News Archive


Oil eases on persistent supply glut, production outlook


CALGARY, Alberta Oil prices fell on Thursday after six days of gains, as concerns that escalating tension in the Middle East could disrupt supply faded, and the focus returned to a persistent market glut.

Brent crude settled down 71 cents at $45.46 a barrel, having earlier dropped more than $1 to a session low of $45.00 a barrel. West Texas Intermediate (WTI) futures, the U.S. crude benchmark, were 53 cents lower at $42.51 per barrel at 1957 GMT (1457 ET), after rising to $43.30 earlier in the session.

The downing of a Russian jet by Turkey on Monday helped push up oil prices this week on the risk that rising geopolitical tension could hit Middle East supplies.

By Thursday, however, those concerns were receding and had done little to shake the belief that global production will stay high even as stockpiles rise. A firmer dollar also weighed on oil as it makes it more expensive for holders of other currencies.

OPEC is determined to keep pumping oil to defend market share, alarming some of the group’s weaker members who fear prices may slump towards $20.

“OPEC has been extremely explicit that it will not cut production in the face of low prices, and with Iran coming back to the market, it will produce more than 32 million barrels per day,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

“Stocks were building all of last year and this. It’s starting to strain inventories and we’re starting to run out of storage space.”

Still, while stockpiles are high and rising in the United States and many European economies, in China commercial crude oil stocks at the end of October were down 4.4 percent from the previous month in their biggest drop since at least 2010, the official Xinhua News Agency reported on Thursday.

Brent is down by more than 8 percent in November and by 20 percent this year, after tumbling from above $115 per barrel last year.

U.S. crude had been supported on Wednesday by a smaller-than-expected build in U.S. inventories and by a fall in oil rigs, a sign that drillers were waiting for higher prices before returning to the well pad.

The data helped prevent deeper losses for WTI futures on Thursday, although trading was thin due to the U.S. Thanksgiving holiday.

(Additional reporting by Simon Falush in LONODON, Catherine Ngai in SINGAPORE and Meeyoung Cho in SEOUL; Editing by Susan Fenton, David Evans and Nick Zieminski)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/1W-ShUQBcoQ/story01.htm

Bank of America to halt dollar supplies to Angola: sources


LUANDA Bank of America (BAC.N) will stop supplying U.S. dollars to Angola at the end of this month, two foreign exchange sources said on Thursday, a move that could pile pressure on the oil exporter’s ailing kwanza AOA= currency.

South Africa’s Rand Merchant Bank (RMMMu.J) (RMB) said on Thursday that a U.S. bank had decided to discontinue providing it with dollars for onward supply to Angola which meant it would stop selling Angolan banks the greenback from Nov. 30.

RMB, a division of FirstRand Bank Ltd [FSRJHB.UL], did not name the U.S. bank or say why it no longer wished to trade dollars with Angola. Bank of America, the biggest supplier of dollars to Angola, declined to comment.

Angola’s kwanza AOA= has weakened around 30 percent officially this year and far more on the parallel market as subdued oil prices LCOc1 hit Africa’s second largest crude exporter.

Angola’s central bank said on Nov. 5 that it would reduce the delivery of banknotes in foreign currency to travelers as well as limit withdrawals from foreign currency accounts as it sought to stem the kwanza’s slide.

In September, Angola’s central bank devalued the kwanza by about 4 percent and tightened dollar liquidity after a devaluation of 6 percent in June. But the currency has continued to weaken and analysts are expecting a further devaluation soon.

Former Portuguese colony Angola is an increasingly important market for global powers. The southern African country is a key oil supplier to China and sold its first Eurobond this month, raising $1.5 billion via a 10-year issue.

(Reporting by Herculano Coroado; Writing by Joe Brock; Editing by Andrew Heavens)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/VlPIOjNv2nc/story01.htm

WTO talks stuck again as ministers prepare to meet, Azevedo says


GENEVA World trade talks are deadlocked and ministers are unlikely to find a way out of the impasse when they meet in Nairobi next month, World Trade Organization Director-General Roberto Azevedo said on Thursday.

