Production agreement boosts oil prices after harsh 2018Opec oil production cuts and hopes of a trade deal between the US and China pushed up oil prices in mid-January. Brent crude closed at $62.70 a barrel on 18 January, about 13 per cent higher than the average for December 2018. Prices have recovered about 25 per cent from the low of $50.80 a barrel on 25 December. The January price correction was attributed to renewed hopes of a trade deal between the US and China, and Saudi Arabia's willingness to reduce oil production by more than was specified in the Opec/non-Opec production cap agreed in December as it seeks to lift crude prices to $80 a barrel.
US secretary of state emphasises need for Gulf unityUS Secretary of State Mike Pompeo said during his tour of the Middle East in January that a united Gulf bloc is essential to building a planned security and economic alliance of regional states. “When we have a common challenge, disputes between countries with shared objectives
are never helpful,†Pompeo said. “They never permit you to have as robust a response to common adversaries or common challenges as you might.†He added that Gulf unity was essential for the planned Middle East Strategic Alliance that would also include Jordan and Egypt. Sovereign creditworthiness in GCC remains stable
Moody's Investors Service has given a 'stable' rating for the outlook for sovereign creditworthiness in the GCC in 2019. The view reflects the expectation that fundamental credit conditions will drive sovereign credit over the next 12-18 months. Stronger oil prices during most of 2018 reduced fiscal and external pressures for GCC countries in the short term, the credit ratings agency said. But it warned that periods of higher oil prices tend to undermine the impetus for governments to diversify their fiscal bases and rein in spending, leaving their credit profiles exposed to future phases of lower oil prices. In 2019, geopolitical tensions will also remain a key source of risk, as well as a catalyst for rising military-related fiscal spending. READ MORE Riyadh to incentivise private sector to hire localsThe Saudi government will contribute to the wages of Saudi nationals employed in the kingdom's private sector, one of several incentives to motivate the hiring of nationals and increase their participation in the labour market, Arab News has reported. Saudi Minister of Labour and Social Development Ahmad al-Rajhi announced the initiative in Riyadh on 15 January. Al-Rajhi, who is also chairman of the Governing Council of the Human Resources Development Fund, said the programme was aimed at improving skills and readying the kingdom's populace for the future. Saudi Arabia has restricted certain jobs to Saudis and pressed companies to employ higher ratios of nationals to foreign workers. The kingdom's Vision 2030 reform plan aims to cut unemployment from 11.6 per cent to seven per cent, and to increase the participation of women in the workforce from 22 per cent to 30 per cent. Banking sector consolidation is a welcome developmentRecent merger and acquisition activity among banks in the GCC is beneficial for the sector as it will ease overcapacity and boost profitability through synergies and increased pricing power, Moody's Investors Service has said. The overcrowded banking sector in the GCC saw a wave of merger and acquisitions announcements in 2018, as below par oil prices hit government budgets, slowing economic growth. The GCC banking sector has many banks serving small populations, driving intense competition and aggressive pricing policies. In Oman, where two potential mergers have been announced, there are 20 licensed banks serving a population of 4.6 million people. This compares with Saudi Arabia where only 27 banks serve a population of close to 33 million. Chinese firm offers to invest $3bn in Iran oil field project China's state oil refiner Sinopec has offered $3bn to Iran's state-owned National Iranian Oil Company (NIOC) to jointly expand the development of the Yadavaran oil field. Yadavaran holds an estimated 31 billion barrels of crude, making it one of the largest undeveloped fields in the world, and North Azadegan contains estimated reserves of 5.7 billion barrels. Sinopec has already invested $2bn in the development of Yadavaran, where production stands at 115,000 barrels a day (b/d), while North Azadegan, operated by NIOC and China's CNPC, started production at a rate of 75,000 b/d two years ago. READ MORE Â
US forces begin 'deliberate withdrawal' from SyriaThe US military in mid-January announced it had started withdrawing from Syria. US forces have “begun the process of our deliberate withdrawal from Syriaâ€, according to media reports quoting the US-led coalition. “Out of concern for operational security, we will not discuss specific timelines, locations or troop movements.†Defence Department officials said initial withdrawals would be limited to equipment and that no troops had yet departed. Additional US forces and air and sea assets currently stationed elsewhere in the region are expected to assist with the operation. Senior administration officials insist the departure will not undermine US goals in Syria. READ MORE UN maintains watch over ceasefire agreement
The UN is to try to prevent the collapse of the ceasefire agreement between the government-backed and Houthi militia groups in Yemen by endorsing a fresh security council resolution urgently increasing the number of monitors overseeing the deal in Hodeidah, the strategic port that lies at the heart of the three-year civil war. The resolution would extend the UN monitoring role for a further six months and increase the number of monitors to as many as 75 people. UN personnel were likely to be transferred from Djibouti to Hodeida. Both the Houthi rebels and the UN-backed government of Yemen's president have accused each other of multiple breaches of the ceasefire.
Cairo secures $1.2bn loan for light rail link to new capitalEgypt has agreed a $1.2bn deal with the Export-Import Bank of China (EximBank) to finance a light rail system from an industrial city on the outskirts of Cairo to the new capital city it is building. The loan has a 1.8 per cent interest rate and matures in five years, the country's Transport Minister Hisham Arafat said. He added that $461m would be spent on infrastructure and $739m on trains. Five state-run and three private companies are involved in the construction, which is expected to be completed within two years, he said. The rail link, which will be 68 kilometres long, will connect the 10th of Ramadan City to the new administrative capital.