Tag Archives: ‘pact’

Global pact forged to drastically cut oil production to contain price crash

The OPEC cartel and other oil producers agreed Sunday to cut crude production by at least a tenth of global supply — an unprecedented move to stabilize the market.

Russian President Vladimir Putin, U.S. President Donald Trump and Saudi Arabia’s King Salman all support the deal, which would see global crude output cut by 9.7 million barrels a day, the Kremlin said Sunday.

OPEC confirmed in a release the cuts will begin May 1 and continue until June 30. After that, the countries will keep gradually decreasing curbs on production until April 202. From July until December of this year, output cuts will continue at 7.7 million bpd, and 5.8 million bpd for the 16 months after that.

The so-called OPEC+ countries agreed to have Mexico reduce its daily output by 100,000 barrels only for those two months, which had been a sticking point for the accord. The pact came after a marathon video conference between officials from 23 nations. The group will meet again in June to determine if further actions are needed.

OPEC+ said in a draft statement seen by Reuters effective oil output cuts could amount to more than 20 million bpd, or 20 per cent of global supply, if contributions from non-members, steeper voluntary cuts by some OPEC+ members and strategic stocks purchases were taken into account.

Global measures to slow the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers. Consumption has dropped by an estimated 30 million bpd.

Trump had threatened OPEC leader Saudi Arabia with oil tariffs and other measures if it did not fix the market’s oversupply problem. Low prices have put the U.S. oil industry, the world’s largest, in severe distress.

Canada hasn’t committed to specific cuts

OPEC+ has said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut a further five per cent, or five million bpd. 

Canada and Norway had signalled their willingness to cut, but as of Friday, Natural Resources Minister Seamus O’Regan had said Canada had yet to promise any specific production cuts.

Alberta, Canada’s biggest oil-producing region, “has already formerly curtailed 80,000 barrels per day,” O’Regan said.

“This is good. We welcome any news that brings stability to global oil markets,” O’Regan said in an emailed statement to CBC News Sunday.

“The federal government is deeply concerned about oil price instability and the impact on thousands of workers in Canada’s energy sector, and their families. 

“Canada is committed to achieving price certainty and economic stability. We will keep working with provinces, businesses, labour, Indigenous communities and our international partners, including the G20.”

A government source told CBC News Sunday that Canada has not committed to production cuts as that would fall under provincial jurisdiction.

Deal won’t turn market around, economist says

Concordia University economics professor Moshe Lander said while the news should in theory be good for Canadian producers, “the proof is in the pudding.”

“I think that markets in general are usually pretty suspicious of OPEC announcements unless there’s a clear announcement of enforcement and consequences for noncompliance,” he said. “Maybe when markets open on Tuesday you might see oil prices jump a little bit.

“I don’t think that this is going to turn the market around.”

Kevin Birn, an analyst with IHS Markit in Calgary, said though the scale and scope of the deal was unprecedented, it is not a sufficient solution to ongoing demand shock brought on by COVID-19.

“What it will potentially do is stave off the lowest potential price that we could’ve seen,” he said. “Of course, the outcome of this remains to be seen in how well the producers adhere to it themselves, which has always been a traditional problem of any of these deals.”

Additional volumes will still have to come off during this period, Birn said, implying there is still a tough road ahead for producers around the world and in Western Canada.

“I think it’s reasonable that we will see some movement on price coming out of the other side of this when the markets open, some optimism,” he said. “But I would caution being too excited about this. We still have a larger issue.”

The United States, where legislation makes it hard to act in tandem with cartels such as OPEC, said its output would fall steeply by itself this year due to low prices.

Mexico had initially blocked the deal but its president, Andres Manuel Lopez Obrador, had said Friday that he had agreed with Trump that the U.S. will compensate what Mexico cannot add to the proposed cuts.

“The United States will help Mexico along and they’ll reimburse us sometime at later date when they’re prepared to do so,” Trump said at a White House press briefing Friday.

