Coronavirus crisis gives oil exporters a crash course in energy transition

The historic deal by OPEC+, led by Saudi Arabia and Russia but brokered by the US, had resulted on the largest supply cut in the history of the oil industry. But the worst was yet to come as market turmoil reached fever pitch, resulting in “Black Monday” in April. (AFP/File Photo)
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Updated 19 September 2020
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Coronavirus crisis gives oil exporters a crash course in energy transition

  • Daniel Yergin’s new book shows how oil is adjusting to a world radically altered by the coronavirus pandemic
  • He says oil producers face many different challenges as they navigate the great energy transition

The historic deal by OPEC+, led by Saudi Arabia and Russia but brokered by the US, had resulted on the largest supply cut in the history of the oil industry. But the worst was yet to come as market turmoil reached fever pitch, resulting in “Black Monday” in April, when oil drillers paid consumers to take barrels away. Pulitzer prize-winning author Daniel Yergin, in the exclusive final excerpt from his latest book “The New Map — Energy, Climate, and the Clash of Nations,” takes up the story — and warns of the challenges ahead for oil producers in the great energy transition.

The agreement had signaled a new international order for petroleum, one shaped not by OPEC and non-OPEC, but by the US, Saudi Arabia and Russia. In the future, markets would shift; it would be a different planet again after the coronavirus; politics and prices and personalities would change over the months and years ahead. But the sheer scale of their resources, and the dramatically changed position of the US, guaranteed that these three countries, one way or the other, would have dominant roles in shaping the new oil order.

The deal was indeed historic, but it turned out to be not enough, not when measured against the ever-deepening collapse in demand — 27 million barrels down in April, more than a quarter of total world demand. After the deal, prices slid into the high teens and, in some places where oil could not be stored or transported, a lot lower. The world was now running out of storage.

Owing to an anomaly in the way the futures market worked, the price dropped to one cent and then, on April 20 — Black Monday — went “negative.” That meant that a financial investor selling a futures contract, who would be obligated to take physical delivery of oil for which they had no storage place, had on that day to actually pay a buyer to take the oil. That, too, was historic — the lowest price ever recorded for a barrel of oil — minus $37.63.

But that was not a price in the oil field, but a one-time fluke in financial markets, an aberration in a futures contract.

Meanwhile, the global calamity continued. On May 1, coronavirus cases in the world exceeded 3.2 million, with more than 1 million in the US, where more than 25 million people had lost their jobs over five weeks.

The IMF, which at the beginning of the year had predicted solid global growth of 3.4 percent, announced that the world had already entered the worst recession since the Great Depression. 

May 1 was also the day that the mega-oil deal, the OPEC+ agreement, went into effect; and Saudi Arabia and Russia and the other producers began to sharply reduce production. At the same time, the brute force of economics was forcing companies to curtail output or shut down wells altogether.




May 1 was the day that the mega-oil deal, the OPEC+ agreement, went into effect; with Saudi Arabia and Russia and the other producers sharply reducing their production. (Shutterstock)

Why sell oil for less than it cost to produce — assuming you could find a buyer or storage — when you could, in effect, store it in the ground — allow the oil to “shelter in place” — and wait for prices to recover?

The biggest market-driven curtailments by far were in the US, followed by Canada. In May the global combination of OPEC+ cuts and market curtailments took 13 million barrels per day of crude oil off the world market.

The planned spending by the larger US oil upstream companies was slashed in half, meaning many fewer wells would be drilled in the months to follow, ensuring that US production would slide significantly over the next year. The US would certainly remain one of the Big Three, but not as big. 

By the beginning of June, the number of coronavirus cases worldwide was over 6 million, more than double what it had been a month earlier. Yet the economic darkness was beginning to lift.

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READ PART 1: How the coronavirus crisis forced the largest oil supply cut in history

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China, the first country to lock down, was the first to unlock, and it was mostly back in business. European countries were at different levels of increased activity, and the US was opening up in stages, albeit with considerable variation among states. With economies coming back, oil demand was increasing.

