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Friday, 24 June 2011

JPMorgan on the IEA’s stimulus


Most of the commentary we’ve seen about the IEA’s announcement has understandably focused on the political ramifications (a shot across the bow at OPEC) and, more frequently, its affect on oil price forecasts.
But what about the macroeconomic impact?
As far as we can tell, JP Morgan is first out of the gate in attempting to place a precise number on the amount of (don’t-call-it-a-)stimulus this will give to the consuming countries involved in the release:
The broader economic impact of this policy action is potentially significant. If our projections are realized, the IEA  release provides the equivalent of a $140 bn stimulus to consumers (albeit with offsetting impacts on flows to producing countries) based on the change in crude prices from 2Q2011. Relative to the $130/bbl we had been expecting for 3Q2011, the benefit is closer to double that amount. The release will prove stimulatory to the global economy, particularly for Emerging Markets and the US. As such, if other economic headwinds can be overcome, it will have the effect of bolstering not just the world economy, but oil demand. This could create additional upside pressures on prices in 2012, particularly if, against our assumptions, Libyan output remains offline. For the time being, our 2012 forecast remains unchanged, but will be reviewed in the next Oil Market Monthly.

JPMorgan on the IEA’s stimulus

Most of the commentary we’ve seen about the IEA’s announcement has understandably focused on the political ramifications (a shot across the bow at OPEC) and, more frequently, its affect on oil price forecasts.
But what about the macroeconomic impact?
As far as we can tell, JP Morgan is first out of the gate in attempting to place a precise number on the amount of (don’t-call-it-a-)stimulus this will give to the consuming countries involved in the release:
The broader economic impact of this policy action is potentially significant. If our projections are realized, the IEA  release provides the equivalent of a $140 bn stimulus to consumers (albeit with offsetting impacts on flows to producing countries) based on the change in crude prices from 2Q2011. Relative to the $130/bbl we had been expecting for 3Q2011, the benefit is closer to double that amount. The release will prove stimulatory to the global economy, particularly for Emerging Markets and the US. As such, if other economic headwinds can be overcome, it will have the effect of bolstering not just the world economy, but oil demand. This could create additional upside pressures on prices in 2012, particularly if, against our assumptions, Libyan output remains offline. For the time being, our 2012 forecast remains unchanged, but will be reviewed in the next Oil Market Monthly.

Interserve CEO cautions on Middle East


British support services and building firm Interserve (IRV.L) Chief Executive Adrian Ringrose cautioned that its growth in the Middle East will not rebound to 2009 levels in the short term, playing down investor expectations.

"We peaked there in 2009, fueled from Dubai Airport and the significant projects in Abu Dhabi and obviously those are gone, and for the moment don't look like they're ever going to be repeated," Ringrose told the Reuters Global Real Estate and Infrastructure Summit in London.

"It will be a while before we get back to anything approaching the profit contributions we've had out of equipment services," he said.

Oman eyes London's Adelphi as Dubai firm sells up

The art deco Adelphi building in London, England
The art deco Adelphi building in London, England
Oman's investment arm in among those interested in buying the Adelphi building in London's West End after it was put up for sale by Dubai's Istithmar World, UK media have reported.
The Omani Government, Hermes Real Estate, Blackstone, and Samsung Life are among parties leading the race to buy the building which used to be home to Peter Pan author JM Barrie, the UK's Estates Gazette reported.
In March, Istithmar World instructed CB Richard Ellis to sell the 306,000 sq ft Art Deco building on Strand.

Moody's cuts KIPCO to Baa3; negative outlook

June 24 (Reuters) - Kuwait Projects Company (Holding) K.S.C (KPRO.KW)
* Moody's downgrades KIPCO to Baa3 from Baa2; negative outlook (Kuwait)

Property prices: Abu Dhabi to drop 20%; Dubai 10% by 2012


Residential property prices in Abu Dhabi are likely to drop by another 20 per cent, while Dubai will see a decline of 10 per cent by end-2012, says a new report.

“We forecast another drop of 10 per cent to take place through to the end of 2012 in Dubai and a 15-20 per cent decline in Abu Dhabi,” Global Investment House said in a new report.

Dubai residential selling prices have dropped almost 56 per cent from their peak in fourth quarter 2008 until first quarter 2011, while those of Abu Dhabi lost 45 per cent over the same period. The current vacancy rate in Dubai and Abu Dhabi stand at 30 per cent and three per cent, respectively. The capital, however, is subject to “significant” increase in the coming 2.5 years given the influx of 65,000 units in the residential market.

Oil reserve release is pure politics not economics and will raise prices

Oil prices have been falling for the past two months. The futility of yesterday’s release of 60 million barrels over one month from the strategic oil reserve is thus exposed as a measure mainly designed to shore up the weakening re-election prospects of US President Barack Obama and is not necessary to lower oil prices.
Whether this is a good use of reserves intended to safeguard the oil consuming nations in periods of real emergency is for the voters to decide. If gas prices fall a little as a consequence for a few months, or a little more than they would have done anyhow, then perhaps they will be grateful.

Middle East: where are all the skilled workers?

The Arab Spring is expected to improve the long-term growth prospects of the moribund Arab world — but that’s not going to happen if companies have to keep struggling to find skilled local labour.

To overcome the skills gap, smart companies are realizing that when it comes to education, they’ve got to take matters into their own hands.

It’s a dangerous reality that in a region with high unemployment, companies often cannot find enough workers with strong technical and soft skills.