Smoothly exiting from the current output pact, and perhaps replacing it with another agreement, has become an important policy question for Opec and its allies.
Under the current “declaration of cooperation”, issued in December 2016, Opec with Russia and some non-Opec countries have pledged to limit their output. Production limits were originally intended to apply for six months between January and June 2017 but have since been extended for a further nine months until the end of March 2018.
The original declaration was vague about its objectives but senior officials have since indicated the primary goal is to reduce oil inventories in OECD industrialised countries down to the five-year average.
Opec and its allies are now approximately half-way towards that goal, with stocks about 160 million to 170 million barrels above the five-year average, compared with 280 million at the start of 2017.
Opec officials have stressed their resolve to finish what they have started and reduce stocks even further next year.
“We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average,” the Saudi energy minister Khalid Al Falih said in Riyadh on Tuesday.
“The intent is to keep our hands on the wheel between now and until we get to a balanced market and beyond,” he said.
Since inventories are unlikely to be reduced to the target by the end of March, Opec officials are discussing an extension of the production cuts for up to another nine months.
But the more complicated and important task is deciding when and how to exit from the current agreement and whether to try to replace it with another production accord.
“When we get closer to that [five-year average] we will decide how we smoothly exit the current agreement, maybe go to a different arrangement to keep supply and demand closely balanced so we don’t have a return to higher inventories,” Mr Al Falih said on the sidelines of the Future Investment Initiatives conference in Riyadh.
Knowing when to declare that an objective has been achieved and making a course correction is often a major challenge for policymakers.
If a policy has been successful, there is a tendency to continue pursuing it, even when the environment has changed and demands a different response.
Opec and its allies must decide when to switch the focus from limiting output and cutting stocks to growing production again to meet rising demand.
If they wait too long, stocks will fall too far, prices will rise strongly, shale production will ramp up and the oil market’s adjustment will overshoot.
There is an entire branch of engineering and information technology on “control theory” or how to adjust system inputs to achieve the desired level of output.
The challenge is to adjust inputs smoothly and in a timely manner to keep outputs close to a reference value rather than swinging around wildly.
In Opec’s case, the challenge is to adjust production to achieve some desired level of inventories, prices and market share.
In practice, the organisation has found that a challenge; policy shifts have tended to be reactive rather than proactive.
_______________
Read more:
Aramco chief says lack of investment may hit oil supplies
Saudi oil minister upbeat as he visits Baghdad
Opec chief sees oil demand rising at 'healthy pace'
_______________
Opec’s declared objective of reducing excess global oil inventories to their five-year average is only an intermediate target.
The ultimate objective is to achieve some desired combination of price and market share that sustainably maximises income for its member states (leaving to one side the question of time horizon).
In practice, the organisation is led by Saudi Arabia, and the kingdom’s priority tends to alternate between supporting prices and defending market share.
Between the middle of 2014 and the middle of 2016, the kingdom focused on defending market share. Since the end of 2016, its priority has switched to cutting stocks and pushing up prices, and it has been willing to accept some reduction in market share to achieve it.
Saudi officials have so far indicated the focus will remain on inventory reduction and price support well into 2018, even if the kingdom has to concede market share to rival producers.
But as stocks continue to fall, the country will have to make some tricky decisions about when to adjust its production policy and what combination of prices and market share to target.
Global consumption rose by almost 6 million barrels per day (bpd) over the past five years, from less than 91 million bpd in 2012, to more than 96 million bpd in 2016.
Consumption is forecast to rise by another 1.5 million bpd in both 2017 and 2018, which means demand will be almost 10 million bpd higher in 2018 than in 2012.
If a balanced oil market includes some desired ratio of stocks to consumption, then a balanced market in 2018 will need to carry a significantly higher level of stocks than 2012-2016 average.
Cutting inventories back to the five-year average would leave the market feeling exceptionally tight. If Opec tries to force stocks down to that level, the result will be a big rise in spot prices and a sharp move into backwardation.
This is exactly what happened following previous Opec-led efforts at market rebalancing in 1999/2000 and 2010/2011, and it could happen again in 2018/19.
In the aftermath of an oil price slump, Opec and its advisers normally announce they will cut excess stocks, raise prices to a “normal” level and then pledge to keep the market stable.
Following the wrenching 1997/98 price slump, Opec announced it would target a price band of US$22 to $28 per barrel, which became a formal target between 2000 and 2004 before being shelved.
In 2008, Saudi Arabia’s then King Abdullah called $75 to $80 per barrel a “fair price”, and it became a de facto price target for a time, before it, too, was overtaken by events and abandoned.
Oil prices quickly overshot both targets, and Opec found it hard to prevent them climbing further.
