Oil ‘supercycle’ not on the cards: Energy experts

The idea of a ‘supercycle’ in oil has gained traction in recent months, as the price of crude has recovered from the historic lows of last year’s pandemic collapse. (AP)
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Updated 12 April 2021

Oil ‘supercycle’ not on the cards: Energy experts

  • Key triggers needed to push crude over $100 per barrel still missing: Report

DUBAI: Oil is unlikely to hit $100 per barrel on a sustainable basis in the near future, according to experts at the Oxford Institute for Energy Studies (OIES), a prestigious UK-based think tank.

In a report prepared by Bassam Fattouh and Andreas Economou of the OIES, the likelihood of an imminent oil “supercycle” — suggested by some commodities analysts — is downplayed because of the absence of key factors that might spark a surge in the price of crude.

“Some key triggers of an oil supercycle, such as an inelastic supply in the face of rampant demand and lack of spare capacity and refining constraints, which could push prices to $100 a barrel and keep them at those high levels, are still missing,” they argue.

Rather, oil will trade in a range of $59-$69 per barrel until the end of 2022, the authors said. “Sentiment could push prices beyond these boundaries, but they are not likely to be sustainable. For prices to reach anywhere close to $100/b, we need to consider other shocks,” they added.

The idea of a “supercycle” in oil and other commodities has gained traction in recent months, as the price of crude has recovered from the historic lows of last year’s pandemic collapse and some oil companies slashed investment in new fields.

Analysts at JP Morgan and Goldman Sachs — two of the biggest banks in the world — have suggested that the global market is on the brink of a run that could see oil top $100 per barrel.

But the Oxford experts, in their latest Oil Monthly report, conclude that this is unlikely. “While oil market dynamics and prices have markedly improved, the degree of uncertainty surrounding the outlook remains high. Following a challenging year, OPEC+ policy choices will keep dictating market outcomes, but the recent oil price rebound does not yet signal the start of the next oil supercycle,” they said.

The experts added that while April 2020 was “the bleakest month in the history of oil markets” with prices averaging $23 per barrel, the price has rebounded to above $60 as demand recovered, stocks were drawn down and OPEC+, the producers’ alliance led by Saudi Arabia and Russia, has kept a tight lid on supplies.

“This impressive recovery occurred despite wide uncertainty surrounding oil demand and the fact that it has yet to fully recover to its pre-pandemic level. Although the dominant expectation is for oil demand to rebound strongly in the second half of 2021 as countries lift restrictions and the global economic recovery accelerates, the uncertainty over the timing and pace of the rebound remains high,” the authors added.

The Oxford analysis provides support for the continued caution expressed by Saudi Energy Minister Prince Abdul Aziz bin Salman, who recently said he would not believe evidence of a recovery in demand “until I see it.”

OPEC+ policy is singled out as one of the main factors behind the recovery in crude prices, the Oxford experts said, noting a “more flexible and more effective OPEC+ in dealing with the adverse shock of COVID-19 and in influencing market expectations and shaping sentiment.”

They added: “Although it has become increasingly difficult to predict OPEC+’s next move, this unpredictability is part of a deliberate policy and has had the effect of increasing the market impact of OPEC+ decisions. At a more fundamental level, it shows a more assertive role for OPEC+ in dictating the pace of market rebalancing.”

Some analysts have forecast that higher oil prices will lead to a return of US shale supply, which was hammered by the pandemic lockdowns in America. But the Oxford analysis does not see this on the immediate horizon. “There is an emerging consensus that US shale growth will be rather limited or even decline in 2021,” the authors said.

The risk of Iranian oil flooding the market in the event of a deal between Tehran and Washington on nuclear policy is also overstated, the authors added. “Even if the Iran nuclear deal is revived, the export increase from current levels will be moderate,” they said.


