Frankly Speaking: Saudi role in OPEC+ contributed to ‘strong global economy recovery,’ says Daniel Yergin

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Updated 21 June 2021

Frankly Speaking: Saudi role in OPEC+ contributed to ‘strong global economy recovery,’ says Daniel Yergin

Pulitzer Prize-winning historian of the oil industry Daniel Yergin, who is also vice chairman of the IHS Markit consultancy, gave his views on Frankly Speaking. (Screenshot)
  • Energy historian made the remarks in the series of video conversations with leading decision-makers
  • Yergin sees alliance of oil producers as a stabilizing force aiding recovery from economic collapse

DUBAI: Saudi Arabia’s leading role within the OPEC+ alliance of oil producers has been instrumental in rebalancing global markets, according to one of the world’s leading energy experts.

Daniel Yergin, the Pulitzer Prize-winning historian of the oil industry, told Arab News: “OPEC+ brought a kind of predictability and stability and caution to the market, and obviously Saudi Arabia has been at the forefront of that. It is a contribution to this incredible strong global economic recovery that we’re seeing right now.”

Yergin, who is also vice chairman of the IHS Markit consultancy, gave his views on Frankly Speaking, the series of video interviews with policy makers and business leaders.

He spoke of the prospects for a resurgence of the US shale industry, the challenge of climate change for the energy industry and the recent controversial “scenario” by the International Energy Agency (IEA) that suggested an end to all new investment in hydrocarbon fuels.

On the recovery in oil markets, which many experts put down to Saudi Arabia’s role as the biggest exporter in OPEC+, Yergin said: “Let’s not forget, it’s only a little over a year ago when the appalling collapse happened. Which was not only a shock for oil-producing and exporting countries, but you had countries like India and Japan, who were deeply concerned because they were fearful of the destruction, the undermining of the global oil industry and the gas industry on which their economies depend so heavily.”




Pulitzer Prize-winning historian of the oil industry Daniel Yergin, who is also vice chairman of the IHS Markit consultancy, gave his views on Frankly Speaking. (Screenshot/AN Photo)

The price of Brent crude has recovered to pre-pandemic levels, and many analysts are forecasting it might hit $100 by the end of this year as post-pandemic recovery accelerates demand for energy.

“OPEC+ has been a moderating force and a stabilizing force and really a mechanism for navigating a recovery from an appalling economic apocalypse,” Yergin said.

IHS Markit analysts see global economic growth at 6 percent in 2021, with the crucial US economy projected to grow by 7.4 percent, he added.

The relationship between the two biggest producers in OPEC+ — Saudi Arabia and Russia — has been crucial to the rebalancing and resumption of demand, Yergin said, adding that the US oil industry had become less significant for the dynamic of the global market.

“The US was part of the Big Three in April 2020. I think the US has stepped aside from that now as a governmental player, and so that means this relationship between Saudi Arabia and Russia is very significant and is the foundation for making OPEC+ work. I think it’s in the interest of both countries to continue,” he said.

A recent visit to the heartland of the US oil industry in Houston, Texas, has persuaded him that a revival of US shale could be under way. “Shale is facing a second revolution. It had to change its relationship with investors and return money to investors and that’s what it’s doing. There’s a mantra of capital discipline that wasn’t there before,” Yergin said.

“It’s stabilized and — as long as prices are in a reasonable range — we’ll see modest growth. What we won’t see is that explosive growth for which there was no precedent which contributed to a sudden oversupply in the oil market. So, you could say shale sort of settled down in a more mature state.”




“OPEC+ brought a kind of predictability and stability and caution to the market, and obviously Saudi Arabia has been at the forefront of that. It is a contribution to this incredible strong global economic recovery that we’re seeing right now,” Yergin said of the Kingdom’s efforts. (Screenshot/AN Photo)

The US oil industry is also facing a new situation of regulatory oversight and investor activism that has cast doubt on long-term prospects. Yergin agreed that the attitude of the Biden administration — in contrast to the Trump presidency’s approach — amounted to a new hostility to the hydrocarbon industry, and that there could be more environmental restrictions imposed. “We’ll see an effort to use regulatory machinery to constrain the industry. I think the regulatory challenges are still ahead,” he said.

But the administration also had to weigh the fact of US energy independence that has come about as part of the shale revolution. “The US spent $400 billion importing oil in 2008. It doesn’t spend anything now and I think Biden and some of the people around him see that energy dependence is a place they don’t want to be,” Yergin said.

