Indonesia Raises Fuel Prices as Jokowi Enacts Key Pledge
Indonesian President Joko Widodo raised fuel prices to reduce state energy subsidies, enacting a key election pledge less than a month after taking office to narrow the budget deficit and free funds for development plans.
The price of subsidized gasoline increased to 8,500 rupiah ($0.70) a liter from 6,500 rupiah effective today, Widodo told reporters in Jakarta late yesterday. Diesel has been raised to 7,500 rupiah a liter from 5,500 rupiah, he said.
Rupiah futures and Indonesia-linked exchange traded funds rose after the announcement as the decision by Widodo, known as Jokowi, spurred optimism he is taking steps to overhaul Southeast Asia’s largest economy. While falling oil costs gave the president room to limit the fuel price increase, his government has yet to say if it will overhaul or scrap the decades-old subsidy system beyond changing prices.
“This was a very important step for Indonesia, and basically eliminated retail fuel subsidies overnight with oil trading where it is now,” Daniel Wilson, an economist at Australia & New Zealand Banking Group Ltd. in Singapore, said in e-mailed comments after the announcement.
The price of Brent crude has slumped 30 percent to about $78.62 since the end of June.
Jokowi is seeking to boost economic growth from the slowest pace since 2009 and reduce Indonesia’s vulnerability to fluctuations in international crude prices. Some 276 trillion rupiah ($22.6 billion) had been earmarked for fuel subsidies in the 2015 budget prior to yesterday, or 13.5 percent of total spending. Oil imports have contributed to a persistent current-account deficit.
Budget Impact
“The country needs a budget to build infrastructure and for education and health,” Jokowi said in presenting the price changes. “Hopefully, the decision to shift the subsidy to the productive sector will open the door for a budget that will be more beneficial for the Indonesian people.”
Jokowi doesn’t need parliamentary approval for any fuel-price increase this year. He will need the legislature, which is dominated by his political opposition, to sign off on his spending plans for a revised budget next year.
Indonesia has been subsidizing fuel since the first oil price shock in the 1970s and kept prices at less than $0.20 per liter until 2005, according to a World Bank report published in March. Before yesterday’s announcement, the price of gasoline at the pump had most recently been raised in 2013, to 6,500 rupiah per liter from 4,500 rupiah.
Inflation
Indonesian full-year 2014 inflation will probably be 7.3 percent after taking into account the fuel-price rise, Finance Minister Bambang Brodjonegoro told reporters yesterday. Consumer prices (IDCPIY) rose 4.83 percent in October from a year earlier, official data show.
The increase in prices will free about 100 trillion rupiah of state spending and reduce the 2015 budget deficit from the current forecast of 2.2 percent, Brodjonegoro said.
Some of the money will be allocated to infrastructure and some to “strengthen the social security for poor and near-poor families,” he said. Funds also will be allocated for maritime development in the archipelago nation, he said.
Dismantling the decades-old fuel subsidy program is a political hot potato -- protests accompanied past price increases and riots spurred by soaring living costs helped oust dictator Suharto in 1998.
After yesterday’s announcement a student association in Jakarta burnt tires at one junction and put up a sign saying: “Fuel expensive. Jokowi go.”
Rupiah, ETF
Twelve-month non-deliverable forwards on the rupiah rose 0.3 percent to 12,192 rupiah as of midnight in Jakarta, according to data compiled by Bloomberg. The IShares MSCI Indonesia ETF (EIDO) advanced 0.3 percent to $27.29.
“We maintain our constructive bias on Indonesia risk assets and believe a hike in fuel prices is critical for performance,” Barclays Plc Singapore-based analysts Wai Ho Leong and Avanti Save said in an Oct. 27 research note.
Southeast Asia’s largest economy expanded 5.01 percent in the third quarter from a year earlier, the least since the period ended September 2009.
“The sharp fall in oil prices couldn’t have come at a better time for Widodo and makes the hikes politically easier to undertake,” Nicholas Spiro at Spiro Sovereign Strategy in London said in an e-mail. “Implementing much-needed institutional and structural reforms is likely to prove much more difficult.”
Hedge Funds Boosted Brent Oil Bull Bets Just Before Slump to $80
Hedge funds and other financial traders increased bullish bets on Brent crude to the highest in two months last week, just before the global oil benchmark plunged below $80 a barrel for the first time in four years.
Money managers’ net wagers on rising prices rose 17 percent to 66,636 contracts during the week ended Nov. 11, according to figures from the ICE Futures Europe exchange today. A day after the report period, Brent futures fell to $79.72, the lowest since September 2010, and have decreased since.
“This must have caused money managers some pain,” Ole Sloth Hansen, an analyst at Saxo Bank A/S, said by e-mail from Copenhagen. “Calling the bottom of the market is one thing, but actually finding it is something else.”
Brent collapsed into a bear market in October on speculation that leading OPEC members won’t pare output in order to drain a supply glut triggered by booming U.S. shale production. Prices rallied on Nov. 10, before ending the day lower, after Chinese exports exceeded forecasts and key oilfields in Libya remained halted.
Some traders may have interpreted the Nov. 10 rally as a “sign of stabilization” and elected to curb bets on declining prices, said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.
Slump Excessive
Producers, consumers and end users of crude became more bearish in the period covered by ICE’s Commitments of Traders report. They extended their net-short position, or bets on falling prices, by 3.3 percent to 319,427 contracts.
Traders probably estimate that Brent’s collapse over the past five months has been excessive, given typical prices over the past three years, Hansen said. Brent traded at $78.41 a barrel in London today, having lost more than 30 percent since June. Still, the outlook for prices remains uncertain before OPEC’s meeting on Nov. 27 and the Nov. 24 deadline for Iran’s negotiations with western governments on its nuclear program, he said.
“I would view a one-third reduction in the price as a level where the risk reward is increasingly skewed to the upside,” Hansen said. “It is, however, brave at this stage where the market has to deal with both the nuclear talks and the OPEC meeting. A solution at one and a failure at the other would leave the downside right open.”
Mounting Pressure on OPEC Spurs More Wagers on Oil Rally
Speculators got more bullish on oil for the first time in three weeks, judging that a slump in prices to a four-year low will force OPEC to act.
The net-long position in West Texas Intermediate rose 8.7 percent in the week ended Nov. 11, U.S. Commodity Futures Trading Commission data show. Long holdings rebounded from the lowest level in 17 months while short bets contracted.
WTI tumbled 30 percent since June as U.S. output climbed to three-decade high, adding to a global supply glut at a time when the International Energy Agency says demand growth is slowing. Ministers from the Organization of Petroleum Exporting Countries accelerated diplomatic visits last week, potentially seeking a consensus before the group’s Nov. 27 meeting in Vienna.
