US Dollar crash hits oil producers' purchase power
Times of Oman - 12/06/2003
MUSCAT — The purchasing power of oil producers has been largely hit by the fall in the value of dollar.
Abdullah bin Hamad Al Attiyah, president of Opec and Qatar's minister of energy and industry, told the 125th extraordinary meeting of the orgainsation in Qatar that the falling value of the US dollar, especially against the euro was a matter of concern to the global economy.
Attiyah said the fall in the value dollar has negatively affected the purchasing power of oil producers' revenues. Oil inventories in industrialised countries are relatively tight for this time of the year. This may serve to support oil prices in the coming months.
The conference has reviewed the decision taken on April 24, 2003, to reduce Opec-10's actual production by two million barrels per day from the levels that prevailed during the events in Iraq, when oil producers increased output so as to assure consumers of steady supplies of crude during that period.
Opec chief said the fact that the cuts came into force on June 1, just 10 days ago, means that they have had little time to work their way through the market's supply/demand balance, even though their influence on the psychology of the market was noticed much earlier.
"We have seen this reflected in the oil price trends, which has strengthened over the past months and the market is settling down again. However, we are still faced with uncertainty in several key areas," Attiyah added.
The pace and the extent of the return of Iraqi crude to the market remain unclear at the present time, as this country, with its proud Opec heritage, seeks to re-establish itself on the world energy scene.
He welcomed observers from many leading non-Opec oil-exporting nations — Angola, Oman, Mexico, Russia and Syria — who have so often in the past been supportive to its efforts towards a stable and fair market. The presence of non-Opec countries emphasises once again the need for the co-operation of all parties in the petroleum industry - including consumers — if we are to achieve order and stability.
Harmony and understanding should prevail at all times in the oil market, to help it meet the energy needs of all nations — in a world that is increasingly aware of the importance of stable and secure energy supplies to the process of sustainable development, Attiyah said.
Though there was no decision on any future output cut, non-Opec producers believe that Opec would not allow the 1999 level of $10-a-barrel to repeat and its target of $25 a barrel for a basket of seven crude prices is reasonable.
Over the last six months, Opec member countries increased production significantly to accommodate supply disruptions in Venezuela, Nigeria and Iraq. The Vienna meet in April had reviewed estimated supply/demand levels for the second quarter of 2003 and decided to reduce actual production by 2mbpd (million barrels per day) to 25.4mbpd, effective from June 1.
The aggregate production levels for Opec-10 (Algeria, Indonesia, Iran, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, UAE and Venezuela) has changed even more than one occasion.
Having reviewed the current oil market situation, as well as supply/demand prospects for the second half of the year, yesterday's conference noted that stability had been maintained in the market following the decision taken by the conference in April 2003 to reduce actual production to 25.4 mbpd with prices remaining within agreed levels. Nevertheless, the conference also noted that despite the fact that the market remains well-supplied, prices displayed an upward trend, recently, due to the slower-than-anticipated recovery in Iraqi production, coupled with unusually low stock levels. However, with low stock levels anticipated to be replenished during the third quarter, the Conference decided to maintain currently agreed production levels, with strict compliance, and emphasised that continued vigilance in monitoring market developments is imperative over the coming period.
Kingdom to Work for Oil Price Stability
RIYADH, 8 June 2003 — Oil ministers from Saudi Arabia, Mexico and Venezuela have pledged to cooperate with other producers in ensuring a fair price for the crude to stabilize the world market.
The pledge came in a joint statement issued after a meeting in Madrid on Friday between Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi, Venezuela’s Oil Minister Rafael Ramirez and Mexican Energy Secretary Ernesto Martens, the Saudi Press Agency reported yesterday.
The statement said the three countries would continue to cooperate to achieve “stability in the international oil market in a way serving the interests of producers and consumers, the oil industry and world economic growth.” They stressed the need to “continue monitoring developments in the market during the coming few months in a bid to avoid factors that may destabilize it,” the statement added.
