$12.6 trillion needs to be invested in the oil sector by 2045, says OPEC

OPEC’s head of research, Dr. Ayed Al-Qahtani, said he was pleased with the OPEC+ production cuts resulting in a decline of the five-year average to 138 million bpd, compared to 267 million bpd around the middle of last year. (Screenshot/IEF)
OPEC’s head of research, Dr. Ayed Al-Qahtani, said he was pleased with the OPEC+ production cuts resulting in a decline of the five-year average to 138 million bpd, compared to 267 million bpd around the middle of last year. (Screenshot/IEF)
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Updated 17 February 2021

$12.6 trillion needs to be invested in the oil sector by 2045, says OPEC

OPEC’s head of research, Dr. Ayed Al-Qahtani, said he was pleased with the OPEC+ production cuts resulting in a decline of the five-year average to 138 million bpd, compared to 267 million bpd around the middle of last year. (Screenshot/IEF)
  • OPEC’s head of research, Dr. Ayed Al-Qahtani, saw oil demand recovering over the next few years from the historic 10 percent drop last April

BERN: The first session of Wednesday’s International Energy Forum symposium compared the energy outlooks of the International Energy Agency (IEA) and OPEC, delineating their assumptions of primary energy demand and supply over the next 24 years.

There were commonalities in terms of oil and gas still being an important part of primary energy demand, but where the two presentations differed was the magnitude of change and how fast the energy transition would impact all aspects of life across the globe.

OPEC’s head of research, Dr. Ayed Al-Qahtani, saw oil demand recovering over the next few years from the historic 10 percent drop last April. Demand would grow the fastest in countries such as India and China, whose gross domestic products were expected to grow by 7.5 percent and 7.4 percent, resulting in a global growth in oil demand of 5.8 million barrels per day (bpd) in 2021. 

He was pleased with the OPEC+ production cuts resulting in a decline of the five-year average to 138 million bpd, compared to 267 million bpd around the middle of last year.

Al-Qahtani reiterated that all forms of energy would be needed over the next 25 years, with the share of renewables growing by 6 percent a year and the demand for natural gas growing by 21 million barrels of oil equivalent by 2045.

READ MORE: Oil producers must remain ‘extremely cautious’: Saudi energy minister

The starkest number mentioned by OPEC was the need for $12.6 trillion worth of investment into the oil sector required between 2019 and 2045, equating to an annual investment demand of $380 million per year.

The IEA was a lot more aggressive in terms of the scope and pace of energy transition between now and 2045. Its three scenarios pointed to a world of pre-pandemic recovery, a delayed recovery scenario and a sustainable development scenario and, in all of them, the absolute demand for coal and oil would decline and the share of renewables would grow commensurately.

The IEA’s director of the office for energy markets and security, Keisuke Sadamori, said the demand for electricity would grow by 4000 TW over the next 10 years to keep up with the electrification needs posed by energy transition. 

He added that energy transition would require contributions from governments in terms of policies and investments, citizens in terms of behavior, as well as requiring a step change from finance in terms of boosting clean energy.

BP’s chief economist Spencer Dale said his scenarios all had the share of fossil fuels in the energy mix declining and the share of renewable sources of energy dramatically increasing.

He reiterated the role of electricity in energy transition and the investments required in all sources of energy in order to supply sufficient energy to a growing world population.


Investors weigh new stock leadership as broader market wobbles

Investors weigh new stock leadership as broader market wobbles
Updated 26 min 23 sec ago

