Category: Economy

Sudan reverses sell-by date order for Kenya tea

{Officials had reduced the length of time the product could be stored from three years to one and a half.}

Sudan has suspended the decision to cut the shelf life of Kenyan tea from three to one-and-a-half years that saw sales to Khartoum drop by 30 per cent last year.

The two governments agreed on Wednesday that the guidelines be suspended for six months pending a joint technical research team that will determine the actual shelf life of the beverage.

The changes had been made by Sudan Standards and Metrology Organisation (SSMO) last year. Tea exports to Sudan last year dropped to 19 million kilogrammes from 27 million kilogrammes exported in the previous year, with the officials attributing the decline to the new guidelines. The decline saw Sudan drop to position seven last year from number five in 2014 in purchase of Kenyan tea.

Agriculture Fisheries and Food Authority (AFFA) director general Alfred Busolo welcomed the move.

“It is a reprieve to our tea industry as Sudan has agreed to suspend its decision on the shelf life, giving us an opportunity to continue enjoying tea exports to the country as we address the outstanding issues,” said Mr Busolo. He said the move had resulted in tea buyers cutting down on their stocks hence impacting negatively on the export volumes.

Kenya Bureau of Standards (Kebs) managing director Charles Ongwae said the joint committee had been formed with the SSMO and other government agencies to carry out a scientific research on the actual shelf life of tea.

“The suspension gives us time to conduct research and come out with conclusive findings on the shelf life of the commodity,” said Mr Ongwae.

Kenya last year, through a Joint Ministerial Commission (JMC) meeting between Foreign ministry officials from both countries, urged Khartoum to reverse its decision.

During the meeting, the delegation led by Foreign Affairs CS Amina Mohamed argued the decision means Kenyan traders will incur more storage costs and make losses if they don’t make sales on time.

Tea earnings are expected to drop this year due to poor performance of the crop in the third and fourth quarter of 2015/16.

The agriculture regulator expects the performance to decline because of low prices witnessed since the beginning of January resulting from overproduction due to good rains last year. Mr Busolo said the earnings could drop from Sh123 billion witnessed in 2014/15 to Sh120 billion.

“The earnings for this financial year are going to decline marginally because of low prices experienced in the last two quarters of the year,” he said. The price of tea has been declining since the beginning of the year, failing to rebound to a high of Sh273 witnessed in the first auction of 2016.

Kenya is the world’s largest exporter of black tea and an oversupply of the commodity in 2014 led to a sharp drop in global prices. The glut also cut farmers’ bonuses to levels last seen seven years ago.

May 20, 2016
Oil prices rise on Nigeria, Venezuela disruptions

{Oil prices edged up in early trading on Monday as output falls in Nigeria and worries about political instability in Venezuela tightened the market, although rising OPEC output and a stronger dollar capped gains.}

International Brent crude futures were trading at $48.11 per barrel at 0148 GMT, up 28 cents, or 0.6 percent, from their last settlement.

U.S. West Texas Intermediate crude futures were up 25 cents, or 0.5 percent, at $46.46 a barrel.

Analysts said that falling supplies from producers such as Nigeria, the Americas and China had pushed up prices, although they added that increases elsewhere were capping gains.

“Oil struggled to hold gains from the previous day as the return of output from Canadian producers negated (production)losses,” said ANZ bank.

An oil pumpjack operates near Williston, North Dakota.
Andrew Cullen | Reuters
An oil pumpjack operates near Williston, North Dakota.
Oil prices edged up in early trading on Monday as output falls in Nigeria and worries about political instability in Venezuela tightened the market, although rising OPEC output and a stronger dollar capped gains.

International Brent crude futures were trading at $48.11 per barrel at 0148 GMT, up 28 cents, or 0.6 percent, from their last settlement.

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U.S. West Texas Intermediate crude futures were up 25 cents, or 0.5 percent, at $46.46 a barrel.

Analysts said that falling supplies from producers such as Nigeria, the Americas and China had pushed up prices, although they added that increases elsewhere were capping gains.

“Oil struggled to hold gains from the previous day as the return of output from Canadian producers negated (production)losses,” said ANZ bank.

