King Salman of Saudi Arabia has reinstated bonuses and special allowances for civil servants and military personnel that had been cut in September 2016 as part of austerity measures when oil revenues were low.
The king also named his son Prince Khalid as new ambassador to Washington.
King Salman’s decrees saw a new national security centre created under the Royal Court.
Photo Getty Images
He also ordered two months extra salary be paid to frontline military personnel taking part in Saudi-led operations in Yemen.
Prince Khalid is a fighter pilot who has trained in the US and carried out air strikes against ISIS in Syria.
The decree said the pay cuts for ministers and government employees – the first in Saudi Arabia, where about two-thirds of working Saudis are employed in the public sector – had been in response to falling oil prices, which sank to a low of $28 a barrel in January 2017.
The oil price has since risen to about $52 a barrel and ministers said budgetary performance had been better than expected in Q1 of 2017.
Under the cuts, ministers had their salaries reduced by 20% and housing and car allowances for members of the advisory Shura Council were cut by 15%.
Wage increases for lower-ranking civil servants were suspended, and overtime payments and annual leave capped.
Salaries and allowances accounted for 45% of government spending in 2015, or $128 billion, and contributed to a record budget deficit of $98 billion.
Oil price has climbed by about 3% after Russia and Saudi Arabia reached an agreement to look for ways to stabilize the oil market.
The announcement was made by energy ministers Alexander Novak and Khalid al-Falih.
The price of Brent crude oil rose by $1.28 on the news to $48.11 a barrel.
A statement said the plan was to support the “stability of the oil market… ensuring a stable level of investment in the long term.”
The start of 2016 saw the price of oil fell to its lowest level in nearly 13 years due to a production glut and is still far below the $110 a barrel price recorded just two years ago.
Russian energy minister Alexander Novak said the agreement, which might include attempts to limit oil output, was a “historical moment” between members of OPEC, which is the traditional oil producers’ cartel, and non-members, of which Russia is one.
He said that Russia was willing to join an oil output “freeze”.
His Saudi counterpart Khalid al-Falih told Al Arabiya TV: “Freezing [production levels] is one of the preferred possibilities but it’s not necessary today.
“The market is getting better and we have noticed that prices reflect this [improvement].”
Strategies to keep prices high by limiting production are usually the preserve of OPEC and are often not successful.
However, Russia and Saudi Arabia are the world’s two largest oil producers.
Alexander Novak and Khalid al-Falih will meet again later this month and again in October and November.
The outline agreement, to set up a joint task force, was publicized at a news conference at the G20 summit taking place in the eastern Chinese city of Hangzhou.
The agreement to talk about a deal, despite the lack of detail, was welcomed by two other oil producers.
Kuwait’s acting oil minister Anas al-Saleh: “This dialogue confirms that the main oil producers are watching the oil market… to help achieve stability.”
UAE’s energy minister Suhail al-Mazroui tweeted: “UAE, as an active and responsible member of OPEC will always support any joint efforts which will benefit market stability.”
Oil prices have dropped sharply after a meeting of oil producers in Qatar failed to agree a cap on output.
Brent crude fell 7% at one point, but then recovered slightly to stand down $1.87, or 4.3%, at $41.23 a barrel.
The meeting was attended by most members of oil producers’ group OPEC, including Saudi Arabia, but not Iran.
Saudi Arabia, the world’s biggest exporter, had been prepared to freeze output if all OPEC members had agreed.
However, Iran is continuing to increase output following the lifting of sanctions against it.
“As we’re not going to sign anything, and as we’re not part of the decision to freeze output, we ultimately decided it was not necessary to send a representative,” the Iranian government said.
After hours of talks in Qatar, energy minister Mohammed bin Saleh al-Sada said that the oil producers needed “more time”.
Mohammed bin Saleh al-Sada told reporters after the meeting: “We of course respect [Iran’s] position… The freeze could be more effective definitely if major producers, be it from OPEC members like Iran and others, as well as non-OPEC members, are included in the freeze.”