Oil Prices
“The market is under incredible pressure and it will stay that way until OPEC takes decisive action,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management which oversees about $120 billion, said by phone Nov. 13. “There has to be something that changes the story, which is that there’s too much supply.”
WTI advanced 1 percent to $77.94 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. The contract fell 18 cents to settle at $75.64 a barrel today, while Brent dropped 10 cents to $79.31.
Ministerial Travel
Libyan Prime Minister Abdullah al-Thani flew to Saudi Arabia on Nov. 13 just as Iraqi President Fouad Masoum left after a two-day visit, the Saudi Press Agency reported. Rafael Ramirez, Venezuela’s foreign minister and representative to OPEC, held talks in Algeria and Qatar while Saudi Oil Minister Ali Al-Naimi toured Latin America.
OPEC last cut quotas in December 2008, trimming its target by 2.46 million barrels a day in response to the financial crash that sent WTI tumbling from a record $147.27 in July 2008 to $32.40 in December of the same year. OPEC produced 30.97 million barrels daily last month, data compiled by Bloomberg show.
“The lower the price falls, the greater the pressure on OPEC to announce an output reduction,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone Nov. 14.
IEA Outlook
Prices may slide further in coming months as demand slips by about 1 percent to 92.6 million barrels a day in the first quarter from this quarter, the IEA said Nov. 14. The IEA estimates that consumption grew in 2014 at the slowest pace in five years.
U.S. daily crude output climbed to 9.06 million barrels in the week ended Nov. 7, the most in weekly Energy Information Administration data that began in 1983.
“It’s possible that even with an OPEC production cut there won’t be an immediate increase in prices,” Evans said. “It sometimes takes time for the supertanker that is the oil market to switch direction.”
ETF investors also boosted bets on rising prices. The four biggest U.S. exchange-traded funds tied to oil had 70.5 million shares outstanding as of Nov. 12, the most since May 2013, according to exchange data compiled by Bloomberg.
The net-long position in WTI rose by 14,584 to 182,490 futures and options in the week ended Nov. 11, still down 49 percent from the peak in June. Long positions climbed 1 percent and short positions fell 15 percent.
For Brent crude, hedge funds and other money managers raised bullish bets for a third week to 66,636 contracts in the week ended Nov. 11, according to data from the ICE Futures Europe exchange.Gasoline Wagers
In other markets, bullish bets on gasoline increased 5.8 percent to 32,362 contracts, the most since August. Futures advanced 1.2 percent to $2.1036 a gallon on Nymex in the reporting period.
Retail gasoline, averaged nationwide, slid to $2.893 a gallon Nov. 15, the lowest since Dec. 1, 2010, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.
Bearish wagers on U.S. ultra low sulfur diesel decreased 5.2 percent to 29,128 contracts. The fuel climbed 1.1 percent to $2.4687 a gallon in the report week.
Net-long wagers on U.S. natural gas advanced 53 percent to 88,238 lots, the highest since the week ended Sept. 30. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract.
Nymex natural gas rose 11.8 cents to $4.247 per million British thermal units during the report week.
An extended drop in crude prices will reduce investment in shale fields and eventually curb supply, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania.
“We’re at a precipice,” Schork said by phone on Nov. 14. “If prices stay at this level you’ll see an impact on investment in the prolific U.S. and Canadian plays.”
Putin Readies Aid as Rosneft’s $21 Billion of Debt Looms
Russia’s financial crisis has become so severe that President Vladimir Putin found himself reassuring investors late last week that the government would provide the support needed to the world’s largest oil company.
With OAO Rosneft facing $21 billion of mostly foreign-currency debt maturities before April, Putin said the government will “definitely” help the company if necessary, according to an interview on the Kremlin’s website Nov. 14. After yields on Rosneft’s benchmark dollar bonds due in 2022 surged to a record 7.34 percent that day as oil sank to a four-year low, the statements may help restore investor confidence in the company, according to Commerzbank AG.
“Putin’s comments tried to reassure investors about Rosneft’s strategic importance,” Apostolos Bantis, a credit analyst at the German lender, said in a telephone interview from Dubai. “This should alleviate investor concerns of a default-risk scenario.”
Rosneft, which has more short-term debt than any other corporate borrower in Russia, is among companies locked out of global capital markets because of international sanctions tied to the conflict in Ukraine. With the sliding ruble feeding a shortage of foreign currency at home, the state-controlled oil producer’s credit rating envisages a “very high likelihood of extraordinary state support,” Elena Anankina, a Standard & Poor’s analyst, said in a Nov. 12 interview.
A Rosneft press official declined to comment when contacted by phone on Nov. 15.
‘No Hurry’
Putin’s statement came three days after Alexei Kudrin, the former finance minister who designed Russia’s Wellbeing Fund, said Rosneft shouldn’t be allowed anywhere near it. Economy Minister Alexei Ulyukayev said on Oct. 29 that the company’s bid for more than $43 billion in state aid didn’t meet the fund’s requirements.
Rosneft may get state aid after an assessment, Putin said in the interview with Russian state news service Tass, which was distributed by the Kremlin’s press service. There’s “no hurry” as the company is in a good financial condition, he said. The oil producer may get 300 billion rubles ($6.4 billion) from the Wellbeing Fund, Kommersant said today, citing officials it didn’t identify.
While there is little risk that Rosneft won’t pay back its debt because it’s “too important for Russia,” its reliance on state hand-outs can turn off investors, according to Sergey Dergachev at Union Investment Privatfonds GmbH in Frankfurt.
Putin Ally
“I am not a big fan of being invested in credits which are fundamentally poorly positioned and where you have to be relying on state funds,” Dergachev, who helps oversee $10 billion as a money manager at Union, said by e-mail on Nov. 14. “Stand-alone, Rosneft will have much more difficulty in a stressed-market scenario than its peers, and this is what I, as an investor in emerging-market debt, want to avoid.”
Rosneft, headed by long-time Putin ally Igor Sechin, has $10.2 billion in debt due this year and $19.5 billion in 2015, according to a company presentation on Oct. 29. Russia’s foreign-currency reserves dropped to a five-year low of $428.6 billion in October, with the Wellbeing Fund at $81.7 billion.
The company has more than $20 billion of available cash as well as backup credit lines of about $6 billion to help roll-over its debt pile, Moody’s Investors Service analyst Julia Pribytkova said by e-mail on Nov 12. Rosneft, which racked up debt for its $55 billion purchase of BP Plc’s TNK-BP joint venture in 2013, may also tap domestic lenders for $3 billion to $5 billion in bridge loans early next year, she said.
Investor Wariness
S&P, which rates the Russian company at BBB- with a negative outlook, its lowest investment grade and at par with the sovereign, said this grade already factors in potential state support because of “Rosneft’s importance for Russia as a large oil producer, a large taxpayer and employer, with very strong links to the government,” Anankina said.
