#Saudi Oil Cuts See Top Buyers Looking at Crude From Elsewhere - Bloomberg

Saudi Oil Cuts See Top Buyers Looking at Crude From Elsewhere - Bloomberg

Asia’s oil refiners, responsible for meeting about a third of the world’s fuel consumption, are getting ready to go elsewhere for crude should Saudi Arabia and Russia’s latest pledged output cuts deprive them of barrels.

The two producer countries said on Monday that they will prolong and deepen output cuts into August. Along with reductions they already made, and ongoing curbs by other nations in the OPEC+ alliance, total supply curtailments will amount — on paper at least — to 3.1 million barrels a day, or about 3% of global consumption.

Traders in Asia said there’s a plentiful supply of barrels from producers outside of the 23-nation alliance — particularly in locations like the US, West Africa and the North Sea — that they will turn to if the region does bear the brunt of the latest cuts.

Any influx into Asia of oil from the Atlantic Basin could be a mixed blessing for Middle East producers. On the one hand, it could help to drain supplies in the US and Europe, home to the world’s most traded oil futures contracts. On the other, it could mean losing a share of the fastest growing demand market.

So far, the production jolts by Saudi Arabia and its allies have failed to make any meaningful difference to headline oil prices, which have been stuck at between $70 and $80 a barrel for weeks. That said, prices for grades that are similar to those that the kingdom pumps have rallied more strongly, catapulting them above Brent last week.

Explainer: Why are OPEC+ supply cuts failing to boost oil prices? | Reuters

Explainer: Why are OPEC+ supply cuts failing to boost oil prices? | Reuters

OPEC+, a group comprising the Organization of the Petroleum Exporting Countries and allies including Russia that pumps around 40% of the world's crude, has been cutting oil output since November in the face of flagging prices.

Members Saudi Arabia and Russia, the world's biggest oil exporters, deepened oil supply cuts on Monday in an effort to send prices higher. Yet the move only briefly lifted the market.

Both cuts came in addition to a broader OPEC+ deal to limit supply into 2024 initially introduced in April, and take total output reductions announced to over five million barrels per day (bpd), or about 5% of global oil output.

The surprise April announcement deepened production cuts introduced in November, and helped to raise prices by about $9 a barrel to above $87 per barrel in the days that followed.

But benchmark crude prices have shed those gains since, with Brent futures on Tuesday trading at just under $76 per barrel.

The additional cuts, Eurasia Group analysts argue, "will do little to shift bearish sentiment in a market that is consumed with pessimism about the prospects for oil demand growth in the second half of the year".

Here are the main reasons why OPEC+ output cuts are failing to significantly lift oil prices:

CONCERNS ABOUT WEAK DEMAND
Data from China has sparked fears that the economic recovery from coronavirus lockdowns in the world's second-largest oil consumer is losing steam.

"The economic recovery in China following the lifting of coronavirus restrictions has been noticeably more sluggish than anticipated, even though the data for Chinese oil demand proved robust," Commerzbank analyst Carsten Fritsch said.

He said the jump in Chinese oil demand was largely a catch-up effect after it fell last year, and that this growth momentum was likely to slow considerably.

HIGHER INTEREST RATES
Adding to worries, leading central banks, including the U.S. Federal Reserve, are warning more interest rates hikes could be on the horizon to fight stubbornly high inflation.

Higher interest rates eat into consumers' disposable income and could translate into less spending on driving and travelling, limiting oil demand.

They also drive up costs for manufacturers, and data suggests a slowdown in the sector is happening.

"There is no beating around the bush, factories are struggling across the globe as the sector shrank in Japan, the euro zone, the UK and the U.S. whilst slowed in China last month," PVM analyst Tamas Varga said.

This all means investors are not buying into the idea that the second half of 2023 will see a strong rebound in oil demand.

There are doubts in particular over forecasts that significant quantities of oil will need to be taken out of storage for supply to meet demand.

"With both the International Energy Agency and OPEC continuing to forecast draws of about 2 million bpd ... the credibility of these forecasts is diminishing over time, and markets will take some convincing for a meaningful correction to occur," Eurasia says.

US OUTPUT RISING
Faster than expected growth in U.S. output has also been contributing to market pessimism about oil price gains.

The Energy Information Administration projects U.S. crude oil production will climb by 720,000 bpd to 12.61 million bpd this year, above a prior forecast increase of 640,000 bpd.

This compares with around 10 million bpd as recently as 2018.

LESS BULLISH
In 2020, Saudi Energy Minister Prince Abdulaziz bin Salman warned traders against betting heavily in the oil market, saying those who gamble on the oil price would be "ouching like hell".

