A large GMC 4×4 sits with deflated tyres. Like the Range Rovers and Camaro GT parked nearby, it is covered in a thick layer of sandy dust — one of more than 30 apparently abandoned cars lining the bays of a floor of a multi storey car park at Dubai airport.
The vehicles are testament to the rising number of “skips” afflicting Dubai — indebted expatriates who have left the city state rather than face debtors’ prison as an economic downturn squeezes the business and finance hub.
Throughout the oil-rich Gulf, the slump in crude prices is forcing governments to slash spending and delay projects, while private companies shed staff and, in some cases, shut down.
“There is a material slowdown under way, and it still has some way to run,” said Simon Williams, chief Middle East economist at HSBC. “Low oil prices are part of the problem. Dubai may not be an oil producer, but it exports its services to the rest of the Gulf where demand is weakening.”
Abandoned vehicles were a totemic image of Dubai’s last crisis in 2009, when the emirate was forced to turn to its oil-rich brother emirate Abu Dhabi, capital of the United Arab Emirates, for a $20bn bailout.
This year’s slowdown has not reached the crisis-levels of that recession, and Dubai is less affected than other oil-dependent peers, such as Qatar or Abu Dhabi. But the emirate is still burdened with debts of around 140 per cent of gross domestic product and faces loan and bond repayments of $22bn through 2018.
A recurring oil market theme in the past few months has been the speculation that despite its jawboning that it is ready and willing to boost crude production, Iran has had a hard time getting both the funding and the required infrastructure to substantially boost its production to recapture its supply levels last seen before the recent US sanctions. That however appears to be changing fast.
Recall all those tankers we have profiled before on anchor next to the Iran shore?
They have finally started to move.
According to Bloomberg, tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April, according to tanker-tracking data. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, adding to the pressure facing producer nations as they prepare to meet in Doha to discuss freezing output to prop up oil prices.
Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast
Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port.
Check out this shocking satellite photo of the tanker traffic jam just off the coast of Iraq.
Bahrain and Oman have increased fuel prices significantly as the Gulf states struggle to rein in budget deficits and ease pressure on government coffers ravaged by the decline in oil prices.
The two poorer members of the six-strong Gulf Co-operation Council followed the example of the United Arab Emirates and Saudi Arabia in cutting subsidies and spending while looking at ways to boost non-oil revenues.
Bahrain, which last year ended state subsidies on meat, announced that regular petrol would rise on Tuesday by 56.3 per cent to 0.125 Bahraini dinars (33 US cents) per litre and premium petrol would increase by 60 per cent to BD 0.160.
Oman said it would raise regular petrol by 23 per cent to 0.140 Omani riyals (36 US cents,) premium petrol by a third to OR 0.160 and diesel by 10 per cent to OR 0.160. The Omani price increase comes into effect on January 15 and will be reviewed monthly. The reform, which includes spending cuts, was endorsed by cabinet in Muscat last month.
Bahrain needs around $125 a barrel to balance its budget, while Oman’s fiscal break-even price is around $110 a barrel.
An expert from Italy’s Institute of International Affairs told Sputnik that the removal of sanctions against Iran’s energy exports will have a great impact on the global energy market, and may even alter the nature of OPEC.
Iran’s entry into the global energy market will enable the world’s consumers to reduce their reliance on carbon energy, and transition to supplies of cleaner gas in the drive towards a low-carbon economy, Nicolo Sartori, a Senior Research fellow in the Energy Program at the Istituto Affari Internazionali, told Radio Sputnik on Tuesday.
Russia and Iran are the two countries in the world with the most gas resources, and their cooperation in tapping into those resources will be an important step towards meeting the world’s energy needs after sanctions are fully lifted, said Sartori.
“Getting closer will be very important for Russia, first of all to be a partner in some of Iran’s projects, in particular in LNG, where Russia is not as strong as it could be, and where Iran is expected to become very strong.”
“To an extent, the two countries are quite complementary in terms of exports. Russia is a pipeline-oriented country, looking to its west, to Europe. Iran is going to possibly become an LNG country, looking eastward, to Asia, and possibly competing with the Qataris,” said Sartori, who expects Russia to remain Europe’s key energy supplier.
Some great lines in this piece on the glut of oil weighing on price
A massive supply glut has caused global oil prices to crash this year
“floating storage” of crude oil soared to nearly triple the normal level last week, according to ClipperData
It’s a “super tanker traffic jam”
Epic oil glut
Smith first noticed the maritime congestion popping up a month ago off the coast of Singapore. And then ClipperData discovered a similar phenomenon off China and even the Arabian Gulf. “There just appears to be more oil than can be dealt with. They haven’t got anywhere to put it”
Ratings agency Moody’s is the latest to warn that the huge decline in oil prices, and weak prospects for a serious recovery, are set to pinch the finances of Gulf states hard, potentially damaging the countries’ credit profiles.
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, (collectively, the Gulf Cooperation Council) ran an aggregate fiscal surplus equivalent to 9 per cent of GDP from 2010 to 2014, Moody’s says. That is set to flip into a deficit close to 10 per cent in 2015 to 2016, it thinks.
Says Steffen Dyck, an analyst at Moody’s:
We expect that the impact of lower hydrocarbon revenues on GCC public finances will spur policy adjustments in 2016. These could include reductions in subsidy spending and measures to broaden the non-oil revenue base.
Brent crude, which now trades at $48.90 per barrel, is set to average $55 per barrel this year, $53 next year, and $60 in 2017, Moody’s analysts reckon. That’s well below previous forecasts of $65 in 2016 and $80 in the following year.
BP will pay a higher than expected $20.8bn to settle civil claims with US federal and state authorities over the 2010 Deepwater Horizon disaster, with $8.1bn of the funds designated for coastal wetlands and marine mammals as part of a 15-year Gulf of Mexico restoration plan.
Federal agencies provided details of the settlement for the first time in a decree that was filed on Monday. The settlement amount exceeds the $18.7bn deal announced in July, which officials attributed to additional refinements of penalties and amounts that BP has already paid.
The deal announced on Monday is the largest ever reached by the Department of Justice with a single entity and resolves what could have been years of legal wrangling over the April 2010 oil spill and explosion that killed 11 workers.
Also included in the settlement are the five Gulf states affected by the spill — Alabama, Florida, Louisiana, Mississippi and Texas. There will be a 60-day public comment period and then the agreement will be subject to court approval.
“BP is receiving the punishment it deserves, while also providing critical compensation for the injuries it caused to the environment and the economy of the Gulf region,” Attorney-general Loretta Lynch said. “Once approved by the court, this agreement will launch one of the largest environmental restoration efforts the world has ever seen.”