Steep Learning Curves - Election Heat for Bonds

Economic

Bond

Summary:

Some might wonder why it took so long, but the risk that this year's key elections exaggerate rather than rein in bloated public debt...

Some might wonder why it took so long, but the risk that this year's key elections exaggerate rather than rein in bloated public debt is finally seeing long-term sovereign bonds rear up.

In a year packed with elections, the past week has marked a critical juncture for polls in the United States and France at least - with Britain's arguably less controversial election set for Thursday too.

America ultimately has to wait for November, but a dire televised debate for U.S. President Joe Biden last week against Republican challenger Donald Trump has seen betting markets break decisively for the latter after months of equivocation.

Emboldened further by this week's Supreme Court ruling on Trump's partial immunity from prosecution, the former President is now clear favorite at bookmakers for the first time to retake the White House.

With Trump's opinion poll lead widening, most notably in some key marginal states, a range of betting sites now ascribe more than a 60% chance of him winning the Presidency.

Compromised further by speculation about him being replaced on the Democrat ticket, Biden's odds have widened to 4/1 in many.

So as the second half of 2024 gets underway, financial markets are starting to stake their own bets on Trump's return - taking on board his pledges to extend 2017's tax cuts, impose severe import tariffs and slash immigration and what that means for the economy and already precarious public finances.

The first real reactions this week seem clearest in the Treasury market - not only in modest gains in long-term borrowing rates but in a steepening yield curve that saw the still-inverted gap between short-dated debt yields and lower long bond ones at their narrowest in five months.

The curve shift is remarkable given the resumption of disinflation and futures markets that remain priced for 90 basis points of Federal Reserve rate cuts over the coming year.

If long-term yields are rising even as the Fed eases, anxiety about rising bond supply is one of main culprits.

Morgan Stanley, for one, thinks the klaxon on a Trump presidency - either in conjunction with a Democrat-led Congress or with a clean sweep for Republicans - has now sounded loudly.

And they see "curve steepeners" as logical fixed income trade to express that view.

"Markets may no longer go totally undecided into the November election," the U.S. investment bank told clients this week. "The sharp shift of probabilities towards a President Trump presidency is a unique catalyst that makes curve steepeners attractive."

The argument they posit is that in either a gridlock scenario or a clean sweep for the Republicans, the curve could steepen either way. That would involve either a so-called "bull steepening", where all yields fall but by a larger amount at the short end, or "twist steepening", where long rates climb even if short rates fell.

Even if Trump were constrained on fiscal policy, White House control of his radical plans to curb immigration and start deportations while ratcheting up trade tariffs worldwide could damage growth to a degree that actually ups Fed easing chances.

On the other hand, the fiscal implications of a tax-cutting clean sweep in Congress on top of already worrisome public deficits and debt piles would just put upward pressure on long-term bond market premia. Steep Learning Curves - Election Heat for Bonds_1

Steep Learning Curves - Election Heat for Bonds_1

Steep Learning Curves - Election Heat for Bonds_2

Steep Learning Curves - Election Heat for Bonds_3

Fiscal Cassandras

To be sure, a record two-year inversion of the 2-to-10 year curve - whose traditional signal on recession ahead seems to have been bamboozled in this cycle so far - has shown remarkably little disturbance to date in those long-term risk premia.

But debt concerns have been repeatedly flagged by agitated fiscal and financial watchdogs home and abroad.

Only last month, the bipartisan Congressional Budget Office updated its alarming long-term deficit and debt forecasts.

Even assuming Trump's 2017 tax cuts are allowed to expire next year as planned, this year's eye-watering deficit of 7% of national output remains almost at that level in 10 years time.

As a result, the CBO said debt held by the public at the end of 2034 would total $50.7 trillion, or 122% of gross domestic product, compared to a February forecast of 116% of GDP and this year's 99%.

What's more, the forecast assumes an annual average Fed funds rate of 3% in 2029-34 period - 228bps below current levels - but with a 10-year yield equivalent at 4%, just 50bps below today's rate.

And the United States is no outrageous outlier.

With France in the middle of a surprise two-legged parliamentary election that's seen a surge in support for far-right and far-left parties - and both promising additional fiscal boosts of either tax cuts or new spending sprees - budget worries seep across the Atlantic.

Although the European Central Bank is already in easing mode, French bond markets have taken fright at the budget risks, with Paris already clocking annual deficits close to 5% of GDP and a showdown with European Union budget rules into the mix.

