Lebanon set to legalise medical, industrial cannabis cultivation

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Lebanon’s parliament is set to vote on a law that would legalise the cultivation of cannabis for medical and industrial use in an effort to boost its crippled economy and curb illicit production of the psychoactive plant.

The draft law, which has been endorsed by parliamentary committees and is now headed for a final vote, would only affect cannabis that contains less than one percent of the psychoactive compound tetrahydrocannabidinol, or THC.

THC gives cannabis the recreational effects that have made it the most widely used illicit substance across the globe. The World Health Organization (WHO) estimates that around 147 million people, or 2.5 percent of the world population, consume cannabis.

Lebanon has cultivated the plant for at least 100 years and produces large amounts of hashish, a sticky, sweet-smelling derivative of the cannabis plant that looks like chocolate. Though illegal to produce, sell or use, it is widely available locally and is also illegally exported.

Lebanese hashish can be found in European capitals, and formerly made up about 80 percent of the world’s supply during the country’s civil war years (1975-90) when cultivation was at its peak.

Instead of dealing with that market, this bill would seek to create a new one involving types of cannabis plants that have not traditionally been cultivated in Lebanon.

Member of parliament Yassine Jaber, who headed the subcommittee that drafted the law, said the bill was based on a 2019 report by United States-based consultancy McKinsey & Company that recommended Lebanon legalise cannabis production for “high-added-value medicinal products with export focus”.

Shortly afterwards, then-economy minister Raed Khoury said a legal cannabis sector in Lebanon could generate $1bn in revenue per year because the quality of Lebanon’s hashish was “one of the best in the world”.

“We have a competitive and a comparative advantage in the cannabis business,” Jaber told Al Jazeera. “Our soil is among the best in the world for this, and the cost of production is low compared to other states.”

Regulating the market
Dozens of countries around the world have allowed research in and production of medical cannabis in recent years, with studies repeatedly demonstrating the therapeutic effects of cannabinoids, a major chemical constituent of cannabis, for treatment of nausea and vomiting in terminal illnesses such as cancer and AIDS.

The WHO says it has also shown therapeutic uses for “asthma and glaucoma, as an antidepressant, appetite stimulant, anticonvulsant and anti-spasmodic”.

Other countries and regions have gone further and entirely legalised cannabis, including Uruguay, Georgia, South Africa, 10 US states and, most recently, Canada.

The draft law creates a commission with a regulatory authority that would issue licences for everything from importing seeds and saplings, establishing cannabis plant nurseries, planting and harvesting the crop, manufacturing goods from it and exporting its derivatives.

Licences can be awarded to Lebanese pharmaceutical companies, industries permitted to create industrial fibers, oils and extracts, and foreign companies that have a licence to work in the cannabis industry from their country of origin.

Additionally, licences can be awarded to specialised agricultural co-operatives established in Lebanon, Lebanese citizens such as farmers or landowners, and labs and research centres qualified to work with controlled substances.

‘Opportunity missed’
One of the draft law’s stated goals is to reduce pressure on Lebanon’s clogged court and prison system stemming from organised crime involving the local cannabis trade.

But instead of decriminalising consumption of the plant or reducing sentences, it calls for “strengthening criminal penalties on violations against the articles of this law”.

Between 3,000 and 4,000 people are arrested for drug crimes each year in Lebanon, the vast majority for the consumption of hashish, according to statistics from the Central Drug Enforcement Office.

The bill would also explicitly prohibit anyone with a criminal record from acquiring a licence to cultivate or work with the cannabis crop in any manner.

It would thereby exclude tens of thousands of people who have served time or have outstanding drug warrants for cultivation and use of cannabis, mostly in the fertile eastern Bekaa Valley region, where most of the crop is grown and processed.

This means that many farmers who have grown cannabis for generations would not be allowed to take part in the new legal sector.

“This law would legalise cultivation without taking into consideration the situation of persons who consume drugs, or those who produce them,” Karim Nammour, a lawyer with progressive NGO Legal Agenda who specialises in drug policy, told Al Jazeera.

