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DELOITTE PREDICTS 2018 WILL BE A YEAR OF CHANGE FOR DUBAI’S REAL ESTATE MARKET

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DELOITTE PREDICTS 2018 WILL BE A YEAR OF CHANGE FOR DUBAI’S REAL ESTATE MARKET

Deloitte the business advisory firm, has today launched the fourth annual Middle East Real Estate Predictions, Dubai, which predicts 2018 will be a year of change for Dubai’s real estate market, from the introduction of Value Added Tax (VAT) to the adoption of disruptive technologies such as 3D printing.

The report examines the performance of Dubai’s real estate market in 2017, covering the hospitality, residential, retail, office and industrial segments and explores how four key themes will shape Dubai’s real estate market in 2018.

Martin Cooper, Head of Development Strategy & Investment in Deloitte’s Real Estate and Construction team said: “The theme for Dubai’s real estate market in 2018 is change. Developers, operators and investors will need to navigate their way through increasing geopolitical uncertainty, the adoption of disruptive technologies and the introduction of VAT. How well they do so will determine their performance in 2018 and beyond.”

The introduction of VAT in the UAE will represent one of the biggest challenges for Dubai’s real estate market as stakeholders embed revised accounting systems and processes. In addition, the introduction of VAT on construction materials and professional services may cause cash flow and working capital pressures for some developers.

Bruce Hamilton, Partner in Deloitte’s Indirect Tax team said: “The interaction of any new law with existing commercial practice always creates some challenges. The introduction of VAT not only forces the Real Estate sector to relook at their own practices and procedures, but those of businesses in the value chain with whom they interact. VAT impacts throughout the business from procurement to marketing of sales and supplies. How well the real estate market, of whom developers are a crucial sector, come to grips with these changes could impact on the sector in 2018 and for years to come.”

Disruptive technologies such as 3D printing will become more mainstream.

Dubai will begin the journey in 2018 to become a world leader in certain disruptive technologies. 3D printing will become more mainstream in the real estate sector, as Dubai starts to deliver its 3D printing strategy and works towards the target that 25% of new buildings are 3D printed by 2025. In addition, Dubai will catch-up with other mature markets in the adoption of online retail in 2018, as Amazon and Noon gain traction.

Dubai’s development finance market is evolving and becoming more diverse.

Despite a challenging 2017, development finance for real estate projects is likely to remain available in Dubai in 2018. However, to access development finance, qualifying investors will need a track record of delivery, a well configured project and alternative sources of free cash to service project debt.

Dubai will become more connected than ever to the global economy.

Dubai will leverage its world-class infrastructure and business friendly legal and regulatory environment to remain well connected to the global economy in 2018. Although this will present a number of opportunities for Dubai, there are risks to the global economy that will need to be managed. These risks include increasing economic protectionism and geopolitical uncertainty.

About the Middle East Real Estate Predictions report, Dubai 2018

A Deloitte initiative that was produced by undertaking in depth market research, extensive consultations with industry stakeholders and analysis of data from sources that include the Economist Intelligence Unit, MasterCard, Oxford Economics, Reidin and STR Global. The in depth market research comprised an assessment of the trend performance and future prospects for Dubai’s hospitality, residential, retail, office and industrial markets.

To discuss the report in more detail please contact Martin Cooper.

To view the full report please click here

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Oil rises as U.S. vaccine progress raises demand expectations

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Oil rises as U.S. vaccine progress raises demand expectations 1

By Shu Zhang

SINGAPORE (Reuters) – Oil prices rose on Wednesday as signs of progress in the COVID-19 vaccine rollout in the United States, the world’s biggest consumer, raised demand expectations.

U.S. West Texas Intermediate (WTI) crude futures rose 15 cents, or 0.25%, to $59.90 a barrel by 0757 GMT, recovering from three days of losses.

Brent crude futures rose 24 cents, or 0.38%, to $62.94 a barrel after four days of losses.

