VIENNA — OPEC will supply a diminishing amount of oil in the next five years as output of U.S. shale and other rival sources expands, the exporter group said, despite a growing appetite for energy fed by global economic expansion.
OPEC’s production of crude oil and other liquids is expected to decline to 32.8 million barrels per day (bpd) by 2024, the group said in its 2019 World Oil Outlook published on Tuesday. That compares with 35 million bpd in 2019.
Rising climate activism in the West and widening use of alternative fuels are putting the strength of long-term oil demand under more scrutiny. The Organization of the Petroleum Exporting Countries cut its medium- and long-term oil demand forecasts in the report.
OPEC supply has been falling in the last few years under a pact with Russia and other non-members to support the market. The resulting higher oil prices have bolstered non-OPEC output and OPEC is expected to restrain output in 2020.
“Non-OPEC supply prospects have been revised up sharply, as U.S. tight oil, in particular, has again outperformed expectations,” OPEC Secretary-General Mohammad Barkindo wrote in the foreword of the report, using another term for shale.
The United States has pushed its oil output to record highs due to a shale revolution that allowed new technology to tap reserves previously deemed uneconomic. OPEC supply has declined as a result of voluntary curbs and U.S. sanctions on OPEC members Venezuela and Iran.
Vienna-based OPEC expects supply of U.S. tight oil to reach 16.9 million bpd in 2024 from 12.0 million bpd in 2019, although the expansion will slow and peak at 17.4 million bpd in 2029.
LOWER DEMAND FORECAST
OPEC, a 14-country, Middle East-dominated producer group that counts world No. 1 oil exporter Saudi Arabia, Iraq and Iran among its members, cut its forecast for global oil demand over the medium term.
The organization, which pumps almost a third of global oil supply, now sees oil consumption in 2023 reaching 103.9 million bpd, down from 104.5 million bpd in last year’s report.
Longer-term, oil demand is expected to increase by 12 million bpd to reach 110.6 million bpd by 2040, also lower than last year’s forecast.
OPEC cited a recent lowering of economic growth forecasts plus efficiency gains and use of other fuels for the lower demand outlook. It said it expected oil use in industrialized countries, or those in the Organisation for Economic Cooperation and Development, to decline after 2020.
Electric cars, while still a very small share of the global fleet, are “gaining momentum,” OPEC said. They will account for nearly half of all new passenger cars in OECD countries by 2040, almost a quarter of those in China and more than 26% globally.
OPEC still hopes to boost production in coming decades thanks to its abundant and cheap-to-extract reserves. It expects supply from non-OPEC producers to hit a high of 72.6 million bpd in 2026 and fall to 66.4 million bpd by 2040.
“In the long term,” Barkindo wrote, “it is OPEC that will be expected to meet the majority of oil demand requirements.”
The Pentagon emphasized Monday that U.S. troops will secure oil fields in northeast Syria in the wake of ISIS leader Abu Bakr al-Baghdadi’s death.
“At the height of Baghdadi’s reign, these oil fields provided ISIS with the bulk of financial resources used to fund its terror,” Secretary of Defense Mark Esper said Monday at the Pentagon.
What’s more, the latest revelation comes as the Trump administration works to withdraw the U.S. military presence in war-torn Syria.
U.S. Defense Secretary Mark Esper (L) and Chairman of the Joint Chiefs of Staff Gen. Mark Milley hold a news conference at the Pentagon the day after it was announced that Abu Bakr al-Baghdadi was killed in a U.S. raid in Syria October 28, 2019 in Arlington, Virginia.Chip Somodevilla | Getty Images News | Getty Images
WASHINGTON — The Pentagon emphasized Monday that U.S. troops will secure oil fields in northeast Syria in the wake of ISIS leader Abu Bakr al-Baghdadi’s death.
“At the height of Baghdadi’s reign, these oil fields provided ISIS with the bulk of financial resources used to fund its terror,” Secretary of Defense Mark Esper said Monday at the Pentagon. “U.S. troops will remain positioned in this strategic area to deny ISIS access to those vital resources and we will respond with overwhelming military force against any group that threatens the safety of our forces there,” he added.
“The fundamental purpose of securing those oil fields is to deny those oil fields access to ISIS in order to prevent ISIS from resurgence,” Chairman of the Joint Chiefs Gen. Mark Milley said alongside Esper.
On Sunday, President Donald Trump confirmed Baghdadi’s death and identified Syria’s oil as a U.S. national security priority. Trump also highlighted a potential U.S. energy market opportunity by tapping into Syrian oil.
“What I intend to do, perhaps, is make a deal with an ExxonMobil or one of our great companies to go in there and do it properly…and spread out the wealth,” Trump said, adding that U.S. troops would be tasked with retaining control of the oil facilities.
″[The oil] fueled ISIS, number one. Number two, it helps the Kurds – because it’s basically been taken away from the Kurds… And, number three, it can help us, because we should be able to take some also,” he said.
“Baghdadi’s death will not rid the world of terrorism or end the ongoing conflict in Syria but it will certainly send a message to those who question America’s resolve and provide a warning to terrorists who think they can hide,” Esper said.
Last year, Trump went through a similar debate over whether to withdraw U.S. troops from Afghanistan, ultimately agreeing to keep them there but only after repeatedly raising questions about why they should stay.
(Reuters) TOKYO (Reuters) – Oil prices fell for a second day on Tuesday as investors awaited U.S. crude inventory data for more insight into oil demand trends, while concerns about economic growth overshadowed signs of a thawing in the trade war between Washington and Beijing.
Brent LCOc1 futures were down 30 cents, or 0.5%, at $61.27 a barrel by 0733 GMT, having fallen 0.7% on Monday.
U.S. West Texas Intermediate (WTI) CLc1 crude was down 40 cents, or 0.7%, at $55.41, after falling 1.5% in the previous session.
Prices rose sharply last week amid a decline in U.S. inventories and signs of an easing in the U.S.-China trade war, but worries on Monday about weaker economic growth offset hopes of a rise in oil demand even if trade talks progress.
“Where the market remains beaten down by demand concerns, traders could be waiting for signs that the economic data is bottoming and the inventory surpluses are decreasing before fully committing to the long risk-on positions,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.
U.S. crude inventories were forecast to have increased by around 700,000 barrels last week, according to a Reuters poll of analysts, having unexpectedly fallen the previous week, the first decline in six weeks.
