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
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
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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
JOKE'S%20ON%20YOU
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Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster who has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
Facebook | Our website | Instagram
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
Tailors and retailers miss out on back-to-school rush
Tailors and retailers across the city said it was an ominous start to what is usually a busy season for sales.
With many parents opting to continue home learning for their children, the usual rush to buy school uniforms was muted this year.
“So far we have taken about 70 to 80 orders for items like shirts and trousers,” said Vikram Attrai, manager at Stallion Bespoke Tailors in Dubai.
“Last year in the same period we had about 200 orders and lots of demand.
“We custom fit uniform pieces and use materials such as cotton, wool and cashmere.
“Depending on size, a white shirt with logo is priced at about Dh100 to Dh150 and shorts, trousers, skirts and dresses cost between Dh150 to Dh250 a piece.”
A spokesman for Threads, a uniform shop based in Times Square Centre Dubai, said customer footfall had slowed down dramatically over the past few months.
“Now parents have the option to keep children doing online learning they don’t need uniforms so it has quietened down.”
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
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.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
ENGLAND SQUAD
Goalkeepers Henderson, Pickford, Pope.
Defenders Alexander-Arnold, Chilwell, Coady, Dier, Gomez, Keane, Maguire, Maitland-Niles, Mings, Saka, Trippier, Walker.
Midfielders Henderson, Mount, Phillips, Rice, Ward-Prowse, Winks.
Forwards Abraham, Barnes, Calvert-Lewin, Grealish, Ings, Kane, Rashford, Sancho, Sterling.
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UAE SQUAD
Khalid Essa (Al Ain), Ali Khaseif (Al Jazira), Adel Al Hosani (Sharjah), Mahmoud Khamis (Al Nasr), Yousef Jaber (Shabab Al Ahli Dubai), Khalifa Al Hammadi (Jazira), Salem Rashid (Jazira), Shaheen Abdelrahman (Sharjah), Faris Juma (Al Wahda), Mohammed Shaker (Al Ain), Mohammed Barghash (Wahda), Abdulaziz Haikal (Shabab Al Ahli), Ahmed Barman (Al Ain), Khamis Esmail (Wahda), Khaled Bawazir (Sharjah), Majed Surour (Sharjah), Abdullah Ramadan (Jazira), Mohammed Al Attas (Jazira), Fabio De Lima (Al Wasl), Bandar Al Ahbabi (Al Ain), Khalfan Mubarak (Jazira), Habib Fardan (Nasr), Khalil Ibrahim (Wahda), Ali Mabkhout (Jazira), Ali Saleh (Wasl), Caio (Al Ain), Sebastian Tagliabue (Nasr).
Common OCD symptoms and how they manifest
Checking: the obsession or thoughts focus on some harm coming from things not being as they should, which usually centre around the theme of safety. For example, the obsession is “the building will burn down”, therefore the compulsion is checking that the oven is switched off.
Contamination: the obsession is focused on the presence of germs, dirt or harmful bacteria and how this will impact the person and/or their loved ones. For example, the obsession is “the floor is dirty; me and my family will get sick and die”, the compulsion is repetitive cleaning.
Orderliness: the obsession is a fear of sitting with uncomfortable feelings, or to prevent harm coming to oneself or others. Objectively there appears to be no logical link between the obsession and compulsion. For example,” I won’t feel right if the jars aren’t lined up” or “harm will come to my family if I don’t line up all the jars”, so the compulsion is therefore lining up the jars.
Intrusive thoughts: the intrusive thought is usually highly distressing and repetitive. Common examples may include thoughts of perpetrating violence towards others, harming others, or questions over one’s character or deeds, usually in conflict with the person’s true values. An example would be: “I think I might hurt my family”, which in turn leads to the compulsion of avoiding social gatherings.
Hoarding: the intrusive thought is the overvaluing of objects or possessions, while the compulsion is stashing or hoarding these items and refusing to let them go. For example, “this newspaper may come in useful one day”, therefore, the compulsion is hoarding newspapers instead of discarding them the next day.
