The sudden and dramatic slump in the oil price poses both an opportunity and a threat to investors.
The fall has been dramatic, with Brent crude down about 30 per cent from US$116 a barrel in June to a recent low of $XX on Thursday, and many analysts expect it to linger at today’s levels.
Goldman Sachs, for example, forecasts $85 a barrel in the first quarter of 2015, although the truth is nobody knows for sure. Goldman previously predicted $100.
Cheap oil is bad news for net hydrocarbon-exporting countries and energy companies, but good news for their customers, and some investors may want to profit from this shift in power.
But who will be the winners, and how do you steer clear of the losers?
The answer partly depends on how low the oil price goes and how long it stays there.
Having fallen such a long way, the scope for further price falls are limited, says Alex Dryden, market analyst in the global market insights strategy team at JP Morgan Asset Management. “Falls in the oil price tend to be self-correcting. Investment dries up, refineries close, supply falls and the price ultimately rises. Brent crude is unlikely to fall below $80 for long, but I can see it sticking at between $80 and $95 for at least a couple of years,” says Mr Dryden.
The US economy should be a major beneficiary, he says. “In the US, the falling oil price feels like a tax cut, because it feeds straight through to prices at the pumps. Business costs drop and consumers spend more. It is all upside, unless it’s a sign we are heading into a global recession.”
The US has already been one of the most rewarding countries for investors over the past 12 months, with its markets up more than 12 per cent in that time, according to figures from MSCI.
That compares with a 5 per cent drop in Europe and China, and a fall of 20 per cent in Brazil and 30 per cent in Russia.
Cheaper oil doesn’t work the same instant magic in western Europe, Mr Dryden says. “Countries such as the UK and France tax oil so heavily that the price to the end consumer barely falls.”
The big losers will be emerging market oil exporters, notably Russia, Venezuela, Nigeria, Iraq, Algeria, Libya and Iran, he says. “Their governments’ fiscal break-even oil prices are all above $100 a barrel. Today’s price will make it very difficult for them to fund their social programmes, which could lead to social unrest.”
Venezuela is particularly vulnerable. It needs Brent crude at $162 a barrel for its fiscal sums to balance, according to Deutsche Bank. Nigeria is also vulnerable, needing $126 a barrel.
It makes sense to tilt your portfolio away from countries such as these, but some emerging markets can thrive on cheap oil, Mr Dryden says. “Poland, Hungary, Taiwan, Singapore and Malaysia tend to correlate positively with rising western markets, so they may benefit.”
If you’re feeling brave, you could take a contrarian position on oil, says James Thomas, regional director at Acuma Wealth Management in Dubai. “I would suggest Russia is now a buying opportunity. Its markets have fallen so far they could well bounce back, providing the Ukraine stand-off is resolved and western sanctions are lifted. But the US stock market is a safer way to play cheap oil.”
IMF figures show that every 10 per cent shift in the oil price translates into a 0.2 per cent change in global GDP, says Dan Dowding, chief executive at IFAs Killik & Co in Dubai. “With the oil price down 25 per cent, global GDP should improve by 0.5 per cent, as consumers spend the money they save on fuel.”
Any country that consumes more oil than it produces will benefit, he says. “China, the world’s second largest net importer of oil, is estimated to save $2.1 billion a year for every $1 drop in the oil price. India is another beneficiary. The government can now reduce fuel and fertiliser subsidies, which will help cut its budget deficit, and cheaper energy will help moderate inflation.”
The sharp drop in the oil price will create winners and losers among individual company stocks.
The airline industry should benefit because aviation fuel is such a large part of their operational costs, Mr Dowding says. “Many airlines hedge their fuel costs and therefore won’t see much benefit, but American Airlines Group hasn’t hedged for the past five years, so has plenty of upside. Airline stocks have been hit by Ebola fears, but if these recede they could take off again.”
Similarly, cruise line operators, such as Carnival Corporation, Royal Caribbean Cruises and Star Cruises might all benefit although, again, Ebola is casting a shadow.
Cheaper fuel has cut costs at logistics company FedEx Corporation, although its shares have struggled lately, and its narrow margins also make it vulnerable to any future oil increase.
Lower fuel costs should also help rival UPS, but other factors, such as its relatively high debt levels, may limit the upside.
Mr Dowding says oil is a major cost for the chemical industry, which should support companies such as agrochemical specialist Syngenta, but again, there are complications. “Most of Syngenta’s customers are large corporates who will demand that oil-price reductions are passed on to them.”
