Pakistan needs US$16.8 billion for rehabilitation and reconstruction

Pakistan is eying generating around US$8 billion from the international community and donor agencies for the rehabilitation and reconstruction of the flood-affected people at the “International Conference on Climate Resilient Pakistan” scheduled for January 09 in Geneva.

Diplomatic sources said Pakistan needs a total of US$16.8 billion for the reconstruction and rehabilitation of more than 33 million flood-affected people.

“We are trying our level best to arrange half or US$8.1 billion of the total US$16.8 billion from our own resources and for the remaining US$8.1 billion we are hopeful that the international community will extend its support generously so that the vast affected population of the country is rehabilitated,” a diplomatic source said.

When asked how the huge amount of around US$8 billion could be arranged in such a grave economic situation, he explained that the amount would not be spent in one go, rather it is a process and the amount would be generated from Public Sector Development Program (PSDP), as well as, from the public-private partnership.

To another question, he said that to the UN flash appeal of US$816 million, more than US$200 million have been received so far from the international community.

In an informal interaction, a senior Foreign Office official said that Pakistan, in coordination with the donor agencies, will present “Resilient, Recovery, Rehabilitation and Reconstruction Framework” before the International Conference on Climate Resilient Pakistan being held in Geneva on January 09.

He said that Prime Minister Shehbaz Sharif and UN Secretary-General António Guterres will co-host the conference while various world leaders including French President Emmanuel Macron and others will also participate.

To a question, he said that France has been very supportive in providing the required assistance for the flood-affected people of Pakistan, adding that Pakistan is also in touch at the highest level with various countries to ensure their participation at heads of state and heads of government level.

The official expressed confidence that the international community will express solidarity with Pakistan for the reconstruction and rehabilitation of flood-affected areas.

“Pakistan is in touch with all the important capitals and a high-level participation from them is expected in the conference,” the official said, adding that the event should also be seen in the context of a diplomatic achievement of Pakistan.

He said that the prime minister has instructed that a small delegation from Pakistan will be accompanying him to the conference while all the provinces have also been asked to ensure their participation either at the level of chief ministers or ministers.

About the transparency in spending international assistance, he said that a procedure has been devised with regard to spending the money in a transparent manner and it will be announced in the proposed “Resilient, Recovery, Rehabilitation and Reconstruction Framework”.

Meanwhile, Foreign Office said in a statement that the Conference will serve as a platform to marshal international support for the people and Government of Pakistan to build back better in a resilient manner after the recent devastating floods, as the country transitions from the rescue-and-relief phase towards the monumental task of recovery, rehabilitation, and reconstruction.

It added that Pakistan will present the Resilient Recovery, Rehabilitation and Reconstruction Framework (4RF) at the Conference, and seek international support and long-term partnerships for its implementation.

The 4RF document outlines a prioritized and sequential Plan, defined at the Federal and Provincial levels, and includes the financial mechanism and institutional arrangements for its execution in an open, transparent and collaborative manner.

The Conference will feature a high-level opening segment, to be co-chaired by the Prime Minister and the UN Secretary General, followed by the official launch of the 4RF document and partner support announcements.

The Prime Minister and the UN Secretary General will also hold a joint press stakeout.

At the Conference, according to the statement the Prime Minister will outline Pakistan’s vision for rehabilitating the affected population and reconstructing the damaged infrastructure in a resilient manner, with the support of development partners, and the country’s transition towards a more dynamic and sustainable economic development model.

Federal Ministers from Pakistan will elaborate on the 4RF document and also present Pakistan’s long-term plan for building climate resilience and adaptation, it added.

It added that the perspectives of the four provinces will be articulated by their representatives.

Heads of State and Government, Ministers and high-level representatives from several countries and International Financial Institutions, Foundations and Funds, as well as from international development organizations, private sector, civil society and INGOs will participate in the Conference, it added.

“The Conference will help Pakistan in forging a long-term partnership with its friends and development partners on the basis of the 4RF document, and serve as a demonstration of international solidarity with the people of Pakistan as they commence the journey towards rebuilding their lives and livelihoods,” it added.