“Its an opportunity missed – they have failed to take a holistic approach.”

Sandy Mteirik, a drug policy development manager at Skoun, a Lebanese nongovernmental organisation focused on drug rehabilitation and advocacy, also criticised the move.

“For sure this is not what the farmers of the Bekaa want,” she told Al Jazeera. “There is no clear mechanism to integrate the existing illegal market into the legal market. You can’t just ignore the implications and consequences of criminalising drug use and say this new market is the priority.”

Big companies, big business
Jaber said local farmers would be able to benefit from the sector once a long-awaited amnesty bill is passed expunging the criminal records of cannabis farmers and users, who he said should be seen as “victims”.

Prime Minister Hassan Diab’s government has committed to endorsing an amnesty bill, though who exactly would be included is not clear.

Jaber said the draft law was not meant to address the issue of decriminalising drug users. “One way or another, the state will have to deal with that because the prisons are full,” he told Al Jazeera.

However, he predicted the new legal cannabis market would move forward with or without the involvement of those who have been criminalised by the illegal sector.

“I think big companies will come and other farmers will come and it will be a big business,” he said.

But Nammour warned the law would create a two-tier system where elites benefit from the production of cannabis, while those who have traditionally grown it in impoverished areas will be unable to participate, and everyday Lebanese will be unable to consume any of its products.

He also warned the draft law left the door open to endemic corruption in Lebanon. The commission tasked with overseeing the sector is funded by the licences it issues, while it is at the same time supposed to regulate licensing and prevent a monopoly or oversupply in the market.


Undocumented in Lebanon: No papers, no coronavirus test


Hospitals on the front lines of Lebanon’s coronavirus outbreak have either turned away undocumented people or are setting prohibitively high costs for tests, leading them to fear for their health and wellbeing.

Al Jazeera spoke with two former domestic workers of Ethiopian origin who sought testing at Beirut’s Rafik Hariri University Hospital (RHUH), the main COVID-19 testing and treatment centre in the country.

Both said they were turned away because they did not have identification documents.

Many live-in migrant domestic workers in Lebanon are left without documents when they escape abusive employers, because of the pervasive practice of employers confiscating passports and IDs.

When asked for comment, a source at RHUH, who spoke on condition of anonymity due to the sensitivity of the matter, confirmed that the hospital’s policy was to turn away those without documents so long as they were not in need of emergency care.

“We must provide the state with the name of any person who we test, so that if it is positive we can inform both the state and the person. We can’t do that without a name,” the source said, adding that they could not rely simply on contact information.

“To be very clear, anyone who comes to us in an emergency condition and needs treatment will be given treatment, but if they are not an emergency case we can’t,” the source said.

Health Minister Hamad Hasan did not respond to a request for comment.

Meanwhile, an employee at the coronavirus ward of Beirut’s St George Hospital, one of the largest in the capital, told Al Jazeera that undocumented people would have to pay for testing themselves, at a cost of 750,000 Lebanese pounds (about $498).

It is a prohibitively high cost for people who struggle to pay for basic needs such as food and rent.

The employee said patients were first given blood and lung scans, then another more precise scan, and only then, if all indicators pointed towards the coronavirus, a COVID-19 test.

The test itself is available at some private clinics at a cost of about 150,000 Lebanese pounds (about $99).

As of Saturday, Lebanon had recorded 412 cases of COVID-19, with eight deaths and 27 recoveries, according to government statistics. At the current rate, the number of cases is doubling every five to six days.

Fear of spread
Tenteb, a 32-year-old former domestic worker who has lived in Lebanon for more than 10 years, told Al Jazeera she began feeling coronavirus-like symptoms – strong cough and headache – in early March.

“I got very scared, because I am living in a three-room apartment with 14 people,” she said, “all of them former domestic workers who either ran away from abusive employers or were laid off during Lebanon’s economic crisis.”

An estimated 250,000 domestic workers reside in Lebanon, coming from a host of African and Southeast Asian countries.

Most earned monthly wages equating to between $150 and $250 before Lebanon began its slide into economic and financial crisis in 2019.