INTERVIEW: Metito lays out strategy to keep region watered

Updated 15 May 2021

INTERVIEW: Metito lays out strategy to keep region watered

  • Rami Ghandour, managing director, explains why Middle East must realize ‘water is not free’

The Middle East’s water challenge is summed up in one stark statistic: The region is home to 6 percent of the world’s population but has just 1 percent of its fresh water.

Rami Ghandour, managing director of UAE-based water company Metito Utilities, knows these and similar figures by heart. He can tell you how much of the population of Egypt inhabits water-intensive cities (97 percent) and how much water the Gulf Cooperation Council (GCC) region consumes per capita compared to the US (significantly more).

“I think the first thing is a realization that water is not free. It is something which is quite costly. Therefore, people need to take care of it,” he told Arab News.

Metito has been taking care of water in the region, and the world, for more than 60 years, after its foundation in Lebanon in 1958 by the serial entrepreneurial Ghandour business family whose members are still big shareholders.

It is a world-leading company in the water infrastructure sector, operating sewage, water treatment, and desalination facilities in 46 countries, and is increasingly playing a leading role in the global drive toward more renewable and sustainable use of the world’s resources.

So, is Metito a utility, or an infrastructure company, or an environmental operation?

“You can check all the boxes if you like. Historically, I’d say we were an environmental company in that what we do is desalinate water, supply water to people, treat wastewater and recycle water, both industrial and domestic. Then also more recently we’ve expanded into the renewables energy sector,” Ghandour said.

The Metito group, backed by big investors such as Mitsubishi of Japan and the investment arm of the World Bank, is organized along three business lines: A design and build unit that covers the full spectrum of the engineering, procurement, and construction process, which to date has executed more than 3,000 projects around the world; the utilities and investments division offers project finance, consulting, and management services; while the chemicals unit develops environment-friendly chemicals and specialist treatment solutions for customers.

“We maintain an arm’s length arrangement between the different companies on purpose but are able to develop projects — that is at the heart of what we do — and deliver those to people to enable both environmental improvement and also basic human development and needs,” Ghandour added.

Water — cheap, free, or subsidized — has long been taken for granted in the Middle East, even as the pressure on its supply has increased with rising population, agricultural and industrial usage. Ghandour thinks that mindset has to change.

“There are obviously jurisdictions in the region, including here in the UAE, where full market price is being charged, full cost recovery and taxes are being charged. But there are other areas where there are heavy subsidies in place and that does result in encouraging wasteful behavior,” he said.


BIO

BORN: Beirut 1975

EDUCATION

  • Master’s degree in chemical engineering from the University of Cambridge
  • MBA in finance and entrepreneurial management from Wharton Business School

CAREER

  • Process engineer, Bechtel London
  • Management consultant, Boston Consulting Group, New York
  • Managing director, Metito Utilities
  • Director, Metito Group

Public education programs — such as encouraging people to turn taps off and wash the car less frequently — obviously play a part in public awareness, but the bigger challenges are more structural.

For example, the biggest consumer of water in the region is not personal domestic consumption, but agriculture.

Governments — including that of Saudi Arabia — have had some success in encouraging more efficient use of water for farming, and new technologies such as hydroponics and vertical farming can also encourage optimal use of water resources.

Some countries too have taken a more radical approach, buying farmland in other parts of the world with better water supply, growing food there, and then importing it back to the Gulf.

But Ghandour pointed out that there were other simple and effective ways to optimize water efficiency. Leakage and water theft were big problems in some countries. “People are just helping themselves and there isn’t the regulation and the enforcement to make sure that it’s not a problem,” he added.

Reuse of water was also an area of great potential. The example here was Singapore, which has made great strides toward reusing water in the domestic, industrial, and agricultural sectors.

In the Gulf, one of the sights that sets environmentalists’ nerves on edge was the liberal use of precious water on golf courses or green public spaces, in areas that would naturally be arid desert.

However, Ghandour noted that an increasing proportion of that was recycled water that may not be fit for human consumption, but which was perfectly acceptable for irrigation. Dubai, for example, has a groundbreaking wastewater recycling facility which offers users two taps for different water uses.

