Oil to continue rally as US exit of Iran deal stokes concern

Oil was poised for a second weekly gain as traders anticipated the supply impact of renewed US sanctions on Iran and continuing tensions in the Middle East.

Futures in New York traded above $71 a barrel, near the highest level since November 2014, and are up 2.3 per cent this week. Israel said it conducted the biggest raid in at least three decades at Iran’s military facilities inside Syria. Concerns about the stability of the region were already heightened after US President Donald Trump decided to exit a 2015 nuclear accord and hit OPEC’s third-largest producer with sanctions intended to curb its exports.

Crude’s recent rally has been driven by a deepening regional conflict in the energy-rich Middle East and Trump’s hawkish stance on Iran. While Saudi Arabia is ready to work with other producers to mitigate any impact of a shortage following the US move, Goldman Sachs Group said the sanctions could push prices above its forecasts and Bank of America Corp. sees a possibility oil could rise to $100 a barrel next year.

“Supply concerns have lifted oil prices,” said Norbert Ruecker, head of market and commodity research at Julius Baer Ltd. in Zurich. “We see the main impact on the oil price through the market mood -- geopolitical noise and escalation fears.”

West Texas Intermediate crude for June delivery was down 8 cents at $71.28 a barrel on the New York Mercantile Exchange at 1:07 p.m. in London. Total volume traded was about 8 percent below the 100-day average.

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The US exit from Iran deal may revise alliance between Opec and non-members
Crude prices rally as market braces for more tightening following Trump decision on Iran

Business Extra Podcast: What's next for the oil price rally?

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Brent for July settlement slipped 29 cents to $77.18 a barrel on the London-based ICE Futures Europe exchange. Prices are up 3.5 percent this week. The global benchmark crude traded at a $5.96 premium to July WTI.

Futures for September delivery on the Shanghai International Energy Exchange dropped 1.1 percent to 471.2 yuan a barrel. The contract is up 5.4 percent this week, heading for a fifth straight weekly advance.

See also: American Oil Exports Flip Influence in Iran Enforcement: Goldman

Some refiners and oil traders are already starting to look for alternatives to Iranian barrels. China’s Ministry of Commerce said Friday it’s engaged in mutually beneficial oil trading with Iran based on commercial factors, without elaborating whether it was going to persist with or curb imports. The U.S. has given buyers 180 days to wind down shipments from the Middle East producer to avoid penalties.

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Formula Middle East Calendar (Formula Regional and Formula 4)

Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi

Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi

Round 3: February 7-9, Dubai Autodrome – Dubai

Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi

Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
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The specs

Engine: 2.0-litre 4-cyl turbo

Power: 201hp at 5,200rpm

Torque: 320Nm at 1,750-4,000rpm

Transmission: 6-speed auto

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Fatherland

Kele Okereke

(BMG)

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MATCH INFO

Uefa Champions League final:

Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports

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Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:

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The Sand Castle

Director: Matty Brown

Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea

Rating: 2.5/5