Pakistan Prime Minister calls for lifting sanctions on Iran to combat coronavirus

Prime Minister Imran Khan, in an interview with Associated Press has called for lifting of sanctions on Iran to enable it to combat coronavirus.

In a call for action from the international community, Imran Khan said it was time to end US sanctions on Iran, where one of the worst coronavirus outbreaks in the world has unfolded. 

Iran has struggled to respond in part because of crippling sanctions imposed by the Trump administration.

Khan further added that Iran is a “classic example” of a place where the humanitarian imperative to contain the outbreak outweighs political rivalries or economic dogmas.   

The prime minister said he fears the new coronavirus will devastate the economies of developing nations and warned richer economies to prepare to write off the debts of the world’s poorer countries. 

“It’s not just Pakistan. I would imagine the same in India, in the subcontinent, in African countries,” the prime minister said, referring to the virus, “If it spreads, we will all have problems with our health facilities. We just don’t have that capability. We just don’t have the resources.”

Falling oil prices, biggest threat to US shale producers

The week ended on 13th March 2020 can be termed one of horrific weeks for crude oil producers and traders as prices went down about 50 percent since the start of the year. 

Oil rebounded a bit on Friday following movement in the U.S. Congress to pass a coronavirus economic relief bill. Nevertheless, the near-term looks dire for oil markets, with supply rising quickly as demand continues to collapse. The added threat is likely hike in output by OPEC and Russia.  

Analysts anticipate oil prices to remain at current depressed levels for months amid a price war and the fight for market share. They fear WTI Crude prices to hover around US$30/barrel in the near term. On Friday, WTI traded at US$33, but down by a massive 25 percent on the week for what is shaping up to be the worst week for oil prices since the financial crisis in 2008. Brent prices are also likely to remain range bond in the near term.

After the collapse of the OPEC+ production cut deal, major banks slashed their oil price forecasts, expecting an enormous oversupply in the market as Saudi Arabia, the United Arab Emirates (UAE), and Russia are turning on the taps and looking out for their own interests instead of trying to fix the prices.

Goldman Sachs has warned oil price may plunge to US$20, Standard Chartered says WTI Crude will average just US$32 a barrel in 2020, and ING slashed its Q2 Brent Crude forecast to $33, from US$56, to name a few.

Saudi Arabia has promised to flood the oil market with an extra 2.6 million bpd of oil from April, while its fellow OPEC producer and ally, the United Arab Emirates (UAE), pledged an additional one million bpd in supply. This will result in a total increase of 3.6 million bpd in global oil supply from OPEC’s heavyweights at a time of depressed oil demand due to the coronavirus outbreak. Russia indicates to raise production up to 500,000 bpd.   

According to the Wall Street Journal, Russia believes that low oil prices can damage U.S. shale producers. Outwardly, Moscow does not link its motivations to an intention to harm U.S. oil companies, but Russia had grown wary of the OPEC+ cuts, which contributed to a 4 million bpd increase in U.S. shale over the past three years. Western analysts believe that U.S. sanctions on Nord Stream 2 and Rosneft stoked ire in Moscow. 

 A study of 30 shale drillers accounting for 38 percent of total U.S. oil production finds that roughly 50 percent of their output is hedged at an average price of US$56. If WTI averages US$40 this year, the hedges would save the companies a combined US$10.5 billion or US$17 billion if WTI averages US$25. “There is definitely a significant amount of default risk,” said Michael Anderson, a strategist at Citi.

Western media annoyed with Russia for not joining Saudi Arab in production cut

As usual the western media is putting pressure on Organization of Petroleum Exporting Countries and Russia, commonly known as OPEC plus to opt for deeper production cut. After the inconclusive meeting of the group on 6th March 2020, the media is projecting a rift between OPEC, led by Saudi Arabia and Russia, but has not said a word to demand United States to cut production. It is on record that now United States has attained the status of largest oil producing country, followed by Russia and Saudi Arabia.  

On Friday, Brent price witnessed its biggest daily loss in more than 11 years, after Russia didn’t support a production cut by OPEC to stabilize prices hit in the aftermath of coronavirus outbreak. Prices plunged because the OPEC conference remained inconclusive. The split between OPEC and Russia revives fears of a 2014 oil price crash, when Saudi Arabia and Russia fought for market share with US shale oil producers of United States; it is on record that United State has never participated in any output limiting pact.

Now there is uncertainty about whether the OPEC plus alliance will survive. A day earlier, OPEC issued a call to cut production and also indicated that there would be no deal without Russia. It is believed that Moscow didn’t agree at production cuts not only because it has a stronger stomach for lower prices than Riyadh, but also because the oil market is suffering from a demand trap.

There is talk that if OPEC plus has failed to agree on additional production cuts, would the current agreement – the one  agreed in December 2019 and set to expire in March in 2020 be adhered to or producers will be at liberty to raise output. The fate of the alliance is now on the rocks, although the group pledged to continue to talk going forward. 

