“A vulnerable global economy” showing prospects for only “moderate demand growth” has come alongside rising crude production: that’s the way OPEC explains the sell-off in crude-oil markets in recent weeks. While last month’s market report painted a rosier-than-consensus view of China’s economy, this month’s is less sanguine. You don’t have to look hard for the reasons: China’s industrial output remains disappointing and the country’s transition from an economy depending on exports to one relying on internal demand could yet be rocky.OPEC has picked up other bearish signals, too. It sticks with its forecast of non-OPEC supply, which it expects to rise by 1 million b/d this year (twice the rate at which it grew in 2012); and on the demand side it sees many risks:

In the tanker market, a general bearish sentiment could be seen in both dirty and clean markets in April due to low tonnage demand. On average, dirty spot freight rates dropped by 4% from the previous month. The drop in freight rates was mainly driven by lower demand on refinery maintenance and the end of the winter season. OPEC and Middle East sailings declined from previous month, along with arrivals in all reported ports.

Above all, the report’s language suggests some concern in the Secretariat about how the poor macroeconomics will weigh on global demand in the coming months, especially as the BRICs hit a rough patch (see graphic). Says OPEC:

While at the beginning of the year it looked as if further momentum was building up, the continued decline in the Euro-zone, the significant deceleration in the first quarter in some of the Asian economies and the recently acknowledged slow-down in Russia all have the potential to again push growth down slightly further. This recent deceleration has also become obvious in the continued slowdown in global industrial output, which began in May 2010 and has been mainly due to lower growth in the industrialized economies. In the major emerging economies, some further stimulus measures might provide upside support. However, given rising inflation levels, central banks and policymakers alike will be careful in pursuing such a policy. China is likely to consider the 1Q13 growth level of 7.7% as reasonable, as it is higher than their official forecast for the year of 7.5%, although below the MOMR forecast of 8.0%. India has continued lowering its key policy rate in April in order to provide some momentum to its economy, which is forecast to grow at around 6.0%. However, elsewhere, the most recent data indicates a more severe slow-down in 1Q13 in many of the Asian economies and the latest PMIs for April point to a continued deceleration.

 

Two graphics taken from the report sum up some of the worry:

Ugly Data

It leaves the group facing a familiar conundrum as it heads into the 31 May meeting in Vienna. The hawks will make the now-familiar call for tighter observance of the 30 million b/d target, citing OPEC’s own grim view of the macroeconomic backdrop. Their argument will be almost identical to the one made before the summer meeting in Vienna last year: if demand is to weaken further — a conclusion that can be drawn from the myriad bearish forces the Secretariat sees around the world — then OPEC should be tightening supply to prevent a slide.

The doves, led by Saudi Arabia, will make the counter argument, saying demand will rise along with the arrival of northern hemisphere’s driving season; and, anyway, the last thing struggling oil-consuming economies need is the risk of an oil-price jump if OPEC takes some supply off the market. (And OPEC wouldn’t want to cop the blame for that, either.)

The crucial point, however, is that the doves are the ones who would do the cutting anyway. Hawkish Iran, Algeria and Venezuela can’t afford to. Iraq, the other one, sees ever-rising supply as a birthright. So cuts are not yet on the agenda, despite the all-too-predictable early call for them from Iran.

In the meantime, don’t be distracted by news of rising Saudi supply. It means neither that demand is more robust than it looks, nor that the kingdom is making a policy statement. Refineries are coming out of maintenance in Asia and the buyers are going back to their supplier. When the Saudi air conditioners kick in (Riyadh was hit by rain and hail storms while PPI visited last week and temperatures are still relatively mild), oil burn will also push up the production figures. For now, Saudi Arabia is quite content with prices where they are. Stability will be its watchword as the Vienna meeting nears.

