1 Limitless pumping shatters Opec unity (Gulf News) Opec abandoned all pretence this week of acting as a group. It’s now every member for itself. At a chaotic meeting Friday in Vienna, the Organisation of Petroleum Exporting Countries tossed aside the idea of limiting production to control prices. Instead, it went all in for the one-year-old Saudi Arabia-led policy of pumping, pumping, pumping until rivals — external, such as Russia and US shale drillers, as well as internal — are squeezed out of market share.
“Lots of people said that Opec was dead; Opec itself just confirmed it,” Jamie Webster, a Washington-based oil analyst for IHS Inc, said. Opec has set a production target almost without interruption since 1982, though member countries often ignored it and pumped well above it. The ceiling of 30 million barrels a day, in place since 2011 and now abandoned as too rigid, is no exception.
Opec output has outstripped it for 18 consecutive months. Now the organisation says it will keep pumping as much as it does now — about 31.5 million barrels a day — effectively endorsing limitless output. The oversupply has sent the price of Brent, a global oil benchmark, to a six-year low, triggering the worst slump in the energy sector since the 2008 world financial crisis.
It’s cut the profits of major oil companies such as Exxon Mobil Corp and BP Plc in half while crude-rich countries such as Mexico and Russia have watched their currencies plunge and their coffers shrink.
“Effectively, it’s ceilingless,” said Iranian Oil Minister Bijan Namdar Zanganeh. “Everyone does whatever they want.” “We aren’t going to go back to a cartel and work against the customers — that time has passed,” said UAE Minister Suhail Al Mazroui.
The prospect of Opec, which accounts for roughly 40 per cent of the world’s oil production, taking US TV personality Sarah Palin’s advice to “drill, baby, drill” sent crude prices further downward. The oversupply is likely to continue in the new year. Iran, for years under sanctions related to its nuclear programme, has promised to lift its production to as much as 4 million barrels a day by the end of 2016, up from about 3.3 million barrels a day currently.
2 China strengthens Africa ties with $60bn pledge (San Francisco Chronicle) China’s president has pledged $60 billion to development in Africa, as part of what Chinese and African leaders have called “win-win cooperation.”
President Xi Jinping outlined 10 areas that will receive funding including infrastructure projects, aid for drought-stricken countries and thousands of scholarships for African students. The Chinese government will also cancel outstanding debts for Africa’s least developed countries in the form of zero interest loans that mature at the end of 2015, he said.
Xi also promised to provide assistance to help upgrade African health care facilities, train hundreds of journalists and provide satellite reception in 10,000 African villages. China has the world’s largest foreign currency reserves at $3.514 trillion. State owned banks have often looked to developing countries for investment opportunities.
The $60 billion pledge is three times as much as the package promised at the last China Africa cooperation summit in 2012. As with pledges from previous summits, the funding will be distributed over the next three years. At the last summit in Beijing, China pledged to provide a $20 billion credit line to African countries for development projects and boosted the China Africa development fund by $5 billion, as it has this year.
3 ISIS is expanding its international reach, not weakening (Hassan Hassan in The Guardian) The United Nations’ sanctions monitoring team has warned that Libya was emerging as a key stronghold for Islamic State close to the shorelines of Europe. The warning aligns with assessments by US intelligence officials that the organisation’s franchise is entrenching itself in the midst of chaos in the north African country.
Isis’s expansion outside its heartlands in Iraq and Syria has raised questions about how more than a year of a relentless air campaign has affected it. The group has faced military defeats in north-eastern Iraq and Syria in recent months, but it also carried out large-scale international terror attacks.
More perplexing is that, as Isis faces increased pressure at home, many fighters are reportedly returning to Libya to shore up its franchise there. This has led some western officials to say the group might be preparing to use the Libyan front as a fallback base in case of a defeat in Iraq and Syria.
Isis seems to be taking steps that indicate it is stable, rather than being under pressure and looking for alternative bases. Despite the air campaign and ground offensives in some areas, the group is in fact facing less pressure than before. Clashes between Iraqi forces and Isis have been relatively rare in recent months, as a result of a political crisis in Baghdad over the reforms promised by the prime minister, Haider al-Abadi, and a dwindling appetite to fight Isis outside Shia areas.
Isis appears to be focused on expanding its presence outside Syria and Iraq and on developing its international network. The bombing of a Russian airliner, the Paris attacks and the Libyan expansion are signs that the group wants to capitalise on its success on the ground in Syria and Iraq by expanding its international reach. That is hardly a sign of weakness.