"Do not talk about oil prices": the US legal threat generates a change in OPEC

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LONDON / DUBAI (Reuters) – OPEC has urged its members not to publicly mention their preferences on oil prices, in a change in strategy with which the group of oil-producing countries tries to avoid the risk of action lawsuits from the United States for the manipulation of the market, sources said close to the cartel.

In the picture, the OPEC logo at the headquarters in Vienna, Austria, 19 June 2018. REUTERS / Leonhard Foeger

An American bill known as "NOPEC", which could generate antitrust claims against the Organization of Oil Exporting Countries, has been boxed for a long time and several US presidents have stated that they would veto any attempt to make it become law.

But the current president Donald Trump has openly criticized OPEC, which has accused the high oil prices, and has asked the group to increase production to alleviate the pressure on a market that is around the maximums of four years.

This has unnerved OPEC and its main member, Saudi Arabia, for what could mean a law without oil production and export cartels (NOPEC, for its acronym in English).

The decision to refrain from discussing a preferred price level – a way in which the group can drive market expectations – highlights how the aggressive position of Trump in the oil market destabilises OPEC and puts test the ties between Riyadh's allies and Washington.

In July, senior cartel officials held a meeting in Vienna with the international law firm White & Case to discuss the NOPEC bill, and lawyers advised to avoid public discussions on oil prices and rather to talk about market stability oil, said two sources with knowledge of the matter.

OPEC officials were also advised to explore diplomatic channels to exert pressure and prevent the law from becoming law, said one source. White & Case did not respond to Reuters comment request.

On 1 August, the OPEC secretariat sent a letter to ministers making a similar recommendation.

"We solemnly believe that market stability, not prices, is the common goal of our actions," said United Arab Energy Minister Suhail al-Mazroui, who holds the rotating presidency dell & # 39; OPEC. year, in the letter to which Reuters has had access.

"I would like to call OPEC member countries, as well as our non-OPEC partners, to refrain from any reference to prices in their comments on our collective efforts or on the conditions of the oil market," he added.

Specifying preference for oil prices is not the only way OPEC tries to drive the market. Reducing production can support prices and increasing supplies can do the opposite, for example.

But the private coordination of how to communicate the OPEC message to the market represents a change from the previous practice, when Saudi Arabia often indicated a preferential price level when it talked about cartel policy and tried to promote actions to achieve it.

While the chances of the NOPEC law being approved this year seem slim, concern among OPEC members and other oil producers is growing out of fear of finally receiving Trump's support, given their open criticism of the cartel and at current high oil prices.

More information from Jarrett Renshaw in New York and Yara Bayoumy in Washington; Edited in Spanish by Ana Laura Mitidieri

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