“We clearly are stuck in the negotiations at this point in time,” Azevedo told a news conference. “I think it will be very difficult to reconcile the views. I would say impossible at this point in time.”

The Geneva-based WTO has been trying and failing to agree on a worldwide package of trade reforms since a meeting in Doha in 2001 hatched an ambitious plan for knocking down trade barriers.

Since then the WTO has still managed to agree a few changes to the global trading rules.

Two years ago it agreed to standardize and streamline customs procedures, and Nairobi could still see agreements on other issues, such as an end to tariffs on $1.3 trillion of IT exports.

Brazil and the European Union are also leading a push to end agricultural export subsidies at Nairobi.

But differences over completing the so-called Doha round have never ceased and the WTO’s 10th ministerial conference, which opens in Nairobi on Dec. 15, is not about to produce a common view on how to take the talks forward.

“I think that’s very unlikely to happen,” Azevedo said.

Azevedo said the biggest potential winners from a global trade deal would be the poorest countries, most of whom are excluded from regional trade talks going on elsewhere, such as the U.S.-led Trans-Pacific Partnership.

Among the WTO’s 161 members, which will grow to 162 when Kazakhstan joins on Monday, some insist on focusing on Doha to the exclusion of all else, while others want to tackle trade reforms in a completely different way, Azevedo said.

“There is no agreement among WTO members on what they want to do. I just work there,” he said. “I think even after Nairobi we’re going to spend some time trying to figure out how we can best interact in the WTO that would allow us to deliver with the negotiating function of the organization.”

(Reporting by Tom Miles; Editing by Angus MacSwan)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ax7qF6tbUmc/story01.htm

Peugeot must improve performance in Germany


FRANKFURT PSA Peugeot Citroen (PEUP.PA) must urgently improve its position in Germany, where it lags peers because it is failing to convince customers of the value and attractiveness of its cars, Chief Executive Carlos Tavares told a German magazine.

“The unsatisfactory results in Germany are apparently due to the fact that German customers are not as convinced of our products as the Spanish, French, Austrian or Dutch ones are,” automotive magazine Auto Motor und Sport quoted Tavares as saying in an interview published on Thursday.

He said PSA needed to improve its image as well as its dealership network in Germany, where its Peugeot and Citroen brands had a combined market share of about 3.3 percent in January to October this year, compared with 21 percent held by the VW brand or 7.1 percent by Opel.

“I do not want to accept that as normal. We must get better in Germany,” Tavares said.

Asked whether he was interested in taking on new investors, he said PSA could remain independent but did not need to do so.

“I’ll talk to anyone. The main point is: If I am talking to someone I want to be in good shape,” he said, while adding he was currently not in negotiations with any one particular party.

PSA expects to be back in the black this year, after swinging to its first profit since 2011 in the first half of this year and despite some headwinds from currency effects and a slowdown in the Chinese market, he said.

“With a return on sales of 5 percent we are back on par with our rivals and not at the end of the field,” he said, adding he expected 2015 vehicle sales to be stable versus 2014.

(Reporting by Maria Sheahan; Editing by Mark Potter)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/JJq6w1CygcY/story01.htm

Bad Saudi PR fuels riyal devaluation talk


DUBAI Speculation that Saudi Arabia could devalue its currency may owe more to a poor public relations effort by Saudi authorities than to the economic pressures on the kingdom.

Riyadh has the tools available to protect itself as low oil prices push the current account and budget balances of the world’s top crude exporter deep into deficit, senior bankers in Saudi Arabia and the Gulf said.

In private conversations with Reuters this week, the bankers – many of whom are in contact with Saudi authorities – said Riyadh may detail a strategy to cope with an era of cheap oil as soon as next month, when the finance ministry presents the 2016 budget plan. The prospect of a riyal devaluation remains far-fetched, they said.

Political sensitivities and a culture of government secrecy have so far prevented officials from publicly discussing the likely policy options, keeping financial markets guessing about Riyadh’s response to the sustained oil price slump. At $45.71 per barrel, Brent crude LCOc1 is down 20 percent this year after tumbling from above $115 last year.