The new alliance of environmental and financial activism in the oil industry, which has brought a surge in challenges to oil companies, was recently highlighted when the IEA controversially outlined a scenario in which all new investment in fossil fuels was immediately halted.

“It was very puzzling because only a few months earlier the IEA had been warning that not enough investment was going into oil and gas and that was going to lead to a supply crunch, high prices and turbulence,” he said.

“I think the oil and gas industry would look to the IEA to be a kind of independent objective source. They look at the IEA differently now and say what happened? Why did this come about? So, there’s been a kind of a shift from one side to the other.”




Yergin’s most recent book, “The New Map”, published last year, is an analysis of the interrelation between, energy, climate and geopolitics. (Supplied)

But Yergin was adamant that so-called fossil fuels would continue to play a vital part in global energy for a long time. “The energy mix is going to change. Oil and natural gas are going to share more and more space with renewables and alternatives. So, I think we’re going to have a mixed system. But in 2050 I think the world is still going to be using oil and gas, along with a lot of other things,” he said.

Yergin’s most recent book, “The New Map”, published last year, is an analysis of the interrelation between, energy, climate and geopolitics. John Kerry, the special presidential envoy on climate change, recently praised Saudi Arabia for its contribution to the global campaign against the effects of climate change and efforts to meet the goals of the Paris Agreement.

The Kingdom has announced plans to phase out oil from the domestic energy mix altogether by 2030, along with a big program of tree-planting to mitigate CO2 emissions.

“What Saudi Arabia is doing is in line with what you see around the world — a much bigger role for renewables. Obviously solar has a big role in Saudi Arabia. The notion of using gas to free up liquids for export and plans to plant trees are steps which of course are really about removing carbon from the atmosphere,” Yergin said.




The relationship between the two biggest producers in OPEC+ — Saudi Arabia and Russia — has been crucial to the rebalancing and resumption of demand, Yergin said, adding that the US oil industry had become less significant for the dynamic of the global market. (Screenshot/AN Photo)

“So, I think the direction Saudi Arabia is moving in is in line with what other countries are doing, and particularly in electric power.”

While the Kingdom’s strategy of a circular carbon economy, in which greenhouse gases are reduced and ultimately eliminated from the atmosphere, was a viable approach to the problem of climate change, Yergin cautioned: “Some in Europe don’t like carbon capture because they don’t like the hydrocarbon industry.”

He said renewable energy sources such as wind and solar were coming down in price to become viable options along with hydrocarbons, and new energy sources like hydrogen could also become part of the energy mix in the next 15 years.

In “The New Map,” Yergin explained how energy and climate change challenges could become big factors in what he called the “clash of nations,” replacing the “WTO consensus” that helped harmonize relations between, principally, the US and China.

“You’re seeing rhetoric today that you wouldn’t have heard five years ago and it is concerning. With all that said, you know by nature I’m an optimistic person,” he said.

“At the end of the book, I was trying to be realistic, but I’m also optimistic, because I believe that there are solutions.”

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Twitter: @frankkanedubai


Oil prices rise over 1 percent as fresh virus curbs threaten demand recovery


Oil prices rise over 1 percent as fresh virus curbs threaten demand recovery

Updated 06 August 2021

Oil prices rise over 1 percent as fresh virus curbs threaten demand recovery


Oil prices rise over 1 percent as fresh virus curbs threaten demand recovery


LONDON: Oil prices rose about 1 percent on Thursday on increasing Middle East tensions, but fresh movement restrictions imposed by countries to counter a surge in COVID-19 cases threatened the demand recovery.

Brent crude oil futures rose 78 cents, or 1.1 percent, to $71.16 a barrel, after earlier dipping below $70 for the first time since July 21.

US West Texas Intermediate (WTI) crude futures traded 80 cents, or 1.2 percent, higher at $68.95 a barrel.

The growing regional tensions come as nuclear talks between Iran and Western powers that would ease sanctions on Tehran’s oil exports appear to have stalled.

“With tensions brewing among Iran and world powers over last week’s drone attack, it seems nuclear deal talks will be lengthy and unlikely to provide imminent sanction relief for Iran,” said Edward Moya, senior analyst at OANDA.

