Gulf exporters to reap oil dividend as battle for Asia market share heats up

A tariff war between China and the US may damage global trade but could benefit Gulf oil exports. (Shutterstock)
Updated 17 August 2018
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Gulf exporters to reap oil dividend as battle for Asia market share heats up

  • Chinese exports to US fall
  • IEA ups demand forecast

LONDON: China is expected to buy more oil from Saudi Arabia and other Gulf producers as it seeks to replace US supply amid a worsening trade war with Washington.
Although China last week omitted US crude from a list of a retaliatory tariffs, analysts told Arab News that the Chinese were cutting forward orders for US oil in case the trade war escalates.
Richard Mallinson, co-founder of London consultancy Energy Aspects, said: “Chinese buyers, anticipating that crude and LNG could go on the list if tensions escalate further, are looking to alternative sources.”
Mallinson said that Chinese buyers wanted to avoid having significant amounts of US oil sitting on tankers in the middle of the ocean, which would be hit with tariffs when unloaded at Chinese ports.
“There is definitely an opportunity for Middle East producers here, and particularly the biggest, Saudi Arabia,” he said.
Andrew Critchlow, head of energy news (EMEA) at S&P Global Platts, told Arab News that there was every likelihood of more demand from China for non-US oil and “Saudi Arabia and other Gulf Cooperation Council countries were the place to get it.”
OPEC already provides 56 percent of China’s oil imports, according to the International Energy Agency (IEA). The US has also been exporting increasing levels to the Asia powerhouse.
A report by the Houston Chronicle on Aug. 13, said that US crude exports to China surged from about 22,000 barrels per day (bpd) in 2016 to almost 400,000 bpd last year and early in 2018, accounting for about 20 percent of all US crude shipments.
This summer, those volumes fell below 200,000 barrels daily, said the report.
Critchlow said that the Kingdom was currently producing about
10.5 million bpd with spare capacity of around 2 million bpd, although the closer you get to that number, the more difficult it was to extract and process, he said.
Russia could also ramp up production, but not as much as KSA, said Critchlow.
“We now have the IEA upping its demand forecast for 2019. They have increased their OPEC barrels estimate by a few hundred thousand barrels a day and by half a million a day by 2019 (for the OPEC 15),”
he said.
But the scope for increased global export potential from the Gulf was also being driven by anticipated tighter supply after the reimposition of US sanctions against Iran later this year.
Still, there was a danger of demand erosion the longer the trade wars continued, and especially if there was further escalation.
Shakil Begg, head of Thomson Reuters oil research in London, warned that by the second half of 2019, global GDP could be cut if world trade levels contracted.
That would lead to a sharp fall in the price of crude, and even herald a US recession that could spill into Europe, he told Arab News.
But Critchlow made the crucial point that the big competition in the oil market today “is to win a bigger share of the Chinese and Asian market, including India.”
He said: “That’s where the battle for market share will take place over the next decade. Also, as Iranian barrels are lost, customers in nations such as China, South Korea, India and Japan will look to the GCC and others to step in.”
US exporters will still be a big force to be reckoned with, he said. The IEA has predicted that the US will overtake KSA and Russia as the largest producer by as early as 2019.
Mallinson said: “At the end of this year and the beginning of next, the market is going to get extremely tight. And the Saudis will have to pump at much higher levels.
“When you’ve got buyers restricted from where they go, it does create alternatives to move upwards,” said Mallinson.
But he warned that if the trade war worsens, it could hobble economic growth.
“These are the two largest economies in the world and it is not good news for them getting into a conflict like this.
“But even with a severe economic slowdown, we still see a tight oil market next year. Iran and sanctions are the biggest driver.”
Mallinson said that there were two other constraints: Underinvestment in capital projects outside the US, and infrastructure bottlenecks
in America.
“Those factors are big enough on the supply side to outweigh the possibility of a sharp slowdown of growth on the demand side,” he said.


