Oil prices surge on OPEC deal to cut output by 1.2m barrels

The price of Brent oil rocketed Friday on reports that OPEC and non-OPEC crude producers had agreed to slash output. (Reuters)
Updated 08 December 2018
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Oil prices surge on OPEC deal to cut output by 1.2m barrels

  • Oil prices have plunged 30 percent since October as supply has surged and global demand growth has weakened
  • OPEC is seeking support from non-OPEC Russia for supply cuts

NEW YORK: Oil prices jumped more than 4 percent on Friday as Saudi Arabia and other producers in OPEC, as well as allies like Russia agreed to reduce output to drain global fuel inventories and support the market.
The Organization of the Petroleum Exporting Countries and its Russia-led allies, referred to as “OPEC+,” agreed to slash production by a combined 1.2 million barrels per day from 2019, larger than the minimum 1 million bpd that the market had expected, despite pressure from US President Donald Trump to reduce the price of crude.
The producer club will curb output by 800,000 bpd from January while non-OPEC allies contribute an additional 400,000 bpd of cuts, Iraqi Oil Minister Thamer Ghadhban said after OPEC concluded two days of talks in Vienna.
Russian Energy Minister Alexander Novak confirmed the combined output cuts of 1.2 million bpd, saying that the market will be oversupplied through the first half of the year.
Brent crude rose $2.94 to $63.00 a barrel by 11:20 a.m. EDT. In early trade, the global benchmark fell below $60 when it looked as if oil exporters might leave production targets unchanged. The benchmark rallied to a session high of $63.73 on news of the agreement.
US crude rose $2.20 to $53.69 a barrel, after earlier reaching a session high of $54.22.
US crude was on track to end the week up 5.2 percent and Brent was 6.9 percent higher on the week so far.
A 1.2 million-bpd cut, if implemented fully, “should be enough to largely attenuate, but not eliminate, expected implied global inventory builds in the first half of next year,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
Oil prices have plunged 30 percent since October as supply has surged and global demand growth has weakened.
Prices fell almost 3 percent on Thursday after OPEC ended a meeting in Vienna with only a tentative deal to tackle weak prices. Talks with other producers were held on Friday.
But Iran gave OPEC the green light on Friday to reduce oil output after finding a compromise with rival Saudi Arabia over a possible exemption from the cuts, an OPEC source said.
Oil output from the world’s biggest producers — OPEC, Russia and the US — has increased by 3.3 million bpd since the end of 2017 to 56.38 million bpd, meeting almost 60 percent of global consumption. 
The surge is mainly due to soaring US oil production, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the US the world’s biggest producer.
The US rig count, an indicator of future output, has risen for five straight months, The latest weekly data is due at 1 p.m. EST.
Given supply that is coming to be online, some analysts and market participants say the cut may not be enough to end oil’s rout.
“Relative to how big this looming supply tsunami, it is not nearly enough to prevent big inventory builds next year,” said Robert McNally, president of Rapidan Energy Group in Washington. “President Trump and President Putin prevented OPEC+ from cutting by more, which was certainly needed to put a sturdy floor under prices. They are putting a fuzzy floor under prices.”
Trump has asked OPEC to keep prices low. Russia had initially balked at cutting production alongside OPEC.


To fight off unemployment, Iraqi youth plant start-up seeds

Updated 17 February 2019
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To fight off unemployment, Iraqi youth plant start-up seeds

  • Iraqi entrepreneurs are taking on staggering unemployment by establishing their own start-ups
  • Under current legislation, private sector employees are not offered the same labor protections or social benefits as those in the public sector

BAGHDAD: Stuck between an endless waitlist for a government job and a frail private sector, Iraqi entrepreneurs are taking on staggering unemployment by establishing their own start-ups.
The first murmurs of this creative spirit were felt in 2013, but the Daesh group’s sweep across a third of the country the following year put many projects on hold.
Now, with Daesh defeated, co-working spaces and incubators are flourishing in a country whose unemployment rate hovers around 10 percent but whose public sector is too bloated to hire.
Many self-starters begin their journey at an aptly named glass building in central Baghdad: The Station.
There, they sip on coffee, peruse floor-to-ceiling bookshelves for ideas and grab a seat at clusters of desks where other stylish Iraqis click away at their laptops.
“We’re trying to create a new generation with a different state of mind,” said executive director Haidar Hamzoz.
“We want to tell youth that they can start their own project, achieve their dreams and not just be happy in a government job they didn’t even want,” he said.
Youth make up around 60 percent of Iraq’s nearly 40 million people.
After graduating from university, many spend years waiting to be appointed to a job in the government, Iraq’s biggest employer.
Four out of five jobs created in Iraq in recent years are in the public sector, according to the World Bank.
And in its 2019 budget, the government proposed $52 billion in salaries, pensions, and social security for its workers — a 15 percent jump from 2018 and more than half the total budget.
But with graduates entering the workforce faster than jobs are created, many still wait indefinitely for work.
Among youth, 17 percent of men and a whopping 27 percent of women are unemployed, the World Bank says.
When Daesh declared Mosul its seat of power in Iraq back in 2014, resident Saleh Mahmud was forced to shutter the city’s incubator for would-be entrepreneurs.
With Mosul now cautiously rebuilding after the militants were ousted in 2017, Mahmud is back in business.
“Around 600-700 youth have already passed by Mosul Space” to attend a seminar or seek out resources as they start their own ventures, said the 23-year-old.
He was inspired after watching fellow Mosul University graduates hopelessly “try to hunt down a connection to get a job in the public sphere.”
“A university education isn’t something that gets you a fulfilling job,” he said.
Another start-up, Dakkakena, is capitalizing on Mosul’s rebuilding spirit, too.
The online shopping service delivers a lorry-full of home goods every day to at least a dozen families refurnishing after the war.
“On the web, we can sell things for cheaper than stores because we have fewer costs, like no showrooms,” said founder Yussef Al-Noaime, 27.
Noaime fled Daesh to the Netherlands, where he was introduced to e-commerce. When he returned home, the computer engineer partnered with another local to found their venture.
A similar service, Miswag, was set-up in the capital Baghdad in 2014 and last year reported hundreds of thousands of dollars in profits.
On an autumn day, some 70 young Iraqi innovators converged for a three-day workshop in Baghdad on founding start-ups.
They flitted among round tables planning projects, their Arabic conversations sprinkled with English terms.
“What we’re doing is showing youth what entrepreneurship is — not necessarily so they succeed, but so they at least try,” said organizer Ibrahim Al-Zarari.
He said attendees should understand two things: first, that the public sector is saturated. And second, that oil isn’t the only resource on which Iraq — OPEC’s second-largest producer — should capitalize.
More than 65 percent of Iraq’s GDP and nearly 90 percent of state revenues hail from the oil sector. Many youths turn to it for work, but it only employs one percent of the workforce.
Widespread corruption and bureaucracy also weaken Iraq’s appeal for private investors. The World Bank ranks it 168th out of 190 for states with a good business environment.
Under current legislation, private sector employees are not offered the same labor protections or social benefits as those in the public sector.
And Iraq’s stuttering banking industry appears too cautious to dive in, said Tamara Raad, 26, who researches start-ups.
“The banks have a role to play. They must make loans without interest and help young entrepreneurs,” she said.
Banks or no banks, Mahmud in Mosul is already planning how he’ll grow his business in 2019.
“We will open a new, larger space for new gatherings,” he said excitedly, to bring together returning designers, developers and other inventors.