Focus: Oil and Aramco

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Updated 12 May 2020
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Focus: Oil and Aramco

What happened:

Saudi Arabia announced cutting oil production by a further 1 million barrels as of June 1 bringing production down to 7.49 million barrels per day (bpd), the lowest in 18 years. The UAE and Kuwait followed the Kingdom’s move, cutting production by 100,000 bpd and 80,000 bpd, respectively.

Austrian Chancellor Sebastian Kurz told Bloomberg it would take several years and open borders for the Austrian economy to reach pre-crisis levels.

Austria is an export-driven economy and derives 15 percent of its GDP from tourism. Kurz said the EU would help Italy, Spain, and France with 500 billion euros ($541 billion) via the European Stability Mechanism, but that he was not in favor of coronabonds or mutualizing debt.

Turkey will inject $3 billion into three lenders in an attempt to support the economy. This comes after the government lifted its ban on Citi, BNP, and UBS.

Budget airline Ryanair will resume 40 percent of its flights by July 1, which will of course depend on how borders will open.

Elon Musk reopened his Tesla plant in California despite government orders to the contrary, and US Treasury Secretary Steven Mnuchin said he understood Musk’s desire to reopen.

Earnings season continues:

Motor manufacturing giant Toyota’s net sales for the full year 2020/21 declined by 2 percent to 2.2 trillion yen. Earnings before interest and taxes declined by 2.9 percent to 196 billion yen. Worse is likely to come moving into the second quarter of 2020, because most major economies are in lockdown and only reopening gingerly.

Financial services company Allianz reported revenue growth of 5.7 percent to 42.6 billion euros. Operating profit declined by 22.2 percent to 2.3 billion euros due to claims in its insurance business related to the coronavirus disease (COVID-19). Net income attributable to shareholders decreased 28.9 percent to 1.4 billion euros. At the same time its asset management business saw net outflow of funds worth 46 billion euros.

Saudi Aramco remains the world’s most profitable company. First-quarter sales came in at $51.4 billion, down 19 percent. Net income was $16.7 billion, down 25 percent compared to the same quarter in 2019. The company’s CEO Amin Nasser expects the COVID-19 pandemic’s impact on demand and oil prices to weigh in on earnings going forward.

In March, Aramco announced a 25 percent reduction in capital expenditure, but Nasser said it would continue to review spending in line with the impact of the pandemic.

Aramco is on track to keep its promised $75 billion dividend, paying $18.8 billion in the first quarter.

Background:

By cutting production by 1 million bpd as of June 1, Saudi Arabia took leadership in OPEC+ to do whatever it takes to start on the road toward rebalancing the markets. This was demonstrated by the fact that both the UAE and Kuwait followed suit and will reduce their output, albeit by smaller amounts. These actions should have a positive impact on the next meeting of OPEC+ in early June.

The outlook for oil demand will remain uncertain until there is a clearer understanding of the shape and pace of economic recovery. BP CEO Bernard Looney told the FT that he was uncertain whether oil demand would go back to pre-pandemic levels or if demand had peaked.

As for Aramco earnings, while a 25 percent drop of net income might look big, it has to be viewed against the backdrop of a decline in oil prices by 65 percent during the same quarter.

The decision to maintain the dividend is important. For one, the Kingdom owns more than 98 percent of Aramco shares and so receives the bulk of the dividends. It is also important that the company proves its reliability to the broader stock market in light of the initial public offering which took place less than six months ago.

Oil majors made different choices when it came to dividends, with BP leaving them intact and Shell slashing them by 75 percent, just to mention two.

The company said the acquisition of a 70 percent stake in SABIC was on track for the third quarter. The media is reporting market rumors that aspects of the deal may be revisited.

Where we go from here:

Goldman Sachs issued a note forecasting an 18 percent retrenchment of the S&P 500 over the next three months, driven, among other factors, by a slow recovery in the real economy, a 50 percent reduction in share buy backs, the potential for higher corporate taxes, and the effect of trade tensions between the US and China.

This call is not an uncontested: On the one hand it is true that the rebounding of the S&P 500 is largely driven by government stimulus and seems to defy contraction in the real economy, but on the other there is still a lot of liquidity chasing investment.

