Iran and Venezuela weighing on oil market, energy watchdog says

People walk by a small square with an oil pump in one of the access roads to the Central University of Venezuela, in Caracas. (AFP)
Updated 16 May 2018
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Iran and Venezuela weighing on oil market, energy watchdog says

PARIS: Global oil supplies could be hit by the decision by the US to pull out of the Iran nuclear deal, and also by falling production in crisis-hit Venezuela, the IEA said on Wednesday.
The decision by US President Donald Trump to withdraw from the Iran deal “has switched the focus of oil market analysis from the fundamentals to geopolitics,” the International Energy Agency wrote in its regular monthly report.
On May 8, Trump announced he would pull the US out of a 2015 pact — agreed by Britain, China, Germany, Russia and the Barack Obama administration — that opened up Tehran’s atomic program in return for an easing of sanctions.
Oil prices — which had already rising on the back of steady demand growth and a landmark deal by oil producing countries, both inside and outside OPEC, to lower output — have since surged above $77 per barrel, the IEA said.
“In these early days, there is understandable uncertainty about (the) potential impact on Iran’s oil exports” from the US move, it said.
When sanctions were imposed in 2012, Iranian exports fell by about 1.2 million barrels per day, the organization said.
“It is too soon to say what will happen this time, but we should examine whether other producers could step in to ensure an orderly flow of oil to the market and offset a disruption to Iranian exports.”
Shortly after the US announcement, Saudi Arabia, the OPEC kingpin, acknowledged the need to work with producers and consumers to mitigate possible supply shortfalls, the IEA noted.
Another possible risk to the global oil supply could come from crisis-hit Venezuela, the IEA said.
“In Venezuela, the pace of decline of oil production is accelerating and by the end of this year output could have fallen by several hundred thousand barrels a day,” the IEA said.
“The potential double supply shortfall represented by Iran and Venezuela could present a major challenge for producers to fend off sharp price rises and fill the gap, not just in terms of the number of barrels but also in terms of oil quality,” it said.
The IEA said that the overall market balance was “continuing to tighten,” and it lowered its estimate for 2018 global oil demand growth to 1.4 million barrels per day from its previous estimate of 1.5 million.
“Demand at the start of the year was supported by cold weather in Europe and the US, the start-up of new petrochemical capacity in the US and a solid economic background,” the IEA said.
“While the economic environment will continue to support oil demand... support from harsh weather conditions will vanish and the recent jump in oil prices will take its toll,” it said.
“Therefore, world oil demand growth is expected to slow” in the second half of the year.


Dubai’s Emirates NBD acquires Turkish lender Denizbank for $3.2 billion

Updated 13 min 25 sec ago
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Dubai’s Emirates NBD acquires Turkish lender Denizbank for $3.2 billion

MOSCOW/DUBAI: Dubai’s biggest lender Emirates NBD has agreed to buy Turkey’s Denizbank from Russia’s state-owned Sberbank for $3.2 billion to help establish itself as a leading bank in the Middle East, North Africa and Turkey.
Denizbank is the fifth-largest private bank in Turkey and the biggest asset held by Sberbank outside Russia. The sale is part of a strategy by Russia’s top lender to divest overseas businesses to focus on its domestic market.
The deal is the biggest ever acquisition by Emirates NBD, which had said in January it was in talks to buy the Russian lender’s stake in Denizbank.
The transaction comes against a backdrop of Turkey’s strained relations with Gulf states since Ankara stood by Qatar after the UAE, Saudi Arabia and others accused Doha of supporting terrorism, a charge it denies.
The deal will help Emirates NBD diversify its business and establish itself as a leading bank in the region, the company’s vice chairman, Hesham Abdulla Al Qassim, said in a statement.
Denizbank has assets of 169.4 billion lira ($37.25 billion) and operates 751 branches, including 43 outside Turkey, while Emirates NBD has banks in the UAE, Egypt, Saudi Arabia, India, Singapore, the United Kingdom, and offices in China and Indonesia.
“By acquiring Deniz, Emirates NDB can diversify its credit risk as it has concentrated exposure to Dubai government,” said Shabbir Malik, a banking analyst at EFG Hermes in Dubai.
“Turkey is an important trading partner for the UAE, and Emirates NBD can serve UAE customers which have trade ties with Turkey. That said, the banking system is crowded and there is strong market share concentration in the top seven banks.”
Reuters reported in March that Denizbank’s chief executive Hakan Ates met with President Tayyip Erdogan and other senior officials in Ankara to try to convince them the deal would be positive for Turkey.
One source said at the time there was an acknowledgement in Ankara that Turkey’s tensions were with Abu Dhabi, not Dubai — meaning the UAE’s policy makers, not the region’s main commercial and financial hub.
The transaction is expected to be accretive to shareholders in the first year, said Emirates NBD Chief Executive Officer Shayne Nelson.
“Earlier there was mass media speculation that the deal would be concluded at a price of over $5 billion,” Russia’s Aton brokerage said in a research note.
“The deal may limit Sberbank’s ability to materially increase dividends for 2018, but will still improve its capital ratios and ROE (Return on Equity). Nonetheless, we expect the stock to be under pressure today.”
Denizbank currently holds subordinated loans issued to it by Sberbank with a value of $1.2 billion, the Russian bank said in a reply to Reuters questions.
Besides its Turkish business, Sberbank has a network of eight subsidiary banks in central and eastern Europe. It has signaled it is interested in finding a buyer for some of those assets if it can get the right deal.
The closing of the deal is subject to regulatory approvals in Turkey, Russia, the UAE and other relevant jurisdictions, where Denizbank operates.