By Alex Lawler
LONDON, Sept 13 (Reuters) - In 1973, Arab members of the
Organization of Petroleum Exporting Countries brought the U.S.
economy to its knees. Now, the cartel created 60 years ago is
more likely to do Washington's bidding.
Since Saudi Arabia and other Arab OPEC members imposed their
famous oil embargo as retribution for U.S. support for Israel
during the Yom Kippur War, shifts in global politics and a surge
in America's oil production have tamed the group.
OPEC's most hawkish members, Iran and Venezuela, have been
sidelined by U.S. sanctions while its kingpin, Saudi Arabia, has
shown it would rather appease Washington than risk losing U.S.
support, current and former OPEC officials say.
While OPEC as a bloc resisted U.S. pressure to lower oil
prices for decades, notably in 2011 during the uprising against
Libya's Muammar Gaddafi, its record over the past three years
has largely been one of capitulation, these officials say.
Founded in Baghdad on Sept. 14, 1960 to counter the power of
seven U.S. and British oil companies, OPEC has repeatedly
yielded to pressure from Washington to pump more oil since U.S.
President Donald Trump took office at the start of 2017.
Trump has regularly called for lower gasoline prices to help
U.S. consumers.
And when prices got too low for U.S. drilling companies to
make money this year, OPEC hashed out a deal to bring them back
up slightly, in an agreement spurred on by Washington's threat
to reduce its military backing for Riyadh, sources have told
Reuters. https://reut.rs/3m4gBSr
"Trump orders from Saudi Arabia what he needs for the oil
price - and he is served," Chakib Khelil, who was Algeria's oil
minister for a decade and OPEC's president in 2001 and 2008,
told Reuters. "So indeed OPEC has changed."
The Saudi Energy Ministry declined to comment.
The White House declined to comment.
Reuters spoke to eight current and former OPEC officials,
representing over a third of the group's output, as well as
analysts, traders and investors to ask how U.S. sanctions on
Iran and Venezuela had affected Saudi Arabia's influence within
OPEC, and whether that had changed the dynamic with Washington.
An OPEC official at the group's Vienna headquarters declined
to comment, saying Reuters should ask member states. Oil and
other government officials in Iran and Venezuela did not
immediately respond to requests for comment.
U.S. OUTPUT SOARS
Saudi Arabia has been the leading OPEC producer for decades,
giving it the biggest sway over policy, but the sidelining of
Iran and Venezuela has only increased its influence.
Iran's share of OPEC output has nearly halved to 7.5% since
2010 while Venezuela's has collapsed to 2.3% from almost 10%,
according to Reuters calculations based on OPEC data. Saudi
Arabia's share, meanwhile, has risen 7 percentage points to 35%.
Iran and Venezuela, which founded OPEC along with Iraq,
Kuwait and Saudi Arabia, had routinely opposed any moves to
bring oil prices down in the face of U.S. pressure.
The increased dominance of Saudi Arabia within OPEC has also
come at a time of higher U.S. oil and gas production, which has
turned the United States into the world's biggest petroleum
producer and slashed its dependence on foreign fuel.
U.S. production more than doubled in a decade to reach over
12 million barrels a day in 2019, according to the Energy
Information Administration, as improved drilling technology made
previously untapped basins accessible.
OPEC figures show the U.S. share of the global oil market
has doubled since 2010, while OPEC's has fallen.
OPEC teamed up with Russia and nine other oil producers in
2016 to form a group known as OPEC+ to boost their collective
leverage but a senior Trump administration official said even
the new group's influence had waned as U.S. output soared.
'OPEC IS AT IT AGAIN'
Trump has engaged more actively with OPEC than his
predecessors, often taking to Twitter to comment on production
decisions and oil price moves.
Trump has also developed a close relationship with Saudi
Arabia's de facto ruler, Mohammed bin Salman, or "MbS", who
relies on the United States for weapons and protection against
regional rivals such as Iran.
"There has never been a U.S. administration more involved in
international oil policy and OPEC than the Trump presidency,"
said Gary Ross, founder of Black Gold Investors and an OPEC
expert.
