Price of oil on the rise as OPEC members eye cuts in production

Saudi Energy Minister Khalid Al-Falih, right, and his UAE counterpart Suhail Al-Mazrouei both said that oil production changes would likely be necessary. (AFP)
Updated 13 November 2018
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Price of oil on the rise as OPEC members eye cuts in production

  • Production cuts of up to 1 million barrels a day may be necessary
  • Suhail Al-Mazrouei, currently the president of OPEC, similarly said ‘changes’ would likely be necessary

LONDON: Oil prices rose on Monday after Saudi Arabia said reduced global demand could lead to a cut in output of a million barrels per day. 

Brent crude oil stood at $71.10 per barrel by 4 p.m. in London on Monday, an increase of 1.4 percent. 

OPEC and its partners saw a need to cut oil supply by as much as 1 million barrels per day compared to October levels to avoid a build-up of unused oil, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday. 

The day before, he said Saudi Arabia alone would reduce its oil shipments by half a million barrels a day in December compared to November, because of seasonal lower demand. 

Al-Falih’s made his comments he met fellow OPEC and non-OPEC partners in the UAE capital to discuss the outlook for the market. 

The potential cuts come amid reduced global demand and a consequent fall in the price of oil by about 20 percent over the last month, according to Reuters. The currencies of major buyers such as India and China have weakened against the dollar, which has reduced their purchasing power. 

Crude oil prices hit four-year highs in late September, with production ramped up in anticipation of the impact of renewed US sanctions on Iran. 

Prices then fell again when the US issued sanctions waivers to major importers of Iranian oil. US oil production also started to increase, placing further pressure on prices. 

“Just like positive demand surprises underpinned the oil price rally, intensifying downside risks to global growth are now on the rise, and will weigh on both market fundamentals and sentiment,” said Konstantinos Venetis, senior economist at TS Lombard. 

Jameel Ahmad, global head of currency strategy and market research at broker FXTM, said the looming threat of an economic slowdown could destabilize the oil markets. 

“A reduction in supply next year would be appropriate with the risks of lower economic growth,” he said. 


Abu Dhabi aims to lure start-ups with investment in new technology hub

Updated 7 min 5 sec ago
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Abu Dhabi aims to lure start-ups with investment in new technology hub

  • The initiative will help Abu Dhabi reduce reliance on oil
  • Mubadala hopes to attract Chinese and Indian companies

ABU DHABI: Abu Dhabi will commit up to $272 million to support technology start-ups, it said on Sunday, in a dedicated hub as part of efforts to diversify its economy.
The capital of the United Arab Emirates is investing billions of dollars in industry, tourism and infrastructure to reduce its reliance on oil revenue.
Abu Dhabi derives about 50 percent of its real gross domestic product and about 90 percent of central government revenue from the hydrocarbon sector, according to ratings agency S&P.
The emirate launched a $13.6 billion stimulus fund, Ghadan 21, in September last year to accelerate economic growth. Ghadan means tomorrow in Arabic. The new initiative, named Hub 71, is linked to Ghadan will also involve the launch of a $136 million fund to invest in start-ups, said Ibrahim Ajami, head of Mubadala Ventures, the technology arm of Mubadala Investment Co.
The goal is to have 100 companies over the next three to five years, Ajami said. “The market opportunities in this region are immense,” he added.
Mubadala, with assets of $225 billion and a big investor in tech companies, will act as the driver of the hub, located in the emirate’s financial district.
Softbank will be active in the hub and support the expansion of companies in which it has invested, Ajami said, adding that Mubadala is also aiming to attract Chinese and Indian companies, among others.
Mubadala which has committed $15 billion to the Softbank Vision Fund, plans to launch a $400 million fund to invest in leading European technology companies.
Incentives mapped out by the government include housing, office space and health insurance as part of the $272 million commitment, Ajami said.
Abu Dhabi will also announce a new research and development initiative on Monday linked to the Ghadan 21 plan, according to an invitation sent to journalists.