Oil skirts $50 barrier as majors soften cuts

Oil skirts $50 barrier as majors soften cuts
A likely rebound in oil demand next year has added to industry optimism, but analysts warn there are ‘further challenges to OPEC+ harmony’ in the months ahead. (Shuutterstock)
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Updated 05 December 2020

Oil skirts $50 barrier as majors soften cuts

Oil skirts $50 barrier as majors soften cuts
  • Bullish global outlook prompts OPEC+ compromise deal to avoid price war

LONDON: Brent crude oil futures neared $50 on Friday after producers reached a compromise deal to nudge output from next month.

The Organization of the Petroleum Exporting Countries (OPEC) and their allies, known collectively as OPEC+ on Thursday agreed to soften output cuts from January by 500,000 barrels per day to be followed by further increases that have not yet been agreed each month.
It means that OPEC+ has committed to cut production by about 7.2 million barrels per day (bpd) from January compared with the existing cuts of 7.7 million bpd. The agreed reduction represents about 7 percent of global oil demand.
“This week’s compromise reflects a determination to avoid a repeat of the price war in March and April this year,” said Wood Mackenzie Vice President Ann-Louise Hittle.
The consultancy expects Brent to average at least $45 next month as a result of the agreement.

FASTFACT

OPEC+ has committed to cut production by about 7.2 million barrels per day (bpd) from January.

The oil price also received a lift from increased support for a $908 billion coronavirus stimulus package in the US congress and building optimism around the rollout of new vaccines that are expected to provide a boost for global air travel and with it demand for aviation fuel.
“Oil demand is likely to rebound strongly in 2021 along with the roll-out of vaccines. There are good reasons to be bullish for oil,” SEB analyst Bjarne Schieldrop said.
While the compromise deal has helped to support the oil price, analysts expect further tests for OPEC+ harmony in the months ahead.
“Now it faces the tricky task of reconsidering production at meetings each month during Q1 2021 and avoiding similar disagreements over compliance and production,” said WoodMac’s Hittle.
Brent was up more than 1 percent at $49.23 a barrel in late afternoon trade in London. Meanwhile, West Texas Intermediate was up by a similar measure at $44.08.


Saudi Arabia meeting water scarcity challenge with innovation

Saudi Arabia meeting water scarcity challenge with innovation
Updated 25 January 2021

Saudi Arabia meeting water scarcity challenge with innovation

Saudi Arabia meeting water scarcity challenge with innovation
  • Kingdom is third biggest consumer per capita in the world, after US and Canada

RIYADH: Saudi Arabia’s National Water Co. (NWC) this month signed a $5.36 million two-year contract with a French utilities company to reduce the amount of water lost during the Kingdom’s water production process, known as non-revenue water in the industry.

This is a positive step forward, as a report released late last year by global consultancy firm Oliver Wyman found that while water usage is rising, supply is diminishing. The study estimated that 25 percent of the world’s population lives in areas that suffer extremely high water stress, and by 2050 that portion of the population will more than double.

“With water resources becoming increasingly scarce globally, the Middle East region is addressing the critical issues, with governments increasingly adopting new strategies for balancing their scarce water resources and growing demand for fresh water,” said Bruno Sousa, a partner in the Energy Practice at Oliver Wyman. “This has led some countries in the Middle East to turn to options such as desalination and
treatment, and reuse of wast water,” he added.

Saudi Arabia is the third biggest consumer of water per capita in the world, after the US and Canada. The Kingdom has implemented a series of measures to rationalize water consumption as part of its Vision 2030 program, with the aim of reducing consumption by 24 percent in 2021 and by up to 43 percent by the end of the decade.

The Saudi Ministry of Environment, Water and Agriculture has developed a unified water sector reference framework that includes a comprehensive water strategy, which integrates national water sector trends, policies, legislation and practices with the main objective of addressing these key challenges and restructuring the sector. Dr. Ibrahim Aref, director of the rehabilitation of agricultural terraces initiative at the ministry, told Arab News that most of the Arabian Peninsula’s water resources comes from rainfall. Yet, rainfall in the Kingdom, especially in the center of the Arabian Peninsula, is very weak compared to any other place in the world, thus causing water scarcity.

New technology has been developed over the years to minimize the environmental impact of desalination.

Bruno Sousa

Aref pointed out that even though the Arabian Peninsula, in general, experiences dry seasons that last for two, four or up to seven years, the Kingdom has been blessed with a strong economy and therefore has been able to work on many solutions that might be unusual elsewhere in the world, such as desalination.

According to Oliver Wyman’s Sousa, desalination can be achieved through two main technologies: Thermal and electric.

He told Arab News that thermal technology consists of heating water and collecting the resulting evaporated pure water. “This is a very energy-intensive process, requiring both electricity and thermal energy to heat the water. As part of the process, electricity is also generated that can be injected into the electric grid.

“Electric consists mainly in reverse osmosis, where water is forced through membranes that remove salt ... it is also an energy-intensive process, but only requires electricity to run,” he said.

“Although thermal desalination is still used, reverse osmosis is the mainstream technology, adopted mainly because of lower costs (including with energy) and a higher rate of potable water conversion from seawater,” he added. Sousa said that new technology has been developed over the years to minimize the environmental impact of desalination. Spanish firm Acciona last year completed the construction of the Al-Khobar I desalination plant in Saudi Arabia, and since Dec. 26, it has produced 210,000 cubic meters of drinking water per day, which will supply a population of 350,000. It is one of the biggest desalination plants in Saudi Arabia in terms of capacity.

Desalination is not the only way the Kingdom is looking to address the issue of water shortages. One of the largest programs being undertaken by the Ministry of Environment, Water and Agriculture is the rehabilitation of agricultural terraces in the southwest of the Kingdom.

The project aims to increase the efficiency of water use for agricultural purposes and to rely on renewable sources that contribute to food security, rural development and increased productivity of strategic crops.