Tag: Oil and Gas

Iraq’s overreliance on oil threatens economic, political strife | Oil and Gas News

With an economy so reliant on oil, Iraq has long faced a tough balancing act between the short-term gains that can come from ramping up production and the long-term problems that can arise from overproduction.

Last week, the Iraqi oil ministry announced that it was rectifying a swing too far in one direction when it announced that it would be curbing oil exports to 3.3 million barrels per day (bpd) after having exceeded since January a quota imposed by the OPEC+ oil cartel.

Production for March will be 130,000 bpd lower than in February, which will keep Iraq’s partners in the Organization of the Petroleum Exporting Countries (OPEC) content.

But future tensions could arise if Iraq hits any unforeseen economic hurdles and falls back on overproduction.

“The whole political economy is driven by oil,” an analyst, who asked to withhold their name due to the sensitivity of their work, told Al Jazeera.

“The budget is set by the oil price. If the price drops, they produce more.”

Reliance on oil

The Iraqi government needs to maximise the income it generates after parliament voted last year to pass a record-high budget of $153bn a year until 2025. It was presented as an investment in building Iraq’s future.

The country’s vast oil reserves played a huge role in its economy rebounding, a little over six years after victory was declared over ISIL (ISIS), which had previously taken over vast swaths of territory.

But some of the huge budget’s planned expenditure will also be spent on adding hundreds of thousands of jobs to an already bloated public sector to, according to analysts, gain the goodwill of Iraq’s 46 million-strong population, which grows by about a million people a year.

“That’s a fast rate of growth while the resources of the country are not only not growing at the same pace but actually, in some important areas, are in decline,” Sarhang Hamasaeed, director of the Middle East Program at the United States Institute for Peace (USIP), told Al Jazeera.

The Iraqi government relies on oil for more than 90 percent of its revenue. While non-oil gross domestic product (GDP) should grow in 2024, the overall economic outlook is tenuous.

In recent years, oil wealth led to growth, but the International Monetary Fund has predicted that growth would end due to OPEC-mandated production cuts and the shutdown of a pipeline between Iraq and Turkey.

Economists and analysts warn that the government’s plans rely on the price of oil remaining at $70 per barrel or above and production at 3.5 million bpd because any dips would derail the budget and cause myriad problems.

In short, they say, a series of short-term fixes could inflict long-term damage.

A decline could lead to serious economic instability, which would mean issues that have plagued the Iraqi federal government might return.

“This destabilising effect on the country has had and will have implications for vulnerability to employment or recruitment by violent extremists, terrorist organisations like al-Qaeda and ISIS, or armed groups,” Hamasaeed said.

Another potential issue is that the government is relying in its calculations on the inclusion of oil production from Iraq’s Kurdish region, governed by the Kurdistan Regional Government (KRG), which has not had a smooth relationship with Baghdad.

Tension with KRG

One of the key issues the Iraqi government needs to figure out, analysts say, is the complicated relationship with the KRG – a semi-autonomous region that remains legally beholden to the federal government.

One of the most contentious issues between the KRG and the federal government has been the management and sale of oil and gas.

“The KRG has interpreted its semi-autonomy to mean full autonomy at times, which has put it into conflict with Baghdad,” the analyst who asked that their name be withheld told Al Jazeera.

Last year’s massive budget passed in part because of a prior deal between Baghdad and Kurdish capital Erbil that gave Iraq’s federal government the power to monitor and audit the KRG’s oil and gas income.

However, even since the deal was agreed, the KRG has often circumvented the federal government and sold natural resources directly to foreign partners, leading to tension between it and Baghdad.

“Because of this, the federal government has used the national budget as a punitive measure: the constitution/law states that the KRG should get 17 percent of the national budget; the federal government has only been giving 12 percent until they can resolve the dispute on matters of oil and gas sale,” the analyst said.

At least some of the KRG and Baghdad’s disputes are over the relationship with Turkey. The International Chamber of Commerce ordered Ankara in 2023 to pay $1.5bn in damages to Baghdad after the KRG sent oil directly to Turkey from 2014 to 2018.

Since then, Iraq’s oil ministry and the Association of the Petroleum Industry of Kurdistan have traded blame over a lack of progress toward reopening the pipeline.

In mid-March, Iraq agreed to ban the Kurdistan Workers’ Party (PKK) – a group that has fought a war against the Turkish state since the 1980s, and that Turkey has targeted with a military operation inside Iraq since April 2022. The deal is part of a political negotiation in exchange for supporting an infrastructure project by Iraqi Prime Minister Mohammed Shia al-Sudani, the unnamed analyst told Al Jazeera.

“[Al-]Sudani is betting Iraq’s economic future on this infrastructure project that will employ people, benefit construction companies captured by security actors, and open a pathway into Turkey and Europe,” they said. “Turkey would back this project if Iraq bans the PKK.”