The French equivalent 2-to-30 year yield curve - which, unlike the U.S. one, is already in positive territory to the tune of more than 60bps - has steepened to twice its level a month ago and is at its highest for the year.

Italy's curve steepened likewise in sympathy.

And despite commitments from Britain's opposition Labour Party - the likely landslide winner at Thursday's UK election - the UK 2-to-30 yield curve hit its widest in more than a year.

Yet again this weekend the Bank for International Settlements warned about the financial stability risks of untamed fiscal positions across the world.

"Consolidation is an absolute priority," it said. "The window of opportunity to take decisive action is narrowing."

"It is important to scale back discretionary measures, by terminating those enacted during the pandemic and refraining from new fiscal stimulus in the absence of compelling macroeconomic justifications."

Credit rating firm S&P Global seemed less hopeful governments would oblige without markets getting restive.

"For the U.S., Italy, and France-- the primary balance would have to improve by more than 2% of GDP cumulatively for their debt to stabilize - this is unlikely to happen over the next three years," it said.

"In our view, only a sharp deterioration of borrowing conditions could persuade G7 governments to implement more resolute budgetary consolidation at the present stage in their electoral cycles."

A steep learning curve indeed. Steep Learning Curves - Election Heat for Bonds_4

Steep Learning Curves - Election Heat for Bonds_5

Steep Learning Curves - Election Heat for Bonds_6

Source: ZAWYA

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Westpac

Central Bank

Economic

OCR to remain on hold awaiting definite signs of inflation returning sustainably to the target range.

The RBNZ presented an unexpectedly hawkish tone at its May Statement by revising up its forward OCR profile. The new profile indicated both an increased probability of a further increase in the OCR (at the November 2024 Statement) and a delay in the timing of an eventual reduction in the OCR to August 2025. The RBNZ tended to de-emphasise the tightening risk in its post-Statement communications but leaned heavily into the message that the OCR needed to remain at 5.5% for "a sustained period" to ensure annual CPI inflation returns to the 1 to 3% range. Preview of RBNZ: Keeping It Tight_1

The RBNZ noted that some upside risks potentially could come from the fiscal outlook and noted a full assessment would need to await the release of Budget 2024. This Review is the RBNZ's first opportunity to update its view now the Budget is public. We anticipate the RBNZ will continue to retain a hawkish perspective with respect to fiscal risks as Budget 2024 ended up being less contractionary than the HYEFU projections the RBNZ's forecasts were based on. We doubt they will be drawing definitive conclusions as no forecasts will be presented at this Review and it is too early to judge the impact that tax cuts (timed to begin at the end of July) will have on consumer spending and inflation.

Economic activity assessment.

What will be interesting is the RBNZ's take on the (sparse) data on economic growth that has emerged since the May Statement. High on the RBNZ's mind was the uncertainty of how the economy would perform during the year ahead now that we are in the period where monetary policy is at "peak transmission" from the interest rate rises that finished in May 2023. The RBNZ also raised the possibility that labour "hoarding" which had prevented firms from adjusting to tighter monetary conditions might suddenly reverse and cause a more rapid adjustment in the labour market in the period ahead. These concerns, if crystalised, could lead to a faster decline in non-tradables inflation and an earlier return of inflation to the middle of the 1 to 3% target range and an earlier easing profile. In this regard we note that since the May Statement:

Q1 GDP was in line with the RBNZ's forecasts and hence won't lead to much of a starting point difference (although consumption was stronger which might be a hawkish indicator at the margin).
Labour market indicators have been weak, but not weaker than expected (monthly filled jobs were down 0.1% net in April and May – and may be further revised down – while Westpac's Employment Confidence survey seems consistent with the 4.6% unemployment rate forecast by the RBNZ for the June quarter).
Forward activity indicators (consumer and business confidence, PMIs) have remained weak in April, May and June and might suggest some downside risks to the RBNZ's 0.1% GDP forecast for Q2 and 0.3-0.4% forecasts for Q3 and Q4 this year.
The recently released NZIER QSBO confirmed that economic activity remains weak – particularly in the interest-sensitive construction sector. The outlook for investment looks weak. The labour market indicators confirm that the uptrend in the unemployment rate remains firmly in place and the RBNZ might be thinking they have some upside risks to their unemployment rate projections (which are 0.2% lower than Westpac's by end 2024).

Inflation assessment.