The subsequent depreciation of the local currency by more than 40 percent has in turn slashed the value of their wages, and many Lebanese employers have cited the economic crisis as a reason to pay domestic workers late, or not at all.

Under the notorious kafala system, domestic workers cannot leave without their employers’ consent. This leads many to languish in abusive and difficult working conditions, while others decide to escape, effectively becoming illegal residents in Lebanon.

Escapees face imprisonment, fines and deportation if they are caught by authorities and so many, like Tenteb, are left living in limbo.

Tenteb said only two of the 14 women at her residence, including herself, were still earning a salary before the coronavirus outbreak began in Lebanon in late February.

Now, both of them have been laid off due to a partial national lockdown aimed at stopping the spread of the virus.

She said she suspected her strong cough had led her employer to let her go, and she immediately sought testing for the coronavirus. But she was turned back from RHUH and was left to self-medicate with “antibiotics, vitamins and panadol”.

Tenteb still does not know whether she has COVID-19, and says that those she lives with have “thankfully not yet developed any symptoms”.

‘Black or white’
Mary, a former domestic worker who began experiencing symptoms last week, was turned away from the RHUH and was unable to afford a test at the St George Hospital.

Speaking on behalf of Mary due to a language barrier, Rosa, a 29-year-old Ethiopian woman who has lived in Lebanon for five years, said they had struggled to move from one hospital to another as Mary’s symptoms grew worse.

Rosa said they eventually paid for a coronavirus test at a hospital on the southern outskirts of Beirut. It came back negative.

“While that’s great, it’s not the most important point here,” Rosa said. “Ok, she’s foreign and has no papers, but this is a dangerous virus that Europe can’t even deal with.”

“How will Lebanon control this virus if they do this? This is more important than anything: documents, nationality, black or white. We all live here together in Lebanon. I don’t know how they think.”

Diala Haidar, a Lebanon campaigner at Amnesty International, told Al Jazeera that, under the human right to health: “Healthcare goods, facilities and services should be available and accessible to everyone without discrimination, especially to the most vulnerable or marginalised groups of the population, [including undocumented migrants].”

Lebanon has ratified the International Covenant on Economic, Social and Cultural Rights, which guarantees “the right of everyone to the enjoyment of the highest attainable standard of physical and mental health”, including the “prevention, treatment and control of epidemic, endemic, occupational and other diseases”.


Lebanon prisons hit by unrest amid coronavirus fears

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A fiery prison riot broke out in the northern Lebanese city of Tripoli on Tuesday, a day after security forces thwarted a potential escape attempt that inmates’ relatives said was tied to fears over the spread of the new coronavirus.

The riot at Tripoli’s Qoubbeh Prison left at least four inmates wounded when security forces fired rubber bullets, according to activists with contacts inside the facility. Local media reported a “number of injuries”.

Videos from inside the prison shared by the activists with Al Jazeera appeared to show two men with injuries consistent with rubber bullets – one man on his leg, another man on his face.

A spokesperson for Lebanon’s Internal Security Forces did not immediately respond to a request for comment on the number of injured.

Two videos reviewed by Al Jazeera showed dozens of men crowded into a large hallway in the prison, a few holding large knives, as fires burned.

They chanted for a general amnesty that has been promised by establishment politicians for many years but has repeatedly faced stumbling blocks.

Among those who have advocated to be included in an amnesty bill are people arrested or wanted on charges of committing petty crimes, drug crimes and “extremism”.

Prime Minister Hassan Diab’s government has committed to endorsing such a bill, though it is unclear who would be included.

Escape attempt ‘over coronavirus’
The large riot came fewer than 24 hours after security forces discovered a tunnel several metres in length during an operation at Zahle Prison in eastern Bekaa Valley.

A security source said security forces on Monday evening raided a section of the prison housing a large number of inmates after learning that “prisoners were attempting to escape”.

Relatives of inmates at the Zahle Prison said the prisoners’ attempt was tied to fears that the coronavirus would spread rapidly inside the overcrowded detention facility.

“They are scared about the coronavirus issue, they are scared it will spread,” the relative of an inmate at Zahle Prison told Al Jazeera, speaking on condition of anonymity for fear of retribution.

