Complex Made Simple

The NOPEC legislation and the potential OPEC retaliation

NOPEC and OPEC are heading for a clash

15 member-nations’ OPEC controls over 80% of the world's reserves of oil NOPEC opponents warn that its passage would hurt U.S. diplomatic interests and provoke retaliation against U.S. producers Crude oil production in OPEC inched up by a modest 30,000 bpd to 30.26 million bpd last month

Earlier this year, a bi-partisan US Congress decided to proceed with crafting the NOPEC (The No Oil Producing and Exporting Cartels) Act.

OPEC is facing additional pressures arising from US oil sanctions on Iran and Venezuela, not to mention rising trade wars between the US and China impacting oil exports as well.

If the legislation passes, there will be a price to pay.

Where is NOPEC now?

The US is not putting on the breaks on NOPEC, even after taking the global lead in oil production at over 12 million bpd. It aims to reduce oil price volatility, and reign in the influence OPEC has over production and price strategies.

15 member-nations’  OPEC controls over 80% of the world's reserves of oil, while OPEC+ includes independents that often align with OPEC interests.

NewMax reported that the legislation has support in the House and Senate and in the event it passes, NOPEC would empower the U.S. attorney general to bring lawsuits against OPEC or any of its member-nations for violating U.S. anti-trust laws, Aka Sherman Anti-Trust Act.

“OPEC, it would appear, is now in the sites of Congress,” says NewMax.

NOPEC repercussions

This year, OPEC is taking its anti-U.S. agenda to a new level by making its first agreement to cooperate with Russia, according to  NewMax.

Bloomberg says opponents warn that its passage would hurt U.S. diplomatic interests and provoke retaliation against U.S. producers.

“But a new white paper written on behalf of Securing America’s Future Energy, which advocates for curtailing oil dependence, argues that those fears are overblown,” says Bloomberg.

Past efforts to sue OPEC haven’t led to reprisals and it’s unlikely new attempts would either, said Harry First, a law professor at New York University and co-author of the report. "We prosecute a lot of big companies that are important to foreign economies and those countries have not retaliated," First said.

Gulf News says UAE’s Minister of Energy and Industry recently slammed legislation in the U.S. that would open up many oil-producing nations to lawsuits.

Suhail Al Mazroui said that the bill, which hasn’t yet been passed by American lawmakers, will even hurt US oil producers, adding OPEC has done a “great deal” of good to shale producers.

At the Bloomberg Invest conference in Abu Dhabi, the minister warned of “chaos” in an oil market without OPEC.

“I had several discussions with many of the major [oil] producers. Everyone is aligned that it’s [the bill] a bad idea. Everyone is aligned that it’s going to affect volumes from the US,” Al Mazroui said.

“It will destroy value and lose some of those volumes that [shale producers] have achieved, because it will mean that the market will assume that it’s open for all, and everyone is going to be dumping in the market.”

A missing formula for oil production 

The expected but yet-to-be-estimated losses of Iranian barrels, as well as an outage of an oil pipeline from Russia to Europe, are giving OPEC a headache in trying to predict how much global oil supply will possibly drop in the second half of 2019, sources in OPEC have told Reuters. said that the end of the U.S. sanction waivers for all Iranian all buyers means that Iran’s oil exports will drop as of this month, but no one is really sure by how much.

“Various analysts expect that Iran will continue to ship oil somewhere between 200,000 bpd and 600,000 bpd, but not all that oil would be oil sales as it could be debt repayment, and some of it is expected to go ‘under the radar’, said

Crude oil production in OPEC inched up by a modest 30,000 bpd to 30.26 million bpd last month, a survey by S&P Global Platts suggested, after four months of steady declines.

The U.S.' crude oil production decreased by 101,000 barrels per day (bpd) to around 12.2 million bpd (mbpd) for the week ending May 3, the EIA data showed.