December 17, 2015


The Global Battle for Oil Market Share (DANIEL YERGIN, Dec. 15, 2015, WSJ)

Had the ban remained in place, the EU would have insisted on it being one of the key issues in negotiating a new U.S.-EU trade agreement. Maintaining the ban also would have left unanswered a most perplexing question posed by Sen. Lisa Murkowski, chairman of the Senate Energy Committee, earlier this year: Why remove sanctions on Iranian oil as part of the nuclear deal, but leave "sanctions" on U.S. oil exports?

With prices in the mid-$30s a barrel, the Gulf countries, led by Saudi Arabia, continue to say that they would consider cutting output, but only if others do the same. There is little sign of that happening. Venezuela, an OPEC founder, rails against the market-share strategy and stridently calls for production cuts. But it might as well be talking to the wall. President Nicolas Maduro's socialist government, defeated this month in parliamentary elections largely due to gross economic mismanagement, has no ability to make cuts.

Iran calls on its Arab neighbors to cut back. Yet at the same time it is gearing up to increase its own exports as fast as possible once the sanctions are lifted, likely sometime in the next few months. The Arab Gulf producers certainly don't want to cut their output to make room for Iran, with which they are fighting what they see as a proxy war in Yemen. That underlines another critical point: that this battle for market share also represents a geopolitical struggle in the Middle East.

In the past six months, Russia, the world's largest oil producer, has received a series of high-level visitors from the Gulf. No doubt oil has been a subject of conversation, although Russia has consistently conveyed that it will not cut production. It seems more likely that these trips reflect a geopolitical rebalancing, building new links with Russia.

The Gulf countries are reacting to the nuclear deal with Iran--and what they perceive as improving relations between the U.S. and their arch rival.

Posted by at December 17, 2015 6:33 PM