Saudia to further cut Arab Light crude prices

Top oil exporter Saudi Arabia may further cut the prices for its flagship Arab Light crude grade to Asia in February 2023 after they were set at a 10-month low this month, as concerns of oversupply continued to cloud the market.

State oil giant Saudi Aramco may cut the official selling price (OSP) for the medium sour grade by about US$1.50/barrel in February, according to four respondents surveyed by Reuters, in line with the move in the Dubai benchmark.

That would drag the February Arab Light price to a level last seen in November 2021, and about US$1.75 a barrel over the Oman/Dubai average.

"The near-term market outlook is dim. More Russian barrels are expected to flow to Asia, but demand is not picking up," said one respondent.

The price cut comes as Russia diverts its oil from Europe to Asia, after the European Union banned seaborne crude oil imports from December 05, 2022 alongside a price cap introduced by the Group of Seven (G7) nations that restricts Russian oil trade using Western financial, shipping and insurance services.

Though, Moscow last week banned crude sales to countries that observe the price ceiling on Russian crude oil, its key oil clients in Asia would be unaffected as they did not join the price cap coalition.

Russia became the top crude supplier to both China and India in November, as the Asian countries took advantage of the steep discounts, while the western countries eschewed business with Moscow.

Oil demand is also unlikely to return imminently even though China has removed its stringent COVID-19 restrictions. The sharp spike of infections in the country has dampened people's willingness to travel, the respondents said.

China has raised export quotas for refined oil products in 2023's first batch, a further effort to spur refinery production and capture healthy export margins amid slow domestic demand.

Saudi crude OSPs are usually released around the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices, affecting about 9 million barrels per day (bpd) of crude bound for Asia.

Saudi Aramco sets its crude prices based on recommendations from customers and after calculating the change in the value of its oil over the past month, based on yields and product prices.

 

Ben-Gvir's Temple Mount visit and Netanyahu's political gamble

National Security Minister Itamar Ben-Gvir's early Tuesday morning visit to the Temple Mount was a political gamble that could pay off big-time for both him and Prime Minister Benjamin Netanyahu – or backfire.

Only one terror attack will prove fodder for the opposition to make a convincing case that Ben-Gvir was indeed dragging Netanyahu into chaos.

Netanyahu and Ben-Gvir met on Monday evening, after which the Likud put out a statement saying, "After consulting with security officials, Netanyahu did not request that Ben-Gvir not visit the site."

Ben-Gvir put Netanyahu in a pickle. The National Security Minister would have likely visited the site even if Netanyahu would have requested him not to.

Netanyahu therefore risked appearing weak, but on the other did not want to encourage Ben-Gvir to visit so as not to be blamed for the consequences.

First, the duo reportedly actually agreed in the meeting that Ben-Gvir would visit on Tuesday, and second, they agreed to keep this secret and intentionally led many to believe that the visit would happen in the next week or even few weeks, rather than the first thing the next day.

After the opposition launched an attack on Monday, including Lapid warning that people will die, both Ben-Gvir and Netanyahu realized that if the visit ends up not provoking a response from Palestinians in the West Bank or Hamas in Gaza, it proves the doomsayers wrong, strengthens the idea of showing who is boss and indicates a new, tougher policy vis-à-vis the Palestinians.

The question is what happens if there is a response?

One siren in the Gaza border area, or one terror attack directly linked to the visit, will prove fodder for the opposition to make a convincing case that Ben-Gvir was indeed dragging Netanyahu into chaos.

This sort of political gamble is typical of Ben-Gvir, but not of Netanyahu, who is notoriously cautious on security issues.

But as Netanyahu showed throughout the coalition negotiations over the past two months, he does not have much of a choice but to go along with his controversial partner, as he has no other realistic government and he was and likely will continue to be willing to sacrifice quite a lot in order to maintain power.

The question is whether such a sacrifice includes a security deterioration, and, god forbid, loss of life of an Israeli soldier or civilian.

