Kuwait sees risk of oil supply shortage in 2019 due to Venezuela crisis

The US and major EU nations have been putting pressure to oust Nicolas Maduro as president of Venezuela, which holds the largest proven oil reserves in the world. (AFP)
Updated 05 February 2019
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Kuwait sees risk of oil supply shortage in 2019 due to Venezuela crisis

  • The Trump administration has imposed sweeping sanctions on Venezuelan state-owned oil firm PDVSA
  • OPEC, Russia and other non-OPEC producers agreed in December to reduce supply from January 1

KUWAIT: The head of state-run Kuwait Petroleum Corp, Hashem Hashem, said on Tuesday that global oil supply could be hit this year by big reductions in exports from Venezuela.
The Trump administration has imposed sweeping sanctions on Venezuelan state-owned oil firm PDVSA, aimed at severely curbing the OPEC member’s crude exports to the United States and at pressuring socialist President Nicolas Maduro to step down.
“One of the known risks of supply shortage in 2019 would include the continuing decline of Venezuelan crude oil production beyond current expectations,” Hashem told an industry conference in Kuwait.
“However, the wild card recently has been market perceptions of potential shortages mainly from geopolitical pressures that have caused supply disruptions in the past and therefore pose a real threat for 2019.”
Hashem also said that the threat of a US-China trade war and mixed messages from the United States on whether it would raise interest rates is causing volatility in the global equity markets and could increase oil price volatility this year.
OPEC, Russia and other non-OPEC producers — an alliance known as OPEC+ — agreed in December to reduce supply by 1.2 million barrels per day (bpd) from Jan. 1.
OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members — all except Iran, Libya and Venezuela.
Hashem said OPEC+ actions should help re-balance the oil markets this year but he also warned of the impact of underinvestment in the oil industry which could cause a supply crunch by 2025.
“OPEC and the non-OPEC producing countries ... have successfully provided stability to the market since 2017 and reduced volatility in oil prices. The resultant prices, are critical to stimulate investment and growth,” he said.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.