Tag Archives: OPEC

Oil prices hit 2019 highs on OPEC cuts and U.S. sanctions

FILE PHOTO: Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. REUTERS/Stringe

By Dmitry Zhdannikov

LONDON (Reuters) – Oil prices rose to new 2019 highs on Tuesday, supported by OPEC supply cuts and falling output from Iran and Venezuela because of U.S. sanctions.

Brent crude oil futures were up 16 cents at $67.70 a barrel at 1415 GMT, having earlier risen to a 2019 peak of $68.20, their highest since November 2018.

U.S. West Texas Intermediate (WTI) futures were at $59.17, up 8 cents from their last settlement. They also touched their highest since November at $59.57.

The Organization of the Petroleum Exporting Countries on Monday scrapped its planned meeting in April, effectively extending supply cuts that have been in place since January until its next regular meeting in June.

OPEC and a group of non-affiliated producers including Russia, known as OPEC+, cut supply in 2019 to halt a sharp price drop that began in the second-half of 2018 on booming U.S. production and fears of a global economic slowdown.

Saudi Arabia has signaled that OPEC and its allies could continue to restrain oil output until the end of 2019.

“The OPEC+ deal has brought stability to crude prices and signs of an extension have taken crude higher,” said Alfonso Esparza, senior market analyst at futures brokerage OANDA.

Prices have been further supported by U.S. sanctions against oil exports from Iran and Venezuela, traders said.

Venezuela has suspended its oil exports to India, one of its key export destinations, the Azeri energy ministry said on Tuesday, citing Venezuela’s oil minister.

Because of the tighter supply outlook for the coming months, the Brent forward curve has gone into backwardation since the start of the year, meaning that prices for immediate delivery are more expensive than those for dispatch in the future. May Brent prices were around $1.20 a barrel more expensive than for December delivery.

(GRAPHIC: Brent crude oil forward curves – https://tmsnrt.rs/2FlM7YZ)

Outside OPEC, analysts are watching U.S. crude oil production that has risen by more than 2 million barrels per day (bpd) since early 2018, to about 12 million bpd, making the United States the world’s biggest producer ahead of Russia and Saudi Arabia.

Weekly output and storage data will be published by the Energy Information Administration (EIA) on Wednesday.

Bank of America Merrill Lynch said that economic “risks are skewed to the downside” and it is forecasting global demand growth of 1.2 million bpd year on year in 2019 and 1.15 million bpd in 2020.

The bank said it expects Brent and WTI to average $70 and $59 a barrel respectively in 2019 and $65 and $60 a barrel in 2020.

(Reporting by Henning Gloystein; Editing Joseph Radford and David Goodman)

Venezuela congress declares ‘state of alarm’ over blackout

People collect water released through a sewage drain that feeds into the Guaire River, which carries most of the city's wastewater, in Caracas, Venezuela March 11, 2019. REUTERS/Carlos Garcia Rawlins

By Shaylim Valderrama and Anggy Polanco

CARACAS/SAN CRISTOBAL, Venezuela (Reuters) – Venezuela’s opposition-run congress on Monday declared a “state of alarm” over a five-day power blackout that has crippled the OPEC member country’s oil exports and left millions of citizens scrambling to find food and water.

Much of Venezuela remained without power on Monday, although electricity had largely returned to the capital of Caracas following an outage that began on Thursday and which President Nicolas Maduro has called an act of U.S.-backed sabotage.

The outage has added to discontent in a country already suffering from hyperinflation and a political crisis after opposition leader Juan Guaido assumed the interim presidency in January after declaring Maduro’s 2018 re-election a fraud.

Venezuelan citizens living in Bogota protest against Venezuela's President Nicolas Maduro and the continuing power outage in Venezuela, in Bogota, Colombia, March 11, 2019. REUTERS/Carlos Julio Martinez

Venezuelan citizens living in Bogota protest against Venezuela’s President Nicolas Maduro and the continuing power outage in Venezuela, in Bogota, Colombia, March 11, 2019. REUTERS/Carlos Julio Martinez

“Nothing is normal in Venezuela, and we will not allow this tragedy to be considered normal, which is why we need this decree of a state of alarm,” said Guaido, who heads the legislature, during the session on Monday.

The constitution allows the president to declare states of alarm amid catastrophes that “seriously compromise the security of the nation,” but does not explicitly say what practical impact such a declaration would have.