 

Pakistan exports 50,000 tons furnace oil to Singapore

Refineries in Pakistan were facing glut of furnace oil, which was also hampering their operations. Pak Arab Refinery Limited (PARCO) takes the lead by exporting the first cargo of 55,000 metric tons on Sunday night. This opens the door for other refineries to follow the footsteps of PARCO.

According to a report, the tender for this cargo was floated by PARCO at the beginning of December 2022, and Dubai-based E3 Energy DMCC won the tender for the export.

According to the sources in the refining sector, PARCO had to export furnace oil to keep the refinery running. PARCO Managing Director Shahid Mahmood Khan took the decision to export the fuel oil.

If the decision was not taken, the refinery would have shut down due to the accumulation of huge furnace oil stocks. Before the export of fuel oil, PARCO had almost fifty percent of total stockpile with the local refineries following slump in demand.

The demand dropped because thermal power plants stopped stockpiling furnace oil which was on the bottom of the electricity generation merit list. Also, electricity demand had declined due to winter.

As PARCO started accumulating excess furnace oil, which was not being taken by the power plants, it started storing the fuel at Port Qasim for exports.

Reportedly, PARCO sold the stock to a foreign group at free on board (FOB) plus five dollars. Although the export price was low, it would help the refinery keep the operations.

Before the export of 55,000 tons, the country’s total furnace oil stock stood at 592,000 tons. Refineries have 233,000 tons or 39% of the total stock.

Oil marketing companies hold 186,000 tons or 31% of the total stock, whereas power plants carry 172,000 tons or 29% of the total stocks available in the country.

Out of the total stocks with refineries, PARCO held 108,000 tons furnace oil or 46%. That has now reduced to 53,000 tons, following Sunday’s export to Singapore.

Cnergyico has 45,000 tons furnace oil or 19% of total stock carried by refineries.

Attock Refinery Limited (ARL) holds 37,000 tons or 16%.

Pakistan Refinery Limited (PRL) stockpile stands at 25,000 tons or 11%.

National Refinery Limited (NRL) is carrying 17,000 tons or 7%.

It may be recalled that Furnace oil stockpiles started increasing after power plants refused to lift it despite government instructions. Their reason of refusal was the low demand of electricity, which made power generation from expensive furnace oil economically unfeasible.

 

Oil slides after IMF warns of tougher 2023

Oil prices slid on Tuesday from their highest levels in a month on a stronger US$ and after the head of the International Monetary Fund warned of a tougher 2023 as major economies experience weakening activity.

Brent crude futures dropped to US$84.93/barrel by 0148 GMT while US West Texas Intermediate crude (WTI) traded at US$79.49/barrel, after the US$ strengthened. A stronger greenback makes dollar-denominated commodities more expensive for holders of other currencies.

IMF Managing Director Kristalina Georgieva said on Sunday that the United States, Europe and China - the main engines of global growth - are all slowing down simultaneously, making 2023 tougher than 2022 for the global economy.

Still, oil prices settled more than 2% higher on Friday with Brent and WTI closing 2022 up 10.5% and 6.7%, respectively.

Commodities saw a substantial US$12.3 billion bullish flow in the week that ended on December 27, 2022 the single largest weekly bullish flow in 2022, Societe Generale analysts said in a January 03. 2023 note.

“The commodity with the largest flow was Brent, which saw a US$3.4 billion bullish flow as Russia outlined its response to the EU and G7 imposed price cap on the country's crude exports to third parties," the analysts said.

President Vladimir Putin banned the supply of crude and oil products from February 01, 2023 for five months to nations that abide by the cap in a decree, which also included a clause that allows for Putin to overrule the ban in special cases.

Russian crude has been diverted to India and China from Europe while Moscow planned to increase diesel exports from the Baltic Sea port of Primorsk to 1.81 million tons in January 2023. However, January oil products exports from Tuapse are expected to fall to 1.333 million tons, traders said.

A Reuters oil price poll showed that Brent prices are expected to average at US$89.37/barrel in 2023 while the average for WTI is at US$84.84 a barrel as global economic growth slows.

