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Murban futures aim to consolidate UAE position as global oil power

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The flags of the United Arab Emirates and the Abu Dhabi National Oil Company sit on the reception desk in the lobby at the company’s headquarters in Abu Dhabi, United Arab Emirates.

Christopher Pike | Bloomberg | Getty Images

DUBAI, United Arab Emirates — Abu Dhabi’s move to launch its Murban oil futures contract this month will strengthen its position as a global oil power, but challenges over adoption remain, according to leading experts and analysts. 

The Abu Dhabi National Oil Company has confirmed that trading of the contract will begin on March 29, marking a major change in how the oil rich emirate prices its crude exports. Murban is Abu Dhabi’s flagship crude grade and makes up more than half of the UAE’s total output.

“What it does show is that Abu Dhabi and the UAE is continuing to consolidate its role as a major producer in the future,” Dan Yergin, vice chairman of IHS-Markit, told CNBC on Thursday. 

“It continues to add capacity and sees itself as a global economic hub, and it wants that reflected in the crude stream,” Yergin told CNBC’s “Capital Connection.”

Wider impact

After its launch was delayed by nearly a year due to regulatory hurdles, the futures contract for Murban, trading on the new ICE Futures Abu Dhabi Exchange, will let the market determine the price of Abu Dhabi’s oil and replace the less transparent retroactive pricing methods that have been used in years past.

“The announcement further cements ADNOC’s shift toward benchmarking Murban as a price setter for the Middle East crude market, particularly for light sour barrels, a plan that has been in motion for several years,” Amrita Sen, chief oil analyst at Energy Aspects said.

It may take time for Murban to gain a foothold in the pricing of Mideast Gulf crude exports, with many companies likely to take a wait-and see stance.

Azlin Ahmad

Crude oil editor, Argus Media

However, experts are divided over whether the contract will dramatically elevate the status of the grade among its rivals or expand its share in the increasingly competitive Asian markets, where 90% of Murban is sold. Abu Dhabi also thinks the futures contract can be used as a regional benchmark to price other crudes from the Gulf, but concerns around adoption remain. 

“Murban has the potential to be a significant development in the evolution of crude trading in the Middle East, but we’ll have to see how readily the market adopts the contract,” Herman Wang, managing editor of OPEC and Middle East news at S&P Global Platts, told CNBC. 

‘It may take time’ 

Saudi Arabia, the largest producer in the Gulf, currently uses a method linked to Omani crude futures traded on the Dubai Mercantile Exchange. Most other producers base their monthly crude price on the Dubai and Oman crude price assessments operated by S&P Global Platts. 

“In a market that tends to hold on to familiar benchmarks, even if flawed, for a long time, it is difficult to see who, beyond ADNOC, might be the first to explore this new pricing option,” Azlin Ahmad, crude oil editor at Argus Media, said in a recent research note.

“All this suggests that it may take time for Murban to gain a foothold in the pricing of Mideast Gulf crude exports, with many companies likely to take a wait-and see stance.”

While broadly optimistic, analysts say it’s going to take some time for Murban futures to gain traction and credibility, but Stuart Williams, president of ICE Futures Europe, is more confident about its future prospects.

Central to the adoption strategy is “plugging Murban into a global distribution network and making it simple for all eyes that are on Brent to also have eyes on Murban,” he told reporters at an ADNOC press conference Wednesday. 

“We’re thinking about Murban as an instrument that can be used by traders globally, and we plan to have participation right across the globe from early on,” he said.

Nine companies have already signed on as shareholders in the new futures exchange, including BP, Shell, Total and Vitol. Two of China’s biggest crude importers, including China’s largest refiner — Rongsheng — and state-run trading firm Unipec, are also looking to utilize the contract.

OPEC dynamics 

The UAE is the third largest producer in the OPEC group. While Murban contract trading doesn’t impact the UAE’s OPEC strategy at face value, experts warn the need for increased liquidity to support the contract might not square with any future caps on production mandated by the organization.

“How ADNOC squares this with country quotas is not abundantly clear. Bolstering liquidity requires higher volumetric production,” one UAE-based banker, speaking anonymously due to professional restrictions, told CNBC. 

“The OPEC quotas are on production, not on market supply, and hence our local and international storage can easily deal with that … if it occurs in the future,” Khaled Salmeen, executive director of ADNOC’s Downstream Industry, Marketing and Trading directorate, told the ADNOC press conference Wednesday. 

“We are committed to the current OPEC+ agreement,” Salmeen said. “We do have significant reserves in our storage … we believe that such availability of storage can deal with the forward months of any of these contracts to ensure that supply is uninterrupted.” 

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Biden announces U.S. troops to leave Afghanistan by Sept. 11

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US President Joe Biden speaks during remarks on the implementation of the American Rescue Plan in the State Dining room of the White House in Washington, DC on March 15, 2021.

Eric Baradat | AFP | Getty Images

WASHINGTON – President Joe Biden said Wednesday that he will withdraw U.S. combat troops from Afghanistan by September 11, ending America’s role in what has become its longest war.

