Analysis by Energy Workforce President Tim Tarpley
After originally postponing a November 30 meeting to iron out differences on production targets for African producers, OPEC, led by Saudi Arabia, has met again this week. Ahead of the anticipated meeting, Brent was hovering around $80 a barrel with WTI futures around $75. Analysts correctly believed that Saudi Arabia would roll over its additional voluntary cut of 1 million barrels per day into next year, as well as an extension in cuts by Russia. Estimated exports by OPEC countries have declined to 1.3 million bpd since April. However, at the same time, the UAE may increase exports of Murban crude early next year, and Iraq is planning to resume northern crude exports via Turkey.
These discussions occurred in the larger context of the increasingly low likelihood of the Israel-Hamas war growing into a larger regional conflict in the Middle East. The two sides currently have agreed to a temporary cease-fire and have begun the process of prisoner for hostage exchanges. There have been a few small border skirmishes between Hezbollah and Israeli forces; however, it appears that for now, neither Hezbollah nor their Iranian leadership want a larger conflict. With a low likelihood of a larger regional conflict, we can expect prices to be more stable and supply-oriented for the coming months, absent another unexpected shock to the system. The Ukraine-Russia conflict appears to be locked in a standoff with a low likelihood of either side making any significant gains anytime soon.
Also of note this week is world leaders will begin the COP 28 meeting in Dubai. In regards to the U.S. side, it is notable that President Biden, despite some talk that he would attend in recent weeks, will not be attending. There had been some speculation that a large announcement, such as the release of the U.S. SEC ESG rule, could be made by the U.S. delegation at the conference. However, this appears to be less and less likely. The post-Thanksgiving Friday came and went without any major announcements by the Biden Administration.
We will be watching the SEC closely for the next few weeks to see if any announcement does in fact occur. Without a release in January or very early February, any such release will end up getting drowned out by the election season and political considerations. Either way, it appears increasingly likely that if the long-anticipated rule is released by the SEC, it will likely only include reporting on Scope 1 and 2 emissions, not the expansive Scope 3 proposal that we saw in the draft rule.
Javier Milei Elected President of Argentina, Hopes For Energy Boom
Javier Milei, a political outsider and self-described anti-establishment politician, easily won the Argentina presidency in a runoff election last week. His election could end up shaking up the economic prospects for Latin America’s third-biggest economy and home to sizeable oil and gas reserves in the Vaca Muerta basin. Milei has proposed a plan to dollarize the Argentine economy as a way to “kill” the hyperinflation that has plagued the country for decades.
Although this plan would need approval from the Argentine Congress, and such approval seems like a long shot at this point, given the amount of focus that Milei placed on this plan during his campaign, he will likely have to at least try to move forward. If successful, this plan could certainly alleviate some of the financial challenges for American companies operating in the country.
Milei also appears poised to be more supportive of oil and gas production than his predecessors. With such a focus on economic growth, he seems more likely to see oil and gas production as a vehicle to meet many of his goals. Also, while he has stated he doesn’t deny climate change, he does not believe that human activity is necessarily the root cause of all climate change and has called for getting rid of the existing Argentine environment ministry. Milei has also said that he plans to privatize the state-owned oil and gas production company YPF. In response, since his election, shares in the company have surged over 43%. Last week Milei picked Tecpetrol executive Horacio Marín to lead YPF.
While time will tell whether Milei is able to successfully complete many of his campaign promises, his election is renewing interest in oil and gas production in Argentina and there certainly may be increasing opportunities for Energy Workforce companies in the area. Energy Workforce bases its Latin America Chapter in Buenos Aires and will continue to follow events in the country and region and continue to partner with the U.S. and Argentine governments to ensure that opportunities for collaboration are realized.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.