Oil News Ahead of the Saudi Oil Summit

Tuesday, UAE Oil Minister Mohamed al-Hamli said a shortage of oil refineries is the main cause of record oil prices. He indicated that industrial nations have not built new refineries due to environmental concerns and this has caused a shortage in refined products and elevated prices at the pump.
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Also on Tuesday, Iran’s President Mahmoud Ahmadinejad said oil prices are being manipulated by “invisible hands” in a “fake way” for political and economic reasons. At an OPEC conference in the Iranian city of Isfahan, Ahmadinejad said the price rise is “completely fake and imposed.” He said the price increases are happening when “the market is full of oil and the growth of consumption is lower than the growth of production.” He said the price rise was due to the lower value of the dollar. "The hard currency reserves of OPEC countries have been heavily affected" by the fall in the dollar, he said. "I repeat my suggestion made six months ago at the OPEC summit in Riyadh to create a basket of credible currencies which would be the basis for oil transactions," said Ahmadinejad. "Or alternatively, that OPEC countries create a new currency for their transactions."
At the same meeting, Iran's OPEC representative, Mohammad Ali Khatibi, said Iran opposed any unilateral move by Saudi Arabia to raise its crude oil output without a consensus of OPEC member states. "Any output increase should be approved in the Organization of Petroleum Exporting Countries' ministerial meeting." Khatibi said, "If Saudi Arabia decides to increase its crude output unilaterally, it will be a wrong move."
Ironicaly, Iran’s opposition to increased Saudi production comes at the same time Iran plans to sell increased crude itself. National Iranian Oil Company official, Hojjatollah Ghanimifard, said yesterday that exports from the country will rise by 300,000 barrels per day to at least 2.5 million bpd this month and next as the country sells off excess oil it had been storing in tankers offshore because of refinery maintenance shutdowns. "The floating barrels will be cleared up by mid-August, we hope," Ghanimifard said. Ghanimifard did not say how much oil Iran is storing, but some analysts have estimated the amount at about 30 million barrels. Iran hopes to sell the oil at the current high prices and the Saudi increased production along with their planned sales cut cause a price reduction.
The refinery shutdowns and high prices have a major impact on another sector of the Iranian oil market – the domestic refined product market. Iran's government plans to ask parliament for $7 billion to pay for increasingly expensive fuel imports. Hojjatollah Ghanimifard, says the amount needed during the Iranian year that ends in March 2009 could rise even further if international gasoline and other fuel prices continued to rise.
He told the daily Tehran-e Emrouz newspaper in an interview on Monday that consumption was estimated at 80 million liters in Iran, above a figure of roughly 75 million liters given by officials when rationing was introduced for motorists in June 2007.
Officials had previously said both consumption and imports fell sharply after Iran launched rationing to curb soaring consumption which had risen well beyond its ability to refine crude, forcing the government to rely on expensive imports.
"If the (fuel) prices continue to rise the budget needed to import will be more than $7 billion. It will be around $9 billion," Ghanimifard was quoted as saying.
Iran's parliament authorized in February the Oil Ministry to import gasoline and gas oil for the equivalent of $3.2 billion in the fiscal year that started on March 21, but Monday's report made clear this would not nearly be enough.
Under the rationing scheme, all fuel had been sold at the heavily subsidized price of 1,000 rials (about 11 US cents) a liter. But the government revised the system starting from March to let drivers buy fuel above their 120 liter a month quota at 4,000 rials a liter.
One official said in October imports would decline by at least 20 percent to $4 billion in the 2007-08 Iranian fiscal year, from $5 billion previously.
