Arthur C Clarke liked to say that any sufficiently advanced technology is indistinguishable from magic. Well, any sufficiently disorganised cartel is indistinguishable from a prisoner’s dilemma. Consider Opec.
An organised cartel fixes prices. It also throttles the competition. Opec, which controls four-tenths of the world’s oil production, has done its part for high prices recently. After 2010, Opec’s largest producer, Saudi Arabia, had a production cost under $10 a barrel, while Brent crude traded over $100 a barrel, on average. They could have pumped more, driven prices down and made more money in the short term. They chose not to.
But Opec left prices so high and for so long that the competition flourished. Oil at $100-a-barrel rendered higher-cost projects such as US shale viable. And it encouraged fiscal reliance on high prices among Opec and non-Opec state producers, making it painful for any of them to cut production. >> Read More
German chancellor Angela Merkel on Wednesday called for trade talks between the EU and a Russia-led economic bloc as a way of maintaining dialogue with President Vladimir Putin – and of countering claims her Ukraine policy is too tough on Moscow.
German officials believe the proposal could help ease tensions if the terms of a ceasefire agreed in Minsk in September can be implemented. Discussions between the EU and the Eurasian Economic Union are unlikely as long as fighting continues in breakaway regions of eastern Ukraine.
“We are ready for talks between the Eurasian Union and the EU on trade issues,” Ms Merkel told the German parliament. The German chancellor floated the idea in a long late-night meeting with Mr Putin during her recent visit to the G20 summit in Brisbane.
While much of this four-hour encounter focused on the differences and lack of trust between east and west, Ms Merkel took the opportunity to air a plan focusing on possible future co-operation rather than the current conflict. Jean-Claude Juncker, European Commission president, later joined their meeting. >> Read More
The European Union “will survive” if Britain leaves after an in-out referendum but would be “dead” if France voted for exit, Herman Van Rompuy has said.
The outgoing president of the European Council criticised the UK and indicated that David Cameron will not be able to secure changes to freedom of movement rules.
He made his comments as it was disclosed that a black hole in the EU budget could leave British taxpayers paying an extra £34 billion over six years.
Mr Cameron will now be legally obliged to make up a share of a shortfall of £259 billion by 2020, with liabilities for the Treasury estimated at £33.7 billion.
The hole in EU spending has been identified by the European Court of Auditors and will come as a major blow to the Prime Minister just days before he is expected to make a major speech about Britain’s relationship with the EU.
Mr van Rompuy said in Paris that Brussels would not negotiate on the “fundamental principles” of the EU simply to convince Britain to remain a part of the bloc.
He said that a British exit would leave Europe “wounded” and that “everything should be done to avoid it”.
Stocks ended higher Wednesday as the Dow and S&P 500 each hit new closing highs and the tech sector rallied.
The Dow Jones industrial average climbed 0.1% to 17,827.75, while the Standard & Poor’s 500 index ended up 0.3% to 2072.83. The Nasdaq composite index gained 0.6% to 4787.32.
Both the Dow and S&P 500 notched their previous closing highs on Monday. The Dow’s nearly 13-point gain Wednesday put the blue-chip index about 10 points above its previous record. A nearly 6 point gain for the S&P 500 put that broader market measure about 3 and a half points above its old record.
Market gains were initially kept in check as investors digested a mixed batch of economic reports on consumer spending, durable goods orders jobless claims and home sales.
The U.S. stock market will be closed on Thursday for the Thanksgiving holiday and will close early, at 1:00 p.m. Eastern time, on Friday.
In a barrage of economic news released Wednesday:>> Read More
Rating agency Moody’s Investors Service today said the sovereign outlook for India remains stable at Baa3, but future rating trends depend on the economic reforms measures taken by the PM Narendra Modi government.
“Sovereign credit rating trends in 2015 will depend on the extent to which the government addresses high fiscal expenditures, recurrent food price inflation, and wide infrastructure deficit,” Moody’s said in a report.
All the three big international rating agencies such as S&P, Moody’s and Fitch have BBB ratings on the country’s sovereign with a stable outlook. The current rating is closest to junk status or below investment grade.
The report says the government’s ability and willingness to undertake structural reforms will have a bearing on the credit rating outlook of the country.>> Read More
Here’s the latest from Vienna, where oil ministers from Opec are due to meet on Thursday.
Iranian oil minister Bijan Zangeneh said after his meeting with Ali al-Naimi, his counterpart from Saudi Arabia:
We had an excellent meeting with Mr Naimi. We will continue our discussion with Mr Naimi and other OPEC members
Asked whether there was an emerging agreement, he said there was “unity inside OPEC but we should monitor the market carefully and react at the convenient time”.
Things are not much clearer than they were when Mr Naimi went on his famous morning walk/jog. But some observers believe that Opec will reaffirm its 30m barrels per day production target on Thursday – even if that triggers a further oil market sell off.
Having trended gradually higher for the last 5 weeks (missing expectations for 4 of them), initial jobless claims printed an uncomfortable 313k (against expectations of a 288k print -the biggest miss in over 11 months) pushing to its worst level in 3 months. This is the biggest week-over-week rise in almost 4 months. Continuing claims hovers at 14-year lows and dropped this week to 2.316 million.