Opec may have no appetite to cut oil production deeper when it meets next month, but flaring political crises across the group are once again threatening supply.
Unrest erupted in Iraq and Iran this month – two of the Middle East’s biggest producers – as people took to the streets protesting financial hardship and bad governance. That’s adding to the range of supply threats already afflicting the Organization of Petroleum Exporting Countries, from economic collapse in Venezuela to simmering discontent in Algeria.
“We kind of had a second Arab Spring, but it’s been under the radar,” said Helima Croft, chief commodities strategist at RBC Capital Markets. “The real question is what is going to happen in Iraq.”
Iraq, Opec’s second-biggest producer, has cracked down on demonstrations against corruption in recent weeks that have spread to the southern oil hub of Basra. Iran has seen its oil exports slashed by US sanctions and is suppressing protests spurred by the resulting economic stagnation.
Opec and its allies – who together pump about half the world’s oil – will meet in Vienna in early December to consider production levels for 2020, having cut output this year to prevent a global surplus. Despite signs that fragile demand and surging US shale supply will unleash a new glut, they’ve signalled no desire to reduce output further.
They may not have a choice.
In recent years, unplanned supply disruptions within Opec nations have done as much to keep markets balanced as the group’s deliberate cutbacks. Iran and Venezuela have lost a combined 1.7mn barrels a day since last October, more than all 24 nations in the Opec+ coalition agreed to cut this year.
As turmoil intensifies across the group, next year could see more accidental losses: oil prices of about $60 a barrel are already below levels most Opec nations need to cover government spending, and a further slump would only deepen the strain.
“There is no better way to put it: the geopolitical risk is rising in the Middle East again,” said Tamas Varga, an analyst at PVM Oil Associates Ltd in London.
Algeria is struggling to placate a mass youth-led movement seeking change after ousting long-term President Abdelaziz Bouteflika earlier this year, and Libya remains split by armed factions. Ecuador, which will leave Opec in January, suffered a 20% slump in oil production last month amid riots and looting.
In Iran protests were triggered by an increase in gasoline prices.
The biggest risk is posed by Iraq, according to RBC’s Croft. While the country’s oil sector has proven robust during recent turbulence, even boosting output when Islamic State militants captured swathes of territory five years ago, the latest demonstrations reflect a new level of popular discontent.
“If you had attacks on infrastructure, oil workers going on strike – Iraq is the place that could surprise the market,” she said.