Lebanon, with a population of about six million, has registered a total of 548 cases to date. Nineteen people have died, and 62 have recovered, according to the information ministry.

Officials say no cases of coronavirus have been found among prisoners.

The relative said they had last been in contact with the inmate on Monday as security forces were about to launch the raid. “He said, ‘they’re coming in now, and we don’t know when we’ll be able to talk again.’ I haven’t heard anything since then,” the relative said.

Many inmates at Lebanese prisons use smuggled mobile phones to speak to relatives.

Video taken inside the prison appeared to show a narrow hole was dug underneath the prison floor. A basket full of reddish-brown earth is illuminated by a light hung on one side of the makeshift tunnel.

The security source said an altercation took place between security forces and inmates during the operation.

The inmate’s relative said that several inmates had been wounded. One officer had stabbed by an inmate but was in stable condition, according to a representative of a committee of families and notables who have long been pushing for the general amnesty, known as the “Amnesty Committee”.

Up to a third of prisoners could be released
Since mid-March, inmates at Lebanese prisons have organised a number of protests, some of which have turned into riots as the coronavirus outbreak worsened in the country.

Inmates have demanded to be released from detention centres that are operating at more than double their capacity.

Officials say they are seeking to secure the early release of up to a third of the country’s roughly 9,000 detainees, specifically those with fewer than six months left in their sentences.

Judges and security forces have also been advised to make new arrests only when serious crimes are committed.

When possible, judges have held interrogations via popular messaging app WhatsApp or other video-calling services, and a top judge said France would provide Lebanon with electronic ankle bracelets which could be used to track inmates released early via GPS.

Interior Minister Mohammed Fehmi said on Sunday that 559 detainees had so far been released early from prisons and jails.

But as time goes on, the situation in prisons is becoming increasingly unstable.


Lebanon arrests central bank official over currency manipulation

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Lebanon’s financial prosecutor has ordered the arrest of the head of monetary operations at the central bank amid a widening probe into manipulation of the country’s volatile currency.

The arrest of Mazen Hamdan late on Thursday marked the first such move against an official at the increasingly embattled institution since Lebanon’s currency crisis began last summer.

The Lebanese pound, long set at 1,500 to $1, is now trading for roughly 4,200 to the greenback on the black market amid an acute dollar shortage linked to dried-up remittances, corruption and unsustainable fiscal policies.

Its demise is just one part of a full-blown financial crisis that has pushed the small, economically crippled nation to seek $20bn in foreign aid, of which $10bn is supposed to come from an International Monetary Fund (IMF) programme.

The crisis has seen tens of thousands of people lose jobs and poverty soar to almost 50 percent, according to finance ministry data. Last month, Social Affairs Minister Ramzi Moucharafieh said some 70-75 percent of the population required aid after the economic crisis was exacerbated by the coronavirus pandemic, while the IMF forecast the economy would shrink by 12 percent this year – one of the worst recessions in the world.

‘Economic nonsense’
The country’s currency had been on a steady downwards trajectory against the US dollar since August. That slide turned into a freefall in late April, with a roughly 12 percent drop in a single day, leading to nationwide street protests and riots.

Prime Minister Hassan Diab’s government blamed the central bank for failing to inject dollars into the market to stabilise the currency. Diab also alleged the central bank governor, Riad Salameh, may be aiming to intentionally hurt the currency, noting “suspicious ambiguity” in decisions.

Salameh denied these charges as part of a “campaign” against him and said he has worked to keep the currency stable for decades through successive political crises and conflict.

The central bank subsequently ordered all currency exchange dealers to trade dollars at a rate of 3,200 – its third attempt to implement an exchange rate cap since the crisis began. At the same time, security forces launched a crackdown against any traders who went above this rate, leading all exchange dealers to go on a strike now heading into its fourth week.

Unrelenting, financial prosecutor Ali Ibrahim has ordered the arrest of several dozen exchange dealers in recent weeks, including the head of the currency exchange dealers’ syndicate, Mahmoud Mrad.

