Oil Prices Drop As Saudi Eyes Non-Military Solution To Iran Crisis

Oil prices fell more than one percent on Monday after Saudi Arabia’s de facto leader said war with Iran would destroy the world economy and hinted instead at a non-military solution.

Washington, Riyadh, Berlin, London and Paris blame Iran for attacks that damaged the Saudi oil sector on September 14 and forced the world’s largest crude exporter to sharply reduce production.

Elsewhere Monday, stock markets diverged as traders tracked the latest twists and turns regarding the US-China trade war. The dollar was mixed against main rivals.

“In terms of geopolitical concerns, common sense is prevailing for now in Saudi Arabia,” noted analyst Naeem Aslam at traders ThinkMarkets, in reference to the comments by Saudi Arabia’s crown prince in an interview with CBS show “60 minutes” broadcast over the weekend.

Mohammed bin Salman said war would be catastrophic for global growth.

‘Unimaginably high’

“Oil supplies will be disrupted and oil prices will jump to unimaginably high numbers that we haven’t seen in our lifetimes,” the prince said.

“The region represents about 30 percent of the world’s energy supplies, about 20 percent of global trade passages, about four percent of the world GDP. Imagine all of these three things stop,” he said.

“This means a total collapse of the global economy, and not just Saudi Arabia or the Middle East countries.”

Iran’s oil minister meanwhile on Sunday ordered his country’s energy sector to be on high alert to the threat of “physical and cyber” attacks.

Bijan Namdar Zanganeh said “it is necessary for all companies and installations of the oil industry to be on full alert against physical and cyber threats”, in a statement published on the oil ministry’s Shana website.

Tehran has denied any link to the Saudi strikes, which were claimed by Huthi rebels in Yemen. Iran supports the rebels against a Saudi-led coalition that has been fighting the Huthis since 2015.

“Oil has been amazing everyone over the last couple of weeks, having surged on the back of the attack on the Saudi oil facilities before reversing the entirety of these gains, despite the country temporarily losing half its output,” Craig Erlam, senior market analyst at Oanda trading group, said Monday.

“Traders are clearly not particularly concerned about risk premiums in oil… Instead, the focus again seems to be shifting back to the demand dynamics and the risk of further downgrades as the global economic slowdown takes hold,” he added.

US-China trade war

Elsewhere Monday, investors digested reports in US media that President Donald Trump is mulling severe new restrictions on investment in China.

Shanghai and Tokyo stock markets slumped the day before a week-long patriotic holiday begins in China, despite assurances from the US Treasury that there were no plans to stop Chinese companies from listing on US exchanges.

On Tuesday the Asian giant celebrates 70 years since the founding of communist China, with markets closed from October 1 to 7, while planned pro-democracy protests in Hong Kong threaten to disrupt festivities.

Shanghai closed down 0.9 percent as some investors took profits, with uncertainty fuelled by fears of an escalation in the US-China trade war that has raged for more than a year.

“The Sino-US trade negotiations have been full of twists and turns,” said Zhang Gang, an analyst with Central China Securities.

“You don’t know what remarks Trump would make in the next seven days, or what variables there will be from the US side. So (investors) have set themselves in a low-key, waiting position.”

Key figures around 1100 GMT

Brent North Sea crude: DOWN 1.3 percent at $61.12 per barrel

West Texas Intermediate: DOWN 1.0 percent at $55.34 per barrel

London – FTSE 100: DOWN 0.3 percent at 7,406.37 points

Frankfurt – DAX 30: DOWN 0.1 percent at 12,368.83

Paris – CAC 40: FLAT at 5,639.56

EURO STOXX 50: FLAT at 3,546.40

Hong Kong – Hang Seng: UP 0.5 percent at 26,092.27 (close)

Shanghai – Composite: DOWN 0.9 percent at 2,905.19 (close)

Tokyo – Nikkei 225: DOWN 0.6 percent at 21,755.84 (close)

London – FTSE 100: UP 0.1 percent at 7,433.79

New York – Dow: DOWN 0.3 percent at 26,820.25 (Friday’s close)

