LONDON: A big question ahead of the oil producers’ meeting in Vienna next week is whether buoyant Chinese demand will continue as crude prices drift higher, experts told Arab News.
Chinese oil imports have surged in 2017 with the authorities increasingly building up the Asian country’s strategic petroleum reserves as a cushion against future energy shocks, said Max Hess, a geopolitics analyst at London-based AKE International.
Cited in the Financial Times, Kristine Petrosyan of the International Energy Agency (IEA) said that since 2015, most excess crude has found a home in China, either in Chinese strategic reserves or commercial inventories.
“Many factors affect the oil price, but Chinese demand is an important one,” said James Henderson, a senior research fellow at the UK’s Oxford Institute for Energy Studies.
Henderson said: “Chinese demand has been rising fast, and is a big part in the rebalancing of the oil market. But will China continue buying as much crude if the price goes to $65 per barrel? That is certainly going to be one of several important factors up for discussion in Vienna,” he said.
There is no doubting the importance of China in the global energy picture — it is the biggest importer of crude. An IEA report said: “China’s target is 80 per cent self-sufficiency … but the remaining 20 per cent involves the critical supply of oil where import dependence has doubled in the last five years.”
China is forecast to overtake US as the largest oil consumer around 2030, with net imports forecast to reach 13 million barrels per day in 2040 (IEA).
To underline the trend, Rosneft struck a deal this week with partner CEFC China Energy, a private company, to supply it with 61 million tons of oil over five years.
CEFC, an energy trader, could sell some of this crude on to foreign buyers, but much of it is expected to be used to meet domestic demand, said Hess.
He added: “Given CEFC's ongoing investment into numerous areas across the 'Belt and Road,' including in Russia as most recently seen through its $500 million investment into hydropower and aluminum firm En+, controlled by Oleg Deripaska, it would appear likely that the deal will help deepen the relationship between the two countries.”
Russia is often the biggest seller on a monthly basis of oil into China, said Henderson. And Chinese demand has played “a big part in rebalancing the market, so the meeting in Vienna will have to look carefully at the maths,” he said.
But the issue that has the market on tenterhooks is whether the Vienna meeting will agree to an extension of supply cuts hammered out last year between OPEC and non-OPEC countries such as Russia.
These cuts, together with stronger Chinese and world demand growth, are also a key factor behind the cutting of world inventories — which have helped to bring the market towards some sort of balance, said Henderson.
In early October, during the first ever visit by a Saudi monarch to Russia, King Salman met with president Vladimir Putin who said at that time the supply curb deal could be extended beyond March 2018.
But the last thing OPEC and non-OPEC producers need is a price hike off the back of an agreement to extend the cuts deal further even as global GDP picks up.
That risks significantly dampening demand, and/or bringing on tonnes of extra US shale as American producers jump to take advantage of higher prices — leading, in time, to another glut.
Henderson reckoned an oil price of around $60 per barrel — against today’s $62 — was about right, but that $50 would hit Saudi and Russian budgets. On the other hand, $70 or $80 could be the tipping point at the other end.
But to what extent does Russia want to extend the cuts agreement? Russian oil executives have been reported to be lobbying the Kremlin to block an extension to allow Russian energy firms to exploit the more benign pricing environment — well up on the $40 recorded since 2014.
That said, Henderson thought Russia would go with the OPEC consensus in Vienna, not least because of King Salman's visit to Moscow last month, and the improvement in relations between the two countries.
“The incentive is there for both countries to achieve a market where supply and demand are in tandem,” said Henderson.
Vienna, he added, was also about Russia’s broader foreign policy in the Middle East, and not just about oil.
“Russia is everywhere in the Middle East at the moment — Assad [Syrian president] has been in Moscow, as has the Saudi King, while Rosneft is in Kurdistan.”
Russia won’t want to upset the applecart as the country’s Middle Eastern geopolitical interests are a critical factor, said Henderson.
“Russia knows the relationship with Saudi is important, as well as with others in OPEC.
“Besides, a row with OPEC would send the oil price into a dive, and that’s not in anyones interest,” said Henderson.
