Quick action by OPEC+ stabilized oil markets during the coronavirus crisis, says IEF chief Joseph McMonigle

Quick action by OPEC+ stabilized oil markets during the coronavirus crisis, says IEF chief Joseph McMonigle
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In this episode of Frankly Speaking, Joseph McMonigle, secretary-general of the International Energy Forum (IEF), spoke to Arab News’ Frank Kane about the looming investment crunch in the oil industry. (AN Photo)
Quick action by OPEC+ stabilized oil markets during the coronavirus crisis, says IEF chief Joseph McMonigle
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International Energy Forum secretary-general Joseph McMonigle. (AN Photo)
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Updated 02 March 2021

Quick action by OPEC+ stabilized oil markets during the coronavirus crisis, says IEF chief Joseph McMonigle

Quick action by OPEC+ stabilized oil markets during the coronavirus crisis, says IEF chief Joseph McMonigle
  • Secretary general of the International Energy Forum was interviewed on the Arab News video show Frankly Speaking
  • McMonigle discussed rising oil prices, looming investment crunch and the fight against climate change among other big issues

DUBAI: Saudi Arabia and Russia have been commended by one of the thought leaders of the global energy industry for playing a “responsible, leadership role” via the OPEC+ alliance in stabilizing oil markets during the coronavirus pandemic.

Joseph McMonigle, secretary general of the International Energy Forum (IEF), the world’s biggest forum for energy policymakers, also spoke of the looming investment crunch in the oil industry and the crucial role that technology will play in the global battle against climate change.

He was interviewed on Frankly Speaking, the Arab News video show in which leading policymakers and business executives give their candid opinion on some of the big issues of the day.

McMonigle took over at the IEF last year after two decades’ experience in the global energy business, including a stint as adviser to the White House administration of George W. Bush.

“OPEC+ has been quite responsible in stabilizing oil markets during the pandemic, and of course like every other producer it had to adjust its demand lower, but really they took a leadership role right out of the box,” he said.

 

The Kingdom, alongside Russia, played a crucial role in limiting excess supply of crude onto fragile markets at the height of the crisis last year, when oil demand fell by 30 per cent and global crude prices plunged into negative territory in some markets.

“Really only due to their quick action were prices able to stabilize during the summer,” McMonigle said. “I think if we just said ‘Let’s wait and just see how market forces affect everything,’ I think it would have been a much more painful transition period.”

Nevertheless, he believes Saudi Arabia and OPEC do not want to see oil prices soaring too fast as the world recovers from the pandemic.

According to him, producers in the region and worldwide are conscious of the risks to economic growth from a “supercycle” in energy prices that some analysts have predicted.

“I don’t think that OPEC and the producers here in the region are necessarily so thrilled with supercycle type prices,” McMonigle said.

“I think they recognize, from the last time this happened, that it wasn’t good for the global economy, and I think they’ve realized now that healthy customers and a healthy global economy is the best for their industry and the best for the energy market.”

His comments came as crude oil prices hit new post-pandemic highs, with Brent crude, the global benchmark, up 20 per cent over the past month to stand at around $66 per barrel.

Some analysts have forecast the Brent will reach $75 in the summer, and could even spike to $100 as demand soars on economic recovery prospects and vaccines are rolled out across the world.

But with OPEC+ just days away from a crucial meeting to decide oil supply levels, McMonigle warned that lack of investment last year as prices plummeted could come back to bite the global industry.

“There’s not much we’re going to be able to do about demand returning faster and stronger than estimated but we can do something on the supply side, and that’s really going to take this investment that we talked about,” he said.

 

“If we’re in a full recovery at the end of the year from the pandemic I think you’re going to see demand be stronger and faster than forecasted, and so if you combine that with the investment crisis, I think the outlook for higher oil prices is quite good.”

The role of the IEF is to encourage dialogue and consultation between energy producers and consumers, and its work has been thrown into sharp relief by the pandemic energy crisis, as well as its effect on accelerating energy transition away from hydrocarbons.

“We have a much more diverse membership and so our agenda is expanded outside of just fossil fuels and we’re very involved in the energy transition and the role of natural gas and obviously paying very close attention to renewables,” McMonigle said.

The new emphasis on renewables — like solar, wind and nuclear energy sources — has struck a chord in Saudi Arabia, which has put in place some $10 billion worth of investment in the sector and announced plans to produce half its electricity from renewable sources by 2030.

But McMonigle also emphasized the role hydrocarbons still have to play in the global energy mix and the importance of innovative technology to mitigate the effect of harmful emissions.

