Oil prices closed slightly higher on the last day of 2024, but ended the year lower, as traders weigh the impact of an oil market glut expected this year, slowing Chinese fuel demand and the possibility of tighter US sanctions on Iranian crude exports.
Brent, the benchmark for two thirds of the world’s oil, settled 0.88 per cent at $74.64 a barrel on Tuesday. West Texas Intermediate, the gauge that tracks US crude, ended the day 1.03 per cent higher at $71.72 a barrel.
For the year, Brent was down 3.1 per cent compared to its closing price of $77.04 per barrel in 2023, while WTI was mostly flat.
Brent prices experienced a volatile year in 2024, ranging from a low of about $69 a barrel to a high of $92 a barrel. After a strong start, prices weakened in the second half due to rising US interest rates and sluggish Chinese oil consumption.
Crude imports from China, the main engine of oil growth for nearly two decades, have shown signs of cooling amid a slowdown in its economy and the rapid adoption of electric vehicles.
Both S&P Global Commodity Insights and the International Energy Agency anticipate a peak in China's petroleum demand. While S&P is projecting a 2025 peak of 3.8 million barrels per day, the IEA is forecasting a 2024 peak of 3.66 million bpd.
The IEA expects petrochemicals to be the key driver of future oil demand growth, with China likely to increase liquefied petroleum gas and ethane imports to meet domestic needs.
"Chinese consumption is undergoing a major structural change. High single-digit annual demand growth is firmly in the rear-view mirror for the Asian giant and peak transportation fuels consumption is probably round the corner," said Vandana Hari, founder of Vanda Insights.
"There is no other country or region that could ever take the place of China in the way it drove global demand growth for the past two decades," she told The National.
Oil market glut
The IEA expects a crude surplus of 1 million bpd this year on rising supply from producers outside of the Opec+ alliance of producers.
The Paris-based agency has forecast that non-Opec+ countries, led by the US, Canada, Guyana and Argentina, will increase oil production by 1.5 million bpd in 2025.
This will hinder the ability of Opec+ to restore some oil production.
The group has extended its voluntary output cuts of 2.2 million bpd, which were originally scheduled to be gradually phased out starting in October 2024, until the end of March next year.
Opec+ also extended its oil production cuts of 2 million bpd and 1.65 million bpd by a year to the end of 2026.
"I think the alliance will remain a key influence in the market in 2025, though it will have its work cut out if it wants to remain a stabilising influence," Ms Hari said.
Trump effect
US president-elect Donald Trump's policies pose risks in both directions, with both bullish and bearish implications, analysts say.
On the bullish side, his "maximum pressure" approach towards countries like Iran, renewed sanctions on Venezuela, and reports indicating that Tehran might be placed under additional sanctions could result in large supply disruptions, Giovanni Staunovo, strategist at UBS, said in a research note in December.
"On the bearish side, tariffs could weigh on growth prospects in 2025. Countries could tackle such policies with more stimulus measures, but the impact would come with some delay," he added.
Mr Trump has proposed a 60 per cent tariff on goods from China and a blanket 20 per cent tariff on all imports into the US. In November, the incoming president said he would sign an executive order imposing a 25 per cent tariff on goods imported into the US from Mexico and Canada.
He has also threatened the EU with tariffs if the bloc does not increase its purchases of US oil and gas.
Mr Trump has promised to bring about a swift resolution to the wars being fought in the Middle East and Europe, which have contributed to the geopolitical risk premium in crude prices.
"If Donald Trump manages to de-escalate the Gaza and Ukraine wars, this volatility factor should evaporate in 2025, though there could be plenty of new ones," Ms Hari said.
"As the new Syrian war, the Georgian unrest and the South Korean political crisis in recent days prove, there is no dearth of geopolitical tensions simmering just under the surface around the world."
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UK’s AI plan
- AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
- £10bn AI growth zone in South Wales to create 5,000 jobs
- £100m of government support for startups building AI hardware products
- £250m to train new AI models
WISH
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The BIO:
He became the first Emirati to climb Mount Everest in 2011, from the south section in Nepal
He ascended Mount Everest the next year from the more treacherous north Tibetan side
By 2015, he had completed the Explorers Grand Slam
Last year, he conquered K2, the world’s second-highest mountain located on the Pakistan-Chinese border
He carries dried camel meat, dried dates and a wheat mixture for the final summit push
His new goal is to climb 14 peaks that are more than 8,000 metres above sea level
Sonchiriya
Director: Abhishek Chaubey
Producer: RSVP Movies, Azure Entertainment
Cast: Sushant Singh Rajput, Manoj Bajpayee, Ashutosh Rana, Bhumi Pednekar, Ranvir Shorey
Rating: 3/5
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
What is Genes in Space?
Genes in Space is an annual competition first launched by the UAE Space Agency, The National and Boeing in 2015.
It challenges school pupils to design experiments to be conducted in space and it aims to encourage future talent for the UAE’s fledgling space industry. It is the first of its kind in the UAE and, as well as encouraging talent, it also aims to raise interest and awareness among the general population about space exploration.
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.”
JOKE'S%20ON%20YOU
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The Bio
Favourite vegetable: “I really like the taste of the beetroot, the potatoes and the eggplant we are producing.”
Holiday destination: “I like Paris very much, it’s a city very close to my heart.”
Book: “Das Kapital, by Karl Marx. I am not a communist, but there are a lot of lessons for the capitalist system, if you let it get out of control, and humanity.”
Musician: “I like very much Fairuz, the Lebanese singer, and the other is Umm Kulthum. Fairuz is for listening to in the morning, Umm Kulthum for the night.”