Graphic: U.S. crude inventories, weekly changes since 2017, here
U.S. crude oil stockpiles at Cushing, Oklahoma, the delivery point for WTI, have risen by about 1.5 million barrels in the week through Oct. 25, traders said earlier, citing data from market intelligence firm Genscape.
The American Petroleum Institute releases industry data later on Tuesday, while the U.S. government’s Energy Information Administration releases inventory data on Wednesday.
The United States Trade Representative is studying whether to extend tariff suspensions on $34 billion of Chinese goods set to expire on Dec. 28 this year, the agency said on Monday.
U.S. President Donald Trump said earlier on Monday he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing.
Leaders of the world’s two biggest economies are working to agree on the text for a “Phase 1” trade agreement announced by Trump on Oct. 11. Trump has said he hopes to sign the deal with China’s President Xi Jinping next month at a summit in Chile.
The trade war has hit economic growth around the world and kept oil prices range-bound for months.
Investment in gas and oil continues despite growing awareness of climate emergency (Photo: European Parliament)
The fossil fuel industry pumped €250m into lobbying the EU in the past 10 years to water down climate friendly laws and targets, according to a new report.
“A cool quarter of a billion over the last decade buys a lot of access and influence in Brussels,” said Pascoe Sabido of Corporate Europe Observatory, a Brussels-based NGO, and one of the authors of the report.
(Reuters) – A lawyer for New York’s attorney general on Tuesday told a state judge Exxon Mobil Corp (XOM.N) used two sets of books to hide the true cost of climate change regulations from investors, while an attorney for the oil major assailed the claims as false and politically motivated.
The lawyers’ opening statements kicked off a long-awaited trial in a civil lawsuit filed by the attorney general last year accusing Exxon of defrauding investors out of up to $1.6 billion.
The trial, expected to last up to three weeks, will take place before Justice Barry Ostrager in Manhattan Supreme Court without a jury and could feature testimony from Rex Tillerson, who served as Exxon chief executive officer and U.S. Secretary of State.
It is the first of several lawsuits currently pending against major oil companies related to climate change to go to trial.
The attorney general sued Exxon in October 2018 under the Martin Act, a New York state law that had been used primarily to go after financial fraud.
The lawsuit claimed Exxon falsely told investors it had properly evaluated the impact of future climate regulations on its business using a “proxy cost” of up to $80 per ton of carbon emissions, but internally used figures as low as $40 per ton or none at all.
“Exxon only ever told its investors about a single set of assumptions,” Kevin Wallace, acting chief of the New York Attorney General’s Investor Protection Bureau, told Ostrager Tuesday.
“What we are saying, and the law demands, is that Exxon not mislead its investors,” he said.
Theodore Wells, a lawyer for Exxon, said that after Tillerson became chief executive in 2006, the company put in place a “robust system” to manage the risk of increasing climate change.
He said the $80 per ton proxy cost represented a “global,” “macro level” assessment of the cost, while lower figures, known as greenhouse gas or GHG costs, were used for particular capital projects.
“There is no document that says … proxy costs and GHG costs were one and the same,” he said.
Wells also accused former New York Attorney General Eric Schneiderman of bringing the case for political reasons.
“They didn’t stay in their lane of objectivity and fairness,” he said.
Massachusetts is separately investigating whether Exxon concealed its knowledge of the role fossil fuels play in climate change.
Both Massachusetts and New York began investigating Exxon after news reports in 2015 saying company scientists had determined that fossil fuel combustion must be reduced to mitigate the impact of climate change.
Those reports, by InsideClimate News and the Los Angeles Times, were based on documents from the 1970s and 1980s. Exxon said the documents were not inconsistent with its public positions.
Exxon and other oil companies including BP Plc (BP.L), Chevron Corp (CVX.N) and Royal Dutch Shell (RDSa.AS) face lawsuits by cities and counties across the United States seeking funds to pay for seawalls and other infrastructure to guard against rising sea levels brought on by climate change.
(ZH) In an interview that aired just days before the one-year anniversary of Saudi journalist Jamal Khashoggi’s disappearance and presumed murder, Saudi Crown Prince Mohammad bin Salman sat for an interview with 60 Minutes – reportedly the most extensive interview he has ever given to a Western media outlet.
During the nearly 15-minute discussion with ’60 Minutes’ correspondent Norah O’Donnell (in an interview that, fittingly, was aired during ’60 Minutes’ 52nd season premier), MbS addressed every controversy afflicting his regime: tensions with Iran and the recent attacks on Abqaiq, the murder of Khashoggi, MbS’s hopes for peace in Yemen and the arrest of female activists despite MbS’s landmark gender reforms like granting women the right to drive.
The two issues from the interview that garnered the most attention were MbS’s insistence that he wasn’t aware of the plot to kill Khashoggi (but that he ‘accepts responsibility’, as a leader should), and the disruption in global oil supplies – triggering a spike in global prices – that could result from a war with Iran (just look at how global benchmarks responded to the attack on Abqaiq, with the largest one-day spike since Saddam Hussein invaded Kuwait).
Why Oil Prices Are Headed Lower
Asked point-blank whether he ordered Khashoggi’s murder, MbS replied “absolutely not” and described the attack as a “heinous crime” (all via a translator).
“Absolutely not. This was a heinous crime. But I take full responsibility as a leader in Saudi Arabia, especially since it was committed by individuals working for the Saudi government.”
When pressed about how he could’ve been unaware of a mission in which some of his closest associates participated, MbS insisted that it would be ‘impossible’ for him to monitor what KSA’s 3 million government employees do on a daily basis.
“Some think that I should know what three million people working for the Saudi government do daily? It’s impossible that the three million would send their daily reports to the leader or the second highest person in the Saudi government.”
Moving on, O’Donnell had a few questions about the attack on Abqaiq, which briefly took 5.5% of global oil production offline. She asked MbS about Iran’s motives, as well as what a conflict would be like.
Asked what ‘strategic’ reason Iran would have for orchestrating the attack on Abqaiq (a question that many skeptical analysts have also raised), MbS responded that the only sensible motive was “stupidity.”
“I believe it’s stupidity. There is no strategic goal. Only a fool would attack 5% of global supplies. The only strategic goal is to prove that they are stupid and that is what they did.”