Water has also come up as a bargaining chip in exchange for oil between Turkey and Iraq, a situation where Iraq has little leverage, according to a report by USIP.

In recent decades, Turkey built a series of 22 dams, including the Ataturk Dam, the third-largest in the world. The dams have cut off much of the water into Iraq and led to serious environmental concerns.

While Turkey tends to help Baghdad in times of extreme water distress, there has been little incentive for Ankara to make wider concessions.

The Iraqi parliament has been debating a new oil and gas law for more than a decade. The main hold-ups are over the management of oil fields and distribution abroad.

The federal government has threatened oil companies working in federal areas that buying oil directly from the KRG would lead to the termination of their contracts.

Iraq is the world’s sixth-largest oil producer and OPEC’s second-largest after Saudi Arabia, producing around 4.2 million bpd over the last year, before the current drop in production.

The KRG produces around 400,000 barrels per day, according to the Middle East Institute, and “presides over at least 25 trillion cubic feet (tcf) of proven gas reserves and up to 198 tcf of largely unproven gas”, according to a report published last year by the Middle East Council on Global Affairs.

Regional differences

The dispute over oil and gas management and distribution is representative of a larger issue between the KRG and the federal government.

These two areas are increasingly different, not simply in terms of language and culture, but also in emerging class differences.

A 2017 referendum overwhelmingly backed the independence of the Kurdish region of northern Iraq, but was rejected by the central government and regional powers.

“The lack of social cohesion stems from the dual reality that people are living with,” Farah Al Shami, a senior fellow at the Arab Reform Initiative, told Al Jazeera. “Cities in the Kurdistan region are more developed and enjoy better living standards than the others.”

The disparity in living standards causes tension on the “political and sociological” levels, she said, adding that the “federal system is really undermining the role of the central government”.

There is also the widespread issue of corruption, which is endemic in Iraq. The country was ranked 154 out of 180 countries in Transparency International’s 2023 Corruption Perceptions Index. While it is less of an issue in the KRG, its institutions also suffer from corruption.

“In the past 20 years, the business of politics has become paralysed in Iraq,” Hamasaeed said. “Corruption has been the biggest barrier.”

The overreliance on oil and engrained corruption has made collaboration between the KRG and federal government difficult and has a discernible impact on the population of Iraq.

The lack of economic diversification also has a ripple effect on society, impacting not only what kind of jobs are available, but also internal migration, desires to emigrate, and much more.

Without serious political and economic reforms, any semblance of progress Iraq has made in terms of stability in recent years could give way. But it’s a long road ahead, as there are no quick fixes.

“This is not a sustainable economic reality, at all,” Al Shami said. “If there is a solution, it will definitely be in the long term.”

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Fitch Ratings upgrades Qatar to third-highest on back of gas expansion | Oil and Gas News

Revenues from Qatar’s LNG fields will provide budget surpluses until the 2030s, Fitch said.

Fitch Ratings has upgraded Qatar to AA, its third-highest rating, on the back of revenues expected from its expanded gas fields, the agency has said.

Revenues from Qatar’s liquified natural gas (LNG) fields will ensure that the country posts budget surpluses until the 2030s, Fitch said in a release on Wednesday outlining the rating rationale.

The upgrade from AA- “reflects Fitch’s greater confidence that debt to GDP will remain in line with or below the ‘AA’ peer median after falling sharply in recent years,” the agency said.

Fitch expects Qatar’s debt-to-GDP ratio to fall to about 47 percent of gross domestic product (GDP) in 2024 and 45 percent in 2025, from a peak of 85 percent in 2020.

Qatar is already one of the richest countries in the world and boasts one of the highest ratios of GDP per capita. The added revenue boost will ensure that its external balance sheet will strengthen from an already strong level, Fitch said.

However, Fitch warned that the continuing war in Gaza posed a risk to Qatar’s rating even though it had so far not been directly affected. Should a sharp escalation in regional tensions lead to capital flight from banks, for instance, or cause prolonged disruptions of Qatar’s hydrocarbon and transport sectors, that would affect the latest rating, Fitch said.

Qatar is one of the biggest exporters of LNG along with the United States, Australia and Russia. Asian countries led by China, Japan and South Korea have been the main market for Qatari gas, but demand has also grown from European countries since Russia’s war on Ukraine threw supplies into doubt.

Qatar Energy plans to expand LNG production capacity at North Field from 77 million tonnes per year (mtpa) to 110 mtpa by end-2025, 126 mtpa by end-2027 and announced a further expansion to 142 mtpa by end-2030.

The North Field is part of the world’s largest gas field, which Qatar shares with Iran, which calls its share South Pars.

Competition for LNG has ramped up since the start of the war in Ukraine, with Europe, in particular, requiring a large quantity to help replace Russian pipeline gas that used to make up almost 40 percent of the continent’s imports.

