Saudi Arabia likely to raise crude output in Q2

Updated 20 February 2013
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Saudi Arabia likely to raise crude output in Q2

RIYADH: Saudi Arabia expects to raise its oil output in the second quarter to satisfy higher demand from China and feed economic recovery elsewhere, oil industry sources said.
The Kingdom kept production steady at around 9 million barrels per day (bpd) in January and sources say production has since hovered around that level because buyers have not asked for more.
Saudi cut production sharply in the fourth quarter of last year because of weak economic growth abroad and lower seasonal consumption during cooler weather at home. But exports are expected to rise again in the second quarter, driven by growth in Asia, one industry sources said.
“There are positive economic indicators in the second quarter and demand is picking up from China and if things stay the same there will be more supply coming from Saudi for sure,” the oil industry source said.
“Saudi Arabia always responds to demand, not prices,” the source said, adding that any increase in production for export would probably be modest.
Saudi production in December and January was more than a million barrels below its peak of last summer, when the kingdom’s own oil use soars to meet rising air conditioning demand.
Domestic oil use is likely to rise again in the second quarter, putting upward pressure on production whatever happens to export demand.
A second oil industry source said that the kingdom planned to raise production to meet increased demand for exports, but declined to say when or by how much.

“Demand for Saudi oil will reflect the increase in global oil demand,” the source said, hinting that demand could rise after refineries return from spring maintenance.
With Europe still mired in debt and the US consuming more of its own oil, Chinese demand is the main driver of Saudi oil export demand.
China imported 1.08 million barrels a day of crude from Saudi Arabia in 2012, up 7.24 percent from 2011 and state-run CNPC expects China’s total net imports of crude to rise to about 5.78 million bpd, 7.3 percent higher than 2012.
OPEC’s leading producer and holder of the world’s only significant spare capacity slashed its output by around 700,000 bpd over the last two months of 2012, helping drive a rise in crude prices since early December.
Saudi oil ministry adviser Ibrahim Al-Muhanna said on Jan. 14 that the cuts came in response to lower Saudi domestic and export demand.
Brent oil traded near $ 117.40 barrel yesterday after posting last week its first weekly loss since early January. Crude has risen from $ 109.50 since the start of the year.
According to official Saudi government figures published through the Joint Oil Data Initiative (JODI), Saudi oil demand for power generation rose by 356,000 bpd from March to June 2011 and by 401,000 bpd from March to June 2012.
So even if demand for exports does not increase in the second quarter, Saudi production is likely to rise to meet its own demand for electricity, although this year’s surge in oil burning should be tempered by more gas being made available for power generation.
Chinese customs will release January 2013 import figures later this week.


Wealthy Gulf individuals feel more confident about regional prospects

Updated 44 min 15 sec ago
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Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.