Iran looms large over OPEC summit

Participants gather in the lobby ahead of an informal meeting between members of the Organization of Petroleum Exporting Countries, OPEC, in the Algerian capital Algiers. (AFP)
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.”


GITEX Tech showcases Saudi Arabia’s regional innovation drive

Updated 15 October 2018
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GITEX Tech showcases Saudi Arabia’s regional innovation drive

DUBAI: Dubai’s GITEX Technology week showcased the region’s ability to take the lead in innovation technology, with Saudi Arabia on its way to take the driver’s seat, according to consulting firm Accenture’s country managing director in Saudi Arabia.
“Saudi Arabia will be a leader in supporting innovation and the development of new technology in the region,” Khaled Al-Dhaher told Arab News.
“I think we (Arab countries) can always complement each other in the region to make sure we have the best innovation that is relevant for us and focused on the needs of our markets,” he added.
Among the main drivers behind the Kingdom’s surge into innovation and incubation is the Center of Initiatives at Prince Mohammed bin Salman bin Abdul Aziz Foundation (Misk), which is an exclusive partner at GITEX Future Stars 2018.
Misk Innovation showcased 20 Saudi-based start-ups and incubators, ranging from 3D printing technology (SHAKL) to e-commerce (Zid) to online grocery shopping (ZADFresh).
Another prominent player from the Kingdom was the Badir Program, which helps to sustain and develop pioneering environments within the Kingdom and stays in line with following the crown prince’s Vision 2030 plan.
The plan, unveiled in 2016, is a comprehensive blueprint for the future, laying out a strategy and clear targets to diversify Saudi Arabia’s economy, and develop public service sectors such as health, education, infrastructure, recreation and tourism.
“We see a big support toward start-ups in terms of seed funding, arranging funding rounds, investment funding rounds, which actually is very important to accelerate the growth of these start-ups,” Badir Program’s CEO Nawaf Al-Sahhaf told Arab News, adding: “They (start-ups) created more than 2,000 jobs in the last two years.”
The 38th annual exhibition, which kicked off on Sunday, centered around the rise of smart cities. Dubai’s government featured high-tech stands promoting the emirate’s ruler Sheikh Mohammed bin Rashid’s vision of a totally smart Dubai.
While Dubai is ahead of Saudi Arabia in this respect, the latter is not far behind.
“Saudi Arabia is building new cities now, and one of them is NEOM. Smart cities needs smart solutions and smart products, so Saudi Arabia is a big supporter of entrepreneurs and the private sector in order to come up with these smart solutions,” Al-Sahhaf said.
“Saudi Arabia is moving in this [Smart] direction and we are in good hands,” he added.
The Saudi Technology Development and Investment Company, Taqania, was also featured at the exhibition. Owned by the Kingdom’s Public Investment Fund, Taqania is one of Saudi Arabia’s main proponents in a non-oil dependent Kingdom aligned with Vision 2030, and invests in technology that contributes to the country’s economic diversification.
The exhibition is split among several categories including Gulf Comms & Mobility, Global Solution Providers, Smart Workplace & Smart Homes, Value-Added Distributors, Printing & Automation, Consumer Tech, Enterprise Software, Network & Security, Future Tech and IOT Big Cloud Data.
GITEX Technology week runs from Oct. 14 to 18, with GITEX Future Stars taking place from Oct. 14 to 17.