Oil prices set for modest recovery on OPEC+ cuts

Analysts expect global demand to contract by between about 6.5 million-8.7 million bpd this year, compared with last month’s prediction of 6.4 million-10 million bpd. (Shutterstock)
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Updated 01 July 2020

Oil prices set for modest recovery on OPEC+ cuts

  • Experts say a resurging virus could bring further restrictions and stifle demand

BENGALURU: Oil prices will consolidate at around $40 a barrel this year, with a recovery gaining steam in the fourth quarter and into 2021 on OPEC-led production cuts and as economies limp back from coronavirus lockdowns, a Reuters poll showed on Tuesday.

The survey of 45 analysts forecast benchmark Brent crude would average $40.41 a barrel in 2020, up from a forecast of $37.58 in a similar survey last month.

The global benchmark has averaged $42.10 so far this year. It was trading just below $42 a barrel on Tuesday, while West Texas Intermediate (WTI) crude was at $39.19.

The poll estimated the price of WTI would average $36.10 a barrel this year, up from a forecast of $32.78 in the May survey.

Of the 37 contributors who participated in both the May and June polls, 26 raised their 2020 Brent forecasts.

“The pace of this recovery will remain modest in the third quarter,” said Harry Tchilinguirian, head of commodity research at BNP Paribas.

But he said it would “accelerate in Q4 under the combined effect of voluntary output restraints by OPEC+ producers, market-driven production declines and a sequential recovery in demand with the reinstatement of economic activity reinforced by monetary and fiscal stimulus measures.”

Under a new agreement the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, have been cutting output since May by a record 9.7 million barrels per day (bpd) to support prices and demand hit by the pandemic.

OPEC+ compliance with the cuts in May was 87 percent.

However, analysts warned that a global rise in COVID-19 cases, which is approaching the 10.5 million mark, could potentially spark further restrictions and slow any economic recovery, and in turn, demand.

Analysts expect global demand to contract by between about 6.5 million-8.7 million bpd this year, compared with last month’s prediction of 6.4 million-10 million bpd.

“End-2020 demand will likely fall well short of end-2019 levels given that people will take some time to return to their old habits after restrictions are lifted,” said UBS analyst Giovanni Staunovo.


Arabtec Holding said to hire AlixPartners for debt advisory

Updated 25 September 2020

Arabtec Holding said to hire AlixPartners for debt advisory

DUBAI: Dubai-listed contractor Arabtec Holding has hired advisory firm AlixPartners to help it restructure the company’s debt, two sources familiar with the matter said.

AlixPartners is assessing the company’s debt profile, before any potential discussions with Arabtec’s creditors, according to the sources, who declined to be named as the matter is not public.

Arabtec did not respond to a query for comment when contacted on Thursday. AlixPartners declined  to comment.

Arabtec Holding is due to hold a shareholder meeting on Thursday afternoon to decide whether to continue operating or liquidate and dissolve the firm after the pandemic hit projects and led to additional costs.

FASTFACT

 

Arabtec last month posted a first-half loss of 794 million dirhams ($216.18 million).

The company, which last month posted a first-half loss of 794 million dirhams ($216.18 million) and total accumulated losses of 1.46 billion dirhams, said on Sept. 9 that it was calling a general assembly under an article of UAE company law.

The law requires companies to vote on whether they should continue operating if their accumulated losses reach half of their issued share capital.

Shares of Arabtec Holding, which helped to build the Louvre Abu Dhabi and the world’s tallest skyscraper, the Burj Khalifa in Dubai, have plunged 56.7 percent this year. They were down almost 5 percent when a suspension of trading was triggered at 1 p.m. local time ahead of the meeting, which was being held in Abu Dhabi.

Several UAE companies have sought to extend debt maturities or agree better terms in recent years to avoid defaults, after an oil price crash hit energy services and construction.

This week, creditors started to enforce claims against Abu Dhabi-based Al Jaber Group, which has struggled since building up debt in the wake of a UAE real estate crisis and began talks with creditors in 2011.

Dubai-listed construction firm Drake & Scull is working under the UAE bankruptcy law to reach an agreement with its creditors in an out-of-court process.