Opec and producers allied with the exporters' group are facing a renewed deadlock, which last year thwarted a global deal and led to oil exporters raising production to some of their highest levels on record. The inability of the alliance to agree on future production increases has left the market undersupplied and forced crude prices to increase, raising inflation concerns. The stalemate once again throws light on the workings of Opec and its ability to influence global oil market dynamics.
Here is a run down on the organisation and its role in oil markets:
What is Opec?
Opec stands for the Organisation of the Petroleum Exporting Countries. It was created in 1960 by the top sovereign oil producers at that time – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – during a conference in Baghdad.
Why did it come into existence?
Opec evolved as an institutional bulwark to the "Seven Sisters", the collective name for the seven international oil and gas companies that dominated the global energy scene, controlling up to 85 per cent of the world’s crude reserves before the 1973 oil crisis. The companies, which later evolved or merged to become BP, Chevron, Shell and ExxonMobil, exercised significant economic and political clout in the Middle East, where they pushed for greater exploitation of resources at terms that were not often in the interest of the states. The decolonisation movement in the region, as well as the nationalisation of companies, notably starting with Iran, led to the need for an organisation that would represent the interests of sovereign producers.
Who are its members today?
In addition to the five founding members, Libya, the UAE, Algeria, Nigeria, Gabon, Angola, Equatorial Guinea and the Congo Republic are members today. Indonesia and Qatar were also part of the group but Jakarta left in 2016 while Doha parted ways in 2019.
Are there Middle East producers who are not part of Opec?
Bahrain, which was first GCC country to strike oil, is not part of Opec as its reserves matured quickly and production remains low. Oman, which also has one of the region’s highest break-even points for oil production, is also not a member. However, both countries take part in controlling their output as part of the broader Opec+ alliance.
What is Opec+?
Opec+ is the name used to refer to a "super group" of producers – Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, South Sudan and Sudan – who are in alignment with Opec. The group came together in 2016 to reverse a record fall in oil prices after an influx of crude from US shale producers. Russia, which leads producers aligned with Opec, set aside its differences with Saudi Arabia to strengthen the bloc in the face of the threat posed by North American shale. The group and allied members have consistently worked together, apart from a brief fallout in April 2020, to calibrate their supply in line with global demand expectations.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
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Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
The Sky Is Pink
Director: Shonali Bose
Cast: Priyanka Chopra Jonas, Farhan Akhtar, Zaira Wasim, Rohit Saraf
Three stars
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- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Brief scores:
QPR 0
Watford 1
Capoue 45' 1
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