Offsetting the geopolitical tensions, concerns over the recovery of global oil demand grew amid a surge in coronavirus cases.

Both benchmarks fell for a third day in a row to a two-week low on Wednesday, partly due to the spread of the coronavirus delta variant.

Japan is poised to expand emergency restrictions to more prefectures while China, the world’s second-largest oil consumer, has imposed curbs in some cities and canceled flights, threatening fuel demand.

“China is now facing its most challenging COVID-19 crisis since the initial outbreak was brought under control,” analysts at consultancy FGE said in a note on Thursday.

In the US, the world’s biggest oil consumer, COVID-19 cases hit a six-month high with more than 100,000 infections reported on Wednesday, according to a Reuters tally.

Analysts at investment bank UBS, however, said they expect oil prices to resume their upward trend despite pandemic concerns, projecting Brent crude will trade between $75 and $80 per barrel in the second half of 2021.


Saudi Ports Authority records 
growth in activities in first half of 2021

Saudi Ports Authority records 
growth in activities in first half of 2021
Updated 06 August 2021

Saudi Ports Authority records 
growth in activities in first half of 2021

Saudi Ports Authority records 
growth in activities in first half of 2021

RIYADH: The Saudi Ports Authority (Mawani) announced on Thursday that all areas of its activities had seen growth during the first half of 2021.

The announcement reflects the Kingdom’s economic recovery from the COVID-19 pandemic.

In terms of containers, Mawani handled 3.6 million TEU (a measure of volume equivalent to a 20-foot cargo container) during the first half of the year — a jump of 5.18 percent year-on-year. Transshipment containers increased by 24.49 percent to 1.4 million TEU, while it handled a total of 138 million tons of cargo.

The number of passengers grew by 0.61 percent year-on-year to 288,000, and Mawani handled 429,000 imported cars.

BACKGROUND

In July, Saudi Ports Authority announced investment opportunities in partnership with the private sector to develop and operate multipurpose terminals in eight of the nation’s ports.

The authority also recorded an increase in the number of ships received at the Kingdom’s ports, which received 6,037 vessels — an increase of 6.6 percent over the same period last year.

Mawani launched four shipping lines in 2020 to help increase Saudi ports’ connectivity with their international counterparts.

In July, the authority announced investment opportunities in partnership with the private sector to develop and operate multipurpose terminals in eight of the nation’s ports, in line with the objectives of Saudi Vision 2030, which include making the Kingdom a leading global logistics platform and connecting hub.

The build-operate-transfer (BOT) contracts on offer are for terminals in Jeddah Islamic Port, King Abdulaziz Port in Dammam, Ras Al-Khair Port, Jizan Port, Yanbu Commercial Port, King Fahad Industrial Port in Jubail, King Fahad Industrial Port in Yanbu, and Jubail Commercial Port.

One of the goals of Saudi Vision 2030 is for transport and logistics to contribute 10 percent of the country’s GDP by that date, up from its current 6 percent, following the implementation of the Kingdom’s new strategy for the sector.

 


Pent-up travel demand helps Lufthansa halve losses


Pent-up travel demand helps Lufthansa halve losses

Updated 05 August 2021

Pent-up travel demand helps Lufthansa halve losses


Pent-up travel demand helps Lufthansa halve losses


FRANKFURT: German airline Lufthansa said on Thursday it halved its losses in the second quarter compared to a year ago, as travel restrictions eased over the coronavirus pandemic and passengers returned.

Europe’s largest airline group said its net loss between April and June came in at €756 million ($890 million) compared with 1.5 billion euros last year, when travel worldwide was halted by COVID-19.

Increased bookings saw the company record a positive cash flow in the second quarter for the first time since the start of the health crisis.

“We have been able to stop the outflow of funds in the current phase of reviving our business and generate a positive cash flow for the first time since the beginning of the pandemic,” said CEO Carsten Spohr.

“In June alone, the number of bookings was more than twice as high as at the beginning of the quarter,” the company said.

Lufthansa said it still expected to operate at 40 percent of its pre-crisis capacity this year, leaving its projection unchanged.

Flight capacity will increase to 50 percent in the third quarter, on the back of continued recovery in demand in Europe, increased business travel and the opening up of further markets, such as North America.

Following an announcement from the US that the country would begin to allow vaccinated foreigners to travel to the country at some point, Spohr said in a conference call that Lufthansa was planning on the change to be implemented at the “end of September.”

