The US had exempted Japan from the gas embargo imposed on Russia.
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The US had exempted Japan from the gas embargo imposed on Russia.
Atmospheric implications of increased Hydrogen use
Analysis: Saudi Arabia's 'icing on the cake' oil cut could feed US producers
Saudi Arabia has crafted a complex OPEC+ deal with a view to punishing investors that have bet on falling oil prices but could inadvertently lend long-term support to the rival U.S. energy industry, OPEC+ insiders and market watchers said.
On Sunday, Saudi Arabia pledged to cut its oil output by 1 million barrels per day (bpd), or 10%, in July on top of existing output cuts from OPEC and its allies. With the new Saudi reduction, the group has agreed to take some 4.6 million bpd off the market in July, equivalent to 4.6% of global demand of 100 million bpd.
OPEC+ also agreed on Sunday to extend the group's existing supply cuts of 3.66 million bpd into 2024.
In response, oil prices rose nearly $2 a barrel early on Monday to $78 per barrel . Analysts said the gains are only the beginning and the cuts will steadily deepen a global supply shortfall that could push prices towards $100 a barrel.
"This market needs stabilisation," Saudi Energy Minister Prince Abdulaziz bin Salman said on Sunday, calling his surprise decision to deepen Saudi production cuts "the icing on the cake" for the deal.
Prince Abdulaziz has repeatedly expressed anger and pledged to punish short-sellers of oil that bet on price falls. Prices had fallen in recent weeks to close to $70 per barrel from over $130 a year ago when Russia invaded Ukraine.
"The Saudi move was driven by the desire to deter short-sellers from pushing the price any lower," a source familiar with OPEC+ strategy said on condition of anonymity.
"The size of (the Saudi) reduction is credible and should at minimum limit the downside pressure on prices for the rest of the year," Natasha Kaneva at JP Morgan said. Unexpected price rises force short-sellers to close positions at a loss.
OPEC says it does not have any oil price target and its policy decisions are to prevent volatility by balancing supply and and demand.
"(The cut) clearly reflects the angst and frustration amongst producers, particularly of Saudi Arabia, of sliding prices," Tamas Varga from PVM brokerage said, adding that Riyadh needs prices of $80 per barrel to balance its budget, according to the IMF estimates.
Previous cuts by the group have triggered heavy criticism from the United States and other consuming nations that have accused it undermining the global economy by driving energy costs higher.
OPEC+ ministers have responded by saying they are defending their own interests and that they need to provide conditions for long-term investment in the oil and gas sector.
They also say piecemeal policies to shift to low carbon energy have discouraged investment and could lead to shortages in future supply before the world is ready to live without oil.
U.S. OIL BOOM
The United States was sanguine about the latest OPEC cuts. A White House official said on Sunday that the administration's focus was "not barrels" but prices for U.S. customers and that they had fallen significantly since last year.So far this year, a weakening global economy, concern about the U.S. banking crisis, and a slow Chinese recovery from COVID-19 restrictions have capped oil prices.
But OPEC, as well as the West's energy watchdog the International Energy Agency and many observers expect rising demand to outstrip supply in the second half of the year.
The Saudi cuts will deepen the market deficit to more than 3 million bpd from July, adding upside pressure in the coming weeks, Jorge Leon from Rystad Energy said.
If the latest OPEC+ curbs push prices higher, rival producers outside the group will also benefit and the biggest rival is the United States.
The U.S. has more than doubled its oil and gas production over the past 15 years, mostly as a result of the development of shale fields.
Shale production plunged during the pandemic and lenders restricted funding, but it has since recovered and US crude exports and output have hit record highs.
OPEC+'s decision to extend existing cuts by another year will likely give U.S. producers much needed longer-term price confidence and boost their capacity to borrow.
Some of Sunday's promised cuts include adjustments to reflect actual production from some members of the group who have been unable to meet existing supply quotas.
While Russia agreed to extend its existing 0.5 million bpd curbs into 2024, Angola and Nigeria agreed to give up their unused quotas. The United Arab Emirates was allowed to boost its production quota by 0.2 million bpd to 3.2 million from 2024.
Kaneva from JPM said the net result would be the OPEC+ decision will reduce supply in 2024 by 1.1 million bpd from previous expectations and cuts could be extended into 2025.
She expects the United States to be able to accommodate that.
