An oil rig in Monahans, Texas. Prices are falling as output is ramped up. Bloomberg
An oil rig in Monahans, Texas. Prices are falling as output is ramped up. Bloomberg

Oil prices fall as US output hits 11 million bpd for first time



Oil prices fell on Thursday after official data showed an unexpected rise in US crude stockpiles, US output hit a record high and major oil exporters increased production.

International crude oil benchmark Brent was down 85 cents at $72.05 a barrel by 09.45 GMT. US light crude was 75 cents lower at $68.01.

Brent has fallen almost 9 per cent from last week's high above $79 on emerging evidence of higher production from Saudi Arabia and other members of Opec, as well as Russia and the United States.

"The outlook remains negative," said Robin Bieber, technical analyst at London brokerage PVM Oil Associates.

The US Energy Information Administration (EIA) said on Wednesday US crude production had reached 11 million barrels per day (bpd) for the first time. The country has added nearly 1 million bpd in production since November, thanks to rapid increases in shale drilling.

Even higher US production is likely, Rystad Energy said.

"We are still bullish on US shale, though we expect to see a temporary plateau in 2019 due to the bottlenecks of pipelines and, indeed, manpower and drivers," said Yosuke Uehara, vice-president at Rystad Energy.

_______________

Read more:

'Opec is doing its part,' says UAE's Mazrouei

How Saudi Arabia plans to price its oil

_______________

A sharp jump in US crude oil inventories also added to the bearish tone in the market. US crude stocks rose by 5.8 million barrels last week, compared with a forecast for a decline of 3.6 million barrels.

US petrol inventories dropped by 3.2 million barrels last week, while distillate stockpiles , which include diesel and heating oil, declined by 371,000 barrels, the EIA said.

A Reuters poll taken before the data release had forecast gasoline stocks would be unchanged and distillate stockpiles would show a build of around 900,000 barrels.

Meanwhile, Opec and non-Opec producers cut oil output in June by 20 per cent more than agreed levels, compared with 47 per cent in May, two sources familiar with the matter told Reuters.

Saudi Arabia boosted production sharply last month, raising crude shipments to world markets by 390,000 bpd to 7.6 million bpd, Kpler tanker-tracking data showed. That was the biggest increase since the end of 2016, according to the International Energy Agency.

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.

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 burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Part three: an affection for classic cars lives on

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

End of free parking

- paid-for parking will be rolled across Abu Dhabi island on August 18

- drivers will have three working weeks leeway before fines are issued

- areas that are currently free to park - around Sheikh Zayed Bridge, Maqta Bridge, Mussaffah Bridge and the Corniche - will now require a ticket

- villa residents will need a permit to park outside their home. One vehicle is Dh800 and a second is Dh1,200. 

- The penalty for failing to pay for a ticket after 10 minutes will be Dh200

- Parking on a patch of sand will incur a fine of Dh300

Freezer tips

  • Always make sure food is completely cool before freezing.
  • If you’re cooking in large batches, divide into either family-sized or individual portions to freeze.
  • Ensure the food is well wrapped in foil or cling film. Even better, store in fully sealable, labelled containers or zip-lock freezer bags.
  • The easiest and safest way to defrost items such as the stews and sauces mentioned is to do so in the fridge for several hours or overnight.