Gulf's financial wealth could be over in 15 years: IMF

[Kambojaric]

Although reports of Gulf states hydrocarbon reserves running out have been in the news for years now, what is likely to damage them is not in fact the depletion of their reserves but rather the worlds push towards electric transportation. The Israelis are set to make commercially available the "alice"within two years (https://www.israel21c.org/israeli-electric-plane-alice-takes-off-at-paris-air-show/). Major players within the aviation industry are also investing in electric planes(https://electrek.co/2018/10/29/elec...ng-a-reality-says-easyjet-ceo-electric-plane/), which is especially important as one of the EUs 2030 goals is to significantly reduce noise pollution.

The growth of electric cars is already evident. The below data is from 2018 and already shows that a small but fast growing percentage of new car sales around the world are EVs. The most interesting nation below is China. In 2019 the percentage increased closer to 5%, and its fair to say that be the end of this decade will hover around 10% at least. As the effects of climate change intensify so will the governments push towards renewable energy and electric transportation around the globe. Currently "road transport (alone) accounts for more than 40% of global oil demand. The industry’s growth has been responsible for more than half of total oil demand growth since 2000."https://about.bnef.com/blog/three-drivers-curbing-oil-demand-road-transport/

All of this is bad news for the Gulf. Their bid to become a transportation and trade hub of the region has been repeatedly struck down by the numerous political and military conflicts in the region (Iran-Iraq war, Iraq-US wars, ISIS, Syria civil war, Iran sanctions etc.). Airlines like Qatar and Etihad are making record losses. Tourism will also likely dampen if new novelty's like the Burj Khalifa which cost large amounts of money are not introduced at regular intervals.

In essence the regions economies need a major restructuring. Hydrocarbon and expat reliance makes these countries extremely vulnerable. Restructuring however is a painful experience and it remains to be seen whether the people of this region are willing to undergo this process with authoritarian regimes at the helm. When the Arab Spring protests emerged in Saudi Arabia the regime simply bought off the protests (https://www.nytimes.com/2011/06/09/world/middleeast/09saudi.html). In more financially difficult times it remains to be seen whether this will be possible.

 

[KhanBaba2]

Middle East Gulf GCC countries running out of money and going back to their camel jockey days will be good for:
1. World Peace ... No more ISIS
2. Pakistan... No more wahabbi terror schools and no more Indian support and no more economical Blackmailing Pakistan.
3. Climate change.... Less dependency on diesel fuels
4. Reduced Arab Gulf arrogance... They can return back to their humble beginnings...
5. Palestinians... These Gulf Arabs have sold them out

No more remittances.

 

[Glass]

Investors oppose delisting of Dubai real estate fund amid property slump

Dubai real estate investment trust ENBD REIT is facing opposition to going private from some shareholders who fear the move could further erode its value, two sources said.


Image used for illustrative purpose. UAE, Dubai, Sheikh Zayed Road, two photographs of the same scene taken at different time of day and merged together in a single image to show the transition from dusk till dawn.

Getty Images/Shomos uddin
By Davide Barbuscia, Reuters News
DUBAI- Dubai real estate investment trust ENBD REIT is facing opposition to going private from some shareholders who fear the move could further erode its value, two sources said.

The trust, managed by the asset management unit of Emirates NBD, Dubai's largest bank, has said it plans to delist because of low trading liquidity and a more than 50% discount on its shares versus the net asset value of the fund.


Dubai's property market has been hit by oversupply and sluggish growth in the private sector, which shrank in the United Arab Emirates in January for the first time since 2009.

The shareholders believe the vehicle's fee structure rewards its managers without taking fully into account the sector's condition, and a delisting would not solve the problem, said the two sources familiar with the matter.

The investors include the UAE's National Bonds, alternative investment firm Sancta Capital and Saudi insurer Tawuniya, as well as Emirati and Saudi family businesses, said one of them.

Their concern illustrates how a slump in the once-booming Dubai real estate sector is pushing investors to ask that business practices be more reflective of the economic slowdown.

REITs manage real estate assets that regularly generate profits, which are distributed to shareholders as dividends.

ENBD REIT - one of the two REITs listed on the Dubai Nasdaq exchange - has a total market value of $105 million, according to Refinitiv data, but its net asset value (NAV) is $246 million.

"Whereas NAV is derived from rental income after considering operating expenses and capex for the upkeep of the assets, market capitalization reflects the true economic value in the hands of the shareholders after the leakage from the REIT’s running expenses and manager fees," Sancta Capital said in an investment document seen by Reuters.

"This leakage has resulted in a structural discount to NAV which will not be resolved with a delisting," it said.

