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“OPEC Plus” decides to continue its commitment to plans to increase production



"OPEC Plus" decides to continue its commitment to plans to increase production

“OPEC Plus” decides to continue its commitment to plans to increase production

The price of a barrel has exceeded $ 110, and the United States is considering sanctions against Russia’s energy sector.

Thursday – 30 Rajab 1443 AH – 03 March 2022 AD Issue no. [

Geopolitical changes put pressure on oil prices while market fundamentals remain stable (Reuters)

Cairo: Sabri Naje, London: Asharq al-Awsat.

The “OPEC Plus” federation agreed on Wednesday to continue its plans to increase production, which was decided earlier in April, at a time when prices are expected to rise as a result of the Russian-Ukrainian conflict.
In addition, “OPEC Plus” has increased production by 400,000 barrels per month since last August, in the wake of the fall in production demand due to the “COVID-19” epidemic.
At the time of the fall in prices in April 2020, when none of the market parties asked OPEC Plus to neutralize more barrels, a barrel was less than $ 20, at which point OPEC Plus gradually reduced it in an attempt to recover. Now gradually, without looking at the rapid geopolitical changes.
Oil prices hit $ 110 yesterday as Western sanctions tightened the noose on Moscow over the invasion of Ukraine, which disrupted Russia’s oil sales, the world’s second-largest oil exporter.
Looking at the market fundamentals, the main reason for these price rises is the Russian-Ukrainian crisis, which led to panic in the markets and turmoil in trade, although it is certain that OPEC Plus will take into account any of these volatility. conditions; In light of its policy aimed at stabilizing markets, the Confederates are expected to meet later this month.
By 15:41 GMT, Brent crude traded above $ 113. Western measures have deterred many Russian crude buyers. The measures taken by Western countries have caused problems in exports from Kazakhstan, which is also a member of the Petroleum Exporting Countries (OPEC), Russia and allied oil producing countries.
According to Ricardo Evangelista, a senior analyst at Brokerage Active Trades, traders are increasingly concerned about finding alternatives to Russian oil in a market that is already struggling with the impact of Western sanctions on Russia.
He explained to Asharq Al-Awsat: “Russian oil exports represent about 8 percent of global GDP, and its potential deviation from the international market will inevitably exacerbate the current situation of demand overstating supply.”
Evangelista expects: “Expectations of oil prices will continue to rise as the military situation in Ukraine worsens and the number of market operators to deal with Russian energy stocks increases, with no indication that the crisis will be resolved soon.”
After yesterday’s meeting, OPEC Plus’s report said: “The key factors in the current oil market and the consensus on its expectations indicate a well-balanced market, not because of the current turbulent change, but because of current geopolitical developments.”
The remaining effective cuts to OPEC Plus production due to the epidemic are 2.6 million barrels a day, and the federation is expected to recover it by the end of next September. Oil prices rose sharply as demand recovered strongly due to the decline in the impact of the epidemic.
For its part, the Organization of the Petroleum Exporting Countries (OAPEC) evaluated the decision of the “OPEC Plus” Federation and its six member states yesterday and said in a press release, “It is within the framework of its ongoing effort to achieve stability and equilibrium in global oil markets, especially in Eastern Europe.” As tensions intensify, markets are expected to react.
OAPEC added: “According to this decision, Saudi Arabia’s production is projected to increase by 105 thousand barrels per day to 10.436 million barrels per day, while Kuwait’s production is projected to increase by 27 thousand barrels per day to 2.666 million barrels per day. 30,000 barrels per day, 3.006 million barrels per day and Iraq’s production increased by 44,000 barrels per day to 4.414 million barrels per day, increasing Algeria’s production by 10,000 barrels per day, reaching 1.002 million barrels per day, and Bahrain’s production per day by 5,000 per thousand barrels per day. Reaches the barrels.
Meanwhile, the White House said yesterday that the United States was “too open” to impose sanctions on Russia’s oil and gas sector. It looks at the potential impact on the market as global oil prices rise to an 8-year low and supply disruptions continue to rise.
White House spokeswoman Jen Psaki said in a television interview that Washington was considering targeting Moscow’s largest energy sector with sanctions in the wake of the Russian invasion; But the impact on global oil markets and U.S. energy prices is a key factor in this structure.
When asked if Washington and its Western allies would impose sanctions on Russia’s energy and gas sector, Zaki told MSNBC: “We are very open to that.” “We are investigating it,” he said. It is too much on the table; But we need to evaluate all the consequences of that.
The administration of US President Joe Biden has warned that Russia could impose sanctions on Russian oil if Moscow continues its occupation of Kiev. However, Psaki said on Wednesday that the White House was examining how this could affect markets. “We are reading this very seriously,” he said in another interview with CNN.
On Tuesday, the United States pledged to release 30 million barrels of oil as part of a global commitment to release 60 million barrels of oil in an effort to boost energy markets in the wake of Russia’s invasion of Ukraine, and said it could take further action if needed. Meanwhile, in response to Berlin’s war in Ukraine, the German economy announced that the German government had released part of its national oil reserves to calm the oil market.

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The world’s central banks are increasing their reserves… Details in 10 facts



The world’s central banks are increasing their reserves… Details in 10 facts

Books – Islam Saeed

Sunday, December 3, 2023 at 03:00 AM

Central banks around the world continue to demand… Gold In 2023, gold trends for the third quarter of the current year 2023 as per the reports of the World Gold Council show that the demand for gold by banks has increased.

Central banks added 337 tonnes in the third quarter of 2023

The third largest buying level in the quarter reached by central banks

In the third quarter of 2022, banks bought a large amount of 459 tonnes of gold..