Nervous investors are hedging against the risk that Saudi Arabia could abandon its three-decade-old peg of 3.75 riyals to the dollar. The riyal fell in the forwards market SAR1Y= this week to its lowest since 1999, after the price of credit default swaps covering Saudi sovereign debt SAGV5YUSAC=MP surpassed those insuring against a Philippines default PHGV5YUSAC=MP.

“A lot of uncertainty has to do with the size of the fiscal deficit expected this year,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. As the government introduces spending cuts and other deficit-curbing measures, “this should help ease worries”, she said.

The central bank and finance ministry did not respond to requests for comment on policy.

Malik said steps expected next year, including an end to one-off state salary bonuses and the introduction of a land tax, could cut the budget deficit to around 10 percent of gross domestic product from the current 20 percent.

That would allow Saudi Arabia to slow the drawdown of its foreign assets, a major focus for the pessimists.

Saudi spending, reserves link.reuters.com/gap75t

APOCALYPTIC

The kingdom faces tougher economic times, the regional bankers said – but not to the point of being forced to break its currency peg.

Their view is at odds with some analysts at major Western financial institutions, who are discussing a looming Saudi devaluation in apocalyptic terms.

“If Saudi cannot resist the gravitational forces created by a persistently strong U.S. dollar and de-pegs the riyal to follow the Russian or Brazilian currencies, oil could collapse to $25 per barrel,” Bank of America Merrill Lynch wrote this week.

In fact Riyadh is determined to avoid devaluation at almost any cost, the Gulf bankers said. The resulting market panic and import cost surge would outweigh the benefit to state finances from higher oil revenue after conversion from dollars to riyals.

Saudi Arabia imports much of its food, consumer goods and machinery, and their rapid price inflation could stoke political discontent in the event of a devaluation.

The state has reserves to support its currency for years to come. With Brent averaging $57.55 a barrel between March and September, the central bank’s foreign assets shrank at an annual rate of $87 billion, leaving it holding $647 billion.

Even if the asset depletion accelerated, it would take several more years to reach $225 billion, or a generous 18 months of import cover – twice the cushion most nations enjoy.

Such arithmetic does little to ease market jitters, however, when Saudi officials have yet to explain how they will handle the pressure. Rare public pronouncements have so far been confined to general assurances of economic health, leaving many investors unconvinced.

Earlier this month, as dwindling oil receipts drove interbank money rates SAIBOR= to their highest levels since 2009, the central bank governor brushed off what he called a “slight” rise in rates, insisting that banks had liquidity aplenty. Borrowing costs have since risen further.

DOMESTIC SENSITIVITY

In a country renowned for government secrecy, reluctance to engage with the markets may have been heightened by leadership changes ushered in with new King Salman’s accession in January.

His son, Mohammed bin Salman, has taken over much of the economic policy apparatus just as it grapples with an oil price slump whose extent may have caught officials off-guard. The last serious bout of market speculation on a Saudi devaluation was handled by their predecessors, in 1998.

Another reason to keep likely countermeasures under wraps is their political sensitivity. Curbing public sector wages, trimming subsidies and slowing construction projects would hit the lavish welfare policies that have helped maintain Saudi Arabia’s social peace.

In a sign of their delicacy, Oil Minister Ali al-Naimi has toned down comments last month that domestic energy prices may have to rise. He softened his stance a week later with assurances that there was no dire need for reform, and that citizens’ welfare would be protected.

However, domestic political hurdles will not deter Riyadh from any necessary steps to shore up financial stability, according to those in regular contact with its officials.

Soon after next month’s budget announcement, the government is expected to publish a multi-year blueprint for economic development in a cheap-oil context, said a senior executive at a major Saudi financial firm.

“This will answer many of the questions people have and should show that the talk of devaluation is overblown,” he said.

(Additional reporting by Celine Aswad and Archana Narayanan in Dubai; Editing by Laurence Frost)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/NeFAhkvG43o/story01.htm

Barclays fined for lax crime checks in ‘deal of century’


LONDON Britain’s financial watchdog has fined Barclays (BARC.L) 72 million pounds ($109 million) for cutting corners in vetting wealthy customers in order to win a huge transaction described by one senior manager as potentially the “deal of the century.”

