Month: June 2018

When Iran’s oil minister stormed out of an OPEC confab on Thursday night, the alliance of producers led by Saudi Arabia and Russia was in danger of losing control of the market.

Less than 24 hours later, they had reasserted their authority, for now. Prices that had breached $80 a barrel in the run-up to the meeting, prompting public admonishment from US President Donald Trump, traded back at $75.

Friday’s agreement was a fudge in the time-honored tradition of OPEC, committing to boost output without saying which countries would increase or by how much. It gives Saudi Arabia the flexibility to respond to disruptions at a time when US sanctions on Iran and Venezuela threaten to throw the oil market into turmoil.

“It is very clear that Saudi Arabia, worried about prices running higher going forward, is trying to put in place a near-term cap on prices,” said Yasser Elguindi of Energy Aspects Ltd., a consultant. “Having secured its floor, Riyadh would like to see a near-term ceiling of $75.”

That’s a shift from only a few months ago, when the kingdom had made clear it was comfortable with prices at $80.

“We know prices in the three digits were causing instability” in 2011-2014, Saudi Oil Minister Khalid Al-Falih said on Friday. “I can tell you that as we approach that range of prices, we feel that instability would be back.”

The deal could add about 700,000 barrels of daily supply from OPEC and non-OPEC producers, delegates said. Russia will probably raise output as much as it can while Saudi Arabia attempts to adjust its production to manage prices.

Some traders are far from confident that all those barrels will materialise. The alliance faces multiple risks: the loss of Iranian and Venezuelan exports because of US sanctions, volatile environments in Libya and Nigeria, and hurricane season in the Gulf of Mexico. At the same time, there is a shrinking amount of spare production capacity globally.

“They cannot control the upside at the moment,” tweeted the market’s most vocal bull, hedge-fund manager Pierre Andurand. “Same as in early 2008.”

Consumer Complaints
Like so much, the road to OPEC’s production increase began with a tweet from Trump, complaining that oil prices were “artificially very high” and blaming the cartel.

Trump was not alone in putting pressure on OPEC to respond to rising prices. The US president’s intervention was followed by more diplomatic calls from other top oil-consuming countries.

India’s petroleum minister rang Al-Falih last month and expressed “concern about rising prices.” A week later, it was the head of China’s National Energy Administration on the phone with the Saudi oil minister, asking Riyadh to guarantee adequate supplies.

Those interventions helped trigger a shift in the Saudi minister’s thinking, according to people familiar with the matter. On the same day that Trump tweeted in April, Al-Falih insisted that the world had the capacity to weather higher prices and he was aiming to maintain the OPEC+ deal until the end of the year, according to several OPEC ministers and delegates.

But after the consumers’ interventions, his tone shifted. “Our customers have spoken loudly and we must listen to them,” he said on Thursday.

It wasn’t just the Saudis who modified their stance in response to buyers’ concerns. “This agreement that we reached is a testimony that we care about the consuming countries, and we listen,” said United Arab Emirates Energy Minister and OPEC President Suhail Al Mazrouei.

Similar concerns were motivating Russia. Alexander Novak, its energy minister, spent Thursday morning in Moscow at a government meeting discussing the domestic energy market, where rising gasoline prices have caused concern, before flying to Vienna for negotiations with Saudi Arabia and other OPEC members. After a brief return to Russia, he jetted back to the Austrian capital on Saturday morning to give the final sign-off to the oil-production increase.

Backroom Deals
It was almost exactly a month ago in St. Petersburg, at a 1 am meeting at the Four Seasons hotel, that Al-Falih and Novak hashed out the broad outlines of a deal to increase production. After a few hours’ sleep, the Saudi minister announced to the world that a supply increase at OPEC’s June meeting was “ likely”.

There was more persuading to be done. Iranian Oil Minister Bijan Namdar Zanganeh, arriving in Vienna on Tuesday, was dismissive of the chances of a deal.

What followed was three days of day-and-night diplomacy in the luxury hotels along Vienna’s famed Ringstrasse, and in the chandeliered halls of the Hofburg palace.

