US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 
1 / 2
Mauston, Wisconsin USA - October 31st, 2021: Joe Biden stickers on fuel pumps saying I Did That due to high fuel prices (shutterstock)
US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 
2 / 2
Image: Shutterstock
Short Url
Updated 24 November 2021

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

US acts outside the IEA and releases oil from SPR to curb fuel prices amid analysts warnings 

LONDON: Despite warning from analysts, US President Joe Biden finally announced the release of crude oil from the country’s strategic stockpile, a unilateral move first mooted by his Energy Secretary Jennifer Granholm in October, as he seeks to curb inflationary pressure in the US economy.

Gasoline prices nationwide are averaging about $3.40 a gallon, more than double their price a year ago, according to the American Automobile Association.

Biden confirmed the release from the US Strategic Petroleum Reserve on Tuesday after months of failed pressure by the President to convince OPEC to hike production amid rising gasoline prices in America - currently at a seven year high - and heightened worries that rising inflation could derail the post Covid-19 economic recovery.

The move, which will make 50 million barrels of oil available from the SPR in conjunction with releases from China, India, Japan, South Korea, and the UK, underlines the intense domestic pressure the President is under as his poll ratings tumble.

The Indian government also announced it would release 5 million barrels of oil from strategic reserves in coordination with other buyers. 

The rules of the International Energy Agency (IEA) – the inter-governmental group charged with managing global supply - specifically state that reserves should only be released to manage market shocks, such as wars or natural disaster, not as a mechanism to correct market imbalances caused by lack of investment and rising demand.

Natasha Kaneva at JP Morgan said the unilateral emergency sale from the SPR, without coordination with the IEA, was unprecedented.

She said: “Presidentially-directed emergency releases have occurred only three times over the last 30 years and all happened before the US shale revolution significantly reduced US dependence on imported crude.”

It is also the first time the US has involved China in any coordinated action to release oil reserves, although China, which is only an affiliate member of the IEA, has so far failed to release all the details of its release.

Giovanni Staunovo at UBS described the release as a “big headline number” but added that the “details provide a less strong narrative”.

He said: “Fifty million barrels from the US is above the market expectations, but the effective volume is much smaller, only 32mb. Moreover,18mb of the 50mb were already planned to be sold next year, now this amount is sold at the start of the year instead of later in 2022.”

He added: “Also the amount being so far mentioned from other countries joining the US looks more symbolic.”

The Strategic Petroleum Reserve was created after the 1973 energy crisis. Two sites in Louisiana and two in Texas currently hold oil in caverns hollowed out of salt domes — mountainous salt deposits that are almost entirely underground.

The most obvious risk in releasing reserves, as Goldman Sachs commented in a recent note, is that it can only offer a short-term solution to Biden for what is clearly a structural problem in the market.

However, a bigger immediate issue will be how OPEC+  responds when it meets next week. Will the organization now decide to adjust its planned oil production increases?  

Most market analysts suggest OPEC is more concerned about the prospect of renewed COVID-19 restrictions in Europe, but add Biden’s decision does provide an opportunity for the organization to downwardly revise its current production levels.

UBS’s Staunovo said: “They (OPEC+) will closely track the developments on mobility restrictions in Europe. That is probably their biggest concern at the moment and increasing the probability that they might pause at the next meeting.”

OPEC+, which comprises OPEC members essentially led by Saudi Arabia and other producers led by Russia, has so far doggedly stuck to its strategy of increasing production by 400,000 barrels per day each month.

OPEC has been wary about opening up the taps amid fears that a worrying spike in COVID-19 rates in Europe and the US could result in fresh economic restrictions.

Austria returned to a full lockdown this week, while the Netherlands is currently in a partial shutdown. Germany is considering the imposition of regional lockdowns as infection rates spiral and Italy is poised to introduce tough restrictions for non-vaccinated people.

Virus cases are rising across the US at a rate of almost 100,000 a day, a trend that prompted the US government’s chief medical adviser, Anthony Fauci, to warn of “dangerous” new surge of infections as Americans prepare to travel across the country for this week’s Thanksgiving holiday.

Government restrictions to prevent the spread of COVID-19 deliberately suppress economic activity while fear of the virus reduces consumption. But even without further restrictions there are increasing concerns about the slow speed of the post pandemic economic recovery.