Chinese demand teaser to weigh on Vienna oil summit
Chinese demand teaser to weigh on Vienna oil summit
ADX imposes mandatory insider trading blackout ahead of Q3 results
RIYADH: A mandatory 15-day blackout on insider trading has been enforced by the Abu Dhabi Securities Exchange, effective Sept. 16, as companies prepare to release their third-quarter 2024 financial results.
The restriction, in line with Securities and Commodities Authority regulations, prohibits board members, executives, and employees with insider information from trading shares until the earnings are fully disclosed.
According to a report by state news agency WAM, the decision follows Article 14 of the Securities and Commodities Authority Board of Directors’ Decision No. 2/R of 2001, which outlines regulations on trading, clearing, settlement, transfer of ownership, and custody of securities.
The rule is designed to ensure transparency and prevent insider trading ahead of major financial disclosures.
Insider trading involves the buying or selling of a publicly traded company’s stock by individuals who possess non-public, material information about the company. This practice is not allowed because it gives an unfair advantage to people with inside information, which can affect the fairness of the market and reduce trust among investors.
The report also stated that the resolution will be shared with the SCA, all listed companies, ADX departments, accredited brokers, and investors.
Established in 2000, ADX facilitates the trading of various securities, including shares from public and private companies, debt instruments, exchange-traded funds, derivatives, and other financial instruments approved by the UAE’s SCA.
On Aug. 30, WAM reported that ADX has become the most active and liquid ETF market in the Middle East and North Africa region, with notable value and volume since the start of the year.
ETF trading on the exchange totaled 1.86 billion dirhams ($506.46 million) in the first eight months of 2024. The trading volume for ETFs on ADX reached approximately 450.7 million units, with 19,853 transactions recorded.
Earlier this month, ADX also welcomed the listing of $1 billion in green bonds issued by Abu Dhabi Future Energy Co., known as Masdar.
The green bonds are split into two tranches: the first, valued at $500 million, has a fixed interest rate of 4.87 percent and matures on July 25, 2029; the second tranche, also $500 million, offers a 5.25 percent interest rate and matures on July 25, 2034.
WAM reported that the bond issuance witnessed strong demand from both international and domestic investors, with subscription orders peaking at $4.6 billion, representing an oversubscription of 4.6 times.
SMEs account for 90% of Saudi industrial and mining sectors: minister
RIYADH: Small and medium enterprises constitute 90 percent of Saudi Arabia’s industry and minerals companies, highlighting that the sector is not “exclusive” to top players, according to a senior official.
The Kingdom’s Minister of Industry and Mineral Resources, Bandar Alkhorayef, highlighted this during a dialogue session at an event organized by the General Authority for Small and Medium Enterprises, known as Monsha’at, according to the Saudi Press Agency.
During the Industry and Mineral Resources Pioneers week, officials highlighted the impact of pioneering projects in the sector, underlining how industrial technical applications, often led by SMEs, are proving effective in resolving challenges in large-scale industries, SPA reported.
In recent years, the Saudi government has launched several initiatives to bolster SMEs’ presence and participation in various sectors, including industry and mining.
These undertakings, spearheaded by entities such as Monsha’at, focus on providing a range of support services, including financing, licensing facilitation, and business development support.
Programs like the SME loan guarantee program – known as Kafalah – and the Saudi Venture Capital Co. are designed to enhance access to capital, mitigating one of the significant challenges faced by smaller companies.
Other examples of SMEs demonstrating innovative capabilities in the sector include improving mine preservation, environmental safety, and productivity.
This reflects the broader trend within Saudi Arabia, where SMEs increasingly leverage technology and innovation to address complex industrial challenges.
EV Auto Show 2024: Riyadh set for key exhibition, spotlighting Saudi green goals
RIYADH: The rapidly evolving transport sector in Saudi Arabia is set for a significant boost with the return of the EV Auto Show to Riyadh, taking place from Sept. 17 to 19.
Hosted at the Riyadh International Convention and Exhibition Center, this three-day event aligns with Saudi Arabia’s Vision 2030, emphasizing its commitment to electric vehicles and sustainable technology.