In the same vein, DAX valuations have reached a 15-year high.

The US Federal Reserve will today start its exchange-traded fund investment-grade bond purchases.

 

— Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.
Twitter: @MeyerResources


Police ban pro-Palestine march near BBC headquarters over ‘disruption’ concerns

Updated 7 min 55 sec ago
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Police ban pro-Palestine march near BBC headquarters over ‘disruption’ concerns

  • Planned Jan. 18 march was set to pass near a synagogue
  • Organizers criticized decision, saying it ‘rejects the implication that our marches are somehow hostile to or a threat to Jewish people’

LONDON: UK police have banned a planned pro-Palestine march from taking place outside the BBC headquarters in London, citing concerns over potential “serious disruption” to a nearby synagogue.

The decision, announced on Friday, prevents the rally — originally scheduled for Saturday, Jan. 18 — from gathering in the area under the Public Order Act.

The Metropolitan Police said that it consulted with local community and business representatives, including members of the synagogue’s congregation located “very close” to the proposed starting point of the march, before making the decision.

The ban follows an earlier request by authorities for the Palestine Solidarity Campaign, or PSC, the march’s organizers, to amend their planned route to avoid disrupting worshippers at the synagogue on Shabbat, the Jewish holy day.

The PSC strongly criticized the move, stating: “The Palestine coalition rejects the implication that our marches are somehow hostile to or a threat to Jewish people.

“The Met police have acknowledged there has not been a single incident of any threat to a synagogue attached to any of the marches.”

In an open letter issued on Friday, more than 150 cross-party MPs, trade union leaders, writers, cultural figures and civil society organizations condemned the police’s actions, accusing them of “misusing public order powers to shield the BBC from democratic scrutiny.”

“The route for the march was confirmed with the Police nearly two months ago and, as agreed with them, was publicly announced on 30 November. This route, beginning at the BBC, has only been used twice in the last 15 months of demonstrations and not since February 2024,” the PSC said in its statement.

“With just over a week to go, the Metropolitan Police is reneging on the agreement and has stated its intention to prevent the protest from going ahead as planned.”

The rally was expected to begin outside the BBC’s headquarters before marching to Whitehall.

Organizers said that the demonstration was intended to protest about the “pro-Israel bias” that they claim dominates the broadcaster’s coverage.


Govt. minister says England should play Afghanistan, despite growing calls for boycott amid women’s rights concerns

Updated 16 min 30 sec ago
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Govt. minister says England should play Afghanistan, despite growing calls for boycott amid women’s rights concerns

  • The ICC’s policy requires nations granted Test-playing status, which Afghanistan was given in 2017, to support women’s cricket

LONDON: World cricket’s governing body is coming under increasing scrutiny for its stance on Afghanistan’s inclusion in the upcoming Champions Trophy tournament, despite the Taliban’s restrictions on women’s rights and sports participation.

The International Cricket Council has so far resisted calls to ban Afghanistan’s men’s team or press the Taliban regime to uphold its own rules surrounding the establishment of a women’s cricket team, citing a strategy to influence change through engagement.

The ICC’s policy requires nations granted Test-playing status, which Afghanistan was given in 2017, to support women’s cricket.

However, Afghanistan was accepted as a full member without an already functional women’s cricket program, citing religious and cultural reasons.

Despite efforts by the Afghanistan Cricket Board to establish a women’s team in 2020 “adhering to the traditional Afghan and Islamic values,” the Taliban’s resurgence in 2021 halted progress, with women and girls increasingly banned from sports and public life since.

More than 160 British MPs and peers have recently called for the England and Wales Cricket Board to boycott their match against Afghanistan, set to be played next month in Pakistan, Sky News reported.

Prime Minister Keir Starmer refused to commit to such action, but said: “The Department for Culture, Media and Sport is in touch with our international counterparts on this issue. I welcome the England and Wales Cricket Board making strong representations to the International Cricket Council on Afghanistan’s women’s cricket team.”

South Africa’s Sports Minister Gayton McKenzie has also supported calls for a boycott, but Cricket South Africa has deferred to the ICC, emphasizing adherence to tournament regulations.

