Emerging Markets Monitor - August 24
OPEC+ Hints At Output Cuts, Indonesia: A Future EV Superpower?, Europe Droughts, Euro Falls Below Dollar Parity, Kenya Oil Dealers See Looming Fuel Crisis
The Top 5 Stories Shaping Emerging Markets from Global Media - August 24
Saudis, Allies Open Door to Output Cuts to Keep Oil Prices High
Wall Street Journal
“Saudi Arabia and some of its oil-producing allies have suggested cutting crude production, disappointing U.S. officials who predicted the kingdom would be instrumental in cooling the market after President Biden met Crown Prince Mohammed bin Salman for the first time in office.”
“The Saudi-led Organization of the Petroleum Exporting Countries and a coalition of producers led by Russia—collectively known as OPEC+—agreed to a smaller-than-expected production increase earlier in August.”
“Now, Saudi Arabia’s energy minister and some OPEC officials have suggested the alliance could extract fewer barrels of oil to stabilize a market buffeted by economic uncertainty, the risk of global recession and energy sanctions triggered by the war in Ukraine.”
“‘OPEC+ has the commitment, the flexibility, and the means…to deal with such challenges and provide guidance including cutting production at any time and in different forms,’ Saudi Energy Minister Prince Abdulaziz bin Salman said late Monday.”
“The Saudi state news agency published his comments first made in an interview with Bloomberg. He described oil markets as ‘in a state of schizophrenia,’ and said Saudi Arabia would soon begin working on a new OPEC+ agreement beyond 2022.” WSJ reports.
Indonesia Aims to Be an EV Manufacturing Superpower
CleanTechnica
“Last week, the government of Indonesia announced a long term agreement to supply $5 billion worth of nickel to Tesla over the next 5 years. It is also a major source of other metals, as well as coal and palm oil, and is willing to use taxes and export bans to coax companies to invest in its manufacturing base.”
“To help realize his vision of a full fledged domestic EV manufacturing industry, President Joko Widodo is considering a new tax on nickel exports, a move that would have big ramifications for automakers. Despite the latest agreement with Tesla, Indonesian officials are still conducting talks with Tesla and other leading automakers to encourage them to invest in manufacturing plants.”
“Widodo said last week in an interview with Bloomberg News editor in chief John Micklethwait, ‘What we want is the electric car, not the battery. For Tesla, we want them to build electric cars in Indonesia. We want a huge ecosystem of electric cars.’ Jokowi, as he is known, said he has similar expectations of Ford, Hyundai, Toyota, and Suzuki as he seeks to ensure his nation isn’t relegated to simply being a raw material supplier or component maker.”
“A Tesla team visited several sites in Indonesia in May, including Morowali Industrial Park, a hub being developed as a key nickel industry site in Central Sulawesi, according to Indonesian officials.” CleanTechnica reports.
Europe Still Rocked by Droughts, Heat Waves
Financial Times
“Almost half of the EU remains under drought conditions, an EU agency has said, with the weather set to remain hotter and drier until November. This will compound fears about crop shortages and energy supply in a continent already hit by a significant reduction in gas flows from Russia.”
“‘The combination of a severe drought and heatwaves has created an unprecedented stress on water levels in the entire EU. We are currently noticing a wildfires season . . . above the average and an important impact on crops production,’ said Mariya Gabriel, EU commissioner for research and innovation.”
“‘Severe-to-extreme’ drought conditions are evident in Italy, south-eastern and north-western France, eastern Germany, eastern Europe, southern Norway and large parts of the Balkans, according to a report published on Tuesday by the EU’s Joint Research Centre.”
“It said about 47 per cent of the EU was under drought warning conditions and 17 per cent in drought ‘alert’, which meant vegetation and crops had been affected. The report also warned of the ‘severe impacts’ on the energy sector, particularly for hydropower plants which are unable to function, and the cooling systems of other power plants.” The FT reports.
Euro Falls Below Dollar Parity
The National
“The euro continued to trade below parity with the US dollar on Tuesday, hitting its lowest level in 20 years overnight after fluctuating yesterday amid growing fears over a recession.”
“The single currency, which came into physical circulation in 2002, fell to $0.9910 Tuesday morning, but pared some losses and was trading at 0.9924 by 3.32pm UAE time.”
“‘Increasing risks to the supply of natural gas from Russia to Europe are darkening the economic outlook,’ said Emirates NBD economists Edward Bell and Daniel Richards. The euro previously fell to below parity with the greenback in early July and has dropped about 12.8 per cent against the dollar this year as households and businesses are squeezed by record inflation.”
“In the euro area, annual inflation was 8.9 per cent in July 2022, up from 8.6 per cent in June 2022 and 8.1 per cent in May 2022, according to Eurostat, the statistical office of the EU.” Massoud A. Derhally reports
Kenya Oil Dealers Warn of Looming Fuel Crisis
The East African
“Kenya is facing the risk of another fuel crisis that could paralyse transport services and inflict more pain on households and businesses weighed down by a high cost of living.”
“The latest fears come amid the government’s failure to compensate oil marketing companies for three consecutive cycles under the state-funded fuel subsidy programme.”
“The EastAfrican has learnt that OMCs are demanding Ksh65.06 billion ($546.722 million) from the government, an amount which has remained in arrears for three consecutive cycles (June, July and August).”
“The companies’ Supply Coordination Committee, in a letter to the Principal Secretary in-charge of Petroleum and Mining Department Andrew Kamau, said the delayed compensation by the government has thrown them in a difficult position to continue with uninterrupted supply of fuel.” James Anywanzwa reports.
“Everything is a risk. Not doing anything is a risk. It's up to you.” ― Nicola Yoon.