OPEC, non-OPEC to Look at Extending Oil-Output Cut by 6 Months
A joint committee of ministers from OPEC and non-OPEC oil producers has agreed to review whether a global pact to limit supplies should be extended by six months, it said in a statement on Sunday.
An earlier draft of the statement said the committee “reports high level of conformity and recommends six-month extension.”
But the final statement said only that the committee had requested a technical group and the OPEC Secretariat “review the oil market conditions and revert … in April, 2017 regarding the extension of the voluntary production adjustments.”
It was not immediately clear why the wording had been changed, although a senior industry source said the committee lacked the legal mandate to recommend an extension.
OPEC and rival oil-producing countries were meeting in Kuwait to review progress with their global pact to cut supplies.
The Organization of the Petroleum Exporting Countries and 11 other leading oil producers including Russia agreed in December to cut their combined output by almost 1.8 million barrels per day (bpd) in the first half of the year.
“Any country has the freedom to say whether they do or they don’t support [an extension]. Unless we have conformity with everybody, we cannot go ahead with the extension of the deal,” Kuwaiti Oil Minister Essam al-Marzouq said, adding that he hoped a decision would come by the end of April.
The oil ministerial committee “expressed its satisfaction with the progress made towards full conformity with the voluntary production adjustments and encouraged all participating countries to press on towards 100 percent conformity,” the statement said.
The December accord, aimed at supporting the oil market, has lifted crude to more than $50 a barrel. But the price gain has encouraged U.S. shale oil producers, which are not part of the pact, to boost output.
The committee said it took note that certain factors, such as low seasonal demand, refinery maintenance and rising non-OPEC supply had led to an increase in crude oil stocks. It also observed the liquidation of positions by financial players.
“However, the end of the refinery maintenance season and noticeable slowdown in U.S. stock build as well as the reduction in floating storage will support the positive efforts undertaken to achieve stability in the market,” it said.
It asked the OPEC Secretariat to review oil market conditions and come back with recommendations in April regarding an extension of the agreement.
“This reaffirms the commitment of OPEC and participating non-OPEC countries to continue to cooperate,” the statement said.
Russian Energy Minister Alexander Novak said it was too early to say whether there would be an extension, although the agreement was working well and all countries were committed to 100 percent compliance.
Before the meeting, Iraqi Oil Minister Jabar Ali al-Luaibi told reporters there were some encouraging elements that suggested the oil market was improving, and that if all OPEC members agreed measures to help price stability, Iraq would support such steps.
“Any decisions taken unanimously by members of OPEC … Iraq will be part of the decision and will not be deviating from this,” Luaibi said.
Iraq’s oil production is running at 4.312 million bpd this month, Luaibi said, adding that his country had cut its oil exports by 187,000 bpd so far and would reach 210,000 bpd in a few days.
Compliance with the supply-cut deal was 94 percent in February among OPEC and non-OPEC oil producers combined, Russia’s Novak said.
Russia is committed to cuts of 300,000 bpd by the end of April, Novak said.
Novak said he expects global oil stockpiles to decrease in the second quarter of this year.
“The dynamics are positive here, I believe,” Novak said, adding that inventories in the United States and other industrialized countries had risen by less than in the past.
Kuwait’s oil minister said the market may return to balance by the third quarter of this year if producers comply fully with their production targets.
“More has to be done. We need to see conformity across the board. We assured ourselves and the world that we would reach our adjustment to 100 percent conformity,” Marzouq said.
Mnuchin: US Growth Prospects Not Fully Reflected in Markets
U.S. Treasury Secretary Steven Mnuchin said on Friday he believes financial markets could improve “significantly” once they fully reflect the potential for U.S. economic growth from President Donald Trump’s economic policies.
Mnuchin said at an event sponsored by news website Axios that optimism about U.S. growth from policies such as regulatory reform and tax reform is “definitely not all baked in” to market valuations.
U.S. stock prices and the dollar have strengthened significantly since Trump was elected in November, largely in anticipation of corporate profits rising as regulatory burdens ease and tax rates fall. Some of those gains were retraced this week as Republicans in Congress faced stiff opposition from
conservatives in passing a bill to replace the Obamacare health law.
