Energy markets headed into uncharted territory as crude prices slump

Energy markets headed into uncharted territory as crude prices slump
Equity markets collapsed March 9 as the rapidly spreading coronavirus fans fears over the global economy, while a crash in oil prices added to the panic with energy firms taking a hammering. (AFP)
Short Url
Updated 10 March 2020

Energy markets headed into uncharted territory as crude prices slump

Energy markets headed into uncharted territory as crude prices slump
  • Leading financial analysts warn that further falls are in the offing

DUBAI: Global energy markets are heading into uncharted territory, experts warned, as the instant effect of the apparent end of cooperation between Saudi Arabia and Russia on limiting crude output began to be felt amid ongoing coronavirus concerns.

Prices for Brent and West Texas Intermediate crude — the two leading benchmarks on global oil markets — fell by the biggest daily proportion in nearly 30 years, as leading financial analysts warned that further falls were in the offing.

By the close of trading in the Middle East, Brent stood at $35.61 per barrel, down nearly 22 percent, with WTI at $32.45, down 23 per cent, having been almost 30 percent down earlier in the trading cycle.

Adding to the downward pressure on crude prices, the International Energy Agency (IEA) slashed its forecasts for oil demand this year as the coronavirus outbreak spread beyond its Chinese center. “Demand this year will drop for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade,” the IEA said.

Daniel Yergin, who wrote about the history of the global petroleum industry in “The Prize,” told CNBC: “We are now in a period of true turmoil. Fear is now all-pervasive.”

US investment bank Goldman Sachs said: “We believe the OPEC and Russia oil-price war unequivocally started this weekend when Saudi Arabia aggressively cut the relative price at which it sells its crude by the most in at least 20 years. This completely changes the outlook for the oil and gas markets, in our view, and brings back the playbook of the ‘new oil order’ with low cost producers increasing supply from their spare capacity to force higher cost producers to reduce output.”

The bank cut its forecasts for this year to $30 per barrel for Brent with “possible dips” to near $20, and other global experts agreed. Japanese bank Mitsubishi UFG forecast oil below $30 for “protracted periods,” with markets sporadically testing levels below $25.

However, despite the “generation-defining free-fall,” Mitsubishi said there was a glimmer of hope. “This is not the first time OPEC and its allies have not been aligned on the most appropriate strategy, and both sides have been able to produce workable solutions in the past.”

The market reaction was exacerbated by the surprising turn of events in Vienna at the weekend, when Russia declined to participate in a further round of supply restrictions proposed by Saudi Arabia and other OPEC members.

The Kingdom immediately signaled big discounts to customers around the world via a revised price list from Saudi Aramco.

Bank of America Merrill Lynch said: “We expected Saudi Arabia to unilaterally rebalance the global oil market, yet Saudi abruptly decided to cut back prices to Europe, Asia and the US by the most ever. If the Saudis have cut prices to bring Russia back to the negotiating table, prices could recover a little bit faster. But if the market share war is being waged against US shale, a longer lasting price drop is likely. Prices could even drop into the teens.”

Goldman Sachs said that, at $20 a barrel, US shale and other high cost producers could face “acute financial stress and declining production.”

Others offered a different narrative. 

Ellen Wald, US consultant and author of “Saudi Inc.,” said: “This is not a plot by Russia to destroy the US shale industry. It is a fundamental difference in strategy, goals and temperament between Russia and Saudi Arabia that was telegraphed for those willing to see it. There is a misconception in the oil market. They (the producers) do not all want higher prices. They all want more revenue. For some that comes from higher prices but some producers can achieve that through more sales, though not if the price drops 30 percent in one day.”

Some experts believed the turmoil in global oil markets would lead to a major shake-up in the corporate energy sector. All the leading independent oil companies — BP, ExxonMobil and Shell — experienced big share price falls.

 

 


Emirates converts 16 passenger planes to carry cargo

Emirates converts 16 passenger planes to carry cargo
Updated 51 min 6 sec ago

Emirates converts 16 passenger planes to carry cargo

Emirates converts 16 passenger planes to carry cargo
  • It comes as some big airlines are faced with competing forces of supply and demand in the cabins and bellies of their aircraft

DUBAI: Emirates has converted 16 passenger planes to transport cargo and is also using some of its fleet to carry goods in the cabin.
Nabil Sultan, Emirates SkyCargo divisional senior vice president said the airline was studying its capacity, in an interview with Bloomberg TV on Sunday.
“So far we have converted 16 passenger aircraft to fully cargo flights,” he said. “We also use the remaining fleet, where we have put cargo in the main cabin, especially to move essential PPE goods and various other medical material.”
It comes as some big airlines are faced with competing forces of supply and demand in the cabins and bellies of their aircraft — as cargo volumes accelerate while at the same time passenger numbers remain subdued.
Earlier on Sunday Emirates said it would begin shipping aid for free into India to help fight the coronavirus.
It comes as air cargo demand has risen to its highest recorded level ever in the wake of the pandemic.


Turkish research group faces criminal charges over inflation data

Turkish research group faces criminal charges over inflation data
Updated 09 May 2021

Turkish research group faces criminal charges over inflation data

Turkish research group faces criminal charges over inflation data
  • The group started publishing its own inflation data in September amid claims from opposition parties that the official agency is under-reporting price increases

DUBAI: Turkey’s statistics agency filed a criminal complaint against a group of local researchers publishing alternative inflation data, Bloomberg reported.