US oil output is soaring. But don’t forget Canada, which is following suit. Alberta’s Energy and Resources Conservation Board said yesterday that the province’s output rose last year by 14% as higher production from horizontal wells pushed conventional production to 556,000 b/d and the yield from the oil sands rose by 10%, to 1.9 million b/d. The jump in conventional oil output (including a 9.5% increase in reserves compared with 2011) was the largest rise in decades, said the ECRB. The full report is here.

Meanwhile, just as his government lobbies heavily to complete a free-trade pact with the EU…  Canada’s natural resources minister, Joe Oliver, has threatened a trade war with the bloc. If the EU’s fuel-quality directive bans Alberta’s bitumen from the bloc, Canada could take the matter to the WTO. Oliver’s certainly a bullish defender of the oil sands. But with Canada eager to sew up the deal with the EU before the bloc turns its attention to a bigger one with the US, Oliver may be a bit off-message on this one.

US

An excellent bit of analysis from Robert Campbell, of Reuters, says a new pipeline glut is about to hit the US — reversing the dominant story of the past two years, in which WTI has been undermined by insufficient infrastructure to drain Cushing of its lake of oil. The reversal of flow through the Seaway pipeline and new pipes in the Permian basin, too, will change all this. Writes Campbell:

The end of the pipeline capacity crunch means a sea change in the way North American oil will be priced, traded, and balanced. With many new pipelines under long-term contracts, oil flows will be significantly altered, potentially creating new gluts but also pockets of scarcity. That means the balance of power in the market will shift away from refiners in some places. Instead of plunging crude prices being the factor that rebalances regional markets, the rapid erosion of refining margins will now govern balances in places where outbound pipeline capacity, much of it locked up under take-or-pay contracts, exceeds inbound capacity.

He adds: “Anyone betting on the existing paradigm remaining in place has the energy market equivalent of the Maginot Line.”

Read the whole thing. It’s worth it. As is this FT story on how natural gas abundance is reviving the country’s industry. Obama, it seems, is also going to back LNG exports.

With that in mind, this story, too, is worth watching, as the US federal government considers whether to change the rules governing fracking.

The WSJ points out that opposition to new drilling methods hasn’t exactly helped economies in states like California.

Libya

Despite some scepticism, Egypt’s sweet deal to buy Libyan crude on interest-free credit seems to be going ahead. But Libya itself is struggling. The latest fiasco was the interim parliament’s passage of a law banning anyone who held a senior position in the Gaddafi era from holding office now. It’s not even clear if prime minister Ali Zidane, a diplomat under Gaddafi, can remain in office. Parliament passed the law under pressure from armed militants, who’ve spent recent weeks barricading various ministries. Locals tell PPI that normal governmental activity has almost entirely ceased. And when Zidane tried to negotiate with the thugs? They brandished a gun and a grenade in their meeting with him. Zidane said the thuwar (revolutionaries) lacked a “culture of dialogue”. No kidding.

Iraq

The steady disintegration of the country amid renewed violence and sectarian violence has not yet affected oil production. But another bomb attack on the Kirkuk-to-Ceyhan pipeline doesn’t bode well. Nor should anyone get their hopes up for a swift political resolution to disputes between Baghdad and Kurdistan, says this Reuters piece, especially with continued bloodshed around Kirkuk. Iraq is also worried about PKK militants moving into Kurdistan from Turkey.

Iran

Notebook has previously mentioned the counter-productive nature of the sanctions on Iran. A new paper from William Yong of the Oxford Institute for Energy Studies puts a bit more meat on this (see especially pp 29-30). Above all, though, Yong’s study shows how Iran’s oil industry has increasingly come under the control of the Iranian Revolutionary Guards Corps, marginalising NIOC. He writes:

It is the IRGC that now carries the aspirations of Iran’s oil sector on its shoulders. The appointment of Rostam Ghasemi [a former commander of the IRGC] as oil minister, coupled with a vastly expanded upstream role for the company he once ran, heralds an uncertain future for NIOC. The Oil Ministry, while ostensibly an executive body, is now controlled by a power centre with its own institutional interests that are no longer compatible with a relatively autonomous NIOC. Whereas in the past, political backers have ensured the automatic compliance of the Oil Ministry, thus guaranteeing NIOC direct access to allies in central government, the newly empowered ministry, detached from the elected executive and with strong ties to an ambitious upstream rival, will likely have no automatic sympathy for the institutional concerns of the national oil company. The rise of Khatam ol-Anbia as a favoured upstream contractor is likely to signal a downgrading of the status of the state oil company and an erosion of its ability to keep contracts and control withinthe NIOC‘ family’.

