Smoothly exiting from the current output pact, and perhaps replacing it with another agreement, has become an important policy question for Opec and its allies.
Under the current “declaration of cooperation”, issued in December 2016, Opec with Russia and some non-Opec countries have pledged to limit their output. Production limits were originally intended to apply for six months between January and June 2017 but have since been extended for a further nine months until the end of March 2018.
The original declaration was vague about its objectives but senior officials have since indicated the primary goal is to reduce oil inventories in OECD industrialised countries down to the five-year average.
Opec and its allies are now approximately half-way towards that goal, with stocks about 160 million to 170 million barrels above the five-year average, compared with 280 million at the start of 2017.
Opec officials have stressed their resolve to finish what they have started and reduce stocks even further next year.
“We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average,” the Saudi energy minister Khalid Al Falih said in Riyadh on Tuesday.
“The intent is to keep our hands on the wheel between now and until we get to a balanced market and beyond,” he said.
Since inventories are unlikely to be reduced to the target by the end of March, Opec officials are discussing an extension of the production cuts for up to another nine months.
But the more complicated and important task is deciding when and how to exit from the current agreement and whether to try to replace it with another production accord.
“When we get closer to that [five-year average] we will decide how we smoothly exit the current agreement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories,” Mr Al Falih said on the sidelines of the Future Investment Initiatives conference in Riyadh.
Knowing when to declare that an objective has been achieved and making a course correction is often a major challenge for policymakers.
If a policy has been successful, there is a tendency to continue pursuing it, even when the environment has changed and demands a different response.
Opec and its allies must decide when to switch the focus from limiting output and cutting stocks to growing production again to meet rising demand.
If they wait too long, stocks will fall too far, prices will rise strongly, shale production will ramp up and the oil market’s adjustment will overshoot.
There is an entire branch of engineering and information technology on “control theory” or how to adjust system inputs to achieve the desired level of output.
The challenge is to adjust inputs smoothly and in a timely manner to keep outputs close to a reference value rather than swinging around wildly.
In Opec’s case, the challenge is to adjust production to achieve some desired level of inventories, prices and market share.
In practice, the organisation has found that a challenge; policy shifts have tended to be reactive rather than proactive.
_______________
Read more:
Aramco chief says lack of investment may hit oil supplies
Saudi oil minister upbeat as he visits Baghdad
Opec chief sees oil demand rising at 'healthy pace'
_______________
Opec’s declared objective of reducing excess global oil inventories to their five-year average is only an intermediate target.
The ultimate objective is to achieve some desired combination of price and market share that sustainably maximises income for its member states (leaving to one side the question of time horizon).
In practice, the organisation is led by Saudi Arabia, and the kingdom’s priority tends to alternate between supporting prices and defending market share.
Between the middle of 2014 and the middle of 2016, the kingdom focused on defending market share. Since the end of 2016, its priority has switched to cutting stocks and pushing up prices, and it has been willing to accept some reduction in market share to achieve it.
Saudi officials have so far indicated the focus will remain on inventory reduction and price support well into 2018, even if the kingdom has to concede market share to rival producers.
But as stocks continue to fall, the country will have to make some tricky decisions about when to adjust its production policy and what combination of prices and market share to target.
Global consumption rose by almost 6 million barrels per day (bpd) over the past five years, from less than 91 million bpd in 2012, to more than 96 million bpd in 2016.
Consumption is forecast to rise by another 1.5 million bpd in both 2017 and 2018, which means demand will be almost 10 million bpd higher in 2018 than in 2012.
If a balanced oil market includes some desired ratio of stocks to consumption, then a balanced market in 2018 will need to carry a significantly higher level of stocks than 2012-2016 average.
Cutting inventories back to the five-year average would leave the market feeling exceptionally tight. If Opec tries to force stocks down to that level, the result will be a big rise in spot prices and a sharp move into backwardation.
This is exactly what happened following previous Opec-led efforts at market rebalancing in 1999/2000 and 2010/2011, and it could happen again in 2018/19.
In the aftermath of an oil price slump, Opec and its advisers normally announce they will cut excess stocks, raise prices to a “normal” level and then pledge to keep the market stable.
