Kuwait Reduces Oil Production under OPEC Cut Agreement

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Gulf OPEC member Kuwait has reduced oil production in January to around 2.707 million barrels per day, meeting its output target under an OPEC supply cut agreement, a Kuwaiti oil official said on Friday.

It joins Saudi Arabia, the world’s top oil exporter and biggest OPEC producer, which also cut production this month by at least 486,000 bpd to its 10.058 million bpd target, according to a Gulf source familiar with Saudi oil policy, meaning it fully implemented OPEC’s agreement to reduce output.

The Organization of the Petroleum Exporting Countries in November agreed to implement output reductions this year as part of a global pact to limit supplies to support prices.

A committee responsible for monitoring compliance with the global oil production cut agreement will meet in Vienna on Jan. 21-22, although an industry source told Reuters on Friday that it would mainly discuss the mechanism to monitor compliance since no solid production data is available yet.

Under the OPEC deal, Kuwait agreed to reduce output by 131,000 bpd starting Jan. 1, from its October baseline production of 2.838 million bpd.

via Reuters.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

 JAMES GILLINGHAM

Here’s why Facebook should buy Twitter

The Twitter logo is displayed on a screen on the floor of the NYSE
The Twitter logo is displayed on a screen on the floor of the NYSE

The suitors fell one by one. Disney. Alphabet. Salesforce.

Now, it seems no one wants to buy Twitter.

There is an obvious solution, though, and it would create a perfect new product. Facebook should buy Twitter, and roll it up with its Live video offering.

Facebook’s transformation from a free social-networking website for desktop web browsers into an ecosystem of mobile apps is one of the most remarkable business and technology success stories of the last century. And yet, Facebook wants more. Facebook is a machine for capturing attention, but it has not managed to capture some key categories of the attention market, most notably “Live.”

There is a reason that it wants the Live market. Live is a specific category of media that relies on the frisson of knowing that you’re being shown things as they happen, in real time. The immediacy of live events can generate a more focused kind of attention than the kind of continuous partial attention that most people give to their social media timelines. And as a result, Facebook Live video streams generate more engagement than other kinds of posts, including non-Live video. Facebook believes its engagement data, so it has begun to push hard for more Live video.

“Live is just one part of our overall video effort, but we think it has a lot of potential,” Mark Zuckerberg said earlier this year. “Friends go Live because it’s unfiltered and personal. Actors and news anchors go Live because they can reach bigger audiences in some cases than they can on even their own shows.”

Live has also become the go-to platform for streaming police brutality.

Live video has taken off among media companies (which are, in some cases, paid by Facebook to make content) and some individuals. Some feel that this is the next great bucket of audience attention that Facebook is opening up. But the truth is that Facebook Live, as a real-time video platform, doesn’t work very well. It’s hard to find compelling stuff. Doing Live video is really, really hard.

More significantly, the idea of the Facebook timeline militates against “Liveness” and real-time storytelling. The whole point of the algorithm is to show you the best stuff, and it’s rare that a Live video actually meets that threshold. Live is not what the News Feed does.

Getty Images
Getty Images

Facebook’s News Feed is about relevance, showing you the post you want to see out of all the thousands that you might be shown. And it’s unbelievably successful at that. But the software that underpins News Feed often falls down when it comes to providing real-time updates. So, Facebook is a place where your friend’s post about making guacamole for the Warriors game gets shown to you in the fourth quarter.

That’s okay! In fact, it’s kind of the point. The fundamental product of the News Feed is about what is happening, not when it’s happening. And Facebook has years worth of data showing that users prefer their feeds ranked in order of relevance, rather than chronologically.

But there is a place where Live video makes a ton of sense. A place that has built a whole business around being a real-time news and conversation engine for the world. That place is Twitter. Where do NBA players post updates? Twitter. Where do celebrities feud, and politicians battle over policy positions? Twitter. Where do people discuss television shows and sports games as they’re being broadcast live? Twitter.

