US shale’s tepid recovery bodes well for OPEC+

US shale’s tepid recovery bodes well for OPEC+
The US rig count, at 580, is a long way short of its pre-COVID level. (Reuters)
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Updated 21 July 2021

US shale’s tepid recovery bodes well for OPEC+

US shale’s tepid recovery bodes well for OPEC+
  • Baker Hughes profit fell 9 percent in the second quarter as US crude producers kept a tight lid on spending
  • Low US production gives room for OPEC+ to increase output

RIYADH: Saudi Arabia and the other members of OPEC+ may have more room to raise production in the coming years than the market believes if Baker Hughes’ latest earnings are anything to go by.
The oilfield services provider said on Wednesday its adjusted profit fell 9 percent in the second quarter from the previous three months and it missed Wall Street estimates for earnings, as crude producers kept a tight lid on spending.
While oil demand has rebounded from the pandemic lows seen last year, output has only inched higher as large public companies vow to hold production flat. That has boosted oil prices, with crude futures trading earlier this month at levels last seen in 2018.
That bodes well for OPEC+, the oil producers alliance led by Saudi Arabia and Russia, which at a meeting this week to bring an extra 400,000 barrels a month onto 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.
Crude prices fell sharply in response to the deal, but some analysts, such at US investment bank Goldman Sachs, said it provided an upside to their current forecasts.
“Shale’s rebound has been slow with the sector very cautious to add capacity,” said Andy Critchlow, head of news EMEA at S&P Global Platts. “The US rig count rose by four this week, bringing the total to 580 rigs, which is along way from its peak prior to COVID-19.”
“It gives OPEC+ more flexibility to strengthen and grow its market share,” he said. “Platts Analytics sees demand growing by 5.7 million b/d in 2021 and a further 4.7 million b/d in 2022, which will see overall consumption 1.2 million b/d above pre-Covid 2019 levels. It supports near-term view the world is going to need more supply coming online.”
The recovery in oil demand could face a threat from new strains of COVID-19, but spending and activity should gain momentum through the year as the macro environment improves, Chief Executive Officer Lorenzo Simonelli said in a statement.
The OPEC+ deal followed protracted negotiations as the UAE pushed for higher output.
The group last year cut output by a record 10 million barrels per day (bpd) amid an evaporation in demand the pandemic developed, prompting a collapse in prices with US oil at one point falling into negative territory.
To overcome internal divisions, OPEC+ agreed new production quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.
“This agreement should give market participants comfort that the group is not headed for a messy breakup and will not be opening up the production floodgates anytime soon,” RBC Capital Markets said in a note .
Increased supply in Saudi Arabia is helping some oil-services firms. Halliburton said yesterday improved business in its Saudi operations helped to grow its Middle East second-quarter revenues.
The oilfield services contractor on Tuesday reported a 33.5 percent increase in second-quarter profit from the previous three months, as an oil price rebound spurred demand for work.
The Houston-based company said net income advanced to $227 million in the three months ended June 30, from $170 million in the first quarter.
Its Middle East and Asia revenues gained 5 percent sequentially to $925 million resulting from” improved activity in multiple product service lines in Saudi Arabia, higher well intervention services across the region, increased drilling-related services in Oman, higher completion tools sales in Kuwait,” the company said in a statement.


Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs
Updated 3 min 33 sec ago

Startup of the Week: Tuma Taiba feeding vegan needs

Startup of the Week: Tuma Taiba feeding vegan needs

JEDDAH: Veganism has become a growing trend in Saudi Arabia with ever more people opting for a plant-based diet.

For some it is for health reasons, while for others it is a moral decision. As a result, supermarket shelves in the Kingdom have over the past four years seen an increase in stocks of vegan products.

In 2019, Amani Nouri, who gained a diploma in nutrition, founded Tuma Taiba — Arabic for good bite — in Jeddah, to cater for the burgeoning vegan market in the country.

“I chose to name it Tuma Taiba because good food is the foundation for a good body,” she told Arab News.

Her company offers vegan cheese spreads made from different nuts, and they come in flavors such as olives, pomegranate, and bell pepper. It also produces vegan and gluten-free pastries made with dates, sourdough bread, and kombucha tea in flavors including a mix of berries or apple, pineapple, and cinnamon.

The startup sold more than 500 products last year and aims to triple that amount this year.

Nouri said 85 percent of her diet was now plant-based after she made the decision to change her eating regime due to suffering from a number of health conditions that cleared up when she switched to a healthier diet.

“I suffered migraines once or twice a week to the point I needed strong painkillers, and this of course could hurt my kidneys and body in general.

“After I turned to the plant-based diet, I lost weight, I even look more youthful, all the pains and conditions I suffered from are cured, the cysts went away without any medication, and the hormonal imbalances too,” she added.