The meeting of the two OPEC members, Saudi Arabia and Venezuela, and non-OPEC Mexico came ahead of a ministerial meeting of the Organization of Petroleum Exporting Countries (OPEC) on June 11 in Qatar’s capital Doha. The OPEC meeting will assess the state of the oil market, especially in light of the expected resumption of Iraqi production and the return of Venezuela and Nigeria to their normal production.
OPEC President Abdullah ibn Hamad Al-Attiyah said late last month that the group would probably agree to reduce output at the Doha meeting.
Venezuelan Oil Minister Ramirez said on Friday that his country was holding talks with Saudi Arabia and Mexico seeking an agreement to cut production.
“We have come to Madrid before the OPEC meeting to discuss world oil market situation. We are getting in touch with Russia and Norway and hopefully we would reach good results,” the Reuters news agency quoted Ramirez as saying.
US control of Baghdad and its crude may signal new assault on OPEC-- Some see emerging ‘super-giant producer’ rivaling Saudi Arabia
Special to The Daily Star, 6/7/03
Reconstruction will cost billions of dollars, and temptation to step away from cartel ú and its production quotas ú will be strong
BEIRUT: The US conquest and occupation of Iraq has given the Americans control of one of the world’s major oil producers, one that many believe has untapped reserves that could rival Saudi Arabia’s and Russia’s. US control could also weaken the grip of the Organization of Petroleum Exporting Countries (OPEC) on world markets and, in particular, Saudi Arabia, the cartel’s dominant member.
So as the Americans help restore Iraq’s oil industry, badly run down by two wars and 13 years of United Nations sanctions, the key question is whether the country will remain in OPEC now that it has resumed oil exports, albeit at a modest level, after the UN Security Council unshackled it from sanctions imposed in 1990.
The Americans have long sought to weaken OPEC, which has been feeling growing pressure from non-cartel producers, particularly Russia, which is vying with Saudi Arabia for dominance of the world oil market. It has also been grappling with what many of its members see as an alarming excess in global oil supplies.
This struggle for influence over the oil market should also be seen as part of a wider battle for political leadership in the Gulf. Former Iraqi Oil Minister Fadhil Chalabi, a cousin of Ahmed Chalabi, the Pentagon-backed leader of the main exile group, the Iraqi National Congress (INC), believes his country could double its proven reserves of 113 billion barrels through widespread exploration and become a “super-giant producer” like Saudi Arabia, putting 10 million barrels on the market every day. That is clearly a scenario in which Iraq is outside OPEC.
Iraq has a geographic advantage that cuts the cost of reaching Western markets ú pipelines that link it to Turkey’s Mediterranean coast. (There are other pipelines to the Red Sea, which the Saudis helped build during the 1980-88 Iran-Iraq war, but Riyadh is unlikely to allow Baghdad to use them if it breaks with OPEC.)
With that kind of output, with low production costs attracting consumer states away from higher-cost regions like the North Sea, an Iraqi oil industry managed by US-based companies would have the capacity “to bring OPEC to its knees,” according to Chalabi.
There are divisions within OPEC itself, particularly over the cartel’s quota system, designed to keep prices at or above $25 a barrel. Algeria, Nigeria and some of the other members are demanding larger shares of OPEC’s production total, which would have to be at Saudi Arabia’s expense.
Iraq’s de facto oil minister, Thamir Ghadhban, said on May 26 that “we really don’t have any problem with OPEC” and that the question of withdrawing from the cartel was not currently on the agenda of the US-appointed administration running Iraq. US Energy Secretary Spencer Abraham said whether Iraq stays in OPEC is entirely up to the Iraqis. “We will support their decision, not impose a decision,” he declared on April 28.
But Philip J. Carroll, the US executive chosen by the Pentagon to advise Iraq’s post-war Oil Ministry, has suggested that Iraq might be best served by disregarding OPEC quotas, the strongest indication so far that the Americans might push whatever government emerges in Iraq into breaking ranks with the cartel. It also underlines the repeated allegation that one of the imperatives that drove the Americans into invading Iraq in the first place was to control its oil resources, the better to lessen its reliance on Saudi Arabia.
