WEEKLY ENERGY RECAP: Trading range squeezed

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Updated 19 July 2020

WEEKLY ENERGY RECAP: Trading range squeezed

  • The consensus within OPEC+ shows a unity capable of bringing the market into balance

Oil prices moved in the narrowest range ever this past week.

Brent crude oil fell by only 10 cents from the week earlier to close at $43.14 per barrel while WTI moved higher by only 4 cents to $40.59 per barrel. 

These prices are extremely close to July average for both benchmarks so far.

Historically large output cuts by OPEC+ of nearly 2 million barrels per day through the end of the year are already well priced into the market.

OPEC’s 13 members pumped 22.27 million bpd in June. The 23 OPEC+ producers have successfully achieved 107 percent compliance with their committed cuts, according to OPEC data seen by S&P Global Platts. Non-compliant producers have also committed to make up for their shortfalls in August and September, making the headline cuts larger.

The huge consensus within OPEC+ demonstrates a powerful sense of unity that is capable of bringing the market into balance and adjusting output as needed.

Rising coronavirus cases worldwide continued to cloud the short-term outlook as infection numbers climbed again in some major economies that had eased restrictions.

Still, the market remains well supported by inventory data released by the US Energy Information Administration (EIA), which showed a large drawdown of 7.5 million barrels.

One potential challenge to the compliance and cohesion of OPEC+ may be the reluctance of some refiners to increase their refining capacities as the recovery in fuel demand remains fragile. 

While Chinese refiners throughput surged to the highest on record in June, Asian refiners may be cautious about boosting crude imports as the demand outlook remains foggy.

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


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.