On Thursday, he also ordered the arrest of Hamdan, who remains in custody.

‘Keep dropping’
“While there have been some instances of currency manipulation, which is not unexpected when the currency peg falls apart after 22 years, the lira [Lebanese pound] is dropping primarily because there isn’t sufficient dollars being pumped by the central bank or coming from overseas to lift it,” Dan Azzi, an economic analyst and former CEO of Standard Charterer Bank Lebanon, told Al Jazeera.

“It will keep dropping until an equilibrium point is reached, when dollar remittances are equal to dollars flowing out to buy imports.”

In a statement, the central bank said it was cooperating with investigations and had lifted secrecy on its transactions with currency exchange dealers. In the period between April 8 and May 5, the central bank said it had sold $12.7m to currency exchange dealers and had bought $11.3m.

These amounts, the statement said, could not account for the “magnitude” of currency depreciation during that period, in which the rate dropped from 2,900 Lebanese pounds to $1 to more than 4,000.

“It is self-evident, after looking at the amounts mentioned, that, contrary to what was rumoured, there was no manipulation in the money exchange market as a result of the Central Bank’s operations,” the statement said.

Some analysts view the attempts to control the currency via a crackdown on exchange dealers or the central bank as futile.

“Accusing money changers for the vertiginous depreciation of Lebanese Pound is politically expedient but is economic nonsense,” Nasser Saidi, a former economy minister and central bank vice-governor, said in a Twitter post.

“Depreciation results [from the central bank] financing budget deficit by printing money, unsustainable fiscal and debt policies, deep recession and nothing to anchor Lebanese Pound expectations.”


Long marginalised, migrant workers in Lebanon strike over pay

Rafi, a migrant worker in Lebanon’s waste sector, has a wife and two young daughters back home in Bangladesh who depend on his monthly remittances to pay for school, food and other needs.

But for the past five months, Rafi says he has been unable to send any money back home, because the private waste-management company for which he works, RAMCO, violated his work contract by effectively slashing his wages from $300 a month to just over $100.

“It’s a very big problem, I cant send my baby to school,” said Rafi, who asked Al Jazeera to refer to him by a pseudonym because he fears retribution.

Rafi is not alone in his hardships, or his anger. Faced with a similarly untenable position, some 400 RAMCO employees – mostly from Bangladesh and India – took the unprecedented decision last month to walk of the job until the company pays them what they are owed.

Though initially overshadowed by the coronavirus pandemic, the labour strike seeped into the headlines on May 12 when employees blocked roads outside RAMCO’s main housing and storage site on the outskirts of Beirut and prevented garbage trucks from leaving.

Riot police were called in. Videos and images that strikers shot at the scene and shared with Al Jazeera showed security forces deploying tear gas and beating strikers – a small contingent of whom vandalised company property. Some of the images showed cuts to workers’ arms and hands. One showed a man with severe bruises to his face.

An employee was arrested during the incident and remains in custody.

While some of the strikers have crossed the picket line and returned to work since the strike was called on April 3, at least 250 are standing their ground and refusing to go back on the job until their demands are met.

“In the history of Lebanon, I don’t think that migrant workers made a weeks-long strike and protested in such a way,” said Lea Bou Khater, a labour movement specialist and researcher at the Consultation and Research Institute.

Bou Khater sees the RAMCO strike as a potential watershed for one of Lebanon’s most marginalised communities.

Denied basic labour protections, migrant workers are frequently exploited by employers who pay below minimum wage and can deport those who step out of line.

“Their accommodation and food depends on their employer,” Bou Khater told Al Jazeera. “They can be deported, they are protesting and striking in very difficult conditions.”


Ghosn escape mystery close to being solved as two US men arrested

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United States authorities on Wednesday arrested a former Special Forces soldier and another man wanted by Japan on charges that they enabled the escape of former Nissan Motor Co boss Carlos Ghosn out of the country.

Federal prosecutors in Massachusetts said that former US Green Beret Michael Taylor, 59, and his son, Peter Taylor, 27, helped Ghosn last year flee to Lebanon to avoid trial in Japan over alleged financial wrongdoing.