In May, another official said Iran expects to import about 20 million liters of gasoline per day during the 2008-9 year, less than half the amount it would have imported had it not launched rationing a year ago.
But that figure was still 5 million liters higher than an import estimate given in February, before Iran allowed the sale of extra, higher-priced gasoline outside the rationing system.
Meanwhile Iran has more crude following an announcement last Suday that Iran has discovered a new sub-field within its southwest Jofeir oilfield that is expected to boost Jofeir's oil output to 33,000 barrels per day. Iran's new discovery is estimated to have reserves of 750 million barrels, according to Iran's Oil Minister, Gholamhossein Nozari.
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Meanwhile, Saudi Arabia will host a meeting on June 22 for oil producing and consuming countries where ways to control soaring energy prices will be discussed. America will participate as both a major producer and consumer. The US will send a delegation to Sunday's meeting in Jeddah, led by US Energy Secretary Samuel Bodman. Venezuela said it would not attend the meeting. China has indicated its Vice President, Xi Jinping, will attend. China is becoming a major oil consumer, accounting for about 40 percent of the growth in global oil consumption but recent earthquakes and bad weather have temporarily reduced China’s oil needs. British Prime Minister Gordon Brown will also attend the meeting. Iraq’s Oil Minister, Hussain al-Shahristani, said he will not attend the meeting.
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Iran and Malaysia's Amona Company have signed a $1.5 billion deal to develop the Resalat oilfield in the Persian Gulf. The Malaysian company will complete the project within three and a half years under terms of the contract. Iranian officials say that on completion of the project Resalat's daily output would increase from the current 8,000 barrels a day to 47,000 barrels a day. Resalat oilfield is located about 50 miles from Lavan Island in the Persian Gulf.
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Oil prices briefly shot up to $137 a barrel on world markets today after the Anglo-Dutch oil company Shell reported it had shut down production at a major offshore oil facility in Nigeria because of another militant attack. "We shut down production at the Bonga oilfield following an attack by unknown militants this morning," Shell spokesman Precious Okolobo told AFP. Violence in the southern Delta region has reduced Nigeria's total oil production by a quarter since January 2006.
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Reliance Industries, India's largest company, is increasing crude oil imports from Saudi Arabia as it seeks to secure supplies in the midst of rising demand in India and the rest of Asia, P.M.S. Prasad, president of the company's oil and gas business told Reuters. The company, which is building the world's largest refinery, is boosting purchases by at least 90,000 barrels a day, accounting for 30% of Saudi Arabia's output increase of 300,000 barrels a day this month.
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Oil revenues for Saudi Arabia, Kuwait and the UAE combined will be twice that of the US GDP if the high price of crude continues according to a Saudi investment company. If the annual average price hits $150, then the three countries will have a capital flow of $25.7 trillion, with $16.6 trillion going to the kingdom and the rest split evenly between Kuwait and the UAE. The GDP in the US, said Brad Bourland, Chief Economist and Head of Research at Jadwa Investment in Saudi Arabia, is $13 trillion. If the average price settles at $100, the three GCC countries will earn $17.2 trillion.
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An official in In Iraq’s Naft Al Janoub (Southern Oil Co.) confirmed yesterday that Iraq oil exports from Basra regained their normal level after storms had suspended oil tankers activity for 4 days. Exports were completely when storms stopped tankers from anchoring in Basra port at the beginning of the week. However, the official said that the amelioration in weather conditions allowed two tankers to anchor in the port on Tuesday.

