After something of a surprise last month, when it kept production levels frozen, the Opec+ group again wrongfooted the market on Thursday. General expectations were for an extension of quotas. Instead, the alliance decided to ease cuts, an important step on the road to recovery.
Despite hopes that there would be no production increases, and a technical committee meeting on Tuesday’s reduction of demand growth forecasts from 5.9 million barrels per day to 5.6 million bpd this year, Brent crude actually rose by 1.4 per cent on the news of the final arrangement.
The idea now is to add 350,000 bpd in both May and June and 441,000 bpd in July, although monthly additions could be up to 500,000 bpd.
Saudi Arabia will also gradually ease its voluntary extra cut of 1 million bpd. That will bring 2.1 million bpd or more back to the market over the next three months.
If Opec+ can adhere to this plan – it has two more monthly meetings to change course before July – its cuts will amount to 5.8 million bpd from July, back in line with the original plan from last April. That would be quite an achievement, given the chaos in the intervening period.
A couple of jolts this year – the Texas freeze in February and the Suez Canal blockage last month – have had only transient effects on the market.
The demand picture is mixed, with a new wave of Covid-19 cases worldwide, particular concerns in Brazil and India, a slow European vaccine campaign and the danger of new virulent strains with high transmission rates that pose a greater risk to younger people.
On the other hand, refinery runs are returning to normal, except for jet fuel. US stocks are essentially back to pre-pandemic levels and American road and air travel appears to be recovering over the Easter holidays.
Forecasts suggest a mild worldwide deficit of oil supplies even in the second quarter of this year, traditionally a period of weak demand.
Higher domestic consumption in Saudi Arabia during summer will give the kingdom room to boost output without increasing exports much.
Despite its heavy dose of environmental objectives, US President Joe Biden’s proposed $2.3 trillion infrastructure plan will be supportive of petroleum consumption over the medium term but bearish in the long term.
An increase in production was becoming harder to resist, whatever the demand signals. It was hard to continue handing out moderate increases to Russia and Kazakhstan, and tolerating Iraqi overproduction while Saudi Arabia continued to bear the burden of extra cuts and the UAE was keen to make more use of its expanded capacity.
Russia has been exceeding its quota and did so by about 165,000 bpd in February. March exports fell sharply and if it keeps production steady, it will be compliant by April.
Deputy Prime Minister Alexander Novak said it will gain 114,000 bpd between May and July, which is true in terms of its quotas. More likely, it will continue to push the limits.
Opec member Iran, which is not part of the deal, managed to boost its exports significantly this year in defiance of US sanctions. Indirect talks between Iran and the other parties to the 2015 nuclear deal commence tomorrow in Vienna, Opec’s usual home.
Given the tension, some of Tehran's neighbours will not be keen on it regaining market share should the negotiations bear fruit, while their output remains capped.
Opec also had to bear in mind the quickening pace of drilling in the US that will, after a lag of a few months, lead to higher production. India has been complaining that high oil prices will crimp its demand. The US is uneasy about the sharp rise in prices in February and early March.
Although the deal framework would keep production constant after July until the end of next April, that may not be realistic.
Recovering demand will require Opec+ to continue adding crude, even if it pauses in some months when problems strike.
What should Opec+ look out for from this point? The pandemic and the associated issues of international travel, vaccination, new infection waves and lockdowns remain pivotal.
The organisation should be proactive to meet anticipated demand – acknowledging how difficult forecasts remain – rather than risk further price spikes and the revival of rivals.
Not as essential, but also significant, is the level of supply outside the deal – most importantly from volatile Libya, sanctioned Iran and price-sensitive US shale.
The structure of oil futures prices is also important. They are now in backwardation, with prices for future delivery lower than prompt, a structure that indicates the market is relatively tight.
Opec prefers this as it encourages the draining of surplus stocks and deters its competitors, tight oil drillers in the US, from hedging output.
There is still a long way to go towards a semblance of normality, both in oil markets and the world at large. However, this production increase gives some confidence of heading in the right direction – hence the gain in prices as it was announced.
Down the road lurks another difficult conversation, on a future realignment of quotas as growing capacity in some members confronts depletion in others. For now, the next few steps are mapped out.
Robin Mills is chief executive of Qamar Energy and author of The Myth of the Oil Crisis
Honeymoonish
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David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
McIlroy's struggles in 2016/17
European Tour: 6 events, 16 rounds, 5 cuts, 0 wins, 3 top-10s, 4 top-25s, 72,5567 points, ranked 16th
PGA Tour: 8 events, 26 rounds, 6 cuts, 0 wins, 4 top-10s, 5 top-25s, 526 points, ranked 71st
Federer's 19 grand slam titles
Australian Open (5 titles) - 2004 bt Marat Safin; 2006 bt Marcos Baghdatis; 2007 bt Fernando Gonzalez; 2010 bt Andy Murray; 2017 bt Rafael Nadal
French Open (1 title) - 2009 bt Robin Soderling
Wimbledon (8 titles) - 2003 bt Mark Philippoussis; 2004 bt Andy Roddick; 2005 bt Andy Roddick; 2006 bt Rafael Nadal; 2007 bt Rafael Nadal; 2009 bt Andy Roddick; 2012 bt Andy Murray; 2017 bt Marin Cilic
US Open (5 titles) - 2004 bt Lleyton Hewitt; 2005 bt Andre Agassi; 2006 bt Andy Roddick; 2007 bt Novak Djokovic; 2008 bt Andy Murray
The specs: 2017 Ford F-150 Raptor
Price, base / as tested Dh220,000 / Dh320,000
Engine 3.5L V6
Transmission 10-speed automatic
Power 421hp @ 6,000rpm
Torque 678Nm @ 3,750rpm
Fuel economy, combined 14.1L / 100km
RESULT
Arsenal 0 Chelsea 3
Chelsea: Willian (40'), Batshuayi (42', 49')
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.”
Sreesanth's India bowling career
Tests 27, Wickets 87, Average 37.59, Best 5-40
ODIs 53, Wickets 75, Average 33.44, Best 6-55
T20Is 10, Wickets 7, Average 41.14, Best 2-12
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Huddersfield Town permanent signings:
- Steve Mounie (striker): signed from Montpellier for £11 million
- Tom Ince (winger): signed from Derby County for £7.7m
- Aaron Mooy (midfielder): signed from Manchester City for £7.7m
- Laurent Depoitre (striker): signed from Porto for £3.4m
- Scott Malone (defender): signed from Fulham for £3.3m
- Zanka (defender): signed from Copenhagen for £2.3m
- Elias Kachunga (winger): signed for Ingolstadt for £1.1m
- Danny WIlliams (midfielder): signed from Reading on a free transfer
Remaining fixtures
- August 29 – UAE v Saudi Arabia, Hazza bin Zayed Stadium, Al Ain
- September 5 – Iraq v UAE, Amman, Jordan (venue TBC)
