Seven reasons why US NOPEC bill has no significant impact on market
Baku, Azerbaijan, Feb.14
By Leman Zeynalova – Trend:
The approval by the Judiciary Committee of the US House of Representatives of the NOPEC bill did not have a significant impact on world oil markets, Francis Perrin, Senior Fellow at the Policy Center for the New South (Rabat) and Senior Research Fellow at the French Institute for International and Strategic Affairs (Paris).
He named the following reasons for that:
1) Several members of the US Congress tried in the past to have such a bill adopted but, so far, all these attempts have been unsuccessful.
2) Traders on the oil markets do not think that there is a high probability of success for the bill just adopted by the House Judiciary Committee.
3) President Donald Trump is clearly not a great fan of OPEC. That being said the Trump Administration's priority is not to break OPEC.
4) The de facto leader of OPEC is Saudi Arabia. This country has very close links with the US since the 1930s and, especially, since 1945 and this special relationship is much valued by the Trump Administration as shown by its behavior since the killing of Jamal Khashoggi. For Washington the relationship with Saudi Arabia is based on several key strategic issues: oil, of course, a common strong opposition to Iran, the interests of Israel, arms sales and good contracts for US industry. It would not be logical for the US Administration to expose Saudi Arabia to antitrust lawsuits in such a context.
5) The US oil industry is not at all in favor of this bill.
6) Current oil prices (about $62 per barrel for North Sea Brent) are not very high as compared with levels above $100/b between 2011 and June 2014.
7) Thanks to unconventional crudes US oil production is much higher than in the past. The US is presently the leading crude oil and liquids producer before Russia and Saudi Arabia and the country's dependence on oil imports has been greatly reduced over the past ten years. According to the US Department of Energy the US should become a net energy exporter and a net oil exporter in 2020.
Perrin pointed out that traders will of course follow the development of discussions within the US Congress about this bill but it is not today a serious concern for them.
US House of Representatives committee approved a bill on Feb.7 that would open up the Organization of the Petroleum Exporting Countries to antitrust lawsuits.
The House Judiciary Committee passed the bipartisan bill, known as the No Oil Producing and Exporting Cartels Act, or NOPEC, on a voice vote.
The legislation would change U.S. antitrust law to revoke the sovereign immunity that has long protected OPEC members from U.S. lawsuits. It allows the U.S. attorney general to sue the oil producers group or any of its members on grounds of collusion.
Versions of the bill have appeared without success in Congress for the past 20 years. The committee also approved a version of the bill last year by voice vote, but it never reached the full House for a vote.