On the pricing side of the ledger, we don't see very much to have moved the RBNZ's short term inflation forecasts. The monthly Selected Price Indices suggest the Q2 CPI will be in line with the RBNZ and our forecast of 0.6%. House prices have been flat recently and might have some modest downside risks in the RBNZ's forecasts given recent trends. Pricing indicators in recent business surveys and the QSBO suggest that inflation pressures are receding but remain somewhat elevated. Businesses still report that cost pressures are elevated. We don't think on balance that there will have been much to change the RBNZ's view that they need additional confidence that inflation is reverting sustainably within the 1-3% target range. The most recent pricing intentions data will have added to the RBNZ's confidence, but future hard data in the form of the next couple of quarterly CPI prints will be most important in that regard. Preview of RBNZ: Keeping It Tight_4

Communication issues.

The RBNZ likely has no change in message to communicate. This is a similar situation to the April Review and resulted in a very short statement. We see something similar here. The objective would be to punt any reassessments of the outlook to the August Statement where full forecasts can be presented and key data (the Q2 CPI and labour market data especially) will be available.

The short statement will likely:

Reiterate the core message that conditions need to be restrictive for a sustained period.
Note that little has come to light to change their assessment of the near-term inflation outlook.
Note that Budget 2024 was less contractionary than previously assumed with the ultimate impact on the economic outlook yet to be seen.
Note that Q1 GDP printed in line with expectations but acknowledge recent indicators pointing to risks of a weaker economy and labour market further out.

We don't think the markets will get a dovish tilt that supports recent market pricing (around a 50% chance of an easing in the October Review and around 35bps priced in by end 2024). If anything like that is coming, we will see it at the August Statement.

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Thomas

Economic

Stocks

Context News

India's securities regulator in a summons dated June 26 accused a fund set up and overseen by Kotak Mahindra Bank of failing to exercise due diligence and engaging in fraudulent transactions by facilitating a short trade targeting Adani Enterprises, part of the Adani infrastructure group, in collusion with Hindenburg Research.

The 46-page document from the Securities and Exchange Board of India (SEBI) accuses U.S. short seller Hindenburg Research and entities related to U.S. fund manager Mark Kingdon and Kingdon Capital of wrongdoing. Entities related to Kingdon had 100% economic interest in the Kotak fund.

Hindenburg's report in January 2023 accused the Adani group of companies of fraud and wiped billions of dollars off their market values. Hindenburg published the SEBI summons on July 1, and said the regulator identified "zero factual inaccuracies" relating to its research. Adani has consistently denied any wrongdoing.

The Kotak fund held a 7% open interest on futures of Adani Enterprises prior to the publication of Hindenburg's report. That short position was closed by February 22, 2023, generating about $22 million of profit for the entity after trading and legal expenses. Kingdon entities had an agreement to share 25% of its profits with Hindenburg, SEBI added.

Kotak said Hindenburg has never been a client of the fund, and the fund wasn't aware Hindenburg was a partner of its investors, and that the firm will continue to cooperate with regulators. Breakingviews was unable to reach Kingdon for comment.

India's securities regulator is going after the short sellers who bet against Gautam Adani's infrastructure empire and triggered a $150 billion rout in the value of his companies. By doing so, however, it has cast a spotlight on the role played by Kotak Mahindra Bank, a $42 billion Indian lender. It brings the scandal closer to home and is a reminder that pursuing sceptical investors typically backfires.

When Hindenburg Research targeted the tycoon's group of listed companies in January 2023, it said it held short positions through U.S.-traded bonds and non-Indian-traded derivatives. Yet fresh details disclosed in a 46-page summons by the Securities and Exchange Board of India show how Hindenburg and a Wall Street fund manager, Kingdon Capital, profited from trading Indian futures of Adani Enterprises. India's Chase of Foreign Shorts Hits Close to Home_1

India's Chase of Foreign Shorts Hits Close to Home_1

The revelation makes Hindenburg's disclaimers in its original report look disingenuous, which is ironic considering the firm criticised Adani for poor corporate disclosures, among other things. SEBI says Hindenburg showed the report to Kingdon before publication. The firm had agreed to hand 25% of profits it made from the trade to Hindenburg; those totalled $22 million by the time the investments were squared off in February 2023. Hindenburg admits its short position in Adani U.S. bonds was by comparison tiny and says SEBI identified "zero factual inaccuracies" in its research. Breakingviews was unable to reach Kingdon for comment.

