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Abu Dhabi Wealth Fund Sees U-Shaped Global Rebound Next Year

Abu Dhabi’s Wealth Fund Sees U-Shaped Global Rebound Next Year

(Bloomberg) -- The global economy is likely to recover from this year’s virus-driven recession with 5% growth in 2021, according to Abu Dhabi’s $220 billion wealth fund.

The most likely outcome following the economic crisis sparked by the coronavirus is a U-shaped rebound, meaning there will be some stagnation before things get better, said Musabbeh Al Kaabi, chief executive officer of the Petroleum & Petrochemicals division of Mubadala Investment Co. The fund -- with holdings in health care, technology, aerospace and energy -- gives that scenario a 70% probability and sees a 30% chance of a longer economic slump, Al Kaabi said.

Abu Dhabi Wealth Fund Sees U-Shaped Global Rebound Next Year

With the pandemic forcing factories all over the world to shutter and people to stay home, the global economy has plummeted and oil prices have dropped by almost half since the start of the year. Though they’ve risen in the past month as activity resumes in nations such as China, demand for crude is likely to peak within 10 years with the growing adoption of cleaner energy, Al Kaabi said.

“We are not in a state of denial, we understand the energy transition,” Al Kaabi said Wednesday, in a virtual energy forum hosted by the Atlantic Council, a Washington-based think tank. Energy markets will see stronger demand for natural gas and Mubadala is skewing its investments in that direction, he said.

The drop in crude has halted growth in U.S. shale output -- as many wells aren’t economic with prices below $35 a barrel -- but it won’t kill the industry, Al Kaabi said. The U.S. is still set to become a major exporter of liquefied natural gas, thanks partly to the massive expansion of shale deposits in recent years and despite current difficulties in energy markets, he said.

Abu Dhabi will remain a “resilient” oil supplier with production costs ranking among the world’s lowest, and the emirate’s crude will continue to reach markets even when demand wanes, Al Kaabi said.

Mubadala’s energy and chemicals business, with $40 billion of investments from the Americas to Asia, is slowing spending in some projects that aren’t critical. Investment in a Malaysian gas development and Belgian and North American chemical expansions are going ahead as planned, Al Kaabi said.

Read about how Abu Dhabi’s Mubadala sees the oil rout create buying opportunities

The oil and chemicals unit has been selling assets after combining with another Abu Dhabi investment fund. In March, it sold part of plastics maker Borealis AG to Austrian partner OMV AG. Last year, the company sold a stake in its Spanish refining unit to Carlyle Group Inc. The deals were valued at nearly $5 billion each. The company has instead invested in gas fields closer to home in the last two years, buying stakes in deposits in Egypt.

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