Opec and its main driver, Saudi Arabia, have decisively shifted gears over the last two months, from neutral to forward. The questions are, who are they trying to outrace, from three plausible candidates? And, how successful will they be?
In March, the eight countries in the wider Opec+ grouping adhering to additional voluntary production cuts agreed finally, after months of pauses, to start returning production to the market. This would be gradual, but was particularly important to the UAE, which would see its baseline production target increased by 300,000 barrels a day, about a tenth of current output.
This was perhaps expected. More surprising was last month’s move, when the producers’ subgroup announced it would effectively bundle three monthly increases into one, raising output limits by 411,000 bpd for this month. The Opec+ eight did the same again this month for June levels. A complex schema of compensation cuts per country and per month, intended to make up for past overproduction, means real increases should be less than the headline.
Nevertheless, a more aggressive policy, a willingness to accept lower oil prices for a while, indicates that Opec+ will start regaining market share. At this rate of increase, the voluntary cuts of 2.2 million bpd, announced in November 2023, would be fully unwound by about September. Half a million barrels a day of compensation cuts, though, would still be in effect then, and they drag on for some countries as late as next June.
Expected demand growth this year ranges from 730,000 bpd, in the view of the International Energy Agency, to Opec’s forecast of 1.3 million bpd. The IEA predicts production growth outside the Opec+ alliance at 1.3 million bpd. Prices already softened last year, the economic outlook has darkened, so to absorb the Opec+ increases, somebody must lose out.
These moves clearly reflected Riyadh’s frustration over some members not fulfilling their commitments, particularly Kazakhstan and Iraq. But there will be another, unstated, casualty.
Kazakhstan’s Energy Ministry has said it has no plans to cut output in May. Its intended crude oil production of about 1.75 million bpd compares to its compensated target of just 1.37 million bpd. Its extra compensation cuts actually reach a maximum in October before dropping off, so it faces a lengthy adjustment.
Iraq is the other problem member. It is allowed 3.909 million bpd in May, again accounting for compensation. Its March output, according to Opec’s own figures, had dropped a bit on February, but was still over-limit at 3.981 million bpd. Its compensation cuts ease off a bit after June.
The others were close to their allowable levels in March, and their agreed compensation cuts are zero or small. The uncertain impact of sanctions on non-target bound Venezuela, Iran and Russia might take some more oil off the market, but could also restore it depending on the path of Washington’s negotiations with Tehran and Moscow.
How effective will the production increases be in restoring compliance?
Iraq’s big fiscal deficits, fast-growing population, severe infrastructure shortfalls and shaky domestic politics make it the most vulnerable to lower oil prices.
However, it is also the Opec+ member, alongside the UAE, with the biggest realistic production growth plans, which are mostly financed by foreign investment.
Under pressure, it has already improved compliance substantially, cutting about 190,000 bpd so far this year. Its remaining overproduction is not that big, at least on Opec’s own figures. And Baghdad will claim special conditions: particularly, the continuing legal deadlock on exports from the semi-autonomous Kurdistan region, and its need for oil to fuel power plants in summer.
Improving Kazakh compliance would now be more helpful. But Astana is in a stronger position than Baghdad. Its sovereign wealth fund, Samruk-Kazyna, holds $81 billion of assets, equivalent to about 30 per cent of gross domestic product. Government debt is not high, fiscal and current account deficits are moderate.
Oil provides less than a third of government revenue. Income is buoyed by Kazakhstan’s strong mining sector for gold and uranium, both metals enjoying high prices. And its higher oil production probably more than compensates it for lower prices.
Kazakhstan’s primary reason for overshooting is the expansion of Tengiz, its main producing field. Production from the even larger Kashagan field is also set to grow, as is third-placed Karachaganak.
All these fields, which yield 70 per cent of Kazakh output, have leading international partners, who make the decisions on output, as do other ventures with Chinese companies. Kazakhstan says older fields cannot easily be cut back without risking permanent losses. These factors limit its ability to comply with Opec+ quotas.
Of course, one might ask why, knowing all this, Astana then signed up to the “voluntary” cuts. It could use government powers to override the various consortia’s production decisions. But recently-appointed Energy Minister Erlan Akkenzhenov told Reuters, “We will act in accordance with national interests with all the ensuing consequences.”
So, Kazakhstan looks neither keen to fall into line, nor under particular economic pressure to do so swiftly. Maybe some Russian arm-twisting might help, as last month, when exports from its pipeline to the Black Sea were briefly interrupted by a Russian regulator’s order. Otherwise, a deal on higher production levels could be sought, but that may just open the floodgates for other Opec+ members with significant unused capacity to demand increases too.
So, if pressuring these two colleagues will not achieve major results, what is the goal of Opec+ in its big target increases?
The group may not be deliberately targeting US oil output. But American shale will be an unavoidable victim of lower oil prices, particularly when compounded by higher costs due to tariffs. Diamondback, one of the biggest operators in the Permian Basin, said “it is likely that US onshore oil production has peaked and will begin to decline this quarter”.
The IEA had predicted US growth at 490,000 bpd this year, so an overall decline would shift market balances significantly – more than bringing all Opec+ members into perfect compliance. Pressuring erring colleagues is a more openly-discussed goal, and a useful side effect. The real pain of the Opec+ boost will be felt not in Astana or Baghdad, but in Houston.
