>>> Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016

Iran Unleashes Oil Flood, Will Quintuple Crude Revenue In 2016

On Saturday, Iran marked what President Hassan Rouhani called a “golden page” in the country’s history when the IAEA ruled that Tehran had stuck to its commitments under last year’s nuclear accord.

Moments after the ruling was handed down, the US and the EU each lifted nuclear-related financial and economic sanctions on the “pariah state,” much to the chagrin of Israel and Tehran’s regional rivals who view the West’s rapprochement with the Iranians with deep suspicion.

"Everybody is happy except the Zionists, the warmongers who are fuelling sectarian war among the Islamic nation, and the hardliners in the U.S. congress,” Rouhani said, referring directly to Israel, the Saudis, and GOP lawmakers in the US.

In addition to the never-ending feud with the Israelis, Tehran is embroiled in a worsening conflict with Riyadh triggered by Saudi Arabia’s execution of prominent Shiite cleric Nimr al-Nimr and subsequent attacks on the Saudi embassy and consulate in Iran. The argument has raised the specter of an all-out conflict between the Sunni and Shiite powers and stoked sectarian discord across the region.

With sanctions lifted, Iran will now have access to some $100 billion in frozen funds and will be able to increase its oil revenue exponentially even as prices remain suppressed.

It’s easy to see why the Saudis and other Gulf Sunni monarchies are nervous. Iran plans to immediately boost output by 500,000 b/d with an additional 500,000 b/d coming online by year end. “The oil ministry, by ordering companies to boost production and oil terminals to be ready, kicked off today the plan to increase Iran’s crude exports by 500,000 barrels,” the official Islamic Republic News Agency reported on Sunday, citing Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs.

“Iran could haul in more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry,” Bloomberg reports, adding that “the lifting of sanctions means Iran can immediately boost oil revenue to about $2.35 billion a month, based on the country’s estimated current output of 2.7 million barrels a day and oil at $29 a barrel.”

Even if oil hovers between $30 and $35 a barrel, Iran will be pulling in some $3 billion a month by summer and nearly $4 billion a month by December.

"Iran's aging oil fields may present some challenges to the pace at
which it can physically raise production," Deutsche Bank wrote last year, as prior to the signing of the accord. Here's a bit more color:

Changes to Iran's sustainable production capacity in the medium term will likely depend partly on the speed and extent to which international oil companies (IOCs) invest in the development of Iran’s oil resources. Currently, 38% of Iran's oil production originates from three large fields and associated areas which began production decades ago (Gachsaran 1934, Ahwaz 1959, Marun 1965). Of the original resource contained in these three "super-giant" fields, only 23% remains now.

 

 

Further development drilling will likely be required in order to maintain production, and secondary techniques such as CO2 or associated gas injection may be required to improve the recovery rate and counteract falling reservoir pressure. Prospects for higher production would be improved by IOC participation. However, foreign investment has lagged not only because of sanctions, but also because of the government's buyback agreements which are considered unattractive.

On Sunday, Rouhani said the country needs between $30 and $50 billion in foreign investment in order for the country to hit its 8% growth target for the year. "Untapped potential in many industries indicates that domestic demand cannot solely push the economy toward eight per cent growth," he said. "Attracting foreign investment will be the best way of using the opportunity of sanctions relief to boost the economy and security." 

But according to Israel, it's all a charade. On Saturday, The Times of Israel said that according to an unnamed "source in Jerusalem", the first thing Iran will do is send money to Hezbollah. "The implementation of the agreement would have a direct impact on the region, as terror groups Hezbollah and Hamas — both recipients of Iranian largesse — found themselves in possession of new and modern weaponry," The Times wrote. A statement from PM Netanyahu's office reads: "Even after the signing of the nuclear agreement, Iran has not abandoned its aspirations to acquire nuclear weapons, and continues to act to destabilize the Middle East and spread terrorism throughout the world while violating its international commitments."

We wonder whether Netanyahu would say the same thing about the Riyadh, where "acting to destabilize the Mid-East and spread terror throughout the world" is an explicit foreign policy aim. 

In any event, Iran just got a $100 billion windfall and will be around $2 billion richer each month by the end of the year. The return of Iranian supply "will have an immediate impact in the spot market” Robin Mills, CEO of consultant Qamar Energy, told Bloomberg by phone. “Putting oil in the market is going to push it down." "Iran’s additional crude shipments have the potential to further depress prices, perhaps to as low as $25 a barrel,” Nomura's Gordon Kwan added on Sunday.