’60 Minutes’ also aired what it described as the first footage of the attack on Abqaiq, which showed the barrage of cruise missiles slamming into various infrastructure inside the plant:
Echoing comments from Mike Pompeo, MbS said he would describe the attack on Abqaiq as an ‘act of war’, before the discussion turned to the global oil market.
Given Saudi Arabia’s importance to global energy supplies, a war with Iran could bring about the “total collapse” of the global economy, not just the Middle East region.
“The region represents about 30% of the world’s energy supplies, about 20% of global trade passages, about 4% of the world GDP. Imagine all of these three things stop. This means a total collapse of the global economy, and not just Saudi Arabia or the Middle East countries. Iran appears willing to risk war to improve its position.”
Oil prices would likely soar to “unimaginable” highs that we “haven’t seen in our lifetimes” as global supplies are disrupted.
“If the world does not take a strong and firm action to deter Iran, we will see further escalations that will threaten world interests. Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven’t seen in our lifetimes.”
Finally, touching on the issue of a ceasefire in Yemen, MbS said Saudi Arabia is working diligently toward peace. He added that he considers the Houthi-backed ceasefire a “positive step.”
Not long after, O’Donnell wrapped up the interview with a final question: “What lessons have you learned? And have you made mistakes?
“Of course I’ve made mistakes,” MbS insisted. “Even prophets make mistakes, so how come we, as humans, expect not to make mistakes?”
(Montel) Crude oil prices eased on early on Thursday, as Saudi Arabia ramps up production and market participants remain cautious about demand growth in a slowing global economy.The front-month contract for Brent crude North Sea oil traded last down USD 0.18 at USD 62.21/bbl, while the WTI equivalent was USD 0.17 lower on the day at USD 56.32/bbl.
On Wednesday, the Brent benchmark slid to USD 61.23/bbl, the lowest intraday trade since before the 14 September attacks on Saudi Arabia’s oil infrastructure that knocked out 5% of global supply and spiked Brent prices to nearly USD 72/bbl.
Saudi Arabia’s oil production has rebounded to more than 8m bbl/day, the Financial Times reported on Wednesday, although that is still around 1.5m bbl/day short of the kingdom’s output before drones and missiles struck the Abqaiq oil facility and Khurais oil field.
“This is a week earlier than they [Saudi officials] have been suggesting since the attack on the Abqaiq oil facility took out 5.7m bbl/day of capacity. Output is essentially at the level it was before the attacks on 14 September,” said analysts at ANZ bank.
“Not surprisingly, Brent prices fell on the news, with very little geopolitical premium built into the prices.”
Despite reports about Saudi Arabia’s quick recovery, geopolitical tensions remain high with the kingdom and the US saying Iran was behind the strikes, an allegation repeatedly rejected by Tehran. Yemen’s Iran-aligned Houthi rebels have claimed they carried out the attacks.
Growth worries Oil prices have fallen 3% this week, with analysts noting global growth concerns as Germany, the EU’s biggest economy, teeters on the brink of recession, while consumer confidence in the US, the world’s biggest consumer of crude, is in sharp decline.
“Market participants are no longer focusing on the risks to supply now that Saudi Arabia has raised the prospect of its oil production being rapidly restored. Instead, concerns about demand have gained the upper hand again,” said analysts at Commerzbank in a Wednesday research note.
The lingering US-China trade war has also eroded sentiment and stoked concerns about demand growth prospects.
“Despite recent encouraging noise on US-China trade talks, there are more tariffs in place than three months ago. Every major economy is seeing a full-blown industrial/manufacturing slowdown, global trade volumes continue to fall, and less than half the deceleration in US-China trade volumes (due to existing tariffs) has played out, on our estimates,” said Barclays in a research note.
US stockpiles, production rise Fresh data on US crude inventories and production has also weighed on crude prices.
US commercial crude oil inventories rose by 2.4m barrels in the week to 20 September to 419.5m barrels, around the five-year average for this time of year, according to official data published on Wednesday.
Analysts were expecting a week-on-week decline of around 0.2m barrels of US stockpiles.
The data from the US Energy Information Administration showed US crude production at 12.5m bbl/day last week – matching the record high reached in the week to 23 August.
“Sentiment wasn’t helped by a strong gain in US inventories,” the ANZ analysts said.
Following the quick heightening of tensions between the US and Iran after a devastating attack on a Saudi oil refinery, The Financial Times’ deputy editor Roula Khalaf argues that both Donald Trump and Iran’s supreme leader Ayatollah Ali Khamenei must go back to the negotiating table and de-escalate what could be a full blown oil crisis.
(FR) London/Tehran/Riyadh | Saudi Arabia faces weeks without full crude and gas production capacity after Saturday’s attack on the world’s most important oil facility.
While some officials in the kingdom have sought to reassure oil markets that production will come back quickly, people briefed on the matter say it could take far longer to restore output to its maximum level.
“It will take weeks to ramp up and bring the complex to maximum capacity,” said one person close to the energy ministry.
While the full extent of the damage is still being investigated, the person said there was enough concern that the kingdom was in talks with several OPEC countries. One option could be to call an emergency meeting of the oil producers’ cartel. Petrochemical feedstocks are also affected.
The kingdom, which is the de facto leader of OPEC, is in the initial stages of assessing whether it will need to ask other member countries to temporarily raise production to calm markets until Saudi Arabia’s output can fully recover.
The discussions are at an early stage and may not materialise into action, the person said. But given that Saudi Arabia has previously led the group in reducing output to support prices, the talks illustrate the depth of concerns in the kingdom.
The US has blamed Iran for the attacks on Abqaiq, a vital crude processing centre south-west of Saudi Aramco’s headquarters in Dhahran, and the Khurais oilfield, that forced the world’s top crude exporter to suspend more than half its oil production.
The attacks have heightened concerns about the vulnerability of Saudi Arabia’s oil infrastructure as the stand-off between the US and Iran has ratcheted up tension across the Middle East.
Riyadh is the Trump administration’s closest Arab ally and has been a staunch backer of the US strategy of imposing “maximum pressure” on Iran in an effort to force it to renegotiate its 2015 nuclear agreement with world powers and curb its support for militant groups across the Arab world.
Iran-aligned Houthi rebels, who are fighting a Saudi-led coalition in Yemen’s four-year civil war, have claimed responsibility for what they said was an attack by 10 drones on the two oil facilities.
Mike Pompeo, US secretary of state, accused Iran of launching “an unprecedented attack on the world’s energy supply,” adding that there was “no evidence the attacks came from Yemen”.
