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.


Pakistan may import crude oil from US to lower tariff burden — official

Updated 16 April 2025
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Pakistan may import crude oil from US to lower tariff burden — official

  • Countries are scrambling to find ways to lower US tariff burdens, which include buying more American oil
  • High-level Pakistani delegation is scheduled to travel to US to discuss American tariffs, trade imbalance

KARACHI: Pakistan’s government is mulling “very good options” which range from importing crude oil from the United States (US) to abolishing tariffs on American imports, an official privy to the matter said on Wednesday, as Islamabad attempts to offset a trade imbalance that has triggered higher tariffs from Washington.
US President Donald Trump has imposed a 10 percent baseline tariff on all imports to the US and higher duties on dozens of other countries. Pakistan faces a 29 percent tariff due to a trade surplus with the US of about $3.6 billion, although that is subject to the 90-day pause Trump announced last week.
The US is the largest buyer of Pakistan’s textile goods, importing goods worth $5.43 billion last year through June, according to State Bank of Pakistan. In return, cash-strapped Pakistan imported $1.88 billion worth of American goods, resulting in the trade imbalance.
Countries are scrambling to find ways to lower their US tariff burdens, and Pakistan is no different. Pakistan’s Finance Minister Muhammad Aurangzeb said last week Islamabad will send a high-level delegation to Washington to discuss the American tariffs.
“There have been talks of Pakistan potentially importing oil, soya been (oil) and cotton from the US. That’s already it,” an official who spoke to Arab News on condition of anonymity as he was not authorized to speak to media, said.
The finance ministry did not respond to Arab News’ request for a comment till the filing of this report.
The official said the Pakistani delegation will inquire about the expectations of the American government regarding trade, which could include abolishing duties or non-tariff barriers against US products.
“Or they may ask us to buy more cotton from them,” the official said. 
A senior official from Pakistan’s commerce ministry who spoke on condition of anonymity as well, said the discussions were at an “immature stage” and further meetings would be held to finalize them. 
“What decisions are taken, what we offer to them, all options are being examined,” he said. “Everything is on the cards but what is finalized, that cannot be said right now.”
Pakistan spends about $17 billion annually on oil imports, most of which come from the United Arab Emirates and Saudi Arabia. Pakistan is also counted among the largest buyers of cotton, which it uses as raw material for its huge textile industry. Most of Pakistan’s cotton imports come from the US.
As per official data, Pakistan spent more than half a billion dollars ($578 million) last year on the import of 204,890 tons of raw cotton and 119,845 tons of soya bean oil after the local harvest was found to be in poor quality.
In 2023, Pakistan began buying discounted Russian crude oil banned from European markets due to Russia’s war in Ukraine. Muhammad Waqas Ghani, head of research at the Karachi-based JS Global Capital Ltd., said Pakistan faces limitations in diversifying its product slate when it comes to Russian crude oil.
He said this was because Russian crude oil yields a higher output of furnace oil. a less desirable fuel in the country’s evolving energy mix. 
“Importing US crude could offer access to a wider range of crude grades, better aligned with Pakistan’s long-term goal of phasing out furnace oil,” Ghani explained. “This move would also open doors for improved trade terms and potentially pave the way for tariff relief which is our primary objective for now.”
‘OTHER VERY GOOD OPTIONS’
Pakistan’s cotton production has been hit hard by low quality of seeds and climate-induced calamities such as floods caused by excessive rains.
“Apart from that (US oil import) there are other very good options which are being discussed,” the official said. 
However, he confirmed that none of these options had been finalized yet as the delegation would want to meet the American officials and gauge Washington’s expectations.
“Let’s listen to them first,” he said. 
Pakistan’s financial experts and independent think tanks have advised Islamabad to establish trade agreements with emerging economies such as Africa or the Central Asian Republics (CARs) or reinforce existing partnerships with China or the Middle East. 
Financial experts have also called upon the country to use America’s imposition of tariffs as an opportunity and diversity its exports market to other regions to mitigate potential losses.


Closing Bell: Saudi main index edges up 0.15% to close at 11,634

Updated 16 April 2025
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Closing Bell: Saudi main index edges up 0.15% to close at 11,634

RIYADH: Saudi Arabia’s Tadawul All Share Index closed Wednesday’s trading session in positive territory, rising 17.61 points to reach 11,634.42, an increase of 0.15 percent.

The total trading turnover on the main index stood at SR5.79 billion ($1.54 billion), with 109 stocks advancing while 131 declined.

The MSCI Tadawul 30 Index also posted gains, climbing 6.2 points, or 0.42 percent, to end the day at 1,479.9.

Meanwhile, the Kingdom’s parallel market, Nomu, recorded a slight dip, falling 57.73 points—or 0.2 percent—to close at 29,083.57. Thirty stocks advanced on the parallel market, while 42 closed lower.