As the oil market continues to tighten in 2018, the same pattern could repeat itself, with both spot prices and the backwardation increasing.
Opec and its allies must decide whether to take some of the increase in demand for their crude in the form of higher prices, higher output, or both.
Since most countries are already pumping near full capacity, the decision will principally rest with Saud Arabia and Russia.
Higher prices would risk a renewed boom in shale production from the United States, so Saudi Arabia is likely to be cautious about the market tightening too much.
But the kingdom needs higher oil revenues to help to fund an ambitious social and economic transformation programme.
And higher prices might help achieve a better valuation if and when the kingdom tries to sell shares in its national oil company Aramco.
Averting a renewed shale boom suggests the kingdom should focus on adding production to keep prices below $60.
But revenue maximisation and the looming sale of oil company shares argues for letting prices rise above $60 in 2018.
Policymakers are likely to adopt a mixed strategy and opt for some combination of both increased output and higher prices.
John Kemp is a Reuters analyst and the views expressed are his own
WITHIN%20SAND
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Dengue%20fever%20symptoms
%3Cp%3EHigh%20fever%20(40%C2%B0C%2F104%C2%B0F)%3Cbr%3ESevere%20headache%3Cbr%3EPain%20behind%20the%20eyes%3Cbr%3EMuscle%20and%20joint%20pains%3Cbr%3ENausea%3Cbr%3EVomiting%3Cbr%3ESwollen%20glands%3Cbr%3ERash%26nbsp%3B%3C%2Fp%3E%0A
Mohammed bin Zayed Majlis
Tips for newlyweds to better manage finances
All couples are unique and have to create a financial blueprint that is most suitable for their relationship, says Vijay Valecha, chief investment officer at Century Financial. He offers his top five tips for couples to better manage their finances.
Discuss your assets and debts: When married, it’s important to understand each other’s personal financial situation. It’s necessary to know upfront what each party brings to the table, as debts and assets affect spending habits and joint loan qualifications. Discussing all aspects of their finances as a couple prevents anyone from being blindsided later.
Decide on the financial/saving goals: Spouses should independently list their top goals and share their lists with one another to shape a joint plan. Writing down clear goals will help them determine how much to save each month, how much to put aside for short-term goals, and how they will reach their long-term financial goals.
Set a budget: A budget can keep the couple be mindful of their income and expenses. With a monthly budget, couples will know exactly how much they can spend in a category each month, how much they have to work with and what spending areas need to be evaluated.
Decide who manages what: When it comes to handling finances, it’s a good idea to decide who manages what. For example, one person might take on the day-to-day bills, while the other tackles long-term investments and retirement plans.
Money date nights: Talking about money should be a healthy, ongoing conversation and couples should not wait for something to go wrong. They should set time aside every month to talk about future financial decisions and see the progress they’ve made together towards accomplishing their goals.
Country-size land deals
US interest in purchasing territory is not as outlandish as it sounds. Here's a look at some big land transactions between nations:
Louisiana Purchase
If Donald Trump is one who aims to broker "a deal of the century", then this was the "deal of the 19th Century". In 1803, the US nearly doubled in size when it bought 2,140,000 square kilometres from France for $15 million.
Florida Purchase Treaty
The US courted Spain for Florida for years. Spain eventually realised its burden in holding on to the territory and in 1819 effectively ceded it to America in a wider border treaty.
Alaska purchase
America's spending spree continued in 1867 when it acquired 1,518,800 km2 of Alaskan land from Russia for $7.2m. Critics panned the government for buying "useless land".
The Philippines
At the end of the Spanish-American War, a provision in the 1898 Treaty of Paris saw Spain surrender the Philippines for a payment of $20 million.
US Virgin Islands
It's not like a US president has never reached a deal with Denmark before. In 1917 the US purchased the Danish West Indies for $25m and renamed them the US Virgin Islands.
Gwadar
The most recent sovereign land purchase was in 1958 when Pakistan bought the southwestern port of Gwadar from Oman for 5.5bn Pakistan rupees.