In Nigeria, oil major Exxon Mobil suspended exports from the country’s biggest crude stream, Qua Iboe, and other producers like Royal Dutch Shell and Chevron have also suffered disruptions following acts of sabotage, cutting output to its lowest in decades of around 1.65 million barrels per day (bpd).

In the Americas, major oil exporter Venezuela seemed to be on the brink of political and economic meltdown, triggering fears of default by its national oil company PDVSA, which has to make almost $5 billion in bond payments this year.

Venezuela’s oil production has already fallen by at least 188,000 bpd since the start of the year as PDVSA struggles to make the necessary investment to keep output steady.

Adding to these disruptions were the United States, where crude production has fallen to 8.8 million bpd, 8.4 percent below 2015 peaks as the sector suffers a wave of debt-fuelled bankruptcies.

In China, Asia’s biggest oil producer and consumer, output fell 5.6 percent to 4.04 million bpd in April, compared with the same time last year.

Yet countering these disruptions was rising supply from the Organization of the Petroleum Exporting Countries (OPEC)following the lifting of sanctions against Iran which triggered a race for market share between Tehran and OPEC-rivals like Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

OPEC pumped 32.44 million bpd in April, up 188,000 bpd from March. This is the highest since at least 2008, according to a Reuters review of past OPEC reports.

Also weighing on markets was recovering output in Canada following forced closures due to a wildfire, as well as a 3 percent rise in the dollar this month against other leading currencies. A firmer dollar makes dollar-traded fuel imports more expensive for countries using other currencies, potentially weighing on demand.

May 16, 2016
Zimbabwe’s ruling club riches fuelled by diamonds

{State cannot trace proceeds from its minerals.}

Zimbabwe president Robert Mugabe got the world angry in March when he used his birthday interview with state TV to say his country produced $15 billion diamonds in six years, yet only $2 billion of the gems could be accounted for.

He dumped the stinking carcass at the doorstep of firms that had been operating in rural Marange and said he had no clue how it happened. That way, the 92-year-old skirted the topic of the role played by the ruling elite in the looting.

The common tale is that diamonds were discovered in Marange in 2006. Thousands of illegal miners swamped the area and fed syndicates with the gems until 2008 when the governments sent in soldiers to flush them out.

This paved the way for commercial production that began in 2009. By 2015, eight companies were extracting the diamonds — most of them in joint ventures with the government.

Discovery of diamonds in the area dates earlier than the 2006 rush. De Beers, the world’s largest diamond firm, held an Exclusive Prospecting Order over Marange from early 1980s via a subsidiary, Kimberly Searches Ltd.

This order expired in 2006 and the British-registered African Consolidated Resources took over exploration rights. ACR challenged state takeover of mining rights and initially won through a High Court order but the same court reversed the decision in September 2010.

A parliamentary committee on mining, headed by Edward Chindori-Chininga, estimated in a 2013 report that Zimbabwe had the capacity to supply 25 per cent of the world market. However, there were concerns that not much was coming out of the mines.

By 2014, alluvial diamond deposits were running ultra-thin, meaning extraction had to go deeper in search of the stones, but the companies were ill-prepared.

Late last year, the government expressed dismay at the “mysterious” losses. It announced the formation of a consolidated outfit that it is now spearheading.
Top government officials and their cronies amassed overnight riches.

COMMERCIAL EXTRACTION STARTED

Obert Mpofu was the mines minister from 2009 when commercial extraction started. He had been in business for long but his profile was modest until he landed in the ministry. His investments straddled transport, banking, tourism, real estate, mining, ranching and the media. He was rumoured to own half of Victoria Falls Town.

Mpofu’s empire began to crumble when he was moved to the transport ministry in 2013. The Zimbabwe Mail newspaper he owned with Robert Mhlanga, a former Air Force officer collapsed. So did Allied Bank which he had bought.

The minister says he built his wealth from the money he got when he left a Zanu-PF owned company in the 1980s. His tale is not convincing.

Sceptics include former finance minister in the 2009-2013 government of national unity, Tendai Biti. “Mpofu must face an independent commission of inquiry,” he said.

