Business

NEW YORK — US oil prices traded below $40 a barrel for the first time since the 2009 financial crisis, ending 2 per cent lower on Friday on signs of US oversupply and weak Chinese manufacturing and notching the longest weekly losing streak in almost three decades.

US crude dipped below the $40 threshold following weekly data that showed US energy firms added two oil drilling rigs earlier this month, the fifth increase in a row. 

The rise in the number of rigs emerging after a second quarter lull in prices is adding to concerns US shale production is proving slow to respond to falling prices, prolonging a global glut.

"Everyone is still looking at it saying 'Wow, you still don't have production coming down,'" said Tariq Zahir, founder at Tyche Capital in Laurel Hollow, New York.

US October crude settled 87 cents, or 2.1 per cent, lower at $40.45 a barrel, having touched a new 6-1/2-year low of $39.86 a barrel. Front-month US crude has fallen 33 per cent over eight consecutive weeks of losses, the longest such losing streak since 1986.

It pared some losses late in the trading session, as US RBOB gasoline futures rebounded from a contract low, on news of a fire in a gasoline making unit at PBF Energy Inc.'s 182,000 barrels per day Delaware City, Delaware, refinery.

Brent oil ended $1.16, or 2.5 per cent, lower at  $45.46 a barrel. It hit a low of $45.07 and threatened to break below $45 a barrel for the first time since March 2009.

Energy markets slid early in the day as world stock and currency markets joined an extended rout across raw materials last week, a slump accelerated on Friday by data showing activity in China's factory sector, a huge user of many commodities, shrank at its fastest pace in almost 6-1/2 years in August.

With deepening gloom over demand growth from the world's second-biggest oil user, and expectations for a significant buildup in surplus oil stocks this autumn, dealers said most oil traders were unwilling to fight the tide.

"The market is stuck in a relentless downtrend," indicated Robin Bieber, a director at London brokerage PVM Oil Associates. "The trend is down — stick with it."

Oil market speculators cut their bullish bets on US crude  to the lowest level in five years, reducing combined futures and options positions in New York and London by 14,884 contracts to 89,035 in the week to August 18, the US Commodity Futures Trading Commission said.

The current collapse in oil prices, the second this year, has raised alarm within the Organisation of the Petroleum Exporting Countries, including some of its core Gulf members. However, there is no indication they will reverse their policy of keeping production wide open to defend market share, delegates told Reuters last week. 

AMMAN — Net profit generated by the Industrial Commercial & Agricultural Company (ICA) fell sharply during the first half of this year.

In a disclosure to the Jordan Securities Commission, the holding company revealed that mid-year 2015 net profit amounted to JD95,267, down from JD0.8 million at the end of June 2014.

The diminished net profit was the result of a drop in sales to JD9.9 million from JD12.3 million registered on June 30, 2014, and lower operational profit which came at JD0.7 million, compared to JD1.3 million, after taking into account production costs.

Signs of lower profitability showed last year when operational profit fell to JD2.3 million and net profit tumbled to JD1 million on December 31, 2014, from JD3.2 million and JD1.9 million respectively in 2013.

The reduced performance was due to a plunge in sales to JD24.6 million in 2014 from JD29.8 million in the previous year.

According to the 53rd annual report covering last year's operations, the company produced 34,000 tonnes of soaps, liquid detergents, cosmetics, and plastic bottles and packs at its plants in Mafraq and Zarqa where 230 workers were employed. Only three employees worked at the holding entity.

Production and marketing activities were processed through three subsidiaries:  United Sulphochemical and Detergents Industries Company, the Unified Soap Industry Company, and Intaj Marketing and Distribution Company.

The report listed Iraq and Syria as key export markets as well as the West Bank, Egypt, Saudi Arabia, Kuwait and Morocco.

It mentioned the Civil Service Consumer Corporation and the Military Consumer Establishment among the main domestic channels, noting that ICA's subsidiaries competed in various local and international tenders.

Other clients in Jordan included the Red Cross and United Nations organisations.

Most of the imported supplies were obtained  from China, Iraq and Malaysia.

Board Chairman Nour "Mohammad Shaher" Mahayni wrote in the annual report that the company was considering all modern methods that would help reduce production costs so as to increase sales with competitive prices and face up to regional producers.

