Oil on track for weekly gains on trade talk hopes, OPEC-led supply cuts

Oil markets are receiving support from supply cuts led by OPEC, aimed at reining in a glut that emerged in the second half of 2018. (Reuters)
Updated 11 January 2019
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Oil on track for weekly gains on trade talk hopes, OPEC-led supply cuts

  • Markets were held in check by expectations of an economic slowdown in 2019
  • Oil markets are receiving support from supply cuts led by the Organization of the Petroleum Exporting Countries

SINGAPORE: Oil prices were on track for solid weekly gains on Friday after financial markets were lifted by hopes the United States and China may soon resolve their trade disputes, and as OPEC-led crude output cuts started to tighten supply.
Despite this, markets were held in check by expectations of an economic slowdown in 2019.
International Brent crude futures were at $61.59 per barrel at 0555 GMT, down 9 cents, or 0.15 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were 4 cents below their last settlement, at $52.55 per barrel.
Brent and WTI are set for their second week of gains, rising nearly 8 percent and 10 percent respectively.
Markets were being supported by hopes that the trade war between Washington and Beijing may be resolved soon after officials said three-day talks this week concluded constructively and that further negotiations would likely follow this month.
Lower oil exports from Iran since last November, when US sanctions against it resumed, have also supported crude.
Despite this, concerns over the health of the global economy lingered on, with signs mounting that China’s growth in 2018 and 2019 would be the lowest since 1990.
“If we experience an economic slowdown, crude will underperform due to its correlation to growth,” said Hue Frame, portfolio manager at Frame Funds in Sydney.
Most analysts have downgraded their global economic growth forecasts below 3 percent for 2019, with some even fearing a looming recession amid trade disputes and spiraling debt.
On the supply side, oil markets are receiving support from supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) aimed at reining in a glut that emerged in the second half of 2018.
A key reason for the emerging glut was the United States where crude oil production soared by more than 2 million barrels per day (bpd) in 2018 to a record 11.7 million bpd.
Consultancy JBC Energy this week said it was likely that US crude oil production was already “significantly above 12 million bpd” by January 2019.
Given the overall supply and demand balance, Swiss bank Julius Baer said it was “price neutral” in its oil forecast.
“We see the oil market as well balanced into the foreseeable future, as the petro-nations make space for further US shale production growth,” said Norbert Ruecker, head of commodity research at the bank.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 8 min 42 sec ago
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”