He repeated his warning ahead of the June 4 OPEC+ meeting, telling speculators to "watch out", which many market watchers and investors interpreted as a signal OPEC+ could consider further output cuts to punish those betting on lower prices.

Yet investors continue to pare back long positions.

The latest data show the combined long position in WTI and Brent futures fell by 66,000 contracts to 231,000 - just 48,0000 above the March 2020 low "that followed the panicky COVID price slump," according to Saxo Bank analyst Ole Hansen.

AllianceBernstein Joins Global Money Firms Setting Up in #Dubai - Bloomberg

AllianceBernstein Joins Global Money Firms Setting Up in Dubai - Bloomberg

AllianceBernstein LP is opening an office in Dubai, joining a raft of international finance firms flocking to the Middle Eastern hub.

The US investment firm with nearly $700 billion in assets under management said it secured a license to operate in the emirate’s finance center from which it will serve the wider region, including institutional clients, distribution partners and family offices.

The firm last year appointed Jean-Paul Hobeika as head of Middle East Institutions. He will work with Eduard van Nes, head of intermediary sales for Middle East & Africa, who recently relocated to Dubai.

“By opening an office in DIFC, we can move into our next phase, as it will allow us to improve our ability to serve clients through proximity as well as capturing important market opportunities,” said Willem van Gijzen, head of CEMEA Institutions at AllianceBernstein.

Most of the world’s top investment banks, asset managers and, more recently, hedge funds have established their Middle Eastern headquarters in Dubai’s financial hub, a free-zone with its own English-language common law court system. It is now home to about 300 wealth and asset management firms, according to the DIFC’s chief executive Arif Amiri.

Despite increasing competition from neighboring financial centers in Riyadh and Abu Dhabi, Dubai has emerged as a favored destination for global financiers drawn by its ease of doing business, low taxes and year-round sunshine.

Most Gulf markets track oil prices higher; #Dubai at 8-year high | Reuters

Most Gulf markets track oil prices higher; Dubai at 8-year high | Reuters

Most stock markets in the Gulf ended higher on Tuesday, tracking oil prices, with the Dubai index at its highest in nearly eight years.

Prices of oil - which fuels the Gulf's economy - ticked higher as markets weighed supply cuts for August by top exporters Saudi Arabia and Russia against a weak global economic outlook.

On Monday, Saudi Arabia said it would extend its voluntary output cut of 1 million barrels per day (bpd) to August, while Russia and Algeria volunteered to lower their output and export levels for August by 500,000 bpd and 20,000 bpd respectively.

Saudi Arabia's benchmark index (.TASI) gained 0.6%, with Saudi Awwal Bank (1060.SE) rising 3.4%, while Saudi Airline Catering Co (6004.SE) surged 9.8% after it announced a contract with Red Sea Global Co valued at about 6.3 billion riyals ($1.7 billion).

Dubai's main share index (.DFMGI) advanced 1.4% to hit its highest in nearly eight years, buoyed by a 3.9% jump in top lender Emirates NBD (ENBD.DU), which is trading near a record high.

Elsewhere, blue-chip developer Emaar Properties (EMAR.DU) edged 0.2% higher, hitting its highest since 2018.

The Dubai bourse extended its gains with traders reacting to an improved credit rating of Emaar Properties, as well as new economic efforts announced by the federal government, said Ahmed Negm, head of market research MENA at XS.com.

"Both events have boosted sentiment and could help propel the market to the upside," he said.

The United Arab Emirates (UAE) will set up a new federal ministry of investment to develop the Gulf state's investment strategy both globally and domestically, as it contends with growing economic competition from neighbours.

The ministry's aims would include stimulating the investment environment in the UAE and to make its legislation and procedures more competitive to attract global investment, Sheikh Mohammed said.

In Abu Dhabi, the index (.FTFADGI) was up 0.4%.

Outside the Gulf, Egypt's blue-chip index (.EGX30) - which resumed trading after a five-session break - dropped 1.1%, hit by a 2% fall in top lender Commercial International Bank (COMI.CA).

#AbuDhabi, OMV in Talks to Combine Borouge, Borealis to Form $30 Billion Giant - Bloomberg

Abu Dhabi, OMV in Talks to Combine Borouge, Borealis to Form $30 Billion Giant - Bloomberg

Abu Dhabi and Austria’s OMV AG are exploring a combination of Borouge Plc and Borealis AG to create a chemicals and plastics company worth more than $30 billion, people familiar with the matter said.

The owners are discussing the potential valuation and ownership structure of a combined entity and may reach the broad outlines for formal merger negotiations in the coming weeks, according to the people. Talks have been on-and-off for several months and could still be delayed or fall apart, they said, asking not to be identified because deliberations are private.