Mahayni indicated in a foreword that ICA was trying to overcome the rise in international fuel prices and higher electricity tariffs, that pushed up production costs, by striving to increase export rates as much as possible.

He said that membership in the World Trade Organisation exacerbated the dumping of similar products on the markets from neighbouring countries.

At the end of 2014, the chairman owned 14 per cent of ICA's JD14.6 million capital along with Jordan Islamic Bank whose stake stood at 39 per cent, and Jamaleddin Bahjat Daaboul who held a 17 per cent equity.

As such, the share of the three aforementioned shareholders came at 70 per cent.

The company evaluated its capital investment at JD12.5 million and its working capital at the end of the  first half of this year stood at JD9.6 million when subtracting JD3.9 million of current liabilities from JD13.5 million of current assets.

Current assets included JD4.5 million in cash on hand and at banks as well as post-dated cheques and under collection, JD5.6 million of inventory, and JD2.6 million in net receivables after deducting JD2.9 million as provision for doubtful assets.

The balance sheet as of June 30, 2015 showed net fixed assets amounting to JD12.7 million, mostly property and machinery.

ICA's liabilities included JD3.4 million of notes payable under a "Murabaha" arrangement with Jordan Islamic Bank which extended the company a line of credit against a first degree hypothecation on the lands in Mafraq and Zarqa.

The company rewarded the shareholders with  JD0.7 million in cash dividends at a rate of 5 per cent. No dividends were distributed since 2010.

AMMAN — Jordan has a promising investment environment with many available opportunities and advantages in different sectors, Investment Commission President Montaser Oqlah said Saturday.

At a meeting with Gary Chapman, president of  Dubai National Air Travel Agency (DNATA), and Dana Odwan, chief executive officer of the company's branch in Jordan, Oqlah noted that  the next phase will witness a new strategy in investment and business environment in the Kingdom, according to a commission statement sent to The Jordan Times.

Dnata began trading from a small shop in Bur Dubai souk in 1959 with just two members of staff and now is one of the world's largest air services providers offering ground handling, cargo, travel and flight catering services across five continents, according to the company's website.

Oqlah said the new investment incentives by law guarantees neutrality, transparency and justice in providing exemptions for projects that fall under one sector, in line with unified standards.

The delegates expressed their appreciation for the commission's president and his endeavours to acquaint them on the investment environment in Jordan, and to find solutions to problems they face, the statement added.

KUALA LUMPUR — Malaysian Prime Minister Najib Razak said on Thursday he would not peg the ringgit to the US dollar or implement capital controls as he sought to calm fears about the sliding currency and capital flight from Southeast Asia's third-largest economy.

Najib, who has come under severe criticism after being embroiled in a scandal over indebted state fund 1Malaysia Development Berhad (1MDB), is trying to reassert his leadership over his government and a stumbling economy.

"The flexibility of our exchange rate is important to absorb global adjustments and volatility," Najib said in a statement.

Najib's comments mirrored remarks made by central bank chief Zeti Akhtar Aziz. Zeti, a widely respected economist, last month denied rumours she had resigned from her post after coming under pressure amid investigations into 1MDB.

Analysts said Najib's comments would reassure investors rattled by the political turmoil facing the government and by external factors weighing down the economy, but only to an extent.

"It's important that his message is now consistent with the central bank but in the near term we are unlikely to see any significant impact in the markets," said Rahul Bajoria, regional economist at Barclays in Singapore. 

"To see a positive impact, it will be global dynamics that make an impact as much as the domestic environment," he added.

The ringgit, Asia's worst performer this year with losses exceeding 17 per cent against the dollar, dropped nearly 1 per cent on Thursday despite the comments.

"There's no intention of moving to a less flexible regime like a peg exchange rate regime," Zeti told reporters, adding the fact that international reserves had dipped below the psycologically significant level of $100 billion was not a cause for worry.

Najib has faced criticism for taking his eye off an economy suffering from weak global commodity prices and falling domestic consumption.

The 62-year-old, who also serves as finance minister, met economists from local and foreign financial institutions this week, promising to "proactively manage the economy going forward", he wrote on Facebook.

