Oil prices have started to decline as output increases. David McNew/Reuters
Oil prices have started to decline as output increases. David McNew/Reuters

Opec's new game as rivalries surface over oil production



The Fifa World Cup, intended to showcase friendly competition between nations, is of course a hotbed of intense rivalries.

Russian President Vladimir Putin and Saudi Arabia's Crown Prince Mohammed bin Salman oversaw proceedings in Thursday’s opening game. Meanwhile, by a stroke of luck, Iran enjoyed late success on Friday. The US, which along with Canada and Mexico won the bid to host the event in 2026, is not on the field but comments from the sidelines. All this makes it much like Opec.

The Saudi Arabian oil team’s problem today is too much winning. The market has tightened significantly as the eventual result of their policy of production restraint. They have been assisted by continuing strong worldwide demand and by the collapse in Venezuela, then by the prospect of lost exports from Iran as the US moves to reimpose sanctions.

Prices hovering around $80 per barrel conjure the spectre of demand destruction, and diplomatic pressure from US President Donald Trump’s anti-Opec tweets and from other major customers such as India. After strongly supporting the US decision to leave the nuclear deal with Iran, Riyadh is now looking to prevent the oil price getting out of control.

After he and Mr Putin assembled an all-stars team of Saudi Arabia, the UAE, Russia, Iran, Iraq, Venezuela, Oman and other leading producers, Prince Mohammed spoke of a “10 to 20 year agreement” for oil market management. It remains to be seen whether production restraint is the right way to play for the long-term, but with threats from surging US production and the rise of electric vehicles, some kind of far-sighted strategy is needed.

Few of the "Opec+" group can raise production significantly – only Saudi Arabia, the UAE, Kuwait, Russia and, given a deal with the Kurdish region on pipeline access, Iraq. Iran feels cheated; having agreed to some production restraint after it emerged from the Obama-era penalties, it now faces losing market share to its rivals again. Exports were down sharply in early June, as South Korean, Turkish and European buyers cut shipments, perhaps in anticipation of sanctions.

Both Tehran and Caracas, also under (milder) American sanctions, object to Opec policy being made in response to US demands, and reducing prices at their expense. Venezuela, historically hopeless at football, is not doing much better at oil production. Its output may dip below 1 million barrels per day shortly, a humiliating fall for Latin America’s once-titan. Libyan oil production is threatened again by fighting at its ports.

In the short term, there is not much Iran, Venezuela, Libya or other declining producers such as Qatar, Angola or Algeria can do if the stronger members go it alone on raising production. Sanctions on Iran might prove ineffective, political change in Venezuela might restore its output, or global recession may hit demand.

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Russia is in the most interesting position. Moscow wants to retain its alignment with Iran, forged by cooperation in their Syrian brutality, and it does not want to seem to play to Mr Trump’s whistle. Yet ideas that it would resell sanctioned Iranian crude at higher prices do not make much sense and China, not Russia, will be the biggest investor in Iranian oil-fields.

The Kremlin also wishes to sustain its influence with Opec, particularly in the Arabian Gulf, which it has developed through the "Vienna deal". Its oil companies have been champing at the bit to raise production again, particularly the largest, Rosneft, controlled by Igor Sechin, Mr Putin’s sidekick. And there is some concern over rising domestic fuel prices during the summer harvesting season.

Saudi Arabia and Russia could quietly boost production to a degree. The Saudi summer, bringing higher domestic demand, is upon us. After over-complying with production cuts for a while, they could employ a period of moderate under-compliance. .

That might help keep the market from boiling over until the next scheduled meeting in November, or perhaps an extraordinary meeting in September or October. By then, the initial impact of the Iran sanctions would be clearer.

Saudi production was up 86,000 bpd in May, although it normally rises in summer anyway to meet domestic power generation. Russia’s output at the start of June was 11.1 million bpd, slightly above its 10.98 million bpd target.

Saudi energy minister Khalid Al Falih has said an Opec deal to boost production is “inevitable”, while his Russian counterpart Alexander Novak has proposed easing the targeted cuts to 1.5 million barrels per day in June, allowing 300,000 bpd to come back on the market. Further increases could then be phased in during the rest of the year.

The Saudi-Russia axis would rather Opec reached a formal position acknowledging the need for more oil to back up a commitment to stable prices. To win acceptance from other members, they could concede to a smaller boost in output, preferable to a breakaway move.

This will work for now, but by November, they need to agree to the game’s new rules.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

Company profile

Company name: Dharma

Date started: 2018

Founders: Charaf El Mansouri, Nisma Benani, Leah Howe

Based: Abu Dhabi

Sector: TravelTech

Funding stage: Pre-series A 

Investors: Convivialite Ventures, BY Partners, Shorooq Partners, L& Ventures, Flat6Labs

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Born: May 19 1952
Place of birth: Deventer, Netherlands
Playing position: Midfielder

Teams managed:
1998-2000 Fortuna Sittard
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2007-2008 Feyenoord
2008-2012 Netherlands
2013-2014 Hamburg
2015-2017 Saudi Arabia
2018 Australia

Major honours (manager):
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Fly Etihad or Emirates from the UAE to Moscow from 2,763 return per person return including taxes. 
Where to stay 
Trips on the Golden Eagle Trans-Siberian cost from US$16,995 (Dh62,414) per person, based on two sharing.