For now, markets are well supplied with ample commercial stocks
— International Energy Agency
On Sunday, Iran dismissed the allegations, with the foreign ministry saying Washington’s claims were part of its policy of “maximum lies”.
Mohammad Javad Zarif, Iran’s foreign minister, said having failed at “max pressure” Mr Pompeo was turning to “max deceit”.
“US & its clients are stuck in Yemen because of illusion that weapon superiority will lead to military victory,” Mr Zarif said on Twitter. “Blaming Iran won’t end disaster.”
Pictures and video posted on social media showed large fires at Khurais, which lies more than 500 kilometres from the Yemen border.
Amin Nassir, Saudi Aramco chief executive, said that the company had extinguished the fire, which had caused no injuries, and was working on restoring production.
Saudi energy minister Prince Abdulaziz bin Salman said early estimates showed that the attack caused a suspension of crude oil supplies of 5.7m barrels or more than 50 per cent of daily production.
But he added that part of the loss of supplies to customers would be offset from inventories. He also said gas production had fallen 50 per cent as a result of the attack.
“This terrorist attack is an extension of recent attacks that targeted oil and civilian infrastructures and pumping stations and oil tankers in the Arabian Gulf,” Prince Abdulaziz said.
“These attacks do not only target the kingdom’s vital installations but also international oil supplies and threaten their security.”
Saudi Arabia supplies more than 10 per cent of global crude and is the world’s largest exporter of oil. The loss of more than 5m barrels a day would be the equivalent of 5 per cent of global oil supply.
While Saudi Arabia has said it expects output to be restored in the near future, the size of the loss is still sending shockwaves though global energy markets.
One person briefed by the Saudi Arabian energy ministry said part of the shutdown of output was precautionary and should be restored quickly.
The International Energy Agency, which co-ordinates global emergency oil stock releases, said: “We are in contact with Saudi authorities as well as major producer and consumer nations. For now, markets are well supplied with ample commercial stocks.”
Analysts warned that the size of the loss could trigger a sharp rise in oil prices, potentially spreading fears to the wider economy.
The US Department of Energy said: “The secretary [of energy] has been briefed on [the] drone attack in Saudi Arabia and stands ready to deploy resources from the strategic petroleum oil reserves if necessary to offset any disruptions to oil markets as a result of this act of aggression.”
“The Secretary has also directed DOE leadership to work with the International Energy Agency on potential available options for collective global action if needed.”
Oil consumers hold emergency stocks in reserve and Saudi Arabia may be able to mitigate some of the loss from its own oil stocks or spare production capacity.
Saudi Aramco informed petrochemicals companies that the supply of feedstock would be down.
Saudi Basic Industries Corporation said it had since reduced supplies to its petrochemicals affiliates by an average of 49 per cent. Industrial firm Tasnee said it had lowered supplies to its affiliates by an average of 41 per cent.
Stocks on Riyadh’s Tadawul exchange opened down 2.3 per cent before recovering to close down 1.3 per cent on Sunday.
“[The] attack on the Abqaiq processing facility constitutes a paramount oil bullish, equity bearish, and global growth negative risk,” said Bob McNally of the Rapidan consultancy, who previously advised the White House under George W Bush.
Saudi Aramco has been fast-tracking plans to launch an initial public offering as soon as later this year as part of the kingdom’s economic reform efforts. Security of supplies and management of Saudi barrels by the company are of utmost concern to potential investors.
Oil prices slipped last week after John Bolton, a noted Iran hawk, left his role as National Security Adviser to the White House and as US president Donald Trump had indicated he was willing to talk with Iran, which wants sanctions removed.
As of 8:20 PM central Sunday evening, there is no change in 3-month, 5-year, 10-year, or 30-year treasury yields.
I propose there is little economic sense to this reaction.
Oil shocks are inherently recessionary.
Theoretically, this could be an inflationary recession like the 1970s.
Global Fairy Godmother
With stocks priced well beyond perfection, a collapse in global trade, a UAW Trade Strike Involving 48,000 Workers, and trade war threats between the US and Europe (and the UK and Europe), this all seems strange.
Then again, perhaps the Global Fairy Godmother will solve all the issues and restore global inflation (as measured by central banks).
ODESSA, Texas (Reuters) – Oil producers and their suppliers are cutting budgets, staffs and production goals amid a growing consensus of forecasts that oil and gas prices will stay low for several years.
The U.S. has 904 working rigs, down 14% from a year ago, and even that is probably too many, estimated Harold Hamm, chief executive of shale producer Continental Resources (CLR.N), which has reduced the number of rigs at work.
Bankruptcy filings by U.S. energy producers through mid-August this year have nearly matched the total for the whole of 2018. A stock index of oil and gas producers hit an all-time low in August, a sign investors are expecting more trouble ahead.
“You’re going to see activity drop across the industry,” Earl Reynolds, CEO of Chaparral Energy (CHAP.N), told Reuters at the EnerCom oil and gas conference last month.
The Oklahoma energy firm has slashed its workforce by nearly a quarter, trimmed its spending plan by 5%, and agreed to sell its headquarters and use some of the proceeds to reduce debt.
Investment bank Cowen & Co estimated last month that oil-and-gas producers spent 56% of their 2019 budgets through June, based on its review of 48 U.S. companies. It expects total spending this year to fall 11% over last year, based on proposed budgets.
The slowdown in drilling is spurring cost-cutting in oilfield services, including staff cuts and restructurings at top firms Schlumberger and Halliburton Co. Schlumberger plans a writedown yet to be determined this quarter, noting its results in North America have been “under significant pressure,” CEO Olivier Le Peuch said on Wednesday.
Halliburton is paring its North American workforce by 8% because of customer spending cuts, and National Oilwell Varco recently offered buyouts to its U.S. workers.
“The service sector I think is going to be flat,” said Superior Drilling Services CEO Troy Meier, whose firm canceled plans to add new machinery.
Such signs of a downturn come as the shale sector had just started generating the cash flow long demanded by investors, who have grown weary of drilling expansions without returns. Last quarter, a group of 29 top publicly-traded producers generated more in cash – $26 million – than it spent on drilling and dividends, according to Morningstar (MORN.O) data provided by the Sightline Institute and the Institute for Energy Economics and Financial Analysis. A year earlier, the same group had spent $2.4 billion more than it generated.
