UAE

Oil jumps to nearly $103 on fears of disruption from Libya air strikes

Fears that intervention will extend the conflict weighed on crude prices.

Associated Press

March 18, 2011

SINGAPORE // Oil prices rose to near $103 a barrel Friday in Asia as traders worried the United Nations' authorization of military strikes against forces loyal to Libyan leader Moammer Qaddafi could prolong the conflict and threaten oil exports.

Benchmark crude for April delivery was up $1.53 at $102.95 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $3.44 to settle at $101.42 on Thursday.

In London, Brent crude was up $1.11 at $116.01 a barrel on the ICE futures exchange.

The UN Security Council on Thursday authorized "all necessary measures" short of a ground offensive to stop Gadhafi forces from snuffing out a monthlong rebel uprising. This week, the government's superior firepower pushed rebels back to their eastern stronghold of Benghazi.

As his forces advanced to within 130km of the city, Gadhafi said there would be "no mercy or compassion" for those who resist.

Fierce fighting in Libya has damaged oil operations and cut most of the OPEC nation's 1.6 million barrels a day of crude output.

"The intensity of fighting and the targeting of oil facilities and installations has been a shock to many observers," Cameron Hanover said in a report. "This decision by the U.N. would seem to extend the fighting for a period of time."

Oil fell earlier this week to below $97 on investor concern last week's massive earthquake and tsunami in Japan would crimp crude demand as the world's third-largest economy struggles to recover. Attention then turned Thursday to Libya and a violent crackdown on anti-government protesters in Bahrain.

"The oil market is confused and in a state of roiling uncertainty," Cameron Hanover said. "As long as there is unrest in Bahrain, oil prices will find it hard to sell off."

In other Nymex trading for April contracts, heating oil was up 2.3 cents at $3.09 a gallon and gasoline added 2.8 cents to $2.98 a gallon. Natural gas gained 0.9 cent at $4.17 per 1,000 cubic feet.

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Engine 3.0-litre inline six-cylinder

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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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