“I think it’s important to recognize that wind and solar energy alone can’t really help us meet our climate goals,” he said. “We really need a shift now by governments and industry to invest more in clean energy R&D, technology and innovation, with a goal to reduce greenhouse gas emissions.

At a recent meeting of the IEF with European Union energy policymakers, Prince Abdul Aziz bin Salman, the energy minister of Saudi Arabia, underlined the Kingdom’s commitment to renewable sources, and to the use of hydrogen as a fuel of the future.

 

“Hydrogen is a very hot and trending topic now and I think that’s because the EU has recognized intellectually that wind and solar just can’t do it alone, and we’re not going to just go off of fossil fuels. We need a replacement and so that’s why I think they’re investing so much in hydrogen, and Saudi Arabia is getting very involved in it,” McMonigle said.

Saudi Arabia has backed the framework of the Circular Carbon Economy (CCE) as a strategy to mitigate and remove the harmful emissions that cause global warming, and that framework was endorsed by G20 leaders at last year’s summit under the Saudi presidency.

McMonigle said that the key to CCE was investment in new technology. “Up until now really it’s just been the US, maybe also the UK, Norway and Australia that have invested in it, but if Saudi Arabia is going to get behind it in a big way that’s really going to advance the technology - not just on this but on the other technologies that will help us solve our climate crisis,” he said.

One crucial technology aspect is the direct capture of carbon from the air, which is a focus of significant Saudi energy research.

The effects of climate change and extreme weather conditions were recently demonstrated in the US, where the Texas electricity network was overwhelmed by severe low temperatures that also seriously affected the state’s oil industry.

Some experts have blamed the Texas policy of renewable investment for the crisis, but McMonigle disagreed.

“Certainly, renewable energy was affected, but natural gas generation was also affected as well. I think it’s a lot more complicated than just pointing out one or two fuel sources,” he said, highlighting the once-in-a-century nature of the Texas storm and the state’s unique regulatory structure as contributory factors.

Some critics of the hydrocarbon industry predict that the rise of electric vehicles (EV) will, in the long term, contribute to the decline of petrol cars and “peak” oil demand, encouraged by environmental legislation in some countries.

“There’s tremendous momentum behind EVs. Last year there were 2.3 million EVs sold globally — that's about one in every 40 cars sold was an electric vehicle or hybrid. These numbers are only going to grow and some forecasts suggest that global EV sales will make up more than 50 per cent in most vehicles segments by the year 2035,” McMonigle said.

But that does not necessarily mean the imminent end of oil as the main global energy source, he insisted.

“Fossil fuel and hydrocarbon demand is going to continue out to 2040 and maybe some of it gets affected by EVs. But you still have jet fuel, you still have diesel, you have petrochemicals that are driving a lot of the growth,” he said.

“The point here is that you know oil is going to be a dominant energy source for the foreseeable future.”

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Twitter: @frankkanedubai

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Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
Updated 21 April 2021

Many global stocks lower after Wall St. decline

Many global stocks lower after Wall St. decline
  • London and Frankfurt opened lower, while Shanghai and Tokyo also declined

BEIJING: Major global stock markets were mostly lower Tuesday after Wall Street retreated from record highs.

London and Frankfurt opened lower, while Shanghai and Tokyo also declined. Hong Kong and Seoul advanced.

Wall Street futures gained a day after the benchmark S&P 500 index lost 0.5 percent on declines for tech, bank and energy stocks.

Investor optimism has been boosted by higher corporate profits, US hiring and consumer confidence. Still, traders are uneasy about a rise in inflation and interest rates and renewed coronavirus infections that prompted some governments to reimpose anti-disease controls.

“Wall Street could be in for a few choppy trading weeks as more of the same strong earnings beats becomes the theme,” said Edward Moya of Oanda in a report.

In early trading, the FTSE 100 in London declined 0.3 percent to 6,982.77 and the DAX in Frankfurt lost 0.2 percent to 15,335.68. The CAC 40 in Paris shed 0.6 percent to 6,256.90. On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were up less than 0.1 percent.

On Monday, the Dow lost 0.4 percent. Both the S&P 500 and the Dow hit highs on Friday.

Capital One lost 0.9 percent and Valero Energy slid 2.3 percent.

The tech-heavy Nasdaq composite slid 1 percent. Chipmaker Intel fell 1.7 percent.