‘Economic conditions continue to worsen’

Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto, said in a release that while the deal was historic, challenges remain — such as the capacity of storage facilities before the deal begins, and questions about what enforcement mechanisms will apply to nations who renege on the agreement. 

“Perhaps most importantly, economic conditions continue to worsen on a global basis, with shutdowns extending, trade flat lining, and unemployment levels surging to historic levels. Demand declines may outpace any production cuts, leaving storage facilities to continue filling,” he wrote.

A 15 per cent cut in supply might not be enough to arrest the global price decline, banks Goldman Sachs and UBS predicted last week, saying Brent prices would fall back to $ 20 US per barrel from $ 32 at the moment, and $ 70 at the start of the year.

As Asian markets reopened Monday local time, West Texas Intermediate crude was trading at $ 22 US per barrel.

Alberta Premier Jason Kenney said on Twitter Sunday that while there are challenging months ahead, the deal puts the sector on a path to recovery.

“We are glad to see sanity return to global oil markets. As I have said, OPEC+ started the fire, and it was their responsibility to put it out,” he wrote.

A spokesperson for Alberta Energy Minister Sonya Savage referred CBC News to a Friday statement, saying the minister was cautiously pleased by the deal.

“The agreement to implement production limits by OPEC+ brings global energy producers in line with measures that Alberta has reluctantly taken since January 2019,” she said

“However, demand will return as economies around the globe recover from this pandemic. Life will return to normal. In the interim, we hope that the measures taken by OPEC+ will stabilize the global price of oil and prevent further stress to energy workers in Alberta.”

Let’s block ads! (Why?)

CBC | World News

U.S. House passes new North American trade pact to replace NAFTA

The U.S. House of Representatives overwhelmingly approved a new North American trade deal on Thursday that includes tougher labour and automotive content rules but leaves $ 1.2 trillion US in annual Canada-U.S.-Mexico trade flows largely unchanged.

The House passed legislation to implement the Canada-U.S.-Mexico Agreement (CUSMA) on trade 385-41, with 38 Democrats, two Republicans and one independent member voting no.

The bipartisan vote contrasted sharply with Wednesday night’s Democrat-only vote to impeach U.S. President Donald Trump.

The House vote sends the measure to the Senate, but it is unclear when the Republican-controlled chamber will take it up. Senate Republican leader Mitch McConnell has said that consideration of the measure would likely follow an impeachment trial in the Senate, expected in January.

The CUSMA trade pact, first agreed upon in September 2018, will replace the 1994 North American Free Trade Agreement (NAFTA). Trump vowed for years to quit or renegotiate NAFTA, which he blames for the loss of millions of U.S. factory jobs to low-wage Mexico.


House Speaker Nancy Pelosi gave CUSMA a green light last week after striking a deal with the Trump administration, Canada and Mexico to strengthen labour enforcement provisions and eliminate some drug patent protections.

Pelosi said she was not concerned about Democrats handing Trump a political victory on CUSMA as they are trying to remove him from office.

“It would be a collateral benefit if we can come together to support America’s working families, and if the president wants to take credit, so be it,” Pelosi said during House floor debate before the vote.

Secretary of State Mike Pompeo said on Twitter that the CUSMA was a “historic milestone” in Trump’s effort to modernize trade relations.

The changes negotiated by Democrats, which include tighter environmental rules, will also set up a mechanism to quickly investigate labour rights abuses at Mexican factories. They have earned the support of several U.S. labour unions that have opposed NAFTA for decades.

U.S. trade representative Robert Lighthizer made a concession by dropping a requirement for 10 years of data exclusivity for biologic drugs, a provision that Democrats feared would keep drug prices high and that they called a “giveaway” to big drugmakers.

Some of the most ardent trade skeptics in Congress have voiced support of the deal, including Rep. Debbie Dingell, who represents an autoworker-heavy district in southeastern Michigan. Dingell said in television interviews that she backed the bill, even though she was skeptical it would bring auto jobs back to Michigan. Rep. Ron Kind, a pro-trade Democrat from Wisconsin, one of the top dairy-producing states, praised new access to Canada’s closed dairy market under CUSMA.

