WEEKLY ENERGY RECAP: It is too early to prejudge the largest oil output cut in history

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of OPEC's headquarters in Vienna, Austria April 9, 2020. (REUTERS)
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Updated 12 April 2020

WEEKLY ENERGY RECAP: It is too early to prejudge the largest oil output cut in history

  • This sustainable output cut strategy will last until April 2022, starting with a reduction of 10 million bpd during May and June

OPEC+ has made the largest oil output cut in history.
The move points to the alliance seeking to balance the oil market over the medium-term rather than working on a short-lived recovery.
The aim of Saudi Arabia remains to ensure energy security through sustainable pricing and sufficient supplies at a level that stimulates upstream projects.
However, facing such unprecedented headwinds, it is still too early to know if the agreed 10 million barrel per day (bpd) output cut from OPEC+ producers will be sufficient enough to balance the demand deficit — in the short term at least.
That is because there are questions over whether the largest oil output cut in history will offset the estimated 20 to 30 million barrels in oil demand that could be lost as a result of the spread of the coronavirus disease, COVID-19, and the associated impact on global transportation.
Over the medium term, we will likely see a more tangible impact as the cuts gradually absorb the glut as lockdowns are lifted around the world, and as inventories deplete.
This sustainable output cut strategy will last until April 2022, starting with a reduction of 10 million bpd during May and June, then falling to 8 million bpd for the second half of 2020, dropping to 6 million bpd for the remaining 16 months.
It represents a commitment to a full two years of output cuts that will be closely monitored by OPEC’s Joint Ministerial Monitoring Committee (JMMC) and assisted by the Joint Technical Committee (JTC) and the OPEC Secretariat.
Hence, the market should not be underwhelmed by the agreed 10 million bpd production cut — even if there was an earlier expectation of a much larger reduction. What is important is that rivalries have been set aside and a common commitment established to protect the global economy from future turmoil.


Bayut and Dubizzle merge to create a Dubai-based unicorn company

Updated 25 min 27 sec ago

Bayut and Dubizzle merge to create a Dubai-based unicorn company

  • The two owner companies will also run a $150 million investment round
  • EMGP will continue operating both Bayut and Dubizzle in the UAE

DUBAI: The owners of UAE technology firms Bayut and Dubizzle have announced a merger which will form a $1 billion Dubai-based unicorn company, state news agency WAM reported on Tuesday.
Emerging Markets Property Group, EMPG, and OLX Group will also run a $150 million investment round as part of the agreement to merge their MENA and South Asia operations.
Unicorn companies are privately held startups valued at over $1 billion.
The merger makes OLX, EMGS’s largest single holder with 39 percent of shares. EMGP will continue operating both Bayut and Dubizzle in the UAE, and the merger will bring OLX entities in Egypt, Lebanon, Pakistan and several GCC countries into the company’s reach.
“This merger of EMPG and OLX will allow us to better serve our customers, given that both operate brands with a strong following and will allow us to leverage existing tech and data to paint a more accurate picture of the state of affairs in the real estate industry across the region. At the same time, we will be making significant technology investments to provide more value to all users of property, automotive and other segments of the Dubizzle and OLX platform,” Head of EMGP MENA Haider Ali Khan said.
The cumulative value of properties sold in the UAE, Egypt, Lebanon and Pakistan through the websites is estimated at $8.984 billion, offering a possible commission pool of above $1.9 billion for real estate agents.
Meanwhile, Ali Maabereh, head of mergers and acquisition (M&A) at KMPG in Saudi Arabia said M&A activity will increase in GCC countries amid the coronavirus pandemic as SMEs and several large corporates will look for capital injections to satisfy working capital needs.
“The current pandemic is creating a lot of uncertainties and contradictions in what to expect after the dust settles. The expected key impacts on companies are shortages of liquidity and working capital requirements. Though companies might be running a healthy P&L, there will be significant pressure on working capital requirements,” he said.