1 Oil giants fail to reach agreement on output cap
(BBC) A meeting of the world's leading oil exporters to discuss capping
production has ended without agreement. After hours of talks in Qatar, the
country's energy minister Mohammed bin Saleh al-Sada said that the oil
producers needed "more time".
Most members of the Opec producers' group, plus
other oil exporters including Russia, attended the talks. They wanted a deal
that would freeze output and help stem the plunge in crude prices over the past
18 months.
Oil prices tumbled in Asian trading as a result,
with the price of both US and London crude oil down more than 5%. Talks hit
difficulties earlier on Sunday as reports emerged of tensions between Iran and
Saudi Arabia. Iran did not attend the meeting. Saudi Arabia, the world's
largest oil exporter, appeared willing to only freeze output if all Opec
members agreed, including Iran.
But Iran maintained it would continue the increase
in oil production it has followed since economic sanctions were lifted earlier
this year. "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.
2 The bad smell hovering over global economy (Larry
Elliott in The Guardian) All is calm. All is still. Share prices are going up.
Oil prices are rising. China has stabilised. The eurozone is over the worst.
After a panicky start to 2016, investors have decided that things aren’t so bad
after all.
Put your ear to the ground though, and it is
possible to hear the blades whirring. Far away,
preparations are being made for
helicopter drops of money onto the global economy. But isn’t it true that
action by Beijing has boosted activity in China, helping to push oil prices
back above $40 a barrel? Has Mario Draghi not announced a fresh stimulus
package from the European Central Bank designed to remove the threat of
deflation? Are hundreds of thousands of jobs not being created in the US each
month?
In each case, the answer is yes. But don’t be
fooled. China’s growth is the result of a surge in investment and the strongest
credit growth in almost two years. In the case of oil, the fundamentals of the
market - supply continues to exceed demand - have not changed.
Then there’s the US. Here there are two problems.
The overt weakness is that real incomes continue to be squeezed, despite the
fall in unemployment. The hidden problem has been highlighted by Andrew
Lapthorne of the French bank Société Générale. Companies have exploited the
Federal Reserve’s low interest-rate regime to load up on debt they don’t
actually need.
So that’s China and the US. How are the other two
members of the “big four” – the eurozone and Japan – faring? The answer is not
so well. Europe’s big problem is that the banking system is not fit for
purpose. In Japan, the financial markets have responded badly to the
announcement of negative interest rates earlier this year.
It will take some time to get the helicopters into
the air. Central banks can muddle through for the rest of this year, beefing up
their QE programmes and driving interest rates deeper into negative territory.
The underlying softness of the global economy, however, means that it is quite
easy to envisage a downturn in 2017, the 10th anniversary of the start of the
financial crisis.
In those circumstances, the unconventional would
quickly become conventional, as it did after the collapse of Lehman Brothers.
The only question would be which central bank would move first. So give it a
few months then listen hard. The choppers are coming.
3 Global warming may be worse than what experts
thought (San Francisco Chronicle) Most computer simulations of climate change
are underestimating by at least one degree how warm the world will get this
century, a new study suggests.
It all comes down to clouds and how much heat they
are trapping. According to the study in the journal Science, computer model
simulations say there is more ice and less liquid water in clouds than a decade
of satellite observations show.
The more water and less ice in clouds, the more heat
is trapped and less the light is reflected, said study co-author Trude
Storelvmo, a Yale atmospheric scientist. She said even though it tens of
degrees below freezing, the clouds still have lots of liquid water because they
don't have enough particles that helps the water turn to ice crystals.
Because as the climate changes, there will be more
clouds with far more liquid, and global warming will be higher than previously
thought, Storelvmo said.
How much warming is predicted for the next 80 or so
years depends a lot on if society cuts back on carbon dioxide emissions. In the
worst case scenario, with no carbon reduction, the United Nations'
Intergovernmental Panel on Climate Change sees temperatures rising by about 6.7
degrees by the end of the century and Storelvmo said the liquid cloud factor
would add another degree or more on top of that.
Uncertainties in mainstream climate science are more
"on the bad side" than on the side of less harm, said climate and
glacier scientist Richard Alley of Pennsylvania State University, who wasn't
part of the study. "Climate science thus is probably more open to
criticism of being too conservative than being too alarmist."