ENBD REIT said in a statement sent to Reuters: "The board and management believe that trading privately would remove the value gap between the publicly traded share price and NAV."

"This would result in the value of shareholdings being reported to shareholders at NAV."

It added it was reviewing its fee structure and would propose alternatives to shareholders soon, potentially improving net income returns.

National Bonds and Tawuniya did not respond to requests for comment.

Emirates REIT , the other Dubai-listed trust, said last month it would withhold interim dividend payments due to uncertainties in the real estate market.


https://www.zawya.com/mena/en/story...d_amid_property_slump-TR20200213nL8N2AB51DX1/

 

[Glass]

The Real Reason The Saudis Are Desperate To Restart This Giant Oilfield
By Simon Watkins - Feb 12, 2020, 6:00 PM CST
Join Our Community

Sources from Kuwait and Saudi Arabia last week let it be known that trial production of 10,000 barrels per day (bpd) would start at the Khafji field in the ‘Partitioned Neutral Zone’ (PNZ) that it shares with Kuwait on or around the 25th of February, with the field likely to be pumping about 60,000 bpd by August. Trial production of 10,000 bpd will also begin in the Kuwaiti area of the Zone in late March, likely increasing to around 80,000 bpd by the end of September, according to the sources. The plan is that within 12 months Khafji will be producing around 175,000 bpd and Wafra about 145,000 bpd.



This said, it is an absolute truism that Saudi Arabia desperately needs the Brent crude oil benchmark price above US$84 per barrel - at the absolute minimum – to ensure that it does not record yet another dismal budget deficit this year. So, it is an absolute truism as well that the last thing a country should do when it desperately needs a higher oil price is to actually increase oil production, especially at a time when the outlook in the key demand element of the supply/demand equation – China – looks uncertain, given the current coronavirus scare. So, what is really going on here?



Such deficits have been running ever since the beginning of the Saudis’ strategically incompetent ‘plan’ begun in 2014 to destroy the then-nascent U.S. shale industry. Having not done the necessary homework in the first place – including an analysis of how the U.S. shale sector might react (i.e. as it transpired, by becoming leaner, meaner, and more cost efficient very quickly) – the Saudis succeeded in only nearly bankrupting itself and its OPEC supporters.

Having only finally twigged onto the appalling naïveté of its plan in 2016, Saudi has subsequently been chasing its own tail financially. It was forced to spend over US$250 billion of its own foreign exchange reserves to prop up its economy that even senior Saudis say have been lost forever.Related: Oil Bulls Are In For A Bitter Disappointment

So bad was the situation that in October 2016 the country’s deputy economic minister, Mohamed Al Tuwaijri, said that: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” As it stands, having recorded budget deficits for the last few years, the estimates are that Saudi will continue to do so until at least 2025, so Saudi wanting to add to the vast level of oil supplies sloshing around the markets – with the hugely negative implications for price that this means – makes no sense, if all other factors have remained equal.

Okay, but maybe the Saudis are really just a bunch of friendly guys who care about helping out their neighbours, like plucky Kuwait? Leaving aside for one moment the fact that the Saudi ‘plan’ to take on the U.S. shale industry took its toll on Kuwait’s economy as well, the degree of petty spite and bullying that prompted the Saudis to close down the Neutral Zone in the first place in 2014 should not be underestimated or forgotten.



The official Saudi line at the time for the closure of Khafji was that it was not compliant with new environmental air emission standards issued by Saudi Arabia’s Presidency of Meteorology and Environment Authority (no, honestly, that was it).

Supposedly, the field – in addition to producing around 280,000-300,000 barrels per day (bpd) of Arabian Heavy grade crude oil just before its closure - also produced around 125 million standard cubic feet per day (mscfd) of associated gases and 50 mscfd of gas and a gas leak had sprung in one of its 15 platforms. Ergo, apparently, the entire area required shutting down, as supposedly the associated plant gathers its gas from all onshore facilities in the PNZ.

The unofficial version was that shutting the field down was Saudi Arabia’s way of ‘jerking Kuwait’s chain to keep it in line’, as the Kingdom perceived that its neighbour had been stepping on its toes in the months leading up to the closure. In this context, Kuwait had increased its overt competition to Saudi Arabia in the key Asian export markets to the point that it was selling oil to buyers in Asia at the widest discount to the comparable Saudi grade for 10 years.

Additionally, Kuwait had also been placing obstacles to the Kingdom’s own operations in the Wafra region of the PNZ by increasing the difficulty for Saudi Arabian Chevron (SAC) in obtaining work permits to operate in the Zone, jeopardising SAC’s ability to move ahead with its full-field steam injection project in Wafra that was intended to boost output of heavy oil there by more than 80,000 bpd.