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Australia: Aaron Finch (c), Mitchell Marsh, Alex Carey, Ashton Agar, Nathan Coulter-Nile, Chris Lynn, Nathan Lyon, Glenn Maxwell, Ben McDermott, D’Arcy Short, Billy Stanlake, Mitchell Starc, Andrew Tye, Adam Zampa.

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Tickets

Tickets for the 2019 Asian Cup are available online, via www.asiancup2019.com

APPLE IPAD MINI (A17 PRO)

Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits

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In the box: iPad mini, USB-C cable, 20W USB-C power adapter

Price: From Dh2,099

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Aguero 1', 44', 61'

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Man of the match: Sergio Aguero (Manchester City)

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8 UAE companies helping families reduce their carbon footprint

Greenheart Organic Farms 

This Dubai company was one of the country’s first organic farms, set up in 2012, and it now delivers a wide array of fruits and vegetables grown regionally or in the UAE, as well as other grocery items, to both Dubai and Abu Dhabi doorsteps.

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Modibodi  

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The Good Karma Co

From brushes made of plant fibres to eco-friendly storage solutions, this company has planet-friendly alternatives to almost everything we need, including tin foil and toothbrushes. 

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Re:told

One Dubai boutique, Re:told, is taking second-hand garments and selling them on at a fraction of the price, helping to cut back on the hundreds of thousands of tonnes of clothes thrown into landfills each year.

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Lush

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Bubble Bro 

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Coethical 

This company offers refillable, eco-friendly home cleaning and hygiene products that are all biodegradable, free of chemicals and certifiably not tested on animals.

www.instagram.com/coethical

Eggs & Soldiers

This bricks-and-mortar shop and e-store, founded by a Dubai mum-of-four, is the place to go for all manner of family products – from reusable cloth diapers to organic skincare and sustainable toys.

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Place of birth: Kalba

Family: Mother of eight children and has 10 grandchildren

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Treaty of Peace in Perpetuity Agreed Upon by the Chiefs of the Arabian Coast on Behalf of Themselves, Their Heirs and Successors Under the Mediation of the Resident of the Persian Gulf, 1853
(This treaty gave the region the name “Trucial States”.)


We, whose seals are hereunto affixed, Sheikh Sultan bin Suggar, Chief of Rassool-Kheimah, Sheikh Saeed bin Tahnoon, Chief of Aboo Dhebbee, Sheikh Saeed bin Buyte, Chief of Debay, Sheikh Hamid bin Rashed, Chief of Ejman, Sheikh Abdoola bin Rashed, Chief of Umm-ool-Keiweyn, having experienced for a series of years the benefits and advantages resulting from a maritime truce contracted amongst ourselves under the mediation of the Resident in the Persian Gulf and renewed from time to time up to the present period, and being fully impressed, therefore, with a sense of evil consequence formerly arising, from the prosecution of our feuds at sea, whereby our subjects and dependants were prevented from carrying on the pearl fishery in security, and were exposed to interruption and molestation when passing on their lawful occasions, accordingly, we, as aforesaid have determined, for ourselves, our heirs and successors, to conclude together a lasting and inviolable peace from this time forth in perpetuity.

Taken from Britain and Saudi Arabia, 1925-1939: the Imperial Oasis, by Clive Leatherdale

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If you go

Flights

Emirates flies from Dubai to Phnom Penh with a stop in Yangon from Dh3,075, and Etihad flies from Abu Dhabi to Phnom Penh with its partner Bangkok Airlines from Dh2,763. These trips take about nine hours each and both include taxes. From there, a road transfer takes at least four hours; airlines including KC Airlines (www.kcairlines.com) offer quick connecting flights from Phnom Penh to Sihanoukville from about $100 (Dh367) return including taxes. Air Asia, Malindo Air and Malaysian Airlines fly direct from Kuala Lumpur to Sihanoukville from $54 each way. Next year, direct flights are due to launch between Bangkok and Sihanoukville, which will cut the journey time by a third.

The stay

Rooms at Alila Villas Koh Russey (www.alilahotels.com/ kohrussey) cost from $385 per night including taxes.

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Robbie Keane (Atletico de Kolkata) The Irish striker is, along with his former Spurs teammate Dimitar Berbatov, the headline figure in this season’s ISL, having joined defending champions ATK. His grand entrance after arrival from Major League Soccer in the US will be delayed by three games, though, due to a knee injury.

Dimitar Berbatov (Kerala Blasters) Word has it that Rene Meulensteen, the Kerala manager, plans to deploy his Bulgarian star in central midfield. The idea of Berbatov as an all-action, box-to-box midfielder, might jar with Spurs and Manchester United supporters, who more likely recall an always-languid, often-lazy striker.

Wes Brown (Kerala Blasters) Revived his playing career last season to help out at Blackburn Rovers, where he was also a coach. Since then, the 23-cap England centre back, who is now 38, has been reunited with the former Manchester United assistant coach Meulensteen, after signing for Kerala.

Andre Bikey (Jamshedpur) The Cameroonian defender is onto the 17th club of a career has taken him to Spain, Portugal, Russia, the UK, Greece, and now India. He is still only 32, so there is plenty of time to add to that tally, too. Scored goals against Liverpool and Chelsea during his time with Reading in England.

Emiliano Alfaro (Pune City) The Uruguayan striker has played for Liverpool – the Montevideo one, rather than the better-known side in England – and Lazio in Italy. He was prolific for a season at Al Wasl in the Arabian Gulf League in 2012/13. He returned for one season with Fujairah, whom he left to join Pune.


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