Britain and Saudi agree $90 billion trade deal

Saudi Arabia’s Crown Prince Mohammed Bin Salman meets British PM Theresa May (SPA)
Updated 08 March 2018
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Britain and Saudi agree $90 billion trade deal

DIUBAI: Britain and Saudi Arabia set out an ambition to build £65 billion ($90.29 billion) of trade and investment ties in coming years, the prime minister’s office said on Wednesday, calling the agreement a vote of confidence in the British economy ahead of Brexit.
“The meeting agreed a landmark ambition for around £65 billion of mutual trade and investment opportunities over the coming years, including direct investment in the UK and new Saudi public procurement with UK companies,” a spokeswoman from Prime Minister Theresa May’s office said in a statement.
“This is a significant boost for UK prosperity and a clear demonstration of the strong international confidence in our economy as we prepare to leave the European Union.”
Prime Minister Theresa May discussed bilateral relations with Saudi Crown Prince Mohammed Bin Salman.
The meeting at 10 Downing Street was preceded by a meeting with Queen Elizabeth at Buckingham palace.
In a statement the Saudi delegation said the Kingdom was an important destination for British companies.
“There are almost 200 joint ventures that are currently valued at £11.5 billion, including the British bank HSBC and Marks & Spencer and Jaguar Land Rover.”
The statement explained that Saudi Arabia was one of the world’s 20 largest economies and that it also had the third fastest growing market in British exports and imports.
“The Kingdom hopes that British companies will be able to take advantage of the profound changes that occur after the completion of Britain’s exit from the European Union negotiations.”
The statement added that British trade relations and Saudi Arabia exceeded £2.3 billion in the past five years.
Furthermore, the statement added – trade in goods and services in 2016 was estimated as being worth £9 billion.
The statement added that Britain faced “huge opportunities” in the post-Brexit era.
“After Britain’s exit from the European Union, there will be huge opportunities for Britain as a result of the 2030 vision,” the statement explained.


Iran looms large over OPEC summit

Updated 22 September 2018
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Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”