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Middle East & African Monitor – 05 April 2017

  • Crude prices edge higher again on supply tightening
  • New sanctions bill on Iran delayed
  • Saudi Arabia prepares for US$ SUKUK
  • UAE purchasing managers index rises
  • Low cocoa prices worse for Ivory Coast than Ghana – Moodys
  • Egypt renews oil contract with Kuwait
  • China offers US$4.5 bio loan to Nigeria
  • Morocco’s economy expands

REGIONAL COMMENTARY

Crude prices edge higher again on supply tightening
Oil prices rose again overnight on speculation global supplies are tightening and on the back of a surprise platform shutdown in the North Sea. Production from the UK’s 180,000bpd Buzzard field was temporarily halted yesterday due to urgent repair work on a processing terminal. On top of this an API report yesterday estimated that US inventories had dropped by 1.8 mio barrels last week, although we await confirmation of this from the EIA later today. Meanwhile the oil tanker tracking firm Vortex, said that the amount of crude being shipped and/or stored at sea has dropped by 16% since the start of this year which, according to them indicates that global supplies are falling at a faster pace than many analysts think. “Water is where the market changes first. We think this is some of the first evidence that the supply cuts are having a major effect,” the CEO of Vortex was quoted as saying to the FT this week, in reference to the OPEC led production cut agreement. His view is supported by a senior oil analyst at Energy Aspects Limited, Amrita Sen, who pointed to the recent sharp fall of crude inventories in the Caribbean as another indication “that rebalancing has begun.”

New sanctions bill on Iran delayed
A bill, which if passed would impose fresh sanctions on Iran, has been delayed in the US Senate apparently due to concerns that it may inadvertently give political capital to hardliners in Tehran, ahead of Presidential elections which are due to be held there later this month. Ironically Boeing has also just signed a US$6 bio MOU with Iran’s Aseman Airlines covering the purchase of 30 Boeing 737 passenger planes and the option for another 30. However this deal still needs the approval of the US Treasury, and a number of congressmen have already criticised it including the influential Illinois Republican representative, Peter Roskam, who was quoted by the NY Times yesterday as saying; “On the same day Bashar al-Assad’s air force dropped chemical weapons onto children, an American company announced its intent to sell airplanes to Assad’s patrons in Tehran,” he stated adding that he hoped the White House would “do everything within its power” to halt the sale. Thus both issues look set to become test cases over the Trump administration’s future policy direction on Iran.

Saudi Arabia prepares for US$ SUKUK
Saudi Arabia has mandated a number of international banks to coordinate an investor roadshow beginning this Sunday, ahead of its first ever US$ denominated Islamic bond issue. The total size of the bond sale is anticipated to be as high as US$10 bio, and consist of 5 and 10Y tenors . Meanwhile Kuwait’s Finance Minister, Anas al Saleh, said yesterday that his country also plans to tap the international markets again this year in order to help fund its budget deficit, which the government predicts will reach US$21.6 bio during the upcoming fiscal year.

UAE purchasing managers index rises
The Emirates NBD PMI rose to 55.80 during the first quarter of this year from 54.2 in Q4 2016. This is its highest level since Q3 2015, and ENBD attributes the rise to “encouraging growth in the non-oil economy” and rising optimism amongst local companies about future customer demand.

Low cocoa prices worse for Ivory Coast than Ghana – Moodys
The 30% drop in global cocoa prices since the middle of last year will have a deeper effect on the Ivory Coast’s economy than Ghana’s, a recent Moodys report claims, and although both countries are clearly negatively affected, the agency expects them to be able to weather this current storm. The commodity currently accounts for more than 24% of Ghana’s total merchandise exports and almost 43% of the Ivory Coast’s, while the agricultural sector is also the primary employer in each. On a brighter note Moodys’ does not expect this period of low cocoa prices to last for an extended period stating; "Growing demand from the developing world is likely to provide support to a recovery in prices over the long term."

Egypt renews oil contract with Kuwait
Egypt’s Petroleum Ministry has announced that it has renewed an agreement to import 2 mio barrels of oil per month from Kuwait. According to Reuters the new deal also extends the payment period for Egypt from 3 to 6 months.

China offers US$4.5 bio loan to Nigeria
China has promised to provide US$4.5 bio in financial assistance to help Nigeria develop its underinvested agricultural sector.

Morocco’s economy expands
According to Morocco’s planning ministry the country’s economy grew by 4.30% in Q1 of this year against 1.70% over the same period in 2016. The main driver was a recovery in the agricultural sector following last year’s drought.  

05-04-2017

AND FINALLY…
The world’s largest camel festival is currently underway in Saudi Arabia where 50,000 ‘ships of the desert’ will compete to be judged the “most beautiful.” The assessments are reportedly based on a number of criteria including the size of the camel’s head, whether the lips cover its teeth, the length of the neck, the roundness, height and placement of the hump, the size of its eyes, how long the lashes are, how the nose droops and whether the ears stand back. 

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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