The effect of the closure in 2014 was much more damaging to Kuwait than to Saudi, with the loss of Kuwait’s 50 per cent share of output effectively wiping out its spare capacity in one fell swoop, according to oil analysts at the time. Additionally, the closure made it all the more difficult for Kuwait to achieve its ambitious output expansion plans.Related: Oil Traders Could Lose Big On Coronavirus Panic

Given this, it is unsurprising to find that an accommodation on pricing to Asian export markets was worked through between the two sides, along with the situation regarding SAC’s visas, in preparation for the restarting of production at the field as soon as possible from the Kuwaiti side.

In a supreme twist of irony – and making nonsense of the current plan to re-open the PNZ – the key reason why the Khafji field was not allowed to be re-opened was the intervention of then-Deputy Crown Prince Mohammed bin Salman who did not want extra output coming into the markets, as this would have depressed the oil price even further than it had been already, according to oil analysts at the time. Saudi also wanted to maintain its leverage over Kuwait going forward, many analysts believed.

So, what is the possible explanation for suddenly allowing these long locked-down fields to go into production? It is, according to a range of sources spoken to by OilPrice.com since the 14 September attacks the fact that Saudi was not telling the truth about the extent of the damage then and it is not telling the truth now either.

As highlighted to OilPrice.com at the time of the attacks by global energy consultancy Energy Aspects’ senior energy analyst Richard Mallinson: “It was extremely telling that he [Abdulaziz bin Salman] spoke of ‘capacity’ and later of ‘supply to the market’, as these are terms that Saudi tends to use in order to avoid talking about actual production, as capacity and supply are not the same thing at all as actual production at the wellheads.” He added: “What Saudi is trying to do by not revealing the true picture is to protect its reputation as a reliable oil supplier, especially to its target clientele in Asia, so we have to take all of these comments with a hefty pinch of salt,” he added.

“Engineers we have spoken to have said that following an incident like this it would take several weeks just to assess the damage, never mind to begin doing anything about it, rather than the few days that the Saudis have taken and then announced the actual timeline – and a very short timeline at that – to bring back various stages of capacity,” he concluded.

By Simon Watkins for Oilprice.com

https://oilprice.com/Energy/Energy-...Desperate-To-Restart-This-Giant-Oilfield.html

 

[El Sidd]

Seems like IMF is writing a new bible for the cheerleaders on this thread.

 

[Glass]

Stalling Saudi Economy Ripe for Fiscal Rethink as Hurdles Mount
By
Abeer Abu Omar
1. März 2020, 06:16 GMT Updated on 2. März 2020, 08:23 GMT

Saudi Arabia’s economy barely expanded last year, increasing the need for the government to reconsider its planned spending cuts to deliver faster growth in 2020 in the face of disruptions from the coronavirus and the prospect of lower energy prices.


Held back by curbs on oil output negotiated by OPEC, the economy of the world’s biggest crude exporter expanded just 0.3% in 2019, down from 2.4% a year earlier and short of the government’s forecast of 0.4%.


Offsetting an acceleration in non-oil growth to 3.3%, the oil sector shrank 3.6%, the most since at least 2011, according to data released Sunday by the General Authority for Statistics.

With non-oil growth quickening to the fastest since 2014, Saudi Arabia is looking to private businesses to help achieve an economic expansion of 2.3% this year. Despite signs of a pickup to start 2020, the government may now have to rethink its plans to scale back spending as the impact of the virus outbreak ripples from China to Europe and the Americas.



Read more: Humbled Saudis May Yet Clinch OPEC+ Deal as Virus Spreads

Saudi policy makers “could opt to defer spending cuts, should non-oil growth be lower than expectations,” according to Bilal Khan, Middle East and North Africa senior economist at Standard Chartered. The bank has revised its 2020 growth forecast for Saudi Arabia to 1% from 2.3% on anticipation of a decline in oil output.

“Fiscal measures could cushion the impact on non-oil economic activity,” Khan said.
Even deeper cuts to oil production will likely be on the agenda of an emergency meeting by OPEC and its partners set to take place this week. Saudi Arabia has led an effort to shore up oil markets against the coronavirus with swift output cuts to compensate for a drop-off in energy demand and crude prices.

WHAT OUR ECONOMISTS SAY...
“The reduction in crude production means that non-oil growth needs to be sustained at around 4% to reach the expectations of the government. This will be hard to achieve if the kingdom implements its plans to cut spending.”

-- Ziad Daoud

Click here to view the piece.