The government body demanded ENAGroup, an independent inflation research group, be fined for “purposefully defaming” the official statistics institution and “misguiding public opinion,” according to documents seen by the news wire.
The group started publishing its own inflation data in September amid claims from opposition parties that the official agency is under-reporting price increases, Bloomberg said
ENAGroup’s inflation figures are higher than the official data. Its consumer price index rose 2.62 percent in April from a month earlier, more than double the 1.1 percent reported by the official agency. The group reported an annual inflation rate of 36.7 percent for 2020, Bloomberg reported.
Turkey’s Treasury and Finance Minister Lutfi Elvan said that the statistics agency filed a complaint against a group “for the first time in the history of the Turkish Republic.”
The group aims to “damage and discredit the Turkish Statistical Institute” by spreading misleading data that are used by opposition parties, Elvan said.

 


Abu Dhabi's ADNOC said to invite banks to pitch for bookrunner roles for drilling unit IPO

Abu Dhabi's ADNOC said to invite banks to pitch for bookrunner roles for drilling unit IPO
Updated 09 May 2021

Abu Dhabi's ADNOC said to invite banks to pitch for bookrunner roles for drilling unit IPO

Abu Dhabi's ADNOC said to invite banks to pitch for bookrunner roles for drilling unit IPO
  • ADNOC is planning to take the unit public in the third quarter
  • ADNOC Drilling owns and operates a large fleet of rigs

DUBAI: Abu Dhabi National Oil Co (ADNOC) has invited investment banks to pitch for bookrunner roles for the initial public offering of its drilling unit, two sources told Reuters on Sunday.
The oil giant invited a handful of international and local banks to take part in the process of the public share sale of ADNOC Drilling, which is due later this month, they said.
ADNOC is planning to take the unit public in the third quarter, they added. One of the sources previously said ADNOC could raise at least $1 billion from the share sale.
ADNOC, which supplies nearly 3 percent of global oil demand, declined to comment when contacted by Reuters on Sunday.
ADNOC Drilling owns and operates a large fleet of rigs, including 75 onshore rigs, 20 offshore jackup rigs, and 11 well water rigs, according to its website.
The drilling business is critical for ADNOC’s upstream operations, helping the oil company reach its production targets.
ADNOC Chief Executive Sultan Al-Jaber has been chief architect of the transformation strategy the company embarked on more than four years ago, building an investment team to monetise assets and raise funds from international private equity groups.
It is also planning to float Fertiglobe, a fertiliser joint venture with Dutch-listed chemical producer OCI later this year.


Google-backed Firefly comes to the Middle East after Abu Dhabi deal

Google-backed Firefly comes to the Middle East after Abu Dhabi deal
Updated 52 min 29 sec ago

Google-backed Firefly comes to the Middle East after Abu Dhabi deal

Google-backed Firefly comes to the Middle East after Abu Dhabi deal
  • IHC-owned Multiply Marketing Consultancy (MMC) acquired the minority stake in the company

DUBAI: A unit of Abu Dhabi’s International Holding Company (IHC) has acquired a stake in Google-backed Firefly, which provides street-level digital media on taxis and rideshare vehicles.
IHC-owned Multiply Marketing Consultancy (MMC) acquired the minority stake in the company, it said in a stock exchange filing on Sunday.
Firefly operates across major US cities, working with major taxi and rideshare companies to install advertising displays atop their vehicles.
The proprietary screens feature content based on location, and are Internet-enabled. The platform attracts millions of impressions per month, according to a statement.
The deal will expand the company’s operations in the Middle East, and will set up an office within MMC’s Abu Dhabi headquarters.
“Investments in our communications vertical ensure that our media teams are servicing our local clients with the latest, most innovative and analytically-precise technology available on the market,” MMC chief Samia Bouazza said.
Gulf governments are ramping up their technology investments in a regional race for supremacy in the sector which is seen as a critical path to economic diversification.
Firefly will become part of Multiply Group’s communications vertical, which includes global agency MMC, Viola, as well as other minority stakes in companies such as Yieldmo, a digital advertising and attention analytics company.


ADQ-owned Senaat offers to merge Arkan Building Materials with Emirates Steel

ADQ-owned Senaat offers to merge Arkan Building Materials with Emirates Steel
Updated 09 May 2021

ADQ-owned Senaat offers to merge Arkan Building Materials with Emirates Steel

ADQ-owned Senaat offers to merge Arkan Building Materials with Emirates Steel
  • The proposed deal implies an equity value for Arkan of about 1.4 billion dirhams

DUBAI: Abu Dhabi industrial conglomerate Senaat has submitted an offer to Arkan Building Materials to merge it with its own Emirates Steel unit.
Under the proposed deal, Emirates Steel would be transferred to Arkan in consideration of a convertible instrument which would on the closing of the deal convert to 5.1 billion ordinary shares at a fixed price of 0.798 dirhams per share in Arkan’s capital.
The proposed deal implies an equity value for Arkan of about 1.4 billion dirhams, the building materials company said in a filing to the Abu Dhabi stock exchange.
Post completion, ADQ-owned Senaat would own approximately 87.5 percent of the entire issued share capital of the combined group
Should an agreement be reached between the two parties, a general assembly meeting would consider approving the transaction during the second half of this year, Arkan said in the statement.
Emirates Steel is a leading integrated steel manufacturer in the Middle East region, based in Abu Dhabi.