However, after a decade of meteoric price rise, gas prices dropped earlier this year to nearly all-time lows after adjusting for inflation. Despite that drop, all leading gas producers, including the US, Australia and Russia, want to increase output betting on further demand growth.

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Global oil demand to grow amid Red Sea shipping disruptions: IEA | Oil and Gas News

The International Energy Agency says shipping disruptions provide a short-term boost to the oil market with demand at 1.3 million barrels per day.

Global oil demand is forecast to grow more than expected due to the rising fuel needs of ships rerouted away from the Red Sea amid attacks by Yemen’s Houthi rebels and a brighter economic outlook in the United States, the International Energy Agency (IEA) has said.

In its monthly oil report released on Thursday, the Paris-based agency made a 110,000 barrels per day (bpd) upward revision of global oil demand from its previous forecast as attacks by Yemen’s Iran-aligned Houthis in the Red Sea delay supplies.

The IEA said world oil demand is now forecast to increase by 1.3 million bpd this year.

“Disruptions to international trade routes in the wake of turmoil in the Red Sea are lengthening shipping distances and leading to faster vessel speeds, increasing bunker demand,” the agency said, using a term for the fuel needs of ships.

The Houthis have repeatedly launched drones and missiles against international commercial shipping since mid-November over Israel’s war on Gaza, disrupting global commerce along a route that accounts for about 15 percent of the world’s shipping traffic, forcing firms to reroute to longer and more expensive journeys around Southern Africa.

The disruptions have meant that nearly 1.9 billion barrels of oil were at sea at the end of last month, the IEA said, nearly the highest since the COVID pandemic.

Longer routes boosted fuel demand and the loading of ships with fuel in Singapore reached all-time highs.

But the agency warned that the settling down of the post-pandemic turbulence and a cloudy economic outlook will weigh on demand, even as shipping disruptions provide a short-term boost.

“The global economic slowdown acts as an additional headwind to oil use, as do improving vehicle efficiencies and expanding electric vehicle fleets,” it said.

“Growth will continue to be heavily skewed towards non-OECD [Organisation for Economic Co-operation and Development] countries, even as China’s dominance gradually fades. The latter’s oil demand growth is expected to slow from 1.7 million bpd in 2023 to 620,000 bpd in 2024,” the IEA said.

The annual growth in demand remains sharply lower than in 2023 when it reached 2.3 million bpd, on the back of energy efficiency gains and the use of electric vehicles.

Total demand is forecast to reach 103.2 million bpd in 2024 compared with 101.8 million bpd last year.

Should the producer bloc OPEC+ maintain voluntary cuts through 2024, the IEA said it sees the market in slight deficit rather than surplus, adding oil prices were rangebound in early March after the market priced in its last cut announcement.

Oil supply growth from non-OPEC+ countries oil will continue to significantly eclipse oil demand expansion, the IEA added.

Following the report, oil prices extended gains on Thursday.

Brent crude futures LCOc1 for May rose 72 cents, or 0.86 percent, to $84.75 a barrel by 10:21 GMT. US West Texas Intermediate (WTI) crude for April was up 83 cents, or 1.04 percent, at $80.55.

“Whilst the IEA’s view on global oil balance is still more than a country mile away from OPEC’s prognosis, this report does nothing to dent the developing upbeat mood,” said analyst Tamas Varga at PVM Oil Associates.

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Qatar announces new gas output boost with mega field expansion | Oil and Gas News

The overall expansion of North Field from 77mtpa currently to 142mtpa by 2030 represents an 85 percent increase in production.

Qatar has announced new plans to expand output from the world’s biggest natural gas field, saying it will boost capacity to 142 million tonnes per annum (mtpa) before 2030.

The new North Field expansion, named North Field West, will add a further 16 million tonnes of liquefied natural gas (LNG) per year to existing expansion plans, Qatar’s Energy Minister Saad Sherida al-Kaabi said at a news conference on Sunday.

“Recent studies have shown that the North Field contains huge additional gas quantities estimated at 240 trillion cubic feet, which raises the state of Qatar’s gas reserves from 1,760 [trillion cubic feet] to more than 2,000 trillion cubic feet,” said al-Kaabi, who also heads the state-owned company QatarEnergy.

These results “will enable us to begin developing a new LNG project from the North Field’s western sector with a production capacity of about 16 million tonnes per annum”, he said.

This will bring Qatar’s production capacity to 142 million tonnes once “the new expansion is completed before the end of this decade” – a nearly 85 percent rise from current production levels, al-Kaabi added.

The QatarEnergy chief said the firm will “immediately commence” with engineering works to ensure the expansion is completed on time.

Qatar is one of the world’s top LNG producers alongside the United States, Australia and Russia.

Asian countries led by China, Japan and South Korea have been the main market for Qatari gas, but demand has also grown from European countries since Russia’s war on Ukraine threw supplies into doubt.

