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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Iran urges other oil producers to freeze output after Doha debacle -- as it happened

Qatar’s Energy Minister Mohammed bin Saleh al-Sada holding a press conference in Doha
Qatar’s Energy Minister Mohammed bin Saleh al-Sada holding a press conference in Doha after efforts to agree a production freeze failed. Photograph: Karim Jaafar/AFP/Getty Images

European markets edge higher

Stock markets recovered from an early slide in the wake of the weekend’s failure by oil producers to agree an output cut, when Saudi Arabia insisted Iran should take part but the latter refusing, writes Nick Fletcher. Tony Cross, market analyst at Trustnet Direct, said:

Oil producers failed to reach a consensus over limiting production at yesterday’s key meeting in Doha, leaving equities to start the week under something of a shadow, but the downside pressures are certainly looking to be remarkably short-lived.

The FTSE 100 and crude oil alike have pared earlier losses, something that could be seen as underlying just where the problem now lies regarding over supply of crude. Yes, Saudi Arabia may be threatening to ramp up output, but with demand stagnant and storage facilities running close to capacity, the argument is looking slightly academic. On top of this we have Opec set to reconvene in two months time, by which time Iran will have made some progress in terms of accelerating its production. This debate still has some distance to run and equity markets are applauding the fact it’s far from over.

An oil workers strike in Kuwait which cut the country’s output in half also gave some support to the crude price.

So Brent is currently down just 0.3% at $42.94 a barrel having earlier fallen as low as $40.1. On the European markets, the final scores showed:

  • The FTSE 100 finished up just 0.15% or 9.77 points at 6353.52, recovering from a low of 6261
  • Germany’s Dax added 0.68% to 10,120.31
  • France’s Cac climbed 0.26% to 4506.84
  • Italy’s FTSE MIB rose 0.55% to 18,358.25
  • Spain’s Ibex ended up 0.35% at 8881.6
  • But in Greece, the Athens market dipped 0.06% to 574.37

On Wall Street, the Dow Jones Industrial Average is currently 72 points or 0.41% higher.

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Wall Street has opened lower, as Doha disappointment reaches New York.

The Dow Jones industrial average has dipped by 43 points, or 0.25%, in early trading, with the falling oil price hitting energy firms.

Greek prime minister, Alexis Tsipras, has met with EC vice-president Jyrki Katainen today, as efforts to break the deadlock between Greece and its lenders continue.

Greek PM Tsipras meets with European Commission Vice-President Katainen in his office in the Maximos Mansion in Athens.
Tsipras (left) talking to Katainen today Photograph: Alkis Konstantinidis/Reuters

Tsipras’s office say that the PM told Katainen that the emphasis now should be on growth, investment and employment, rather than finding additional spending cuts.

Katainen has tweeted that the talks were productive:

Officials representing Greece’s lenders are arriving back in Athens today, for fresh talks.

It’s possible (although frankly not very likely) that the review of Greece’s reform measures could be concluded before Friday, when eurozone finance ministers hold a regular meeting.

An EC spokesman told a news conference in Brussels that:

The aim of the mission remains to conclude the first review of the programme as soon as possible.”

Brazilian central bank intervenes

The central bank of Brazil appears to have intervened to weaken the real, after seeing it jump by 1.5% against the US dollar in early trading.

A burning funnel of a Romanian central oil platform.

Oil is coming under more pressure at American investors reach their desks, pushing US and Brent crude down around 4%.

FXTM research analyst Lukman Otunuga says there’s an “undeniable feeling of disappointed” in the global markets.

Despite Iran’s absence in the meeting, expectations were high for a freeze deal to be struck, but the visible dispute between Saudi Arabia and Iran sabotaged all efforts consequently causing WTI crude to plunge more than 5%.

While realistically the effects of an output freeze would have had a minimal impact on the supply glut, even a symbolic gesture from OPEC to deal with the oversupply could have boosted optimism for future deals.

Brazilian real surges after impeachment vote

Brazil’s currency has surged at the start of the American trading day, following last night’s congressional vote to impeach president Dilma Rousseff.

Investors are calculating that if Rousseff is ousted, a new government could promote more growth-friendly measures and overhaul tax and spending policies.

But Mihir Kapadia, CEO at Sun Global Investments, warns that the markets may have got too excited, given Brazil’s economic problems.

The issue now moves to the Senate as the drawn-out process continues its March towards what looks like an inevitable conclusion. Brazilian stocks are now up 23% in 2016 – that’s 43% up in US dollar terms - and this latest development is likely to add even more momentum to bonds, equity and the Brazilian Real.

In all likelihood we will see some profit-taking soon, as the market will start to focus on a post-Rousseff world where the economy must struggle through a deep and long recession.

Back in London, Centrica appears to have avoided a major shareholder vote over pay.

The parent company of British Gas has been criticised for handing its new boss, Iain Conn, a £3m deal, at a time when it’s also cutting 3,000 workers.