Airlines, shipping and logistics companies in the GCC could all benefit, says Sachin Mohindra, portfolio manager at Invest AD in Dubai. “These are energy-intensive industries whose costs are correlated to the price of oil. This might include airlines Air Arabia and Al Jazeera Airways, freight and distribution company Agility Dubai, and logistics and transportation company Aramex.”
Petrochemical and speciality chemical companies could also gain, because oil derivatives such as naphtha and methanol trace the oil price. Mr Mohindra suggests that Korean chemical company LG Chem could be a good way to play this trend.
Jahangir Aka, managing director of SEI Investments in Dubai, says that although GCC oil exporters will be hit by the falling oil price, some individual companies in the region will benefit. “Saudi Arabia as a whole may suffer but that doesn’t mean local businesses will. Agricultural company The Savola Group, for example, is primarily a transportation, haulage and distribution company, and will benefit from lower input costs.”
The oil majors such as BP, ExxonMobil and Royal Dutch Shell are inevitably hurting. BP’s share price, for example, is down nearly 15 per cent in recent months, while Exxon and Shell are both down about 10 per cent.
Oil isn’t the only factor behind the fall, BP has been hit hard by continuing legal wrangles over the huge Gulf of Mexico spill, and its 20 per cent stake in Kremlin-controlled Rosneft, which is vulnerable to EU sanctions.
Mr Aka says: “Oil producer margins have been squeezed, but this could actually be a good time to invest if you take a two to three-year view, as their share prices could recover, especially if the oil price revives.”
But investors who want to play shifts in the oil price should tread carefully, because an equally sudden rebound could turn today’s winners into tomorrow’s losers.
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Black Panther
Dir: Ryan Coogler
Starring: Chadwick Boseman, Michael B Jordan, Lupita Nyong'o
Five stars
KEY HIGHLIGHTS
Healthcare spending to double to $2.2 trillion rupees
Launched a 641billion-rupee federal health scheme
Allotted 200 billion rupees for the recapitalisation of state-run banks
Around 1.75 trillion rupees allotted for privatisation and stake sales in state-owned assets
The specs
Price, base / as tested Dh1,100,000 (est)
Engine 5.2-litre V10
Gearbox seven-speed dual clutch
Power 630bhp @ 8,000rpm
Torque 600Nm @ 6,500rpm
Fuel economy, combined 15.7L / 100km (est)
MATCH INFO
Newcastle United 1 (Carroll 82')
Leicester City 2 (Maddison 55', Tielemans 72')
Man of the match James Maddison (Leicester)
The lowdown
Badla
Rating: 2.5/5
Produced by: Red Chillies, Azure Entertainment
Director: Sujoy Ghosh
Cast: Amitabh Bachchan, Taapsee Pannu, Amrita Singh, Tony Luke
Citizenship-by-investment programmes
United Kingdom
The UK offers three programmes for residency. The UK Overseas Business Representative Visa lets you open an overseas branch office of your existing company in the country at no extra investment. For the UK Tier 1 Innovator Visa, you are required to invest £50,000 (Dh238,000) into a business. You can also get a UK Tier 1 Investor Visa if you invest £2 million, £5m or £10m (the higher the investment, the sooner you obtain your permanent residency).
All UK residency visas get approved in 90 to 120 days and are valid for 3 years. After 3 years, the applicant can apply for extension of another 2 years. Once they have lived in the UK for a minimum of 6 months every year, they are eligible to apply for permanent residency (called Indefinite Leave to Remain). After one year of ILR, the applicant can apply for UK passport.
The Caribbean
Depending on the country, the investment amount starts from $100,000 (Dh367,250) and can go up to $400,000 in real estate. From the date of purchase, it will take between four to five months to receive a passport.
Portugal
The investment amount ranges from €350,000 to €500,000 (Dh1.5m to Dh2.16m) in real estate. From the date of purchase, it will take a maximum of six months to receive a Golden Visa. Applicants can apply for permanent residency after five years and Portuguese citizenship after six years.
“Among European countries with residency programmes, Portugal has been the most popular because it offers the most cost-effective programme to eventually acquire citizenship of the European Union without ever residing in Portugal,” states Veronica Cotdemiey of Citizenship Invest.
Greece
The real estate investment threshold to acquire residency for Greece is €250,000, making it the cheapest real estate residency visa scheme in Europe. You can apply for residency in four months and citizenship after seven years.
Spain
The real estate investment threshold to acquire residency for Spain is €500,000. You can apply for permanent residency after five years and citizenship after 10 years. It is not necessary to live in Spain to retain and renew the residency visa permit.
Cyprus
Cyprus offers the quickest route to citizenship of a European country in only six months. An investment of €2m in real estate is required, making it the highest priced programme in Europe.