Metito is bidding in a project in Botswana in Africa where wastewater is directly recycled back into the consumption and drinking water systems, one of only two in the world that does that.

The company was also looking at the technology behind a pioneering project in California which recycles wastewater directly into the underground aquifers that feed water back into the consumption cycle.

But even if the region optimizes its usage, prevents leakages, and adopts efficient pricing mechanisms, there will always be a need for desalination in a part of the world as arid as the Arabian Gulf.

Desalination has been the mainstay of the basic infrastructure that has allowed the region to enjoy high rates of economic growth over decades, but it has also come under fire from environmentalists, for two reasons: The use of carbon fuels such as oil and gas in the expensive process of turning sea water into usable water; and the extra brine — salty water — expelled into the sea as a by-product.

Ghandour said the second objection was less of a significant factor, pointing out that the Arabian Gulf and Red Sea were open tidal seaways, and also that some desalination facilities in the UAE have been built on the Indian Ocean side of the country, allowing brine to disperse into a wider body of water.

The use of hydrocarbon fossil fuels to produce water was a different matter.

“I would decouple the power issue from the desalination. The good news is that the renewables business model has become much more competitive. Renewable power today is often below the cost of fossil fuels power,” he added.

The megaprojects of Saudi Arabia were the perfect testing ground for this new model. Metito is involved in two solar-powered desalination facilities in the NEOM development, which mix renewable power with sources from the national grid, and it has also won a contract for a huge desalination plant in the industrial zone at Jubail in the Eastern Province. Ghandour hinted that other big Saudi contracts were in the offing.

There are also huge Metito projects on the other side of the Red Sea, in Egypt, including an ambitious plan to irrigate the Sinai desert with treated water pumped under the Suez Canal.

Saudi Arabia’s need for clean, efficient, and reusable water was likely to increase exponentially over the next decade. For example, in addition to the megaprojects such as NEOM and Qiddiya outside Riyadh, there are massive plans to double the size of the Saudi capital by 2030, as well as an initiative to plant 10 billion trees in the Kingdom to help mitigate carbon emissions. Does Ghandour think these ambitious plans are feasible, from the viewpoint of a water expert?

He noted that the way Saudi Arabia and other Gulf countries had gone about the task was encouraging, with increasing private sector investment. “I would argue that is typically the most efficient way to deliver these projects with very strong environmental compliance standards in place,” he said, with one eye on the higher standards now required by international private sector investors in line with ESG (environmental, social, and governance) standards.

“It has put everybody in the mindset of the ESG priorities that are there, so everybody is looking at doing projects in a manner that is sustainable, and definitely the Saudis have been very much involved in that,” he added.

And does he think the Kingdom will have the capacity to water all those trees?

“I don’t have the specifics on the plan to irrigate those trees, but I’m sure as an outsider I would say yes. Additional desalination capacity is being implemented at a high rate with these public private partnership projects.

“So, additional sources of water are there, and I go back to the wastewater that can be reused, which is perfect for irrigating trees. There is today a lot of wastewater that is effectively thrown away in the Kingdom. So, it’s something where reuse would be of a significant environmental benefit,” he said.


US capital running out of gas, even as Colonial Pipeline recovers

Updated 15 May 2021

US capital running out of gas, even as Colonial Pipeline recovers

  • Servers of key pipline's hacker Darkside forced down, says security firm

NEW YORK: The US capital was running out of gasoline on Friday even as the top US fuel pipeline ramped up deliveries following a cyberattack and Washington officials assured motorists that supplies would return to normal soon.

Servers for Darkside were taken down by unknown actors Friday, a US cyber security firm said.

Recorded Future, the security firm, said in a post that the allegedly Russia-based Darkside operator "Darksupp" had admitted in a web post that it lost access to certain servers used for its web blog and for payments.

Accessed via TOR on the dark web, the Darkside onionsite address showed a notice saying it could not be found.

