Oil prices were steady on Wednesday as investors weighed China’s easing of its monetary policy rate and potential additional efforts to stimulate its economy.
Brent, the benchmark for two thirds of the world’s oil, was trading 0.40 per cent higher at $76.20 a barrel at 12.26pm UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 0.49 per cent at $71.54 a barrel.
US Federal Reserve Chairman Jerome Powell is expected to give his semi-annual report to Congress on Wednesday after the central bank decided to pause raising interest rates earlier this month.
“He will likely stress that more work is required to push back against inflation even as it has slowed substantially in the US,” said Edward Bell, senior director of market economics at Emirates NBD.
“Powell may also face questioning on whether the Fed will need to quickly cut rates if economic conditions start to worsen, particularly in the labour market.”
Higher interest rates could slow the global economy and dampen crude demand. The Fed increased interest rates by a combined 500 basis points since March 2022.
China, the world’s second-largest economy and top crude importer, cut two market-based benchmark lending rates this week, but the loosening of the monetary policy was less aggressive than what some analysts were expecting.
China’s economy, which rebounded after the lifting of Covid-19 restrictions at the start of the year, lost momentum in May, posting weaker retail sales and manufacturing output while registering a slowdown in the property sector.
Earlier this week, US investment bank Goldman Sachs trimmed its 2023 gross domestic product growth forecast for the Asian country to 5.4 per cent, from 6 per cent earlier. It also reduced its 2024 growth forecast to 4.5 per cent, from 4.6 per cent.
“China's recovery is also not taking off as many thought earlier in the year and stimulus efforts have thus far not been as powerful as they could have been,” said Craig Erlam, senior market analyst at Oanda.
“I expect both of these will change in the second half of the year but for now, it's not helping oil prices.”
MUFG cut its short-term oil price forecasts on Wednesday, citing higher-than-expected supply from Russia and other sanctioned countries.
The Japanese bank now expects Brent to average about $81 a barrel this year, lower than its previous estimate of $88. It also slashed its 2024 forecast to $84 from about $98.
MUFG said its bullish 2023 price outlook was based on a supply-constrained market with depleted crude inventories, limited spare capacity, underinvestment due to ESG (environmental, social, and governance) concerns and poor returns in the old economy.
Market fundamentals have been “softer-than-expected” in the first half of the year and prospects for the second half are “starting to slip”, the bank said.
“Global oil demand data does not explain the oil price sell-off, as demand estimates have been consistently revised higher since November 2022,” MUFG said.
“Demand is strong for services orientated refined products, such as gasoline and jet fuel, but weak for goods-orientated products, such as naphtha and LPG [liquefied petroleum gas]”
The bank maintained its global oil demand growth estimates of 1.3 million barrels per day for 2023 and 1.1 million bpd for 2024.
But it now expects a smaller supply deficit of 1.2 million bpd for the second half of the year, which is lower than its previous estimate of 1.6 million bpd.
“Earlier this year, it was mostly driven by China’s reopening, a recovery in aviation and an acceleration of Russian oil decoupling,” the bank said.
“The deficit we envisage in H2 2023 is now mostly a function of demand seasonality and higher Opec+ supply.”
Killing of Qassem Suleimani
Company%20Profile
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Brief scores:
Everton 2
Walcott 21', Sigurdsson 51'
Tottenham 6
Son 27', 61', Alli 35', Kane 42', 74', Eriksen 48'
Man of the Match: Son Heung-min (Tottenham Hotspur)
Sholto Byrnes on Myanmar politics
Killing of Qassem Suleimani
No_One Ever Really Dies
N*E*R*D
(I Am Other/Columbia)
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.”
The specs: 2017 Dodge Viper SRT
Price, base / as tested Dh460,000
Engine 8.4L V10
Transmission Six-speed manual
Power 645hp @ 6,200rpm
Torque 813Nm @ 5,000rpm
Fuel economy, combined 16.8L / 100km
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Gully Boy
Director: Zoya Akhtar
Producer: Excel Entertainment & Tiger Baby
Cast: Ranveer Singh, Alia Bhatt, Kalki Koechlin, Siddhant Chaturvedi
Rating: 4/5 stars