Population growth and climate change are putting increasingly intense pressure on the planet’s limited water supplies, with worsening shortages emerging from the Middle East to Asia and Latin America, researchers and bankers said on Monday.
“All the local crises around the world are building up to a global crisis,” Torgny Holmgren, executive director of the Stockholm International Water Institute, told a conference on the issue at London-based think-tank Chatham House.
But easing the threat and ensuring more people have access to a stable, safe water supply will be hugely challenging because water access and distribution are tied up in politics, cultural views and entrenched systems, conference speakers said.
In Jordan, the third most water-scarce country, raising water prices to reflect the shortage would make economic sense — but not when nearly 1.5mn Syrian refugees, on top of 9mn citizens, depend on it, said Craig Davies of the European Bank for Reconstruction and Development (EBRD).
“It’s potentially a powder keg,” said Davies, who heads climate resilience investments for the bank. “From a political point of view, it’s imperative to keep water tariffs very low.”
Uzbekistan, meanwhile, has built its economy on exports of thirsty cotton, something that might not make sense as water becomes more scarce.
But “you can’t adjust that very easily” without upsetting farmers and the economy, Davies added.
In North Africa, newly available solar-powered water pumps are giving drought-hit farmers crucial access to irrigation — but also removing incentives to use water sparingly as farmers no longer have to buy fuel for diesel-powered irrigation pumps.
“There is literally no control,” said Annabelle Houdret, a senior researcher at the German Development Institute who works in the region.
Aquifers there could be depleted, she warned.
In many Islamic countries, water is seen as a human right and a gift from God, so asking governments to charge people for better water services can be complicated, Davies said.
In most places the EBRD works, the price users pay for water is far below the actual cost of bringing it to them, he said, meaning there is often too little money to invest in treating and delivering water, and maintaining and expanding networks.
“If you’re not paying a rational price for the water, the incentive is to use the water irrationally,” he added.
Getting water use right in an increasingly parched world is crucial, said Olcay Unver, vice-chair of UN-Water, a co-ordinating agency on water issues for the United Nations.
Three out of every four jobs globally depend on water in some way, including small-scale farmers who produce 80% of the world’s food, said Unver, who is also a water advisor for the United Nations Food and Agriculture Organisation (FAO).
By 2050, FAO estimates food demand globally will rise by 50% but “we don’t have 50% more water to allocate to agriculture”, he noted, adding it is already the dominant water user.
Demand for water is also surging in fast-growing cities, where more than half of people live now and over two-thirds are expected to live by 2050, Unver said.
Getting enough water to everyone is particularly difficult as climate change brings more erratic rainfall, with many places hit by floods and droughts in turn, conference speakers said.
But some countries are coming up with innovative ways to protect or expand supplies.
In India’s Gujarat state, for instance, much of the year’s rain comes in monsoon season — and then rapidly evaporates, said Gareth Price, a Chatham House senior research fellow who works on South Asia.
But some farmers have begun gathering leftover straw after harvest and piling it in low-lying spots in their fields to absorb and hold excess rain, allowing it to slowly filter into the groundwater, he said.
The innovation — which also helps cut down on burning of field stubble, a major source of air pollution in the region — has won World Bank funding for its expansion, he said.
In Brazil, meanwhile, farmers and ranchers who preserve and plant more forests along rivers to protect water supplies are paid by downstream users under a “water producers” programme, said Paulo Salles, director of a Brazilian water regulatory agency.
Daanish Mustafa, a geography professor at King’s College London, said growing water scarcity would unlikely drive a surge in wars, but instead lead to more “unjust co-operation” — cross-border sharing pacts where the stronger party gets the better deal.
Water access is already hugely unequal, speakers said, with US residents using 700-900 litres a day, Europeans about 200 litres and many of the world’s poorest just 10-15 litres.
Reliable access to water is crucial to achieving many of the global sustainable development goals (SDGs) — from ending poverty and hunger, to reducing inequality — they added.
Yet climate change threatens to put secure water access ever further out of reach.
“With the SDGs, we can see the light at the end of the tunnel — but the problem is it’s almost certainly a climate change train coming,” said Christopher Hurst, director general of projects for the European Investment Bank. — Thomson Reuters Foundation

PARIS — France’s parliament on Friday voted to remove tax breaks for the use of palm oil as a biofuel, a day after a ruling in favour of maintaining the advantage led to howls of protests from environmentalists.

A large majority of members present voted against a government-backed proposal to delay until 2026 the end of palm oil’s tax advantages, giving companies like oil major Total more time to phase out the use of palm oil in biofuels.

Late on Thursday, the National Assembly, France’s lower house of parliament, had agreed to extend the tax breaks, but following strong pushback from environmentalist MPs within President Emmanuel Macron’s ruling LREM party, the government agreed on a second vote.

“This is an important issue that warrants debate,” Environment Minister Elisabeth Borne told MPs.

She proposed maintaining the tax breaks while a committee reconsidered the issue, but the extension of tax breaks for palm oil was rejected by 58 votes to two.

“Senators considering the text in coming days and MPS who will have to consider it again before year-end will have to remain extremely vigilant to make sure that the scrapping of this tax break is not somehow again put into question during the legislative process,” Greenpeace said in a statement.

Greenpeace added that it is “shocking that the government… continues to defend the interests of multinational companies which jeopardise the climate and the environment”.

Critics say that using palm oil in biofuel adds to deforestation in tropical countries and contributes to the destruction of habitat for endangered species such as orangutans.

Moves in Europe to restrict palm oil use have also created tensions with Malaysia and Indonesia, which dominate global production of the oil.

The debate was part of 2020 budget discussions, and the bid to extend the tax breaks was another attempt to overturn 2019 budget provisions to end them.

The 2019 budget specified that palm oil would be removed from a list of permitted biofuels from January 2020.

Total had tried to overturn the ban through an appeal to France’s constitutional court, which was rejected in October.

The firm argued that removing the tax breaks would put at risk its biofuel production site in La Mede, southern France.

