File Picture: REUTERS/RAMZI BOUDINA
File Picture: REUTERS/RAMZI BOUDINA

Johannesburg/London — Oil cartel Opec is consulting with lawyers to prepare a strategy to defend against proposed US legislation that could open the cartel up to anti-trust lawsuits, according to people familiar with the matter.

The organisation’s legal team will hold talks in the coming days with law firms including White & Case about the US’s No Oil Producing and Exporting Cartels Act (Nopec), one of the people said, asking not to be identified because the information is not public. The cartel is seeking strategy recommendations for dealing with the Nopec bill, which could allow the US government to sue it for manipulating energy prices, the person said.

A spokesman for White & Case declined to comment.

The planned meeting highlights the growing pressure on Opec from the world’s largest oil consumer. US President Donald Trump has repeatedly criticised the cartel on Twitter, accusing it of inflating prices and urging it to increase production. The cartel has bowed to Trump’s will, pledging last month to add about 1-million barrels per day (bpd) of crude to the market, yet lawmakers have continued to push Nopec forward.

The House of Representatives introduced a version of the bill in May. Earlier this week, the Senate also brought up a draft of the legislation, which would amend the Sherman Antitrust Act of 1890. That’s the law used more than a century ago to break up the oil empire of John Rockefeller.

Congress has discussed various forms of Nopec legislation since 2000, but both presidents George W Bush and Barack Obama threatened to use their veto power to prevent it becoming law. The risk for Opec is that Trump could break with this precedent.

Opec pumps about a third of the world’s crude, and the biggest of its 15 members is Saudi Arabia, one of America’s closest friends in the Middle East. While the group doesn’t target a specific oil price, it adds or removes supplies in the market and can therefore affect the cost of crude. Since January 2017, the group and allies, including Russia, have cut production by about 1.8-million bpd, helping lift international prices to a three-year high of more than $80 a barrel in May.

With assistance from Javier Blas

Bloomberg