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OPEC-Shale Peace Prospects Crumble Hours After Historic Call


(Bloomberg) — Just hours after one of the most powerful officials in the biggest U.S. oil state was invited to OPEC’s inner sanctum in June, propspects for a rapprochement between two historically antagonistic crude powers began to unravel.

Texas Railroad Commissioner Ryan Sitton said Friday he was invited by OPEC Secretary General Mohammad Barkindo to attend the group’s summer meeting in Vienna. But even as the surprise announcement reverberated across U.S. and international petroleum circles, Sitton’s proposal to curb Texas crude output for the first time since the 1970s was criticized by fellow regulators.

“While I am open to any and all ideas to protect the Texas Miracle, as a free-market conservative I have a number of reservations about this approach,” Wayne Christian, chairman of the Texas commission that oversees the oil industry, said in a statement. If Texas cuts supply, “there is no guarantee other nations, or even states will follow suit.”

Sitton, an entrepreneur and Republican Party activist virtually unknown outside the Lone Star state, proposed Texas would curb oil output by 10% in exchange for an equivalent gesture by the cartel that controls more than one-third of global production.

Stability Quest

The third commissioner, Christi Craddick, also expressed doubts about capping production, according to a person with direct of knowledge of the situation

Sitton’s outreach came at the end of a brutal two-week stretch in which international crude lost almost half its value, triggering layoffs, cash crunches and the steepest dive in Permian Basin oil drilling in more than three years. The demand-sapping spread of coronavirus was compounded with the unraveling of the Saudi-Russia supply compact on March 6.

“We all agree an international deal must get done to ensure economic stability as we recover from Covid-19,” Sitton said in a tweet after his conversation with Barkindo.

Although Sitton’s proposal appears to face an uphill battle, the potential consequences of an OPEC-Texas agreement would be hard to overstate. The cartel’s primacy over world crude markets is unrivaled; Texas pumps more than 40% of U.S. oil and as a standalone entity gushes more than every member of the cartel except mighty Saudi Arabia.

Such a tie-up would also confront Russian President Vladimir Putin with a formidable and heretofore unimaginable foe in using petroleum as a geopolitical weapon.

As it stands, the Organization of Petroleum Exporting Countries and U.S. shale producers are caught in the middle of a price war between Saudi Arabia and Russia, which has helped to drive crude prices to an 18-year low.

‘Total Meltdown’

U.S. Energy Secretary Dan Brouillette told Fox Business he’s aware of the Texas proposal, but he said his agency isn’t “not part of that conversation.”

“There are state laws that are available to Governors, state regulators if you will, to manage production within the states,” he said.

Sitton wrote in a Bloomberg Opinion piece on Friday that the federal government could coordinate output cuts with Saudi Arabia and Russia to calm the market.

Riyadh and Moscow have been locked in a bare-knuckle fight for market share for three weeks after they failed to agree on a response to the oil-demand crash, and dissolved a partnership that had coordinated oil supplies for three years.

In addition to his philosophical objections, Christian cited the state agency’s lack of experience in throttling back output by thousands of independent companies. “Our IT capabilities to handle this process are limited at best,” he said.

It wouldn’t be the first time Sitton has split with his fellow commissioners. Last year, Craddick nominated Christian to serve as chairman, even though tradition dictated that Sitton would lead the agency as he ended his six-year term.

In a shocking upset earlier this month, Sitton lost the Republican primary election to Jim Wright, a rancher and chief executive of an oilfield-service company. Two Dallas lawyers, Chrysta Castañeda and Roberto Alonzo, will compete in a May runoff for the Democratic nomination to challenge Wright. No Democrat has won election to the commission in more than 25 years.

‘Uniquely Catastrophic’

OPEC officials have often said that U.S. shale drillers, the biggest contributors to the oil surplus that has emerged this decade, should help shoulder the burden of rebalancing the market. With depressed prices forcing a flurry of job cuts, they may now be willing to join in.

Permian oil explorer Parsley Energy Inc. said the industry needs a coordinated approach, and railroad commission caps on state oil output could be one part of the solution. “This is a uniquely catastrophic time for the industry, and as such we need to think outside of our normal course of action,” Chief Executive Officer Matt Gallagher said Friday in an email.

But American Petroleum Institute Senior Vice President Frank Macchiarola blasted the proposal as “shortsighted” and “anti-competitive” efforts that will “harm U.S. consumers and American businesses.”

“It seems totally irrational that the solution to the disruptive behavior of Saudi Arabia and Russia would be to imitate OPEC,” Macchiarola said in a phone interview.

(Updates with Texas regulator’s objections starting in 13th paragraph)

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Leftists Riot to Demand ‘Peace Deal’ with Marxist Terror Group



Leftist rioters in Colombia set out a range of demands in a letter to President Iván Duque on Thursday, including a renewed peace deal with the Marxist terror organization National Liberation Army (ELN).

In the letter to Duque, elected last year on a platform of taking a harder stance against the Marxist terror organizations that have destabilized Colombia for decades, the “National Strike Committee” warned that his promise of a “grand national dialogue” was not sufficient to end the riots that have rocked the country over the past eight days.

In the letter, also signed by 56 members of Congress and the pro-guerrilla Movement to Defend Peace, the signatories propose three demands to begin a dialogue with the government. One of these demands involves the demilitarization of Colombian cities following violent clashes between rioters and security forces.

Another demand is to hold a “national table of dialogue that is both plural and diverse,” featuring representatives from various social sectors involved in the recent protests, including the National Committee of Unemployment, the Movement to Defend Peace, the Peace Bank, local assemblies and town councils, cultural expressions, and other sectors of the population.

Once having initiated a dialogue, the committee is demanding that the government engage and make concessions on five different issues, which include:

  1. Negotiations on the government’s social and economic policy, with specific regard to minority movements such as students, peasantry, and indigenous communities.
  2. Full implementation of the Final Peace Agreement with the Revolutionary Armed Forces of Colombia (FARC) forced through by former President Juan Manuel Santos, with a view to re-opening talks with the People’s Liberation Army (ELN), who have carried out a number of deadly terrorist attacks across the country in recent years.
  3. Discussions surrounding the government’s national security policy, human rights and military campaign against guerrilla forces.
  4. Political and electoral reform, as well as a detailed plan of how they plan to fight corruption.
  5. Measures to guarantee the rights of nature and the protection of the environment.

It remains highly unlikely that the Duque administration would cede to such extensive demands, although the severity of the demonstrations has placed him under increased pressure to return stability to the South American country.

The demands also make clear that the riots are being coordinated by groups with ties to Marxist terrorist organizations. The FARC, which the rioters seek to legitimize, declared war on the state this fall despite the Santos government issuing them multiple uncontested seats in the Colombian Congress.

On Friday, it was reported that the government is seeking around $1 billion in dividends from state company Ecopetrol S.A. to help fund a public spending spree that would help reduce tensions, especially among Colombia’s most impoverished communities.

Follow Ben Kew on Facebook, on Twitter at @ben_kew, or email him at [email protected]





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