In China, the world's largest crude importer and second-largest oil consumer, some people in key cities braved the cold and a rise in COVID-19 infections to return to regular activity on Monday, raising the prospect of a boost to the economy and oil demand as more recover from infection.

 

Pakistan in the midst of a perfect storm

At present Pakistan is plagued by policy paralysis and the situation is likely to get worse before getting better. The continuation of the IMF program remains critical.

Unfortunately, analysts do not see much of an improvement. Pakistan seems to be caught in the midst of a perfect storm of adversities with spiraling inflation, falling reserves and external vulnerabilities.

Politics appears to be a nightmare because the current set up seems incapable of making the right decisions. The logjam in politics continues to persist, which is prolonging policy inaction, delaying the 9th IMF review and taking the situation from bad to worse.

Given the urgent need for action to revive the IMF program and procure fresh bilateral funding, the possibility of a technocrat-led government has made its way into the discourse. Such a setup would need very strong backing and slack by political parties, which appears to be missing.

Balance of Payments crisis is getting worse. Pakistan barely managed to meet the US$ one billion Sukuk maturity in early December 2022, but confidence on meeting external debt obligations in 2023 is being shattered with foreign exchange reserves slipping below US$ 6 billion.

There is little conviction also that the donors conference scheduled for January 09, 2023 in Geneva will generate meaningful funds for post-flood reconstruction.

Pakistan urgently needs the promised US$3 billion from Saudi Arabia, together with the continuation of the IMF program.

The situation has already become unsustainable and analysts expect the PKR to slip further down.

They also expect the policy rate to rise by another 100bps to 17% in the next Monetary Policy Committee meeting scheduled for January 23, 2023.     

Prime Minister Shehbaz Sharif has indicated there is no option but to comply with IMF conditions (market-based exchange rate, energy reforms, higher revenue generation), but the government needs to take immediate action.

Exploring affiliation of Israeli cabinet members

Benjamin Netanyahu's newly formed cabinet has been officially sworn in despite receiving no favorable headlines from around the world, reports Tehran Times

Even some Israeli media outlets have referred to the new cabinet as the most rightwing during the entity’s decades-long history.

Israel, as a colonialist regime, has always been viewed as an extremist right-wing occupation committing atrocities and Palestinian do not see much difference between any Israeli cabinets over the past seven decades.

All the regime's cabinets have committed crimes against humanity that included war crimes, genocide, the mass slaughter of children, the ongoing ethnic cleansing campaign along with so many other violations of international law.

However, the newly formed Netanyahu cabinet is perhaps the most extreme and right-wing and that's according to Israel’s leftist parties who are afraid that it will result in an increased number of retaliatory operations by the Palestinians.

A member of Israel’s own Knesset admitted that the occupation, under the rule of Netanyahu and his extremist cabinet, is moving toward a full-fledged fascist state.

The remarks were made during an Israeli settler protest outside the Knesset in strong opposition to the return of Netanyahu who has been Israel's longest-ever serving Prime Minister.

The truth is Israel has always held a fascist ideology but it is now under the rule of a more extreme and fascist ideology. The regime has given the powers of governance to war criminals and extremists because Israel has never been so weak and vulnerable as it is at the moment.

It has been exposed because of the unprecedented armed resistance that has been emerging from the occupied West Bank this year. 

Such is the extent of the resistance; Israel has turned to Netanyahu, the war criminal and a person that is facing multiple corruption charges along with a coalition that is so extreme that it has called for the expulsion of all Palestinians from their native land and the execution of Palestinian prisoners.

Netanyahu was forced to bring in these fascist figures because he wanted to secure a majority that can bring him back to power and save him from corruption charges.

In other words, the war criminal does not care for the safety of Israeli settlers which is something that is very concerning for Israelis who are planning on leaving the occupied Palestinian territories in their droves, according to surveys.

There are now Israelis protesting against the new cabinet, for the first time in history, because of new ministers in an office such as Itamar Ben-Gvir who has made so many disturbing and racist statements that even Israel’s allies are concerned.

The most extreme and right-wing fascist cabinet in history will put Israel at odds with large parts of the Israeli public, and concern Israel's closest allies while escalating tensions with the Palestinians.