At the heart of Najib's woes is 1MDB, which has debts of over $11 billion and is being investigated for allegations of graft and financial mismanagement. Najib sits as the chair of its advisory board.

The prime minister sacked his deputy and other Cabinet members last month and replaced the attorney general heading a probe into 1MDB.

His crackdown on criticism has extended to traditional and online media, angering pro-democracy activists. A rally planned for next week calling for Najib's resignation is expected to draw thousands despite being officially barred by authorities.

WASHINGTON — The Federal Reserve (Fed) was divided about whether the US economy is strong enough to withstand an interest rate increase at July's policy meeting, the minutes of the meeting showed Wednesday.

Although policy makers at the Federal Open Market Committee (FOMC) meeting viewed conditions getting closer to allowing the first rate hike in nearly nine years, they cited evidence that the time was not ripe.

As expected, the FOMC left unchanged the benchmark federal funds rate at the zero level, where it has been pegged since late 2008 to support the US economy's recovery from the Great Recession. But Fed Chair Janet Yellen has signalled that a hike is on track this year.

The record of the July 28-29 FOMC meeting gave no clear indication of when the Fed will pull the rate trigger, which some experts had put as early as the next FOMC meeting just four weeks away.

"In our view, the minutes have lowered the probability of liftoff in September and raised the probability for December," Nomura Global Economics said in a client note.

"It's clear... that the committee sees downside risk to its inflation outlook and it may need more evidence that inflation is moving in the right direction," it added.

Moody's Analytics analyst Ryan Sweet said the minutes confirmed that a rate hike at the September 16-17 meeting remained possible, but was "not a slam dunk, and we believe the odds have diminished over the past couple of weeks”.

FOMC participants highlighted tepid inflation, slack in the job market and low wage growth, and risks from China's economic slowdown as they considered raising near-zero borrowing costs.

"Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point," the minutes said.

Some FOMC participants emphasised the economy had made "significant progress" over the past few years and viewed conditions for a rate hike "as having been met or were confident that they would be met shortly."

A couple worried that an appreciable delay in hiking would result in an "undesirable increase in inflation" or otherwise hurt financial stability, while one member was ready to pull the trigger but would wait for additional data.

Officials generally agreed that job market conditions had improved. However, several noted that "some noticeable margins of slack remained", including a high share of employees working part time because full-time jobs were not available.

Tepid inflation concerns 

Some participants said they did not have enough information to make them "reasonably confident" that tepid inflation would move back to the Fed's 2 per cent target over the medium term, a key element of the Fed's dual mandate of price stability and maximum employment.

"Members are satisfied with improvements in the labour market, but it is inflation that has members leaning one way or the other," said Patrick Newport, US economist at IHS Global Insight.

"That's probably because the inflation numbers are a puzzle. The economy is nearing full employment, productivity has stalled, yet inflation shows no signs of taking off," he indicated.

Earlier Wednesday, the Labour Department reported consumer prices rose a mere 0.2 per cent in July year-over-year, extending a slow rise since April. 

China's slowdown also troubled Fed policy makers.

"While the recent Chinese stock market decline seemed to have had limited implications to date for the growth outlook in China, several participants noted that a material slowdown in Chinese economic activity could pose risks to the US economic outlook," the minutes said.

The FOMC meeting came before China's shock devaluation last week of the yuan, which many observers saw as a sign that its slowdown is deeper than thought.

LONDON — Global oil prices tanked Wednesday to a 6.5-year low as a surprise jump in US crude inventories signalled weak demand in the world's top economy.

US benchmark West Texas Intermediate for September delivery dived to $40.60 per barrel, a level last seen on March 2009.

The contract, which has lost more than 30 per cent of its value in the past two months, later stood at $40.81, down $1.81 from Tuesday's close.

Brent North Sea crude for October tumbled to $46.81, nearing the lowest level since mid-January.

It later stood at $47.24 in afternoon London deals, down $1.58.

The market was pummelled after the US government's Department of Energy (DoE) reported that American crude inventories rose by 2.6 million barrels in the week to August 14.

That confounded expectations for a drop of 820,000 barrels, according to analysts polled by Bloomberg News.

