Iran snubs Doha proposal, won't freeze oil output

AP | By ALI AKBAR DAREINI | February 17, 2016

TEHRAN, Iran (AP) - Iran appeared Wednesday to back a plan laid out by four influential oil producers to cap their crude output if others do the same, though it offered no indication that it has any plans to follow suit itself.

The agreement reached in Doha the day before by Qatar, Saudi Arabia, Russia and Venezuela is aimed at stabilizing global oil prices, which recently plunged to less than $30 a barrel, a 13-year low. But Iran is keen to ramp up exports to regain market share now that sanctions related to its nuclear program have been lifted under a landmark agreement.

"Iran supports any measure to boost oil prices," Oil Minister Bijan Namdar Zanganeh said after talks with his counterparts from Iraq, Venezuela and Qatar.

"The decision taken to freeze the production ceiling of OPEC and non-OPEC members to stabilize and boost prices is also supported by us," he added, in comments posted on the ministry's website late Wednesday.

Iran's envoy to OPEC, Mahdi Asali, had earlier blamed the fall in prices on oversupply, and said it was up to Saudi Arabia and others to cut production. He said the four nations that participated at the Doha gathering could stabilize oil prices on their own -- if they cut their production by 2 million barrels a day.

"These countries increased their production by 4 million barrels when Iran was under sanctions," Asali was quoted as saying by the Shargh daily. "Now it's primarily their responsibility to help restore balance on the market. There is no reason for Iran to do so."

The four countries made their announcement following an unexpected meeting in the Qatari capital that pointedly did not include Iran. They agreed to act only if other producers made similar freezes.

Iran has previously said it hopes to put another 500,000 barrels a day on the market. Figures from the International Energy Agency show it pumped 2.9 million barrels daily in December, before sanctions were lifted.

Iran used to export 2.3 million barrels per day, but its crude exports fell to 1 million in 2012, when sanctions were tightened.

On Tuesday, Iran's oil minister said it had no intention of giving up its share of the market. Zanganeh acknowledged that global markets are "oversupplied," but said Iran "will not overlook its quota," according to comments carried by his ministry's Shana news service.

Even with Iran's cooperation, it was unclear if the Doha plan would be enough to put a floor under prices.

The United Arab Emirates' energy minister, Suhail Mohamed al-Mazrouei, refused on Wednesday to discuss the Doha proposal after giving a keynote address at a Dubai conference in which he mentioned low oil prices only in passing.

"I will only talk about this conference," he said, before smiling and walking away from reporters' shouted questions.

He later took to Twitter to say his country's oil policy "is open to cooperate with all producers toward mutual interest of the market stability and we are optimistic on the future."

Kuwait, another Gulf OPEC member, signaled it was willing to go along with the Doha plan.

Anas al-Saleh, who is Kuwait's deputy premier, finance minister and acting oil minister, said in a statement that his country was committed to the proposal if others join in.

"Kuwait hopes the agreement would provide a positive atmosphere for oil prices, and for the market to regain balance, and calls on all to support stability of markets," he said.

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Associated Press writers Jon Gambrell and Adam Schreck in Dubai, United Arab Emirates, contributed to this report.

Citi: World economy trapped in ‘death spiral’

NBC | Katy Barnato | February 5, 2016

Ivan Bliznetsov | Getty Images

The global economy seems trapped in a "death spiral" that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi strategists have warned.

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

"The world appears to be trapped in a circular reference death spiral," Citi strategists led by Jonathan Stubbs said in a report on Thursday.

"Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)... and repeat. Ad infinitum, this would lead to Oilmageddon, a 'significant and synchronized' global recession and a proper modern-day equity bear market."

Stubbs said that macro strategists at Citi forecast that the dollar would weaken in 2016 and that oil prices were likely bottoming, potentially providing some light at the end of the tunnel.

"The death spiral is in nobody's interest. Rational behavior, most likely, will prevail," he said in the report.

Crude oil prices have tumbled by around 70 percent since the middle of 2014, during which time the U.S. dollar has risen by around 20 percent against a basket of currencies.

The world economy grew by 3.1 percent in 2015 and is projected to accelerate to expand by 3.4 percent in 2016 and 3.6 percent in 2017, according to the International Monetary Fund. The forecast reflects expectations of gradual improvement in countries currently in economic distress, notably Brazil, Russia and some in the Middle East.

By contrast, Citi forecasts the world economy will grow by only 2.7 percent in 2016 having cut its outlook last month.

Overall, advanced economies are mostly making a modest recovery, while many emerging market and developing economies are under strain from the rebalancing of the Chinese economy, lower commodity prices and capital outflows.