In Asia, the Shanghai Composite Index lost 0.1 percent to 3,472.94 while the Nikkei 225 in Tokyo tumbled 2 percent to 29,100.38. The Hang Seng in Hong Kong gained 0.1 percent to 29,135.73.

The Kospi in Seoul rose 0.7 percent to 3,220.70 while the S&P-ASX 200 in Sydney sank 0.7 percent to 7,017.80.

India’s Sensex was up less than 0.1 percent at 47,978.05. New Zealand, Singapore and Jakarta declined while Bangkok advanced.

This week, 81 of the 500 members of the S&P 500 index are due to report earnings, as are 10 of the 30 members of the Dow, including Johnson & Johnson, Verizon Communications and Intel. On average, analysts expect quarterly profits across the S&P 500 to be up 24 percent from a year earlier, according to FactSet. In energy markets, benchmark US crude rose 82 cents to $64.25 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price international oils, gained 90 cents to $67.95 per barrel in London.

The dollar advanced to 108.40 yen from Monday’s 108.11 yen. The euro gained to $1.2070 from $1.2039.


Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
Updated 21 April 2021

Surge in demand for companies looking to set up in KSA

Surge in demand for companies looking to set up in KSA
  • Consultants have seen a 50 percent rise in activity in the first quarter of 2021

RIYADH: Sovereign AEI, a firm which specializes in helping companies set up operations in the Kingdom, has seen a spike in business activity.

“The beginning of this year has been very encouraging as we have seen a 40 to 50 percent increase in Saudi Arabia market-entry activity, when compared to pre-pandemic levels,” Stuart D’Souza, co-founder and CEO of Arabian Enterprise Incubators (AEI), one of the partner firms that makes up Sovereign AEI, told Arab News.

As part of the ambitious Riyadh Strategy 2030 announced by Crown Prince Mohammed bin Salman earlier this year, the government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“Sovereign AEI is helping to facilitate this new strategy. Our products and services are conducive with Riyadh Strategy 2030 by helping new and existing businesses capitalize on the expected significant growth forecast for the Kingdom,” Paul Arnold, managing director of Sovereign Saudi Arabia, told Arab News.

BACKGROUND

• The government wants to attract up to 500 international companies to set up their regional bases in the city, create around 35,000 new jobs for Saudi locals, and double the capital’s population.

• The strategy aims to invest up to SR70 billion ($18.67 billion) into the national economy by the end of the decade. The strategy is already paying dividends.

“We are also encouraging businesses to look ahead and establish a physical presence in the Kingdom, while taking into consideration new criteria set to come into force by 2024, the specifics of which are yet to be formally announced,” he added.

Sovereign has been operating in Saudi Arabia for about 20 years and AEI since 2012. They formed their joint partnership in 2019.

In 2019, the company helped 600 businesses visit Saudi Arabia to investigate potential opportunities. Half were first-time visitors and over 70 percent went on to establish new business links in the Kingdom. AEI alone has helped over 1,500 foreign businesses to enter, establish or expand in Saudi Arabia since 2012.

Last year, despite the restrictions as a result of the pandemic, Sovereign AEI reported a 300 percent increase in corporate services in Saudi Arabia. The team is expecting this positive growth to continue in 2021.

“The Saudi market presents tremendous opportunities. Most companies are now aware of the potential of the market, the main pillars of Vision 2030 and the significant number of economic reforms carried out over the past 18 months. However, plotting a road map to success can be a challenge,” Arnold said.

“Our principles are to educate, de-risk and enable the client’s ability to enter, establish or expand in the Kingdom. Our robust performance in the first quarter is a testament to the attractive nature of the Saudi market and we continue to see a growing interest and increasing shift of client focus toward the Kingdom, as the country continues to unveil new strategic initiatives,” he added.


New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
Updated 21 April 2021

New oil price surge caps year of recovery since ‘Black Monday’

New oil price surge caps year of recovery since ‘Black Monday’
  • Anniversary of US crude plunging to minus-$40 at start of pandemic recession

