Latest news with #Non-OPEC
Mint
6 days ago
- Business
- Mint
Will the UAE break OPEC?
On May 31st the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) said that it would pump 411,000 more barrels per day (b/d) of crude in July. The statement marked the third such rise in as many months. OPEC+'s increased production is equivalent to 1.2% of global demand, and represents a drastic acceleration from plans drawn up last year, when the group said that it would raise output by 122,000 b/d a month. Big moves, though not big enough to sink oil prices. You might, therefore, think that OPEC+ is in total control. After all, the cartel, which supplies half the world's oil, exists to keep prices high. In reality, however, it faces a crisis that could mark the beginning of its end. In its 65 years of existence OPEC has navigated many crises, from Gulf wars and America's shale boom to a pandemic-era oil bust. But today is different. Knowing that oil demand could peak in the coming decade, members want to liquidate reserves. That, together with the spending required for petrostates to diversify their economies away from oil, means some are flouting the cartel's cardinal rule: to not supply more than is agreed upon. Although Saudi Arabia, the group's enforcer, is trying to slap them into obedience, one serial cheater is getting a free pass: the United Arab Emirates, OPEC's third-largest exporter, and its biggest menace. To understand OPEC's predicament, look at the justifications for the cartel's latest increases in output. The one broadcast by the group—that 'healthy fundamentals' mean the world needs more oil—does not pass the sniff test. Analysts, OPEC's included, have revised down their demand forecasts to account for the damage of Donald Trump's trade wars. Non-OPEC countries, meanwhile, keep pumping more. The world is swimming in oil. There are more credible explanations for the move. One is that Gulf states are trying to please Mr Trump, who wants cheap petrol in America's forecourts. Another is that the group wants to recover lost market share. A third frames it as an effort by Saudi Arabia to punish members who are flouting their quotas. It is possible that, at the margin, the second 411,000 b/d hike—announced days before Mr Trump started touring the Gulf—helped Saudi Arabia and the UAE obtain goodies from Uncle Sam, such as artificial-intelligence chips. But 'Saudi Arabia does not want to set too much of a precedent,' says a former OPEC executive. Clawing back market share will also prove hard. Oil demand is expected to jump by 1m b/d from May to August in OPEC countries alone, as extra-hot weather means greater need for air-conditioning, which will help absorb the output hikes so far. Should the group opt to pump still more, however, prices could drop below $50, at which point members may revolt. And OPEC+ remains far from recovering its market power. By June its target output will still be 5m b/d or so lower than in August 2022, when it began to announce cuts. What of enforcing discipline? Iraq, last year's biggest overproducer, appears to have trimmed output a little despite not having control over all its production, some of which is in Kurdish territory. Kazakhstan, which overshot by 300,000 b/d in April, is more troublesome. Its production is dominated by international firms over which the state holds little sway. Yet the trickiest pupil of all is the UAE. The country tells OPEC it produces 2.9m b/d, bang on its quota. The cartel's own assessment, which averages estimates from 'secondary sources' (eight consultancies) has not deviated from 2.9m b/d since at least 2023. Computing an exact, independent figure is impossible, since the UAE stopped releasing detailed data years ago. All the same, OPEC's figures look impossibly low: tanker-tracking suggests the country's crude exports alone add up to 2.8m b/d, and that is before accounting for any local refining or additions to stocks. (The country's energy ministry did not respond to our requests for comment.) In private, analysts admit their numbers are massaged. Several—including one at a secondary-source firm—say they produce one estimate for internal purposes and another for external consumption. Two reckon that the UAE overproduces by 200,000 to 300,000 b/d. The International Energy Agency, an official forecaster that OPEC ditched as a secondary source in 2022, estimates the UAE's output at nearly 3.3m b/d in April. Some foreign producers with outposts in the UAE suggest all these estimates are too low. One Gulf-based analyst who supplies data to national and international oil firms goes as high as 3.4m b/d. Almost everyone upholds the fiction in public. After a reshuffle in February, when OPEC dropped America's Energy Information Administration as a source, all of its external assessors are now commercial outfits. Foreign consultancies count the cartel and its oil giants, such as Saudi Aramco and Abu Dhabi's Adnoc, as clients. Journalists fear being cut off. Why does Saudi Arabia, which has a testy relationship with the UAE, allow this? At oily get-togethers its leaders are now frostier to the Emiratis, notes one confidant to Gulf leaders. But they cannot get too angry. Among OPEC+ members, the UAE has long had the most idle capacity as a share of its total production capacity, which generates huge frustration in Abu Dhabi. When global oil demand rebounded post-covid, a clash over quotas twice led the UAE to consider leaving OPEC, which could have been a fatal blow for the cartel. As a consequence, Saudi leaders now fear it might really walk if criticised again. Things will probably get still more fraught. The UAE cares less about low oil prices than Saudi Arabia. An economist at an Emirati bank says that the country needs them at just $50 a barrel to balance its books, whereas its bigger neighbour, which is spending lavishly on real-estate projects, requires them at $90 a barrel. In the five years to 2027 the UAE is slated to invest $62bn in new production, bringing its capacity to 5m b/d, up from 3.6m b/d in 2021; Adnoc, which pumps most of the territory's oil, says that capacity has already almost hit the target for two years' time. The uae's quota has not kept up with this growth. Last year it negotiated a 300,000 b/d increase, to be phased in over 18 months. On May 28th OPEC+ scheduled a more comprehensive revision of quotas—originally due this year—for 2027. The Emiratis are unlikely to accept their straitjacket. One analyst with contacts in both governments says it is only a matter of time before Saudi Arabia and the UAE openly clash. A descent into disorder, fuelled by conflict between OPEC's largest and third-largest exporters, could then make the cartel unworkable. Will-the-UAE-break-OPEC-