Twitter CEO Jack Dorsey made the point that Twitter is still the best at real-time media earlier this year during a rough earnings call:

Twitter has always been the best place to see what’s happening immediately, to see what’s happening instantly, and to bring people together around a particular shared experience. And as we talked about last time we think the easiest way to get what Twitter is, is really to show a live event; show people the great accounts who are providing insight that you can’t find anywhere else, you can’t find in your address book but you actually meet on Twitter through that experience, to connect them through a Follow and also to encourage them in a conversation.

AP Images
AP Images

He’s right: The people making the culture are on Twitter, making and talking about that culture in real-time.

Imagine, then, a Facebook-owned product called “Now.” You pair the Twitter timeline, showing you the real-time global text conversation, based on a list of people you follow, with the best of Live video from around the world. This would be the best real-time media product imaginable, especially with Facebook’s corporate muscle behind it.

For Facebook, a Twitter purchase would join a long line of strategic acquisitions made to enhance the company’s core capabilities. When Facebook bought Instagram, it didn’t just want the app’s users—Instagram brought deep, native knowledge of the mobile game into the Facebook house, where it could be used to enhance Facebook’s primary app. Same with WhatsApp, which was purchased, in part, to augment Facebook’s knowledge about the messaging world.

Twitter would bring deep experience with the real-time world to Facebook. And as a nice bonus, Twitter would bring in a squadron of elite power users from across the celebrity and media landscape, who have gotten used to reaching their fans on Twitter.

For hardcore Twitter users, a Facebook acquisition would be something to celebrate. In the past several years, as Twitter has bounced from strategy to strategy in an attempt to chase user growth and justify its value to investors, the core Twitter experience has gotten a little schizophrenic—Twitter Moments appearing one day, hearts replacing stars the next, autoplaying Periscope video suddenly appearing in feeds, axing Vine, weird decisions about reply threads, and so on. (As our Felix Salmon pointed out last year, Twitter’s push for mass market growth “comes at the expense of some of the characteristics which cause its most active users…to love and value it.”)

But if Facebook bought it, Twitter wouldn’t have to change at all—it would simply become the backbone of Facebook’s Live offerings, and fill a niche that Facebook has had trouble building on its own. For the mainstream Facebook user, there would be Live Video. For people who wanted in on the real-time text conversation, there’d be the timeline formerly known as Twitter. Rather than trying to become something it is not, Twitter could double down on the core real-time components of its experience, while attaching itself to the most powerful mobile ad infrastructure in the world.

Why a strengthening dollar is bad for the world economy

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Zippier growth in the world’s largest economy sounds like something to welcome. A widely cited precedent is Ronald Reagan’s first term as president, a time of widening budget deficits and high interest rates, during which the dollar surged. That episode caused trouble abroad and this time could be more complicated still. Although America’s economy makes up a smaller share of the world economy, global financial and credit markets have exploded in size. The greenback has become more pivotal. That makes a stronger dollar more dangerous for the world and for America.

Novus ordo seclorum

America’s relative clout as a trading power has been in steady decline: the number of countries for which it is the biggest export market dropped from 44 in 1994 to 32 two decades later. But the dollar’s supremacy as a means of exchange and a store of value remains unchallenged. Some aspects of the greenback’s power are clear to see. By one estimate in 2014 a de facto dollar zone, comprising America and countries whose currencies move in line with the greenback, encompassed perhaps 60% of the world’s population and 60% of its GDP.

Other elements are less visible. The amount of dollar financing that takes place beyond America’s shores has surged in recent years. As emerging markets grow richer and hungrier for finance, so does their demand for dollars. Since the financial crisis, low interest rates in America have led pension funds to look for decent yields elsewhere. They have rushed to buy dollar-denominated bonds issued in unlikely places, such as Mozambique and Zambia, as well as those issued by biggish emerging-market firms. These issuers were all too happy to borrow in dollars at lower rates than prevailed at home. By last year this kind of dollar debt amounted to almost $10trn, a third of it in emerging markets, according to the Bank for International Settlements, a forum for central bankers.

