Qatar Petroleum to push ahead with expansion despite Gulf crisis
From: REUTERS NEWS AGENCY / 8 Mayo
State energy giant continue with expansion strategy to be on par with oil majors, despite Gulf crisis embargo.
Tag Archive for: global economy
International Energy Forum: Mexico eyes strong energy ties with India
From:Jyoti Mukul / Business-standard / 12 April
Mexico is looking to enhance its energy ties with India through greater participation of Indian companies, especially in meeting its gasoline deficit.
The Latin American country will conduct its first shale auction in September, but before that it will carry out another round of auction of onshore conventional blocks in July, in which Indian companies are likely to take part. Mexico is among the top five crude oil suppliers to India.
In an interview with Business Standard, Aldo Flores-Quiroga, deputy minister for hydrocarbons, Mexico, said, “Indian companies can participate in the full value chain. We have investment requirement in upstream, mid-stream and downstream. Mexico has opened up the sector through a competitive and transparent process.”
Mexico’s shale blocks are in Burgos Basin, in the northwestern border state of Tamaulipas, where state-owned oil company Pemex has drilled some 20 exploratory wells. The Mexican basin is considered an extension of America’s Eagle Ford basin, which revolutionised shale gas and oil production. Flores-Quiroga said Mexico was a net importer of natural gas and gasoline (petrol). “Mexico is the sixth largest market for petroleum products in the world, and it imports 60-70 per cent of its gasoline requirement. So there is an opportunity for investment,” he said.
Almost three years ago, Mexico started opening up the oil sector after 60 years. “Response from inside and outside Mexico has been amazing. We had one company that was in charge of the full value chain. Now, we have over 150 national and international companies in the oil sector. Those companies have announced investment commitment close to $200 billion so far, of which $150 billion is in upstream,” he said, adding, “Should they reach the commercial stage, we will see $150 billion invested over the life of project.”
The minister said it was a similar story in the mid and downstream sectors. Its natural gas market has over 60 registered participants and 24 companies engaged in daily transactions. “The gasoline market, where we would like India to participate, has also been transformed. We had one gasoline brand, now we have 40,” he said.
The country, he said, still needed to “find depth in storage and distribution segment”. “We have a lag in the energy infrastructure. With this opening, we expect to see more investment to improve the logistics segment.”
Entering the Mexican market, however, could be tricky, as a change in the political regime is scheduled for July. The front-running Left leaning party said it would review the liberal investment policy in the oil sector. The deputy minister, nonetheless, ruled out any change in policy, stating it was supported by the country’s constitution. Besides, there are independent trade commissions.
From:Jyoti Mukul / Business-standard / 12 April
Global shares climb as firmer Chinese yuan eases deflation fears
World stocks rose sharply on Monday as China’s central bank fixed the yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation.
The rally belied a string of poor economic data from Beijing and Tokyo as demand for safe-haven assets waned, yet investors remained on edge due to lingering concerns about growth and the health of the financial sector.
European stocks rose 3 percent .FTEU3, having shed nearly 10 percent over the last fortnight, mirroring a bounce in Asia. Futures pointed to notional gains of 1.6 percent on Wall Street ESc1 but U.S. markets will be closed for a holiday.
Meanwhile, assets that tend to perform well in times of stress lagged. The Japanese yen lost ground against the U.S. dollar, top-rated German bond yields edged away from nine-month lows and gold slipped 2 percent after its strongest week in four years.
“We had a very strong statement from the Chinese authorities signaling they are committed to a stable currency and that’s helped sentiment … safe-haven flows have unwound somewhat,” said RIA Capital Markets strategist Nick Stamenkovic.
In China, spot yuan jumped more than 1 percent to 6.4934 per dollar – its firmest this year – after the People’s Bank of China set its daily midpoint 0.3 percent stronger and the head of the bank was quoted as saying speculators should not be allowed to dominate market sentiment. [CNY/] A stronger yuan reduces the risk that China will export deflation to the world, while worries about consumer price growth have also been helped by bounce back in the oil price.
Brent LCOc1 and U.S. crude futures CLc1 edged up on Monday adding to Friday’s 10 percent surge on speculation that the Organization of the Petroleum Exporting Countries (OPEC) might finally agree to cut output to reduce a world glut.
Euro zone long-term inflation expectations also rebounded from record lows on Monday even as Germany’s Bundesbank cut its forecast for consumer price growth in the bloc’s biggest economy.
