Amid Hamas-Israel War, MBS Holds the Key to Oil Prices - Bloomberg
The Hamas attack on Israel that derailed Saudi Arabian Crown Prince Mohammed bin Salman’s principle diplomatic initiative — a three-way deal with the US and Israel — and scrambled the regional political landscape has left one thing unchanged: Riyadh’s influence over the global oil market.
For the last year, Saudi Arabia has cut production to boost prices, including a unilateral 10% reduction in output on top OPEC-negotiated curbs. Although the market has relentlessly focused – wrongly — on perceived weakness in demand growth, the truth is Riyadh faced unexpected supply from countries under Western sanctions, notably Iran but also Venezuela and Russia. Since October 2022, Iran has boosted its production by as much as 700,000 barrels per day — the second-largest source of incremental oil supply this year, behind only US shale.
The reason? Washington turned a blind eye to rising smuggling of Iranian crude, mostly finding its way into China via Malaysia. The priority was an informal détente with Tehran, including a prisoner swap and bringing oil prices lower. Moreover, rising Iranian oil exports were an unacknowledged cost of easing the pain of another set of oil sanctions on Russia.
Iran has long supported Hamas financially and militarily — although its role in Saturday’s brutal attacks remains unclear. Yet it’s difficult to see Washington maintaining its hands-off approach to Iran much longer. The Islamic Republic isn’t just supporting Hamas, but it’s also providing weapons to Russia for its war against Ukraine. And the key to that support is oil revenue.
Dubai non-oil economy up in September as sales growth touches highest in four years
Business activity in Dubai's non-oil private sector economy remained robust in September as sales growth hit the highest in more than four years amid improving demand.
The emirate's seasonally adjusted S&P Global purchasing managers' index reading rose to 56.1 in September, marking its strongest performance in three months, up from 55.0 in August.
It remained well above the neutral 50 mark separating an expansion from a contraction.
The survey, which covers the construction, wholesale and retail, and travel and tourism sectors, showed that the confidence for future activity also rose sharply last month.
Adia expects continued investment opportunities despite global challenges
Abu Dhabi Investment Authority (Adia), one of the world's biggest sovereign wealth funds, expects continued investment opportunities, despite rising inflation and higher borrowing costs globally.
The fund is also focusing on the effect that climate change will have on the investment landscape and the opportunities that it presents, Adia said in its 2022 annual report on Tuesday.
“On a fundamental level, it is clear that the era of low inflation and cheap money that propelled risk assets higher following the global financial crisis has drawn to a close,” Sheikh Hamed bin Zayed, Adia's managing director, said.
“Investors will now be required to navigate a less benign landscape marked by higher inflation and borrowing costs. This situation presents both challenges and opportunities.”
Gulf's biggest lender QNB reports nearly 8% rise in Q3 earnings | Reuters
Qatar National Bank (QNB) (QNBK.QA), the biggest Gulf bank by assets, reported a nearly 8% rise in third-quarter net profit on Tuesday, helped by loan growth.
Net profit attributable to QNB's equity holders in the three months to the end of September was 4.27 billion riyals ($1.17 billion), up from 3.97 billion a year earlier.
Gulf banks are reaping windfalls from charging clients higher interest rates as the Federal Reserve raised borrowing costs to rein in stubborn inflation.
In a note to clients, analysts at EFG Hermes said QNB results beat its estimate of 3.81 billion riyals by 12%, on higher than expected margins, fee and foreign exchange income and lower than expected provisioning costs.
The bank had 1.186 trillion riyals in total assets at the end of September, up 4% from a year earlier, QNB reported in an earnings filing.
Loans and advances rose 7% to 815 billion riyals.
OPEC’s Spare Oil Buffer Can Help Market Weather Mideast Storm - Bloomberg
Global oil markets may be facing heightened risk from tumult in the Middle East, but they’re better equipped to weather the shock than during previous crises.
Having slashed crude output this year to prop up prices, Saudi Arabia and its OPEC+ allies are left with a healthy reserve of spare production capacity. Outside of the Covid pandemic — when lockdowns caused demand to slump — it’s the biggest buffer in more than a decade.
OPEC, primarily Saudi Arabia and the United Arab Emirates, will be sitting on more than 4 million barrels a day of idle capacity this year and next, about 4% of global supplies, according to the US Energy Information administration.
That’s almost double the cushion they held during other regional crisis, such as when the kingdom’s Abqaiq processing facility was bombarded by Iran in 2019, or when Islamic State fighters captured huge swathes of Iraq in 2014. It’s almost 20% more than when Libyan output collapsed during the uprising against Moammar Al Qaddafi in 2011.
Oil slips on investor caution as market watches Middle East turmoil | Reuters
Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.
Brent crude was down 37 cents to $87.78 a barrel as of 1240 GMT, while U.S. West Texas Intermediate (WTI) crude had eased 40 cents to $85.98 a barrel. Both benchmarks had fallen by more than $1 in earlier trade.
Brent and WTI had surged more than $3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza. Hamas launched the largest military assault on Israel in decades on Saturday, while Israel pounded the Gaza Strip on Tuesday with the fiercest air strikes in the 75-year history of its conflict with the Palestinians.
