Tag Archives: Prices

Venezuelan schools emptying as Chavez legacy under threat

Juliani Caceres, grand daughter of Carmen Penaloza, have rice and platain for lunch at her home in San Cristobal, Venezuela April 5, 2018. Picture taken April 5, 2018. REUTERS/Carlos Eduardo Ramirez

By Vivian Sequera and Francisco Aguilar

SOCOPO, Venezuela (Reuters) – It is mid-morning on a weekday yet all that can be heard in the once-bustling corridors of the Orlando Garcia state primary school is the swish of palm trees outside in the wind.

The white, tin-roof building in the town of Socopo once held nearly 400 children, yet closed two months ago in a protest by teachers and parents at low salaries and lack of school lunches.

Nearly 3 million children are missing some or all classes in Venezuela, according to a study by universities, in a depressing knock-on from a deepening economic crisis that could cause long-lasting damage to the South American country.

Venezuela has about 8 million school children in total, and free education was a cornerstone of ex-President Hugo Chavez’s 1999-2013 socialist rule of the OPEC nation.

Now, along with hospitals and other flagship welfare projects, the education sector is in crisis, heaping pain on Venezuelans and eroding Chavez’s legacy as his successor Nicolas Maduro seeks re-election in a May 20 presidential vote.

In Socopo, in the agricultural savannah state of Barinas that was once home to Chavez, half of the 20 public schools, including Orlando Garcia, closed completely in February, mid-term.

They have since reopened, but, along with the rest of Barinas’ approximately 1,600 public schools, they are operating just three days a week.

Venezuela’s economic implosion has led to millions suffering food shortages, unable to buy basic goods. Prices double every two or three months and the currency is worth less every day.

Education experts fear a stunted generation.

“Hungry people aren’t able to teach or learn,” said Victor Venegas, president of the Barinas chapter of the national Federation of Education Workers.

“We’re going to end up with a nation of illiterates.”

A major bonus for school children was once free food but state food programs are now intermittent, and when lunches do come, they are often small and missing protein.

The problems are felt across the country, with children often falling unwell or dizzy due to poor nutrition.

“We were singing the national anthem and I felt nauseous. I’d only eaten an arepa (a local cornbread) that day, and I fainted,” recounted Juliani Caceres, an 11-year-old student in Tachira state on the border with Colombia.

“BACK TO THE 19TH CENTURY”

While critics lambast him for incompetence and corruption, Maduro blames Venezuela’s crisis on Washington and the opposition, accusing them of waging an “economic war.”

Officials constantly downplay the social problems.

“There may be weaknesses in the food program in some municipalities, but we are always attentive and looking to improve the situation,” Education Minister Elias Jaua said in an interview in Barinas.

The government insists education remains a priority and says that 75 percent of the national budget goes to the social sector.

“Amid the economic war, the fall of oil prices, international harassment and financial persecution, not a single school has closed,” Maduro said at a Caracas rally last month, referring to U.S. sanctions against Venezuela.

His Barinas governor, Argenis Chavez, however, acknowledged the closures in Socopo, blaming them on the opposition as part of a plan to sabotage the upcoming election.

Despite Venezuela’s plethora of problems and Maduro’s personal unpopularity, he is widely expected to win re-election, given that the opposition’s most popular leaders are banned from standing and the main anti-Maduro coalition is boycotting the vote on grounds it is rigged in advance.

One opposition leader, former state governor Henri Falcon, has broken with the boycott and is hoping Venezuelans’ fury at their economic woes will translate into votes for him.

According to the opposition, prices rose more than 8,000 percent in the 12 months to March.

Teachers in the public sector earn around four times the minimum wage of just over a dollar a month at the black market exchange rate. That is nowhere near what Venezuelans need to feed themselves and their families.

“With my last paycheck, I was able to buy a kilo of meat and a kilo of sugar,” said Roxi Gallardo, a 35-year-old teacher in the Andean city of San Cristobal who, like so many others, is looking to leave Venezuela.

In addition to food shortages, school communities are suffering from a collapse in transport systems and inability to pay bus fares, plus frequent water and power-cuts.

“We’re heading back to the 19th century,” said Luis Bravo, an education researcher at Caracas’ Central University.

Doctor Marianella Herrera, at the same university, said the combination of inadequate nutrition and patchy education would cost Venezuela dearly in the future, depriving it of skilled workers.

“The longer this goes on without reversing the situation, the tougher it will be,” she said.