Guaido has been recognized as Venezuela’s legitimate leader by the United States and most Western countries, but Maduro retains control of the armed forces and state institutions, and the backing of Russia and China, among others.

Oil industry sources said that exports from the primary port of Jose had been halted for lack of power, cutting off Venezuela’s primary source of revenue.

During the legislative session, Guaido called for a halt in shipments of oil to Maduro’s political ally Cuba, which has received discounted crude from Venezuela for nearly two decades. The deals have drawn scrutiny from the opposition and its allies abroad as Venezuela’s economic crisis worsened.

“We ask for the international community’s cooperation to make this measure effective so that the oil the Venezuelan people urgently need to attend to this national emergency is not given away,” Guaido said.

U.S. National Security Advisor John Bolton backed the measure, writing on Twitter that, “insurance companies and flag carriers that facilitate these give-away shipments to Cuba are now on notice.” He did not specify any measures the U.S. government may take.

Earlier on Monday, the U.S. Treasury imposed sanctions on a Russian bank over its dealings with Venezuela’s state-owned oil company PDVSA and Secretary of State Mike Pompeo criticized Russia’s Rosneft for buying PDVSA oil.

People collect water released through a sewage drain that feeds into the Guaire River, which carries most of the city's wastewater, in Caracas, Venezuela March 11, 2019. REUTERS/Carlos Garcia Rawlins

People collect water released through a sewage drain that feeds into the Guaire River, which carries most of the city’s wastewater, in Caracas, Venezuela March 11, 2019. REUTERS/Carlos Garcia Rawlins

RESTORATION ‘COMPLEX’

The blackout has left food rotting in refrigerators, hospitals have struggled to keep equipment operating, and people have clustered on the streets of Caracas to pick up patchy telephone signals to reach relatives abroad.

On Monday, Venezuelans seeking water formed lines to fill containers from a sewage pipe.

“This is driving me crazy,” said Naile Gonzalez in Chacaito, a commercial neighborhood of Caracas. “The government doesn’t want to accept that this is their fault because they haven’t carried out any maintenance in years.”

Venezuela’s electrical grid has suffered from years of underinvestment. Restrictions on imports have affected the provision of spare parts, while many skilled technical personnel have fled the country amid an exodus of more than 3 million Venezuelans in recent years.

Winston Cabas, the president of an electrical engineers’ professional association, told reporters that several of the country’s thermoelectric plants were operating at just 20 percent of capacity, in part due to lack of fuel. He said the government was rationing electricity.

The process of restoring service was “complex” and could take between five and six days, he said.

“We once had the best electricity system in the world – the most vigorous, the most robust, the most powerful – and those who now administer the system have destroyed it,” he said.

A source at PDVSA also said the government had decided to ration electricity, in part to supply power to the Jose oil export terminal.

The Information Ministry did not respond to a request for comment.

Experts consulted by Reuters believe the nationwide blackout originated in transmission lines that transport energy from the Guri hydroelectric plant to the Venezuelan south.

The lack of electricity has aggravated a crisis in Venezuelan hospitals, already lacking investment and maintenance in addition to a shortage of medicines.

School and work activities are set to be suspended on Tuesday, the third working day in a row.

(Reporting by Shaylim Valderrama, Vivian Sequera, Anggy Polanco, and Deisy Buitrago; additional reporting by Sarah Marsh in Havana; writing by Daniel Flynn, Brian Ellsworth and Luc Cohen; editing by Grant McCool and Rosalba O’Brien)

Venezuelan opposition envoy urges foreign help to get aid in

Venezuelans line up as they wait for a free lunch at the "Divina Providencia" migrant shelter outskirts of Cucuta, on the Colombian-Venezuelan border, Colombia February 13, 2019. REUTERS/Edgard Garrido

By Luc Cohen and Matt Spetalnick

WASHINGTON (Reuters) – The Venezuelan opposition’s envoy to the United States accused the government of President Nicolas Maduro on Thursday of blocking humanitarian aid to the country and urged the international community to help open “thousands of windows” to let assistance in.

Carlos Vecchio, opposition leader Juan Guaido’s representative in Washington, spoke to an international aid conference hosted at the Organization of American States (OAS) headquarters in Washington as a deadlock persisted in delivering aid to the crisis-stricken South American country.

