Oil prices climbed on Monday as China’s reopening of its borders eased concerns about fuel demand.
Brent, the benchmark for two thirds of the world’s oil, was 3.23 per cent higher at $81.11 a barrel at 4.10pm UAE time while West Texas Intermediate, the gauge that tracks US crude, was up 3.51 per cent at $76.36 a barrel.
China’s near-total reversal of border controls — introduced to stem the spread of Covid-19 — came into effect on Sunday.
The reopening ended about three years of strict entry requirements that had slowed growth in the world’s second-largest economy and biggest crude oil importer.
Futures have registered sharp declines since the start of 2023 amid concerns about China and the growing possibility of a recession.
Both Brent and WTI benchmarks declined by more than 8 per cent last week, their biggest weekly loss in the first seven days of a new year since 2016.
“The reopening of the Chinese borders has been the biggest driver for today’s price move,” said Sudharsan Sarathy, lead analyst at the London Stock Exchange Group.
“With this, the zero-Covid policy comes to an end effectively and brings up the prospects of … strong travel by Chinese citizens, both domestically and internationally.
“Forecasts suggest a strong airline demand in the Lunar New Year period.”
Expectations of less aggressive US interest rate rises are supporting financial markets while weakening the US dollar.
A weaker dollar makes oil cheaper for holders of other currencies.
The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, was down 0.25 per cent at 103.62 on Monday morning. The index is lower by 1 per cent since January 1.
US non-farm payrolls exceeded expectations slightly, with the addition of 223,000 jobs in December, the Bureau of Labour Statistics (BLS) reported on Friday.
A survey of Bloomberg economists had forecast employers would add 203,000 jobs.
The unemployment rate dipped to a 53-year low of 3.5 per cent, from 3.6 per cent, while wage growth was up 0.3 per cent but still below forecasts of 0.4 per cent.
The slowing wage growth has raised hopes that the US Federal Reserve “might yet achieve a soft landing despite its aggressive rate hiking”, said Edward Bell, senior director of market economics at Emirates NBD.
Last month, the Fed raised its interest rates by 50 basis points, its seventh increase in 2022, to curb inflation, which hit a four-decade high last June.
The US central bank indicated in December that more increases were planned this year.
Inflation in the eurozone, which hit a record high in 2022, fell more than expected in December amid an easing in energy prices.
Consumer prices rose at an annual rate of 9.2 per cent in December, compared with a 10.1 per cent increase the previous month.
“This was slower even than the projected 9.5 per cent and marked the slowest pace of price growth since August as slower growth in energy prices brought down the headline level,” said Mr Bell.
Danish investment bank Saxo Bank expects Brent to trade below $80 a barrel in the first quarter before bouncing back to about $90 on China's recovery and seasonal demand.
“We have strong doubts about the recession risk to the US economy and see demand from some of the world’s largest consumers underpin the price during a year where supply will continue to be managed by the Opec+ and US producers' inability or unwillingness to ramp up production,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Last week, Swiss bank UBS forecast that Brent would trade at $110 a barrel in the middle of 2023 while WTI would average $107 a barrel.
China’s reopening may result in oil demand hitting a “record high” in the second half of this year, the Swiss lender said in a research note.
“Meanwhile, Russian oil production should fall in 2023 due to the European Union's embargo on Russian crude and refined products,” UBS strategists said.
An increase in production outside the Opec+ group of countries is expected to be modest, given years of underinvestment in new oil and gas projects, they 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
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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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