The latest expansion plans follow a flurry of announcements for long-term Qatari gas supply deals.

Earlier this month, Qatar said it would supply 7.5mtpa of LNG for 20 years to India’s Petronet, with the first deliveries expected from May 2028.

At the end of January, QatarEnergy announced a deal with US-based Excelerate Energy to supply Bangladesh with 1.5mtpa of LNG for 15 years.

Last year, Qatar signed LNG deals with China’s Sinopec, France’s Total, Britain’s Shell and Italy’s Eni.

Global price collapse

Competition for LNG has ramped up since the start of the war in Ukraine, with Europe, in particular, requiring a large quantity to help replace Russian pipeline gas that used to make up almost 40 percent of the continent’s imports.

The Qatari announcement came as the US gas prices trade near an all-time low if adjusted to inflation after a decade of meteoric rises in output which made the US one of the top oil and gas exporters.

Prices of gas in Europe also fell steeply despite a drop in Russian supplies after the US and Qatar helped replace lost volumes.

Despite the price drop, all leading gas producers, including the US, Australia and Russia, want to increase output betting on further demand growth and worries that their gas might not be needed decades from now if the energy transition makes green energy cheaper.

The latest expansion may not be the last for the Gulf energy giant as al-Kaabi said appraisal of Qatari gas reservoirs would continue and production would be further expanded if there is a market need.

On partnerships for the new trains, al-Kaabi said QatarEnergy will go ahead and begin the engineering phase of this project on its own without seeking partners and then take a decision on partnerships later.

The North Field is part of the world’s largest gas field, which Qatar shares with Iran, which calls its share South Pars.

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Venezuela accuses US of ‘blackmail’ over sanctions | Boycott, Divestment, Sanctions News

The US reimposed sanctions after a ban blocking the candidacy of the opposition in Venezuela’s elections was upheld.

Venezuela has criticised Washington’s decision to reimpose oil and gas sanctions and warned it could halt deportation flights for Venezuelan migrants who are in the United States without documents.

“All of Venezuela rejects the rude and improper blackmail and ultimatum expressed by the US government,” Vice President Delcy Rodriguez wrote on X.

“If they take the wrong step of intensifying the economic aggression against Venezuela … as of February 13 repatriation flights for Venezuelan migrants would be immediately cancelled.”

The US began repatriating Venezuelan migrants on chartered flights in October, after a deal was struck between Nicolas Maduro and President Joe Biden for the “orderly, safe and legal repatriation” of undocumented Venezuelan migrants.

Rodriguez said that all other areas of cooperation would be reviewed as a countermeasure to the “deliberate attempt to strike a blow to the Venezuelan oil and gas industry”.

The rejection comes in response to the United States’s reimposition of sanctions on Caracas this week. Washington took action after Venezuela’s top court upheld a ban blocking the candidacy of the leading opposition hopeful in a presidential election later this year.

The US Department of the Treasury on Monday gave US entities until February 13 to wind down transactions with Venezuelan state-owned miner Minerven.

The US Department of State said on Tuesday that Washington does not plan to renew a licence that has allowed Venezuela’s oil to freely flow to its chosen destinations.

“Actions by Nicolas Maduro and his representatives in Venezuela, including the arrest of members of the democratic opposition and the barring of candidates from competing in this year’s presidential election, are inconsistent with the agreements signed in Barbados,” the State Department said in a statement.

“Absent progress between Maduro and his representatives and the opposition Unitary Platform … the United States will not renew the license when it expires on April 18,” the State Department said, referring to General License 44, which provides relief to Venezuela’s oil and gas sector.

The US, which first imposed oil sanctions on Venezuela in 2019, had granted sanctions relief for the OPEC member country in October in recognition of a deal signed in Barbados with President Nicolas Maduro’s administration that included releasing political prisoners, allowing international observers and setting conditions for a fair presidential election.

Venezuela is prepared for any scenario including the reimposition of US sanctions on its crude and gas exports, Oil Minister Pedro Tellechea said.

The US would also feel the effect of any reimposed energy sanctions on Venezuela, Tellechea told reporters, adding that the country would not “kneel down” just because someone tried to dictate the countries with which it can do business.



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Oil supply tightens in Europe over Red Sea disruptions | Israel War on Gaza News

The structure of the global benchmark Brent crude futures market and some physical markets in Europe and Africa have been reflecting tighter supply partly over concerns about shipping delays as vessels avoid the Red Sea due to missile and drone attacks.

The disruptions – which have been the largest to global trade since the COVID-19 pandemic – have combined with other factors such as rising Chinese demand to increase competition for crude supply that does not have to transit the Suez Canal, and analysts say this is most evident in European markets.