"The price of US oil has fallen to a fresh six-year low today," said analyst Fawad Razaqzada at trading site Forex.com. "The level of US crude stockpiles actually increased last week, and by 2.6 million barrels, no less."

"The increase was in part because of a major refinery outage in the US Midwest and due to a sharp rise in oil imports, which averaged over 8 million barrels per day (bpd) last week, up a good 465,000 bpd from the previous week," he added.

CMC Markets analyst Jasper Lawler indicated that the increase in crude inventories "was the biggest build in four months and demonstrates the resilience of US oil output despite the falling price".

Reserves of distillates, including heating fuel and diesel, rose 600,000 barrels last week, the DoE said. Analysts had pencilled in a drop of 1.5 million.

And stocks of gasoline or petrol recoiled by 2.7 million barrels, which was far heavier than an anticipated decline of 1.25 million.

The weekly DoE update is a crucial barometer of crude demand in the world's biggest economy, which is also a large producer of shale oil.

Analysts said prices were unlikely to stage a sustained rally because the market remains awash with supplies from the Organisation of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia.

Analyst Razaqzada cautioned that the oil market remained plagued by slowing Chinese demand, alongside rebounding Iranian oil supplies in the wake of Tehran's nuclear energy deal with the West.

"The prospect of fresh supplies from Iran and potentially weaker demand growth from China and the likes means the global supply glut could be worse than was expected previously," he indicated. "As such, the outlook for oil prices remains bleak." 

Iran last month also reached an agreement with major world powers to rein in its nuclear ambitions in exchange for the lifting of crippling Western economic sanctions, which have restricted its oil exports.

Meanwhile, demand growth is not keeping pace with supply, especially with the slowdown in China, the world's top energy-consuming nation and its second-biggest economy.

AMMAN — Hikma Pharmaceuticals announced Wednesday in a press statement that group revenue reached $709 million during the six months ended June 30, 2015, in line with the first half of 2014.

"The full year 2015 group revenue guidance maintained at around 6 per cent growth in constant currency, or 2 pre cent on a reported basis," it said Hikma indicated in the press release that it launched 40 new products and received 118 product approvals across all countries and markets.

"Branded revenue rose by 16 per cent in constant currency or 9 per cent on a reported basis, resulting from a strong performance in the countries of the Gulf Cooperation Council and Algeria, Hikma’s two largest MENA markets," the company said.

In line with expectations, following the extremely strong performance in the prior year, global Injectables revenue increased 3 per cent on a constant currency basis, due to sustaining strong sales across the broad portfolio and have continued to be successful in capturing specific market opportunities.

The successful integration of Bedford is delivering new approvals for US Injectables as Hikma continues to enhance its global injectables product portfolio. 

BAGHDAD — In business since the 1960s, Karim Al Aboudi's family has seen Iraq's economy boom with oil wealth and bust through wars and the 2003 US-led invasion, but today marks the worst downturn he's seen in decades.

Forced to fire 65 per cent of his staff and close two of his six aluminum and glass factories, Aboudi's troubles mirror those facing business owners across Iraq. 

As the country battles the Daesh group on the ground, it faces massive budget deficits brought on by the lowest global oil prices in six-and-a-half years.

And while austerity cuts have helped Iraq fund its military effort against the extremists, it has slowed businesses like Aboudi's and construction firms that rely on government contracts.

Taking a deep puff of a cigarette, 65-year-old Aboudi said he and others don't see it getting much better soon: "The manufacturers and merchants are now only drinking tea and reading newspapers."

Since early 2014, Iraq has suffered a serious economic decline after the Shiite-led government in Baghdad started losing territory to the Sunni militants of the Daesh group. 

Low oil prices exacerbated the decline, wreaking havoc on Iraq's national budget, of which oil revenue makes nearly 95 per cent.

As of July, Iraq's oil revenues stood at $31.5 billion, according to oil ministry figures, with an average daily export capacity less than a 3.3 million barrel quota set in this year's budget. 

Iraq's semi-autonomous Kurdish region now sells oil independently from the central government.

Iraq's $102.5 billion budget now runs a deficit of about $21.4 billion. Some $27 billion is earmarked for defence, but more could be needed.

"For sure the situation in dire and needs quick alternatives," lawmaker Haitham Al Jaburi said.

