Around the World
OPEC may soon crack, as Oil price sets for biggest quarterly rise
OPEC and its allies are scheduled to meet in June to set policy, but progress is clouded with uncertainties as cracks are reportedly emerging in the union.
The Organisation of Petroleum Exporting Countries (OPEC) has once again shrugged off President Donald Trump’s continued Twitter rants against the organisation’s crude output cuts.
Last Thursday, Trump called out OPEC on Twitter as part of his constant criticisms, demanding that the oil cartel stops driving prices higher.
Very important that OPEC increase the flow of Oil. World Markets are fragile, price of Oil getting too high. Thank you!
— Donald J. Trump (@realDonaldTrump) March 28, 2019
Oil Price fell after Trump’s Twitter tirade
After Trump’s call on OPEC to increase the flow of oil, global prices of the commodity reportedly fell. West Texas Intermediate (WTI) trading down by $0.46 (-0.77%), while Brent dipped by $0.52 (-0.77%).
Recall that Trump has always been critical of OPEC and its non-affiliated allies (OPEC+). He has been demanding that they increase oil production by 1.2 million barrels per day (bpd).
Oil Price rebounds the biggest quarter in 10 years
Earlier, the U.S West Texas Intermediate crude fell to $58.20 per barrel. However, Oil price futures rebounded and settled 11 cents lower at $59.30 a barrel.
Similarly, the International Brent crude oil futures fell 1 cent to $67.82 per barrel on Thursday, after earlier sinking to $66.54 per barrel in the wake of Trump’s tweet.
Away from the rebounding of oil prices after Trump’s tweet, data reportedly shows that U.S. West Texas Intermediate (WTI) futures rose 63 cents to $59.93 a barrel, and were on track for a rise of 32 percent over the January-March period. For the two benchmarks, the first quarter was the best-performing quarter since 2009, when both gained about 40%
Factors to consider
Away from the U.S sanctions, the power blackouts witnessed by Venezuela has crippled its oil industry. According to Industry sources, the country’s main oil export ports required to convert the country’s heavy oil into exportable grades were halted this week.
Forecasts
However, analysts have expressed optimism for oil prices reaching $75 dollars per barrel as inventories fall.
According to Tamas Varg of PVM Oil Associates:
“If the unplanned supply cuts remain in place, oil prices could hit $75 dollars a barrel as inventories fall.”
Similarly, a monthly survey forecast shows Brent would average $67.12 a barrel in 2019, about 1 percent higher than the previous poll’s $66.44.
Meanwhile, the rebound in oil price has been attributed to production cuts in OPEC+ group of producers, and that has been the main reason for the dramatic recovery since the 38% price slump witnessed during the final quarter of 2018.
Oil Price rebounded 4 months high in 17 years, but for how long?
Bloomberg reported that oil rose to a four month high because news of Russian production cuts helped crude continue toward its best first quarter in 17 years.
It is instructive to note that the U.S sanctions on Iran and Venezuela boosted oil prices this year because the sanctions have restricted crude exports out of the countries.
However, the U.S sanctions are at the detriments of Saudi Arabia and Russia whose oil exports have so far been restricted.
Despite oil price rebounding, it has been reported that there is some skepticism that Saudi Arabia, a member of the allied OPEC+, may heed to President Trump’s call for more output.
According to John Kilduff, a partner at Again Capital in New York:
“There is some skepticism that Saudi Arabia and other oil producers will heed President Trump’s call for more output, which was the initial reaction.”
Warning for Nigeria, as OPEC’s unholy alliance may soon crack up
OPEC and its allies are scheduled to meet in June to set policy, but some cracks are reportedly emerging in the union. The OPEC-led pact may appear to be working, driving prices up. But there are some uncertainties surrounding it.
For instance, Russia has reportedly deepened its output cuts. The country’s Energy Minister, Alexander Novak, stressed that the country will review the possibility of extension or otherwise. The minister stated this just a day after it was reported Russia had been considering letting the cut lapse in September.
The issue is this: Saudi Arabia has been having a hard time convincing Russia to stay longer in the deal to cut production.
Hence, Russia, which only reluctantly agreed to cut down production, may not hold back supply beyond September 2019. If this happens, it most likely may drag down global oil price. By implication, Nigeria may be adversely affected by this, seeing as the country’s economy depends largely on crude exportation.
Around the World
US government to ban WeChat and TikTok from app stores
Chinese-owned social media apps are facing a ban in the US over national security concerns.
The United States government says it will ban the services of Chinese tech giants, WeChat and TikTok, from online mobile application stores in the U.S. It also plans to prohibit any funds transfer/payment services through the WeChat mobile application.
This was announced by the U.S Commerce Secretary, Wilbur Ross, in a statement on Friday, following President Donald Trump’s Executive Orders (E.O.) 13942 and E.O. 13943, on the 6th of August.