Family and friends encouraged Nouri to pursue the vegan business after trying her recipes. “On the insistence of family and friends, I started sharing my dishes with people because of the community’s need for different vegan-friendly food.”

She noted that the number of people in the Kingdom opting for vegan food was steadily increasing.

And some of her customers were non-vegans. “They find a delicious plant-based alternative that satisfies their tastes, and benefits their bodies, and notice the difference after eating more plant-based foods,” she said.

Tuma Taiba is planning to expand its product range and open a restaurant in the next couple of years.

• Details are available on Instagram @tumataiba.


Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
Updated 26 July 2021

Low interest rates boosted mortgage demand by 27% through May

Low interest rates boosted mortgage demand by 27% through May
  • Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion

RIYADH: Mortgage lending in Saudi Arabia increased 27 percent this year through May, as interest rates decreased to between 1 percent and 4.9 percent, compared to about 6 percent early last year.

Residential real estate financing contracts offered to individuals by local banks reached 133,006 through May, with a value of SR69.5 billion, according to data from the Saudi Central Bank (SAMA).

Real estate financing grew by 50 percent compared with the same period in 2020 when SR46.6 billion was lent via 104,000 contracts.

“There is great competition between banks and real estate finance companies to obtain a greater share of the housing demand, after government support and joint financing programs with the Real Estate Development Fund (REDF), which led to an increase in the volume of lending for home purchases,” Riyadh-based Menassat Reality Co. CEO Khaled Almobid told Arab news.

“I expect more lending during the last quarter of this year despite the difficulties it is facing due to the rise in some housing prices in major cities and the lack of supply,” he said.

Saudi banks are offering mortgages with interest rates as low as 1 percent at Al Rajhi Bank, 2.5 percent at the Saudi National Bank (AlAhli Bank) and up to 4.5 percent at some banks.

Residential villas made up about 80 percent of the total financing, apartments 17 percent, while the purchase of residential lands’ financing made up the remaining 3 percent.

Saudi real estate financing achieved a record growth during the past three years, amounting to about 295,590 contracts, worth SR140.7 billion in 2020, compared to 22,259 financing contracts, worth SR17 billion in 2016, local media reproted citing SAMA data.


Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
Updated 26 July 2021

Lebanon sells cheapest Big Mac in the world as currency collapses

Lebanon sells cheapest Big Mac in the world as currency collapses
  • Lebanese pound is 70 percent undervalued according to the Big Mac Index
  • A split is emerging between those paid in Lebanese pounds and those in dollars

RIYADH: Lebanon is home to the world’s cheapest Big Mac after the pound slumped in value, leaving it more than 70 percent undervalued against the US dollar, according to the Economist Intelligence Unit.

At 29,904 Lebanese pounds, a Big Mac is not cheap for those being paid in local currency, but with an exchange rate of 17,800 to the dollar, it costs just $1.68 for tourists and those lucky enough to get paid in dollars.

The slump in the Lebanese pound is exacerbating and accelerating inflation on a basic basket of goods, such as rice, sugar and flour, on a daily basis, said Lebanese economic analyst Bassel Al-Khatib.

Most people are paid in the local currency in Lebanon, where the national minimum wage stands at 675,000 Lebanese pounds per month, which was once worth almost $450 at the official exchange rate, but today barely fetches $30 on the black market, according to the Crisis Observatory at the American University of Beirut (AUB).

The Observatory said the cost of food has soared by 700 percent over the past two years, and this increase had picked up pace to 50 percent in the past few weeks alone.

Most Lebanese people are getting poorer on a daily basis, pushing some of them to sell their gold, cars and even furniture to survive, while others wait for US dollar transfers from their relatives abroad, or wait for civil society aid, Al-Khatib told Arab News.

This is all reflected in Lebanese social media, which is flooded with donation requests for new-born baby milk and medications that are not available anymore in the markets or are sold for extremely high prices. There are also numerous donation requests for people in need of food.

At the same time, others are sharing their expensive restaurant bills, such as Babel Baher who spent 5 million Lebanese pounds on a meal and posted the cheque on Facebook.

“$250 is almost nothing for someone coming from abroad,” a Facebook user called Rania wrote under the post. “This is a very cheap bill for someone who has US dollars and this dinner is not expensive at all compared to abroad.”

Al Khatib said that those paid in US dollars are living an affordable life with only $300 out of their salaries while before they needed $3,000 to have the same quality of life.

“The patchwork policies to support some commodities is not helping as all commodities that are subsidized are smuggled, ” said Al Khatib.

The country’s mismanagement with no plan or economic vision to save Lebanon from its worsening crisis, led us here, and there are no positive prospects as long as there are no radical solutions in the country, he said.


PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
Updated 26 July 2021

PIF-backed Lucid Motors makes trading debut on Nasdaq

PIF-backed Lucid Motors makes trading debut on Nasdaq
  • will make itsLucid to make trading debut on New York’s Nasdaq Global Select Market on Monday
  • Lucid merged with special purpose acquisition vehicle Churchill Capital Corp. IV

RIYADH: Lucid Motors, the Californian electric vehicle (EV) carmaker majority-owned by Saudi Arabia’s Public Investment Fund (PIF), will make its trading debut on New York’s Nasdaq Global Select Market on Monday.

Listed under the new ticker symbol “LCID”, the listing came about following the merger of Lucid and Churchill Capital Corp. IV — a special purpose acquisition company — on July 23. The EV firm will begin trading by ringing the Nasdaq opening bell on July 26.


The deal will help Lucid raise $4.4 billion, which will be used to fast track its production growth plans. The firm has over 11,000 paid reservations for its Lucid Air vehicle, which is on scheduled to start deliveries in the second half of this year.

“We are on track to meet our projected deliveries for the next two years, and we look forward to delighting our customers around the world with the best electric vehicles ever created,” Peter Rawlinson, CEO and CTO of Lucid Group, said in a press statement.

Michael S. Klein, chairman and CEO of Churchill Capital Corp. IV, said ahead of the merger: “Lucid has industry-leading technology, clear demand for its products, and is on track to deliver revenue-generating cars to customers in the second half of this year. We are excited to support Lucid’s transition into a public company and confident in its ability to address unmet needs in the automotive industry, which is moving toward electrification at a rapid pace and on a global scale.”

PIF announced its investment in Lucid Motors in Sept. 2018. The Lucid Motors CEO told Arab News in January that his team were scrutinizing possible locations in Saudi Arabia to open retail outlets — what Lucid calls “studios” — for their luxury EVs.

“We are already looking,” he said. “My retail team just returned from a scouting trip in the Kingdom, and that is very much on the road there. Hopefully, we can get a retail outlet there right at the tail end of 2021, probably early 2022.”

Earlier this month, the Wall Street Journal reported that Saudi Arabia stands to record a profit of nearly $20 billion on the back of its investment in Lucid.

PIF will own over 60 percent of the company, which is expected to have a market capitalization of about $36 billion.

Lucid’s expected market capitalization is nearly twice the valuation of Nissan Motor Co. and about two-thirds that of Ford Motor Co., which delivered more than 4 million cars last year. Lucid has yet to sell any cars.

Looking at the market for EVs, a report by the Pew Research Center found that 7 percent of respondents said they currently owned an electric or hybrid vehicle, and 39 percent said they were very or somewhat likely to buy an EV when they next came to purchase.

Interest has grown, with 1.8 million EVs registered in the US in 2020, more than three times as many as four years ago, according to the International Energy Agency.

While the US accounts for 17 percent of the world’s 10.2 million EVs, China is the biggest market, with 44 percent of all cars and Europe following with 31 percent.


Saudi Arabia to introduce insurance on domestic labor contracts in 2022

Saudi Arabia to introduce insurance on domestic labor contracts in 2022
Updated 26 July 2021

Saudi Arabia to introduce insurance on domestic labor contracts in 2022

Saudi Arabia to introduce insurance on domestic labor contracts in 2022
  • Move aims to increase attractiveness of Saudi labor market
  • Recruiters must carry the cost of insuring contracts for first two years

RIYADH: Saudi Ministry of Human Resource and Social Development is expected to start implementing insurance on the domestic labor contract early in 2022 in cooperation with the Saudi Central Bank (SAMA), Al Eqtisadia paper reported.

This decision guarantees the rights and benefits of the employer and the worker, including compensating the employer for the expense of bringing in a replacement domestic worker in the event of death, inability to work, or suffering from chronic or critical diseases, according to the ministry.

The move aims to increase the attractiveness of the Saudi labor market, improve the contractual relationship between workers and employers, and reduce risks in the domestic labor recruitment market, helping to cut costs.

“Recruitment companies and agencies used to provide a 3-month trial period for the worker, compensating families for any potential damage, but once the trial period ends, the two parties are not protected, causing lot of losses to Saudi families,” Saudi development and localization specialist Saleh Al-Anzi told Arab news.

“The insurance contract protects both the worker and the employer,” he said.

The insurance will be technically linked to the mediation contract for the recruitment of domestic workers through the Musaned platform, and the ministry will issue the implementation mechanism later in cooperation with the relevant authorities, including SAMA and the Ministry of Interior, sources familiar with the matter told the paper.

Recruitment companies must carry the cost of insuring the contracts of domestic workers they bring into the country for the first two years, the Saudi Council of Ministers decreed in May.