Consumption in China was almost back to pre-crisis levels, and the streets in Beijing and Shanghai and Chongqing were once again gridlocked as people who had the option chose to drive rather than take public transportation.

Gasoline consumption in the US, which had fallen by half at the beginning of April, was now growing again. All this pulled oil prices back up higher — to levels that not so long ago would have been considered a low-price scenario, but now a relief. 

With prices rising, would OPEC+ stay together and the cut-backs hold? Key would be the restored relationship between Saudi Arabia and Russia. But also of importance would be how quickly.

US producers, who had shut down their wells, would turn around and open them again, which could renew the oversupply and deliver another blow to prices, as could low economic growth or a persisting recession — or a resurgent virus. 




A gas station attendant refills a car at a station in the Saudi capital Riyadh on May 11, 2020. (AFP/File Photo)

And there were many perspectives on what lay ahead. Looking beyond the crisis, some thought that market cycles were over and that, even with economic recovery, oil prices would be low for a long time.

Others thought otherwise — more likely that the slashing of investment in new production would lead, with renewed economic growth, to a tightening in the balance between supply and demand that would send prices higher.

And some thought entirely differently. They sought a “green recovery:” Governments taking advantage of the crisis to reorient their energy mix away from oil and gas and hasten what they saw as the coming energy transition.

What do the changing world energy markets mean for oil-exporting countries? Markets will go in cycles.

They always have, and oil exporters will face volatility, although what happened in 2020 was never anticipated. They may well have to live with periods of lower revenues, which will mean austerity and lower economic growth, with greater risk of turmoil and political instability.

This emphasizes the need for these countries to address their over-reliance on oil.

The overweening scale of the domestic oil business crowds out entrepreneurship and other sectors in many oil-exporting countries; it can promote rent-seeking and corruption. It also overvalues the exchange rate, hurting non-oil businesses.

In the future, even with a rebound in prices, countries will need to manage oil revenues more prudently, with an eye on the longer term. That means more restrained budgeting and building up a sovereign wealth fund, which can invest outside the country and develop non-oil streams of revenues, helping to diversify the economy and hedge against lower oil and gas prices. 

Petroleum-exporting countries will also find themselves competing with other exporting countries for new investment by companies that will be cost-conscious, selective and focused on “capital discipline.” That will push countries to shape scale and regulatory regimes that are competitive, attractive, stable, predictable and transparent.

Experience proves how hard it is to diversify away from over-dependence. It requires a wide range of changes — in laws and regulations for small-and medium-sized companies, in the educational system, in access to investment capital, in labor markets, in the society’s values and culture.

These are not changes that can be accomplished in a short time. In the meantime, the flow of oil revenues creates a powerful countercurrent that favors the status quo.

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Extracted from “The New Map: Energy, Climate and the Clash of Nations” by Daniel Yergin (Allen Lane). Copyright Daniel Yergin 2020.


Global Markets — stocks and dollar dip as Trump’s spending bill passes, trade deal deadline nears

Updated 04 July 2025
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Global Markets — stocks and dollar dip as Trump’s spending bill passes, trade deal deadline nears

LONDON: Stocks slipped on Friday as US President Donald Trump got his signature tax cut bill over the line and attention turned to his July 9 deadline for countries to secure trade deals with the world’s biggest economy.

The dollar also fell against major currencies with US markets already shut for the holiday-shortened week, as traders considered the impact of Trump’s sweeping spending bill which is expected to add an estimated $3.4 trillion to the national debt.

The pan-European STOXX 600 index fell 0.8 percent, driven in part by losses on spirits makers such as Pernod Ricard and Remy Cointreau after China said it would impose duties of up to 34.9 percent on brandy from the EU starting July 5.

US S&P 500 futures edged down 0.6 percent, following a 0.8 percent overnight advance for the cash index to a fresh all-time closing peak. Wall Street is closed on Friday for the Independence Day holiday.

Trump said Washington will start sending letters to countries on Friday specifying what tariff rates they will face on exports to the US, a clear shift from earlier pledges to strike scores of individual deals before a July 9 deadline when tariffs could rise sharply.

