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Trump’s Weapon To End The Oil War




U.S. President Donald Trump is facing increasing calls from some U.S. senators and congressmen to pressure Saudi Arabia into ending the oil price war, with one of his own Republican party – Senator Kevin Cramer – last week urging him to impose an embargo on oil imports from Saudi Arabia, Russia and other OPEC nations. It is not because the U.S. shale producers cannot deal with a much lower sustained oil price environment as they can. It is because in order to cope with this environment, capital expenditure will have to be trimmed back to the sorts of ratios seen the last time that the Saudis tried the same thing from 2014 to 2016.

The U.S. shale sector won last time and it will win this time (along with Russia) but behind the scenes, the U.S. Presidential Administration is also being advised that it already has the ultimate weapon to make Saudi Arabia end the oil price war right now, understands from legal sources in Washington. The weapon is the ‘NOPEC Bill Bomb’. The ‘NOPEC Bill Bomb’ refers specifically to the ‘No Oil Producing and Exporting Cartels Act’ (NOPEC) that was last threatened by the U.S. in October 2018 when the Saudis had enabled the Brent oil price to remain above the key US$70 per barrel level since March. Any sustained Brent price above US$70 per barrel was – and is – regarded by the current Presidential Administration as being in an area where the benefits to U.S. shale producers of higher prices are outweighed by the relative damage done to the U.S. economy.

More specifically, it is estimated that every US$10 per barrel change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline rises, more than US$1 billion per year in consumer spending is lost. As Bob McNally, the former energy adviser to the former President George W. Bush put it: “Few things terrify an American president more than a spike in fuel [gasoline] prices.”

In any year, this is bad news for the sitting U.S. President but at that specific point in 2018 when the U.S. (in March) was looking to re-impose sanctions on Iran just a couple of months later “it looked like Saudi was taking advantage of the U.S. position, rather than helping its most important ally,” as one senior Washington-based legal source told last week. “It came at a time when we were concerned anyway that the Saudis were becoming too dependent on Russia because of the OPEC-plus deals and were listening too much to its [Russia’s advice],” he added. With the oil price during the March-October period consistently well above US$70 per barrel of Brent and in September trading at nearly US$85 per barrel and looking like it was going higher, Trump warned Saudi Arabia’s King Salman that: “He would not last in power for two weeks without the backing of the U.S. military.” This was also the occasion when the Saudis were remainder of the NOPEC Bill, according to the legal sources in Washington.

Specifically, the NOPEC bill would make it illegal to artificially cap oil (and gas) production or to set prices, as OPEC and Saudi Arabia do. It would also now work as a very neat trick to prevent Russia from resuscitating OPEC+, rather than just OPEC, as if it did then it too would face the consequences of the NOPEC Bill, once it was approved and became the NOPEC Act. The bill would also immediately remove the sovereign immunity that presently exists in U.S. courts for OPEC as a group and for each and every one of its individual member states. This would leave Saudi Arabia, for instance, open to being sued under existing U.S. anti-trust legislation, with its total liability being its estimated US$1 trillion of investments in the U.S. alone. The U.S. would then be legally entitled to freeze all Saudi bank accounts in the U.S., seize its assets in the country, halt all use of U.S. dollars by the Saudis anywhere in the world (oil, of course, to begin with, is denominated in U.S. dollars), and to go after Aramco and its assets and funds, as it is still a majority state-owned production and trading vehicle. It would also mean that Aramco could be ordered to break itself up into smaller, constituent companies that are not deemed to break competition rules in the oil, gas, and petrochemicals sectors or to influence the oil price.

Up until recently, the bill was progressing at a pace through the U.S. system and came very close indeed to being passed into law before Trump stepped in and vetoed it after the Saudis did what he told them to do. In February of last year, the House Judiciary Committee passed the NOPEC Act, which cleared the way for a vote on the Bill before the full House of Representatives. On the same day, Democrats Patrick Leahy and Amy Klobuchar and – most remarkably – two Republicans, Chuck Grassley and Mike Lee, introduced the NOPEC Bill to the Senate. Even before this, the full approval of the Bill has only been stopped by the President. In 2007, the full House of Representatives and Senate passed the NOPEC legislation and it was passed again in 2008 by the House. In terms of presidential views on the Bill, George W. Bush always threatened a veto and Barack Obama opposed it, but Trump has veered from initially being against it to being a lot less clear.


Aside from the various threats to King Salman whenever oil prices have come near to the US$70 per barrel level, and the increasing omni-toxicity of Saudi Crown Prince Mohammed bin Salman – documented here – Trump also, understandably, has a big problem with OPEC. Since the U.S. unilaterally withdrew from the Joint Comprehensive Plan of Action (Iran nuclear deal) in May 2018, Trump has regarded OPEC and Saudi as “looking to take advantage of the short term supply constraints [at that time] that resulted from the U.S.’s attempts to force Iran back to the negotiating table for a better deal for the U.S. by imposing sanctions on it,” according to one of the Washington-based legal sources.

