[Reading level: C1 – Advanced]
OPEC has lost what control of the oil market it ever had. The actions (or tweets) of three men – Presidents Donald Trump and Vladimir Putin and Crown Prince Bin Salman – will determine the course of oil prices in 2019 and beyond. But of course Mohammed they each want different things.
While OPEC struggles to find common purpose, the U.S., Russia and Saudi Arabia dominate global supply. Together they produce more oil than the 15 members of OPEC. All three are pumping at record rates and each could raise output again next year, although they may not all choose to do so.
It was Saudi Arabia and Russia that led the push in June for the OPEC+ group to relax output restraints that had been in place since the start of 2017. Both subsequently jacked up production to record, or near record, levels. U.S. output soared unexpectedly at the same time, as companies pumping from the Permian Basin in Texas overcame pipeline bottlenecks to move their oil to the Gulf coast.
These increases, alongside smaller downward revisions to demand growth forecasts and President Trump’s decision to grant sanctions waivers to buyers of Iranian oil, have flipped market sentiment from fears of a supply shortage to concerns about a glut in the space of three months. Oil stockpiles in the developed nations of the OECD, which had been falling since early 2017, are rising again and are likely to exceed their five-year average level when October data are finalized, according to the International Energy Agency.
As oil prices have headed south, Saudi Arabia said it would cut exports by 500,000 barrels a day next month and warned fellow producers that they needed to cut about 1 million barrels a day from October production levels. That drew a lukewarm response from Putin and swift Twitter rebuke from Trump.
Bin Salman needs oil revenue to fund his ambitious plans to transform Saudi Arabia, while avoiding unrest from those hurt in the process. The International Monetary Fund forecasts that the kingdom will need an oil price of $73.3 a barrel next year to balance its fiscal budget. Brent crude is trading about $5 below that, with Saudi Arabia’s exports trading at a discount to the North Sea benchmark. Prolonging output cuts for a third year is the only way he can realize the price he needs.
He will face more challenges from Putin and Trump. The Russian president shows no great enthusiasm for restricting his country’s production again. Moscow’s budget is much less dependent on oil prices than it was when Russia agreed to join OPEC-led efforts to re-balance the oil market in 2016 and the country’s oil companies want to produce from the fields where they have invested.
Putin may yet decide that maintaining his improved political relationship with MBS, as the Crown Prince is known, is worth a small sacrifice. But it’s not a foregone conclusion that Russia will agree to extend output cuts when producers gather in Vienna next month. Putin says oil prices of around $70 a barrel suit him “completely.”
The opposition from Trump will – naturally – be much louder and comes at a time when he and MBS are trying to preserve their political relationship, while American senators consider harsher sanctions on Saudi Arabia in response to the war in Yemen and the killing of dissident journalist Jamal Khashoggi.
A bigger U.S. threat to Saudi plans than Trump’s tweets will come from the Texas oil patch. American producers have added a volume equivalent to the entire output of OPEC’s Nigeria in the past 12 months. Their production could reach 12 million barrels a day by April, according to the Department of Energy. That’s six months sooner than it was forecasting just a month ago and 1.2 million barrels a day more than it foresaw in January.
Saudi Arabia will have to risk Trump’s wrath, Putin’s indifference and a booming U.S. shale industry if it hopes to balance the oil market in 2019.
the course of sth /kɔːs/ (n): diễn biến của cái gì
struggle to do sth /ˈstrʌɡ.əl/ [B2] (v): vật lộn để làm gì
dominate /ˈdɒm.ɪ.neɪt/ [B2] (v): thống trị
lead the push (expression): đi đầu
relax /rɪˈlæks/ (v): nới lỏng
restraint /rɪˈstreɪnt/ (n): hạn mức
subsequently /ˈsʌb.sɪ.kwənt.li/ [C1] (adv): sau đó
jack up sth (v): tăng cái gì
soar /sɔːr/ [C2] (v): tăng vọt
pipeline /ˈpaɪp.laɪn/ (n): nguồn cung (dầu, ga)
bottleneck /ˈbɒt.əl.nek/ (n): nút cổ chai, điểm tắc nghẽn, vấn đề gây ra sự trì hoãn
sanction /ˈsæŋk.ʃən/ (n): lệnh trừng phạt
waiver /ˈweɪ.vər/ (n): sự miễn trừ
flip /flɪp/ (v): lật
market sentiment (business term): tâm lý thị trường
glut /ɡlʌt/ (business term): dư thừa nguồn cung
stockpile /ˈstɒk.paɪl/ (n): kho dự trữ
exceed /ɪkˈsiːd/ [C1] (v): vượt quá
head south (expression): đi theo xu hướng giảm
fellow /ˈfel.əʊ/ [B2] (adj): đồng nghiệp
lukewarm response /ˌluːkˈwɔːm rɪˈspɒns/ (expression): phản ứng thiếu thiện cảm
swift /swɪft/ [C2] (adj): nhanh chóng
rebuke /rɪˈbjuːk/ (n): lời quở trách
revenue /ˈrev.ən.juː/ [C1] (n): doanh thu
unrest /ʌnˈrest/ [C2] (n): tình trạng bất ổn
fiscal /ˈfɪs.kəl/ (adj): thuộc về tài chính
benchmark /ˈbentʃ.mɑːk/ (n): tiêu chuẩn
prolong /prəˈlɒŋ/ [C1] (v): kéo dài
foregone conclusion /ˌfɔː.ɡɒn kənˈkluːʒən/ (n): dự báo rõ ràng
senator /ˈsen.ə.tər/ (n): thượng nghị sĩ
dissident /ˈdɪs.ɪ.dənt/ (adj): bất đồng chính kiến
wrath /rɒθ/ (n): cơn thịnh nộ
indifference /ɪnˈdɪf.ər.əns/ [C2] (n): sự thờ ơ
shale /ʃeɪl/ (n): đá phiến, dầu đá phiến
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