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.”