When the dollar rises, so does the cost of servicing those debts. But the pain caused by a stronger greenback stretches well beyond its direct effect on dollar borrowers. That is because cheap offshore borrowing has in many cases caused an increased supply of local credit. Capital inflows push up local asset prices, encouraging further borrowing. Not every dollar borrowed by emerging-market firms has been used to invest; some of the money ended up in bank accounts (where it can be lent out again) or financed other firms.

A strengthening dollar sends this cycle into reverse. As the greenback rises, borrowers husband cash to service the increasing cost of their own debts. As capital flows out, asset prices fall. The upshot is that credit conditions in lots of places outside America are bound ever more tightly to the fortunes of the dollar. It is no coincidence that some of the biggest losers against the dollar recently have been currencies in countries, such as Brazil, Chile and Turkey, with lots of dollar debts.

The eye of providence

There are lurking dangers in a stronger dollar for America, too. The trade deficit will widen as a strong currency squeezes exports and sucks in imports. In the Reagan era a soaring deficit stoked protectionism. This time America starts with a big deficit and one that has already been politicised, not least by Mr Trump, who sees it as evidence that the rules of international commerce are rigged in other countries’ favour. A bigger deficit raises the chances that he act on his threats to impose steep tariffs on imports from China and Mexico in an attempt to bring trade into balance. If Mr Trump succumbs to his protectionist instincts, the consequences would be disastrous for all.

Much naturally depends on where the dollar goes from here. Many investors are sanguine. The greenback is starting to look dear against its peers. The Fed has a record of backing away from rate rises if there is trouble in emerging markets. Yet currencies often move far away from fundamental values for long periods. Nor is it obvious where investors fleeing America’s currency might run to. The euro and the yuan, the two pretenders to the dollar’s crown, have deep-seated problems of their own. The Fed, whose next rate-setting meeting comes this month, may find it harder than before to avoid tightening in an economy that is heating up.

If the dollar stays strong, might protectionist pressure be defused by co-ordinated international action? Nascent talk of a new pact to rival the Plaza Accord, an agreement in 1985 between America, Japan, Britain, France and West Germany to push the dollar down again, looks misplaced. Japan and Europe are battling low inflation and are none too keen on stronger currencies, let alone on the tighter monetary policies that would be needed to secure them.

Stockmarkets in America have rallied on the prospect of stronger growth. They are being too cavalier. The global economy is weak and the dollar’s muscle will enfeeble it further.

Italy’s Brexit moment? The complex constitutional referendum that could rock Europe.

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On June 23, a referendum in Britain produced a dramatic result: The United Kingdom would become the first European Union member to leave the supranational institution that some credit as the glue that has kept postwar Europe together.

This weekend, another less-heralded referendum could mark another blow to Europe’s status quo. Italians will go vote Sunday on whether to amend the Italian constitution to reform the country’s parliament and the way its governments are created.

While it may sound remarkably technocratic and complicated, the Italian referendum could have a huge effect in both symbolic and practical terms upon all of Europe. Here’s our guide.

Why is Italy having a referendum?

When Prime Minister Matteo Renzi came to power in 2014, he promised to reform Italian politics and get the economy booming. With the support of his center-left Democratic Party, he introduced a parliamentary bill that attempted to alter Italy’s 1947 constitution. The prime minister and his allies argued the constitutional changes would streamline the country’s legislative process, while his critics note that it would take away many powers from Italy’s parliament and put them in the hands of the prime minister.

The highly contested bill finally passed through parliament earlier this year, but it didn’t receive the qualified two-thirds majority of votes needed to change the constitution. So, Renzi had to seek a referendum. After Italy’s Court of Cassation approved the referendum in August, the vote’s date was set for Dec. 4.

It will be Italy’s third constitutional referendum: In 2001 voters approved changes to the constitution, but in 2006, proposals were rejected.

What exactly are Italians voting on?

Unlike the Brexit vote, which was a seemingly simple question about E.U. membership (though maybe not so simple in practical terms), Italians on Sunday will be voting on a complicated package of changes to the way Italy’s democracy functions. It’s actually so complicated that one Italian start-up has been offering classes for how to understand the referendum. They cost around $154 an hour, according to the Telegraph.

Perhaps the most important change is relatively easy to understand. The idea is to move Italy from a perfect bicameral system, where the lower Chamber of Deputies and upper Senate are roughly equal, to one where the Chamber of Deputies holds the majority of power and the Senate has vastly reduced powers.

The number of Senators will be dropped from 315 to 100: 95 would be selected by the government from regional councils and include some mayors and the other five would be appointed by Italy’s president. Under this system, the Senate would take on a consultative role and the Chamber of Deputies would have the final say on a variety of legislation, including the budget, though the Senate would still have equal powers in some limited areas like constitutional reform.

There are other aspects of the proposal that are also important, however. One major one would attempt to clarify the balance of power between the regions and the central government, largely granting the former more control. Then there’s also the separate, but deeply intertwined, issue of Italicum, Renzi’s new electoral system for the Chamber of Deputies.

Italicum? What’s that?

Renzi was the leading proponent of a new electoral system dubbed “Italicum,” which would change the way voting for the Chamber of Deputies worked, creating a two-round voting system that could give a bonus number of seats to whichever party wins more than 40 percent of seats. The system effectively means that a party will be able to hold a majority in the Chamber of Deputies without winning a majority of seats. It seems designed to create a true two party system, like that of the United States or Britain.

This voting system was approved last year, but it was not designed to apply to the Senate. If Renzi loses the referendum and the Senate retains its considerable power, it will have to be dramatically reconsidered.

Why does Renzi want to do all this?

The sympathetic answer: Italy’s democracy has long been accused of making slow progress on legislation. In particular, the constitution, drawn up after the fascist rule of Mussolini at a politically contentious time in Italy, makes it necessary for a government to have strong support in both houses of parliament, which effectively have the same power.

Without the support of both houses, Italian governments can be remarkably short-lived. In the 70 years since the constitution was put in place, there have been 65 governments. Only one has served a full five-year term. Meanwhile, legislation can end up lost in limbo indefinitely. The proposed changes would not only make it easier to form a government, but make it simpler for that government to implement legislation. Renzi believes this would make Italy stronger politically, which would in turn boost the country’s uninspiring economic performance.

The unsympathetic answer: Renzi, a headstrong politician already, wants to remove the checks and balances imposed on the prime minister’s office, at a time when smaller anti-establishment parties like Beppe Grillo’s Five Star Movement are challenging his power.

Wait, what is the Five Star Movement and why does it oppose Renzi?

It’s a far from perfect comparison in many ways — the Five Star Movement is usually described as left-leaning, for one thing — but Grillo’s anti-establishment and anti-corruption message certainly has the potential to upend Italian politics in the same way that Donald Trump did during the recent U.S. election or Nigel Farage and others did during Britain’s Brexit vote. Grillo himself welcomed Trump’s election. “It is those who dare, the obstinate, the barbarians who will take the world forward,” he wrote on his blog. “We are the barbarians!”

Along with former prime minister Silvio Berlusconi’s Forza Italia (which actually led an attempt to make constitutional changes in 2006, but lost their own referendum), the Five Star Movement has become one of the main voices speaking out against the referendum, using it as a tool to criticize Renzi’s government. To make matters worse, Renzi has suggested he would resign if he loses the referendum, effectively making it a plebiscite on his leadership at a time when many Italians are not so sure he is doing a good job.

So is this Brexit, Part 2?

Not exactly. There are as many differences as similarities. Most obviously, the referendum isn’t actually directly related to the E.U. at all. And as much as it is widely seen as a populist revolt, some members of the Italian political elite, including former prime minister Mario Monti and members of the Democratic Party, have campaigned for the “no” vote.

In particular, it’s worth pointing out that the populist Five Star Movement is actually campaigning against dramatic change here. And remarkably, some view the rise of the Five Star Movement as a reason to keep the system they have already, should Grillo be able to form a government at some point.

But the symbolic value of the vote could be huge for the E.U. To many, it will be yet another populist uprising, after Trump and Brexit and ahead of a French election next year that many suspect the National Front’s Marine Le Pen could win (the vote takes place on the same day that a far-right candidate could win presidential office in Austria). The vote may be seen as a mark of approval for Grillo, who has said he wants a referendum on leaving the euro, though he has stopped short of saying Italy should leave the E.U. itself.

And while Renzi styled himself as a “Demolition Man,” willing to stand up to Brussels and hoping to reform the country, he’s now seen as key defender of European values in the E.U.’s fourth largest economy. Italy’s business groups and investors tend to support the “yes” vote in the referendum, like their counterparts supported the “remain” vote with Brexit.

What will happen on Sunday?

Because of Italian law, the last polls on the referendum were released Nov. 18. They largely showed that the “no” vote had the edge, though many experts caution that this shouldn’t be taken as a sign that the outcome is set in stone: A lot can change in two weeks, and there remain a large amount of undecided voters.

If Renzi does win the referendum, it will be a key win for an ambitious politician — and possibly a good sign for his chances in elections due in 2018. (Renzi became prime minister in 2014 without election.) However, it remains possible that Italy’s Constitutional Court could reject Renzi’s electoral reform or seek to alter it, which would be a loss for the prime minister though likely one he could survive.

If the “no” vote wins, Renzi has repeatedly said he will resign as prime minister, much like David Cameron, the British prime minister who called Britain’s Brexit referendum. Unlike Cameron, however, he is widely expected to continue working on the front lines of politics. In the chaos that follows, Italy’s banks — already in real trouble — are expected to take a hit. It’s also possible new elections could be called — and some recent polls showed that Grillo and the Five Star Movement may be the most popular party in the country.

JAMES GILLINGHAM

Boris Johnson has defended his ‘semi-parodic’ pro-EU article

Yana Paskova / Stringer
Yana Paskova / Stringer

Boris Johnson has dismissed an article he wrote in favour of Britain staying in the EU as “semi-parodic.”

Johnson, who campaigned fiercely in support of Brexit, wrote the unpublished article just two days before announcing his alliance with the Leave camp.

In the pro-EU article, published in a new book and the Sunday Times, he supported membership of the free-trade zone and insisted that Britain’s membership of the 28-nation bloc is a “boon for the world and Europe.”

“This is a market on our doorstep, ready for further exploitation by British firms,” he wrote on February 19.

” The membership fee seems rather small for all that access. Why are we so determined to turn our back on it?”

The foreign secretary’s article for the Telegraph also foresaw the “economic shock” that has since seen the pound fall to historic lows.

He has since defended his comments. Speaking to the press outside his home in London, he explained that he was “wrestling” with the situation and had not taken a stance at the time of writing.

“I wrote a long piece which came down overwhelmingly in favour of leaving,” he said. “I then thought I better see if I can make an alternative case to myself.”

“I set them side-by-side and it was blindingly obvious what the right thing to do was, and I think the people made the right decision.”

The previously unseen article has been published in a new book by the Sunday Times political editor, Tim Shipman, called “All Out War: The Full Story of How Brexit Sank Britain’s Political Class.”

In the weeks running up to the referendum, the foreign secretary became one of the most prominent and recognisable Leave campaigners.

The article also urged voters to “think of the future.” Johnson wrote: “Think of the desire of your children and your grandchildren to live and work in other European countries; to sell things there, to make friends and perhaps to find partners there.”