In terms of the risk posed to the business by the spread of the more-infectious delta variant, Spohr said that the progress of the vaccination campaign was “more important” for the sector.

As a result, Lufthansa expects to book positive operating, or underlying, profit later this year on its path back into the black.

Earnings before interest, tax, depreciation and amortization (EBITDA), a yardstick closely watched by analysts, was still severely negative in the second quarter, with the company registering a loss of about €400 million in the second quarter.

Lufthansa, which also includes Austrian, Swiss and Brussels Airlines, was saved from bankruptcy last June by a German government bailout.

Lufthansa’s chief financial officer Remco Steenbergen said the company was discussing with investors about how to raise the capital needed to pay down the state aid the group received, and said the final figure would be “significantly less” than the €3 billion to €4 billion previously mooted.

The company is in the throes of a painful restructuring to slash costs that will include thousands of job cuts, with 30,000 already axed since the start of the pandemic.

As part of the recovery plan, the airline will slash its current fleet of 800 aircraft to 650 by 2023.


JP Morgan launches bitcoin fund; Uruguay mulls letting businesses accept cryptos

JP Morgan launches bitcoin fund; Uruguay mulls letting businesses accept cryptos
Updated 05 August 2021

JP Morgan launches bitcoin fund; Uruguay mulls letting businesses accept cryptos

JP Morgan launches bitcoin fund; Uruguay mulls letting businesses accept cryptos

DUBAI, RIYADH: The second-largest cryptocurrency after bitcoin, Ethereum, recorded gains early on Thursday as investors anticipate a major upgrade that is aimed to improve and optimize the digital currency.

Its price was up by around 8 percent over the last 24 hours, according to Forbes.

Ether traded at $2,687.71 at 5 p.m. Riyadh time on Thursday, according to data from Coindesk.

Bitcoin traded lower, falling by 2.78  percent to $38,035.85.

In other developments, a report by Pymnts and Bitpay showed consumers in the US are increasingly interested in using cryptocurrencies for their payments.

“The report analyzes a census-balanced survey of 8,008 US consumers who were current and former cryptocurrency owners and cryptocurrency nonowners between Feb. 8 and Feb. 23, 2021,” the report said, cited by Bitcoin.com.

It found that 93 percent of crypto users would consider making purchases using cryptocurrency, while 59 percent of non-crypto owners said they are interested in using it for their purchases in the future.

In Europe, French asset manager Melanion Capital received regulatory approval to launch an exchange-traded fund (ETF) tracking bitcoin price for investors across the region.

Another act to regulate the industry is from a senator in Uruguay who introduced a bill to allow businesses to accept cryptocurrencies as payments.

The bill will provide “legal, financial and fiscal security in the business derived from the production and commercialization” of crypto, CoinDesk has reported.

JP Morgan has launched an in-house bitcoin fund, and has begun pitching it to private bank clients.

Google’s new ad policy for financial products and services has gone into effect – and it allows some crypto ads.

In the East, Hong Kong is seeing a rise in crypto-related crimes, according to Bitcoin.com, with authorities saying it could be due to the increasing popularity of crypto investments.

But in China, a global leader in the crypto scene, these crimes have decreased significantly in recent years.


Saudi Maaden shifts to profitability in the second quarter, year-on-year

Saudi Maaden shifts to profitability in the second quarter, year-on-year
Updated 05 August 2021

Saudi Maaden shifts to profitability in the second quarter, year-on-year

Saudi Maaden shifts to profitability in the second quarter, year-on-year

RIYADH: The Saudi Arabian Mining Co. (Maaden) turned in profits after zakat and tax, at about SR1.1 billion ($2.94 billion) in the second quarter of 2021, compared to losses of about SR434.15 million in the second quarter of 2020, the company announced in a statement on the Saudi Stock Market (Tadawul).

Maaden’s profits increased by 45.1 percent in the second quarter of 2021, compared to profits of about SR761.15 million in the first quarter, while revenues rose by 11.95 percent to SR6.1 billion.

The company attributed its shift to profitability year-on-year to the increase in the average prices achieved for all products except industrial minerals, despite the decrease in the quantities sold of gold, ammonia and alumina.

Profitability was also due to the increase in net profit attributable to Maaden’s stake in joint ventures and the increase in other revenues, despite the decrease in income from term deposits.