While Al-Falih met his counterparts from countries such as Iraq and Venezuela in the palace, in another room nearby, Al Mazrouei was sitting down with the Iranian minister.

Seeking Consensus
Rather than making proposals of their own, the Saudis asked others what they wanted to do, according to one minister at the talks.

They slowly convinced almost everyone that the only question was not whether to increase output, but by how much. Iran remained resolutely opposed.

On Thursday evening, back at OPEC’s headquarters, Zanganeh stormed out of the pre-OPEC meeting, saying he wouldn’t support a deal.

Enter Prince Abdulaziz bin Salman, Saudi Arabia’s state minister for energy affairs. A veteran of challenging negotiations, the snappily dressed prince is skilled in the Byzantine diplomacy and backroom deals that have characterized OPEC since its founding almost six decades ago.

After about 45 minutes of talks on Friday morning, Al-Falih and Abdulaziz emerged from a meeting with Zanganeh with the outlines of a deal. And in the afternoon came a vaguely worded communique that pledged to “strive to adhere” to the production levels originally agreed to in December 2016.

“It wasn’t easy, but everyone found a way to navigate the obstacles,” said one of the ministers at the talks, who asked not to be identified because the discussions were private. “The Iranian resistance was strong and the communique is the art of finding the middle ground.”

Source:http://www.arabianbusiness.com/middle-east/399253-how-saudis-deal-fudge-helped-opec-retain-market-control

Saudi oil minister Khalid Al-Falih said he was looking forward to his daughters being able to drive

The end of Saudi Arabia’s driving ban for women will have an impact on the economy and gasoline consumption, the energy minister said.

On Sunday the kingdom ending its status as the only country in the world to ban half the population from getting behind the wheel.

“There will be more cars on the road,” Khalid Al-Falih said in Vienna, where he was attending an OPEC meeting.

“Women will be more empowered and more mobile and I think they will participate more in the job market over time, so I think it’s going to contribute to employment of females in Saudi Arabia. A secondary effect will probably be higher gasoline demand.”

The plan to allow women to drive is one of the most dramatic move in the government’s bid to open up Saudi society and modernise the economy. Yet at the same time, the government has jailed some women who campaigned to drive for years.

Saudi Arabia adheres to an austere version of Islam and has curbs on women, barring them from driving and requiring them to have the permission of a male guardian to marry or travel abroad.

When asked if he was looking forward to his daughters being able to drive, Al-Falih said, “absolutely.”

Source:http://www.arabianbusiness.com/politics-economics/399278-women-drivers-will-boost-petrol-demand-says-saudi-oil-minister

Saudi women are severely under-represented in the jobs market, with a staggering 31 percent unemployment rate among the female workforce

The end of a decades-old female driving ban is expected to bring an economic windfall for millions of Saudi women, making it easier for them to work and do business.

Taghreed Ghazala, who owns a chain of beauty salons, sees the move as a huge step forward for businesswomen like her in the ultra-conservative kingdom.

“I have many drivers that I pay to transport my employees around,” she told AFP.

“Now I don’t need them anymore. My business will save money, effort and time and I can invest them to grow my business faster.”

Saudi women are severely under-represented in the jobs market, with a staggering 31 percent unemployment rate among the female workforce.

They make up just under 23 percent of the national workforce of six million, according to official figures — mainly because of their restricted mobility.

A recent survey by the Chamber of Commerce of the Red Sea city of Jeddah showed that transportation was considered one of the top barriers holding Saudi women back from joining the labour market.

Experts expect that the lifting of the driving ban will not only help raise female participation and employment rates but also create new jobs.

‘More than just jobs’
“I believe the decision will do more than just provide more job opportunities for women,” said Ihsan Bu-Hulaiga, head of the Riyadh-based Joatha Business Development Consultants.

“It will also boost the female economic participation rate and cut the overall national jobless rate because most of the unemployed are women and many of them are university graduates,” Bu-Hulaiga told AFP.

Saudi Arabia’s “Vision 2030” reform programme, the brainchild of Crown Prince Mohammed bin Salman aimed at weaning the kingdom off its dependence on oil, seeks to boost women’s representation in the Saudi workforce to 30 percent by 2030.