Riyadh, 7 May

Jeddah appeared on the horizon, looking like a giant kaleidoscopic glare of electric lights, as we descended towards the Saudi coast. There was mile upon mile of dense interlocking street lamps, punctuated by illuminated tower blocks and flashing advertising signs. The only lights not in proliferation were those of vehicles. At 4.30 am, most residents of Jeddah were asleep.

Huge government subsidies on energy and power over decades have led Saudis to assume that minimal charges for electricity are part of their birthright. Their hands don’t automatically reach for the off switch at the end of the evening.

But things will have to change. “Subsidies have become increasingly distorting to our economy,” Saudi Economy and Planning Minister Mohammed al-Jasser told the audience at a conference in Riyadh on Tuesday. “This is something we are trying to address.”

The minister also pointed to another challenge for Saudis: to boost productivity in order to remain competitive in global markets. For this to happen, “rationalisation of subsidies” is essential.

The issue of subsidies is extremely sensitive in the kingdom and it is rare for a minister to address it head-on in this way. But few would disagree with Jasser’s view that the current state of affairs cannot continue indefinitely: the world’s largest oil producer stands as number six in the line of world oil consumers. Burning oil generates about 40% of Saudi electricity.

Of course, identifying areas for reform is not the same as pushing through the desired changes. An overnight rise in fuel and power costs would be traumatic: it is hardly the course of action that a government keen to prevent Arab Uprising contagion would take. So the chances are that adjustments to the subsidy regime will need to await the implementation of projects to expand basic services like housing and social care. Completion of such schemes will come only five or so years down the line. Even then, those at the bottom end of the income scale are likely to continue receiving state help to meet fuel and power bills.

Change in Saudi Arabia, as is well known, happens slowly. But the country’s economy minister has shown that there is now a younger generation of Saudis in senior government positions who are willing to grasp the nettle and initiate public debate over the kind of reforms that are needed, sensitive and controversial though they might be. And that’s a big change.

Jordan is treading water. The nation is collectively holding its breath, anxious about the progress of the Syria conflict and how the kingdom might be affected. “We’re all tense, all nervous,” a university lecturer in Amman said. “We’re waiting to see what will happen.” It’s a sentiment heard across the region, but especially here.

Talk to any Jordanian for a few minutes and the subject of Syria invariably comes up. On this topic there is one point on which all seem to agree and one which appears to split the nation in two.

Uniting Jordanians is a passionate desire to see the country avoid getting sucked into a military conflict, and an equally strong insistence that American forces should not be allowed to launch an attack on Syria from their soil. The announcement that 200 US military personnel are to assist the Jordanian army prepare for any spillover from Syria, even though American trainers have been here for years, has spooked Jordanians. “We don’t want another Iraq here,” one said.

But the desire to avoid Jordan becoming embroiled in the Syria conflict is where the common ground ends. Mirroring the state of affairs in Syria itself, about half the population supports the Assad regime and half wants to see the back of it. “This is creating tension within society here,” an Amman lawyer said. “To give you an example, the head of the lawyers’ syndicate is pro-Assad, but the executive and membership are split down the middle. It’s all very uncomfortable and potentially dangerous.”

Then there’s the already overwhelming but still expanding challenge presented by Syrian refugees. Around half a million have registered with the authorities, and it’s impossible to guess how many more have come across the border. And still they arrive. Last Monday alone, another 1,800 sought shelter in Jordan – in the Zaatari camp (now the fifth biggest “town” in the country) or with friends and relatives elsewhere. Much smaller numbers are returning to Syria, to check on property or family, or to get away from the misery of being refugees.

