Russian minister says OPEC oil deal hurting domestic economy

Maxim Oreshkin’s comments are the first by a senior Russian official giving a negative assessment of the OPEC and Russia deal to curb crude oil production. (Reuters)
Updated 23 November 2017
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Russian minister says OPEC oil deal hurting domestic economy

MOSCOW: Russia’s economic growth in October was negatively affected by a global deal between members of OPEC and Russia to curb crude oil production, Russia’s economy minister said on Thursday.
Maxim Oreshkin’s comments are the first by a senior Russian official giving a negative assessment of the deal, in which Russia joined OPEC and others in cutting output from January by about 1.8 million barrels per day (bpd) to end a supply glut.
The minister was speaking a week before Russia and the Organization of the Petroleum Exporting Countries meet in Vienna to discussing an extension of the pact to curb output, possibly to the end of 2018. It is now due to expire on March 31.
Under the deal, Russia agreed to cut output by 300,000 bpd from its level in October 2016.
“Because of the OPEC deal we have a negative direct impact from oil production, as well as indirect effects related to low investment activity due to production limits,” Oreshkin said.
Russia’s oil-dependent economy grew 1.8 percent year-on-year in the third quarter of 2017, slowing from 2.5 percent in the second quarter, the best annual rate since the third quarter of 2012, data showed this month.
Oreshkin and other officials have said the economy was on track to grow by more than 2 percent after two years of recession. But data on retail sales and other areas have raised questions about the durability of the recovery.
Oreshkin told reporters that annual inflation in Russia had slowed to 2.4-2.5 percent, adding that the ministry retained its full-year inflation forecast of up to 2.8 percent.
Russian Energy Minister Alexander Novak said on Monday Russia would determine its position on a extending the oil pact later in November. OPEC meets in Vienna on Nov. 30.
Top crude exporter Saudi Arabia has been lobbying oil ministers to agree to a nine-month extension at next week’s meeting, people familiar with the matter told Reuters.
Brent crude futures have climbed above $60 a barrel for the first time since mid-2015 thanks to the oil pact, helping Russia’s economy which depends heavily on oil and gas revenues.
But, if oil stays in the $60-$65 range or higher, Russia would be unlikely to support a deal extension for fear the spike would be followed by a damaging fall, said Chris Weafer, a senior partner at Moscow-based Macro-Advisory strategy firm.
“Moscow has had to deal with the economic and social consequences of two recent oil price collapses, in 2008-09 and from 2014,” he said in a note this week.
“The damage from a third collapse would likely greatly outweigh the financial gains to be made from higher oil in the meantime,” he wrote.


Maalem Financing raises $26m in debut sukuk

Updated 17 October 2018
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Maalem Financing raises $26m in debut sukuk

  • The sukuk from Maalem, a shariah-compliant commercial and consumer financing firm, is a small but novel deal
  • The three-year unsubordinated deal was sold through a private placement and Maalem could tap the market again

LONDON: Saudi Arabia’s Maalem Financing has raised SR100 million ($26.6 million) from a debut sale of Islamic bonds, or sukuk, as the firm seeks to develop a crowdfunding product and expand its operations, a senior executive said on Tuesday.
The sukuk from Maalem, a shariah-compliant commercial and consumer financing firm, is a small but novel deal in a market that is dominated by issuance from sovereign institutions and Islamic banks.
The three-year unsubordinated deal was sold through a private placement and Maalem could tap the market again as early as January next year, said John Sandwick, a member of Maalem’s board of directors.
“The program is for SR500 million and with 3.6 times oversubscription, there seems to be a lot of demand,” he said.
Additional sales of sukuk aimed to raise between SR100 million and SR200 million, depending on market conditions, he said, adding that Maalem may consider a dollar-denominated sukuk issuance at a later stage.
The debut transaction used a structure known as murabaha, a cost-plus-profit arrangement commonly used in Saudi Arabia. The firm hoped to use an asset-backed structure for future deals, Sandwick said.
Established in 2009, Maalem received regulatory approval to operate as a non-real estate finance company in 2016 and increased its capital in 2017 to SR150 million.
The company plans to open several regional offices by the end of 2018 and is awaiting regulatory approval for a crowdfunding license, Sandwick said.
Crowdfunding enables startup firms to collect small sums of money from many individuals as an alternative to bank loans.
Albilad Capital, the investment banking unit of Bank Albilad, served as sole lead manager and arranger of the sukuk.