Allowing women to drive is also expected to sharply boost both car and insurance sales but is likely to reduce the number of expatriates and increase traffic jams and demand for energy, analysts said.

Dubai-based PWC Middle East Consultancy estimates that by 2020, the number of Saudi female drivers will reach three million, in addition to Saudi Arabia’s 9.5 million male drivers.

The kingdom has a population of 32 million people, including 12 million expatriates, according to official figures.

Car sales are expected to grow by nine percent annually until 2025 as more women get behind the wheel, compared to three percent annual growth in the past four years, PWC said.

‘Transformative’
The decision will also result in less spending on male drivers hired to chauffeur women — and potentially leave foreigners employed in those positions without work.

“The decision will reduce the number of expatriate private (family) drivers which will positively impact the Saudi family budgets regarding drivers wages, housing and health insurance,” Fadhl al-Buainain, a Saudi financial and banking consultant, told AFP.

The move will also have an immediate impact on the daily lives of Saudi Arabia’s working women.

For more than 15 years, Raghda Bakhorji used to wait every morning for a driver to pick her up, and take her to the King Abdulaziz Center for World Culture in Dharan, where she works as a coordinator for an outreach program.

“Being able to drive will be a transformative experience to my routine and lifestyle in general,” says the young career woman.

“In my case, driving will also probably let me save around 3,000 riyals ($800), on a monthly basis”, she told AFP.

Buainain, the consultant, said transportation costs consumed almost a quarter of employed women’s earnings.

Saudi Arabia spends more than 25 billion riyals ($6.7 billion) on the annual salaries of around 1.38 million foreign private drivers, according to official figures.

In addition there are expenses for their entry and residence permits, housing and healthcare.

But the decision could also have some negative impacts such as traffic jams caused by an increase in the number of vehicles on the roads, said Buainain.

In February, the energy-dependent kingdom allowed women to open their own businesses without the consent of a husband or male relative, in a bid to expand a fast-growing private sector.

Source :http://www.arabianbusiness.com/culture-society/399275-end-of-driving-ban-to-boost-saudi-womens-economic-role

Allowing Saudi women to drive could add as much as $90 billion to economic output by 2030
Allowing Saudi women to drive could help the kingdom reap as much income as selling shares in Saudi Aramco.

The move, which went into effect on Sunday, could add as much as $90 billion to economic output by 2030, with the benefits extending beyond that date, according to Bloomberg Economics.

Selling as much as 5 percent stake in Saudi Arabian Oil Co. – at the most optimistic valuation – could generate about $100 billion.

Saudi Arabia ended its status as the last country on earth to prohibit women from taking to the wheel.

A handful of women drove through the still-packed streets of the capital early Sunday while others drove in convoys around Riyadh neighbourhoods in celebration of the ban’s end. The decision would enable women to work without having to incur the cost of a driver or taxis.

“Lifting the ban on driving is likely to increase the number of women seeking jobs, boosting the size of the workforce and lifting overall incomes and output,” according to Ziad Daoud, Dubai-based chief Middle East economist for Bloomberg Economics.

“But it’ll take time before these gains are realised as the economy adapts to absorbing growing number of women seeking work.”

Ending the ban is one of the most socially-consequential reforms implemented by Saudi Arabia’s Crown Prince Mohammed bin Salman. It’s also a key part of his plan to veer the economy from its reliance on oil.

“The participation of women in Saudi Arabia’s labour market is poor. With only 20% of females in Saudi Arabia economically active, the country even lags behind its neighbours in the Gulf, where participation averaged 42% in 2016,” said Daoud.

“Recognising this, the Saudi administration made raising the female participation rate one of its main targets in the National Vision 2030 program, designed to modernise Saudi society.”

Adding 1 percentage point to the Saudi participation rate every year might add about 70,000 more women a year to the labour market, according to Daoud.

The larger participation of women will lift potential economic growth by as much as 0.9 percentage points a year, “depending on the proportion that chooses to work full or part-time,” he said.

Source:http://www.arabianbusiness.com/politics-economics/399298-saudi-women-driving-set-to-boost-economy-more-than-aramco-ipo