business update

OPEC's Crucial Role in 2024: Navigating Production Policies Amidst Challenges

OPEC's Crucial Role in 2024: Navigating Production Policies Amidst Challenges

OPEC’s Crucial Role in 2024: Navigating Production Policies Amidst Challenges

Recent years have unfolded with unprecedented geopolitical events, including Russia’s invasion of Ukraine in 2022 and Hamas attacks on Israel in 2023. These events, coupled with ongoing challenges such as tensions between China and Taiwan and North-South Korea dynamics, have raised concerns about potential disruptions in oil markets. However, despite the tumultuous events, the oil market has displayed resilience, with the benchmark Brent oil price closing lower in 2023.

Shifting Dynamics: Shale Revolution and OPEC’s Response
The rise of the U.S. shale sector from 2010 disrupted traditional oil market dynamics, leading to Saudi Arabia’s initiation of the 2014-2016 Oil Price War to undermine the U.S. shale industry. The unexpected resilience of the U.S. shale sector created a new normal in oil price dynamics, prompting the establishment of an informal oil price range by the U.S. to maintain stability.

Political-Economic Nexus: Informal Oil Price Range and Global Implications:
The U.S. informal oil price range, from US$40-45 per barrel (pb) to US$75-80 pb, is rooted in political and economic considerations. The correlation between oil prices, election outcomes, and consumer spending on gasoline plays a crucial role, historically influencing U.S. presidential election results. Meanwhile, China’s role in the global oil market has evolved, and its economic vulnerabilities are linked to its reluctance to escalate conflicts in the Middle East.

Economic Interplay and Future Outlook:
Navigating the uncertainties of 2024 requires considering the delicate balance between global geopolitics, oil markets, and economic factors. The strategic responses of major players, particularly the U.S. and China, will continue to shape the trajectory of oil prices and the broader global economic order.

According to the Asset & Wealth Management Investment Strategy Group (ISG) at Goldman Sachs, the price of a barrel of oil is expected to trade between $70 and $100 for most of 2024. This forecast reflects slowing oil demand growth, tighter financial conditions, and elevated U.S. recession odds. Short-term volatility is anticipated due to macroeconomic uncertainties and heightened geopolitical risks, particularly amid ongoing OPEC+ negotiations on 2024 production quotas.

OPEC’s Role in 2024:
OPEC’s production policy and discipline, especially from key producers like Saudi Arabia and Russia, are crucial in supporting the oil price path in 2024. Despite the challenging task of balancing the market, both countries have committed to production cuts, surprising the market with their implementation.

Impact of Israel-Hamas Conflict:
The Israel-Hamas war introduces potential oil price volatility. If the conflict escalates, there may be sharp but transitory increases in spot oil prices. Possible disruptions include tighter oil sanctions on Iran, attempts to block the Strait of Hormuz, an Arab oil embargo, and production cuts by other Arab producers. However, the dynamics of the global oil market have changed since the 1970s, and the overall impact of such conflicts on oil prices has been neutral in recent years.

As we navigate the complexities of 2024, the interconnectedness of global geopolitics, oil markets, and economic considerations will continue to shape the future of oil prices. OPEC’s decisions, the evolving role of major players, and the resolution of geopolitical conflicts will play pivotal roles in determining the stability and direction of the oil market in the coming year.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry's Wish List

Budget 2024 Anticipations: Real Estate Industry’s Wish List

Budget 2024 Anticipations: Real estate consultancy firm Knight Frank India reported on Wednesday that the sales of residential properties priced at Rs 50 lakh and below declined to 97,983 units last year from 1,17,131 units in 2022. Consequently, the share of affordable homes in total housing sales has decreased to 30% from 37%.

The decline in sales of affordable homes is attributed to subdued demand due to the combined impact of rising property prices, increased home loan rates, and the disproportionately adverse effects of the pandemic in this category, according to the consultant.

On the contrary, JLL, in its report, anticipates an improvement in affordability for home purchases in 2024. This expectation is based on the anticipation of a 60-80 bps repo rate cut in 2023, which is expected to keep buyers’ affordability within a comfortable range and sustain market momentum in the coming year.

During this period of various growth figures, the industry expresses its expectations, hoping for them to be addressed in the upcoming Union Budget scheduled for presentation on February 1st. The upcoming budget is an interim one, typically presented when there’s insufficient time for a full budget, often due to upcoming elections or the end of a government’s term, serving as a bridge until the new government presents a full budget.

The real estate industry routinely presents an ambitious wish list to the Finance Ministry before the annual Union Budget.