Euro/dollar: DOWN at $1.0920 from $1.0941 at 2030 GMT

Pound/dollar: UP at $1.2302 from $1.2293

Euro/pound: DOWN at 88.80 pence from 89.01 pence

Dollar/yen: DOWN at 107.93 yen from 107.95

AFP

Macron Seeks Lead EU Role In Iran Crisis

Macron Signs Controversial French 'Anti-Rioters' Bill Into Law
France’s President Emmanuel Macron talks to journalists after a European Council meeting in Brussels on April 11, 2019. KENZO TRIBOUILLARD / AFP

 

French President Emmanuel Macron is seeking to lead European diplomatic efforts to find a face-saving solution to the latest crisis between Tehran and Washington, with the EU looking to buy time and soothe tensions, diplomats and experts say.

Macron dispatched an envoy to Tehran for the second time in a month on Tuesday in another attempt to convince the Iranian government to come back into compliance with a landmark 2015 deal limiting its nuclear programme.

After President Donald Trump unilaterally pulled the United States out of the deal in May 2018, Iran has begun enriching uranium to higher levels, leading to fears the faltering accord could be doomed.

If it falls apart and Iran continues enriching uranium all the way to levels approaching those that could be used in a weapon, diplomats see a high risk of conflict in the Middle East involving the United States and possibly its ally Israel.

“We are buying time. The Iranians are too,” a European diplomat told AFP on condition of anonymity. “We need to bring Iran back on board in exchange for a symbolic gesture from the United States.”

Analysts agree that European efforts in the short-term have to be two-fold: convincing Iran to stop enriching, then convincing Trump to suspend some of the crippling new economic sanctions he has imposed on Tehran.

“It’s about creating the conditions for both sides (the US and Iran) to back away from the corners they are stuck in because the end-game here is negotiation,” Sanam Vakil, an expert at the Chatham House think-tank in London, told AFP.

“For Iran to come back to the negotiating table, they have made it abundantly clear there will have to be sanctions relief granted.”

Macron to Tehran? 

Macron has taken an active mediation role, speaking to Iranian President Hassan Rouhani and Trump in recent days.

Last year, he was weighing whether to become the first French leader to travel to Tehran since 1976. But tensions over the nuclear issue and Iran’s involvement in the wars in Syria and Yemen meant he never accepted an invitation to visit.

Iran’s alleged role in a plot to bomb a meeting of opposition activists at a political meeting near Paris in June killed off any possibility, diplomats say.

But recent French media reports suggest Macron might once again be considering travelling to meet Rouhani and Iranian Supreme Leader Ayatollah Ali Khamenei.

“Individually he is probably the best placed to be the E3 leader,” said Vakil, referring to the E3 group of European powers which comprises France, Germany and Britain.

“Everyone is talking to each other,” the European diplomat told AFP on condition of anonymity.

Mixed results 

Macron relishes the world stage, but his efforts at mediating in the Middle East have led to mixed results.

He successfully intervened in November 2017 to free Lebanese Prime Minister Saad Hariri after he was detained by Saudi authorities during a trip to the country.

But his efforts in forge a solution in war-torn Libya have yet to yield fruit and he has made enemies in Italy, the former colonial power in Libya, as well as in the UN-recognised government in Tripoli.

Past efforts at lobbying Trump to respect the nuclear deal, particularly during a state visit to Washington in April 2018, came to nought.

Experts say that for the moment Iran is not close to enriching uranium to levels that could be used for a weapon, which would spark a regional arms race and acute security fears in Israel.

But it is considered by European nations to be in breach of its commitments.

The country’s atomic energy organisation announced on Monday that it had surpassed a cap on the level to which it can enrich uranium, reaching 4.5 per cent, above the 3.67 per cent limit stipulated in the deal.

It has also exceeded limits on its stockpile of enriched uranium set in the 2015 accord signed by the US, Iran, Russia, China, Britain, Germany, France and the EU.

European nations are seen as wanting to avoid triggering a dispute mechanism in the text which could lead to sanctions being reimposed.

Such a move would heighten tensions, while the threat of fresh sanctions remains one of few levers available to the Europeans as they seek to convince Iran to respect the deal.

“But the road they are taking (by enriching further) could force us to take a road we don’t want to take,” said a French diplomat on condition of anonymity.

AFP