Flexibility and finesse essential to enduring Saudi-Russia oil deal

Russian Energy Minister Alexander Novak. (Reuters)
Updated 07 June 2019

Flexibility and finesse essential to enduring Saudi-Russia oil deal

  • There had been melodramatic suggestions that the panel on global energy markets at Russia’s premier economic gathering would be some kind of high noon stand-off
  • One of the themes of the conference has been the growing closeness of the Saudi-Russia relationship, not just in oil but extending across industrial and financial sectors

ST. PETERSBURG: The message that came across loud and clear from the energy sector gathered in St. Petersburg on Friday was that the entente between Saudi Arabia and Russia on oil supply limits is here to stay, but that all parties to the deal will need to show finesse and flexibility in how it is operated.
There had been melodramatic suggestions that the panel on global energy markets at Russia’s premier economic gathering would be some kind of “high noon” stand-off over production limits, but no such outcome was likely or forthcoming.
The two main architects of the alliance — Saudi Energy Minister Khalid Al-Falih and his Russian counterpart Alexander Novak — have too much respect for each other, as was made clear at Friday’s meeting, for such an outcome.
More importantly, there is consensus between them that the arrangement has served both the global oil industry, and the economies of their two countries, well. Novak said the objectives of the agreement are being met. The alternative of letting the market go the way it did in 2015 is “unacceptable,” said Al-Falih.
In fact, the cuts regime may be more needed now than ever, both men agreed. “Fundamentals are no longer the biggest driver of oil prices,” the Russian said, while Al-Falih pointed out that Saudi Arabia and OPEC+ could only affect the supply side of the equation. “Demand is influenced by macro factors,” like connected worries about economic growth and global trade tensions, while “sentiment and expectation are also outside our control,” he said.
So in an uncertain world, the stability of an OPEC+ deal is essential. But the devil is in the detail, and this has to be pinned down at the coming full meeting of OPEC and non-OPEC oil producers, which both men were adamant would take place soon.
This is where the flexibility will come in. There is a consensus that the supply deal will continue — “rolled over” in the industry parlance — but both men agreed there was still work to be done to get to a definitive arrangement. “We will come to a decision, but it will not be cast in concrete. We can always adjust up or down as the need may be,” said Al-Falih, recognizing that the volatile global economic and geopolitical outlook might affect their calculations in the future.
One of the themes of the conference has been the growing closeness of the Saudi-Russia relationship, not just in oil but extending across industrial and financial sectors, right through to cultural ties. Neither side wants to risk that relationship for the sake of a few dollars a barrel.
The imminent rollover may also be prompted by a recognition that even tougher economic times might be ahead. Daniel Yergin, the oil expert who was also on the panel, was asked what would be needed to resolve China-US trade tensions at the upcoming G20 summit in Japan.
“A miracle,” he replied.


Automechanika Riyadh opens, featuring leading global suppliers

Updated 25 February 2020

Automechanika Riyadh opens, featuring leading global suppliers

  • Saudi auto deals grew 40 percent last year with influx of female buyers

RIYADH: Leading names in the global auto services industry are out in force at Automechanika Riyadh — which opened on Monday at Al Faisaliah Hotel — vying to increase their share of a growing market expected to reach a value of $10.15 billion by 2023.

Automechanika Riyadh is the regional arm of the world’s largest trade fair, congress and event organizer, Messe Frankfurt, which has licensed the Automechanika brand to event organizer Al Harithy Company for Exhibitions (ACE) Group.

Mansour Abdullah Al-Shathri, vice chairman of the Riyadh Chamber of Commerce, inaugurated the trade event, which will run from Feb. 24-26.

It was revealed that Saudi auto deals grew approximately 40 percent last year, with female buyers accounting for between 10-15 percent of sales after the landmark decision to allow women to drive in the Kingdom for the first time.  

“International suppliers are stepping up their marketing for the resurgence in Saudi’s market, and this impacts the entire supply chain,” said Mahmut Gazi Bilikozen, show director for Automechanika Riyadh.

“While there is growth potential in the market, it is becoming a more competitive landscape and one which will also have to contend with evolving customer preferences. The conditions are ripe for new business relationships for those wishing to succeed in this transformative environment,” he added.

Zahoor Siddique, vice president of ACE, said: “Future vehicles will become more complex and challenging for the aftermarket industry. It is therefore imperative for manufacturers, local garages, technicians and mechanics to upskill and remain above the curve. 

 “Automechanika Riyadh is one such platform that can enable us to share and learn what the industry needs to unleash its potential.”

Two major US players — disc pad producer Giant Manufacturing and United Motors Mopar, the Kingdom’s sole distributor of Chrysler, Dodge, Jeep and Fiat cars — forecast a bullish market over the next few years.

Giant’s vice president, Eli Youssian, said he believed car sales in the Kingdom would grow by 9 percent annually until 2025, while United Motors District CEO Hassan Elshamarani expected another three million female drivers to be on the Kingdom’s roads by the end of the year.

Both Giant and United Motors launched new products at the show, with the former rolling out its new German-engineered Euro Premium Metallic Disc brake pads, and the latter introducing its Magneti Marelli spare parts.

The high potential of the new-look Saudi automotive landscape has also struck a major chord with South Korean suppliers.

The show’s Korean pavilion is hosting new-to-market entrants and existing suppliers all looking for business partners. With products from wiper blades to filters and air-conditioning parts to brake pads, the Korean contingent was positive about the Kingdom’s prospects.

One exhibitor, D Only Automotive, is looking to ring fence 10 percent of the Saudi brake market. “With more vehicles on the road, demand for brakes will increase, (so) we believe this is possible,” said President Jeon JaeWon.

Global research and analytics firm Aranca — Automechanika’s knowledge partner — has forecast that Saudi Arabia’s automotive spare parts and service market will grow at approximately 6 percent over the next five years to reach a value of $10.15 billion by 2023.

“The spare parts and service market for passenger cars alone is expected to eclipse $6.9 billion by 2023,” said Vishal Sanghavi, Aranca’s automotive practice head.