But for Jordan’s increasing number of poor people, the sight of Syrians receiving special treatment from the international community and free schooling for their children, when their own suffering is increasing, is galling. Tension between the refugees and the indigenous community is growing. Jordan, quite simply, is being choked. With Syrians starting to take Jordanians’ jobs, resentment is turning to animosity.

Many Jordanians are fearful, too, that camouflaged among the refugees are agents of the Assad regime, ready to carry out terrorist attacks if the word comes from Damascus. President Assad has already warned Jordan that it is playing with fire by hosting American forces on its soil.

Rationing, social unrest

Aside from security concerns, the sudden increase in the size of the population is putting pressure on basic services that were already under chronic strain. Jordan is a poor country, with meagre natural resources. Water, in particular, is scarce. Jordanians face the prospect of rationing as the summer months increase. Cuts to electricity can be expected, too, as air conditioning units are turned on as the heat arrives.

To make matters worse, under pressure from the IMF to reduce the country’s public debt of around $25 billion, electricity prices in June are to be raised by no less than 16%. “It’s a sure recipe for more social unrest,” said the lawyer.

It will be surprising if the overnight spike in electricity charges does not result in street protests. But one side effect of the Syria crisis has been the evaporation of the huge weekly demonstrations which, a year ago, looked ominously like the arrival of the Arab Spring in Jordan. “Today,” in the view of the university lecturer, “everyone is too consumed by worries about Syria.” So mass protests, too, are on hold.

Unlike the case in Egypt and elsewhere, the protests, at their height, demanded reform and the stamping out of corruption, rather than the overthrow of the regime. Furthermore, at this time of national uncertainty, the monarchy seems to provide for many a reassuringly welcome symbol of security and stability.

That’s not to say, though, that the demands for change – most of all for a constitutional monarchy – have been forgotten. There is much in public life that the majority of Jordanians, who have no connections with those around the ruling elite, find abhorrent. As one of the country’s leading bloggers, Naseem Tarawneh, wrote recently, “the patronage system, land allocations, gifts, university seats for the privileged few, vast public sector employment – all of this has expanded in the past 14 years, not decreased.”

So there may well be another surge of public emotion on the streets demanding that these issues be addressed. But nothing to shake the monarchy as long as the Syria crisis remains unresolved. Even then, when Jordanians can breathe easily once more, the country’s structural economic challenges are mounting and the need for decisive action is growing.

As Notebook said yesterday, China isn’t likely to be the pillar of oil-price support it once was. Today’s news from the country — pointing to further economic weakness — is a case in point. Chinese exports look bad, too. So do the numbers from other export-orientated economies, like Taiwan and Ireland, suggesting consumer weakness around the globe. But it’s China that worries oil exporters, such as Canadian oil-sands producer Husky Energy, especially when there’s so much oil around. Willian Pesek’s column on China this week is a good read, too. Meanwhile, a “car crash of a data release” points to widespread and chronic economic malaise across Europe, says The Economist. In Project Syndicate, Federico Fubini writes darkly of a European depression. Time magazine reckons gold, copper and oil prices point to a global slowdown. Then there’s the Fed, where an end to the quantitative easing programme seems to be in sight. That won’t help commodity prices.

Nigeria

Oil theft is severely denting Nigeria’s exports. Foreign shipments could fall to 1.76 million b/d, their lowest level since 2009.