Despite that progress, many small to mid-sized shale firms are now pulling back on production targets amid the gloomy price projections.
A slowing oil industry could weigh on the United States economy. The boom in shale oil output added about 1 percent to U.S. gross domestic product, or 10% of growth, between 2010 to 2015, according to the Federal Reserve Bank of Dallas. In Texas, the center of shale oil production, energy employment dipped 1.8 percent in the first six months of 2019, according to the Dallas Fed. New drilling permits in the state fell 21% in July compared with the same month last year, according to state data.
MAJORS STAY THE COURSE
Any broader economic impact, however, could be limited by the massive investments in shale drilling by some of the world’s biggest oil firms – Exxon Mobil (XOM.N), Chevron (CVX.N), Royal Dutch Shell (RDSa.L) and BP PLC (BP.L). Even as small and mid-sized firms dial back, the majors continue to pour billions of dollars into years-long shale drilling plans. They have argued their integrated well-to-refinery networks allow them to control costs enough to withstand a sustained period of low prices.
Spokespeople for Exxon, Chevron and BP declined to comment on the industry downturn but referred to previous statements of their longterm commitment to shale. Shell did not respond to requests for comment.
Chevron has focused much of its production growth plans on shale, and CEO Michael Wirth has called its Permian Basin holdings in West Texas and eastern New Mexico the “highest return use of our dollars.”
Exxon CEO Darren Woods told a Barclays energy conference on Sept. 4 that the company continues to take the long view.
“The way we look at the business is tied to some very basic fundamentals that haven’t changed for decades, if not hundreds of years,” he said, noting it took oil a century to replace coal as the world’s dominant energy source.
Exxon has estimated it can earn a double-digit return in the Permian Basin even if oil falls to $35 a barrel.
BRACING FOR LOW PRICES
U.S. oil prices largely have traded just above $50 a barrel since last November, requiring higher output to generate the same profit as when prices were higher. Prices this quarter are about 18% lower than this time last year, according to U.S. government data.
U.S. oil prices are likely to remain below $55 a barrel for the next three years, said Scott Sheffield, CEO of Pioneer Natural Resources (PXD.N), one of the largest oil producers in the Permian Basin. Lackluster prices will result in a “significant fallback in Permian growth” and probably “no growth for most,” he said on a recent earnings call.
Part of the slowdown comes as the best drilling spots in some areas of the field are being “exhausted at a very quick rate,” Sheffield said.
The severity of the looming downturn is a matter of debate.
Flotek Industries Inc (FTK.N), a supplier of oilfield chemicals, has cut staff twice this year. CEO John Chisholm told Reuters that the industry is just “pumping the brakes” as it grapples with well-design issues.
Matt Sallee, a portfolio manager at energy investors Tortoise Capital, expects a longer industry decline.
“It’s hard to see how this gets any better for several quarters,” he said.
(ZH) The U.S. could “drown the world in oil” over the next decade, which, according to Global Witness, would “spell disaster” for the world’s attempts to address climate change.
The U.S. is set to account for 61 percent of all new oil and gas production over the next decade. A recent reportfrom this organization says that to avoid the worst effects of climate change, “we can’t afford to drill up any oil and gas from new fields anywhere in the world.” This, of course, would quickly cause a global deficit, as the world continues to consume around 100 million barrels per day (bpd) of oil.
Global Witness notes that the industry is not slowing down in the United States, notwithstanding recent spending cuts by independent and financially-strapped oil and gas firms. If anything, the consolidation in the Permian and other shale basins, increasingly led by the oil majors, ensures that drilling will continue at a steady pace for years to come.
It isn’t as if the rest of the world is slowing down either. The global oil industry is set to greenlight $123 billion worth of new offshore oil projects this year, nearly double the $69 billion that moved forward last year, according to Rystad Energy. In fact, while shale drilling has slowed a bit over the past year amid investor skepticism and poor financial returns, offshore projects have begun to pick up pace.
But that trend might turn out to be just a blip. The U.S. is still expected to account of the bulk of new drilling and the vast majority of new production, with much of that coming from shale. Already, the U.S. is the world’s largest producer of both oil and natural gas. And the pace has accelerated in recent years. In 2018, U.S. oil and gas production increased by 16 and 12 percent, respectively. According to the EIA, the U.S. surpassed Russia in terms of gas production in 2011, claiming the top spot, and it surpassed Saudi Arabia in oil production last year.
Going forward, new production from the U.S. will be eight times larger than the next largest source of growth, which is Canada. In fact, the U.S. will add 1.5 times more oil and gas than the rest of the world combined, according to Global Witness.
But because so much drilling in the U.S. is concentrated in a few areas, individual U.S. states on their own tower over the rest of the world. If Texas were a country, it would account for the most new oil and gas production in the world. Between 2020 and 2029, Texas could account for 28 percent of all additional output, Global Witness says.
Canada and Pennsylvania tie for second and third with 7 percent each. Then comes New Mexico at 5 percent of the growth and North Dakota at 4 percent. Oklahoma, Brazil, Colorado, Russia and Ohio are all tied at 3 percent a piece.
In other words, 7 out of the top 10 sources of new oil and gas production globally over the next decade are U.S. states.
“If things don’t change, by the end of the next decade, new oil and gas fields in the US will produce more than twice what Saudi Arabia produces today,” Global Witness said in its report.
This presents a massive challenge. “To avoid the worst impacts of climate change, our analysis shows that global oil and gas production needs to drop by 40% over the next decade. Yet, instead of declining, US oil and gas output is set to rise by 25% over this time, fueled by expansion in new fields,” the report warned.
(EUobserver) The United States has warned Greece not to give harbour to an Iranian oil tanker suspected of smuggling oil to Syria in defiance of EU sanctions, saying it would treat the act as support for terrorism. The ship was previously seized by the British navy and detained in Gibraltar, but Gibraltar let it go despite US pressure, while Iran has denied any wrongdoing.
(EUobserver) According to a German advisory note, the EU should send a European naval mission to the Strait of Hormuz in the Persian Gulf, writes the Belgian newspaper De Morgen. The German government would launch the idea at one of the informal European meetings in Helsinki at the end of August. According to the note, the mission would need five frigates, two corvettes and protection teams with planes and logistical ships.