Investors are “now just waiting for July 9,” said Tony Sycamore, an analyst at IG, with the market’s lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea.

At the same time, investors cheered the surprisingly robust jobs report on Thursday, sending all three of the main US equity indexes climbing in a shortened session.

“The US economy is holding together better than most people expected, which suggests to me that markets can easily continue to do better (from here),” Sycamore said.

Following the close, the House narrowly approved Trump’s signature, 869-page bill, which averts the near-term prospect of a US government default but adds trillions to the national debt to fuel spending on border security and the military.

Trade the key focus in Asia

Trump said he expected “a couple” more trade agreements after announcing a deal with Vietnam on Wednesday to add to framework agreements with China and Britain as the only successes so far.

US Treasury Secretary Scott Bessent said earlier this week that a deal with India is close. However, progress on agreements with Japan and South Korea, once touted by the White House as likely to be among the earliest to be announced, appears to have broken down.

The US dollar index had its worst first half since 1973 as Trump’s chaotic roll-out of sweeping tariffs heightened concerns about the US economy and the safety of Treasuries, but had rallied 0.4 percent on Thursday before retracing some of those gains on Friday.

As of 2:00 p.m. Saudi time it was down 0.1 percent at 96.96.

The euro added 0.2 percent to $1.1773, while sterling held steady at $1.3662.

The US Treasury bond market is closed on Friday for the holiday, but 10-year yields rose 4.7 basis points to 4.34 percent, while the two-year yield jumped 9.3 bps to 3.882 percent.

Gold firmed 0.4 percent to $3,336 per ounce, on track for a weekly gain as investors again sought refuge in safe-haven assets due to concerns over the US’s fiscal position and tariffs.

Brent crude futures fell 64 cents to $68.17 a barrel, while US West Texas Intermediate crude likewise dropped 64 cents to $66.35, as Iran reaffirmed its commitment to nuclear non-proliferation. 


World food prices tick higher in June, led by meat and vegetable oils

Updated 04 July 2025
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World food prices tick higher in June, led by meat and vegetable oils

PARIS: Global food commodity prices edged higher in June, supported by higher meat, vegetable oil and dairy prices, the UN Food and Agriculture Organization has said.

The FAO Food Price Index, which tracks monthly changes in a basket of internationally traded food commodities, averaged 128 points in June, up 0.5 percent from May. The index stood 5.8 percent higher than a year ago, but remained 20.1 percent below its record high in March 2022.

The cereal price index fell 1.5 percent to 107.4 points, now 6.8 percent below a year ago, as global maize prices dropped sharply for a second month. Larger harvests and more export competition from Argentina and Brazil weighed on maize, while barley and sorghum also declined.

Wheat prices, however, rose due to weather concerns in Russia, the EU, and the US.

The vegetable oil price index rose 2.3 percent from May to 155.7 points, now 18.2 percent above its June 2024 level, led by higher palm, rapeseed, and soy oil prices.

Palm oil climbed nearly 5 percent from May on strong import demand, while soy oil was supported by expectations of higher demand from the biofuel sector following announcements of supportive policy measures in Brazil and the US.

Sugar prices dropped 5.2 percent from May to 103.7 points, the lowest since April 2021, reflecting improved supply prospects in Brazil, India, and Thailand.

Meat prices rose to a record 126.0 points, now 6.7 percent above June 2024, with all categories rising except poultry. Bovine meat set a new peak, reflecting tighter supplies from Brazil and strong demand from the US. Poultry prices continued to fall due to abundant Brazilian supplies.

The dairy price index edged up 0.5 percent from May to 154.4 points, marking a 20.7 percent annual increase.

In a separate report, the FAO forecast global cereal production in 2025 at a record 2.925 billion tonnes, 0.5 percent above its previous projection and 2.3 percent above the previous year.

The outlook could be affected by expected hot, dry conditions in parts of the Northern Hemisphere, particularly for maize with plantings almost complete. 