As for what effect a richer, more prosperous Iran will have on regional stability, we'd suggest that anything that serves to counter Saudi influence is probably conducive to a more secure environment. Besides, things can't get much worse in the Mid-East, so it's hard to see the 

>>> Barron's Summary: positive on YHOO, BEAV Cover story: Participants at the Ba

Barron's Summary: positive on YHOO, BEAV Cover story: Participants at the Barron's 2016 Roundtable "see more stock market turmoil, junk-bond mayhem, and global strife in the year ahead"; Oscar Schafer of Rivulet Capital likes EVTC, CPN, COMM, NICE; Brian Rogers of T. Rowe Price likes AXP, CMCSA, ETN, M, OXY, QCOM. 

Feature: 1) Positive on YHOO: Company faces increasing pressure to unload its core Internet business, which would likely also lead to a sale of its stakes in BABA and Yahoo! Japan, netting shareholders a potential 35% gain, or about $40 a share; 2) Positive on BEAV: If aerospace company's growth picks up steam, shares-which have dropped from a high in 2014-could see 30% upside, and even more if it becomes a takeover target; 3) Barron's looks back on its bullish stock recommendations for 2015, noting shares of the 146 companies it wrote about fell 2.4% against a 1.8% drop for the benchmarks, while bearish picks fell 18% on average; 4) As world leaders gather for the World Economic Forum in Davos this week, "a new industrial revolution is the theme for debate...but there will be plenty of talk about turmoil in emerging markets and geopolitical issues too."

Tech Trader: Cautious on AAPL, Samsung: The smartphone sector is doing worse than the PC sector, with shares of both big players down, but suppliers such as SWKS, QRVO, and ADI are feeling even more pain; Cautious on GPRO: Camera maker relies on a single product and has yet to prove that it will have staying power; Brian Schwartz of Oppenheimer & Co. thinks CRM, ELLI, INST, and WDAY are likely to survive what could be major turmoil in the cloud-computing sector. 

Trader: David Kelly of JPM Asset Management thinks that the current market turmoil will last another two weeks, and says investors shouldn't succumb to emotional reactions during the swings; Wall Street strategists Stephen Auth of Federated Investors and David Kostin of GS have shifted to a significantly less bullish viewpoint of the market following two bad trading weeks; Cautious on QLIK: Software developer has a solid niche in a growing business, but sales have slowed significantly and its valuation is still extremely high.

Profile: Clare Hart, portfolio manager, JPMorgan Equity Income fund looks for sustainable growth and strategy, and will exit a holding if gains were achieved by diverting from management's outlined game plan (top 10 holdings: WFC, XOM, JNJ, AAPL, PNC, OXY, CME, PFE, TRV, MO). 

Small Caps: Cautious on CFX: Shares of pump and welding-products maker have tanked, but assuming oil prices don't stay at $30 forever, the stock looks like a bargain. Penta: A survey by Fidelity Investments of its high-net-worth clients found that impact investing, which attempts to generate market-rate returns while advancing social or environmental goals, is "a surprisingly big deal."

European Trader: Positive on SHPG: Most of the concerns about pharma company's acquisition of BXLT seem to have been dispelled, and investors seem confident it can complete the transaction and boost value. 

Asian Trader: If China's reform efforts were effective, the country could get back on track, but local politicians are likely to drag their feet when it comes to change. 

Emerging Markets: Saudi Arabia doesn't offer much potential for investors, and though the government loosened foreign-ownership restrictions for institutional investors last year, retail choices remain limited. 

Commodities: "Investors in agricultural commodities will continue to feel the pain of weak prices this year" amid strong global supplies, a strong dollar, and weakness in the currencies of producing and exporting countries. 

Streetwise: The market is a lot cheaper than it was a few months ago, and that means value can be found, especially at cash-rich companies.

FT : ‘Sell (mostly) everything,’ investors are warned

‘Sell (mostly) everything,’ investors are warned

It is the worst start to any trading year anyone can remember, says Katie Martin, and the worst for European stocks since at least the early 1970s

“Well, that escalated quickly. I mean, really, that got out of hand fast.”
The spirit of fictional journalist Ron Burgundy stalks global markets so far this year. Investors barely had enough time for a cup of tea and a “fine thanks, how was your Christmas” chat with colleagues before the wheels fell off.

