Business

DOHA — Oil companies in Qatar and Kuwait on Tuesday announced that they will reduce production levels from the beginning of the year.

The reduction — beginning on January 1 — follows the recent decisions by OPEC and non-OPEC oil-producing countries to cap output.

“We have started advising our customers of the expected reductions in oil deliveries to ensure the state’s compliance with OPEC’s allocations,” said a statement from Saad Sherida Al Kaabi, president and chief executive of state-owned Qatar Petroleum.

“This decision comes in line with the state of Qatar’s commitment to the recently agreed production levels by the members of OPEC during its ministerial meeting held on 30 November, 2016.”

No further details about production levels were given in the statement.

National oil conglomerate Kuwait Petroleum Corp. (KPC) also said on Tuesday it has informed its clients that their export quantities will be reduced, starting in January.

KPC said this was part of the Gulf state’s commitment under the OPEC deal last month.

It did not provide any details of the quantities to be reduced, but local media said Kuwait’s share is around 130,000 barrels per day out of its daily output of 3 million bpd.

UAE’s ADNOC had announced on Saturday that it was also “committed to meeting new OPEC terms”, adding on Twitter that it will “work closely with customers on revised allocations for January”.

ADNOC produces more than 3.15 million bpd.

On November 30, Qatar, Kuwait and the United Arab Emirates were among the OPEC countries which agreed to reduce output by 1.2 million bpd.

This was followed earlier this month by non-OPEC oil producing countries agreeing a cut of 558,000bpd. 

AMMAN — The World Bank Group, through its Trade and Competitiveness Global  Practice, has supported the Jordan Investment Commission (JIC) in launching its e-investment portal and incentives inventory, according to a recent JIC statement.

The e-investment portal will help the JIC improve its services and interactions with the private sector, with a focus on attracting investment, increasing transparency and improving business regulations, JIC said.

It will facilitate investors’ access to information about private investment opportunities in Jordan and the services offered by JIC, including the Investment Single Window, which serves as a one stop shop for business registration. It will also include an inventory of investment incentives that will help JIC enhance transparency  about the tax, customs and financial incentives offered by different government agencies in Jordan, it added. 

NEW YORK — Oil prices surged to their highest level since mid-2015 on Monday after the world's top crude producers agreed to the first joint output cut since 2001, sparking concerns about inflation which pushed up US treasury yields to a more than two-year peak.

Yields also gained ahead of a two-day policy meeting of the Federal Reserve that starts on Tuesday, which is expected to raise interest rates for the only the second time since the global financial crisis.

Following the weekend agreement between OPEC and key non-OPEC states that set the markets alive, Brent crude futures were up $1.97 at $56.30 per barrel, having hit a session peak of $57.89, the highest since July 2015. US crude futures were up $1.97 at $53.47 a barrel.

"The original OPEC deal pointed to a fairly lumpy 3 per cent cut [in production], so this suggests there is a bit more upside for oil prices," said Neil Williams, chief economist at fund manager Hermes.

There was particular surprise as Saudi Arabia, the world's number one producer, said it may cut its output even more than it had first suggested at an Organisation of Petroleum Exporting Countries meeting just over a week ago.

Energy shares jumped, helping to lift the Dow Jones industrial average and S&P 500 to record intraday highs in early trading, extending their recent string of records.

"This market has gone up without taking a breather and will enter a cautious trading day as it awaits the Fed," said Peter Cardillo, the chief market economist at First Standard Financial in New York.

Benchmark US bond yields topped 2.5 per cent for the first time since October 2014, with analysts saying the OPEC agreement boosted reflation expectations.

"We have the Fed decision coming up on Wednesday, and people are unsure whether they should buy the dip here," said interest rate strategist Gennadiy Goldberg of TD Securities in New York.

In late morning trading, US 10-year note prices were down 8/32, while the yield rose to 2.493 per cent from 2.464 per cent late on Friday. Earlier Monday, the yield struck 2.528 per cent, its highest since September 29, 2014, according to Reuters data.

In the currency markets, the dollar fell against most major currencies on concerns the Fed could suggest in an upcoming policy statement that the greenback's gains had gone too far.

Also, a rally in oil prices boosted commodity-linked currencies.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.45 per cent at 101.130, easing from an earlier 1-1/2-week high of 101.780.

The dollar was last down 0.4 per cent against the Canadian dollar at C$1.3122 after hitting C$1.3108, its lowest level against the Canadian dollar since October 20.
Overnight, Chinese stocks suffered their biggest fall in six months as blue chips were knocked by fresh regulatory curbs to rein in insurers' aggressive stock investments and rising bond yields prompted profit-taking in equities.

The blue-chip CSI300 index fell 2.4 per cent, to 3,409.18 points, while the Shanghai Composite Index lost 2.5 per cent to 3,152.97 points.