Saudi Arabia posts 4 years of VC growth despite global slowdown: report 

Updated 04 July 2025
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Saudi Arabia posts 4 years of VC growth despite global slowdown: report 

RIYADH: Saudi Arabia achieved four consecutive years of growth in venture capital relative to its economy, a feat unmatched among its peers, according to a new report.

Between 2020 and 2023, the Kingdom was the only large market in the sample to post uninterrupted annual gains in VC intensity, contrasting with the more episodic deal flow seen across Africa and parts of Southeast Asia, MAGNiTT’s recently published Macro Meets VC report stated. 

While 2024 saw a slight contraction in funding amid global tightening, Saudi Arabia’s multi-year upward trend signals a sustained commitment to innovation-led diversification.

The Kingdom is steadily consolidating its position as a model for policy-driven venture capital development in emerging markets as it seeks to diversify its economy in line with the Vision 2030 blueprint. 

“Saudi Arabia is becoming the model for long-term, policy-driven ecosystem building,” the report notes, highlighting that sovereign limited partners and local funds have been instrumental in buffering the Kingdom from some of the volatility that struck other emerging venture markets. 

Saudi Arabia’s policy momentum 

The MAGNiTT data revealed that Saudi Arabia recorded a five-year average VC-to-GDP ratio of 0.07 percent. 

Although this figure remains modest compared to more mature hubs like Singapore, its consistent upward movement underscores the growing depth of domestic capital formation. 

Beyond the headline ratios, the Kingdom’s strategic positioning has also come into sharper focus. Saudi Arabia, along with the UAE, is classified as a “Growth Market”— a designation that reflects not only a sizeable GDP and population but also the rising economic clout of local consumer and enterprise demand. 

With a GDP approaching $950 billion and a population exceeding 33 million, Saudi Arabia presents a significant scale advantage. 

According to MAGNiTT’s benchmarking, this size creates “natural expansion targets for startups moving beyond initial launch markets,” supporting both regional and international founders seeking to diversify beyond smaller ecosystems. 

MENA’s uneven progress 

Across the broader Middle East and North Africa region, venture capital activity has continued to evolve unevenly. 

The UAE has retained its reputation as a strategic innovation hub and one of the few “MEGA Markets” in the emerging world, boasting a five-year average VC-to-GDP ratio of 0.20 percent. 

This proportion — identical to Indonesia’s ratio — signifies robust venture activity relative to the economy’s size. 

Yet, while the UAE maintained this level, Saudi Arabia has seen more consistent growth in funding, a dynamic the report attributes to policy-led market development. 

In Egypt, VC has gained further traction over the period under review. Egypt achieved a 25 percent rise in total funding compared to the previous five-year average, lifting its VC-GDP ratio by 0.02 percentage points to 0.11 percent. 

Although Egypt’s overall economic constraints remain acute — GDP per capita still lags below $10,000 — the relative progress suggests improving investor confidence, particularly in fintech and e-commerce. 

However, the report cautions that deal flow in Egypt, much like in Nigeria, remains fragile and prone to episodic swings driven by a handful of large transactions. 

The macroeconomic context across MENA has also been influential. Elevated oil price volatility and the impact of the Israel–Iran conflict have created a challenging backdrop for policymakers. 

Brent crude surged more than 13 percent in a single day earlier in 2025, underscoring the region’s exposure to external shocks. 

Nevertheless, both Saudi Arabia and the UAE managed to maintain monetary policy stability in line with the US Federal Reserve’s cautious stance. 

Saudi Arabia kept its benchmark rate at 5.5 percent, supported by inflation trending around 2 percent, while the UAE held steady at 4.4 percent. 

These decisions reflected a delicate balance between containing price pressures and supporting economic diversification efforts. 

Overall, MENA’s five-year aggregate venture funding reached $12.52 billion. Although this total remains well below the levels seen in more mature regions, it represents a meaningful share of emerging markets capital. 

MENA also posted the highest deal count relative to its peers in Southeast Asia and Africa over the period, indicating a broader base of early-stage transactions even as late-stage funding remains more limited. 

