Choosing Opec’s next move is a complex mix of game theory and signalling, beyond simply barrel-counting. But even the number-crunching of supply and demand is proving hard. What does Opec’s latest long-term outlook suggest it, and its biggest member, Saudi Arabia, should do now?
The Financial Times reported on Thursday, based on anonymous sources, that Riyadh was prepared to abandon its “unofficial price target of $100 a barrel” and that it would increase production from December onwards, as previously committed.
And on Tuesday, Opec released its latest annual long-term outlook, extending to 2050. Of course, there is always room for short-term tinkering, but the current market management approach of Opec+ has already endured eight years. Three more such periods take us to midcentury. What Opec+ and Saudi Arabia decide to do now has to be in service of the long-term objective.
The last two decades alone have seen repeated shocks and energy market transformations: the US occupation of Iraq, China’s frenetic rise, the global financial crisis, the US shale oil and gas revolution, the rise of truly cost-effective electric cars, batteries and solar and wind power, the Covid-19 pandemic, Russia’s invasion of Ukraine and now Israel’s wars in Gaza and Lebanon.
Several of these factors hit oil demand or boosted competing supply. One, China’s rise, supercharged oil consumption, but now seems to be running out of steam. Opec had, of course, to contend with dramatic short-term shocks, particularly avoiding the complete collapse of the oil market that appeared possible in the early months of 2020.
The oil exporters’ organisation forecasts much stronger demand in the short term than rival agencies. On top of nearly 103 million barrels per day last year, it sees 2 million bpd of growth this year and 1.7 million bpd next year, compared to 0.9 million and 0.95 million bpd from the International Energy Agency (IEA), and 0.9 and 1.5 million bpd from the US Energy Information Administration (EIA). The gap is particularly remarkable with only the final quarter of this year remaining.
Despite this divergence, Opec’s analysis has grown more, not less, confident about the future of oil demand. Its annual outlooks from 2019 to 2022 saw global demand flattening from 2035, landing in a range of about 108-111 million bpd by 2040 to 2045. Partly, this reflected pessimism about demand recovery from the pandemic.
Now, the 2023 and 2024 outlooks together have boosted this by 8 million bpd or so, with the latest report seeing growth at quite a healthy rate post-2045 (the previous reports did not extend to 2050). In particular, the 2023 and 2024 editions are much more bullish than the previous four on growth up to 2030.
Opec’s more optimistic viewpoint is because of the rapid rebound from the pandemic, greater concern for energy security than climate action, and the need for more affordable energy to power developing nations. In particular, it is bullish on India, where it predicts another 8 million bpd of oil demand by 2050 over last year’s 5.4 million bpd. And despite governments’ environmental aspirations, Opec is understandably sceptical about whether even current plans will be fully delivered, let alone more ambitious future policies.
This view contrasts sharply with several other leading agencies and analysts. The IEA’s “Stated Policies” case sees demand by 2045 at 97.5 million bpd, while BP’s “Current Trajectory” projection has 84.1 million bpd. The IEA and BP present other scenarios where oil demand diminishes much quicker because of climate action. Even US supermajor ExxonMobil, by contrast, solidly wedded to its legacy business, sees barely any growth in oil demand after 2025, though no decline either.
Contrary to the Financial Times report, Opec and Saudi Arabia do not have an explicit (even if private) price target, but they certainly are acutely tuned to prices falling lower than they wish. It is revenue – price times sales – that matters, though. In the short term, production cuts can maximise revenue. In the longer term, they become increasingly dangerous, because they discourage demand, while encouraging competing production.
That is exactly what has played out since 2016, and especially from 2022 onwards. Relatively high oil prices helped stoke inflation, leading to interest rate rises and a slower global economy. US shale production proved – yet again – surprisingly resilient. Higher prices accelerated the development of some new frontiers such as Guyana, while helping mature producers such as China to eke out additional barrels.
These risks become even greater in 2050. In particular, expensive oil will push motorists more quickly to electric vehicles.
The payoff to raising production more aggressively and accepting lower prices depends on what we assume for the price-responsiveness of demand and of competing supply, and how fast existing production would decline in the absence of new investment. Trying to gain market share is much riskier in the world of the BP or IEA scenarios, than in that of the Opec outlook where demand rises strongly and the big problem is underinvestment and too little oil.
Nevertheless, under some reasonable assumptions, Opec+ as a whole would gain revenue by restricting output. But Saudi Arabia and the other core Opec producers, such as the UAE and Iraq, would benefit from boosting their production substantially by 2050, versus holding it at today’s levels, even in the more pessimistic outlooks for demand. Indeed, raising production would make these downside cases less likely to materialise.
This does suggest that a change of approach by Riyadh could bear fruit: activate measured production increases from December onwards as planned, until, after a couple of years, some of the weaker members would no longer be able to keep up. The pain of lower prices would be immediate, the uncertainties immense, but the long-term result far preferable.
Robin M. Mills is chief executive of Qamar Energy and author of 'The Myth of the Oil Crisis'
How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
Financial considerations before buying a property
Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.
“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says.
Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.
Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier.
Gulf Under 19s final
Dubai College A 50-12 Dubai College B
Manikarnika: The Queen of Jhansi
Director: Kangana Ranaut, Krish Jagarlamudi
Producer: Zee Studios, Kamal Jain
Cast: Kangana Ranaut, Ankita Lokhande, Danny Denzongpa, Atul Kulkarni
Rating: 2.5/5
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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.”
Last-16
France 4
Griezmann (13' pen), Pavard (57'), Mbappe (64', 68')
Argentina 3
Di Maria (41'), Mercado (48'), Aguero (90 3')
The specs
Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)
Results
Ashraf Ghani 50.64 per cent
Abdullah Abdullah 39.52 per cent
Gulbuddin Hekmatyar 3.85 per cent
Rahmatullah Nabil 1.8 per cent
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
ZAYED SUSTAINABILITY PRIZE
Seven tips from Emirates NBD
1. Never respond to e-mails, calls or messages asking for account, card or internet banking details
2. Never store a card PIN (personal identification number) in your mobile or in your wallet
3. Ensure online shopping websites are secure and verified before providing card details
4. Change passwords periodically as a precautionary measure
5. Never share authentication data such as passwords, card PINs and OTPs (one-time passwords) with third parties
6. Track bank notifications regarding transaction discrepancies
7. Report lost or stolen debit and credit cards immediately
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
The specs
Engine: 2.0-litre four-cylinder turbo
Power: 178hp at 5,500rpm
Torque: 280Nm at 1,350-4,200rpm
Transmission: seven-speed dual-clutch auto
Price: from Dh209,000
On sale: now
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
Winners
Best Men's Player of the Year: Kylian Mbappe (PSG)
Maradona Award for Best Goal Scorer of the Year: Robert Lewandowski (Bayern Munich)
TikTok Fans’ Player of the Year: Robert Lewandowski
Top Goal Scorer of All Time: Cristiano Ronaldo (Manchester United)
Best Women's Player of the Year: Alexia Putellas (Barcelona)
Best Men's Club of the Year: Chelsea
Best Women's Club of the Year: Barcelona
Best Defender of the Year: Leonardo Bonucci (Juventus/Italy)
Best Goalkeeper of the Year: Gianluigi Donnarumma (PSG/Italy)
Best Coach of the Year: Roberto Mancini (Italy)
Best National Team of the Year: Italy
Best Agent of the Year: Federico Pastorello
Best Sporting Director of the Year: Txiki Begiristain (Manchester City)
Player Career Award: Ronaldinho