Eudys Olivier, a 39-year-old homemaker in a poor area of San Felix in southern Bolivar state, and her two children, live off her husband’s bakery wage of just under $5 per month.

“If there isn’t enough food, I prefer to leave the children at home,” she said. “I want them to go to school every day because it’s their future. But I can’t send them hungry.”

(Reporting by Vivian Sequera and Francisco Aguilar, Additional reporting by Maria Ramirez in Bolívar and Anggy Polanco in Tachira; Writing by Girish Gupta; Editing by Andrew Cawthorne, Daniel Flynn and Rosalba O’Brien)

Oil drops on surprise U.S. gasoline stocks build; crude stocks also up

FILE PHOTO: An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S. on May 3, 2017. Picture taken May 3, 2017. REUTERS/Ernest Scheyder/File Photo

By Ayenat Mersie

NEW YORK (Reuters) – Oil prices fell more than 1 percent on Wednesday and gasoline futures tumbled, after the U.S. government said crude inventories rose more than expected while gasoline stocks posted a big build instead of the draw that was forecast.

U.S. crude inventories rose by 3 million barrels for the week ending Feb. 23, compared with analyst expectations for a build of 2.1 million barrels.

Gasoline inventories rose by 2.5 million barrels, compared to analyst expectations for a 190,000-barrel drawdown. Gasoline futures fell sharply, leading the rest of the energy complex lower.

“The report was bearish, primarily due to the fairly large crude oil and gasoline inventory builds,” said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.

U.S. West Texas Intermediate crude dropped 75 cents at $62.26 a barrel, a 1.2 percent decline, as of 10:55 a.m. EST (1555 GMT). Brent crude futures for the most active May contract were down 84 cents at $65.68 a barrel.

Gasoline futures lost 2.2 percent to $1.7636 a gallon. The rise in inventories came even as refineries boosted activity in the most recent week.

“In spite of refiners undergoing maintenance, they continue to process more crude compared to previous years adding to gasoline and diesel supply,” said Andrew Lipow, president at Lipow Oil Associates in Houston.

Soaring U.S. production kept a lid on oil prices this year, even though the Organization of the Petroleum Exporting Countries and Russia have reduced output.

A Reuters survey on Wednesday showed OPEC maintained its supply cuts in February, dropping output to 32.28 million bpd, lowest since April of last year.

“Climbing U.S. production continues to weigh on the market as traders fear that the OPEC output cuts will be nullified by the rising U.S. output,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. crude production has risen by a fifth since mid-2016 to more than 10 million barrels per day. Wednesday’s release showed weekly production rose again to 10.3 million bpd. More reliable monthly figures are due later in the day, and analysts expect that report to show another large upward revision.

Prices were pressured earlier after three of the world’s top consumers of crude – China, India and Japan – reported a slowdown in monthly factory activity.

The U.S. dollar hit a one-month high Wednesday, putting additional pressure on crude. A stronger dollar makes oil more expensive for holders of other currencies.

(Additional reporting by Scott DiSavino in NEW YORK, Amanda Cooper in LONDON, Aaron Sheldrick in TOKYO and Henning Gloystein in SINGAPORE; Editing by Dale Hudson and David Gregorio)

Wave of looting shutters stores, spreads fear in Venezuela

A worker closes the security shutter of a window display at a shoes store in downtown Caracas, Venezuela January 16, 2018.

By Alexandra Ulmer and Anggy Polanco

CARACAS/SAN CRISTOBAL, Venezuela (Reuters) – A wave of looting by hungry mobs across Venezuela has left streets of shuttered shops in provincial towns and pushed some store owners to arm themselves with guns and machetes, stirring fear that the turmoil could spread to the capital Caracas.

Worsening food shortages and runaway inflation have unleashed the spate of pillaging since Christmas in the South American country, in which seven people have reportedly died.

The unrest was sparked by shortages of pork for traditional holiday meals, despite socialist President Nicolas Maduro’s promise of subsidized meat to alleviate shortages.

Looters have ransacked trucks, supermarkets and liquor stores across the nation of 30 million people, which ranks as one of the most violent in the world.

The plunder is heaping more pain on battered businesses, raising questions about how much longer they can survive. Venezuela, once one of Latin America’s richest countries, is suffering a fifth straight year of recession and the world’s highest inflation rate, which the opposition-run Congress says topped 2,600 percent last year.

In the first 11 days of January alone, some 107 lootings or attempted lootings have taken place, according to the Venezuelan Observatory for Social Conflict, a rights group.