DISCONNECT
China’s weak exports and imports in January, down 11.2 percent and 18.8 percent year-on-year respectively, seemed not to disturb markets. The resulting jump in the country’s trade surplus to $63 billion for the month might have helped, as that may offer support to the yuan.
The disconnect between markets and economics was perhaps starkest in Japan, where the Nikkei .N225 jumped more than 7 percent, putting its worst week since the depths of the global financial crisis in 2008 quickly behind it.
This came despite data showing the economy contracted by an annualized 1.4 percent in the last three months of 2015, more than expected.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.3 percent .MIAPJ0000PUS, after losing 10 percent of its value so far this year.
European shares followed in their wake, led by a 4 percent rebound in banking stocks .SX7P on news that the European Central Bank (ECB) is in talks to buy bundles of Italian bad bank loans as part of its asset-purchase program.
Yet some strategists cautioned that Monday’s rebound may prove short-lived, with concern that central banks have little ammunition left to fight off the heady mix of an oil-induced deflationary forces, capital outflows and economic weakness in China, and pressure on the world’s financial sector.
“It’s possible we could see calmer markets this week but we are not out of the woods yet,” Thomas Harr. global head of fixed income and currency research at Danske Bank in Copenhagen.
“For the last couple of weeks we have seen a bit of central bank fatigue – they have cut rates into negative but it isn’t having much of an impact.
Against a basket of currencies .DXY, the dollar was up slightly at 96.433 having been at its lowest in almost four months. Likewise, it edged up to 113.99 yen JPY=, having touched a 15-month trough just under 111.00 last week.
The euro was last down 0.6 percent at $1.1184 EUR=, having slipped from a 3-1/2 month peak of $1.1377.
Copyright: Reuters
Saudi Arabia, Venezuela talk of co-operation to stabilize oil market
Saudi Arabia’s oil minister Ali al-Naimi discussed cooperation between OPEC members and other oil producers to stabilize the global oil market with his Venezuelan counterpart on Sunday, state news agency SPA reported.
Venezuela’s Oil Minister Eulogio Del Pino, who is on a tour of oil producers to lobby for action to prop up prices, said his meeting with Naimi was “productive”, his ministry reported.
Cash-strapped OPEC member Venezuela has been calling for an emergency meeting of producers to discuss steps to prop up prices, which are close to their lowest since 2003.
The prospect of supply restraint by the Organization of the Petroleum Exporting Countries and rivals helped oil prices LCOc1 rise above $34 a barrel on Friday from a 12-year low close to $27 last month, despite widespread scepticism that a deal will happen.
“It was a successful meeting and (conducted) in a positive atmosphere,” SPA cited Naimi as saying.
Both ministers discussed Del Pino’s visits to other oil producers and the outcome of his “meetings that aim towards the cooperation of those countries to stabilize the international oil market”, Naimi said.
“During the meeting, there were discussions about the cooperation of the producing countries within OPEC and outside (OPEC)… and the importance of the continuation of such consultations,” SPA added.
However, the comments by Saudi Arabia, the world’s largest oil exporter, show no indication of a shift in the country’s policy of refusing to cut supplies to prop up crude prices, some OPEC delegates said.
“They seem like just general talk about cooperation, but nothing about cutting production,” said one OPEC source.
“It’s always good to say discussions were positive and productive. Never say they were negative. The issue is not with Venezuela, it is with Iran,” said another OPEC source.
Sources familiar with the matter say Iran is reluctant to restrain crude supply as it wants to recover the market share it lost during sanctions that were imposed in 2012 because of its nuclear program. International sanctions were lifted in January.
OPEC oil production jumped to its highest in recent history in January as Iran increased sales and its rivals Saudi Arabia and Iraq also boosted supply, a Reuters survey showed.
Last Wednesday, the Iranian news agency Shana quoted Del Pino as saying six producing countries, including OPEC members Iran and Iraq and non-members Russia and Oman, supported a producer meeting.
But so far, none of OPEC’s Gulf members, including OPEC heavyweight Saudi Arabia, has publicly backed a meeting.
Copyright: Reuters
Five Reasons Oil Is Driving The Stock Market
At its basic level the price of oil is a product of supply and demand. Other factors such as political turmoil can influence it but the main factor is supply and demand. At times and especially now oil is viewed as a proxy for the global economy, which has a ripple effect on the stock market. Over the past month the changes in the price of oil have had a very large influence on the US and international stock markets. There are at least five reasons for this which I’ve outlined below.
1. Lower oil prices may signal the global economy is slowing
Commodities such as copper and oil can be signals that worldwide economic growth is accelerating or decelerating. Oil was $100 a barrel in August 2014 and went into free fall to $45 in January 2015. It bounced back to $60 between May and June and then went into a slide and has been trading between $30 and $35 for the past month.