Total has invested 300 million euros to convert the site from a crude oil refinery. It started production in July, using palm oil as part of the feed stock to produce biofuel. — Reuters

Investors are finally warming up to Canadian energy stocks.
There’s no shortage of superlatives to describe market optimism as the price of oil climbed and corporate profitability concerns eased. The S&P/TSX Energy Index is on pace for its biggest monthly gain since January. It also has the No 1 spot among sectors on the S&P/TSX Composite Index on Friday. And the iShares S&P/TSX Capped Energy ETF saw its largest inflows since June last month.
Energy stocks have been mired in negative headlines for years with a strained pipeline network pushing Canadian crude prices lower and the exodus of multinational energy companies.
Now, investors are flooding back in as third-quarter results came in better than expected, and companies bought back shares, raised dividends and divested assets to shore up cash. “They’re being very good to the shareholder,” John Kinsey, portfolio manager at Caldwell Securities Ltd, said by phone.
Earnings results “highlighted strong free cash-flow generation and active debt repayment,” Eight Capital analyst Phil Skolnick said in a November 12 report.
Suncor Energy Inc approved a boost to its share buyback program this week, pleasing analysts as the company checks the box on providing shareholder returns. Crescent Point Energy Corp’s latest gas infrastructure asset sale for C$500mn ($378mn) topped analyst expectations.
With oil and gas stocks making up more than 16% of the Canadian benchmark index, that’s given the TSX a boost this month — up every single trading session in November, hitting all-time highs for most of this week. The key stock gauge crossed the 17,000 mark on Friday.
Still, energy stocks are the third-worst performing sector this year. To bulls, the share price discount may mean investors should buy the dip. For bears, perhaps it brings home the point that investors should still stay out of the sector. Saudi Aramco’s IPO prospectus that flagged a peak in global oil demand in the next two decades might also give investors the jitters.
“They’re just very good value. The world still runs on energy. They may try to change it to solar and electric and all this other kind of stuff, but it’s going to take a long time,” Kinsey said.
Canada’s stock index climbed for an eleventh day on Friday, its longest streak since January 21. The benchmark index breached the 17,000 level for the first time ever and posted 11 records this year. Foreigners bought C$1.08bn worth of stocks in September, according to Statistics Canada.
The Canadian two-year yield rose to 1.54% on Friday, staying below its US counterpart. Click here for our weekly bond wrap. Foreigners sold C$2.81bn worth of government bonds in September. The loonie was little changed against the greenback this week, but was still one of the worst performers among its G-10 peers.
Prime Minister Justin Trudeau will reconvene parliament on Dec. 5 to elect a Speaker of the House of Commons followed by a so-called Throne Speech that sets out the government’s agenda. The leader of Canada’s left-leaning New Democratic Party said he’s confident he can work together with Trudeau, suggesting the prime minister will be able to successfully govern in a minority parliament.
Economists will focus on October inflation data and September retail sales figures next week.

“President Trump made good on his promise this week to withdraw ^[5] from the Paris Climate Agreement. This wasn’t a surprise. But it still baffles us. Try as we might, we cannot see how America’s interests are served by this decision.

Our climate emergency does not respect borders. California’s forest fires will not burn less fiercely, and rising sea levels will not spare Miami or Mar-a-Lago, just because Mr. Trump has chosen to opt out of a treaty of nearly 200 nations that represents our best and only chance of saving humanity from the catastrophic effects of rising temperatures.

Let us put it in language Mr. Trump might understand. If average global temperatures rise by the end of the century by another one degree Celsius, or 1.8 degrees Fahrenheit, there will be no winners on this planet. Only losers.

And those immigrants the president rails against? Expect the trickle to become a flood. Climate change could force 1.4 million people to abandon their homes in Mexico and Central America, according to the World Bank ^[6].That is because one-third of all jobs in the region remain linked to agriculture and climate change is making those livelihoods more precarious. The best way to keep climate refugees from the United States’ doorstep is to support a vigorous and effective climate agreement that helps protect America’s neighbors from the ravages of drought and erratic weather patterns. But Mr. Trump is turning his back on this opportunity.

Not a trade agreement

The Paris Agreement is not a trade agreement. There is no trade-off between Detroit, Youngstown and Pittsburgh, on the one side, and Paris on the other. Tariffs and sanctions will not make this problem go away.