As it is, the return of Iraq ú which has operated outside OPEC since the 1990 invasion of Kuwait ú as a major exporter under a new government would cause considerable uncertainty. Iraq has the second-largest proven oil reserves in the world after Saudi Arabia, and its return to the market unconstrained by the cartel could further erode OPEC’s already limited ability to set prices. It might even trigger a price war that would weaken the Saudis and other cartel members. That would, of course, delight the Americans (and other consumers), who have been hoping to break OPEC’s grip on pricing for many years.
Carroll, formerly Royal Dutch/Shell’s chief in the US, insists that he is not the instrument of an Iraqi oil policy that would sabotage OPEC. But as he told The Washington Post in mid-May: “In the final analysis, Iraq’s role in OPEC or in any other international organization is something that has to be left to the Iraqi government.”
Already, officials in the Oil Ministry ú now supervised by US forces ú are actively considering pulling Iraq out of OPEC and exporting as much oil as possible, as soon as possible, to maximize revenue once the oil fields have returned to full capacity.
Earlier this year, US-backed Iraqi exiles, including Ahmed Chalabi, whom the Pentagon wants to see in key government posts drew up a policy document which recommended that Baghdad renounce OPEC’s production restrictions, and noted that it may have to withdraw from the cartel if it sought to impose unacceptable ceilings.
Before the 1990 invasion of Kuwait, Iraq was producing more than 3 million barrels per day (bpd). With the imposition of UN sanctions in 1990, it was excluded from OPEC’s production quotas. Under the UN’s “oil-for-food” agreement it was allowed to produce all that its increasingly dilapidated oil industry could manage and before the US invasion was producing around 2 million bpd. Output ground to a standstill because of the conflict but is expected to resume on a limited scale in the next few weeks.
Iraqi oil officials estimate the country will be able to export around 750,000 bpd by late June, with expectations that this can be boosted quite rapidly to 1.5 million bpd, half of which would be for domestic consumption. Production is expected to hit the pre-1990 OPEC quota level of 3 million bpd within 18 months and 3.5 million bpd six months after that. Then, by opening up fields that have gone untapped because of the sanctions, it is anticipated that production could reach as high as 6 million bpd in five or six years ú almost as much as Saudi Arabia’s output level.
That would amount to nearly one-quarter of OPEC’s current targeted production of 24.5 million bpd and would mean that other OPEC members would have to give up a lot of output ú and revenue ú to accommodate Iraq. With increased output pushing prices down, OPEC would be in trouble. The Saudis, as the cartel’s largest producer with nearly one-third of its output, would be under intense pressure to lower their output.
As it is, OPEC’s share of the world oil market has dropped from a peak of around 90 percent in the 1970s to around 39 percent now. This is because since the OPEC-induced oil shocks of the 1970s and the recession they caused, the US and other industrialized states have sought to obtain more oil from non-OPEC producers. Current US and European efforts to open up giant new fields in West Africa, the Caspian Basin, Siberia and elsewhere will further undermine OPEC’s clout.
OPEC is scheduled to meet in Qatar on June 11 to consider a new cut in production ú currently running at 25.4 million bpd ú to accommodate Iraq’s return to the market and avoid a possible price collapse.
Before the US invasion, former Venezuelan Oil Minister Humberto Calderon opined: “After the war there will be a substantial increase in Iraqi oil production and I wouldn’t be surprised is schemes emerged to weaken, if not destroy, OPEC.”
The US-British declaration that they are the occupying powers and will continue to run Iraq underlines their control of the country’s oil industry. The coalition’s failure to produce even a transitional government by now means that it will remain in charge for a lot longer than expected ú up to a year, according to US Defense Secretary Donald Rumsfeld. Even proposals for an Iraqi government have been downgraded to the level of an “Iraqi authority” with lesser, though still undefined powers.