Barclays arranged the 1.9 billion pound transaction in 2011 and 2012 for a number of rich clients deemed by the regulator to be politically exposed persons (PEPs), or people holding prominent positions that could be open to financial abuse.

That should require a bank to conduct more detailed checks on them, but Barclays failed to do so and in fact cut corners with its compliance procedures, Britain’s Financial Conduct Authority (FCA) said in a damning report on Thursday.

“Barclays did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated 52.3 million pounds in revenue,” the FCA said.

It said the bank took unusual steps to keep the details of the clients and the transaction off its computer system, where it would normally be recorded.

These included buying a safe specifically for storing some documents relating to the clients and agreeing to pay the clients 37.7 million pounds if their names were ever revealed.

“Barclays went to significant lengths to accommodate the client to ensure that it won their business,” the FCA said in a 37-page notice on the bank’s failings.

“Barclays’ approach was to request information only if it was absolutely necessary and did not want to ‘irritate’ the clients with multiple requests,” it added.

Just over 52 million pounds of the penalty comprised disgorgement, meaning clawing back the profit Barclays made on the transaction. That is the largest disgorgement penalty ever imposed by the FCA.

The watchdog made no criticism of the clients, and gave few clues on their identity. It said Barclays described their wealth as coming from “landholdings, real estate and business and commercial activities.”

Barclays, which received a 30 percent discount on the fine for settling early, said the FCA made no finding that the bank facilitated any financial crime in relation to the transaction or the clients on whose behalf it was executed.

“Barclays has cooperated fully with the FCA throughout and continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements,” it said.

The FCA said the failings were not identified by Barclays, however. It was only after the regulator discussed the transaction with the bank that it gathered more information on the relationship with the clients.

The deal’s size meant “very significant” harm could have been done to the integrity of the UK finance system and society if it had been related to criminal activity, the FCA said.

“ELEPHANT DEAL”

The fine is the seventh significant penalty imposed on Barclays by Britain’s regulator in the past six years, including penalties for allegedly manipulating Libor interest rates and foreign exchange prices.

The series of scandals means improving standards and culture will be a key task of the bank’s new Chief Executive Jes Staley, who starts on Tuesday.

The FCA said several members of Barclays’ senior management were aware of and endorsed the transaction, and said five individuals were identified as giving part approval for it, but it did not name any individuals at fault.

It said the bank set up “a select team”, including senior managers, to carry out checks and arrange and execute the deal, which was known by those involved within Barclays as an “elephant deal” because of its size.

Bob Diamond was the chief executive of Barclays from the start of 2011 until he left in July 2012. The head of its wealth management business in 2011 and 2012, which oversees dealings with rich clients, was Tom Kalaris. He stepped down in May 2013.

A spokesman for Diamond declined to comment, while Kalaris could not immediately be reached for comment.

The deal was the largest Barclays had ever executed for wealthy clients and in its early stages one senior manager said it could be “the deal of the century,” according to the FCA.

The bank failed to establish adequately the purpose and nature of the deal and did not sufficiently corroborate the clients’ stated source of wealth and source of funds for the transaction, the FCA said.

It was a structured finance deal comprising investments in notes backed by underlying warrants and third party bonds. The aim was to deliver a specific rate of income with a full guarantee on the capital over a number of decades.

The regulator listed nine features that should have raised red flags for Barclays, including its complex structure involving offshore companies, and that at one point clients requested Barclays make a payment of several tens of millions of dollars to a third party, which was not made.

(Editing by Mark Potter)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/4fE9gF2EI0o/story01.htm

Oil eases on glut, production outlook


LONDON Oil prices fell on Thursday after six days of gains, as concerns that escalating tension in the Middle East could disrupt supply faded, and the focus returned to a persistent market glut.

Brent crude was down 77 cents at $45.40 a barrel at 0910 ET. West Texas Intermediate (WTI) futures were 32 cents lower at $42.72 per barrel after the U.S. crude rose to $43.30 earlier in the session.