The exhibition is a central event for the Kingdom’s expanding EV ecosystem. It brings together key stakeholders, including automotive manufacturers, charging solution providers, policymakers, and consumers, to discuss the future of mobility in the region.
Attendees will have the chance to explore a variety of EVs, charging solutions, and green technologies. The show will feature interactive seminars and panel discussions, allowing participants to engage with industry experts and innovators.
As Saudi Arabia aims to manufacture and export over 150,000 electric cars by 2026, such events are vital for advancing the shift toward clean technology and sustainable energy sources.
The show also serves as a platform for knowledge exchange, focusing on advancements in battery technology, charging infrastructure, and regulatory developments.
This exchange is crucial for overcoming current challenges and accelerating the Kingdom’s transition to electric mobility.
Shift in perception
Saudi Arabia’s EV market is growing, fueled by government initiatives, public-private partnerships, and increasing consumer interest.
Ravi Ravichandran, president of Ford Middle East, told Arab News: “The electric vehicles market in Saudi Arabia is undergoing rapid expansion, largely driven by the Kingdom’s Vision 2030, which seeks to diversify the economy beyond its traditional reliance on hydrocarbons.”
He noted a rise in consumer interest in EVs, citing a recent survey that shows 40 percent of Saudi consumers are considering purchasing one within the next 12 months. This reflects a growing shift away from traditional internal combustion engine vehicles.
Among those surveyed, hybrid vehicles were the most popular choice, followed by plug-in hybrids and pure battery EVs.
Ravichandran added that nearly one third of Saudis are already exploring the EV market. He also highlighted that 81 percent of respondents reported an improved view of electric vehicles over the past year, with many now perceiving them as sleek, enjoyable to drive, and technologically advanced. This indicates a positive shift in public perception.
Infrastructure development
A significant challenge in promoting EV adoption is the development of a comprehensive charging infrastructure.
The Ford executive highlighted that “range anxiety” remains a significant issue for consumers who worry about the availability of charging stations for long trips or daily commutes.
To address this, he added: “The Saudi government, along with regional stakeholders, is actively working to build a robust charging network.”
Electromin is a key player in expanding the charging infrastructure across the Kingdom.
Mark Notkin, chief innovation officer at Electromin, told Arab News: “The widespread implementation of fast charging services across Riyadh hinges on several key factors including governmental incentives, EV adoption rates, regulatory approvals, and partnerships with the private sector.”
These factors will influence the timeline for making fast charging facilities widely available.
Electromin has already installed over 100 chargers across Saudi Arabia, all operated by the company and accessible via its app. The company is focusing on increasing the availability of fast charging services in high-traffic areas, including major malls in Riyadh and Jeddah.
Localization and talent development
An essential component of developing a sustainable EV ecosystem is the localization of talent in the infrastructure sector.
Vision 2030 is driving companies to invest in training and hiring local professionals.
Notkin said: “The localization rate of Saudi employees in the EV infrastructure sector is rising, driven by Vision 2030. Companies are increasingly training and hiring local talent in roles such as project management, marketing, and operations.”
This growing localization is expected to continue as the sector expands, contributing to job creation and fostering technological expertise in the Kingdom.
Ravichandran also highlighted the job creation potential, and said: “The expansion of EV manufacturing, charging infrastructure, and related services will generate significant new job opportunities, playing a crucial role in Saudi Arabia’s economic diversification.
“As more local talent is employed in the EV sector, this will in turn foster the transfer of advanced technologies, particularly in battery production, charging solutions, and software development.”
Creating awareness
Increasing consumer awareness about the benefits of EVs is essential for widespread adoption.
However, misconceptions continue to pose barriers. Ravichandran said: “Nearly one-third of Saudis mistakenly believe EV batteries cannot be recycled, half think EVs require routine oil changes, and one-quarter incorrectly assume that EVs still need fuel to operate.”
These misconceptions highlight the need for “targeted education to inform the public about the realities of owning and maintaining an electric vehicle.”
