Hindsight is a wonderful thing, but perhaps Opec should have kept its powder dry in December. On Friday, confronting an unexpected demand crisis, it was unable to persuade Russia to cut oil production even further. So now, the organisation has to stand its ground. Russia and American shale cannot be assured that Vienna will indefinitely bail them out.
In November 2016, Opec with its new allies Russia, Oman and others agreed to lower production by 1.9 million barrels per day (bpd). In December, after three years of restraint had modestly revived prices, the market in the first half of this year still looked weak. They agreed to make a further reduction of 1.7 million bpd, and Saudi Arabia would slash another 0.4 million bpd if the others lived up to their commitments. This came after an apparent truce in the US-China trade war revived economic fortunes, but before news broke of the virus epidemic.
In Friday’s gathering, a further reduction of 1 million bpd from Opec and 0.5 million bpd from non-Opec, extended to the end of the year, was on the table, but Russian oil minister Alexander Novak balked.
Opec has historically been more successful in counteracting sharp contractions in demand, as it did in 2009, than to supply surges, the problem it has confronted from 2014 to 2019. Widening cooperation to several non-Opec countries reduced competition from “free-riders” that overwhelmed earlier periods of Opec restraint, yet the organisation – and especially its key members – have still heavily lost market share.
Iraq and Nigeria have been the least compliant members, but least the deal stopped Iraq’s output growing much, while Nigeria gained a bit more. Most of the burden of adjustment has fallen involuntarily on Iran, Venezuela and Libya, which have collectively lost almost 3.4 million bpd to sanctions and civil strife. But after that, Saudi Arabia, with assistance from its allies the UAE and Kuwait, has voluntarily shed 1.05 million bpd.
Russia’s best compliance came in the middle of last year, when contamination in the Druzhba pipeline forced a reduction in exports. The country produced 11.29 million barrels per day in November 2016 before the Opec+ deal. In January, it was up to 11.49 million bpd. In the same time period, Saudi Arabia dropped 0.9 million bpd.
Yes, because of its floating exchange rate, and a budget that balances at $49 per barrel for its crude, Russia is more flexible in adapting to oil prices than rivals, whose currencies are pegged to the dollar. But a weaker rouble means lower Russian purchasing power, and higher living costs through imported inflation. The economy contracted in 2015 and barely grew in 2016 following the oil price fall.
Russia probably would have added some more production over this period were it not for Opec cooperation. But its mature workhorse fields in west Siberia, and costly remote greenfields in the Arctic and east Siberia, were further restrained by US sanctions and not about to surge, especially had oil prices been stuck in the $30s.
The US is, of course, not party to production curbs. It lost half a million bpd in 2016 up to the Vienna agreement, as shale came under the pressure of low prices, but it has gained almost 6 million barrels per day of output since then.
Finally, signs of shale struggle were emerging to encourage Opec to stay the course: field maturity, slowing technical improvements, pioneers such as Chesapeake and Ultra teetering on the edge of bankruptcy, frustration from investors seeking a return on $400 billion of capital spent up to 2018. Predictions of about 0.6 million bpd of growth this year, down sharply from an average of almost 1.9 million bpd over the past three years, are likely to plummet further under the stress of lower prices. Much of shale firms’ output is not hedged, or is vulnerable to price declines below $45 per barrel (West Texas crude reached $41.28 on Friday).
Meanwhile, sales of light vehicles powered by internal combustion engines (petrol and diesel) in the main global markets, the US, EU and China, fell by almost four million, while the share of electric vehicles rose to 3.6 per cent from 2 per cent. While Opec has missed three years of solid demand growth, battery vehicles are starting to chip away at oil’s monopoly.
Leading national oil companies have sought to capture a higher share of a market that may decline in the not-so-distant future. The UAE and Iraq have raised production capacity substantially. Saudi Aramco, Adnoc and Kuwait Petroleum Corporation, in particular, have expanded their refining and petrochemical activities with multi-billion dollar investments at home, and in joint ventures in Asia. Yet simultaneously, the Opec core has been playing a low-volume, medium-price game that better suits its high-cost rivals.
