Oil prices to rise 'soon' towards $70-80 a barrel: UBS

Switzerland-based UBS Global Wealth Management said that despite the recent drop in crude oil prices, the downturn remains temporary and a reversal towards $70-80 a barrel is anticipated within 12 months.

Also Read: Saudi Arabia is 'key' for UBS's business strategy in Middle East: executive

In an exclusive interview with Argaam, Themis Themistocleous, a top official at UBS Global Wealth Management, talked about the region’s investment outlook, Saudi Arabia’s growth prospects, and his company's investment strategy for the region.

Q: In a recent media appearance, you said that investors need to handle more volatility in 2019 -- can you elaborate on that?

A: What we experienced during 2017 was an unusual period of very low volatility. The pick-up during 2018 resulted in more normal environment, although during the late part of 2018 volatility picked up further. As the global economy enters the late cycle stage, the market will likely continue to ask the question how far is the next recession.

We believe the probability of a recession in the next 6-12 months is low, that will not prevent some market participant speculating for an earlier recession, resulting in high volatility to persist.

We advise clients to remain invested, ensure they have portfolios that are well diversified across asset classes and regions, and be more selective as asset class performance is likely to be more diverse than what we have seen in the last few years. We see this as the best strategy in an environment of elevated volatility.

Also See: UBS to expand footprint, increase staff in Saudi

Q: Do you expect GCC, and especially Saudi Arabia’s GDP growth to fall, as oil prices have softened?

A: Growth is expected to have picked up in 2018 across the region and should accelerate further in 2019, toward 2.5 percent for Saudi Arabia and toward 3 percent for the UAE.

We see the drop in energy prices as temporary and expect prices to increase again towards $70-80 a barrel in 12 months but the growth trajectory in the energy sector will also crucially depend on the output.

In the non-oil sector, we also expect growth to pick up, as business confidence recovers, fiscal pressure ease, and private consumption improves.

Structural reform plans, such as Saudi Arabia’s Vision 2030 agenda, can help to boost the region's growth potential over the longer term and reduce the dependency on energy exports.

Q: How would you describe UBS Wealth Management’s business today in the GCC region? Which is your largest market in the region and why?

A: Our business in the region is long standing and deep-rooted. We have been present in the Middle East for over 50 years and ‎are currently working with second and third generation family relationships.

This is a testament to our commitment to clients throughout the region. We focus on the entire GCC and have specialist client advisers with vast experience covering the Gulf countries.

By virtue of the size of its population and economy, Saudi Arabia represents a significant part of our business across the GCC.

Q: Which asset classes Gulf investors should diversify in current volatile market condition?

A: Despite manifold efforts to diversify economic growth away from energy exports, the economic fate of the region still strongly depends on energy prices. Diversifying assets internationally is therefore of high relevance for investors based in the Gulf region.

This should include growth assets in other regions such as Asia, the US, and Europe, alternative assets like real estate, hedge funds, or private investments, as well as defensive, safe haven assets like high grade and investment grade bonds from developed markets. 

Write to Sunil Kumar Singh at sunil.kumar@argaamplus.com