The report emphasizes that expanding geographic and sectoral reach within MENA will be critical to boosting efficiency metrics. 

“VC remains heavily concentrated in a few sectors and cities,” the report observes, warning that without broader inclusion, capital intensity will struggle to match potential. 

Southeast Asia’s VC benchmark 

Beyond MENA, Southeast Asia’s ecosystem stands out as the most mature among emerging venture markets, driven primarily by Singapore’s exceptional performance. 

Over the 2020–2024 period, Singapore achieved a 5-year average VC-to-GDP ratio of 1.3 percent, surpassing not only all emerging markets but also developed economies such as the US, which registered 0.79 percent, and the UK, with 0.73 percent. 

Even with a 5.4 percent decline in total funding compared to the prior five years and a 0.19 percentage point drop in VC-GDP ratio, Singapore maintained unmatched capital efficiency. 

The report describes the city-state as “a benchmark for capital efficiency in venture ecosystems,” attributing this strength to strong regulatory frameworks, institutional capital participation, and a deep bench of experienced founders and investors. 

Indonesia, Southeast Asia’s largest economy, recorded total VC funding volumes nearly twice as large as Singapore’s over five years, but its relative VC-GDP ratio remained lower at 0.2 percent. 

This dynamic illustrates one of the report’s core findings: venture capital inflows correlate more strongly with GDP per capita than total GDP. 

In Indonesia’s case, while its GDP surpassed $1.2 trillion, GDP per capita hovered around $4,000, constraining purchasing power and, by extension, startup revenue potential. 

Thailand, meanwhile, reported funding gains due mainly to a single mega deal rather than systematic improvements in ecosystem depth. 

In Africa, Nigeria emerged as an unexpected bright spot in 2024, as a single major transaction lifted its VC-GDP ratio to 0.15 percent — the highest in the region for that year. 

However, this outlier result also revealed the episodic nature of capital deployment in developing markets. 

Kenya registered a relatively high five-year VC-GDP ratio of 0.3 percent, even as absolute funding volumes remained modest. 

The report notes that in low-GDP contexts, this ratio can overstate ecosystem maturity. 

South Africa and Egypt showed more modest growth trajectories, weighed down by persistent inflation, structural constraints, and capital scarcity. 

In aggregate, African economies continued to lag both Southeast Asia and MENA in total venture funding and deal velocity. 

Global challenges ahead 

Globally, the five years covered by the report were marked by intensifying volatility. 

High interest rates, trade tensions, and geopolitical uncertainty weighed on capital flows. 

The US Federal Reserve held its policy rate between 4.25 percent and 4.5 percent through mid-2025, citing “meaningful” inflation risks. 

The European Central Bank moved to lower its deposit rate to 2 percent, reflecting cooling inflation but acknowledging sluggish growth. 

The World Bank cut its global GDP forecast for 2025 to 2.3 percent, the weakest pace since the 2008 crisis, excluding recessions. 

These headwinds contributed to the decline in venture capital across most emerging markets in 2024. 

In response, sovereign capital and strategic investors have become increasingly important backstops. 

The report highlights that domestic capital formation in MENA has partially offset declining global risk appetite. 

However, these funds tend to be slower moving, more sector-concentrated, and less risk-tolerant than international investors. 

“Without renewed foreign inflows or regional exit pathways, deal velocity may remain muted into the second half of 2025,” the report warns. 

This environment is likely to force startups to extend runway and compel general partners to adopt more selective deployment strategies. 

Despite the challenges, the outlook for Saudi Arabia and other growth markets remains constructive over the medium term. 

The Kingdom’s policy clarity, deepening institutional capital pools, and Vision 2030 commitments create a foundation for continued expansion. 

As the report concludes: “High GDP markets like KSA and Indonesia trail in VC efficiency — suggesting capital underutilization.” 

Closing this gap between potential and realized funding will be the defining challenge for emerging ecosystems as they navigate a turbulent global landscape.