“A no vote is a return to the failed policy of the old NAFTA, the status quo, rather than this more modernized version,” Kind said in floor debate.


Democrats and U.S. President Donald Trump’s administration have for months been negotiating over the finer details of CUSMA. (Drew Angerer/Getty Images)

The agreement modernizes NAFTA, adding language that preserves the U.S. model for internet, digital services and e-commerce development, industries that did not exist when NAFTA was negotiated in the early 1990s. It eliminates some food safety barriers to U.S. farm products and contains language prohibiting currency manipulation for the first time in a trade agreement.

But the biggest changes require increased North American content in cars and trucks built in the region, to 75 from 62.5 per cent in NAFTA, with new mandates to use North American steel and aluminum.

In addition, 40 to 45 per cent of vehicle content must come from high-wage areas paying more than $ 16 an hour — namely the United States and Canada. Some vehicles assembled in Mexico mainly with components from Mexico and outside the region may not qualify for U.S. tariff-free access.

The U.S. Congressional Budget Office estimated earlier this week that automakers will pay nearly $ 3 billion more in tariffs over the next decade for cars and parts that will not meet the higher regional content rules.

Let’s block ads! (Why?)

CBC | World News

U.S. formally withdraws from 1987 nuclear pact with Russia

The U.S. formally withdrew from a landmark nuclear missile pact with Russia on Friday after determining that Moscow was in violation of the treaty, something the Kremlin has repeatedly denied.

U.S. President Donald Trump made the determination that the U.S. would terminate adherence to the 1987 arms control accord, known as the Intermediate-range Nuclear Forces Treaty (INF), senior administration officials told reporters.

The treaty bans either side from stationing short- and intermediate-range, land-based missiles in Europe. Washington signalled its intention six months ago to pull out of the agreement if Russia made no move to adhere to it.

“The United States will not remain party to a treaty that is deliberately violated by Russia,” Secretary of State Mike Pompeo said in a statement about the U.S. withdrawal.


U.S. Secretary of State Mike Pompeo says that the U.S. was put in jeopardy by Russia’s non-compliance of the treaty, an accusation that Moscow denies. (Athit Perawongmetha/Reuters)

“Russia’s noncompliance under the treaty jeopardizes U.S. supreme interests as Russia’s development and fielding of a treaty-violating missile system represents a direct threat to the United States and our allies and partners,” Pompeo said.

The senior administration officials, who spoke on condition of anonymity, said Russia had deployed “multiple battalions” of a Russian cruise missile throughout Russia in violation of the pact, including in western Russia, “with the ability to strike critical European targets.”

Russia denies the allegation, saying the missiles range puts it outside the treaty, and has accused the U.S. of inventing a false pretext to exit a treaty Washington wants to leave anyway so it can develop new missiles. 

Russia asks U.S. to refrain from deploying missiles in Europe

In response, Russia said it had asked the U.S. to declare and enforce a moratorium on the deployment of short and intermediate-range nuclear missiles in Europe.

“We have proposed to the United States and other NATO countries that they weigh the possibility of declaring the same kind of moratorium on the deployment of short and intermediate range missiles as ours, like the one announced by Vladimir Putin,” Deputy Foreign Minister Sergei Ryabkov was quoted as saying by the TASS news agency.


Russia’s Deputy Foreign Minister Sergei Ryabkov has urged the U.S. to put a moratorium on testing new missile systems. (Christof Stache/AFP/Getty Images)

The INF treaty, negotiated by then-President Ronald Reagan and Soviet leader Mikhail Gorbachev and ratified by the U.S. Senate, eliminated the medium-range ground-launched missile arsenals of the world’s two biggest nuclear powers and reduced their ability to launch a nuclear strike at short notice.

The treaty bans land-based missiles with a range between 500-5,500 kilometres.

Trump has sought to improve U.S. relations with Russia after a chill during the tenure of his predecessor, Barack Obama. He and Russian President Vladimir Putin spoke by phone on Wednesday about Siberian wildfires and trade.

Arms control did not come up in the call, the officials said.

