Adnoc and Aramco CEOs bullish on future demand
▶ Celebrities whip up enthusiasm to ignite a resurgence of interest in the digital asset, reports Vikram Barhat
The chief executives of Saudi Aramco and Adnoc are confident that oil demand will return to pre-coronavirus levels this year as vaccination campaigns and government stimulus packages drive a global economic recovery.
Dr Sultan Al Jaber, Adnoc Group chief executive and UAE Minister for Industry and Advanced Technology, told an online panel at CeraWeek that global oil consumption currently stood between 94 million barrels per day and 95 million bpd.
He expects demand to return to what it was before the pandemic by the end of the year.
Aramco’s chief executive Amin Nasser said demand could recover to 99 million bpd next year, helped by growth in key energy consumers such as China, India and countries in East Asia.
“We are seeing good cause for optimism and recovery in demand,” said Mr Nasser. “The current demand that we see in the [global] market is about 94 million bpd.”
The International Energy Agency and Opec last month revised their demand expectations for this year to about 96 million bpd.
Global oil demand, which fell early last year as Covid-19 movement restrictions disrupted travel, is expected to regain 60 per cent of lost volume this year, the agency said.
Oil prices rose by more than 17 per cent over the past month, supported by vaccine campaigns in developed economies and Opec+ action.
Dr Al Jaber said a strong economic rebound in China, which registered 2.3 per cent growth in gross domestic product last year despite the pandemic, and recoveries in India and the US bode well for an overall recovery in demand.
“From last year’s low of about 75 million bpd, the rebound in oil demand has been robust,” he said.
Consumption, which faltered in the US and in Europe this year because of renewed lockdowns, is expected to increase as vaccination campaigns pick up speed.
Demand in India, a big Asian importer, was now back to “almost the same as pre-Covid”, said Mr Nasser.
“I see demand continue to grow from here, especially from the second half of this year,” he said.
Mr Nasser said he also expects continued growth in natural gas, despite reservations in some markets about “fugitive” methane emissions.
The term refers to methane leaks and losses during the production of natural gas.
The global energy industry is taking methane emissions seriously as the gas is 28 times more potent than carbon dioxide in warming the Earth’s atmosphere.
“Gas still has better credentials over other fuels and it will grow significantly in a number of sectors, especially for power generation and for industrial and commercial use,” said Mr Nasser.
Saudi Arabia, which has begun switching its power stations to gas, will generate half of its electricity from the transitional fuel and the rest from renewables by 2030.
Hydrogen, which is emerging as a top alternative fuel for Gulf oil exporters, is also being given investment priority.
“We are exploring the potential of new fuels such as blue
We are exploring the potential of new fuels such as blue hydrogen that could be produced at scale
DR SULTAN AL JABER
Adnoc Group chief executive
hydrogen, which shows great promise, as a close-to-zerocarbon fuel that could be produced at scale as part of our existing hydrocarbon value chain,” said Dr Al Jaber.
Blue hydrogen is formed when natural gas is split using steam methane reforming.
Saudi Arabia intends to increase production of ammonia, which is easier to transport and can store hydrogen, and is running trials to boost output, said Mr Nasser.
“I expect the costs for both the green and blue hydrogen to come down in the future.”
Green hydrogen refers to gas produced from renewable sources.
Saudi energy minister Prince Abdulaziz bin Salman said last week that the kingdom plans to sell green hydrogen to Europe and export it by pipeline “if the economics allow for it”.
Aheady cocktail of celebrity promotion, sensational headlines, co-ordinated social media hype and risk-on trade has created a strong tailwind for cryptocurrencies, triggering hyperbolic price moments. As the old saying goes, a rising tide lifts all boats. One such proverbial boat is Dogecoin, a virtual currency that few had heard of until recently, but is now making waves and headlines throughout the investing world.
No sooner had the breathless coverage of the dramatic rise and fall of GameStop stock fallen off the front pages, than the Fomo-fuelled momentum of Dogecoin promptly filled the vacuum. In no small measure, its swift rise to prominence was the doing of millennial and Gen Z traders chasing get-rich-quick dreams.
To borrow a cliche, the rise of the altcoin – a catch-all term for all cryptocurrencies other than Bitcoin – has been nothing short of meteoric. Dogecoin had clocked a more than 900 per cent jump in value for the year to date, going from $0.00473 apiece to $0.051154, as of Tuesday.
The staggering ascent, not without frequent and wild fluctuations both ways, continues to create a social media feedback loop that has been pulling in speculative investors.
Feeling irresistibly drawn to the thrill of a low-stakes cyber cash game? Take a moment to grasp what’s going on before you get swept up by the noise and plough your life savings into Dogecoin.
What is Dogecoin?
The meme-based cryptocurrency, one of more than 1,000 brands of digital tokens in existence, was created in 2013 as a joke by engineers Billy Markus from IBM and Jackson Palmer from Adobe. The term Dogecoin was borrowed from a popular Doge meme at the time featuring a Shiba Inu dog.
The coin’s value remained flat for years, but over time it gained a following and the recent increase pushed its total market value past $10 billion, landing it among the top 10 digital coins on CoinMarketCap’s ranking as of February 8. It has since fallen to 14th spot and its market cap has nearly halved.