But only 15% of shareholders have voted against the package, according to figures released at its annual general meeting today:

Iran’s oil minister, Bijan Zanganeh, has also insisted that his country won’t join an output freeze.

Zanganeh argues that Iran can hardly impose sanctions on itself, having only just shaken off international restrictions.

Updated

Iran: Other countries should freeze output

An Iranian flag in the Persian Gulf.

Newsflash from Dubai: Iran has called for other oil producers to continue negotiating an output freeze.

Iranian OPEC Governor Hossein ‎Kazempour Ardebilli has told local media that production curbs are needed, but insisted that Iran won’t take part.

Reuters has the details:

“We support cooperation between OPEC and non-OPEC member countries and efforts to bring stability to the oil market, and we urge all producers to continue their negotiations,” Ardebilli said.

But he also said Iran had made it clear that it wanted to regain its share of the oil market lost when it was hit by economic sanctions, and that “its position is supported by most OPEC and non-OPEC members around the world”.

Bloomberg have just published an inside account of how the OPEC talks floundered yesterday.

It confirms that initial optimism waned once Saudi Arabia surprised attendees by insisting that any deal had to include Iran.

And with Iran stayed away from Doha, because they were unwilling to accept an output freeze, there was little chance of agreement.

Here’s a flavour:

In an apparent reference to Saudi Arabia, Russia’s Novak said at a press conference after the talks that some countries changed their position right before the meeting after agreeing to an earlier draft.

“I thought countries that came here, came to agree and not to discuss the need of joining in of those countries that were not participating,” he said. “We had been disputing today a lot, and that was because some countries from OPEC changed their positions in the morning.”

Updated

Get your thinking caps on - The Treasury’s new analysis into the risks of Brexit has just been published.

Politics Live has full details of the report, and George Osborne’s speech and Q&A which is happening now.

Oil clawing back from worst losses

The initial panic over the failure of the Doha talks may be easing, as oil recovers some of its early losses.

Brent crude is now trading around $42, down around 2.5% from Friday night. Still a chunky loss, but better than the initial 5% tumble.

Brent crude today
Brent crude today Photograph: Thomson Reuters

Investors may be concluding that OPEC’s deadlock hasn’t really changed anything, especially as Saudi Arabia and Iran were always unlikely to emerge as best friends.

Mike van Dulken, head of research at Accendo Markets , explains:

Traders appear to be coming round to the understanding that although no deal came out of the weekend’s Doha oil production freeze meeting, we shouldn’t really have expected anything given the strong stances by Iran (‘not while we ramp up post sanctions’) and Saudi Arabia (not without Iran).

George Osborne’s report on the benefits of the EU is already making my head hurt.

UK chancellor George Osborne is about to give a speech on why Britain should stay within the European Union.

He’s announcing an official Treasury report which found that households would be thousands of pounds worse off if Britain leaves the EU, as growth will be slower over the

Although journalists were briefed about the report yesterday, it’s only being released this morning.

Some Brexit campaigners are already questioning whether the findings are truly accurate, given the government’s strong support for the Remain campaign.

Our Politics Live blog is covering Osborne’s speech:

Russian stock market hit by OPEC gloom

Investors in Moscow have reacted badly to the lack of an oil deal.

The ruble has slumped by over 1% against the US dollar, to 67.3 from 66.4 on Friday night. The Russian stock market is also suffering, down almost 3% right now.

Russia is the world’s largest oil producer, and its 2016 budget was based on an average oil price of $50 per barrel.

Why cheaper oil isn't always good news

Readers who can remember the oil price shocks of the 1970s may welcome OPEC’s recent impotence over the price of crude.

In an era where market abuse is outlawed and anti-competitive businesses face hefty fines, the oil cartel feels as outdated as flares and jumpsuits.

And there is something rather sinister about oil producers gathering, amid a media scrum, to cobble a deal to boost their revenues at the expense of the rest of the world.

Russian Minister of Energy, Alexander Novak, was quizzed by journalists in Doha
Russian Minister of Energy, Alexander Novak, was surrounded by journalists in Doha yesterday Photograph: STR/EPA

So many developed economies will welcome the sight of oil falling back towards $40 per barrel, as Mike Bird of the WSJ points out:

However.... another bout of oil price volatility might do more harm than good.

Oil producers are already suffering fiscal pain, given crude is trading well below their break-even point. The IMF recently predicted that Saudi Arabia would be forced into deep austerity, with tax hikes and spending cuts, unless crude prices recover.

Federal Reserve chair Janet Yellen warned last month that oil could be near a “financial tipping point”.

If OPEC members slash spending, and oil producers lay off staff, the wider global economy could suffer.

Saudi Arabia and Iran have been fighting a proxy war in Yemen for months, so it’s hardly surprising that they can’t get on the same page over oil.

In addition, it was clearly implausible that Iranian officials would commit to freezing output at January levels, the point in which sanctions had just been lifted.