Malta
The Malta citizenship by investment programme is lengthy and investors are required to contribute sums as donations to the Maltese government. The applicant must either contribute at least €650,000 to the National Development & Social Fund. Spouses and children are required to contribute €25,000; unmarried children between 18 and 25 and dependent parents must contribute €50,000 each.
The second step is to make an investment in property of at least €350,000 or enter a property rental contract for at least €16,000 per annum for five years. The third step is to invest at least €150,000 in bonds or shares approved by the Maltese government to be kept for at least five years.
Candidates must commit to a minimum physical presence in Malta before citizenship is granted. While you get residency in two months, you can apply for citizenship after a year.
Egypt
A one-year residency permit can be bought if you purchase property in Egypt worth $100,000. A three-year residency is available for those who invest $200,000 in property, and five years for those who purchase property worth $400,000.
Source: Citizenship Invest and Aqua Properties
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
UAE%20athletes%20heading%20to%20Paris%202024
%3Cp%3E%3Cstrong%3EEquestrian%3C%2Fstrong%3E%3Cbr%3EAbdullah%20Humaid%20Al%20Muhairi%2C%20Abdullah%20Al%20Marri%2C%20Omar%20Al%20Marzooqi%2C%20Salem%20Al%20Suwaidi%2C%20and%20Ali%20Al%20Karbi%20(four%20to%20be%20selected).%3Cbr%3E%3Cstrong%3EJudo%3C%2Fstrong%3E%3Cbr%3EMen%3A%20Narmandakh%20Bayanmunkh%20(66kg)%2C%20Nugzari%20Tatalashvili%20(81kg)%2C%20Aram%20Grigorian%20(90kg)%2C%20Dzhafar%20Kostoev%20(100kg)%2C%20Magomedomar%20Magomedomarov%20(%2B100kg)%3B%20women's%20Khorloodoi%20Bishrelt%20(52kg).%3Cbr%3E%3Cbr%3E%3Cstrong%3ECycling%3C%2Fstrong%3E%3Cbr%3ESafia%20Al%20Sayegh%20(women's%20road%20race).%3Cbr%3E%3Cbr%3E%3Cstrong%3ESwimming%3C%2Fstrong%3E%3Cbr%3EMen%3A%20Yousef%20Rashid%20Al%20Matroushi%20(100m%20freestyle)%3B%20women%3A%20Maha%20Abdullah%20Al%20Shehi%20(200m%20freestyle).%3Cbr%3E%3Cbr%3E%3Cstrong%3EAthletics%3C%2Fstrong%3E%3Cbr%3EMaryam%20Mohammed%20Al%20Farsi%20(women's%20100%20metres).%3C%2Fp%3E%0A
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Cargoz%3Cbr%3E%3Cstrong%3EDate%20started%3A%3C%2Fstrong%3E%20January%202022%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Premlal%20Pullisserry%20and%20Lijo%20Antony%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%3C%2Fstrong%3E%2030%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20Seed%3C%2Fp%3E%0A
UAE squad
Humaira Tasneem (c), Chamani Senevirathne (vc), Subha Srinivasan, NIsha Ali, Udeni Kuruppuarachchi, Chaya Mughal, Roopa Nagraj, Esha Oza, Ishani Senevirathne, Heena Hotchandani, Keveesha Kumari, Judith Cleetus, Chavi Bhatt, Namita D’Souza.
