Posts Tagged ‘Saudi Arabia’

As Global Oil Consumption – and Prices – Rise, OPEC Rejects Increased Production

Monday, June 20th, 2011

As gas prices seesaw up and down at the pump and Americans reluctantly pay more to fill their tanks as the economy slows, OPEC (the Organization of Petroleum Exporting States) could not agree on whether or not to increase production and provide some relief. The two key factors are Saudi Arabia and Iran. At an unusually contentious meeting, the 12-nation group could not reach agreement on new production targets.  That sets the stage for higher prices for oil and gas later this year as world demand for oil rises faster than supplies.  Saudi Arabia favored an increase in output, which likely would have translated to lower oil prices.  Other countries – such as Iran — resisted, arguing that oil supplies are adequate to meet demand and current prices are on target.  “We are unable to reach consensus,” OPEC Secretary General Abdullah Al-Badri said.  Saudi oil minister Ali Naimi called the meeting “one of the worst ever.”

Writing on the Salon website,Andrew Leonard points out that China is partially to blame for high prices at the gas pump.  According to Leonard, “If you want to know why gas prices are high, and why, in the long run, they will keep getting higher, all you need to do is peruse BP’s Statistical Review of World Energy 2011 report. Bottom line:  World oil consumption hit an all-time record high of 87.4 million barrels a day in 2010, driven by a surge in demand from emerging nations, but primarily led by China.  China has now overtaken the U.S. as the world’s largest energy consumer, with demand for all kinds of energy growing 11.2 percent in 2010.  In 2010, Chinese oil consumption grew by 860,000 barrels a day.  Since 2000, China’s oil consumption has grown an incredible 90 percent.  Supply, globally, is not keeping up with demand growth. And barring a major global economic meltdown, that dynamic is not going to change.  The rest of the world is going to continue to consume more oil, and finding and developing new sources of oil is going to continue to get more expensive.  And Obama can’t do a damn thing about it, except to put in place policies that encourage U.S. consumers to consume as little oil as possible.”

The Saudis and the Iranians frequently lock horns over pricing at OPEC meetings.  Typically, however, member nations follow Saudi Arabia’s lead, which produces most of the group’s oil.  This time the Saudi-Iranian rivalry resulted in a deadlock.  The International Energy Agency (IEA) had urged oil producers to put more crude on the market.  “Ongoing supply disruptions, as well as the fragile state of the global economy, call for a prompt increase in supply,” the agency said.  Iran, the second largest OPEC member after Saudi Arabia, is the leading price “hawk,” favoring expensive oil.  Saudi Arabia has consistently acted to moderate prices.

“Looking to the remainder of this year, the expected supply/demand balance indicates a tightening market,” OPEC’s report said. “As a result, global inventories could continue to decline as the market enters a period of high seasonal demand.”  OPEC’s member nations include Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.

According to the IEA, demand for OPEC crude will average 29.95 million bpd (barrels per day)  in the 2nd half of 2011, or 1.2 million bpd more than April production of 28.75 million bpd.  Analysts said OPEC’s report had minimal impact on oil prices and a bigger focus would be the IEA’s latest forecasts.  “It’s absolutely market neutral,” said Olivier Jakob of Petromatrix.  “What’s going to matter more is the IEA report when we will be able to see if there are any more changes.”  OPEC’s May oil output rose by approximately 171,000 bpd to 28.97 million bpd as extra supplies from Saudi Arabia, Nigeria and Iraq offset declining production from Libya.  The report said Saudi output totaled 8.86 million bpd in May.  Saudi newspaper al-Hayat reported that Riyadh would boost supplies to 10 million bpd in July and oil traders said the kingdom was offering more to Asian customers, because they are driving the increase in global demand.  The world is expected to use 1.38 million bpd of oil more this year than in 2010, OPEC’s report said.