Stubbs added that policymakers would likely attempt to "regain credibility" in the coming weeks and months.

"This is fundamental to avoiding a proper/full global recession and dangerous disorder across financial markets. The stakes are high, perhaps higher than they have ever been in the post-World War II era," he said.

Just 151,000 new jobs were created in January in the U.S., in the latest sign that the world's biggest economy is slowing. Economists are concerned about an industrial or manufacturing recession in the country, following some warnings from companies in earnings seasons and recent weak manufacturing activity and durable goods orders data.

However, some analysts say markets are overegging the prospect of a global slump.

"Many markets are now pricing in a significant probability of recession and when we talk about recession, we're talking particularly about a U.S. recession. Do you think that is likely or not? To me, the odds are too high; the market is pricing too high a probability," Myles Bradshaw, the head of global aggregate fixed income at Amundi, told CNBC this week.

IMF and World Bank move to forestall oil-led defaults

FT | Jack Farchy in Moscow and Shawn Donnan in Washington | January 27, 2016 6:47 pm

Secretary Kerry Holds Trilateral Meeting With Presidents of Azerbaijan and Armenia at NATO Summit in Wales | IMAGE SOURCE: WIKIPEDIA COMMONS

Officials from the International Monetary Fund and the World Bank are heading to Azerbaijan to discuss a possible $4bn emergency loan package in what risks becoming the first of a series of bailouts stemming from the tumbling oil price.

The Baku visit, which follows a currency crisis triggered by the collapse in crude, comes amid concern at the two global institutions over emerging market producers from central Asia to Latin America.

The fund and the bank have also been monitoring developments in other oil-producing countries such as Brazil, which is now mired in its worst recession in more than a century, and Ecuador. The oil-driven crisis in Venezuela has even raised the possibility of repaired relations between the fund and Caracas, a city IMF staff last visited more than a decade ago.

Azerbaijan depends on oil and gas for 95 per cent of its exports and the fallout of its currency weakness has sparked a series of protests across the country rattling the government of President Ilham Aliyev.

Last week the former Soviet republic became one of the first countries in the world to resort to capital controls in response to the collapse in oil prices, imposing a 20 per cent tax on exporting foreign currency.

The Azerbaijani currency, the manat, has fallen 35 per cent since the central bank in late December abandoned a dollar peg after spending more than half its reserves in a year.

The IMF team would be in Baku from January 28 until February 4 for “a fact-finding staff visit at the authorities’ request”, an IMF spokesperson said. It would discuss possible “technical assistance” and “assess possible financing needs”. The financing package under discussion was worth about $4bn, people familiar with the discussions said.

A World Bank spokesman said the IMF and it were discussing with the government immediate and longer-term measures “in response to the pressure on the local currency and low oil prices”.

The World Bank predicted this week crude prices would average just $37 a barrel this year and warned of long-term consequences. It also issued a caution that both producers and commodity markets still faced the significant risk of a bigger than expected slowdown in major oil-consuming emerging economies like China.

“These are bad times for oil producers and their creditors,” Oxford Economics warned clients on Wednesday. “History provides reason for extreme pessimism on the likely fortunes of commodity producers; suggesting that [emerging markets] are prone to default and that commodity slumps are possibly the biggest cause of defaults.”

Christine Lagarde, the managing director of the IMF, began the year with a visit to Nigeria when she warned that Africa’s largest economy would have to confront “tough choices” and the reality of lower oil prices for some time.

Discussions with Baku are at an early stage and the Azerbaijani government may yet opt to go without support from the IMF, people familiar with the matter said.

While Azerbaijan’s central bank reserves have fallen dramatically in the past year, the country has little debt and a sovereign wealth fund with assets of $34.7bn at the start of October, more than 60 per cent of GDP.

However, the fall in oil prices has put the Azerbaijani economy under extreme stress. Elman Rustamov, the central bank governor, said last week that over the course of 2015 the country’s balance of payments had fallen from $17bn to “practically zero”. Moody’s, the credit rating agency, said last month it expected Azerbaijan to record a budget deficit of 5.5 per cent in 2016 after a 9.2 per cent deficit last year.

Representatives of the Baku government did not respond to requests for comment on Wednesday. Samir Sharifov, finance minister, said in an interview on Azerbaijani television broadcast over the weekend that government bonds issued on the domestic market would be “one of the sources” to cover the budget deficit.

Delegations from other international financial institutions, including the European Bank for Reconstruction and Development and the Asian Development Bank, are also due to arrive in Baku in the next few days.