WEEKLY ENERGY RECAP: Is the price right for crude?

Azerbaijan's Energy Minister Parviz Shahbazov (R) and Saudi Arabia's Energy Minister Khalid al-Falih attend a press conference at the end of the 13th meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC and non-OPEC countries in Baku on March 18, 2019. (AFP)
Updated 07 April 2019

WEEKLY ENERGY RECAP: Is the price right for crude?

RIYADH: The big story of the week was Reuters reporting that Saudi Arabia was mulling selling its oil in currencies other than the dollar if Washington pushed ahead with legislation exposing OPEC to anti-trust prosecution.
The story, which cited unnamed sources, added further drama to a narrative that is hardly in need of any more twists and turns of plot.
Before getting too carried away, it is worth reflecting on the absolutely vital role that the Kingdom of Saudi Arabia plays in balancing global oil markets.
Saudi Arabia is one of the 20 most powerful economies in the world and that same world depends on it to ensure that the fuel that powers people’s cars and heats their homes is in steady supply.
It is hard to imagine a world without the Kingdom playing that vital role. Changing the pricing mechanism deployed to price oil is not so unusual.
After all China, which does not export crude oil but is the world’s largest crude oil importer, has launched its own oil pricing exchange as a clear direction to detach from dollar dominance in pricing crude.
The establishment of the Shanghai Energy Exchange was the first step in displacing the dollar in almost 10 percent of the global oil consumption.
Whether Saudi Arabia wishes to price crude in dollars or riyals is ultimately a matter for the government as it determines what is in the best economic interests of the country. In this there is no difference with other countries and other industries.
For example, car makers price their cars without referring to global benchmarks and without pressure from the media, speculators or money managers.
The debate around pricing should not deflect from the Kingdom’s pivotal role in balancing global oil markets. Attempts to criminalize OPEC through the US bill known as “NOPEC” threatens global energy security more than OPEC itself or indeed its largest producer.
The other big running story that has been moving global energy markets has been sanctions against Iran and the granting of import waivers. 
With Brent crude passing through the $70 mark, oil prices have gained almost 30 percent since the beginning of the year. This may encourage the administration of US President Donald Trump to grant waiver extensions for some major oil importers.
Looking at the current trajectory of prices, Brent crude may not be far off from reaching the mid-70’s mark by May amid a continuing supply deficit and further potential supply outages.
With this in mind, earlier predictions about an economic recession dampening demand for oil and refined products was completely wrong. It ignored market fundamentals and drove prices lower by failing to take account of seasonal demand, trade balances and rising refinery capacity.

Gulf Marine CEO quits after review sparks profit warning

Updated 22 August 2019

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.