It is against this backdrop that OPEC+ believes demand is not yet strong enough to justify increased production and be shifting towards a reduction.

Indeed, figures from the International Energy Agency indicate OPEC+ production is 700,000 bpd less than planned during September and October, a shortfall largely attributable to Angola and Nigeria.

The sharp decline in industry investment, a symptom of environmental pressures on oil majors in the shape of environmental, social and governance concerns, has left many producers, with the exception of Saudi Arabia, the UAE, and Iraq, unable to pump more.

It is worth bearing in mind that the so-called “sweet spot” for global crude prices is currently thought to be between US$75 to $90, a price that is seen to provide sufficient revenues for producers, while not at a level to hurt demand or encourage investment in other forms of energy.

Oil ticked up slightly following the release announcement to almost $80.

The other danger for Biden is that releasing reserves may well be seen by the American public as the very least he could do. Reversing his decision to revoke the Keystone XL Pipeline and his suspension of new oil and gas leases on federal government lands would prove a good deal more effective in sending the market a message.

Speaking earlier this month in Abu Dhabi, the chief executive of US oil firm Occidental Petroleum said Biden should ask domestic shale producers to increase production rather than the OPEC+.  
US Republican Sen. John Barrasso, echoed that view. “President Biden’s policies are hiking inflation and energy prices for the American people. Tapping the Strategic Petroleum Reserve will not fix the problem. We are experiencing higher prices because the administration and Democrats in Congress are waging a war on American energy.”

Prior to the pandemic, the US shale industry was seen as the world’s swing producer, and had even turned the US into a net exporter.

While oil production from the Permian Basin, the largest US shale field, is set to surpass its pre-pandemic record next month, overall shale output is below its boom years of 2018 and 2019 amid inflationary pressures, labor shortages, and some banks charging higher interest rates on loans for fossil fuel than green projects.

Against that backdrop, one could argue some US producers appear to be as unwilling to ramp up production of crude oil to levels that would lower prices at the pump as OPEC+. 

 


UK hosting Africa investment summit for green transition

UK hosting Africa investment summit for green transition
Updated 20 January 2022

UK hosting Africa investment summit for green transition

UK hosting Africa investment summit for green transition
  • The conference aims to unlock millions of pounds of new investment, especially in clean energy industries in the UK and Africa
  • Britain will launch a digital tool to link African and British businesses to the UK government

LONDON: The UK is hosting an investment conference on Thursday to boost sustainable economic cooperation with African countries and to support the continent’s transition to clean growth.
UK Prime Minister Boris Johnson will open the one-day event, which will be attended by UK and African ministers, business leaders and and heads of international organizations.
The conference, in its second edition, aims to unlock millions of pounds of new investment, especially in clean energy industries in the UK and Africa.
“Two years on from the inaugural UK-Africa Investment Summit, the UK’s ambition to be Africa’s investment partner of choice has never been stronger,” said Secretary of State for International Trade Anne-Marie Trevelyan.
“This year’s conference focuses on the importance of resilient, sustainable investment to support Africa as it pivots toward a more environmentally friendly growth trajectory, and I look forward to working with leaders from the continent as they continue on this path to a greener future,” she added.
During the conference, the UK will launch a new Growth Gateway — a digital tool to link African and British businesses to UK government trade, finance, investment services and opportunities.
UK Export Finance — Britain’s export credit agency — has significantly increased support for markets in Africa in the past year from about £600 million ($817 million) in 2018-19 to more than £2.3 billion in 2020-21, supporting a range of infrastructure projects in countries from Cote d’Ivoire to Uganda, the Department for International Trade said.
Minister for Africa Vicky Ford said that the UK is “deepening its economic ties with African nations” and “there is a lot more that can be done,” adding: “Growth Gateway will make it easier than ever for African and British businesses to access the support they need to boost two-way trade and investment.”
This year’s conference also comes after Britain hosted the UN Climate Change Conference, COP26. The country is looking to build on its commitment to providing £11.6 billion of its International Climate Finance program to help developing countries tackle climate change over the next five years.
Last year’s virtual conference was attended by more than 2,800 delegates from over 40 African countries. Across the UK, 27 trade and investment deals worth £6.5 billion were announced, on top of further commitments worth £8.9 billion.