The jump in Rosneft’s bond yields is fueled by investor wariness amid tumbling crude prices and concern the crisis in Ukraine will trigger new sanctions against Russia, Egor Fedorov, an analyst from ING Groep NV in Moscow, said by e-mail Nov. 14.
Penalties from the U.S. and the European Union, which accuse Putin of destabilizing neighboring Ukraine, are making it harder for Russian companies to refinance their debts, with corporate bond sales dropping 64 percent this year from the same period of 2013, according to data compiled by Bloomberg. While Putin denies he’s helping pro-Russian rebels in Ukraine, the ruble is down 30 percent in 2014, the biggest drop in emerging markets.
Putin left a G-20 meeting in Brisbane, Australia early after being told by fellow leaders to stop arming the separatists. The ruble weakened for a third day against the dollar, sliding 0.2 percent to 47.2450 as of 5:13 p.m. in Moscow.
“We do not foresee any difficulties with debt repayments in the near term” for Rosneft, Brigitte Posch, the head of emerging-market corporate debt at Babson Capital Management LLC in London, where she manages about $1.8 billion, said by e-mail on Nov. 14. “Primarily because of the state support.”
Russia Seen as Biggest Threat in Poll Even as Oil Erodes Putin Power
Russia poses the biggest security risk to world markets and will be the biggest loser from the drop in oil prices, according to a Bloomberg Global Poll of international investors.
Asked which of five possibilities posed the greatest risk to global financial markets, 52 percent of participants chose the Russia-Ukraine conflict. Twenty-six percent cited Islamic State, while Ebola barely registered with 5 percent. The U.S. was seen as the most likely beneficiary from lower crude prices.
Russia is being buffeted by the twin blows of sanctions and an oil-market selloff that threatens to hollow out its economy. While the country is menacing Ukraine with tanks and sending its jets into foreign airspace, President Vladimir Putin said Nov. 14 that the drop in crude is potentially “catastrophic” for the world’s largest energy exporter.
“The Russia-Ukraine situation is more dangerous as we have a sovereign state, which is trying to increase its power by creating chaos both through threatening actions of war,” Mikael Simonsen, chief sales manager for cross asset sales at Nordea Bank in Helsinki and a poll respondent, said by e-mail. “This might impact the common thinking of how developed we are today, and impact the risk premium.”
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The poll of 510 investors, analysts and traders who are Bloomberg subscribers was conducted Nov. 11-12 by Selzer & Co., a Des Moines, Iowa-based firm, and has a margin of error of plus or minus 4.3 percentage points.
Warship Movement
Investors have been confronted by a series of geopolitical crises this year ranging from war in Eastern Europe to Ebola in Africa and persistent territorial tensions between China and its neighbors. In the past week alone, Russia moved warships toward Australia on the eve of a Group of 20 summit and announced plans to extend its long-range bomber patrols as far as the Gulf of Mexico.
Russia, which annexed Crimea from Ukraine in March, has repeatedly denied that it’s sending its armed forces into Ukraine or aiding the separatists.
Standoff in Ukraine
The degree of risk to financial markets from political and military violence was seen rising by 46 percent of respondents, while 41 percent saw it steady and 13 percent said it’s declining. Russia itself has paid a price for the conflict and ensuing sanctions: The ruble is down 30 percent this year.
Falling oil prices also have the potential to alter the political landscape. Russia was seen by 51 percent as the biggest loser from the lower price of oil, ahead of Venezuela at 21 percent, Saudi Arabia at 12 percent and Iran at 6 percent.
Affordable Prices
“Russia and some other smaller producers might be the biggest losers as they depend on a high oil price to finance the government budget and external trade,” said Fabian Fritzsche of Collineo Asset Management GmbH in Dortmund, Germany. “For the Middle East oil exporters a higher price is nice, but they can afford a lower price.”
Opinions on which countries benefit most from cheaper oil were more divided. Thirty-one percent pointed to the U.S., 18 percent to China and 15 percent to Japan. Eleven percent cited Europe and India.
Many European investors saw themselves and industrialized Asian countries as the bigger winners because U.S. shale production will be hit by falling prices.
“The U.S. also benefits from low prices, but to a less extent than the EU because the U.S. is a big oil producer too,” said Gala Prada Sevilla, head of pension funds at Fiatc Seguros in Barcelona.
Investors are also trying to maneuver ongoing disputes between Japan and China over territory in the East China Sea. Asians were more likely to see rising risk than respondents in the U.S. or Europe.
For some respondents, Islamic State represents the biggest threat of all because the protagonists are the most unpredictable.
“It cannot be controlled, you never know what they are up to, they will do anything to achieve their goals and they are expanding,” Fiatc’s Prada said. “Ukraine is more a local conflict and I don’t think the EU will let it get out of hand.”
For Related News and Information: World Outlook Darkening as 89% in Poll See Europe Deflation Risk Russia Bracing for Catastrophic Oil-Price Slump, Putin Says Putin, Rousseff Plunge in Poll While Newer Leaders Find Support Global poll stories: NI BNPOLL Top economy stories: TOP ECO
Nigeria Plans Budget Cuts as Oil Price Drop Erodes Revenue
Nigeria is planning spending cutbacks next year as falling oil prices eat into the government’s revenue, Finance Minister Ngozi Okonjo-Iweala said.
The minister will propose to lower expenditure by 6 percent to 4.66 trillion naira ($27 billion) in the 2015 budget by tightening rules on foreign travel and raising taxes on private jets and luxury cars, Okonjo-Iweala told reporters yesterday in the capital, Abuja. Those plans are based on a benchmark oil price of $73 a barrel, down from $77.5 in this year’s budget, she said.
The government of Africa’s biggest oil producer, which is preparing to hold elections on Feb. 14, earns about 70 percent of its income from crude oil, the price of which has slumped to a four-year low this month. The naira weakened to a record low last week, prompting the central bank to run down reserves in a bid to defend the currency.
“We can control and will control the way the country responds” to a global price drop, she said, adding that Nigeria has contingency plans if the oil price falls further.
Nigeria, a member of the Organization of the Petroleum Exporting Countries, expects to produce 2.27 million barrels of oil per day next year, generating revenue of 6.8 trillion naira, Okonjo-Iweala said. This year’s budget was based on output of 2.39 million barrels a day.
The naira fell 0.4 percent to 172.25 against the dollar on the interbank market as of 12:14 p.m. in Lagos, the commercial capital, taking its decline this year to 6.9 percent.
Oil Savings
The Excess Crude Account, which was set up to save the difference between the selling price of oil and the budgeted benchmark, may be drawn down to about half of its current balance of $4.11 billion by the end of the year, the minister said. Foreign currency reserves stood at $37.6 billion on Nov. 13, down from $39.5 billion at the end of September and $44.9 billion a year ago.
