OPEC set to prolong oil output cuts by nine months – Reuters

* Saudis win Iraqi support for nine-month extension

* Deal might include new, small non-OPEC producers

* Deepening of cuts unlikely, OPEC watching U.S. shale (Adds Ecuador comments, Saudi arrival)

By Alex Lawler, Rania El Gamal and Ahmad Ghaddar

VIENNA, May 23 (Reuters) – OPEC is likely to extend production cuts for another nine months, ministers and delegates said on Tuesday as the oil producer group meets this week to debate how to tackle a global glut of crude.

OPEC’s top producer, Saudi Arabia, favours extending the output curbs by nine months rather than the initially planned six months, as it seeks to speed up market rebalancing and prevent oil prices from sliding back below $50 per barrel.

On Monday, Saudi Energy Minister Khalid al-Falih won support from OPEC’s second-biggest and fastest-growing producer, Iraq, for a nine-month extension and said he expected no objections from anyone else.

The Organization of the Petroleum Exporting Countries meets in Vienna on Thursday to consider whether to prolong the deal reached in December in which OPEC and 11 non-members, including Russia, agreed to cut output by about 1.8 million barrels per day in the first half of 2017.

The decision pushed prices back above $50 per barrel, giving a fiscal boost to major oil producers. But it also spurred growth in the U.S. shale industry, which is not participating in the output deal, thus slowing the market’s rebalancing.

Saudi Arabia’s Gulf ally Kuwait said on Tuesday not every OPEC member was on board yet for an extension to March 2018, but most ministers and delegates in Vienna said they expected a fairly painless meeting.

Ecuador Oil Minister Carlos Perez said OPEC and other oil-producing countries would discuss a six- or nine-month extension to output cuts and probably choose the latter.

“Six and nine months are both proposals on the table … we will support the majority, probably the nine months,” Perez, whose country is in OPEC, told reporters after arriving in Vienna on Tuesday.

Asked whether deeper cuts would be discussed, he said: “Not at this point, I don’t think so.”

Noureddine Boutarfa, energy minister of OPEC member Algeria, said OPEC was discussing a possible nine-month extension, with curbs kept at the same level as under the group’s existing deal.

“Right now we are talking about nine months,” Boutarfa told reporters in the Austrian capital. Falih also arrived in Vienna on Tuesday but made no comment to reporters.

“The Saudi oil minister’s view seems accurate and no serious objection is expected if at all,” said one OPEC delegate, who asked not to be identified as he is not allowed to speak to the media. “No surprises,” said a second delegate.

UPSIDE SURPRISE

Many OPEC meetings in recent years witnessed bitter fights between Saudi Arabia and its rival Iran, OPEC’s third-largest oil producer.

Tehran has kept relatively quiet in the past few weeks, saying it saw a need to extend cuts. Iran is emerging from a presidential election won by the incumbent, Hassan Rouhani.

“It has been some time since we had such a strong consensus going into an OPEC meeting,” BNP Paribas’s commodities strategist Harry Tchilinguirian said.

“Despite a supply cut extension being factored in by the market, oil prices have made only modest progress. It may take more than an extension to rekindle bullish spirits,” he added.

Oil prices initially fell 1 percent on Tuesday after U.S. President Donald Trump proposed to sell half of the United States’ Strategic Petroleum Reserve in the next 10 years as well as to speed up Alaskan exploration.

By 1550 GMT, Brent crude was up 13 cents at $54.00 a barrel as most analysts said the sale would not affect immediate OPEC efforts.

Two OPEC sources said a one-year extension was also an option, though others said most discussions were centring on nine months due to weak seasonal demand in the first quarter.

Saudi’s Falih said on Monday he expected the new deal to be similar to the old one, “with minor changes”.

“He (Falih) has talked to several countries including Norway, including Turkmenistan, including Egypt, and they have made signs of their willingness to join the collaboration,” Kuwait’s oil minister Essam al-Marzouq said on Tuesday.

Norway’s oil ministry said later on Tuesday it had no plan to join cuts but had a good dialogue with OPEC.

Deutsche Bank said the market had priced in a nine-month extension.

“The inclusion of smaller producing non-OPEC countries such as Turkmenistan, Egypt and the Ivory Coast would be a negligible boost, in our view,” Deutsche said. “A deepening of cuts, though, has more potential to provide an upside surprise.” (Additional reporting by Ernest Scheyder; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

Source: http://af.reuters.com/article/nigeriaNews/idAFL8N1IP4XY?sp=true

 

Nigerian economy shrinks again, cenbank keeps rates on hold – Reuters

CBN

By Ulf Laessing and Alexis Akwagyiram

LAGOS May 23 (Reuters) – Nigeria’s economy contracted again in the first quarter, data showed on Tuesday, but the central bank expects Africa’s biggest economy to return to growth by the end of the third quarter thanks to higher foreign exchange inflows.

Africa’s biggest economy shrank by 1.5 percent in 2016 for its first annual recession in 25 years, hit by a shortage of hard currency and lower revenues from its dominant oil sector as world crude prices remained under pressure.