OPEC’s daily production is bound by quotas of 26.32 million bpd in May of 2011, according to the group’s monthly report.  That’s an increase from 26.17 million bpd in April, OPEC said.  Saudi Arabian output climbed to 8.86 million bpd in May, compared with 8.8 million in April.  OPEC’s total supply, including Iraq, was 28.97 million bpd May compared with 28.8 million the previous month.  Libyan supplies fell to 169,000 bpd in May as the conflict between forces loyal to Muammar Qaddafi and anti- government rebels halted output.  That compares with an average 1.56 million last year.  OPEC, which provides approximately 40 percent of the world’s crude oil, announced its biggest-ever supply cuts in late 2008 when the financial crisis caused a collapse in global demand.  The decision capped production at 24.845 million bpd for all members except Iraq, which is exempt from the quota system.

Now we are unhappy that we did not reach a decision but this is not the end of the world,” al-Badri said.”It was not political, it was really an economic situation.  Of course, for the past six years we have enjoyed a very relaxed atmosphere, now we have some tension.  I hope we will overcome it.”

Middle East Investors See Good Deals Globally

Thursday, February 4th, 2010

Middle East investors shopping in Europe and the Far East.Capital is flowing out of the Middle East and being invested in real estate across the globe, according to Nicholas Maclean, Managing Director, CB Richard Ellis, Middle East. “The outflow of capital from the Middle East to be invested into real estate properties worldwide has been higher than the influx of global capital into real estate properties in the Middle East.  The UAE, in particular, has been looking to diversify its investments and part of the reason has been the lack of transparency within this region.”

Europe and the Far East have received the lion’s share of Middle East investment, with India and China perceived as strong growth markets.  Additionally, United Arab Emirates capital is being infused into Abu Dhabi’s office and hospitality sectors.  “Capital spent as FDI into real estate within the Gulf Cooperation Council represents only 11 percent of the total.  Cross-border activity in the world has exceeded 50 percent and so we have a great opportunity to be the recipient of more investment,” Maclean said.

In terms of where the Middle East is placing its investment dollars globally, “London, Paris and Germany have been the largest recipients in Europe while Hong Kong, Singapore and Australia saw the largest inflows in the regions in the Far East.  Knowledge and liquidity have been the key driving forces for the Middle East investors transferring capital to these areas.  Institutional investors from the Middle East are investing in commercial developments in these markets while individual investors are looking at residential properties in the UK,” Maclean said.

To learn more about the Middle East and its real estate market, listen to Rochdi Younsi, director in the Middle East and Africa practice of Eurasia Group, analyze the major players in real estate and the new investment opportunities in the Middle East.

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Rochdi Younsi: Doing Business in the Middle East

Tuesday, September 22nd, 2009

With 28 million people and a $376 billion economy, Saudi Arabia provides its citizens with subsidized goods, services, healthcare, housing and education to assure a stable political system and long-term allegiance to the House of Saud, according to Rochdi Younsi, director in the Middle East and Africa practice at the Eurasia Group.  An expert on the Gulf Cooperation Council, Younsi has been featured on CBS’ “60 Minutes” and on National Public Radio.

viewThanks to its oil revenues, Saudi Arabia is building new cities such as the $26 billion King Abdullah Economic City, and hiring American contractors and consultants to construct this sustainable metropolis on the Red Sea.  The vision: to create modern cities in which various major corporations will be headquartered.  The payoff:  approximately 1,000,000 new jobs for Saudi nationals.

Cash-rich Kuwait, which recently invested $800 million buying the Chrysler Building, has a $138 billion economy and $200 billion in reserves.  According to Younsi, Kuwait is fascinating because it depends heavily on oil production and export to finance its Kuwait Investment Authority, which was established in the 1950s.  The nation’s democratic system of government can be both an impediment and an advantage because it includes a parliament with real legislative powers and the ability to redesign the emirate’s economic strategy – which can mean gridlock.

Dubai, by contrast, has a $37 billion economy and is $100 billion in debt, following its building boom to establish itself as the Middle East’s financial hub.  Younsi says it is important to not think of Dubai as an independent nation because it is one of seven emirates comprising the United Arab Emirates.  Dubai lacks energy resources and is dependent on revenues it receives from the larger and wealthier Abu Dhabi, which is rich in oil and gas.

Eurasia Group is the world’s leading political risk and consulting firm that helps corporations make informed business decisions in countries around the world.

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