Investors weigh new stock leadership as broader market wobbles

Investors weigh new stock leadership as broader market wobbles
NEW YORK: A shakeup in stocks accelerated by the past week’s surge in Treasury yields has investors weighing how far a recent leadership rotation in the US equity market can run, and its implications for the broader S&P 500 index.
Moves this week further spurred a shift that has seen months-long outperformance for energy, financial and other shares expected to benefit from an economic recovery, while a climb in Treasury yields weighed on the technology stocks that have led markets higher for years.
The two-track market left the benchmark S&P 500 down for the week, and sparked questions about whether it could sustain gains going forward if the tech and growth stocks that account for the biggest weights in the index struggle.
So far this year, the S&P 500, which gives more influence to stocks with larger market values, is up 1.5 percent, while a version of the index that weights stocks equally is up 5 percent.
“That just tells us the gains are less narrow, more companies are participating, and I think that’s healthy,” said James Ragan, director of wealth management research at D.A. Davidson.
The focus on market leadership comes as investors are weighing whether the S&P 500 is due for a significant pullback after a 70 percent run since March, with the rise in long-dormant yields the latest sign of trouble for equities as it means bonds are more serious investment competition. The yield on the 10-year US Treasury note this week jumped to a one-year peak of 1.6 percent before pulling back.
Economic improvement will be in focus in the coming weeks, including the monthly US jobs report due next Friday, as will the country’s ability to ensure widespread coronavirus vaccinations, especially as new variants emerge.
Tech and momentum stocks helped drive returns in 2020 “when everyone was locked down and all they had was their computer,” said Jack Ablin, chief investment officer at Cresset Capital Management. “Now it seems with the vaccines, the stimulus and the prospect of reopening that we are looking out toward a recovery phase.”
The shift in the market this week is building on one that was fueled in early November, when Pfizer’s breakthrough COVID-19 vaccine news generated broad bets on an economic rebound in 2021.
Among the moves since that point: the S&P 500 financial and energy sectors are up 29 percent and 65 percent, respectively, against a nearly 9% rise for the benchmark index and 7 percent rise for the tech sector. The Russell 1000 value index has gained 16.5 percent against a 4.3 percent climb for its growth counterpart, while the smallcap Russell 2000 is up 34 percent.
“You definitely are seeing the reopening trade that has pretty much come alive here,” said Gary Bradshaw, portfolio manager of Hodges Capital Management.
Despite the gains, there remains “plenty of room for the reflation trade to run from a valuation perspective,” Lori Calvasina, head of US equity strategy at RBC Capital Markets, said in a report this week. RBC is “overweight” the financials, materials and energy sectors.
Rising rates tend to be favorable for more cyclical sectors, David Lefkowitz, head of Americas equities at UBS Global Wealth Management, said in a note, with financials, energy, industrials and materials showing the strongest positive correlations among sectors with 10-year Treasury yields.
Still, how long the market’s reopening trade lasts remains to be seen. Investors may be reluctant to stray from tech and growth stocks, especially with many of the companies expected to put up strong profits for years.
Any setbacks with the economy or with efforts to quell the coronavirus could revive the stay-at-home stocks that thrived for most of 2020.
And with a GameStop-fueled retail-trading frenzy taking hold this year, banks and other stocks in the reopening trade may fail to draw the same attention from amateur investors as stocks such as Tesla, said Rick Meckler, partner at Cherry Lane Investments.
“There isn’t the pizzazz to those stocks,” Meckler said. “There rarely is a potential for stocks to make the kind of moves that big tech growth stocks have made.”

IMF urges Tunisia to cut wage bill and energy subsidies

IMF urges Tunisia to cut wage bill and energy subsidies
Updated 31 min 9 sec ago

IMF urges Tunisia to cut wage bill and energy subsidies

IMF urges Tunisia to cut wage bill and energy subsidies
  • The IMF said in statement that monetary policy should focus on inflation by steering short term interest rates, while preserving exchange rate flexibility

TUNIS: The International Monetary Fund urged Tunisia on Friday to cut its wage bill and limit energy subsidies to reduce a fiscal deficit, putting more pressure on the fragile government amid a severe financial and political crisis.
With the coronavirus pandemic, political infighting and protests since last month over social inequality, it is a time of unprecedented economic hardship in the North Africa country that ran a fiscal deficit of 11.5 percent of GDP in 2020.
The IMF said in statement that monetary policy should focus on inflation by steering short term interest rates, while preserving exchange rate flexibility.
Tunisia’s 2021 budget forecasts borrowing needs $7.2 billion including about $5 billion in foreign loans. It puts debt repayments due this year at 16 billion dinars, up from 11 billion dinars in 2020.
The IMF said the service salary bill is about 17.6% of GDP, among the highest in the world.