Guaido invoked constitutional provisions last month to declare himself interim president, arguing that Maduro’s re-election last year was a sham.

Most Western countries, including the United States and many of Venezuela’s neighbors, have recognized Guaido as the country’s legitimate head of state, but Maduro retains the backing of Russia and China as well as control of Venezuelan state institutions including the military.

Guaido told a huge rally of supporters on Tuesday that humanitarian aid would enter the country on Feb. 23, setting the stage for a showdown with Maduro.

“They are blocking humanitarian aid that’s being sent,” Vecchio told the conference, which was attended by diplomats and representatives from dozens of countries. “We must open thousands of windows to bring humanitarian aid to Venezuela … Here we are creating an international coalition to bring in food and medicine.”

Lester Toledo, the opposition’s humanitarian aid coordinator, recounted an incident in 2016 when protesters marched to the border with Colombia where aid was being held up.

“That’s exactly what we’re going to do next Saturday,” he told the conference, suggesting how aid might make its way into Venezuela. “With people, people and more people working peacefully.”

Maduro has called the aid a U.S.-orchestrated show and denies there is an economic crisis, despite a widespread lack of food and medicine and hyperinflation.

But Gustavo Tarre, the opposition’s OAS representative, insisted the only objective is “to relieve the suffering of Venezuelans” and that there no political, economic or military motives.

Last week, the United Nations warned against politicizing aid in Venezuela after the United States accused Maduro of preventing the delivery of food and medicine.

An aid convoy supplied by the United States and Colombia arrived in the Colombian border town of Cucuta last week, where it is being held in warehouses.

The United States has said it will try to channel aid to Venezuela, via Colombia and possibly Brazil.

Elliott Abrams, Washington’s special envoy on Venezuela, said last week the aid effort was being coordinated with Guaido’s team but that the aid would not be forced into Venezuela.

Maduro has overseen an economic collapse that has left millions struggling for food and fueled an unprecedented migration crisis in the region.

An estimated 3 million Venezuelans have left the oil-rich OPEC country since 2015, some 800,000 of whom have ended up in Colombia.

(Reporting by Luc Cohen and Matt Spetalnick in Washington; Editing by Alistair Bell and James Dalgleish)

Venezuela opposition envoys in Rome to press Guaido’s cause

FILE PHOTO: Venezuelan opposition leader Juan Guaido, who many nations have recognized as the country's rightful interim ruler, talks to the media after attending a religious event in Caracas, Venezuela February 10, 2019. REUTERS/Carlos Garcia Rawlins/File Photo

By Philip Pullella and Vivian Sequera

VATICAN CITY/CARACAS (Reuters) – Envoys for Venezuela’s self-declared caretaker leader Juan Guaido met Vatican officials and lobbied the Italian government for support on Monday in their quest to keep international pressure on socialist President Nicolas Maduro.

The Vatican, which has offered to mediate, called for respect for rights and avoidance of bloodshed after Guaido’s bid to end two decades of increasingly authoritarian leftist rule in the volatile OPEC member nation of 30 million people.

Members of the Vatican Secretariat of State met a delegation including Francisco Sucre, president of the foreign affairs commission of Venezuela’s National Assembly, and Antonio Ledezma, former mayor of Caracas.

They also met Italy’s deputy prime minister Matteo Salvini.

“We’re in Italy to seek more support for our President @jguaido,” tweeted Ledezma. “We’re doing well, but we need to finish this with victory.”

The Vatican “underscored the deep concern that a just and peaceful solution could be found urgently to overcome the crisis while respecting human rights, seeking the good of all the country’s people and avoiding bloodshed,” it said in a statement.

Pope Francis has said the Vatican could mediate if both sides asked. Maduro wants that, but Venezuela’s opposition is skeptical given past dialogue failures and Guaido says the starting point for any talks must be Maduro’s exit.

Venezuela’s opposition regards Maduro as an incompetent dictator who has wrecked their economy and crushed dissent, while he calls them puppets of Washington seeking a coup in order to control the nation’s vast oil reserves.

Rank-and-file opposition supporters, though often Roman Catholics, are suspicious of the Vatican given its support of past talks that have enabled Maduro to win time and survive various waves of protests.

Vatican Secretary of State Cardinal Pietro Parolin calls the Holy See’s stance “positive neutrality”, saying it has to stay above both sides if it is to help.