Lazurde Company for Jewelry led the gains on the main index with a sharp rise of 10 percent, closing at SR14.08. Saudi Industrial Export Co. followed, increasing 9.69 percent to SR2.49. Shares of Mobile Telecommunication Company Saudi Arabia advanced 5.65 percent to SR13.08.

Saudi Real Estate Co. also recorded a notable uptick, with its shares climbing 4.88 percent to SR23.20, while Takween Advanced Industries Co. rose 4.78 percent to close at SR9.20.

On the other end of the spectrum, Al Mawarid Manpower Co. was the day’s worst performer on TASI, with its shares dropping 4.93 percent to SR142.60. City Cement Co. fell 4.56 percent to SR20.10, and Umm Al-Qura Cement Co. declined 3.96 percent to SR17.94.

On the Nomu market, Watani Iron Steel Co. emerged as the top gainer, with its share price climbing 7.14 percent to SR2.40. Hedab Alkhaleej Trading Co. and Knowledge Tower Trading Co. also performed well, with their shares increasing by 5.61 percent and 4.62 percent to close at SR43.30 and SR13.60, respectively.

Other notable gainers included Nofoth Food Products Co. and Knowledge Net Co.

On the losing side, Jana Medical Co. posted the steepest decline on Nomu, with shares dropping 8.53 percent to SR19.30. Almuneef Co. for Trade, Industry, Agriculture and Contracting fell 8.02 percent to SR7.45, while Horizon Educational Co. slipped 7.67 percent to SR83.


Saudi Arabia sees 333% surge in private hospitality licenses amid tourism boom

Updated 16 April 2025
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Saudi Arabia sees 333% surge in private hospitality licenses amid tourism boom

RIYADH: Saudi Arabia issued 8,357 licenses for private hospitality facilities in 2024, marking a 333 percent year-on-year surge as the Kingdom ramps up efforts to build a globally competitive tourism sector. 

The latest data, released by the Ministry of Tourism, reflects soaring investor interest in the hospitality segment and the government’s push to expand capacity across accommodation types, particularly individually owned, furnished units licensed to serve paying guests, the Saudi Press Agency reported. 

This surge in permits aligns with a nearly fourfold increase in tourism license applications since Saudi Arabia secured the hosting rights for the 2034 FIFA World Cup, according to Vice Minister of Tourism Princess Haifa bint Mohammed Al-Saud, who made the remarks during an event earlier this month. 

As part of Vision 2030, Saudi Arabia aims to draw 150 million annual visitors by the end of the decade and is investing heavily in mega-tourism and hospitality projects such as NEOM, the Red Sea destination, and Diriyah Gate. 

Mohammed Al-Rasasmah, the official spokesman for the Ministry of Tourism, said that “the increasing growth in the number of licenses issued for private tourism hospitality facilities confirms the ministry's keenness to enable individual investors in the hospitality sector to obtain the necessary ministry license to operate, within the framework of the ministry's keenness to ensure the improvement of services provided,” the SPA reported. 

“He pointed out that these efforts come within the framework of the "Our Guests Are a Priority" campaign; which aims to enhance hospitality facilities' commitment to licensing and classification standards, and ensure their compliance with the requirements and requirements set by the Tourism System and its regulations,” it added.  

Earlier this month, the ministry reported an 89 percent increase in licensed hospitality facilities across Saudi Arabia, reaching 4,425 units by the end 2024. The rise reflects mounting demand from domestic and international travelers as the Kingdom accelerates tourism development under Vision 2030. 

Makkah accounted for 1,030 of these licensed facilities — an 80 percent annual jump — making it the leading region for the number of certified accommodations and rooms. The ministry said the uptick supports its commitment to improving the visitor experience, especially for Umrah pilgrims. 

In a post on X at the time, Al-Rasasimah described the surge as “remarkable,” adding that it reflects efforts “to support the sector’s growth and enhance its investment attractiveness.” 

The ministry emphasized that the regulation of private hospitality providers is not only intended to enhance competitiveness but also to protect guest rights and uphold service standards, particularly in high-demand areas like Makkah and Madinah. 


GCC banks poised to weather global trade turbulence: S&P report

Updated 16 April 2025
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GCC banks poised to weather global trade turbulence: S&P report

RIYADH: Despite rising global trade tensions and heightened market volatility, banks across the Gulf Cooperation Council are expected to remain resilient, according to a recent report by S&P Global Ratings.

In its analysis titled “GCC banks can cope with the fallout from intensifying trade tensions,” the ratings agency pointed to the region’s strong financial fundamentals as a key buffer against economic uncertainty stemming from evolving US tariff policies and global investor jitters.

S&P highlighted investor risk aversion and market volatility as the most immediate threats, but noted that Gulf banks are well-positioned to absorb potential shocks. “GCC banks appear to be in a good position to withstand these threats,” the report stated, citing robust liquidity levels, solid profitability, and healthy capitalization as major strengths.

While the direct impact of trade tensions on GCC economies is expected to be limited—due in part to their relatively low export exposure to the US — the report warned of more significant indirect effects. In particular, a sustained decline in oil prices could weigh on fiscal spending and economic sentiment across the region. S&P has revised its assumed oil price forecast for 2025 to $65 per barrel.

