LONDON: The oil price hike to over $60 per barrel — $10 ahead since July — reflects underlying fundamentals such as robust global gross domestic product (GDP) growth and a better realignment of supply and demand, according to London-based analysts.
These underlying trends, more than instability in Kurdish regions of Iraq, were the real drivers of the price rise, the analysts said.
Oil has topped $60 a barrel for the first time in two years in the past few days, reinforcing views expressed recently by the head of the Organization of the Petroleum Exporting Countries (OPEC) that stability was returning to the sector.
Jason Gammel, oil analyst at London broker Jefferies, said internal research — using a variety of sources including data supplied by the International Energy Agency — showed demand exceeding supply for the first time in four years.
Gammel said “demand is ahead of supply, but I think for this to continue, the agreement by OPEC and non-OPEC countries to constrain production, which they struck in 2016, would have to be extended through 2018.”
That will not be confirmed until the next OPEC meeting in Vienna later this month.
Gammel said excess inventories were approaching the five-year average in the US, but were still 179 million barrels over that average in the wider OECD.
He does not expect OECD inventories to revert to the five-year average until late 2018 or even 2019. But he was generally “encouraged” by underlying demand growth potential driven by stronger global GDP.
Oswald Clint at London-based Bernstein Research said fundamentals were pushing up the price. In the short term, he was cautious because of the possibility of a US supply response.
“We are medium to long-term bullish, and expect the price to go back to the $70s range by 2020,” he said.
“We don’t see demand risks, we don’t see international supply response risks, we believe in the efficacy of OPEC curtailments and continue to see that helping, but if there is no US shale response, we could meet our price target sooner.”
Clint said the key to understanding the market was price elasticity — where lower prices pull in demand. “People didn’t expect that to last long after the 2014 correction, but cheap pricing stimulates demand,” he said. Reporting a surge in third-quarter earnings on Tuesday, BP Chief Finance Officer Brian Gilvary said,“inventory reductions and continued efforts from OPEC and non-OPEC countries to maintain cuts supported price gains.”
He added: “Oil demand over the remainder of the year is expected to remain robust. Overall we expect inventory levels to continue to edge lower, although there still remains a lot of uncertainty around the pace of that adjustment and around the longer-term outlook.”
At a recent forum in London, OPEC Secretary-General Mohammed Barkindo said the global oil market was tightening at an “accelerating pace,” and cited a sharp reduction in worldwide inventories as evidence that last year’s agreement by producers to cut supply was having an effect.
He added: “OPEC stocks in September were about 160 million barrels above the five-year average, down from 340 million in January. There has been a massive drainage of oil tanks across all regions … a balanced oil market was now fully in sight.”
‘Oil demand outstrips supply for the first time in four years’
‘Oil demand outstrips supply for the first time in four years’
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