“I think there is some good news that’s baked in, but yet, I think there is further room for significant growth in the economy that would be reflected in the markets,” Mnuchin said. “The consequence would be that the market could go up significantly,” Mnuchin added.
Treasury secretaries in the past have shied away from publicly discussing market valuations.
But Mnuchin said Trump’s policies could produce growth of 3 percent to 3.5 percent, which is significantly higher than the fourth quarter reading of 1.9 percent.
“We’re in an environment where the U.S. assets are the most attractive assets to invest in on a global basis.”
Mnuchin said he is still aiming to achieve passage of comprehensive tax reform by the time Congress takes its August recess. He also said he expects the Trump administration’s Obamacare replacement bill to pass later on Friday.
Report: State Department to Approve Keystone Pipeline Friday
The Trump administration will approve the Keystone XL pipeline Friday, senior U.S. officials say, ending years of delay for a project that has served as a flashpoint in the national debate about climate change.
The State Department will recommend the pipeline is in U.S. interests, clearing the way for the White House to grant a presidential permit to TransCanada to build the $8 billion pipeline, two officials said. It’s a sharp reversal from the Obama administration, which rejected the pipeline after deeming it contrary to national interests.
The officials, who weren’t authorized to speak publicly on the matter and demanded anonymity, said the State Department’s recommendation and the White House’s final approval would occur Friday.
The White House declined to comment, other than to say it would offer an update Friday. State Department spokesman Mark Toner wouldn’t reveal the decision, but said the agency had re-examined Keystone thoroughly after ruling against the proposed project barely two years ago.
“We’re looking at new factors,” Toner said. “I don’t want to speak to those until we’ve reached a decision or conclusion.”
Canada to Texas Gulf Coast
The 1,700-mile pipeline, as envisioned, would carry oil from tar sands in Alberta, Canada, to refineries along the Texas Gulf Coast, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma. The pipeline would move roughly 800,000 barrels of oil per day, more than one-fifth of the oil Canada exports to the U.S.
Oil industry advocates say the pipeline will improve U.S. energy security and create jobs, although how many is widely disputed. Calgary-based TransCanada has promised as many as 13,000 construction jobs — 6,500 a year over two years — but the State Department previously estimated a far smaller number. The pipeline’s opponents contend the jobs will be minimal and short-lived, and say the pipeline won’t help the U.S. with energy needs because the oil is destined for export.
President Donald Trump has championed the pipeline and backed the idea that it will prove a job creator. In one of his first acts as president, he invited pipeline company TransCanada to resubmit the application to construct and operate the pipeline. And he had given officials until next Monday to complete a review of the project.
No American steel
A Trump presidential directive also required new or expanded pipelines to be built with American steel “to the maximum extent possible.” However, TransCanada has said Keystone won’t be built with U.S. steel. The company has acquired the steel, much of it from Canada and Mexico, and the White House has acknowledged it’s too difficult to impose conditions on a pipeline under construction.
Portions of Keystone have been built. Completing it requires a permit involving the State Department because it crosses the U.S.-Canada border.
In an unusual twist, the agency’s recommendation won’t come from Secretary of State Rex Tillerson. The former CEO of oil company Exxon Mobil recused himself after protests from environmental groups who said it would be a conflict of interest for Tillerson to decide the pipeline’s fate.
Instead, Tom Shannon, a career diplomat serving as undersecretary of state for political affairs, will sign off, officials said.
Route under litigation
Even with a presidential permit, the pipeline will still face obstacles — most notably when it comes to the route, which is being heavily litigated in the states. Native American tribes and landowners have joined environmental groups in opposing the pipeline.
Environmental groups also say the pipeline will encourage the use of carbon-heavy tar sands oil which contributes more to global warming than cleaner sources of energy. President Barack Obama reached the same conclusion in 2015 after a negative recommendation from then-Secretary of State John Kerry.
The Trump administration has dropped fighting climate change as a priority and left open the possibility of pulling out of the Paris deal.
India Doubles Maternity Leave, But Many Won’t Benefit
Neda Saiyyada was among a handful of women in India whose company gave her six months of maternity leave last year instead of the mandatory three months. The extended leave helped the young mother enormously.