The Covid-19 onslaught may seem like bad luck, but an economic downturn of some kind was ever likelier as the Opec+ deal stretched on far beyond its original expiry date.
Russia has gained from the Opec+ alliance beyond simply higher oil revenues: promises of investment from the Gulf, and political leverage, now in danger. If Moscow thinks again by the next meeting in June, it may agree to extend the December cuts, but likely there is no consensus for deeper reductions.
This may be the best way forward. A return to pumping at will would be very painful for all, but so would giving up yet another slice of demand, that may not return even when the virus is past. Holding the line at $60 to $80 per barrel has proved untenable – a spell at $40 may be achievable and enough to see off both the Russians and Texans.
Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis
WITHIN%20SAND
%3Cp%3EDirector%3A%20Moe%20Alatawi%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Ra%E2%80%99ed%20Alshammari%2C%20Adwa%20Fahd%2C%20Muhand%20Alsaleh%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
ICC Women's T20 World Cup Asia Qualifier 2025, Thailand
UAE fixtures
May 9, v Malaysia
May 10, v Qatar
May 13, v Malaysia
May 15, v Qatar
May 18 and 19, semi-finals
May 20, final
The specs: 2018 Ford F-150
Price, base / as tested: Dh173,250 / Dh178,500
Engine: 5.0-litre V8
Power: 395hp @ 5,000rpm
Torque: 555Nm @ 2,750rpm
Transmission: 10-speed automatic
Fuel consumption, combined: 12.4L / 100km
THE SPECS
Engine: 3-litre V6
Transmission: eight-speed automatic
Power: 424hp
Torque: 580 Nm
Price: From Dh399,000
On sale: Now
In-demand jobs and monthly salaries
- Technology expert in robotics and automation: Dh20,000 to Dh40,000
- Energy engineer: Dh25,000 to Dh30,000
- Production engineer: Dh30,000 to Dh40,000
- Data-driven supply chain management professional: Dh30,000 to Dh50,000
- HR leader: Dh40,000 to Dh60,000
- Engineering leader: Dh30,000 to Dh55,000
- Project manager: Dh55,000 to Dh65,000
- Senior reservoir engineer: Dh40,000 to Dh55,000
- Senior drilling engineer: Dh38,000 to Dh46,000
- Senior process engineer: Dh28,000 to Dh38,000
- Senior maintenance engineer: Dh22,000 to Dh34,000
- Field engineer: Dh6,500 to Dh7,500
- Field supervisor: Dh9,000 to Dh12,000
- Field operator: Dh5,000 to Dh7,000
The specs
Engine: 77.4kW all-wheel-drive dual motor
Power: 320bhp
Torque: 605Nm
Transmission: Single-speed automatic
Price: From Dh219,000
On sale: Now
Brief scores:
Liverpool 3
Mane 24', Shaqiri 73', 80'
Manchester United 1
Lingard 33'
Man of the Match: Fabinho (Liverpool)
LILO & STITCH
Starring: Sydney Elizebeth Agudong, Maia Kealoha, Chris Sanders
Director: Dean Fleischer Camp
Rating: 4.5/5
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
The nine articles of the 50-Year Charter
1. Dubai silk road
2. A geo-economic map for Dubai
3. First virtual commercial city
4. A central education file for every citizen
5. A doctor to every citizen
6. Free economic and creative zones in universities
7. Self-sufficiency in Dubai homes
8. Co-operative companies in various sectors
9: Annual growth in philanthropy
Company profile
Company name: Suraasa
Started: 2018
Founders: Rishabh Khanna, Ankit Khanna and Sahil Makker
Based: India, UAE and the UK
Industry: EdTech
Initial investment: More than $200,000 in seed funding
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Analysis
Maros Sefcovic is juggling multiple international trade agreement files, but his message was clear when he spoke to The National on Wednesday.
