Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review

Special Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review
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Updated 04 January 2022

Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review

Farewell 2021, the year that put OPEC+ back in driving seat: Year in Review
  • Renewables were the only energy sector to see investment rise above pre-pandemic levels

LONDON: Greta Thunberg’s excoriating dismissal of world leaders over their promises to address global warming as “blah, blah, blah” wasn’t as it turned out, too wide of the mark in 2021.

Despite earnest commitments, from Washington to Beijing, to reduce fossil fuel consumption and cut planet-heating emissions, demand for crude oil soared in 2021 as the global recovery from the COVID-19 pandemic took off.

Don’t tell Greta, but oil prices are up around 50 percent this year, courtesy of increased demand and tight supply. 

In January, the month when Joe Biden was officially sworn in as president of the US and Washington rejoined the Paris Agreement on climate emissions, a barrel of Brent crude was trading at about $52.

By March it had spiked to $70.

Momentum in oil prices had been building since the last quarter of the previous year, but the immediate catalyst for March’s spike, and indeed this year’s increase in global crude prices, started with OPEC and its allies, who surprised the markets by agreeing to extend its production cuts into April.

Amid a nascent economic recovery, low inventories, and a lack of spare capacity, oil supply suddenly looked a lot tighter.

The sharp increase in oil demand as COVID-19 restrictions began to ease in the middle of the year took suppliers by surprise and led to tensions between the US and OPEC+.

As demand overwhelmed supply, domestic gas prices soared in the US President Biden called on OPEC+ to open up the pumps and boost production, a plea that fell on deaf ears as the group and its OPEC partners continued to opt for restraint.

In reality, like all global oil producers, OPEC+ struggled to increase output due to underinvestment. While oil investment increased about 10 per cent this year, spending has remained well below pre-pandemic levels as pressure remains on private companies to keep oil and gas portfolios in check.

FASTFACT

10%

In reality, like all global oil producers, OPEC+ struggled to increase output due to underinvestment. While oil investment increased about 10 per cent this year, spending has remained well below pre-pandemic levels as pressure remains on private companies to keep oil and gas portfolios in check.

In June, more than 400 blue chip investors controlling $41 trillion in assets called for governments around the world to end support for fossil fuels. Small wonder an International Energy Agency report released this year noted the “balance of investment in fossil fuels is shifting toward state-owned companies.”

Even the US shale industry, which a few years ago was seen as the swing producer for global oil, has reined in spending. As Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, succinctly put it in March: “Drill, baby, drill”, the mantra of the US fracking industry, “is gone forever.”

The International Energy Agency hardly helped investment when in May it demanded an immediate end to fossil fuel extraction, a demand Prince Abdulaziz bin Salman again succinctly described as a “la-la-land” scenario.

Against the backdrop of a hostile environment for fossil fuels, investment in renewables continued to grow this year. Indeed in 2021, renewables were the only energy sector to see investment rise above pre-pandemic levels, up around 10 percent since 2019.

But of course, the problem with calls for disinvestment in the oil industry is that attacking supply does absolutely nothing to curb consumer demand — the real driver of global warming. Thus, as the world tuned into the delayed Tokyo Olympic Games, which began in July, black gold was sprinting towards $75.

By October, just weeks before world leaders gathered to profess their commitment to tackle climate change at the UN COP26 Climate Conference in Glasgow, Brent crude hit a seven-year high at around $86 per barrel.

October’s price rise was largely attributable to forecasts of a supply deficit as demand continued to increase. At the same time, the sharp rise in global gas prices, and even coal prices, since August had forced many power generators to turn away from natural gas towards fuel oil and diesel. 

Wholesale European gas prices have increased more than 800 percent over 2021 due to a combination of global demand and competition between Europe and Asia for supplies.

European leaders also accused Russian President Vladimir Putin, whose country supplies around a third of Europe’s gas, of withholding supply to force the EU to approve its controversial pipeline Nord Stream 2. This pipeline is planned to supply oil to Europe, but bypasses Ukraine, which has longstanding territorial disputes with Russia.

October’s oil spike was again helped by OPEC+, which earlier in the month insisted they would stick to their July pact to gradually increase supply, ignoring fresh calls from President Biden to open the taps as US gasoline prices hit a seven-year high.

In response, and just days after demanding urgent action on climate change at COP26 in November, Biden announced the largest release of emergency oil reserves in US history from the country’s Strategic Petroleum stockpile. The release of 50 million barrels of oil had no impact on prices which jumped 2 percent on the news.

If nothing else, Biden’s action in November revealed that 2021 marked the year that OPEC and its allies found itself back in charge of setting the global price for crude oil.

Despite sliding back toward the end of the year, the decline was largely driven by fears that travel restrictions imposed by governments due to the omicron variant will hit the aviation industry, Brent crude is still trading at near $80 a barrel as December, and 2021, draws to a close.

Looking forward to 2022, a report by JP Morgan in December predicted that oil will hit $125 a barrel next year and, fasten your seatbelts, $150 in 2023, again due to capacity-led shortfalls in OPEC+ production.

