Oil prices steady as OPEC supplies weigh but Iran sanctions loom

The high rig count has helped lift US crude oil production by more than 30 percent since mid-2016, to 11 million barrels per day. (Reuters)
Updated 03 September 2018
0

Oil prices steady as OPEC supplies weigh but Iran sanctions loom

  • Output OPEC rose by 220,000 barrels per day between July and August
  • Meanwhile, US drillers added oil rigs for the first time in three weeks

SINGAPORE: Oil prices were stable on Monday, weighed down by rising supply from OPEC and the United States but supported by concerns that falling Iranian output will tighten markets once US sanctions bite from November.
International Brent crude oil futures were at $77.67 per barrel at 0651 GMT, up 3 cents from their last close.
US West Texas Intermediate (WTI) crude futures were at $69.73 per barrel, down 7 cents from their last settlement.
Output from the producer group Organization of the Petroleum Exporting Countries (OPEC) rose by 220,000 barrels per day (bpd) between July and August, to a 2018-high of 32.79 million bpd, a Reuters survey found.
Output was boosted by a recovery in Libyan production and as Iraq’s southern exports hit a record.
Meanwhile, US drillers added oil rigs for the first time in three weeks, energy services firm Baker Hughes reported on Friday, increasing the rig count by 2 units to 862.
The high rig count has helped lift US crude oil production by more than 30 percent since mid-2016, to 11 million bpd.
Despite the price dip, Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA said Brent was “supported by the notion that US sanctions on Iranian crude oil exports will eventually lead to constricted markets,” which he said would likely push up prices.
“Iranian production is already showing signs of decline, falling by 150,000 barrels per day (bpd) last month ... (as) importers of Iranian barrels will already be moving away from taking shipments,” said Edward Bell, commodity analyst at Emirates NBD bank in Dubai.
Many analysts have warned that an economic slowdown because of trade disputes between the United States and other major economies including China and the European Union would drag on oil demand.
Amid rising trade tariffs raised by Washington and Beijing, China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.
Despite this, OANDA’s Innes said it was too early to say whether an economic slowdown would put a serious dent on oil prices.
“While the analysts continue fretting that $200 billion in tariffs could drag down oil demand, it isn’t at all clear that such type of economic headwinds will topple oil prices given ... the constant barrage of supply outages,” he said.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
0

Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.