The Venezuela conflict has fed into a wider geopolitical struggle. Along with U.S. President Donald Trump, numerous Latin American and European nations have recognized Guaido as interim president and backed his calls for a new, free election.

But other powers, including Russia and China who have billions of dollars invested and loaned to Caracas, have denounced outside interference and backed Maduro.

Breaking the unity of other major European countries, Italy’s coalition government is divided over Venezuela.

Salvini, far-right leader of the Northern League party and also interior minister, favors recognizing Guaido, but its coalition partner the 5-Star Movement believes that is a bad precedent.

Salvini telephoned Guaido while the Venezuelan delegation was visiting him, stressing his opposition to Maduro and support for a new vote, his office said.

Guaido, who heads Venezuela’s opposition-led National Assembly, invoked a constitutional provision last month to declare himself president.

As well as the Vatican, Norway, another traditional international mediator, has also offered to help with dialogue.

(Reporting by Philip Pullella in Rome, Vivian Sequera in Caracas, Nerijus Adomaitis in Oslo; Editing by Andrew Cawthorne)

Trump says U.S. military intervention in Venezuela ‘an option;’ Russia objects

Venezuelan opposition leader and self-proclaimed interim president Juan Guaido and his wife Fabiana Rosales gesture during a rally against Venezuelan President Nicolas Maduro's government in Caracas, Venezuela February 2, 2019. REUTERS/Carlos Garcia Rawlins

By Brian Ellsworth

CARACAS (Reuters) – U.S. President Donald Trump said military intervention in Venezuela was “an option” as Western nations boost pressure on socialist leader Nicolas Maduro to step down, while the troubled OPEC nation’s ally Russia warned against “destructive meddling.”

The United States, Canada, and several Latin American countries have disavowed Maduro over his disputed re-election last year and recognized self-proclaimed President Juan Guaido as the country’s rightful leader.

Trump said U.S. military intervention was under consideration in an interview with CBS aired on Sunday.

“Certainly, it’s something that’s on the – it’s an option,” Trump said, adding that Maduro requested a meeting months ago.

“I’ve turned it down because we’re very far along in the process,” he said in a “Face the Nation” interview. “So, I think the process is playing out.”

The Trump administration last week issued crippling sanctions on Venezuelan state-owned oil firm PDVSA, a key source of revenue for the country, which is experiencing medicine shortages and malnutrition.

Maduro, who has overseen an economic collapse and the exodus of millions of Venezuelans, maintains the backing of Russia, China and Turkey, and the critical support of the military.

Russia, a major creditor to Venezuela in recent years, urged restraint.

“The international community’s goal should be to help (Venezuela), without destructive meddling from beyond its borders,” Alexander Shchetinin, head of the Latin America department at Russia’s Foreign Ministry, told Interfax.

France and Austria said they would recognize Guaido if Maduro did not respond to the European Union’s call for a free and fair presidential election by Sunday night.

“We don’t accept ultimatums from anyone,” Maduro said in a defiant interview with Spanish television channel La Sexta carried out last week and broadcast on Sunday.

“I refuse to call for elections now – there will be elections in 2024. We don’t care what Europe says.”

EMBOLDENED OPPOSITION

The 35-year-old Guaido, head of the country’s National Assembly, has breathed new life into a previously fractured and weary opposition. Tens of thousands of people thronged the streets of various Venezuelan cities on Saturday to protest Maduro’s government.

Guaido allies plan to take a large quantity of food and medicine donated by the United States, multilateral organizations and non-profit groups across the Colombian border into the Venezuelan state of Tachira this week, according to a person directly involved in the effort.

The group has not yet determined which border point it will cross, said the person, who asked not to be identified because he is not authorized to speak publicly about the issue.

It is unclear whether Maduro’s government, which denies the country is suffering a humanitarian crisis, will let any foreign aid through.

The embattled president on Sunday promised peace for Venezuela without specifically responding to Trump.

“In Venezuela, there will be peace, and we will guarantee this peace with the civil-military union,” he told state television, in the company of khaki and black-clad soldiers who were earlier shown carrying guns and jumping from helicopters into the sea.

Maduro has overseen several such military drills since Guaido declared himself president to display he has the backing of the military, and that Venezuela’s armed forces are ready to defend the country.

Air Force General Francisco Yanez disavowed Maduro in a video this weekend, calling on members of the military to defect. But there were no signs the armed forces were turning against Maduro.