“We think OPEC+ will slow committed increases in early 2022, and believe the group is unlikely to increase supply unless oil prices are well underpinned,” the bank said.

A slightly more conservative estimate by Goldman Sachs also predicts high oil next year and in 2023, with crude potentially rising to between $100 and $110 per barrel.

The IEA now predicts crude consumption will reach 99.53 million barrels per day in 2022, up from 96.2 million this year, and more or less back to pre-pandemic levels.

Consequently, carbon emissions are on track to rise by 16 percent by 2030 according to the UN, rather than fall by half, the reduction required to keep global warming below the Paris Agreement limit of 1.5C.

Happy New Year Greta — and all Arab News readers.


KPMG joins Saudi Arabia’s Digital Cooperation Organization as observer

KPMG joins Saudi Arabia’s Digital Cooperation Organization as observer
Updated 13 sec ago

KPMG joins Saudi Arabia’s Digital Cooperation Organization as observer

KPMG joins Saudi Arabia’s Digital Cooperation Organization as observer

RIYADH: KPMG has become the first professional services organization to join Saudi Arabia’s Digital Cooperation Organization as an official observer.

DCO is an intergovernmental organization established to enable digital prosperity. In a tweet, DCO wrote that KPMG will work together with the organization to inclusive digital economy growth and ensure digital prosperity for all.

A report published in ITP noted that KPMG’s association with DCO will involve operations in digital taxation, cross-border data flows, digital transformation and e-governance.

“KPMG is the first professional services observer of the DCO, with international expertise and a vital knowledge partner as we continue our mission to enable digital prosperity for all,” said Hassan Nasser, DCO vice president of international affairs.

 


AMAALA megaproject receives 3 bids for multi-utilities infrastructure contract: MEED

AMAALA megaproject receives 3 bids for multi-utilities infrastructure contract: MEED
Updated 30 min 49 sec ago

AMAALA megaproject receives 3 bids for multi-utilities infrastructure contract: MEED

AMAALA megaproject receives 3 bids for multi-utilities infrastructure contract: MEED

RIYADH: Saudi Arabia’s AMAALA megaproject has received three bids for a contract to develop multi-utilities infrastructure for its 4,155 square kilometers tourism scheme, MEED reported, citing industry sources. 

The companies which submitted the bids are ACWA Power, Alfanar, and the UAE-French consortium Masdar/EDF, the report added. 

The scope of the project includes a 146-megawatt solar power plant, and a seawater reverse osmosis plant with a peak capacity of 58,000 cubic meters a day, along with a sewage treatment plant with a capacity of 7,250 cm/d and power and water transmission networks. 

The energy component of the package comprises multiple substations and a centralized battery energy storage system. It will also have a solar photovoltaic power plant. 

AMAALA issued the tender for the contract in January, and it was extended multiple times. 

The complete package is expected to enter commercial operations by June 2024, the report further noted. 


TASI starts flat as investors assess the lower oil prices and higher inflation: Opening bell

TASI starts flat as investors assess the lower oil prices and higher inflation: Opening bell
Updated 16 August 2022

TASI starts flat as investors assess the lower oil prices and higher inflation: Opening bell

TASI starts flat as investors assess the lower oil prices and higher inflation: Opening bell

RIYADH: Saudi Arabia's benchmark index started Tuesday’s trading session flat as more earnings reports came out; investors tried to assess the impact of rising inflation and weaker oil prices on the index.

As of 10:06 a.m. Saudi time, the Tadawul All Share Index and the parallel market Nomu opened at 12,542 and 22,111, respectively.

In the energy market, Brent crude fell to $94.20 a barrel, while US West Texas Intermediate declined to $88.82 a barrel, as of 10:12 a.m. Saudi time.

The country's biggest lender Saudi National Bank increased 0.28 percent, while the Kingdom’s largest valued bank Al Rajhi added 0.11 percent.

Saudi Aramco lost 0.87 percent, despite achieving its highest quarterly profit since going public in 2019 with SR182 billion ($48.4 billion), a 90 percent jump over analysts' expectations.

Dallah Healthcare Co. edged up 0.17 percent, after posting a 52 percent gain in profit during the first half of 2022, reaching SR152 million.

KEIR International rose 1.92 percent, after it partnered with US-based Quadratics Development to deploy its eco-friendly building system and technology in Saudi Arabia

Qassim Cement Co. dropped 2.08 percent, after reporting a 73 percent decline in first-half profits to SR54 million.

Al-Etihad Cooperative Insurance Co. shed 2.76 percent after its profits dropped 93 percent to SR2 million in the first half.

Abo Moati for Bookstores Co rose 1.63 percent, following a 125 percent profit surge to SR4.3 million for the second quarter of 2022.

Saudi Industrial Development Co. edged down 1.60 percent, after its losses widened by 88 percent to SR11 million during the first half.

Al Kathiri Holding Co. declined 1.35 percent, after it turned into losses of SR5.5 million in the first half of 2022.