New York (CNN Business)The deepening trade war between the United States and China could deal a double shock to the fragile oil market.The tit-for-tat tariffs have already sent crude prices plunging because of fears of a severe global economic slowdown or even recession in the United States that could dent already anemic demand for oil.But there could also be a supply shock coming. Bank of America Merrill Lynch warned that China could retaliate against US tariffs by purchasing vast amounts of oil from Iran in defiance of Washington’s sanctions on the OPEC nation.
If China ignores US sanctions, Iran oil could flood the market.”
BANK OF AMERICA COMMODITY STRATEGIST FRANCISCO BLANCH
The one-two punch would cause Brent oil to crash from $60 a barrel today to just $40, Bank of America wrote in a note published on Friday.”A Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin,” Bank of America commodity strategists led by Francisco Blanch wrote in a note to clients.US oil prices have tumbled by nearly 7% since July 31, the day before President Donald Trump vowed to impose a 10% tariff on $300 billion of US imports from China on September 1. Brent, the global benchmark, has plunged by 8%.The latest round of US tariffs on China could wipe out 250,000 to 500,000 barrels per day of global oil demand, Bank of America said. The world’s appetite for oil has already been running at a sluggish pace because of the economic slowdown.China has promised to retaliate, casting further doubt on the global economic outlook.Trump’s trade war with China is starting to get out of handBeijing on Monday allowed its currency to drop sharply below a key psychological level. China’s central bank in part cited the looming US tariffs.China is also taking further aim at American farmers by announcing Chinese companies have halted purchases of US agriculture goods.Oil could be in the crosshairs next. Although Beijing has imposed a 10% tariff on US liquefied natural gas, oil has so far avoided tariffs.
Iran’s oil exports have crashed
China could retaliate indirectly by seeking to undermine Trump’s foreign policy.Trump’s sanctions on Iran are aimed at starving Tehran of cash and creating economic pain that forces the country to abandon its nuclear ambitions.The sanctions have successfully scared away most of Iran’s oil buyers and stressed the country’s economy. Iranian unemployment is expected to soar above 16% in 2020, according to the International Monetary Fund.Iran’s oil exports plummeted to 530,000 barrels per day in June, according to the International Energy Agency. That’s down from 2.6 million barrels per day in May 2018.In other words, the sanctions have wiped out about 2 million barrels of daily oil supply, helping to blunt the impact of blockbuster output from the United States.Bank of America had been anticipating Iran’s oil exports would shrink to near-zero in 2020.”If China ignores US sanctions, Iran oil could flood the market,” the firm wrote.
China may seek to avoid ‘open provocation’
However, it’s not like China has completely stopped purchasing oil from Iran.China imported an average of 400,000 barrels per day from Iran during the first half of 2019, according to Matt Smith, director of commodity research at ClipperData.”Iran could be a possible way for China to get back at the US, but to some extent they’re already doing that,” Smith said.US sanctions Chinese company for buying Iranian oil. Beijing slams ‘bullying’ behaviorSmith said it’s difficult to say how many barrels were purchased in July because Iran has conducted “general subterfuge to try to disguise the origins of these flows.” He cited Iran turning off ship tracking signals and doing ship-to-ship transfers.Some believe China would be unwilling to escalate the trade war dramatically by emphatically undermining Trump’s Iran crackdown.”China will not phase out its imports from Iran by any means,” said Michael Hirson, Eurasia Group’s practice head of China and Northeast Asia. “But they are going to stop short of the kind of action that would be open provocation to the Trump administration.”Hirson pointed out that China would have “a lot to lose” if the United States responded to vast purchases of Iranian oil by sanctioning a major Chinese company or financial institution.”That would outweigh the benefit of importing more oil from Iran and thumbing Beijing’s nose at Washington,” he said.
(ZH) The Trump Administration’s decision to reimpose sanctions on the Iranian oil trade has dramatically reduced Iranian crude exports – but it hasn’t stopped some of the US’s largest economic rivals from accepting shipments of Iranian crude, according to several media investigations. Not only has China continued to import Iranian crude, so have several other Asian and Mediterranean countries, according to data from several tanker tracking services studied by the New York Times and other media organizations.
Per the NYT, in April 2018, before Trump withdrew from the nuclear deal, Iran exported 2.5 million barrels of oil per day. One year later, that figure was at one million. And in June, after the end of the exceptions or waivers, ships in Iranian ports loaded about 500,000 barrels per day, according to Reid I’Anson, an energy economist at Kpler, a company tracking seaborne commodities.
Of course, this fact isn’t lost on the Trump Administration, which, according to the FT, has been tracking the movements of tankers linked to China’s biggest state-run oil company amid signs that the ships are helping to bring in Iranian crude.
China National Petroleum Corp, via its subsidiary, the Bank of Kunlun, has, in recent months, employed a fleet of tankers to move oil from Iran to China.
And an NYT visualization of tanker traffic shows the route some of these tankers take while moving oil from Iran to China and elsewhere in the region.
Below are satellite images of some of these tankers docking at Chinese ports.
Last week, the Treasury Department sanctioned Chinese oil trader Zhuhai Zhenrong for buying oil from Iran. The decision was intended to send a message to other Chinese firms, and anyone else buying Iranian oil who also hoped to do business with the US.
“Any entity considering evading our restrictions, particularly related to Iranian petrochemicals, should take this message seriously,” said one official. “We recently sanctioned Zhuhai Zhenrong…for knowingly engaging in a significant transaction for the purchase or acquisition of crude oil from Iran. This action underscores our commitment to enforcement.”
But targeting CNPC would be an especially serious escalation at a time when tensions between the US and China are nearing a breaking point. Even as satellite data and imagery suggest that the tankers linked to Bank of Kunlun are employing tactics including turning off tracking devices and changing their names.
Any US decision to target CNPC would mark a significant escalation given the company’s status as China’s largest oil producer. Its publicly listed arm, PetroChina, has operations in the US and secondary shares listed in New York, in addition to partnerships with international energy companies such as Ineos.
Bank of Kunlun said it was “not involved in the crude oil import business” and denied having “violated any laws or regulations.” But people in Washington familiar with the activities of the bank said it was viewed by the US as a “bad actor.” “Bank of Kunlun has always been the sacrificial lamb for CNPC and, more broadly, for the Chinese government,” said one former senior US intelligence official. “It is a bank that the Chinese government recognises as expendable in some sense.”
And cracking down on the Bank of Kunlun would come with certain risks that might impede the US’s agenda, particularly when it comes to North Korea.
