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Washington Eyes Crackdown at OPEC



Legislation aimed at OPEC is suddenly getting steam in the US Congress, and raising the alarm bells to the cartel.

On Thursday, the Judiciary Committee adopted a bill that would allow the US Department of Justice to sue OPEC members to manipulate the oil market. The so-called "NOPEC" bill will remove sovereign immunity, exposing member states to antitrust regulation.

The bill has appeared earlier in previous administrations. But former presidents of both political parties have opposed taking criminal charges, fearing damage to the US-Saudi relationship.

Times have changed. President Trump has repeatedly posted angry tweets about OPEC and owes it to high gas prices. This led to a revived push for NOPEC legislation. The murder of Saudi journalist Jamal Khashoggi can also be a turning point and delete a lot of goodwill for Saudi Arabia in Washington.

In theory, OPEC members may face confiscation of their assets in the United States. For example, Saudi Aramco controls Motiva Enterprises, which owns the largest oil refinery in the country in Port Arthur, Texas.

According to the Financial Times, the prospectus for the NOPEC bill is the law, raising alarm bells not only for OPEC, but also for international oil companies who fear reprisals abroad. Companies such as ExxonMobil and BP have great efforts in projects in places like Nigeria and Iraq. These OPEC member states could retaliate if they face sanctions from the US government. FT reports that the oil spills, together with the American Petroleum Institute and the US Chamber of Commerce, lobby against the NOPEC legislation.

Analysts speculate that Qatar left OPEC in 201

8, not only because of its rivalry with Saudi Arabia, but also because it has great interests in the United States and does not want to face antitrust action. Qatar Petroleum, along with ExxonMobil, gave only the final investment decision for the $ 10 billion Golden Pass LNG project in Texas. Related: Chevron looks at double-permed production by 2022

So what are the odds of passage for the NOPEC bill? Hedgeye's senior energy analyst Joe McMonigle told Reuters that low oil prices have removed some of the urgency. "I see no basis for that," McMonigle said.

But the takeover of the US House of Representatives by Democrats speeded the bill. One of the first actions in the new Parliament's panel of justice was to address the legislation, which it quickly approved on 7 February. It is now possible to complete house voting.

In fact, there is suddenly two-part support for the bill, making it closer to law than at any point in history. Senator Chuck Grassley, a Republican, has proposed a companion to the Senate. "The oil cartel and its member states need to know that we are committed to stopping their competitive behavior," Grassley said. Above the aisle, Sender Amy Klobuchar from Minnesota, who also represents a state with significant ethanol interests, came out in support of the bill.

"Given President Trump's familiar hostile attitude towards OPEC, it now looks like a very good chance that the bill will be voted in," says Bjarne Schieldrop, analyst at chief commodities at SEB, in a statement. "The view of a passage of NOPEC legislation has given bearish pressure to Brent crude. "

It is still too early to say with some certainty, but if the NOPEC law were to be allowed, it could theoretically make it much more difficult for OPEC to set production limits with a view to It can also jeopardize the formalization of the OPEC / non-OPEC alliance with Russia, the so-called OPEC + event, OPEC and the non-OPEC group led by Moscow negotiating for such an entity. [19659008] Related: The next major threat to oil comes from China

Nevertheless, countries can individually increase and decrease production, or, more specifically, Saudi Arabia – the only country that can make major product changes levels – can still tailor production to meet strategic goals. But it would not be able to invoke other countries to chipe in. "The NOPEC legislation can end tactical, collaborative interruptions and increase orchestrated by OPEC," Schieldrop said. "It will probably not prevent Saudi Arabia from moving its production up and down alone to cope with tactical fluctuations and imbalances in the global oil market."

Othes sees a more significant impact. "We're just a tweet away from Nopec being allowed," Bob McNally from the Rapidan Energy Group told FT. McNally said the legislation could lead to more volatility and lower prices if OPEC failed to limit its supply. "After a good dose of Nopec, if it was successful, we would end up asking for them to reunite, get back to business and start controlling the delivery," he added.

Maybe. But outside the oil companies themselves, it is not a massive constituency in the US for OPEC. The cartel is not exactly popular in the United States. Moreover, if the NOPEC law was allowed and the oil prices were pushed down, Trump could claim credit and millions of US motorists would probably be grateful. It seems unlikely that it will be a political price to pay in the US for lower oil prices and a breakdown on OPEC, even though US oil companies are facing retaliation. No one is going to throw a tear for ExxonMobil if the company suddenly goes into trouble in Iraq or Nigeria because of the NOPEC law.

By Nick Cunningham from Oilprice.com

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