Oil had its worst week since the financial crisis on fears that the spreading coronavirus will crush demand, with Brent crude sliding below $50 a barrel.

The kingdom’s 2020 budget, which envisages a deficit of 6.4% of gross domestic product, is designed under the assumption that the global oil benchmark will average about $65 per barrel, according to calculations by Bloomberg Economics.

The International Monetary Fund predicts Saudi Arabia would need Brent to trade at $89 to balance its budget in 2020. The energy sector accounts for about 50% of the kingdom’s GDP.

Saudi officials have sounded confident that the economy remains on track for an upturn. Growth this year will be faster than in 2019, “especially in the private sector,” central bank Governor Ahmed Alkholifey told reporters during a conference in Riyadh last month.

It was “too early to tell” what the impact of virus outbreak will be on the Saudi economy, he said.

https://www.bloomberg.com/news/arti...wth-slowed-to-0-3-in-2019-after-opec-led-cuts

 

[Titanium100]

This entire thread and comments are not factual.. Hard to argue with people speaking from emotions rather than facts.

The same people saying UAE economy will collapse were the same people saying that for the last 10 years and saying Saudi economy will collapse for the last 20 years? The truth is they only got richer.

If anyone is looking for a collapse wait until the early 2050s not now. You will be wasting your time and energy. GCC will prosperous for the next 30 years

 

[Glass]

facts are on the ground if you dislike them then thats just the way it is

 

[anatolia]

Stalling Saudi Economy Ripe for Fiscal Rethink as Hurdles Mount
By
Abeer Abu Omar
1. März 2020, 06:16 GMT Updated on 2. März 2020, 08:23 GMT

Saudi Arabia’s economy barely expanded last year, increasing the need for the government to reconsider its planned spending cuts to deliver faster growth in 2020 in the face of disruptions from the coronavirus and the prospect of lower energy prices.


Held back by curbs on oil output negotiated by OPEC, the economy of the world’s biggest crude exporter expanded just 0.3% in 2019, down from 2.4% a year earlier and short of the government’s forecast of 0.4%.


Offsetting an acceleration in non-oil growth to 3.3%, the oil sector shrank 3.6%, the most since at least 2011, according to data released Sunday by the General Authority for Statistics.

With non-oil growth quickening to the fastest since 2014, Saudi Arabia is looking to private businesses to help achieve an economic expansion of 2.3% this year. Despite signs of a pickup to start 2020, the government may now have to rethink its plans to scale back spending as the impact of the virus outbreak ripples from China to Europe and the Americas.



Read more: Humbled Saudis May Yet Clinch OPEC+ Deal as Virus Spreads

Saudi policy makers “could opt to defer spending cuts, should non-oil growth be lower than expectations,” according to Bilal Khan, Middle East and North Africa senior economist at Standard Chartered. The bank has revised its 2020 growth forecast for Saudi Arabia to 1% from 2.3% on anticipation of a decline in oil output.

“Fiscal measures could cushion the impact on non-oil economic activity,” Khan said.
Even deeper cuts to oil production will likely be on the agenda of an emergency meeting by OPEC and its partners set to take place this week. Saudi Arabia has led an effort to shore up oil markets against the coronavirus with swift output cuts to compensate for a drop-off in energy demand and crude prices.

WHAT OUR ECONOMISTS SAY...
“The reduction in crude production means that non-oil growth needs to be sustained at around 4% to reach the expectations of the government. This will be hard to achieve if the kingdom implements its plans to cut spending.”

-- Ziad Daoud

Click here to view the piece.

Oil had its worst week since the financial crisis on fears that the spreading coronavirus will crush demand, with Brent crude sliding below $50 a barrel.

The kingdom’s 2020 budget, which envisages a deficit of 6.4% of gross domestic product, is designed under the assumption that the global oil benchmark will average about $65 per barrel, according to calculations by Bloomberg Economics.

The International Monetary Fund predicts Saudi Arabia would need Brent to trade at $89 to balance its budget in 2020. The energy sector accounts for about 50% of the kingdom’s GDP.

Saudi officials have sounded confident that the economy remains on track for an upturn. Growth this year will be faster than in 2019, “especially in the private sector,” central bank Governor Ahmed Alkholifey told reporters during a conference in Riyadh last month.

It was “too early to tell” what the impact of virus outbreak will be on the Saudi economy, he said.

https://www.bloomberg.com/news/arti...wth-slowed-to-0-3-in-2019-after-opec-led-cuts

LETS look our economy bro.. we had fragile economy and country..lets put aside fighting with others and work harder for our country .i mean more work than talk..