Commodities Update — Gold ekes out gains; Corn, soybean down; Copper up; Five more grain ships leave Ukrainian port; 

Commodities Update — Gold ekes out gains; Corn, soybean down; Copper up; Five more grain ships leave Ukrainian port; 
Updated 16 August 2022

Commodities Update — Gold ekes out gains; Corn, soybean down; Copper up; Five more grain ships leave Ukrainian port; 

Commodities Update — Gold ekes out gains; Corn, soybean down; Copper up; Five more grain ships leave Ukrainian port; 

RIYADH: Gold prices edged higher on Tuesday, supported by a dip in US bond yields, although a stronger dollar and concerns over further rate hikes by the Federal Reserve kept gains in check.

Spot gold was up 0.1 percent at $1,781.40 per ounce, as of 0241 GMT.

US gold futures eased 0.1 percent to $1,796.70.

Silver slips

Spot silver slipped 0.3 percent to $20.20 per ounce, while platinum fell 0.1 percent to $932.01. 

Palladium was up 0.1 percent at $2,148.76.

Corn down, wheat up

Chicago soybean and corn futures lost more ground on Tuesday, with expectations of crop-friendly US weather conditions and declining demand in top importer China weighing on the market.

Wheat ticked higher after two sessions of losses.

The most-active soybean contract on the Chicago Board of Trade lost 0.7 percent to $14.02-1/4 a bushel, as of 0309 GMT.

Corn gave up 0.3 percent to $6.26-1/4 a bushel, while wheat added 0.8 percent to $8.07-1/2 a bushel.

Copper rises

Copper rose on Tuesday, tracking upbeat sentiment in the US markets on prospects that the Federal Reserve can achieve a soft landing for the economy, but gains were limited as weak China data clouded the demand outlook in the biggest consumer.

Three-month copper on the London Metal Exchange was up 0.8 percent at $8,040 a ton, as of 0307 GMT, having dropped 2.8 percent in the previous session, the steepest daily decline in a month.

The most-traded September copper contract on the Shanghai Futures Exchange climbed 0.6 percent to $9,180.38 a ton.

Turkey says five more grain ships leave Ukrainian ports

Five more ships have left Ukrainian ports carrying corn and wheat, three from Chornomorsk and two from Pivdennyi, under an UN-brokered grain export deal, Turkey’s defense ministry said on Tuesday.

It added that four more ships bound for Ukraine were to be inspected on Tuesday by the joint co-ordination center, set up by Russia, Turkey, Ukraine and the UN in Istanbul.

One of the ships leaving on Tuesday was the Brave Commander, carrying the first cargo of humanitarian food aid bound for Africa from Ukraine since Russia’s invasion, Refinitiv Eikon data showed.

(With input from Reuters)


Saudi PIF buys shares in Alphabet, Zoom and Microsoft in US shopping spree

Saudi PIF buys shares in Alphabet, Zoom and Microsoft in US shopping spree
Updated 16 August 2022

Saudi PIF buys shares in Alphabet, Zoom and Microsoft in US shopping spree

Saudi PIF buys shares in Alphabet, Zoom and Microsoft in US shopping spree

RIYADH: Saudi Arabia’s Public Investment Fund bought shares in Alphabet, Zoom Video and Microsoft as part of a wider pick of US stocks, bringing the sovereign wealth fund’s second-quarter investments to about $40.8 billion.

The PIF acquired 213,000 class A shares in Alphabet, 4.7 million class A shares in Zoom and 1.8 million shares in Microsoft, a US Securities and Exchange Commission filing showed.

It also acquired shares in JPMorgan and BlackRock, buying 3.9 million shares and 741,693 shares respectively.

The fund bought 6.3 million shares in Starbucks, and added other stocks including Adobe Systems, Advanced Micro Devices, Salesforce, Home Depot, Costco, Freeport-McMoRan, Datadog and NextEra Energy.

The PIF, which manages $620 billion in assets, is at the center of Saudi Arabia’s plans to transform the economy by creating new sectors and diversifying revenues away from oil.

The PIF is pursuing a two-pronged strategy, building an international portfolio of investments while also investing locally in projects that will help to reduce Saudi Arabia’s reliance on oil.

Apart from these firms, Saudi Arabia’s PIF is also the majority stakeholder in Lucid Motors, headquartered in California. Currently, PIF owns more than 60 percent share in the electric vehicle manufacturer.

In the first quarter of this year, PIF reduced its ownership of US equities by 22 percent to $43.6 billion, against the $55.9 billion it held a quarter earlier.

A filing by the US Securities and Exchange Commission by the end of the first quarter suggested that PIF cut its stake in three companies which includes Visa Inc., Plug Power, and Walmart.

PIF, however, increased its holdings in Take-Two Interactive, PayPal, Alibaba, and Farfetch Ltd.

Data released by the Sovereign Wealth Fund Institute, in April, had revealed that PIF is currently in the fifth spot among the largest sovereign funds in the world with assets valued at $620 billion. 

(With inputs from Reuters)