Apple Loses EU Top Court Fight Over €13 Bil Irish Tax Bill

Demand fears weigh on oil

Oil prices saw a fair amount of volatility in August. In fact, implied volatility in ICE Brent hit a year-to-date high during the month. Several supply risks have arisen, providing a short-term boost to prices. However, this has been short-lived, with demand concerns continuing to weigh on sentiment.

Demand concerns are centred around China, where cumulative imports over the first seven months of the year are down 2.1% year-on-year, while apparent domestic consumption has fallen year-on-year for the last four months. Given that China is expected to make up a significant portion of global oil demand growth, weaker domestic demand has had an impact on oil prices. However, global oil demand is still expected to grow in the region of 1m b/d in 2024 and by a similar amount in 2025.

A key uncertainty for the market is OPEC+ policy. OPEC+ members are scheduled to start unwinding their additional voluntary cuts from October 2024 until the end of September 2025. The process should see the group bringing more than 2m b/d of oil back onto the market. However, the group stated from the beginning that plans to bring this supply back can be paused or reversed depending on market conditions. Demand concerns and the fact that Brent is trading below US$80/bbl could delay plans to increase supply. However, much will also depend on how the situation in Libya evolves. A dispute between the Western and Eastern governments in Libya has seen the eastern government shutting down oil fields, putting 1.2m b/d of oil supply at risk. If this dispute lingers, it could provide OPEC+ members the opportunity to increase their supply without actually seeing a net increase in global oil supply.

Weaker Chinese demand has led us to revise our Brent forecast lower for the remainder of the year. We now expect ICE Brent to average US$80/bbl in the fourth quarter of this year, down from our previous forecast of $84/bbl. In addition, our balance is showing a slightly larger surplus in 2025, which has led us to cut our 2025 Brent forecast from an average of $79/bbl to $77/bbl. Our balance sheet assumes that OPEC+ will stick to its plan to unwind additional voluntary supply cuts.

Global oil market to return to surplus in 2025 (m b/d)

Source: ING Research, IEA, EIA, OPEC

Supply risks propping up European natural gas

The European natural gas market was well supported in August. TTF traded above €40/MWh on several occasions during the month. The strength in the market is due to increased speculative activity caused by growing supply risks, rather than fundamentals becoming increasingly bullish. Speculators built their net long in TTF to a record high in August.

There are several supply risks facing the market. This includes concern that remaining Russian pipeline flows via Ukraine could be disrupted due to recent developments between the two countries. Ukrainian attacks in the Kursk region of Russia, specifically near the Sudzha entry point, where Russian pipeline gas enters Ukraine before making its way to the EU, threaten around 40mcm/day of supply to Europe, equivalent to almost 15bcm of natural gas annually. However, for now, these flows remain uninterrupted.

Russian pipeline gas via Ukraine is still set to stop at the end of this year. Ukraine has made it very clear that it has no intention to extend the transit deal with Russia, which expires on 31 December 2024. The EU and Ukraine are looking at alternatives, including a possible gas swap with Azerbaijan. No renewal in the transit deal should be largely priced into the market, given that Ukraine has made its position clear over the past year. However, there is still the potential for a knee-jerk reaction in prices, particularly if the 2024/25 winter is colder than usual.

The market is also nervous about ongoing maintenance in Norway. This maintenance has led to a drastic reduction in Norwegian gas flows to Europe. While this maintenance is scheduled, and not a surprise to the market, there is concern over the potential for an overrun in work, which could leave the market tighter than expected going into the next heating season.

Supply risks and healthy speculative appetite in the gas market have forced us to revise our forecasts for the remainder of 2024. We expect TTF to average €37/MWh in the fourth quarter of 2024, up from €35/MWh previously. Although, this suggests that we still see prices trading down from current levels. Storage is more than 92% full and hit the European Commission’s target two months early. We expect storage will be close to 100% full by the start of the 2024/25 heating season.

In addition, further LNG capacity is expected to ramp up later this year and in 2025, leaving the global LNG market more comfortable next year. As a result, we continue to expect TTF to average €29/MWh in 2025.

Private equity investments in the Middle East and North Africa reached $5.9 billion across 49 deals in the first half of 2024, despite challenging market conditions, according to a new report. 

The figures reflect a slowdown in deal activity compared to 2023, when $15.4 billion was deployed across 159 deals for the entire year, raising concerns about whether activity will rebound in the second half of 2024, according to the latest report by PitchBook. 

Private equity refers to investment funds that acquire ownership in mature companies, typically through buyouts, aiming to improve performance, restructure operations, or expand before eventually selling for profit. 

