London — OPEC is devising a legal strategy to counter so-called NOPEC legislation in the US that would revoke the producer group's sovereign immunity, as President Donald Trump's tweets about the organization have raised alarm, sources familiar with the deliberations told S&P Global Platts.
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OPEC's legal department will meet Thursday at the organization's headquarters in Vienna to consider its options, the sources said.
Several member country delegates will also attend the meeting, as they are already in town for a technical meeting Wednesday on production quotas.
Senator Chuck Grassley, an Iowa Republican and chairman of the Senate Judiciary Committee, introduced the No Oil Producing and Exporting Cartels, or NOPEC, Act on Monday. The bill, which would allow the US Justice Department to sue OPEC for antitrust violations, is identical to the NOPEC bill Representative Steve Chabot, an Ohio Republican, introduced in the House in May. Chabot's NOPEC bill was approved by the House Judiciary Committee on June 13.
The bill, which would require passage in both houses of Congress and Trump's signature to become law, would allow the US attorney general to sue a foreign crude producer for price manipulation under the Sherman Antitrust Act.
Though more than 20 versions of the NOPEC Act have been introduced over the past two decades, OPEC is concerned that this year's version may face better-than-even odds of passing with Trump, a frequent OPEC critic and past supporter of previous NOPEC bills.
"Trump is certainly a wildcard," one OPEC source told Platts on condition of anonymity.
Trump has tweeted five times at OPEC over oil prices that he considers too high, most recently on July 4, when he said: "The OPEC Monopoly must remember that gas prices are up & they are doing little to help."
House and Senate leaders have given no indication they will bring the NOPEC bills to a floor vote this year and a congressional aides said that they are waiting for Trump to signal support for the bill before pushing it forward.
"Trump has supported it in the past, but he hasn't said anything about it since he moved into the White House," one aide said.
Hogan Gidley, a White House spokesman, did not respond to requests for comment this week.
The NOPEC Act makes it illegal under US law for a foreign state "whether by cartel or any other association" to collectively limit production, set prices or take any other action which could restrain the trade of oil, natural gas and petroleum products and impact the US market. It gives the US Attorney General sole authority to enforce the law and removes sovereign immunity in oil cartel cases.
If the NOPEC Act is ultimately signed into law by Trump, OPEC members will likely continue to export to the US due to the nature of the oil market, but commercial risk in the US will increase, according to Kevin Book, managing director with ClearView Energy Partners.
"Flows might continue, but investment might slow," Book said.
OPEC officials have privately expressed frustration at Trump's tweets, noting the irony that the president is accusing the organization of price fixing when he is asking members to act in concert to lower prices.
Some also accuse the president of trying to deflect blame for his recent sanctions on OPEC members Iran and Venezuela that may tighten the market further.
Trump in May announced he was snapping back US sanctions on Iran's oil sales in November by withdrawing from the nuclear deal, which analysts say could take 1 million b/d or more of crude off the market.
Trump has also imposed sanctions on Venezuela over human rights violations, which has hampered state oil company PDVSA's ability to refinance its crushing debt load and fund badly needed maintenance on oil infrastructure.
OPEC's 15 members pump about one-third of the world's crude. In late 2016, it banded together with Russia and nine other producers in a supply cut agreement, forming a coalition responsible for almost half of global crude production.
Partly in response to pressure from Trump on Saudi Arabia, OPEC's largest producer and a key US ally, OPEC on June 23 agreed with Russia and nine other allies to boost production by 1 million b/d in order to head off any future supply shortages and cool prices.
The producer group is still hashing out the details of how those extra barrels will be allocated, with delegates meeting Wednesday to discuss the issue.