Iran

The sanctions are hurting and cut oil exports last year to 1.5 million b/d, the lowest level since 1986, according to the US’ EIA. Last year’s exports were down almost 40% from 2011. Oil production in 2012 also fell, by 700,000 b/d, reckons the EIA. In the FT, Javier Blas spells out the impact for Iran’s oil exports:

Iran is already parking an unusually large amount of barrels in supertankers off its coast due to a lack of buyers in Asia. This build-up in stocks tends to happen every year in early spring due to refinery maintenance in Asia. But the rise in inventories seems larger than in the past. At some point, Tehran will be forced to cut already low production. The build-up could be an early indication that the new sanctions are reducing the appetite in Asia for Iranian crude, just as the price of the commodity weakens. If the trend of lower Iranian oil exports and lower oil prices remains for the remainder of the year, Tehran could suffer significantly more from the sanctions than in 2012.

Don’t forget, however, Iran’s capacity to resist the sanctions; or the incapacity of sanctions to do the job they’re intended to do. Meanwhile, as Mahmoud Ahmadinejad’s presidency winds down, the regime is rapidly closing off his influence, too.

Saudi Arabia

Prince Turki Al-Faisal said in a speech to Harvard’s Belfer Center that Saudi Arabia needs to increase production capacity from 12.5 million b/d to 15 million b/d by 2020, enabling the kingdom’s export capacity to reach 10 million b/d (and implying a surge in domestic demand to 5 million b/d). A few hours down the road at Washington’s Center for Strategic and International Studies, however, oil minister Ali Naimi flatly contradicted Faisal, saying “we don’t see anything like 15 million barrels a day before 2030, 2040″. While he welcomed as “good news” the surge of output in the US (where oil production, at a 21-year high, topped net imports for the first time since 1996), he said talk of ending the US’s reliance on the Middle East was a “naive, rather simplistic view” that “fails to recognize the interconnected nature of global energy markets”.

Back in the Gulf a day later, Naimi also said a recent trip to Hong Kong had confirmed for him the “optimism towards future growth in the region” and that his “expectations of energy demand and growth are still positive”.

Iraq

Despite persistent violence, Iraq’s oil production continues to rise. If the KRG resumes exports of 250,000 b/d from the region, oil minister Abdul Kareem Luaibi says the country’s export target of 2.9 million b/d in 2013 (compared with 2.6 million now) could be reached. Don’t hold your breath, though, about an oil law being signed, despite words to that effect after a Baghdad meeting between Nuri Al-Maliki and Nechirvan Barzani, prime ministers of Iraq and the KRG, respectively.

Russia

Global gas abundance has shifted the ground beneath Gazprom’s feet, as this excellent piece in the WSJ shows. Here’s the nutgraf:

In Europe, where Gazprom once had a reputation for hardball tactics and dictating prices, customers are tapping new sources. Booming shale-gas production in the U.S. has freed up vast quantities of other fuel from around the world, including American coal no longer needed at home. With that new leverage, Gazprom’s European customers have squeezed billions of dollars in discounts from the company, and they are pressing for more.

Europe is Gazprom’s most lucrative market. The company supplies about one-quarter of the European Union’s natural gas via a network of pipelines. Gazprom said Tuesday its net profit declined by $6.5 billion, or 15%, in 2012, as sales to the EU fell by about 9%.

At least Gazprom needn’t worry about a European shale-gas bonanza akin to that in the US. The NYT reports on Europe’s stuttering efforts to frack its way to gas abundance. “Poland is certainly not Texas.”

Meanwhile, there is a puzzle at Surgutneftegaz, where $15 billion worth of treasury shares has disappeared from the books.

But unlike its predecessor, the new government of Premier Li Keqiang is expected to place a focus on structural reform over growth. Speaking in Argentina this week, Li talked of building an updated version of China’s economy — part of the long-trailed structural shift away from export-led growth to domestic demand. Instead of a short-term focus on what many analysts believed were unreliable GDP data, the government will instead be prepared to sacrifice growth to achieve these much longer-term aims. The government will work to keep a lid on inflation and be wary of unemployment;  but GDP growth alone will no longer be the litmus test.