The proposals don’t go far enough to address the weakness in government revenue, Bismarck Rewane, chief executive officer of Lagos-based Financial Derivatives Co., said by phone. Okonjo-Iweala has proposed a 5.9 percent cut in the benchmark oil price while the cost of crude has plunged by almost a third since July, he said.
“The cut alone will not address the problem of fiscal imbalance,” he said. “As a nation, you have to reduce your leakages and increase your injections.”
The Finance Ministry’s proposals will be submitted to lawmakers in the National Assembly where they are debated before a final document can be signed into law by the president. The ministry’s proposals for the 2014 budget were given to lawmakers in late December last year, and Jonathan signed the budget in May.
Printing additional naira or borrowing heavily in the domestic market to plug the shortfall aren’t options, Okonjo-Iweala said. The government needs to guard against inflation, which reached 8.1 percent in October, she said.
“The worst enemy of the poor in any country is inflation,” she said. “We won’t compensate by printing money.”
Japan's recession big drag on oil prices
NEW YORK, Nov. 17 (UPI) -- Government data showing the Japanese economy slipped unexpectedly into recession battered crude oil prices in Monday trading.
The Japanese government said gross domestic product slipped 1.6 percent in the third quarter. That's in contrast to forecasts of a 0.4 percent decline to 2 percent expansion.
Japan started taking on more fossil fuels to compensate for the loss of nuclear power from the 2011 meltdown of the Fukushima Daiichi facility. That corresponded with the shift in energy demand centers away from Western economies toward Asia.
The shift in global supply and demand dynamics, coupled with slow growth in the eurozone, helped push crude oil prices into a bear market, shedding more than 20 percent of their value since June.
Brent, the global price index, was down more than $1 per barrel early Monday to trade near $78 per barrel, extending the slip below the $80 mark that started last week.
West Texas Intermediate, the U.S. benchmark, lost nearly $1 to trade near $74.90 for the December contract.
Last week, the International Energy Agency projected growth in oil demand from a five-year low of 680,000 barrels per day to 1.1 million bpd next year "as the macroeconomic backdrop is expected to improve."
Hess starts new oil production in Gulf of Mexico
NEW YORK, Nov. 17 (UPI) -- Hess Corp. said Monday the start of production from its Tubular Bells field in the Gulf of Mexico shows it has the mettle to succeed in a complex environment.
Discovered in 2003, Hess said the deep-water field should be producing on average 50,000 barrels of oil equivalent per day by the end of the year.
"This important achievement demonstrates our ability to successfully execute highly complex, deep-water development projects," said John Hess, chief executive officer.
Development plans for Tubular Bells were sanctioned more than two years ago. The field lies more than three-quarters of a mile beneath the water's surface.
In October, Hess said it expects to pull at most 80,000 barrels of oil per day from the Stampede project in the Green Canyon reserve area of the Gulf of Mexico.
For Chevron, which holds a minority stake in Tubular Bells, the new development helps advance the company's production growth targets.
"Achieving first oil at Tubular Bells is an important step toward Chevron achieving its production goal of 3.1 million barrels per day by 2017," Vice Chairman George Kirkland said in a separate statement.
The U.S. federal government says the Gulf of Mexico is "one of the most productive basins in the world" and is one of the cornerstones of the domestic energy sector.
New fields in the Gulf of Mexico should boost output by more than 115,000 barrels of oil equivalent by 2016.
After that, analysis from energy consultant company Wood Mackenzie finds Gulf of Mexico oil production should start to level off.
Hess last year transformed into an exploration and production company after it left the refining business by closing a facility in New Jersey. It sold its entire retail sector of gasoline stations and convenience stores to Marathon Petroleum Corp. in June.
Kabul, Islamabad pursue gas pipeline connections
ISLAMABAD, Nov. 17 (UPI) -- Islamabad thanks the leadership in Kabul for putting renewed emphasis behind a multilateral gas pipeline from Turkmenistan, the Pakistani prime minister said.
Representatives from Turkmenistan, Afghanistan, Pakistan and India met last year in Ashgabat, the capital of Turkmenistan, to sign a transaction advisory services agreement. That cleared the way for the Asian Development Bank to look for a consortium to find the money needed to build the $7.8 billion pipeline.
Pakistani Prime Minister Nawaz Sharif met Saturday with visiting Afghan President Ashraf Ghani to discuss regional energy and trade initiatives, including TAPI.
"We reaffirmed our resolve to forge a robust economic partnership - by expanding trade, promoting investment, improving infrastructure, building road and rail links and enhancing energy collaboration," he said.
Pakistan and India would each get 1.3 billion cubic feet of natural gas per day and Afghanistan would get 500 million cubic feet of gas per day from the pipeline from Turkmenistan.
Pakistan's aging infrastructure leaves it short on electricity. Ghani, elected this year to take the place of long-time President Hamid Karzai, said addressing regional underdevelopment would help both countries succeed.
"This outcome owes much to the statesmanship of the new Afghan leadership and would further strengthen Afghanistan's stability and national unity," Pakistan's prime minister said.
Norway's Statoil pegs future to East African gas
By Daniel J. Graeber Follow @dan_graeber Contact the Author | Nov. 17, 2014 at 8:36 AM
STAVANGER, Norway, Nov. 17 (UPI) -- Norwegian energy company Statoil said Monday it was putting an emphasis on natural gas developments in sub-Saharan Africa.
"Statoil has over the past few years made significant gas discoveries offshore Tanzania and we are excited about the opportunities we see for a natural gas and LNG development," Statoil acting Chief Executive Officer Eldar Saetr said in a statement.
Statoil and its joint venture partner, Exxon Mobil, in October announced the discovery of about 1.2 trillion cubic feet of natural gas in place at the Giligiliani-1 exploration well offshore Tanzania. The new discovery pushes the total of in-place gas reserves above the 20 trillion cubic feet mark.
Saetr pointed to a report from the International Energy Agency, which said the sub-Saharan economy could grow by as much as 30 percent by 2040 with the right investment climate in place.
Last year, energy consultant group Wood Mackenzie reported Tanzania was among the growing number of emerging producers in East Africa. Despite the discoveries and opportunities, Statoil said much of the region's population still lacks access to reliable forms of energy.
Saetr said operating in East African basins comes with responsibilities.
"This is about developing a sound, sustainable and profitable business that gives the government revenues necessary for economic growth and development," he said. "It is about contributing to local capacity building, and about contributing to openness and transparency."
EU report laments lack of free trade
BRUSSELS, Nov. 17 (UPI) -- The European Union's trade commissioner said Monday she regretted global trade was restricted, where road blocks exist even in the U.S. market.
Commissioner Cecilia Malmstrom said trade restrictions remain strong among many of the bloc's commercial partners.