Biti is angry at the president for shielding Mpofu from scrutiny. He accuses Mpofu of barring him from directly engaging with the mines when he (Biti) was finance chief.

Mpofu appointed or influenced the appointment of most of the people to represent government stake in companies involved in Marange diamond production and marketing, according to the parliamentary study headed by Chindori-Chininga. The MP was from the ruling party and died in a mysterious car crash months after the release of the report.

The report is brazen in its condemnation of Mpofu who signed himself off as Mugabe’s “Ever Obedient Son”.

“Board appointments…were being done by the minister of mines in clear violation of the law. Due to the unilateral appointments, certain individuals with a conflict of interest were appointed.”

Four key people with Zanu-PF links were named. Mhlanga, who was the chairperson of Mbada Diamonds, was also a shareholder in Liparm — a subsidiary of the giant mining firm that the report said was arrogant and untouchable.

CHARGE LATER DROPPED

Besides owning the Zimbabwe Mail with Mpofu, he shared more than his first name with President Mugabe. He was the leader’s helicopter pilot for a long time.

According to uncorroborated reports, Mhlanga said he represented Mugabe’s business interests and the president was the one who ordered his appointment as Mbada boss.

He was also implicated in a 2002 sting operation against Morgan Tsvangirai, the opposition leader, who was accused of plotting to “exterminate” Mugabe though the charge was later dropped.

Mhlanga hit the headlines when he acquired prime real estate in Durban and Johannesburg. South African media reported in mid-2012 that Mhlanga bought a $24.5 million mansion in Kwa-Zulu Natal, complete with two artificial lakes, bullet proof windows, a helipad and an underground bunker.

There was speculation that the mansion would be Mugabe’s get-away or retirement home but no proof has been provided yet. Documents in South Africa show that, in one day in January 2011, Mhlanga bought three properties valued at $7.4 in Durban and Sandton. He bought more properties elsewhere, sometimes at inflated prices.

Other officials named include Goodwills Masimirembwa who was the chairperson of ZMDC, the government agency tasked with diamond production.

Current mines Walter Chidhakwa toured Manicaland province where Marange is located and had no kind words those named in the report.

“We want to see politicians who protected them (the syndicates) charged,” he said.

Army generals are also accused of taking advantage of the murk in the diamond industry to enrich themselves.

May 7, 2016
Uganda:Parliament approves Shs26 trillion Budget

{With unusually little disagreement on the floor, Parliament on Tuesday night passed a record Shs26.3 trillion post-election Budget for the 2016/17 financial year with the government staying true to what it promised in its campaign manifesto.}

The major objective of the Budget, according to Finance minister Matia Kasaija is to enable implementation of the ruling party’s 2016 manifesto within the overall framework of the Second National Development Plan.

“The largest proportion of the resources have been allocated to the key priority sectors of Works and Transport (18.7 per cent); Education (12 per cent); Energy and Mineral Development (11.7 per cent); Health (8.9 per cent) and Agriculture (4.0 per cent),” Mr Kasaija said.

The minister is expected to present the details in his Budget speech expected in the first week of June.

The Budget was approved in line with Section 14 of the Public Finance Management Act, 2015. The new law changed the budget cycle in such a way that Parliament must now approve the budget before it’s read by the minister so as to ease implementation and delivery of services.

In laying out public spending plans for the next financial year, Mr Kasaija announced in a statement yesterday that the new budget will focus on wealth creation by supporting agricultural productivity; infrastructure development; improving the quality and access to key social services in education, health and water and heightening defence and security.

As promised in the NRM manifesto, priority went to Works and Transport, which has been allocated Shs3.6 trillion, Energy Shs2.3 trillion, Education Shs 2.2 trillion, Shs1.4 trillion to the health sector and more than Shs326b going to provision of agricultural inputs such as hoes, pesticides, fertilisers and planting materials like coffee seedlings to boost household incomes.

Women and youth groups were allocated Shs138.25 billion; salary enhancement for teachers Shs122 billion, salary enhancement for public universities Shs78 billion and recruitment of critical staff in local governments taking Shs50 billion.