US House tees up vote on Biden’s $1.9tn COVID-19 relief plan

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan
Updated 27 February 2021

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan

US House tees up vote on Biden’s $1.9tn COVID-19 relief plan
  • Final passage appeared likely after the measure cleared a procedural hurdle by a partyline vote of 219 to 210.

WASHINGTON: The US House of Representatives moved on Friday toward a late-night vote on President Joe Biden’s $1.9 trillion coronavirus aid bill, as Democrats who narrowly control the chamber steered the sweeping measure toward approval.
Final passage appeared likely after the measure cleared a procedural hurdle by a partyline vote of 219 to 210.
With Republicans lining up in opposition, Democrats who hold a slim majority have few votes to spare.
“I am a happy camper tonight. This is what America needs,” Democratic Representative Maxine Waters said in debate on the House floor.
Democrats said the package was needed to fight a pandemic that has killed more than 500,000 Americans and thrown millions out of work, while Republicans criticized it as too expensive.
The measure would pay for vaccines and medical supplies and send a new round of emergency financial aid to households, small businesses and state and local governments.
Democrats aim to get the bill for Biden to sign into law before mid-March, when enhanced unemployment benefits and some other types of aid are due to expire.
But their path has been complicated by the Senate’s rules expert, who said on Thursday that they cannot include an increase in the minimum wage to $15 per hour in the package.
House Speaker Nancy Pelosi predicted the bill will pass Congress with or without the increase, but said Democrats would not give up on the matter.
“We will not stop until we very soon pass the $15 minimum wage,” she said at a news conference.
Opinion polls have found broad public support for the package.
Republicans who have broadly backed previous COVID-19 spending say another $1.9 trillion is simply too much. They said too much would go to Democratic priorities they called unnecessary, and only a fraction to directly fighting the virus.
“We need targeted tailored relief that actually helps the American people, not this $2 trillion boondoggle,” Republican Representative Debbie Lesko said.
The White House and some economists say a big package is needed to revive the world’s largest economy.
Biden has focused his first weeks in office on tackling the greatest public health crisis in a century, which has upended most aspects of American life.
Pelosi is counting on nearly all of her rank and file to get the bill passed before sending it to a 50-50 Senate where Democratic Vice President Kamala Harris holds the tie-breaking vote.

MINIMUM WAGE HIKE
The House bill would raise the national hourly minimum wage for the first time since 2009, to $15 from $7.25. The increase is a top priority for progressive Democrats.
That is unlikely to win approval in the Senate.
The chamber’s parliamentarian ruled on Thursday that, unlike other elements of the sweeping bill, it could not be passed with just a simple majority of 50 senators plus Harris, rather than the 60 needed to advance most legislation in the 100-seat chamber.
At least two Senate Democrats oppose the $15 hourly figure, along with most Republicans. Some are floating a smaller increase, in the range of $10 to $12 per hour.
Senate Majority Leader Chuck Schumer might add a provision to penalize large corporations that do not pay a $15 minimum wage, a Senate Democratic aide said.
The bill’s big-ticket items include $1,400 direct payments to individuals, a $400-per-week federal unemployment benefit through Aug. 29, and help for those in difficulty paying rents and home mortgages during the pandemic.
An array of business interests also has weighed in behind Biden’s “America Rescue Plan” Act, as the bill is called.
Efforts to craft a bipartisan coronavirus aid bill fizzled early on, shortly after Biden was sworn in as president on Jan. 20, following a series of bipartisan bills enacted in 2020.

Related


BA owner calls for COVID health passes after record $9 billion loss

BA owner calls for COVID health passes after record $9 billion loss
In this Tuesday, Jan. 10, 2017, file photo, British Airways planes are parked at Heathrow Airport in London. (AP)
Updated 27 February 2021

BA owner calls for COVID health passes after record $9 billion loss

BA owner calls for COVID health passes after record $9 billion loss
  • Tighter travel restrictions have threatened to ruin Europe's critical summer season

LONDON: British Airways owner IAG is counting on digital health passes to help spur a travel recovery this summer, after the pandemic pushed it to a record €7.4 billion ($9 billion) loss last year, when it ran just a third of normal flights.

