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Global benchmark Brent crude inched higher on Wednesday on improving global economic outlook, but U.S. crude fell on rising gasoline inventories amid fears that new coronavirus outbreaks will weaken a global recovery in fuel demand.
Brent crude futures were up 44 cents, or 0.7%, to $63.18 a barrel by 1:42 p.m. EDT (1742 GMT) while U.S. West Texas Intermediate crude fell 40 cents, or 0.7%, to $59.73.
U.S. crude stocks fell 3.5 million barrels last week, but gasoline inventories jumped 4 million barrels, the Energy Information Administration said, compared with expectations in a Reuters poll for a 221,000-barrel gasoline drop. [EIA/S]
“If you don’t need to make gasoline, then you don’t need to use more crude oil,” said Bob Yawger, director of energy futures at Mizuho Securities.
West Texas Intermediate for May delivery declined 83 cents to $58.50 a barrel at 12:29 p.m. in New York
Brent for June settlement lost 74 cents to $62.00 a barrel
Oil extended losses alongside a strengthening dollar while the biggest U.S. gasoline supply increase in two months offset a drop in crude inventories.
Futures in New York furthered their decline to as much as 2% on Wednesday, in tandem with a rising dollar, which reduces the appeal of commodities priced in the currency. U.S. government data showed domestic gasoline stockpiles rose more than 4 million barrels last week amid a surge in imports. Still, crude inventories fell for a second week, bringing stockpiles to a five-week low, according to the Energy Information Administration data.
“The size of the builds on the refined side may have been more than the market was expecting, given the fact that mobility continues to increase in the U.S.,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. “The U.S. has been making really good Covid progress, while challenges remain in Europe surrounding the vaccine rollout and the spike in cases.”
Oman is studying options for state energy company OQ SAOC, including a potential initial public offering, as the Persian Gulf sultanate seeks to shore up its finances, people with knowledge of the matter said.
The Omani government has been speaking with potential advisers as it considers alternatives for OQ, which could also include selling a stake in the business or one of its subsidiaries, according to the people. OQ could be valued in the billions of dollars if it decides to pursue a listing, the people said, asking not to be identified because the information is private.
OQ is an integrated energy company with oil and gas exploration and production operations, refineries, a retail network and a large petrochemical business. It was formed through the merger of Oman Oil Co. with several companies including state-owned Oman Gas Co., refining group Orpic and chemical producer Oxea.
Oman has been seeking ways to tame its budget deficit and steady an economy that’s been reeling from a decline in crude prices and the coronavirus pandemic. The country, which is the largest Middle Eastern oil exporter outside of OPEC, has pushed through reforms including cutting spending, slashing government jobs and introducing plans for an income tax.
The government previously discussed a potential listing of Oman Oil in 2019. Deliberations are at an early stage, and Oman could elect to keep OQ’s current structure, the people said. Representatives for Oman’s energy ministry and OQ didn’t immediately respond to requests for comment.
Oman is also seeking to raise money from another state-controlled energy company. The sultanate may issue around $3 billion of bonds this year through Energy Development Oman, Bloomberg News has reported. EDO holds the government’s 60% stake in Block 6, one of the largest oil deposits in the Middle East. JPMorgan Chase & Co. is advising the government on its options for EDO, a person with knowledge of the matter has said.
Masdar plans to develop a 230-megawatt solar project in Azerbaijan as Abu Dhabi’s clean energy company continues to expand its renewable energy portfolio.
The company signed two separate deals including an investment agreement with Azerbaijan’s ministry of energy and a power purchase and transmission connection agreement with state-owned power company Azerenerji to provide a revenue stream, Masdar said in a statement on Wednesday.
The project is Azerbaijan's first solar plant, funded through foreign investment.
“By signing these contracts for a solar power plant worth about $200 million, we are one step closer to our goals for renewable energy and carbon emissions,” Parviz Shahbazov, minister of energy of the Republic of Azerbaijan, said.
“The solar power plant to be built in Baku and Absheron district will produce about 500 million kilowatt-hours of electricity annually, save 110 million cubic metres of natural gas, reduce carbon emissions by 200,000 tonnes, create new jobs and attract other investors to new projects.”
The International Monetary Fund expects most Gulf economies to recover this year at a faster pace than previously estimated, as it raised its 2021 global growth forecast to 6% from 5.5% less than three months ago.
Saudi Arabia’s economy, the region’s largest, is expected to grow 2.9% this year, up from the 2.6% forecast in January, the IMF said in its latest World Economic Outlook, released this week.
The kingdom’s economy contracted 4.1% last year due to the twin shock of the COVID-19 pandemic and lower oil prices.
The United Arab Emirates, the Gulf’s second largest economy, will see growth of 3.1% this year, rebounding from a 5.9% contraction in 2020, the IMF said. In October last year it had forecast a 6.6% drop in 2020 and 1.3% growth this year.