In one of the most dramatic incidents, a mob slaughtered cattle grazing in a field in the mountainous western state of Merida.

Skeptical that authorities can protect them, shopkeepers in the Andean town of Garcia de Hevia in the neighboring state of Tachira have taken matters into their own hands.

“We’re arming ourselves with sticks, knives, machetes, and firearms to defend our assets,” recounted William Roa, the president of the local shopkeepers’ association.

Roa, who owns a restaurant and liquor store, estimated that more than two-thirds of stores in the small town near the Colombian border were shut.

“A person spends the night in each store and we communicate using WhatsApp groups, coordinating by block 24 hours a day,” he said.

In Ciudad Guayana, a former industrial powerhouse on the Orinoco river in eastern Venezuela, many stores remain closed after a wave of nighttime lootings.

Garbage fills the streets and few cars circulate, though buses crammed with people crisscross town looking for places to buy food.

Businessmen in Caracas now fear the lootings, so far concentrated in the poorer and more lawless provinces, will spread to the sprawling capital, with its teeming hillside slums.

The owners of patisserie Arte Paris, in the city’s gritty downtown, reinforced the storefront with metal shutters last month. They now only stock ingredients like sugar for a handful of days and have considered hiring a costly nighttime guard.

“The fear is real,” said Sebastian Fallone, one of the owners, as men and children begged patrons for food. “I leave at night without knowing what I will find the next morning.”

‘NO HOPE’

Government critics say Maduro’s refusal to reform the OPEC nation’s floundering economy is to blame for the chaotic fight for survival in the country home to the world’s largest crude reserves.

With a presidential election looming this year, Maduro retorts that Venezuela’s oil-reliant economy is under attack by U.S.-backed saboteurs seeking to stoke conflict and discredit socialism in Latin America.

While videos of ransacking have gone viral, Maduro’s government has stayed largely mum. The Information Ministry did not respond to a request for information on the scale and impact of the looting.

The unrest has also stoked fears Venezuelan society could unravel as chaos sets in, fuelling mass emigration to nearby South American countries or a full-blown social explosion at home.

People line up outside a supermarket with its security shutters partially closed as a precaution against riots or lootings, in San Cristobal, Venezuela January 16, 2018.

People line up outside a supermarket with its security shutters partially closed as a precaution against riots or lootings, in San Cristobal, Venezuela January 16, 2018. REUTERS/Carlos Eduardo Ramirez

“Small-scale protests will be numerous and increasingly violent; any of these protests could contain the spark to serious unrest,” said consultancy Teneo Intelligence in a note to clients about the year ahead in Venezuela.

In an effort to curb voter anger over inflation, the government agency tasked with ensuring “fair prices” ordered some 200 supermarkets to slash their rates this month, triggering frenetic buying.

Roadside lootings have also scared truck drivers, disrupting the food distribution chain that is traditionally slower anyway in January because of holidays.

For Mery Cacua, manager of La Gran Parada, a supermarket chain in Tachira’s state capital San Cristobal, it has become too much to handle.

“We’re closing in two weeks. There’s no hope anymore,” said Cacua, adding she and her siblings had not yet mustered the strength to break the news to their 87-year-old father, who founded the business 60 years ago.

The family does not know what to do but is considering starting from scratch in Colombia.

Venezuelan supermarkets that remain open are often a shadow of what they once were. Many shelves are barren and poor Venezuelans increasingly mass outside stores, imploring entering shoppers to buy them goods.

“What are they going to loot here? There’s nothing. The warehouse is empty,” said an employee at a big supermarket in Caracas, as a colleague behind him filled empty shelves with water bottles to make them look stocked.

(Additional reporting by Maria Ramirez in Ciudad Guayana, Mircely Guanipa in Maracay, Andreina Aponte and Leon Wietfeld in Caracas; Writing by Alexandra Ulmer; Editing by Daniel Flynn and Sandra Maler)

With tunnel lifeline cut, pressure mounts on Syrian rebel enclave

Abu Malek, one of the survivors of a chemical attack in the Ghouta region of Damascus that took place in 2013, uses his crutches to walk along a street in the Ghouta town of Ain Tarma, Syria. REUTERS/Bassam Khabieh

By Ellen Francis

BEIRUT (Reuters) – For nearly four years, food, fuel and medicine have traveled across frontlines into the besieged eastern suburbs of Damascus through a network of underground tunnels.

