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Draghi Says Too Early to Declare ECB Success as Growth Firms

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  • Draghi Says Too Early to Declare ECB Success as Growth Firms

Mario Draghi said the European Central Bank’s stimulus hasn’t finished the job yet, even as he acknowledged that the region’s economy is getting stronger.

“The economic recovery has evolved from being fragile and uneven into a firming, broad-based upswing,” the ECB president said at the opening of a hearing at the Dutch Parliament in The Hague on Wednesday. “Nevertheless, it is too early to declare success.”

ECB policy makers are pondering whether and how to communicate a gradual removal of stimulus amid a steadily strengthening economy that has so far showed little signs of generating faster price growth. While Executive Board members Yves Mersch said on Monday that the central bank was “within reach” of describing risks to the recovery as “broadly balanced” — wording that could signal the first step toward unwinding stimulus — Draghi struck a somewhat more cautious note.

“Incoming data confirm that the cyclical recovery of the euro area economy is becoming increasingly solid and that downside risks have further diminished,” he said. However, “underlying inflation pressures continue to remain subdued and have yet to show a convincing upward trend.”

Labor Slack

The ECB president singled out wages as one key component of inflation that hasn’t been responding to the reduction of spare capacity in the economy. Research by central bank economists shows that, despite falling unemployment, labor-market slack has remained high since the start of the upswing, suggesting that a significant pickup in pay could still be some way off.

Responding to questions from Dutch lawmakers, Draghi said that changes to the ECB’s policy guidance and rates will only come when inflation is solid enough to continue without the support of monetary stimulus.

“Our monetary policy was successful. The question is, ‘Is it time to exit or time to think about exit or not?’ This time hasn’t come yet,” he said. “This will happen when inflation” is durable, “self-sustained, and it’s for the whole of the euro area.”

The ECB president also defended the central bank against the charge that they delayed reforms in weaker euro-area countries and worsened economic disparity in the region.

“What is the best measure we had of the decrease in inequality? To create employment, to create jobs,” he told lawmakers, repeating that 4.5 millions jobs have been created since the start of ECB unconventional policies three years ago.

The ECB’s next policy-setting meeting is scheduled for June 8 in Tallinn, Estonia, when the Governing Council will decide whether to send a signal about when and how it may start winding down the stimulus.

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.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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