The removal of approximately 3,000 American servicemembers coincides with the 20th anniversary of the Sept. 11, 2001, terror attacks which spurred America’s entry into lengthy wars in the Middle East.

“It is time to end America’s longest war,” Biden said. “It is time for American troops to come home.”

Biden said that he coordinated his decision with international partners and allies as well as with Afghan President Ashraf Ghani. The withdrawal of U.S. troops will begin on May 1. Following his remarks, Biden said he would visit Section 60 at Arlington National Cemetery, the final resting place for Americans killed in Iraq and Afghanistan.

Ghani said he spoke with Biden and respects the U.S. decision to withdraw its forces. Ghani said Afghanistan’s military is “fully capable of defending its people and country.”

A senior administration official, who spoke on the condition of anonymity, said Tuesday that the orderly withdrawal of U.S. and foreign troops from the war-torn country could happen well before September. The official added that Washington is prepared to “strike back hard” if American troops are attacked ahead of the September departure.

CIA Director William Burns acknowledged in testimony before the Senate Intelligence Committee Wednesday that Washington’s ability to act on threats will be diminished by the U.S. withdrawal. However, Burns said some U.S. capabilities will remain in place.

“When the time comes for the U.S. military to withdraw, the U.S. government’s ability to collect and act on threats will diminish. That’s simply a fact,” Burns said. 

“It is also a fact, however, that after withdrawal, whenever that time comes, the CIA and all of our partners in the U.S. government will retain a suite of capabilities, some of them remaining in place, some of them that we will generate, that can help us to anticipate and contest any rebuilding effort,” Burns said.

Lance Cpl. Patrick Reeder, with Combined Anti-Armor Team 2, patrols in Nawa district, Helmand province, Afghanistan, Oct. 28, 2009.

Marine Corps photo by Lance Cpl. James Purschwitz

In February 2020, the Trump administration brokered a deal with the Taliban that would usher in a permanent cease-fire and reduce further the U.S. military’s footprint from approximately 13,000 troops to 8,600 by mid-July last year.

By May 2021, all foreign forces would leave Afghanistan, according to the deal. The majority of troops in the country are from Europe and partner nations. About 2,500 U.S. service members are now in Afghanistan.

Under the agreement, the Taliban promised to not let terrorist groups use Afghanistan as a base to launch attacks against the U.S. or its allies and agreed to conduct peace talks with the central government in Kabul.

The White House, when pressed Wednesday about whether the Taliban will use the U.S. withdrawal to topple the central government in Kabul, said it expects the militant group to abide by its commitments.

“We have an expectation that the Taliban is going to abide by their commitments and that they are not going to allow Afghanistan to become a pariah state. That’s our view, that’s also in their interests,” White House press secretary Jen Psaki said.  

However, the Taliban said earlier this week that it will not attend a summit on Afghanistan in Turkey set for later this month and will not attend any conference until foreign forces leave the country.

Last month, Biden told reporters during his first press conference that he could not yet commit to the May 1 deadline. “It’s going to be hard to meet the May 1 deadline,” Biden said, adding, “it is not my intention to stay there for a long time.”

CNBC Politics

Read more of CNBC’s politics coverage:

When asked if U.S. service members would remain in Afghanistan another year, Biden said he did not see that being the case.

“We are not staying a long time. We will leave, the question is when we leave,” the president said, adding that his administration was in consultations with NATO allies and partners in the region.

The announcement to leave Afghanistan comes on the heels of a Wednesday meeting between NATO allies and Secretary of State Antony Blinken and Secretary of Defense Lloyd Austin. NATO joined the international security effort in Afghanistan in 2003 and currently has more than 7,000 troops in the country.

“Our allies and partners have stood beside us shoulder to shoulder in Afghanistan for almost 20 years and we are deeply grateful for the contributions they have made to our shared mission,” Biden said. “The plan has long been in together and out together.”

The wars in Afghanistan, Iraq and Syria have cost U.S. taxpayers more than $1.57 trillion collectively since Sept. 11, 2001, according to a Defense Department report

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Powell calls cryptocurrencies ‘vehicles for speculation’

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Federal Reserve Chair Jerome Powell holds a news conference following the Federal Reserve’s two-day Federal Open Market Committee Meeting in Washington, July 31, 2019.

Sarah Silbiger | Reuters

Cryptocurrencies are largely for making bets on price increases and haven’t reached the status of payment mechanisms yet, Federal Reserve Chairman Jerome Powell said Wednesday.

“They’re really vehicles for speculation,” the central bank leader told The Economic Club of New York in a virtual interview with David Rubenstein, co-founder of the Carlyle Group. “They’re not really being actively used as payments.”

Powell compared crypto to gold.

“For thousands of years, human beings have given gold a special value that it doesn’t have” as an industrial metal, he said.

The comments come the same day as Coinbase goes public in a direct listing on the Nasdaq, an exchange that is weighted with tech companies.

Coinbase is the predominant exchange for trading bitcoin and other cryptocurrencies. It opened at $381 a share, well above its $250 reference price. The company said it generated $1.8 billion in revenue for the first quarter amid wild price gains for bitcoin, ethereum and other crypto names.