More from Armen Sarkissian
Kanye%20West
%3Cp%3EYe%20%E2%80%94%20the%20rapper%20formerly%20known%20as%20Kanye%20West%20%E2%80%94%20has%20seen%20his%20net%20worth%20fall%20to%20%24400%20million%20in%20recent%20weeks.%20That%E2%80%99s%20a%20precipitous%20drop%20from%20Bloomberg%E2%80%99s%20estimates%20of%20%246.8%20billion%20at%20the%20end%20of%202021.%3Cbr%3EYe%E2%80%99s%20wealth%20plunged%20after%20business%20partners%2C%20including%20Adidas%2C%20severed%20ties%20with%20him%20on%20the%20back%20of%20anti-Semitic%20remarks%20earlier%20this%20year.%3Cbr%3EWest%E2%80%99s%20present%20net%20worth%20derives%20from%20cash%2C%20his%20music%2C%20real%20estate%20and%20a%20stake%20in%20former%20wife%20Kim%20Kardashian%E2%80%99s%20shapewear%20firm%2C%20Skims.%3C%2Fp%3E%0A
Timeline
1947
Ferrari’s road-car company is formed and its first badged car, the 125 S, rolls off the assembly line
1962
250 GTO is unveiled
1969
Fiat becomes a Ferrari shareholder, acquiring 50 per cent of the company
1972
The Fiorano circuit, Ferrari’s racetrack for development and testing, opens
1976
First automatic Ferrari, the 400 Automatic, is made
1987
F40 launched
1988
Enzo Ferrari dies; Fiat expands its stake in the company to 90 per cent
2002
The Enzo model is announced
2010
Ferrari World opens in Abu Dhabi
2011
First four-wheel drive Ferrari, the FF, is unveiled
2013
LaFerrari, the first Ferrari hybrid, arrives
2014
Fiat Chrysler announces the split of Ferrari from the parent company
2015
Ferrari launches on Wall Street
2017
812 Superfast unveiled; Ferrari celebrates its 70th anniversary
Company%20Profile
%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20HyveGeo%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202023%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Abdulaziz%20bin%20Redha%2C%20Dr%20Samsurin%20Welch%2C%20Eva%20Morales%20and%20Dr%20Harjit%20Singh%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3ECambridge%20and%20Dubai%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%208%3Cbr%3E%3Cstrong%3EIndustry%3A%20%3C%2Fstrong%3ESustainability%20%26amp%3B%20Environment%3Cbr%3E%3Cstrong%3EFunding%3A%20%3C%2Fstrong%3E%24200%2C000%20plus%20undisclosed%20grant%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EVenture%20capital%20and%20government%3C%2Fp%3E%0A
The specs
Engine: 1.5-litre 4-cyl turbo
Power: 194hp at 5,600rpm
Torque: 275Nm from 2,000-4,000rpm
Transmission: 6-speed auto
Price: from Dh155,000
On sale: now
Specs%3A%202024%20McLaren%20Artura%20Spider
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%203.0-litre%20twin-turbo%20V6%20and%20electric%20motor%3Cbr%3E%3Cstrong%3EMax%20power%3A%3C%2Fstrong%3E%20700hp%20at%207%2C500rpm%3Cbr%3E%3Cstrong%3EMax%20torque%3A%3C%2Fstrong%3E%20720Nm%20at%202%2C250rpm%3Cbr%3E%3Cstrong%3ETransmission%3A%3C%2Fstrong%3E%20Eight-speed%20dual-clutch%20auto%3Cbr%3E%3Cstrong%3E0-100km%2Fh%3A%3C%2Fstrong%3E%203.0sec%3Cbr%3E%3Cstrong%3ETop%20speed%3A%20%3C%2Fstrong%3E330kph%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh1.14%20million%20(%24311%2C000)%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3C%2Fp%3E%0A
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3ENamara%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EJune%202022%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3EMohammed%20Alnamara%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%20%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EMicrofinance%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%20%3C%2Fstrong%3E16%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESeries%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EFamily%20offices%0D%3Cbr%3E%3C%2Fp%3E%0A
Porsche Taycan Turbo specs
Engine: Two permanent-magnet synchronous AC motors
Transmission: two-speed
Power: 671hp
Torque: 1050Nm
Range: 450km
Price: Dh601,800
On sale: now
The biog
Born: near Sialkot, Pakistan, 1981
Profession: Driver
Family: wife, son (11), daughter (8)
Favourite drink: chai karak
Favourite place in Dubai: The neighbourhood of Khawaneej. “When I see the old houses over there, near the date palms, I can be reminded of my old times. If I don’t go down I cannot recall my old times.”
MATCH INFO
Europa League final
Who: Marseille v Atletico Madrid
Where: Parc OL, Lyon, France
When: Wednesday, 10.45pm kick off (UAE)
TV: BeIN Sports
The specs: Audi e-tron
Price, base: From Dh325,000 (estimate)
Engine: Twin electric motors and 95kWh battery pack
Transmission: Single-speed auto
Power: 408hp
Torque: 664Nm
Range: 400 kilometres
25%20Days%20to%20Aden
%3Cp%3EAuthor%3A%20Michael%20Knights%3C%2Fp%3E%0A%3Cp%3EPages%3A%20256%3C%2Fp%3E%0A%3Cp%3EAvailable%3A%20January%2026%3C%2Fp%3E%0A
The Bio
Ram Buxani earned a salary of 125 rupees per month in 1959
Indian currency was then legal tender in the Trucial States.
He received the wages plus food, accommodation, a haircut and cinema ticket twice a month and actuals for shaving and laundry expenses
Buxani followed in his father’s footsteps when he applied for a job overseas
His father Jivat Ram worked in general merchandize store in Gibraltar and the Canary Islands in the early 1930s
Buxani grew the UAE business over several sectors from retail to financial services but is attached to the original textile business
He talks in detail about natural fibres, the texture of cloth, mirrorwork and embroidery
Buxani lives by a simple philosophy – do good to all