Iraq had a state-run economy under Saddam Hussein, buoyed by its oil wealth. Back then, 1 Iraqi dinar was worth $3. But the economy began to suffer under economic sanctions after the 1991 Gulf War. 

By the time of the US-led invasion, it was 3,000 dinars to $1. Today, it's about 1,166 dinars to $1. Annual inflation stands at about 2 per cent.

Like other businesses, Aboudi's flourished after Saddam's overthrow, buoyed by authorities suspending most tariffs and import duties and starting nationwide government-funded projects. 

But sectarian violence in 2006 and 2007 damaged the country's economy. Meanwhile, Iraq's national power grid supplies only a fraction of the country's needs, forcing residents and business to rely on diesel generators.

Reeling from the Daesh advance, Iraq's government now has stopped spending money on construction projects to fund its military.

"Since the deterioration in security situation, the fall of Mosul and the austerity measures, the [government] business has dropped to zero," said Aboudi, whose business was 65 per cent government-funded projects.

Reacting the crisis, Iraq plans to issues bonds worth $7 billion, $5 billion in international bonds and $2 billion for domestic banks, to narrow the deficit. 

It introduced initiatives to impose new excise and consumption taxes. It also secured a $1.7 billion in loans from the World Bank and a $833 million loan with the International Monetary Fund.

Iraq also revived a long-delayed plan to redenominate the Iraqi dinar by knocking three zeroes off the nominal value of its banknotes, said Ihsan Shamran Al Yassiri, the head of Iraq Central Bank's issuing and vaults department. 

The plan is set to be implemented by 2017 after restructuring dinar by issuing two large banknotes, a 50,000 dinar note before the end of this year and 100,000 banknote next year, and canceling small ones.

This month, bond rating agency Fitch gave Iraq its first rating, calling it "B-" with a stable outlook. The rating agency forecast a double-digit fiscal deficit for 2015 due to lower oil prices, higher military spending and war costs.

"Iraq scores the worst of all Fitch-rated sovereigns on the composite World Bank governance indicator, reflecting not only insecurity and political instability but also corruption, government ineffectiveness and weak institutions," Fitch said.

That doesn't surprise construction company owner Sahab Awad, who built a government housing project in Iraq's southern Maysan province, worth about $33.6 million. 

The government still owes him about $2.5 million for that, as well as millions of dollars more for a project his company had to abandon in the Daesh-held city of Fallujah.

"We sold whatever properties and projects we have and laid off about 90 per cent of the employees and debts are still accumulated," said Awad, 73. "We had high ambitions of developing the country, but unfortunately those who run it are incompetent and lack a real vision."

Despite hundreds of billions in oil revenues and international aid since the 2003, Iraqis still suffer from shabby public services and weak economy due to endemic corruption and poor financial management, as many senior appointments are determined by party patronage and sectarian loyalties.

Fed up with the weak government, Aboudi joined thousands of Iraqis who have been protesting across the country. The protests forced the government to launch a plan to dismantle government posts, merge ministries, cut spending and fight corruption.

Last week, parliament's approval for the plan gave Aboudi a rare dose of optimism despite Iraq's many challenges.

"I'm optimistic... and we will continue protesting until we have tangible reforms," he said.

AMMAN — Holiday Inn Amman generated lower profit during the first half of this year.

Al-Sharq Investment Projects, the Jordanian public shareholding company which owns the 5-star hotel, indicated in a disclosure to the Jordan Securities Commission that Holiday Inn Amman's operational earnings dropped by 31.2 per cent.

According to the disclosure, income during January-June 2015 amounted to JD2.5 million, down from JD3.6 million during the same period of last year.

After subtracting operational costs, gross profit stood at JD1.6 million at the end of June 2015 compared to JD2.6 million recorded at the end of June 2014.

Further deductions covering administrative, general and marketing expenses besides energy and maintenance costs and  taking into account other income, after-tax profit declined further to JD0.8 million from JD1.2 million.

The diminished mid-year performance followed a stable year which almost maintained the functioning level of 2013.  

Al-Sharq Chairman Ahmad Mufleh Horani told the shareholders in the 20th annual report covering the year 2014 that the hotel's occupancy rate slipped to 66.2 per cent, down from 69.1 per cent in 2013.

