The Banking Executive Magazine - May 2021

OIL TO PERFORM STRONGLY IN 2021 AFTER COVID-19 VACCINATION CAMPAIGN Improving mobility due to the mas- sive COVID-19 vaccination cam- paign, in addition to economic growth and other strong macro tail- winds, may bode well for oil prices this year, according to a recent analy- sis by Bank of America (BofA). Economists at the bank have esti- mated that the world GDP is set to rise by 5.8 percent in 2021 and ex- pand further by 4.5 percent in 2022. This, coupled with other factors, such as inflation, monetary easing and a weaker US dollar, could mean that oil prices will appreciate. “A steady distribution of effective vaccines suggests that cyclical real and financial assets like oil should perform strongly into 2021,” BofA said. “Big macro drivers – including a weaker US dollar, inflation and mon- etary easing- all point to higher oil prices in 2022.” Brent crude has so far posted a rela- tively modest recovery, barely break- ing $70 per barrel a couple of times this year. Global oil demand remains at 95 million barrels per day, or below 4 percent the seasonal pre- COVID level of 2019, and the OPEC+ group still holds plenty of spare productive capacity. “Both of these factors could soon change... While COVID-19 surge in India has depressed mobility, the link between COVID-19 cases and fuel consumption is starting to break down around the world,” BofA said. The bank noted that workplace mo- bility is now picking up, thanks to the global vaccination campaign. “Despite a resurgence in COVID-19 cases in countries like Chile, the UAE or Bahrain (nations with some of the highest vaccination levels in the world), hospitalisation and death rates have stayed low,” it said. Between 2021 and 2023, global Brent crude demand is forecast to grow by more than 9 million barrels per day, the fastest since the 1970s. Vaccine rollouts are brightening the outlook for global oil demand, the International Energy Agency (IEA) said in its monthly report in April. “Fundamentals look decidedly stronger. The massive overhang in global oil inventories that built up during last year's COVID-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing,” the IEA said in its monthly report. Oil-exporting countries were im- pacted by the fall in demand for oil as a result of the coronavirus pan- demic last year. In April 2020, oil prices turned fell below zero for the first time in history, tumbling from $18 per barrel to -$38. Egyptian Parliament APPROVES DRAFT LAW TO GOVERN FINTECH SPACE The Egyptian parliament's com- munication and information tech- nology (CIT) committee gave a preliminary nod yesterday to a draft law that would govern the fintech space. The new law aims at regulating the use of fintech to deliver non- banking financial services (NBFS) in a bid to expand the sector’s beneficiaries and promote finan- cial inclusion by granting the Fi- nancial Regulatory Authority (FRA) the power to license and regulate NBFS businesses and fin- tech startups. Under the new law, the FRA would have supervisory powers over the sector to ensure compa- nies adhere to transparency and governance standards, in addition to protecting consumer rights. On May 23rd, the parliament also approved a bill raising basic salaries for public sector employ- ees by 13% at the start of the next fiscal year on July 1st. The parliament discussed a five- article bill, which aims at raising minimum bonuses and incentives granted to state employees. the BANKING EXECUTIVE 46 ISSUE 149 MAY 2021