Venezuela has as many as 2,000 generals, according to unofficial estimates, many of whom do not command troops and whose defection would not necessarily weaken the ruling socialists.

The police have also fallen in line with Maduro.

A special forces unit called FAES led home raids following unrest associated with opposition protests in January, killing as many as 10 people in a single operation in a hillside slum of Caracas.

Venezuela’s ambassador to Iraq, Jonathan Velasco, became the latest official to recognize opposition leader Guaido this weekend.

(Reporting by Brian Ellsworth; Additional reporting by Lucia Mutikani and Doina Chiacu in Washington; Writing by Brian Ellsworth and Sarah Marsh; Editing by Lisa Shumaker and Peter Cooney)

EU parliament recognizes Guaido as Venezuelan interim president

Venezuelan opposition leader and self-proclaimed interim president Juan Guaido attends a meeting with supporters to present a government plan of the opposition in Caracas, Venezuela January 31, 2019. REUTERS/Carlos Garcia Rawlins

By Robin Emmott

BRUSSELS (Reuters) – The European Parliament recognized Venezuela’s self-declared interim president Juan Guaido as de facto head of state on Thursday, heightening international pressure on the OPEC member’s socialist President Nicolas Maduro.

EU lawmakers voted 439 in favor to 104 against, with 88 abstentions, at a special session in Brussels to recognize Venezuelan congress head Guaido as interim leader.

FILE PHOTO: Venezuela's President Nicolas Maduro sits between National Constituent Assembly (ANC) President Diosdado Cabello (L) and National Electoral Council (CNE) President Tibisay Lucena during a ceremony to mark the opening of the judicial year at the Supreme Court of Justice (TSJ), in Caracas, Venezuela, January 24, 2019. REUTERS/Carlos Garcia Rawlins/File Photo

FILE PHOTO: Venezuela’s President Nicolas Maduro sits between National Constituent Assembly (ANC) President Diosdado Cabello (L) and National Electoral Council (CNE) President Tibisay Lucena during a ceremony to mark the opening of the judicial year at the Supreme Court of Justice (TSJ), in Caracas, Venezuela, January 24, 2019. REUTERS/Carlos Garcia Rawlins/File Photo

In a statement with the non-binding vote, the parliament urged the bloc’s 28 governments to follow suit and consider Guaido “the only legitimate interim president” until there were “new free, transparent and credible presidential elections”.

British Foreign Secretary Jeremy Hunt, who spoke to Guaido on Wednesday and wants further EU sanctions on Venezuelan officials, urged counterparts to embrace the 35-year-old head of Venezuela’s National Assembly.

“Parliament has spoken. For us, Mr. Guaido is the president of Venezuela and we do hope that the European Union will find a united position on this,” he told reporters on arrival at a two-day meeting of EU foreign ministers in Bucharest.

Hungary’s Foreign Minister Peter Szijjarto said he was ready to join a common position on Venezuela if the bloc could agree what next steps to take.

Though accusing Maduro of stifling democracy, the European Union is nervous at the precedent of a self-declaration, so has been reluctant to follow the United States and most Latin American nations with immediate recognition of Guaido.

Britain, France, Germany and Spain said on Saturday, however, that they would recognize Guaido unless Maduro called elections within eight days. But the EU as a whole has not set a time limit in its call for a new presidential vote.

Maduro has dismissed the demands as an unacceptable ultimatum from the corrupt elite of spent colonial powers.

“The leaders of Europe are sycophants, kneeling behind the policies of Donald Trump,” he said at the weekend.

The European Parliament has no foreign policy powers but sees itself as a champion of human rights.

“Those who are demonstrating today in the streets of Venezuela are not Europeans, but they fight for the same values for which we fight,” Spanish center-right EU lawmaker Esteban Gonzalez Pons said in a statement.

As Venezuela has sunk into economic and political crisis that has brought mass emigration and hyperinflation, the EU imposed an arms embargo and sanctions on officials to decry what it views as rights violations and the rupture of democracy.

On Thursday, the Brussels-based International Federation of Journalists said seven foreign journalists were detained in Venezuela, including French and Spanish reporters. EU foreign policy chief Federica Mogherini called for their release.

