BALTIMORE: The US economy will likely resume its steady growth now that the government has reopened, though economists say some scars — for the nation and for federal workers — will take time to heal.
Most analysts estimate that the 35-day partial shutdown shaved a few tenths of a percentage point from annual economic growth in the first three month of 2019. They say growth should pick up in the coming months, though some of the money federal workers and contractors didn’t spend in the past five weeks — on such items as movie tickets, restaurants and travel — will never be made up. Having gone without two paychecks, many federal workers were forced to visit food banks or to borrow money. Federal workers will now receive backpay, though some contractors might not.
President Donald Trump agreed to reopen the government for three weeks after having forced the shutdown in hopes of compelling Democrats to approve billions for a wall on the Mexico border. Trump failed to secure any such money.
During the shutdown, a shortage of airport security and air traffic controllers disrupted travel at such major hubs as LaGuardia Airport in New York and Newark Liberty International Airport in New Jersey. The pressure on Trump to reopen the government intensified Friday after a delay of about 3,000 flights by mid-afternoon because six of 13 air traffic controllers didn’t show up to work at a critical center in Virginia.
S&P Global Ratings estimates that the economy lost $6 billion because of the government closure — a sizable but relatively negligible sum in a $19 trillion-plus US economy.
“If the shutdown had lasted much longer, the economic impacts would have snowballed — travel problems, tax refunds, etc.,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
Still, the damage isn’t likely to lift immediately. And some federal employees had expressed anxiety during the shutdown about the stability and security of their jobs. The most skilled or talented among them may be likelier to leave government service, a potential problem for an economy already facing worker shortages in some areas.
Job searches by employees at multiple federal agencies jumped during the shutdown, according to clicks tracked by the jobs site Indeed. Employees who had gone unpaid at the Department of Homeland Security, Census Bureau, the IRS and the Transportation Safety Administration were much more likely to be hunting for a new job compared with the past two years of searches.
One lingering risk is if Trump chooses to shutter the government again after the three-week agreement lapses on Feb. 15. Should that occur, it would sabotage consumer confidence and hurt the economy, predicted Mark Zandi, chief economist at Moody’s Analytics.
“It would wipe out confidence,” Zandi said.
US economy likely to pick up, though pain may linger for some
US economy likely to pick up, though pain may linger for some
Oil Updates – prices slip as Russia lifts supplies, jet fuel demand stirs caution
SINGAPORE: Oil prices dipped on Tuesday due in part to the prospect of rising supply from Russia, slower-than-expected downstream demand in sectors such as jet fuel, and cautious trading ahead of the Fed’s decision on US interest rates, according to Reuters.
The Brent crude oil futures contract for May delivery slipped 15 cents to $86.74 a barrel as at 7:33 a.m. Saudi time, while US West Texas Intermediate prices fell 14 cents to $82.02. The WTI April contract, with expires tomorrow, fell 15 cents to $82.57.
Both benchmarks reached four-month highs in the previous session, buoyed by lower crude exports from Saudi Arabia and Iraq and signs of stronger demand and economic growth in China and the US.
Regarding Russia, supply concern stemming from increased exports following Ukrainian attacks on the country’s oil infrastructure continued to pressure prices downward.
“Attacks will likely reduce Russian crude runs by up to 300 kbd (thousand barrels per day), in addition to scheduled maintenance closures ... Lower primary runs, however, would lead to higher crude oil exports, helping Russia to simultaneously achieve output cuts while keeping exports flat,” JP Morgan analysts wrote in a client note.
Russia will increase oil exports through its western ports in March by almost 200,000 barrels per day against a monthly plan for 2.15 million bpd, while on a daily basis, shipments will increase by 10 percent compared to its initial plan for March, Reuters calculations showed.
Prices were weighed down by uncertainty about how US interest rates would pan out ahead of the Federal Reserve meeting on March 20 at 9:00 p.m. Saudi time.
“The market may be in consolidation mode awaiting signals on rate cuts from this week’s FOMC meeting,” said DBS Bank energy sector team lead Suvro Sarkar in an email, adding: “Oil prices are already up quite a bit over the last two weeks, factoring in higher geopolitical risk premium after the attacks on Russian refineries ... There could be some profit-taking at these levels as we doubt price movements above $85/bbl will be sustainable in near term for Brent.”
On the demand side, analysts were slightly cautious on demand growth coming from the jet fuel sector ahead of the summer traveling season in the third quarter of the year.
Global jet fuel prices are likely to be “higher by 5.4 percent over our previous forecast to $111/bbl as soft demand is expected to give way to peak summer travel and stronger prices,” BMI analysts wrote in a client note.
“However, a global economic slowdown will temper consumption of air travel and weigh on jet fuel prices limiting price upside,” they added.