“Ongoing stimulus measures, as COVID-19 vaccinations speed up, have boosted sentiment,” ANZ analysts wrote in a note.

The U.S. will have enough COVID-19 vaccine for every American adult by the end of May, President Joe Biden said on Tuesday after Merck & Co agreed to make rival Johnson & Johnson’s inoculation.

Futures were down earlier in the day amid uncertainty over how much supply the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, will restore to the market at its Thursday meeting and a big build in U.S. crude inventories

The OPEC+ meeting on Thursday comes at a time when producers are generally positive on the oil market outlook compared with a year ago when they slashed supply to boost prices.

The market widely expects OPEC+ to ease production cuts, which were the deepest ever, by about 1.5 million barrels per day (bpd), with OPEC’s leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd.

Still, an OPEC+ technical committee document reviewed by Reuters called “for cautious optimism,” citing “the underlying uncertainties in the physical markets and macro sentiment, including risks from COVID-19 mutations that are still on the rise”.

Reinforcing concerns of potential oversupply, the American Petroleum Institute industry group reported U.S. crude stocks rose by 7.4 million barrels in the week to Feb. 26, in stark contrast to analysts’ estimates for a draw of 928,000 barrels. [API/S]

However, that build occurred while U.S. refining capacity was shut during the survey week because of cold weather in Texas. Refinery runs fell by 1.75 million bpd, the API data showed.

“The recent selloff may help reinforce Saudi’s cautious stance and delay any production increase,” said Stephen Innes, global market strategist at Axi.

“It’s probably something that could sway the OPEC+ increase more back toward the 500,000 bpd as opposed to the 1.5 million bpd,” he said.

(Reporting by Shu Zhang and Sonali Paul; Editing by Gerry Doyle and Christian Schmollinger)

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OPEC oil has advantage over U.S. shale during pandemic recovery

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OPEC oil has advantage over U.S. shale during pandemic recovery 2

By Jennifer Hiller

(Reuters) – The once-brash U.S. shale industry, which spent profusely in recent years to grab market share, is now focused on preserving cash, putting it at a disadvantage to low-cost OPEC producers as the global economy begins to gear up again.

Prior to the pandemic-induced downturn, OPEC countries led by Saudi Arabia restrained their production, eager to bolster prices to fund national budgets dependent on oil revenue. Shale drillers took advantage, boosting U.S. output to a record 13 million barrels a day.

But attendees of the year’s top energy conference made clear that even with a buoyant, $60-per-barrel oil price, shale will not come roaring back from the Covid-19 pandemic as it did from the 2016 downturn.

By contrast, the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, has more than 7 million barrels of daily oil output sitting in reserve. This positions them to boost production much more easily than shale players for the first time in years.

The concern about free-wheeling shale companies taking advantage of OPEC’s output curbs led to a brief supply war in March 2020. Russia balked at a three-year agreement to extend production cuts, and Saudi Arabia responded by flooding the markets with oil, leading U.S. futures prices to slump to negative-$40 a barrel.

“Let’s face it. OPEC has had a very difficult time managing to accommodate the U.S. shale players and their ability to grow at low prices,” said IHS Markit analyst Raoul LeBlanc, adding that the key debate within OPEC is what oil price is just low enough to avoid a massive U.S. response.

The pandemic destroyed a fifth of global fuel demand, and numerous shale companies declared bankruptcy, while others arranged mergers to offload debt. Frustrated investors sent energy-related stocks slumping throughout 2020.

While shale executives expressed concern about reopening the wells too quickly, OPEC nations are expected to ease supply curbs at their meeting later this week, without having to look over their shoulder at shale.

“The worst thing that could happen is that U.S. producers start growing rapidly again,” said ConocoPhillips Chief Executive Ryan Lance.