"Importantly, with oil prices substantially lower from year-ago levels and U.S. oil liquids production at an all-time high, OPEC’s decision is not expected to become a political issue for the U.S. administration," Kaneva said.
Saudi Arabia's 'icing on the cake' oil cut could feed US producers
Saudi Arabia has crafted a complex OPEC+ deal with a view to punishing investors that have bet on falling oil prices but could inadvertently lend long-term support to the rival U.S. energy industry, OPEC+ insiders and market watchers said.
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Maybe Biden admin will finally come to its senses about the "green new deal" blah blah that has upset lot of energy majors investments domestically for a few years now.
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Both the Biden government and the German governments that have been in power in the recent past are ideological bigots.
The Biden government thought that green energy would be switched over to one night and ended the US domestic fossil fuel production. The German governments, on the other hand, trusted Russia too much and shut down the nuclear power plants in the country just before the war. After that, they burned coal!
In my opinion, the only positive outcome of the Ukraine-Russia war, this war has opened everyone's eyes to energy security. The Ukraine-Russia war accelerated the transition to green energy.
The Biden government thought that green energy would be switched over to one night and ended the US domestic fossil fuel production. The German governments, on the other hand, trusted Russia too much and shut down the nuclear power plants in the country just before the war. After that, they burned coal!
In my opinion, the only positive outcome of the Ukraine-Russia war, this war has opened everyone's eyes to energy security. The Ukraine-Russia war accelerated the transition to green energy.
I think it's too late for that. The planning-construction process and commissioning of investments take years. But the USA has no years. And next year there is an election. It is not possible for them to find an effective solution in a few months. Inflation looks set to rise anyway.
Saudi crown prince threatened ‘major’ economic pain on U.S. amid oil feud
Last fall, President Biden vowed to impose “consequences” on Saudi Arabia for its decision to slash oil production amid high energy prices and fast-approaching elections in the United States.
In public, the Saudi government defended its actions politely via diplomatic statements. But in private, Crown Prince Mohammed bin Salman threatened to fundamentally alter the decades-old U.S.-Saudi relationship and impose significant economic costs on the United States if it retaliated against the oil cuts, according to a classified document obtained by The Washington Post.
The crown prince claimed “he will not deal with the U.S. administration anymore,” the document says, promising “major economic consequences for Washington.”
Eight months later, Biden has yet to impose consequences on the Arab country and Mohammed has continued to engage with top U.S. officials, as he did with Secretary of State Antony Blinken in the seaside Saudi city of Jiddah this week.
It is unclear whether the crown prince’s threat was conveyed directly to U.S. officials or intercepted through electronic eavesdropping, but his dramatic outburst reveals the tension at the heart of a relationship long premised on oil-for-security but rapidly evolving as China takes a growing interest in the Middle East and the United States assesses its own interests as the world’s largest oil producer.
The U.S. intelligence document was circulated on the Discord messaging platform as part of an extensive leak of highly sensitive national security materials.
A spokesperson with the National Security Council said “we are not aware of such threats by Saudi Arabia.”
“In general, such documents often represent only one snapshot of a moment in time and cannot possibly offer the full picture,” the official said, speaking on the condition of anonymity to discuss an intelligence matter.
“The United States continues to collaborate with Saudi Arabia, an important partner in the region, to advance our mutual interests and a common vision for a more secure, stable, and prosperous region, interconnected with the world,” the official added.
The Saudi Embassy in Washington did not respond to a request for comment.
Mohammed, 37, is the de facto ruler of Saudi Arabia, after his father King Salman appointed him to be prime minister in 2022.
Biden, who pledged to make Saudi Arabia a “pariah” as a presidential candidate, scarcely communicates with the crown prince but the president’s top aides have gradually rebuilt ties with him hoping the two nations can work together on pressing issues, including a long-sought peace deal in Yemen, a sustained cease-fire in Sudan, counterterrorism challenges and continued disagreements over the supply of oil.
The improved rapport has disappointed human rights advocates who hoped for a sharper break with the kingdom in light of Mohammed’s role overseeing the war in Yemen and the U.S. intelligence community’s assessment that he ordered the 2018 murder of Washington Post columnist Jamal Khashoggi.
Mohammed denies ordering the killing but has acknowledged that it happened “under my watch.”
