Oil markets bearish ahead of OPEC+ meeting as alliance may stick to same output plan

Oil markets bearish ahead of OPEC+ meeting as alliance may stick to same output plan
Short Url
Updated 31 August 2021

Oil markets bearish ahead of OPEC+ meeting as alliance may stick to same output plan

Oil markets bearish ahead of OPEC+ meeting as alliance may stick to same output plan

Crude prices slipped in trading on ahead of Wednesday's OPEC+ meeting where the group is forecast to stick to its planned increase of 400,000 barrels per day, ignoring pleas from Washington to turn on the taps more than the alliance planned earlier.

OPEC+, which includes Russia, meets on Wednesday evening at 18:00 Saudi Arabian time.

The group’s joint technical committee said it expects the oil market to remain in a 0.9 million barrel per day (bpd) deficit this year, before reaching a surplus of 2.5 million bpd in 2022 as it increases production in line with its earlier commitment.

Oil traders are largely bearish on higher oil prices despite concerns the market is increasingly susceptible to one-off disruptions in the current tight conditions.

Hurricane Ida has led to the closure of offshore oil platforms which has resulted in around 95 percent of Gulf of Mexico oil and gas production - 1.72m barrels of crude and 2.01bn cubic feet of natural gas output per day - being halted.

However, the latest snapshot from China, the world’s largest oil importer, has increased fears about the impact of the pandemic on demand as the country’s factory output grew at a slower pace than forecast in August while the country’s services sector contracted.

A survey of analysts by Reuters revealed the majority believe prices will remain comfortably below US$70 this year.

DBS Bank analyst Suvro Sarkar said: “With the Delta variant in play weighing on demand and price sentiment, overheating in oil prices is unlikely in the near term.”

The analysts predict an average price for Brent of $68.02 a barrel in 2021, down slightly from an earlier consensus of $68.76.

However, the more bullish in the market believe prices could jump 20 percent higher as the global economy, most notably international aviation, continues to reopen with the help of the Covid-19 vaccine.

Swiss bank UBS is forecasting Brent will hit a minimum of $75 per barrel before the end of the year.

Mark Haefele, chief investment officer with UBS Global Wealth Management, said: “We expect the structural tightness in the oil market to persist in the remainder of 2021, and we see the energy sector as one of the key beneficiaries of the global reopening. We maintain our forecast for Brent to climb to $75 per barrel or higher this year.”

Current OECD oil inventories, are well below the five-year average and are likely to fall further in the coming months as mobility improves with the global rollout of the Covid-19 vaccine.

Matt Maley, equity strategist at Miller Tabak, told CNBC this week that US crude could jump by between 20-50 percent this year.

He added the energy sector had outperformed the overall market by a large margin since last October.

Wednesday's OPEC + meeting comes as oil and gas producers were warned they should use current cash flow generated by steadily rising prices to speed up decarbonisation of their businesses.

Energy consultancy Wood Mackenzie said the “oil price windfall” had given producers had a “golden opportunity” to invest more in renewables.

Tom Ellacott, senior vice president of corporate research at WoodMac said: “It is incredibly rare for an industry to get a decades-long notice that its business is under threat. Not only does the oil and gas industry have the luxury of clear warning, it has significant cash flow coming its way from higher prices. The commodity price upcycle provides a golden opportunity to accelerate emissions reduction, with a clear financial framework.”

David Clark, vice president of corporate research at the consultancy added: “Many oil and gas companies willingly accept hedging costs to de-risk near-term cash flows. It’s time to hedge longer-term carbon risk with rising low-carbon investment.”

Clark said producers need to establish a financial framework for their transition away from fossil fuels that should include capital allocation between dividends and investment in both legacy oil and gas ventures and future low-carbon businesses.

The Wood Mackenzie Corporate Service estimates oil majors will allocate around 15 percent of their 2021 investment budget to renewables but said they needed to spend more. 

Brent crude futures for October, due to expire on Tuesday, fell 0.56 percent, to $73 a barrel at 6:04 p.m. Riyadh time. US West Texas Intermediate (WTI) crude futures were down 0.64 percent, at $68.77.


Saudi SABIC, ExxonMobil begin operations of petrochemical JV on US Gulf Coast

Saudi SABIC, ExxonMobil begin operations of petrochemical JV on US Gulf Coast
Updated 20 January 2022

Saudi SABIC, ExxonMobil begin operations of petrochemical JV on US Gulf Coast

Saudi SABIC, ExxonMobil begin operations of petrochemical JV on US Gulf Coast

RIYADH: Riyadh-based Saudi Basic Industries, also known as SABIC, one of the leading petrochemical firms worldwide, announced the start of operations of its petrochemical joint venture with US ExxonMobil.