As well as the fall in Brent, the price of US crude oil fell nearly 7% before recovering some ground to stand $1.88 lower at $38.48 a barrel.
The meeting in Qatar was not formally an OPEC event, though most of the group’s members were represented.
OPEC has been slow to respond to the sharp fall in oil prices, which are still less than half the peak of $115 a barrel seen in June 2014.
Oil prices had risen in recent weeks, largely due to speculation that some major exporters would limit supply.
Oil prices soared as much as 12% on February 12 after new suggestions that OPEC nations were set to cut oil production.
According to the Wall Street Journal, the United Arab Emirates’ energy minister said that OPEC members were ready to reduce output.
Meanwhile, Venezuela’s oil minister said oil-producing nations were on a “very good path” to clinch a deal.
However, traders said sharp falls on February 11 may have triggered some bargain-hunting.
Eulogio Del Pino, the Venezuelan minister, who recently visited Russia and Saudi Arabia as part of a global tour to drum up support among both OPEC and non-OPEC producers, said “we’re on a very, very, very good path” to reducing production.
Brent crude closed up $3.30 at $33.36 a barrel in New York after falling below $30 on February 11.
After sinking to a 12-year low of $26.05 on February 11, US crude settled up 12%, or $3.23, to $29.44 a barrel – its biggest one-day rise since 2009.
Many traders were skeptical about the Journal‘s report, pointing out that Venezuela and Russia had tried in vain earlier this week to stir Saudi Arabia and other major producers into agreeing to output cuts.
However, some believe that prices would rebound sooner or later if production tightened or demand rose.
Commerzbank analysts said: “We expect declining US oil production, in particular, to drive the oil price back up to $50 per barrel by the end of the year.”
Friday’s price rises were also aided by figures from oil services company Baker Hughes, which said that US energy companies cut the number of oil rigs for the eighth consecutive week to the lowest levels since January 2010.
Drillers removed 28 oil rigs, bringing the total rig count down to 439, Baker Hughes said.
The jump in oil prices helped to boost sentiment on stock markets.
Wall Street was trading higher on February 12, with the S&P 500 rising 1.8% and the Dow Jones Industrial Average up close to 2% in late trading.
Shell has confirmed it would cut 10,000 jobs after a sharp fall in its annual profits.
The Royal Dutch Shell shares rose 4% as it said it made $1.8 billion for Q4 of 2015, compared with a $4.2 billion profit for the same period the year before.
Full-year earnings have seen their steepest fall in 13 years, from $19 billion in 2014 to $3.8 billion in 2015.
Oil prices have fallen steadily, from more than $100 a barrel 18 months ago to around $30 a barrel now.
Nevertheless, Shell has maintained its dividend payout to shareholders, a move that relieved investors.
Oil companies and their suppliers have been cutting back hard on investment and jobs as the low price eats into profits and makes investment less worthwhile.
Shell’s rival, BP, announced a profits slump of 51% to $5.9bn for 2015 and a further 3,000 job cuts earlier this week.
Shell had already made clear when investors were preparing to vote on its planned takeover of BG that its profit figures for 2015 would be hit.
The company also said thousands of job would go, because of its takeover of BG.
Royal Dutch Shell CEO Ben van Beurden said the company was entering a new phase: “The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company and improving shareholder returns.
“We are making substantial changes in the company… as we refocus Shell, and respond to lower oil prices. As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies.”
Ben van Beurden added he would take further action if necessary: “Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that.”
Some analysts question whether Shell can continue to keep paying investors at the rate it does on the back of a shrinking business.
At the time of the proposed BG tie-up, oil was trading at about $55 a barrel, but it is currently trading at about $35 a barrel, leading some shareholders to oppose the plan.