However, British Culture and Sport Secretary Lisa Nandy has rejected the idea of a boycott, stating that such actions could penalize athletes and alienate fans.

Speaking to BBC Breakfast, Nandy said: “I’m instinctively cautious about boycotts in sports. I think they deny sports fans the opportunity that they love, and they can also very much penalize the athletes and the sports people who work very, very hard to reach the top of their game and then they’re denied the opportunities to compete.

“They are not the people that we want to penalize for the appalling actions of the Taliban against women and girls,” she added.

Instead, Nandy pointed to diplomatic measures to bring about change, highlighting past UK efforts to withhold symbolic support at sporting events, such as avoiding dignitary attendance at the Winter Olympics in China.

“When China hosted the Winter Olympics, I was very vocal, many of us were very vocal about making sure that we didn’t send dignitaries to that event, that we didn’t give them the PR coup that they were looking for when they were forcibly incarcerating the Uighurs in Xinjiang,” she said.

The ICC has reiterated its commitment to engaging with Afghanistan to foster inclusivity in cricket.

“The ICC remains closely engaged with the situation in Afghanistan and continues to collaborate with our members,” a spokesperson told Sky News.

“We are committed to leveraging our influence constructively to support the Afghanistan Cricket Board in fostering cricket development and ensuring playing opportunities for both men and women in Afghanistan.

“The ICC has established an Afghanistan Cricket Task Force, chaired by deputy chairman Mr. Imran Khwaja, who will lead the ongoing dialogue on this matter,” they added.

However, the ICC’s approach has drawn sharp criticism from Afghan women’s rights activists.

Khalida Popal, former captain of Afghanistan’s women’s football team, expressed disappointment in the governing bodies’ lack of action.

“The governing bodies have failed to stand by their own policies. There’s clear gender discrimination in sport, and they’ve ignored the women of Afghanistan,” she told Sky News.

England’s match against Afghanistan remains scheduled, and the ICC continues to engage with the ACB. But the Champions Trophy, set to take place next month, has become a focal point for global scrutiny of Afghanistan’s policies and the ICC’s role in upholding its principles.


Pakistani PM, OIC chief urge global push for Gaza ceasefire

Updated 22 min 48 sec ago
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Pakistani PM, OIC chief urge global push for Gaza ceasefire

  • The OIC leader is currently in Islamabad to attend a global conference on girls’ education in Muslim countries
  • Shehbaz Sharif also met with the secretary general of the Muslim World League, the co-host of the conference

ISLAMABAD: Prime Minister Shehbaz Sharif and Organization of Islamic Cooperation (OIC) Secretary General Hissein Brahim Taha agreed on Friday the OIC must intensify pressure on the international community to secure an immediate ceasefire in Gaza during their meeting in Pakistan’s federal capital.
The top OIC official arrived in Islamabad earlier in the day to attend a two-day global conference on girls’ education in Muslim countries, set to begin on Saturday. He was received by Education Minister Khalid Maqbool Siddiqui upon arrival.
During the meeting, the prime minister thanked the OIC for its consistent support regarding the Kashmir dispute with his country’s nuclear rival, India.
Sharif strongly condemned Israel’s ongoing “genocidal campaign” in Gaza and stressed the need for an immediate and unconditional ceasefire, unrestricted humanitarian aid for Palestinians and global accountability for Israel’s conduct of war.
“Both leaders agreed that the OIC must maintain its pressure on the international community for an immediate ceasefire in Gaza,” read an official statement released by Sharif’s office after the meeting. “They emphasized that the resolution of the Palestine issue must align with UN resolutions and the aspirations of the Palestinian people.”
The meeting also touched on combating Islamophobia and other global and regional matters of mutual interest.
GIRLS’ EDUCATION
The OIC secretary general expressed gratitude for Pakistan’s warm reception and praised the country’s leadership role in addressing critical issues facing the Muslim world.
“The hosting the international conference on girls’ education in the Muslim world is an example of Pakistan’s leadership role in addressing important issues,” he said.
Separately, the prime minister also met with Sheikh Dr. Mohammad bin Abdulkarim Al-Issa, the secretary general of the Muslim World League (MWL).
Sharif commended the MWL’s partnership in co-hosting the two-day conference and emphasized that the event would send a strong global message about the Muslim world’s commitment to advancing girls’ education.
Dr. Al-Issa informed Sharif the conference would culminate in the Islamabad Declaration, a consensus document promoting girls’ education in Muslim countries.
He also informed the conference would feature renowned scholars, educators, and thought leaders from around the globe to address a wide range of issues affecting the Muslim world.