Gross domestic product shrank a further 0.52 percent year-on-year in the first quarter, the National Bureau of Statistics (NBS) said on Tuesday, but less than the revised contraction of 1.73 percent in the fourth quarter.

Hours after the figures were published, Central Bank Governor Godwin Emefiele said the monetary policy committee voted to keep the benchmark interest rate at 14 percent, saying it was to early for a cut due to the inflation rate being above its target.

Analysts polled by Reuters had expected no change in the rate.

Lukman Otunuga, a research analyst for FXTM, said the central bank made a “logical decision” to keep rates on hold while the nation sought economic stability.

“The damage of depreciating oil prices still lingers on with social economic issues, soft domestic data and inflation exposing the nation to downside risks,” he said.

Emefiele said the recession would be over by the end of the third quarter. “We have seen various positive signs of the economy,” he said.

Adding to the optimism, a spokesman for the presidency also said Nigeria would leave recession late this year.

FOREX

Emefiele also said the bank was pushing to end the spread between the black market and official foreign exchange rates, pointing to a rally in the naira after a new trading window launched a month ago attracted foreign inflows worth $1.1 billion.

Nigeria created the window to attract more investors confused over its system of at least five foreign exchange rates.

“I am so optimistic that we will get to the end of this struggle,” Emefiele said, refusing to give an exchange rate target.

Signs of growth in the oil sector, as laid out in the NBS data, fuelled hopes of an upturn in the coming months.

Average oil production inched up from the fourth quarter of 2016 by 0.07 million barrels per day (bpd) to 1.83 million barrels in the first quarter, the statistics office said.

Militants attacks on energy facilities in the southern Niger Delta region last year cut crude output by as much as a third in 2016, but there have been no major attacks in 2017 amid talks with the government aimed at reaching a peace agreement.

The NBS said the economy’s non-oil sector grew by 0.72 percent in the first quarter in real terms, which was 1.05 percent higher than the fourth quarter of 2016. (Additional reporting by Felix Onuah, Camillus Eboh, Oludare Mayowa and Paul Carsten in Abuja; Editing by John Stonestreet and Ed Osmond)

Source: http://af.reuters.com/article/nigeriaNews/idAFL8N1IP2LL

 

Dollar shortage: Moody’s says Nigeria’s recovery may take time – Punch

Oyetunji Abioye

Although foreign currency shortages in Nigeria and other sub-Saharan African countries are easing, it will take time for the sovereigns, banks and non-financial companies to restore their financial health, Moody’s Investors Service has said.

In a report released on Monday, Moody’s noted that dollar shortages stemming from lower oil and commodity prices had hit the finances of countries in the sub-region.

The report was titled, “Foreign-currency shortages are subsiding but will take time to overcome.”

In a statement on Monday, Moody’s Vice-President and co-author of the report, Lucie Villa, was quoted as saying, “Falling oil and commodity prices over the past two years have led to foreign currency shortages in numerous sub-Saharan African countries, with oil exporters hit particularly hard.”

“The stabilisation in oil and commodity prices over recent months will help to ease the pressure, but any recovery will depend on continued higher prices and could take some time.”

According to the VP, managing foreign currency shortages will remain a key policy challenge for sub-Saharan oil exporters.

In recent quarters, dollar rationing, currency devaluation and foreign currency borrowing by governments have stemmed the fall in external reserves in Angola and Nigeria.

According to the report, in the region’s banking sector, banks in Angola, Nigeria and the Democratic Republic of the Congo remain the most affected by foreign currency shortages due to their economies’ high reliance on dollars.

It said the region’s banks’ foreign currency deposits had been depleted and they had limited capacity to source new foreign funding.

“The resultant currency devaluations have also eroded banks’ loan quality, profitability and capital”, Moody’s Senior Vice-President and co-author of the report, Constantinos Kypreos, added.

According to a statement by Moody’s, pressures appear to be receding as their central banks continue to inject more dollars into the economy on the back of higher oil prices and related revenues.

Banks in South Africa are the least affected, reflecting the system’s limited dollarisation levels and low reliance on foreign funding.

The statement read in part “Although a gradual increase in commodity prices over recent months is supporting foreign currency liquidity and helping to ease currency shortages, it is too early to conclude that pressures on banks have reversed.

“This can only happen gradually as dollars flow back into the economies and exchange rates in ‘unofficial’ markets converge with official rates. Despite these challenges, banks in sub-Saharan Africa generally maintain high capital buffers and their profitability is robust.”

Non-financial companies operating in oil exporting countries such as Nigeria and Angola have been most affected by dollar scarcity and local currency weakness, according to the report.

Moody’s expects these challenges to continue in 2017 but alleviate in 2018.

“Dollar shortages make it difficult to pay suppliers of imported goods and equipment, meet dollar debt payments or to repatriate funds outside of the respective countries”

Moody’s Vice-President and co-author of the report, Dion Bate, was quoted as saying, “The associated local currency weakness increases the cost of servicing unhedged foreign currency debt obligations, reduces repatriated profits in foreign currency and lowers operating margins, as companies are not able to pass on high import costs to the consumer.”