(Additional reporting by Clare Roth; Editing by Andrew Cawthorne)

Venezuelan streets quieter than usual after opposition strike call

People queue to withdraw cash from automated teller machines (ATM) at a Mercantil bank branch in Caracas, Venezuela August 21, 2018. REUTERS/Carlos Garcia Rawlins

CARACAS (Reuters) – Venezuela’s streets were quieter than normal on Tuesday but many businesses remained open despite an opposition call for a national strike to protest economic measures announced by socialist President Nicolas Maduro.

The OPEC nation on Monday cut five zeros from prices in response to hyperinflation as part of a broad set of measures meant to address an economic crisis, including pegging the country’s currency to an obscure state-backed cryptocurrency.

Opposition critics slammed the plan as inadequate in the face of inflation that topped 82,000 percent in July and called for a one-day halt of commercial activities.

“Don’t got to work, you have the right to protest, because what’s at stake is your life, your future, and your country. Rebel!” opposition party Popular Will wrote via its Twitter account.

Maduro declared Monday a national holiday for banks and consumers to get accustomed to the new pricing scheme, under which items that cost 1,000,000 bolivars last week were remarked with price tags of 10 bolivars.

Fedecamaras, the country’s main business group, slammed the proposal as “incoherent,” noting that the plan’s 3,000 percent minimum wage increase would make it impossible for businesses to keep their doors open.

But the group did not take a position on the opposition-led strike, saying individual members should choose on their own.

Venezuelan 100 bolivar notes thrown by people in a trash bin are seen at a gas station of the Venezuelan state-owned oil company PDVSA in Caracas, Venezuela August 20, 2018. REUTERS/Marco Bello

Venezuelan 100 bolivar notes thrown by people in a trash bin are seen at a gas station of the Venezuelan state-owned oil company PDVSA in Caracas, Venezuela August 20, 2018. REUTERS/Marco Bello

The Information Ministry did not immediately reply to a request for comment.

The ruling Socialist Party announced a march on Tuesday morning to support Maduro’s economic measures that was scheduled to end with a rally at the presidential palace.

The collapse of the country’s once-booming economy has fueled hunger and disease, spurring an exodus of migrants to nearby countries.

In recent days, Ecuador and Peru tightened visa requirements for Venezuelans and violence drove hundreds of Venezuelan migrants back across the border with Brazil.

The discontent has also spread to the military, as soldiers struggle to get enough food and many desert by leaving the country.

Two high-ranking military officers were arrested this month for alleged involvement in drone explosions during a speech by Maduro, who called it an assassination attempt.

Maduro says his government is the victim of an “economic war” led by the opposition with the help of Washington, which last year levied several rounds of sanctions against his government and high-ranking officials.

(Reporting by Brian Ellsworth; Editing by Paul Simao)

China defies U.S. pressure as EU parts ways with Iranian oil

A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Persian Gulf, Iran, July 25, 2005. REUTERS/Raheb Homavandi/File Photo

By Chen Aizhu and Florence Tan

BEIJING/SINGAPORE (Reuters) – China, seeking to skirt U.S. sanctions, will use oil tankers from Iran for its purchases of that country’s crude, throwing Tehran a lifeline while European companies such as France’s Total are walking away due to fear of reprisals from Washington.

The United States is trying to halt Iranian oil exports in an effort to force Tehran to negotiate a new nuclear agreement and to curb its influence in the Middle East.

China, which has cut imports of U.S. crude amid a trade war with Washington, has said it opposes unilateral sanctions and defended its commercial ties with Iran.

On Monday, sources told Reuters Chinese buyers of Iranian oil were beginning to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all their imports.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were reimposed after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program.

“The shift started very recently, and it was almost a simultaneous call from both sides,” said one source, a senior Beijing-based oil executive, who asked not to be identified as he is not allowed to speak publicly about commercial deals.

Tehran used a similar system between 2012 and 2016 to circumvent Western-led sanctions, which had curtailed exports by making it virtually impossible to obtain shipping insurance for business with Iran.

Iran, OPEC’s third-largest oil producer, relies on sales of crude to China, Japan, South Korea, India and the EU to generate the lion’s share of budget revenues and keep its economy afloat.

The United States has asked buyers of Iranian oil to cut imports from November. Japan, South Korea, India and most European countries have already slashed operations.

French oil major Total, previously one of the biggest European buyers of Iranian oil, has said it had no choice but to halt imports and abandon Iranian projects to safeguard its operations in the United States.

