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U.K. Cuts 2017 Growth Forecast and Plans to Increase Borrowing

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Exchequer Philip Hammond
  • U.K. Cuts 2017 Growth Forecast and Plans to Increase Borrowing

U.K. Chancellor of the Exchequer Philip Hammond laid out a somber framework for post-Brexit Britain, slashing the forecast for economic growth in 2017 and saying the government will need to borrow more over the next five years partly as a result of the vote to leave the European Union.

Outlining his Autumn Statement to Parliament on Wednesday, five months to the day after Britain opted to quit the EU, Hammond said the Office for Budget Responsibility now sees economic growth next year of 1.4 percent instead of the 2.2 percent forecast in March. The cumulative budget deficit will also widen, with just under half the extra 122 billion pounds ($151 billion) foreseen through 2021 — 58.7 billion pounds — a direct result of the referendum result, the Treasury said in documents published to accompany Hammond’s statement.

The vote to leave the EU “will change the course of Britain’s history,” Hammond told the House of Commons. “But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” including a productivity gap, a housing shortage and a “damaging imbalance in economic growth and prosperity,” he said. “Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.”

In his first budget statement since he was appointed by Prime Minister Theresa May in the wake of June’s Brexit vote, Hammond cited heightened economic uncertainty and a weaker pound for the clouded outlook. The OBR said the economy has less potential for sustainable growth as a result of the decision to quit the bloc.

The vote to leave the EU “will change the course of Britain’s history,” Hammond told the House of Commons. “But it’s a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses,” including a productivity gap, a housing shortage and a “damaging imbalance in economic growth and prosperity,” he said. “Our task now is to prepare our economy to be resilient as we exit the EU and match-fit for the transition that will follow.”

In his first budget statement since he was appointed by Prime Minister Theresa May in the wake of June’s Brexit vote, Hammond cited heightened economic uncertainty and a weaker pound for the clouded outlook. The OBR said the economy has less potential for sustainable growth as a result of the decision to quit the bloc.

The government is no longer trying to deliver a budget surplus by 2020, Hammond said, but he pledged to “balance the books” early in the next parliamentary term from 2020 to 2025.

“A credible fiscal policy remains essential for maintaining market confidence and restoring the economy to long-term health,” Hammond said. “The prime minister and I remain firmly committed to seeing the public finances return to balance as soon as practicable while leaving enough flexibility to support the economy in the near term.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

South Africa’s iGas, PetroSA and Strategic Fuel Fund Merge to Create South African National Petroleum Company

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The South African Department of Mineral Resources and Energy (DMRE) has announced the merger of Central Energy Fund (CEF) subsidiaries iGas, PetroSA and the Strategic Fuel Fund (SFF).

The merger will be effective from 1 April 2021 and the new company will be called the South African National Petroleum Company.

The merger, driven by the pursuit of implementing a new company that has a streamlined operating model via the development of a shared services system and a common information platform, comes a few months after cabinet approval and the confirmation that PetroSA had incurred losses of R20 billion since 2014.

Additional factors which prompted the move included the determination to strengthen PetroSA which had not had a permanent CEO in five years prior to the appointment of CEO Ishmael Poolo last and, had become majorly ungainful since its failure to secure gas for the gas-to-liquids refinery project in Mossel Bay.

While the merger deadline has been set, the portfolio committee expressed reservations to the department’s likelihood of meeting the deadline, considering the existing legislative regime, pending issues raised in the SFF and PetroSA forensic reports, as well as PetroSA’s current insolvency and liquidity challenges, the official press statement on the briefing revealed.

“South Africa’s energy sector is entering a new dawn,” said NJ Ayuk, Executive Chairman of the African Energy Chamber. “With gas discoveries off the coast and the announcement of the REIPPP programme bid window 5 and 6 on the horizon, now is the most opportune time for the merger of the CEF subsidiaries. Of course, it is not an easy task and delays may be anticipated but, this move signals a real change towards a meaningful strategy that will not only be beneficial to the DMRE but to potential investors and local development as well.”

The African Energy Chamber welcomes this move and acknowledges that this is yet another step supporting the country’s determination to restarting the engines of sustainable growth and the transformation of energy policy and infrastructure.

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Crude Oil

Crude Oil Hits $71.34 After Saudi Largest Oil Facilities Were Attacked

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Brent Crude Oil Rises to $71.34 Following Missile Attack on Saudi Largest Oil Facilities

Brent crude, against which Nigerian oil is priced, jumped to $71.34 a barrel on Monday during the Asian trading session following a report that Saudi Arabia’s largest oil facilities were attacked by missiles and drones fired on Sunday by Houthi military in Yemen.

On Monday, the Saudi energy ministry said one of the world’s largest offshore oil loading facilities at Ras Tanura was attacked and a ballistic missile targeted Saudi Aramco facilities.

One of the petroleum tank areas at the Ras Tanura Port in the Eastern Region, one of the largest oil ports in the world, was attacked this morning by a drone, coming from the sea,” the ministry said in a statement released by the official Saudi Press Agency.

It also stated that shrapnel from a ballistic missile dropped near Aramco’s residential compound in Eastern Dhahran.

Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” a ministry spokesman said in a statement on state media.

Oil price surged because the market interpreted the occurrence as supply sabotage given Saudi is the largest OPEC producer. A decline in supply is positive for the oil industry.

However, Brent crude oil pulled back to $69.49 per barrel at 12:34 pm Nigerian time because of the $1.9 trillion stimulus packed passed in the U.S.

Market experts are projecting that the stimulus will boost the United States economy and support U.S crude oil producers in the near-term, this they expect to boost crude oil production from share and disrupt OPEC strategy.

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Crude Oil

A Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

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Loud Blast Heard in Dhahran, Saudi Arabia’s Largest Crude Oil Production Site

Two residents from the eastern city of Dhahran, Saudi Arabia, on Sunday said they heard a loud blast, but they are yet to know the cause, according to a Reuters report.

Saudi’s Eastern province is home to the kingdom’s largest crude oil production and export facilities of Saudi Aramco.

A blast in any of the facilities in that region could hurt global oil supplies and bolster oil prices above $70 per barrel in the first half of the year.

One of the residents said the explosion took place around 8:30 pm Saudi time while the other resident claimed the time was around 8:00 pm.

However, Saudi authorities are yet to confirm or respond to the story.

 

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