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Middle East & African Monitor - 21 November 2016

  • Oil prices rise on back of progress in OPEC talks
  • Iran reduces supplies of heavy water as Trump presidency approaches
  • FITCH downgrades several Nigerian banks
  • Algeria’s trade deficit widens
  • Egypt conducts US$1.6 bio T-Bill issue
  • USD/LYD hits record high in the parallel market
  • Morocco presses forward with plans to float the Dirham
  • Oman plans to Offer 49% stake in MEDC

REGIONAL COMMENTARY

Oil prices rise on back of progress in OPEC talks
Crude prices bounced overnight after Iran said it was open to the “more flexible approach” on production quotas as suggested by other OPEC members. Iraq too has hinted it may rejoin the Saudi/Russian led efforts to reach a production cut agreement after its oil minister, Jabbar al Luaibi, said yesterday that Baghdad would offer fresh proposals with regards to its own output at a 2-day “technical” OPEC meeting in Vienna, which begins today and ahead of the full ministerial meeting on November 30th. Meanwhile in its annual energy outlook which was released last week, the EIA has warned that the world could encounter a serious conventional oil supply shortage within the next few years if CAPEX by the oil majors continues to decline.  

Iran reduces supplies of heavy water as Trump presidency approaches
Iran has reportedly begun shipping up to 11 metric tons of heavy water to Oman in order to diffuse criticism from the IAEA after the country again exceeded its 130 ton threshold for its heavy water stocks, as outlined within last year’s nuclear accord. Heavy water is used to cool uranium in a process that can also be used to produce plutonium. A spokesperson for Iran’s Atomic Energy Organisation was quoted by the country’s state media saying yesterday that; "In view of the progress of talks with several foreign firms and countries to purchase heavy water, some quantities of Iran's surplus production has been transferred to Oman." According to the WSJ, the US complained strongly about the breach at last week’s IAEA meeting, with its representative warning; “Iran must strictly adhere to all its commitments.”

FITCH downgrades several Nigerian banks
FITCH ratings agency has announced a downward revision of its support rating floors on 10 Nigerian banks to ‘No Floor’ and downgraded nine others support ratings to 5 following a reassessment of potential sovereign support for the domestic banking sector. FITCH explained that the change was due to the agency’s assumption “that senior creditors can no longer rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” adding that while “the Nigerian authorities retain a willingness to support the banks, their ability to do so in foreign currency is weakening due to Nigeria’s eroding foreign currency reserves/ revenues, as well as limited confidence that any available foreign currency will not be used to execute other policy objectives.”

Algeria’s trade deficit widens
Algeria’s trade deficit widened to US$15.8 bio in the first 10 months of this year against US$13.7 bio during the same period last year, as exports fell by more than 23% according to official data. Meanwhile the IMF has called on the government to press on with its economic reform program, with the head of the organization’s mission to Algeria, Jean Francois Dauphin, saying that more measures had be implemented in order to counter the drop in oil and gas prices, such as a reduction of public spending, as well as other structural reforms aimed at altering the current economic model, strengthening the role of the private sector and reducing the country’s heavy dependency on hydrocarbons.

Egypt conducts US$1.6 bio T-Bill issue
Egypt’s Central Bank announced yesterday that it was issuing US$1.6 bio in Treasury bills in order to rollover some of their maturing debt. The bill auction has a deadline of 11am (Cairo time) today. Meanwhile the country’s Finance Minister, Amr el Garhy, has said the government will make a final decision “within days” on whether to still conduct its planned Eurobond issue this year or delay it until early January 2017.

USD/LYD hits record high in the parallel market
According to a Guardian newspaper report, the Libyan Dinar was reportedly changing hands at 6.00 against the US dollar in the “kerb” market yesterday compared to an official rate of 1.40. Meanwhile the UN backed ‘Government of National Accord” is still battling to establish its authority beyond Tripoli in the midst of ongoing arguments with the Central Bank over economic policy, and a lack of support by General Khalifa Haftar whose forces now control a sizeable chunk of Libya’s oil production. European countries are attempting to intervene and help the government produce an economic plan for 2017 which will apparently include the removal of fuel subsidies and a potential devaluation of the official exchange rate, moves that while necessary, could likely also spark more anger on the streets.  

Morocco presses forward with plans to float the Dirham
The governor of Morocco’s Central Bank, Abdellatif Jouahri, last week repeated the bank’s plan to move away from its current managed-peg FX regime towards a partial float of the MAD sometime during 2017. Part of this process would include the introduction of an interbank market that would see the local currency permitted to initially trade within a reasonably tight range, although the CB would also intervene regularly. This band would be gradually widened over time and a full-float established within “a few years.”

Oman plans to Offer 49% stake in MEDC
The Omani government is planning to partially privatise the Muscat Electricity Distribution Company via an IPO and a private placement.  

Middle-East-African-Monitor-21-11-2016

AND FINALLY…
Did you know that Libya is home to five UNESCO world heritage sites including ancient rock art and Hellenic ruins?

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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NBAD Middle East & African Monitor - 21 November 2016

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