The market widely expects OPEC to ease production cuts, which were the deepest ever, by around 1.5 million barrels per day (bpd), with OPEC’s leader, Saudi Arabia, ending its voluntary production cut of 1 million bpd. (Graphic: Pandemic ends U.S. oil output) climb) OPEC oil has advantage over U.S. shale during pandemic recovery 3

At CERAWeek, OPEC vs. shale is often discussed as a showdown between competing interests, but the dynamic of Texas vs. the Middle East is nearly invisible this year. Just one panel discussion in a five-day schedule focused on shale. Neither the Exxon or Chevron CEOs mentioned shale during their talks. Both companies have cut spending in the U.S. Permian Basin.

Crude on Tuesday topped $60 per barrel, up from $44.63 at the start of December, high enough to bolster U.S. producers’ earnings given recent cost cuts.

In the past, rising prices have enticed shale companies to ramp up production even after they promised prudence, and $60 oil would have once prompted companies to rush drilling rigs and frack fleets back to work. That is not happening now.

“They are not taking the bait,” LeBlanc said.

Private companies are likely to increase oilfield activity, but not enough to meaningfully boost U.S. output, said LeBlanc, adding that U.S. spending is likely to remain around $60 billion, flat with 2020, as companies prioritize shareholder returns.

“The severe drop in activity in the U.S. along with the high decline rates of shale and the pressure from investment community to maintain discipline instead of growth means in my view that shale will not get back to where it was in the U.S.,” said Occidental Petroleum CEO Vicki Hollub.

(Reporting by Jennifer Hiller; additional reporting by Laila Kearney and Devika Krishna Kumar; editing by David Gaffen and David Gregorio)

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U.S. oil industry lobby weighs support of carbon pricing – source

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U.S. oil industry lobby weighs support of carbon pricing - source 4

By Valerie Volcovici

WASHINGTON (Reuters) – The American Petroleum Institute (API) is weighing endorsing a price on carbon emissions, a major shift after long resisting mandatory government climate policies, a source familiar with the decision making said.

The API, the main U.S. oil industry lobby group that includes most of the world’s biggest oil companies, is considering carbon pricing “among other policy solutions to reduce emissions and reach the ambitions of the Paris Agreement,” the source said, confirming a report about the policy shift by the Wall Street Journal.

The group is confronting its previous resistance to regulatory action on climate change amid a shift in industry strategy on the issue and the new U.S. presidency.

European member Total quit the group because of disagreements over API’s climate policies and support for easing drilling regulations and the Biden administration is pursuing a policy agenda that would shift the United States from fossil fuels.

A draft statement of the policy shift reviewed by the Wall Street Journal said the group does not endorse a specific carbon pricing tool such as a tax on carbon emissions or emissions trading scheme. The source said, however, that the group’s State of American Energy report released in January was supportive of a market-based carbon pricing policy.

The API did not comment on whether or when the group would formally endorse a price on carbon but said it has been working for nearly a year on an industry-wide response to climate change.

“Our efforts are focused on supporting a new U.S. contribution to the global Paris agreement,” said API spokeswoman Megan Bloomgren.

Within API, there has been a widening rift between Europe’s top energy companies https://www.reuters.com/article/us-total-api/frances-total-quits-top-u-s-oil-lobby-in-climate-split-idUSKBN29K1LM, which over the past year accelerated plans to cut emissions and build large renewable energy businesses, and their U.S. rivals Exxon Mobil Corp and Chevron Corp that have resisted growing investor pressure to diversify.

Other major industry groups like the U.S Chamber of Commerce and the Business Roundtable https://www.reuters.com/article/usa-business-carbonpricing/u-s-ceo-group-says-it-supports-carbon-pricing-to-fight-climate-change-idUSKBN2672W4, which includes Chevron, over the last year have endorsed market-based carbon pricing.

Chevron said it has engaged those groups and API “to support well-designed carbon pricing.”

“We support economy-wide carbon pricing as the primary policy tool to address climate change, applied across the broadest possible area to maximize environmental and economic efficiency and effectiveness,” Chevron spokesman Sean Comey said in an e-mailed statement.

BP and Shell declined to comment.

(Reporting by Valerie Volcovici; Editing by Chizu Nomiyama and Christian Schmollinger)

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