On Monday, Iranian Oil Minister Bijan Zanganeh said Total had officially left Iran’s South Pars gas project.

Total later confirmed it had notified the Iranian authorities of its withdrawal from South Pars after it failed to obtain a waiver from U.S. sanctions.

Iranian officials had earlier suggested China’s state-owned CNPC could take over Total’s stake and Zanganeh said the process to replace the French company was under way.

“As for the future of Total’s share, we have not been informed of an official CNPC position, but as we have always said, CNPC, a Chinese state-owned company, has the right to resume our participation if it decides so,” Total said in an emailed statement.

WALK AWAY

French President Emmanuel Macron has repeatedly called for safeguarding the Iranian nuclear deal and defended the interests of EU companies in Iran.

But most European companies have conceded that they would be forced to walk away from Tehran for fear of sanctions and losing access to operations that require U.S. dollars.

The first round of U.S. sanctions, which included cutting off Iran and any businesses that trade with it from the U.S. financial system, went into effect on Aug. 7.

A ban on Iranian oil purchases will start in November. Insurers, which are mainly U.S.- or European-based, have begun winding down their Iranian business to comply with the sanctions.

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in long-term supply agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated tankers, four sources with direct knowledge of the matter said.

The price for oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning Iran will cover all costs and risks of delivering the crude as well as handling the insurance, they said.

In July, all 17 tankers chartered to carry oil from Iran to China were operated by NITC, according to shipping data on Thomson Reuters Eikon. In June, eight of 19 vessels chartered were Chinese-operated.

Last month, those tankers loaded about 23.8 million barrels of crude oil and condensate destined for China, or about 767,000 barrels per day (bpd). In June, the loadings were 19.8 million barrels, or 660,000 bpd.

In 2017, China imported an average of 623,000 bpd, according to customs data.

Sinopec declined to comment. A spokesperson for Nam Kwong Group, the parent of Zhenrong, declined to comment.

NIOC did not respond to an email seeking comment. An NITC spokesman said it would forward a request from Reuters for a comment to the country’s Ministry of Culture and Islamic Guidance.

It was not immediately clear how Iran would provide insurance for the Chinese oil purchases, worth some $1.5 billion a month. Insurance usually includes cover for the oil cargoes, third-party liability, and pollution.

(Additional reporting by Parisa Hafezi in Ankara and Cyril Altmeyer in Paris; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

Trump’s revenge: U.S. oil floods Europe, hurting OPEC and Russia

FILE PHOTO: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. REUTERS/Nick Oxford/File Photo

By Olga Yagova and Libby George

MOSCOW/LONDON (Reuters) – As OPEC’s efforts to balance the oil market bear fruit, U.S. producers are reaping the benefits – and flooding Europe with a record amount of crude.

Russia paired with the Organization of the Petroleum Exporting Countries last year in cutting oil output jointly by 1.8 million barrels per day (bpd), a deal they say has largely rebalanced the market and one that has helped elevate benchmark Brent prices <LCOc1> close to four-year highs.

Now, the relatively high prices brought about by that pact, coupled with surging U.S. output, are making it harder to sell Russian, Nigerian and other oil grades in Europe, traders said.

“U.S. oil is on offer everywhere,” said a trader with a Mediterranean refiner, who regularly buys Russian and Caspian Sea crude and has recently started purchasing U.S. oil. “It puts local grades under a lot of pressure.”

U.S. oil output is expected to hit 10.7 million bpd this year, rivaling that of top producers Russia and Saudi Arabia.

In April, U.S. supplies to Europe are set to reach an all-time high of roughly 550,000 bpd (around 2.2 million tonnes), according to the Thomson Reuters Eikon trade flows monitor.

In January-April, U.S. supplies jumped four-fold year-on-year to 6.8 million tonnes, or 68 large Aframax tankers, according to the same data.

Trade sources said U.S. flows to Europe would keep rising, with U.S. barrels increasingly finding homes in foreign refineries, often at the expense of oil from OPEC or Russia.

In 2017, Europe took roughly 7 percent of U.S. crude exports, Reuters data showed, but the proportion has already risen to roughly 12 percent this year.

Top destinations include Britain, Italy and the Netherlands, with traders pointing to large imports by BP, Exxon Mobil and Valero.

Polish refiners PKN Orlen and Grupa Lotos and Norway’s Statoil are sampling U.S. grades, while other new buyers are likely, David Wech of Vienna-based JBC Energy consultancy said.

