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Oil’s upwards rally

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By Ed Crooks: 11 March 2016

Oil this week continued its recent rally, with Brent crude clinging on above $40, but there was speculation that most of the gains of the past two months could be undone if Opec members and Russia failed to finalise their earlier conditional agreement to freeze production.

Reuters reported Opec sources as saying that a suggested meeting in Moscow on March 20 to confirm the deal was unlikely to take place. The critical factor is Iran; other countries say they will not meet to discuss joining the freeze unless Tehran agrees to sign up for it too. President Hassan Rouhani’s chief of staff told a conference in London that his country wanted to increase exports to regain its pre-sanctions market share before it would start talking about cuts. The same official, Mohammad Nahavandian, also sought to reassure international companies that the country would soon unveil new and improved contracts for investors in its oil and gas industry, even though the issue has raised concerns about attempts by foreign businesses to “loot Iran’s natural resources”.

Meanwhile, oil producers in the US and Europe have been continuing the process of adjusting to lower prices. John Watson, Chevron’s chief executive, told the FT that big oil still had a future, in spite of the rise of shale and tightening curbs on greenhouse gas emissions.

Ben van Beurden, his counterpart at Shell, earned total remuneration worth 5.6m last year, giving him the smallest pay-packet of any of the company’s chief executives for six years. Smaller US companies took advantage of the upturn in oil prices to lock in some of their revenues by using derivatives to hedge against further falls. Worried about the impact of low prices have been spreading from oil and gas producers to the pipeline companies. A court ruling that companies in bankruptcy could walk away from contracts to carry their oil and gas was another blow to the pipeline operators.

Talks about a possible takeover of Columbia Pipeline Group by Transcanada suggested that the pressures on the industry could drive consolidation. In a more concrete sign of US-Canadian co-operation, the two countries’ governments agreed to cut methane emissions from their oil and gas industries by 40-45 per cent, in an attempt to reduce their contribution to global warming.

Hillary Clinton and Bernie Sanders both spoke out against fracking, earning themselves criticism in an FT editorial for being “unrealistic about energy policy”.

The UK’s attempt to enter a new era of nuclear power has been thrown into doubt by tensions at EDF, the French utility that is planning to build the new plant at Hinkley Point. Bronwen Maddox eloquently made the case for pulling the plug on the project.

Bloomberg ran a vivid account of the final hours of Aubrey McClendon, the shale gas pioneer. The FT’s Tom Burgis reviewed what sounds like a fascinating book: ‘Blood Oil: Tyrants, Violence and the Rules that Run the World’. It proposes what the author calls a “Clean Trade” system to certify oil extracted with the consent of the people of the country where it has been produced. An interesting idea, that would be good for producers in democratic countries including the US and Canada. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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