The six-day Colonial Pipeline shutdown was the most disruptive cyberattack on record, which underscored the vulnerability of vital US infrastructure to cybercriminals.

Widespread panic buying continued two days after the nation’s largest fuel pipeline network restarted, leaving filling stations across the US Southeast out of gas even in areas far from the pipeline.

US pump prices are at their highest in years, just two weeks before the peak summer driving season kicks off and as traffic continues to recover from mobility restrictions during the COVID-19 pandemic. The average national gasoline price has climbed to almost $3.04, the most expensive since October 2014, the American Automobile Association said.

On Friday gas station outages in Washington, DC climbed to 87 percent, from 79 percent the day before, tracking firm GasBuddy said.

“Most of these states/areas with outages have continued to see panicked buying, which is likely a contributing factor to the slowish recovery thus far,” said GasBuddy’s Patrick De Haan. “It will take a few weeks.”

Colonial Pipeline announced late Thursday it had restarted its entire pipeline system linking refineries on the Gulf Coast to markets along the eastern seaboard.

President Joe Biden also reassured US motorists that fuel supplies should start returning to normal by this weekend.

Some states experienced modest improvements in gas outages but still saw a high amount. About 70 percent of gas stations in North Carolina were without fuel, while around 50 percent of stations in Virginia, South Carolina and Georgia had outages.

The hacking group believed to be responsible for the attack, DarkSide, said it had hacked four other companies including a Toshiba subsidiary in Germany.

Colonial Pipeline, which is owned by pension funds, private equity and energy firms, has not determined how the initial breach occurred, a spokeswoman said on Thursday. The company has focused on cleaning its networks, restoring data and reopening the pipeline.

Colonial has not disclosed how much money the hackers were seeking or whether it paid. However, Bloomberg News reported that it paid nearly $5 million to hackers.

To stem fuel shortages, four states and federal regulators relaxed fuel driver restrictions to speed deliveries of fresh supplies. Washington also issued a waiver to US refiner Valero Energy Corp. allowing it to transport gasoline and diesel from the US Gulf Coast to East Coast ports on foreign-flagged vessels. The US normally limits deliveries between domestic ports to US-built and crewed vessels.

Gulf Coast refiners that send their fuel to market through the Colonial Pipeline have had to cut production because they have not been able to move their gasoline, diesel and jet fuel through the pipeline. A smaller, alternative pipeline filled to capacity quickly after Colonial announced its network was shut last Friday.


Portugal opens door to British tourists, ending uncertainty

Updated 15 May 2021

Portugal opens door to British tourists, ending uncertainty

  • British travelers will need to show on arrival a negative PCR test for COVID-19 taken in the previous 72 hours

LISBON: British tourists can return to Portugal from next Monday, ending days of uncertainty over whether thousands of UK vacation bookings for Portuguese destinations would be allowed.

British visitors will be admitted on nonessential travel from May 17, the Portuguese Foreign Ministry said in a statement Friday. British travelers will need to show on arrival a negative PCR test for COVID-19 taken in the previous 72 hours.

Because of the COVID-19 pandemic British people can currently only go to Portugal — and into the rest of the European Union — for work, study, family reunions, health or humanitarian reasons.

Next Monday is also the day the UK government will permit British tourists to travel to a limited number of countries, including Portugal, without having to quarantine on their return.

The UK decision on May 7 to ease travel bans and include Portugal on its so-called green list, with 11 other low-risk territories countries, sparked a deluge of flight and hotel bookings, especially on Portugal’s southern Algarve coast, which is one of Europe’s most popular vacation destinations.

Tourism, by mainly British tourists, is a mainstay of the southern European country’s economy. It accounts for around 15 percent of the annual gross domestic product.

The Portuguese government’s delay in announcing its decision on UK tourists came four months after Lisbon officials labeled as “absurd” a British decision to halt flights to and from Portugal. The British government said the measures was needed to prevent a COVID-19 variant found in Brazil, with which Portugal has close ties, from reaching the UK

It wasn’t clear whether the UK government consulted Portugal before including it on the green list.