 

[Glass]

Coronavirus impact: Dubai's economy may feel effects into Q2 2020

All air, sea and road freight from China are affected as workers in the country are choosing to remain at home

Image used for illustrative purpose. Dubai, United Arab Emirates

Getty Images
By Seban Scaria, ZAWYA
Dubai saw remarkable external trade growth in 2019, and with a contribution of 150 billion dirhams, China was its largest trading partner. Then came the coronavirus outbreak, disrupting trade lines and sowing panic in global markets.

Zawya spoke to Moody’s Investors Service to gauge how China’s shutdown will affect Dubai from a sovereign, banking and corporate perspective in 2020.


“China is Dubai’s largest trading partner, and Chinese exports to Dubai will be affected by the factory shutdowns across China and the resulting impact on supply chains,” Thaddeus Best, a Moody’s analyst, told Zawya. “Almost all of the goods that the UAE imports from China are intermediate and finished goods that are at higher risk of being affected by the disruptions to factory output and goods storage facilities.”

Beyond the direct impact of disrupted trade with China, as a global trade hub, Dubai would certainly be exposed to any adverse impact on global growth conditions that may result from an extended outbreak of the coronavirus.

“The lagged effect from this will likely show up in shipping throughput data from March onwards. At the absolute minimum there will be an economic impact across the first quarter of 2020, which will likely extend into the second quarter due to lagged effects in the trade and transportation sectors. However, clearly, there is a non-negligible risk that the impact of the outbreak could extend beyond this period,” Best said.

“All air, sea and road freight from China are affected as workers in the country are choosing to remain at home; hence, all Chinese export consignments are delayed and held up at customs, ports and borders waiting for regulatory clearances in several countries,” Bassel El Dabbagh, Regional Director for Chemical Logistics at Agility for the Middle East and Africa region had told Zawya.

Banking perspective
The UAE Central Bank has advised banks to grant temporary deferrals on monthly loan payments and reduce fees and commissions for customers affected by the coronavirus. The apex bank has set up a committee along with UAE Banks Federation to ensure consumer protection and safeguard the stability of the bank sector.

"In addition to imposing flight restrictions on virus outbreak epicenters, the UAE government response so far has also extended to proactive measures for the financial system. The UAE central bank released guidelines advising banks to implement measures in order to mitigate the effects of the coronavirus on the economy," said, Mik Kabeya, Moody’s AVP Analyst.

“Expectations are that both monetary policy action, some have already been taken, as well as fiscal stimulus measures will be announced,” said, Ehsan Khoman, Head of MENA Research and Strategy, MUFG.

Corporate perspective
Some government-related corporates, particularly those in sectors most likely to be affected by the outbreak like tourism, transportation and trade, have begun to take measures in anticipation of weaker demand arising from the virus outbreak.

For example, Emirates Airline has offered paid and unpaid time off for staff, mirroring the response of other major airline groups like Lufthansa.

"However, as the coronavirus is likely to lead to lower aggregate global demand in the short-term, opportunities to offset lost revenues will be more scarce and measures are likely to focus on cost-cutting,’’ Rehan Akbar, a Moody’s VP-Senior Credit Officer.

On Sunday, the Dubai index declined 7.4 percent, its biggest intra-day fall since December 2014. Banking and real estate shares led the decline. While banking giant Emirates NBD fell 8.7 percent, the blue-chip developer Emaar Properties tumbled 8.2 percent.

"Investment sentiment driven sectors such as real estate and subsequently construction and contracting sector would be materially impacted should situation be prolonged,’’ Akbar said, adding, “Businesses with material leverage, reliance on credit and having weak liquidity are exposed in the current environment and would have little financial flexibility to absorb shock in current environment."

However, Dubai continues to attract new businesses despite economic challenges worldwide. While the emirate’s Department of Economic Development had issued 10 percent more trade permits in February compared to the previous month, Dubai International Financial Centre, the largest financial hub in the Middle East, issued more licenses in the first two months of 2020, despite coronavirus fears, compared to same time in 2019.


https://www.zawya.com/mena/en/econo...eel_effects_into_Q2_2020-ZAWYA20200309052614/

Oil in free fall as Saudi launches price war with Russia
BY COMPILED FROM WIRE SERVICES
ISTANBUL ENERGY
MAR 09, 2020 7:55 AM GMT+3

In this Thursday, Aug. 31, 2017, file photo, a flame burns at the Shell Deer Park oil refinery in Deer Park, Texas. (AP Photo)


Oil prices are plunging amid concern a dispute among producers could lead a global economy weakened by COVID-19 to be awash in an oversupply of crude.

Brent crude, the international standard, more than $14, or nearly 31%, to $31.02 per barrel in electronic trading in London. Benchmark U.S. crude fell $13.98, or 33%, to $27.34.