In 2018, as oil prices spiked over $70 a barrel, a level
Washington viewed as too high for U.S. consumers, Trump fired a
barrage of tweets at the cartel.
"Oil prices are too high, OPEC is at it again. Not good!" he
tweeted on June 13, 2018, nine days ahead of an OPEC meeting. As
OPEC gathered in Austria on June 22, Trump wrote: "Hope OPEC
will increase output substantially. Need to keep prices down!"
Later that day, OPEC agreed to raise its output by a million
barrels a day.
Two OPEC officials, who asked not to be identified due to
the sensitivity of the issue, said a Trump intervention on oil
prices effectively nudges the organisation to discuss, or even
adjust, its production policy.
And Trump's Twitter feed has become a source of anxiety.
"I hope no tweet will follow," one top OPEC official told
Reuters on April 9, 2019 after oil prices hit $71 a barrel, a
five-month high at the time.
Oil market watchers including OPEC officials say the irony
is that the price rises in 2018 and 2019 were both due mainly to
Washington's sanctions on Iran and Venezuela – policies that
slashed some 3 million barrels off daily oil production.
GREAT FOR THE INDUSTRY!
Earlier this year, Trump wanted something new from OPEC: a
production cut, to help U.S. oil companies make money.
Oil prices had tanked because of a supply glut caused by a
price war between Saudi Arabia and Russia at the same time as a
collapse in demand due to worldwide coronavirus lockdowns.
"Just spoke to my friend MBS (Crown Prince) of Saudi Arabia,
who spoke with President Putin of Russia, & I expect & hope that
they will be cutting back approximately 10 Million Barrels, and
maybe substantially more which, if it happens, will be GREAT for
the oil & gas industry!" Trump tweeted on April 2.
On April 12, OPEC+ agreed to a record cut in production
equivalent to a 10th of global output.
Reuters reported on April 30 that Trump had presented bin
Salman with an ultimatum: cut production or risk a withdrawal of
U.S. troops from the kingdom.
Asked about the ultimatum at the time, Trump said: "I didn't
have to tell him." He said he had spoken to MbS by phone and
they were able to reach a deal on production cuts.
Saudi Arabia's government media office did not respond to a
request for comment on the April report.
"In sum, OPEC does not make decisions anymore on what is
best for its members economically, as it is supposed to
according to its statutes," Algeria's Khelil said.
'GIFT TO TRUMP'
In 2011, when Libyan output was hit by the uprising against
Gaddafi, Saudi Arabia tried to convince OPEC to lift production
to lower prices. But Algeria, Angola, Ecuador, Iran, Iraq, Libya
and Venezuela all resisted.
"Previously, you had a bloc which could become quite vocal
and actually upend meetings," said Samuel Ciszuk, who founded
consultancy ELS Analysis and used to work for the Swedish Energy
Agency.
"Now, Iran and Venezuela still have votes but they are
sidelined and have such desperate economic and marketing
situations that other countries are more careful about lining up
politically with them," he said.
Iran's former OPEC governor Hossein Kazempour Ardebili told
Reuters in 2018, when OPEC+ had just raised output following
pressure from Trump, that both OPEC and the broader group had
begun acting against the interests of their smaller members.
"They gave an oil price gift to Trump while inflicting
revenue loss on all OPEC members," he said.
While there is no suggestion OPEC is about to suffer an
exodus of smaller members as a result of the shifting dynamic -
and there have been new entrants - some countries have left.
Qatar quit in 2019, partly due to a political row with
Riyadh. Another small producer, Ecuador, left this year and
Indonesia departed in 2016. Both said they did not want to be
constrained by OPEC production quotas.
Others that may be unhappy with OPEC's trajectory, however,
plan to remain so they can still have a say.
As one source familiar with Iran's oil policy put it: "It's
important to be a member of OPEC or OPEC+ so that you can
maximize your interests."
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OPEC Market Share 2010 and 2020 https://tmsnrt.rs/323I5jb
OPEC Crude Output and U.S. Oil Supply as % of World Total https://tmsnrt.rs/3bBGODc
SPECIAL REPORT-Trump told Saudis: Cut oil supply or lose U.S.
military support
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