Efforts are underway to enhance consumer understanding of the long-term cost savings associated with EVs. “Consumers need to understand the long-term cost savings, such as reduced fuel consumption and lower maintenance expenses,” said Ravichandran, adding: “Unlike traditional internal combustion engine vehicles, EVs have fewer components to maintain, making them a more cost-effective and reliable option over time.”
Future outlook
Looking ahead, the Saudi EV market is expected to undergo significant evolution over the next five to 10 years, driven by key developments and innovations.
Ravichandran believes that a “pivotal focus will be on accelerating the rollout of advanced charging infrastructure, with particular emphasis on integrating cutting-edge technologies to enhance convenience and efficiency for customers.”
He also highlighted advancements in local manufacturing capabilities, predicting that innovations in EV production processes and materials will likely drive down costs and increase competitiveness.
Oil Updates – prices climb on Fed rate cut outlook
- Brent crude futures for November were up 38 cents, or 0.5%, at $71.99 a barrel
- US crude futures for October were up 49 cents, or 0.7%, at $69.14 a barrel
SINGAPORE: Oil prices rose in Asian trade on Monday amid expectations of a US interest rate cut this week, though gains were capped by persistent demand worries and weaker China data, according to Reuters.
Brent crude futures for November were up 38 cents, or 0.5 percent, at $71.99 a barrel at 10:00 a.m. Saudi time. US crude futures for October were up 49 cents, or 0.7 percent, at $69.14 a barrel.
Both contracts had settled lower in the previous session, with concerns about supply disruptions easing as Gulf of Mexico crude production resumed following Hurricane Francine and as rising data showed a weekly rise in US rig count.
Still, nearly a fifth of crude oil production and 28 percent of natural gas output in the Gulf of Mexico remain offline in the hurricane’s aftermath.
“Markets are focused on upcoming FOMC policy decisions and traders are likely to stay cautious,” said Phillip Nova senior market analyst Priyanka Sachdeva, adding that prices are still supported by some supply worries given some capacity remains offline in the Gulf of Mexico.
The Federal Open Market Committee is expected to make a decision during its Sept. 17-18 meeting.
Fed fund futures show investors are increasingly betting the US central bank will cut by 50 basis points instead of 25 bps, according to CME FedWatch.
Lower interest rates typically reduce the cost of borrowing, which can boost economic activity and lift demand for oil.
However, analysts are concerned that an aggressive rate cut of 50 bps could signal underlying recession worries, which would be a bane for demand.
“A cut of 50 bps from the Fed will likely indicate weakness in the US economy, raising demand concerns for oil,” said OANDA senior market analyst Kelvin Wong in an email.
Optimism in the market was dampened by weaker Chinese economic data released over the weekend, with the low-for-longer growth outlook in the world’s second largest economy reinforcing doubts over oil demand, said IG market strategist Yeap Jun Rong in an email.
Industrial output growth in China, the world’s top oil importer, slowed to a five-month low in August, while retail sales and new home prices weakened further.
“Coupled with increased odds of a deflationary risk spiral in China after industrial production and retail sales growth declined in August, the current rebound in WTI crude oil is likely unsustainable with intermediate key resistance at $72.20/73.15 per barrel,” OANDA’s Wong said.
Oil refinery output also fell for a fifth month as disappointing fuel demand and weak export margins curbed production.
Italy’s Saipem wins $4 billion contract from QatarEnergy
- Contract will help boost production at QatarEnergy’s North Field offshore natural gas field
DOHA: Italian energy engineering group Saipem said on Sunday it had won an offshore contract worth $4 billion from QatarEnergy, one of the world’s top suppliers of liquefied natural gas.
The contract will help boost production at QatarEnergy’s North Field offshore natural gas field, which lies off the northeastern coast of Qatar, Saipem added in a statement.
Earlier this year, Qatar announced an expansion project to boost the North Field’s LNG output to 142 million tons per annum (mtpa) from the current 77 mtpa by 2030.
The Italian group said this month it had won two offshore contracts in Saudi Arabia worth about $1 billion in total, under an existing long-term agreement with oil giant Saudi Aramco.