The dramatic losses follow a 10.1% drop for U.S. oil on Friday, which was its biggest loss in more than five years.

Driving the declines was a ferocious sell-off in the oil markets, sparked by top exporter Saudi Arabia slashing prices — in some cases to unprecedented levels — after a bust-up with Russia over production.

Both main oil contracts — which had already been under pressure over falling demand caused by the virus — dived around 30%, marking the worst drop since the 1991 Gulf War and the second biggest fall on record, according to Bloomberg News.





Saudi Arabia launched an all-out oil war Sunday with the biggest cut in its prices in the past 20 years, Bloomberg News said, after OPEC and its allies failed to clinch a deal to reduce output.

A meeting of main producers was expected to agree to deeper cuts to counter the impact of the coronavirus — but Moscow refused to tighten supply.

The turmoil in the oil markets caused share prices to plunge in the Middle East and in Asia. While lower oil prices can be a boon for economies that rely heavily on imports to fuel their industries, such as South Korea, Japan and China, extreme uncertainty can wreak havoc.

Demand for energy is falling as people cut back on travel. The worry is that the new coronavirus will slow economies sharply, meaning even less demand.

Stephen Innes, chief markets strategist at AxiCorp, called reports that Saudi Arabia could increase its oil production in order to gain market share in a “shock-and-awe” strategy.

The oil market has seen arguments like this before. In 2014, OPEC held off production cuts in order to hold onto market share in the face of a resurgent U.S. oil industry. That led to oil to tumble from over $100 a barrel to below $40 by 2015.

This most recent plummet for oil adds another punch to what's already been a brutal and dizzying couple weeks for financial markets worldwide. The U.S. stock market is down 12.2% since setting its record last month on worries about how much corporate profits will fall because of COVID-19. It's set on Monday to mark the 11th anniversary of hitting bottom after the 2008 financial crisis.

Treasury yields have plummeted to record lows as investors pile into anything that looks safe, almost regardless of how little it pays. The 10-year Treasury yield pierced below 1% for the first time on Tuesday, only to breach 0.70% Friday.

The virus usually leaves people with only mild to moderate symptoms, but because it's new, experts can't say for sure how far it will ultimately spread and how much damage it will do, both to health and to the economy. The number of cases has reached 109,000 globally, and Italy on Sunday tried to quarantine a region holding more than a quarter of its population in hopes of corralling it.

If the number of new infections slows in other parts of the world as it has in China, if the U.S. jobs market remains as solid as it's been and if all the unease in markets ends up creating just a short-term dip in confidence among shoppers, all this may recede quickly. But those are a lot of potential pain points.

“There are more if's than at any other time in this 11-year bull market,” say strategists at BTIG.


https://www.dailysabah.com/business/energy/oil-in-free-fall-as-saudi-launches-price-war-with-russia

 

[Glass]

Saudi Aramco posts $88.2 billion net income in 2019
Net income down 20.6% year-over-year, while Brent price falls 9.6% during that period
Ovunc Kutlu |16.03.2020

ANKARA

Saudi Aramco, the world's largest company by market capitalization, recorded a fall in net income down to $88.2 billion in 2019, according to the firm's full-year financial results statement announced late on Sunday.

This level, however, represents a 20.6% year-over-year decline as Aramco's net income amounted to $111.1 billion in 2018.

"The decrease was primarily due to lower crude oil prices and production volumes," the Saudi national oil company said in the statement.

The price of international benchmark Brent crude was down 9.6% year-over-year, averaging $64.37 per barrel in 2019, from $71.19 a barrel on average in 2018, according to official data.

While Saudi Aramco's total hydrocarbon production averaged 13.2 million barrels of oil equivalent (boe) per day in 2019, this level remained unchanged from the first half of last year.

"Following the attacks on two facilities in September, the company restored production levels within 11 days, due to its emergency response training and procedures," the statement said.

Drone attacks on two of Saudi Aramco facilities on Sept. 14, 2019 caused a production cut of 5.7 million barrels per day (bpd), equal to around 6% of global oil output, and raised concerns over the security of the company's infrastructure.

The company's results show its hydrocarbon reserves rose slightly by 0.66% to 258.6 billion boe, compared to 256.9 billion boe in 2018.

The firm, however, reduced its capital expenditure by 6.5% to $32.8 billion in 2019, down from $35.1 billion in 2018.

The company said it expects that capital spending in 2020 will range between $25 and $30 billion "in light of current market conditions and recent commodity price volatility."

The recent sudden oil price decline due to coronavirus caused Saudi Aramco shares to fall to 29 Saudi riyals ($7.73) last week, from 33 Saudi riyals ($8.80).