While the two firms are out of SEBI's reach, this is not the case for Kotak, which set up and oversaw the fund that Kingdon used to make the Indian trades. The regulator downplayed Kotak's role. Neither does SEBI detail how much money the bank made in fees from Kingdon.

Kotak says Hindenburg has never been a client, and its fund wasn't aware of Hindenburg's partnership with its investors. Ultimately, though, SEBI concludes the fund - in which Kingdon entities subsequently acquired a 100% economic interest - failed to do due diligence and engaged in fraudulent transactions by "effecting a scheme to share" profit from the trade with Hindenburg and by using research improperly.

Uday Kotak, whose shareholding in the lender makes him Asia's richest banker, has a reputation that is hard for regulators to besmirch. He chaired a 2017 SEBI committee on corporate governance and was picked by New Delhi to manage the collapse of a large shadow bank the following year. He also dragged India's central bank to court when it contested the size of his stake in the lender he founded; that fight ended in a settlement.

SEBI's summons ought to embarrass Hindenburg. It also shows how one of India's top private banks played a key role in a short attack that prompted a nationalist backlash and was portrayed as a global conspiracy against the country's most important infrastructure tycoon. Going after overseas investors can hit closer to home.

Source: Reuters

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Devin

Political

Economic

A bond market crisis that rocked Britain's economy two years ago has cast a long shadow over the country's July 4 election which will likely linger as a new government finds its feet.

Spooked by plans by the ruling Conservative Party's then-Prime Minister Liz Truss to slash taxes in September 2022, the scars of the bond rout remain.

Politicians have avoided grand economic plans in the current election campaign for fear of waking the bond market dragon. The opposition Labour party has used the episode, which also pushed sterling to record lows and jacked up mortgage rates, to attack the Conservatives' economic record.

Labour, well ahead in the polls, looks set to inherit one of the highest debt loads in UK history. Yet looming interest rate cuts could work in its favour.

The following five charts outline the sort of bond market awaiting the next government:

1) Still-High Borrowing Costs

After the 2022 mini-budget crisis, Britain's 10-year bond yields soared to a 14-year high on fears about high levels of borrowing and as complicated pension fund investment strategies were caught in the meltdown. Yields rise as prices fall.

The Bank of England stepped in to stabilise markets, yet 10-year gilt yields remain well above those in benchmark euro zone bond issuer Germany. That's largely because stickier UK inflation forced the BoE to hike rates to 5.25%, compared with 4% in the euro zone.

Yet there is some reason for optimism. Barclays analysts reckon the "idiosyncratic risks around gilts seem much less than in other markets", as the rise of the far-right rocks France and unsettles Europe. Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_1

Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_1

2) Britain Tests the Market

Britain's borrowing needs, exacerbated by the COVID-19 crisis and the Ukraine war that sent energy prices soaring, remain high.

The 2024-25 financial year is set to be the second-highest for government debt issuance on record at 278 billion pounds ($350 billion). Pressure is unlikely to ease any time soon, even before new policies are considered.

Separately, the BoE is meanwhile cutting its bond holdings by 100 billion pounds a year, including through active sales - meaning more pressure on the market to soak up new debt and raising some concerns about financial stability. Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_2

Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_2

3) Rate Cuts Are Coming

The good news for Labour's Rachel Reeves, set to become Britain's first female finance minister, is that BoE rate cuts will likely start soon.

Inflation has slowed back to its 2% target amid tepid growth, and traders anticipate a first cut in August or September. Money market pricing suggests rates will fall by around 1.2 percentage points by the end of 2025.

"If you've got an economy that's slowing and interest rates are being cut ... you generally don't have a problem selling sovereign bonds," said Craig Inches, head of rates and cash at Royal London Asset Management. Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_3

Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_3

4) Solid Demand

Demand for Britain's bond sales has been strong, with record bids for one issue in March. Rate cut bets have made government bonds appealing - bond prices rise as rates fall, as older, higher-yielding debt becomes more attractive than new issuance.

Prospects for stability after a period of political and economic uncertainty has also boosted sentiment towards UK assets.

Yet Royal London's Inches said inflation may pick up in the coming years and rates could rise again.

"That type of environment, where you've got very high levels of supply in a rate-rising environment, with poor debt-to-GDP ratios, that becomes problematic," he said, adding that borrowing costs would have to rise. Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_4

Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_4

5) Uncertain Interest Costs

Britain's interest payments on its debt has surged along with inflation and interest rates, hitting a post-war high of 111 billion pounds in 2022-23, or around 4.4% of gross domestic product.