As Stephen S. Roach argues, a labour-intensive services sector boom will deliver employment and wealth at much lower levels of GDP growth than the export and infrastructure-led model of the previous leadership. For that reason, lower but sustainable growth will be good for China. But energy markets may take some getting used to the idea of a sub-8%-growth China. Says Roach:

Financial markets, as well as  growth-starved developed economies, are not thrilled with the natural rhythm of  slower growth that a rebalanced Chinese economy is likely to experience.  Resource industries – indeed, resource-based economies like Australia, Canada,  Brazil, and Russia – have become addicted to China’s old strain of unsustainable  hyper-growth. Yet China knows that it is time to break that dangerous habit.

China’s transition to new economic priorities will take some time to filter through to markets. For now, much of the economic commentary has characterized the Q1 GDP slippage as evidence that the recovery from a weak 2H12 may have been derailed. Chinese oil demand may continue to look strong in the near term since refiners appear keen to continue to keep throughput in newly installed refining capacity high, sending surplus products into stocks and the Asian export market. But until the new economic narrative becomes embedded, headline risks from China’s new “unsmoothed” GDP numbers will remain, especially for energy markets.

The International Crisis Group does not mince its words. Iraq, it says, has:

begun a perilous, downward slide toward confrontation. The emergence of an arc of instability and conflict linking Lebanon, Syria and Iraq, fueled by sectarianism and involving porous borders as well as cross-border alliances, represents a huge risk. Failure to integrate Sunni Arabs into a genuinely representative political system in Baghdad risks turning Iraq’s domestic crisis into a broader regional struggle.

Syria’s war is part of the problem, believes the ICG. As the conflict there intensifies, “Sunni Arabs experience mounting solidarity with their brethren next door and share feelings of hostility toward a purported Shiite axis linking Hizbollah, Damascus, Baghdad and Tehran”. But feelings of disenfranchisement among Sunnis in Iraq are also a feature. The extreme reaction of the Iraqi army to the predominately Sunni protests against Nuri Al-Maliki’s government (especially the attacks in Hawija last week) has also worsened the situation. The ICG says the prime minister’s rhetoric — claiming the Shia protestors are agents of the Gulf States and Turkey; or former Baathists — has also radicalised Sunnis. Iraq can not afford such zero-sum politics. Meanwhile, the government has banned several news organisations, including Qatar-based Al Jazeera, saying their “biased reporting” has “incited violence”. Hardly a reassuring sign.

Oil production has been unaffected — so far. But the violence, which has been escalating since deadly clashes in Hawija last week, is spreading closer to the oil-rich south, as seen today’s bombings in Shia areas south of Baghdad. How long until oil-transport infrastructure is targeted?

The ultimate decision, of course, will not be taken by the president but by Iran’s Supreme Spiritual Leader, Ayatollah Ali Khamenei. But the president’s advice will be heeded, because the new head of state will be a close confidant of Khamenei. In all the speculation surrounding the forthcoming elections and Iran’s future in general this is one certainty: Khamenei and his ultra-conservative backers are resolutely determined to ensure that the election throws up their preferred candidate. As Kasra Naji, of the BBC’s Persian TV service, said during a discussion on Wednesday evening at the Frontline Club in London, “Khamenei wants someone who is subservient to him and his policies, and carries out what he wants done.”

The conservative candidate (and Iran’s next president) will be one of the following: former Foreign Minister Ali Akbar Velayati; Tehran Mayor Mohammad Baqer Qalibaf; or the Supreme Leader’s top adviser Gholamali Haddad-Adel (whose daughter is married to Khamenei’s son).

The conservatives have learned from their past mistakes and humiliations. They have never recovered from the shock of seeing the reformist candidate Mohammad Khatami sweep to power in 1997; and they never want to see another loose cannon like Mahmoud Ahmedinejad. So one can expect the all-powerful Guardian Council to be even more diligent than usual in weeding out candidates who could represent a threat to Khamenei’s grand plan. Ahmedinejad’s eccentric nominee, Esfandiar Mashaei, looks certain to fall into this category. Leaders of Iran’s Green opposition movement, closeted in their homes, know they would be wasting their time even putting their names forward.