Circuit breakers kicked in to suspend trading in Chinese stocks for two days in a row before authorities binned the limits altogether, fearing that they were throwing fuel on the selling pressure. Metals are in meltdown. Oil is falling faster than forecasts can keep up. The International Monetary Fund is warning that emerging markets are in a very tricky spot, and that better safety nets are needed to prevent market ructions from infecting the global system.
Even UK markets are looking shaky. Sterling has flopped to its lowest point in five-and-a-half years as investors rip up forecasts for when the Bank of England will start raising interest rates. (Did we say May? Try November.)
All told, it is the worst start to any trading year anyone can remember, and the worst for European stocks since at least the early 1970s. Last year brought the largest number of corporate debt defaults since 2009, says Standard & Poor’s, the rating agency, and this year corporate downgrades are set to far outweigh the upgrades.
Bears have their tails up. “Sell (mostly) everything,” wrote Andrew Roberts, an analyst at RBS. “My ‘severe downside for the world’ call is looking OK so far.”
One big problem here: many of the usual emergency exits are bricked up.
True to form, the yen has been attracting new fans in this time of stress. A “yen in a China shop”, to steal the term from Kit Juckes, fixed-income strategist at Société Générale.
Speculative accounts have switched to a net positive position in the Japanese currency for the first time since October 2012.
Keep going? Good luck. As several analysts have pointed out, it is probably only a matter of time before the Bank of Japan winces at the negative impact on Japanese stocks, which are already under pressure from the global malaise, and starts to scare investors off, possibly with the threat at least of more monetary easing.
OK, so the yen is juiced out, or getting there. The Swiss franc? Maybe. A rally in this currency is certainly seen as an under-appreciated risk by some investors, but with benchmark rates at -0.75 per cent and a central bank known to be hostile to currency strength, it is tough to justify. Plus, most traders are keen just to avoid the franc altogether, after the hideous surprise rally one year ago.
The dollar? It is already looking pretty punchy, and too much strength will serve only to put the Federal Reserve off its pace of interest rate rises.
Government bonds? US Treasuries are widely (if not universally) tipped for a decline, as you would expect with the Fed already raising rates. And no one wants to be the fund manager hauled up in front of an investment committee to explain why he or she piled in to German Bunds, just like last year, when we all remember the ferocity of the slide in that debt from mid-April onwards.
Gold? The yellow stuff has had a good run this year, but its once-reliable tendency to climb when markets are jumpy has unravelled somewhat in recent years.
Investors are cornered. This may help explain why some are putting money to work in bet-small, win-big highly speculative bets, like a devaluation of the Saudi riyal.
Keep the faith in more mainstream risky bets, say some. JPMorgan Asset Management, for example, says now is not the time to panic as a result of volatility, adding that we have “an attractive entry point” for annualised returns of about 10 per cent in European equities in the next five years.
That calm response may well end up as the winning strategy, but a lot of “certainties” and strong hunches have been blown out of the water already this year.
Confidence is low, and deserves to be.

FT : Markets a month on from the Fed rate rise: charts



From: LAURENT CHEKROUN (MAKOR SECURITIES LO) At: Jan 16 2016 22:15:03
Subject: FT : Markets a month on from the Fed rate rise: charts
Markets a month on from the Fed rate rise: charts

DA DAAAAA!

Da da da daaa daaa, d-d-d daaa daaa d-d-d daaa daaa d-d-d daaa!

Been one month since the Fed raised rates .

Yep, it has. And although it hasn’t been what might be described as an outright currency war, the past month has definitely seen a disturbance in the force, writes Peter Wells in Hong Kong.

We’ve created some charts to show how the calendar month after the first rate rise in the US central bank’s current tightening cycle, commenced on December 16, played out for key global currencies and stock markets. And we’ve compared that to the start of the Fed’s previous tightening cycle, which began on June 30, 2004 when Emperor Greenspan lifted rates 0.25 percentage points to 1.25 per cent.

For major equities benchmarks, the month-after response has leaned more heavily toward the dark side this time around i.e. fallen more. But is that the Fed’s fault? Perhaps not.

