Oil prices continue to drop; stocks tumble worldwide

Updated 09 December 2014
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Oil prices continue to drop; stocks tumble worldwide

NEW YORK: Investors aggressively sold equities worldwide on Tuesday, after China's market posted its worst day in five years and oil prices fell to levels not seen since 2009.
US and European shares were down for a second day in a row, in part due to concern that the decline in oil suggested global economic weakness and as Greece's equity market slumped 12 percent on political turmoil.
Chinese shares, which had recently touched a three-and-a-half-year high, had their biggest daily percentage loss in more than five years and the yuan currency took its biggest hit against the dollar since 2008, adding to the gloom pervading emerging markets.
Brent crude, which has fallen more than 40 percent in the last six months, slipped to a five-year low of $65.29 on worries over a supply glut before rebounding slightly. Oil prices have been under pressure as the dollar has strengthened and after the Organization of the Petroleum Exporting Countries decided against an output cut.
"To some extent, a drop in oil prices of course is positive, but there comes a point at which people begin to be concerned whether the drop is too much, too fast and can there be unintended consequences of it," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
Brent crude was last up 20 cents, or 0.3 percent, at $66.39 a barrel. US crude was last up 0.73 percent, at $63.51 per barrel.
MSCI's all-country world equity index, which tracks shares in 45 nations, was last down 0.78 percent at 418.41 points. The FTSEurofirst 300 index of top European shares provisionally closed down 2.2 percent at 1,364.74.
Political unrest rose in Greece after the government brought a presidential vote forward in a political gamble that raised uncertainty over the country's transition out of its bailout. Greek sovereign bond yields, which move inversely to prices, shot higher.
The dollar was on track for its largest one-day loss against the yen since June 2013, as investors booked profits after sharp gains in recent weeks and a day after comments by some Federal Reserve policymakers suggested that the Fed will maintain its pledge to keep rates near zero for a "considerable time." The Fed is to hold its last meeting of the year next week.
The drop in oil and equity markets fueled a rally in safe-haven US Treasuries. Long-dated US government bond yields fell to their lowest level in roughly two months, at 2.84 percent. The benchmark 10-year note was last up 15/32 in price to yield 2.2 percent.
The S&P 500 was last down 0.85 percent at 2,042.79. The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.74 percent, to 88.382.
Gold rose 2 percent and hit its highest since late October on the pullback in the dollar and equity markets. Spot gold prices was last up 2.21 percent, to $1,229.36 an ounce.


Iraq’s move to rush oil bidding could deter some major companies

Updated 3 min 11 sec ago
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Iraq’s move to rush oil bidding could deter some major companies

  • Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April
  • Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks
BAGHDAD: Iraq is opening more of its untapped oil and gas resources to foreign developers, hoping to boost revenues after its costly war with the Daesh group, but analysts say the rushed bidding process — now timed to precede national elections — could draw a lukewarm response.
Last month, Oil Minister Jabar Ali Al-Luaibi unexpectedly moved the date to receive bids from late June to April, meaning the bidding would be held before May 12 national elections. Some believe Al-Luaibi, who is campaigning for a seat in parliament, moved up the date for political reasons.
Al-Luaibi hopes to represent the oil-rich southern province of Basra as a member of the Victory Alliance, which is led by Prime Minister Haider Al-Abadi, who is running for re-election.
“Personal and partisan interests are taking priority over national interests,” said Ruba Husari, managing director of the consulting firm Iraq Insight. “The objective of the exercise is aimed doubtlessly at portraying the ministry — and the minister — as aggressive in developing the nation’s resources ahead of the (elections).”
The Associated Press placed multiple calls to Al-Luaibi’s spokesman, who did not pick up. An aide to the spokesman said Al-Luaibi’s office was too busy with the election campaign to comment on the allegations.
In one of his campaign videos, Al-Luaibi tries to reassure a group of weary Iraqis who are worried about their future.
“Past years have wreaked havoc on everything,” a man in traditional Arab clothing says in the video, referring to the devastation caused by war. “Iraq’s wealth is your responsibility,” says a woman dressed in a conservative abaya — a loose black cloak that covers the body from shoulders to feet.
“I’m confident that with your determination I can protect the wealth of the generations,” Al-Luaibi says at the end of the video.
Thursday’s auction will be the fifth since Iraq opened its vast oil and gas reserves to international energy companies in 2009 for the first time in decades.
In previous bidding rounds, officials spent months hosting conferences, road shows and discussions with companies before issuing final contracts. Last month, the minister changed the date to April 15, but when companies asked for more time it was extended to Wednesday, and then to Thursday.
Ian Thom, principal analyst at energy consultancy Wood Mackenzie, said the tighter deadline could work against Iraq.
“Companies may be more cautious if they have not fully evaluated the bid terms,” he said. “This may result in bids being less competitive as companies seek a greater margin of safety.”
Fourteen companies are qualified to bid for exploration and development rights for 11 underdeveloped blocks.
Seven are located near the border with Iran, and three others are located near the Kuwaiti border, while the 11th is in the Arabian Gulf, in Iraqi territorial waters.
Encouraged by an improved security situation, Iraq in 2009 began to attract international oil companies to develop its vast untapped oil and gas reserves. Top among major oil companies are the US’s Exxon Mobil, Royal Dutch Shell, the UK’s BP, China’s CNPC and Russia’s Lukoil.
Since then, Iraq has awarded a handful of oil deals to develop major fields that hold more than half of its 153.1 billion barrels of proven oil reserves. Deals to tap natural gas resources were also awarded. As a result, Iraq’s daily production and exports have jumped to levels not seen since the late 1970s and early 1980s.
The country is now producing around 4.36 million barrels a day from Baghdad-controlled oil fields, up from nearly 2.4 million a day in 2009, and its daily exports averaged 3.450 million barrels a day last month, making it OPEC’s second-largest producer behind Saudi Arabia. Oil revenues make up nearly 95 percent of the country’s budget.
An economic crisis set in over the course of 2014, when the Daesh group swept across much of northern and western Iraq and oil prices plummeted. Iraqi forces concluded major military operations against the extremists last year, but large parts of the country were reduced to rubble.
In February, Iraq secured $30 billion from international donors to help rebuild devastated areas, far from the $88.2 billion Baghdad estimates it needs.
Earlier this month, the Iraqi Cabinet approved a five-year development plan with a target of 6.5 million barrels a day by 2022.
Iraq’s 2018 budget of nearly $88 billion comes with a deficit of more than $10 billion. It is based on a projected oil price of $46 per barrel and a daily export capacity of 3.8 million barrels.