tv Best Of Middle East 2016 Bloomberg December 30, 2016 7:00pm-8:01pm EST
♪ >> is the end of the year. hello and welcome to bloomberg markets: middle east as we want -- wrap up 20 sixteenths with this special holiday edition. we are in dubai. take it back 11 months. oil was $27 a barrel. record stockpiles, supply out wayne dement and iran is back online. something just had to give and it give. on november 30, it agreed to its
first production cut in eight years. here are the details on singapore. >> the real differences were between iraq and iran. both beue that should exempt from any production cuts. iraq because it would be the mighty fight isis. iran because it was the lifting pretensionrom its levels. what happened when you get into the evening was iraq finally agreed to be part of the production cuts. it had the highest production cut after saudi arabia. that gave someone a room for trying to, instead of push love their oil production up to the pre-section limits of to go upis only going to the pretension levels. once those three were in line they were able to bring
everybody else and and get behind this 1.2 million barrel a day production and oil output starting for the first six months into next year. the big winners are oil producers. the rising oil prices of all kinds of both across the region. singapore,rs in energy and china are also benefiting from this. airlines and refiners are having a little bit of a rougher go of things today. are someng run, there questions in the oil market about how this will play out. morgan stanley put out a note saying tt higher oil prices now mean that you will see more investment in drilling from u.s. shale from other players. acted as applied to the second half of next year leading to some price instability around this time next year. we will have to see how everything shakes out over the next year or so. in the game of
defending the price of oil and russia among all other opec producers followed suit. they now turn to the implementation of the deal. begin inthat it will january. i spoke to robin mills, he is the ceo of energy. this is shortly after the deal is done. >> i do not think it will be very sustainable. there are two things that will happen. first of all there is a lot of the oil out in stores. the floating storage and official storage. the this higher price and flattening forward curve, some of that product is not going to quickly come into the market. deal going to put this under pressure. secondly, this is christmas coming early for the show producers in north america. >> how sustainable is the skill? 1.2 million barrels per day? you are going to give shale in .he u.s. quite a bit
they are going to put more oil into the market. >> or are a couple of questions that. it is a six-month deal. production reduce because of the domestic demanding lower. after six months and will be summer again in saudi arabia and production will go up again. the deal will come under strain then. the second question is that shall start coming back and we will stick to those cuts. thatit be forced to accept is coming back strong and anticipated? a lot of the analyst we have been speaking to have told us the deal again that was done. the compliant, the execution. they put together a committee and they were supposed to oversee the agreement that they've stood by. i optimistic on that? the fact is that it doesn't significantery degree of compliance. other going to be able to turn things around this time? >> that would be good if it happened.
> do think it would happen? listen to the oilman. he is first ethical -- he is very skeptical. i am with him. >> you make comments overdue made comments over the weekend. not very positive. >> it should be cheap but not too much. everybody can cheat a little on their quotas. perhaps it will be a cut of more. about one million barrels or something like that. the question is if one member starts cheating, it all falls apart as a society. this is a gorgeous, beautiful chart that bloomberg clients can pull up on thir screens as
well. the blue bar is continuing to indicate that bills are in the red flake. the yellow line, that is the reference line. u.s. crude has jumped out accordingly. where does this go from here? the u.s. shale story. you want to gains until 2018 and the nasal slowdown. i think that the u.s. shale oil story has just begun. expand going to tremendously. when you look at this chart, one very important thing, back in 2014, these rigs at the four houra day, seven days a week, at is not the caseoday. the number of breaks coming and, there is a lot of slack in the system.
the bottleneck here is hydraulic fracturing crews. it is to be rebuilt and expanded. they need higher prices to do so. see shalespeaking, i to thejust beginning. they could add one million barrels. shale has proven to be resilient with only marginal production, one point 3 billion barrels were sent to the 2016. >> i think we are likely to see a strong rebound and shale. the question is maybe over the next three or four years, how much other will be lost. we're looking amateur areas.