DUBAI: Oil prices resumed their surge on global markets on Tuesday as traders shrugged off the memory of “Black Monday” 2020, when some crude prices went into negative territory at the start of the pandemic recession.
Brent crude, the global benchmark, went above $68 a barrel for the first time in over a year, while West Texas Intermediate, which approached minus-$40 at the depth of the oil crisis exactly a year ago, leapt above $64.
The resurgence in the oil price — which has seen some experts suggesting the possibility of a “supercycle” in which crude goes back above $100 a barrel — is partly down to improved prospects as the global economy moves outs of pandemic lockdowns.
The global rollout of coronavirus vaccines has led economic experts to predict a sharp recovery in growth in 2021, with the International Monetary Fund recently forecasting a sharp rise in economic activity for the rest of the year. China last week said its economy had grown by 18.3 percent in the first quarter of the year.
But oil analysts believe the actions of OPEC+ — the producers’ alliance led by Saudi Arabia and Russia —had been the biggest factor in helping reduce the huge glut of oil that threatened to swamp the world market last spring.
Since last April, OPEC+ has taken more than 3 billion barrels of oil off the global market, through a combination of strong internal discipline and voluntary cuts by Saudi Arabia, the world’s biggest exporter.
Prince Abdul Aziz bin Salman, the Saudi Energy Minister and co-chairman of OPEC+, has repeatedly urged caution on the 23-member organization as COVID-19 cases re-emerge in some parts of the world. Europe and India are the latest causes of concern.
“The reality remains that the global picture is far from even, and the recovery is far from complete,” he told the last OPEC+ meeting.
The oil price bulls are encouraged by increasing demand from China, the biggest oil consumer in the world.
Figures from the country’s customs regulator, released on Tuesday, showed that crude oil imports from Saudi Arabia — its biggest supplier — had risen by nearly 9 percent in March, with strong domestic demand bolstered by a freeing up of supplies after port congestions.
Some analysts still believe Brent crude could hit $75 this year, and reckon $100 a barrel next year is a possibility.
But nobody appears to believe the volatile market conditions of last spring, and negative oil prices, will happen again.
Robin Mills, chief executive officer of consultancy Qamar Energy, told Arab News: “That was a pretty unusual set of circumstances.”
He added: “Never say never, and traders have short memories, but I think the fixes in place would make it unlikely to go negative again.”


Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
Updated 21 April 2021

Egypt targets investments of $80 billion

Egypt targets investments of $80 billion
  • Plan forecasts 125 percent increase in funding for production sector

CAIRO: Egypt is aiming to raise EGP 1.25 trillion ($80 billion) as part of its investment plan for the fiscal year 2021/2022, according to the Egyptian Minister of Planning and Economic Development Hala Al-Saeed.

The investment plan forecasts a 125 percent increase in funding for the production sector, the minister said, along with a 30 percent increase for the country’s service sector.

Al-Saeed said the plan helps address the public spending commitments related to health and education and scientific research, as well funding for the continued efforts to combat the COVID-19 pandemic.

She said priority would be given to high-productivity sectors that drive sustainable economic growth in Egypt such as the manufacturing, communications, information technology and agriculture sectors.

According to the minister, the most important goals of the 2021/2022 sustainable development plan include addressing important social issues such as gender equality and public investments into green projects.


Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
Updated 20 April 2021

Korean envoy invites Saudi Arabia to GICC2021

Korean Ambassador Jo Byung-Wook during a meeting with Prince Saud bin Talal bin Badr and officials from Ministry of Municipal and Rural Affairs and Housing. (Supplied)
  • The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations

RIYADH: South Korean Ambassador Jo Byung-Wook has invited Saudi Arabia to attend the Global Infrastructure Cooperation Conference (GICC2021).

The annual conference provides an opportunity to present projects to potential Korean partners, and to hold personal consultations.

The ambassador met Prince Saud bin Talal bin Badr, undersecretary at the Ministry of Municipal and Rural Affairs and Housing for housing subsidies, and general supervisor of the International Cooperation Department at the ministry in Riyadh.

GICC2021 is scheduled for “later this year,” the ambassador told Arab News, adding that the meeting “reviewed the close, friendly and cooperative relations” between the two countries, and “agreed to continue to expand bilateral cooperation in the housing sector.”

He said: “I commended the Saudi government’s efforts to help Saudi families own their house through the Sakani program, taking note of the signing of four agreements during the Sakani Forum held last Thursday in Riyadh.”

The Sakani program helped 70,000 families in the first quarter of 2021, surpassing its target of serving 51,000 families.

It was formed in 2017 by the Ministry of Housing and the Real Estate Development Fund, with the aim of facilitating home ownership in the Kingdom by creating new housing stock, allocating plots and homes to nationals, and financing their purchase. It has a goal of reaching 70 percent home ownership by 2030.

The program aims to serve 220,000 Saudi families this year by creating 50,000 housing units, facilitating the reservation of 30,000 residential land plots, and arranging 140,000 real estate loans. To date, Sakani has enabled more than 350,000 families to own homes.