The Port of Fujairah is to start publishing regular data on oil inventories to increase transparency, as part of its broader effort to develop itself as the region’s oil trading hub.
Inventory data is one of the key pieces of information that spurs trading activity, as it provides one of the more objective and transparent reads on world oil supply and demand.
It was, for example, an early indicator of the oversupply that has bedevilled the world oil market for more than two years.
Weekly data will be published on an aggregate basis for the major categories of refined oil products, including fuel oil, middle distillates (such as diesel), and light ends (including petrol).
A starting date has not yet been determined.
Fujairah is still relatively small compared with other world energy hubs. For example, stored fuel oil alone in Singapore was as much as 30 million tonnes this year, compared to Fujairah’s total storage capacity of under 10 million tonnes.
Total oil inventories in the US and European Union are about 300 million tonnes and 220 million tonnes, respectively.
But the Fujairah data will help spur trading on, for example, price differences between Singapore and the Middle East.
“The release of inventory data is a major step forward in market development terms as it brings Fujairah into line with other major global oil hubs around the world,” said Owain Johnson, the managing director of the Dubai Mercantile Exchange, where regional benchmark Oman crude oil futures contracts are traded.
The DME yesterday said it would add two new contracts aimed at traders hedging, or betting on, the difference between the price of fuel oil in Singapore and in Fujairah, as assessed by S&P’s Platts commodities data service.
The contracts will be listed as Singapore vs Middle East, with two options available based on viscosity, as measured in centistokes: Fuel Oil 180 cSt or 380 cSt.
“The increased market transparency is a major positive in terms of the development of stand-alone benchmarks around the Fujairah oil hub,” said Mr Johnson.
The UAE central government has backed Fujairah’s efforts to develop its trading hub infrastructure and Suhail Al Mazrouei, the UAE’s Energy Minister, blessed the move. “This transparency initiative will play a key role in Fujairah’s evolution from a key logistics hub for the region into a trading hub for global energy markets,” he said.
amcauley@thenational.ae
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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.”