Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
Tel: +971 2 6110 127
N. Korean Official Arrives In Tehran - Iran & Russia Discuss Closer Military Ties.
Russia’s Deputy Prime Minister, Dimitry Rogozin, met with Iran’s Defence Minister, Hossein Dehqan, this past Saturday to discuss a potential increase in military and technological cooperation between the two countries including fresh arms orders, according to various Russian media sources. These talks come hot on the heels of a ratcheting up of US sanctions on both Moscow and Tehran last month. Meanwhile a senior North Korean official, Kim Yong Nam, arrived in Tehran last Thursday for an alleged ten-day visit which will have certainly raised more than a few eyebrows especially considering Pyongyang’s recent ballistic missile tests. North Korea will no doubt be desperate to find new sources of hard currency after the implementation of fresh UN sanctions which now ban that country’s exports of iron ore, coal, lead and fish.
Shale Well Decline Rates Accelerating.
As we have discussed in previous commentaries on the topic, fracked wells are normally characterized by sharp production decline rates. However according to some recent analysis conducted by the US based energy consultant, Nick Cunningham, these decline rates have been speeding up due in part to one of the methods the US fracking industry introduced over the past few years in an attempt to improve efficiency, namely moving wells closer together. But the closer drillers are to each other the respective wells’ natural pressure falls, this in turn reduces the amount of oil that can be extracted. This scenario is already highlighted in the Permian basin where, according to Cunningham’s research, the legacy decline rate has risen from an average of 100,000bpd per month in 2016 to 154,000bpd this year. In other words, the Permian will see its legacy wells lose 154,000 bpd from July to August, which means that operators will have to drill at least as much just to stay flat. The situation is also beginning to affect the giant Eagle Ford region whose decline rate has jumped from 80,000bpd at the beginning of 2017 to 136,000 bpd last month. Cunningham’s comments are supported by a new report from Horseman Capital which also concluded that "New well production is increasingly cannibalizing legacy production.” Meanwhile in other energy news a technical committee consisting of representatives from OPEC and NOPEC are due to meet today to assess current conformity of those countries who signed up to the crude output cut agreement and ways to improve the overall percentage.
Tensions Build Ahead Of Kenyan Election.
Kenyans will head to the polls tomorrow in order to select their country’s next President, and judging by the latest voter surveys the incumbent Uhuru Kenyatta, is facing a serious challenge to his re-election by the opposition leader Raila Odinga. Tensions are high and being driven by concerns that a very close outcome could trigger a return of politically-related violence such as that seen in 2007 when almost 1,300 people were killed and 600,000 displaced. These latest fears were exacerbated following the murder last week of a senior fraud monitor working for the country’s National Electoral Commission, and by earlier allegations from Odinga that agents of the ‘deep state’ may be planning to rig the election. A Kenyan opposition strategist quoted by the NY Times last week warned that the country will “burn” if Mr. Kenyatta is declared the winner in a ‘sham election.’ Odinga, is making his fourth and most likely last attempt to become President, he also blamed vote-rigging for his last defeat to Kenyatta 4 years ago.
S&P Affirms Kuwait Ratings.
Standard & Poors has affirmed its AA/A-1+ long and short-term ratings on Kuwait and maintained a stable outlook. In a statement the agency said that its decision was supported by the country’s, “High levels of accumulated fiscal, external, and household wealth, despite the subdued, albeit improved, oil price environment,” adding however that the ratings were “Constrained by the concentrated nature of the economy and regional geopolitical tensions. Kuwait derives about 60% of GDP, more than 90% of exports, and about 90% of fiscal receipts from hydrocarbon products. Given this high reliance on the oil sector, we view Kuwait’s economy as undiversified,” S&P said although noting that Kuwait was unlikely to experience any negative spillover linked to the ongoing Qatar crises.
Nigeria’s Fixing Rates Likely To Converge Soon.
Last week Nigeria’s FMDQ OTC Securities Exchange reportedly called on domestic banks to begin quoting their USD/NGN exchange rates in line with the ‘Investors and Exporters’ window rate instead of the existing interbank rate which itself is derived from the CB’s official rate (305-315). The local currency was last fixed at 367.00 against the US dollar (NAFEX) as opposed to the current interbank fix of 325.00 (NIFEX). The offshore NDF market is still currently using NIFEX to fix maturing transactions.
QIB To Offer New CDs.
Qatar Islamic Bank has begun offering 1 and 2 year certificates of deposit in both Qatari Riyals and US dollars in an attempt to boost its deposit base. The bank’s new two-year CDs offer a rate of 3.75% for QAR and 2.75% for USD. These rates are 1% above those offered for similar paper in QIB's first CD issuance back in 2015.
Mauritius Inflation Rate Dips.
The headline inflation rate in Mauritius dropped to 5.30% y/y last month from 6.40% in June.
Samsung- Petrofac JV Seals US$2 Bio Refinery Project In Oman.
South Korea’s Samsung Engineering in partnership with the UK’s Petrofac, has won a US$2 bio engineering, procurement, construction, commissioning, training and start-up operations contract on the Duqm refinery project in Oman.
Arabtec Wins Dubai Mall Contract.
Arabtec Construction has been awarded a AED 363 mio contract to build a new addition to Dubai Mall.
Japan Approves Infrastructure Loan To Iraq.
Japan’s government has agreed to provide the Iraqi government with a US$195 mio soft loan to help rebuild a thermal power station in Basra. Iraq is expected to record a US$21.4 bio budget deficit this year.
Did you know that a thousand years before the Wright brothers took to the air, a man named Abbas Ibn Firnas made several attempts to construct a flying machine? In 852 he reportedly jumped from a tower in Cordoba wearing a loose cloak stiffened with wooden struts, which he hoped would allow him to glide like a bird. He didn't. But the cloak slowed his fall, creating what is thought to be the world’s first parachute, leaving him with only minor injuries.
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