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Sunday, April 17, 2016

Saudi-Iran tensions scupper deal to freeze oil output

Kuwait oil workers' strike sees output plunge AFP April 17, 2016 Kuwaiti oil workers arrive at their union headquarter in Al-Ahmadi, 35 km south of Kuwait city, on April 17, 2016, to protest against plans to cut their wages and privatise parts of the oil sector View photos Kuwaiti oil workers arrive at their union headquarter in Al-Ahmadi, 35 km south of Kuwait city, on April 17, 2016, to protest against plans to cut their wages and privatise parts of the oil sector (AFP Photo/Yasser Al-Zayyat) More Kuwait City (AFP) - Thousands of Kuwait's oil workers began an open-ended strike on Sunday in protest at plans to cut their wages, action which saw the emirate's crude production plunge. A spokesman for the Kuwait Oil Co. (KOC), Saad al-Azemi, said on Twitter that "average production reached 1.1 million" barrels in Kuwait on Sunday. Daily production in OPEC's fourth largest producer is normally around 3.0 million barrels per day. Azemi also said natural gas production was at 620 million cubic feet, down from Kuwait's daily average of more than 1.3 billion cubic feet. The strike comes as world oil producers gathered in Qatar aiming to negotiate an output freeze to boost prices. "Thousands of workers began their strike," the oil workers union chief Saif al-Qahtani told AFP, adding that production had been partly halted but without clarifying which sites were affected. "Observed since 7:00 am (0400 GMT), this open-ended strike will continue until the workers' demands are met," Qahtani said. The cabinet strongly criticised the "unacceptable" strike, calling it a "clear violation of the law", and demanded legal measures against those involved. The government also urged Kuwait Petroleum Corp (KPC) to mobilise the manpower needed to ensure continued production. On Saturday, the union turned down an appeal from Kuwait's acting oil minister, Anas al-Saleh, to call off the strike. Hit by the sharp drop in crude prices on world markets, Kuwait is introducing a new payroll scheme for all public employees and wants to include the country's 20,000 oil workers, which would mean an automatic cut in wages and incentives. As the strike began, KPC spokesman Sheikh Talal Khaled al-Sabah said that the national oil conglomerate had activated an "emergency plan" to ensure that local and international markets were not affected by the walkout. "Export operations are going ahead as planned and (KPC) is capable of responding to major international market demands, based on agreements with clients," he said in a statement published on the KUNA news agency's website. The plan ensures that all petrol stations will continue to be supplied, as will Kuwait's international airport and companies operating there, he said. He urged Kuwaitis "not to listen to rumours that the strike has affected the needs of the local market". He said reserves of gasoline and petrol derivatives were "enough to meet the country's demands for 25 days and strategic reserves could suffice for 31 more days". KPC had offered to suspend all spending cuts if the union agreed to join a committee to negotiate a settlement, but said workers had boycotted negotiations called for Thursday by the social affairs and labour ministry. The union is also protesting against plans to privatise parts of the oil sector. ========================== Saudi-Iran tensions scupper deal to freeze oil output Saudi Arabia's Oil Minister Ali al-Naimi arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari Saudi Arabia's Oil Minister Ali al-Naimi arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. Reuters/Ibraheem Al Omari Mohammed bin Hamad Al Rumhy, Oman's Minister of Oil and Gas, arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari Mohammed bin Hamad Al Rumhy, Oman's Minister of Oil and Gas, arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. Reuters/Ibraheem Al Omari Qatar's Energy Minister Mohammed Saleh Al Sada arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari Qatar's Energy Minister Mohammed Saleh Al Sada arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. Reuters/Ibraheem Al Omari Nigerian Oil Minister Emmanuel Ibe Kachikwu arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari Nigerian Oil Minister Emmanuel Ibe Kachikwu arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. Reuters/Ibraheem Al Omari Bahrain's Minister of Energy Abdul Hussain bin Ali Mirza arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. REUTERS/Ibraheem Al Omari Bahrain's Minister of Energy Abdul Hussain bin Ali Mirza arrives to a meeting between OPEC and non-OPEC oil producers, in Doha, Qatar April 17, 2016. Reuters/Ibraheem Al Omari A worker looks at a pump jack at the Rosneft company owned Samotlor oil field outside the West Siberian city of Nizhnevartovsk, Russia, January 26, 2016. REUTERS/Sergei Karpukhin A worker looks at a pump jack at the Rosneft company owned Samotlor oil field outside the West Siberian city of Nizhnevartovsk, Russia, January 26, 2016. Reuters/Sergei