In a sign of tighter supply, the market structure of Brent – which is used to price nearly 80 percent of the world’s traded oil – hit its most bullish in two months on Friday, as tankers diverted from the Red Sea following recent air strikes by the United States and United Kingdom on targets in Yemen.

In response to Israel’s war on Gaza, rebels from the Iran-aligned group that controls northern Yemen and its western coastline have launched a wave of assaults on ships in the Red Sea.

By targeting vessels with perceived links to Israel, the Houthis are attempting to force Tel Aviv to stop the war and allow humanitarian aid into the Gaza Strip.

Houthi activity has so far been concentrated in the narrow strait of Bab al-Mandeb, which connects the Gulf of Aden to the Red Sea. Approximately 50 ships sail through the strait every day, heading to and from the Suez Canal – a central artery for global trade.

Some of the world’s largest shipping companies have suspended transit in the region, forcing vessels to sail around the Cape of Good Hope in Southern Africa. The lengthier route has raised freight rates due to higher fuel, crew and insurance costs.

“Brent is the most impacted futures contract when it comes to Red Sea/Suez Canal disruptions,” Viktor Katona, lead crude analyst at Kpler, told the Reuters news agency. “So who suffers the most on the physical front? Undoubtedly, it is European refiners.”

The premium of the first-month Brent contract to the six-month contract LCOc1-LCOc7 rose to as much as $2.15 a barrel on Friday, the highest since early November. This structure, called backwardation, indicates a perception of tighter supply for prompt delivery.

Less oil heads to Europe

Less Middle Eastern crude is heading to Europe, with the volume nearly halved to about 570,000 barrels per day (bpd) in December from 1.07 million bpd in October, Kpler data showed.

Ships travelling through the Suez Canal have taken on greater strategic significance since the war in Ukraine, as sanctions against Russia have made Europe more dependent on oil from the Middle East, which supplies one-third of the world’s Brent crude.

But it’s challenging to measure the impact of Red Sea shipping separately, one crude trader told Reuters. “It’s a strong market everywhere, but people are very nervous.”

Other developments have also tightened the European crude market including a drop in Libyan supply due to protests, the first such disruption for months, and lower Nigerian exports.

Angolan crude, which also heads to Europe without having to pass through the Suez Canal, is seeing higher demand from China and India because of issues around Iranian and Russian crude, reducing the supply that could come to Europe.

China’s oil trade with Iran has stalled as Tehran withholds shipments and demands higher prices, while India’s imports of Russian crude have fallen due to currency challenges, although India attributed the drop to unattractive prices.

Meanwhile, Russia leapfrogged Saudi Arabia to become China’s top crude oil supplier in 2023, data showed on Saturday, as the world’s biggest crude importer defied Western sanctions over Russia’s 2022 invasion of Ukraine to buy vast quantities of discounted oil for its processing plants.

Russia shipped a record 107.02 million metric tonnes of crude oil to China last year, equivalent to 2.14 million bpd, the Chinese customs data showed, far more than other major oil exporters such as Saudi Arabia and Iraq.

Imports from Saudi Arabia, previously China’s largest supplier, fell 1.8 percent to 85.96 million tonnes, as the Middle East oil giant lost market share to cheaper Russian crude.



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Oil prices steady despite Middle East tensions, but risks are rising | Oil and Gas News

In recent weeks, missile and drone attacks on cargo ships crossing the Red Sea have caused the biggest disruption to global trade since the COVID-19 pandemic. Despite delayed supplies, however, oil prices have remained surprisingly stable.

In response to Israel’s war on Gaza, Houthi rebels – the Iran-aligned Shia movement that controls northern Yemen and its western coastline – have launched a wave of assaults on ships in the Red Sea. By targeting vessels with perceived links to Israel, they are attempting to force Tel Aviv to stop the war and admit full humanitarian aid into Gaza. Houthis have launched at least 26 separate attacks since November 19 on merchant freighters.

Though no ships have yet been sunk, the United States recently dispatched a multinational naval task force to the region. On December 31, American Navy helicopters killed 10 Houthi fighters and sank three of the group’s speedboats.

The following day, Iran dispatched its Alborz warship to the Red Sea, compounding an already volatile situation. The government did not provide information on the vessel’s mission.

On Wednesday, Houthi rebels fired their largest barrage of projectiles yet, forcing an engagement with US and British naval forces. On Thursday night, the US and UK led a bombing campaign against multiple Houthi facilities in Yemen.

While Brent crude briefly topped $80 per barrel after Thursday’s air strikes, oil prices have mostly trended sideways in recent weeks. Market fundamentals suggest a balanced, or slightly surplus, market. And until there is a clear threat to global supply, traders appear to have relegated tensions in the Middle East to background noise.

The Suez Canal

Houthi activity has so far been concentrated in the narrow strait of Bab al-Mandab, which connects the Gulf of Aden to the Red Sea. Approximately 50 ships sail through the strait every day, heading to and from the Suez Canal – a central artery for global trade.