U.S. officials say the U.S.-Saudi relationship is too important to let languish given Riyadh’s economic and political clout and Beijing’s courtship of traditional U.S. partners in the Middle East.
“Together, we can drive real progress for all our people, not only to address the challenges or crises of the moment, but to chart an affirmative vision for our shared future,” Blinken said at a joint news conference in Riyadh on Thursday alongside Saudi Foreign Minister Faisal bin Farhan.
Blinken met with the crown prince, also known as MBS, for an hour and 40 minutes on Tuesday during this three-day visit to the kingdom, U.S. officials said. The men had a “candid, open” conversation that included U.S. efforts to broker normalization between Israel and Saudi Arabia, the conflict in Yemen, human rights and the fighting in Sudan.
Following Blinken’s meetings, differences appeared to remain over Saudi Arabia’s ambitions to generate nuclear power, seen by Washington and others as a potential proliferation risk, and the notion that the United States has a right to admonish the kingdom over its human rights record.
Saudi Arabia’s foreign minister noted that while Riyadh would welcome U.S. support in building its civilian nuclear program, “there are others that are bidding,” a not-so-subtle reminder that the kingdom could deepen its cooperation with China on the initiative.
On human rights, he struck a defiant note, saying Saudi leaders “don’t respond to pressure.”
“When we do anything, we do it in our own interests. And I don’t think that anybody believes that pressure is useful or helpful, and therefore that’s not something that we are going to even consider,” he said.
Blinken’s visit caps a steady stream of high-level U.S. meetings in the kingdom in recent months, including trips by national security adviser Jake Sullivan, CIA Director William J. Burns, Biden’s top Middle East adviser Brett McGurk, and his senior energy security official Amos Hochstein.
The surge of meetings appeared to serve as a counterweight to the frosty personal relations between Biden and Mohammed, said David Ottaway, a Gulf scholar at the Wilson Center, noting that the two leaders have not spoken since their meeting in Riyadh last July.
“The Biden administration decided it had to figure out how to work with MBS even if Biden and he still do not talk to each other,” Ottaway said.
The oil-rich country has sought to present itself as a global player unmoored to Washington. In recent months, Riyadh has been on a diplomatic tear, winding down hostilities in Yemen, restoring relations with arch-nemesis Iran, inviting Syrian President Bashar al-Assad back into the Arab League after a decade-plus ban, and ending its regional tiff with Qatar.
“Riyadh is returning to a more traditional foreign policy that avoids conflict and favors accommodation with rivals,” said Bruce Riedel, a Middle East expert at the Brookings Institution.
The dramatic changes in Saudi foreign policy come as Washington seeks Saudi help on some regional matters. Days before Blinken’s arrival, Saudi Arabia announced it would deepen oil production cuts in July on top of a broader OPEC Plus agreement to limit oil supply in an effort to raise prices — a move opposed by the Biden administration.
“The administration has a big agenda for Blinken to work with the Saudis: Keeping the cease-fire in Yemen, getting one in Sudan, fighting ISIS, and above all keeping oil prices from rising out of control,” Riedel said.
Most difficult of all appears to be normalizing ties between Saudi Arabia and Israel, particularly as Israeli-Palestinian tensions worsen under the far-right coalition government led by Prime Minister Benjamin Netanyahu.
“Biden has put a big priority on securing Saudi public recognition of Israel. That is unlikely absent serious progress on the Palestinian front,” Riedel said. “The Palestinian issue still has deep resonance in the kingdom, especially with King Salman.”
Some moves by the Saudi government have pleased U.S. officials, including its assistance to Ukraine announced during a foreign minister visit to Kyiv in February and its plans to purchase a large order of Boeing jetliners.
Saudi Arabia’s relationship with China, which the United States considers its top economic and security competitor, was also raised during Blinken’s news conference in Riyadh. The top U.S. diplomat denied any suggestion that the United States was forcing Saudi Arabia to choose between Washington and Beijing.
A second leaked U.S. intelligence document from December warned that Saudi Arabia plans to expand its “transactional relationship” with China by procuring drones, ballistic missiles, cruise missiles and mass surveillance systems from Beijing. But U.S. officials say those warnings were exaggerated and did not come to fruition.
Saudi’s foreign minister, when asked during Thursday’s news conference about his country’s relationship with China, insisted it was not a threat to Saudi Arabia’s long-standing security partnership with the United States.