Why is it in the news?
Dogecoin’s revival in the past few weeks can be attributed to investor enthusiasm whipped up by a roster of high-profile celebrities, including Tesla chief executive Elon Musk, rapper Snoop Dogg, former Kiss frontman Gene Simmons and billionaire entrepreneur Mark Cuban. The social media plugging by these influential people pumped the price up to a record high.
“Elon Musk’s tweets about Dogecoin sparked renewed interest in the fringe altcoin, which has since snowballed into a social investing movement akin to what we saw with GameStop and the r/wallstreetbets community on Reddit,” says Charles Hayter, the chief executive of Bitcoin and cryptocurrency data provider CryptoCompare.
“It shows the power of social communities and the impact they can have on markets when organised by influencers and meme culture.”
An underappreciated reason Dogecoin has proved so popular is that “it’s a joke coin that doesn’t take itself too seriously unlike a lot of the altcoins out there that claim to be the next ‘Bitcoin killer’,” says Mr Hayter.
Should investors buy in?
Given the frenzy and low barrier to entry, some investors may look at Dogecoin as the ticket to a Bitcoin-like ride. However, experts warn against rushing in blindly.
“The resurgence in attention to Dogecoin may seem attractive to investors due to its volatility. But for the currency to ever have intrinsic value, scalability and security issues need to be addressed,” says Michael Kamerman, chief executive of Skilling, a forex and contract for difference trading platform.
Dogecoin is, undoubtedly, a risky investment, so the usual investing rules apply. “Investors should query why the currency exists and what its use cases are,” he says. “If not, it may prove difficult to have long-term success in calling the direction of this particular digital asset.”
For the average retail investor, a cautious approach to any altcoin investment is advised.
“Don’t invest more than you can afford to lose,” says Mr Hayter. He much prefers investors own Dogecoin as a virtual memento. “If you want to be part of history, you may want to buy a few Doge, that’s why billionaire investor
Mark Cuban bought it.” Mr Cuban admittedly bought a few dollars worth of the meme cryptocurrency for his son as an educational tool, but mostly for its entertainment value. “Dogecoin is less than a dime [10 cents]. You can buy $1 worth or $10 worth, and have fun watching it all day,” he says in a tweet.
It may be noted that Dogecoin has set itself apart from other cryptocurrencies, particularly Bitcoin, because there are no limits to the numbers of Dogecoins in circulation.
“This is intended to maintain the incentive to mine, by removing the cap on coins,” says Mr Kamerman. But he makes it clear that “the main driver behind Dogecoin’s popularity is its online communities, coupled with support from high-profile business magnates like Elon Musk”.
The road ahead
It is hard to predict the market direction, but Mr Kamerman hypothesises that “the variables underpinning such run-ups in price will remain unchanged for the short term”.
Price rallies, near-zero interest rates, social media amplification and online trading platforms have conspired to create an environment where investors and traders are almost encouraged to make risky bets.
“Mainstream news continues to proffer stories about how the wealthy have become even wealthier on the back of rising stock prices – during a global pandemic,” says Mr Kamerman.
The market exuberance may or may not ebb any time soon. A desirable outcome of all this hype would be the introduction of new and interesting products to trade, says Mr Kamerman. “I am especially interested in security tokens and the value they bring to democratising investments in illiquid instruments or instruments too expensive for the average trader to take a position on,” he says.
Where to buy Dogecoin
Until recently, investors could buy digital currencies directly at crypto exchanges and trading platforms such as Coinbase, Robinhood and Binance. However, they now have a range of financial instruments – such as futures, options, exchange-traded funds and CFDs – to access the market.
Mr Kamerman stresses that while more products and lower fees means greater accessibility, “each of these financial products has unique advantages and disadvantages”, which investors must weigh carefully.
The most recent crypto-themed product was launched in February in Canada, making it the first North American country to offer a Bitcoin ETF. The response from investors was so overwhelming that the fund collected a whopping C$421.8 million ($331.2m) in only two days.
Across the pond, Europe already has several exchange-traded crypto-tracking products, including the $1.7 billion Bitcoin Tracker EUR. It is the world’s largest Bitcoin exchanged-traded product and listed on the Stockholm Stock Exchange in Sweden.
Investors can also get an indirect exposure to the cryptocurrencies market by buying into blockchain ETFs. While these funds do not invest in digital money directly, they own stocks in technology companies that profit from blockchain, a decentralised digital-ledger technology used to record cryptocurrency transactions.
Future of virtual currencies
The media hype, sky-high valuations and persistent public support have forced some critics to reconsider their stand on digital currencies. Much of the credit for this change goes to Bitcoin, which is also the biggest beneficiary of the mainstreaming of cryptocurrencies.
In recent months, Bitcoin has managed to secure a nod of approval from celebrities, giant corporations, legacy financial institutions and payment processors, bestowing upon it a level of legitimacy few imagined possible.
As a result of the recent runup in prices, the market cap of Bitcoin has been hovering around the $1 trillion mark, prompting some crypto watchers to predict it may replace the US dollar as the world’s reserve currency.
Mr Kamerman is not sold on the suggestion, though. “I think cryptocurrencies are here to stay but I do not think they will ‘overtake’ a fiat currency,” he argues.