Daniel Yergin is the vice chairman of the industry consulting group IHS and author of The Prize. Courtesy IHS
Daniel Yergin is the vice chairman of the industry consulting group IHS and author of The Prize. Courtesy IHS

Saudi Arabia’s output policy on crude working, says oil guru



Saudi Arabia’s policy aimed at forcing higher-cost oil producers to cut output and balance the world market appears to be working, according to the oil expert Daniel Yergin.

Although oil prices are still less than half the levels of recent boom years, there are signs that they are responding to supply cuts as well as the ratcheting up of geopolitical risks, especially in the Middle East, according to Mr Yergin, who is the vice chairman of the industry consulting group IHS and author of the much-garlanded The Prize, widely considered as the definitive history of the oil world.

He is scheduled to be the featured speaker at next month's Adipec, which is the big annual oil industry gathering in Abu Dhabi.

Mr Yergin sees the oil business as having undergone a technology-driven shift from one where investment to production took many years to a shorter cycle for key production provinces, including US shale oil.

Oil prices had been trading around US$100 per barrel for much of the period after the 2008 financial crash until last summer, when they fell precipitously and have struggled to recover.

“For 10 years, the oil markets had been defined by demand from emerging markets, primarily China, and now it’s moved into the shale era,” says Mr Yergin, who says the tipping point seemed to take the market by surprise last summer.

Saudi Arabia – whose oil minister has talked of the need for cuts to higher-cost production in general, without specifying US shale producers – had little option but to keep producing and let supply and demand find its own equilibrium, says MrYergin. “If they pursued the other option they would have had to cut and cut again and again,” he says, a strategy that as Mr Yergin’s book chronicles was a spectacular failure in previous decades.

The world benchmark North Sea Brent crude futures have had a volatile ride all year, hitting a six-year low at around $37 per barrel last month and then rebounding to about $53 on Friday.

The recovery has been partly attributed to signs in the US shale oil boom – which helped to double output to 9.6 million barrels per day in the past decade – had topped out last spring and began to fall as producers reacted to the price drop.

"Inadvertently, the US has become the swing producer for world oil," a role occupied by Opec – mostly Saudi Arabia – for the previous four decades," Mr Yergin explains.

Another factor that has supported oil prices is the growing destabilisation in the region.

“It is striking that up to now [regional conflicts] have not had a bigger impact,” he says. “Russian involvement in Syria really raises the risk that some kind of accident makes that issue even more worrisome.”

The question for both regional powers and for Opec is whether the growing number of conflicts – several of which pit Saudi Arabia and its allies against Iran’s proxies – will be reflected in greater competition for oil market share next year, when Iran is expected to have nuclear-related sanctions lifted and sell more of its oil on world markets; or whether it will be an impetus for more cooperation and coordination.

Mr Yergin says he believes talk of the death of Opec is misplaced.

“People in the West have tended to think of Opec as a single-minded entity that makes decisions about production, but that loses sight of what it actually is,” he says. “I’ve always thought of it as a framework for major oil producers, for collaboration, communication and decision-making.”

If the competition becomes greater at a time when China’s oil demand is slowing, then “we will be back in one of those all-out battles for market share”, he warns.

Looking further ahead, Mr Yergin says that next month he will be telling the oil industry’s leaders that while hydrocarbons still look like being the world’s main energy source for decades to come, they should plan for scenarios in which inroads from technology and policy arrive more quickly.

“The big disruptor in the near term could be major changes in transportation and how people use cars,” he says. This includes a scenario (the “autonomy scenario”, IHS calls it), where there is a rapid move away from car ownership and the introduction of self-drive vehicles.

Also, the recent abandonment by Shell of its Alaska exploration venture after spending $8bn, “is a very big statement about the high cost of regulatory and fiscal uncertainty”.

That is a scenario that so far does not apply to the major state oil producers of the region.

amcauley@thenational.ae

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The specs

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How Beautiful this world is!
Election pledges on migration

CDU: "Now is the time to control the German borders and enforce strict border rejections" 

SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom" 

Specs

Engine: Dual-motor all-wheel-drive electric

Range: Up to 610km

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A little about CVRL

Founded in 1985 by Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, the Central Veterinary Research Laboratory (CVRL) is a government diagnostic centre that provides testing and research facilities to the UAE and neighbouring countries.

One of its main goals is to provide permanent treatment solutions for veterinary related diseases. 

The taxidermy centre was established 12 years ago and is headed by Dr Ulrich Wernery. 

Test

Director: S Sashikanth

Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan

Star rating: 2/5

The smuggler

Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple. 
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.

Khouli conviction

Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.

For sale

A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.

- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico

- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000

- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950

THE SPECS

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Engine: Duel electric motors
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Torque: 1075Nm
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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.”

Bio

Born in Dubai in 1994
Her father is a retired Emirati police officer and her mother is originally from Kuwait
She Graduated from the American University of Sharjah in 2015 and is currently working on her Masters in Communication from the University of Sharjah.
Her favourite film is Pacific Rim, directed by Guillermo del Toro

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How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

How to come clean about financial infidelity
  • Be honest and transparent: It is always better to own up than be found out. Tell your partner everything they want to know. Show remorse. Inform them of the extent of the situation so they know what they are dealing with.
  • Work on yourself: Be honest with yourself and your partner and figure out why you did it. Don’t be ashamed to ask for professional help. 
  • Give it time: Like any breach of trust, it requires time to rebuild. So be consistent, communicate often and be patient with your partner and yourself.
  • Discuss your financial situation regularly: Ensure your spouse is involved in financial matters and decisions. Your ability to consistently follow through with what you say you are going to do when it comes to money can make all the difference in your partner’s willingness to trust you again.
  • Work on a plan to resolve the problem together: If there is a lot of debt, for example, create a budget and financial plan together and ensure your partner is fully informed, involved and supported. 

Carol Glynn, founder of Conscious Finance Coaching

Company profile

Name: Tharb

Started: December 2016

Founder: Eisa Alsubousi

Based: Abu Dhabi

Sector: Luxury leather goods

Initial investment: Dh150,000 from personal savings

 

The specs

Engine: 3.0-litre six-cylinder MHEV

Power: 360bhp

Torque: 500Nm

Transmission: eight-speed automatic

Price: from Dh282,870

On sale: now

SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20S23%20ULTRA
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Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

How to help

Call the hotline on 0502955999 or send "thenational" to the following numbers:

2289 - Dh10

2252 - Dh50

6025 - Dh20

6027 - Dh100

6026 - Dh200

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Paatal Lok season two

Directors: Avinash Arun, Prosit Roy 

Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong

Rating: 4.5/5

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