WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. (REUTERS)
Updated 14 July 2019

WEEKLY ENERGY RECAP: Oil prices move up despite bearish outlook

  • It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020

OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
After holding stable below $65 and $60 for nearly two months respectively, Brent crude’s price jumped to $66.72 and WTI’s to $60.21 per barrel. Oil prices are higher over sharpening US crude inventories and concerns over US Gulf of Mexico production ahead of Tropical Storm Barry, as well as tensions in the Arabian Gulf after Iran’s alleged attempt to block a British-owned tanker in the Strait of Hormuz.
The Atlantic hurricane season threatened offshore oil production and began soaking Louisiana with heavy rains, leading to 15 production platforms and four rigs being evacuated in the Gulf of Mexico. So far, oil companies operating in the area have halted about 1 million barrels per day (bpd) of offshore oil output, or 53 percent of the region’s total production.
The Gulf of Mexico and the Texas coast produce about 5 percent of US natural gas and 17 percent of crude oil. Onshore facilities account for about 45 percent of US refining capacity and 51 percent of its gas processing. The Louisiana Offshore Oil Port will be closely monitoring Atlantic storm activity.
The weather has added to the headaches caused by the increasing demand for refined products while US inventories continued to recede more than expected for the fourth consecutive week. As US oil producers in the gulf cut more than half their output, commercial crude stocks fell 9.5 million barrels to 459 million barrels, a 12-week low.
Meanwhile, the Organization of the Petroleum Exporting Countries’ (OPEC) monthly oil market report MOMR concluded that OPEC+ output cuts will not change the fundamental outlook of an already oversupplied market. OPEC kept its modest global oil demand growth forecast at 1.14 million bpd for 2020, suggesting that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year.
The International Energy Agency’s (IEA) also suggested an oversupply forecast for 2020, with a 2.1 million bpd expansion from non-OPEC supply led by US shale producers. The IEA still sees weak oil demand growth and surging US shale oil output, estimating 2019 oil demand growth at 1.2 million bpd and 1.4 million bpd for 2020.
The EIA, in its short-term energy outlook, sees crude oil demand growing more slowly than previously expected. It forecast US oil production to average 12.36 million bpd in 2019, up about 40,000 bpd from last month’s forecast, and 13.26 million bpd in 2020.

Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


Riyadh property market swells as mortgages surge 250%

Updated 1 min 8 sec ago

Riyadh property market swells as mortgages surge 250%

  • Vision 2030 economic reforms and major infrastructure projects encourage investment into capital’s real estate sector

LONDON: Riyadh recorded a 250 percent jump in mortgages last year as the value and number of property deals surged in the Saudi capital.

The volume of real estate transactions rose by 53 percent in 2019 compared to a year earlier while the value of transactions was up 63 percent according to a report from broker CBRE.

“The recent economic and social initiatives and legislation introduced by the Saudi Government have already had an extremely positive impact on the country’s real estate sector,” said Simon Townsend, head of strategic advisory at CBRE MENAT. “We are already starting to witness impressive growth across major real estate segments including residential, hospitality and retail, and this upwards trajectory is likely to continue in the short to medium term.”

Ongoing economic reforms under the Vision 2030 initiative have encouraged investment into the real estate sector while spending on major infrastructure projects such as the Riyadh Metro and tourism developments on the Red Sea coast have helped to boost confidence despite oversupply concerns.

“Overall, the country is making great leaps in its efforts to become a global business hub and world-class tourism destination, and the market is expected to continue to react positively to the efforts of the public and private sectors alike,” added Townsend.

Residential mortgages for individuals in the Kingdom recorded a growth rate of more than 250 percent in terms of the number of contracts signed from January 2019 — November 2019, according to the CBRE data. The value of contracts rose by more than 160 percent in the same period year-on-year. 

FASTFACT

At the end of last year, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023.

In October 2019, the Ministry of Housing launched an initiative to support residential renovations by providing financing for residential units more than 15 years old which is expected to result in higher activity among existing aging stock within the central districts of Riyadh.

Beneficiaries of the Saudi Ministry of Housing’s ‘Sakani’ initiative aimed at increasing the national rate of home ownership, grew by about 14 percent in 2019.

At the end of last year, the capital’s residential supply stood at 1,290,000 residential units with an expected delivery of 111,000 additional units by 2023, CBRE said.

Hotel occupancy is also on the rise in the capital and is expected to receive a further boost from Saudi Arabia hosting the G20 summit this year.

The opening of Qiddiya entertainment giga project which is scheduled for 2023 is also expected to benefit the tourism sector.

There are currently about 17,700 hotel rooms in Riyadh with another 4,500 expected to enter the market by 2023. Hotel occupancy has risen by 5 percent year-on-year, CBRE said.