Noting that the average room rate per night edged up slightly to JD81.7 from JD81.5, he wrote in the foreword that the gross earnings of the hotel totalled JD6.9 million in 2014, almost unchanged from the previous year. 

The income statement as of December 31, 2014, showed after-tax profit at JD2.3 million, slightly more than the 2013 figure. 

In line with practice, shareholders voted to distribute cash dividends at a rate of 10 per cent, albeit less than the 12 per cent in 2013.

"Your company is one of the few hotel owners in Jordan that annually distribute reasonable dividends to shareholders," Horani said in the report.

The report singled Marriott, Kempinski and Meridien as the 5-star hotels in Jordan that compete with Holiday Inn Amman because they differ from other 5-star hotels in terms of number and type of rooms as well as the selling rate which averages between $120 and $130 per night.

"Based on the number of rooms of competitor hotels, the market share of Holiday Inn Amman stands at 28.5 per cent," the report said, estimating the fair market share at  25 per cent.

As required, the company disclosed that at the end of last year its workforce totalled 210 employees, three of whom worked at Al-Sharq and the remaining 207 at Holiday Inn Amman.

The disclosure showed that the chairman and Al Daman for Investments, out of 211 shareholders, owned 65 per cent and 26.1 per cent of the company's JD16 million capital.

Capital investment was put at JD16 million.

According to the balance sheet as of June 2015, total assets amounted to JD20.6 million, JD14.5 million of which were property, machines and equipment. JD0.9 million were financial assets at fair value.

Current assets totalled JD4.8 million, JD3.9 million of which were cash and quasi cash.

TEHRAN — Iran's famed carpet weavers are busy at work anticipating a boost in exports as sanctions are set to be lifted in the months ahead.

"The Persian hand-woven carpet is Iran's ambassador. I'm delighted that the ambassador is in the process of resuming work in the US," exporter Jila Rassam Arabzadeh said. "The Persian carpet is like the Iranian flag, known all over the world. Let our flag fly."

Curbing Tehran's nuclear programme in exchange for lifting crippling international sanctions, the US will resume imports of Iranian carpets, which were halted in 2010.

Persian carpets were the Iranian non-oil commodity that suffered most as a result of sanctions.

The US market had made up one-fifth of Iran's carpet exports. 

Hamid Kargar, president of Iran's national carpet centre, said producers in the Islamic republic are already making carpets with Americans in mind and are hopeful that trade will resume next year.

"People in the carpet business have begun to produce carpets suiting the taste of the American market, receiving orders and negotiating with customers," he added. 

"Since 2010, we lost one-fifth of our exports because we were deprived of the US market," Kargar indicated. "Our rivals replaced Iran. However, we expect that Americans will welcome Persian carpets again because of its unique designs and colours."

Iran exported $330 million in Persian carpets last year. Exports account for two-thirds of Iran's carpet production, which now stands at over 5 million square metres a year.

The Islamic republic was once the world's biggest carpet exporter but the industry has been hampered by the sanctions and competition from cheaper Indian, Pakistani and Chinese copies of traditional Iranian patterns.

Arabzadeh, the carpet exporter, said she is preparing to respond to a variety of American customers.

"Americans and Canadians prefer light colours but the older generations go for darker ones. We are reassessing to meet the demands of our American customers," she added.

Handwoven Persian carpets can range in cost from several thousand dollars to multi-million dollar floor coverings fit for palaces.

In 2000, Iran shipped a giant handwoven carpet to the sultan of Oman worth $5.2 million. In 2006, Iran produced the world's largest handwoven floor covering, worth $8.5 million, for the Sheikh Zayed Mosque in Abu Dhabi, the United Arab Emirates.

Iran is also seeking to resume exports of pistachios, another major Iranian non-oil commodity.

However, in past decades, the US itself has become a major pistachio producer and Iranian imports face 300 per cent duties. The tax was imposed to protect American producers, according to Mohsen Jalalpour, head of Iran's chamber of commerce.

He's confident, though, that Iranian pistachios have a special advantage.

"Americans like the taste of Iranian pistachios more than that of their own," he said.