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Middle East & African Monitor - 18 October 2016

Overview

  • Russia Proposes 6-Month Oil Production Freeze
  • Ceasefire Agreement Reached In Yemen
  • Kuwait’s Parliament Dissolved
  • Egypt Edges Towards IMF Bailout
  • Saudi International Bond Issue Set To Launch This Week
  • O/N Interbank Rate In Nigeria Hits Record High
  • Warba Plans US$ Islamic Bond Issue
  • Kone Wins Major Contract In Qatar

Russia Proposes 6-Month Oil Production Freeze.
Russia’s Energy Minister, Alexander Novak, has suggested that a freeze in global crude production for a minimum period of 6 months would be the most “efficient” way to rebalance the market. "We believe that freezing is the most appropriate option. In my opinion, the most effective period that would actually achieve a result is 6 months with a possible prolongation," Novak stated adding that he expected all Russian oil firms would participate in such a move. “We continue to work with our companies, hold consultations and hope that they all would take part in the freeze. Taking into consideration that it would be profitable both for companies and budget as it will maintain prices and the investment process for companies, we count on a common approach in the implementation of these goals.” Meanwhile a recent research note issued by US based Bernstein Energy, claims that recent data releases appear to confirm a slowing in worldwide oil inventory builds, with Q3 this year showing an increase of just 17 mio barrels (the smallest build since 2014) and an oversupply of 200 mio barrels against earlier expectations of 300 mio by the IEA.

Ceasefire Agreement Reached In Yemen.
The UN envoy to Yemen, Ismail Ould Cheikh Ahmed, announced this morning that a 72-hour ceasefire agreement had been reached last night by all sides involved in the conflict, and that this would come into force from tomorrow evening. There is also the option for a possible extension of the initial 3 day time limit if all parties adhere to the agreement’s conditions. Saudi Arabia’s Foreign Minister, Adel al Jubeir, was quoted yesterday saying that his government were prepared to sign a ceasefire agreement with the Houthis in Yemen, but remained skeptical that the rebel group would not renege on such a deal again. “We would like to see a ceasefire yesterday. Everybody wants a ceasefire in Yemen, nobody more so than the kingdom of Saudi Arabia and the coalition members. Yes, we come at this with a lot of cynicism. But we are prepared, the Yemeni government is prepared, to agree to a cessation of hostilities if the Houthis agree to it. The coalition countries will respect the desire of the Yemeni government," al Jubeir stated.  

Kuwait’s Parliament Dissolved.
The Emir of Kuwait, Sheikh Sabah al Ahmed al Sabah, announced the dissolution of the country’s parliament by Royal decree earlier this week due to “regional circumstances” including security issues. The decision comes after days of arguments between some MPs and the government over the reduction of fuel subsidies and is the 7th time parliament has been dissolved since 2006. The state-owned television channel described the ongoing disagreements as a “lack of cooperation.” On Sunday a BBC report claims that the parliamentary speaker, Marzouq al Ghanem had called for early elections saying the only way to face the challenges Kuwait faced was “to form a new government line-up.” Fresh elections are due to be held on November 26th 2016.

Egypt Edges Towards IMF Bailout.
The Egyptian Finance Minister, Amr El Garhy, said yesterday that he expected the additional US$6 bio in funding, (required by his government as a pre-condition for the IMF loan program’s final approval), to be in place within the next 2 weeks. He also said that a new investment law which would reduce bureaucratic red tape (another IMF demand) has been drafted and would be submitted to parliament before the end of the year, while a proposed international bond sale would take place within the same timeframe. Meanwhile President Abdel Fattah al Sisi has again warned the country’s citizens that further impending reforms would be “difficult” on day-to-day life in the short-term but necessary to reverse Egypt’s economic decline. “The reforms are tough but they're unavoidable to save the economic situation," Sisi stated adding that Egyptians had to “stand together” and recognize the importance and inevitability of such reforms. The President also dismissed ongoing rumours of a possible rift between his administration and Saudi Arabia calling the stories a “false” picture created by the media. "Strategic relations between Egypt and Saudi Arabia are not affected by anything and we should not allow anything to harm these relations,” he said.

Saudi International Bond Issue Set To Launch This Week.
Saudi Arabia is expected to launch its long-awaited debut international bond tomorrow which will probably be split into 5Y, 10Y and 30Y maturities. Regional markets have received a boost ahead of this issuance, with the Saudi 5Y CDS tightening 25bps since the beginning of October from 170 to 144. While ADGB and Qatar over the same period are in about 6-7bps. For those who missed it you can read our comments yesterday on this upcoming bond sale, along with other regional stories via our research website : https://www.nbad.com/en-ns/insight-and-features.html
Meanwhile Moodys Investor Services has issued a note warning that a reduced project pipeline within Saudi Arabia’s construction industry could lead to an increase in NPLs and higher provisioning costs for local banks in the country.

O/N Interbank Rate In Nigeria Hits Record High.
The o/n interbank lending rate in Nigeria hit a record high of 128% late last week as local banks scrambled to take part in the Central Bank’s two-month forward US$ auction, which in turn created a domestic cash shortage. The rate reportedly dipped back down to 100% yesterday.

Warba Plans US$ Islamic Bond Issue.
Kuwait’s Warba Bank is reportedly planning to launch a US$250 mio SUKUK issue soon in order to increase its Tier 1 capital.

Kone Wins Major Contract In Qatar.
The Finnish based Kone company, has been awarded a contract to supply and install, 139 elevators, escalators and auto walk stations to serve the Lusat Light Rail Transit System currently being built in Qatar.

Middle-East-African-Monitor-18-10-2016

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NBAD Middle East & African Monitor - 18 October 2016

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