The Bush administration ú which Victor Poleo, professor of graduate studies in oil economics at Central University in Caracas, Venezuela, calls “an oil directorate” because of its strong links to the oil industry ú has already made clear that the lion’s share of the fat contracts worth an estimated $30 billion-$100 billion will go to US firms. That includes refurbishing and exploiting the oil fields.
Russia, France and China, which had supported Baghdad in the UN Security Council in 1991-2003, are unlikely to be allowed to implement the major oil contracts they signed with Saddam Hussein’s regime, which means urgently needed investment from that quarter will not be forthcoming. The Americans are expected to urge the Iraqis to privatize what had been a state-owned industry that enriched Saddam and his henchmen on a vast scale.
Privatization is anathema to most of OPEC, particularly the Saudis, but if Iraq goes that route, opening up to large amounts of outside investment, it would put the other producers under pressure to do the same since they are increasingly in need of investment to upgrade and expand their oil industries, in most cases their primary revenue-earner. Such a move would also weaken OPEC’s influence.
Carroll has said that Iraq might best be served by exporting as much oil as it can and ignoring the quotas set by OPEC, giving the strongest indication so far that a future Iraqi government might quit the cartel that Baghdad helped found in 1960.
He told The Los Angeles Times on May 16: “Historically, Iraq has had, let’s say, an irregular participation in OPEC quota systems. They have from time to time, because of compelling national interest, elected to opt out of the quota system and pursue their own path. They may elect to do that same thing. To me, it’s a very important national question.”
Leading figures in OPEC, and elsewhere in the oil industry, do not believe the Iraqis themselves will quit the cartel, but could do so with US prodding. Saudi Oil Minister Ali al-Naimi declared in late May that he saw no reason why OPEC could not cope with Iraq’s resumption of exports and said it would be “folly’ to leave the market to determine oil prices.
Maintaining oil prices, and revenues, would be a key priority for any Iraqi government, he noted. “Iraq, like other producing states, be they in or out of OPEC, is keen to realize a fair and stable income from its petroleum resources,” he said, “and more particularly for the reconstruction and rebuilding of its production capacity.”
Fadhil Chalabi says he prefers staying within OPEC, but he also stressed that “Iraq is going to need a lot of money in the next five years ú up to $300 billion … Iraq must maximize revenue from its oil ú with or without OPEC.”
Fundamentalism and Peace in the Middle East
Venezuela's Electronic News
Posted: Monday, June 02, 2003
By: Ambassador Alfredo Toro Hardy
Venezuelan scholar & diplomat Alfredo Toro Hardy writes: Through the road map the United States is placing all the weight of its might on the peace process between Israelis and Palestinians. The great pitfall will come from the fundamentalism. Not only from the Islamic fundamentalism, but the Jewish and Christian fundamentalism.
The second half of the seventies of the last century saw the emergence of fundamentalism within the religions above mentioned. The common denominator was the reaction to the disassociating challenges of modernity and the search for a new encounter with the immutable certainties of the holy scriptures. In essence, it represented a rejection of dominant secularism and an attempt to affirm the primacy of the religious over all the other spheres of social life. As a phenomenon it was an expression of the three monotheist religions already mentioned for the simple fact that it responded to a literal interpretation of the sacred texts and canons: the Koran and Shariah for Muslims, the Torah for Jews and the Bible for Christians. Such literalism did not find sustenance in other religions such as Buddhism and Hinduism, precisely for their lack of scriptures and canons. All in all, fundamentalism understands the “revealed truth” textually and free from its symbolic character. Through this it seeks the reconstitution of patriarchal and traditionalist societies.