Since the beginning of 2023, demand by central banks has increased by more than 14%.

Total bank purchases of gold since the beginning of 2023 have reached a record high of 800 tonnes of gold.

Gold reserves reported by global central banks rose by a net 77 tonnes in September.

Central bank’s gold sale is only 1 ton.

– Fund outflows from gold investment funds continued in October, $2 billion

Since the beginning of the year, the funds’ investments have fallen 6%.

– Total cash outflows from gold-backed global investment funds have hit $13 billion since the start of the year

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Oil loses 2% as investors worry about OPEC plus cuts



Oil loses 2% as investors worry about OPEC plus cuts

Oil prices settled up more than 2% – yesterday, Friday – after a volatile trading week as the market anxiously watched the latest round of OPEC Plus production cuts and a slowdown in global production activity.

Brent crude futures for February delivery were down 2.45% at $78.88 a barrel, while US West Texas Intermediate crude futures were down 1.9% at $74.07.

For the week, Brent posted a decline of about 2.1%, while the West Texas Intermediate posted a decline of more than 1.9%.

On Thursday, oil-producing countries in the OPEC Plus alliance – which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and other countries including Russia – agreed to cut global oil production by about 2.2 million barrels on the world market. per day in the first quarter of next year, including… extending current voluntary cuts by 1.3 million barrels per day from Saudi Arabia and Russia.

The OPEC Plus alliance – which accounts for more than 40% of the world’s oil – is focused on cutting production, with prices falling from around $98 a barrel in late September, amid fears of weaker economic growth in 2024.

A survey showed that the US manufacturing sector is still weak, with the factory employment rate falling last November.

On Friday, talks to extend a week-long ceasefire between Israel and the Palestinian Islamist movement (Hamas) collapsed, leading to renewed fighting in Gaza that could disrupt global oil supplies, Reuters reported.

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A private credit boom leads to a new crisis



A private credit boom leads to a new crisis

If this is a “golden moment” for private lending, where will things go? What are the risks? Higher interest rates and turmoil in regional banks earlier this year have boosted confidence in the recovery of private credit. According to data provider Preqin, the market is expected to grow from $1.6 trillion to $2.8 trillion this year. BlackRock takes a more optimistic view, predicting the market will grow to $3.2 trillion.

Mark Rowan, CEO of private equity firm Apollo, sees “de-banking” in its early stages, while John Gray, chairman of BlackRock, coined the phrase “golden moment” to describe conditions in private capital at the start of the year. .

If the new banking rules under Federal Reserve regulations are considered a catalyst, capital requirements for the commercial banking industry in the US are likely to increase by up to 35%, according to Oliver Wyman, the world’s leading management consultancy. company — and no wonder Jamie Dimon said. , head of JP Morgan, said private lenders would be “very happy.”

How things develop in the market will be a key issue not only for large firms and banks in the private market, but also for traditional asset managers who have begun to use the capabilities of the private market to avoid the extreme rise of passive asset management. . This coincides with at least 26 traditional asset managers buying or launching new private credit units in the past two years.

This shift confirms the extent to which the structure of the financial market has changed. 20 years ago, when I was working at Morgan Stanley, I noted in a research paper that investor flows would split into barbells. On the one hand, investors would flock to passive, exchange-traded funds to get record returns. They are cheap and convenient. On the other hand, investors looking for higher returns will use asset allocation with specialist fund managers who invest in private equity, hedge funds and real estate. For traditional “major” fund managers, caught between the two, they will be pressured to make their investment machines more specialized or merge to increase their size, which has already been achieved.

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According to ETFGI, ETFs have grown from $218 billion in 2003 to $10.3 trillion last October, but what’s surprising is how unbalanced the situation has become in terms of returns, with management fees likely to account for half of the investment sector. to alternative asset managers in 2023 from 28% in 2003.

Central banks are now scaling back their quantitative easing, which was implemented to support economies and markets, which has traditionally supported corporate profits. Without these tailwinds, the pressures on fund managers become more severe. So, how will the transition to private lending proceed?

Currently, Preqin estimates that just 10 companies have received 40% of private credit resources in the last 24 months. There are three reasons why private credit growth has disproportionately favored these large firms.

First, a good amount of growth is expected from the sale of investment portfolios by regional banks, which have to reduce their debt and are forced to sell good assets. The central bank’s new rules signal an inability for big banks to step up. In light of the large portfolio sizes and the speed required for transactions, the acquisition of these assets is a specialized venture that is in the interest of large companies that can underwrite the risks.

Second, a growing number of deals require more money, and August saw a new record for the largest loan, reaching $4.8 billion for fintech firm Finastra. The third and most important reason is that banks prefer to enter into partnerships so as not to lose access to customers. Even though tougher rules mean they have to divest assets, banks want to continue lending and partnering to help manage deal flows, which could benefit larger firms.

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Several major banks have already closed deals and more are expected to follow. Citi is the latest bank to report its intention to launch a new unit in 2024.

A changing interest rate regime will mean loan losses rise as funding costs normalize and exposed weak balance sheets, which will be a source of challenges for private lenders. It may be unwise for new companies to try to exploit the growth. This requires a strong focus on the risks and rewards of selection and contracts, and teams that specialize in reconciliation, which many of the major players in the market have.

Of course, there will be key opportunities, such as hard credit or energy infrastructure credit, that are places that efficient companies can tap into, but they may not be on the scale that traditional companies need to maximize opportunities.

In general, a complete and comprehensive shift in capital allocation awaits us, requiring a major shift towards private credit, as Howard Marks recently argued, but the coming tide will not smooth all boats.

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