Some of the world’s largest shipping companies have suspended transit in the region, forcing vessels to sail around the Cape of Good Hope in Southern Africa. The lengthier route has raised freight rates due to higher fuel, crew and insurance costs.

According to Clarksons, a shipbroker, roughly 24,000 vessels crossed the Suez Canal last year. That amounts to one-tenth of global trade, including 10 percent of seaborne oil and 8 percent of liquefied natural gas.

Ships travelling through the Suez Canal have taken on greater strategic significance since the war in Ukraine, as Russian sanctions have made Europe more dependent on oil from the Middle East, which supplies one-third of the world’s Brent crude, the international benchmark.

“The region is an important channel for freight, representing almost one-third of global container capacity. As such, Houthi-linked bottlenecks pose a new risk to inflation,” said Rahul Sharan, a senior manager for maritime consultancy Drewry.

“We’ve seen hundreds of vessels rerouted from the Suez Canal in recent months. We don’t yet have visibility on which industries have been most severely affected, but [consumer goods] costs could rise if oil and gas prices increase.”

Despite diverting supplies from the Suez Canal, tensions in the Red Sea have so far had a muted impact on energy prices. “We’ve seen plenty of volatility, so geopolitical risks are being considered. But not enough to lift prices,” says energy trader Mohammed Yagoub.

“The truth is that headline fatigue has set in. There’s been a lot of coverage on tensions in the Red Sea, especially today. But global supplies have remained broadly steady in recent weeks,” Yagoub told Al Jazeera.

“You have to remember that the oil can still travel around Africa, as well as from ports in western Saudi Arabia, bypassing the need to cross Bab al-Mandeb.” The Houthis, he said, were also unlikely to attack ships from friendly oil and gas-producing countries in the region.

Tensions with Iran

There are other factors at play – recent record US production, the lifting of oil sanctions in Venezuela and tepid global demand, Yagoub added.

However, looking ahead, he warned that “tensions in Iran, especially around Hormuz, could move the needle on prices.”

Approximately 17 million barrels of crude oil, nearly one-sixth of global supply, are transported on a daily basis through the Strait of Hormuz, between the Arabian Gulf and the Gulf of Oman. If Iran became actively engaged in the conflict, Tehran could threaten to close this vital channel.

Any such closure could see crude prices surge by 20 percent in a month and higher thereafter, according to Callum Bruce, an analyst at Goldman Sachs.

“It would be a huge, huge shock. For now, though, the implied market probability of that happening is less than 1 percent,” he said. Tehran has appeared reluctant to engage in military conflict with the US military and its economy remains fragile.

Bruce pointed out that “oil traders will continue paying close attention to activity in the Middle East. Gaza is ground zero. Then, you have the Red Sea. Tensions across the region have also ratcheted up in recent weeks.”

On January 2, senior Hamas leader Saleh al-Arouri was killed in Beirut by an Israeli drone raid following three months of hostilities at the Lebanon-Israel border. It was the first air raid on Beirut since 2006.

This past week, Israel assassinated a Hezbollah commander in south Lebanon, while Hezbollah, which has Iranian support, struck a sensitive Israeli base with rockets. Meanwhile, Iran-backed groups in Iraq have stepped up attacks on US military bases.

For his part, US President Joe Biden has said he is keen to prevent the war on Gaza from spiralling into an all-out regional conflagration, though the bombing of Yemen has been viewed by the Houthis as an escalation. On Sunday, US Secretary of State Anthony Blinken was dispatched to the Middle East on a diplomatic trip for the fourth time in three months.

“Israel’s war with Hamas seems to have energised already existing tensions,” said Bruce. “And while US naval activity in the Red Sea provoked headlines, economic essentials are continuing to dictate oil prices.”

Mohammed Yagoub added, “It’s true that mega-trends are pre-occupying traders. But the likelihood of a regional conflict will increase the longer the fighting in Gaza persists. Yemen is proving that. So, you could make the case that oil traders are too sanguine right now.”

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Dozens killed as gas tanker explodes in Liberia | Oil and Gas News

Some locals flocked to the scene and took the leaking gas from the tanker when it exploded.

At least 40 people have died after a gas tanker exploded in northcentral Liberia, the country’s Chief Medical Officer Francis Kateh said on Wednesday.

Late Tuesday, a fuel truck crashed in Totota, Lower Bong Country, about 130km (80 miles) from the capital, Monrovia – after exploding, the blast killed and injured many who had flocked to the scene.

Kateh told local news on Wednesday that it was difficult to determine the number of victims because some had been reduced to ashes, but he estimates that 40 people were killed in the incident.

“We have our team going from home to home to check those that are missing,” he told the French news agency AFP.

Police had earlier put the death toll at 15 and said that at least 30 others were injured as locals gathered at the scene.

