Top Oil Producers to Meet amid Record Crude Prices

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
TT

Top Oil Producers to Meet amid Record Crude Prices

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen inside their headquarters in Vienna, Austria December 7, 2018. REUTERS/Leonhard Foeger/File Photo

The world's top oil-producing countries will meet on Wednesday to discuss a further increase in output, while crude prices have reached seven-year highs rattled by geopolitical tensions.

Part of their regular meetings since the Covid-19 pandemic shook markets, the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies convene by videoconference to set output.

Many analysts expect the grouping, including Saudi Arabia and Russia, to decide to continue to boost output by 400,000 barrels per day in March.

This will be in line with their strategy to slowly re-open the taps since May last year, after drastic cuts to curb slumping prices when the coronavirus first started spreading.

"With that said, we wouldn't completely rule out a larger increase, given high oil prices and recent OPEC+ underproduction," Capital Economics analysts said.

Brent oil on Wednesday surpassed $90 per barrel, attaining a level last seen in October 2014.

The price of West Texas Intermediate (WTI) crude hit its highest level in more than seven years earlier this month, fueled by easing concerns about the Omicron Covid variant and geopolitical tensions.

- Russia sanctions? -
The United States and Britain on Sunday flagged new and "devastating" economic sanctions against Russia, as Washington and its NATO allies step up efforts to deter any invasion of Ukraine.

Fears of an imminent invasion have grown in recent days, despite denials from Moscow and pleas from Ukraine's president to avoid stirring "panic" over the massive Russian military build-up on the border.

A Russian invasion of Ukraine would lead to "very hard sanctions" against Moscow, according to Bjarne Schieldrop, analyst at SEB.

"It would halt exports of natural gas to Europe even more. Natural gas and power prices in Europe would be much higher than the current extremely high prices we have now," he told AFP.

In the Middle East, Yemen's Iran-backed Huthi militants launched two missile attacks on the United Arab Emirates this month.

- Struggling to meet targets -
Besides the geopolitical uncertainties, analysts have noted that OPEC nations and other key producers are struggling to meet targets to lift output by 400,000 barrels a month, adding to the upward pressure on prices.

"OPEC+ underperformance and inaction support elevated oil prices as the group has underdelivered against its stated production targets by hundreds of thousands of barrels," Rystad Energy analyst Louise Dickson said.

The grouping "has committed to a passive role in the conversation despite external pressure primarily from the US, to increase production and ease fuel prices," she added.



Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
TT

Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.