The jobs of the US Federal Reserve and of Opec are somewhat similar. They are driving a car on an undulating mountain road, only able to look through the rear-view mirror, and with just one control: the brake, which works with at least a month’s delay.
A further challenge for Opec is that it has several drivers, who don’t always agree on the destination.
But for now, the oil exporters’ group is back on the road. It took a quarter longer than expected, but Opec+'s brakes – supply cuts – finally seem to be having the desired impact.
The group’s meeting last Wednesday confirmed production cuts would stay in place until at least the end of June. Brent prices finally jumped above $90 a barrel for the first time since October.
After the hairpin bends of Covid, then the Russian war, the oil market is back to relative normality – and that implies Opec+ should also seek a smoother ride
Last year, observers anticipated that the market would tighten significantly in the fourth quarter, and that $100 per barrel was within reach. Instead, a surge of US oil production collided with economic concerns over China and prices tumbled by almost $20 a barrel by mid-December, bottoming out around $73, before mounting a halting recovery.
Compliance to Opec+ targets remains pretty good. Iraq is the main over-producer, at about 300,000 barrels per day above its allocation in March, because of the revival of output in the Kurdistan region, even while the main export pipeline through Turkey remains shut. Kazakhstan and, on a much smaller scale, Gabon, have also been above target.
Nigeria remains below it but is nevertheless producing a lot more than last year. Kazakhstan, in the wider Opec+ group, was more than 100,000 bpd over target in March.
Members who have been overproducing have been exhorted to provide plans of how they will cut back to compensate. It is unlikely that Iraq will fully offset past months' excesses, even if it does trim current production. Output in Iran, Libya and Venezuela, which are not bound by targets, is up on last year in every case, by almost half a million barrels per day for Iran.
After a stellar 2023, US output dipped in January, hit by winter storms – not an unusual occurrence. Expectations are for a much more subdued year, with a rise of 260,000 bpd, according to the Energy Information Administration. Interestingly, the EIA sees stronger expansion next year.
One of the remarkable features of the current market has been the huge divergence in demand outlooks between Opec and the International Energy Agency. Opec has essentially held the line on its bullish call, seeing an increase of 2.25 million bpd, while the IEA pushed its estimate up in March, but still only sees gains of 1.3 million bpd. Meanwhile, the EIA comes in at 1.43 million bpd. Most analysts fall somewhere in the space between Opec and the IEA, but generally towards the lower end.
While China continues to be a concern, the US economy is strong. It may avoid not just the dreaded hard landing, but even a soft landing, this year. With US inflation rebounding, the Federal Reserve is pushing back expectations of interest rate cuts. Last year’s one-off deflationary pressure from easing supply chains and lower energy prices, not just in the US but in Europe and Australia, has probably run its course.
Geopolitical factors have not had any real impact on overall prices. Dramatic as they are, and troublesome for oil trade and shipping, the Houthi attacks on vessels in the Red Sea have not affected supply. Nor have Ukraine’s drone attacks on Russian refineries, which have successfully cut petroleum product output but not yet significantly affected crude.
That could be about to change. Tighter enforcement of US sanctions on Russian shipping has hit exports to India, and could further crimp Russia’s output if it has to switch away from using its damaged domestic refineries. The US may also reinstate sanctions on Venezuela if, as seems increasingly likely, its presidential election in July is not considered fair.
Most dangerous is the prospect of a conflict involving Israel and Iran. Israel has stepped up attacks on Hezbollah targets in Lebanon, might have been behind explosions on gas pipelines in Iran in February, and killed several senior Revolutionary Guards commanders with a missile that destroyed the Iranian consulate in Damascus last Monday.
Iran has been restrained so far, but that may not last. Israel would hope that the US would also be sucked into any outright war.
Even if there is no serious disruption of production anywhere, if Opec+ sticks to its production cuts throughout the year, there will be a substantial deficit – as much as 4 million bpd in August. Chinese demand is also expected to strengthen in the second half.
These hints of the road ahead are important. Opec+ could follow one of two paths.
First, it could hold to its current policy and keep the cuts in place until prices rise above $100 per barrel, possibly well above, and when there is more data on the economic and demand outlook for the year’s second half.
The risks here are that higher prices spur a further surge in US output, push up inflation and result in delaying interest rate cuts. The general economic picture may weaken. If Opec+ gets stuck in a repeat of the fourth-quarter situation of tepid demand and strong competition, it cannot cut much further. Saudi Arabia would not want to deepen its voluntary reductions further, while there is increasing fatigue on cuts, especially from Iraq and the UAE.
Or, the group could believe its own strong demand forecasts. After a long period of cuts, it could then begin charting its path back to fuller output. That particularly applies to members with the most spare capacity – the UAE and Saudi Arabia.
After the hairpin bends of Covid, then the Russian war, the oil market is back to relative normality – and that implies Opec+ should also seek a smoother ride.