“China is not going to do the US any favours,” said Dennis Wilder, a former top CIA and White House official. “This is the price you pay strategically. You cannot tell China on the one hand to be aligned with you on Iran and North Korea and at the same time decide you’re going to retard or destroy some of their corporations.”
In what will be seen as another escalation of tensions in the Persian Gulf, Iran’s Revolutionary Guards seized a foreign oil tanker in the Persian Gulf on July 31, adding to rising concerns about the safety of shipping in a region crucial to oil exports.
The vessel – the third foreign ship seized by Iran in the Gulf since July 14 in response to a UK seizure of Iran’s own ship – is suspected of smuggling a large volume of fuel, the Guards said on their Sepah News portal according to Bloomberg. They did not, however, give any details about the flag or nationality of the ship or its operator.
The ship’s seizure took place last Wednesday, Sepah News, the Revolutionary Guard’s official news service, reported, a day after United Arab Emirates officials traveled to Iran to discuss maritime border cooperation and the flow of shipping traffic, including illegal movements.
The ship was carrying 700,000 liters (4,403 barrels) of smuggled fuel when it was seized near Farsi Island in the western part of the Gulf, off Iran’s southwestern coast, Sepah News reported. The island is located about 400 miles (640 kilometers) from the Strait of Hormuz, the volatile center of Iran’s standoff with the West in recent weeks. Iran’s state-run Press TV reported that the seized ship is an Iraqi tanker that was delivering the fuel to some Arab countries in the Persian Gulf.
Iranian state news agency IRNA reported that a video of the moment the vessel was seized showed it was Iraqi, although as the WSJ notes, maritime confrontations between Iran and Iraq are considered rare. The Iraqi ship’s seizure would follow July’s visit to Tehran by Prime Minister Adel Abdul-Mahdi, who has sought to ease tensions between the U.S. and Iran, both close allies of Iraq.
Gen. Ramezan Zirahi, a navy forces commander in the Guard, was quoted by Iran’s Fars News Agency as saying the fuel had been transferred to the vessel from another ship, and was bound for Arab countries in the region when it was impounded. The seven detained crew members – who were arrested – were foreign, he said, without naming their nationality or that of the vessel. The ship was taken to Bushehr port on Iran’s southwest coast, and its cargo was confiscated and handed over to the National Oil Distribution Company of Iran.
The announcement of the ship’s capture coincides with a joint meeting between the Iranian and Qatari coast guards in Tehran aimed at improving and developing maritime cooperation between the Gulf neighbors, state-run Islamic Republic News Agency reported earlier Sunday. That gathering follows a rare meeting between the coast guards of Iran and the U.A.E. last week.
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The impounding of the ship will escalate the tensions that have flared in the region’s waters as Iran resists U.S. sanctions that are crippling its all-important oil exports and retaliates after one of its ships was seized July 4 near Gibraltar. Iran grabbed a British tanker, the Stena Impero, in Hormuz two weeks later and continues to hold it. Iran also detained a small Emirati-based vessel, the Riah, earlier in July and accused it of smuggling fuel. Nine of the 12 Indian crew members have since been released, but the vessel remains impounded. Ship-tracking experts noted the size of the cargo on the vessel seized on Wednesday was even smaller. Petroleum products sold domestically in Iran are heavily subsidized, so it is potentially lucrative to divert them to foreign markets, where they can be sold for a higher price.
The passage at the mouth of the Persian Gulf accounts for about a third of the world’s seaborne oil flows. To reduce the risks of navigating the waterway, the Royal Navy has started to escort British ships, and a plan for a European naval mission is taking shape.
Meanwhile, the U.S. has blamed Iran for attacks on oil tankers in the region in recent months, a charge Tehran has denied.
The crisis in the Gulf has caused oil prices and shipping premiums to rise and prompted some vessel owners to avoid the region. Last week, Bloomberg reported that British oil giant BP, which had to shelter one of its tankers in the Persian Gulf this month in fear it could be targeted by Iranian forces, was avoiding sending ships to the region after tensions flared between Tehran and London.
BP is “certainly not sending British ships and crews” through the Strait of Hormuz, the only way for tankers to reach the world’s biggest oil-exporting region, Chief Executive Officer Robert Dudley said in a Bloomberg TV interview.
Earlier this month, a BP tanker had to abandon a plan to load Iraqi crude and instead took shelter near Saudi Arabia because the company feared the ship could be targeted in a tit-for-tat response for British Royal Marines seizing a vessel transporting Iranian crude in the Mediterranean, a person familiar with the matter said at the time.
At the same time, the U.S. has boosted military deployments in the Persian Gulf and Strait of Hormuz and is trying to pull together an international maritime force to patrol the region. The British also plan to create a separate European maritime security force.
Ironically, it remains unclear if allies in the North Atlantic Treaty Organization will cooperate: as the WSJ notes, the U.K., Germany and France are at odds with the Trump administration over its decision to pull out of the 2015 Iranian nuclear deal to which they are co-signatories, and are working to keep the deal alive and to ease tensions with Tehran.
For its part, Iran says it is trying to maintain maritime security in the region. But its officials also have repeatedly warned they would block the Strait of Hormuz—through which a third of the world’s seaborne oil is transported—in response to crippling U.S. sanctions. Iran has accused the Europeans of not providing adequate relief from American pressure.
(AJ) Iran’s Revolutionary Guard Corps says tanker was captured ‘for failing to respect international maritime rules’.
Iran’s Revolutionary Guard Corps (IRGC) said its forces have captured a British oil tanker in the Strait of Hormuz for allegedly violating international laws, amid rising tensions in the Gulf.
The Stena Impero tanker “was confiscated by the Revolutionary Guards at the request of Hormozgan Ports and Maritime Organisation when passing through the Strait of Hormuz, for failing to respect international maritime rules,” the IRGC’s official website Sepahnews announced.
The tanker “was led to the shore and handed over to the organisation to go through the legal procedure and required investigations,” it said.
The vessel was seized by “small crafts and a helicopter” at 7:30pm local time (15:00GMT), the owner of the vessel, Stena Bulk, and Northern Marine Management said, adding that they are “presently unable to contact the vessel”.
Tanker tracking service Marine Traffic showed that the UK-flagged, Swedish-owned Stena Impero last signalled its location near the Island of Larak in the highly sensitive waterway at 9pm local time (16:30 GMT).
There are 23 crew members on board, the company’s statement added.