Powell’s predecessor at the Fed, Janet Yellen, is now Treasury secretary. In February, she told CNBC that she views bitcoin as “a highly speculative asset” and said it is not “widely used as a transmission mechanism” and is an “extremely inefficient way of conducting transactions.”

Along with a brief chat about crypto, the Powell interview encompassed a variety of other subjects, much of it familiar ground for the Fed leader.

One revelation was that Powell has yet to meet with President Joe Biden.

Fed watchers have been speculating as to whether Biden will give Powell another term as chair when the current one expires in 2022. Asked in a “60 Minutes” interview that aired Sunday on whether he wants another term, Powell demurred, saying he’s focused on “doing the best job I can.”

Powell said he has had no contact with Biden since the latter became president nearly three months ago.

Asked if he’s ever met Biden, Powell said, “I think I’ve shaken his hand, but I have not really met him and talked to him.”

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Xpeng Motors launches P5 Lidar electric car to rival Tesla in China

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Xpeng Motors launches the P5 sedan at an event in Guangzhou, China on April 14, 2021. The P5 is Xpeng’s third production model and features so-called Lidar technology.

Arjun Kharpal | CNBC

GUANGZHOU, China — Chinese electric vehicle maker Xpeng Motors launched the P5 on Wednesday, a sedan with new self-driving features, as it looks to race ahead in China’s ultra-competitive auto market.

The P5, Xpeng’s third production model and second sedan after the P7, adds another competitor to Tesla’s Model 3 in China’s increasingly crowded field of electric car-makers.

The Chinese firm, a rival to domestic players Nio and Li Auto, said it will release its pricing at the Shanghai Auto Show on Apr. 19.

But in an interview with CNBC on Wednesday, Xinzhou Wu, vice president in charge of autonomous driving at Xpeng, said the P5 will be priced lower than the P7.

“At this price range with the features we put in the car, I think it will be quite compelling for our customers,” he said.

The P7 starts from 229,900 yuan ($35,192) after subsidies. In comparison, Tesla’s Model 3 in China starts at 249,900 yuan.

Wu said the P5 would roll out to customers in China in the third or fourth quarter of this year. Xpeng has also expanded into Norway, its first international market. Wu said that the company will expand its footprint in northern Europe and the P5 would eventually be launched there. He gave no timelines on when this might happen.

Driverless tech

Xpeng has tried to push the advancement of its self-driving features to differentiate from its competitors.

The P5 is equipped with so-called Lidar, or Light Detection and Ranging technology. Lidar systems send out lasers that bounce back and can measure distance. Those returning beams are processed by an algorithm to create a three dimensional representation of surrounding objects — a key technology for autonomous vehicles to understand their environment.

Xpeng claims that Lidar can help the P5 distinguish pedestrians, cyclists and scooters as well as road works — even at night and under low-light conditions.

On Wednesday, the Chinese vehicle maker also released a new version of XPILOT, its so-called advanced driver-assistance system (ADAS). This refers to a system with some autonomous features but where a driver is still required.

XPILOT 3.5 will have an updated version of a feature called Navigation Guided Pilot or NGP, which allows users to autonomously do tasks such as changing lanes or overtaking cars. Some of these features will work on city roads for the first time. Previously, NGP was just designed for highways.

Xpeng’s XPILOT is an attempt to compete with Tesla’s own ADAS system called Autopilot as well as other rivals like Nio with its Nio Pilot.

“In P7 we launched NGP … only on highways. But highway driving only occupies like 10% of peoples’ driving time. Being able to bring the technology and the capability to cities is very important to make the feature more usable and more compelling to Chinese customers,” Wu said.

In the city, Wu said the situation was becoming “exponentially” more difficult, citing challenges in ensuring the car can recognize objects in its path accurately and reliably. “We believe with Lidar … it will help us achieve our goal much faster and gives us an edge against our competitors.”

Competition heating up

China’s electric car market is expected to pick up this year with 1.9 million units expected to be sold, growing 51% year-on-year, according research firm Canalys.

Various incentives from the government, such as subsidies, have helped China become the biggest electric car market in the world. With that, a number of start-ups have grown rapidly such as Xpeng, Nio and Li Auto.

But these players are competing against traditional automakers who are boosting their electric vehicle capabilities as well as other technology firms entering into the fray.

Chinese search giant Baidu teamed up with Geely to create a standalone electric car company, while smartphone giant Xiaomi announced plans to launch an electric car business.

Last year, Xpeng delivered 27,041 vehicles, more than doubling from 2019. In comparison, Tesla’s Model 3 alone sold more than 137,000 units in 2020 in China.

Wu said Xpeng has developed a lot of technology which he believes gives the company an edge.

“We are definitely a step, a few steps ahead, you know as compared to most of our competitors. So we are pretty confident that we can win this race even with more newcomers into this space,” Wu told CNBC.

“We believe that with this kind of focus on the Chinese market, Chinese customers, Chinese road conditions and also the different technologies we bring together to make the tech better fitted to China market, I think we do have an edge as compared to Tesla in the China market.”

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