Elidérico Viegas, president of the AHETA association of hotels and resorts in the Algarve, said that the region has witnessed an “exponential increase” in bookings by British tourists since the green list came out.

“We knew (UK bookings) would increase, but not by this much,” he said, though he said there were no reliable figures yet.

Local businesses are “much more optimistic about the summer” after being closed for most of the past year, he said.

Restaurants and cafes recently reopened in Portugal, thought they must shut at 10:30 p.m.


Dollar falls after weak retail sales data

Updated 15 May 2021

Dollar falls after weak retail sales data

  • Friday’s drop erases some of a two-day rally in the dollar after data on Wednesday showed US consumer prices increased by the most in nearly 12 years

NEW YORK: The US dollar edged lower against major currencies on Friday after a report that US retail sales unexpectedly stalled in April and as fears of accelerating inflation receded.

The greenback was down half a percent against a basket of currencies, last at 90.341, retracing most of the gains made earlier this week after data showed a surprise surge in consumer prices.

The Commerce Department said on Friday that retail sales were unchanged in April after recording a 10.7 percent surge in March, boosted by stimulus checks. But another acceleration in retail sales is likely in the coming months as the US economy reopens and Americans spend the savings they have been amassing.

“The US dollar pared more of its weekly gain Friday after disappointing news on America’s main growth engine, the consumer, added more evidence of an uneven recovery,” wrote Joe Manimbo, senior market analyst at Western Union Business Solutions.

Friday’s drop erases some of a two-day rally in the dollar after data on Wednesday showed US consumer prices increased by the most in nearly 12 years. While the Fed has pledged to keep interest rates low even as inflation rises, some in the market have bet that the Fed will be forced to act sooner than expected. Higher interest rates strengthen the dollar.

“Tepid data serves as a strong vote of confidence in the Fed’s low rate outlook, a dovish stance and a key vulnerability for the dollar,” said Manimbo.

The euro was among the gainers against the dollar on the day, up 0.46 percent at $1.213. Wall Street also bounced back on Thursday and Friday after falling earlier in the week. The return of risk appetite that bolstered US stocks also helped to support the euro.

The pound is on track to gain more than 0.75 percent this week, on bets of a strong economic recovery in Britain and expectations that any Scottish independence referendum could be a ways off.

In cryptocurrencies, Bitcoin is down more than 13 percent this week after Tesla boss Elon Musk said he would stop accepting the token as payment due to environmental concerns. It was moderately stronger on Friday, up 1.87 percent to trade at $50,689.11.


Saudi copycat watchdog destroys 5 million products amid global crackdown

Updated 14 May 2021

Saudi copycat watchdog destroys 5 million products amid global crackdown

  • Saudi move comes amid global push to tackle IP theft
  • Amazon removed 10 billion suspect listings last year

RIYADH: The Saudi Authority for Intellectual Property destroyed about five million products violating intellectual property regulations during the past year.
It was working in tandem with the Zakat, Tax and Customs Authority and the Ministry of Information.
Counterfeit commercial goods accounted for about 40 percent of the tally, amounting to two million goods, while nearly three million products were defined
as a violation of intellectual property rights.
The Authority seized 11,620 products that violated intellectual property in five cities, Al Eqtisadiah reported.
It warned against promoting or trading in any product that violates intellectual property rights, or any behavior that violates intellectual property regulations.
Governments and corporations are increasing their efforts to crack down on counterfeit goods as rogue operators use e-commerce to boost sales.
Amazon said this week that it blocked more than 10 billion suspected listings of counterfeit goods on its platform last year as part of a global crackdown in the face of pressure from consumers, brands and regulators.
The e-commerce giant made the announcement in its first “brand protection report,” as part of its initiative to weed out listings of fakes by third-party sellers, AFP reported.

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