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Middle East & African Monitor - 03 January 2017

  • Major oil firm remains wary over fresh Iran deals
  • Oil prices push higher
  • Libya’s Deputy PM resigns
  • Nigeria’s FX reserves fall again
  • Egyptian firms may receive financial relief
  • Qatar’s ratings constrained by fiscal & C/A deficits - EIU
  • KIA ponders asset sales
  • MCC wins hospital contracts in Kuwait

REGIONAL COMMENTARY

Major oil firm remains wary over fresh Iran deals
BP has reportedly decided not to participate in any of the new oil and gas tenders currently on offer by Iran ahead of an incoming and potentially heavily anti-Tehran US administration. According to an article in the FT some BP officials have suggested that the risk of a more hardline stance towards Iran by Washington was a major factor in the company’s decision. To be fair this issue did not deter other international oil firms such as Total and Shell from bidding on the latest Iranian contracts on offer. Meanwhile a letter signed by more than 30 influential physicists and former scientific advisors to the US government has been sent to President-elect Trump urging him not to consider unwinding the P5+1 nuclear agreement with Iran. “This agreement has dramatically reduced the risk that Iran could suddenly produce significant quantities of material for making nuclear arms and lowered the pressure felt by Iran’s neighbors to develop their own nuclear weapons options,” the letter read, adding that even if Tehran were to restart it’s A-bomb program, the accord gives all the other signatories enough options to respond quickly and effectively to such an event.

Oil prices push higher
Crude prices have maintained their bullish tone into the new year as signatories of last year’s production cut agreement begin reducing output in line with their respective allowances.Meanwhile despite a more than 50% rise in oil prices since the beginning of 2016, many small and independent energy companies, especially those in expensive producing regions such as the North Sea, are still struggling to survive. This fact was highlighted by a recent comments from the UK accountancy firm, Moore Stephens, who were quoted Scotland’s Herald newspaper as saying that 16 such oil and gas firms had declared insolvency last year, and that a number of those producers still operating continue to face a series of challenges, including the cost of decommissioning their offshore rigs. This situation has also been reflected in the number of job losses, with Oil and Gas UK saying 84,000 people, linked to the North Sea energy sector, were made redundant in 2015, and a further 40,000 were likely to have been laid off last year.

Libya’s Deputy PM resigns
A senior member of Libya’s interim government (the Presidential Council) has reportedly resigned from his post. Musa al Koni, who was the administration’s deputy Prime Minister announced his resignation yesterday citing the ongoing inability of the UN backed government to unify and actively run the country. “We failed to resolve the political crisis, we failed to solve our citizens everyday problems, the problems have increased since we began and those unsolved have accumulated," al Koni stated adding, “Everyone is trying to rule Libya and the Presidential Council is ruling this country by appearance only.” Meanwhile there were reports yesterday of renewed fighting taking place between rival militia groups operating near the southern military airport of Barak Al Shati.

Nigeria’s FX reserves fall again
Domestic manufacturing firms in Egypt who have been struggling to repay their hard-currency denominated debt since the pound was devalued and then floated late last year, may soon be able to negotiate a special “fixed-rate,” and an extension of their debt repayments from 1-3 years by their respective lenders. According to the deputy chairman of the Federation of Egyptian Industries, Tarek Tawfik, this mooted arrangement is supported by the Central Bank, although we have not as yet seen any official comment on the matter. The proposed deal “is very positive and will help end most of the FX-related dues problems,” Tawfik was quoted as saying by Bloomberg.

Egyptian firms may receive financial relief
According to the Nigerian Central Bank, the country’s foreign exchange reserves dropped to US$25.72 bio last month, against US$29.13 bio the year before. Meanwhile USD/NGN was exchanging hands at around 490.00 in the parallel market against an official rate of 305.00.

Qatar’s ratings constrained by fiscal & C/A deficits - EIU
A recent report published by the Economist’s Intelligence Unit has suggested that Qatar’s sovereign ratings are likely to remain constrained this year due to the country’s heavy reliance on oil and gas related revenues, as well as its fiscal and current-account deficits. The EIU added that the ongoing and rapid expansion of credit in an environment of falling government deposits, places some liquidity pressure on Qatar’s local banks. However the EIU also notes that Qatar’s ability to meet all of its external debt obligations is “not in doubt” and that the Central Bank’s sizeable reserves are still sufficient enough to fend off any potential pressure on local currency’s long established pegged rate to the US dollar.

KIA ponders asset sales
Kuwait’s sovereign wealth fund is reportedly considering selling off some of its “unnecessary” assets this year, especially in those countries with a high level of FX volatility, according to an article in the Al Anba newspaper and on Bloomberg.

MCC wins hospital contracts in Kuwait
China’s Metallurgical Group Corp, has been awarded a US$535 mio contract to build two 600-bed hospitals in Kuwait.  

03-01-2017

AND FINALLY…
Did you know that pistachios are one of the oldest flowering nut trees and are native to the Middle East region?

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 - 03 January 2017

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