Al-Naimi optimistic oil prices will recover in few months

Updated 11 September 2014
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Al-Naimi optimistic oil prices will recover in few months

Global oil prices fell further on Thursday, with Brent reaching a new 17-month low but Minister of Petroleum and Mineral Resources Ali Al-Naimi played down the drop in oil prices saying this is not the first time crude prices slumped.
In early Thursday morning deals, Brent North Sea crude for October sank to $97.10 per barrel — the lowest point since April 18, 2013. And US benchmark West Texas Intermediate (WTI) for October delivery slid to $ 90.92 — a level last seen on May 2, 2013.
"Prices of oil always go up and down so I really don't know why the big fuss about it this time," AFP quoted Al-Naimi as saying.
Al-Naimi told reporters ahead of a regular meeting for oil ministers of the Gulf Cooperation Council (GCC) states in Kuwait City on Thursday that any measures the Organisation of Petroleum Exporting Countries (OPEC) needs to take regarding the price slump "should be discussed when OPEC meets" in November.
Saudi Arabia told OPEC it reduced its oil output in August by 400,000 barrels per day (bpd), a cutback coinciding with a drop in oil prices toward below $100 a barrel.
In a monthly report issued on Wednesday, the OPEC said Saudi Arabia reported August production of 9.597 million bpd, down from 10.005 million bpd in July.
Sadad Al-Husseini, a Saudi oil expert, said the Kingdom’s announcement on cutting production by 400,000 bpd was aimed at balancing the international market. “Saudi Arabia also wants to show that it was closely following the market where the demand is less than what was expected.”
He said the Kingdom based its oil production decisions on the demand and supply in the market. “Saudi Arabia prefers to see oil prices at $100 per barrel as it will not have negative impact on the international economy. We can see economic recovery all over the world except Europe,” he pointed out.
“The price changes reflect concern over the demand outlook, which is less optimistic than what was previously expected. At the same time, the political risk premium has likely diminished somewhat as some of the feared disruptions have been less than expected. In practice, however, the market dynamics do not allow for great volatility in the longer term as the marginal cost of extraction is high, in many cases necessitating prices at current or even higher levels,” a regional analyst, who wants to remain anonymous, said.
He added that this is partly reflective of general softness for commodities among concerns about the outlook for Europe and China in particular.
“Lower prices naturally mean lower fiscal receipts in the GCC in the near term. Saudi Arabia's role as the swing producer means that it will respond to slowing demand by cutting back on its output as already seems to have happened according to the most recent OPEC data,” he said.
Ole Hansen, head of commodity strategy, Saxo Bank, told Arab News: “It is widely believed that Saudi Arabia is using $85 as their current breakeven so on that basis further price reductions from current levels will not be a problem at the moment. If the reduction in price also occurs at a time of reduced production then the impact could be bigger but so far Al-Naimi has not expressed any concerns following the recent price slump and he sees the price recover back to $100 within a few months.”
He added: “The world has grown used to a global benchmark price close to $110 per barrel since 2011 but given the current slowdown in Europe, China and elsewhere, a lower price will help support the recovery. On that basis, a price closer to $100 will go a long way to help this process without bringing to much hardship on global producers both within OPEC but also North American shale oil producers, which needs a relative high price to breakeven.”
Hansen said: “From a price perspective what is also important to conclude is that the increased production from North America has helped reduce the geopolitical price spikes seen since the Libyan war in 2011 and this reduced uncertainty among consumers also go a long way to help economic growth.”
Oil prices plumbed the latest lows on Thursday after the Paris-based International Energy Agency (IEA) cut its oil demand outlook.
The IEA cut its estimate for oil demand this year to growth of one percent or to 900,000 barrels per day, from a previous estimate of 1.1 percent or one million barrels per day. That takes total demand for the year to 92.6 mbd.