China's insurance regulator, which recently warned it would curb "barbaric" acquisitions by insurers, said late on Friday it had suspended the insurance arm of China's Evergrande Group from conducting stock market investment.

Concerns were also rumbling about US-Sino relations after Donald Trump re-ignited controversy over Taiwan.

AMMAN — The Jordanian-Qatari business forum opened in Doha on Monday, hosting businesspeople, investors and representatives of the private sector from both countries, the Jordan News Agency, Petra, reported. 

During the forum, Jordan showcased investment opportunities worth around $1.36 billion. 

The Jordanian delegation was chaired by Jordan Chamber of Commerce President Nael Kabariti, who said that the Kingdom exerts all efforts to improve policies and legislation regulating business, showcasing investment opportunities to Arab and Gulf investors, especially the Qataris. 

Qatar Chamber of Commerce Chairman Sheikh Khalifa Bin Jassim Al Thani welcomed the Jordanian delegates and said that international economic conditions are witnessing accelerating political changes, which he said require Arab countries to focus on economic and trade cooperation among each other. 

He highlighted the importance of discussing the means to reform and utilise the best economic capabilities and available opportunities to achieve sustainable development.

Sheikh Khalifa also showcased the opportunities available to Jordanian investors and businesspeople in Qatar, especially in the field of infrastructure.

For his part, Jordan Investment Commission Secretary General Mikhled Omari highlighted the investment climate in Jordan, noting that Jordan's stability and security factors are major advantages.

The investment opportunities Omari showcased, which amount to $1.36 billion, include an $80 million tram project in Irbid, the $50 million Bus Rapid Transit project between Amman and Zarqa, a $60 million electricity generation station and a $60 million water plant, in addition to a $300 million project to generate energy from solid waste.

KUWAIT CITY — Kuwait's Emir Sheikh Sabah Al Ahmad Al Sabah opened the new parliament on Sunday by declaring that a reduction in public spending is "inevitable" in the face of weak oil prices.

The emir said the sharp drop in oil revenues has resulted in a huge budget deficit and "there is no other option but to take effective measures to deal with it".

"I am confident that parliament and my brother citizens are all aware that reducing public expenditure is inevitable through well-studied measures," he said.

He, however, said that those measures should spare low income people and take into consideration social justice.

OPEC member Kuwait, which sits on around 7 per cent of the world's proven crude reserves, has sought to cut spending and boost non-oil revenues in a bid to diversify its economy.

But the measures, which included raising electricity and fuel prices, triggered a political crisis that led the ruler to dissolve the previous parliament in October and call for snap polls.

In the November 26 polls, the opposition which vowed to reject austerity measures won nearly half of the 50 seats.

Most of the other candidates also opposed the measures.

Before crude prices began to slide in mid-2014, Kuwait generated about 95 per cent of its income from oil. 

But the country's oil revenues dropped from a massive $97 billion in the 2013-2014 fiscal year to just $40 billion in the last financial year, which ended on March 31, according to finance ministry figures.

And oil income is projected to slide further to around $35 billion this fiscal year.

In 2015-2016, the OPEC state posted its first budget deficit, of $15 billion, in 16 years. It is projecting a shortfall of $29 billion this year.

During its run of surpluses, Kuwait amassed reserves worth $600 billion invested mostly abroad.

Kuwait has been providing a generous cradle-to-grave welfare system to its nationals, who make up 30 per cent of its population of 4.4 million. 

"I would not have liked to ask you any day to drop anything of the welfare [you have been getting]," the emir said in his speech.

To plug a growing budget shortfall, the Gulf state has started borrowing for the first time in two decades.

Parliament on Sunday reelected pro-government Marzouk Al-Ghanem as its speaker for a new four-year term and pro-government MP Issa Al Kundari as his deputy, in a blow to opposition candidates.

The Islamist-led opposition controls nearly half of the 50-member parliament while 15 unelected Cabinet ministers out of a 16-strong lineup become members of the national assembly and can vote. 

VIENNA — OPEC and non-OPEC producers on Saturday reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices that overstretched many budgets and spurred unrest in some countries.

With the deal finally signed after almost a year of arguing within the OPEC and mistrust in the willingness of non-OPEC Russia to play ball, the market’s focus will now switch to compliance with the agreement.

OPEC has a long history of cheating on output quotas. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions.

Russia, which 15 years ago failed to deliver on promises to cut in tandem with OPEC, is expected to perform real output reductions this time. But analysts question whether many other non-OPEC producers are attempting to present a natural decline in output as their contribution to the deal.

“This agreement cements and prepares us for long-term cooperation,” Saudi Energy Minister Khalid Al Falih told reporters after the meeting, calling the deal “historic”.