But an army offensive near the Syrian capital has shut the routes into the rebel enclave of Eastern Ghouta, causing supplies to dwindle and prices to rocket, residents say.

“The price of fuel went up like crazy,” said Adnan, 30, the head of a local aid group that distributes food.

A cooking gas canister now costs 50,000 Syrian pounds, nearly four times its price before the attack and almost 20 times the state-regulated price in nearby Damascus.

Adnan, whose aid group buys rice, lentils and other goods that arrive via the tunnels, said the shutdown and steep price hikes had triggered rising despair in the suburbs.

As the army tightens the noose, fighters and civilians are bracing for a full-blown assault and bitter shortages that could last through the winter.

“The operation aims to strangle the Ghouta … by closing off the crossings and tunnels,” Hamza Birqdar, military spokesman for the Jaish al-Islam rebel group, told Reuters.

“Trade through the tunnels has completely stopped.”

Government forces have blockaded Eastern Ghouta, a densely populated pocket of satellite towns and farms, since 2013. It remains the only major rebel bastion near Damascus, though it has shrunk by almost half over the past year.

President Bashar al-Assad’s government has been steadily defeating pockets of armed rebellion near the capital, with the help of Russian air power and Iranian-backed militias.

It ultimately aims to seize the Ghouta, pushing fighters to accept state rule or leave for rebel territory in the north, in a type of negotiated withdrawal that has helped shore up its rule over Syria’s main urban centers.

TUNNEL CRACKDOWN

Heavy fighting and air strikes have rocked the districts that stand between Damascus and Eastern Ghouta, severing smuggling routes that provided a lifeline for around 300,000 people in the besieged suburbs.

The army assault entered a higher gear in recent months in the districts of Barzeh and Qaboun, at the capital’s eastern edges, which abruptly ended a local truce that had been in place with rebels there since 2014.

Their relative calm and location had turned them into a transit point where traders brought supplies from the capital and shuttled them underground into the opposition enclave. Government forces have now swept into most of the two districts.

The siege generated a black market economy and profiteers who traded across frontlines, says an activist who has smuggled medicine through one of the tunnels.

Goods prices were ramped up by payments to checkpoints in government-held areas and rebels that control the tunnels, the activist and other residents said.

Syrian officials were not available for comment on such allegations.

Syrian state media says Ghouta militants dug tunnels hundreds of meters long to move weapons and ambush army positions. The tunnels have been a target of army operations, with several blown up in recent months, it has said.

The wide array of rebels – including hardline jihadists and other groups supported by Turkey, the United States and Gulf monarchies – have been on the back-foot across Syria.

In Eastern Ghouta, a bout of renewed rebel infighting, after a rebel attack at the fringes of Damascus quickly fizzled out in March, could play into the government’s hands.

Birqdar said rebels faced “heavy shelling, air strikes, and incoming tanks” every day. “We must prepare for every scenario that could happen on the battlefield,” he said.

“We are fully ready to negotiate over stopping the bloodshed by the regime, but will not accept any talks that lead to surrender.” He ruled out a local evacuation deal.

The government says such deals have succeeded where U.N.-based peace talks failed. The opposition describes it as a strategy of forced displacement after years of siege – a method of warfare the United Nations has condemned as a war crime.

WHEN WINTER COMES

The U.N. has warned of impending starvation if aid does not reach Eastern Ghouta, where international deliveries have long been erratic and obstructed. A convoy that entered last week, for the first time in months, carried food and supplies for just about 10 percent of the estimated population.

“People have rushed to the markets to stock up,” said Adnan. “Because they have bitter memories of 2013,” when their towns first came under siege.

Merchants inside the Ghouta had filled up large warehouses that would last months, and residents would harvest crops in the area’s remaining farmland in the summer, he said. “Things will get worse when winter comes.”

The Wafideen crossing at the outskirts, where checkpoints allowed food to enter, has also been restricted since February, Adnan and others said.

One resident said rebel fighters also ran their own hidden routes through which they had moved unnoticed or smuggled arms.

Medics relied on the tunnels for antibiotics, anesthetics, and other supplies, said Abu Ibrahim Baker, a surgeon in Eastern Ghouta. Hospitals would be “able to hold out, God willing, but not for very long,” he said.

(Reporting by Ellen Francis; Editing by Tom Perry and Catherine Evans)

Weekly jobless claims rise; import prices push higher

Job applicants listen to presentation for job opening at job fair

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits rose less than expected last week, pointing to a tightening labor market that is starting to spur faster wage growth.

