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Qatar will pull out of OPEC amid tension with Saudi Arabia

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Qatar will pull out of OPEC amid tension with Saudi Arabia

DUBAI, United Arab Emirates (AP) — The tiny, energy-rich Arab nation of Qatar announced on Monday it will withdraw from OPEC in January, mixing its aspirations to increase production outside of the cartel’s constraints with the politics of slighting the Saudi-dominated group amid the kingdom’s boycott of Doha.

The surprise announcement from Qatar’s minister of state for energy affairs, Saad Sherida al-Kaabi, again throws into question the role of the cartel after needing non-members to push through a production cut in 2016 after prices crashed below $30 a barrel.

It also marks the first time a Mideast nation has left the cartel since its founding in 1960.

In a statement, al-Kaabi said Qatar, the world’s largest exporter of liquified natural gas, planned to increase its exports from 77 million tons of gas per year to 110 million tons. He also said Qatar wants to raise its oil production.

“In light of such efforts and plans, and in our pursuit to strengthen Qatar’s position as a reliable and trustworthy energy supplier across the globe, we had to take steps to review Qatar’s role and contributions on the international energy scene,” al-Kaabi said in a statement.

There was no immediate comment from Vienna-based OPEC, which is to meet this month and discuss possible production cuts. In November, Saudi Energy Minister Khalid al-Falih said OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market.

Qatar produces only some 600,000 barrels of crude oil a day, making it OPEC’s 11th biggest producer. The loss of production, under 2 percent of overall OPEC supply a day, won’t greatly affect the cartel’s position in the market.

Anas Alhajji, an oil analyst, said Qatar’s decision “has no impact on the market either way whether they’re in or they’re out.”

“The cost for them is higher than the benefit” of remaining in OPEC, Alhajji said. “This is just like shutting down a losing business.”

Qatar, a country of 2.6 million people where citizens make up over 10 percent of the population, discovered its offshore North Field gas deposit in 1971, the same year it became independent.

It took years for engineers to discover the field’s vast reserves, which shot Qatar to No. 3 in world rankings, behind Russia and Iran, with which it shares the North Field. It’s also made the country fantastically wealthy, sparking its successful bid for the 2022 FIFA World Cup.

Qatar’s wealth also has seen it take on a larger importance in international politics. Its political stances, often supporting Islamists, have drawn the ire of its neighbors, particularly Saudi Arabia, OPEC’s largest exporter.

In June 2017, Bahrain, Egypt, Saudi Arabia and the United Arab Emirates cut ties to Qatar in a political dispute that continues to this day. They also launched an economic boycott, stopping Qatar Airways flights from using their airspace, closing off the small country’s sole land border with Saudi Arabia and blocking its ships from using their ports.

They say the crisis stems from Qatar’s support for extremist groups in the region, charges denied by Doha. The four nations have also pointed to Qatar’s close relationship with Iran, with which its massive offshore gas field. Qatar restored full diplomatic ties to Iran amid the dispute.

OPEC, or the Organization of the Petroleum Exporting Countries, was formed in 1960 as a reaction to Western domination of the oil industry.

Qatar was the first nation outside of its founding members to join the cartel, entering its ranks in 1961. Qatar is a nation about the size of the U.S. state of Connecticut, which juts out from the Arabian Peninsula into the Persian Gulf. It hosts the al-Udeid Air Base, the home of the forward headquarters of the U.S. military’s Central Command and some 10,000 American troops.

With Qatar, OPEC had 15 members, including Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates and Venezuela. OPEC nations like Ecuador, Gabon and Indonesia have either withdrawn or suspended their membership in the past, only later to rejoin. Qatar could potentially do the same.

OPEC sets production targets for its members in an effort to control the price of oil available on the global market. However in recent years, oil-producing nations outside of the group like the United States and Russia have played a larger role in affecting prices.

Among its members, Saudi Arabia is by far its largest oil exporter, hitting a record high in November of over 11 million barrels of oil a day.

President Donald Trump repeatedly has criticized both OPEC and American ally Saudi Arabia over rising oil prices in recent weeks, demanding a production hike to drive down U.S. gasoline prices. That rising supply, coupled with the Trump administration allowing many countries to continue to import Iranian oil despite his targeting of Tehran with sanctions, has seen global prices drop.

