Opec says Novem­ber agree­ment has failed to elim­i­nate global over­sup­ply, re­sult in sus­tained price re­cov­ery

New Straits Times - - Business -

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


United States mo­tor­cy­cle brand Har­ley-David­son is look­ing to ex­pand its pres­ence in the Asia-Pa­cific mar­ket by build­ing an assem­bly fa­cil­ity in the Ray­ong Prov­ince in Thai­land.

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