Instead, the Paris Agreement is more like a collective insurance policy, into which we all invest to protect our futures. And like most insurance policies, it makes sound business sense. The best investments we can make right now are those that will protect our food, water and energy sources, our transportation, homes and cities, and our businesses and finances from the worst impacts of climate change.

We must invest to adapt to higher temperatures, rising seas, fiercer storms, water scarcity, wildfires — conditions that are now inevitable. The Global Commission on Adaptation ^[7] estimates that investing just $1.8 trillion to build climate resilience over the next decade would yield more than $7 trillion in net benefits. That is a great return on investment.

In other words, we can either plan now and prosper — or do nothing and pay for the consequences later. It seems to us that Mr. Trump is choosing to do nothing and let the country pay later. How is this smart?

The Paris Agreement is a collaborative project, perhaps the greatest collective undertaking ever attempted by mankind. Is it perfect? No. Is it worth keeping? Definitely. Put bluntly, it is the only weapon we have to fight our climate emergency.

Bear in mind that the Paris Agreement is a work in progress. There are standards and targets to be set, compliance measures to be agreed on, budgets to be allocated.

One of the best things about the agreement is that nations have pledged to share the fruits of innovation in low-carbon technologies — for clean energy, zero-emissions transportation, greater food security and sustainable businesses and homes. The United States is a great innovator and the Paris Agreement will undoubtedly be the poorer without its participation. But equally, the country had much to gain by joining in this collective endeavor. Why miss out on the greatest technological and economic transformation of our era?

Missing out

Above all, the world will miss America’s talent, leadership and ideas as we map out a low-carbon future. We know American voices will still be heard — notably, the thousands of local and state governments and businesses in the United States that have made pledges to reduce greenhouse gas emissions under a movement called We Are Still In ^[8]. They are proof that millions of Americans still support the Paris Agreement, even if the current administration does not.

It is not too late for Mr. Trump to reconsider his decision. Staying in the Paris Agreement is the right thing to do, for America’s sake and for the rest of the world. Winston Churchill is said to have once remarked that you could always count on Americans to do the right thing, after they’d tried everything else. We hope Mr. Trump proves him wrong and stays in the Paris Climate Agreement — that he does the right thing from the beginning.”

The European Commission cut its euro-area growth and inflation outlook amid global trade tensions and policy uncertainty, warning that the bloc’s economic resilience won’t last forever.

The EU’s executive arm sees economic momentum remaining muted through 2021, forecasting an expansion of 1.2% for that year. At 1.3%, inflation is projected to remain well below the European Central Bank ^[10] goal of just below 2% over the medium term.

The updated projections, which put the Commission broadly in line with the consensus view among economists, reflect more pronounced weakness in the region, which has stumbled along with the world economy as tariffs disputes hit manufacturers and dent broader confidence. The institution warned that risks, which include the possibility of a disorderly Brexit, remain “decidedly to the downside.”

LONDON (Reuters) – From higher-quality paint to state-of-the-art propellers: shipping companies are looking in every corner to reduce their carbon footprint as investor and activist pressure increases.

The move comes as aviation and shipping firms face demands to slash emissions due to their reliance on oil. The two sectors are expected to account for 40% of global CO2 output by 2050 unless action is taken, the European Environment Agency says.

International shipping accounts for 2.2% of global carbon dioxide emissions, according to the International Maritime Organization (IMO), more than aviation’s 2% share.

The IMO, a United Nations agency, has said it aims to halve greenhouse gas emissions from 2008 levels by 2050.

“Ships are long-life assets, typically up to 25 years, and if the industry is to meet the IMO target … then we need to accelerate the pace of change to greener vessels,” Stephen Fewster, Dutch bank ING’s global head of shipping, told Reuters.

A private initiative launched this year also means leading banks will change how they look at financing modern, more fuel-efficient ships at a time when the sector faces a capital shortfall estimated to be at least $20 billion.

While questions loom over whether shipping can meet its 2050 target without an overhaul of the types of cleaner fuel available and infrastructure, shipping firms are making individual efforts to change in a shake-up seen costing billions.