One problem for the incoming government is that forecasts for the debt interest bill have bounced around along with market rate expectations. Although rates are expected to fall, how low they will go remains uncertain.

This means that interest spending "is likely to remain a major source of risk to the fiscal outlook," Britain's budget watchdog said in March. Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_5

Twitchy, Truss-Scarred UK Bond Market Awaits a Labour Government_5

($1 = 0.7914 pounds)

Source: Reuters

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Warren Takunda

Economic

The Pound to Australian Dollar dipped to 1.90 after the ABS said retail trade rose 0.6% month-on-month in May from just 0.1% in April and tripling consensus estimates for a 0.2% outcome.

The numbers signal an ongoing demand in the Australian economy that might be boosted further by incoming tax cuts. The Reserve Bank of Australia (RBA) might raise interest rates further to ensure robust demand does not stimulate inflation.

The Australian Dollar has been the best-performing G10 currency of the past month as investors anticipate Australia to command higher interest rates for longer than peer countries. Outperformance is also seen in the wake of the retail trade numbers, indicating the figures have had an impact on currency trade.

The Aussie Dollar is 0.22% higher against the U.S. Dollar (0.6681) and 0.17% higher against the Euro (1.66090).

We wrote on Tuesday that the RBA minutes from the June meeting came in more 'dovish' than expected. The RBA said it was mindful that households were coming under pressure, which weighed against the odds of further rate hikes.

However, evidence of robust demand would make a counterargument to the RBA's assessment.

Australian Dollar Tops the Charts on Retail Beat_1

Above: AUD gains against all peers on July 03.

The rise in retail trade marks the best gain since the start of the year, with annual sales growth lifting to 1.7% year-on-year, also the strongest pace for the year.

May saw strong demand in the basic food category (+0.7%), and gains in the clothing (+1.6%) and household goods brackets (+1.1%).

An August rate hike at the RBA is not guaranteed, and ANZ economist Madeline Dunk says the next set of Aussie economic releases will carry greater weight than usual.

"The RBA Deputy Governor said the Board will be watching the activity data carefully, and today’s data is just one piece of information the RBA will receive before its August meeting," says Dunk.

"We’ll be looking at the next retail sales print (due 30 July) to gauge whether there is any meaningful upward momentum in today’s result. If the June retail data are strong, inflation comes in higher than the RBA’s forecasts (as we expect) and the labour market remains resilient, there is a chance the RBA could hike in August," she adds.

Source: Poundsterlinglive

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Warren Takunda

Commodity

Domestic gasoline and distillate inventories also decline

U.S. oil prices failed to find much support from official U.S. data revealing a drop of more than 12 million barrels in crude inventories and a weekly rise in implied gasoline demand, with many traders out for the upcoming Independence Day holiday.

Price moves

West Texas Intermediate crude for August delivery CL.1 CLQ24 fell 25 cents, or 0.3%, to $82.56 a barrel on the New York Mercantile Exchange, after losing 0.7% on Tuesday.September Brent crude BRN00 BRNU24, the global benchmark, rose 7 cents, or nearly 0.1%, to $86.31 a barrel on ICE Futures Europe.August gasoline RBQ24 shed 1% to $2.5489 a gallon, while August heating oil HOQ24 lost 1.3% to $2.5954 a gallon.Natural gas for August delivery traded at $2.472 per million British thermal units, up 1.5%.

Market drivers

With the market in the middle of a holiday-shortened trading week in the U.S., Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch that he was "not surprised to see lighter volume today and a lack of direction."

"We wouldn't read into today's price action too much," he said, although he said to keep in mind that "we are in hurricane season, and the situation in the Middle East could get worse at any moment."

Read: Hurricane Beryl puts focus on oil with climate change likely to intensify storms

The Energy Information Administration reported on Wednesday that U.S. crude inventories fell by a greater-than-expected 12.2 million barrels for the week that ended June 28.

Strategists at Macquarie had forecast a fall of 10.9 million barrels for crude supplies. The American Petroleum Institute on Tuesday reported a decline of 9.16 million barrels, according to sources.

"Strong exports, a slight drop in imports and a rebound in refinery runs colluded to draw crude inventories by a whopping 12 million barrels," said Matt Smith, head analyst for the U.S. at Kpler.