"I regret to see that many countries still consider protectionism a valid policy tool," she said in a statement Monday.
With the European economy struggling to emerge from the global economic recession, Malmstrom said such restrictions were fueling uncertainty in the world economy.
In an annual report, the commission said the number of export restrictions is problematic in an economy where connections are strong, particularly in the trade of natural resources.
"The tendency to restrict participation of foreign companies in public tenders remains strong, in particular in the United States," the report said.
The European economy is looking to diversify an economy that depends in part on Russian natural resources. U.S. allies have said sending natural gas from shale could help break the Russian grip on the European economy.
Companies looking to send shale gas from the United State in the form of liquefied natural gas need a special permit to do so from the federal government if they seek to target economies without a free-trade agreement.
There are no free-trade agreements in place between the United States and European countries. U.S. and European leaders said in a joint statement they were committed to the Transatlantic Trade and Investment Partnership that would clear some of the energy trade hurdles.
"We remain committed ... to promote stronger, sustainable and balanced growth, to support the creation of more jobs on both sides of the Atlantic and to increase our international competitiveness," Saturday's statement read.
A policy paper obtained in June by the Washington Post showed the EU wanted a commitment to free export of crude oil and natural gas from the United States as part of the TTIP.
"Such a specific commitment would, in the EU's view, not require that the U.S. amend its existing legislation on oil and gas," the EU said.
In February, members of an EU civil liberties committee passed a measure by 33 votes to 7, with 17 abstentions, that said the trade deal with the United States was in serious risk because of spying allegations leaked to the media last year by Edward Snowden, a former contractor for the National Security Agency.
US commercial crude stocks likely fell 660,000 barrels last week: analysts
New York (Platts)--17Nov2014/458 pm EST/2158 GMT
US commercial crude stocks are expected to have declined 660,000 barrels in the reporting week that ended November 14, according to a Platts analysis and a survey of oil analysts Monday.
The American Petroleum Institute will release its weekly stocks data at 4:30 pm EST (2130 GMT) Tuesday and the US Energy Information Administration is scheduled to release its weekly data at 10:30 am EST (1530 GMT) Wednesday. The EIA five-year average shows inventories falling significantly by 3.1 million barrels.
Refineries tend to come back into service in mid-November after performing seasonal maintenance, causing stocks to draw lower, reversing the accumulation that occurs once the summer driving season concludes.
US crude stocks are well supplied by recent historical standards. At 378.5 million barrels at the end of the week that ended November 7, crude stocks were 4.9% above the EIA five-year average (2009-13).
Analysts expect US refinery utilization rates to have increased 0.4 percentage point to 90.5.
Crude runs increased the last two reporting periods. Refineries processed 15.8 million b/d, compared with 15.4 million b/d one year earlier. During the summer, refineries were processing more than 16 million b/d each week.
In refinery news, Phillips 66-operated Wood River refinery in Roxana, Illinois, completed planned maintenance November 11. Repairs began at the 306,000 b/d refinery September 18.
DISTILLATE STOCKS SEEN FALLING
US distillate stocks are expected to have drawn 1.2 million barrels lower over the latest reporting week. The EIA five-year average shows US distillate stocks typically draw 1.9 million barrels in this reporting week.
US distillate exports to Europe rose sharply last week to 440,000 mt from 140,000 mt the previous week, Platts cFlow ship-tracking tool showed.
A tight supply picture in Europe improved the economics of shipping distillates after a prolonged period of closed arbitrage.
Exports provide an additional outlet for distillates, helping drain inventories and offsetting the impact from increased domestic production.
BP restarted a hydrotreater November 12 at its 413,000 b/d Whiting, Indiana, refinery. The hydrotreater, which involves distillate production, had been undergoing repairs since early October.
US gasoline stocks likely were 600,000 barrels higher last week, according to the analysts surveyed. The EIA five-year average shows inventory levels falling a modest 366,000 barrels in this reporting week.
At 203.6 million barrels in the reporting week that ended November 7, US gasoline stocks were 1.9% below the EIA five-year average.
Gasoline stocks on the US Atlantic Coast -- home to the New York Harbor-delivered NYMEX RBOB contract - totaled 50.3 million barrels, 1.8% below the EIA five-year average.
Phillips 66 restarted the No. 40 fluid catalytic cracker at its Borger refinery in Texas November 14. The FCC was closed November 8 for maintenance.
The Borger facility has two FCCs with a total capacity of 56,000 b/d. Petrobras' Pasadena, Texas, refinery restarted November 9 an FCC and sulfur recovery unit. The 56,000 b/d FCC was closed in late September.
FCCs convert vacuum gasoil into gasoline and other high-end refined products. An FCC's closure could result in a gasoline stock drawdown, unless imports increase enough to offset production losses.
Nigeria's Q3 oil output down 3% from Q2 to 2.15 million b/d
Lagos (Platts)--17Nov2014/739 am EST/1239 GMT
OPEC member Nigeria's July-September oil output fell 3% quarter on quarter to an average 2.15 million b/d, National Bureau of Statistics data showed Monday.
With oil being Nigeria's economic mainstay, the country's growth rate fell to 6.23% in the third quarter, from 6.54% in the April-June period, the agency said.
"The oil sector experienced production challenges," it said.
Large-scale theft remains a major challenge to oil production and exports, with output disrupted by thieves vandalizing pipelines and other production facilities.
On Sunday, Nigeria's special military unit in the Niger Delta, the Joint Task Force, said that on Friday it had arrested 10 suspected thieves who had laid siege to oil facilities in Brass River near the Eni-operated Brass Oil Export Terminal, siphoning crude into vessels.
"The arrest was effected following a tip-off that a vessel christened MV SKYE [was] laden with substances suspected to be stolen crude oil," JTF spokesman Mustapha Anka said.
Crude oil theft is a growing problem for Nigeria, with estimates the country loses $6 billion revenue per year.
Armed gangs are tapping crude from pipelines either for local refining or to be moved to barges for sale to tankers waiting off the coast.
State oil firm Nigerian National Petroleum Corp. and the JTF said last month cases of oil theft had been rising despite government efforts to curb the crime, pumping money into security agencies to battle the thieves.
The finance ministry said in October Nigeria's gross revenue in September fell 20% month on month to Naira 502 billion ($3.2 billion), partly due to the closure of trunk lines and pipelines at oil export terminals.
Singapore 10 ppm gasoil premium at close to one-year high on tightness, firm West
Singapore (Platts)--17Nov2014/255 am EST/755 GMT
The FOB Singapore 10 ppm sulfur gasoil jumped to a near one-year high last Friday, November 14, due to supply tightness and a flurry of arbitrage movements of ultra low sulfur diesel from Asia and the Middle East to Europe as demand in the West firmed, market sources said Monday.