cancellations of deepwater project. a much will shall make up for that? if prices go higher, they have a much longer lead time for show projects. i am physically quite optimistic that shale will bridge that gap. the have been other concerns raised by the iaea and some kind of investment gap. >> a healthy dose of skepticism about whether the cuts will work and the role of shale in global supply. we'll take a look at how the middle east might explain up this year and what investors need to be thinking about the 2017. how oilstors start with is this year. there is this talk of a need for an agreement. beens obviously have rising since. eventuallythat deal between oil producers, etc. prices to range in the moment. before i move on, expect quarter one of next year to be about global inflation. that is really when we see the
basis that come into play, right what people really are talking about. but have a look at market dynamics, moving ahead. there could be some interesting relations as we head into 2017, some interesting trends that we noticed. let's shift this chart. we have a look at the daily change of the oil price. this chart takes you other back to 2012. what it shows you is 2016 was all about price. yes price as well, it got exacerbated. that as bad as 2015. we were stuck between 40 or $55 per barrel and within that range, 45% daily swings were not uncommon. a sort of died down as we move into next year. the second thing i want to bring up, have a look at this, this is your oil price. -- callnd one is every relation between oil prices and equities.
the benchmark we are using is a index. historically, it looks like this. look atsitive, have a this five-year chart. theorically, ilooks like past o years, it has been positive, it dipped a little bit in november. that has actually come back up. with this relation a positive, that may not actually told well for equities. if and when investors get there first with if you will of noncompliance to that deal. that is how things look. it looks to be more interesting. bloomberg, still to come on the program, looking to liberalize to offset the slumping oil prices. sweepingbia announces reforms this year. including'tis to the capital markets. we will hear from the kingdom of financeutes --
♪ >> in november, saudi arabia finance replacing finance ministers of two decades. theew man for the job had been running the kingdom's capital market authority overseeing markets toopening up foreign investors. i sat down with him in september. i began by asking how much money the kingdom hopes to attract. >> as much as we can. generally, think it is a matter of what the market can take. what is happening in the region, what is happening in saudi, it is a priority prize. the foreigns investment is concerned, it is a journey.
summer of back to 2015 when the first series of reforms came through, you relax the restrictions for foreign investment. atwas a lot of you curious the time. expectations were high. the reality is that those expectations have not been met. why is that and why is going to be different this time around? a lot of investors will track these. some duebe doing diligence. asking around but they are not going to put their money and their international embassies. we are talking to investors. investmentwe have an talk in new york. the month after we have another one and london. we want to try to support them which exchanges efforts in
the market curvature exchange. that they make sure do that. do think that the reforms you have undertaken and you intend to do in the future are going to be enough for an emerging market classification? been under other international embassies, we are under continuous investigation with them. we believe that the amendments are going to happen. it should be enough to put the saudi markets within 2017.
-- beinganother country buffered by the ups and does of the energy market. . of understanding means it has plenty in reserve, here is the deputy prime minister. >> the effect of our nominal gdp is quite substantial. coming with the measures of fiscal and epic -- fiscal and economical reform announced by the canada great that after five years we will be able to come back to cover all of our gdp nominations. we are closing of our deficit tremendously. >> a big five-year plan.
i know you are advocate of the six-point plan. my question to is, a brave man and brave reform. you have six points, it is a tough parliament. corporate tax, it is and privatization. what is the priority of those three? i've the three, what are the priorities? codes a closing on my public deficit. and the financial deficit. we need to locally and nationally lead up to that. we are willing to do that. i believe some of the agencies that just issued the ratings realize this very well. turn intoy we were
our existing rating. we are really happy to hear that. we are happy to receive this news. the negative allegation that they see is something that we have to do it in the coming eight months to see. the liability, we need to determine the level of doing those referrals. >> up next, the fallout from turkey pot -- turkey's failed coup. you're watching bloomberg markets middle east. ♪
armed forces trying to take control. yousef: they defended the economy 10 days after the official -- initial unless. the coup attempt had an economic impact on the turkish economy. snp immediately cut our rating and i think that was not an ethical stand. advantage of the situation. we had overcome is to attempt. the of to keep democracy running. this was set up for us. the turkish economy does not deserve this if you look at the indicators. it is an ideological and political decision. we had no doubt about that. to global saying investors is that this has come and gone. the national will of the citizen has destroyed the plotters.
