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Qatar’s Growth Prospects Dim as Saudi-Led Boycott Takes Toll



  • Qatar’s Growth Prospects Dim as Saudi-Led Boycott Takes Toll

Qatar’s economy will expand this year at the slowest pace since 1995, according to economists surveyed by this month, as the impact of a Saudi Arabia-led boycott is felt on trade and investor confidence.

Gross domestic product will grow 2.5 percent in 2017 and 3.2 percent next year, compared with 3.1 percent and 3.2 percent respectively in the previous survey conducted in June. Economists now expect a budget deficit of 5.1 percent of GDP this year, up from 4.6 percent, while the forecast for inflation dropped to 2.2 percent from 2.5 percent.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut ties with Qatar on June 5, accusing the nation of 2.7 million people of destabilizing the region through its ties to Islamist extremists — a charge Qatar has repeatedly denied. Imports and foreign deposits have plummeted and interest rates soared, exacerbating a broader slowdown due to lower global energy prices.

After almost two decades of rapid growth driven by a sevenfold increase in the production of oil and gas, Qatar’s energy boom has waned this decade as projects were completed and focus shifted to promoting non-oil growth as crude prices fell. The world’s biggest producer of liquefied natural gas is spending $200 billion to upgrade infrastructure ahead of the 2022 soccer World Cup, and has aspirations to be a regional tourism and services hub.

“Even before the diplomatic crisis with regional powers, it looked like Qatar’s non-energy economy would slow,” said William Jackson, senior economist for emerging markets at Capital Economics. “The early signs are that the sanctions dealt a damaging blow to Qatar’s economy in June. The impact appears to be temporary, but it will still result in weaker growth.”

Amid the Saudi-led boycott, officials have been trying to inspire confidence in the economy, including plans to build food-processing facilities near a new port and immigration rules introducing permanent residency to attract investors and some skilled workers. In his only public address since the diplomatic spat began, ruler Sheikh Tamim bin Hamad Al Thani said Qatar will open up its economy and diversify income sources.

Qatar’s energy exports weren’t affected by the boycott and disruptions to imports were temporary, Sheikh Saif Al Thani, director of Qatar’s Government Communications Office, said in a statement.

“The illegal actions of our neighbors have been the catalyst for us to accelerate our economic plans and renew our commitment to diversification and sustained growth,” he said. “We fully expect to see a strong return of the Qatari economy this year and growth over the years to come.”

Qatar Petroleum has also said it plans to increase its energy output by about a million barrels of oil equivalent per day in five to seven years.

Positive Outlook

Qatar’s optimism is reflected in the Bloomberg survey. Expectations for higher growth in 2018 are independent of whether the boycott on Qatar is lifted, said both Jackson at Capital Economics and Farouk Soussa, London-based chief economist for the Middle East at Citigroup Inc.

“We expect the disruptive impact of the boycott to have evaporated by next year,” Soussa said. “Trade routes will have been fully reconfigured, confidence will have been restored, building will recommence — all possibly against a backdrop of a continued boycott, but one that the economy has adapted to.”

There’s also a silver lining for Qatar. Despite facing the slowest growth in more than two decades in 2017, its economy is still forecast to expand the most in the six-nation Gulf Cooperation Council — ahead of Saudi Arabia at 0.5 percent and the U.A.E. at 2 percent, according to the latest surveys.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend




Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.


  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return



Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather




Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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