European officials have voiced concern that if the treaty collapses, Europe could again become an arena for nuclear-armed, intermediate-range missile buildups by the U.S. and Russia.

Possible trilateral deal with China

The officials said the U.S. was months away from the first flight tests of an American intermediate-range missile that would serve as a counter to the Russians. Any such deployment would be years away, they said.

Trump has said he would like to see a “next-generation” arms control deal with Russia and China to cover all types of nuclear weapons.

He has broached the topic individually with Putin and Chinese President Xi Jinping, including at the G20 summit in Osaka in June.

China is not a party to nuclear arms pacts between the United States and Russia and it is unclear how willing Beijing would be to be drawn into talks.

China’s foreign ministry has reiterated that the country had no interest in joining such talks.

Let’s block ads! (Why?)

CBC | World News

China promises prompt action on U.S. trade pact

A Chinese government spokesperson on Thursday said Beijing was "full of confidence" it will strike a trade deal with the United States within the next 90 days, praising the recent meeting between U.S. President Donald Trump and Chinese President Xi Jinping as highly successful.

In Argentina last weekend, Trump and Xi agreed to a truce that delayed a planned hike of U.S. of tariffs on $ 200 billion US of Chinese goods while they negotiate a trade deal. The hikes, which were set to come into effect on Jan. 1, would have increased existing American tariffs to 25 per cent from 10 per cent.

"We are very confident in reaching an agreement (with the United States) within the next 90 days," China's Commerce Ministry spokesperson Gao Feng said in a weekly briefing, adding both sides have been communicating and co-operating "smoothly" since the leaders met in Argentina.

China's ultimate goal during the 90-day trade talks is to remove all U.S. tariffs imposed on Chinese goods, Gao said.

Huawei arrest threatens new flare-up

His comments come as the arrest of a top executive of Chinese tech giant Huawei by Canadian authorities, on Washington's request, threatens to spark a flare-up in tensions between the world's two economic powerhouses once again.

The two countries have hit each other with tit-for-tat tariffs on goods worth hundreds of billions of dollars in sectors from automobiles to agriculture and energy, stymying trade and redrawing global supply chains.

Gao confirmed for the first time since the high-stakes meeting that China had agreed to implement consensus reached by both sides on agriculture, energy and cars, although he did not give details on any specific measures.

"We will start with agricultural products, energy, automobiles to immediately implement the issues that the two sides have reached consensus," Gao said, when asked about what is on the negotiation agenda.

President Donald Trump recently said on Twitter that the U.S. will either have 'a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States.' (Win McNamee/Getty Images)

"Then, in the next 90 days, we will follow a clear timetable and roadmap to negotiate on issues such as intellectual property right protection, tech cooperation, market access and trade balance," he said, stressing the consultations should be based on meeting the interests of both parties.

The White House has said China had committed to start buying more American products and lifting tariff and non-tariff barriers immediately, while beginning talks on structural changes with respect to forced technology transfers and intellectual property protection.

The United States has levied additional duties of between 10 per cent and 25 per cent on $ 250 billion of Chinese goods this year as punishment for what it calls China's unfair trade practices. China has responded with its own tariffs.

Consensus reached at G20

"China and United States have reached very important consensus as both sides' interests overlap," Gao said. His comments echoed earlier remarks made by senior Chinese diplomat Wang Yi, who said the meeting was "friendly and candid" and would help to avoid further trade tensions.

"All of these help to safeguard China's legitimate interests, and are also in the interests of the United States, and even more are in line with the expectations of the international community," he added in a statement carried on the foreign ministry's website.

But global markets have been nervous about the prospect of a China-U.S. trade dispute spilling over to growing rivalry 
between both sides in areas such as technology, and many economists have remained cautious about being too optimistic on a temporary truce.

The daughter of Huawei's founder is facing extradition to the United States, dealing a blow to hopes of an easing of Sino-U.S. trade tensions and rocking global stock markets.

Trump also warned this week of more tariffs if the two sides could not resolve their differences.

Let’s block ads! (Why?)

CBC | World News