Following the wrenching 1997/98 price slump, Opec announced it would target a price band of US$22 to $28 per barrel, which became a formal target between 2000 and 2004 before being shelved.
In 2008, Saudi Arabia’s then King Abdullah called $75 to $80 per barrel a “fair price”, and it became a de facto price target for a time, before it, too, was overtaken by events and abandoned.
Oil prices quickly overshot both targets, and Opec found it hard to prevent them climbing further.
As the oil market continues to tighten in 2018, the same pattern could repeat itself, with both spot prices and the backwardation increasing.
Opec and its allies must decide whether to take some of the increase in demand for their crude in the form of higher prices, higher output, or both.
Since most countries are already pumping near full capacity, the decision will principally rest with Saud Arabia and Russia.
Higher prices would risk a renewed boom in shale production from the United States, so Saudi Arabia is likely to be cautious about the market tightening too much.
But the kingdom needs higher oil revenues to help to fund an ambitious social and economic transformation programme.
And higher prices might help achieve a better valuation if and when the kingdom tries to sell shares in its national oil company Aramco.
Averting a renewed shale boom suggests the kingdom should focus on adding production to keep prices below $60.
But revenue maximisation and the looming sale of oil company shares argues for letting prices rise above $60 in 2018.
Policymakers are likely to adopt a mixed strategy and opt for some combination of both increased output and higher prices.
John Kemp is a Reuters analyst and the views expressed are his own
Company Profile
Name: HyveGeo
Started: 2023
Founders: Abdulaziz bin Redha, Dr Samsurin Welch, Eva Morales and Dr Harjit Singh
Based: Cambridge and Dubai
Number of employees: 8
Industry: Sustainability & Environment
Funding: $200,000 plus undisclosed grant
Investors: Venture capital and government
TWISTERS
Director:+Lee+Isaac+Chung
Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos
Rating:+2.5/5
A Round of Applause
Director: Berkun Oya
Starring: Aslihan Gürbüz, Fatih Artman, Cihat Suvarioglu
Rating: 4/5
A Cat, A Man, and Two Women
Junichiro Tamizaki
Translated by Paul McCarthy
Daunt Books
COMPANY PROFILE
Company name: Klipit
Started: 2022
Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant
Based: Dubai, UAE
Industry: Digital receipts, finance, blockchain
Funding: $4 million
Investors: Privately/self-funded
PROFILE OF SWVL
Started: April 2017
Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh
Based: Cairo, Egypt
Sector: transport
Size: 450+ employees
Investment: approximately $80 million
Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani
The specs: 2018 Maxus T60
Price, base / as tested: Dh48,000
Engine: 2.4-litre four-cylinder
Power: 136hp @ 1,600rpm
Torque: 360Nm @ 1,600 rpm
Transmission: Five-speed manual
Fuel consumption, combined: 9.1L / 100km
Results:
6.30pm: Al Maktoum Challenge Round-2 (PA) | Group 1 US$75,000 (Dirt) | 2,200 metres
Winner: Goshawke, Fernando Jara (jockey), Ali Rashid Al Raihe (trainer)
7.05pm: UAE 1000 Guineas (TB) | Listed $250,000 (D) | 1,600m
Winner: Silva, Oisin Murphy, Pia Brendt
7.40pm: Meydan Classic Trial (TB) | Conditions $100,000 (Turf) | 1,400m
Winner: Golden Jaguar, Connor Beasley, Ahmad bin Harmash
8.15pm: Al Shindagha Sprint (TB) | Group 3 $200,000 (D) | 1,200m
Winner: Drafted, Pat Dobbs, Doug Watson
8.50pm: Handicap (TB) | $175,000 (D) | 1,600m
Winner: Capezzano, Mickael Barzalona, Sandeep Jadhav
9.25pm: Handicap (TB) | $175,000 (T) | 2,000m
Winner: Oasis Charm, William Buick, Charlie Appleby
10pm: Handicap (TB) | $135,000 (T) | 1,600m
Winner: Escalator, Christopher Hayes, Charlie Fellowes
Age 26
Born May 17, 1991
Height 1.80 metres
Birthplace Sydney, Australia
Residence Eastbourne, England
Plays Right-handed
WTA titles 3
Prize money US$5,761,870 (Dh21,162,343.75)
Wins / losses 312 / 181
Dengue fever symptoms
- High fever
- Intense pain behind your eyes
- Severe headache
- Muscle and joint pains
- Nausea
- Vomiting
- Swollen glands
- Rash
If symptoms occur, they usually last for two-seven days
Company Profile
Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000
About RuPay
A homegrown card payment scheme launched by the National Payments Corporation of India and backed by the Reserve Bank of India, the country’s central bank
RuPay process payments between banks and merchants for purchases made with credit or debit cards
It has grown rapidly in India and competes with global payment network firms like MasterCard and Visa.