Oil Updates — crude falls as Iran affirms commitment to nuclear treaty

Updated 04 July 2025
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Oil Updates — crude falls as Iran affirms commitment to nuclear treaty

LONDON: Oil futures fell slightly on Friday after Iran reaffirmed its commitment to nuclear non-proliferation, while major producers from the OPEC+ group are set to agree to raise their output this weekend.

Brent crude futures were down 49 cents, or 0.71 percent, to $68.31 a barrel by 11:31 a.m. Saudi time, while US West Texas Intermediate crude fell 41 cents, or 0.61 percent, to $66.59.

Trade was thinned by the US Independence Day holiday.

US news website Axios reported on Thursday that the US was planning to meet with Iran next week to restart nuclear talks, while Iran Foreign Minister Abbas Araqchi said Tehran remained committed to the nuclear Non-Proliferation Treaty.

The US imposed fresh sanctions targeting Iran’s oil trade on Thursday.

Trump also said on Thursday that he would meet with representatives of Iran “if necessary.”

“Thursday’s news that the US is preparing to resume nuclear talks with Iran, and Araqchi’s clarification that cooperation with the UN atomic agency has not been halted considerably eases the threat of a fresh outbreak of hostilities,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Araqchi made the comments a day after Tehran enacted a law suspending cooperation with the UN nuclear watchdog, the International Atomic Energy Agency.

OPEC+, the world’s largest group of oil producers, is set to announce an increase of 411,000 bpd in production for August as it looks to regain market share, four delegates from the group told Reuters.

Meanwhile, uncertainty over US tariff policies resurfaced as the end of a 90-day pause on higher levy rates approaches.

Washington will start sending letters to countries on Friday specifying what tariff rates they will face on goods sent to the US, a clear shift from earlier pledges to strike scores of individual trade deals.

President Trump told reporters before departing for Iowa on Thursday that the letters would be sent to 10 countries at a time, laying out tariff rates of 20 percent to 30 percent.

Trump’s 90-day pause on higher US tariffs ends on July 9, and several large trading partners have yet to clinch trade deals, including the EU and Japan.

Separately, Barclays said it raised its Brent oil price forecast by $6 to $72 per barrel for 2025 and by $10 to $70 a barrel for 2026 on an improved outlook for demand. 


EV maker Lucid’s quarterly deliveries rise but miss estimates

Updated 03 July 2025
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EV maker Lucid’s quarterly deliveries rise but miss estimates

  • Lucid delivered 3,309 vehicles in the quarter ended June 30

LONDON: Electric automaker Lucid on Wednesday reported a 38 percent rise in second-quarter deliveries, which, however, missed Wall Street expectations amid economic uncertainty.

Demand for Lucid’s pricier luxury EVs have been softer as consumers, pressured by high interest rates, shift toward cheaper hybrid and gasoline-powered cars.

Lucid delivered 3,309 vehicles in the quarter ended June 30, compared with estimates of 3,611 vehicles, according to seven analysts polled by Visible Alpha. It had delivered 2,394 vehicles in the same period last year.

Saudi Arabia-backed Lucid produced 3,863 vehicles in the quarter, missing estimates of 4,305 units, but above the 2,110 vehicles made a year ago.

The company stuck to its annual production target in May, allaying investor worries about manufacturing at a time when several automakers pulled their forecasts due to an uncertain outlook.

US President Donald Trump’s tariff policy has led to a rise in vehicle prices as manufacturers struggle with high material costs, forcing them to reorganize supply chains and produce domestically.

Lucid’s interim CEO, Marc Winterhoff, had said in May that the company was expecting a rise of 8 percent to 15 percent in overall costs due to new tariffs.

The company’s fortunes rest heavily on the success of its newly launched Gravity SUV and the upcoming mid-size car, which targets a $50,000 price point, as it looks to expand its vehicle line and take a larger share of the market.

Deliveries at EV maker Tesla dropped 13.5 percent in the second quarter, dragged down by CEO Elon Musk’s right-wing political stances and an aging vehicle line-up that has turned off some buyers.