U.S. agricultural group Cargill [CARG.UL], one of the world’s biggest charterers of dry-bulk ships, has a target of reducing its CO2 output per cargo-tonne-mile by 15% by 2020 from 2016 levels and has already cut it by more than 12%.

One measure taken is the use of higher-quality paints that give a smoother hull, meaning less energy is used on a voyage.

“If the industry would move from the standard paints to more sophisticated ones, and used in combination with other initiatives, this could have a real impact on decreasing emissions,” Jan Dieleman, president of Cargill’s ocean transportation business, told Reuters.

Emanuele Grimaldi, president and managing director of Italian shipping company Grimaldi Group, said apart from changing the paint that the firm uses, it has modified propellers for 30 of its ships.

To save fuel, Grimaldi has also introduced slower speeds when coming into port areas at night and increased the capacity of some of its fleet so each ship can take more cargo.

“These are lots of small things but if put all together they can make a difference,” he said, adding that the whole group had achieved an annual CO2 reduction of 300,000 tonnes.

PRESSURE

The IMO has adopted mandatory rules for new vessels to boost fuel efficiency as a way of cutting CO2 from ship engines, but a final plan on these is not expected until 2023.

In September, an initiative was launched to get zero-carbon ships and fuels on the water by 2030.

In a report this June, CDP (formerly known as the Carbon Disclosure Project) ranked NYK Line, Maersk and Mitsui OSK Lines as the three shipping companies most prepared for a low-carbon transition, out of 18 of the largest publicly listed shipping firms.

Maersk, the world’s biggest container line, aims to be carbon neutral by 2050, and has spent $1 billion over the last four years retrofitting around 150 vessels.

“Such measures will represent a small fraction of the overall capex expenditure required to meet the IMO’s target,” a spokesman for CDP, a not-for-profit organization, said.

A report by the Energy Transition Commission, a panel of global experts, last year estimated that a fully decarbonised shipping industry could cost less than 0.2% of gross domestic product in 2050, or below $600 billion a year.

This compares with less than 0.13% of GDP or under $500 billion per year for a fully decarbonised aviation sector.

“Maersk’s target is a big deal. There isn’t an aviation company in the world close to making that sort of commitment,”

said Ned Harvey, a managing director at the Rocky Mountain Institute think tank.

“We have the financial industry taking climate alignment seriously and that is going to make it real, as well as customers asking for lower-carbon supply chains,” he added.

The second-largest container line, Switzerland’s MSC, achieved a 13% reduction in CO2 emissions per tonne-mile carried during 2015-18.

It has retrofitted more than 250 ships in its fleet with the latest design features including propellers and bulbous bows, as well as better-performing engines.

It is also deploying 11 new mega-ships including the MSC Gulsun – the world’s largest container ship – with the lowest carbon footprint by design.

“When you go beyond 2030 and look across the industry’s container fleet and the broader maritime sector, the future goals around CO2 and other greenhouse gases will not be achievable without some major breakthroughs in fuel and propulsion technologies,” said Bud Darr, executive vice president at MSC Group.

While there have been signs of growing interest in using liquefied natural gas (LNG) as a cleaner fuel, take-up is slow. Other options including hydrogen and ammonia are years away and costly, some experts and shippers say.

“It’s going to get tougher and tougher and we are running out of time. We need to build zero-emission fuel vessels in the next 10 years. We don’t need to mess about with LNG,” Lasse Kristoffersen, president and CEO of Norwegian shipping company Torvald Klaveness, said at a shipping conference last month.

POSEIDON PRINCIPLES

Pressure on the sector is also coming from lenders. Banks are gradually becoming more selective about which ships they include in their lending portfolios due to an initiative launched in June called the “Poseidon Principles”.

Eleven banks representing $100 billion of the global shipping portfolio joined the initiative, which will for the first time integrate efforts to cut CO2 emissions into banks’ decision-making when providing loans to shipping companies.

There is around $450 billion of senior debt that the world’s shipping banks and Chinese lenders grant to the sector and about 70,000 commercial vessels, according to Paul Taylor, global head of shipping & offshore with Societe Generale CIB.

ING, which according to market sources has a shipping finance portfolio estimated at $10 billion, is among the banks that joined the initiative, and finances the most modern and latest-design ships.