There was pressure on Russia to agree, but Moscow has been skeptical of additional cuts for quite some time. A few days ago, Russian President Vladimir Putin said that his country was more or less contented with where oil prices were, noting that the Russian budget had taken into accounts the possibility of low oil prices.

Western analysts find it hard that Russia didn’t agree to further production cut. They believe it required only a modest reduction on Moscow’s part that would have boosted crude prices. They also believe that no-deal would almost surely lead to further decline in prices.

Another twist appeared when Iranian Oil Minister, Bijan Namdar Zanganeh told reporters that if Russia does not sign there will be no deal. Western experts term this a hollow threat. They insist, OPEC has shown signs of a determination to cut output even without Russia. The pressure on government budgets from low oil prices is already pinching.

“OPEC is making the cuts conditional on Russia joining. What Moscow perhaps is underestimating is that Saudi Arabia may be ready to walk away if it doesn’t get a positive answer,” said Amrita Sen, chief oil analyst at consultant Energy Aspects, reported Bloomberg.

Russia, for its part, sees US shale on the ropes, with financial stress deepening for small and medium-sized drillers. US oil production growth has slowed dramatically in recent weeks and months, and if WTI lingers below US$50/barrel for a long period, first output will flatten and then decline.

Keeping crude oil prices has facilitated the US in boosting production. Time has come for Saudi Arabia and Russia to snatch the title of largest oil producing country from United States. This target can’t be achieved without plunging crude oil prices below US$40/barrel that will force many US Shale companies to shutdown their operations.

Is Coronavirus reporting merely a media driven plot to topple President Trump?

Reportedly, Acting White House chief of staff Mick Mulvaney has refused to take responsibility for the Trump administration's response to Coronavirus spread and crafted a new conspiracy theory that the news coverage on the novel virus is merely a media-driven plot to take down Donald Trump.

"They think this will bring down the president," Mulvaney said at the Conservative Political Action Conference, regarding news reporting on the spread. The virus and its spread have caused panic among investors, who fear the disease could have lasting impacts on the economy.

On Thursday (27th February 2020), the Dow Jones Industrial Average fell nearly 1,200 points, the worst one-day drop in history. On Friday, the index fell by another 1,190 points, dropping 4.4%. As a consequence, equities are likely to witness their worst week since the 2008 financial crisis, according to the Wall Street Journal.

When asked how the administration could calm the markets, Mulvaney again blamed the media — the go-to strategy Trump and his aides employ when faced with criticism over their policies. "What I might do to calm the markets is turn the television off for 24 hours," Mulvaney said. "This is not Ebola. It's not SARS."

While Trump and his appointed officials are trying to calm fears, experts within the Centers for Disease Control and Prevention are warning of community spread of virus, saying cities should plan to implement "social distancing measures," including closing schools and asking businesses to have employees work from home.

Because Trump fears the impact the virus may have on his reelection hopes, he's trying to control the amount of information that gets to the public on the disease, putting Mike Pence solely in charge of the communications response. Pence, has a checkered record on public health crises, overseeing the worst outbreak of HIV in Indiana when he served as state governor.

And in even worse news for the administration, a whistle blower came forward to say that public health workers in the federal government are not well trained or properly equipped to deal with the disease, saying workers were "improperly deployed" to military bases where people infected with the disease are being quarantined.

There is a talk also that Congress and the White House need to rise above their usual partisan sniping and name-calling and show a little unified leadership as the United States readies itself for the spread of the new virus.

It seems hard, given the level of bitter polarization in Washington, but Democrats and Republicans owe it to the American people to shun their differences. That’s what rational, responsible governments do in cases of war, natural disaster and, yes, a mass outbreak of infectious disease.

It is being said that the outbreak in the United States seems all but inevitable. Transmission without a known connection to someone who is sick or traveled to a place where people are sick marks a concerning turning point in any disease outbreak.

One thing that needs to happen now is the accelerated production of millions of masks needed to protect healthcare providers; another is to get working testing kits out to the states to confirm suspected cases.

President Trump made the same point about working together in a news conference Wednesday night. He tried to assure the country that he and his team had things completely under control. To make that point he waved a printout that he said was a list from the Johns Hopkins Hospital in Baltimore ranking the U.S. as the most prepared country to handle an epidemic.

“We should be working together,” he said when asked about criticism by House Speaker Nancy Pelosi and the partisan debate about the right amount of federal funds needed to properly prepare. “Pelosi shouldn’t be making statements like that because it’s so bad for the country,” he said.

The president then undercut his own point by trash-talking Pelosi, Sen. Chuck Schumer (D-New York) and all of the Democratic candidates on whom he inexplicably placed blame for the recent stock market drops.