Turkey Dream Games triples in valuation after raising $255m in funding

Turkey Dream Games triples in valuation after raising $255m in funding
Updated 19 January 2022

Turkey Dream Games triples in valuation after raising $255m in funding

Turkey Dream Games triples in valuation after raising $255m in funding
  • Turkish mobile gaming start-up Dream Games raised an unprecedented $255 million in its latest Series C funding round

RIYADH: Turkish mobile gaming start-up Dream Games raised an unprecedented $255 million in its latest Series C funding round, almost tripling its valuation to $2.75 billion in six months, MAGNiTT reported.

This round of funding was led by Index Ventures, subscribed by returning investors such as Makers Fund, IVP, Kora, Balderton Capital and managed by BlackRock.

The company plans to use the funds for doubling its headcount to 200 people and launch a new game this year.

Founded in 2019, Istanbul-based Dream Games is a mobile gaming company that developed Royal Match — one of the highest grossing mobile games.


UAE, Saudi Arabia, Qatar top competitive economies in the Arab World: AMF

UAE, Saudi Arabia, Qatar top competitive economies in the Arab World: AMF
Updated 19 January 2022

UAE, Saudi Arabia, Qatar top competitive economies in the Arab World: AMF

UAE, Saudi Arabia, Qatar top competitive economies in the Arab World: AMF
  • The United Arab Emirates, Saudi Arabia, and Qatar were ranked the most competitive Arab economies

RIYADH: The United Arab Emirates, Saudi Arabia, and Qatar were ranked the most competitive Arab economies for the period between 2017 until 2020, according to a report launched by the Arab Monetary Fund.

The fifth Arab economies competitiveness report showed that the UAE maintained its top ranking in the general index as it benefited from high scores in the business environment and infrastructure category as well as the organizational and government governance category.

The Kingdom ranked second after having performed well in the overall economic index, the external activities sector and the official reserves index.

Qatar followed in third place, after attaining first place in the real economy sector, the inflation index and GDP per capita index.

Four Arab nations advanced in terms of competitiveness compared to the previous period, including Sudan, Egypt, Morocco, and Mauritania.

Arab states and other non-Arab countries — such as Singapore, Malaysia, Turkey — are included also in the calculation of the index.

The report monitors the economic competitiveness of Arab countries and sheds light on the economic and political measures applied by decision makers for that purpose.


TRSDC closes financing for $3.76bn loan from four Saudi banks

TRSDC closes financing for $3.76bn loan from four Saudi banks
Updated 19 January 2022

TRSDC closes financing for $3.76bn loan from four Saudi banks

TRSDC closes financing for $3.76bn loan from four Saudi banks

RIYADH: Saudi Arabia's The Red Sea Development Co., or TRSDC, announced the financial closure of a SR14.12 billion ($3.76 billion) loan with four Saudi banks.

The financing will be in a form of a term loan facility and a revolving credit facility.

TRSDC, which is developing the world's largest sustainable tourism project, has obtained the loan from Saudi National Bank, Riyad Bank, Banque Saudi Fransi, and Saudi British Bank, according to a statement.

“This year, we have proceeded at pace with the delivery of our flagship project, all the while mindful of our commitment to not only reduce our impact on the environment but actively deliver a 30 percent net conservation benefit by 2040,” explained John Pagano, chief executive officer of The Red Sea Development Company.

GFC Media Group have recently awarded TRSDC’s Green Financing as Project Finance Deal of Year in the Capital Markets Saudi Arabia Awards.


Egypt achieves a $204m initial budget surplus in six months 

Egypt achieves a $204m initial budget surplus in six months 
Updated 19 January 2022

Egypt achieves a $204m initial budget surplus in six months 

Egypt achieves a $204m initial budget surplus in six months 

RIYADH: Egypt’s general budget achieved an initial surplus of 3.2 billion Egyptian pounds ($204 million) during the first six months of the 2021/22 fiscal year, the minister of finance said. 

Mohamed Maait added that revenues grew by 10.3 percent on an annual basis during that period, while tax revenues increased by 15.7 percent, the Middle East News Agency reported. 

He also said that Egypt targets a budget deficit of 6.6 percent in the 2021/22 fiscal year and a primary surplus of 1.5 percent of gross domestic product. 

The minister’s comments came during the cabinet meeting held on Wednesday by the prime minister Mostafa Madbouly, to review the financial performance indicators during the six months period.