Saudi outing to Latam evokes 1990s oil troika with a new rival: U.S.

November 4, 2014 - Finding Carter

Nov 04 2014

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Photo Credit:Reuters/FAISAL NASSER

By Jonathan Leff

Nov 4 (Reuters) – Some 15 years ago, a troika of powerhouse
oil producers fake a tip agreement to revitalise oil prices from a
crisis-inducing low of nearby $10 a barrel. In a array of private
meetings from Madrid to Cancun, ministers from Saudi Arabia,
Venezuela and Mexico set aside months of severity to produce out
production cuts.

This week, Saudi Oil Minister Ali al-Naimi will make a rare
visit to a dual other nations concerned in that effort. But
veteran oil analysts see no pointer of a new bloc in the
making, notwithstanding some parallels to a late 1990s – a structural
downturn in oil markets and speak of a cost fight among producers.

If anything, Naimi might simply find to explain Saudi Arabia’s
latest position on a market, a tough summary about how all big
producers contingency be prepared to continue a duration of reduce prices in
order to delayed a impetus of their newest rival: a United
States.

“I think that Naimi will tell a Venezuelans the
unvarnished law – prices have to go down utterly a bit and stay
down,” says Philip K. Verleger, boss of consultancy
PKVerleger LLC and a one-time confidant to President Jimmy Carter.

Oil prices have tumbled scarcely 30 percent given June, with
U.S. wanton descending subsequent $80 a tub on Monday, though a open
hostility and panic large oil producers faced scarcely dual decades
ago is mostly absent. Even if Naimi were rallying support for
action, Latin American producers struggling to contend output
would expected be his final stop.

“This (trip) is really most a pointer of business as usual
without any panic,” pronounced Paul Horsnell, tellurian conduct of
commodities investigate during Standard Chartered Bank.

The visits might be an early denote that a three
countries – once extreme competitors offered complicated wanton into the
premium U.S. marketplace – are anticipating common means confronting the
fast-emerging hazard of North American shale and oil sands.

“There are some engaging changes and opportunities today
given a fact that a United States has turn a vital light
sweet producer,” pronounced Amy Myers Jaffe, executive executive of
energy and sustainability during a University of California,
Davis.

CLIMATE AND NATURAL GAS

The settled purpose of Naimi’s trips is benign: he will
attend a meridian change discussion in Venezuela and a natural
gas discussion in Mexico. Naimi has prolonged been a kingdom’s
envoy to tellurian meridian talks, though he has not been to Venezuela
since 2006.

But a visits will also means a possibility for Naimi – who was
involved in a late 1990s talks – to explain a kingdom’s
relaxed position on oil prices to Venezuela, one of a OPEC
members during biggest risk from descending wanton revenues. It might be
a predecessor to some-more formidable conversations down a road.

Less than 4 weeks before a Organization of the
Petroleum Exporting Countries meets in Vienna, there is no
indication that a group’s core Gulf members are in any hurry
to tie a taps. Without a rebate in OPEC outlay or a
sharp slack in U.S. shale production, some analysts expect
prices to keep shifting into subsequent year.

Officials in Venezuela and Mexico declined to contend whether
any approach discussions between oil officials were planned.

TOUGH TALK OR FRIENDLY CHAT

Venezuelan officials have publicly lamented speak of a price
war following Saudi Arabia’s pierce final month to cut export
prices of a crude, seen by some as an denote that the
world’s biggest exporter had shifted plan toward defending
its marketplace share, even during a responsibility of reduce tellurian prices.

But that potential critique is a distant cry from a open
hostility between a dual nations in a late 1990s, when Saudi
Arabia sought to retaliate Venezuela for revving adult outlay in
excess of a OPEC share by flooding a marketplace – a final of
several cost wars within a cartel. Now Venezuela is fighting
to keep outlay from falling.

“Right now if we wanted to get prolongation cuts a last
place we would go is Caracas or Mexico City,” pronounced Nathaniel
Kern, boss of Foreign Reports in Washington.

Mexico, not an OPEC member, was enlisted as an “honest
broker” to get a dual countries talking, pronounced Horsnell. Oil
prices had tumbled 40 percent after a Asian financial crisis
of 1997.

In a end, Algeria’s oil apportion acted as a go-between
during months of cloak-and-dagger petro-diplomacy, involving
unmarked jets, tip trips to Europe and, finally, a Mar 1998
output understanding in a rented room during a Madrid airport.

Naimi’s outing shows that speak of a stream cost fight is
overblown, says Horsnell.

(Reporting by Jonathan Leff, additional stating by Timothy
Gardner in Washington, Joshua Schneyer in New York; Editing by
Steve Orlofsky)
((jonathan.leff@thomsonreuters.com; +1-646-223-6068; Reuters
Messaging: jonathan.leff.thomsonreuters.com@reuters.net))

Keywords: SAUDI OIL/LATAM


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