Japan had in January issued arrest warrants for both men along with a third, George-Antoine Zayek, in connection with facilitating the December 29, 2019 escape. The Taylors are scheduled to appear by video conference before a federal judge later on Wednesday.

Lawyers for the men could not be immediately identified.

Ghosn fled to Lebanon, his childhood home, while he was awaiting trial on charges of under-reporting earnings, breach of trust and misappropriation of company funds, all of which he denies.

The former corporate titan has previously said he was subjected to inhumane prison conditions in Japan, which he also accused of fabricating charges against him to destroy his reputation.

During a news conference in Lebanon back in January, Ghosn characterised allegations that he misappropriated Nissan company funds and property as an attempt at “character assassination”.

US legal papers recount the details of Ghosn’s escape, including his departure from Japan hidden in a large black box on board a private jet.

The Japanese embassy in Washington, DC and Nissan did not immediately comment on the arrests.

Federal prosecutors asked the judge to order both of the men arrested today to be detained.

“The very offence for which Michael Taylor is charged in Japan demonstrates his aptitude for hatching escape plans on a grand scale and his blatant disrespect for bond conditions,” the government said.

Earlier this month, Turkish prosecutors prepared an indictment charging seven people, including four pilots and two flight attendants, over Ghosn’s escape via Istanbul to Lebanon.

After Japan submitted requests for the men’s arrest, the Justice Department obtained warrants on May 6.

US law enforcement learned Peter Taylor had booked a flight from Boston to Beirut departing on Wednesday with a layover in London and he was arrested by US marshals as was Michael Taylor in Harvard, Massachusetts.


Lebanon’s industry sector on verge of collapse: official

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Fadi Gemayel, head of the Association of Lebanese Industrialists (ALI), warned on Tuesday of the collapse of Lebanon’s industry sector if banks fail to secure needed liquidity for the import of the raw materials.

“If banks fail to adopt a proper mechanism to secure the needed liquidity, the Lebanese market will soon face an absence of some necessary products due to the lack of the needed raw materials,” Gemayel was quoted as saying in a statement by ALI.

Gemayel said that Lebanese factories are not functional these days and tens of thousands of families working in this field are threatened to face very tough living conditions.

The economic slowdown and the drop in cash injections from Lebanese abroad have reduced the central bank’s foreign currency reserves, leading to a shortage in U.S. dollar for both businesses and individuals.

Central Bank Governor Riad Salameh announced a day earlier that he has asked banks to secure the needed liquidity for businesses in a bid to save the economy from further deterioration.

“We hope that banks react positively to Salameh’s demands for us to be able to import our needed raw materials and save our factories from bankruptcy,” he said.

Gemayel added that a big number of factories may soon shut their doors down due to the absence of raw materials in the country which disable factories from producing and selling their products.

The Lebanese industry sector has been facing great challenges in the past few years due to competition by other countries, the absence of proper power supply, high cost of labor and other factors.

Successive governments in Lebanon failed to address these issues leading many factories to go out of business.


UN launch anti-coronavirus guide for Lebanon’s industry sector

Lebanon’s Industry Ministry and the UN Industrial Development Organization (UNIDO) launched on Wednesday a guide to combatting COVID-19 for the country’s industry sector, the National News Agency reported.

Titled “Recommendations and Preventive Measures to Combat COVID-19 in the Industrial Sector,” the guide was launched under the auspices of Lebanese Prime Minister Hassan Diab represented by Industry Minister Imad Hoballah.

Hoballah noted that his ministry had already taken a series of measures in this framework to fortify work safety in the industrial sector while maintaining the level of national production.

Meanwhile, Italian Ambassador to Lebanon Nicoletta Bombardiere said the COVID-19 outbreak prompted Italy to focus more on supporting productive sectors with the aim of enhancing livelihoods.