THE%20STRANGERS'%20CASE
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More from Rashmee Roshan Lall
Company%20profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EHakbah%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3ENaif%20AbuSaida%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3ESaudi%20Arabia%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%20%3C%2Fstrong%3E22%20%0D%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3E%24200%2C000%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3Epre-Series%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EGlobal%20Ventures%20and%20Aditum%20Investment%20Management%0D%3Cbr%3E%3Cbr%3E%3C%2Fp%3E%0A
Dust and sand storms compared
Sand storm
- Particle size: Larger, heavier sand grains
- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
- Source: Open desert areas with strong winds
Dust storm
- Particle size: Much finer, lightweight particles
- Visibility: Hazy skies but less intense
- Duration: Can linger for days
- Travel distance: Long-range, up to thousands of kilometres
- Source: Can be carried from distant regions
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
General%20Classification
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UAE currency: the story behind the money in your pockets
The%20specs
%3Cp%3E%3Cstrong%3EPowertrain%3A%20%3C%2Fstrong%3ESingle%20electric%20motor%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E201hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E310Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20auto%0D%3Cbr%3E%3Cstrong%3EBattery%3A%20%3C%2Fstrong%3E53kWh%20lithium-ion%20battery%20pack%20(GS%20base%20model)%3B%2070kWh%20battery%20pack%20(GF)%0D%3Cbr%3E%3Cstrong%3ETouring%20range%3A%20%3C%2Fstrong%3E350km%20(GS)%3B%20480km%20(GF)%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh129%2C900%20(GS)%3B%20Dh149%2C000%20(GF)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3C%2Fp%3E%0A
WHAT%20IS%20'JUICE%20JACKING'%3F
%3Cp%3E%E2%80%A2%20Juice%20jacking%2C%20in%20the%20simplest%20terms%2C%20is%20using%20a%20rogue%20USB%20cable%20to%20access%20a%20device%20and%20compromise%20its%20contents%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20The%20exploit%20is%20taken%20advantage%20of%20by%20the%20fact%20that%20the%20data%20stream%20and%20power%20supply%20pass%20through%20the%20same%20cable.%20The%20most%20common%20example%20is%20connecting%20a%20smartphone%20to%20a%20PC%20to%20both%20transfer%20data%20and%20charge%20the%20former%20at%20the%20same%20time%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20The%20term%20was%20first%20coined%20in%202011%20after%20researchers%20created%20a%20compromised%20charging%20kiosk%20to%20bring%20awareness%20to%20the%20exploit%3B%20when%20users%20plugged%20in%20their%20devices%2C%20they%20received%20a%20security%20warning%20and%20discovered%20that%20their%20phones%20had%20paired%20to%20the%20kiosk%2C%20according%20to%20US%20cybersecurity%20company%20Norton%3C%2Fp%3E%0A%3Cp%3E%E2%80%A2%20While%20juice%20jacking%20is%20a%20real%20threat%2C%20there%20have%20been%20no%20known%20widespread%20instances.%20Apple%20and%20Google%20have%20also%20added%20security%20layers%20to%20prevent%20this%20on%20the%20iOS%20and%20Android%20devices%2C%20respectively%3C%2Fp%3E%0A
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
Five expert hiking tips
Always check the weather forecast before setting off
Make sure you have plenty of water
Set off early to avoid sudden weather changes in the afternoon
Wear appropriate clothing and footwear
Take your litter home with you
PRISCILLA
%3Cp%3EDirector%3A%20Sofia%20Coppola%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Cailee%20Spaeny%2C%20Jacob%20Elordi%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
If you go
The Flights
Emirates and Etihad fly direct to Johannesburg from Dubai and Abu Dhabi respectively. Economy return tickets cost from Dh2,650, including taxes.
The trip
Worldwide Motorhoming Holidays (worldwidemotorhomingholidays.co.uk) operates fly-drive motorhome holidays in eight destinations, including South Africa. Its 14-day Kruger and the Battlefields itinerary starts from Dh17,500, including campgrounds, excursions, unit hire and flights. Bobo Campers has a range of RVs for hire, including the 4-berth Discoverer 4 from Dh600 per day.
Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
UAE currency: the story behind the money in your pockets
Mohammed bin Zayed Majlis
Engine: 5.6-litre V8
Transmission: seven-speed automatic
Power: 400hp
Torque: 560Nm
Price: Dh234,000 - Dh329,000
On sale: now
Score
Third Test, Day 2
New Zealand 274
Pakistan 139-3 (61 ov)
Pakistan trail by 135 runs with 7 wickets remaining in the innings
LILO & STITCH
Starring: Sydney Elizebeth Agudong, Maia Kealoha, Chris Sanders
Director: Dean Fleischer Camp
Rating: 4.5/5
Cricket World Cup League 2
UAE results
Lost to Oman by eight runs
Beat Namibia by three wickets
Lost to Oman by 12 runs
Beat Namibia by 43 runs
UAE fixtures
Free admission. All fixtures broadcast live on icc.tv
Tuesday March 15, v PNG at Sharjah Cricket Stadium
Friday March 18, v Nepal at Dubai International Stadium
Saturday March 19, v PNG at Dubai International Stadium
Monday March 21, v Nepal at Dubai International Stadium
