IEA cuts oil demand forecast again

The International Energy Agency cut its forecast again today for global oil demand this year, but warned about a future supply crunch because of current low investment levels. The energy watchdog for industrialised nations forecast that global oil demand would measure 84.7 million barrels per day (bpd) on average in 2009 ? 570,000 bpd less than its last forecast made in January. At this level, demand would be 1.1 per cent or 1.0 million bpd less than in 2008, when demand also fell compared with the year earlier.

"Not only will the two-year contraction in oil demand be the first since the early 1980s, but 2009's decline will also be the largest since 1982," the IEA said in its monthly oil report. The watchdog, which has been revising down its once-buoyant forecasts for oil demand steadily since the end of last year, said its revisions were based on new economic growth forecasts from the International Monetary Fund.

The IMF slashed its global growth forecast for 2009 at the end of January, saying the financial crisis and spreading economic problems would result in expansion of just 0.5 per cent, its lowest rate since World War II. The bleak economic environment has pushed oil prices down to below US$40 (Dh147) a barrel in recent weeks, far from their peaks of nearly 150 dollars last year, despite production cuts by Opec oil producers.

The Organization of Petroleum Exporting Countries (Opec) has slashed its output in successive decisions to try to support the plunging market. The IEA, echoing warnings from industry insiders and Opec members, warned that one of the effects of low prices would be a delay in investment in future capacity which will be needed once global growth picks up again. "Ultimately, low prices sow the seeds of their own destruction, and only clear signs of a recovering global economy will spur investment in new oil supply," the report said. The secretary general of Opec, Abdalla Salem El-Badri, said on Monday that members of the cartel had already postponed 35 oil drilling projects because of low crude prices. He has said that Opec members need a price above 50 dollars per barrel for their exports to encourage investment and balance their government budgets. Many expensive oil projects have been called off in the last 12 months, particularly in Canada's high-cost tar sands, but news that Opec countries are also reducing investment has sounded an alarm for analysts. *AFP

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Top New Zealand cop on policing the virtual world

New Zealand police began closer scrutiny of social media and online communities after the attacks on two mosques in March, the country's top officer said.

The killing of 51 people in Christchurch and wounding of more than 40 others shocked the world. Brenton Tarrant, a suspected white supremacist, was accused of the killings. His trial is ongoing and he denies the charges.

Mike Bush, commissioner of New Zealand Police, said officers looked closely at how they monitored social media in the wake of the tragedy to see if lessons could be learned.

“We decided that it was fit for purpose but we need to deepen it in terms of community relationships, extending them not only with the traditional community but the virtual one as well," he told The National.

"We want to get ahead of attacks like we suffered in New Zealand so we have to challenge ourselves to be better."

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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.”

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