Joe Rundle, head of trading at ETX Capital, says:

Both sides had made their stances clear, although Saudi Arabia clearly thought Tehran might come to the table at the 11th hour.

The prospect of cheaper oil is pushing up shares in airlines and holiday firms; every other sector is down, though.

Markets hit by Doha disappointment

Skyscrapers in the City of London

European stock markets are falling sharply at the start of trading, following oil’s lead

In London, the FTSE 100 has lost 50 points, or 0.7%, to 6299 as a bout of Doha disappointment grips the City.

Royal Dutch Shell and BP both lost over 2%, while emerging market-focused bank Standard Chartered is the biggest faller, down 4%.

Mining companies are also down, reflecting concerns that emerging market growth will suffer if the oil price remains low.

Other European markets have dropped by around 1%:

European stock markets are in the red

Tony Cross, market analyst at Trustnet Direct, explains how investors had pinned such hopes on OPEC’s meeting.

The market had high expectations that an agreement would be forged in Doha yesterday to limit oil production. This failed to materialise and the rally we had observed for crude prices – which in turn was lending support to the broader equity market – is now quickly coming undone.

Colin Smith, oil and gas analyst at City stockbroker Panmure Gordon, predicts more volatility in the crude price, now that OPEC has shown it cannot agree an output freeze.

He adds:

Given that this meeting has been three months in the making, it is surprising that it was held at all in the absence of firm commitments to strike a deal and odder still that the position of the most important player, Saudi Arabia, had not been fully firmed up in advance. Iran had always excluded itself from participation in a deal and it was not present at the Doha meeting.

The finger pointing suggests that Saudi Arabia could not bring itself to sign a deal without some sort of commitment from Iran and may have been expecting late concessions.

This is oil’s biggest one-day plunge since February.

Several oil producers are venting their anger about the Doha failure.

Falah Alamri, Iraq’s representative, says (via the FT).

“We are very very disappointed.....This will affect the [oil] price and our earnings. We wanted a deal.”

Oman’s oil minister, Mohammed Al Rumhy, is also disapppointed:

Analysts are largely blaming Saudi Arabia for OPEC’s failure to agree an output freeze.

Ed Morse, head of global commodity research at Citigroup, told Bloomberg that:

“The weekend talks are demonstration that the Saudi government, as the deputy crown prince has clearly stated, doesn’t want to cede market share.

They are fearful that the world may be in a weak or bearish market for a long period of time. In a bear market, as they learned from the 1980s, if they cede market share it is very difficult to get it back.”

Oil price dives after OPEC failure

The price of oil is sliding sharply this morning, as markets are hit by gloom following yesterday’s OPEC meeting.

US crude oil has shed almost 5%, falling to $38.45 per barrel. Brent crude is suffering too, down 4.4% at $41.20.

Oil has now lost all its recent gains, as hopes of a breakthrough deal between producers are dashed.

Investors are unhappy that the proposed deal to freeze oil output at January’s levels fell apart last night.

The talks failed because Saudi Arabia insisted that Iran joined in with the deal - even though Iranian ministers has already warned they wouldn’t take part (and didn’t even show up in Doha).

The feuding between the two countries appears to have ruined any chance of a deal between OPEC members, and Russia. That has reignited speculation of a new battle for market share; good news for oil consumers, but potentially damaging to oil producers.

Oil and shares have been tracking each other closely for many months, so the Doha fiasco may cause wider losses today....

Updated

The agenda: Oil, Brazil, Brexit, steel and Greece

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Investors have a lot to worry about this week.

Firstly, OPEC has just failed to agree a deal to freeze crude output, at their crunch meeting on Sunday. That’s obviously bad for the oil price, and may also prompt a rout in the currencies of commodity currencies.

Then there’s Brazil. Overnight, MPs have dramatically voted to impeach Dilma Rousseff, over allegations that her government illegally used money from state-owned banks to cover up the budget deficit.

The vote, amid dramatic scenes inside and outside congress, put the Brazilian president in a very sticky situation.

Brazilian assets have already been rising, as investors anticipate Rousseff being toppled, and replaced by a more free-market friendly leader. But with her supporters angrily crying “coup, coup, coup” last night, the future of the recession-dogged country is unclear.

Brazil’s woes come at a tough time for the world economy, which appears to be running out of gas again.

IMF chief Christine Lagarde will be taking questions on Twitter tonight, from 6pm BST (1pm in Washington).

Britain’s EU referendum continues to loom over the markets.

Today, the Treasury will be pitching into the war of words, and tit-for-tat statistics, with a report claiming that families will be thousands of pounds worse off after Brexit.

Over in Brussels, ministers from across the globe will gather for an emergency summit on the crisis gripping the steel industry - putting thousands of jobs at risk at plants across the UK.

And Greece’s lenders are due to resume bailout negotiations with government officials in Athens. There’s no sign that a deal is close, though.

We’ll be tracking all the main events through the day.....

Updated

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