Zawya
19-03-2025
- Business
- Zawya
Qatar banks exhibit sufficient profitability, robust capital strength: EY
Qatar - Banks in Qatar exhibit sufficient profitability and robust capital strength, with both Tier 1 and capital adequacy ratio (CAR) surpassing the mandated regulatory thresholds, a report by EY has shown. Domestic funding avenues are predicted to adequately finance credit expansion in Qatar this year with the completion of major infrastructure projects and increased liquefied natural gas (LNG) production, 'EY GCC Banking Sector Outlook 2024 report' said. 'The expansion of gas production in Qatar will underpin the resilience of local banks this year,' it said. According to the report, GCC banks will continue to benefit from strong capital levels, supporting their overall performance in 2025. Credit growth in most GCC countries is broadly based on a strong project pipeline, with aggregate contract awards driven by infrastructure development, especially in Saudi Arabia and the UAE. The positive trajectory is expected to continue in the near future. This outlook is supported by rising lending volumes, increased fee income, stable margins and effective cost management. As the cost of lending turns more favorable, GCC countries might expand their investments globally. EY MENA Financial Services leader Mayur Pau noted, 'As we go into the first quarter of 2025, the GCC banking industry should remain strong due to considerable capital cushions, healthy asset quality indicators and adequate profitability. Furthermore, resilient economies, the region's economic diversification efforts and enabling policies will support higher consumption and investment, further boosting the sector's performance. 'The upcoming financial year looks to be a transformative period, with advancements in technology, shifts in consumer behavior and regulatory changes shaping the future of banking.' Non-oil growth remains a bright spot: GDP growth in the GCC is projected at 3.5% in 2025. Interest rate cuts, together with further investment and structural reform initiatives, will mean non-oil growth of over 3.4% in the region's two largest economies – Saudi Arabia and the UAE. As per the International Monetary Fund (IMF), the current account surplus is expected to be 8.2% of the GDP in 2025. On the fiscal front, a surplus of 3.9% of the GDP is forecast for 2025. Global oil demand is forecasted to increase by 1.6mn bpd to 104.5mn bpd in 2025, reflecting the end of the post-Covid-19 pandemic release of pent-up demand, challenging global economic conditions and clean energy technology deployment. Non-OPEC+ producers are likely to account for the bulk of the increase if OPEC+ voluntary cuts remain in place. High oil prices – with the average for 2024 estimated at $81 per barrel – and favorable economic growth have supported the GCC banks' healthy finances. GDP growth in the GCC is forecast to rebound to 3.5% in 2024, up from 1.4%, as oil production gradually increases, providing a boost to the region's economies, EY said. Hydrocarbon growth is likely to be 3.3%, while non-hydrocarbon sectors are forecast to grow at 3.4%, supported by strong domestic investment momentum. GCC banks have shown sustained growth in credit facilities during 2024, supported by economic transformation plans, robust project pipeline, healthy demand and resilient economic conditions. The banks are well-capitalised with strong asset quality indicator and are likely to uphold this strong performance trajectory throughout 2025. 'To fortify their profitability and improve cost optimisation in the current landscape, GCC banks should consider how to best to navigate a new normal that not only addresses regulatory fragmentation and national interests, but fully harnesses the power of technology and its multiple scopes such as digitisation, generative AI (GenAI), open banking and APIs, and the digital currency revolution – all while committing to a sustainable future. This will ensure they remain competitive and agile to better counteract the pressure of contracting margins,' Pau said. Ends
Times of Oman
18-03-2025
- Automotive
- Times of Oman
India will drive global oil consumption growth: Phillip Capital
New Delhi: Despite increasing consumption in developing economies, global oil supply is anticipated to outpace demand growth and India is expected to be the major driver of consumption growth according to a report by Phillip Capital. "With GDP growth projections above 6 per cent annually, India's energy demand will continue to soar, and the country will remain heavily reliant on fossil fuels, including oil, to meet its needs," said the report. As per the International Energy Agency (IEA) India's oil demand is projected to rise by 1.3 million barrels per day (mbpd) by 2030. The Organization of the Petroleum Exporting Countries (OPEC) estimates an even higher increase of 1.8 mbpd, bringing India's total oil consumption to 7.1 mbpd, up from 5.3 mbpd in 2023. India's economic growth, expanding middle class, and young population are fuelling this demand. Investments in oilfield services and cost reductions have ensured that production remains strong, even in the face of lower oil prices. By 2030, the IEA and OPEC forecast that global oil supply capacity will grow by approximately 6 mbpd, reaching 113.8 mbpd. Non-OPEC countries will be responsible for 76 per cent of this increase, with the United States contributing between 2.1 and 2.3 mbpd. Other key contributors include Brazil, Guyana, Canada, and Argentina. The rise of electric vehicles (EVs) is often cited as a key factor in reducing oil demand. In 2023, 14 million EVs were sold, accounting for 18 per cent of global car sales, a significant increase from 2 per cent in 2018. However, EVs currently make up only 2.5 per cent of the total global vehicle fleet, with sales primarily concentrated in China, the European Union, and the United States. While the IEA projects that EV sales will grow by 23 per cent annually through 2035, potentially displacing 6 mbpd in oil demand by 2030, recent trends suggest otherwise. The growing popularity of plug-in hybrid electric vehicles (PHEVs) over battery electric vehicles (BEVs) and the challenges in electrifying heavy transport could limit the expected decline in oil consumption. Despite the ongoing transition to renewable energy, the global reliance on crude oil and natural gas will persist. Oil demand growth will be primarily driven by developing nations in a well-supplied market. This balance is expected to result in stable crude prices, ranging between USD 65 and USD 75 per barrel, barring major geopolitical disruptions.