10 ppm sulfur gasoil was assessed at $2.36/barrel to the Mean of Platts Singapore Gasoil assessments, FOB basis, last Friday, jumping 29% from a $1.83/b premium last Thursday.
Trafigura and BP were bidding for 10 ppm sulfur gasoil for December 1-5 loading from Singapore at MOPS Gasoil plus $2.50/b during Platts Market on Close assessment process last Friday, which failed to elicit sell interest.
The last high for 10 ppm sulfur gasoil was December 5, 2013, at $2.68/b premium, Platts data showed.
Sources said while arbitrage economics to send cargoes from Asia and the Middle East to Europe were "still not good enough" with the December gasoil Exchange of Futures for Swaps at minus $10.50/mt last Friday, traders had term contractual commitments in the West to fulfil, and some were moving in anticipation of stronger demand during winter, with diesel used for heating in Europe and the US.
The tightness in Europe was triggered by a sharp drop in exports from the US due to refinery outages, strong demand in both Northwest Europe and the Mediterranean, and European refineries in the middle of seasonal refinery maintenance, traders said.
Stocks in the Amsterdam-Rotterdam-Antwerp region were drawn down, which led the December/January ICE gasoil futures to flip into a $3.50/mt backwardation from a contango up to November 7.
"All the barrels are arbed out. AG and India production went west. Plus China imported many vessels of 10 ppm in November and [is] looking to import [for] December as well," said a Singapore-based trader.
China was said to have imported up to five medium-range tankers of 10 ppm sulfur gasoil from Japan for November loading, and could be looking to buy more for next month. The country is usually a gasoil exporter and does not import, or imports very little, gasoil.
Japan is seeing lower exports of 10 ppm gasoil in December as refiners maximize kerosene production to stockpile for winter in North Asia, and some refineries just completed refinery maintenance, a source with a Japanese refiner said.
Japan is expected to have about seven MRs of gasoil for export next month, down from a typical monthly volume of 10-15 MRs, the source said.
The Singapore 500 ppm sulfur gasoil crack against front-month cash Dubai crude peaked at a six-month high of $18.32/b on November 10 before receding to $17.84/b last Friday.
Argentina, Chile state firms aim to boost offshore natural gas output
Buenos Aires (Platts)--17Nov2014/455 pm EST/2155 GMT
Argentina's state-run energy company YPF and Chile's state-owned ENAP agreed Monday to invest around $200 million to boost offshore oil and natural gas production in southern Argentina.
The goal is to ramp up gas output to 4 million cubic meters/d from 2.4 million cu m/d over the next three years, and to increase output of associated liquids to more than 7,000 b/d from 5,000 b/d, YPF said in a statement.
The partnership will allow the companies "to share financing to accelerate the process," YPF CEO Miguel Galuccio said after signing the deal with ENAP General Manager Marcelo Tokman in Buenos Aires.
The project will be carried out at Magallanes, a block in the South Atlantic off the coast of Tierra del Fuego, the southernmost province of Argentina.
YPF said the companies plan to build a new plant for gas treatment, compression and injection, and make improvements to a processing plant at Magallanes. They also will lay new undersea pipelines to improve deliveries of the output to the mainland from the five platforms and 56 productive wells on the block.
For YPF, the deal is part of an effort to rebuild production after it declined 6% a year between 2002 and 2012, leading to a surge in imports to meet domestic demand. The company, which came under state control in 2012, plans to invest $37.2 billion between 2012 and 2017 in developing shale resources and squeezing more out of maturing reserves, with the goal this year to increase oil and gas production 5% and 18%, respectively, compared with 2013.
ENAP plans to use the project as part of a wider plan to boost its gas production by 60% and oil by 300% from Magallanes by 2025.
"We are ensuring a good balance in our product mix," Tokman said. "We are taking advantage of reserves that are already proven, and we are generating a significant contribution to future economic results of ENAP."
YPF, which holds the license to Magallanes, said the agreement to extend the field concession hinges on approval from national and provincial governments in Argentina.
YPF is the biggest producer in Argentina, accounting for about 42% of 530,000 b/d of crude and 30% of the 114 million cu m/d of gas.
Algeria's H1 oil, gas exports edge down to 50.59 million mtoe: Central Bank
Algiers (Platts)--17Nov2014/745 am EST/1245 GMT
Algeria's oil and gas exports in the first half of this year fell 1.09% year on year to 50.59 million mt oil equivalent (2.06 million boe/d) from 51.11 million mtoe, the country's central bank said Monday.
The Bank of Algeria said crude exports for the period fell 3,528 mt year on year, while refined oil product exports rose 2,937 mt over January-June.
Meanwhile, a 2,631 mtoe (573,000 Mcf/day) decline in exports of pipeline gas were offset only partially by a 1,837 mt (490,000 Mcf/d gas equivalent) increase in LNG exports.
The total value of Algeria's hydrocarbon exports in the first half of this year fell 1.37% year on year to $31.83 billion from $32.27 billion, the bank reported.
That included a $1.34 billion drop in gas export revenue, partially offset by the $900 million rise in revenue from exports of oil and gas liquids.
The price of Algeria's Sahara Blend export crude averaged $109.45/barrel during the first half of this year, compared with $108.55/b in the first half of 2013, data showed.
Italian October natural gas demand down 5.2% year on year to 4.556 Bcm
London (Platts)--17Nov2014/805 am EST/1305 GMT
Natural gas demand in Italy in October stood at 4.556 billion cubic meters, down 5.2% year on year, gas and power exchange manager GME said.
The decrease was mainly due to lower power plant consumption, which was down by 10.3% to 1.628 Bcm.
Meanwhile, demand from industrial sites and local grids fell 5.3% and 1.8%, respectively, to 1.092 Bcm and 1.639 Bcm. Exports and grid losses rose 17.9% to 197 million cu m.
On the supply side, imports decreased 16.6% to 4.160 Bcm, driven by a drop in Algerian and Russian gas flows into the Mazara del Vallo and Tarvisio entry point by 87% and 33.2%, respectively, to 1.527 Bcm and 151 million cu m.
Imports from Switzerland and Libya into Passo Gries and Gela increased 126% and 107.5%, respectively, to 1.461 Bcm and 588 million cu m.
Output at the Cavarzere LNG terminal fell 12.2% to 432 million cu m, while national production was down 10.6% to 579 million cu m.
GME said 294 million cu m were injected into storage in October, down 64.7% year on year, while 579 million cu m were taken out of storage.
Total levels of stored gas stood at 11.749 Bcm on the last day of October, up by 12.4% year on year.
Meanwhile, some 4.3 TWh were exchanged on regulated gas platforms, accounting for 8.9% of total demand.
All volumes were exchanged on the sessions "G-1" and "G+1" of the gas balancing platform PB-gas, which settle the day before and after the balancing takes place, at average prices of Eur23.61/MWh and Eur26.45/MWh, respectively.