Vienna-headquartered Borealis is 75% owned by OMV, with the remainder held by Abu Dhabi National Oil Co. Abu Dhabi-listed Borouge is itself a partnership between Adnoc and Borealis and has a market value of about $22 billion.

The two parties are discussing a possible valuation of about $10 billion for Borealis, including its Borouge stake, the people said. After taking into account potential synergies, the overall valuation of the combined entity could exceed $30 billion, the people said. The exact value and ownership structure remain the two key hurdles for any agreement and may still change, they said.

OMV shares jumped as much as 9.1% in Tuesday afternoon trading, the biggest intraday gain since October 2022. They were up 7.6% at 4:32 p.m. in Vienna.

Construction market in Riyadh ‘overheating’, #Dubai ‘hot’ and #Qatar most expensive

Construction market in Riyadh ‘overheating’, Dubai ‘hot’ and Qatar most expensive

Average building costs in Riyadh are currently less than half of New York, but the Saudi capital is one of two markets in a global survey that are ‘overheating’, boosted by strong pipelines and straining under robust activity levels.

As Saudi Arabia makes progress on giga projects towards its Vision 2030 goals and the capital becomes home to the regional headquarters of international companies, a new report by professional services firm Turner & Townsend revealed that Riyadh, along with Canadian capital, Ottawa, is one of two markets in a global survey that it considers as belonging to the overheating category for construction tendering.

Nearby hub Dubai is assessed as ‘hot’, and Abu Dhabi ‘warm’ according to Turner & Townsend’s assessments.

Saudi Arabia has an average build cost in Riyadh currently $2,379 per sqm, the report said, with construction costs higher than Dubai across most sectors, except for prestige car showrooms, where the cost is higher in Dubai at $2,478 per sqm compared with $2,403 in Riyadh.

High-rise offices prestige offices cost $2,136 per sqm to build in Riyadh compared with $1,852 in Dubai, and residential apartments cost $2,003 in Riyadh compared with $1,280 per sqm in Dubai.

Mideast's biggest tobacco firm AIR invites banks to pitch for roles in IPO-sources | Reuters

Mideast's biggest tobacco firm AIR invites banks to pitch for roles in IPO-sources | Reuters

Dubai-based Advanced Inhalation Rituals (AIR), the Middle East's biggest tobacco company, has invited banks to pitch for roles in its planned initial public offering (IPO) next year, two sources with knowledge of the matter told Reuters.

AIR, one of the world's biggest producers of shisha molasses, is planning a flotation in the first half of 2024, said the people, declining to be named as the matter is not public.

AIR did not immediately respond to a request for a comment when contacted by Reuters on Tuesday.

Britain's Kingsway Capital, the majority owner of AIR, is seeking a sale as part of a dual-track process, where a seller pursues a sale and an IPO at the same time.

Reuters reported in March that Kingsway had hired Rothschild & Co (ROTH.PA) to advise it on options for AIR, including a possible IPO.

Rothschild did not immediately respond to a request for comment on Tuesday.

Major Gulf markets in black, #Dubai at 8-year high | Reuters

Major Gulf markets in black, Dubai at 8-year high | Reuters

Major stock markets in the Gulf rose in early trade on Tuesday tracking oil prices higher, with the Dubai index trading at its highest since 2015.

Oil prices - a key catalyst for the Gulf's financial markets - rose as markets weighed supply cuts for August by top exporters Saudi Arabia and Russia against the backdrop of an uncertain global economic outlook.

Saudi Arabia would extend its voluntary cut of 1 million barrels per day (bpd) from output to August, the kingdom's state news agency reported. Russia will also reduce its oil exports by 500,000 bpd in August, Deputy Prime Minister Alexander Novak said.

Dubai's main share index (.DFMGI) advanced 1.4% and is at its highest in nearly 8 years, led by a 4.6% jump in top lender Emirates NBD (ENBD.DU), which is trading near a record high.

Saudi Arabia's benchmark index (.TASI) gained 0.3%, led by a 9.8% surge Saudi Airline Catering (6004.SE) after it announced a contract with Red Sea Global Co valued at about 6.3 billion riyals ($1.68 billion).

Separately, the United Arab Emirates (UAE) will set up a new federal ministry of investment to develop the Gulf state's investment strategy both globally and domestically as it contends with growing economic competition from neighbours.

The ministry's aims would include stimulating the investment environment in the UAE and to make its legislation and procedures more competitive to attract global investment, Sheikh Mohammed said.

In Abu Dhabi, the index (.FTFADGI) was up 0.4%.

The Qatari index (.QSI) gained 0.9%, as most of the stocks on the index were in positive territory including the Gulf's biggest lender Qatar National Bank (QNBK.QA).