IRAN’S Minister of Petroleum, Bijan Zangeneh, says shale oil producers in the US and Canada are being punished by a historic rout in oil markets for refusing to join production cuts by OPEC and its allies.
US crude prices plummeted to their lowest level in history below minus $40 a barrel on Monday amid a slump in demand due to the coronavirus pandemic and a massively oversupplied oil market.
Earlier this month, OPEC along with Russia and other producing nations, known as OPEC+, agreed to cut oil production by ten million barrels per day (bpd), but the deal was not large enough to counter oil demand destruction.
‘Shale oil producers in the United States and Canada did not undertake any commitment and as we can see, they are naturally punished by the market,’ Zangeneh told reporters in Tehran after a cabinet meeting on Wednesday.
The minister said to stabilise the market, all producers should commit to production cuts because ‘OPEC’s actions alone are not enough’.
He added: ‘Just as the whole world must work together to fight the coronavirus, there must be cooperation to balance the oil market, especially by the producers who produce expensive oil.’
The collapse in prices has threatened to drive the once-booming US oil industry into bankruptcy. Coupled with pessimistic annual forecasts by companies, it has also foreshadowed the biggest economic slump in the US since the Great Depression due to the coronavirus outbreak.
Sweeping lockdowns have halted business activity and sparked millions of lay-offs in the United States. Companies have launched dramatic cost-saving measures which have already resulted in 22 million job losses in the past month.
The US was bracing for readings of business activity surveys due on Thursday which were expected to plummet to recession-era lows.
US President Donald Trump has tried to keep a stiff upper lip. On Tuesday, he called on the government to make funds available to the US oil and gas industry which is now facing the spectre of bankruptcy.
His urgent call came after US crude futures settled at negative $37.63 a barrel on Monday as traders scrambled to get out of the contract for new oil delivery into storage which is already overflowing with no customers.
Iranian minister Zangeneh said the state of oil inventories and low demand as well as uncertainty over the end of the pandemic is preventing prices from recovering and intensifying problems.
‘With the outbreak of the coronavirus, the demand for oil was declining but in March, we had the price war which saw some producers increase their output and aggravate and accelerate the crisis through grandstanding,’ he added.
A month-long price war between Saudi Arabia and Russia, against the backdrop of the coronavirus pandemic, drove global benchmark Brent crude to below $20 and the OPEC basket to $14.5.
OPEC and other large oil producers led by Russia approved a deal to cut output, after the US threatened to take measures against Saudi Arabia over its crude price war with Moscow.
The US president had threatened Riyadh with oil tariffs and other measures if it did not fix the oil market’s problem of oversupply.
The OPEC and other large oil producers led by Russia agreed on a deal to cut output after a row between Saudi Arabia and the US degenerated into open threats.
And a group of 13 US senators from oil producing states had served Saudi Arabia a portentous warning, saying the kingdom would lose its lifeline on Capitol Hill and face anti-Saudi legislation flourishing if it did not agree to a cut.
The senators called the Saudi Ambassador to the US, Princess Reema Bint Bandar Al Saud last month, and said that they would ‘not only re-evaluate, but take actions’ regarding relations with the kingdom.
The collapse in economic activity caused by the coronavirus has reduced demand by an estimated 30 million to 35 million barrels a day, according to international energy agencies and oil consultants.
‘This will be oil’s last dance for many US producers as the Trump administration’s efforts to save the shale industry will fall short,’ Edward Moya, senior market analyst at OANDA, warned.
He predicted: ‘North America shale-oil producers will be forced to shut very soon and most of the smaller players will not be able to survive this low-price and dismal demand environment.’
Meanwhile, Trump praised his border wall before banning immigration into the United States on the pretext of tackling the coronavirus crisis.
He cited the wall and the Mexican soldiers he claims are protecting it, reiterating in a tweet on Wednesday that his executive order would ban immigration into the country.
‘I will be signing my Executive Order prohibiting immigration into our country today,’ he said.
‘In the meantime, even without this order, our Southern Border, aided substantially by the 170 miles of new Border Wall & 27,000 Mexican soldiers, is very tight – including for human trafficking!’ Trump tweeted.
Trump’s suspension of immigration to the country is drawing a backlash.
Trump initially made the announcement on Monday, which faced a backlash from his Democratic nemeses.
‘It would be wrong and unjust for Americans laid off by the virus to be replaced with new immigrant labour flown in from abroad,’ Trump told reporters on Tuesday. ‘We must first take care of the American worker.’
The comment came amid reports that the first deaths in the United States took place earlier than thought.
The nation’s first two deaths from the virus happened on February 6th and February 17th, the Santa Clara County, California, public health department confirmed in a statement on Tuesday.
It was previously thought that the first death was recorded on February 29 in Washington state.
‘Testing criteria set by the CDC at the time restricted testing to only individuals with a known travel history and who sought medical care for specific symptoms,’ it added. ‘As the Medical Examiner-Coroner continues to carefully investigate deaths throughout the county, we anticipate additional deaths from Covid-19 will be identified.’
Dr Jeffrey Smith, who serves as county executive for Santa Clara County, said the first case had been mistaken for flu, which was quite common at the time.
‘This wasn’t recognised because we were having a severe flu season,’ Smith said. ‘Symptoms are very much like the flu. If you got a mild case of covid, you didn’t really notice … You didn’t even go to the doctor. The doctor maybe didn’t even do it because they presumed it was the flu.’
- Iran’s production of aluminium would jump by more than 63 per cent in the current calendar year ending March 2021 to reach over 430,000 metric tons, says the country’s minister for industries.
Reza Rahmani said on Wednesday that the total output for aluminum in the past calendar year ending March 19 topped 276,000 tons.
He said output would jump in the year ahead with the opening of SALCO, Iran’s massive aluminium smelter in the southern province of Fars.
‘The aforementioned project has been completed in the city of Lamerd in Fars Province with an output capacity of 300,000 tons (a year) with an investment of around $1.2 billion,’ said Rahmani, adding that by opening SALCO, Iran’s total output capacity for aluminium would reach 785,000 tons a year.
He added that SALCO would be the only aluminium plant in Iran benefiting from all components of aluminium production chain, including smelter, anode making and storage facilities, in one single location.
The minister said the plant would enjoy the services of an exclusive port terminal on the Persian Gulf for the purpose of the exports of its products; a structure he said had cost the government more than $170 million to build.
SALCO is jointly owned by IMIDRO, Iran’s government-run holding for mining and metals, and Ghadir Investment Company, where Iran’s Social Security Organisation and pension funds related to the armed forces are the main shareholders.
The plant is expected to directly employ more than 1,500 people, mostly from the local population, while 5,000 more jobs would be created on the company’s wider supply chain.
A first phase of the giant aluminium smelter had been planned to open in November but it was delayed because of a series of logistics issues.