Libya's El Sharara oilfield still closed due to pipeline shutdown
TRIPOLI, 14 hours, 16 minutes ago
Libya's El Sharara oilfield, which normally produces around 200,000 barrels per day (bpd), remains shut due to its main pipeline being closed, an official from the state-run National Oil Corporation said.
The field, one of the Opec producer's largest, was caught up in the country's political struggle between rival armed factions earlier this month after gunmen forced a shutdown.
The commander of guards of El Sharara oilfield told Reuters his men had been forced out of the area by local tribes, some workers at the field and members of an armed faction allied to a group now controlling Tripoli.
He said his guards were waiting for negotiations with tribal elders to resolve the stand-off over El Sharara.
The fight over El Sharara is part of a wider struggle in Libya where competing armed groups and factions are vying for control and energy resources three years after the ouster of Muammar Gaddafi.
One group, Libya Dawn, allied to the city of Misrata, took over Tripoli after battles in the capital over the summer. It has since set up its own government and reinstated a former parliament to rival the internationally recognised government of Prime Minister Abdullah Al Thinni.
Since the fall of Tripoli to the Libya Dawn forces, Al Thinni's government and the elected parliament have been operating out of the eastern city of Tobruk. The El Sharara guards are from Zintan forces, which are allied to Thinni's government.
Reports from one Libyan industry source said the pipeline leading to the Zawiya port had been blocked in Zintan territory.
Since the end of Gaddafi's one-man rule, Libya's fledgling democracy has struggled to advance with heavily armed brigades of former rebels who once fought together against Gaddafi now competing with each other for power.--Reuters
Oil slide won't impact Saudi budget: Minister
RIYADH, 13 hours, 2 minutes ago
The recent plunge in oil prices will not have a direct impact on Saudi Arabia's budget as the kingdom takes precautions to handle all possibilities when planning its finances, Finance Minister Ibrahim Alassaf was quoted as saying.
Asked by Saudi newspaper Okaz if cheaper oil could have a direct impact on next year's budget or government spending, Alassaf replied, according to the newspaper's Monday edition: "The global oil situation usually in one way or another affects countries' revenues and debts, but the kingdom has always been keen on building its budgets on estimates that take all possibilities into consideration." He did not elaborate.
With the price of Brent crude oil now below $80 a barrel, down from around $115 in June, the Saudi government may post a budget deficit next year. The oil price which the government needs to balance its budget rose to $89 a barrel in 2013, the International Monetary Fund has estimated.
However, economists believe the country's huge fiscal and foreign reserves - the central bank's net foreign assets exceed $700 billion - mean financing that deficit will be easy, and the kingdom will be able to avoid any sharp cutback in spending if it chooses to do so.
The country's 2015 budget plan is expected to be announced in late December. Its original 2014 budget projected spending would rise a modest 4.3 per cent from the 2013 plan to SR855 billion ($228 billion), the slowest rate in a decade, suggesting the kingdom was already starting to curb expenditure after years of huge increases.
The 2014 budget conservatively projected state finances would exactly break even this year. The ministry did not specify the average oil price on which that calculation was based, but since the average price so far this year is above $100, Saudi Arabia still looks likely to post a budget surplus for 2014. - Reuters
COLUMN-OPEC's options (none of them good): Kemp
By John Kemp
Nov 17 (Reuters) - As ministers from the 12 members of the Organization of the Petroleum Exporting Countries (OPEC) prepare to fly to Viennafor their 166th meeting next week, the quiet consultations and soundings have already begun.
OPEC must decide whether and how to respond to the 30 percent decline in oil prices since the middle of June, in what may be the organisation's toughest test in five years.
Slower oil demand growth and rising competition from non-OPEC suppliers, especially U.S. shale producers, pose a common threat to all the organisation's members.
But formulating a common response will be hard because the slowdown in demand and the shale revolution have had a very different impact from member to member.
Saudi Arabia, Kuwait and the United Arab Emirates are producing and exporting close to their highest-ever levels of crude, according to the BP Statistical Review of World Energy.
All three countries have built large financial reserves so they could weather a prolonged period of lower prices without too much effect on their day-to-day government operations.
In contrast, production and exports from Iran, Iraq, Libya, Venezuela and Nigeria have been variously hit by war, sanctions, unrest, expropriations and mismanagement.
None of those countries has significant foreign exchange reserves and the drop in oil revenues will quickly feed through into reduced government spending and/or inflation.
The light oils being produced in the United States are not much of a direct threat to the heavier crude grades exported by Saudi Arabia and other Gulf countries.
But they compete directly with the very light oils exported by North and West African producers, including Libya, Nigeria and Angola.
Formulating a common response is made complicated because ministers are negotiating on two separate issues: (1) OPEC's share of the world oil market versus non-OPEC producers; and (2) how OPEC's share is allocated among its members.
Allocating production is the age-old problem for any cartel -- OPEC is a cartel, whatever its members may say, and however incomplete its market coverage.
OPEC has struggled with these issues, on and off, since the early 1980s, so it is familiar territory for the ministers.
But sharing out the market is much easier when oil demand is growing rapidly and non-cartel supplies are flat or falling -- a situation that describes much of the last decade.
It is much harder when demand is stagnating and non-OPEC output is surging -- putting the organisation back into the difficult position in which it found itself 30 years ago.
TO CUT, AND IF SO, HOW MUCH
Ministers must decide whether to cut production, and if so by how much, and how to share out the reductions.
The first option is to do nothing, allowing lower prices to force a rebalancing between demand and supply: the best cure for low prices is low prices.
Prices might remain stuck at current levels, perhaps even head another $10 or $20 lower in the short term.
But eventually demand will pick up as moves towards energy efficiency take a back seat in consuming countries and incomes rise in emerging markets.
And supply growth will fall as shale producers cut back and new capital spending around the world is postponed or cancelled.
The market would tighten again over a 12- to 24-month period and prices begin to rise.
Saudi Arabia, Kuwait and Abu Dhabi could ride out a period of lower prices with comparative ease. But for the organisation's other members, it would be much tougher.
The second option is to cut production, sacrificing market share in the hope of obtaining higher prices and higher revenues overall, and perhaps also speed the adjustment process.
But there is no guarantee production cuts would produce a big enough rise in prices to offset the fall in volumes. If prices rose too much, shale producers would be unlikely to cut back, and the necessary rebalancing might not take place at all.
ALLOCATING PRODUCTION CUTS
If the organisation does decide to cut, the question becomes how to share the reductions.
The producers that are best placed to cut their output (Saudi Arabia, Kuwait and Abu Dhabi) are also the ones with the least incentive to do so.
The countries that most need higher prices (Iran, Iraq, Libya, Nigeria and Venezuela) are the least able to afford to reduce their output.