Source: Dr Robert Chandler, clinical psychologist at Lighthouse Arabia
BlacKkKlansman
Director: Spike Lee
Starring: John David Washington; Adam Driver
Five stars
QUALIFYING RESULTS
1. Max Verstappen, Netherlands, Red Bull Racing Honda, 1 minute, 35.246 seconds.
2. Valtteri Bottas, Finland, Mercedes, 1:35.271.
3. Lewis Hamilton, Great Britain, Mercedes, 1:35.332.
4. Lando Norris, Great Britain, McLaren Renault, 1:35.497.
5. Alexander Albon, Thailand, Red Bull Racing Honda, 1:35.571.
6. Carlos Sainz Jr, Spain, McLaren Renault, 1:35.815.
7. Daniil Kvyat, Russia, Scuderia Toro Rosso Honda, 1:35.963.
8. Lance Stroll, Canada, Racing Point BWT Mercedes, 1:36.046.
9. Charles Leclerc, Monaco, Ferrari, 1:36.065.
10. Pierre Gasly, France, Scuderia Toro Rosso Honda, 1:36.242.
Eliminated after second session
11. Esteban Ocon, France, Renault, 1:36.359.
12. Daniel Ricciardo, Australia, Renault, 1:36.406.
13. Sebastian Vettel, Germany, Ferrari, 1:36.631.
14. Antonio Giovinazzi, Italy, Alfa Romeo Racing Ferrari, 1:38.248.
Eliminated after first session
15. Antonio Giovinazzi, Italy, Alfa Romeo Racing Ferrari, 1:37.075.
16. Kimi Raikkonen, Finland, Alfa Romeo Racing Ferrari, 1:37.555.
17. Kevin Magnussen, Denmark, Haas Ferrari, 1:37.863.
18. George Russell, Great Britain, Williams Mercedes, 1:38.045.
19. Pietro Fittipaldi, Brazil, Haas Ferrari, 1:38.173.
20. Nicholas Latifi, Canada, Williams Mercedes, 1:38.443.
Profile of Foodics
Founders: Ahmad AlZaini and Mosab AlOthmani
Based: Riyadh
Sector: Software
Employees: 150
Amount raised: $8m through seed and Series A - Series B raise ongoing
Funders: Raed Advanced Investment Co, Al-Riyadh Al Walid Investment Co, 500 Falcons, SWM Investment, AlShoaibah SPV, Faith Capital, Technology Investments Co, Savour Holding, Future Resources, Derayah Custody Co.
The specs
Engine: 8.0-litre, quad-turbo 16-cylinder
Transmission: 7-speed auto
0-100kmh 2.3 seconds
0-200kmh 5.5 seconds
0-300kmh 11.6 seconds
Power: 1500hp
Torque: 1600Nm
Price: Dh13,400,000
On sale: now
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Zayed Sustainability Prize
Types of bank fraud
1) Phishing
Fraudsters send an unsolicited email that appears to be from a financial institution or online retailer. The hoax email requests that you provide sensitive information, often by clicking on to a link leading to a fake website.
2) Smishing
The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
3) Vishing
The telephone equivalent of phishing and smishing. Fraudsters may pose as bank staff, police or government officials. They may persuade the consumer to transfer money or divulge personal information.
4) SIM swap
Fraudsters duplicate the SIM of your mobile number without your knowledge or authorisation, allowing them to conduct financial transactions with your bank.
5) Identity theft
Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
6) Prize scams
Fraudsters claiming to be authorised representatives from well-known organisations (such as Etisalat, du, Dubai Shopping Festival, Expo2020, Lulu Hypermarket etc) contact victims to tell them they have won a cash prize and request them to share confidential banking details to transfer the prize money.
Biography
Favourite Meal: Chicken Caesar salad
Hobbies: Travelling, going to the gym
Inspiration: Father, who was a captain in the UAE army
Favourite read: Rich Dad Poor Dad by Robert Kiyosaki and Sharon Lechter
Favourite film: The Founder, about the establishment of McDonald's
World Cup warm up matches
May 24 Pakistan v Afghanistan, Bristol; Sri Lanka v South Africa, Cardiff
May 25 England v Australia, Southampton; India v New Zealand, The Oval
May 26 South Africa v West Indies, Bristol; Pakistan v Bangladesh, Cardiff
May 27 Australia v Sri Lanka, Southampton; England v Afghanistan, The Oval
May 28 West Indies v New Zealand, Bristol; Bangladesh v India, Cardiff
Secret Nation: The Hidden Armenians of Turkey
Avedis Hadjian, (IB Tauris)
RACE CARD
6.30pm: Handicap (Turf) US$175,000 1,000m
7.05pm: Al Bastakiya Trial Conditions (Dirt) $100,000 1,900m
7.40pm: Al Rashidiya Group 2 (T) $250,000 1,800m
8.15pm: Handicap (D) $135,000 2,000m
8.50pm: Al Fahidi Fort Group 2 (T) $250,000 1,400m
9.25pm: Handicap (T) $135,000 2,410m.
The specs: 2019 Lincoln MKC
Price, base / as tested: Dh169,995 / Dh192,045
Engine: Turbocharged, 2.0-litre, in-line four-cylinder
Transmission: Six-speed automatic
Power: 253hp @ 5,500rpm
Torque: 389Nm @ 2,500rpm
Fuel economy, combined: 10.7L / 100km
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
The specs: 2018 Maserati Levante S
Price, base / as tested: Dh409,000 / Dh467,000
Engine: 3.0-litre V6
Transmission: Eight-speed automatic
Power: 430hp @ 5,750rpm
Torque: 580Nm @ 4,500rpm
Fuel economy, combined: 10.9L / 100km
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
Results:
5pm: Handicap (PA) | Dh80,000 | 1,600 metres
Winner: Dasan Da, Saeed Al Mazrooei (jockey), Helal Al Alawi (trainer)
5.30pm: Maiden (PA) | Dh80,000 | 1,600m
Winner: AF Saabah, Tadhg O’Shea, Ernst Oertel
6pm: Handicap (PA) | Dh80,000 | 1,600m
Winner: Mukaram, Pat Cosgrave, Eric Lemartinel
6.30pm: Handicap (PA) | Dh80,000 | 2,200m
Winner: MH Tawag, Richard Mullen, Elise Jeanne
7pm: Wathba Stallions Cup Handicap (PA) | Dh70,000 | 1,400m
Winner: RB Inferno, Fabrice Veron, Ismail Mohammed
7.30pm: Handicap (TB) | Dh100,000 | 1,600m
Winner: Juthoor, Jim Crowley, Erwan Charpy