Standard Life, a key investor in Royal Dutch Shell, said last month that the price of oil needed to be $60 a barrel for the takeover to make financial sense, but in January, the majority of shareholders in Shell, which is Europe’s largest oil company, voted in favor of that deal.
Shell said it had cut operating costs over the year by $4 billion, or around 10%, and expected to cut costs by a further $3 billion in 2016.
The company also cut back hard on investment over the year, with capital spending slashed by $8.4 billion from a year ago to $28.9 billion.
Shell sold $5.5 billion worth of assets in the course of 2015 and is planning to sell another $30 billion of assets.
Europe’s stock markets have cut their losses after oil rose back above $30 a barrel, despite another slide in Asia on January 26.
London’s FTSE 100 was down 0.5% at 5,847.5 points, with declines of about 0.4% in both Frankfurt and Paris.
Shanghai tumbled 6.4% to its lowest close since December 2014, while the Hang Seng in Hong Kong fell 2.4%.
Brent crude rose 1.2% to $30.87 a barrel, reversing earlier falls, while US oil was up 1% at $30.63.
Stock markets have made the rockiest start to the year in recent memory as worries over the economic strength of China- considered for years the engine of world economic growth – have intensified.
Other investment prices have been buffeted by falling confidence.
Although China is still growing the pace is slowing, and as demand for key industrial products such as oil and iron ore slips back, so do their prices.
Oil prices were hit again earlier on January 26 by figures from China showing annual rail freight volume – a key economic indicator – fell 11.9% last year, compared with a decline of 3.9% in 2014.
The Shanghai index has already fallen about 17% this year.
On the FTSE 100, among the top risers were Randgold Resources and Fresnillo.
Gold rallied to its highest level since November at $1,112.86 an ounce. The safe-haven commodity has risen nearly 5% this year, after sliding more than 10% in 2015.
The US Federal Reserve’s rate-setting committee starts a two-day policy meeting on January 26 and is not expected to make any change.
Meanwhile, Chinese state media have warned billionaire investor George Soros against betting on falls in the yuan or the Hong Kong dollar.
George Soros, who made more than $1 billion from shorting sterling in 1992, has said he was betting against the S&P 500, commodity-producing countries and Asian currencies, although he has not specifically mentioned the yuan or Hong Kong dollar.
China’s central bank has been making plenty of liquidity available to the banking system to avoid any cash squeeze ahead of the long Lunar New Year holiday early next month.
Traders said that the bank would inject 440 billion yuan into the money markets, the biggest daily injection in three years.
Oil prices fell again on January 25, eroding last week’s gains, as OPEC called for co-operation from oil-producing nations outside the cartel.
Brent crude fell 2.6% to $31.34 a barrel following a 10% rise on January 22, while US oil shed 95 cents to $31.24.
The slide came as the head of OPEC called for all oil-producing nations to work together.
Abdalla Salem el-Badri said both OPEC and non-OPEC oil producers needed to tackle oversupply to help prices rise.
“It is vital the market addresses the issue of the stock overhang. As you can see from previous cycles, once this overhang starts falling then prices start to rise,” he told a conference in London.
Despite the ongoing refusal of Saudi Arabia, the dominant OPEC member, to cut production, Abdalla Salem el-Badrinevertheless blamed countries outside the cartel for the huge global oil glut.
“Yes, OPEC provided some of the additional supply last year, but the majority of this has come from non-OPEC countries,” he said.
The organization accounts for almost 42% of the world’s oil production.
The OPEC secretary-general said all major producers should agree on methods to reduce stockpiles and thus help prices recover.
“The current environment is putting this future at risk. At current price levels, it is clear that not all of the necessary future investment is viable,” Abdullah al-Badri said.
Oil prices briefly fell to less than $28 a barrel earlier this month.
HSBC has lowered its forecast for the average price of Brent crude in 2016 from $60 to $45 a barrel, while UniCredit lowered it from $52.50 to $37 a barrel.