Samsung announces folding phone with 5G — at nearly $2,000

Updated 21 February 2019
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Samsung announces folding phone with 5G — at nearly $2,000

  • The device looks similar to a conventional smartphone, but then opens like a book to reveal a display the size of a small tablet
  • Samsung is also making improvements to its flagship Galaxy S devices and plans to offer a 4G version of its folding phone
SAN FRANCISCO/LONDON: Samsung Electronics Co. Ltd. on Wednesday unveiled a nearly $2,000 folding smartphone in a bid to top the technology of Apple Inc. and Chinese rivals and reignite consumer interest amid slumping sales.
The Galaxy Fold will go on sale on April 26 and take advantage of new and faster 5G mobile networks. The device looks similar to a conventional smartphone, but then opens like a book to reveal a display the size of a small tablet at 7.3 inches (18.5 cm).
The device “answers skeptics who said that everything that could be done has been done,” DJ Koh, chief executive of Samsung Electronics, said at an event in San Francisco. “We are here to prove them wrong.”
Samsung remains the world’s largest smartphone maker with nearly a fifth of global unit sales but underperformed a slumping market last year. Chinese rival Huawei Technologies Co. Ltd. — whose Mate series of phones also command premium prices — gained market share. Other Chinese makers like Xiaomi Corp. have also been increasing prices, leaving Samsung to defend its turf against upstart rivals in addition to its longtime foe Apple.
With the foldable phone, Samsung is going on the offense on two fronts in the smartphone race: It is offering an eye-catching new feature with the big, bending screen and the first 5G connection in a premium phone, a feature analysts do not expect Apple to match until 2020.
Samsung is also making improvements to its flagship Galaxy S devices and plans to offer a 4G version of its folding phone.
It also challenges the notion of what a phone can cost, debuting at nearly twice the price of current top-of-the-line models from Apple and Samsung itself.
Patrick Moorhead, founder of Moor Insights & Strategy, said the new folding device could help Samsung stay at the top and lure consumers to upgrade devices that have looked largely the same over the past five years.
“Samsung and Apple go back and forth” to lead the premium smartphone market, Moorhead said. “I think this is Samsung’s chance to take back the innovation crown.”
And even though the $1,980 starting price is steep, some dedicated Samsung fans said they would pay it. Navneet Kumar Singh, a Samsung enthusiast from India who traveled to San Francisco to watch the launch, is ready to place his order.
“The prices of the flagship models have been a little aggressive in India,” he said, “But in the end, if you invest the money you’re getting a different experience.”
Samsung also introduced several accessories to compete against Apple, including a pair of wireless headphones called Galaxy Buds. The headphones include wireless charging, a feature that Apple has promised to put into is competing AirPods but has not yet released.
Samsung also said that its new Galaxy phones will be able to wirelessly charge its headphones and new smartwatches by setting the accessories on the back of the phone.

10 times faster
Along with the folding phone, Samsung also added new cameras and a 5G version to its Galaxy series of phones.
Verizon Communications Inc. will be the first carrier to offer service for Samsung’s 5G phones. The networks are expected to be 10 times faster than current ones, improving viewing of live news and sports events.
With the 5G versions of its flagships, the Korean electronics maker looks to have beaten Chinese rivals in the 5G race, although the device will operate only on the small number of networks launching later this year. Apple is not expected to release a 5G smartphone until late 2020.
The new networks are not available in many places yet but will roll out this year and next. Consumers who want to hold on to their phones for several years before upgrading may be tempted to buy a 5G phone now so that it will be able to take advantage of those networks later, said Bob O’Donnell of TECHnalysis Research. That could sway some Apple buyers over to Samsung and other Android makers with 5G devices.
“People are going to be thinking about, am going to be able to use this a year from now? Two years from now? Three years?” he said.
Rival smartphone makers are expected to announce 5G models at next week’s Mobile World Congress, the industry’s top annual event, in Spain. Samsung said its 5G handset would be available in the early summer.
The Galaxy 10 series needs to appeal to consumers who are reluctant to upgrade for only incremental technological improvements in performance.
All of the Galaxy series of rigid phones except the 5G will be available from March 8, with the S10+ priced from $1,000, the S10 priced from $900 and the smaller S10e from $750.
The mainline S10 compares with $999 for Apple’s iPhone XS and $858 for Huawei’s premium Mate 20 Pro.