Benchmark Brent crude for instance reached over $85 a barrel in early October, only to drop sharply in the time since. It was over $61 a barrel in trading Monday.

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This story has been corrected to show that the name of the minister is Saad Sherida al-Kaabi.

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Economy

J&J hammered by report it knew of asbestos in baby powder

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J&J hammered by report it knew of asbestos in baby powder

NEW YORK (AP) — Johnson & Johnson is forcefully denying a media report that it knew for decades about the existence of trace amounts of asbestos in its baby powder.

The report Friday by the Reuters news service sent company shares into a tailspin, suffering their worst sell-off in 16 years.

Reuters is citing documents released as part of a lawsuit by plaintiffs claiming that the product can be linked to ovarian cancer. The New Brunswick, New Jersey company has battled in court against such claims and on Friday called the Reuters report, “one-sided, false and inflammatory.”

Shares are down more than 9 percent, the most severe decline since 2002.

In the report, Reuters points out that documents show consulting labs as early as 1957 and 1958 found asbestos in J&J talc. Further reports by the company and outside labs showed similar findings through the early 2000s.

In its statement Friday, Johnson & Johnson said “thousands of independent tests by regulators and the world’s leading labs prove our baby powder has never contained asbestos.”

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Fed survey cites rising concerns about trade tariffs

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Fed survey cites rising concerns about trade tariffs

WASHINGTON (AP) — The Federal Reserve said Wednesday that the U.S. economy was growing in the fall, but there were concerns about higher tariffs from a widening trade war, rising interest rates and tight labor markets.

In its latest report on economic conditions around the country, the Fed said that most of its 12 regions saw moderate growth through late November. Dallas and Philadelphia said growth had slowed, while St. Louis and Kansas City depicted growth as slight.

The report, known as the beige book, found that optimism about the future had waned somewhat, with business contacts citing “increased uncertainty.”

The survey will used at the Fed’s next meeting on Dec. 18-19. The central bank is widely expected to boost its benchmark rate for a fourth time this year at that meeting.

The beige book report noted problems the higher tariffs from Trump’s get-tough approach to trade were causing: rising costs for manufacturers, weaker sales at companies and farmers hurt by retaliatory tariffs imposed by China and other nations.

Even with the tariff concerns, the beige book said most districts continued to report moderate growth in manufacturing.

The impact of rising interest rates affected interest-rate sensitive sectors such as housing, with the beige book noting that new home construction and sales of existing homes were either holding steady or experiencing slight declines.

The Fed survey said that labor markets had tightened further across a broad range of occupations.

“Over half of the districts cited firms for which employment, production and sometimes capacity expansion had been constrained by an inability to attract and retain qualified workers,” the report said.

Unemployment fell in October to a 49-year low of 3.7 percent with economists forecasting further declines in the coming months. A key reason the Fed has been raising interest rates is to slow the economy to ensure that tight labor markets don’t unleash unwanted inflation pressures.

With labor markets already so tight, the Fed said that many districts were seeing examples of firms enhancing their nonwage benefits, including health benefits, profit-sharing, bonuses and paid vacation days.

Despite the wage pressures, the report said that prices continued to increase at a modest pace in most districts although reports of tariff-inducted cost increases have spread more broadly in such areas as manufacturing, retailing and restaurants.

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White House intensifies confusion and fear on US-China deal

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White House intensifies confusion and fear on US-China deal

WASHINGTON (AP) — The Trump administration raised doubts Tuesday about the substance of a U.S.-China trade cease-fire, contributing to a broad stock market plunge and intensifying fears of a global economic slowdown.

Investors had initially welcomed the truce that the administration said was reached over the weekend in Argentina between Presidents Donald Trump and Xi Jinping — and sent stocks up Monday. But on Tuesday, after a series of confusing and conflicting words from Trump and some senior officials, stocks tumbled, with the Dow Jones shedding about 800 points, or 3.1 percent.

White House aides have struggled to explain the details of what the two countries actually agreed on. And China has not confirmed that it made most of the concessions that the Trump administration has claimed.

“The sense is that there’s less and less agreement between the two sides about what actually took place,” said Willie Delwiche, an investment strategist at Baird. “There was a rally in the expectation that something had happened. The problem is that something turned out to be nothing.”

