OPEC+ members agree to raise output by 400,000 barrels a day from August

OPEC+ members agree to raise output by 400,000 barrels a day from August
The OPEC+ group agreed new production allocations from May 2022. (Aramco/File)
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Updated 19 July 2021

OPEC+ members agree to raise output by 400,000 barrels a day from August

OPEC+ members agree to raise output by 400,000 barrels a day from August
  • Special meeting also saw agreement on new baseline levels, extension of current strategy until the end of 2022

DUBAI: OPEC+, the oil producers alliance led by Saudi Arabia and Russia, has agreed a schedule of output increases to meet growing demand as the global economy recovers from the pandemic recession.

A special meeting arranged in Vienna endorsed the plans, which will see an extra 400,000 barrels a month come on to world markets from the beginning of next month, and will allow some producers — including Saudi Arabia and the UAE — to increase the baseline from which they calculate production.

The deal will also extend the current OPEC+ alliance beyond its original term next April until at least the end of 2022. “OPEC+ is here to stay,” Prince Abdul Aziz bin Salman, the Saudi energy minister, told journalists after the deal was announced.

We are working with the UAE, and we see eye to eye with them.

Prince Abdul Aziz bin Salman, Saudi energy minister

On the negotiations that ended the deadlock of last week when an OPEC+ meeting was canceled, the prince said: “Consensus-building is an art.”

The successful conclusion will allay suggestions in some quarters of a split in OPEC+ ranks. Suhail Al-Mazrouei, the energy minister of the UAE, said: “I can confirm the UAE is committed to OPEC+ and will always work with it and within it. We’ll always remain very good friends.”

Prince Abdulaziz underlined the unity in the group when he read a message from Alexander Novak, deputy prime minister of Russia and OPEC+ co-chairman, which stated that Russia was “ready to support anything” the Saudi minister said to the meeting.

“There is no way to demonstrate trust any more than this,” the prince said.

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Under the new terms, output will increase by 400,000 barrels per month until the full production cut of 5.8 million barrels is returned to global markets.

The regime of monthly meetings of OPEC+ ministers to monitor global markets will continue until the end of next year, but the producers hope to be able to phase out all cuts by September 2022, OPEC+ said.

In addition, the baseline calculations for production adjustment will be reassessed, and new ones will take effect from next May.

The UAE will see its baseline rise from 3.17 million barrels per day (bpd) to 3.5 million bpd — satisfying its main concern about the new proposals. Saudi Arabia and Russia will both see their baselines rise from 11 million bpd to 11.5 million bpd. Iraq and Kuwait will also be allowed to produce more.

OPEC+ said that there was an “ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling as the economic recovery continued in most parts of the world as vaccination programs accelerated.”

I can confirm the UAE is committed to OPEC+.

Suhail Al-Mazrouei, UAE energy minister

The meeting also stressed the “critical importance” of adhering to full conformity with the new levels, and compensating by the end of September for any past overproduction. Compliance in June was once again historically high, at 113 percent.

The Saudi and UAE ministers stressed that they were working together on the strategy to advance energy transition via the adoption of renewables and other cleaner fuels and technologies. “We are working with the UAE, and we see eye to eye with them. We’re going about it in exactly the same way,” Prince Abdulaziz said.

The deal — which ends a period of uncertainty in global oil markets — was welcomed by energy experts.

Robin Mills, chief executive of Qamar Energy consultancy, told Arab News: “This is a good deal for OPEC+. It holds the deal together and addresses the baseline issue for the future from all the countries that had issues. The countries that didn’t get baseline increases probably couldn’t have used them anyway.”

International oil markets last traded on Friday, with Brent ending at $73.30 per barrel. The next OPEC+ meeting, the 20th time the alliance ministers have met, will take place on Sept. 1.


China’s central bank rules all crypto transactions are illegal

China’s central bank rules all crypto transactions are illegal
Updated 24 September 2021

China’s central bank rules all crypto transactions are illegal

China’s central bank rules all crypto transactions are illegal
  • The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations
  • Bitcoin, the world’s largest digital currency, and other cryptos cannot be traced by a country’s central bank, making them difficult to regulate

BEIJING: China’s central bank on Friday said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for the digital trade in China after a crackdown on the volatile currencies.
The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations, which have sought to prevent speculation and money laundering.
“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China (PBOC) said in an online statement Friday, adding that offenders would be “investigated for criminal liability in accordance with the law.”
The notice bans all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives and “illegal fundraising.”
Bitcoin, which had already been falling before the announcement, sank by as much as 8.9 percent to $41,019 in European afternoon trading before recovering slightly later in the day.
The central bank said that in recent years trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities.”
This was “seriously endangering the safety of people’s assets,” the PBOC said.
While crypto creation and trading have been illegal in China since 2019, further crackdowns this year by Beijing warned banks to halt related transactions and closed much of the country’s vast network of bitcoin miners.
Friday’s statement by the central bank sent the strongest yet signal that China is closed to crypto.
Bitcoin, the world’s largest digital currency, and other cryptos cannot be traced by a country’s central bank, making them difficult to regulate.
Analysts say China fears the proliferation of illicit investments and fundraising from cryptocurrency in the world’s second-biggest economy, which also has strict rules around the outflow of capital.
The crypto crackdown also opens the gates for China to introduce its own digital currency, already in the pipeline, allowing the central government to monitor transactions.
In June, Chinese officials said more than 1,000 people had been arrested for using the profits from crime to buy cryptocurrencies.
Several key Chinese provinces have banned the operation of cryptocurrency mines since the start of this year, with one region accounting for eight percent of the computing power needed to run the global blockchain — a set of online ledgers to record bitcoin transactions.
Bitcoin values tumbled in May on the back of a warning by Beijing to investors against speculative trading in cryptocurrencies.
“China’s ban on all cryptocurrency trading activity will have some short-term impact on currency valuation, but long-term implications are likely to be muted,” said Ganesh Viswanath Natraj, Assistant Professor of Finance at Warwick Business School.
“This ban will result in the migration of crypto investment opportunities to other hubs in Asia, such as Singapore’s launch of the DBS digital currency exchange earlier this month,” he added.


Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
Updated 24 September 2021

Saudi Arabia insurance reforms will enhance sector — CAIS CEO

Saudi Arabia insurance reforms will enhance sector — CAIS CEO
  • Adoption of IFRS 17 standards will increase investment in the sector

RIYADH: Saudi Arabia may be the first country in the world to witness a merger between three insurance companies following regulatory reforms, according to Sulaiman Binmayouf, CEO at United Co. for Actuarial Services CAIS.

Many of Saudi Arabia’s 29 insurance companies need capital infusions or mergers to meet the requirements of regulators, after they ordered to triple capital to SR300 million from SR100 million, Binmayouf said.

The Kingdom’s insurance companies are only profitable with high premiums, some of which they have to freeze as reserves, meaning they can’t invest the money, he said.

However, he expects the adoption of IFRS 17 standards by the insurance sector in the Kingdom will help solve the problem.

IFRS 17 is an International Financial Reporting Standard that was issued by the International Accounting Standards Board in May 2017.

The financial statements of insurance companies on the Capital Market Authority (CMA) website are not sufficient for taking an investment decision, said Binmayouf.

The standard will provide a more accurate supervision and disclosure process in the development of financial statements, giving investors a clearer idea of whether they want to invest in the company or not, he said.

“Investors should look at the status of insurance companies in terms of the board of directors and committees, and review the strategic plan and financial statements to make the investment decision,” he said.

That will lead to more capital flowing into the insurance sector, while supporting its stability, he said. IFRS 17 will be implemented in stages, as decided by the central bank.


Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
Updated 24 September 2021

Fed policy tightening not all bad for Gulf economies — Jefferies

Fed policy tightening not all bad for Gulf economies — Jefferies
  • A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive

RIYADH: The impending end of super-loose monetary policy from the Federal Reserve will have both positive and negative effects on the economies of the Arabian Gulf, according to Alia Moubayed, a managing director at investment bank Jefferies International.

A likely strengthening of the dollar, to which Gulf currencies are pegged, may push down inflation, because it makes imports less expensive, Moubayed said in an interview with Asharq.

Higher interest rates on dollar-denominated assets tend to lead to outflows from emerging markets, but Moubayed said that the Gulf markets have recently witnessed an influx of foreign capital, especially into stocks, and so should not be affected as badly as many of their EM peers.

Higher interest rates will increase the financing burden on governments with large budget and trade deficits, such as Bahrain, Moubayed said.

However, countries such as Qatar, Saudi Arabia and the UAE will “benefit from shrinking deficits due to the rise in oil prices and the increase in revenues in national currencies,” she said.

The Federal Reserve announced yesterday that it will likely start reducing its asset purchase program soon, and said policy makers are increasingly minded to start raising interest rates in 2022 instead of 2023 as previously envisioned.

If progress toward employment and inflation targets continues, the slowdown in asset purchases may start in November and end in mid-2022, the Fed said.


APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
Updated 24 September 2021

APICORP sukuk program given expected AA rating by Fitch

APICORP sukuk program given expected AA rating by Fitch
  • A default in APICORP's sukuk program would be considered a default in the parent, Fitch said

RIYADH: APICORP, the multilateral development bank set up by Arab oil producers, has received a rating of AA(EXP) by Fitch for its sukuk program.

APICORP Sukuk Ltd. (ASL) is incorporated in the Cayman Islands with the sole purpose of issuing Islamic debt. The final rating is contingent on Fitch receiving documents that support information already provided.

ASL is expected to receive the same AA rating as APICORP as a default in the sukuk program would be considered a default in the parent, Fitch said. APICORP’s rating is based on Fitch’s solvency and liquidity assessment and a “medium risk” business environment.

APICORP was established in 1975 by the 10 members of the Organization of Arab Petroleum Exporting Countries (OAPEC) with the aim of developing the Arab world’s energy sector through equity investment, debt financing, financial advisory and energy research services.


UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
Updated 24 September 2021

UAE allocates $17.6bn to Emirati housing program in Dubai

UAE allocates $17.6bn to Emirati housing program in Dubai
  • Land plots allocated to Emirati housing projects in Dubai increased to 1.7 billion square feet.

RIYADH: Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum has approved the allocation of 65 billion dirhams ($17.6 billion) to a housing program for Emirati citizens in Dubai, to be spent over the next two decades, according to a statement from the Dubai Media Office.

Sheikh Mohammed, who is also prime minister of the UAE, issued directives to quadruple the number of Emiratis benefiting from the housing program from next year, and to increase the land plots allocated to Emirati housing projects in Dubai to 1.7 billion square feet.

“We are working to develop a comprehensive plan for ensuring our citizens have access to high quality housing over the next 20 years,” said Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, deputy ruler of Dubai. “Dubai’s urban development plans are subject to constant review and our housing policy will continue to evolve according to the requirements of our citizens.”

The Dubai 2040 Urban Master Plan sets out a comprehensive future map for sustainable urban development in the city, and focuses on enhancing people’s happiness and quality of life in line with the UAE’s vision for the next 50 years.