Oil prices surge after Gulf of Oman tanker attacks

The Saudi oil tanker Al-Marzoqah was one of the four ships damaged in alleged ‘sabotage attacks’ a month earlier off the coast of Fujairah. (AFP)
Updated 13 June 2019

Oil prices surge after Gulf of Oman tanker attacks

  • The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade
  • They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf

LONDON: Twin attacks on tankers in the Gulf of Oman, close to the world’s biggest energy chokepoint, sent oil prices surging by as much as 4.5 percent on Thursday.

The attacks took place to the east of the Strait of Hormuz, a major strategic waterway for world oil supplies, raising fears of disruption to the global energy trade. 

They come at a time of heightened tensions over Iran’s activities in the region and after Tehran has repeatedly threatened to disrupt shipping in and out of the Arabian Gulf.

Benchmark brent crude prices were up by 1.8 percent to $61.06 at around 4 p.m. GMT, having risen as much as 4.5 percent earlier in the day.

Thursday’s attacks involved the Front Altair, which caught fire in between the coast of Iran and the UAE after an explosion, and the Japanese-owned Kokuka Courageous, which was abandoned after being hit by a suspected torpedo.

The incidents follow the “sabotage” of four commercial vessels off the coast of the UAE’s Fujairah port last month.

Robin Mills, CEO of consultancy Qamar Energy, told Arab News that Thursday’s attacks were “considerably” more serious than the Fujairah incident. 

“Security will no doubt be beefed up, but it will have to be extended further if there is any repetition of such an attack,” he said. 

The impact on oil prices came despite global exporters having the capacity to boost production if needed, Mills added. 

“On the overall market, demand growth is weakening and there is plenty of spare capacity, but most of this is in the Gulf, of course. So (it is) not surprising we saw the price response,” he said. 

Andy Lipow, an analyst at Lipow Oil Associates in Houston, said the attacks could have a further knock-on impact on the market, notably on insurance risk premiums. 

“These types of attacks have always been a concern,” he told Reuters.

“But the impact of tanker owners not chartering their vessels and insurance companies potentially refusing to provide coverage could further exacerbate the supply problem.”


Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.