Other data on Thursday showed import prices posting their largest gain in nearly five years in the 12 months through December, suggesting that inflation could soon push higher. Import prices are being driven by rising oil prices, but a strong dollar could limit some of the impact on inflation.

Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 247,000 for the week ended Jan. 7, the Labor Department said. It was the 97th straight week that jobless claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970, when the labor market was much smaller.

“Jobless claims remain in a very constructive range and are still evidence of an environment in which turnover is low and employers are generally content to maintain and expand their payrolls,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.

Economists had forecast first-time applications for jobless benefits rising to 255,000 in the latest week.

Jobless claims data tends to be volatile around the holiday season. The four-week moving average, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1,750 to 256,500 last week.

The number of Americans still receiving jobless benefits after an initial week of aid fell 29,000 to 2.09 million in the week ended Dec. 31. That was the first decline in the so-called continuing claims since November.

U.S. financial markets were little moved by the data amid disappointment over the lack of details regarding president-elect Donald Trump’s economic policy on Wednesday during his first press conference since his Nov. 8 election victory.

Stocks on Wall Street were trading lower, while prices for U.S. government debt rose. The dollar fell against a basket of currencies also as minutes from the European Central Bank’s last meeting revealed a few policymakers had not backed an extension of the ECB’s bond buying program.

During his election campaign Trump pledged to cut taxes, increase spending on infrastructure and relax regulations. While he has offered few details on these election promises, economists are hoping that the proposed fiscal stimulus would boost economic growth this year.

The stimulus would come against the backdrop of a labor market that is at or near full employment, with the unemployment rate near a nine-year low of 4.7 percent.

With tightening labor market conditions starting to push up wage growth, that could stoke inflation pressures and prompt the Federal Reserve to raise interest rates at a faster pace than currently envisaged.

The Fed raised its benchmark overnight interest rate last month by 25 basis points to a range of 0.50 percent to 0.75 percent. The U.S. central bank has forecast three rate hikes for this year. Average hourly earnings increased 2.9 percent in the 12 months through December, the largest gain since June 2009.

In a second report, the Labor Department said import prices increased 0.4 percent last month as the cost of petroleum products surged 7.9 percent. Import prices slipped 0.2 percent in November.

In the 12 months through December, import prices jumped 1.8 percent, the largest gain since March 2012, after edging up 0.1 percent in the 12 months through November.

Import prices are rising as the drag from lower oil prices fades. Oil prices have risen above $50 per barrel.

Import prices excluding petroleum, however, fell 0.2 percent in December after being unchanged the prior month. This decline in underlying import prices likely reflects sustained dollar strength. Prices of imported automobiles, consumer and capital goods fell last month.

The dollar rose 4.4 percent against the currencies of the United States’ main trading partners last year, with most of the gains coming in the wake of Trump’s victory.

“While the drag on import price inflation stemming from energy is fading, dollar headwinds have resurfaced,” said Sarah House an economist at Wells Fargo Securities in Charlotte, North Carolina.

“We expect the renewed strength in the dollar to remain a challenge for import price reflation in the coming months, but the rebound in energy prices should more than offset any drag.”

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)

Venezuela floods shops with unaffordable goods ahead of Christmas

Venezuela's people looking for affordable groceries

By Fabian Cambero

CARACAS (Reuters) – Topping off a year of economic crisis that left many Venezuelans hungry, the country’s socialist government is flooding shops with products ahead of Christmas, at prices that most cannot afford.

Thousands of containers of festive food and toys are on their way, say authorities, and while supermarket shelves appear fuller, prices are ludicrously high for people earning just tens of dollars a month at the black market exchange rate.

“If you’ve got money, then of course you’re happy,” said Geronimo Perez, selling newspapers in the center of Caracas. “But if not, you’re left empty-handed.”

A 1.8-kilogram (4 lbs) carton of powdered milk costs the equivalent of $20 in Caracas at the black market exchange rate. That’s more than two weeks’ work at Venezuela’s minimum wage.

The country is undergoing major economic and social problems, as a decade and a half of currency controls, price controls and now low oil prices have left the government and businesses without sufficient hard currency to import goods.

This means supermarkets are empty of basics from rice to chicken, let alone Christmas gifts.

“AT LEAST THE CHILDREN”

Queues at supermarkets that stock regulated goods can run into hundreds or thousands, many of whom are left disappointed.

President Nicolas Maduro blames the problems on an “economic war” waged against the country and his government has promised that supply will be “sufficient” in December.