Karpukhin A van is refuelled at Woqod oil station in Doha, Qatar January 28, 2016. REUTERS/Naseem Zeitoon A van is refuelled at Woqod oil station in Doha, Qatar January 28, 2016. Reuters/Naseem Zeitoon Saudi-Iran tensions scupper deal to freeze oil...X By Rania El Gamal and Reem Shamseddine DOHA (Reuters) - A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday after Saudi Arabia demanded that Iran join in despite calls on Riyadh to save the agreement and help prop up crude prices. The development will revive oil industry fears that major producers are embarking again on a battle for market share, especially after Riyadh threatened to raise output steeply if no freeze deal were reached. Iran is also pledging to ramp up production following the lifting of Western sanctions in January, making a compromise with Riyadh almost impossible as the two fight proxy wars in Yemen and Syria. Some 18 oil nations, including non-OPEC Russia, gathered in the Qatari capital of Doha for what was expected to be the rubber-stamping of a deal - in the making since February - to stabilize output at January levels until October 2016. But OPEC's de facto leader Saudi Arabia told participants it wanted all members of the Organization of the Petroleum Exporting Countries to take part in the freeze, including Iran, which was absent from the talks. Tehran had refused to stabilize production, seeking to regain market share post-sanctions. After five hours of fierce debate about the wording of a communique - including between Saudi Arabia and Russia - delegates and ministers announced no deal had been reached. "We concluded we all need time to consult further," Qatar's energy minister Mohammed al-Sada told reporters. Several OPEC sources said if Iran agreed to join the freeze at the next OPEC meeting on June 2, talks with non-OPEC producers could resume. Russian oil minister Alexander Novak called the Saudi demand "unreasonable" and said he was disappointed as he had come to Doha under the impression that all sides would sign the deal instead of debating it. Novak said Russia was not shutting the door on a deal but the government would not restrain output for now. ADVERTISEMENT Russia is a key ally of Iran and has been defending Tehran's right to raise output post-sanctions while also supporting the Islamic Republic in many of its conflicts with Riyadh. TOUGH SAUDI STANCE The failure to reach a global deal could halt a recent recovery in oil prices. "With no deal today, markets' confidence in OPEC's ability to achieve any sensible supply balancing act is likely to diminish and this is surely bearish for the oil markets, where prices had rallied partly on expectations of a deal," said Natixis oil analyst Abhishek Deshpande. In December, OPEC failed to agree on output policy for the first time in years after Iran disagreed over a production ceiling proposed by Saudi Arabia, arguing again that it wanted to boost output post-sanctions. "Without a deal, the likelihood of markets balancing is now pushed back to mid-2017. We will see a lot of speculators getting out next week," said Deshpande, who added that prices could fall close to $30 per barrel. Brent oil LCOc1 has risen to nearly $45 a barrel, up 60 percent from January lows, on optimism that a deal would help ease the supply glut that has seen prices sink from levels as high as $115 hit in mid-2014. Amrita Sen of Energy Aspects said oil prices could fall below $40 on Monday in a knee-jerk reaction. "While today’s lack of a freeze deal has no negative impact on balances - since Iran is really the only country likely to raise output substantially - it has a huge negative impact on sentiment especially as the deal had been hyped up so much," she said. Related Coverage Russia says door not closed for oil output freeze Qatar says OPEC needs more time for freeze deal OPEC, non-OPEC fail to reach deal on output freeze: sources Russia, Saudi debate oil deal draft at Doha talks Gary Ross, the founder and executive chairman of New York-based consultancy PIRA, said the failure to reach a deal was negative but would not have a long-lasting impact. "The market has recently moved up due to tightening balances. We see geopolitical risks to supply rising, we see U.S. production declining. In many respects, the rebalancing has already started," he said. Saudi Arabia has taken a tough stance on Iran, the only major OPEC producer to refuse to participate in the freeze. Deputy Crown Prince Mohammed bin Salman told Bloomberg that the kingdom could quickly raise production and would restrain its output only if Iran agreed to a freeze. Iran's oil minister Bijan Zanganeh said on Saturday OPEC and non-OPEC should simply accept the reality of Iran's return to the oil market: "If Iran freezes its oil production ... it cannot benefit from the lifting of sanctions." (Reporting by Rania El Gamal and Reem Shamseddine; Additional reporting by Vladimir Soldatkin, Sam Wilkin, Katie Paul and Tom Finn; Writing by Dmitry Zhdannikov and Andrew Torchia; Editing by Dale Hudson)

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