“Italy is contributing to a project to establish three industrial zones in Lebanon, in addition to its support to the agricultural sector,” the Italian ambassador noted. Enditem


Oman allows exchange houses to open as Covid-19 restrictions ease

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Establishments that are allowed to operate on a limited basis include vehicle and fishing boat repair shops, electronics outlets, car rental offices, office suppliers and printing shops

Oman allows exchange houses to open as Covid-19 restrictions ease
To date, there have been 2,131 cases of Covid-19 in the Sultanate, including 10 fatalities.

Oman’s government has announced that a limited number of commercial businesses in the Sultanate will be able to operate again as Covid-19 restrictions ease, the state-run Oman News Agency (ONA) has announced.

As part of the move, money exchange companies to resume their services.

Establishments that are allowed to operate on a limited basis – in which they receive and deliver only, with no customers allowed inside – include vehicle and fishing boat repair shops, electronics outlets, car rental offices, office suppliers and printing shops.

Automobile electrical outlets, lube change stores, brake repaid workshops and tyre sale and repair outlets are also allowed to operate, with two customers allowed in at any given time.


Rare oil-price dislocation gives Asia a profitable arbitrage

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China’s head-start on the path to recovery in oil demand is giving traders a rare opportunity to profit as coronavirus lockdowns continue to depress consumption in other parts of the world.

With Chinese refineries ramping up processing to pre-virus levels as the country’s economy re-opens, oil prices on Shanghai’s INE futures exchange are near the largest premium to crude from the Middle East since mid-2019.

The difference is so wide that traders can turn a profit of as much as $9 a barrel by buying a cargo of Oman crude on the Dubai Mercantile Exchange for June and shipping it to China for delivery into the local futures contract for July, according to traders familiar with the matter.

While it may prove fleeting, this rare arbitrage shows that the collapse in oil prices around the world doesn’t have to be a disaster for traders with the nous and flexibility to take advantage of dislocations in regional prices. It’s also symptomatic of how the pace of recovery in demand is going to be uneven around the world.

“China’s financial market is recovering faster than rest of the world as more producers resume work and investors are enthusiastic to buy the oil dip on the Shanghai Exchange, thus shoring up the yuan oil futures prices,” said Chen Tong, a Tianjin-based analyst with First Futures. “For those who are spot players, they can also take advantage of the price spread for physical hedging.”

The virtual shutdown of the global economy will wipe out about 35 million barrels a day of demand, according to the latest estimates by independent oil trader Trafigura Group. Chinese oil demand was first to be hit as large swaths of the country went into lockdown from the end of January to control the spread of coronavirus.

But just as China was first to suffer the fallout, it’s among the first to recover after seemingly containing the pandemic. While consumption in the rest of the world has been crushed as Covid-19 spreads, Chinese refiners have been reporting a rebound in processing since March as the government focuses on getting its economy back up and running.

In fact, oil inventories in the Asian nation have fallen by 1.3 million barrels this month, after increasing by almost 90 million barrels in February and March, signalling a recovery in refining runs, according to Alexis Berson, a senior analyst at energy market analytics company Kayrros.

The dislocation is causing regional discrepancies in prices. The front-month June Oman contract on the DME has tumbled about 19% this month, while July futures on INE slipped around 6%. The price differential averaged about $14 a barrel in the last two weeks after adjusting for currency differences – which more than makes up for ship-chartering, insurance and storage costs – compared with close to parity during the same period last year.

It seems that traders are already taking advantage of the price dislocation. Omani crude was delivered into INE storage for the first time this year in the week ended April 24, with 948,000 barrels added. While Oman is one of the seven oil grades that can be delivered into the INE contract, Iraq’s Basrah Light is more often supplied due to its lower quality and price.

Since early-April, the INE has been aggressively approving new crude storage sites as delivery points for its futures contract. It recently added a handful of storage facilities as new depots. The facilities held by Sinopec Group’s Zhanjiang and Caofeidian units, Sinochem Hongrun and Dalian North Oil Storage and Transport Co. will provide a combined capacity of almost three million cubic meters of storage space.

The exchange also recently approved the expansion of current storage capacity at units by held by PetroChina and Sinopec by at least 1.3 million cubic meters. It now has 14 depots with combined capacity of 8.5 million cubic meters, according to official data.