Russian Energy Minister Alexander Novak told the same news conference: “Today’s deal will speed up the oil market stabilisation, reduce volatility, attract new investments.”

Last week, OPEC agreed to slash output by 1.2 million barrels per day from January 1, with top exporter Saudi Arabia cutting as much as 486,000 bpd.

On Saturday, producers from outside the 13-country group agreed to reduce output by 558,000bpd, short of the initial target of 600,000bpd, but still the largest contribution by non-OPEC ever. Of that, Russia will cut 300,000bpd.

“They are all enjoying higher prices and compliance tends to be good in the early stages. But then as prices continue to rise, compliance will erode,” said veteran OPEC watcher and founder of Pira Energy consultancy Gary Ross.

Amrita Sen from consultancy Energy Aspects said: “Compared to two months ago when the prospects of a deal were fading rapidly, this is a huge turnaround. Sceptics will argue about compliance but the symbolism in itself cannot be understated.”

Ross added that OPEC would target an oil price of $60 per barrel as anything above that could encourage rival production.

Two years of pain 

Oil prices have more than halved in the past two years after Saudi Arabia raised output steeply in an attempt to drive higher-cost producers such as US shale firms out of the market.

The plunge in oil to below $50 per barrel — and sometimes even below $30 — from as high as $115 in mid-2014 has helped reduce growth in US shale output.

But it also hit the revenues of oil-dependent economies, including Saudi Arabia and Russia, prompting the two largest exporters of crude to start their first oil cooperation talks in 15 years.

Apart from Russia, the talks on Saturday were attended by or had comments or commitments sent from non-OPEC members Azerbaijan, Bahrain, Bolivia, Brunei, Equatorial Guinea, Kazakhstan, Malaysia, Mexico, Oman, Sudan and South Sudan.

Novak said OPEC and the non-OPEC countries at the meeting were responsible for 55 per cent of global output. Their joint reduction of around 1.8 million bpd would account to about 2 per cent of global oil supply.

Many non-OPEC countries such as Mexico and Azerbaijan face a natural drop in oil production, and some analysts expressed doubts those declines should be counted as cuts.

Industry sources said Oman and Kazakhstan had yet to inform their foreign partners on joint oilfields about possible output cuts. Kazakhstan said on Saturday it would try to reduce output by 20,000bpd next year.

“While a lot of the countries are formalising natural declines, cuts by Russia, Kazakhstan and Oman are real. Russia and Kazakhstan were between them expected to add 400,000bpd to production next year,” Sen of Energy Aspects said.

AMMAN — The Jordanian Businessmen Association (JBA) convened a Jordanian-Turkish business forum on Saturday, with the participation of representatives of several Turkish companies.

The event seeks to boost commercial exchange between Amman and Ankara, increase joint investments and raise awareness of the favourable business environment in the Kingdom, the Jordan News Agency, Petra, reported.

Minister of State for Economic Affairs Yusuf Mansur, who inaugurated the event, said both countries can launch joint investments that can reach the entire world. JBA President Hamdi Tabbaa said that both countries' private sectors have "good relations", thanks to the Jordanian-Turkish Business Council, established in 1994.

Geneva — Airlines are expected to earn $35.6 billion this year, “a record profit”, even if slightly less than original expectations, IATA Director General and CEO Alexandre de Juniac said on Thursday. 

Speaking at the IATA Media Day 2016, he said this “best performance in the industry’s history — irrespective of the many uncertainties we face”, is all the more impressive considering that the oil prices averaged at or were above $100 per barrel of Brent for three of the last six years (since 2010). He also forecast that the strong profitability will extend into next year.

“A net profit of $29.8 billion in 2017 will mean eight years in the black for the industry.  And it will be the third year in a row where the return on invested capital (7.8 per cent) will exceed the cost of capital (6.9 per cent),” he told the attendees.

But while the strongest financial performance is being delivered by airlines in North America, whose net post-tax profit will stand at $18.1 billion next year, Middle Eastern airlines have one of the lower break-even load factors. 

Average yields are low, but unit costs are even lower, “partly driven by the strength of capacity growth, forecast at 10.1 per cent this year”, according to IATA chief economist Brian Pearce.

Post-tax profit for Middle Eastern airlines is expected to slip to $0.3 billion in 2017, representing a profit of $1.56 per passenger and a net margin of 0.5 per cent, said Pearce.

The success of global aviation rests on safety, security, sustainability and global standards, but “while respecting them, airlines must run efficient businesses and generate enough surplus to reward their shareholders”, which is “difficult”, said De Juniac.

Nevertheless, “the industry has improved its financial resilience” and the airlines are in better shape to remain profitable while facing challenges, he added.

One way to deal with challenges is innovation through the use of technology.

