Gulf
shares in free fall after oil rout, Iran deal
Kuwait City
(AFP) - Share prices in the energy-rich Gulf states nosedived Sunday
following the sharp decline in oil prices as Iran prepares to resume
crude exports after the lifting of sanctions
17
January, 2016
The
plunge in the first day of trading in the Muslim week also follows
heavy losses in global bourses on Friday, when Gulf exchanges were
closed for the weekend.
The
price of oil, which contributes more than 80 percent to Gulf states'
revenues, shed more than 20 percent this year to drop below $30 a
barrel. This follows a plunge of 65 percent in the past two years.
The
expected return of Iran to the oil market, following the
implementation Saturday of its historic nuclear deal with world
powers, will only worsen the production glut that has been the main
reason for the oil price dive.
All
seven Gulf bourses saw a wave of panick selling, sending indices to
multi-year lows.
Big
investors joined small dealers in dumping shares in fear of a further
slump.
"The
majority of Gulf firms depend on their governments, which depend on
oil revenues. No one knows the bottom of oil prices," Kuwaiti
analyst Ali al-Nemish said.
"The
Iranian impact on the markets appears to be somewhat inflated because
Iranian crude exports will not be huge initially," Nemish told
AFP.
-
Negative territory -
The
bourses of Saudi Arabia, Qatar and Abu Dhabi have already lost in the
past two weeks more than they dropped in the whole of 2015.
The
Saudi Tadawul All-Shares Index, the largest Arab market, fell by over
7.2 during trading but recovered slightly to finish down 5.44 percent
on 5,520.41 points, close to a five-year low.
The
leading petrochemicals sector dipped 5.1 percent, while banks lost
3.7 percent.
Since
the start of 2016, the TASI has dropped 20.1 percent, more than all
of its losses last year.
The
Qatar Exchange, the second largest in the Gulf after Saudi Arabia's,
plunged 7.2 percent to close trading just above the 8,500-point mark,
last seen in April 2013.
All
the listed firms were in the red and the bourse has so far dipped 18
percent this year, more than the 15 percent it lost in 2015.
The
Dubai Financial Market dropped 6.0 percent at the opening but
recovered slightly to close the day down 4.64 percent on 2,684.9
points, a three-year low.
Blue
chip properties giant Emaar shed 4.0 percent and the leading
construction firm Arabtec sank the maximum allowed 10 percent.
Since
the beginning of this year, Dubai has dropped 15 percent.
The
Abu Dhabi Securities Exchange also slumped 4.24 percent but remained
above the 3,700-point mark. All sectors were down with banks and real
estate shedding above 5.0 percent.
Dubai
and Abu Dhabi bourses are the lowest since September 2013.
The
Kuwait Stock Exchange dropped 3.2 percent to just above the
5,000-point mark, levels only seen in May 2004.
The
small market of Oman dropped 3.2 percent to below the 5,000-point
mark for the first time since mid-2009. Bahrain dropped 0.4 percent.
Since
the beginning of 2016, the seven stock markets have shed more than
$130 billion of their market capitalisation, which now stands at
about $800 billion.
All
Gulf stock exchanges ended 2015 in negative territory, led by Saudi
Arabia, after the sharp decline in oil prices.
Mid-East Massacre: Qatar Crashes, Saudi Stocks Plunge Most Since Black Monday
17
January, 2016
Broad
middle-east and african stock markets crashed
over 5%, erasing any gains back to November 2008 as
the carnage from last week continues. From Kuwait (-4.3%) to Qatar
(-8%) it was a bloodbath as Saudi
Arabia Tadawul Index plunged 5.4% - the most since Black Monday (now
down over 50% from their 2014 highs). These losses are far in excess
of US 'catch-up' moves and suggest a dark cloud over Asia this
evening.
It's
been a bloodbath in the Middle-East since the year began...
Africa/Middle-East
Stocks crashed 5%...
Saudi
Arabia's Tadawul Index is down 5.4% on the day - the worst since
August's collapse and has lost over 50% since its exuberant peak in
2014...
Kuwait
down over 4% to 2009 lows...
But
Qatar was carnaged... (down over 8%)
Makes
you wonder where all that hot-money from The Fed flowed eh?
Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016
17
January, 2016
On
Saturday, Iran marked what President Hassan Rouhani called a “golden
page” in the country’s history when the IAEA ruled that Tehran
had stuck to its commitments under last year’s nuclear accord.
Moments
after the ruling was handed down, the US and the EU each lifted
nuclear-related financial and economic sanctions on the “pariah
state,” much to the chagrin of Israel and Tehran’s regional
rivals who view the West’s rapprochement with the Iranians with
deep suspicion.