SAUDI 'HILLARY' MAKES THE SUMMIT OF EVEREST

Farouk Saad Hamad al-Zuman, a 30-year-old Saudi, is the first citizen from the Kingdom to climb Mount Everest, the world's highest mountain. He reached the summit early yesterday as part of an eight-member summit team, including four Americans, a Frenchman, an Omani and a team leader from Canada. The Omani was forced to drop out because of altitude sickness but the others made the summit as well. Earlier others in the group dropped out at lower altitudes and one Japanese climber died.

Farouk’s accomplishment is the culmination of a life-long dream and has been a source of great pride of Saudi citizens. There he has garnered the nickname of "Sir Edmund Hillary of Saudi Arabia". Farouk is a US-educated public relations executive working for Attariq Communications, who sponsored the climb.

Farouk started climbing in the U.S. as an economics student at Oregon State University. He climbed Washington’s Mount Rainer and Mount Shasta in California.

Thanks to Arab News for the photo.

PRESIDENT BUSH TRAVELLS TO THE MIDEAST

President Bush and the First Lady arrived in Israel on May 14th at the beginning of a three-nation tour of the MidEast.

Upon arrival at Tel Aviv’s Ben Gurion airport the Israelis rolled out the red carpet. The embattled Israeli Prime Minister Ehud Olmert and President Shimon Peres were there to greet him. In welcoming remarks Shimon Peres said President Bush may be the best friend Israel has ever had in its 60 year history. Wednesday night he held talks with Peres at his Tel Aviv residence and then addressed an international conference hosted by President Shimon Peres. There, President Bush said, "With every passing year, the bonds of friendship between America and Israel have grown stronger. America stands for peace, and so does Israel. And as we stand in peace, we must understand the realities of the world in which we live. We must be steadfast, and we must be strong in the face of those who murder the innocent to achieve their objectives. And in the long run, we share a powerful belief in a powerful weapon against the terrorists. We believe that the surest way to defeat the enemies of hatred is to advance the cause of hope through the cause of freedom; liberty as the great alternative to tyranny and terror." He also visited the Western Wall that evening with the First Lady.

Tomorrow, he and First Lady Laura Bush, makes a trip to Masada. Upon his return, he will speak to the Israeli Knesset. That evening, he will view the biblical Isaiah Scroll, the most complete and best-preserved of the Dead Sea Scrolls dating from 120 BCE. It has recently been put on display at the Israel Museum as part of the Nation’s 60th Anniversary events.

Security is tight for all these Presidential events. Traffic has been banned in the area around the President’s hotel and 14,000 Israeli police have been marshaled to help the Secret Service provide security.

Friday, President Bush finishes the mainly ceremonial trip to Israel and he flies in Air Force One to Saudi Arabia. There the President will hold talks with the aging King Abdullah. The visit officially is to commemorate the 75th year of formal U.S.-Saudi diplomatic relations. Talks are expected to focus on Iran. Saudi Arabia warned Iran today that they must be careful about their activities in Lebanon where their Shi’a surrogates, the Hizballah, fought sharp battles with Sunni and Druze forces in Beirut and Tripoli in the last week. President Bush is expected to ask the King to increase oil production. The Kingdom is currently producing 8.5 million barrels a day down from a peak production capacity of 11 million BPD. The President’s plea is likely to fall on deaf ears. The Saudi’s for their part will warn the President about the weakening of the U.S. dollar and its regional consequences.

From Saudi Arabia, Air Force One will make the short flight across the Red Sea to the Egyptian resort city of Sharm es Sheikh. There he and the First Lady will be the guests of Egyptian President Hosni Mubarak. He is also scheduled to meet with Palestinian Authority President Mahmoud Abbas and other Arab leaders, including Jordan’s King Abdullah, for substantial talks on regional issues. Topics will include the Israeli-Palestinian talks, Syria, Lebanon and Iran. Leaders from Iraq and Afghanistan are also reportedly coming to some of the meetings. He will also make remarks at the World Economic Forum on the Middle East. Once again security will be very tight as Egypt pulls out all the stops in deploying their best military and police assets.

It would not be impossible that there may be an unannounced visit by the President to Iraq on the way home. The President may see this as his best opportunity to say goodbye to the troops and to get a new update from General Petraeus, who will also soon leave Iraq to take command of U.S. Central Command.

Syrian-Lebanese Dance of Chaos Continues

Lebanese Parliamentary Speaker Nabih Berri has again postponed an important Presidential Election session. A parliamentary session scheduled for today in order to elect a new Lebanese President was cancelled and has now been re-scheduled for noon on April 22d. This is the 17th such cancellation.

Parliament has so far been unable to elect a replacement for pro-Syrian head of state, President Emile Lahoud. His term ended in November, and Lebanon has been without a president for over three months.