The downing of a Russian jet by Turkey on Monday helped push up oil prices this week on the risk that rising geopolitical tension could hit Middle East supplies.

By Thursday, however, those concerns were receding and had done little to shake the belief that global production will stay high even as stockpiles rise. A firmer dollar also weighed on oil as it makes it more expensive for holders of other currencies.

OPEC is determined to keep pumping oil to defend market share, alarming some of the group’s weaker members who fear prices may slump towards $20.

“OPEC has been extremely explicit that it will not cut production in the face of low prices, and with Iran coming back to the market, it will produce more than 32 million barrels per day,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.

“Stocks were building all of last year and this. It’s starting to strain inventories and we’re starting to run out of storage space.”

Still, while stockpiles are high and rising in the United States and many European economies, in China, commercial crude oil stocks at the end of October were down 4.4 percent from the previous month in their biggest drop since at least 2010, the official Xinhua News Agency reported on Thursday.

Brent is down by more than 8 percent in November and by 20 percent this year, after tumbling from above $115 per barrel last year.

U.S. crude had been supported on Wednesday by a smaller-than-expected build in U.S. inventories and by a fall in oil rigs, a sign that drillers were waiting for higher prices before returning to the well pad.

The data helped prevent deeper losses for WTI futures on Thursday, although trading was thin due to the U.S. Thanksgiving holiday.

(Additional reporting by Catherine Ngai in SINGAPORE and Meeyoung Cho in SEOUL; Editing by Susan Fenton and David Evans)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/1W-ShUQBcoQ/story01.htm

GSK in China: escaping the shadow of a scandal


SHANGHAI GlaxoSmithKline Plc (GSK.L) has cut 40 percent of its sales reps in China and axed some units as it eyes a return to growth in 2016, after sales plunged during a bribery scandal that landed it with a record $490 million fine in 2014.

The British firm is gambling on a new, cleaner image to reboot its performance and reputation with doctors and consumers, China head Herve Gisserot told Reuters during a wide-ranging interview at the group’s Shanghai headquarters.

It is the first time Gisserot has spoken at length about the firm’s progress since the high-profile scandal, which saw his predecessor Mark Reilly charged with bribery and eventually deported to Britain. Reilly has since left the company.

“Obviously GSK is a very well-known name in China and unfortunately not for the right reasons,” said Gisserot, who took over as general manager in July 2013 soon after the scandal surfaced. “We are in the process of rebuilding our reputation, and we have to be very humble.”

GSK has previously said it would overhaul its business in China, and more globally, to avoid some of the issues that led to the probe, including stopping all sales-based incentives for drug reps and reducing paid junkets for doctors.

The problem is, many of GSK’s rivals are not following in step, and adapting to a new model means taking a business hit.

“If you look at the short-term business performance, it’s not great,” said Gisserot.

GSK’s China sales dropped from 759 million pounds ($1.2 billion) in 2012 to 585 million pounds in 2013 and were flat in 2014. This year has been volatile, after the disposal of peripheral operations and disruption to a factory in Tianjin following deadly explosions in the port city in August.

But despite its woes GSK China remains profitable, and Gisserot expects sales to grow again in 2016, before rising in double digits from 2017, helped by the rollout of new products, including HPV vaccine Cervarix.

SHRINKING

GSK, in China since 1910, has shrunk its business since the scandal, drastically reducing promotional activities and focusing its resources on a smaller number of therapy areas including hepatitis, respiratory disease and vaccines.

The number of front-line sales reps has fallen from 5,000 to around 3,000, and GSK is putting a focus on hiring new graduates who don’t have the “baggage” of established peers.

This smaller team won’t have traditional sales-driven incentives, a fact GSK hopes will reduce the likelihood of bribery, but will undoubtedly hit sales in the short run.

“Our ability to win under the new model is a question I regularly have to debate with our own employees,” Gisserot said. “Can we outperform the market in the short term? Probably not.”

China’s drug market is the world’s second largest but grwoth is slowing. After expanding around 15 percent annually in the first half of the decade, sales are set to grow just 6-9 percent a year over 2016-2020, according to IMS Health. Gisserot believes even that forecast could be optimistic.