“In response to President Trump’s Executive Orders signed August 6, 2020, the Department of Commerce (Commerce) today announced prohibitions on transactions relating to mobile applications (apps) WeChat and TikTok to safeguard the national security of the United States,” said Wilbur Ross.
He added that the Chinese Communist Party (CCP), has proven it has the means and the motive to use Chinese tech apps, to threaten America’s national security foreign policy, and the economy of the U.S.
He said the following transactions will be prohibited from September 20th for WeChat and November 12th for TikTok
- Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates, through an online mobile application store in the U.S.
- Any provision of services through the WeChat mobile application, for the purpose of transferring funds or processing payments within the U.S.
Mr. Ross said that with the Executive Order, the US government has taken a ‘significant action’ in fighting China’s malicious personal data breach on American citizens, and also promote democratic rule-based norms, and aggressive enforcement of U.S. laws and regulations.
The U.S government announced that further prohibitive measures, relating to both companies may be announced in the future.
“Should the U.S. Government determine that WeChat’s or TikTok’s illicit behavior is being replicated by another app somehow outside the scope of these executive orders, the President has the authority to consider whether additional orders may be appropriate to address such activities.”
President Trump has given until November 12, to resolve the TikTok security concerns of the US. He added that the prohibitions may be lifted, if they are addressed.
Around the World
WTO: Okonjo-Iweala still in contention as 3 candidates depart race for DG
Okonjo-Iweala and the remaining 4 other candidates hope to succeed the current DG, Mr Roberto Azevêdo.
Three candidates running for the post of the Director-General of the World Trade Organisation have fallen out of the race after failing to secure enough votes in the first rounds of voting, leaving only 5 candidates left, including Nigeria’s Ngozi Okonjo-Iweala.
This was disclosed by Bloomberg on Thursday, before the meeting on Friday. The Candidates that are out of the race are Jesus Seade (Mexico), Tudor Ulianovschi (Moldova), and Hamid Mamdouh (Egypt). The candidates were not able to secure the support needed for the first round of 3 rounds of voting.
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Dr. Ngozi Okonjo Iweal joins 4 other candidates for the next round of voting. The candidates are; Liam Fox (UK), Amina Chawahir Mohamed Jibril (Kenya), Yoo Myung-hee ( South Korea), and Mohammad Maziad Al-Tuwaijri ( Saudi Arabia).
Ngozi Okonjo-Iweala disclosed last month some of her plans for the Organization if made President. Nairametrics reported she noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.
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On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:
“Well, this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’’
She added she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.
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“You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members,’’ she said.
Okonjo-Iweala and the 4 other candidates will present themselves to the members of the global trade body for the later stages of voting in the hopes of securing the highest number of votes to succeed the current DG, Mr. Roberto Azevêdo.
Around the World
WTO: Selection of new DG might be tied to the upcoming US presidential election
The eventual winner could be dependent on the outcome of the November 3 US Presidential elections.
The WTO’s effort to select a new leader entered a new stage this week, as the ambassadors from 164-member countries met for private consultations, on who they would support.
Six former WTO officials and trade experts revealed that the politicking in Geneva, Switzerland – WTO headquarters, could be a wild goose chase, as the decisive developments that will shape the future of the embattled global trade organization, are unfolding miles away in Washington, ahead of the November 3 presidential elections.
Although, the support of a particular candidate by the United States is critical; 4 trade experts, including former WTO employees, believe that the Trump administration is unlikely to breathe life into a multilateral body that he once threatened to leave. Donald Trump launched a trade war with China, repeatedly imposed tariffs on US allies, and destroyed WTO’s ability to intervene in disputes, by blocking the appointment of members to its Appellate Body.
David Tinline, a former adviser to Azevedo said, “I find it hard to imagine that the Trump administration would shift tack and do something very positive for the system.’’
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The US Trade Representative (USTR), Robert Lighthizer, had in June told US lawmakers that, “the WTO needed a reform-driven leader and that he would veto any candidate who showed any whiff of anti-Americanism.”
The former WTO officials and trade experts said that the US-China economic conflict is a further divisive factor, as both countries will likely reject any candidate backed by the other.
The 8 candidates in contention for the top job, are expected to be trimmed down to 5 after the first confessional meetings on September 16. This will be further cut down to 2, and the final decision designed to be taken by convention before the November 7 deadline – just four days after the US elections.
READ: Where next for oil prices?
Aside from the two influential African women vying for the role, Liam Fox, Britain’s former Trade Secretary, is a force to reckon with. If a favorite candidate does not emerge, some WTO members might prefer to wait until after the US election in case Joe Biden wins the US presidential election; especially, as Voting, seen as a last resort, has never occurred in WTO’s history.
A former member of WTO, Peter Van Den Bossche said, “They could play a waiting game, but that would push the decision until at least February or March 2021.”
Even though WTO is member-led, a strong leader who can facilitate decision making, and galvanize its 164 member nations, is crucial to reviving a severely embattled global organization.
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