Reports indicate that some elements of the new Israeli cabinet are so extreme that the administration of US President Joe Biden will not deal with them as they feel uncomfortable with such elements. 

Netanyahu's incoming hardline government will place illegal West Bank settlement expansion at the top of its agenda and had already pledged to legalize dozens of illegally built outposts and annex the occupied territory as part of its coalition deal with ultranationalist allies.

Some members of the new cabinet squat on illegal settlements themselves, in a sign that there will be a major push in the future toward expanding settler units, despite the fact they are considered illegal under international law. 

But experts say the newly formed West Bank resistance groups will expand their armed operations in the face of further settlement expansion, which comes alongside Israeli demolitions of Palestinian homes.

The new cabinet members also support the Israeli settlers storming of the al-Aqsa Mosque compound, something Palestinians have said is a red line. 

There is no doubt this will represent a new escalation in occupied al-Quds (Jerusalem) next year and the wider occupied West Bank as well as inside the occupied Palestinian territories.

Some Palestinian analysts say they are glad the new Israeli government is in power because it represents the real face of the regime in front of the international community. 

Meanwhile, Palestinians have welcomed a vote by the United Nations General Assembly to ask the International Court of Justice (ICJ) to deliver a widespread opinion on the legal consequences of Israel's occupation of the Palestinian territories.

"The time has come for Israel to be a state subject to law, and to be held accountable for its ongoing crimes against our people," said Nabil Abu Rudeineh, a senior Palestinian official based in the occupied West Bank.

In a social media post, another senior official Hussein al-Sheikh said that the vote "reflects the victory of Palestinian diplomacy."

The United Nations General Assembly has passed a resolution calling on the ICJ to give an opinion on Israel’s illegal occupation of Palestine.

The General Assembly voted 87 to 26 with 53 abstentions on the resolution, with Western nations split but with virtually unanimous support in the Islamic world – including among Arab states that have normalized relations with Israel.

Russia and China also voted in favor of the resolution.

Global economy faces tougher year 2023

For much of the global economy, 2023 is going to be a tough year as the main engines of global growth - the United States, Europe and China - all experience weakening activity, the Head of International Monetary Fund (IMF) said on Sunday.

The New Year is going to be "tougher than the year we leave behind," IMF Managing Director Kristalina Georgieva said on the CBS Sunday morning news program "Face the Nation."

"Why? Because the three big economies - the United States, European Union and China - are all slowing down simultaneously," she said.

In October 2022, the IMF had cut its outlook for global economic growth for 2023, reflecting the continuing drag from the war in Ukraine as well as inflation pressures and the high interest rates engineered by central banks like the US Federal Reserve aimed at bringing those price pressures to heel.

Since then, China has scrapped its zero-COVID policy and embarked on a chaotic reopening of its economy, though consumers there remain wary as coronavirus cases surge. In his first public comments since the change in policy, President Xi Jinping on Saturday called in a New Year's address for more effort and unity as China enters a "new phase."

"For the first time in 40 years, China's growth in 2022 is likely to be at or below global growth," Georgieva said.

Moreover, a "bushfire" of expected COVID infections there in the months ahead are likely to further hit its economy this year and drag on both regional and global growth, said Georgieva, who traveled to China on IMF business late last month.

"I was in China last week, in a bubble in a city where there is zero COVID," she said. "But that is not going to last once people start traveling."

"For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative," she said.

In October's forecast, the IMF pegged Chinese gross domestic product growth last year at 3.2% - on par with the fund's global outlook for 2022. At that time, it also saw annual growth in China accelerating in 2023 to 4.4% while global activity slowed further.

Her comments, suggest another cut to both the China and global growth outlooks may be in the offing later this month when the IMF typically unveils updated forecasts during the World Economic Forum in Davos, Switzerland.

 

China launches direct shipping line to Chabahar Port

The first container ship departing from China docked at Iran’s key port of Chabahar on Saturday, marking the establishment of the first direct shipping line between China and Iran's southeastern seaport.

