OPEC, Russia oil output freeze deal may be ‘meaningless’: IEA

Updated 23 March 2016

OPEC, Russia oil output freeze deal may be ‘meaningless’: IEA

SINGAPORE: A deal among some OPEC producers and Russia to freeze production is perhaps “meaningless” as Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said.
Brent crude futures are up more than 50 percent from a 12-year low near $27 a barrel hit early this year, bouncing back after Russia and OPEC’s Saudi Arabia, Venezuela and Qatar struck an agreement last month to keep output at January levels.
Qatar has invited all 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers to Doha on April 17 for another round of talks to widen the production freeze deal.
“Amongst the group of countries (participating in the meeting) that we’re aware of, only Saudi Arabia has any ability to increase its production,” said Neil Atkinson, head of the IEA’s oil industry and markets division, at an industry event.
“So a freeze on production is perhaps rather meaningless. It’s more some kind of gesture which perhaps is aimed ... to build confidence that there will be stability in oil prices.”
Libya has joined Iran in snubbing the initiative, and the absence of the two OPEC producers — both with ample room to increase output — would limit the impact of any success in broadening the freeze at the April meeting.
The rise in output from Iran in the first quarter post-sanctions has been in line with IEA’s expectation of 300,000 barrels per day (bpd), Atkinson said, adding that Tehran’s output could rise again by the same amount by the third quarter.
“Iran has not exactly been flooding the market with lots more oil. It seems to be far more measured,” Atkinson said.
It will take a while for Iran to regain its pre-sanctions share in Europe, where markets have been taken over by Saudi Arabia, Russia and Iraq, he added.
The IEA, energy watchdog for the Organization for Economic Co-operation and Development (OECD), expects the wide gap between supply and demand to narrow later this year, paving the way for an oil price recovery in 2017.
“We think the worst is over for prices ... Today’s prices may not be sustainable at exactly $40 a barrel, but in this mid-$30s and upward range, we think there will be some support unless there’s a major change in fundamentals,” Atkinson said.

Saudi central bank injects $13.333bn to support liquidity of banking system

Updated 02 June 2020

Saudi central bank injects $13.333bn to support liquidity of banking system

  • Latest cash boosts from Saudi Arabian Monetary Authority follow March fund to support SMEs, employment

RIYADH: The Saudi Arabian Monetary Authority (SAMA) is set to inject $13.333 billion in the banking system to enhance the liquidity in the sector, the Saudi central bank said.

The stimulus package aims to enhance its liquidity and enable banks to continue providing credit facilities to their clients, SAMA added.

The new support follows SAMA’s decision in March to provide SR50 billion for banks to provide debts and delay overdue loan installments for small and medium-sized businesses (SMEs) to help them maintain jobs.

SAMA added that the cash will help to continue “supporting and financing the private sector through modifying or restructuring their finances without additional fees, and supporting plans to maintain employment levels of the private sector.”

Dr. Ahmed Alkholifey, governor of SAMA, told Al-Arabiya that the funds will come in the form of one-year no-interest deposits in all Saudi banks.

Alkholifey added that the SAMA move aims to enhance liquidity in the banking sector as well as reducing the burden on some banks that delayed payments of companies and weren’t covered by the March support package, and those banks with high exposure to enterprises in Makkah or Madinah.

He added that SAMA is going to activate the open market operation for all banks during this month to enable them to get the required liquidity levels from SAMA.

“We are monitoring the liquidity levels on a weekly basis since the (coronavirus) crisis started, we care about both the liquidity index and the quality of debts, regarding the liquidity index we monitor the debt-to-deposits where there is a slight increase, we set it to not exceed 90 percent,” he said, adding: “Three banks have exceeded that percentage slightly, this might be one of the indicators of pressure on liquidity but in reality there is no big pressure.”

He added that injecting liquidity aims to give more confidence to the banking sector and to enable them to give more loans after reopening the business activities.

Alkholifey added that since SAMA announced providing supporting packages for SMEs in March, more than 65,000 contracts have been signed between SMEs and banks to benefit from the supporting package.

Talat Hafiz, secretary-general of the Media and Banking Awareness Committee for Saudi banks, said that SAMA’s new stimulus package is an extension to initiatives taken by the central bank to ensure the stability of the system amid the coronavirus crisis and its economic impacts.

“It’s one of SAMA’s monetary tools that it uses to ensure there is enough liquidity in the banking sector to enable banks to carry out their duty of financing the private sector in general and the SMEs in particular,” he told Arab News.

“The banking sector shows very healthy financial indicators, as the first quarter of this year has shown the Capital Adequacy Ratio of the banking sector recording 18.6 percent, which is much higher than Basel requirement. 

“The total assets of the banks has grown to 14 percent in the same period compared with last year. Loans and credit facilities extended to the private sector have grown by 12 percent.”