The so-called Santa Rally actually kicked in following the Federal Open Market Committee’s policy meeting. Probably because the most well-telegraphed rate rise in history was finally out of the way, people prepared for it and could now get on with their lives.

But 2016 has brought with it a renewed focus on China. The renminbi commenced a sizeable (in its terms) depreciation right after Christmas, and heightened volatility in mainland equity markets at the start of January damaged sentiment. As a result, global financial markets had arguably their worst start to a year on record.

A relative stabilisation in the renminbi during the second week of the year has done little to quell concerns, with the market also unsettled by volatile – and declining – oil prices.

In 2004, shares were weaker coming into the Fed’s rate rise and were also weaker in the aftermath. But by the end of the month, they were starting to recover. It could take a bit longer before markets shake off this year’s malaise.

Currencies, though, have been a bit more haphazard. The range of performance this time compared to 2004 is much wider.

The US dollar has been a winner, naturally, in both instances, but by a little less during the start of this new, policy tightening cycle.

Worth noting, though, is that in 2004 the greenback was in the middle of a seven-year bear market, that saw the dollar index fall to a record low of 71.329 in April 2008 from a 15-year high of 120.9 in mid-2001. This time, and notwithstanding concerns about the effect of its strength on the US economy, the dollar is seen as being in an upswing.

Also noteworthy is the yen, which has strengthened since last month’s rate rise, as market jitters push investors shift toward haven assets. In 2004, the yen was the weakest of the major currencies we looked at.

The Australian dollar, the British pound and Asian currencies in general, have been hurt more this time around than in 2004. The renminbi is suffering more now for the simple reason it was still hard-pegged to the US dollar in 2004.

In general, the Fed’s December rate rise drew a much stronger immediate response from currencies and stocks than the June 2004 move did. And that’s despite how well-flagged the move was.

Volatility, measured by the Vix, was higher when the Fed pushed the button in December (17.86 versus 14.34 in 2004) and also in the month after (27.02 on Friday versus 15.32 in 2004).

It’s still early days in terms of how the most recent rate rise will play out, and the slumping oil price and disappointing US economic data are prompting markets to push back expectations for the next rate rise.

A stronger dollar may put the brakes on US economic growth this year. Measured by the dollar index, the US currency is about 12 per cent stronger than it was in mid-2004 when that other first rate rise took place.

The greenback and the yen may remain strong as uncertainty encourages investors to hug haven assets, which would likely complicate matters for the central banks of both countries. And who knows what’s going on with the renminbi: markets don’t seem convinced even the People’s Bank of China knows what it’s doing, to almost everyone’s detriment.

Investors are probably in for many more weeks of nervousness. In which case, May the force be with you; you’re going to need all the help you can get.

WSJ : Iran Completes Steps to Implement Nuclear Accord

Iran Completes Steps to Implement Nuclear Accord

Process set to lead within hours to relief from years of tight international sanctions

The head of the United Nations atomic agency said Saturday evening he had issued a report verifying that Iran had completed all the steps needed to implement last July’s nuclear deal, triggering a process that will lead within hours to relief from years of tight international sanctions on Tehran.

“We have come a long way since the IAEA first started considering the Iran nuclear issue in 2003. A lot of work has gone into getting us here, and implementation of this agreement will require a similar effort,” said Yukiya Amano, the director-general of the International Atomic Energy Agency in a statement. “For our part, we are ready to get on with the job.”

The IAEA report was necessary to confirm that Iran had shut down thousands of uranium-enrichment centrifuges that can manufacture nuclear fuel, removed the reactor core at its Arak heavy-water facility near Tehran and sent out of the country its stockpile of nuclear fuel.

Those steps, according to Western experts, mean that it would take Iran at least one year to make enough nuclear fuel for an atomic bomb. Iran has always insisted its nuclear program is purely peaceful.

Under the U.S.-led agreement, most nuclear-related sanctions imposed by the U.S., European Union and U.N. will be removed, reopening international markets to hundreds of thousands of barrels of Iranian oil and returning billions of dollars in frozen oil money to Iran.

The implementation of the deal came as Iran said it freed four Iranian-American prisoners in a swap with the U.S., including The Washington Post correspondent Jason Rezaian. U.S. officials later confirmed the swap. In exchange, the Obama administration agreed to release seven Iranian nationals who were either jailed in the U.S. or facing charges.