Although the Islamic and Christian fundamentalisms date back to the decade of the twenties in the last century, it was in the seventies that they showed true expansion. It was also at that time that Jewish fundamentalism erupted. Islamism, synonymous with Muslim fundamentalism, established itself with the victory of the revolution of Khomeini in Iran. However, it expressed itself through a group of different movements that started to spread throughout the Islamic world: Society of Muslims, Jamaat, Hezbollah, Hamas, Islamic Jihad and the most notorious of them all, Al Qaeda, among others. The majority of such movements channeled their actions through terrorism, as a reaction to the Palestinian issue and the pro Western and secular orientation of many dominant regimes. Jewish fundamentalism was expressed basically through two movements: Gush Emunim and Haredim... The extremist rhetoric of various rabbis associated to the former was responsible for the assassination of Prime Minister Rabin. The Christian fundamentalism, on the other hand, is essentially Protestant, Evangelist and has its roots in America. Among its most sonorous expressions are the Moral Majority and the New Christian Right. It is noteworthy that the North American Christian fundamentalism has managed to penetrate significantly the Republican party, even controlling it in some states of the “Bible Belt”.
Any possibility of a solution to the Palestinian-Jewish issue will inexorably clash with the action of fundamentalists. From the Islamic extremism that tries to thwart any peace process, to the Jewish extremism which fiercely oppose the abandonment of settlements and the devolution of occupied territories, and the Christian fundamentalism that has become common cause with the Jewish, the obstacles faced by fundamentalisms will be huge. They will undermine although in different ways and with variable intensity, the initiatives coming from the Palestinian, Israeli and American authorities.
Alfredo Toro Hardy is a Venezuelan scholar and diplomat who has held many ambassadorial posts, including Washington D.C., London, Brazil, Chile etc. Author of several books, he writes regular editorial commentaries in the Spanish-language Venezuelan media and VHeadline.com Venezuela. You may email Ambassador Toro Hardy at email@example.com
Fundamentalismo y paz en el Medio Oriente
A través del llamado 'mapa de ruta', Estados Unidos está poniendo todo el peso de su poderío en el proceso de paz entre israelíes y palestinos. El gran escollo vendrá del fundamentalismo. Pero no sólo del fundamentalismo islámico, sino también del judío y del cristiano.
LA SEGUNDA MITAD de los años setenta del siglo pasado evidenció el emerger del fundamentalismo dentro de las tres religiones citadas. El denominador común fue la reacción ante los retos disociadores de la modernidad y la búsqueda de un reencuentro con las certidumbres inmutables de los textos sagrados. En esencia, representó un rechazo al secularismo dominante y un intento por afirmar la primacía de lo religioso sobre todas las demás esferas de la vida social. Como fenómeno fue expresión de las tres religiones monoteístas citadas, por el simple hecho de que respondía a una interpretación literal de los textos y cánones sagrados: el Corán y la Shaira para los musulmanes, la Torah$para los judíos y la Biblia para los cristianos. Dicho literalismo no encontraba sustento en otras religiones como el budismo y el hinduismo, precisamente por la carencia de textos y cánones. En definitiva, el fundamentalismo entiende la 'verdad revelada' en forma textual y desprovista de su carácter simbólico. Por esta vía busca la reconstitución de sociedades patriarcales y tradicionalistas.
SI BIEN los fundamentalismos islámico y cristiano se remontan a la década de los veinte del siglo pasado, fue a partir de los setenta que éstos evidenciaron su verdadera expansión. Fue también por esa época que el fundamentalismo judío hizo erupción. El islamismo, sinónimo de fundamentalismo musulmán, se consagró con el triunfo de la revolución de Khomeini en Irán. Sin embargo, se expresó también a través de un conjunto de movimientos variados que comenzaron a diseminarse por todo el mundo islámico: Sociedad de Musulmanes, Jamaat, Hezbollah, Hamas, Jihad Islámica y, el más célebre de todos, Al Qaeda, entre otros. La mayor parte de esos movimientos encauzaron su acción por vía del terrorismo, como reacción al problema palestino y a la orientación pro occidental y secularista de muchos de los regímenes dominantes. El fundamentalismo judío se expresó básicamente a través de dos movimientos: Gush Emunim y Haredim. La retórica extremista de varios rabinos asociados al primero de ellos fue responsable del asesinato del primer ministro Rabin. El fundamentalismo cristiano, por su parte, es esencialmente protestante, evangelista y de raigambre estadounidense. Entre sus expresiones más sonoras se encuentran la Mayoría Moral y la Nueva Derecha Cristiana. Valga agregar que el fundamentalismo cristiano norteamericano ha logrado penetrar de manera muy significativa al Partido Republicano, controlándolo, incluso, en algunos estados del llamado 'Cinturón de la Biblia'.
