9 MORE MONTHS
Opec says November agreement has failed to eliminate global oversupply, result in sustained price recovery
VIENNA two delegates familiar with the decision.
The ministers are scheduled to discuss the extension with nonmember producers.
Six months after forming an unprecedented coalition of 24 nations and delivering output reductions that exceeded expectations, resurgent production from United States shale fields has meant oil inventories remain well above targeted levels.
While supplies are shrinking, tariffs on their products across 40 per cent of the world’s economy.
During his election campaign he frequently held up Wisconsinbased Harley as an example of an American manufacturer that kept jobs and production inside US borders and was harmed by such free-trade agreements.
But even Harley has found it hard to resist the lure of overseas assembly lines — to be geographically closer to emerging markets and circumvent high tariffs that favour local competitors.
It has assembly plants in Brazil ministers acknowledged that the surplus built up during three years of overproduction wouldn’t clear until the end of next year.
“Maintaining the same production cuts through March is a safe and certain option to do the trick,” said Saudi Oil Minister Khalid Al-Falih at the opening session of the group’s meeting, here.
Opec agreed in November to cut output by 1.2 million barrels a day. Eleven non-members and India that put together bike kits made from parts from its US factories. The Thai plant will do the same.
Whitmore said high tariffs were only part of the reason Harley decided to build a plant in Thailand but she added: “Our growth is currently limited due to uncompetitive retail prices.”
Thailand currently has around a 60 per cent import tariff on foreign motorbikes.
A plant in Thailand will also allow Harley to take advantage of tax breaks when exporting to nearby neighbours under trade including Russia joined the deal in December, bringing the total supply reduction to about 1.8 million.
The curbs were intended to last six months from January, but confidence in the deal, which boosted prices by 20 per cent, waned as inventories remained stubbornly high and US output surged.
Al-Falih insisted the cuts were working, saying stockpile reductions would accelerate in the third quarter and inventory levels agreements struck by the 10member Asean.
It also reduces import distances to China, which is fast emerging as a major market for foreign bike brands.
But Harley’s decision to open the Thai plant has sparked an angry backlash among US union workers.
“Management’s decision to offshore production is a slap in the face to the American worker and to hundreds of thousands of Harley riders across the country,” said the United Steelworkers union in a statement. AFP would come down to the fiveyear average in the first quarter of next year.
Libya and Nigeria would remain exempt from the output curbs as they restore lost production, according to Al-Falih.
Nigerian Oil Minister Emmanuel Kachikwu said earlier in an interview extending the deal would bring price stability, suggesting a “US$50 floor” for oil if producers stuck to their cuts. Bloomberg