“There are a number of customers who still may test U.S. crude oil,” Wech said.

The gains for U.S. suppliers could come as a welcome development for U.S. President Donald Trump, who accused OPEC on Friday of “artificially” boosting oil prices.

“Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!” Trump wrote on Twitter.

‘KEY SUPPLY SOURCE’

While the United States lifted its oil export ban in late 2015, the move took time to gain traction among Europe’s traditional refineries, which were slow to diversify away from crude from the North Sea, West Africa and the Caspian.

“European refiners started experimenting with U.S. crude last year,” said Ehsan Ul-Haq, director of London-based consultancy Resource Economics. “Now, they know more than enough to process this crude.”

U.S. oil gained in popularity, sources said, in part because of the wide gap between West Texas Intermediate, the U.S. benchmark, and dated Brent, which is more expensive and sets the price for most of the world’s crude grades.

This gap, known as the Brent/WTI spread, has averaged $4.46 per barrel this year, nearly twice as high as the year-earlier figure, Reuters data showed.

Wech of JBC Energy said the spread would likely persist in the near future.

The most popular U.S. grades in Europe are WTI, Light Louisiana Sweet, Eagle Ford, Bakken and Mars.

Prices for alternative local grades have been slashed as a result.

CPC Blend differentials recently hit a six-year low versus dated Brent at minus $2 a barrel. Russia’s Urals also came under pressure despite the end of seasonal refinery maintenance. BFO-CPC BFO-URL-BFO-URL-NWE

WTI was available at 80-90 cent premiums delivered to Italy’s Augusta, well below offers of Azeri BTC at a premium of $1.60 a barrel, according to trading sources.

U.S. oil is even edging out North Sea Forties, which is produced in the backyard of the continent’s refineries.

Cargoes of WTI were offered in Rotterdam at premiums of around 50-60 cents a barrel above dated Brent, cheaper than Forties’ premium of 75 cents to dated.

(Additional reporting by Julia Payne and Devika Krishna Kumar; Editing by Dale Hudson)

Oil hits highest since July 2015 as producers say market rebalancing

A gas station worker pumps gas into a car at a gas station of the state oil company PDVSA in Caracas, Venezuela August 29, 2017.

By Jessica Resnick-Ault

NEW YORK (Reuters) – Oil prices hit a more than two-year high on Monday after major producers said the global market was on its way toward re-balancing, while Turkey threatened to cut oil flows from Iraq’s Kurdistan region toward its ports.

The November Brent crude futures contract was up $1.51, or 2.5 percent, at $58.37 a barrel by 11:33 a.m. EDT, its highest since July, 2015.

U.S. West Texas Intermediate crude for November delivery rose $1.02, or 2 percent, to $51.68 a barrel, close to highs last seen in May.

“It’s all driven by the idea is that the production cut is starting to work and the rebalance is underway,” said Gene McGillian, director of market research at Tradition Energy in New York.

Even as both contracts rallied, concerns about U.S. production growth weighed on WTI, widening the spread between the two, he said.

The discount of the WTI to Brent futures widened to $6.61, the widest since August 2015.

Turkey has said it could cut off a pipeline that carries oil from northern Iraq to the global market, putting more pressure on the Kurdish autonomous region over its independence referendum.

The Iraqi government does not recognize the referendum and has called on foreign countries to stop importing Kurdish crude oil.

“If this boycott call proves successful, a good 500,000 fewer barrels of crude oil per day would reach the market,” Commerzbank said in a note.

The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping to lift oil prices by about 15 percent in the past three months.

Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting in Vienna of the Joint Ministerial Monitoring Committee, said output curbs were helping to cut global crude inventories to their five-year average, OPEC’s stated target.

Russia’s energy minister said no decision on extending output curbs beyond the end of March was expected before January, although other ministers suggested such a decision could be taken before the end of this year.

Iran expects to maintain overall crude and condensate exports at around 2.6 million bpd for the rest of 2017, a senior official from the country’s state oil company said.

The energy minister from the United Arab Emirates said the country’s compliance with OPEC’s supply cuts was 100 percent.

Nigeria is pumping below its agreed output cap, its oil minister said.

 

 

(Additional reporting by Osamu Tsukimori in Tokyo and Fanny Potkin in London; Editing by Marguerita Choy and Jane Merriman)