“We are urgently seeking further information and assessing the situation following reports of an incident in the Gulf,” a spokesperson for Britain’s Ministry of Defence said.
Second vessel seized
The British Foreign Office confirmed a second naval vessel, a Liberian-flagged vessel, had been seized in the Strait of Hormuz by Iranian authorities.
Later on Friday, Iran’s semi-official Fars news agency reported that the Liberian-flagged Mesdar tanker was briefly held and given a notice to comply with environmental regulations before being allowed to continue on its way.
“I’m extremely concerned by the seizure of two naval vessels by Iranian authorities in the Strait of Hormuz,” said Foreign Secretary Jeremy Hunt.
“I will shortly attend a COBR (national security) meeting to review what we know and what we can do to swiftly secure the release of the two vessels.
“These seizures are unacceptable. It is essential that freedom of navigation is maintained and that all ships can move safely and freely in the region.”
There was no immediate confirmation from Iran that its forces had seized a second vessel.
The developments came a day after the IRGC said it had seized a foreign tanker accused of smuggling oil with a crew of 12 on Sunday.
The Strait of Hormuz in the Gulf, the world’s most important waterways for the transport of oil, has become a hotspot for tensions with Iran amid a spate of incidents there.
Relations between Britain and Iran and the United States and Iran have soured in particular.
Earlier this month, British Royal Marines seized an Iranian oil tanker off the British overseas territory of Gibraltar for allegedly violating sanctions against Syria.
On Friday, Gibraltar’s Supreme Court extended for 30 days the detention of the seized Iranian supertanker, Panama-flagged Grace 1, which was intercepted off the southern tip of Spain on July 4.
Richard Weitz, a security analyst at Wikistrat, a global risk consultancy group, said Friday’s incident was a “reciprocal action” by Iran.
“This was anticipated,” he told Al Jazeera from Washington, DC. “This is just the latest in a series of these subconventional forms of provocative moves.”
The move by Moscow to work with the EU is also surprising, given the little cooperation between the two parties since Russian annexed Crimea in 2014, attempted murder of a double agent in the UK, and alleged attempts to meddle in EU elections.
However, it also marks a move by both the EU and Moscow to ignore Trump’s sanctions. Since he pulled out of the deal last May, France, Germany, China, the UK, and Russia all have been trying to maintain trade with Iran, but have been hindered by companies not wanting to risk problems with the White House.
Since then Iran has breached the deal by going above the agreed limit on uranium enrichment levels, out of retaliation for US sanctions on Iran.
“Russia is interested in close co-ordination with the European Union on Instex,” the Russian foreign ministry told the Financial Times. It added that it would become more effective as more countries got involved.
Iran has been expressing it’s frustration with the other parties who signed the 2015 deal at not helping Iran after the US imposed sanctions — namely on oil imports, which is Iran’s most valuable commodity.
In a televised speech on Sunday, Iranian President Rouhani said “we are ready to hold talks with America today,” but wants to return to the Obama-era nuclear agreement and have the economic sanctions from President Donald Trump’s administration lifted before that happens.
(ZH) With the Persian Gulf uncharacteristically quiet in recent days, without any material provocation either real of staged, late on Wednesday CNN reported that five armed Iranian Islamic Revolutionary Guard boats unsuccessfully tried to seize a British oil tanker in the Persian Gulf. There was no independent verification of the report, but instead it was once again sourced to those who stands to gain the most from a way with Iran, namely “two US officials with direct knowledge of the incident.”British Heritage tanker
According to the report, the British Heritage tanker was sailing out of the Persian Gulf and was crossing into the Strait of Hormuz area when it was approached by the Iranian boats. The Iranians ordered the tanker to change course and stop in nearby Iranian territorial waters, according to the officials. A US aircraft was overhead and recorded video of the incident, although so far a video has not been released.
In addition to the US aircraft escort, the UK’s Royal Navy frigate HMS Montrose had been escorting the tanker, and during the confrontation, it trained its deck guns on the Iranians and gave them a verbal warning to back away, which they did. Montrose is equipped on the deck with 30 mm guns specifically designed to drive off small boats. The frigate was in the region performing a “maritime security role” according to a prior notification from UK officials.HMS Montrose
The incident takes place less than a week after British Royal Marines in Gibraltar stormed and seized an Iranian ship believed to have been carrying oil to Syria, in what authorities said was a violation of European Union sanctions on Syria. Iranian President Hassan Rouhani warned earlier Wednesday that the UK “will see the consequences” after the Gibraltar seizure.
Rouhani, speaking in a cabinet session, said, “I tell the British that they are the initiator of insecurity and you will understand its consequences later.”
On Tuesday, the US Chairman of the Joint Chiefs of Staff Gen. Joseph Dunford said that the US and allies were working to put together a coalition of countries to come up with a system to enforce freedom of navigation in the region amid what the US says are heightened threats from Iran.
“We had a discussion today, the Secretary of State, the Secretary of Defense and I and we are engaging now with a number of countries to see if we can put together a coalition that would ensure freedom of navigation both in the Straits of Hormuz and the Bab el Mandeb,” Dunford said following an awards ceremony for his Finnish counterpart.
“I think what we’ll do is, we certainly from the United States perspective would provide maritime domain awareness and surveillance,” he said, adding that naval vessels would escort commercial ships that shared a country of origin, if required.
“Escorting in the normal course of events would be done by countries who have the same flag so a ship that is flagged by a particular country would be escorted by that country and I think what the United States can provide is domain awareness, intelligence, surveillance, reconnaissance and then coordination and patrols for other ships that would be in the area would be largely coalition ships,” Dunford said.
This alleged latest provocation by Iran comes just hours after President Trump announced on Twitter that sanctions on Iran will “soon be increased, substantially!” following news that Iran was enriching uranium beyond the limits imposed by the Iran Nuclear Deal.
Last month Trump halted plans for a military strike against Iran in retaliation for the shooting down of a US drone, Trump said he found it hard to believe it had been an “intentional” act. “I think that it could have been somebody who was loose and stupid that did it,” Trump said in the Oval Office on June 20.
It is unclear if Trump has been briefed on the latest events in the Gulf, and if this alleged attempt at seizing a western tanker will give the neocons in Trump’s circle enough sway to finally commence the Gulf war which could send oil above $300 and involve all the world’s superpowers in what would be one giant, and very deadly proxy war.