So don’t expect a particularly lively or interesting election campaign. Having said that, the poll matters hugely to Khamenei and his backers. For above all else they want to avoid a repetition of the violence that erupted after the 2009 elections. In Naji’s view, Khamenei’s would like the elections “to take place without incident and with a high turnout. He wants to restore the legitimacy that was lost in 2009”.

The likelihood is that the June elections will pass off peacefully. The consensus among speakers at last night’s Frontline discussion was that despite the severe economic hardships caused by sanctions there was no sign of Iranians being inspired by the spirit of the Arab Spring. As Kelly Golnoush Niknejad, editor of the Tehran Bureau blog, put it: “Iranians are revolutioned out.” Naji agreed: “Iranians have little appetite for another revolution without knowing where they are going next.”

So in that respect Iran’s new president will have nothing to worry about. But there will still be plenty to keep him awake at night. On his watch not only will the nuclear issue have to be resolved one way or another, but the likelihood also is that Iran will have to find a new Supreme Leader, given Khamenei’s advancing years. Momentous months lie ahead for a president who will have no choice but to make history.

In general, there are a few reasons why Opec ministers aren’t too worried. First, the price hawks — Iran, Algeria, Venezuela and sometimes Iraq — aren’t in a position to do any cutting themselves. Second, $100/b is where Saudi Arabia, the group’s lynchpin (and, incidentally, the member that has shouldered almost all of the drop in Opec output in recent months), wants the price. Third, as PPI boss Bill Farren-Price hints at in the FT piece, rising production from Iraq, which is exempt from output targets, will make other Gulf producers more reluctant to cut back. (Not least because Iraq has been aggressively marketing its crude exports, too.)

Many Opec ministers believe — rightly or wrongly — that any dip in the price will be self-correcting, anyway, because marginal oil output will eventually be shut in. They’re also expecting demand in the second half of the year to be “much higher” than in the first half (see p26, of its latest market outlook).

Trouble brewing

More worryingly, though, after a brief hiatus political risk in critical supply countries is rising again, too. Iraq’s politics are getting messier by the day. Clashes between the army and Sunni protestors this week have left some wondering whether another full-blown sectarian conflict is on the way (for a brief, if alarming, round up of Arab newspapers’ view, go here). Some see this as spillover from Syria’s Sunni-Shia conflict. As Barham Salih, a former deputy prime minister of Iraq and prime minister of Kurdistan, tweeted:

Iraq, Syria dynamics could merge into 1 w dire consequences. Iraq’s political leaders must act decisively & now to spare country from abyss.

(Here is a counter-argument to that.) In the background, meanwhile, remain tensions between Kurdistan and the Nuri Al-Maliki’s central government. The rise of Kurdistan’s oil exports, which Baghdad deems illegal, pushes this issue a little further. While there is no sign that the political disintegration is yet disrupting Iraqi oil production, which continues to rise,  the tensions, combined with moves to oil autonomy in some provinces (spurred by the Kurdish example), bear close attention. Iraq, after all, accounted for about 13% of the rise in global output in 2012. As the IEA’s chief economist Fatih Birol said last year, without Iraq’s extra oil in coming years, the market is headed for “troubled waters”.

Then there’s Libya, where a massive car bomb was detonated outside the French embassy this week. Or Egypt, a “train wreck waiting to happen”, in opposition leader Mohammed Elbaradei’s words.

In short, for all the bearish macro-economic news swirling over oil markets, political risk is bubbling under them again. It’s hardly a time for Opec to be thinking of cutting.

As Troner sees it, US NGLs and shale gas are now involved in a virtuous dance of abundance. Rising US gas production, for example, is promoting a sustained expansion of NGL output. (“For even dry gas, ie, gas output containing minimal NGLs, will produce some liquids.”) And when the US begins exporting its gas as LNG (about 20 permits for liquefaction plants are under review), this will sustain more shale-gas output and, therefore, more NGL production, too. Read More