• 4 minutes Pompeo: Aramco Attacks Are An "Act Of War" By Iran
  • 7 minutes Who Really Benefits From The "Iran Attacked Saudi Arabia" Narrative?
  • 11 minutes Trump Will Win In 2020
  • 15 minutes Experts review Saudi damage photos. Say Said is need to do a lot of explaining.
  • 7 hours Ethanol is the SAVIOR of the Oil Industry, Convenience Store Industry, Automotive Supply Chain Industry and Much More!
  • 1 hour Ethanol, the Perfect Home Remedy for A Saudi Oil Fever
  • 6 hours Instagram Now Banning Photos Of People At Gun Ranges, Claiming They Promote "Violence"
  • 2 hours Let's shut down dissent like The Conversation in Australia
  • 2 hours Pepe Escobar: “How The Houthis Overturned The Chessboard”
  • 12 hours Famous Manufacturer of Anti-Ethanol Additives Proves Ethanol's Safety and Benefits
  • 18 hours Collateral Damage: Saudi Disruption Leaves Canada's Biggest Refinery Vulnerable
  • 1 day Hong Kong protesters appeal to Trump for support.
  • 1 day Saudi State-of-Art Defense System looking the wrong way. MBS must fire Defense Minister. Oh, MBS is Defense Minister. Forget about it.
  • 14 hours Trump Accidentally Discusses Technology Used In The Border Wall
  • 10 hours US and China are already in a full economic war and this battle for global hegemony is a little bit frightening
  • 15 hours One of the fire satellite pictures showed what look like the fire hit outside the main oil complex. Like it hit storage or pipeline facility. Not big deal.

Oil Price Rise Not Enough: Angola Ditches U.S. Dollar Peg

Angola

To offset the decline in its foreign currency reserves, OPEC member Angola—which relies on oil for 90 percent of government revenues—is ditching its currency peg to the U.S. dollar and will allow a more flexible exchange rate regime with the currency trading within a band.

Since the oil price crash of 2014, Angola’s economy has suffered badly, and its foreign reserves have dwindled.

Now Angola is trying to protect foreign reserves and is joining other oil producing nations that have devalued or floated their currencies to protect FX reserves, such as Russia, Kazakhstan, and Nigeria.

Since the oil prices tumbled in 2014, Angola’s currency—the kwanza—has already lost 40 percent of its value and is 166/$1.00, but according to analysts, the kwanza is still overvalued.

On the black market, the kwanza is 430/$1.00, and dollars are scarce, making companies struggle to pay foreign employees and international suppliers.

Even with oil prices rising in recent months, there has been “little evidence of the pressure on reserves subsiding,” Cobus de Hart, senior economist at South Africa-based research firm NKC African Economics, told CNBC.

The new ‘trading band’ exchange regime could lead to the kwanza devaluing by 30 percent, Kaan Nazli, senior economist at investment management firm Neuberger Berman, told Reuters

Related: Can Norway Survive Without Big Oil?

The lower-for-longer oil prices have not only battered Angola’s oil revenues and foreign reserves, but they have also led to a standstill in upstream investment, because reserves and developments are in deepwater and ultra-deep waters, which require higher oil prices for breakevens. No new projects have been sanctioned since 2014 and exploration is at a standstill, Wood Mackenzie says. 

Big Oil and major oilfield service companies have started to reshuffle operations and renegotiate service contracts in Angola, due to the higher production costs, bureaucracy, and slow decision-making by state oil firm Sonangol, The Wall Street Journal reported in December 2017.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play