28 Group 1 winners nominated for Saudi Cup 2025

Updated 23 min 19 sec ago
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28 Group 1 winners nominated for Saudi Cup 2025

  • Laurel River, Sierra Leone and Romantic Warrior on course to clash in world’s most valuable race next month

RIYADH: A strong entry of 28 Group 1 winners have been put forward for this year’s Group 1 $20 million Saudi Cup, which will take place at King Abdulaziz Racecourse in Riyadh on Feb. 22.

The winner of last year’s Dubai World Cup, Laurel River (USA), could face Breeders’ Cup Classic victor Sierra Leone (USA) along with three-time Hong Kong Cup winner Romantic Warrior (IRE), 2024 Kentucky Derby winner Mystik Dan (USA), and last year’s Saudi Cup champion, Senor Buscador (USA). 

Other notable runners that could feature in the 1,800m contest are last year’s Saudi Derby winner Forever Young (JPN), 2024 Japanese Derby winner Danon Decile (JPN), Breeders’ Cup Filly & Mare Sprint star Soul Of An Angel (USA) and five-time Argentine Group 1 winner El Kodigo (ARG).

Prince Bandar Bin Khalid Al-Faisal, chairman of the Jockey Club of Saudi Arabia, said: “On behalf of everyone at the JCSA, I would like to extend my thanks to owners and trainers from around the world for their nominations for the 2025 Saudi Cup meeting. We are proud to be top of mind for the trainers of the world’s best from more than 20 countries, including so many that have won at the highest level.”

Including the feature race, the two-day Saudi Cup meeting has attracted 1,123 entries — comprising 81 individual Group 1 winners — from a total of 21 countries, all set to fight it out for the $38.1m prize money on offer across Saudi Cup weekend on Feb. 21-22.

Japanese-trained Warp Speed (JPN), runner-up in the Melbourne Cup on his last start, holds an entry for the newly upgraded Group 2 Red Sea Turf Handicap and could be joined in the field by the UK-trained Al Nayyir (GB), who finished fourth in the 2024 renewal of the race, and Continuous (JPN), the 2023 St Leger winner.

Sir Alex Ferguson-owned Spirit Dancer (GB) has been given the chance to defend his crown in the Group 2 Neom Turf Cup and could line up alongside Japan Cup runner-up Shin Emperor (FR) and Danon Beluga (JPN), while dual Group 1 winners Measured Time (GB) and Al-Riffa (FR) could represent the UAE and Ireland respectively.

The Group 2 1351 Turf Sprint entries are headed by last year’s winner Annaf (IRE) and 2024 Prix Maurice de Gheest victor Lazzat (FR), with Japanese Group 1 winners Ten Happy Rose (JPN) and Ascoli Piceno (JPN) also entered.

Remake (JPN) is set to bid for consecutive wins in the Riyadh Dirt Sprint, which will be run as a Group 2 for the first time. Other notable entrants include Golden Shaheen winner Tuz (USA) and Breeders’ Cup Sprint winner, Straight No Chaser (USA).

Last year’s Group 3 Saudi Derby saw a Japanese victor in Forever Young (JPN), and another Japanese horse tops the entries in the unbeaten Myriad Love (JPN), while Getaway Car (USA) for the USA, Al Qudra (IRE) and Argentine G1 winner Giustino (ARG) are also entered.

As well as thoroughbred action on Saudi Cup night, there is also the Group 1 Obaiya Arabian Classic for purebred Arabians, where 2022 race winner Hadi De Carrere (FR) holds an entry along with the exciting unbeaten HM Alchahine (FR). Saturday’s card also features the Saudi International Handicap, which has attracted horses trained in eight countries.