“A prolonged period of lower oil prices could lead to reduced government spending, dampen business confidence, and potentially trigger an uptick in non-performing loans,” the report noted.

To gauge the sector’s resilience, S&P conducted stress tests modeling severe scenarios, including sharp capital outflows and a surge in NPLs. Even under a worst-case scenario—where NPLs increase by 50 percent—the top 45 banks in the GCC would face cumulative losses of $30.3 billion, significantly lower than their combined projected net income of $60 billion in 2024.

The findings reinforce the region’s financial stability amid global economic headwinds, underlining the strength of its banking sector even in the face of mounting external pressures.

“Even in our worst-case scenario, we still expect the shock to affect banks’ profitability rather than their solvency,” the report noted.  

Qatari banks were identified as more vulnerable due to their net external debt position, but strong government support mitigates risks. In contrast, UAE banks exhibit the highest resilience, thanks to their robust net external asset position.  

The report also pointed to regulators’ proactive measures as a critical factor. During the COVID-19 pandemic, forbearance policies helped banks navigate uncertainty, and similar actions are expected if trade tensions escalate further.   

While challenges loom, GCC banks enter this period of uncertainty from a position of strength. “Banks continue to display strong capitalization, with an average Tier 1 capital ratio of 17.2 percent at year-end 2024,” S&P noted.

The combination of solid fundamentals and potential regulatory backstops suggests the sector is prepared to weather the storm. 


Riyadh, Jakarta hold talks to strengthen ties in mining sector

Updated 16 April 2025
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Riyadh, Jakarta hold talks to strengthen ties in mining sector

JEDDAH: Economic ties between Saudi Arabia and Indonesia are set to deepen as the Kingdom’s top minister visits Jakarta to explore investment opportunities and enhance cooperation in the mining and industrial sectors. 

Saudi Minister of Industry and Mineral Resources Bandar Alkhorayef is leading a high-level delegation to Indonesia from April 15 to 17, aiming to strengthen bilateral business relations and forge strategic partnerships across mining, food, pharmaceuticals, and auto parts industries, the Saudi Press Agency reported. 

This comes as the Kingdom aims to position mining as a foundational pillar of its industrial economy, with its mineral wealth estimated at SR9.4 trillion ($2.4 trillion). 

In a post on his X account, Alkhorayef said: “At the start of my visit to Indonesia, I met with the Special Presidential Envoy for Energy and Environmental Affairs to discuss cooperation in mining and explore opportunities to strengthen bilateral partnerships.”  

His meeting with Special Envoy Hashim Djojohadikusumo focused on enhancing collaboration in the mining sector. The Indonesian official highlighted promising prospects in the production of strategic minerals, including nickel and copper, according to a statement from the Saudi Ministry of Industry. 

Alkhorayef emphasized the alignment of Saudi-Indonesian priorities, citing the mining sector’s key role in Saudi Arabia’s economic diversification under Vision 2030. 

The Saudi minister also held a meeting with Industry Minister Agus Gumiwang Kartasasmita and Minister of State-Owned Enterprises Erick Thohir.

“During the two meetings, we discussed ways to enhance industrial cooperation and expand partnerships between private sector entities in the two countries, in addition to reviewing investment opportunities and the Kingdom’s goals to become an industrial and logistics hub in the region.” Alkhorayef said.

As part of his trip, Alkhorayef also visited PT Vale Indonesia Tbk and Mining Industry Indonesia, or MIND ID, to learn about their pioneering efforts in mineral exploration and mining. 

During these visits, he held discussions with senior executives on ways to boost cooperation in strategic minerals — particularly nickel, cobalt, and copper — while promoting sustainable practices and outlining Saudi Arabia’s National Mining Strategy and investor-friendly ecosystem. 

The talks also focused on strengthening private sector collaboration, attracting investment, and sharing expertise in critical minerals essential to the global energy transition. 

Technology and innovation were highlighted as key drivers of growth in the mining sector, aligned with broader sustainable development goals. 

At MIND ID, both sides discussed best practices in mining operations and explored potential partnerships to develop strategic minerals sustainably. 

Conversations with PT Vale underscored the importance of innovation and technology in shaping the future of mining. 

Alkhorayef noted that Indonesia’s mining achievements align closely with Saudi Arabia’s mining strategy, which aims to unlock domestic mineral resources, localize value chains, and position the Kingdom as a global hub for mining investment and innovation. 

Indonesia ranks among the world’s top producers of strategic minerals, including nickel, cobalt, copper, tin, and gold. In 2023, the mining sector contributed 11.9 percent to the country’s gross domestic product, underscoring its critical role in the national economy. 

The country continues to attract international investment focused on developing downstream industries and reinforcing global mineral supply chains — goals that mirror Saudi Arabia’s own strategy to localize value chains and maximize its mineral wealth, the ministry’s statement added.