“There were lots of people that got burned,” said Prince B Mulbah, deputy inspector-general for the Liberia National Police.

According to United Nations figures, poor road safety and weak infrastructure have made sub-Saharan Africa the world’s deadliest region for crashes, with the fatality rate three times higher than the European average.

After Tuesday’s crash, some locals took the leaking gas when the tanker exploded, another police officer, Malvin Sackor, said. He added that police were still gathering the total number of injured and killed.

An eyewitness from Totota, Aaron Massaquoi, told AFP that “people climbed all on top of the truck taking the gas, while some of them had irons hitting the tanker for it to burst for them to get gas.

“People were all around the truck and the driver of the truck told them that the gas that was spilling they could take that … but some people were even using screwdrivers to pit holes on the tank”.

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Political crisis in Nigerian oil capital sparks fears of more economic woes | Oil and Gas

Abuja, Nigeria – On October 30, oil-rich Rivers State, Nigeria’s oil capital, became the latest hub of political drama in the country following the state parliament’s attempted impeachment of Siminalayi Fubara, who had been governor for only five months.

The impeachment notice was signed by 24 of 32 lawmakers, all loyal to Nyesom Wike, Fubara’s predecessor, who was hitherto seen as his “political godfather”. Wike has accused Fubara of wanting to destabilise the structure that brought him to office.

Since then, a political crisis has unfolded, impeding governance in the state and risking crude production in Africa’s largest oil producer.

The parliament complex was burned down; 27 lawmakers defected from the Peoples Democratic Party to the All Progressives Congress – the opposition at state level but the national ruling party –  while the remaining five elected a factional speaker; Fubara presented the 2024 budget to these five lawmakers and nine members of the state cabinet resigned.

The crisis split the parliament into two factions: one backed by Wike, now a federal minister, and the other faction loyal to Fubara. A night before the impeachment attempt, an explosion by unknown arsonists destroyed a section of the legislative complex. During Fubara’s inspection tour of the complex the next day, the police fired tear gas at him.

Nigeria’s President Bola Tinubu met with parties involved in the crisis on December 18. After the meeting, the parties involved reportedly signed a resolution stating that court cases instituted by Fubara be withdrawn and the state parliament drop all impeachment proceedings against him.

Confidence MacHarry, a lead security analyst at Lagos-based consultancy SBM Intelligence, says although the move may be in the interests of peace, such intervention could “end badly.”

“That kind of direct intervention of Tinubu sets a dangerous precedent and people in the state are not taking it quite kindly being that the president is not from the region and he is from a different political party [APC],” MacHarry told Al Jazeera.

He explained that because Wike played a critical role in ensuring the president got the majority of votes from the state during the February 25 election and was then appointed a minister, “people do not think the president would be an impartial arbiter”.

Former Rivers State Governor Nyesom Wike addresses the Peoples Democratic Party delegates during a special convention in Abuja, Nigeria, on May 28, 2022 [File: Afolabi Sotunde/Reuters]

Risk to the economy

The peace agreement has barely resolved the crisis, creating fears of continued risk to the oil capital, even as Nigeria’s economy, which is overly reliant on oil exports, continues to plummet.

At least 90 percent of the country’s revenue goes to servicing its debt obligations and workers have threatened strikes if there is no pay increase to counter a cost-of-living crisis, worsened by a controversial fuel subsidy ending in May.

For decades, crude oil from the delta has accounted for the majority of the country’s export earnings. Rivers, one of the six states in the region, is home to pipelines that transport crude from other states to its Bonny export terminal. In 2021, the state accounted for 6.5 percent of Nigeria’s entire revenue.

“If the political crisis continues, it could spread to other parts of the Niger Delta which will be more devastating to the economy,” says Gabriel Adeola, a professor of political science specialising in political economy at Crawford University, Ogun State.

Nigeria’s crude production averages 1.25 million barrels per day (bpd), according to data from the Organization of the Petroleum Exporting Countries (OPEC).

Revenue from non-oil outpaced that of oil by 1.5 trillion Nigerian naira ($1.9bn) in 2022, due to factors such as oil theft – which cost Nigeria at least $2bn between January and August 2022 alone and caused oil production to dip.

Still, experts like Peter Medee, associate professor of economics at the University of Port Harcourt, insist that Nigeria cannot thrive on revenue from non-oil sectors alone.

“Oil is the nerve centre of [Nigeria’s] economy … If anything happens to oil production, it means that 60 percent of revenue is gone,” Medee told Al Jazeera.

‘Recipe for disaster’

There are also fears that the political crisis could eventually snowball into an ethnic crisis because of the identity of the main actors. Fubara is Ijaw, Nigeria’s fourth largest ethnicity and spread across the delta while Wike is Ikwerre, the largest ethnic group in Rivers.