In India, it can be used at ATMs, for online payments and variations of the card can be used to pay for bus, metro charges, road toll payments
The name blends two words rupee and payment
Some advantages of the network include lower processing fees and transaction costs
The specs
Powertrain: Single electric motor
Power: 201hp
Torque: 310Nm
Transmission: Single-speed auto
Battery: 53kWh lithium-ion battery pack (GS base model); 70kWh battery pack (GF)
Touring range: 350km (GS); 480km (GF)
Price: From Dh129,900 (GS); Dh149,000 (GF)
On sale: Now
Specs: 2024 McLaren Artura Spider
Engine: 3.0-litre twin-turbo V6 and electric motor
Max power: 700hp at 7,500rpm
Max torque: 720Nm at 2,250rpm
Transmission: Eight-speed dual-clutch auto
0-100km/h: 3.0sec
Top speed: 330kph
Price: From Dh1.14 million ($311,000)
On sale: Now
COMPANY PROFILE
Company: Eco Way
Started: December 2023
Founder: Ivan Kroshnyi
Based: Dubai, UAE
Industry: Electric vehicles
Investors: Bootstrapped with undisclosed funding. Looking to raise funds from outside
WE NO LONGER PREFER MOUNTAINS
Director: Inas Halabi
Starring: Nijmeh Hamdan, Kamal Kayouf, Sheikh Najib Alou
Rating: 4/5
Kill
Director: Nikhil Nagesh Bhat
Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal
Rating: 4.5/5
COMPANY PROFILE
Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others
UAE - India ties
The UAE is India’s third-largest trade partner after the US and China
Annual bilateral trade between India and the UAE has crossed US$ 60 billion
The UAE is the fourth-largest exporter of crude oil for India
Indians comprise the largest community with 3.3 million residents in the UAE
Indian Prime Minister Narendra Modi first visited the UAE in August 2015
His visit on August 23-24 will be the third in four years
Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, visited India in February 2016
Sheikh Mohamed was the chief guest at India’s Republic Day celebrations in January 2017
Modi will visit Bahrain on August 24-25
Other simple ideas for sushi rice dishes
Cheat’s nigiri
This is easier to make than sushi rolls. With damp hands, form the cooled rice into small tablet shapes. Place slices of fresh, raw salmon, mackerel or trout (or smoked salmon) lightly touched with wasabi, then press, wasabi side-down, onto the rice. Serve with soy sauce and pickled ginger.
Easy omurice
This fusion dish combines Asian fried rice with a western omelette. To make, fry cooked and cooled sushi rice with chopped vegetables such as carrot and onion and lashings of sweet-tangy ketchup, then wrap in a soft egg omelette.
Deconstructed sushi salad platter
This makes a great, fuss-free sharing meal. Arrange sushi rice on a platter or board, then fill the space with all your favourite sushi ingredients (edamame beans, cooked prawns or tuna, tempura veggies, pickled ginger and chilli tofu), with a dressing or dipping sauce on the side.
'Outclassed in Kuwait'
Taleb Alrefai,
HBKU Press
More from Neighbourhood Watch
J Street Polling Results
97% of Jewish-Americans are concerned about the rise in anti-Semitism
76% of US Jewish voters believe Donald Trump and his allies in the Republican Party are responsible for a rise in anti-Semitism
74% of American Jews agreed that “Trump and the Maga movement are a threat to Jews in America"
Where to donate in the UAE
The Emirates Charity Portal
You can donate to several registered charities through a “donation catalogue”. The use of the donation is quite specific, such as buying a fan for a poor family in Niger for Dh130.