Oman saw the biggest positive revision of the Gulf countries, from expectations of a 0.5% contraction this year to a forecast of 1.8% growth.
Bahrain’s economy is now expected to grow 3.3% this year versus a forecast of 2.3% in October. Forecasts for Kuwait and Qatar remained almost unchanged, with Kuwait expected to post 0.7% growth this year, up from an October estimate of 0.6%.
Qatar’s economy is estimated to grow 2.4%, just below the previous 2.5% estimate.
The IMF on Tuesday said unprecedented public spending to fight the COVID-19 pandemic, primarily by the United States, would push global growth to 6% this year, the fastest pace since 1976.
The United Arab Emirates central bank decided to extend until the end of this year a 50 billion dirhams ($13.6 billion) facility introduced to help banks and financial companies, state news agency WAM said on Wednesday.
The “zero cost funding support facility” was one of a series of stimulus measures introduced last year by the UAE central bank to contain the impact of the coronavirus crisis on the economy.
Saudi Arabia’s bourse Tadawul has received proposals from 10 local and international firms on potential advisory roles for its upcoming initial public offering (IPO), Group Chief Executive Khalid al-Hussan said on Wednesday.
“In the next two weeks, we will be announcing the appointment of the advisor or advisors of that offering,” al-Hussan told Reuters.
Saudi Arabia’s stock exchange has converted itself into a holding company and will be renamed Saudi Tadawul Group ahead of its IPO this year, he said earlier.
Emirates NBD Bank has entered into an agreement to sell a controlling interest in Dubai Bank to Eradah Capital, the lender confirmed in a statement to the Dubai Financial Market on Wednesday.
The transfer, expected to complete in 2021, is subject to regulatory approval by the Central Bank of the UAE, it added.
Eradah Capital, based in Abu Dhabi and operates in the investment services sector, according to its LinkedIn page.
Major stock markets in the Gulf ended mixed on Wednesday, with the Abu Dhabi index ending its run of gains, while Saudi Arabia was lifted by its financial shares.
The Saudi benchmark index .TASI rose 0.3%, helped by a 5.7% gain in Banque Saudi Fransi 1050.SE and a 3.3% increase in Dr Sulaiman Al-Habib Medical Services 4013.SE.
However, petrochemical firm Saudi Basic Industries Corp (SABIC) 2010.SE eased 0.3%.
SABIC has selected HSBC HSBA.L and Morgan Stanley MS.N to work on the planned initial public offering (IPO) of its specialty chemicals business, Reuters reported, citing two sources familiar with the matter.
The Abu Dhabi index .ADI declined 0.8%, snapping eight sessions of gains, hit by a 1.5% fall in the country's largest lender First Abu Dhabi Bank FAB.AD and a 1.6% decrease in telecoms firm Etisalat ETISALAT.AD.
However, International Holding IHC.AD continued its upbeat trend to conclude 2% higher.
The firm has gone through rapid expansion across its major business sectors, resulting in a sharp growth in its financials, positioning it for long-term growth.
In Dubai, the main share index .DFMGI fell 0.6%, with its largest lender Emirates NBD ENBD.DU losing 0.9%, while budget airliner Air Arabia AIRA.DU dropped 2.3%.
Separately, United Arab Emirates President Sheikh Khalifa bin Zayed has appointed Khalid al-Tameemi as governor of the UAE's central bank, state news agency WAM said, citing a decree issued on Wednesday.
Tameemi, who was appointed central bank vice governor in February, will be replacing Abdulhamid Saeed.
In Qatar, the benchmark .QSI advanced 1%, as most of the stocks on the index gained led by a 6.4% jump in Commercial Bank COMB.QA.
Saudi Arabia’s stock exchange, the largest in the Middle East, announced a reorganization of its corporate structure as it prepares for a highly anticipated initial public offering this year.
The newly created Saudi Tadawul Group will have four subsidiaries, comprising the exchange, a clearing center, a depository company and a technology-services business. The changes create the “necessary platform” to strengthen the group’s infrastructure before the IPO this year, company officials said in a virtual event Wednesday.
Saudi Arabia has been the hottest market for IPOs in the Middle East over the past two years, with new offerings oversubscribed, mostly by local retail and institutional investors. In 2019, the bourse hosted the $29 billion offering of the world’s biggest oil producer, Saudi Aramco, with shares being sold mostly to Saudi investors seeking guaranteed dividends.
Saudi Arabia’s benchmark Tadawul All Share Index (TASI) crossed the 10,000-point level for the first time since November 2014 in early trade on Wednesday.
The index was trading 0.4 percent higher at 10,025 points at noon UAE time. Turnover hit 2.4 billion riyals ($640 million) in the first hour of trading.
