Lebanese PM, Saudi minister talk support for country’s economy

Saudi Finance Minister Mohammed Al-Jadaan
Updated 24 September 2019

Lebanese PM, Saudi minister talk support for country’s economy

  • Beirut remains one of the world’s most heavily indebted governments, a victim of low growth and lack of capital inflow

BEIRUT: Prime Minister Saad Al-Hariri spoke to the Saudi finance minister on Saturday about support for the Lebanese economy and preparations for the first meeting of a bilateral council, his media office said.

Saudi Finance Minister Mohammed Al-Jadaan said on Wednesday that Riyadh was in discussions with the Lebanese government about providing financial support, lifting Lebanon’s dollar-denominated government bonds.

Lebanon, one of the world’s most heavily indebted states, faces financial strains linked to a slowdown in capital inflows needed to meet the financing needs of the government and the import-dependent economy. Years of low growth also weigh heavily.

Central bank foreign assets have been in decline. These, excluding gold, fell around 15 percent from an all-time high in May last year to $38.7 billion in mid-September.

In a phone call, Hariri and Al-Jadaan discussed “preparations to hold the first meeting of the Lebanese-Saudi joint committee and ... the agenda that includes agreements and memorandums of understanding that are intended to be signed.”

They also discussed “ways leading to the support of the Lebanese economy and the participation of the Saudi private sector in projects included in the Cedre conference,” a reference to a major infrastructure investment program.

Lebanon won pledges of some $11 billion in financing for the investment program at the “Cedre” conference in Paris last year. But foreign governments including France first want to see Beirut follow through on long-delayed reforms aimed at putting the public finances on a sustainable path.

A Lebanese official source told Reuters on Wednesday that work was underway to convene the bilateral council in October.

The statement from Hariri’s office gave no details of what kind of financial support Saudi Arabia might provide.

Krisjanis Krustins, director at Fitch Ratings, noted that one step taken by Saudi Arabia and others to help Lebanon in the past was to deposit funds at the central bank.

“Buying bonds is another option and another thing that could be done is support for purchase of petroleum products. Investments are another option but (it’s) not clear what assets they would buy other than bonds,” Krustins said.

Finance Minister Ali Hassan Khalil said on Wednesday Lebanon would “very soon” start measures to issue foreign currency bonds of about $2 billion.


OPEC sees small 2020 oil deficit even before latest supply cut

Updated 12 December 2019

OPEC sees small 2020 oil deficit even before latest supply cut

  • OPEC keeps its 2020 economic and oil demand growth forecasts steady and is more upbeat about the outlook

LONDON: OPEC on Wednesday pointed to a small deficit in the oil market next year due to restraint by Saudi Arabia even before the latest supply pact with other producers takes effect, suggesting a tighter market than previously thought.

In a monthly report, OPEC said demand for its crude will average 29.58 million barrels per day (bpd) next year. OPEC pumped less oil in November than the average 2020 requirement, having in previous months supplied more.

The report retreats further from OPEC’s initial projection of a 2020 supply glut as output from rival producers such as US shale has grown more slowly than expected. This will give a tailwind to efforts by OPEC and partners led by Russia to support the market next year.

OPEC kept its 2020 economic and oil demand growth forecasts steady and was more upbeat about the outlook.

“On the positive side, the global trade slowdown has likely bottomed out, and now the negative trend in industrial production seen in 2019 is expected to reverse in 2020,” the report said.

Oil prices were steady after the report’s release, trading near $64 a barrel, below the level some OPEC officials have said
they favor.

The Organization of the Petroleum Exporting Countries, Russia and other producers, a group known as OPEC+, have since Jan. 1 implemented a deal to cut output by 1.2 million bpd to support the market. At meetings last week, OPEC+ agreed to a further cut of 500,000 bpd from Jan. 1 2020.

The report showed OPEC production falling even before the new deal takes effect.

In November, OPEC output fell by 193,000 bpd to 29.55 million bpd, according to figures the group collects from secondary sources, as Saudi Arabia cut supply.

Saudi Arabia told OPEC it made an even bigger cut in supply of over 400,000 bpd last month. The Kingdom had boosted production in October after attacks on its oil facilities in September briefly more than halved output.

The November production rate suggests there would be a 2020 deficit of 30,000 bpd if OPEC kept pumping the same amount and other factors remained equal, less than the 70,000 bpd surplus implied in November’s report and an excess of over 500,000 bpd seen in July. OPEC and its partners have been limiting supply since 2017, helping to revive prices by clearing a glut that built up in 2014 to 2016. But higher prices have also boosted US shale and other rival supplies.

In the report, OPEC said non-OPEC supply will grow by 2.17 million bpd in 2020, unchanged from the previous forecast but 270,000 less than initially thought in July as shale has not grown as quickly as first thought.

“In 2020, non-OPEC supply is expected to see a continued slowdown in growth on the back of decreased investment and lower drilling activities in US tight oil,” OPEC said, using another term for shale.