Bitcoin craze hits Iran as US sanctions squeeze weak economy

Updated 18 July 2019
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Bitcoin craze hits Iran as US sanctions squeeze weak economy

  • Some Iranian officials worry that “mining” is abusing the subsidized electricity
  • Iranian Bitcoin miners are purchasing more affordable Chinese ready-made computers

TEHRAN: Iranians feeling the squeeze from US sanctions targeting the Islamic Republic’s ailing economy are increasingly turning to such digital currencies as Bitcoin to make money, prompting alarm in and out of the country.
In Iran, some government officials worry that the energy-hungry process of “mining” Bitcoin is abusing Iran’s system of subsidized electricity; in the United States, some observers have warned that cryptocurrencies could be used to bypass the Trump administration’s sanctions targeting Iran over its unraveling nuclear deal with world powers.
The Bitcoin craze has made the front pages of Iranian newspapers and been discussed by some of the country’s top ayatollahs, and there have been televised police raids on hidden computer farms set up to bring in money by “mining” the currency.
Like other digital currencies, Bitcoin is an alternative to money printed by sovereign governments around the world. Unlike those bills, however, cryptocurrencies are not controlled by a central bank. Bitcoin and other digital currencies like it trade globally in highly speculative markets without any backing from a physical entity.
As a result, computers around the world “mine” the data, meaning they use highly complex algorithms to verify transactions. The verified transactions, called blocks, are then added to a public record, known as the blockchain. Any time “miners” add a new block to the blockchain, they are rewarded with a payment in bitcoins.
To work, the expensive specialized computers require a lot of electricity to power their processors and to keep them cool. In Iran, “miners” have an edge because electricity is cheap thanks to longtime government subsidies. “Miners” also buy cheaper Chinese ready-made computers to do the work.
But the constant raids and authorities’ conflicting statements on the issue have Bitcoin “miners” in Iran incredibly leery of being identified. Those contacted by The Associated Press refused to speak about their work or to say how much they earn from their “mining.”
But they acknowledge they do this to make some money at a time when Iran’s currency, the rial, tumbled from 32,000 rials to $1 at the time of the 2015 nuclear deal, to around 120,000 rials to $1 now.
“It is clear that here has turned into a heaven for ‘miners,’” Mohammad Javad Azari Jahromi, Iran’s minister for information and communications technology, recently told AP in an interview. “The business of ‘mining’ is not forbidden in law but the government and the Central Bank have ordered the Customs Bureau to ban the import of (mining machines) until new regulations are introduced.”
Ali Bakhshi, the head of the Iran Electrical Industry Syndicate, said earlier this month that the country’s Energy Ministry likely would boost costs for Bitcoin “miners” to 7 cents for each kilowatt of electricity they consume, a massive increase from the current half-cent but still almost half the cost of electricity in the United States, according to the semi-official Fars news agency.
Still, there are concerns, especially among Iran’s religious leaders, that people might try to circumvent paying extra for the electricity as well as using digital currency to hide or move money illicitly.
Tabnak, a hard-line news website associated with a former commander of the country’s paramilitary Revolutionary Guard, quoted three ayatollahs describing Bitcoin as either problematic or “haram,” meaning forbidden. Islam prescribes strict rules about finance.
But Jahromi said clerics became more receptive to the idea after his staff briefed them that Bitcoin had a value in the real world, which is required under Islamic finance. Islamic finance also prohibits gambling, the payment of interest and misleading others.
“Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islamic and cybercurrencies are haram,” Jahromi said. “When we explain to them this is not a currency but an asset, they change their mind.”
Iran has tried to keep its economic situation in check by controlling foreign currency rates and cutting down on those moving their money from the rial to other currencies, including Bitcoin. Last year, the semi-official Mehr news agency quoted Mohammad Reza Pour-Ebrahimi, the head of the Iranian parliament’s economic commission, as suggesting that about $2.5 billion left Iran through digital currency purchases. He did not elaborate and authorities have not discussed it since.
The US, meanwhile, has been keeping a close watch on Iranians holding bitcoins. In November, a federal grand jury in Newark, New Jersey, accused two Iranian men of hacking and holding hostage computer systems of over 200 American entities to extort them for Bitcoin, including the cities of Newark and Atlanta.
“As Iran becomes increasingly isolated and desperate for access to US dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers and other providers of digital currency services harden their networks against these illicit schemes,” said Sigal Mandelker, Treasury’s undersecretary for terrorism and financial intelligence.
Not so, said Jahromi.
“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned,” he said. “We cannot use them to go around international monetary mechanisms.”