In the NRM manifesto, President Museveni also promised free sanitary pads to school girls, scholastic materials such as textbooks and mathematical sets, hand hoes, Shs1 trillion for Naads, more money towards the Youth Fund, Women Fund, Microfinance Fund and Innovation Fund.

Like other developing countries in Sub-Saharan Africa, Uganda is facing a crisis of unemployment, widespread poverty amidst constrained growth. Trade imbalances have also aggravated the situation.

In March, Mr Kasaija unveiled a cocktail of tax proposals which he said would help pay for the government’s spending plans in the coming financial year.

A month later, Parliament amended the Excise Duty Act 2014 to increase taxes on all types of cigarettes, ready-to-drink spirits, cement, motor spirit (gasoline), gas oil (automotive, light, amber for high speed engine), cane or beet sugar and chemically pure sucrose in solid form, vehicle lubricants, confectioneries (chewing gum, sweets and chocolates).

However, MPs rejected the proposed tax increase on used clothes and shoes after West Budama North MP Fox Odoi argued that used items were crucial to “a second-hand economy” like Uganda’s.

Finance ministry spokesperson Jim Mugunga yesterday said: “This is not about the political honeymoon ending, it’s about Uganda working on its tax collection efficiencies so that we all pay a fair share of our obligation to national revenue.”

May 5, 2016
UK joins IMF and World Bank to cut Mozambique aid

{The UK government says it has suspended financial aid to Mozambique over an alleged “serious breach of trust” relating to undisclosed debts.}

This follows similar action from the International Monetary Fund (IMF) and the World Bank.

The IMF halted funding 10 days ago when it found Mozambique had not declared debts of more than $1bn (£700m).

The government says the liabilities relate to guaranteeing loans taken out by two mostly state-owned companies.

The UK said in a statement that it was now “working closely with other international partners to establish the truth and coordinate an appropriate response”.

The IMF is currently carrying out an analysis to see if Mozambique has a sustainable level of debt, and the World Bank is waiting for its outcome before it approves any more loans.

Mozambique’s Prime Minister Carlos Agostinho do Rosario went to the IMF headquarters in Washington DC last week to explain the government’s position.

The government has admitted that it acted as guarantor for a $622m loan taken out by state-owned Pro-Indicus, and another loan of $535m by Mozambique Asset Management. Both are involved in the maritime industry.

Mozambique has had one of Africa’s fastest growing economies in recent years with oil and gas discoveries buoying its prospects and attracting a lot of investment.

The mechanics of this are the same as with a personal loan.

If you take out a loan from a bank, the bank always asks you about your other liabilities. Do you have other debts? It will also want to see a payslip.

From the bank’s point of view, it is all to do with risk. Can you make the payments on their loan, if you have a lot of other debt as well?

And it is the same with countries. So, when the IMF lent money to Mozambique, it would have asked about the country’s other liabilities.

As the Mozambique government failed to disclose that it guaranteed the two large loans, it has put the IMF loan in jeopardy.

The IMF is now worried that Mozambique will not be able to meet its liability commitments with this extra debt on its books.

April 29, 2016
Tanga pipeline to take more than just oil to sea

{Officials from Uganda and Tanzania will in the coming days meet to fine-tune the work plan for the development of the proposed Shs11 trillion crude oil export pipeline.}

The 1,400km pipeline will run from Hoima District in the Albertine Graben through Masaka and Mutukula in Uganda to Bukoba, Biharamulo, Shinyanga, and finally to the Indian Ocean port of Tanga in Tanzania.

For Tanga – the oldest port in East Africa having been established by Portuguese traders around 1500 as a trading port for ivory and slaves – the development will likely rouse the city port that had faded off the region’s trading map following the rise of Mombasa (further north) and Dar es Salaam (further south).

Tanga remains Tanzania’s second largest port though, handling about 700,000 tons of cargo annually, according to the Tanzanian Ports Authority (TPA). It handles a negligible amount of cargo – if at all – to and from Uganda.

While recent discussions and developments have majorly revolved around the pipeline, for Uganda, a landlocked country, the development could finally open up an alternative and perhaps a more reliable route to the sea.