Feb. 21, the day before Saudi Cup night, features the Group 1 Al-Mneefah Cup for purebred Arabians, which has attracted a strong entry including seven-time PA Group 1 winner Abbes (FR) and Nour Al-Maury (FR), also a seven-time PA Group 1 winner, who could be joined by 2022 race winner First Classs (USA) and recent President Cup winner Heros De Lagarde (FR).

Local-bred champion Asfan Al-Khalediah (KSA), who won the Al-Mneefah Cup in 2023 before going on to land the Obaiya Arabian Classic last year, holds entries in both races. His stablemate, 2024 Dubai Kahayla Classic winner Tilal Al-Khalediah (KSA), is also double-entered.

The Friday program will also feature the International Jockeys Championship, with seven male and seven female jockeys from around the world participating.

Prince Bandar said: “Horse racing thrives on international competition, and we believe the Saudi Cup is the perfect event to showcase the best of global racing. The Saudi Cup itself is the pinnacle of our racing season and in a few short years has become a truly global race. This year’s renewal looks perhaps the strongest yet.

“Horse racing and celebrating the brilliance of both the thoroughbred and purebred Arabian are at the heart of traditional culture in Saudi Arabia, and events such as the Saudi Cup play a big role in engaging the local community in all aspects of the sport. As we continually improve our offering, through race upgrades and further investment, the Kingdom continues to grow as a destination for horse racing, both domestically and internationally.

“We look forward to welcoming all connections to King Abdulaziz Racecourse next month for what promises to be another unforgettable Saudi Cup meeting.”


Amorim keen to keep hold of Mainoo, Garnacho

Updated 26 min 17 sec ago
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Amorim keen to keep hold of Mainoo, Garnacho

  • “I really love my players. I want to keep my players, especially the talented ones,” Amorim said
  • “It’s a special moment in this club, it’s a hard moment, but, of course, I’m really happy with Kobbie, he’s improving, and also with Garna“

MACNEHSTER: Manchester United boss Ruben Amorim has expressed his desire to keep talented youngsters Kobbie Mainoo and Alejandro Garnacho despite rumors the duo could be sold to ease the club’s financial pressures.
United sit 13th in the Premier League and have won only four of Amorim’s 12 games in charge so far.
The club’s ability to hand the former Sporting Lisbon coach, who took charge in November, significant funds to rebuild in the transfer market is limited by profit and sustainability rules.
United lost £113.2 million ($139 million) in the financial year to June 2024 — their fifth straight year in the red.
As academy graduates, any fee received for Mainoo or Garnacho would appear on the books as 100 percent profit.
Reports this week said United were therefore open to offers for the pair, as well as a number of other recently acquired signings such as Leny Yoro, Manuel Ugarte and Matthijs de Ligt.
“I really love my players. I want to keep my players, especially the talented ones,” Amorim said at his pre-match press conference ahead of Sunday’s FA Cup trip to Arsenal.
“It’s a special moment in this club, it’s a hard moment, but, of course, I’m really happy with Kobbie, he’s improving, and also with Garna.”
Amorim has previously admitted United’s recruitment must be better and he stressed the need to also improve the club’s academy to help save money in the transfer market.
“When we are targeting players, we need to be sure that they will cope with the demands,” he added.
“I also said we have to improve our academy, to bring young kids that fills the club in the right way, and also with that rules, we are able to do some business and have some money to invest in the team.
“Our idea is always to keep the best players and the players that we build for this club.
“We know the position that the club is in at the moment, but we will see. I’m very happy, I like our players, especially the guys from our academy.”
Another United academy graduate — Marcus Rashford — does seem set to leave Old Trafford this month.
The 27-year-old reportedly held talks with AC Milan this week, with other European clubs, including Borussia Dortmund, also interested.
Rashford has not featured in United’s last six games and Amorim refused to be drawn on whether he could return at the Emirates.
The Portuguese coach did confirm that second string goalkeeper Altay Bayindir will feature ahead of Andre Onana despite his errors in a 4-3 League Cup quarter-final exit to Tottenham last month.