The EIA also reported weekly inventory decreases of 2.2 million barrels for gasoline and 1.5 million barrels for distillates. Macquarie strategists had forecast declines of 1.2 million barrels for gasoline and 2.3 million barrels for distillates.

Total motor gasoline supplied, a proxy for demand, rose to 9.424 million barrels per day from 8.969 million bpd in the latest week, EIA data showed.

Both gasoline and distillates showed draws despite higher refinery runs, with implied demand higher for both - particularly for gasoline - "as gas stations stocked up ahead of the Independence Day holiday weekend," said Smith.

Gasoline at around $3.50 a gallon for the national average, slightly down on last year, is "good enough to incentivize a record bout of road-tripping," he said.

Indeed, solid demand expectations for U.S. travel this week around the Independence Day holiday Thursday have provided some support for crude, analysts said. AAA is forecasting record automobile travel for the holiday period.

The Energy Department on Tuesday announced that contracts for the previously announced sale of 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve have been awarded. They were sold for an average price of $2.34 a gallon, with the goal of helping to lower gas prices ahead of the July 4 holiday.

Before the release of the petroleum supply data, oil prices had been searching for direction.

Some of the volatility seen in oil prices early Wednesday was likely tied to Hurricane Beryl, as the storm could impact some production facilities in the western Gulf of Mexico, Gary Cunningham, director of market research at Tradition Energy, told MarketWatch. However, he said, we are seeing "Beryl's impacts as fairly limited based on the current track."

Crude prices ended lower Tuesday after updated forecasts indicated Hurricane Beryl would weaken substantially before it threatened the U.S. Gulf Coast, reducing the risk of significant production shut-ins. Forecasts Wednesday show that on its current projected path, the storm will miss most of the offshore drilling rigs in the Gulf of Mexico.

This week, Hurricane Beryl became the earliest Category 5 storm in Atlantic history, stoking concern over the potential for a severe hurricane season.

Source: Marketwatch

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Alex

Economic

OPEC says the rise will be fueled by a world economy that is expected to double in size, growing from $138 trillion dollars in 2023 to $270 trillion dollars in 2045.

The OPEC Secretary-General, Haitham Al Ghais, made this known on Tuesday at the ongoing 23rd Nigerian Oil and Gas (NOG) Energy Week Conference and Exhibition, holding in Abuja.

The conference, which holds from June 30 to July 4, has its theme as “Showcasing Opportunities, Driving Investment, Meeting Energy Demand”.

Addressing the Strategic Conference via teleconference, Al Ghais explained that it forecasted a rapidly expanding world population that would surpass 9.5 billion people.

“Why are we optimistic? Let us consider these statistics, which are based on OPEC’s World Oil Outlook.

“Urbanisation alone will account for over half a billion people moving to cities around the world by 2030.

“This data tells us that the world will require all forms of energy to meet long-term energy needs.

“Oil and gas will remain the predominant fuels in the energy mix.

“In fact, oil alone will retain its share at almost 30 per cent in 2045 as world demand for oil soars to an estimated 116 million barrels per day (mb/d) by that time,” he said.

To meet this rapid and robust growth in energy consumption, he said the industry would need to boost investment levels significantly in the years to come.

He said according to its research, cumulative oil-related investment requirements from 2024 until 2045 would amount to $14 trillion dollars or around $610 billion dollars on average per year.

“Securing this vital funding is essential to maintaining security of supply and avoiding unwanted volatility.

“In spite of these facts, I am certain you are aware of some recent predictions for peak demand by 2030 and calls for a discontinuation of investment in hydrocarbons,” he said.

Al Ghais further emphasised that indeed, the rush to adopt “Net-Zero” strategies was misguided and simply not realistic.

The OPEC Secretary General said that developing countries would continue to balance priorities between developing their national economies and addressing climate change.

In this regard, he pledged that OPEC and its member countries would continue to advocate for a fair process for adaptation, mitigation and means of implementation, with regard to climate finance and technology.

He decried the fact that there were an estimated 675 million people with no access to basic forms of energy and 2.3 billion without access to clean cooking fuels.

He tasked World leaders to unite and advocate for the necessary support and resources to make a difference in addressing this important matter.

“Looking ahead, OPEC will continue to enhance dialogue and cooperation with all of its energy partners, including in Africa,” Al Ghais said.

The Secretary-General, while commending President Bola Tinubu, appreciated Nigeria’s staunch commitment to OPEC and to the Declaration of Cooperation. #We see Energy Demand Rising by 23% by 2045 – OPEC