Other concerns contributed to the stock sell-off, including falling long-term bond yields. Those lower rates suggested that investors expect the U.S. economy to slow, along with global growth, and possibly fall into recession in the coming year or two.

John Williams, president of the Federal Reserve Bank of New York, also unnerved investors by telling reporters Tuesday that he supports further Fed rate hikes. His remarks renewed fears that the Fed may miscalculate and raise rates so high or so fast as to depress growth.

The disarray surrounding the China deal coincides with a global economy that faces other challenges: Britain is struggling to negotiate its exit from the European Union. Italy’s government is seeking to spend and borrow more, which could elevate interest rates and stifle growth.

And in the United States, home sales have fallen sharply in the past year as mortgage rates have jumped.

Trump and White House aides have promoted the apparent U.S.-China agreement in Buenos Aires as a historic breakthrough that would ease trade tensions and potentially reduce tariffs. They announced that China had agreed to buy many more American products and to negotiate over the administration’s assertions that Beijing steals American technology. But by Tuesday morning, Trump was renewing his tariff threats in a series of tweets.

“President Xi and I want this deal to happen, and it probably will,” Trump tweeted. “But if not remember, I am a Tariff Man. When people or countries come in to raid the great wealth of our Nation, I want them to pay for the privilege of doing so.”

Trump added that a 90-day timetable for negotiators to reach a deeper agreement had begun and that his aides would see “whether or not a REAL deal with China is actually possible.”

He revisited the issue later Tuesday with a tweet that said: “We are either going to have a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal – either now or into the future. China does not want Tariffs!”

The president’s words had the effect of making the weekend agreement, already a vague and uncertain one, seem even less likely to produce a long-lasting trade accord.

“We expect the relationship between the world’s two largest economies to remain contentious,” Moody’s Investors Service said in a report. “Narrow agreements and modest concessions in their ongoing trade dispute will not bridge the wide gulf in their respective economic, political and strategic interests.”

Among the conflicting assertions that White House officials made was over whether China had actually agreed to drop its 40 percent tariffs on U.S. autos.

In addition, Treasury Secretary Steven Mnuchin said Tuesday on the Fox Business Network that China agreed to buy $1.2 trillion of U.S. products. But Mnuchin added, “If that’s real” — thereby raising some doubt — it would close the U.S. trade deficit with China, and “We have to have a negotiated agreement and have this on paper.”

Many economists have expressed skepticism that very much could be achieved to bridge the vast disagreements between the two countries in just 90 days.

“The actual amount of concrete progress made at this meeting appears to have been quite limited,” Alec Phillips and other economists at Goldman Sachs wrote in a research note.

During the talks in Buenos Aires, Trump agreed to delay a scheduled escalation in U.S. tariffs on many Chinese goods, from 10 percent to 25 percent, that had been set to take effect Jan. 1. Instead, the two sides are to negotiate over U.S. complaints about China’s trade practices, notably that it has used predatory tactics to try to achieve supremacy in technology. These practices, according to the administration and outside analysts, include stealing intellectual property and forcing companies to turn over technology to gain access to China’s market.

In return for the postponement in the higher U.S. tariffs, the White House said China had agreed to step up its purchases of U.S. farm, energy and industrial goods. Most economists noted that the two countries remain far apart on the sharpest areas of disagreement, which include Beijing’s subsidies for strategic Chinese industries, in addition to forced technology transfers and intellectual property theft.

Chief economic adviser Larry Kudlow acknowledged those challenges in remarks Tuesday morning.

“China’s discussed these things with the U.S. many times down through the years and the results have not been very good,” he said. “So this time around, as I said, I’m hopeful, we’re covering more ground than ever … So we’ll see.”

Complicating the challenge, Trump’s complaints strike at the heart of the Communist Party’s state-led economic model and its plans to elevate China to political and cultural leadership by creating global champions in robotics and other fields.

“It’s impossible for China to cancel its industry policies or major industry and technology development plans,” said economist Cui Fan of the University of International Business and Economics in Beijing.

Trump had tweeted Sunday that China agreed to “reduce and remove” its 40 percent tariff on cars imported from the U.S. Mnuchin said Monday that there was a “specific agreement” on the auto tariffs.

Yet Kudlow said later that there was no “specific agreement” regarding auto trade, though he added, “We expect those tariffs to go to zero.”

___

Associated Press writer Joe McDonald in Beijing contributed to this report.

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