The bolivar currency has weakened some 40 percent against the dollar at the black market rate in the last month alone. One dollar buys nearly 1,900 bolivars on the street, compared to just 10 bolivars at the government’s strongest official rate.

This means that importers bringing products in on the black market are paying even more and passing those costs onto consumers, fueling inflation that the IMF says will surpass 2,000 percent next year.

Anger is mounting and hundreds of thousands of people have taken to the streets in recent weeks hoping for change. Some though, are pleased with the festive respite.

“It’s better that at least we can celebrate a little amid all these problems, at least the children,” said Karina Mora, as she left a supermarket in the center of Caracas with her two small children.

(Writing by Girish Gupta; Editing by James Dalgleish)

Oil jumps after surprise drop in U.S. crude inventories

The Philadelphia Energy Solutions oil refinery owned by The Carlyle Group is seen at sunset in front of the Philadelphia skyline

By Amanda Cooper

LONDON (Reuters) – Oil prices jumped 2 percent on Wednesday after a surprisingly large drop in U.S. crude inventories and as an oil services workers strike in Norway threatened to cut North Sea output.

Brent crude futures were up 91 cents at $46.79 per barrel by 1113 GMT, while West Texas Intermediate (WTI) crude futures rose by 96 cents to $45.01 a barrel.

Oil took its cue from American Petroleum Institute (API) data which showed a 7.5 million barrel drop in U.S. crude inventories to 507.2 million barrels, almost twice the fall expected by analysts.

“Oil’s got its own pretty positive drivers at the moment. The API surprise draw overnight is obviously leading to the question of whether we are going to see the same in the official inventory today,” CMC Markets strategist Jasper Lawler said.

Official storage data is due to be published by the U.S. Energy Information Administration (EIA) later on Wednesday.

Adding to the upward price momentum was an oil service workers strike in Norway that could affect output from western Europe’s biggest crude producing region.

Nevertheless, analysts said any gains could be tempered by caution ahead of the Federal Reserve’s Federal Open Market Committee (FOMC) decision on interest rates later on Wednesday.

Economists do not expect a change in rates but any indication from the Fed on the outlook for economic growth could have an impact on the dollar, and in turn, on oil.

“I don’t expect the Fed to do anything and I don’t expect a ‘hawkish hold’ either. But a bit of dollar weakness should support the backdrop for oil,” CMC’s Lawler said.

“Wednesday has become ‘Big Wednesday’ for oil traders, with not only the FOMC but also the EIA crude inventory numbers out. Should they (EIA) follow the unexpected drawdown like the API and we get no FOMC rate hike, oil bulls may well have reason to be cheering after a tough couple of weeks,” Singapore-based brokerage Oanda said.

Key for the market is next week’s meeting in Algeria between producers from the Organization of the Petroleum Exporting Countries (OPEC) and Russia to discuss measures to rein in oversupply, including an output freeze at current levels, but analysts said they did not expect significant results.

“Even with a freeze – which would still mean OPEC production is at record levels – we will still be in an oversupplied market,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.

(Additional reporting by Henning Gloystein and Mark Tay in Singapore; editing by David Clarke)

Oil slips on dollar strength, still set for monthly gain

Traffic passes a BP gas station on the North Circular Road in London,

By Libby George

LONDON (Reuters) – Crude slid on Wednesday, pressured by a strong dollar and high stocks of oil, though prices remained on track for a monthly gain of more than 10 percent.

Brent crude futures were trading at $47.94 per barrel at 1126 GMT, down 43 cents from the previous close, while U.S. West Texas Intermediate crude futures were down 33 cents at $46.02.

Oil had rallied by more than 20 percent from the beginning of August on hopes that producers were reviving talks on a possible output freeze, setting prices on course for their largest monthly gains since April.

Analysts, however, said the focus had shifted to physical market fundamentals, which remained shaky.

“The market is getting tired of those headlines,” Olivier Jakob, managing director of Swiss-based consultant PetroMatrix, said of a potential production freeze.

“Fundamentally, there is not a lot to support oil because the stocks are still at very high levels,” he said.

On Wednesday Saudi Arabian energy minister Khalid al-Falih said that the top crude exporter does not have a specific target figure for its oil production and that its output depends on the needs of its customers.

Yet high oil inventories could limit any quick recovery in prices. U.S. crude stocks rose by 942,000 barrels to 525.2 million barrels in the week to Aug. 26, data from industry group the American Petroleum Institute showed on Tuesday.