TICKETS
Tickets start at Dh100 for adults, while children can enter free on the opening day. For more information, visit www.mubadalawtc.com.
The biog
Favourite books: 'Ruth Bader Ginsburg: A Life' by Jane D. Mathews and ‘The Moment of Lift’ by Melinda Gates
Favourite travel destination: Greece, a blend of ancient history and captivating nature. It always has given me a sense of joy, endless possibilities, positive energy and wonderful people that make you feel at home.
Favourite pastime: travelling and experiencing different cultures across the globe.
Favourite quote: “In the future, there will be no female leaders. There will just be leaders” - Sheryl Sandberg, COO of Facebook.
Favourite Movie: Mona Lisa Smile
Favourite Author: Kahlil Gibran
Favourite Artist: Meryl Streep
Greatest Royal Rumble results
John Cena pinned Triple H in a singles match
Cedric Alexander retained the WWE Cruiserweight title against Kalisto
Matt Hardy and Bray Wyatt win the Raw Tag Team titles against Cesaro and Sheamus
Jeff Hardy retained the United States title against Jinder Mahal
Bludgeon Brothers retain the SmackDown Tag Team titles against the Usos
Seth Rollins retains the Intercontinental title against The Miz, Finn Balor and Samoa Joe
AJ Styles remains WWE World Heavyweight champion after he and Shinsuke Nakamura are both counted out
The Undertaker beats Rusev in a casket match
Brock Lesnar retains the WWE Universal title against Roman Reigns in a steel cage match
Braun Strowman won the 50-man Royal Rumble by eliminating Big Cass last
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
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.
Zayed Sustainability Prize
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
MATCH INFO
Champions League quarter-final, first leg
Tottenham Hotspur v Manchester City, Tuesday, 11pm (UAE)
Matches can be watched on BeIN Sports
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
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
The specs: Aston Martin DB11 V8 vs Ferrari GTC4Lusso T
Price, base: Dh840,000; Dh120,000
Engine: 4.0L V8 twin-turbo; 3.9L V8 turbo
Transmission: Eight-speed automatic; seven-speed automatic
Power: 509hp @ 6,000rpm; 601hp @ 7,500rpm
Torque: 695Nm @ 2,000rpm; 760Nm @ 3,000rpm
Fuel economy, combined: 9.9L / 100km; 11.6L / 100km
The specs
Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
Company name: Play:Date
Launched: March 2017 on UAE Mother’s Day
Founder: Shamim Kassibawi
Based: Dubai with operations in the UAE and US
Sector: Tech
Size: 20 employees
Stage of funding: Seed
Investors: Three founders (two silent co-founders) and one venture capital fund
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Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
The biog
From: Ras Al Khaimah
Age: 50
Profession: Electronic engineer, worked with Etisalat for the past 20 years
Hobbies: 'Anything that involves exploration, hunting, fishing, mountaineering, the sea, hiking, scuba diving, and adventure sports'
Favourite quote: 'Life is so simple, enjoy it'
more from Janine di Giovanni
Children who witnessed blood bath want to help others
Aged just 11, Khulood Al Najjar’s daughter, Nora, bravely attempted to fight off Philip Spence. Her finger was injured when she put her hand in between the claw hammer and her mother’s head.
As a vital witness, she was forced to relive the ordeal by police who needed to identify the attacker and ensure he was found guilty.
Now aged 16, Nora has decided she wants to dedicate her career to helping other victims of crime.
“It was very horrible for her. She saw her mum, dying, just next to her eyes. But now she just wants to go forward,” said Khulood, speaking about how her eldest daughter was dealing with the trauma of the incident five years ago. “She is saying, 'mama, I want to be a lawyer, I want to help people achieve justice'.”
Khulood’s youngest daughter, Fatima, was seven at the time of the attack and attempted to help paramedics responding to the incident.
“Now she wants to be a maxillofacial doctor,” Khulood said. “She said to me ‘it is because a maxillofacial doctor returned your face, mama’. Now she wants to help people see themselves in the mirror again.”
Khulood’s son, Saeed, was nine in 2014 and slept through the attack. While he did not witness the trauma, this made it more difficult for him to understand what had happened. He has ambitions to become an engineer.
Sholto Byrnes on Myanmar politics
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
RESULTS
6.30pm: Al Maktoum Challenge Round-1 Group 1 (PA) Dh119,373 (Dirt) 1,600m
Winner: Brraq, Adrie de Vries (jockey), Jean-Claude Pecout (trainer)
7.05pm: Handicap (TB) Dh102,500 (D) 1,200m
Winner: Taamol, Connor Beasley, Ali Rashid Al Raihe.
7.40pm: Handicap (TB) Dh105,000 (Turf) 1,800m
Winner: Eqtiraan, Connor Beasley, Ali Rashid Al Raihe.
8.15pm: UAE 1000 Guineas Trial (TB) Dh183,650 (D) 1,400m
Winner: Soft Whisper, Pat Cosgrave, Saeed bin Suroor.
9.50pm: Handicap (TB) Dh105,000 (D) 1,600m
Winner: Hypothetical, Mickael Barzalona, Salem bin Ghadayer.
9.25pm: Handicap (TB) Dh95,000 (T) 1,000m
Winner: Etisalat, Sando Paiva, Ali Rashid Al Raihe
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KEY%20DATES%20IN%20AMAZON'S%20HISTORY
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MANDOOB
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Background: Chemical Weapons