Currently, Uganda heavily relies on the Indian coastal port of Mombasa in Kenya for more than 90 per cent of its in-bound and out-bound cargo, nearly all of it by road. The port is congested and it takes up to four days to clear goods out of the port. The construction of a new standard gauge railway along the old 1892 Uganda railway route from Mombasa through Nairobi, Kisumu to Tororo and Kampala, once completed, might shift some cargo onto the rails but experts have repeatedly warned that it is risky business to rely on one access to the sea.

So what opportunity in real terms does Tanga present to Uganda and Tanzania?

Old plan, new need
In the 1960s, then Tanzanian president Julius Nyerere and his Ugandan counterpart Milton Obote (both socialists by political orientation) mooted the idea of Uganda leasing the port of Tanga from Tanzania so it becomes Uganda’s point of access to the sea as an alternative to Mombasa.

Tanga had been eclipsed by the growth of Dar es Salaam and with the sisal export trade, the mainstay of the port dwindling, Tanzania wanted to create a new use for the port that would bring in revenue and stimulate the city.

The plan, however, died at its infancy with the overthrow of Obote in 1971 and the ascendency to power of Idi Amin. After Amin was overthrown in 1979, the idea remained an on-and-off talking point which never crystalised into concrete action.

Instead much attention was focused on the use of the “southern route” as an alternative import/export avenue for Uganda. The southern routes follows Tanzania’s central railway which runs from Dar es Salaam port through Dodoma to Tabora and finally to Mwanza port on the southern shores of Lake Victoria. From Mwanza, wagons were then loaded onto ferries docking at Jinja or Port Bell on the northern shores of Lake Victoria.

To complete the railway-ferry route, Uganda in 1983 commissioned three large capacity wagon ferries to ply the lake from Mwanza (in Tanzania) to Jinja and Port Bell. They were MV Pamba, MV Kaawa and MV Kabalega each with capacity to carry 44 20-foot containers mounted on 22 40-foot railway wagons.

The route had previously been plied by only two smaller wagon ferries – MV Uhuru and MV Umoja – that belonged to the defunct East African Community. Idi Amin’s government then ordered and fully paid for three larger ferries from Belgium whose construction was, however, completed four years after his ouster.

The southern route was active for many years until 2005 when all Uganda’s marine vessels were grounded following the sinking of MV Kabalega after it collided with MV Kaawa. Today, there are almost no imports or exports that go through this Mwanza route.

April 29, 2016
TTIP trade pact: Obama pushes deal on Germany visit

{After talks with Chancellor Merkel, US president says he wants transatlantic trade deal finalised before his term ends.}

US President Barack Obama and German Chancellor Angela Merkel have given a fresh push to a potentially huge US-European trade pact despite mounting opposition.

Obama said after talks with Merkel in Hanover on Sunday that the deal could be reached by the end of the year.

“Angela and I agree that the United States and the European Union need to keep moving forward with the Transatlantic Trade and Investment Partnership (TTIP) negotiations,” he said.

“I don’t anticipate that we will be able to have completed ratification of a deal by the end of the year, but I do anticipate that we can have completed the agreement.”

If a deal is signed, it would form the world’s biggest trading bloc.

Those in favour of the pact say it could create millions of new jobs and increase trade by billions of dollars – a much needed stimulus for the global economy. But opponents believe it is undemocratic and would give big companies too much power.

Free-trade advocates say the TTIP will form a market of 800 million people, create millions of jobs and serve as a counterbalance to growing Asian economic clout.

Anti-TTIP activists, campaigning under the banner “Stop TTIP”, say an accord would undermine European food and environmental laws and give too much power to US corporations.

‘Unsettled by globalisation’

“As you see other markets like China beginning to develop and Asia beginning to develop and Africa growing fast, we have to make sure our businesses can compete,” Obama said.

Merkel echoed that sentiment, saying the deal would be “extremely helpful” for growth in Europe.

“It is good for the German economy, it is good for the European economy,” she said.

But Obama acknowledged there was popular opposition, saying that many opponents of the deal were unsettled by globalisation.

“People visibly see a plant moving and jobs lost and the narrative develops that this is weakening rather than strengthening the position of ordinary people and ordinary workers,” he said. “The benefits often times are diffused.”

About 200 protesters gathered in Hanover on Sunday to protest against the deal, with organisers saying they had expected considerably more people to turn out.

The demonstration started in the centre of the city and moved to the Congress Centre where Obama opened the Hanover industrial trade fair with Merkel on Sunday evening.

The day before, though, police said as many as 35,000 people in Hanover had taken to the streets.

Obama will wrap up his visit Monday with a speech designed to frame his vision of transatlantic relations and a meeting with Merkel and the leaders of Britain, France and Italy.

Despite the diplomatic niceties, the relationship between Obama and Merkel has had its rocky moments, hitting a low in 2013 when the US government was found to have been tapping Merkel’s phone.

But officials point to the Ukraine conflict as a turning point that allowed both leaders to work more closely together.

April 25, 2016
Kenya opts to build its own oil pipeline

{Government convinced its efforts to persuade Uganda would not succeed.}

Kenya will construct its own pipeline to transport crude oil from the Lake Turkana Basin to Lamu for export, it has emerged.

Top government sources on Thursday revealed Kenya was convinced its efforts to persuade Uganda that the Hoima-Lokichar-Lamu route was the most cost effective option for the regional pipeline would not succeed.

President Uhuru Kenyatta, who is scheduled to fly to Kampala on Friday for talks on the pipeline route on the eve of the Northern Corridor Investments Project summit, is expected to deliver Kenya’s position to Presidents Yoweri Museveni of Uganda and Tanzania’s Joseph Magufuli of Tanzania in Kampala.

“Kenya will tell the meeting (on the regional crude pipeline that it is willing to go the Lokichar-Lamu route which it sees as the cheapest of the three options. It will act in self interest,” said a government source.

MAKE OR BREAK TALKS

On Thursday, Kenya and Uganda delegations were locked up in make or break talks in Kampala over the route even as reports last week indicated that Uganda had opted to go for the Tanzania route.

This week, The Observer newspaper quoted Ugandan technocrats saying that Kampala had opted for the Hoima-Tanga route fearing that the Lamu Port could only start operations in 2022.

“The Kabaale-Tanga route is the only option to secure first oil export by mid 2020, with pipeline availability of 99 per cent. Uganda firmly concludes that Kabaale-Tanga route is the least costly route,” the paper said.

Uganda has discovered 6.5 billion barrels of oil in the Lake Albert Basin, while Kenya has 600 million in the Turkana basin.

New oil deposits have also been found in Chepktuket, Kerio Valley basin.

Talks between Kenya and Uganda on the pipeline route have taken over a month with President Kenyatta and President Museveni meeting in Nairobi last month, where they sanctioned a team to prepare a report for adoption on Saturday.

Kenya added the Mombasa route option to the talks.

April 22, 2016
OPEC meeting ends without deal on oil production freeze

{World’s big oil producers fail to agree on output cap to stabilise prices after months of uncertainty.}

The world’s biggest oil producers have failed to reach agreement at a meeting aimed at freezing output and reassuring markets that a recent recovery in prices could be sustained.

Sunday’s talks in Qatar’s capital saw the Organisation of the Petroleum Exporting Countries (OPEC) – and, unusually, other producers – trying to agree that average daily crude oil production in the coming months would not exceed levels recorded in January.

Qatari Energy Minister Mohammed Saleh al-Sada said – after six hours of negotiations – that consultations would continue between the parties until an OPEC meeting in June.

“All participating countries will consult among themselves and with others,” he said.

Oman’s Oil Minister Mohammed al-Rumhy said one reason a deal could not be reached was that not all OPEC members were present.

“Until this morning we thought there would be a deal. We didn’t know Iran wasn’t coming,” he told Al Jazeera.

After 6 hours of meeting, OPEC secretary general left without saying a word. Tired reporters pled: Just say anything pic.twitter.com/8EyriAq6b5

— Basma Atassi | بسمة (@Basma_) April 17, 2016
The run-up to the summit saw months of disagreements about the impact any freeze would have on individual OPEC members.

The position of Iran – now ramping up production after Western sanctions were lifted as part of the nuclear deal it signed with world powers – had proved a sticking point, with diplomats and officials at the talks telling Al Jazeera that Saudi Arabia was insisting that Tehran should sign up to any agreement.

Iran, though, did not send a delegation to the meeting, saying it would not accept proposals to cap its production until it recovered a similar market share to that which it held before the sanctions were imposed.

Uncertainty and volatility

Countries such as Ecuador and Venezuela have been hardest hit by plummeting prices. Venezuela has seen its worst recession since the 1940s, and its economy is expected to shrink by 10 percent this year.

Larger OPEC producers such as Saudi Arabia, though, have insisted on keeping production levels high, because they do not want to lose customers to non-OPEC producers such as the United States.

“Countries came to the summit with different interests and therefore the prospects of a deal were low,” Abdurahim al-Hor, a Doha-based economist told Al Jazeera at the summit.

He said that oil prices were expected to go down because of the failure to agree to any cap on output – possibly down to $35 a barrel, compared with the current $40.

“The price has been fluctuating with a big margin before, between $20 and $40 in January, so the decrease now could also be big,” he said.

Despite tanking prices and a glut in global supplies, OPEC members had previously increased production levels as disagreement grew about which strategy to take.

The bloc is made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

Qatar’s government currently holds the OPEC presidency.

April 18, 2016
OPEC meeting: Oil producers gather to weigh output cap

{Iran a key sticking point as world’s big oil producers meet in attempt to stabilise prices after months of uncertainty.}

The world’s biggest oil producers are meeting to hammer out a possible agreement to freeze output and reassure markets that a recent recovery in prices can be sustained.

Sunday’s talks in Qatar will see the Organisation of the Petroleum Exporting Countries (OPEC) – and other major producers – try to agree that average daily crude oil production in the coming months will not exceed levels recorded in January.

According to a draft copy of the agreement, seen by the Reuters news agency, the cap would last until October 1 this year, and producers would then meet again in Russia to review their progress in engineering what the document called “a progressive recovery of the oil market”.

READ MORE: Will national interests be sacrificed for a return to stability?

Final agreement has not been reached on the draft but, speaking to reporters at the meeting on Sunday, Anas Khalid al-Saleh, Kuwait’s acting oil minister, said he was confident a cap would be agreed.

There have, however, been conflicting statements in the run-up to the summit after months of disagreements about the impact any freeze would have on individual OPEC members.

The position of Iran, now ramping up production after Western sanctions were lifted as part of the nuclear deal between it and world powers, has proven a sticking point.

Countries such as Ecuador and Venezuela have been hardest hit by plummeting prices. Venezuela has seen its worst recession since the 1940s, and its economy is expected to shrink by 10 percent this year.

Larger OPEC producers, though, have insisted on keeping production levels high, because they do not want to lose customers to non-OPEC producers like the United States.

Iran said there was no point in it sending a full delegation as it would not accept proposals to cap its production until it recovered a similar market share to that which it held before the sanctions were imposed.

It would instead send Hossein Kazempour Ardebilli, an OPEC governor, according to a report by the oil ministry news agency, Shana.

“It is impossible for the meeting to fail,” Kamel al-Harami, a Kuwaiti oil analyst, told Al Jazeera on the sidelines of the summit, adding though that were differences of opinion, particularly between Saudi Arabia and Iran.

Tehran, however, did not yet have the power to cause significant fluctuations in prices, he said.

Ministers were tight-lipped after preliminary talks in the morning, refusing to talk to reporters as they headed to a meeting with the Emir of Qatar, Sheikh Tamim bin Hamad al-Thani, whose government currently holds the OPEC presidency.

Uncertainty over the outcome of the summit has already added to market volatility, with some analysts questioning whether a cap would have much impact on prices in the short-term.

“A decision to freeze production may not trigger an immediate upsurge in oil prices, [but] risks are on the upside as overcapacity would gradually start to normalise over the coming months,” Apostolos Bantis, a credit analyst at Commerzbank, told Al Jazeera.

Producers would continue to develop the process of consultation on the best ways to bolster the market and the deal would be open for other states to join, the draft document said.
Despite tanking prices and a glut in global supplies, OPEC members had previously increased production levels as disagreement grew about which strategy to take.

The cartel is made up of Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

April 17, 2016