US Texas is to witness the launch of an ethylene production unit – operating an annual capacity of around 1.8 million tons, the homegrown petrochemical company said in a statement.

The new production unit, which started construction in 2019, will produce materials to be utilized in packaging, agricultural film, construction materials, clothing, and automotive coolants.

This project is in line with SABIC’s strategy, aimed at diversifying its feedstock as well as strengthening its position in North America.

“This is a remarkable achievement that positions us well to help meet growing global demand for performance products while providing meaningful investment in the US Gulf Coast,’ president of ExxonMobil Karen McKee said, commenting on the partnership.

SABIC noted that the deal’s financial impact is expected to roll out on the company’s financial statements during the ongoing quarter.

In the latest trading session, shares of the company edged down by 0.2 percent to close at SR126 ($33.6).


Mastercard, Coinbase partner to make NFTs more accessible

Mastercard, Coinbase partner to make NFTs more accessible
Updated 20 January 2022

Mastercard, Coinbase partner to make NFTs more accessible

Mastercard, Coinbase partner to make NFTs more accessible

RIYADH: Payments giant Mastercard has partnered with cryptocurrency exchange Coinbase to make non-fungible tokens more accessible.

Mastercards can be used to make purchases on Coinbase’s upcoming NFT marketplace.

“We’re excited to announce today that we’re partnering with Coinbase to let people use their Mastercard cards to make purchases on Coinbase’s upcoming NFT marketplace,” Mastercard said in a statement.

“Getting more people involved safely and securely is perhaps the best way to help the NFT market thrive.”

Mastercard also sees greater potential for core NFT technology to go beyond art and collectibles in many other areas.

Coinbase announced in October last year that it is launching an NFT marketplace.

“Coinbase NFT, as a peer-to-peer marketplace that will make minting, purchasing, showcasing and discovering NFTs easier than ever,” Coinbase said.

“We’re making NFTs more accessible by building user-friendly interfaces that put the complexity behind the scenes. We’re adding social features that open new avenues for conversation and discovery. And we’re going to grow the creator community exponentially, a win for artists and for fans.” 


Saudi Wafrah appoints Khaled Saleh Al Amoudi as CEO

Saudi Wafrah appoints Khaled Saleh Al Amoudi as CEO
Updated 20 January 2022

Saudi Wafrah appoints Khaled Saleh Al Amoudi as CEO

Saudi Wafrah appoints Khaled Saleh Al Amoudi as CEO

RIYADH: Saudi food firm Wafrah for Industry and Developments has appointed Khaled Saleh Al Amoudi as CEO on Thursday, according to a bourse statement. 

The decision follows recommendation from the Remuneration and Nomination Committee.

With a M.Sc.in Financial Management, Al Amoudi currently holds the chief financial officer position at the firm, with more than 20 years of accumulated experience as CFO and in the governmental and bank sectors.


Tadawul approves $755m government debt listing

Tadawul approves $755m government debt listing
Updated 20 January 2022

Tadawul approves $755m government debt listing

Tadawul approves $755m government debt listing

RIYADH: Saudi stock exchange Tadawul approved listing of SR2.83 billion ($755 million) worth of government debt instruments, submitted by the Ministry of Finance, according to a bourse filing.

The first issuance dated January 8, amounts to SR1.25 billion, Tadawul said in a statement.

The second issuance dated January 12, is valued at SR1.59 billion.


Profits of Saudi-based SADAFCO drop 28.6% as pandemic hits sales

Profits of Saudi-based SADAFCO drop 28.6% as pandemic hits sales
Updated 20 January 2022

Profits of Saudi-based SADAFCO drop 28.6% as pandemic hits sales

Profits of Saudi-based SADAFCO drop 28.6% as pandemic hits sales

RIYADH: Saudia Dairy and Foodstuff Co., or SADAFCO, reported a 28.6 percent decline in profit during the nine months ending Dec. 31, 2021. 

Profits dropped to SR146 million ($38.9million), compared to SR205 million in the corresponding period a year earlier, the company announced in a bourse statement.

SADAFCO attributed the lower profit figures to lower sales volumes driven by the pandemic, an increase from 5 percent to 15 percent in VAT, and higher material and logistics costs.

The financial statements of the company indicated a healthy cash flow, with a strong cash position of SR679 million.

SADACFO’s share price edged down by 0.12 percent in today’s session to close at SR167.

Earlier, the company’s board recommended cash dividends at SR3 per share for the first half of the fiscal year ended Mar. 31, 2022.

Jeddah-based SADAFCO operates sales and distribution depots in 24 locations across Saudi Arabia, Bahrain, Qatar, Jordan, and Kuwait. Its products are also exported to several countries in the MENA region.