Official U.S. oil inventories data from the Energy Information Administration is due on Wednesday.

The strong U.S. currency, which makes dollar-priced commodities more expensive for holders of other currencies, was also affecting oil prices. The dollar index, measured against a basket of six leading currencies, touched 96.143 on Tuesday, its highest since Aug. 9.

The dollar could strengthen further if the U.S. Federal Reserve chooses to increase interest rates this year, as recent comments from Fed Chair Janet Yellen suggested it could.

“I think that many participants underestimate the compounding bearish impact of Fed rate hike amidst weak oil fundamentals,” Harry Tchilinguirian, global head of commodity strategy with BNP Paribas told the Reuters Global Oil Forum. “The only way for this market to prop itself higher is that we have another string of unplanned supply disruptions like we had between February and May this year.”

Still, many analysts still expect a tighter supply and demand balance towards the end of the year and are raising price forecasts accordingly, with Barclays lifting its fourth-quarter forecast by $2 to $52 a barrel.

“The balances are slightly tighter in Q4 than previously assessed,” the bank said.

(Additional reporting by Mark Tay and Henning Gloystein in Singapore; Editing by David Goodman and William Hardy)

As exports struggle, Israel’s economy faces slower growth

supermarket employee in Israel

By Steven Scheer

JERUSALEM (Reuters) – For decades, Israel’s high growth was driven by exports of oranges, diamonds, pharmaceuticals and software, but the picture is changing due to weak global demand and a strong shekel.

Consumer spending is now a critical growth driver. Businesses fear factories and jobs are at risk if exports, which have declined 10 percentage points over the past decade, fall further.

“We are exporting 80 percent less than our peak” a decade ago, said Joseph Ben-Dor, chief executive of Ben-Dor Fruits & Nurseries on the Jordan River in northern Israel.

Ben-Dor, whose family started the business in 1888, said his main market is Europe, particularly Britain where his largest customers for plums and other fruits are Tesco, Marks & Spencer, Morrisons and Waitrose. He largely blames a strong shekel, rising water, labor and other costs, and government obstacles for lower sales abroad.

Diamond exports, 25-30 percent of Israel’s industrial exports, have slid 30 percent in the past few years, mainly on slower global demand, said Yoram Dvash, president of the Israel Diamond Exchange. Exports to China, a key market, have plunged 70 percent in the last 18 months.

Citing weak global growth that has hurt exports, Israel’s Finance Ministry on Wednesday lowered its economic growth forecast for 2016 to 2.5 percent from 2.8 percent and trimmed estimates through 2019.

The Bank of Israel last month cut its growth estimate from 2.8 percent to 2.4 percent for 2016 and 2.9 percent in 2017.

When exports are hot, Israel’s economy tends to grow between 4 and 5 percent a year. With flat or declining exports in 2014, 2015 and probably again this year, growth is closer to 2.5 percent, well below the average of 4.5 percent from 2004-2011.

“If the trend continues we can witness sustained private consumption growth but we will shift to a lower growth rate,” Nathan Sussman, head of research at the Bank of Israel, said. “Growth will likely be in the 2.5 to 3 percent range if it stays this way.”

With the population growing 2 percent a year, that amounts to per capita growth of just 0.5-1 percent.

NO MAGIC PILL

Ten years ago, net exports accounted for 41 percent of output. Now the ratio is 31 percent. While that tops the 13 percent in the United States and 27 percent for Europe, the decline has strained the economy.

“We need to target growth of 4 to 5 percent so if you want to reach that, you need to turn on the engine of exports,” said Shraga Brosh, president of Israel’s Manufacturers’ Association.

Brosh said the government needed to invest more in research and development and encourage small- and medium-sized factories to become more efficient through tax incentives.

Ohad Cohen, head of the Foreign Trade Administration in the Economy Ministry, said there was only so much the government could do. “We don’t have any magic pill,” he said.

Still, the ministry supports exporters with insurance guarantees and in opening new markets. In recent years, it has doubled the number of offices in Asia to 16. Asia now accounts for 22 percent of Israel’s exports, compared with 31 percent for Europe and 25 percent for the United States.

Israel plans to invest in penetrating markets in Africa and Latin America, Cohen said.

Exports excluding diamonds and start-ups are forecast to fall 1.5 percent this year after a similar decline in 2015. Much of the weakness has come from Europe, in part because the euro has lost 15 percent against the shekel since late 2014.