Anticipations for Budget 2024: Real Estate
Anuj Puri, Chairman of Anarock Group, stated that the residential real estate market experienced extraordinary growth in 2023, with record-high new launches and home sales. In 2023, sales of housing in the top seven cities reached an all-time high of about 4.77 lakh units, while sales of newly launched homes reached almost 4.46 lakh units. Puri added that the outlook for the real estate industry in 2024 is positive, but the results of the upcoming general elections will also significantly impact the demand for and growth in residential real estate.

Industry status for the housing sector and single-window clearance for housing projects remain standard expectations this year as well. However, given the generally slow pace at which issues in the real estate sector are resolved, these expectations persist, though they remain as urgent as ever. That said, reasonable expectations are necessary for the interim budget before the general elections.

Maximum Deduction for Home Loans (under Section 24)
It is imperative to raise the Rs 2 lakh tax rebate on home loan interest rates provided under Section 24 of the Income Tax Act to at least Rs 5 lakh. This move could stimulate a more robust housing market, especially in the budget homes segment, which has seen a decline in demand since the pandemic.

Decisive Boost for Affordable Housing
The affordable housing segment has been severely affected by the pandemic, with a decline in overall sales to approximately 20% in 2023 from over 30% in 2022 and nearly 40% in the period before the pandemic, according to Anarock Research.

Several interest stimulants for developers and consumers in this market have expired in the last one to two years. To encourage developers to construct more affordable housing and enable customers to acquire such homes, it is essential to revive and extend significant benefits, such as tax breaks.

Modifying the qualifying standards for affordable housing to make more buyers eligible for additional deductions is necessary. The Ministry of Housing and Urban Poverty Alleviation defines affordable housing based on the buyer’s income, property size, and price. The government needs to reconsider the qualifying cost of properties within the affordable housing segment in cities, as the current definition of up to Rs 45 lakh makes them unaffordable for a significant share of the target clientele.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Toyota's Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Toyota's Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Toyota’s Bid to Badge Engineer Jimny and Swift Faces Rejection from Maruti Suzuki

Maruti Suzuki has firmly rejected Toyota’s proposal to badge engineer two of its iconic models, the Jimny and Swift, citing their integral role in the brand’s identity. While the two automakers have previously collaborated successfully on models like the Baleno and Glanza, Ertiga and Rumion, and Grand Vitara and Urban Cruiser Hyryder, Maruti Suzuki is adamant about retaining exclusivity for the Jimny and Swift.

Toyota had expressed a keen interest in creating its versions of the popular Jimny and Swift, envisioning a Toyota-badged Jimny as an affordable 4×4 alternative to the relatively expensive Fortuner. Despite a recent decline in Jimny sales, Maruti Suzuki remains committed to preserving the iconic status of these models, emphasizing that core brand identity models are not meant for sharing.

The Swift, a consistent best-seller for Maruti Suzuki, averages over 17,100 units sold monthly. Toyota, having only retailed Maruti Suzuki’s premium Nexa products under its own brand, saw potential for significant sales growth by introducing a Toyota-badged Swift. The Glanza and Rumion, both badge-engineered Maruti models, currently contribute 25 percent to Toyota’s total monthly sales.

Maruti Suzuki drew a parallel between the request for Toyota to badge engineer the Jimny and Swift and asking the same for the Land Cruiser, highlighting a shared commitment to respecting core models defining their brand identity.

Rumors about Toyota’s plans to rebadge both the Jimny and Swift had surfaced soon after the Jimny’s launch. Suzuki declined the offer, stating that both models are integral to the brands’ DNA, and sharing them would dilute their iconic status. This decision impacted Toyota’s potential benefits in the Indian market, as a rebadged Jimny could have served as an affordable 4×4 SUV option.

The Swift, a consistently popular hatchback, could have further boosted Toyota’s monthly sales. Currently, rebadged Baleno and Ertiga models contribute 25 percent to total sales. If the Swift were added, it could potentially add another 25 percent. Although the Jimny faces pricing challenges in India, Maruti Suzuki has implemented discounts and introduced a Thunder Edition to stimulate sales.

In addition to this development, Maruti Suzuki is actively working on an electric vehicle (EV) expected to launch next year. Toyota is also set to receive a different version of this EV, likely an SUV comparable to the current Grand Vitara, with pricing estimated between Rs 20-25 lakh. This collaboration exemplifies the ongoing partnership between Maruti Suzuki and Toyota in developing diverse automotive solutions.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround