The pace of recovery in Gulf oil exports has accelerated, with crude flows recovering 82 percent of their pre-war levels, a development that contributed to changing the International Energy Agency’s expectations of the market’s path, from a deficit to recording a surplus in supply during the last quarter of this year.
The agency expected the global oil market to return to record surplus supply during the last quarter of this year, driven by a faster-than-expected recovery in Gulf oil exports, despite the continued attacks on oil tankers and tensions related to the war on Iran. It expected that average global supplies would reach 105 million barrels per day in the fourth quarter, exceeding demand by about 1.7 million barrels per day, in a shift from its previous expectations that indicated a deficit in the market.
The improvement came with global supplies rising to 105.4 million barrels per day in October, an increase of 2.3 million barrels per day from September, while Gulf oil exports, excluding Oman, reached 18.4 million barrels per day. That is, about 26 percent less than pre-war levels.
On the other hand, the agency expected global demand for oil to decline by 2.7 million barrels per day during 2026, to 102.3 million barrels per day, due to rising prices and supply disruptions. It is also expected that the surplus supply will expand to 3.8 million barrels per day in 2027, with the recovery of Gulf production and an increase in supplies from outside the “OPEC Plus” group.
US Treasury Secretary Scott Besent called on the Federal Reserve to be flexible and not raise interest rates in response to the energy supply crisis resulting from the war on Iran, warning that excessive monetary policy tightening in light of a temporary crisis may be based on misleading indicators, at a time when the US economy still enjoys strong strength.
In an interview with CNBC on Friday, Besant said that the Council must realize that the current pressures are resulting from a crisis in energy supplies, adding that raising interest rates sharply while the crisis is heading toward subsiding may lead to decisions based on an inaccurate reading of economic conditions.
He added: “The Council is supposed to look to the future, and not look in the rearview mirror,” indicating the necessity of not basing monetary policy decisions on the repercussions of the current energy shock alone.
Besant stressed that he does not intend to dictate what the Council should do, but stressed the need for monetary policy makers to remain open to various possibilities. He said that if he had been a member of the Council, he would not have chosen the sharp shift towards tightening monetary policy due to a crisis in energy supplies, but he indicated that he is not a member of it.
Besant's statements come at a time when the economic indicators on which the Fed relies in determining the interest rate's path vary. The US jobs report, which came stronger than expected last week, reinforced the justifications for continuing monetary tightening, after these expectations partially declined in the wake of a wave of selling in the stock market, and fears that weak demand related to artificial intelligence will weaken economic activity.
The Federal Reserve kept interest rates unchanged last month, while Council Chairman Kevin Warsh said that monetary policy makers will continue to follow economic data to determine whether there is a need for further tightening.
Besant pointed out that the Council reduced interest rates three times during the same period last year, considering that the shift now toward sharp increases just to deal with the energy supply crisis is not the path he would have followed if he had been a member of the Monetary Policy Committee.
The new round of negotiations between Lebanon and the International Monetary Fund did not open the way to reaching a preliminary agreement at the staff level, despite progress in narrowing differences over the required reforms, as a fundamental obstacle emerged related to the need to match financial obligations to depositors with the capabilities available to the state and the Bank of Lebanon. While the two parties agreed to intensify work to complete the financial gap law, and to unify the formula that will be referred to the House of Representatives, the time limit set for completing the required legislation appears to be subject to extension again, which makes it likely that the signing of the financing program amounting to about 4 billion dollars will be postponed.
The four-day round of negotiations in Beirut between the IMF mission and the Lebanese authorities concluded that more time was needed to complete the legislative and procedural requirements necessary to reach a joint agreement that supports structural reforms and opens the way for the financing program. Thus, the progress achieved in the discussions did not lead to renewing the agreement between the two working groups, amid the continued need to address a number of outstanding issues before moving to the final agreement stage.
Following the opening session of negotiations at the beginning of this week, Finance Minister Yassin Jaber expressed his hope of reaching an initial agreement with the IMF during the same week. He stressed that the approval of the Financial Gap Law represents the basic entry point to begin addressing the banking crisis, and that its failure to approve it constitutes an obstacle preventing the transition to the stage of agreeing on a program with the Fund.
For her part, International Monetary Fund spokeswoman Julie Kozak said on Thursday that a team of Fund experts had begun a mission in Lebanon to discuss the strategy for restructuring the banking sector, without clarifying whether reaching a preliminary agreement was imminent.
She added that the Fund's mission in Beirut continues to hold intensive discussions with the Lebanese authorities, with the aim of developing a comprehensive reform program that will restore financial stability and support economic recovery. She indicated that the Fund team will provide further updates on the mission upon its conclusion.
The results of the round are “satisfactory” for the Lebanese side
While urgent technical complications prevented the early issuance of the final statement by the Fund mission, the results of the round appeared to be somewhat “satisfactory” to the Lebanese side, according to information obtained by Asharq Al-Awsat from a senior financial official, despite the inability to transfer the progress achieved in keeping pace with the desired reforms, according to the Fund mission’s admission, to renewing the joint agreement at the level of the two working groups. The most notable achievement was the agreement to form a tripartite committee that includes the Ministry of Finance and the Bank of Lebanon, in coordination with the Fund, to work on a consensual and joint formulation of the draft financial gap law, paving the way for the completion of discussions on one of the most important conditions for reaching the agreement.
Additional convergence of views
The discussions revealed an additional convergence of views, but it remained conditional, according to the observations of the Fund’s experts, on the necessity of verifying in advance the financial capabilities available and expected in the future, before approving any general financial commitments for the benefit of rights holders. This condition aims to ensure the ability to fulfill these obligations, and to avoid the emergence of new crises that may be more severe if it is not possible to adhere to them.
The delegation placed matching financial capabilities with obligations at the level of importance of accelerating the approval of basic legislation, represented by the “Restoring Financial Regularity and Deposit Recovery” Law. He stressed the necessity of completing this path within a period not exceeding six months, starting immediately and extending until the end of the current year, through participatory treatment of the gaps and obstacles between the executive and monetary authorities, before moving to the legislative authority, in preparation for referring an integrated and consensual draft law to the House of Representatives.
The complexities of the draft “financial gap” law, according to a concerned official who spoke to Asharq Al-Awsat, go beyond the issue of determining the mechanisms for repaying depositors’ funds, starting from the guaranteed amount of $100,000 in cash, all the way to how the deferred payment bonds cover the amounts that exceed this ceiling, which is estimated at about $60 billion. These complications extend to determining the state’s contribution to paying its debts owed to the Bank of Lebanon, which requires agreement between the two parties on the final value of these obligations. In addition to this, there are legal caveats and political tensions surrounding the possibility of using part of the gold reserves, whether to sell part of it and liquidate it or to use it as a guarantee for securities allocated to depositors.
Taking into account the factors of the difficult situation existing in the country, including sovereign, political and security files, which the Fund’s mission is well aware of, the concerned official is likely to extend the deadlines later beyond the middle of next year, which means the continuation of work on the Central Bank’s circulars, as a means of installments to return parts of deposits, pending the approval of the desired law.
The Minister of Finance confirmed that the new round of negotiations had made progress in narrowing the gap between the parties concerned, in light of discussions that he described as frank and witnessed mutual understanding, indicating that efforts were focused on addressing the banking crisis that has been ongoing for seven years.
Jaber quoted the head of the International Monetary Fund mission, Ernesto Ramirez Rigo, as describing the Lebanese financial crisis as an “unprecedented case” of a banking crisis that has continued without treatment for all these years.
The Minister of Finance indicated the formation of a small committee to continue meetings and complete the required formulas before the end of the current year, with the aim of reaching a unified position and a common formula to be referred to the House of Representatives, thus facilitating the adoption of the financial gap law. He expressed his hope that an enforceable law would be completed before next March.
Regarding the agreement with the IMF, Jaber expressed his aspiration to make progress that would allow reaching an agreement on a financing program and signing it during the first quarter of next year, or by the end of the year at the latest. He explained that the details of the treatment are still under discussion, and that it is based on two basic goals: reactivating the banking sector in a way that contributes to supporting economic development and restoring confidence in banks, and starting to return depositors’ money.