GSK sales staff now have to work very differently. Reps have iPads to monitor every interaction with doctors, while fancy meals on expenses have been replaced by a centrally controlled catering system providing “lunch boxes” worth no more than 60 yuan ($9.40). The move is explicitly designed to take cash out of the system.

Bonuses also make up just 25 percent of salaries, down from 40 percent pre-scandal, and won’t be tied to sales.

PRICE PRESSURE

The wider market has seen huge price pressures on drugs as Beijing tries to curb over-prescribing by hospitals, which still make money from dishing out drugs, and rein in an overall healthcare bill set to expand to $1.3 trillion by 2020.

Gisserot said this would erode sales of expensive branded generics – long a cash cow for Big Pharma in China – and shift the industry’s reliance towards more innovative drugs, hopefully helped by faster approvals, although this will take time.

“We certainly expect in next couple of years to see a significant price pressure,” he said.

Gisserot added GSK, which previously promised to become a “model for reform” in China, was willing to cut prices and promote technology transfer – both demands from a government anxious to secure long-term drug supplies.

With more than 30 staff employed solely to check every single expense claim, GSK is now paying a high price to ensure compliance, but Gisserot warned China’s anti-bribery drive could in future snare others.

“I cannot believe the GSK case is a one-off,” he said. “One way or the another this anti-corruption campaign will continue and I hope others will learn before it is too late.”

($1 = 0.6625 pounds)

($1 = 6.3877 Chinese yuan renminbi)

(Reporting by Adam Jourdan and Ben Hirschler; Editing by Will Waterman)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/RDeLyijjKcI/story01.htm

Britain sets 2018 deadline for claims in country’s costliest bank scandal


LONDON Britons who were missold loan insurance, in what turned out to be the country’s costliest consumer finance scandal, will have until 2018 to claim compensation under regulatory plans intended to draw a line under the issue.

Britain’s banks, which have already set aside more than 28 billion pounds ($42 billion) to cover payment protection insurance (PPI) complaints are also keen to close the issue. Lloyds Banking Group (LLOY.L) alone is accounting for about half the total compensation payments.

The banking watchdog, in a consultation paper published on Thursday, set out new rules on PPI complaints and said a campaign to inform consumers about the time limit would be funded by banks who missold the insurance.

The Financial Conduct Authority (FCA) proposed setting a deadline for new complaints on PPI sales of two years after the start date of the new rules, meaning some time in 2018.

“Consumers who are unhappy about PPI should continue to complain to the firms concerned and to the Financial Ombudsman Service if they are not satisfied with the response,” the FCA said in a statement.

Making a complaint is free and most people should not need to use a claims management company to help them, it added.

Thursday’s announcement is largely in line with a pre-announcement by the FCA in October on PPI, which was intended to give borrowers cover against possible default on a loan, such as a mortgage, but was often missold to people would could not make a claim.

Consumer campaign website MoneySavingExpert.com said the proposed new rules and time limit were a “done deal”, and was disappointed the deadline for claims was not longer to give consumers more time.

The regulator said the same deadline would apply to complaints being contemplated following the so-called Plevin landmark ruling last year by the Supreme Court, which suggested there might be additional cause for complaint concerning commissions paid on PPI sales. A commission of 50 percent or more on a PPI sale should be deemed unfair, with the customer potentially eligible for compensation. However, the FCA proposed some additional flexibility around this threshold, such as when it concerns particularly vulnerable people.

The average commission was about 67 percent and compensation would be paid on commission above the 50 percent “unfair” threshold.

The watchdog said its consumer communications campaign would cost 42.2 million pounds or 3.64 pounds per PPI complaint, paid by 18 lenders over two years in proportion to their level of PPI complaints.

The FCA said it could not reasonably estimate the costs and benefits of the planned new rules and communications campaign.

($1 = 0.6633 pounds)

(Additional reporting by Steve Slater; Editing by Jane Merriman and Susan Fenton)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/SnREYkc2O9c/story01.htm