"There is still plenty of uncertainty across markets following the attacks in Israel over the weekend," said ING analysts on Tuesday, adding that oil markets are now pricing in a risk premium.
UAE, after Israel-Gaza conflict, says it does not mix trade with politics | Reuters
The United Arab Emirates does not mix trade with politics, the country's trade minister said on Tuesday when asked whether the conflict between Israel and Hamas would impact economic agreements.
"We don't mix the economy and trade with politics," Thani al Zeyoudi told reporters in Dubai.
In March, a Comprehensive Economic Partnership Agreement (CEPA) between the two countries came into effect, Israel’s first free trade agreement with an Arab state.
The UAE was the first Gulf country to normalise relations with Israel in 2020, breaking with decades of Arab policy toward the Palestinian cause.
Most Gulf shares rise on dovish Fed tone; Mideast in focus | Reuters
Most stock markets in the Gulf advanced on Tuesday as U.S. rate worries eased, while investors kept their focus on raging conflict in the Middle East after a surprise attack by Hamas militants on Israel over the weekend.
Top Federal Reserve officials on Monday indicated rising U.S. Treasury yields could steer the central bank away from further rate increases.
Monetary policy in the six-member Gulf Cooperation Council (GCC) is usually guided by policy decisions by the Fed because most regional currencies are pegged to the U.S. dollar.
Saudi Arabia's benchmark index (.TASI) bounced back from an eight-session losing streak and closed 0.6% higher, lifted by gains in energy, finance and IT sectors.
The world's top oil exporter Saudi Aramco (2222.SE) surged 1.2% and Riyad Bank (1010.SE) shot up 5.1%.
Among the gainers, Saudi Arabian Mining (1211.SE) and Elm Company (7203.SE) climbed 2.1% and 1.8% respectively.
The Qatari index (.QSI) inched up 0.2%, snapping four- session straight losses, supported by a 1.1% rise in Industries Qatar (IQCD.QA) and 0.7% gain in Qatar National Bank (QNBK.QA).
QNB, the region's largest lender, reported a nearly 8% rise in third-quarter net profit on Tuesday after market hours.
Dubai's benchmark index (.DFMGI) recouped much of its losses to end 0.1% lower after it slumped 2.6% a day earlier, the sharpest fall since June last year.
The real estate developer Emaar Properties (EMAR.DU) rose 2.3% and Tecom Group (TECOM.DU) added 1.9%.
However, the emirate's largest lender Emirates NBD (ENBD.DU) sank 2.3% and Emirates Central Cooling Systems Corp (EMPOWER.DU) dropped 3.2%.
In Abu Dhabi, the benchmark index (.FTFADGI) retreated for a fifth consecutive session and ended 0.2% lower, with Abu Dhabi National Oil Company for Distribution (ADNOCDIST.AD) falling 1.7% and the UAE's largest lender First Abu Dhabi Bank (FAB.AD) dropping 1.5%.
Outside the Gulf, Egypt's blue-chip index (.EGX30) was up for a second session and ended 1.6% higher with almost all its stocks in positive territory.
Misr Fertilizers Production (MFPC.CA) shot up 10.9% and Eastern Co (EAST.CA) surged 5.4%.
Meanwhile, investors continued to monitor developments in the conflict in Middle East, with Israel on Tuesday saying it had re-established control over the Gaza border.
Sovereign wealth fund ADIA optimistic on equities, private credit after turbulent 2022 | Reuters
Sovereign wealth fund Abu Dhabi Investment Authority (ADIA) said it was optimistic on public equities for 2023 after last year's market rout, driven by high inflation and rising interest rates, weighed on stocks' valuations, making them more attractive.
The fund was also looking at opportunities in the private credit market, as banks become more cautious on lending due to rising financing costs, it said in its 2022 annual review.
ADIA, which manages the surpluses the Gulf emirate earns from oil exports, does not disclose the value of its assets but Global SWF, an industry specialist, estimates them at $993 billion.
As of the end of last year ADIA achieved 20-year and 30-year annualised rates of return of 7.1% and 7.0% respectively, compared with 7.3% and 7.3% in 2021, it said in its report, published on Tuesday.
"Equities - both public and private - should continue to find support, especially if profitability remains resilient despite lingering tensions in supply chains and the availability of labour," Managing Director Hamed bin Zayed Al Nahyan said in the report.
Oil dips on investor caution as market watches Middle East turmoil | Reuters
Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.
Brent crude fell 36 cents to $87.79 a barrel by 0805 GMT, while U.S. West Texas Intermediate (WTI) crude eased 35 cents to $86.03 a barrel. Both benchmarks had fallen by more than $1 in earlier trading before recovering slightly.
Brent and WTI had surged more than $3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza into the oil-rich region. Hamas launched the largest military assault on Israel in decades on Saturday, while fighting continued into the night on Monday as Israel retaliated with a wave of air strikes on Gaza.
"There is still plenty of uncertainty across markets following the attacks in Israel over the weekend," said ING analysts on Tuesday, adding that oil markets are now pricing in a risk premium.
