The oil price is now controlled by just three men

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[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.

 

Source: https://www.bloomberg.com/opinion/articles/2018-11-18/bin-salman-trump-and-putin-control-the-oil-price-now?fbclid=IwAR1ZYG0KmlKMQCcBFOR7HvvBxTYXPi30lE5522B2wruRgDWtplAF8gTbBVA

WORD BANK:

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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