“When I was pregnant, my biggest worry was that I will not be able to leave my child,” she said. “In three months the child is nothing, can’t even hold the neck straight, and my child was eating and sitting up straight when I joined back, so it was a blessing in disguise.”
About 1.8 million women working in India’s formal sector will soon be legally entitled to get the extended maternity leave that Saiyyada was so grateful for after parliament passed a landmark bill earlier this month doubling maternity leave from 12 weeks to 26 weeks.
WATCH: India maternity leave
India is joining a handful of countries, such as Canada and Norway, that give women generous paid leave of six months or more.
Besides boosting maternal and child health, experts hope the longer maternity leave will encourage more women to return to work and help close a growing gender gap in a country where women account for about one-quarter of the workforce.
Women in workforce
Shachi Irde, executive director of the nonprofit Catalyst India Women’s Research Center, worried that the number of women in the workforce is not only small, it has been declining.
“In 2004 to 2005 there were about 37 percent women in the workforce, now it has dropped to 29 percent,” she said.
Pointing out that India is the only country facing this downward trend, she said “there are many reasons, but one of them is child care.”
According to a study by the Associated Chambers of Commerce and Industry of India, 25 percent of new mothers in India quit their jobs after having their first child. And research by Catalyst shows that family responsibilities make it tougher for women to climb the career ladder: About half of working women do not go beyond junior or midlevel positions.
India has few quality child care facilities and most women fall back on the family to take care of children.
The new law tries to address that problem by making it compulsory for workplaces employing more than 50 people to set up day care facilities.
The extended leave itself also will be a huge help, said Neda Saiyyada, who added, “It will encourage women to stay connected with the workplace.”
Will hiring drop?
However some human resource professionals fear the new bill could discourage employers from hiring women, particularly small companies that would see the extended maternity leave as an additional burden.
“For businesses, it is just not easy to not have an employee for six months,” said Sairee Chahal, founder of SHEROES, a portal for women job seekers. “Instead of saying we will hire you as an employee, they will hire you for noncore roles or for more modular roles so this does not fall on them.”
She pointed out that maternity leave has been doubled at a time when the organized sector is facing multiple challenges and shorter business cycles.
“It (companies) is also under churn of a different kind, under churn of automation, under churn of globalization. So all those trends are overpowering it at this stage,” she said.
Others say the government should also have looked at involving both parents in the extended leave period instead of only making the provision for the mother.
But in a country that is coping with a huge population of 1.3 billion people, the 26 weeks of leave will only be given for the first two children, and women would only be entitled to 12 weeks for a third child.
The bill also brings no benefits to women working in the informal sector, which employs as much as 90 percent of the female workforce. That includes housemaids, laborers or workers in small workshops, who do not get entitlements such as paid leave.
But for the time being, those who stand to get six months off are celebrating.
Traptika Chauhan who is expecting a baby in August was “extremely, extremely relieved” when she heard about the passage of the bill. She pointed out that with more and more people staying in nuclear families, child care is a challenge for working couples.
“I don’t have my parents who stay here or my in-laws who stay here. Then it is really difficult to leave such a small baby all by himself or herself and leave for work,” she said. “Plus your own body is trying to cope up so extremely, extremely great news and perfect for me.”
Venezuelans Line Up for Gasoline as OPEC Nation’s Oil Industry Struggles
Grumbling Venezuelans were lining up for scarce gasoline across the OPEC nation on Wednesday, due to mounting oil industry woes in the country with the world’s largest crude reserves.
Venezuela, which also has the world’s cheapest gasoline, has wrestled with intermittent gasoline shortages in recent months, especially in the central coastal area.
Long lines were reported in capital Caracas, which is unusual, and the eastern city of Puerto Ordaz on Wednesday.
Dozens of cars could be seen snaking into streets and some service stations were shuttered.
“I can’t find 95 octane gasoline anywhere. And we’re an oil-producing country! It’s pathetic,” said Jose Paredes in Caracas’ wealthy Altamira district.