The prospect of OPEC members cutting production remains unlikely. Indonesia’s OPEC representative said that only one member of the cartel supported calling an emergency meeting to discuss ways of boosting oil prices.
The chairman of Saudi Aramco, the state-owned oil giant, said on January 25 that prices would ultimately rise to a moderate level as global demand increased.
The Iraqi government said on the same day that oil output reached a record high in December, producing as much as 4.13 million barrels a day.
Iran, which has the world’s fourth-biggest oil reserves, is also preparing to resume exports now that sanctions have been lifted.
A fall in the number of oil rigs in the US, one of OPEC’s biggest production rivals, could reduce output, with Goldman Sachs predicting a decline of 95,000 barrels per day this year.
According to preliminary figures published by Russia’s statistics service, the country’s economy contracted by 3.7% in 2015.
Retail sales plunged by 10% and capital investment fell by 8.4% in the economy’s worst performance since 2009.
In contrast, Russian GDP increased by 0.6% in 2014.
Russia’s economy has been hit hard by the extraordinary collapse in oil prices, which have fallen by 70% in the past 15 months.
Sanctions imposed by the West after Russia annexed Ukraine’s Crimea region in 2014 have also had an impact.
PM Dmitry Medvedev warned earlier this month that the fall could force Russia’s 2016 budget to be revised.
President Vladimir Putin said in December that the budget had been calculated based on oil at $50 a barrel. Oil is trading at just over $30 a barrel.
The state-controlled media blames the crisis, principally, on low oil prices and, to a lesser extent, on western sanctions.
In 15 years that Vladimir Putin has ruled Russia as president or prime minister, Russia failed to prepare for the possibility of low oil prices and did little to diversify its economy and reduce its reliance on energy exports.
Russian citizens are increasingly concerned. Inflation is rising, so is the fear of job losses. Meanwhile, real incomes in Russia are falling and social benefits are being cut.
Earlier this month senior citizens blocked streets in Sochi and Krasnodar to protest against the scrapping of free travel passes for pensioners. People power persuaded the local authorities to reverse the decision. The longer Russia’s economic woes continue, the greater the likelihood that social protest here will spread.
Taxes from oil and gas generate about half the Russian government’s revenue.
The ruble fell to record lows against the US dollar last week, before regaining some ground as oil prices recovered slightly.
The currency was down more than 1% on January 25 at 78.87 after oil prices fell about 3%.
Economy minister Alexei Ulyukayev said he expected the Russian central bank to leave interest rates on hold at 11%.
Elvira Nabiullina, the head of the central bank, said last week that authorities had “all the means” needed to keep the economy stable.
Unemployment in Russia was steady at 5.8% in December, meaning that 4.4 million people were out of work, and real wages fell by 10%.
Despite the gloomy economic news, McDonald’s said on January 25 it planned to open more than 60 restaurants in Russia in 2016.
Khamzat Khasbulatov, chief executive of McDonald’s Russia, said sanctions and the weak ruble had forced the fast food giant to make “serious adjustments” to its business model, but focusing on local suppliers and affordable menus had proved successful.
Oil prices have fallen below $28 a barrel amid fears the lifting of international sanctions on Iran could worsen the existing oversupply problem.
Brent crude, used as an international benchmark, fell as low as $27.67 a barrel, its lowest since 2003, before recovering slightly to trade at $28.17.
The price of US crude fell below $29 a barrel to $28.86.
The lifting of the Iran sanctions mean half a million barrels more oil per day could be produced, say analysts.
The decision to lift the sanctions against Iran came on January 17 after the international nuclear watchdog, the IAEA, said Iran had complied with a deal designed to prevent it developing nuclear weapons.
Iran has the fourth largest proven oil reserves in the world, according to the US Energy Information Agency and any additional oil would add to the one million barrels a day of over-supply that has led to a more than 70% collapse in oil prices since the middle of 2014.
Analysts said Iran already had quite a lot of oil ready to sell.
The drop in the price of oil has been driven by oversupply, mainly due to US shale oil flooding the market.
At the same time, demand has fallen because of a slowdown in economic growth in China and Europe.
Historically, OPEC has cut production to support prices. But led by Saudi Arabia, by far the group’s most powerful member, the group has resolutely refused to trim supply this time.
Analysts expect supply to continue to outstrip demand over the next two years, which would keep prices low.
Saudi Arabia government has decided to cut spending and delay some state projects after the recent decline in the price of oil, Finance Minister Ibrahim al-Assaf has announced.
Talking to broadcaster CNBC Arabia, Ibrahim al-Assaf said Saudi Arabia was in a good position to manage low oil prices.
Saudi Arabia, the world’s largest oil exporting country, has maintained its production levels despite a collapse in the price of oil.
Oil is trading at less than $50 per barrel, half the price of a year ago.
“We have built reserves, cut public debt to near-zero levels and we are now working on cutting unnecessary expenses while focusing on main development projects and on building human resources in the kingdom,” Ibrahim al-Assaf said in the interview.
Some areas of the economy will still receive investment, the finance minister said, as Saudi Arabia tries to improve industries outside energy.
“Projects in sectors such as education, health and infrastructure are not only important for the private sector but also for the long-term growth of the Saudi economy,” he said.
Ibrahim al-Assaf did not give details of where cuts would happen.
It may issue bonds, or Islamic bonds known as sukuk to finance some spending, Ibrahim al-Assaf said.
The kingdom of Saudi Arabia has more than $600 billion in reserves it can draw upon should expenditure outstrip income from oil exports.
The Russian ruble has regained some ground from yesterday’s all-time low, although trading remains edgy and volatile.
The currency opened 4% lower on December 17, but then edged up. By early afternoon, one US dollar bought 68 rubles, far fewer than the record low of 79 on December 16.
The ruble has been hit by worries over the Russian economy, which has been affected by cheaper oil and sanctions.
Russia’s Finance Ministry said the currency was “undervalued” and that it was intervening in the market.
It also gave details of the amount it spent on such action, saying it had spent almost $2 billion on December 15 in an attempt to stop the ruble sliding.
Deputy finance minister Alexei Moiseyev said Russia was going to sell foreign currency from its treasury accounts “as much as necessary and as long as necessary”.
The drastic 6.5 percentage point rise in Russian interest rates to 17% early on December 16 failed to halt the slide in the currency.
The rate rise, which was meant to strengthen the ruble, helped it to hit 58 to the dollar early on Tuesday but the rate then collapsed to a record low of 79.
There is not much more Russia can do to prop up its currency, which has only been allowed to move in line with the world’s currency markets in the past year.
Capital controls, where money is restricted from moving out of the country, are the main, final option.
Russian PM Dmitry Medvedev ruled that out. Speaking at an emergency meeting of ministers and industry leaders, he said he was confident that Moscow could contain the crisis: “Central bank and the government have worked out a package of measures to stabilize the situation. What we are seeing today is mainly emotional games.
“It is in our interests to bring order to the markets, no one gains from instability. But at the same time, there is no need for tough regulations, as used to happen in the past. It does not bring anything good – we shall use market tools.”
The ruble has lost more than half its value against the dollar this year, hit by Western sanctions and the fall in the oil price which have both weakened the Russian economy.
Russia’s economy is expected to shrink next year, although the amount by which it does is closely linked to the price of oil, with the economy rising or falling in line with that.
The Russian ruble went into free-fall in December 16 trading, falling repeatedly to hit record lows, despite the central bank’s dramatic decision to raise interest rates from 10.5% to 17%.
The rate rise was meant to strengthen the currency.
It helped it to 58 to the dollar early on Tuesday, but the dollar at one stage bought as many as 79 rubles.
The ruble has lost more than half its value against the dollar this year, hit by cheaper oil and Western sanctions.
Both of these have weakened the Russian economy.
Russia’s central bank has now pledged fresh further measures to try to stabilize its currency, with First Deputy Governor Sergei Shvetsov describing the situation as “critical”.
However, the Russian stock market was higher, with the main Micex index up 2% in afternoon trading.
Last week, Russia raised rates to 10.5% from 9.5%, a move that had little impact. The ruble’s slide this week was prompted by fears that the US was considering a fresh set of sanctions against the country for its support for separatists in Ukraine.
Russian oil giant Rosneft’s decision to issue 625 billion rubles ($9.9 billion) worth of bonds late last week at lower rates than Russian bonds has been blamed by some for exacerbating the currency’s decline.
However, Rosneft denied it was trying to dump rubles, saying “not a single ruble” would be used to buy foreign currency.
The chairwoman of the Russian central bank, Elvira Nabiullina, said the latest rate rise should curb inflation and encourage Russians to put more rubles into interest rate-bearing accounts.
However, she said she did not expect the ruble’s value to be immediately influenced by the rate rise.
“The ruble is currently undervalued according to all fundamental parameters and the state of the economy… and the current account,” she said.
“But for the ruble to return to its fundamental exchange rate it would take time.”
Russia’s central bank has previously tried unsuccessfully to stabilize the currency, buying rubles in the markets.
It has spent more than $70 billion supporting the ruble since the start of the year.
“This decision is aimed at limiting substantially increased rouble depreciation risks and inflation risks,” the central bank said in a statement.
Last week, the World Bank warned that Russia’s economy would shrink by at least 0.7% in 2015 if oil prices did not recover. It says an oil price of $70 a barrel would leave it with a fall of 1.5%.
Raising interest rates has its own risks, as more expensive borrowing can itself slow growth. But it may also stem the tide of money leaving the country.
Russia’s economy will fall into recession in 2015 as Western sanctions, in response to the country’s role in eastern Ukraine, and falling oil prices begin to bite, the Russian government has warned.
The country’s economic development ministry estimates the economy will contract by 0.8% next year.
It had previously estimated the economy would grow by 1.2% in 2015.
Russia’s reliance on tax revenues from the oil industry makes it particularly sensitive to price movements.
Household disposable incomes are also forecast to decline by as much as 2.8%, compared with a previous estimate that they would grow by 0.4%.
The sharp revision in Russia’s economic forecast is the first admission from the government that the economy will contract.
“The current prognosis is based on a drop in GDP by 0.8% in 2015, against the previous prognosis of growth by 1.2%,” deputy PM Alexi Vedev said.
On December 1, the rouble suffered its biggest one-day fall since 1998.
The currency slid almost 9% against the dollar before rallying after suspected central bank intervention. The currency has already lost 40% in value this year.
The Russian finance ministry has also not ruled out spending more than 500 billion roubles from the budget’s Reserve Fund next year.
The 2015-2017 budget allows for spending of up to 500 billion roubles next year from the Reserve Fund, but Maxim Oreshkin, head of the finance ministry’s long-term strategic planning department, said it was possible the government could spend more to support the economy.
Maxim Oreshkin added that if the average oil price were $80 per barrel in 2015, the finance ministry’s forecast for a fall in GDP was in line with the economy ministry’s prediction of a 0.8% contraction.
He also said that a scenario in which the oil price averaged $60 a barrel in 2015 was pessimistic, and at that price, the Russian economy would contract as forecast in the central bank’s “stress scenario”.
The bank published its stress scenario last month, saying that at $60 per barrel, GDP would decline by 3.5% to 4%.
The price of oil has fallen nearly 40% since the summer because of oversupply caused by rising US shale oil production.
Demand has also fallen, particularly in China, the world’s second largest consumer of the commodity, where industrial production has slowed in recent months.
The fall in the oil price has been causing concern for several members of the oil cartel, as most require a price above $80 a barrel to balance their government budgets and many need prices to be above $100 a barrel.