“China is the world’s second-largest economy. China is our largest trading partner. So naturally, there is a lot of interaction … and that cooperation is likely to grow,” he said. “But we still have a robust security partnership with the U.S. That security partnership is refreshed on an almost daily basis.”
Iran has denied these allegations.
İran: ABD ile nükleer anlaşmanın yerine geçecek "geçici anlaşma" gündemde değil
İran, ABD ile nükleer programında kısıtlamalara gitme karşılığında yaptırımların hafifletilmesini öngören "geçici bir anlaşma"nın gündemde olmadığını bildirdi. İran resmi ajansı IRNA'nın haberine göre, İran'ın Birleşmiş Milletler (BM) Daimi Temsilciliği tarafından yapılan açıklamada, Tahran ile...
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Saudis Are Tightening the Screws on US Oil Shipments
When Saudi Arabia needs to quickly convince the oil market that supply is tightening, putting upward pressure on prices, nothing beats reducing its crude exports into the US.
Riyadh has promised to slash oil production next month by 10%, a unilateral cut that would reduce output to just 9 million barrels a day, the lowest since 2011 — save for brief disruptions from Covid and the Yemeni attack on its facilities. Crucially, as important as the cut itself, is where it’s going to be felt: The signals point to the US and Europe.
Focusing on the US would telegraph the reduction clearly to traders. Fluctuations in American crude imports, and ultimately, oil stockpiles have an outsize impact because Washington publishes the data weekly. In other regions, traders only get official figures on a monthly basis, or sometimes not at all, as in China and India.
It’s a tactic that Saudi Arabia used to great effect six years ago when the kingdom targeted American buyers to rewrite the market’s narrative. "Exports to the US will drop measurably," Saudi Energy Minister Khalid Al-Falih said in May 2017 after an OPEC+ meeting. By July, Saudi oil shipments to America had fallen to a 30-year low. The price of West Texas Intermediate, an oil benchmark, rose 20% from the day Al-Falih spoke to the end of the year.
Whether it can work again remains to be seen.
For one, the US is now far less dependent on Saudi crude. Back in mid-2017, the US regularly bought 1 million barrels a day of Saudi crude. So far this year, it has bought an average of less than 500,000 barrels a day.
Still, it’s probably the best chance Riyadh has to jump-start prices. Despite robust demand growth this year, a flood of crude from Russia, Iran and Venezuela – all under Western sanctions -- has overwhelmed consumption. As a result, West Texas Intermediate has struggled to sustain the $70-a-barrel level. Going after the US and European markets has an advantage for Riyadh: Neither can switch to Russian or Iranian supplies, something that refiners in Asia do every day.
After the production cut, the Saudis would have less than 6 million barrels for export. The bulk of that would go east of Suez, where Saudi Aramco, the state-controlled oil giant, has told several Asian refiners they would get as much crude as they requested. That means any cuts will be felt west of Suez: Europe and the US.
Saudi Arabia can unilaterally reduce supply, but US refiners may decide to buy less Saudi oil if prices are too high versus similar varieties of crude. And Riyadh is making sure that’s the case. For July, Aramco set the premia for Arab Light, its flagship export oil grade, at an all-time high of $7.15-a-barrel above the reference for US sales. That’s more than double the highest ever premia set before the pandemic. As such, Aramco is pricing itself out of the market, and refiners would opt to buy cheaper crude varieties.
Aramco also controls the largest refinery in America, Motiva Enterprises LLC, capable of processing about 630,000 barrels a day, giving it another lever to reduce shipments. Motiva’s Port Arthur, Texas, refinery accounted for nearly 45% of all the Saudi crude that the US imported in the first quarter, buying roughly 182,000 barrels a day, according to government data. Energy Aspects Ltd., a London-based consultancy, reckons that Motiva will buy only about 25,000 barrels a day of Saudi crude in July.
If that’s the case, and considering a tanker’s 40-day trip from the kingdom to the US, Saudi flows into America will plunge in August and September. I wouldn’t be surprised if we see shipments near zero in some weeks during that period – something seen only twice in the past 40 years.
Prince Abdulaziz bin Salman, who replaced Al-Falih as Saudi energy minister, has so far kept the market largely in the dark about where the Saudi oil production cuts would be felt. Only the size of the cut is known. Savvy oil traders will have to read the tea leaves for the rest of the story.
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