Iran blames Saudi Arabia for taking advantage of U.S. sanctions to increase its market share at the expense of Iranian exports, and expects Saudi Arabia and its allies to shoulder the bulk of any cuts.
In fact, Saudi Arabia's share of global oil exports has remained broadly flat. It is U.S. shale production (up 3 million barrels per day in the last five years) which has filled the gap left by sanctions, war and unrest across the Middle East.
If there are to be production cuts, Saudi Arabia will almost certainly insist all the organisation's members participate. There is no reason for the kingdom to accept a significantly greater share of the cuts than its historic market share (link.reuters.com/suw43w).
Cuts totalling around 500,000 barrels per day (bpd) would be too small to make a significant difference to prices or market balances in the short term.
To have any impact, the organisation would need to find cutbacks amounting to at least 1 million bpd.
Based on Saudi Arabia's historic share of OPEC production, which has been around 30 percent since the late 1990s, the kingdom might contribute 300,000 bpd -- which could perhaps be stretched to as much as 500,000 bpd.
Close allies such as Kuwait and Abu Dhabi might contribute another 150,000 to 250,000 bpd between them based on their financial strength. That would leave the other members needing to find relatively small and symbolic cuts totalling around 300,000 to 400,000 bpd.
Production cuts would demonstrate that the organisation is not powerless to respond to the challenge posed by the shale revolution. But by propping up prices, production cuts also prop up non-OPEC suppliers who contribute nothing to the cutbacks.
Free-riding has always been the organisation's biggest problem. In the past, it was Britain, Norway, Mexico and Russia that benefited most. Now it would be U.S. shale players.
If prices do bounce and non-OPEC supply growth continues unabated, OPEC could be forced to cut again in 12-18 months, and face the prospect of a permanent loss of market share.
OPEC must determine the best joint path for its output, prices and the output of non-members. This is fiendishly difficult, given the large uncertainties around the demand outlook and the sensitivity of U.S. shale producers to falling prices.
So there are no good options for oil ministers in Vienna next week -- only a choice between poor alternatives in the hope of finding the least-bad one.
And there is no guarantee that they can reach an agreement at all. (Editing by Dale Hudson)
TEHRAN (FNA)- Chairman of the State Duma of the Russian Federation Sergei Naryshkin underlined his country's readiness to cooperate with oil-producing states to control the fluctuating crude prices.
"We are ready for cooperation with oil producing countries to fix the prices at the international level," Naryshkin said in a joint press conference with Iranian Parliament Speaker Ali Larijani in Tehran on Monday.
He also underlined that relations between Iran and Russia in different oil, gas, agriculture and nuclear energy are further developing "as this is in both countries' interests".
Describing Iran as the main actor in the establishment of stability in the region, Naryshkin said Tehran and Moscow have similar positions on different regional and international issues and "we are opposed to the performance of the westerners who are the main culprits behind the crises in different parts of the world".
The falling oil prices in recent days has made OPEC (the Organization of the Petroleum Exporting Countries) members look for ways to stop this trend.
Iranian Oil Minister Bijan Namdar Zanganeh announced on Sunday that he had conferred on ways and mechanisms to prevent further price falls in the global market in meetings with high-ranking Qatari and Kuwaiti officials.
On Saturday, Zanganeh underlined that the OPEC members were determined to reverse the trend of the falling market prices.
"It is important that the OPEC members are feeling the necessity for strengthening cooperation to restructure the current situation in the market and it is OPEC's responsibility to adopt proper action in this regard," Zanganeh said after meeting the Venezuelan foreign minister in Tehran.
Referring to the 166th meeting of OPEC due to be held on November 27, he said, "It is important that all OPEC members narrow down the gaps in their ideas during their bilateral and multilateral consultations."
OPEC is an international organization and economic cartel whose mission is to coordinate the policies of the oil-producing countries. The goal is to secure a steady income to the member states and to collude in influencing world oil prices through economic means.
OPEC is an intergovernmental organization that was created at the Baghdad Conference on 10–14 September 1960, by Iraq, Kuwait, Iran, Saudi Arabia and Venezuela. Later it was joined by nine more governments: Libya, United Arab Emirates, Qatar, Indonesia, Algeria, Nigeria, Ecuador, Angola, and Gabon. OPEC was headquartered in Geneva, Switzerland before moving to Vienna, Austria, on September 1, 1965.
UPDATE 1-Iraq expects 2015 budget based on $80 per barrel oil price - minister
Nov 17 (Reuters) - OPEC producer Iraq expects to base its 2015 budget on an oil price of $80 per barrel, Oil Minister Adel Abdel Mehdi told parliament on Monday.
Oil prices have fallen to below $80 on abundant and weak demand from $115 a barrel in June. Scepticism that OPEC will cut supply when it meets on Nov. 27 have also weighed on the prices.
Iraq's budget breakeven point for 2014 is above $100 a barrel according to the IMF, but Abdel Mehdi suggested production levels might rise next year.
He said government forecast southern Iraq output of 2.75 million barrels per day. "If Kurdistan and Kirkuk oil will enter, it is possible we reach numbers that will exceed the number ...in (the) 2014 budget of 3.4 million barrels".
The government was not able to present a 2014 budget to parliament but has pledged to detail spending at a later date. Finance Minister Hoshiyar Zebari said this month that the government had promised to set out a proper budget for 2015.
Venezuela, Ecuador and a Libyan OPEC official have called for OPEC to cut output, and so far only Kuwait and Iran have said a reduction is unlikely at the OPEC meeting.
Privately some OPEC delegates are talking of the need for some action, although they warn an agreement will not be easy to reach.
Iraq did not publicly comment on whether OPEC would need to cut output but it has said in the past it should be exempt from any official cuts by OPEC as it is struggling to build its economy after years of violence and war. (Reporting by Raheem Salman; Writing by Michael Georgy; Editing by Dominic Evans)
UPDATE 1-Venezuela says OPEC to 'increase coordination' in face of oil price fall
Mon Nov 17, 2014 1:12pm EST
Nov 17 (Reuters) - Venezuela's Foreign Minister Rafael Ramirez said the Organization of the Petroleum Exporting Countries will increase coordination in the face of the fall in oil prices, the South American government said in a statement on Monday, without elaborating.
The oil market is waiting to see whether OPEC will agree a cut in production at its Nov. 27 meeting to stem the roughly 30 percent drop in oil prices since June.
"We will be united in terms of putting forth a common policy," said Ramirez, who until September was both oil minister and head of state oil company PDVSA.
Cash-strapped Venezuela has been pushing for a production cut to boost prices and help it cover its mounting debts, arrears and popular but expensive social programs.
Ramirez has been on a global tour of OPEC and non-OPEC nations to shore up support for an output cut. (Editing by Marguerita Choy)