The data highlights the impact of what it describes as the “worst market conditions in the past two years” on private equity dealmaking in the region. 

In comparison with the last decade, where deal values surpassed $10 billion in five out of 10 years, the first half of 2024 represents a significant drop.

Historically, MENA private equity activity has often been driven by a few large, multibillion-dollar deals, and a similar pattern would be required in the second half of the year to match 2023’s performance. 

The report revealed that Saudi Arabia’s Public Investment Fund was the most active investor since 2018, reportedly investing in 36 deals. 

The Emirate’s Abu Dhabi Developmental Holding Co., also known as ADQ, came in second with 20 deals, followed by Jordan’s Al Arabi Investment Group with 19 transactions. 

Market conditions this year have been heavily impacted by a combination of geopolitical conflicts, fluctuating oil prices, and the threat of trade sanctions. 

The ongoing conflict between Israel and Gaza has not only caused immense humanitarian suffering but has also destabilized economies across the region. 

“The risk of escalation or a lengthy conflict creates difficult circumstances for economies. Alongside the humanitarian impacts, conflicts lead to substantial economic losses with potential spillovers to neighboring countries,” the report stated. 

Compounding these challenges are disruptions in trade and oil production. Earlier this year, attacks on ships in the Red Sea prompted shifts in trade routes and contributed to a reduction in oil output, amplifying volatility in oil prices — a key factor for MENA economies

As energy exports represent a significant portion of revenue for many countries in the region, any reduction in oil production heightens fiscal pressures and affects broader economic stability, the report explained. 

These market headwinds are making it increasingly difficult for private equity investments to gain traction, as businesses navigate both operational risks and broader economic uncertainty. 

PE digest 

A significant private equity deal in the first half of 2024 was CVC Capital Partners’ $3.3 billion sale of GEMS Education to Brookfield. 

GEMS Education, a Dubai-based private school provider with over 60 years of operation, is expected to welcome more than 140,000 students across 46 schools in the UAE and Qatar by September. 

“Education has been a key consideration in MENA, and attempts to improve it have been a priority. Initiatives including strengthening education funds, revamping programs, focusing on STEM (science, technology, engineering, and mathematics) skills, and the implementation of virtual education due to the COVID-19 pandemic have been part of the plans,” the report said. 

The healthcare sector in the MENA region is poised for significant growth in the coming years, driven by increasing demand and substantial investments. 

A major deal this year was Gulf Islamic Investments’ $164.6 million investment in Saudi-based health care provider Abeer Group.

As part of its Vision 2030, the Kingdom plans to invest over $65 billion in healthcare infrastructure, with projects including 20,000 new hospital beds and 224 health care centers valued at $12.8 billion. 

The UAE is also advancing healthcare development, with approximately 700 projects worth a combined $60.9 billion, largely driven by the private sector. Public-private partnerships are expected to play a key role in the sector’s growth. 

Qatar has introduced a PPP law to encourage international investment, while Oman has initiated its first medical city through the same arrangement. 

Additionally, mandatory health insurance policies are becoming increasingly common across the Gulf Cooperation Council, leading to higher patient numbers. 

“Strong demand for healthcare fueled by increasing and aging populations in the MENA region is anticipated to drive up government and private investor spending in the sector. A large pipeline of projects as well as new technologies will create opportunities for startups, portfolio companies, and investors,” the report added. 

MENA exits 

Private equity and venture capital-backed exit activity saw a sharp decline in the first half of 2024, with only $1.6 billion generated from 25 exits. 

This marks a significant drop compared to the previous four years, where annual exit values consistently surpassed $10 billion. 

The report stated that the current figures underscore a notable slowdown in exit activity within the MENA region, reflecting broader global trends in 2024. 

Investors and management teams have been hesitant to pursue exits amid market volatility, influenced by fluctuations in public markets, inflationary pressures, and rising interest rates, which have dampened growth prospects. 

With interest rate hikes largely on pause and potential rate cuts expected in Europe and the US later this year, there is cautious optimism for a recovery in the second half of the year. 

The easing of monetary policy could help stabilize market conditions and create more favorable opportunities for exits. 

VC’s role in PE 

The MENA venture capital ecosystem experienced weaker capital deployment in the first half of the year, mirroring global trends. 

A total of $1.3 billion was invested across 321 VC rounds, putting the region on track to fall short of 2023 levels by year-end.

 This follows a decline in 2023, when activity in the sector dropped from a peak of $5.5 billion across 894 deals in 2022. 

“The MENA region has been earmarked for high growth and untapped opportunities, but it has not been insulated from the broader slump in activity felt by more mature ecosystems,” the report said. 