The announcement was made by Amir Moghadam, Managing Director of the Chabahar Free Zone Organization, Tasnim news agency reported.

According to Moghadam, Chinese ships previously unloaded in Bandar Abbas, the capital city of the southern province of Hormozgan, with their cargos then being transferred to Chabahar in Sistan-Baluchestan Province via smaller ships.

With the establishment of the direct shipping line between China and Chabahar, cargos are delivered ten days earlier, while the cost of loading and unloading is reduced by US$400 per container, the official explained.

In addition, the establishment of the mentioned shipping line plays a great role in the development of transit via Chabahar Port, he added.

As Iran's only oceanic port on the Gulf of Oman, Chabahar port holds great significance for the country both politically and economically. The country has taken serious measures for developing this port in order to improve the country’s maritime trade.

In this regard, Iran has been welcoming investors from all over the world to take part in the development of this port and benefit from its distinguished position as a trade hub in the region.

Chabahar port consists of Shahid Kalantari and Shahid Beheshti terminals, each of which has five berth facilities.

The port is located in Iran’s Sistan-Baluchestan Province and is about 120 kilometers southwest of Pakistan’s Baluchistan province, where the China-funded Gwadar port is situated.

In May 2016, India, Iran, and Afghanistan signed a trilateral agreement for the strategically-located Chabahar to give New Delhi access to Kabul and Central Asia.

Based on an agreement with Iran, India is going to install and operate modern loading and unloading equipment including mobile harbor cranes in Shahid Beheshti Port in Chabahar.

While Iran is combating the US unilateral sanctions on its economy, the country’s ports as the major gates of exports and imports play a significant role in this battle. This role makes all-out support to ports and more development of them serious and vital.

Such necessity has led the government to define projects for more development of the ports and also take some measures to encourage investment making in ports, in addition to facilitating the loading and unloading of goods, especially basic commodities, there.

 

Arab League welcomes UN adoption of resolution on Israeli practices

The Palestinian Presidency has welcomed the UN general assembly adoption by a majority of 87 in favor of a Palestinian draft resolution regarding the Israeli practices marring the human rights of the Palestinian people in the Palestinian territories, considering the latest UN-sponsored development a victory for the world justice and the Arab-Islamic-Internationally-supported Palestinian diplomacy alike.

In a statement, Nabil Abu Rudeineh, the spokesman of the Palestinian Authority President Mahmoud Abbas, cited the vote as yet another evidence of the support of the world for the Palestinian people and their historic inalienable rights.

It is time to hold the Israeli occupation accountable according to international law for its crimes, said Abu Rudeineh, noting that the Palestinian people firmly believe that imposing international justice is the only way to achieve peace.

For its part, the Palestinian Foreign Ministry drew the attention that resorting to the International Court of Justice comes in line with the Palestinian story based on the international law and the Palestinian people basic rights in confrontation to the Israeli fake story.

It also confirms that all Israeli policies and practices on the occupied Palestinian territories, including the city of Al-Quds are denounced by the world community and according to the international law.

In Cairo, the secretariat general of the Arab League (AL) welcomed the resolutions issued by the UN General Assembly as regards the Palestinian cause, citing, in particular, the one asking the world court to weigh in on Israeli occupation and annexation since 1967, including the city of Al-Quds.

In a statement, Assistant Secretary General for Palestinian and Arab Territories Affairs at the AL Dr. Saeed Abu-Ali said that the UN-sponsored resolution has constituted an important station and platform to confront the Israeli plots, practices and aggression through legal tracks and holding the occupation accountable of its crimes.

He said that the resolution has reflected the will of the world community through scoring victory for the principles of the international law and legitimacy resolutions, including empowering the legal mechanisms to confront the Israeli practices and plots.

Abu-Ali called on the countries that did not support the resolution to review their positions according to the principles of international law, charters and justice in support for fair peace based on the two-state solution.

In Jeddah, the secretariat general of the Organization of Islamic Cooperation (OIC) welcomed the resolutions issued by the UN general assembly as regards the Palestinian cause, citing, in particular, the one asking the world court to weigh in on Israeli occupation and annexation since 1967, including the city of Al-Quds. OIC paid tribute to the countries that supported the resolution.