The latest delay may have been induced by reports that Syria recently moved three Army Divisions close to the Lebanese border.

Meanwhile, the United States has deployed three warships, including the destroyer USS Cole, to Lebanese and Syrian coastal waters. The U.S. says the ships will remain there until after a successful Lebanese Presidential Election takes place.

Damascus obviously wants a pro-Syrian President but right now Damascus doesn’t want the distraction of an election. Syria is focused on hosting an Arab Summit this week. This was to be a political plum for Syria. But it is back-firing, as Egypt and Saudi Arabia have announced that they are sending low-level diplomats to the meeting in retaliation for Syrian obstruction of the Lebanese Presidential election. Other Arab states are likely to do the same. Many Arab nations are bent on isolating Syria who has increasingly been improving its relations with Iran.

Saudi Arabia, long an important player in Lebanon and Syria, announced yesterday that neither King Abdullah nor Saudi Foreign Minister Prince Saud al-Faisal would attend the summit. Riyadh's ambassador to the Arab League, Ahmad Qattan, said he would head his country's delegation.

To add to the tension, Monday was the end of the 40 day mourning period of the death of arch-terrorist Imad Mughniyeh. He was killed in Damascus in a February bombing. Syria’s Hezbollah allies held bellicose demonstrations and gave speeches saying they would avenge his death. They accuse Israel of having assassinated Mughniyeh. These threats and Syrian troop movements have made Israeli officials concerned.

Thus the stage is set for another failed Arab Summit and a protracted period of political impasse in Lebanon.

Lebanese election delayed 14 times

Despite an apparent agreement to elect Army Chief of Staff General Michel Suleiman, Lebanon’s Parliament has delayed its vote to elect a president for the 14th time. Nabih Berri, the speaker of the Lebanese parliament, said the vote would take place on 26 February. By then Lebanon will have been without a president for over three months.

The Arab League’s Amr Musa has made a number of trips to Lebanon and Syria to try and resolve the issue but always without success. He has advocated GEN Suleiman’s election and the forming of a national unity government. The election of a President will be much easier than getting the parties to form a united government. In the meantime bombs and assassinations and riots take place as the parties play full-contact politics. The Saudis and Iranians as well are working behind the scenes to advance their agendas.

For its part the United States is choosing this critical time to replace its Ambassador. The highly effective Jeff Feltman, who had stayed in Lebanon six months longer than planned, departed just days after a bomb attack on an Embassy vehicle left two dead. He is being replaced by Ambassador Michele J. Sison, a career diplomat. Ambassador Sison, pictured here, just completed a four year tour of duty as American Ambassador in the United Arab Emirates. Upon her arrival see made the following comments about the Presidential election impasse:

“The United States strongly supports the election of a new president of Lebanon. It is regrettable that a vacuum continues, and that presidential elections have been postponed twelve times. An agreement on a consensus president was reached long ago. Outside forces must stop obstructing Lebanon’s democratic process. The Parliament should meet and elect a president now, without conditions. It is tragic that this vacuum has been marked by violence and the loss of many lives.”

“I look forward to offering the congratulations of the U.S. government soon to a new Lebanese president– one who is elected freely and according to Lebanon’s constitution.”

A New Al Qaeda Video

Ayman az-Zawahiri al-Musri, al Qaeda’s number two man, is featured in a twenty minute video released today. It was released by as-Sahab, the terrorist group’s media arm. The terrorist is seen speaking before a backdrop of still pictures of him and the recent Annapolis talks.

He attacks those that attended the conference in Maryland, especially Arab and Palestinian leaders. Over 40 nation and organizations participated, including some prominent Arab countries, such as Egypt and Saudi Arabia. He called them traitors to the Palestinian cause. "The Arab states and governments were present as false witnesses to the latest of the treacherous deals to sell Palestine."

The Egyptian-born terrorist called on Muslims to stand by their Palestinian brethren in the face of those Arab leaders who would compromise with the Americans and Israelis.