Zoning and rotation of positions is an often unwritten rule in Nigerian politics, ostensibly to ensure equality in what is a very diverse society. Until Fubara’s election victory in March, no Ijaw had become governor since the return to democracy in 1999; all three of his predecessors in that time have been Ikwerre.

Already, Ijaws have started drumming support for the governor.

Jonathan Lokpobiri, president of the nationalist Ijaw Youth Council (IYC), said his people were already “worried about the catastrophic effect this crisis may have on Rivers State and the spiral effect it will have on the entire Niger Delta”.

The current developments, Lokpobiri told Al Jazeera, have so far “undermined and insulted the sensibilities of the Ijaw people”.

He said a lack of a fair and lasting solution could force the people to deploy different means in showing support for the governor, warning that interested parties could “go destructive which tends to get attention faster and better”.

“The president’s [actions and inactions] can be a recipe for disaster not just in Rivers State but the Niger Delta,” he warned. “If this issue is not managed and the president thinks it does not affect him, it will affect the oil industry.”

This could lead to an armed revolution, says Medee.

“People revolt in their area of advantage and one of their [Ijaw people] area of advantage is the oil pipeline that carries crude from other parts of the state through Ogoniland in Rivers …they could cut it off,” he told Al Jazeera.

A man throws dead fish back into a polluted river in Ogoniland, Rivers State, Nigeria, on September 18, 2020 [File: Afolabi Sotunde/Reuters]

‘A multiplier effect’

In the early 2000s, Niger Deltan youths, aggrieved by the economic marginalisation and environmental degradation of the region despite being the source of oil wealth, banded together into armed groups. They infamously destroyed oil pipelines and abducted oil companies’ employees. These attacks reduced oil production significantly, costing Nigeria a fifth of its production.

This continued for years until a 2009 presidential amnesty directive granted unconditional pardons and gave cash payments to rebels who agreed to turn in their arms.

“If the [rebels] boys start again, it will hamper oil production and our calculation will fall short of expectation,” Adeola said.

Since the amnesty, the armed struggle in the delta has quietened partly because of surveillance deals granted to some former rebel leaders but also because of illegal small-scale refineries operated in parts of the region.

But experts like Obemeata Oriakpono, a reader in environmental health and toxicology at the University of Port Harcourt, say the political crisis could reignite that conflict and cause environmental damage that “cannot be quantified”.

“If the conflict degenerates more, it will be a multiplier effect,” he said.

Meanwhile, oil spillage resulting from sabotage could compound a continuing cleanup in Ogoniland, an area of 1,000sq km (385sq miles), which has historically been the epicentre of oil spills in the delta.

So Lokpobiri hopes the crisis is resolved permanently. “Our goal is not victory over one but a peaceful reconciliation,” he said, but warned that “[the] Ijaw nation will never allow [the governor] to be impeached. He must complete his [four-year] tenure.”

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Angola to leave OPEC over disagreement on oil production quotas | OPEC News

Oil minister says the country ‘gains nothing’ from remaining in the group after disagreements emerge over production cuts.

Angola says it will leave the Organization of the Petroleum Exporting Countries (OPEC) over a disagreement regarding production quotas, a move that will bring the group down to 12 members.

Speaking on public television on Thursday, Diamantino Azevedo, minister for mineral resources, petroleum and gas, said Angola, which produces about 1.1 million barrels of oil a day, is leaving OPEC because it was not serving the country’s interests.

“We feel that … Angola currently gains nothing by remaining in the organisation and, in defence of its interests, decided to leave,” Azevedo was quoted as saying in a statement issued by the president’s office.

Angola, which first joined OPEC in 2007, has struggled to meet production quotas over the past several years. The country is joining others, such as Qatar and Ecuador, that have left OPEC in the past decade.

Questions about potential production cuts sought by leading oil producers such as Saudi Arabia have been a source of recent debate within the group.

Without Angola, OPEC countries will produce about 27 million barrels of oil per day, about 27 percent of the global supply.

But while Angola was a relatively small player in OPEC, the country’s departure has raised larger questions about the future of the organisation.

Crude prices dropped by more than 1.5 percent after the announcement.

“From an oil market supply perspective, the impact is minimal as oil production in Angola was on a downward trend and higher production would first require higher investments,” said Giovanni Staunovo, a commodity analyst with UBS.

“However, prices still fell on concern of the unity of OPEC+ as a group, but there is no indication that more heavyweights within the alliance intend to follow the path of Angola.”

Oil and gas make up about 90 percent of Angola’s exports and are a crucial economic lifeline for the country.

Last month, Azevedo’s office protested against an OPEC decision to reduce its production quota for 2024, concerned that it would damage Angola’s ability to increase its output capacity.

OPEC and its allies in OPEC+ have agreed to cut production to prop up oil prices.

Angola’s production capacity peaked in 2008 at 2 million barrels per day but has dropped since due to ageing infrastructure.

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