UAE UPBEAT ABOUT OIL DEMAND RECOVERY NEXT YEAR
▶ Vaccines and easing US-China trade tensions could boost markets
The UAE, Opec’s third-largest producer, is optimistic about oil demand recovery next year but it expects the rebound to be gradual, its energy minister said.
The start of global distribution of coronavirus vaccines and easing trade tensions between the world’s two biggest economies – the US and China – are reasons for optimism about an improvement in demand for oil, Suhail Al Mazrouei told Sky News Arabia on Thursday.
“We see that 2021 will be a year of recovery,” the minister said. “However, the recovery in demand will be gradual and will not be in a quarter or two.”
Mass inoculations and the introductions of vaccines would will help major economies recover faster, while improved US-China trade relations will benefit global economic activity and boost demand for oil in countries including China and India, he said. Goldman Sachs forecast Brent, the international benchmark for oil, to hit $65 a barrel by the end of next year, while Standard Chartered projected a price of $44.
After rallying to more than $51 per barrel, oil prices have pulled back slightly from their October highs over concerns a mutation of the coronavirus discovered in the UK could accelerate transmission of Covid-19 and lead to more lockdowns across Europe that could hit oil demand.
However, Mr Al Mazrouei said the emergence of a mutant strain of the virus is not a cause for concern.
“The global health sector can co-operate and find solutions for this virus,” he said.
A number of countries across the globe have already started inoculation drives to keep their economies running.
The UAE, the second-biggest Arab economy, approved the use of a Sinopharm vaccine in November, while Dubai separately approved the PfizerBioNTech vaccine earlier this week. The emirate on Wednesday launched its extensive vaccine drive.
Dubai’s economy is forecast to expand by 4 per cent next year, driven by its effective Covid-19 response and countering a pandemic- driven economic slowdown, according to government projections.
Dubai’s strong economic fundamentals and the pandemic-delayed Expo 2020 in October next year have also provided the bedrock for a quick rebound, Dubai Media Office said. However, the expansion next year will follow an estimated 6.2 per cent economic contraction in 2020, the media office said. The emirate’s economy shrank 10.8 per cent in the first half of the year, on the back of the massive shock of unprecedented global and local measures to contain Covid-19, it said.
Dubai, the commercial and trading hub of the Middle East, took measures to support businesses and individuals, launching four stimulus packages worth Dh6.8 billion ($1.85bn), between March and October.
Dubai’s growth projections follow the Central Bank of the UAE’s estimate of a 2.5 per cent expansion of the country’s economy next year. The rebound in 2021 will be led by a 3.6 per cent acceleration in the non-oil sector, according to the regulator’s third-quarter economic review.
Overall, economic packages and initiatives by the federal and local governments since the outbreak have reached more than Dh388bn.
The UAE, Opec’s third-largest oil producer, is bullish about a recovery in demand next year but expects it to be gradual.
Minister of Energy and Infrastructure Suhail Al Mazrouei told Sky News Arabia on Thursday that the optimism could be attributed to the global distribution of Covid-19 vaccines and the easing of trade tension between the US and China.
“We see that 2021 will be a year of recovery,” he said. “However, the recovery in demand will be gradual and will not be in a quarter or two.”
Mr Al Mazrouei said an improvement in US-China trade relations could boost oil demand in major consumers such as China and India.
Goldman Sachs forecast that Brent, the international benchmark for oil, could hit $65 a barrel by the end of next year, while Standard Chartered projected a price of $44.
After rallying to above $51, oil prices have receded somewhat from their October highs amid concern that a Covid-19 strain discovered in the UK could speed up transmission of the virus, resulting in more lockdowns across Europe that could hit oil demand.
Brent was trading at $50.95 at 7.18pm UAE time on Thursday, while West Texas Intermediate, the gauge for US oil, was trading at $47.87.
Mr Al Mazrouei said the emergence of the new
Covid- 19 strain was not a cause for concern.
“The global health sector can co-operate and find solutions for this virus,” he said.
Opec+, the alliance of oil producers led by Saudi Arabia and Russia, reached an agreement on production cuts that has helped the market during the period of reduced demand, he said.
Earlier this month, Opec cut its oil demand forecast for 2021 by 350,000 barrels per day but left its assessment for this year relatively unchanged, as it factored in uncertainty over the effect the pandemic will have on transport fuels.
Overall demand is expected to be 96.89 million bpd next year, marginally higher than the projected 89.99 million bpd for this year, Opec said.
The UAE is keen on more oil-producing countries joining the alliance in future, Mr Al Mazrouei said.
Improved US-China trade ties could boost demand in nations that are major oil consumers