The stock of Norway's DNO International, which pumps oil in Iraqi Kurdistan, has had a bumpy ride this past year. This week, however, the outlook for the oil junior took a definitive turn for the better.
That was because, for the first time since they were suspended in September, Baghdad raised hope that Kurdish oil exports might soon restart.
Iraq's central government has long been at odds over oil jurisdiction with the government of the semiautonomous Kurdistan region, but ordered the exports' immediate resumption, said the Iraqi oil minister Dr Hussain al Shahristani.
On Monday, DNO's stock surged 15 per cent on the news. Yesterday, the stock was still trading near that level.
Dr al Shahristani has been unstintingly critical of the production-sharing contracts that Kurdish leaders signed with foreign oil firms to develop Kurdistan's neglected oil and gas resources. He has called the contracts "illegal" and "unconstitutional", a position vehemently disputed by the Kurds.
True to form, after allowing Kurdistan to export crude for the first time last June, through Iraq's northern pipeline into Turkey, Dr al Shahristani said the regional government should pay the two companies pumping the crude from its 17 per cent share of revenues.
That would have left the Kurds with nothing, so DNO and Turkey's Genel Enerji went unpaid and soon stopped producing all but minor amounts of crude for the local market.
So why should anything be different now?
The short answer is that an Iraqi national election is less than a month away, and the current prime minister, Nouri al Maliki, needs to woo Iraqi Kurds to his nationalist agenda to bolster his re-election chances. Mr al Maliki, not Dr al Shahristani, may now be calling the shots.
@Email:tcarlisle@thenational.ae
UAE currency: the story behind the money in your pockets
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Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
'The Sky is Everywhere'
Director:Josephine Decker
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Fuel economy, combined: 9.0L / 100km
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Europe’s rearming plan
- Suspend strict budget rules to allow member countries to step up defence spending
- Create new "instrument" providing €150 billion of loans to member countries for defence investment
- Use the existing EU budget to direct more funds towards defence-related investment
- Engage the bloc's European Investment Bank to drop limits on lending to defence firms
- Create a savings and investments union to help companies access capital
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The specs
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SPECS
Engine: Two-litre four-cylinder turbo
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UAE currency: the story behind the money in your pockets