China discovers 100m tonne oilfield in Bohai Sea
- Chinese state oil company raises its 2024 production target by about 8 percent
RIYADH: China’s CNOOC Ltd. has made a major oilfield discovery in the Bohai Sea, adding over 100 million tonnes of oil equivalent proved in-place volume, the state-owned oil and gas giant said on Monday.
The discovery was made at the Qinhuangdao 27-3 oilfield located in the north-central waters of the Bohai Sea, the company said in a statement. The field has been tested to produce about 742 barrels of crude oil per day from a single well, it added.
Earlier in the month, CNOOC announced the discovery of a new reserve in the South China Sea, which contains over 100 million tonnes of oil equivalent proved in-place.
The announcements come as CNOOC invests heavily in the development of China’s offshore oil and gas reserves as part of a broader push to offset declining output from aging onshore fields.
The oil and gas giant in January raised its 2024 production target by about 8 percent to a record 700 million to 720 million barrels of oil equivalent, citing higher annual capital spending, with production reaching about 675 million boe in 2023.
Industrial output
China’s factory output and retail sales beat expectations in the January-February period, marking a solid start for 2024 and offering some relief to policymakers even as weakness in the property sector remains a drag on the economy and confidence.
Monday’s data join recent better-than-expected exports and consumer inflation indicators, providing an early boost to Beijing’s hopes of reaching what analysts have described as an ambitious 5 percent gross domestic product growth target for this year.
FASTFACTS
• The discovery was made at the Qinhuangdao 27-3 oilfield located in the north-central waters of the Bohai Sea.
• The field has been tested to produce about 742 barrels of crude oil per day from a single well.
• The announcements come as CNOOC invests heavily in the development of China’s offshore oil and gas reserves.
“China’s activity data broadly stabilized at the start of the year. But there are still reasons to think some of the strength could be one-off,” said Louise Loo, China economist at Oxford Economics.
Industrial output rose 7 percent in the first two months of the year, data released by the National Bureau of Statistics showed on Monday, above expectations for a 5 percent increase in a Reuters poll of analysts and faster than the 6.8 percent growth seen in December. It also marked the quickest growth in almost two years.
Retail sales, a gauge of consumption, rose 5.5 percent, slowing from a 7.4 percent increase in December but beating an expected 5.2 percent gain.
The eight-day Lunar New Year holiday in February saw a solid return of travel, which supported revenue of tourism and hospitality sectors. That also led to a 3 percent growth in oil refinery throughput to meet strong demand for transport fuels.
Property sector
A protracted crisis in the property sector, a key pillar of the economy, remains a major concern for policymakers, consumers and investors.
Monday’s data offered little relief on that front with declines in property investment narrowing in January-February, but still far from levels of reaching stability.
The frailty of the sector was highlighted by the poor demand. Property sales by floor area logged a 20.5 percent slide in January-February from a year earlier, compared with a 23 percent fall in December last year.
Aramco CEO calls for energy transition reset during keynote speech at CERAWeek 2024
- Amin H. Nasser: ‘We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately, reflecting realistic demand assumptions’
- Nasser: ‘Despite the world investing more than $9.5 trillion on energy transition over the past two decades, alternatives have been unable to displace hydrocarbons at scale’
DHAHRAN: Aramco President and CEO Amin H. Nasser today emphasized the need for a new, realistic pathway for the energy transition that includes oil and gas. In a keynote speech at CERAWeek 2024 in Houston, Texas, Mr. Nasser said the current transition strategy “is visibly failing on most fronts as it collides with five hard realities.”
These hard realities include the need to reset global efforts to meet climate ambitions, the inability of alternatives so far to displace hydrocarbons at scale, the costs associated with alternatives, energy requirements of the Global South, and the potential for further emissions reductions from hydrocarbons.
On reducing emissions from oil and gas, Nasser said: “We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately, reflecting realistic demand assumptions. We should ramp up our efforts to reduce carbon emissions, aggressively improve efficiency, and introduce lower carbon solutions. And we should phase in new energy sources and technologies when they are genuinely ready, economically competitive, and with the right infrastructure.”
On the energy transition’s impact on consumers, Nasser said: “As the current transition strategy increasingly impacts the majority, not just a tiny minority, consumers around the world are sending powerful messages that can no longer be ignored. We know they want energy with lower emissions, and rightly so. But many are struggling to afford the energy they need. And they worry about ample and reliable supply, which the recent energy crisis showed is not guaranteed… Unfortunately, the current transition strategy overlooks these broader messages from consumers. It focuses almost exclusively on replacing hydrocarbons with alternatives, more on sources than on reducing emissions.”
On the demand outlook for hydrocarbons, Nasser said: “Despite the world investing more than $9.5 trillion on energy transition over the past two decades, alternatives have been unable to displace hydrocarbons at scale… Global oil demand is expected to reach an all-time high in the second half of this year… Likewise, gas remains a mainstay of global energy, growing by about almost 70 percent since the start of the century… All this strengthens the view that peak oil and gas is unlikely for some time to come.”