“Smart security, fast travel, the e-Air Waybill and new distribution capability (NDC) are all examples”, said IATA CEO, who is particularly enthusiastic about NDC, expected to modernise the distribution process and enable airlines to better understand the needs of their customers. 

Airlines are catalysts for economic development. They deliver about a third of goods traded internationally — by value.

They support some $2.7 trillion of the gross domestic product (GDP), and employment levels associated with aviation have reached almost 69 million, according to IATA figures.

But while global connectivity promotes prosperity, “charges and taxes dampen demand” and that comes with an “economic cost”, said De Juniac, noting that this is “why IATA spends a lot of time fighting taxes and charges”.

The air transport association is also involved in “a constant battle to get governments to understand and fulfil the industry’s infrastructure needs”, considering that nearly 4 billion travellers are expected in 2017 and 7.2 billion in 2035, a growth that “will bring net economic benefits, but only if infrastructure development can keep pace”.

While admitting that “there is no magic solution for infrastructure”, De Juniac suggested that “when it comes to airports and air traffic management, that is best done [by governments] in consultation and partnership with airlines who are the users”.

That helps ensure “that we hit the mark on capacity, efficiency and affordability”, he said, also sounding a note of caution on infrastructure privatisation — particularly for airports.

“Governments must take great care to effectively balance public and private interests... Finding the highest bidder should not be the prime motivation. The focus must be on finding the best long-term solution to support the local and national economy. The entire process must be guided by iron-clad regulations to ensure that the privatised entity does not become an out-of-control monopoly,” he said.

“In connecting our world, aviation makes people’s lives better. It supports trade, creates business opportunities, facilitates the exchange of ideas, builds friendships across borders and develops global understanding,” he concluded.

He also expressed concern over the current protectionist rhetoric which he said “is gaining popularity and geographic scope”.

With a much revised line-up, new technology and more decidedly upmarket direction, Volvo is set to make an official comeback to Jordan early in 2017, with an eye on making significant inroads into the premium automotive segment.

In an exclusive interview with The Jordan Times, Managing Partner of GAA & Co. — Jordan’s recently appointed importer — Marwan Naffi said Volvo Jordan’s goal is to ultimately “reach at least 10 per cent market share” in the premium segment. 

Traditionally dominated by the Mercedes-Benz, Audi and BMW luxury troika globally and more decisively by Mercedes in Jordan, he said that Volvo is “ready to compete in every sense with its German premium rivals in Jordan”.

One of the oldest Volvo importers globally, Naffi said that GAA’s long experience “will be at the disposal of the Jordanian consumer”. Asked about possible conflicts of interest and whether GAA represents any other rival brands, he stressed the company’s automotive interests as being “mono-brand” and dedicated to Volvo.

Echoing such sentiments, the iconic Swedish brand’s Turkish-based regional office cited GAA’s “professional and skilled team”, “benchmark operations” and “strong association with Volvo”.

Also interviewed by The Jordan Times, General Manager of Volvo MENA-CIS Emre Karaer said GAA’s  “expertise and dedication to our brand in Lebanon can bring out great achievements in Jordan… and ‘help build customer confidence”, when asked whether the importer’s extensive experience with Volvo would outweigh its position as a newcomer to the Jordanian automotive sector.

Expected to open for business in January, Karaer believes that Volvo’s return to the “stable and important” Jordanian market is a “significant step”, adding that Volvo’s hybrid models represent a particularly “good prospect”, owning to Jordan’s hybrid-friendly tax regime.

Absent from the Jordanian market in recent years, Volvo has, however, been undertaking a more premium and up-market direction since 2010 — according to Naffi — and much further more with the launch of the recent high-tech SPA platform models. 

Set to be priced on “par with competitors” albeit with “more options” and “state of the art safety technology features”, Naffi believes that Volvo will be competitive in the premium segment and “regain the trust of the Jordanian consumer.”

Distinguished by its Swedish character and innovative approach to safety, Naffi said that Volvo’s Scandinavian design and luxury is “all about enhancing life experience”, coupled with a calming effect.

 In terms of safety, its approach is a “holistic” one according to Karaer, who added that Volvo’s driver interface is designed to be “as simple and intuitive as possible to reduce eyes-off-road time at “critical events”. 

Asked as to how Volvo’s autonomous driving systems would fare in the real world and especially in less than ideal road environments and driving styles, Karaer said that V Volvo will be testing autonomous drive cars in real-world situations. 

Committed to the highest safety standards and ambitions in the automotive industry, Volvo will start a 100-vehicle programme, in 2017 in Gothenburg, Sweden, during which families will ride autonomous drive versions of the XC90 in “everyday life”, while similar tests will be conducted in London and China to accurately benchmark the “efficiency and practicality of autonomous driving”.