Oil supply drops as Iran sanctions bite: IEA

The agency said Iranian crude oil output fell in April. (Shutterstock/File)
Updated 15 May 2019
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Oil supply drops as Iran sanctions bite: IEA

  • The agency said the market balance might flip from surplus to deficit
  • Saudi Energy Minister said the attack on the Saudi pipelines targeted global oil supplies

PARIS: The world’s oil supply fell last month, the International Energy Agency said Wednesday, amid rising global tensions as US sanctions on Iran tightened and OPEC+ members produced less crude in line with their pact.
In its latest monthly report on the global oil market, the Paris-based IEA said that while geopolitics and industry disruptions were clouding the outlook it believes that the market balance is set to flip from surplus into deficit, a development that would favor efforts by oil producing nations to keep prices high.
Tensions have been mounting in recent days after the mysterious sabotage of several tankers in the Gulf and drone attacks claimed by Iran-aligned Yemen rebels shut down one of Saudi Arabia’s major oil pipelines.
Saudi Energy Minister Khalid Al-Falih called the pipeline attacks, which did not halt exports despite the temporary shutdown of the pipeline, an “act of terrorism... that not only targets the kingdom but also the security of oil supplies to the world and the global economy.”
Meanwhile, the UAE has said four ships were damaged Sunday in “sabotage attacks” off the emirate of Fujairah, on the mouth of the Hormuz, a key transit point for oil tankers.
The incidents follow the expiration at the beginning of May of waivers the US granted eight major importers of Iranian oil.
The IEA said Iranian crude oil output fell in April to 2.6 million barrels per day (mbd), the lowest level in over five years, and could tumble in May to levels not seen since the 1980s war with Iraq.
In a table with data from energy sector intelligence firm Kpler, Iranian exports are seen as plunging to roughly 0.5 mbd in May from around 1.4 mbd in April.
The supply disruptions, including those from crisis-hit Venezuela, come as OPEC and its allies including Russia, often called OPEC+, are pushing forward with their latest pact to restrain production.
After a production glut lead to prices dropping last year they agreed in December to trim production once again.
The IEA said the OPEC+ nations produced 0.44 mbd less than their target in April.
Nevertheless, it said: “there have been clear and, in the IEA’s view, very welcome signals from other producers that they will step in to replace Iran’s barrels, albeit gradually in response to requests from customers.”
It noted that despite the supply uncertainty and a brief run up to $75 per barrel, prices for the global benchmark Brent crude are little changed from one month ago.
With fresh economic data and forecasts now available, the IEA trimmed its forecast for growth in global oil demand this year to an increase of 1.3 mbd, primarily due to a slow start of the year.
However, it said: “slower demand growth is likely to be short-lived, as we believe that the pace will pick up during the rest of the year.”
The lower demand in the first quarter of the year means that the oil market likely remained in surplus despite efforts by OPEC+ to eliminate the glut, the IEA said, adding that it is “highly likely” it will flip into deficit this quarter.
But the IEA’s outlook is based on the general assumption that global economic activity picks up from the soft patch experienced at the end of 2018 and beginning of 2019.
“Rising trade tensions, however, represent the main threat to the currently fragile rebound,” it warned as the dispute between the United States and China deepened.
The United States last week raised tariffs on $200 billion worth of Chinese imports, with China responding with increased duties on $60 billion of US goods.
The administration of US President Donald Trump is considering whether to put tariffs on another $300 billion in Chinese goods, which would mean nearly all imports from China would face tariffs.
Citing estimates that a full blown trade war would dent global economic and trade growth, the IEA said it would have “negative implications” for oil demand.


‘Don’t be too optimistic’: Huawei employees fret at US ban

Updated 26 May 2019
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‘Don’t be too optimistic’: Huawei employees fret at US ban

  • This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei
  • Another critical partner, ARM Holdings, said it was complying with the US restrictions

BEIJING: While Huawei’s founder brushes aside a US ban against his company, the telecom giant’s employees have been less sanguine, confessing fears for their future in online chat rooms.
Huawei CEO Ren Zhengfei declared this week the company has a hoard of microchips and the ability to make its own in order to withstand a potentially crippling US ban on using American components and software in its products.
“If you really want to know what’s going on with us, you can visit our Xinsheng Community,” Ren told Chinese media, alluding to Huawei’s internal forum partially open to viewers outside the company.
But a peek into Xinsheng shows his words have not reassured everyone within the Shenzhen-based company.
“During difficult times, what should we do as individuals?” posted an employee under the handle Xiao Feng on Thursday.
“At home reduce your debts and maintain enough cash,” Xiao Feng wrote.
“Make a plan for your financial assets and don’t be overly optimistic about your remuneration and income.”
This week Google, whose Android operating system powers most of the world’s smartphones, said it would cut ties with Huawei as a result of the ban.
Another critical partner, ARM Holdings — a British designer of semiconductors owned by Japanese group Softbank — said it was complying with the US restrictions.
“On its own Huawei can’t resolve this problem, we need to seek support from government policy,” one unnamed employee wrote last week, in a post that received dozens of likes and replies.
The employee outlined a plan for China to block off its smartphone market from all American components much in the same way Beijing fostered its Internet tech giants behind a “Great Firewall” that keeps out Google, Facebook, Twitter and dozens of other foreign companies.
“Our domestic market is big enough, we can use this opportunity to build up domestic suppliers and our ecosystem,” the employee wrote.
For his part, Ren advocated the opposite response in his interview with Chinese media.
“We should not promote populism; populism is detrimental to the country,” he said, noting that his family uses Apple products.
Other employees strategized ways to circumvent the US ban.
One advocated turning to Alibaba’s e-commerce platform Taobao to buy the needed components. Another dangled the prospect of setting up dozens of new companies to make purchases from US suppliers.
Many denounced the US and proposed China ban McDonald’s, Coca-Cola and all-American movies and TV shows.
“First time posting under my real name: we must do our jobs well, advance and retreat with our company,” said an employee named Xu Jin.
The tech ban caps months of US effort to isolate Huawei, whose equipment Washington fears could be used as a Trojan horse by Chinese intelligence services.
Still, last week Trump indicated he was willing to include a fix for Huawei in a trade deal that the two economic giants have struggled to seal and US officials issued a 90-day reprieve on the ban.
In Xinsheng, an employee with the handle Youxin lamented: “I want to advance and retreat alongside the company, but then my boss told me to pack up and go,” followed by two sad-face emoticons.