Weaker shale oil production forecast for 2023

The shale oil patch this week closes the door on a disappointing year while bracing for weaker output gains in 2023, hamstrung by rising costs, dwindling reserves and pressures to hold down spending.

The US oil production is anticipated to rise by an average of 620,000 barrels per day, according to the latest government estimates, a third less than the roughly one million bpd some forecasts called for at the start of the year. That shortfall has undercut shale's influence on global markets and helped lift prices for the second year in a row.

Gains in 2023 year will be harder to come by, said Scott Sheffield, Chief Executive Officer of top Permian producer Pioneer Natural Resources. He predicted 300,000 bpd to 400,000 bpd of increased shale production in 2023.

"Most companies are drilling tier two and tier three inventories now," having tapped their best prospects, Sheffield said in an interview. "Less quality production is coming out of the Permian, out of the Bakken," he said, referring to the top two US shale basins.

Weakening output gains come despite historically strong demand in the wake of Russia's invasion of Ukraine. Brent futures on Friday December 30, 2022 settled at US$85.91 per barrel, a level that typically would spur producers to pursue higher prices with drilling increases. For the year, Brent is up about 10%, after jumping 50% in 2021.

Sheffield predicts global crude to average about US$90 per barrel in 2023, with a potential upside of about US$120, higher than current levels.

A more optimistic production view from energy technology firm Enverus - which forecasts an about 500,000 bpd increase next year - is still below this year's tepid level.

"These headwinds are expected to persist," said Chetan Sharma, a senior associate with Enverus who cited supply chain constraints and uncertainty over what the OPEC cartel will do.

Denver-based Civitas Resources, Colorado's largest producer, said the regulatory environment also has made it difficult for companies to ramp up production quickly.

"If we want to increase significantly as an industry, we would need to shorten permit cycle times," said CEO Chris Doyle, pointing to an 18-month lead-time for a new drilling permit.

Civitas grew volume about 4% year-over-year and anticipates relatively flat production in the coming year as it prioritizes free cash flow and balance sheet strength over growth.

Pioneer and other shale producers are experimenting with oil recovery techniques that could eventually squeeze more oil out of older wells. The maturing of shale fields became a bigger problem for industry growth year 2023.

In the near-term, Sheffield warned oilfield inflation, which ran around 10% to 15% this year, will persist and limit production growth. Another restraint is investor demands to focus on returns over volume increases.

Pioneer and other oil firms are no longer contracting with drillers or fracking firms to have new equipment built because of the financial demands.

"We're not doing that this year because they would charge another 30% to 40% more, and we don't know what is going to happen in three or four years, by the time we've made that investment," Sheffield said.

 

 

 

Iran: IMF sees a positive outlook in 2023

Drawing a positive outlook for the Iranian economy in 2023, the International Monetary Fund (IMF) has predicted that 10 major indicators of the Iranian economy would experience growth and improvement in the forthcoming year as compared to 2022.

IMF has announced that Iran's foreign currency reserves are more than US$120 billion, but it claims that Iran has access to only a small part of these reserves due to the US sanctions.

According to the IMF data, Iran's Gross Domestic Product (GDP) based on the purchasing power index will grow by US$91 billion or two percent in 2023 to reach US$1.7 trillion.

Meanwhile, Iran's GDP per capita is also expected to increase by US$865 based on the purchasing power index to reach US$19,528 in 2023 from US$18,663 in 2022.

IMF sees Iran's GDP excluding oil grow by 2% in 2023, and the growth of the country’s economy including oil will be 2.1% this year.

The inflation rate in Iran is predicted to be 40% in 2023, registering no change as compared to 2022.

The International Monetary Fund expects the rate of the country’s liquidity growth to slow down in 2023. The liquidity growth that reached 47.5% of GDP in 2022 will decrease to 45.6% in 2023.

The budget deficit of the Iranian government in 2023 will reach 6% of GDP, which is 1.8% higher than the figure for 2022.