While lower oil prices are positive for US consumers and other countries that are large oil importers such as China, Japan and most of Western Europe concerns about lower growth rates in China are negating the benefits. China had been the driver for increased oil demand over the past five years and with oil prices collapsing it appears that its economy may be slowing more than anticipated. This is also exacerbated by concerns that the economic data released by China is rosier than it actually is.
2. Oil export nations are tapping into their stock holdings
Every large oil exporting country budgeted their tax revenues from oil at much higher levels. Saudi Arabia had $635 billion in foreign exchange reserves as of November 2015 and withdrew almost $100 billion from global asset managers over the past year. Russia’s monetary reserves dropped by $40 billion and could be exhausted in 2016.
For the 11 OPEC countries it is estimated that their budget deficits increased from $17 to $278 billion in 2015. At the current oil price their deficits will be larger in 2016. Norway has one of the largest sovereign wealth funds at $805 billion and is tapping into it to fill its budget gap. While not all the assets that these companies are selling are equities a large percentage must be due to their liquidity. This creates pressure on stock prices.
3. Oil companies cutting spending
As oil prices went over $100 the oil sector boomed in the US and one state that very high correlation of 0.9 for the 50 day rolling average between the S&P 500 and the price of oil. Back in 2013 people with no experience were being paid $100,000 and unemployment was 1% compared to the national rate of 7.5%.
Certain parts of Texas have also been hit hard. I saw a news story about a small oil supply firm that has seen its business drop 90% with only safety related equipment being sold. Another has laid off over 150 of its 200 employees. Exxon also announced that it was cutting its capital expenditures in 2016 by 25% which is billions of dollars.
4. Bank loans to the oil sector
Investors are concerned that a large number of loans that allowed US oil companies to rapidly expand fracking operations over the past few years will default. These companies took on a lot of debt based on higher oil prices and are now hanging on by a thread. While the oil companies continue to pump as much as they can, as long as it covers the marginal cost of extracting it, they are trying to generate enough cash to service the debt and stay in business. This of course keeps prices lower.
The ripple effect for the banks is if they have too much of their loan portfolio lent out to these companies the banks will have to write off a large portion of the loans. Investors are taking more of a shoot first (sell bank stocks they believe are exposed) and ask questions later. Having the price of oil stay low only makes this item worse.
5. Algorithms are driving stock movements based on oil price changes
There is a lot of fast money that gravitates to whatever trading system works. For at least the past month there has been a very high correlation of 0.9 for the 50 day rolling average between the S&P 500 and the price of oil (1.0 being that two assets trade in lock step, 0 being there is no relationship and -1.0 being they move in opposite directions).
Copyright: Forbes
British wage growth slows as worries grow over oil and Europe
UNEMPLOYMENT in Britain is just 5.1%, the lowest since 2006. Economists expect that when joblessness falls, wages will rise, because employers have to compete more fiercely for staff. After a long slump brought on by the recession, by mid-2015 wages were growing nicely. But as unemployment continued to decline, the economists have been left scratching their heads. In November three-month average growth in pay was just 1.9% year on year (see chart), far below levels in the years leading up to the 2008-09 global crisis.
The shaky world economy is partly to blame. The oil-price slump is biting: wages in the oil-and-gas industry, which are about 50% above the average, have fallen by 12% in the past year. Cheaper oil also prompted a flirtation with price deflation in the middle of 2015, making workers less inclined to push for pay rises. In the year to December 2015 sterling appreciated on a trade-weighted basis by 7% as nervous investors hoarded British assets (it has since been falling back). As exporters’ competitiveness suffered, they tried to cut costs, including pay. The manufacturing sector, which is heavily export-oriented, has seen especially low earnings growth in recent months.
A more pessimistic view is that, even without market turmoil, wages were bound to come down to earth. In the latest figures a strong rise in August fell out of the rolling three-month average. Mark Carney, the governor of the Bank of England, pointed out on January 19th that long-term unemployment is still 50% higher than in 2007 (though it is falling). In addition, Mr Carney noted that Britons have in recent months reduced the number of hours they work, which is also suggestive of weak demand for labour.
Yet talk of labour-market “slack” is hard to reconcile with businesses’ complaints (which are growing, according to surveys by the Bank of England) about finding labour—especially the skilled sort. Firms may be sating their desire for skills without paying full whack, argues Doug Monro of Adzuna, a job-search website. Mr Monro reckons that, instead of hiring people with experience, more businesses are choosing to hire youngsters, whose wages crashed in the crisis, and train them up. Penguin Random House, a publisher, may be an example: it has announced that it will no longer require job applicants to have a degree.