CERAWeek is an annual conference that gathers leaders, ministers, public-policy officials and CEOs from around the world to share insights, innovative ideas and solutions to energy, climate and environmental challenges. More than 8,000 representatives of the energy, utilities, automotive, manufacturing, policy, financial, and technology fields attend CERAWeek, which features more than 1,400 expert speakers.
Saudi Arabia’s mining sector records 138% growth in exploitation licenses
RIYADH: Saudi Arabia’s mining sector is on an impressive upswing, recording a 138 percent increase in the issuance of exploitation licenses since the implementation of the new Mining Investment Law in 2021.
The number of permits rose from eight in 2021 to 19 last year as the Saudi Ministry of Industry and Mineral Resources actively works to boost mineral production and investment.
The strategic shift is part of the Kingdom’s efforts to transform mining into a foundational industrial pillar. The Kingdom’s mineral wealth is valued at an estimated SR9.4 trillion ($2.4 trillion), according to a press release from the ministry.
Data further revealed a surge in building materials quarry licenses, which rose from 158 in 2021 to 538 in 2023, and a leap in exploration licenses, from 58 to 259 during the same period.
These increases, 241 percent and 347 percent, respectively, are propelled by strategic undertakings like the Accelerated Exploration Program initiative and more efficient licensing procedures.
Saudi Arabia’s mining sector has been expanding both locally and internationally, with significant strides being made.
In January, the Royal Commission for Jubail and Yanbu signed a memorandum of understanding with Brazilian mining company Vale for the development of an iron ore briquettes project in the Kingdom.
The MoU was signed on the sidelines of the two-day Future Minerals Forum, during which the Brazilian company disclosed its plans for the Middle East.
The deal marked a key milestone in Vale’s journey in the region, spotlighting the upcoming state-of-the-art project in the Kingdom as a crucial part of its strategy to decarbonize the steelmaking industry.
Speaking in a panel discussion titled “Making Africa, Western and Central Asia Processing and Manufacturing Hubs,” Vale CEO Eduardo Bartolomeo highlighted the technological innovations and advancements planned within the mega hub in Ras Al-Khair Industrial City.
Vale said that its participation at the forum underscored the company’s pivotal role in the region’s sustainable mining sector, adding that it demonstrated a strong alignment with the Kingdom’s Vision 2030 in an emphasis to its project in Ras Al-Khair and commitment to net-zero emissions.
Closing Bell: TASI ends session in green, nears $3bn in trade volume
RIYADH: Saudi Arabia’s Tadawul All Share Index wrapped up Monday’s trading session at 12,772.46 points, witnessing an increase of 10.03 points, or 0.08 percent.
The parallel market, Nomu, ended the day at 27,204.67 points, down 75.02 or 0.28 percent.
Conversely, the MSCI Tawadul Index grew by 1.53 points to close at 1,606.96, a 0.10 percent increase.
TASI reported a trading volume of SR11 billion ($2.94 billion), with 115 stocks gaining and 113 witnessing declines.
Nomu, on the other hand, saw a trading volume of SR26 million.
On the announcement front, the Saudi Industrial Investment Group Co. released its financial results for 2023, recording a 59.5 percent drop in net profits compared to the previous year.
Since SIIG employs the equity method for its joint venture investments, it does not list sales, revenue, and gross profit on its profit or loss statement.
However, the company’s results indicated a massive drop in net profits from SR277 million in 2022 to SR112 million in 2023.
SIIG reported a decline in its share of profits from joint ventures, primarily due to falling selling prices across all products and an unplanned shutdown at the Saudi Polymer Co. project this year.
Despite these challenges, the company observed an uptick in financing income, particularly from Murabaha, and a reduction in general and administrative expenses, indicating a mixed financial performance in the current fiscal period, according to a bourse filing.
Furthermore, United Mining Industries Co. saw a slight decrease in its revenue, recording SR240,327 in 2023, a 0.6 percent drop from SR241,813 the year before.
However, the company’s net profit experienced a massive uptick recording SR35,830 last year, an 11.81 percent rise from the year before, largely attributed to a change in the sales mix, according to a bourse filing.
Moreover, Nahdi Medical Co. reported a marginal increase in net profit for 2023, totaling SR892.6 million, up 0.5 percent from the previous year.
The company faced a slight decline in gross profit due to investments in sales promotions, leading to a gross margin of 40.4 percent.
Despite this, strategic investments in healthcare, e-commerce, and the UAE operations were supported by efficient cost management, keeping operating expenses steady.
Arabian Drilling also announced its financial results for 2023 reporting a 28.5 percent growth in revenue to reach SR3.4 billion.
The company’s net profit also increased to reach SR605 million, an 8.4 percent growth from 2022.