Saudi Aramco's initial public offering (IPO) was completed on Dec. 5 with a final offer share price of 32 Saudi riyals ($8.53), securing the company’s market value at $1.7 trillion.

Aramco saw its market value surpass the $2 trillion mark on its second day of public trading on the Saudi stock exchange Tadawul on Dec. 12.

https://www.aa.com.tr/en/economy/saudi-aramco-posts-882-billion-net-income-in-2019/1767608

Gulf debt issues on hold after oil price war sell-off
BY REUTERS
DUBAI ECONOMY
MAR 15, 2020 4:10 PM GMT+3

A general view of Saudi Aramco's Abqaiq oil processing plant, Sept. 20, 2019. (AFP Photo)


With over $30 billion in Gulf bonds due in 2020, the oil-dependent region’s issuers will have to urgently reassess their funding plans, as low oil prices and huge volatility impact their ability to access debt markets.

Gulf bond sales have already screeched to a halt after investor panic over the coronavirus pandemic, aggravated by an oil price war between Saudi Arabia and Russia that last week sent oil prices to their lowest levels since 2016.

Regional bond yields have spiked and fund managers say the volatility looks likely to last for a while. “It’s horrible and not stopping any time soon,” a Dubai-based fixed income manager said.

Some debt sales have already been shelved, such as a dollar sukuk sale by Dubai Islamic Bank announced last month, and bankers and fund managers said a slate of issuers will delay planned fundraising exercises.

But this might be problematic for borrowers with upcoming debt maturities and little cash to allow them to repay them without raising new debt. Rising borrowing costs might complicate things further for issuers with weak credit ratings.





“Issuers based in Oman or Bahrain, plus some of those in Dubai, may face obstacles in refinancing their maturing debt or deficits,” S&P said in a report. Oman and Bahrain are rated ‘junk’ by all major credit rating agencies.

Sell-off

The yields of bonds by the Saudi government and oil giant Aramco due in 2049 rose by roughly one percentage point last week while Abu Dhabi - one of the best credits in the region - saw its 30-year bond yields rise to 3.4% from 2.8%.

The losses were sharper for less wealthy Oman and Bahrain, with yields on 30-year bonds rising about 3.7 percentage points and 2 percentage points, respectively.

As oil prices plunged, Moody’s and Fitch downgraded Oman further into junk territory - to ‘Ba2’ and ‘BB’ respectively - citing the continued erosion of the country’s fiscal and external balance sheets.

Doug Bitcon, head of credit strategies at Rasmala Investment Bank, said no borrower would issue bonds in the current conditions.

“At some point, you’ll need the governments to come back into the market to set a benchmark and say, ‘okay, this is where pricing is’ and everyone prices off that benchmark,” he said.

Bitcon said the situation was less critical for regional banks - which, according to Refinitiv, have more $20 billion in maturing bonds this year – as they are “flush with liquidity.”

Nevertheless, banks’ profitability is likely to take a hit because of both lower oil prices and the economic slowdown due to the coronavirus outbreak.

“A prolonged period of oil price volatility and low oil prices will be credit negative for the solvency and liquidity of banks operating in the Gulf Cooperation Council states,” Moody’s said.




https://www.dailysabah.com/business/economy/gulf-debt-issues-on-hold-after-oil-price-war-sell-off

 

[Glass]

Virus-hit Gulf has little room to boost revenue after oil price shock

Davide Barbuscia
5 MIN READ


DUBAI (Reuters) - The coronavirus outbreak and plunging crude prices are a double blow that leaves Gulf Arab governments with few options to manage fiscal stability while trying to shield their economies and defend currency pegs.


FILE PHOTO - An oil tanker is being loaded at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. Picture taken May 21, 2018. REUTERS/Ahmed Jadallah
Even the largest Arab economy, Saudi Arabia, which launched a war for market share with Russia following the March 6 collapse of an output deal between OPEC and its allies that has wiped 30% off oil prices, will face strains.

The last oil price rout in 2014 saw the region, which relies on energy exports, slash subsidies, introduce taxes to diversify revenue sources and try to shrink lavish cradle-to-grave welfare systems and bloated public sectors.

Now, a focus on stimulating economic activity and easing the impact on their populations of the spreading coronavirus makes it difficult for the six Gulf Cooperation Council (GCC) governments to hike taxes or cut subsidies.

Most can fall back on hefty financial reserves if oil prices do not recover. They could slash capital expenditure to manage budget deficits or buy time by raising more debt.

But “monetary reserves can’t sustain the current spending for too long” meaning “they may have to cut spending,” said a Saudi banker, speaking on condition of anonymity.