life is back to normal in turkey. you can continue your long-term investments, we will eliminate obstacles before you. we are laying out the turquoise carpet in front of investors. we had all kinds of tax incentives, invest --nvtment incentives and we are given priority to value added investments. wedoes this concern you that are putting pressure on the turkish economy on the weak spot which is the current account deficit? it remains the third-largest in the 20 nations. >> we will continue with our large-scale investments that putting our put on the break. just before the religious bridge one opened the june 30. july 26, we willave the third bridge inaugurated. in the beginning of 2018, we will have the first terminal of the largest airport in europe. that will be inaugurated on december 20 and we will have the eurasian tunnel under the balsa
risk which will be inaugurated. in 2016, he will lay the cornerstones of the 10 ocalan bridge. the longest bridge in the world. down, turkey will continue its investment. >> you mentioned that the government would increase investment and productive sectors rather than investment on social spending. more on investment. mean that it would reinforce the growth that the economy has seen which has been dependent on government spending. are you planning any measures beyond what you just mentioned? to encourage private investment. rather than just investment in bonds and stocks? we are establishing a wealth management fun. it is a structure that will finance large-scale projects. we are going to finance investments through this fund and instead of the general
budget which will be cleared of problems. >> when you became prime minister you said that changing turkey into a presidential system and democracy was one of your priorities. in thathing changed after last week? for example, especially regarding the timeline of that change. are you still considering a referendum? is there a possibility of early elections? an early election out of the question. i am underlying this and being very clear about it. there are some circles were trying to confuse the situation, saying that the ex parte has come out stronger after this too. it will have an ambush election. this is not even going through our minds and we don't find it difficult. andave power for four years
will use that power for the next four years. is tryings anyone who to seize that authority we will all on their heads like a sledgehammer. and we did. thinking about doing such a thing we should watch their step. why a presidential system is necessary, it is necessary for stability and security. the presidential system there would be no one attempting such an adventure. then, an absolute political will would be in charge, a weak government would encourage coup plotters and there have been several such attempts during the latest rain. we have always succeeded in warning that. have we succeeded? because the nation was backing us. reforms including a current to flow have seen inflation surge.
we hear from the finance minister next, this is bloomberg. expect to use inflation gradually. we are starting to go down to 10%. with the xfinity tv app, anything with a screen is a tv. stream 130 live channels. plus 40,000 on demand tv shows and movies, all on the go. you can even download from your x1 dvr
♪ : securing it involves performs. including footage of and cutting these subsidies. this is just after the deal was signed. >> progress is going very well. even beyond our expectations. especially when it comes to the currency. they are very encouraging in the foreign currency market and the fish market.
there was very charming to the economy. they are very positive. the central bank and the banking sector is doing a great job so far. >> it is about mental conversion. is that momentum growing? >> it is gathering. it is basically the central bank and the banking system including all of the stakeholders into the system. you hold all the way that they are going to take some time, the performance of part is great. it is really very good. >> the youth minister say that you have to have a bandwidth. what have you worked into the models in terms of the economic connection for next year? >> we are not calling for result when a. things will take time until
that. what is happening so far is very encouraging. transferring poor encouraging to the banking system. also, the feedback into the investors. me how do i said to participate in the future upside of egypt? if i have the bond market. year, if this bond issue goes well, how much more could we see come for next year? >> it depends on our financing. it depends on the development on something like a much investment will come into the country. market.come to the billion? 10 billion? >> 54 6 billion. -- five or 6 billion.