Another issue is that three companies – Intel, Israel Chemicals (ICL) and Teva Pharmaceutical Industries – control nearly half of industrial exports. For various reasons they have trimmed output.

Intel is shifting production to a new chip plant in Israel, while falling demand and prices for potash have weighed on ICL. Teva said its exports are “characterized with monthly and seasonal fluctuations” but are not falling on an annual basis.

Concerned by sluggish exports, the central bank continues to buy dollars to try to prevent further shekel strength. It has bought about $70 billion of foreign currency since 2008, but the shekel has not weakened enough to spur an export recovery.

(Editing by Janet Lawrence)

Iran-Saudi row threatens any OPEC deal

A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf

By Alex Lawler and Rania El Gamal

LONDON/DUBAI (Reuters) – OPEC’s thorniest dilemma of the past year – at least from a purely oil standpoint – is about to disappear.

Less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes, adding extra barrels to the market in an unexpectedly smooth way and helped by supply disruptions from Canada to Nigeria.

But the development will do little to repair dialogue, let alone help clinch a production deal, when OPEC meets next week amid rising political tensions between arch-rivals Iran and oil superpower Saudi Arabia, OPEC sources and delegates say.

Earlier this year, Tehran refused to join an initiative to boost prices by freezing output but signaled it would be part of a future effort once its production had recovered sufficiently. OPEC has no supply limit, having at its last meeting in December scrapped its production target.

According to International Energy Agency (IEA) figures, Iran’s output has reached levels seen before the imposition of sanctions over its nuclear program. Tehran says it is not yet there.

But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, OPEC delegates say. Oil has risen toward a more producer-friendly $50 from a 12-year low near $27 in January.

“I don’t think OPEC will decide anything,” a delegate from a major Middle East producer said. “The market is recovering because of supply disruptions and demand recovery.”

A senior OPEC delegate, asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”

Within OPEC, Iran has long pushed for measures to support oil prices. That position puts it at odds with Saudi Arabia, the driving force behind OPEC’s landmark November 2014 refusal to cut supply in order to boost the market.

Sources familiar with Iranian oil policy see no sign of any change of approach by Riyadh under new Saudi Energy Minister Khalid al-Falih – who is seen as a believer in reform and low oil prices.

“It really depends on those countries within OPEC with a high level of production,” one such source said. “It does not seem that Saudi Arabia will be ready to cooperate with other members.”

 

HIGHER EXPORTS

Iran has managed to increase oil exports significantly in 2016 after the lifting of sanctions in January.

It notched up output of 3.56 million barrels of oil per day in April, the IEA said, a level last reached in November 2011 before sanctions were tightened.

Saudi Arabia produced a near-record-high 10.26 million barrels per day in April and has kept output relatively steady over the past year, its submissions to OPEC show.

Iran, according to delegates from other OPEC members, is unlikely to restrain supplies, given that it believes Saudi Arabia should cut back itself to make room for Iranian oil.

“Iran won’t support any freeze or cut,” said a non-Iranian OPEC delegate. “But Iran may put pressure on Saudi Arabia that they hold the responsibility.”

Saudi thinking, however, has moved on from the days when Riyadh cut or increased output unilaterally. Talks in Doha on the proposed output freeze by OPEC and non-OPEC producers fell through after Saudi insisted that Iran participate.

Indeed, differences between Saudi Arabia and Iran, which helped found the Organization of the Petroleum Exporting Countries 56 years ago, over OPEC policy have made cooperation harder – to say nothing of more fundamental disagreements.

For more than a decade after oil crashed to $10 in 1997, the two set aside rivalries to manage the market and support prices, although they fell into opposing OPEC camps with Iran wanting high prices and Saudi more moderate.

Now, the Sunni-Shia conflicts setting Saudi Arabia and Iran at each other’s throats, particularly in Syria and Yemen, make the relationship between the two even more fraught.

The two disagree over OPEC’s future direction. Earlier in May, OPEC failed to decide on a long-term strategy as Saudi Arabia objected to Iran’s proposal that the exporter group aim for “effective production management”.

With that backdrop, ministers may be advised to keep expectations low, an OPEC watcher said.

“The only aspiration OPEC should have for its 2 June meeting is simply not to repeat the chaos of the Doha process,” said Paul Horsnell, analyst at Standard Chartered.

“A straightforward meeting with no binding commitments and, most importantly, no overt arguments would be the best outcome for ministers.”

(Reporting by Alex Lawler and Rania El Gamal; Editing by Dale Hudson)