Tighter travel restrictions over the last two months have threatened to ruin Europe’s critical summer season and leave some airlines needing more funding, analysts have warned.
But after taking on new loans, IAG said it had €10.3 billion of liquidity and was well set to ride out the crisis.
“We’ve got very strong liquidity going into 2021 ... so no, we will not need additional funding,” finance chief Steve Gunning told reporters on a call.
European airlines hope travel restrictions will soon be eased to allow them to make money again. Britain on Monday laid out plans for travel markets to possibly reopen from mid-May, prompting a flood of bookings.
IAG chief executive Luis Gallego said if the UK plans went ahead, it would be a “positive summer,” but digital health passes were needed to unlock the market.
“Health passes are going to be the key to restart the aviation and the travel,” said Gallego, who is six months into the job, calling for a digital system that could include test results and proof of vaccination.
Several countries are considering health passports to help revive travel, but are worried about risks to civil liberties. However, Britain’s Heathrow Airport warned this week that dealing with a big rise in passengers would not be possible with current paper-based checks.
IAG shares were up 4 percent at 194 pence in morning trading. They have jumped 13 percent in the last five days, after Britain’s announcement on a travel restart, but over the last 12 months have lost half their value.

Cash burn
The pandemic has already crippled airlines like Norwegian Air, and left major players such as Air France-KLM and Lufthansa relying on state support.
While a recovery is now in sight, there is still much uncertainty.
IAG, which also owns Aer Lingus, Iberia and Vueling, said it could not give profit guidance for 2021, and asked how many flights it might run this year, Gallego said: “To be honest nobody knows what’s going to happen.”
For January-March, IAG said it expected to fly about 20 percent of 2019’s capacity, compared to the whole of 2020 when it flew at 34 percent of capacity.
IAG’s focus for now is on cutting costs to reduce cash burn. Weekly cash burn fell to €185 million in the first quarter, down 30 million from the previous quarter.
Last October, IAG secured shareholder backing for a €2.74 billion capital hike and Goodbody analysts said it might have to call on investors again.
“With further losses expected this year ... another rights issue can’t be ruled out in the medium term,” they said.
IAG’s operating loss before exceptional items, its preferred measure, came in at €4.37 billion, slightly better than analysts’ consensus forecast for a 4.45 billion loss.


India’s economy expands 0.4% in Oct.-Dec.

India’s economy expands 0.4% in Oct.-Dec.
A vendor speaks on his mobile phone as he waits for customers displaying clothing in front of a store in a market in New Delhi on February 23, 2021. (AFP)
Updated 27 February 2021

India’s economy expands 0.4% in Oct.-Dec.

India’s economy expands 0.4% in Oct.-Dec.
  • India’s central bank, the Reserve Bank of India, is projecting the gross domestic product growth of 10.5 percent in financial year 2021-22

NEW DELHI: India’s economy expanded by a weaker-than-expected 0.4 percent in the October-December quarter, which still allowed it to escape recession following large contractions in the two previous quarters during the coronavirus pandemic, the government said Friday.
The National Statistical Office projected an 8 percent contraction for the 2020-21 financial year, which ends in March. In January, it had projected a contraction of 7.7 percent for the fiscal year, following 4 percent growth in 2019-20.
It said fertilizer production rose by 2.7 percent in January, steel by 2.6 percent and electricity generation by 5.1 percent. Coal production declined by 1.8 percent, crude oil by 4.8 percent and natural gas by 2 percent, it said in a statement.
India’s economy contracted by 7.5 percent in the July-September quarter following a record plunge of 23.9 percent in the previous three months. The government had imposed a strict two-month lockdown across the country in March after the outbreak of the pandemic.

HIGHLIGHTS

● India’s economy contracted by 7.5 percent in the July-September quarter following a record plunge of 23.9 percent in the previous three months.

● The government had imposed a strict two-month lockdown across the country in March after the outbreak of the pandemic.

A country enters a technical recession if its economy contracts in two successive quarters. India’s recovery is expected to improve with a rise in consumer demand and investment.
India’s central bank, the Reserve Bank of India, is projecting the gross domestic product growth of 10.5 percent in financial year 2021-22. The International Monetary Fund has projected 11.5 percent growth in calendar 2021.
The IMF estimated that the Indian economy contracted 8 percent in 2020.