-- i want tobe feel safe in the knowledge that i can -- where are we with the backlog how long will it take for you to clear that backlog? give us an update. >> i think the banking system is working on this and a good way. it is a jurisdiction of the bank of egypt. so far, they are doing it fine in terms of signing for these needs. the process is taking place in a very positive way. >> confidence, it is an interesting word. you are at the conference last week. talk to me about the biggest question that investors have had for you. the conversations you have had with foreign investors. >> it is all about confidence.
confidence and the policies. when you decide to do something that hasn't been done for the last 30 or 40 years, floating the current is in such a way that give us companies, when people see that the system is kind of transparent, that there's confidence. when we do the fiscal conservation, that gives confidence. i understand that when you get involved with the ins, there are many issues. there are many discussions. what additional tax rises are going to be necessary when they are coming for egypt in 2017 after the new relation with the ins? >> it is not a matter -- matter of when and how. this was a plan that happened
every year for five years. it is taking place year after year. because of the sharp reduction in oil prices, the action was not like that. we are addressing this issue because we know that this fight has really hurt egypt for some time. we are redressing the subsidy. toare giving the subsidy people who deserve it the most wantst to the subsidy who -- not one for everybody. that you are floor targeting your fx reserves for next year? >> i will not talk about specific numbers. having very we were good ones.
decide other figures, we were in very good shape. -- we have ang trade deficit. we have takenhat very bad ones. this is something that will take fashion.a very good >> let's talk about the economy. of what you have done is monumental. in terms of floating the currency. growth ine realistic 2017? >> we should suspect something rapport percent. you are in it transition. of --ht create some sort
of the passageway to go. you need to see investments come into the country. the next step is to see a really common function. the hangover on the economy was the situation now. this issue is being resolved. respect to see results. we probably encourage and bring more to the country as well. >> inflation, that is the other issue for you. 25% is the level. what is your primary driver for tackling inflation? -- we peek atched inflation because the currency situation is forcing our current
currency out of the market. it is also affecting the inflation by increasing the investment reducing. they expect to reduce the invasion gradually. -- inflation gradually. we want to go down to 10%. sometime the next year. year,etime -- up next putin will tell us what he does a donald trump. this is bloomberg. ♪
>> i will support him because he was elected by the america and we have to accept that. number one, he promised to andantle the nuclear theical element between u.s. and iraq. if he will meet this promise that i will take the first step. there are a lot of things he promised to do. >> there are a lot of things he promised to do. we would forgive him for shrimp betting of muslims? this is talk. political talks. it will not be implemented. do think that by trump now becoming president that that will make their properties easier? that relationship with trump? >> i think we have to address him as the president of the united states.
>> investing in america, people say he will go for infrastructure spending and that america will grow. would you be prepared to invest in america? >> i will look and i will see. we will see what he's going to implement for his promises. the should begin in priority. iraq and iran. >> what the one who -- what you want to see him say on iraq russian mark lacks the current by iranian slaves and by the iranian proxy.
therefore we want iran to come back. >> i don't necessarily know that that is a 100% representation. somewhat say that obama pulled back. he brought the troops home. i think we have to see that there are both sides on that. let's talk a little bit more about you, your business and marketing. warren buffett look a lot of money into cash before the selection. did you take any preparations risks that the market was assuming on it from victory? the market is reacting positively now. thinking that i have to hold for a few months. to look into any project. i will wait and see if he implements what he is promising. then i canceled him. -- if the infamous what he
and i can salute him. >> if you look to the left, it is a little hazy this morning. he on his a few hotels in the region. one of them is the w. that is just beside the burj khalifa. done to pretty much this man. as talk about the dollar and impact on the region. has the strong dollar helped the hotel occupancy? our success is not tied to the dollar. it is not impacting us at all. >> but in fact the torts coming in. -- it affects the torts coming in. >> let's talk about that because you say that the peg is there. would you say that the pegs will hold against the dollar?