The EU-UAE bilateral trade deal will be finalised soon, he said. It is in everyone’s interests to do so. Both sides want to move quickly and are in alignment. He said the UAE is a very important partner for the EU. It’s full speed ahead - and with some lofty ambitions - on the road to a free trade agreement.
We also talked about US-EU tariffs. He answered that both sides need to talk more and more often, but he is prepared to defend Europe's position and said diplomacy should be a guiding principle through the current moment.
Killing of Qassem Suleimani
The%20specs
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Mercedes-AMG GT 63 S E Performance: the specs
Engine: 4.0-litre twin-turbo V8 plus rear-mounted electric motor
Power: 843hp at N/A rpm
Torque: 1470Nm N/A rpm
Transmission: 9-speed auto
Fuel consumption: 8.6L/100km
On sale: October to December
Price: From Dh875,000 (estimate)
MATCH INFO
CAF Champions League semi-finals first-leg fixtures
Tuesday:
Primeiro Agosto (ANG) v Esperance (TUN) (8pm UAE)
Al Ahly (EGY) v Entente Setif (ALG) (11PM)
Second legs:
October 23
Fund-raising tips for start-ups
Develop an innovative business concept
Have the ability to differentiate yourself from competitors
Put in place a business continuity plan after Covid-19
Prepare for the worst-case scenario (further lockdowns, long wait for a vaccine, etc.)
Have enough cash to stay afloat for the next 12 to 18 months
Be creative and innovative to reduce expenses
Be prepared to use Covid-19 as an opportunity for your business
* Tips from Jassim Al Marzooqi and Walid Hanna
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
England World Cup squad
Eoin Morgan (capt), Moeen Ali, Jofra Archer, Jonny Bairstow, Jos Buttler (wkt), Tom Curran, Liam Dawson, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, James Vince, Chris Woakes, Mark Wood
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs
Price: From Dh180,000 (estimate)
Engine: 2.0-litre turbocharged and supercharged in-line four-cylinder
Transmission: Eight-speed automatic
Power: 320hp @ 5,700rpm
Torque: 400Nm @ 2,200rpm
Fuel economy, combined: 9.7L / 100km
Results
5pm: Maiden (PA) Dh 80,000 (Turf) 1,400m. Winner: Al Ajeeb W’Rsan, Pat Dobbs (jockey), Jaci Wickham (trainer).
5.30pm: Maiden (PA) Dh 80,000 (T) 1,400m racing. Winner: Mujeeb, Fabrice Veron, Eric Lemartinel.
6pm: Handicap (PA) Dh 90,000 (T) 2,200m. Winner: Onward, Connor Beasley, Abdallah Al Hammadi.
6.30pm: Sheikh Zayed bin Sultan Al Nahyan Jewel Crown Prep Rated Conditions (PA) Dh 125,000 (T) 2,200m. Winner: Somoud, Richard Mullen, Jean de Roualle.
7pm: Wathba Stallions Cup Handicap (PA) Dh 70,000 (T) 1,600m. Winner: AF Arrab, Tadhg O’Shea, Ernst Oertel.
7.30pm: Handicap (TB) Dh 90,000 (T) 1,400m. Winner: Irish Freedom, Richard Mullen, Satish Seemar.
Founders: Ines Mena, Claudia Ribas, Simona Agolini, Nourhan Hassan and Therese Hundt
Date started: January 2017, app launched November 2017
Based: Dubai, UAE
Sector: Private/Retail/Leisure
Number of Employees: 18 employees, including full-time and flexible workers
Funding stage and size: Seed round completed Q4 2019 - $1m raised
Funders: Oman Technology Fund, 500 Startups, Vision Ventures, Seedstars, Mindshift Capital, Delta Partners Ventures, with support from the OQAL Angel Investor Network and UAE Business Angels