The waits heap extra hardship on the nation of 30 million, where many already jostle for hours in hot lines for food and medicines amid product shortages caused by a brutal economic crisis under leftist president Nicolas Maduro.
State oil company PDVSA’s new head of trading blamed the shortages on problems with internal shipping of products and vowed the issue would be solved soon.
“We’re strengthening deliveries to the center of the country to stabilize gasoline supplies,” Ysmel Serrano tweeted.
The gasoline shortage comes as new top executives are appointed at PDVSA, largely from political and military quarters, and increasing problems in Venezuela’s oil industry.
As of March 22, about a dozen tankers were waiting around PDVSA ports in Venezuela and the Caribbean to discharge refined products, components, and diluents crucial for oil blending, Reuters vessel tracking data showed.
Backlogs and payment delays to PDVSA’s suppliers, which are now demanding to be prepaid, sometimes mean shippers wait weeks to deliver oil products.
And many tankers are idle because PDVSA cannot pay for hull cleaning, inspections, and other port services, according to internal documents and Reuters data.
Union leader Ivan Freites, a PDVSA critic, said Venezuelan refineries, which have been at around half capacity for months amid outages, only had oil inventories for around two days versus a standard of 15.
“To solve this immediately, we would need deliveries from at least 10 tankers,” he said.
In Venezuela’s industrial city of Puerto Ordaz, the problem has been increasing this week and National Guard soldiers were trying to maintain order at operational service stations.
“We’ve been working extra hours, opening before 6 a.m and closing after 11 p.m. because of the lines,” said Caura service station manager Felix Rodriguez, tired and with blood-shot eyes, adding he had not been given a reason for the slow deliveries.
Officials: German Companies Interested in Train Crossing South America
Dozens of German companies including Siemens attended meetings in Bolivia this week to discuss building a coast-to-coast railway through Brazil, Bolivia and Peru that could speed up the export of corn and soybeans to Asia, German and Bolivian officials said on Wednesday.
The massive, $10-billion project would involve building a 3,700-kilometer (2,299 miles) rail line across the continent, linking the Atlantic and Pacific oceans, through mountains and jungles.
“This is the project of the century,” said Germany’s State Secretary of German Transport, Building and Urban Development Rainer Bomba.
Representatives from Brazil, Peru, Paraguay, Uruguay and Bolivia as well as Germany and Switzerland are still studying the feasibility of the train route, which would drastically shorten shipping routes from Brazil’s coast to Asian markets for key commodities.
Siemens, Europe’s top engineering group, participated in the meetings “to get more information about the project,” spokesman Dennis Hofmann said in an email.
“The project is at an early stage and questions have to be clarified,” he wrote.
The discussions, on Tuesday and Wednesday, come after a similar, Chinese-led project build a trans-South America railway ran into roadblocks late last year due to cost and environmental concerns.
Bolivian and German officials did not name other companies that attended the meetings, but Bomba said: “The presence of 40 German companies here demonstrates that Germany is not only in the planning phase, but also in the realization phase.”
Bolivia’s Public Works Minister Milton Claros told Reuters Bolivia and Germany had signed agreements for technical assistance and financing for the project. The ministry said the project would connect the Brazilian port of Santos to the Peruvian port of Ilo and had a preliminary cost estimate of $10 billion.
Brazil is expected to export 28 million tons of corn and 61 million tonnes of soybeans in the 2016/17 crop year according to the USDA. It is the world’s largest soybean exporter and second-largest corn exporter.
China and Peru agreed in 2015 to study a 3,000-mile-long railway through the Andes, but Peru balked when China estimated its cost at $60 billion. Peru’s President Pedro Pablo Kuczynski later said the rail should go through Bolivia.
Land-locked Bolivia has long pined for a corridor to the Pacific, blasting Chile for taking its coastline in a war in the late 19th century and maintaining its Navy on Lake Titicaca.
Brazil had also questioned the Chinese project and would likely back the Bolivian route, a member of the Brazilian delegation said.
“We identified problems in the reports made by the Chinese group. We communicated the points of disagreement to Chinese authorities and we are seeing how we can continue the studies,” said Joao Carlos Parkinson, coordinator of economic affairs at Brazil’s Foreign Ministry, who attended the meetings.
