Akos Stiller | Bloomberg | Getty Images
Khalid Al-Falih, Saudi Arabia's energy and
industry minister, arrives for the 171st Organization of Petroleum
Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday,
Nov. 30, 2016.
OPEC has urged its members not to mention oil prices when discussing
policy in a break from the past, as the oil producing group seeks to
avoid the risk of U.S. legal action for manipulating the market, sources
close to OPEC said.
Proposed U.S. legislation known as “NOPEC”, which could open the
group up to anti-trust lawsuits, has long lain dormant, with previous
American presidents signaling that they would veto any move to make it
law.
But U.S. President Donald Trump has been a vocal critic of
the Organisation of the Petroleum Exporting Countries, blaming it for
high oil prices and urging it to increase output to relieve pressure on a
market hovering around four-year highs.
That has made OPEC and
its unofficial leader, Saudi Arabia, nervous about what it might mean
for NOPEC, or No Oil Producing and Exporting Cartels Act.
The
decision to refrain from discussing a preferred oil price level — one
way the group can guide market expectations — underlines how Trump’s
aggressive stance on the oil market is unsettling OPEC and testing ties
between allies Riyadh and Washington.
In July, senior OPEC
officials attended a workshop in Vienna with international law firm
White & Case to discuss the NOPEC bill, and the lawyers advised
avoiding public discussion of oil prices and rather talk about the
stability of the oil market, two sources familiar with the matter said.
OPEC
officials were also advised to explore diplomatic lobbying channels to
try and prevent the NOPEC bill from becoming law, one of the sources
said.
On Aug. 1, the OPEC secretariat sent a letter to the ministers making a similar recommendation.
“We
solemnly believe that market stability, and not prices, is the common
objective of our actions,” UAE Energy Minister Suhail al-Mazroui, who
holds the rotating OPEC presidency this year, wrote in the letter, seen
by Reuters.
“I would like to call upon OPEC Member Countries, as
well as our participating Non-OPEC colleagues, to refrain from any
reference to prices in their commentary about our collective efforts or
oil market condition,” he added.
White & Case did not respond to a Reuters request for comment.
Specifying
oil prices is not the only way OPEC tries to guide the market. By
cutting production it can support prices and by raising supplies it can
do the opposite, for example.
But the private coordination of how
to communicate OPEC’s message to the market represents a departure from
past practice, when Saudi Arabia would often signal a preferred price
level when speaking about OPEC policy and seek to push through actions
to achieve that.
TIES STRAINED
While chances of the law
passing this year appear slim, concerns among OPEC members and other oil
producers are growing that it may ultimately get the support of Trump,
given his open criticism of OPEC and high oil prices.
The
OPEC letter came two months before U.S.-Saudi relations were further
strained when a Saudi journalist disappeared during a visit to the
kingdom’s consulate in Istanbul.
Turkish officials say they
believe Jamal Khashoggi, a critic of Saudi policies, was murdered and
his body removed. Saudi Arabia has strongly denied killing Khashoggi.
Some
members of the U.S. Congress, which has long had a testy relationship
with Saudi Arabia, have criticized the kingdom over the case.
A
Senate source familiar with the bill said renewed interest in NOPEC was
likely, as lawmakers weigh any actions in response to Khashoggi’s
disappearance.
The source, who declined to be named, said that
with lawmakers out of town for the next several weeks, it was difficult
to measure current sentiment.
LITIGATION RISKS MAY BE BEHIND IPO DELAY
Over
much of the last year, Saudi Arabia irked Washington by pushing OPEC to
adopt measures to boost oil prices in a shift from its previous, more
moderate stance.
Industry sources have linked that shift to a
desire to maximize revenues and raise the valuation of state energy
giant Saudi Aramco ahead of a planned IPO, a key part of Crown Prince
Mohammed bin Salman’s reforms aimed at diversifying the economy.
The share float, expected by some to be worth up to $100 billion, has been put on hold, sources have told Reuters.
Prince
Mohammed said this month the float was postponed to 2021, and several
industry sources say the delay was partly because of litigation risks if
Aramco was listed in New York, a preferred venue by the Saudi crown
prince.
“There is a major fear NOPEC could turn into another
JASTA,” one of the sources familiar with Aramco IPO preparations said,
referring to the Justice Against Sponsors of Terrorism Act which allows
victims of the Sept. 11, 2001, attacks to sue Riyadh.
Saudi
Arabia, which denies involvement in the attacks, had long had broad
immunity from the lawsuits. That changed in 2016, when the U.S. Congress
overrode then-President Barack Obama’s veto of JASTA.
With close
to $1 trillion in investments in the United States, including assets
owned by Aramco, Riyadh has a lot to lose if the NOPEC bill was passed
into law.
It would revoke the sovereign immunity which oil producers, including OPEC members, currently enjoy from U.S. legal action.
Washington-based
legal firm Gibson Dunn and the Saudi embassy there signed a contract in
late August, according to a copy of the contract filed to the U.S.
Department of Justice.
The contract outlines that among its other responsibilities, Gibson Dunn would be “opposing NOPEC”.
Saudi
Energy Minister Khalid al-Falih has also raised concerns over NOPEC
with senior U.S. officials including U.S. Energy Secretary Rick Perry
during private meetings, two sources familiar with the talks told
Reuters, on condition of anonymity.
Additional reporting by Jarrett Renshaw in New York and Yara Bayoumy in Washington; Editing by Mike Collett-White
No comments:
Post a Comment