A Joe Biden presidency is likely to increase the challenge of drawing back global oil inventories for Opec+, which has to contend with greener policies in the US, and crude from Iran and Venezuela hitting the markets.
The alliance, led by Saudi Arabia and Russia, had cooperated with the Trump administration in increasing production in 2018 and then agreeing to cut back output in the first half of 2020. Earlier this year, president Donald Trump, who was previously antagonistic towards the oil bloc, helped nudge non-Opec producer Mexico to join an historic production cut deal.
At a meeting of G20 energy producers and Opec+, Mr Trump also backed the alliance’s role in correcting the imbalances in supply and demand in the oil markets, even if US law forbade independent producers from joining the deal.
Opec relations with the US oil industry, which had thawed since 2016, may now come under pressure under a Biden administration.
"President-elect Biden will take a different approach here and not intervene as strongly as President Trump did,” said Giovanni Staunovo, commodity analyst with UBS.
US oil production is likely to remain restrained around current levels of 11 million barrels per day over the next 12 months, with more sustained output from the shale basins to flow when prices trade above $50 per barrel, according to Mr Staunovo.
Opec+, which is currently cutting 7.7m bpd, tapering the Trump-backed historic curbs of 9.7m bpd that were in place between May and July, could possibly hold off further reductions of cuts for the foreseeable future.
"Unless crude prices spike over the coming weeks, economic recovery accelerates considerably and/or the increase in Covid-19 cases stalls—none of which is our base case—the taper process is likely to be delayed by a few months,” Mr Staunovo said.
Opec+ already has to contend with rising supplies from Libya, which is currently producing above 1m bpd, after a force majeure in place since January came to an end. Oil demand is also likely to weaken during the winter months, which is likely to be factored into Opec+ assessment of current oil market dynamics.
“We do not expect deeper cuts unless global lockdowns return,” said Mr Staunovo.
Globally, Covid-19 cases are above 50 million as of Monday with over 1.2 million deaths registered so far.
Mr Biden will assume leadership of a country with the worst count of Covid-19 and is likely to have his hands full controlling the outbreak in the US and paying attention to the economy, rather than devoting significant time towards the oil industry. The US accounts for a fifth of all Covid cases and registered 243,768 deaths, according to Worldometers, which tracks the pandemic.
Oil prices surged above $40 per barrel on Monday following news of a vaccine breakthrough by US-based pharmaceuticals company Pfizer. Brent jumped 8.64 per cent to trade at $42.86 per barrel at 5.58pm UAE time on Monday and receded on Tuesday to $41.86 at 8.02am, while WTI rallied 9.72 per cent to $40.75 per barrel and fell to $39.64.
"Optimism that a vaccine will be deployed could transform behaviours if it is deployed widely, allowing a recovery across the barrel, particularly in jet fuel," said Shady Elborno, head of macro strategy at Emirates NBD.
A Biden presidency could prove to be a "short-term catalyst for higher oil prices” in spite of a Republican-controlled Senate due to the “accelerated push” towards clean energy, which is likely to lead to a higher marginal cost of shale, according to Japan's largest bank, MUFG. “Investors [will be] less willing to fund exploration and development,” it added.
Mr Biden, who took a highly-contested Democratic nomination, from an increasingly left-leaning party is likely to continue to appease the greener elements within the caucus.
The President-elect has pledged $2 trillion over the next four years to help with progressing energy transition in the US, notably in growing the role of clean resources in the transportation, utility and building sectors.
"Anybody who's a price taker of oil is going to be struggling under this type of situation where the US is going to probably green quicker than what the markets had anticipated under a Trump presidency,” said Stephen Innes, chief global strategist at Axi.
"However, you know, let's face it, the world is going green. You know, China's going green, Europe is green,” he added.
Mr Biden is expected to reverse some of the more controversial executive orders issued during the Trump presidency, notably the US exit from the Paris Agreement.
He is also likely to reverse the outgoing administration’s ‘maximum pressure’ strategy towards Iran, which is likely to face more sanctions before President Trump leaves office on January 20, 2021.
However, Mr Innes says the orders are unlikely “to stick” as a transition is already underway.
UBS, meanwhile, is not factoring in a return of Iranian barrels for the first half of 2021, considering the length of time it took to negotiate the Iran nuclear deal under the Barack Obama administration, in which Mr Biden served as vice president.
"Some market participants see Iran exporting more crude than others, which might mean that Iran's production estimates might be underestimated, resulting in a smaller effective production increase," Mr Staunovo said.
"In case of Venezuela, the production response should be smaller, considering the under-investment in the energy sector over the past years.”
RESULT
Huddersfield Town 2 Manchester United 1
Huddersfield: Mooy (28'), Depoitre (33')
Manchester United: Rashford (78')
Man of the Match: Aaron Mooy (Huddersfield Town)
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
The specs: Lamborghini Aventador SVJ
Price, base: Dh1,731,672
Engine: 6.5-litre V12
Gearbox: Seven-speed automatic
Power: 770hp @ 8,500rpm
Torque: 720Nm @ 6,750rpm
Fuel economy: 19.6L / 100km
Farage on Muslim Brotherhood
Nigel Farage told Reform's annual conference that the party will proscribe the Muslim Brotherhood if he becomes Prime Minister.
"We will stop dangerous organisations with links to terrorism operating in our country," he said. "Quite why we've been so gutless about this – both Labour and Conservative – I don't know.
“All across the Middle East, countries have banned and proscribed the Muslim Brotherhood as a dangerous organisation. We will do the very same.”
It is 10 years since a ground-breaking report into the Muslim Brotherhood by Sir John Jenkins.
Among the former diplomat's findings was an assessment that “the use of extreme violence in the pursuit of the perfect Islamic society” has “never been institutionally disowned” by the movement.
The prime minister at the time, David Cameron, who commissioned the report, said membership or association with the Muslim Brotherhood was a "possible indicator of extremism" but it would not be banned.
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
Medicus AI
Started: 2016
Founder(s): Dr Baher Al Hakim, Dr Nadine Nehme and Makram Saleh
Based: Vienna, Austria; started in Dubai
Sector: Health Tech
Staff: 119
Funding: €7.7 million (Dh31m)
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
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Price: From Dh1,700,000
Available: Now
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.”
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
Company%20Profile
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