>> do think all of these will hold? it is costing me. i've come down from london. have you seen any impact on brexit? with the drop in sterling. with the drop in sterling ask -- tell you to look at u.k. more? >> that is very true. we are looking at property in england. we are buying property in england. >> you have bought a lot of sterling. what you buy more sterling? >> we are buying to limitation. we bought a property there. we are looking for other properties as well likes will he be looking in central london? do think it is good value? or do think it should be looking elsewhere? >> everybody is making money.
>> this signals is the path for cost in 2017. they wasted little time in following the bed. even saudi arabia, kuwait and they are all raising the benchmarks within hours of the decision. this is the chief economic advisor. pressured him how much is putting on emerging markets. others are free-floating.
-- bottom line it is not a disaster because they cannot offset that off of the other means. >> they have been interpreting his comment indicative of a more --kish set than we had was once expected. what was your take on that? if i was to summarize it in one phrase, it would be beyond data dependence. i think the bfed took a small step the -- beyond data dependence. she walked back this notion of high pressure. the people said wait a minute, are we not just seeing this high expectation?
this is a fed that could be tighter than we thought otherwise. that is what we moved to market. it wasn't so much the statement as the press conference. ask if you been surprised by this witness with which markets have reacted to the prospect of higher relation? waseems like a switch flight and week the bailey shifted from the era of the red, slow economic growth, though inflation to something new. >> know because i have always had this notion that there were artificial levels. this notion of a beach ball that you hold underwater and at some point when you let go, it too tough much faster. note, we are aware at artificial levels. now there is a clear indication that the fed is less willing to keep interest rates artificially low. and the markets are reacting. those of the action has been on the interest rate front and on the currency front. it is going to be interesting to see what the consequences are of all that.
>> where does this leave equity markets? us of ank we are in the big romance with three elements. higher growth, high inflation, and more liquidity coming into the markets. why? policy of the announcement of donald trump. he has focused on element of a progrowth, pro-inflation and his concept of bringing back money to the states, part of which will end up in the markets. that is what the markets are focusing on, rather than policy. us that way in such a big way. >> know the truck is heading to the white house, he had the potential for this goal stimulus, how comfortable do you deal with -- feel with equity markets? >> i think at this pivot from overreliance on central banks to a more comprehensive policy approach is way overdue. why?
because we have seen the downits of the pulse come and the cost and risks go up. the market sensing this pivot haven't had design, application, connectivity, that is a good thing for the economy. >> is that a potential that the market has gotten ahead of the agenda mark given that we don't know the details. we don't know if it will actually happen. >> if announcements do not translate into people and details designed -- the markets have gotten ahead. there is another possibility that the markets have gotten ahead. we have only heard about the progrowth helmets of this program. there has been no repeat of the elements. benefit of the doubt are you giving donald trump and all of those energy-related appointments that we are seeing. especially sitting in your seat in dubai. front andreally
center to that region and really around the world. two things, one is that i can only comment on the economic point. i will give more than the benefit of the doubt. he has got to people who i have express with, they are progrowth. as long as they surround themselves with colleagues who know how governments work, that .an be a very potent policy on oil, think the major issue is a supply side at this point. it is the extent to which opec has forged a different agreement. has a much more explicit inclusion of non-opec members, anchored by russia which accounts for over half of the cuts on the non-opec side. that is anchored by the commitment of the highest level of russia. this is a much more flexible agreement. among opectiates members. i think the major change on the oil side is from a supply-side
i will get hillary clinton. change. not going to >> a presidential race like done in history. with a business leader in the white house. >> it is going to be a very business from administration. >> the markets wait for the fed to move. not always patiently. >> get off of this fixation of lower interest rates providing a push for economic ow