CUALQUIER POSIBILIDAD de solución al problema judío-palestino, chocará inexorablemente con la acción de los fundamentalistas. Desde el extremismo islámico que intenta frustrar cualquier proceso de paz, hasta el extremismo judío que se opone férreamente al abandono de los asentamientos y a la devolución de los territorios ocupados, pasando por el integrismo cristiano que ha hecho causa común con el judío, los escollos planteados por los fundamentalismos serán gigantescos. Estos minarán por igual, aunque de distinta manera y variable intensidad, las iniciativas provenientes de las autoridades palestinas, israelíes y estadounidenses.
U.S-Iran tensions put oil markets on alert
Reuters, 05.30.03, 3:04 PM ET
By Andrew Mitchell
NEW YORK (Reuters) - Brewing tensions between the Iran and the United States will keep oil markets on alert in coming months, but a direct threat to Iran's crude supply is so far too remote to push prices up, analysts said on Friday.
This week U.S. Defense Secretary Donald Rumsfeld stepped up charges that Iran was harboring wanted leaders of the Islamic militant network al Qaeda. Iran's Foreign Minister Kamal Kharrazi said on Friday the charges were baseless.
Rumsfeld is pressing for a U.S. policy shift to support "regime change" in Tehran, after U.S.-led forces last month ousted Saddam Hussein from another big Middle East oil producer Iraq, officials have said.
"The slow burning issue on the political agenda at the moment that has oil market implications is the US-Iran relationship," said Paul Horsnell of J.P. Morgan bank.
"We expect it to be a background factor and a source of occasional alarms in the market for quite some time to come," said Horsnell.
A disruption to Iran's 3.7 million barrels per day production -- second only to Saudi Arabia among the OPEC cartel -- would rattle an oil market already operating on low stocks after recent supply problems in Iraq, Venezuela and Nigeria.
The United States has already branded Iran part of an "axis of evil," accused of developing nuclear weapons, aiding militant groups and violating human rights.
"What you will see is knee-jerk reactions from time to time when you have declarations out of the administration which seem to be not too diplomatic," said Roger Diwan of PFC Energy in Washington.
It will take clear signals of possible military action -- currently viewed as highly unlikely -- for there to be any rerun of the pre-Iraq war price spike that pushed crude prices to 12-year highs near $40 a barrel earlier this year.
"I think this has a longer fuse. Iran is not Iraq -- the chances are the U.S. will not invade Iran. The oil market's going to be a little bit more sanguine on this," said Sarah Emerson of Energy Security Analysis in Boston.
"You won't have a premium which will stay there and which is significant. The only real risk here is if you have an attack on a nuclear reactor. That could have quite a lot of impact on the market in terns of psychology," said Diwan.
Iran holds 9 percent of the world's oil reserves, has the world's second largest gas reserves and sits beside the Strait of Hormuz, the main shipping channel carrying Middle East crude exports to international market.
The United States has already used most of the economic measures it could wield against Iran.
Since 1995 Washington has had unilateral sanctions, which bans U.S. firms from importing Iranian oil, and it threatens sanctions against foreign firms investing in Iranian oil although these measures are widely disregarded.
Analysts also expect a muted oil price impact from any deepening tensions with Syria, another Middle East oil producer on Washington's list of "rogue states."
Syria only exports 250,000 bpd, around 10 percent of Iran's exports. although U.S. majors ConocoPhillips (nyse: COP - news - people) and ExxonMobil (nyse: COP - news - people) are both regular buyers.