Saudi Arabia well equipped to sustain oil market share

Updated 28 January 2016

Saudi Arabia well equipped to sustain oil market share

JEDDAH: OPEC’s oil production is expected to rise by a further 500,000 barrels per day by Q4 2016 year-on-year, according to a report released by Jadwa Investment.
It said that the current period of low prices is set to remain throughout 2016, pulled down primarily as a result of persistently high oil supply. All-out competition between members of OPEC will be the main reason for continued oversupplied markets.
But Saudi Arabia remains well equipped to hold off any attempts of encroachment on its market share since it is currently the only major oil producer with spare oil production capacity, Jadwa economists added.
Saudi Arabia’s (3 percent of global oil demand) total crude consumption is expected to average 2.8 million barrels per day in Q4 2015 up 5 percent compared to the same period last year, states the Quarterly Oil Market Update released by Jadwa Investment this week.
The rise in oil demand is largely a result of the start up of the 400,000 barrels per day Yasref refinery which came online earlier in 2015.
Latest data shows that year-to-November 2015 crude demand was also at 2.8 million barrels per day, up 8 percent year-on-year, and slightly below our forecasted 2.9 million barrels per day for the full year 2015.
“We expect lower consumption in line with seasonal demand during cooler months in Q1 2016,” said the Jadwa research team.
“Looking further ahead in 2016, while demand for crude will increase as three new crude oil-powered electricity plants come online, higher domestic energy prices and increases in gas output will help keep consumption flat year-on-year,” said the report.
The Hasbah and Arabiyah gas fields will produce non-associated gas processed by the Wasit plant, said the Jadwa report.
“According to Saudi Aramco, the Wasit gas plant will add around 1.75 billion cubic feet of sales gas per day (bcf/d), which we expect will replace the use of more expensive industry diesel and crude oil in generating electricity,” said the economists.
According to the report, total oil output from OPEC rose by 5 percent in Q4 2015, year-on -year, as a result of large increases from Iraq (up 22 percent) and Iran (up 10 percent), which pushed the organization’s quarterly average to 32.5 million barrels per day.
OPEC production in December 2015 was 2 million barrels per day higher than the November 2014 total, when it switched to defending market share from its previous policy of cutting output to maintaining prices.
Jadwa economists believe that lower for longer oil prices will have a direct implication over the kingdom’s current account and fiscal budget.
“We have therefore revised down our forecast for the kingdom’s fiscal and external balances for 2016,” they said.
The fiscal deficit is now expected to reach SR402 billion (17.8 percent of GDP), up from SR313 billion forecasted previously, according to the report.
Imbedded in our new forecast is a sharper reduction in total government spending to SR890 billion, down from our earlier forecast of SR922 billion.
“This reduction in spending will likely be achieved by a stronger implementation of initiatives specified in the budget announcement, which included proposed reforms to improve budgetary procedures, and reviews to existing government projects,” said the Jadwa research team.
“While we now forecast spending to be lower for 2016, our forecast of a steeper decline in total revenue (from SR609 billion to SR488 billion) will mean that the deficit will widen in 2016,” the report added.
The lower spending by the government will cause the non-oil private sector to post a slower growth than previously anticipated.
“We therefore expect growth in non-oil private sector activity to slow down to 2.6 percent, compared to our previous forecast of 2.8 percent. However, we maintain our view that overall GDP will expand by 1.9 percent in 2016,” said the economists.
“We have revised down our forecast for the 2016 current account deficit from $40 billion (6.3 percent of GDP), to $72 billion (12 percent of GDP),” they said.
“As a result of the decline in prices, we think 2016 oil export revenues will fall to their lowest levels since 2003 to reach $101 billion. We expect both non-oil exports and imports to rise marginally compared to their 2015 levels,” said the Jadwa researchers.
The deficit in the services account will meanwhile shrink as a result of lower expected demand for services during 2016.
“We have also revised our forecast for inflation to 3.9 percent, up from 2.5 percent previously. The recent increase to energy and water prices will likely put pressure on prices of multiple components of the headline index, including the housing, electricity, and water, and the transport components,” said the Jadwa economists.


Big week for Big Tech as earnings, hearings loom

Updated 25 October 2020

Big week for Big Tech as earnings, hearings loom

  • The four giants drawing the most scrutiny — Apple, Amazon, Facebook and Google — have been wildly successful in recent years

SAN FRANCISCO: Big Tech is bracing for a tumultuous week marked by quarterly results likely to show resilience despite the pandemic, and fresh attacks from lawmakers ahead of the Nov. 3 election.

With backlash against Silicon Valley intensifying, the companies will seek to reassure investors while at the same time fend off regulators and activists who claim these firms have become too dominant and powerful.

Earnings reports are due this week from Amazon, Apple, Facebook, Microsoft, Twitter and Google-parent Alphabet, whose combined value has grown to more than $7 trillion.

They have also woven themselves into the very fabric of modern life, from how people share views and get news to shopping, working, and playing.

Robust quarterly earnings results expected from Big Tech will “highlight the outsized strength these tech behemoths are seeing” but “ultimately add fuel to the fire in the Beltway around breakup momentum,” Wedbush analyst Dan Ives said in a note to investors.

The results come amid heightened scrutiny in Washington of tech platforms and follow a landmark antitrust suit filed against Google, which could potentially lead to the breakup of the internet giant, illustrative of the “techlash” in political circles.

Meanwhile, Senate Republicans have voted to subpoena Jack Dorsey and Mark Zuckerberg, the chief executives of Twitter and Facebook respectively, as part of a stepped-up assault on social media’s handling of online political content, notably the downranking of a New York Post article purported to show embarrassing information about Democrat Joe Biden.

CEOs of Twitter, Facebook and Google are already slated to testify at a separate Senate panel on Wednesday examining the so-called Section 230 law, which offers liability protection for content posted by others on their platforms.

The four giants drawing the most scrutiny — Apple, Amazon, Facebook and Google — have been wildly successful in recent years and have weathered the economic impact of the pandemic by offering needed goods and services.

Google and Facebook dominate the lucrative online ad market, while Amazon is an e-commerce king.

Apple has come under fire for its tight grip on the App Store, just as it has made a priority of making money from selling digital content and services to the multitude of iPhone users.

The firms have stepped up lobbying, spending tens of millions this year, and made efforts to show their social contributions as part of their campaign to fend off regulation.

“For the most part, tech companies know how to do this dance,” said analyst Rob Enderle of Enderle Group.

“They don’t spend a lot of time bragging about how well they have done any more.”

Ed Yardeni of Yardeni Research said the outlook for Big Tech may not be as rosy as it appears.

“For one, regulators at home and abroad are gunning to rein in some of the largest US technology names,” Yardeni said in a research note.

Of interest to the market short-term will likely be whether backlash about what kind of content is left up and what is taken down by online titans causes advertisers to cut spending on the platforms.

Economic and social disruption from the pandemic also looms over tech firms, which benefitted early in the pandemic as people turned to the internet to work, learn, shop and socialize from home.

“Performance will be best for those providing solutions for people working at home,” analyst Enderle said.

Amazon, Google and Microsoft each have cloud computing divisions that have been increasingly powering revenue as demand climbs for software, services and storage provided as services from massive datacenters.

Amazon has seen booming sales on its platform during the pandemic, and viewing surge at its Prime streaming television service.

Enderle expressed concern that with the coronavirus disease (COVID-19) cases and a lack of new stimulus money in the US, tech companies could reveal in forecasts that they are bracing for poorer performance in the current quarter.