In addition to telling Saudi Arabia’s King Salman that he and his family would not be in power without U.S. support – entirely true, incidentally – Trump also blamed OPEC via Tweets for the 2018 multi-month oil price spike. He said: “Looks like OPEC is at it again. With record amounts of Oil [sic] all over the place, including the fully loaded ships at sea, Oil [sic] prices are artificially Very High [sic]! No good and will not be accepted!” He later added at the U.N. General Assembly in September 2018 that OPEC is “ripping off the world.” Shortly after this, Trump told reporters when asked about the NOPEC Bill specifically: “The United States is firmly committed to open, fair, and competitive markets for global energy trade. We do not support market-distorting behaviour, including cartels.” Quod erat demonstrandum.

Reported By Simon Watkins

Edited By Harry Miller

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Demand Destruction Will Decimate Oil Prices –



Demand Destruction Will Decimate Oil Prices |

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    I have been warning since January that the long-term ramifications of the ongoing coronavirus (COVID-19) outbreak on the oil industry could be significant and long-lasting. In March we saw significant impacts on price and demand. What we don’t know is how long this crisis will last.

    But, I believe we are in the midst of an existential crisis for the oil industry as we know it. This will not be the same industry after this dark period ends. Only the strongest companies are going to survive the financial pain that lies ahead.

    There are many variables in this equation, and they are constantly changing. Demand is plummeting, production and prices are following, and Saudi Arabia and Russia are jockeying to hold onto market share.

    Vitol, the world’s largest independent oil trading company, has said that oil demand could slump as much as 20 million barrels per day (BPD) over the next few weeks, which would lead to an annual decline of 5 million BPD. Vitol CEO Russell Hardy said “It’s pretty huge in terms of anything we’ve had to deal with before.”

    Goldman Sachs said it expected March demand to be down 10.5 million BPD, followed by a further decline to 18.7 million BPD in April. The company noted that this deep plunge would be beyond the ability of OPEC to counteract: “A demand shock of this magnitude will overwhelm any supply response including any potential core-Organization of the Petroleum Exporting Countries output freeze or cut.”

    Related: U.S. Shale Ready To Fire Back In The Oil Price War

    Meanwhile, benchmark prices have temporarily settled in the lower $20s, but local prices have dropped even further. In a story that warned of the largest idling of oil wells in the past 35 years, reported that last week some crude prices were trading in the $1 per barrel range

    The oil and gas sector has been crushed, and there will be a great deal of collateral damage. It’s hard to see when the sector will emerge from this crisis, or what the supply situation will be when we do. But it’s inevitable that there will be fewer players in the sector when this crisis ends.

    By Robert Rapier

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      Five Canadian banks cut credit card interest rates to ease COVID-19 impact – Canoe



      TORONTO — Bank of Nova Scotia, Toronto-Dominion Bank, Royal Bank of Canada, National Bank of Canada and Canadian Imperial Bank of Commerce said on Friday they are cutting interest rates on credit cards to provide relief to customers affected by COVID-19 pandemic.

      Late on Friday, Scotiabank said it would reduce credit card interest rates to 10.99% for personal and small business clients who have been approved for, or seek, payment deferrals.

      Earlier, in separate statements, TD Bank said it will cut credit card interest rates by 50% for customers experiencing hardship, and Royal Bank said it will reduce the charges by the same extent for clients receiving minimum payment deferrals.

      National Bank will allow credit card customers to defer minimum payments for up to 90 days and reduce annual interest rates to 10.9% for these clients, it said.

      CIBC too will reduce interest rates to 10.99% on personal credit cards for users who request to skip a payment, Canada’s fifth-largest lender said. (

      Most Royal Bank, TAD, Scotiabank and CIBC credit cards charge 19.99% interest on purchases. Most National Bank cards charge 20.99%.

      Last week, Prime Minister Justin Trudeau said his government had urged banks to help alleviate the burden credit card interest rates placed on Canadians. Friday’s moves are the latest in a raft of measures announced by the banks to ease the impact of the coronavirus pandemic on customers.

      Canada’s six biggest banks unveiled a mortgage-relief plan two weeks ago to allow homeowners to defer or skip mortgage payments for up to six months as businesses come to a grinding halt due to the pandemic.

      National Bank said it will refund additional interest accrued on the deferred mortgage payments. The lender will also waive fees for transfers and stop payments on checks and pre-authorized debts, and will not charge overdraft fees on checking and high-interest savings accounts, it said.

      Since the mortgage-relief plan was announced, the banks have received nearly half a million requests that have been completed or were being processed.

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      OPEC+ meeting delayed on new Saudi, Russia rift –



      OPEC+ delayed a meeting aimed at ending the oil price war, as Riyadh and Moscow trade barbs about who’s to blame for the collapse in oil prices.

      The alliance is tentatively aiming to hold the virtual gathering on April 9 instead of Monday as it previously intended, a delegate familiar with the matter said. Producers need more time for negotiations, said another. Beyond the alliance, Saudi Arabia and Russia have indicated they want other oil countries to join in any output cuts, complicating efforts to call a meeting, the delegate said, asking not to be named discussing diplomatic matters.

      The delay came hours after Saudi Arabia made a pointed diplomatic attack on Russian President Vladimir Putin, opening a fresh rift between the world’s two largest oil exporters and jeopardizing a deal to cut production.

      In a statement early on Saturday, the Saudi Foreign Minister Prince Faisal bin Farhan said comments by Putin laying blame on Riyadh for the end of the OPEC+ pact between the two countries in March were “fully devoid of truth.”

      The direct criticism of Putin, echoed in a statement by Energy Minister Prince Abdulaziz bin Salman, threatens a new agreement to stabilize an oil market that’s been thrown into chaos by the global fight against coronavirus. President Donald Trump had devoted hours of telephone diplomacy last week to brokering a truce in the month-long price war between Moscow and Riyadh.

      “We always remained skeptical about this wider deal as U.S. producers cannot be mandated to cut,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. “If so, Russia doesn’t come to the table. And if everyone doesn’t cut, Saudi Arabia’s long held stance is that they will not cut either.”

      The prospect of a new deal spurred a 50% recovery in benchmark oil prices last week as traders saw some relief from the catastrophic oversupply caused by a lockdown of the world’s largest economies, in a bit to halt the coronavirus pandemic. With billions of people forced to stay at home, demand for gasoline, diesel and jet has collapsed by about as much 35 million barrels a day.

      “Russia was the one that refused the agreement” in early March, the Saudi foreign ministry said. “The kingdom and 22 other countries were trying to to persuade Russia to make further cuts and extend the agreement.”

      Sponsored by Trump, who’s fretting about the future of America’s shale industry, momentum for a new agreement had built in recent days.

      A delay is “not a good sign,” said Ayham Kamel, head of Middle East and North Africa at the Eurasia Group consultancy. “This entirely plays negatively for the discussions.”

      “Part of Putin’s comments are about saving face and also justifying why the oil price crashed and partly to deter criticism from the U.S. Putin doesn’t want to be blamed for any losses in the U.S. energy industry. It seems to me that there’s both a defensive effort to shield from criticism abroad for both the Saudis and the Russians,” Kamel said.

      Blame Game

      Putin acknowledged the need for a deal on Friday, saying Russia was willing to contribute cuts. This could be 1 million barrels-a-day if the U.S. joins, according to four people familiar with sentiment in the industry.

      But he also put responsibility for the downward spiral in prices on Saudi Arabia.

      “It was the pullout by our partners from Saudi Arabia from the OPEC+ deal, their increase in production and their announcement that they were even ready to give discounts on oil” that contributed to the crash, along with the coronavirus-driven drop in demand, he said.

      “This was apparently linked to efforts by our partners from Saudi Arabia to eliminate competitors who produce so-called shale oil,” Putin continued. “To do that, the price needs to be below $40 a barrel. And they succeeded in that. But we don’t need that, we never set such a goal.”

      In fact, at the time the deal collapsed, Russian officials said privately they were seeking to do just that: use lower prices to force U.S. shale producers from the market and reverse some of the losses in market share they’d seen in recent years.

      Since the original OPEC+ deal fell apart at a March 5 meeting in Vienna, the Saudis have argued Russia decided to walk away and was first to say countries were free to pump as much as possible.

      Prince Abdulaziz, the energy minister and half-brother of Crown Prince Mohamed bin Salman, made the same point in his statement on Saturday.

      “The Russian Minister of Energy was first to declare to the media that all the participating countries are absolved of their commitments,” he said. “This led to the decision by countries to raise their production in order to offset lower prices and compensate for their loss of returns.”

      But the end of OPEC+, first forged in 2016, reflected long standing tensions between the two most important members in the 24 nation alliance. Saudi Arabia was shouldering most of the burden, producing more than 2 million barrels a day below capacity, while Russia had made a more nominal contribution.

      The Saudis, who have ramped up production to a record 12 million barrels a day in the past month and massively discounted the price of their oil, have insisted a new agreement must involve significant contributions from all OPEC+ nations and major producers outside the coalition, including the U.S. and Canada.

      “No one had expected such a total collapse in the oil market,” said Fyodor Lukyanov, head of the Council on Foreign and Defense Policy, a research group which advises the Kremlin. “Saudi Arabia and Russia have lost control of the situation. Tearing up the OPEC+ deal caused a lot of hurt feelings in Moscow and Riyadh, for Putin and MBS. That makes things more difficult, they have to get over that while not losing face. That’s why they’re both pointing the finger at each other.”

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