Oil prices settled lower on Friday and slid to its lowest levels in seven months on weak economic data from the US and China, and as demand concerns offset fears of a supply disruption caused by geopolitical tension in the Middle East.
Brent, the benchmark for two thirds of the world’s oil, plunged 3.41 per cent to at $76.81 a barrel. West Texas Intermediate, the gauge that tracks US crude, dove 3.66 per cent to $73.52 a barrel.
Oil was dragged by weak economic signals from the world's two top economies: the US reported weak job numbers as Wall Street declined, stoking fears of a new recession, and China's manufacturing sector softened.
"Crude futures were volatile but could remain under pressure ... driven by weaker global fuel demand. Disappointing economic data from China and reduced manufacturing activity across Asia, Europe, and the US have offset the rising geopolitical tensions in the Middle East," said Mazen Salhab, chief market strategist for the Middle East and North Africa at broker BDSwiss.
"The economic slowdown in the world’s largest oil importer, China, impacted negatively crude prices. Lower crude oil imports in China have further hurt demand prospects. Although there was stronger-than-expected US domestic oil demand for May, overall demand concerns overshadow these positive signs."
Crude prices swung after the killing of Hamas leader Ismail Haniyeh in Tehran, which has led to concerns of a wider regional conflict, before ultimately settling down to its lowest since January.
Iran claimed Israel was behind the assassination and threatened “harsh punishment” in retaliation.
“Unless an actual disruption occurs, which in the worst-case scenario could impact 15 per cent to 20 per cent of global exports, we see the current risk premium deflate within a relatively short period of time,” Ole Hansen, head of commodities strategy at Saxo Bank, told The National.
“An actual disruption, on the other hand, may initially send prices back towards $100 before potentially collapsing, given the impact on global economic growth, which is currently relatively fragile.”
While the market is on tenterhooks in gauging what next steps look like, in the absence of “an actual supply disruption, the geopolitical-led pop in oil prices historically tends to ebb out of the equation”, Japanese lender MUFG said.
Strong summer demand for transport and cooling, as well as limited production outside Opec+ will drive a supply deficit of 1.3 million barrels per day in the third quarter, which is expected to push Brent to $88 a barrel, it added.
Opec+ stuck to its production caps after an online meeting on Thursday but the crude producers’ group repeated that its policy of a gradual unwinding of cuts could be “paused or reversed”.
In June, the group announced a plan to gradually lift the additional voluntary production cuts of 2.2 million bpd by eight Opec+ member states from October 2024 to September 2025.
The producer alliance also agreed to extend output cuts of 3.66 million bpd, which were initially planned to end this year, until the end of 2025.
The Opec+ announcement came after oil prices suffered their biggest monthly loss since 2023 in July, amid growing concerns about fuel demand, particularly in China, the world's top crude importer and second-largest economy.
China is facing challenges with a real estate crisis, sluggish consumer spending and a deceleration in manufacturing.
The Asian country’s manufacturing activity fell to its lowest level in five months in July as factories struggled with decreasing orders and low prices, according to an official survey released this week.
Meanwhile, in the US, new unemployment benefit applications rose to an 11-month high last week, indicating a potential softening in the labour market and supporting the case for an interest rate cut in September.
Lower interest rates stimulate economic growth, boosting crude demand.
On Wednesday, Federal Reserve chairman Jerome Powell said the US central bank could cut interest rates as soon as September, nearly completing the Fed's policy cycle after leaving rates unchanged for about a year.
“We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point,” he told reporters.
The Fed has maintained its target federal funds rate at a range of 5.25 per cent to 5.5 per cent.
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
RACE CARD
6.30pm Maiden (TB) Dh82.500 (Dirt) 1,400m
7.05pm Handicap (TB) Dh87,500 (D) 1,400m
7.40pm Handicap (TB) Dh92,500 (Turf) 2,410m
8.15pm Handicap (TB) Dh105,000 (D) 1,900m
8.50pm UAE 2000 Guineas Trial (TB) Conditions Dh183,650 (D) 1,600m
9.25pm Dubai Trophy (TB) Conditions Dh183,650 (T) 1,200m
10pm Handicap (TB) Dh102,500 (T) 1,400m
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Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
It's up to you to go green
Nils El Accad, chief executive and owner of Organic Foods and Café, says going green is about “lifestyle and attitude” rather than a “money change”; people need to plan ahead to fill water bottles in advance and take their own bags to the supermarket, he says.
“People always want someone else to do the work; it doesn’t work like that,” he adds. “The first step: you have to consciously make that decision and change.”
When he gets a takeaway, says Mr El Accad, he takes his own glass jars instead of accepting disposable aluminium containers, paper napkins and plastic tubs, cutlery and bags from restaurants.
He also plants his own crops and herbs at home and at the Sheikh Zayed store, from basil and rosemary to beans, squashes and papayas. “If you’re going to water anything, better it be tomatoes and cucumbers, something edible, than grass,” he says.
“All this throwaway plastic - cups, bottles, forks - has to go first,” says Mr El Accad, who has banned all disposable straws, whether plastic or even paper, from the café chain.
One of the latest changes he has implemented at his stores is to offer refills of liquid laundry detergent, to save plastic. The two brands Organic Foods stocks, Organic Larder and Sonnett, are both “triple-certified - you could eat the product”.
The Organic Larder detergent will soon be delivered in 200-litre metal oil drums before being decanted into 20-litre containers in-store.
Customers can refill their bottles at least 30 times before they start to degrade, he says. Organic Larder costs Dh35.75 for one litre and Dh62 for 2.75 litres and refills will cost 15 to 20 per cent less, Mr El Accad says.
But while there are savings to be had, going green tends to come with upfront costs and extra work and planning. Are we ready to refill bottles rather than throw them away? “You have to change,” says Mr El Accad. “I can only make it available.”
DEADPOOL & WOLVERINE
Starring: Ryan Reynolds, Hugh Jackman, Emma Corrin
Director: Shawn Levy
Rating: 3/5
Company Fact Box
Company name/date started: Abwaab Technologies / September 2019
Founders: Hamdi Tabbaa, co-founder and CEO. Hussein Alsarabi, co-founder and CTO
Based: Amman, Jordan
Sector: Education Technology
Size (employees/revenue): Total team size: 65. Full-time employees: 25. Revenue undisclosed
Stage: early-stage startup
Investors: Adam Tech Ventures, Endure Capital, Equitrust, the World Bank-backed Innovative Startups SMEs Fund, a London investment fund, a number of former and current executives from Uber and Netflix, among others.
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.”
WISH
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Secret Pigeon Service: Operation Colomba, Resistance and the Struggle to Liberate Europe
Gordon Corera, Harper Collins
'Worse than a prison sentence'
Marie Byrne, a counsellor who volunteers at the UAE government's mental health crisis helpline, said the ordeal the crew had been through would take time to overcome.
“It was worse than a prison sentence, where at least someone can deal with a set amount of time incarcerated," she said.
“They were living in perpetual mystery as to how their futures would pan out, and what that would be.
“Because of coronavirus, the world is very different now to the one they left, that will also have an impact.
“It will not fully register until they are on dry land. Some have not seen their young children grow up while others will have to rebuild relationships.
“It will be a challenge mentally, and to find other work to support their families as they have been out of circulation for so long. Hopefully they will get the care they need when they get home.”
