The Russian invasion in Ukraine, Covid-induced fresh lockdowns in the world’s second largest economy China and soaring inflation will collectively reduce the global oil demand that could also calm the high prices, according to Rystad Energy.
Global oil demand is set to shed 1.4 million barrels per day, dropping below the highs set in 2019, with a rebound unlikely until at least next year, the Oslo-based consultancy said on Friday.
The new projection for oil demand shows an annual world average of 99.6 million bpd, dropping well below the pre-pandemic high of 100.2 million bpd set in 2019.
Additional lockdowns or geopolitical issues could lead to further economic growth reductions, applying additional downward pressure to demand forecasts, said Claudio Galimberti, senior vice president of analysis at Rystad Energy.
“Shrinking demand is a direct result of the impact of lower economic activity globally … despite continued supply tightness, a demand slump could provide some respite for global prices,” Mr Galimberti said.
Oil prices continued to trade higher amid Russia-Ukraine conflict. Brent is up more than 30 per cent since the start of this year, after falling from a 14-year high when the benchmark nearly touched $140 per barrel last month.
Opec+ member countries, led by Saudi Arabia and Russia, are boosting oil supplies in the market every month as global economies recover from the pandemic. The group will add another 432,000 barrels per day of crude to the market in May, it said last month.
“The global economy is battling surging inflation, additional strict Covid-19 lockdowns [in China] … continuing supply chain disruptions, and the impact on oil demand will be significant,” said Mr Galimberti.
On Monday, the World Bank cut its forecast for global growth to 3.2 per cent from its earlier expectation of 4.1 per cent. On Tuesday, the International Monetary Fund’s revised its global growth projections at 3.6 per cent in 2022 and 2023, revising the figures down 0.8 and 0.2 percentage points from its January forecast.
The revisions largely reflect the global spillovers of Russia’s military offensive in Ukraine and latest lockdowns in China as part of Beijing's strict zero-Covid-19 strategy that could cause new bottlenecks in global supply chains.
A prolonged war between Russia and Ukraine can be accompanied by a “significant increase in commodity prices, in particular oil and gas, especially if Europe decides to embargo Russian imports”, Mr Galimberti said.
“The Russian war worst case for oil demand is premised on Brent prices reaching $180 per barrel in the fourth quarter, triggering a further economic slowdown and outright destruction of oil demand.”
Russia is the world’s third-largest oil producer and the largest exporter, with about 5 million bpd of its crude representing roughly 12 per cent of global. Around 60 per cent of Russia’s oil exports go to Europe and another 20 per cent to China, according to the Paris-based International Energy Agency said.
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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'Laal Kaptaan'
Director: Navdeep Singh
Stars: Saif Ali Khan, Manav Vij, Deepak Dobriyal, Zoya Hussain
Rating: 2/5
RedCrow Intelligence Company Profile
Started: 2016
Founders: Hussein Nasser Eddin, Laila Akel, Tayeb Akel
Based: Ramallah, Palestine
Sector: Technology, Security
# of staff: 13
Investment: $745,000
Investors: Palestine’s Ibtikar Fund, Abu Dhabi’s Gothams and angel investors
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
The biog
Favourite book: You Are the Placebo – Making your mind matter, by Dr Joe Dispenza
Hobby: Running and watching Welsh rugby
Travel destination: Cyprus in the summer
Life goals: To be an aspirational and passionate University educator, enjoy life, be healthy and be the best dad possible.
Florida: The critical Sunshine State
Though mostly conservative, Florida is usually always “close” in presidential elections. In most elections, the candidate that wins the Sunshine State almost always wins the election, as evidenced in 2016 when Trump took Florida, a state which has not had a democratic governor since 1991.
Joe Biden’s campaign has spent $100 million there to turn things around, understandable given the state’s crucial 29 electoral votes.
In 2016, Mr Trump’s democratic rival Hillary Clinton paid frequent visits to Florida though analysts concluded that she failed to appeal towards middle-class voters, whom Barack Obama won over in the previous election.
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.”
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
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