Sluggish economic growth, geopolitical tensions, and inflationary pressures have dampened market confidence, contributing to the overall slowdown in VC activity.

Source: ARAB

The upcoming Budget 2025 should continue to advocate for strategic investments to drive digital transformation, representing a pivotal moment for Malaysia to cement its position as a regional leader in the digital economy, a technology expert said.

World Digital Chamber board member Georg Chmiel believed that Budget 2025 presents a unique opportunity to unlock significant economic growth, solidifying the country’s position in the global technology arena.

Chmiel, who is also Juwai IQI co-founder and chairman, noted that to establish Malaysia as a global technology (tech) hub, the sector needs a budget that simplifies international trade and investment.

“To position Malaysia as a leader in emerging technologies such as artificial intelligence and blockchain, we hope that the Ministry of Digital will prioritise robust research and development investment and incentives.

“By streamlining regulations, we can attract global investors and help companies like Juwai IQI and GoFlex Events expand their global footprint,” he said in a statement.

According to Chmiel, the future of tech in Malaysia depends on its ability to work together, share knowledge, and create groundbreaking solutions.

“Collaboration is the cornerstone of innovation. We encourage Budget 2025 to support public-private partnerships that foster innovation hubs and drive digital transformation across industries,” he said.

He opined that by focusing on innovation, infrastructure, talent development, sustainability, and global competitiveness, the government can empower the tech industry to drive economic growth and contribute to the realisation of the Madani Economy vision.

“Budget 2025 is not just another fiscal plan — it is a blueprint for Malaysia’s digital future and will determine our nation’s trajectory for years to come.

“With strategic investments in the right areas, Malaysia can lead the global digital revolution, creating a prosperous and sustainable future for all,” he added.

Source: Theedgemarkets

Goldman Sachs Group Inc. is selling a significant risk transfer tied to a portfolio of about $3 billion of leveraged loans, according to people with knowledge of the matter.

The bank is selling notes that are tied to a pool of revolving credit facilities and term loans, the people said. Deal terms are still being discussed with potential investors, said the people, who asked not to be identified because the details are private.

Significant risk transfers — also known as credit risk transfers — have become increasingly popular in recent years as European banks in particular have turned to them.

However, so-called Basel III Endgame rules are expected to increase Wall Street firms’ regulatory capital requirements and boost SRT growth further.

The proposed changes, previewed Tuesday by Federal Reserve Vice Chair for Supervision Michael Barr, stipulate that the eight biggest US banks would now face a 9% increase in the capital they must hold as a cushion against financial shocks.

Lobbying Campaign

While that would be considerably less onerous than the 19% hike originally proposed, which sparked a fierce lobbying campaign, it will still increase banks’ capital requirements.

In an SRT, banks typically issue notes linked to a pool of loans that also include a credit derivative and provide default protection for loan portfolios. The deal effectively transfers a bank’s credit risk, allowing the lender to cut the amount of regulatory capital required to hold against the assets.

Investors usually receive a floating-rate coupon, offering a fixed premium above the Secured Overnight Financing Rate. Yields on SRTs have frequently topped 10%.

Source: The edge markets

Crude palm oil (CPO) prices are anticipated to hover around RM4,000 per tonne by year end, according to the Malaysian Palm Oil Board (MPOB).

MPOB director general Datuk Ahmad Parveez Ghulam Kadir stated that CPO prices ranged between RM3,800 and RM4,200 per tonne last year.

“We have observed a rise in stock levels this year, but we are hopeful that by year end, our stocks will stay below two million tonnes,” he told Bernama on the sidelines of the third Sustainable Vegetable Oils Conference organised by the Council of Palm Oil Producing Countries (CPOPC).

According to the board, Malaysia’s CPO production increased by 2.9% to 1.89 million tonnes in August 2024 from 1.84 million tonnes in the preceding month, while CPO stocks rose by 2.5% to 953,145 tonnes against 930,099 tonnes in July.

It added that palm oil exports fell 9.7% to 1.53 million tonnes from 1.69 million tonnes in July.

Earlier, Ahmad Parveez delivered a presentation in which he emphasised that MPOB is actively working to meet the criteria and traceability requirements of the European Union Deforestation-free Regulation (EUDR).

He explained that MPOB is conducting canopy mapping to document the areas where oil palm is cultivated.

“We need to be prepared, which is why we are undertaking this effort. Using satellite imagery, we can identify all oil palm plantations.

“We can distinguish between oil palm, coconut, or other crops based on the planting methods. Additionally, by analysing the spacing, we can estimate the age of the trees,” he said.

Source: Theedgemarkets