“ING and other leading ship-finance banks have a strong preference to finance more environmentally friendly vessels which in turn should encourage shipyards to continue to improve vessel design and efficiency,” ING’s Fewster said.

BERLIN (Reuters) – Germany will nominate university professor Isabel Schnabel to the European Central Bank’s executive board, a source familiar with the process told Reuters on Tuesday, giving Germany an expert voice on the bank’s top decision-making body.

Schnabel, who rushed to the ECB’s defense last month amid a fury of criticism over its most recent stimulus package, would become the second woman on the bank’s 25-member Governing Council after incoming president Christine Lagarde.

A member of the German Council of Economic Experts, the country’s “wise men”, Schnabel would replace Sabine Lautenschlaeger, another German, who resigned from the ECB board last month after having unsuccessfully opposed more ECB stimulus.

A German finance ministry spokesman declined to comment.

Although ECB board members are appointed by European leaders, Germany has a de-facto permanent seat on the ECB’s board, so its nominee is virtually assured approval.

While Lautenschlaeger was a top bank supervisor, she lacked the expertise in monetary policy and her critics said she was not a powerful enough voice to defend German interests against more stimulus.

Schnabel, considered a conservative economist and monetary policy expert, argued last month that the ECB’s most recent stimulus package was excessive it was within the mandate of the bank.

With Bundesbank chief Jens Weidmann openly criticizing the ECB decision, Schnabel also defended the bank, warning that too much criticism could undermine trust in the ECB.

“It’s dangerous that politicians, journalists and bankers reinforce the narrative that the ECB steals the money of German savers,” Schnabel told German newspaper Handelsblatt last month.

“The ECB, one of the most important European institutions, is constantly being made a scapegoat in Germany,” she added.

Lautenschlaeger will leave the ECB board on Oct 31 but European officials are unlikely to approve her replacement before December, indicating that Schnabel could take up her new role in late December or early January.

The natural gas boom is killing America’s nuclear industry. Wind and solar may finish the job.

While nuclear plants struggle to compete with the flood of cheap gas coming from the nation’s shale fields, they still offer a key advantage, supporters say: They generate 24-hour electricity without producing carbon emissions. Renewables, meanwhile, haven’t yet nailed down the storage capacity needed to do that. Proponents insist it’s only a matter of time.

Battery prices have plunged 85% from 2010 through 2018, and huge storage plants are planned in California and Arizona. Meanwhile, science is advancing on new technology — including chemical alternatives to lithium-ion systems — with the potential to supply power for 100 hours straight, sun or no sun.

All signs point to the acceleration of renewable energy that can out-compete nuclear and fossil fuels,” said Jodie Van Horn, director of the Sierra Club’s Ready for 100 campaign, a group seeking a grid powered solely by renewables.

The drive for grids that are 100% emissions-free is being pushed by a growing number of U.S. states citing increasingly aggressive time frames. In July, New York mandated that 70% of the state’s power come from renewables by 2030, and 100% by 2040. Seven other states, including California, have similar mandates, and Virginia’s governor earlier this month announced an executive order calling for 100% clean energy there by 2050.

Still, there remains a gap between now and 2050. “To get to 80%-to-85%, you can see a path to get there with today’s technologies,” said Yayoi Sekine, an analyst with BloombergNEF. But using renewables to achieve the final 15%, “that’s where the challenge really is.”

By 2050, BNEF expects renewables to account for 48% of the U.S. power system, paired with multiple types of supplemental, peaking plants that can supply electricity when needed.

Today, these plants typically burn cheap gas, supplied by a muscled-up U.S. shale industry. By 2035, though, so-called battery peakers — large arrays that store energy when renewables are working at their peak, and send power when they’re not — will be more cost-competitive, according to BNEF forecasts. Meanwhile, over the same period, nuclear will wane, as high costs force most reactors to just shut down.

The U.S. isn’t the only place where the nuclear industry is struggling. Some nations that rely heavily on the technology, including France and Sweden, are reducing nuclear’s load as old reactors retire, and diversifying into cheaper solar and wind power.

Still, the industry has the potential to grow in countries where costs can be reduced through shorter construction times. Engineers in China have been able to build and connect nuclear plants in less than seven years, on average, while their counterparts in the U.S. and Europe need a decade or more.