Opec's most unpopular word – oversupply – keeps hitting the headlines … and the price of the commodity. The appetite for crude oil stayed sporadic through March. Traders are sceptical because United States producers are keeping the pressure up and building inventories. It appears that Opec's attempts to build up the price are not going far enough.
There are two main pressures on the crude oil price: the rock and the hard place. The rock is US supply, which keeps going strong. The hard place is a volatile greenback which – even when weaker – is not stimulating demand for crude. After trading in a narrow range for almost three months, we experienced a steep sell-off for most of March. Declines exceeded 10 per cent before struggling back upwards after Opec's willingness to extend production cuts. This could turn out to be a short-term rise. While it demonstrates commitment to cutting supplies, it is only half the battle.
The market has changed, perhaps forever. Oil markets are currently being driven by two main sets of data, neither of which are under Opec’s direct control. These are US rig counts and petroleum inventories. Recently, US drillers pushed aggressively forward. Crude oil bears cheered as drillers ramped up their rig count for 10 weeks running. Oil prices fell below US$49 per barrel as oil inventories in the US rose 50 million barrels to a record high of 533 million barrels. However, another record was reached at the same time – the number of unfinished US shale oil wells. The wells were abandoned as the oil price burned to ashes of its former self. This could mean that drilling activities might not be as negative to prices as assumed. Nonetheless, drilling activity is picking up as the price slowly rises phoenix-like from the flames.
Late yesterday afternoon, Brent crude was trading at $54.70 per barrel. Despite the short-term crests in the otherwise becalmed crude oil prices, it is difficult to get away from the reality that the oil markets have changed. Commitment of Traders (COT) data shows that shale producers are re-entering the market even more aggressively.
They are selling future contracts at a record pace, strongly challenging the decades-old status quo built by Opec. The US producers need to make up for lost revenues while protecting themselves from another downturn in oil prices. I am keeping a close eye on this data to understand how producers and speculators are behaving.
It took three years for the US shale industry to become strong enough to challenge Opec and keep a cap on oil prices. Since the prices plunged in 2014, shale producers have been eating up market share. But Opec’s power and experience still carry a huge amount of weight. I believe that as long as Opec producers keep their commitment to balancing the market, prices will recover. It might be a roller-coaster ride until they do. Gulf economies were weakened by three years of depressed oil revenues. They cannot afford to enter a new market share war. Instead, they are wisely diversifying their economies. The aim is to recover their own losses and to protect from future oil price downturns.
The US shale industry and Opec have diverged in their approach towards the market. Shale producers are moving to increase supplies. Opec members counter by trimming supplies. As chess games go, it is stalemate for the time being. The medium-term outlook is a different story. The winner of the game is likely to be the group that has the most influence in developing countries with promising growth.
Emerging markets will be coming into their own over the next decades. The US president Donald Trump intends to restrict trading ties with blocs such as Asean. That would leave Opec in a much stronger position to increase trade and supply oil to the emerging markets. As global growth picks up pace, Opec could get the opportunity to checkmate US shale, simply by virtue of its stronger trading ties.
Let us recall again the most unpopular of words for Opec – oversupply. Once that word fades from price fundamentals and world economic growth turns around, the game will change. Rising demand may be the power that blows the oil price out of its tight squeeze between a rock and a hard place. Investors need to watch carefully and time their investments finely to take advantage of the surge of growth in crude oil prices that could follow.
Hussein Al Sayed, chief market strategist for the Gulf and Middle East at the forex broker FXTM, is also host of the evening business show Bursat Al Alam on CNBC Arabia.
business@thenational.ae
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Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
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
Company%20profile
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The specs: 2019 BMW i8 Roadster
Price, base: Dh708,750
Engine: 1.5L three-cylinder petrol, plus 11.6 kWh lithium-ion battery
Transmission: Six-speed automatic
Power: 374hp (total)
Torque: 570Nm (total)
Fuel economy, combined: 2.0L / 100km
Baby Driver
Director: Edgar Wright
Starring: Ansel Elgort, Kevin Spacey, Jamie Foxx, Lily James
Three and a half stars
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
UAE currency: the story behind the money in your pockets
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
Film: Raid
Dir: Rajkumar Gupta
Starring: Ajay Devgn, Ileana D'cruz and Saurabh Shukla
Verdict: Three stars
The specs: 2017 Porsche 718 Cayman
Price, base / as tested Dh222,500 / Dh296,870
Engine 2.0L, flat four-cylinder
Transmission Seven-speed PDK
Power 300hp @ 6,500rpm
Torque 380hp @ 1,950rpm
Fuel economy, combined 6.9L / 100km
Closing the loophole on sugary drinks
As The National reported last year, non-fizzy sugared drinks were not covered when the original tax was introduced in 2017. Sports drinks sold in supermarkets were found to contain, on average, 20 grams of sugar per 500ml bottle.
The non-fizzy drink AriZona Iced Tea contains 65 grams of sugar – about 16 teaspoons – per 680ml can. The average can costs about Dh6, which would rise to Dh9.
Drinks such as Starbucks Bottled Mocha Frappuccino contain 31g of sugar in 270ml, while Nescafe Mocha in a can contains 15.6g of sugar in a 240ml can.
Flavoured water, long-life fruit juice concentrates, pre-packaged sweetened coffee drinks fall under the ‘sweetened drink’ category
Not taxed:
Freshly squeezed fruit juices, ground coffee beans, tea leaves and pre-prepared flavoured milkshakes do not come under the ‘sweetened drink’ band.
THREE
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Defined benefit and defined contribution schemes explained
Defined Benefit Plan (DB)
A defined benefit plan is where the benefit is defined by a formula, typically length of service to and salary at date of leaving.
Defined Contribution Plan (DC)
A defined contribution plan is where the benefit depends on the amount of money put into the plan for an employee, and how much investment return is earned on those contributions.
EA Sports FC 26
Publisher: EA Sports
Consoles: PC, PlayStation 4/5, Xbox Series X/S
Rating: 3/5
Boulder shooting victims
• Denny Strong, 20
• Neven Stanisic, 23
• Rikki Olds, 25
• Tralona Bartkowiak, 49
• Suzanne Fountain, 59
• Teri Leiker, 51
• Eric Talley, 51
• Kevin Mahoney, 61
• Lynn Murray, 62
• Jody Waters, 65
Dhadak 2
Director: Shazia Iqbal
Starring: Siddhant Chaturvedi, Triptii Dimri
Rating: 1/5
Muslim Council of Elders condemns terrorism on religious sites
The Muslim Council of Elders has strongly condemned the criminal attacks on religious sites in Britain.
It firmly rejected “acts of terrorism, which constitute a flagrant violation of the sanctity of houses of worship”.
“Attacking places of worship is a form of terrorism and extremism that threatens peace and stability within societies,” it said.
The council also warned against the rise of hate speech, racism, extremism and Islamophobia. It urged the international community to join efforts to promote tolerance and peaceful coexistence.
The specs
Price, base / as tested Dh960,000
Engine 3.9L twin-turbo V8
Transmission Seven-speed dual-clutch automatic
Power 661hp @8,000rpm
Torque 760Nm @ 3,000rpm
Fuel economy, combined 11.4L / 100k
PRISCILLA
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First Person
Richard Flanagan
Chatto & Windus