In recent months the workforce has thus become younger, pushing down average wages. However, with youth unemployment now lower than in mid-2008, firms may struggle to continue this practice for much longer. On top of this, flows of people moving from one job to another, which fell sharply during the recession as workers clung on to whatever position they could find, have picked up and are now back at pre-recession levels, says Samuel Tombs of Pantheon Macroeconomics, a consultancy. A year ago there were slightly more vacancies than jobseekers, according to data from Adzuna; now there are twice as many openings. Those workers happy to flit between jobs ought to be able to drive a harder bargain on pay.
Add in the new “national living wage”, which is coming into force in April and is worth £7.20 an hour for workers who are 25 or older, and wage growth may pick up again in the coming months. The biggest threat to workers realising these gains, though, is home-grown. Thanks to worries over the forthcoming referendum on membership of the European Union, business investment is slowing, say economists at Barclays bank. If investment shrinks, productivity will suffer. Britons could then once again face measly pay growth, just as the economy was picking up speed.
Copyright: The Economist
OECD Trims Global Growth Forecast on Emerging-Market Slowdown
The OECD trimmed its global economic forecasts for the second time in three months as slower growth in emerging markets spilled over into countries such as Germany and Japan.
World output will expand 2.9 percent in 2015 and 3.3 percent in 2016, down from the 3 percent and 3.6 percent predicted in September, the Organization for Economic Cooperation and Development said in a semi-annual report published Monday.
“Global growth prospects have clouded this year,” the Paris-based organization said. “The outlook for emerging-market economies is a key source of global uncertainty at present.”
With Russia and Brazil in recession and China poised to deliver its weakest expansion in more than two decades, the economies that powered world growth in recent years are now slowing it down. Developed economies are feeling the brunt in the form of reduced demand for both commodities and manufactured goods.
China, Russia
The OECD barely changed its forecasts for Chinese output, pegging growth at 6.8 percent this year and 6.5 percent in 2016. Yet Brazil’s economy is now seen shrinking 3.1 percent this year and 1.2 percent next, compared with contractions of 2.8 percent and 0.7 percent predicted in September.
Russian gross domestic product is on track to drop 4 percent in 2015 and 0.4 percent next year, according to the report. Since the OECD didn’t give an estimate for Russia in September, that compares with a June prediction for a contraction of 3.1 percent in 2015 and expansion of 0.8 percent in 2016.
For emerging markets, “challenges have increased,” the OECD said. Should their situation deteriorate, “growth would also be hit in the euro area, as well as Japan.”
Japanese GDP will grow 0.6 percent this year and 1 percent next, according to the report. While the 2015 forecast is unchanged, the 2016 one has been cut from 1.2 percent.
“The outlook for Japan remains softer than in other advanced economies, despite an anticipated upturn in real wage growth,” the OECD said. “This reflects a larger drag exerted by weak external demand, especially in Asia, and strong fiscal headwinds.”
Refugee Crisis
The euro area’s expansion is now seen at 1.5 percent in 2015 and 1.8 percent in 2016, a reduction by 0.1 percentage point for each year.
In terms of the economy, Europe’s immigration crisis represents a much needed potential boost, the OECD said. It estimates that the influx of refugees may add between 0.1 and 0.2 points to growth in 2016 and 2017 thanks to extra government spending.
“Asylum seekers need not impose an unmanageable economic burden,” the OECD said. “If the refugees who stay are rapidly integrated into European society, they are likely to benefit the host countries.”
The U.S. expansion remains on track, with the OECD predicting growth of 2.4 percent this year and 2.5 percent in 2016. U.K. GDP is seen rising 2.4 percent in both years, little changed from September.
In the U.S., “output remains on a solid growth trajectory, propelled by household demand,” the OECD said. “Monetary policy remains very accommodative, which is consistent with stubbornly below-target inflation, subdued wage pressures and hints of downward pressure on inflation expectations.”
The OECD also offered its first glimpse of 2017, predicting a global expansion of 3.6 percent. It sees growth of 2.4 percent in the U.S., 1.9 percent in the euro area and 6.2 percent in China.
Copyright: Bloomberg
Oil at $50 Is ‘Gift to World’ as Abu Dhabi Sees Higher Prices
Oil at $50 a barrel is a “gift to the world” as prices should be low enough to spur economic growth, according to the head of Abu Dhabi’s Department of Economic Development.