"Everybody
is happy except the Zionists, the warmongers who are fuelling
sectarian war among the Islamic nation, and the hardliners in the
U.S. congress,”
Rouhani said, referring directly to Israel, the Saudis, and GOP
lawmakers in the US.
In
addition to the never-ending feud with the Israelis, Tehran is
embroiled in a worsening conflict with Riyadh triggered by Saudi
Arabia’s execution of prominent Shiite cleric Nimr al-Nimr and
subsequent attacks on the Saudi embassy and consulate in Iran. The
argument has raised the specter of an all-out conflict between the
Sunni and Shiite powers and stoked sectarian discord across the
region.
With
sanctions lifted, Iran will now have access to some $100 billion in
frozen funds and will be able to increase its oil revenue
exponentially even as prices remain suppressed.
It’s
easy to see why the Saudis and other Gulf Sunni monarchies are
nervous. Iran plans to immediately boost output by 500,000 b/d with
an additional 500,000 b/d coming online by year end. “The oil
ministry, by ordering companies to boost production and oil terminals
to be ready, kicked off today the plan to increase Iran’s crude
exports by 500,000 barrels,” the official Islamic Republic News
Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil
minister for commerce and international affairs.
“Iran
could haul in more than five times as much cash from oil sales by
year-end as
the lifting of economic sanctions frees the OPEC member to boost
crude exports and attract foreign investment needed to rebuild its
energy industry,”Bloomberg
reports,
adding that “the lifting of sanctions means Iran can immediately
boost oil revenue to about $2.35 billion a month, based on the
country’s estimated current output of 2.7 million barrels a day and
oil at $29 a barrel.”
Even
if oil hovers between $30 and $35 a barrel, Iran
will be pulling in some $3 billion a month by summer and nearly $4
billion a month by December.
"Iran's
aging oil fields may present some challenges to the pace at
which it can physically raise production," Deutsche Bank wrote last year, as prior to the signing of the accord. Here's a bit more color:
which it can physically raise production," Deutsche Bank wrote last year, as prior to the signing of the accord. Here's a bit more color:
Changes to Iran's sustainable production capacity in the medium term will likely depend partly on the speed and extent to which international oil companies (IOCs) invest in the development of Iran’s oil resources. Currently, 38% of Iran's oil production originates from three large fields and associated areas which began production decades ago (Gachsaran 1934, Ahwaz 1959, Marun 1965). Of the original resource contained in these three "super-giant" fields, only 23% remains now.
Further development drilling will likely be required in order to maintain production, and secondary techniques such as CO2 or associated gas injection may be required to improve the recovery rate and counteract falling reservoir pressure. Prospects for higher production would be improved by IOC participation. However, foreign investment has lagged not only because of sanctions, but also because of the government's buyback agreements which are considered unattractive.
On
Sunday, Rouhani said the country needs between $30 and $50 billion in
foreign investment in order for the country to hit its 8% growth
target for the year. "Untapped potential in many industries
indicates that domestic demand cannot solely push the economy toward
eight per cent growth," he said. "Attracting foreign
investment will be the best way of using the opportunity of sanctions
relief to boost the economy and security."
But
according to Israel, it's all a charade. On Saturday, The
Times of Israel said that
according to an unnamed "source in Jerusalem", the first
thing Iran will do is send money to Hezbollah. "The
implementation of the agreement would have a direct impact on the
region, as terror groups Hezbollah and Hamas — both recipients of
Iranian largesse — found themselves in possession of new and modern
weaponry," The Times wrote. A statement from PM Netanyahu's
office reads: "Even after the signing of the nuclear
agreement, Iran has not abandoned its aspirations to acquire nuclear
weapons, and continues to act to destabilize the Middle East and
spread terrorism throughout the world while violating its
international commitments."
We
wonder whether Netanyahu would say the same thing about the Riyadh,
where "acting to destabilize the Mid-East and spread terror
throughout the world" is an explicit foreign policy aim.
In
any event, Iran just got a $100 billion windfall and will be around
$2 billion richer each month by the end of the year. The return of
Iranian supply "will have an immediate impact in the spot
market” Robin Mills, CEO of consultant Qamar Energy, told
Bloomberg by phone. “Putting oil in the market is going to
push it down." "Iran’s additional crude shipments have
the potential to further depress prices, perhaps
to as low as $25 a barrel,”
Nomura's Gordon Kwan added on Sunday.
As
for what effect a richer, more prosperous Iran will have on regional
stability, we'd suggest that anything that serves to counter Saudi
influence is probably conducive to a more secure environment.
Besides, things can't get much worse in the Mid-East, so it's hard to
see the downside.
Hassan Rouhani
Implementing #JCPOA not a detriment to any country. Our friends are happy & our rivals need not worry. We're no threat to any nation/state.
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