The Iranian government’s total revenues will not change in 2023 as compared to the previous year. The Iranian government’s income in 2023 is estimated to be 8.3% of the GDP, registering no change compared to the previous year. However, the government's non-oil incomes will increase from 7.4% of GDP in 2022 to 7.5% of GDP in 2023.

Based on the IMF data, the downward trend of the Iranian government's gross debt will continue in 2023 to settle at 31.9% of the GDP this year.

The fund also predicts Iran's current account balance to be US$30.2 billion in 2023. Iran's current account balance in 2022 is estimated at more than US$32 billion.

Based on the referred data, Iran's foreign currency reserves increase by more than US$11.4 billion in 2023 and reach US$42.2 billion. Iran's available foreign currency reserves in 2022 are estimated at US$30.8 billion.

According to the estimate of the International Monetary Fund, Iran's foreign debt in 2022 will be equal to 0.5% of the GDP and it is expected that this figure will remain the same in 2023.

 

Weak demand persists for US natural gasoline

The natural gasoline market in the US Gulf coast could face headwinds in 2023 as faltering gasoline blending demand undercuts stable export demand, while record production provides ample supply.

One of the primary demand drivers for US natural gasoline is its use as a diluent for bitumen produced in the oil sands in Alberta, Canada. Diluents like natural gasoline are mixed into bitumen so it can more easily be transported on pipelines and railcars.

US natural gasoline exports to Canada totaled 204,000 barrels per day (bpd) in September, up by 4.6% from a year earlier, according to the latest available US Energy Information Administration (EIA) data.

During the first nine months of year 2022, exports averaged 176,555 bpd, down by 13% from the same time last year and down by 3.6% from the five-year average.

Bitumen production remained robust and reached 3.3 million bpd in September, up by 9.3% from last year, according to the Canada Energy Regulator (CER).

Bitumen production in the first nine months of this year totaled 3.12 million bpd, up by 2.3% from the same period last year.

Over the past decade, bitumen production has increased every year apart from the crude demand shock in 2020 that was caused by the onset of the Covid-19 pandemic.

Historical trends suggest bitumen production will continue to increase in 2023 and beyond, providing a stable, if not favorable, outlook for the US natural gasoline export market.

The other primary demand driver for natural gasoline is as a blending component for motor gasoline.

US refinery and blender net inputs of natural gasoline into gasoline blending pools averaged 212,000 bpd in September, up by 18% from a year earlier, according to the EIA.

US blending demand averaged 205,333 bpd through the first nine months the year, up by 41% from the same time last year.

Part of the increase in blending demand can be attributed to favorable margins for gasoline blenders. As a low-octane fuel, natural gasoline is one of many possible fuels that blenders can use in their blending pool. Lower natural gasoline prices relative to motor gasoline prices generally can incentivize blenders to incorporate more natural gasoline in their blending pools.

The premium of Nymex RBOB gasoline futures to natural gasoline prompt-month prices at Mont Belvieu, Texas, for example, averaged 154.17¢/USG from May 02 to August 30 this year, according to Argus data.

Refiners and blenders used on average 216,750 bpd in their blending pools during that time. During the same period last year, the differential averaged 66.89¢/USG and the amount of natural gasoline used in the blending pool averaged 139,000 bpd.

The premium started to narrow again in late-November 2022, a worrying sign for gasoline blending demand. The RBOB-natural gasoline spread narrowed from 105.31¢/USG on November 23 to 73.11¢/USG on December 09, 2022. Should this trend continue into 2023, it could provide downward pressure on natural gasoline prices.

In addition, record natural gasoline production will likely continue to pad inventories and provide ample supply. Natural gasoline production rose to a record 738,000 bpd in September, up by 12% from a year earlier.

Production this year through September was also a record at 662,777 bpd, up by nearly 11% from the same period last year.

Record production has helped to build inventories, which stood at 27.2 million barrels in September, up by 21%YoY.

Persistently elevated production heading into 2023 will likely provide additional downward pressure on prices as caverns will have ample supply to meet buying interest.