Notable stocks that rose in value are Savola Group which 2.7 percent and is trading at 41.35 riyals and Halwani Bros. Co. which jumped 2.8 percent to 114.2 riyals.
The United Arab Emirates appointed financial services veteran Khaled Mohammed Al Tameemi as the Gulf nation’s central bank governor as it plots a way out of the pandemic-driven economic downturn.
Al Tameemi, who has worked in banking and financial services for more than three decades, previously held the central bank’s vice chairman post. He was previously a board member at the General Pension and Social Security Authority, and an executive director of the real assets department at Abu Dhabi Investment Council.
He will take over from Abdulhamid Saeed Alahmadi, who became governor last April at the height of the coronavirus outbreak and is retiring, according to state-run WAM news agency.
The UAE pledged billions of dollars last year to combat the impact of the virus -- mostly monetary programs aimed at reducing or waiving payments. Its economy is set to grow 3.1% this year, according to the International Monetary Fund’s latest estimates, a partial recovery from last year’s 6% contraction.
The role of a central bank governor in Arab Gulf countries differs from elsewhere, as the regulator pegs its currency to the dollar and policy tends to move in lockstep with the U.S. Federal Reserve.
Most major stock markets in the Gulf fell in early trade on Wednesday, although the Saudi index nudged higher.
Saudi Arabia’s benchmark index rose 0.3%, bolstered by a 2.7% gain in Banque Saudi Fransi and a 1.4% increase in Riyad Bank.
However, petrochemical firm Saudi Basic Industries Corp (SABIC) eased 0.3%.
SABIC has selected HSBC and Morgan Stanley to work on the planned initial public offering (IPO) of its specialty chemicals business, Reuters reported, citing two sources familiar with the matter.
Dubai’s main share index fell 0.4%, with blue-chip developer Emaar Properties losing more than 1%, while its unit Emaar Malls was down 1.2%.
In Abu Dhabi, the index eased 0.3%, driven down by a 1.2% fall in the country’s largest lender First Abu Dhabi Bank and a 0.7% drop in telecoms firm Etisalat.
The United Arab Emirates’ first nuclear power plant started commercial operations on Tuesday, the Gulf Arab state’s leaders announced on Twitter.
The Barakah nuclear power plant in the Abu Dhabi emirate is the first nuclear power station in the Arab world and part of the oil producing state’s efforts to diversify its energy mix.
The Qatari index lost 0.2%, weighed down by 1.1% fall in Qatar Islamic Bank.
Abu Dhabi-listed food and beverage company Agthia Group on Wednesday said its board has approved an indirect acquisition of three quarters of Egypt’s Ismailia Agricultural and Industrial Investment.
Agthia’s acquisition of the 75.02% stake would give Ismailia an enterprise value of 3.22 billion Egyptian pounds ($205.6 million), Agthia said in a stock exchange filing.
Two wholly-owned units of Agthia will be incorporated as private limited companies with nominal share capital in the Abu Dhabi Global Market and used as acquisition vehicles for the transaction.
Agthia, owned by Abu Dhabi state-owned holding company ADQ, has made a series of recent acquisitions as it seeks to become a big player in the region’s food and beverage industry.
Ismailia produces frozen chicken and beef products under four brands in the Egyptian market.
In its latest World Economic Outlook report published on Tuesday, the International Monetary Fund (IMF) increased the UAE’s economic growth forecast for 2021 to 3.1 percent, in what is seen as a credit to the country’s positive handling of coronavirus.
While the forecast is up from the 1.2 percent forecasted in October last year, it is expected to soften in 2022, dropping down to 2.6 and stabilising through to 2026, according to the IMF report.
This is in line with what Stephen Anderson, Middle East Strategy and Markets Leader, for PwC Middle East, discussed at the Arabian Business Forum in late February where he said the UAE economy is “moving in such a positive way forward” to become the world’s leading post-Covid-19 economy.
The country has been widely praised for its response to the global pandemic, which initially saw the implementation of strict lockdown measures, before a gradual reopening from May last year.
Oil prices edged higher on Wednesday on the prospects for stronger global economic growth amid increased COVID-19 vaccinations and a report that crude inventories in the United States, the world’s biggest fuel consumer, fell.
But optimism about talks between the United States and Iran over Iran’s nuclear programme and an impending increase in supply by major oil producers capped gains.
Brent crude futures for June rose by 16 cents, or 0.3%, to $62.90 a barrel by 0657 GMT while U.S. West Texas Intermediate crude for May was up 14 cents, or 0.2%, to $59.47.
“Optimism on the global economic outlook boosted sentiment in the crude oil market,” analysts from ANZ bank wrote in a note on Wednesday.
Prices were buoyed as data on Tuesday showed U.S. job openings rose to a two-year high in February while hiring picked up. This followed earlier data showing improvement in the services sectors in the U.S. and China.
