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Challenges facing MENA

Source:Ringier Release Date:2011-05-30 910
Metalworking
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? Alain Juteau | Dreamstime.com

 The tensions in the Middle East and North Africa region (MENA) have rattled the global market over the past few months. With oil hitting and now coming off a new peak, the world continues to watch the volatility and react to the troubles in the North Africa/Middle East.

Saudi Arabia's exports of liquefied petroleum gas (LPG) rose 30% in February compared to a year earlier, while exports of petroleum products fell, Saudi Gazette has reported. LPG exports increased to 166,786 metric tonnes from 128,827 tonnes in 2010, according to data by the Saudi Port Authority. The kingdom exported 39% more LPG from the previous month. Exports of all oil products, excluding crude, from Saudi ports fell 2.7% in February to 3.05 million metric tonnes from 3.14 million tonnes a year earlier, the data showed.

The recent unrest across the Arab world has prompted oil prices to soar, with Brent Crude climbing steadily to more than $115 a barrel, from just over $70 in August last year. As a result, major carriers including Emirates Airline have announced ticket price increases, while motorists are feeling the pain at the pumps as petrol prices rise. But while oil producers might be making a fortune, analysts warn the world's energy supply network could be one 'Jasmine revolution' away from collapse.

Before the crisis, Libya exported 1.3 million barrels a day of crude oil, more than 1.5 percent of global demand, in large part to Europe. Those exports have dwindled to a trickle amid the uprising.

That makes Brent crude futures, the European benchmark contract, more sensitive to the situation in Libya than the U.S. market, where crude oil reserves are abundant.

"The longer these battles are going on, the more the market is realising the supply is going to be offline," said Matt Smith of Summit Energy.

Unrest in other parts of the Arab world also contributed to the rise in oil prices. "Yemen is such a big threat at the moment because of the proximity with Saudi Arabia, the biggest oil producer in the OPEC cartel. "Things in Bahrain have calmed down a little bit but any further unrest could press prices higher."

In Gabon, sub-Saharan Africa's fourth-largest oil producer, a strike by oil-sector employees had halted almost all oil production. Gabon's oil daily output normally ranges from 220,000 to 240,000 barrels. "It is not a lot of oil but given the current situation we can't afford any more outages, so all the barrels are important."

Economic growth

International Monetary Fund revised down its economic growth projection for Middle East and North Africa to 4.1 percent this year, from 4.6 percent in January, when a wave of uprisings began spreading across the Arab world.

" Government spending continues to be the main growth driver. Petrodollars are trickling down across the economy, fueling growth and benefiting the profitability of corporate in the region."
— Rami Sidani, Head of Middle East & North Africa Equities, Schroders


"Spreading social unrest, rising sovereign risk premiums and elevated commodity import prices will constrain growth prospects in several MENA economies," the IMF said in its World Economic Outlook. "Although economic prospects across the MENA region are quite diverse, an ongoing region wide reprising of risk is pushing up borrowing costs," it added.

The badly hit economies are those of oil-importing countries that have been rocked by unrest, mainly Egypt wheNIKE

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