Prices will probably be at $60 next year, after hitting bottom at $45, Ali Al Mansoori, the department’s chairman, said in an interview Sunday in the capital of the United Arab Emirates, the fourth-largest oil producer in the Organization of Petroleum Exporting Countries. Benchmark Brent crude has dropped 16 percent this year amid a global oversupply and was trading Monday at $47.98 a barrel at 11:55 a.m. London time.
“It is a gift to the world that oil has dropped to $50,” Al Mansoori said. “Would we like for oil to stay at $50? Absolutely not. We would like oil to go to $70, $80, but beyond that I think it would hurt the economic growth.”
Oil demand growth will climb to a five-year high of 1.8 million barrels a day this year before slowing next year amid a weaker outlook for the world economy, the International Energy Agency forecast in its October market report. The market will probably remain oversupplied through 2016 as Iran exports more crude, should international sanctions be eased, it said.
‘Win-Win’
Oil at $50 to $60 a barrel is a “win-win situation” because it benefits consumers and producers alike, Al Mansoori said. For buyers, “it’s an opportunity for them now to use it as much as possible to set up their policies for economic growth in the next five years because ultimately the commodity is scarce.”
Declining oil prices will mean Abu Dhabi’s gross domestic product growth will be little changed next year, Al Mansoori said. The emirate is doing what it can to expand the economy, but “if we don’t, we take next year as a challenge and turn this challenge into opportunity and turn 2017 with strong growth,” he said.
Major projects in Abu Dhabi will continue. The Midfield Terminal Building at the Abu Dhabi International Airport is still slated to open in 2017, while a branch of the Louvre museum will open next year, Al Mansoori said. In addition, Al Mansoori said he’s meeting with architect Frank Gehry next month in Los Angeles to review the final design for the Guggenheim museum being built in Abu Dhabi, and move ahead with signing the museum’s contract.
Stocks end mixed as investors eye Fed rate call
Wall Street, which is riding a four-week winning streak, kicked off a busy week quietly Monday as it awaited a slew of earnings releases, fresh data on the economy and a Federal Reserve meeting on interest rates.
The Standard & Poor’s 500 stock index, which gained 2.1% last week on the heels of a interest rate by the Bank of China and hints of more stimulus ahead from the European Central Bank, closed down 0.2%.
The Dow Jones industrial average ended down 0.1% and the Nasdaq composite inched up less than 0.1%.
This week, traders will digest earnings reports from 169 companies in the S&P 500, according to earnings-tracker Thomson Reuters. The third-quarter earnings picture, so far, has been better than expected.
Seven out of 10 companies have topped profit forecasts, and while earnings are still expected to contract 2.8% this quarter for the first time since 2009, that’s better than the projections of earnings falling more than 4% at the start of the earnings season.
Today’s earnings releases are expected from 10 companies in the S&P 500. Well-known companies such as Xerox (XRX)and Broadcom (BRCM) report.
But the major market-moving earnings reports don’t kick in until Tuesday, when iPhone maker Apple (AAPL), automaker Ford (F), drug makers Merck (MRK) and Pfizer (PFE) and package delivery giant UPS (UPS) report.
Heading into the week, the S&P 500 was up 0.8% for the year but still down 2.6% from its May 21 record close of 2130.82.
Copyright: Is this the death of America’s middle class?
When Barack Obama made his State of the Union speech in January this year, one phrase kept coming up again and again: middle class. The concept is a part of America’s DNA, with many in the country arguing that a strong middle class boosts economic growth and investment.
But fewer Americans than before are identifying as middle class. In 2008, according toresearch from Pew, 58% of people in the US did. Five years later, that had dropped to 49%.
They might be on to something. This year, according to a new report from Credit Suisse, China’s middle class overtook America’s for the first time, becoming the largest in the world. “The middle class is so closely associated with North America – and the United States in particular – that some of our results for individual countries may come as a surprise,” the report’s authors note.
Here are the numbers of middle-class adults (in millions), by region and country (2015):
Although China has the world’s largest middle class, this social segment still makes up a rather small part of its population: just 10.7%, compared with 37.7% for the US. But while America’s percentage might look good compared with its Asian rival, it is in fact low for a developed country. In Australia, for example, 66.1% of the population are middle class. In the UK that figure stands at 57.4% and in Canada 47.8%.
What’s more, the middle class in China (and Asia more widely) will continue to grow: “The middle class will continue to expand in emerging economies overall, with a lion’s share of that growth to occur in Asia,” the report concluded.
Copyright: World Economic Forum
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