“It’s difficult times. People are starting to talk and beginning to prepare for what could come next,” he added.

Expectations of tighter liquidity have already pressured Gulf currencies, pegged for decades to the U.S. dollar.


DIFFERENCES
There are sharp differences between the six GCC countries.

Qatar has a fiscal surplus and its economy is dependent on liquefied natural gas exports, so less directly affected by oil prices, while the debt-burdened economies of small oil producers Oman and Bahrain are more vulnerable to price swings.

But “the overall GCC fiscal picture deteriorates sharply” with oil prices at $30 per barrel, Arqaam Capital said.

Crude prices of between $30 to $40 a barrel this year could cost Gulf producers tens of billions of dollars in revenues.

Saudi Arabia could see its 2020 deficit widen to 16.1% from a previous projection of 6.4% if oil prices average $40, according to Arqaam. At $30, the deficit would hit 22.1%, it said — roughly $170 billion, according to Reuters calculations.

Unlike its smaller neighbors, the world’s top oil exporter can partly offset the drop in prices by ramping up production. Nevertheless, sources told Reuters last week Riyadh has already asked government agencies to submit proposals for cuts of at least 20% to their budgets.

PAINFUL MEASURES
With government spending a key driver for economic growth in the region, cuts could even lead to recessions, some analysts said.

The central banks of Saudi Arabia, the United Arab Emirates and Qatar have offered a total $60 billion in stimulus to ease the impact of coronavirus, while governments have cut property transaction and utilities fees to help the private sector.


“Historically ... GCC countries have tended to initially cut back on capital spending, more so than current expenditure,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

“However, sustained downwards pressure on the oil price would also require a meaningful retrenchment in current spending.”

Fiscal discipline slipped in recent years as oil prices recovered and governments prioritized economic growth. Some countries, such as Oman, have delayed introducing taxes or deeper subsidy cuts to avoid political unrest.

“The double-whammy of coronavirus and low oil could be a wake-up call not only for governments but also for companies that rely too much on government spending to boost economic activity,” said Tarek Fadlallah at Nomura Asset Management Middle East.

MORE DEBT?
The UAE, Kuwait and Qatar, which have deeper fiscal buffers than Saudi Arabia, can afford oil price weakness for longer but “are unlikely to want to see sustained large deficits,” said ADCB’s Malik.

To avoid painful measures, governments could increase borrowing or raise cash by selling assets.

Since 2014, Saudi Arabia has raised over $100 billion in foreign debt, taking advantage of low global interest rates.

With debt of only around 20% of GDP, it can continue to borrow to finance its deficit, but may opt instead to utilize reserves, which stood at around 469 billion riyals ($124.96 billion) in 2019, equivalent to 17% of GDP.

“In practice the government was planning to borrow around 3% of GDP this year (with a budgeted deficit of 6.4% of GDP), and it could probably borrow more from the debt capital markets if it needed,” said Krisjanis Krustins, a director in the Middle East and Africa team at Fitch Ratings.


Borrowing costs have risen, however, with Gulf bonds heavily sold after oil prices dropped. Oman and Bahrain are already rated as “junk” by all major rating agencies.

And the cost of insuring against a potential Saudi debt default almost tripled last week, to its highest since 2016.



https://www.reuters.com/article/us-...t-revenue-after-oil-price-shock-idUSKBN2140QL

 

[xenon54 out]

Centre of the world is shifting to Indo-Pacific region anyway. Middle East would be completely irrelevant in 2 decades,

Middle east lied/lies pretty much in the most important trade route of the world, its the cradle of human civilization, it was and never will be completely irrelevant.

 

[Uguduwa]

Middle east lied/lies pretty much in the most important trade route of the world, its the cradle of human civilization, it was and never will be completely irrelevant.

We will see bud. It will be like a forgotten mad max style wasteland. Then we will build a 1km tall wall to separate Middle East from the rest of the world. Even in the sea we will build this wall. If someone commits a serious crime in another part of the world, we can airdrop this guy into this newly designated wasteland instead of wasting money on prisons. Then we will have an annual hunger games where we drop a bunch of teams in one side and ask them come out from the other side.

 

[xenon54 out]

We will see bud. It will be like a forgotten mad max style wasteland. Then we will build a 1km tall wall to separate Middle East from the rest of the world. Even in the sea we will build this wall. If someone commits a serious crime in another part of the world, we can airdrop this guy into this newly designated wasteland instead of wasting money on prisons. Then we will have an annual hunger games where we drop a bunch of teams in one side and ask them come out from the other side.

Its time for your meds. pal.