Robin M. Mills is chief executive of Qamar Energy, and author of 'The Myth of the Oil Crisis'
Sri Lanka-India Test series schedule
- 1st Test India won by 304 runs at Galle
- 2nd Test India won by innings and 53 runs at Colombo
- 3rd Test August 12-16 at Pallekele
Company%20profile
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UAE currency: the story behind the money in your pockets
UFC%20FIGHT%20NIGHT%3A%20SAUDI%20ARABIA%20RESULTS
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The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
Killing of Qassem Suleimani
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
RESULTS
5pm: Maiden (PA) Dh80,000 2,200m
Winner: Arjan, Fabrice Veron (jockey), Eric Lemartinel (trainer).
5.30pm: Maiden (PA) Dh80,000 1,400m
Winner: Jap Nazaa, Royston Ffrench, Irfan Ellahi.
6pm: Al Ruwais Group 3 (PA) Dh300,000 1,200m
Winner: RB Lam Tara, Fabrice Veron, Eric Lemartinal.
6.30pm: Shadwell Gold Cup Prestige Dh125,000 1,600m
Winner: AF Sanad, Bernardo Pinheiro, Khalifa Al Neyadi.
7pm: Shadwell Farm Stallions Handicap (PA) Dh70,000 1,600m
Winner: Jawal Al Reef, Patrick Cosgrave, Abdallah Al Hammadi.
7.30pm: Maiden (TB) Dh80,000 1,600m
Winner: Dubai Canal, Harry Bentley, Satish Seemar.
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Rankings
ATP: 1. Novak Djokovic (SRB) 10,955 pts; 2. Rafael Nadal (ESP) 8,320; 3. Alexander Zverev (GER) 6,475 ( 1); 5. Juan Martin Del Potro (ARG) 5,060 ( 1); 6. Kevin Anderson (RSA) 4,845 ( 1); 6. Roger Federer (SUI) 4,600 (-3); 7. Kei Nishikori (JPN) 4,110 ( 2); 8. Dominic Thiem (AUT) 3,960; 9. John Isner (USA) 3,155 ( 1); 10. Marin Cilic (CRO) 3,140 (-3)
WTA: 1. Naomi Osaka (JPN) 7,030 pts ( 3); 2. Petra Kvitova (CZE) 6,290 ( 4); 3. Simona Halep (ROM) 5,582 (-2); 4. Sloane Stephens (USA) 5,307 ( 1); 5. Karolina Pliskova (CZE) 5,100 ( 3); 6. Angelique Kerber (GER) 4,965 (-4); 7. Elina Svitolina (UKR) 4,940; 8. Kiki Bertens (NED) 4,430 ( 1); 9. Caroline Wozniacki (DEN) 3,566 (-6); 10. Aryna Sabalenka (BLR) 3,485 ( 1)
Hunger and Fury: The Crisis of Democracy in the Balkans
Jasmin Mujanović, Hurst Publishers
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
UAE currency: the story behind the money in your pockets
TV: World Cup Qualifier 2018 matches will be aired on on OSN Sports HD Cricket channel
The%20specs
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School counsellors on mental well-being
Schools counsellors in Abu Dhabi have put a number of provisions in place to help support pupils returning to the classroom next week.
Many children will resume in-person lessons for the first time in 10 months and parents previously raised concerns about the long-term effects of distance learning.
Schools leaders and counsellors said extra support will be offered to anyone that needs it. Additionally, heads of years will be on hand to offer advice or coping mechanisms to ease any concerns.
“Anxiety this time round has really spiralled, more so than from the first lockdown at the beginning of the pandemic,” said Priya Mitchell, counsellor at The British School Al Khubairat in Abu Dhabi.
“Some have got used to being at home don’t want to go back, while others are desperate to get back.
“We have seen an increase in depressive symptoms, especially with older pupils, and self-harm is starting younger.
“It is worrying and has taught us how important it is that we prioritise mental well-being.”
Ms Mitchell said she was liaising more with heads of year so they can support and offer advice to pupils if the demand is there.
The school will also carry out mental well-being checks so they can pick up on any behavioural patterns and put interventions in place to help pupils.
At Raha International School, the well-being team has provided parents with assessment surveys to see how they can support students at home to transition back to school.
“They have created a Well-being Resource Bank that parents have access to on information on various domains of mental health for students and families,” a team member said.
“Our pastoral team have been working with students to help ease the transition and reduce anxiety that [pupils] may experience after some have been nearly a year off campus.
"Special secondary tutorial classes have also focused on preparing students for their return; going over new guidelines, expectations and daily schedules.”
Killing of Qassem Suleimani
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
DEADPOOL & WOLVERINE
Starring: Ryan Reynolds, Hugh Jackman, Emma Corrin
Director: Shawn Levy
Rating: 3/5
SPECS
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'Cheb%20Khaled'
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Read more from Aya Iskandarani
More coverage from the Future Forum
Countdown to Zero exhibition will show how disease can be beaten
Countdown to Zero: Defeating Disease, an international multimedia exhibition created by the American Museum of National History in collaboration with The Carter Center, will open in Abu Dhabi a month before Reaching the Last Mile.
Opening on October 15 and running until November 15, the free exhibition opens at The Galleria mall on Al Maryah Island, and has already been seen at the Jimmy Carter Presidential Library and Museum in Atlanta, the American Museum of Natural History in New York, and the London School of Hygiene and Tropical Medicine.