The General Authority of Islamic Affairs & Endowments
The site has an e-donation service accepting debit card, credit card or e-Dirham, an electronic payment tool developed by the Ministry of Finance and First Abu Dhabi Bank.
Al Noor Special Needs Centre
You can donate online or order Smiles n’ Stuff products handcrafted by Al Noor students. The centre publishes a wish list of extras needed, starting at Dh500.
Beit Al Khair Society
Beit Al Khair Society has the motto “From – and to – the UAE,” with donations going towards the neediest in the country. Its website has a list of physical donation sites, but people can also contribute money by SMS, bank transfer and through the hotline 800-22554.
Dar Al Ber Society
Dar Al Ber Society, which has charity projects in 39 countries, accept cash payments, money transfers or SMS donations. Its donation hotline is 800-79.
Dubai Cares
Dubai Cares provides several options for individuals and companies to donate, including online, through banks, at retail outlets, via phone and by purchasing Dubai Cares branded merchandise. It is currently running a campaign called Bookings 2030, which allows people to help change the future of six underprivileged children and young people.
Emirates Airline Foundation
Those who travel on Emirates have undoubtedly seen the little donation envelopes in the seat pockets. But the foundation also accepts donations online and in the form of Skywards Miles. Donated miles are used to sponsor travel for doctors, surgeons, engineers and other professionals volunteering on humanitarian missions around the world.
Emirates Red Crescent
On the Emirates Red Crescent website you can choose between 35 different purposes for your donation, such as providing food for fasters, supporting debtors and contributing to a refugee women fund. It also has a list of bank accounts for each donation type.
Gulf for Good
Gulf for Good raises funds for partner charity projects through challenges, like climbing Kilimanjaro and cycling through Thailand. This year’s projects are in partnership with Street Child Nepal, Larchfield Kids, the Foundation for African Empowerment and SOS Children's Villages. Since 2001, the organisation has raised more than $3.5 million (Dh12.8m) in support of over 50 children’s charities.
Noor Dubai Foundation
Sheikh Mohammed bin Rashid Al Maktoum launched the Noor Dubai Foundation a decade ago with the aim of eliminating all forms of preventable blindness globally. You can donate Dh50 to support mobile eye camps by texting the word “Noor” to 4565 (Etisalat) or 4849 (du).
Duterte Harry: Fire and Fury in the Philippines
Jonathan Miller, Scribe Publications
CREW
Director: Rajesh A Krishnan
Starring: Tabu, Kareena Kapoor Khan, Kriti Sanon
Rating: 3.5/5
Points Classification after Stage 1
1. Geraint Thomas (Britain / Team Sky) 20
2. Stefan Kueng (Switzerland / BMC Racing) 17
3. Vasil Kiryienka (Belarus / Team Sky) 15
4. Tony Martin (Germany / Katusha) 13
5. Matteo Trentin (Italy / Quick-Step) 11
6. Chris Froome (Britain / Team Sky) 10
7. Jos van Emden (Netherlands / LottoNL) 9
8. Michal Kwiatkowski (Poland / Team Sky) 8
9. Marcel Kittel (Germany / Quick-Step) 7
10. Edvald Boasson Hagen (Norway / Dimension Data) 6
THE SWIMMERS
Director: Sally El-Hosaini
Stars: Nathalie Issa, Manal Issa, Ahmed Malek and Ali Suliman
Rating: 4/5
'Joker'
Directed by: Todd Phillips
Starring: Joaquin Phoenix
Rating: Five out of five stars
How to increase your savings
- Have a plan for your savings.
- Decide on your emergency fund target and once that's achieved, assign your savings to another financial goal such as saving for a house or investing for retirement.
- Decide on a financial goal that is important to you and put your savings to work for you.
- It's important to have a purpose for your savings as it helps to keep you motivated to continue while also reducing the temptation to spend your savings.
- Carol Glynn, founder of Conscious Finance Coaching
WandaVision
Starring: Elizabeth Olsen, Paul Bettany
Directed by: Matt Shakman
Rating: Four stars
Herc's Adventures
Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5
Teaching in coronavirus times
More from Rashmee Roshan Lall