Brazil’s Ambassador to Bolivia Raymundo Santos said talks would continue.
“Our delegation confirmed Brazil’s interest in participating,” he said. “The political side has been resolved, but now the technical work has to move forward.”
Oil Prices Fall on Bloated US Crude Storage
Oil prices dipped on Wednesday as rising crude stocks in the United States underscored an ongoing global fuel supply overhang despite an OPEC-led effort to cut output.
Prices for front-month Brent crude futures, the international benchmark for oil, were at $50.79 per barrel at 0451 GMT, down 17 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down 18 cents, or 0.4 percent, at $48.08 a barrel.
“Crude oil prices fell as concerns over rising U.S. inventories resurfaced,” ANZ bank said on Wednesday.
U.S. crude oil inventories climbed by 4.5 million barrels in the week to March 17 to 533.6 million barrels, the American Petroleum Institute (API) said late on Tuesday.
“The American Petroleum Institutes’ crude inventories stuck the knife into crude overnight, coming in at a 4.5 million barrel increase against an expected increase of 2.8 million barrels,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
“If the API stuck the knife in, tonight’s EIA Crude Inventory figures may twist it. A blowout above the 2.1 million barrel increase expected, may well torpedo oil below the waterline,” he added.
Official U.S. Energy Information Administration (EIA) oil storage data is due on Wednesday.
The bloated storage comes as U.S. oil production has risen over 8 percent since mid-2016 to more than 9.1 million barrels per day (bpd), levels comparable to late 2014, when the oil market slump started.
Rising production in the United States and elsewhere, and bloated inventories, are undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output and prop up prices.
“OPEC’s market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience,” U.S. bank Jefferies said on Wednesday in a note to clients, although it added that the cutbacks would likely start to show by the second half of the year if OPEC extends its production cuts beyond June.
Despite cuts, analysts warned of renewed or ongoing oversupply in coming years, especially as U.S. shale producers ramp up and once OPEC returns to full capacity.
U.S. bank Goldman Sachs warned its clients in a note this week that a U.S. shale led production surge “could create a material oversupply in 2018-19.”
Brazil Senate Leader Sees Huge Spending Freeze
Brazil’s government plans to announce spending freezes of 30 billion to 35 billion reais ($9.7 billion to $11.3 billion) this week to help meet part of its 2017 budget deficit target, the Senate leader said on Tuesday.
The rest of the shortfall will have to come from raised taxes and higher revenues from such sources as infrastructure concessions to private companies, Senator Romero Jucá said in an interview.
Jucá said tax increases being studied include one on gasoline and another on financial operations called IOF, both of which would not require legislation.
“The freezes will be a maximum of 30 to 35 billion reais, More than that would be an amputation,” Jucá said.
Brazil’s primary budget deficit target for this year is 139 billion reais, but a severe recession shrunk revenues and the government is expected to miss that goal by 65 billion to 70 billion reais.
Nothing has been decided
Finance Minister Henrique Meirelles told reporters that the freezes have not been decided yet, nor any tax hikes.
President Michel Temer’s key measure to bring the widening deficit under control, reform of Brazil’s costly social security system to make it pay for itself, is facing a battle for approval in Congress.
Jucá said the government is working on an agreement between the Senate and lower chamber on the proposal which established a minimum retirement age among other unpopular changes.
The consolidated report will cover possible adjustments to make the bill more palatable to lawmakers, and some of them will be announced by Temer by the end of this week, Jucá said.
Change in retirement age?
Jucá said he believed the government must insist on the introduction of a minimum retirement age of 65, a controversial move in a country where people on average work until they are 54.
Modernizing labor laws, next on the government’s reform list to lower business costs and help pull Brazil from its worst recession, will get off the ground before the pension bill clears Congress, Jucá said.
An outsourcing bill will be put to a vote this week in the Senate and merged with another proposal from the lower chamber, so that it can be quickly sent to Temer to sign into law.
The bills face fierce opposition from labor unions who see allowing temporary workday contracts as an attack on workers’ rights. Jucá said temporary union payments will be added to the legislation to keep labor leaders happy.