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.
The Real Reason The Saudis Are Desperate To Restart This Giant Oilfield
By
Simon Watkins - Feb 12, 2020, 6:00 PM CST
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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
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
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
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
Get fucked
The Decline and Fall of the Gulf's Oil Empire Is Looming
Bloomberg News
David Fickling
March 21, 2020
9:01 PM EDT
Filed under
By David Fickling
(Bloomberg Opinion) — For much of the world, oil wealth is a curse. Endowed with ample reserves of hydrocarbons, the likes of Nigeria, Angola, Kazakhstan, Mexico and Venezuela frittered the benefits away.
Only in the Persian Gulf has oil been a nation-building blessing. The discoveries of petroleum in the mid-20th century turned an anarchic, desperately poor region into one of the most affluent places on the planet. Qatar, Kuwait and the United Arab Emirates are all richer than Switzerland. Even Saudi Arabia, Bahrain, and Oman are on a par with Japan or the U.K.
The transformation has been so complete that it’s easy to believe the wealth derives from some eternal law of nature. That’s not true, though. The current price war in oil markets will only hasten the moment when the unsustainable nature of Gulf economies faces a brutal reckoning.
Right now, all six monarchies are joining with Russia in opening the taps to flood the crude market and flush out higher-cost producers. While the planned 2.5 million barrels per day increase from Saudi Arabia is by far the biggest wave in this tsunami, its neighbors aren’t holding back. The U.A.E. will daily add about 200,000 barrels or more, according to consultancy Rystad Energy, while Kuwait will lift output by 110,000 barrels. Russia will raise daily production by 200,000 barrels.
That splurge of supply isn’t due to geopolitics. Instead, it’s a mathematical result of the decline in the oil price. With fewer dollars coming in for each barrel of crude, Gulf monarchies need to pump much more to maintain something resembling current revenues.
In principle, there’s ample firepower to fight this war. It costs about as much to pump a barrel of oil from a Gulf oilfield as it does to buy a bottle of fancy mineral water. Even in an extreme scenario where crude prices fall as low as $10 a barrel and almost the entire global oil industry loses money, Gulf producers would remain in the black. The problem, as we wrote last week, comes for their economies, which need a far higher price to balance their budgets and support dollar-linked currencies.
The region’s central banks and sovereign wealth funds have assembled vast sums to see them through such a crisis, as well as the longer-term risk of declining demand. Faced with lower prices, however, these buffers could disintegrate quickly.
Take the net financial assets held by Saudi Arabia’s government — central bank reserves, plus sovereign wealth fund assets, minus government debt. These declined to just 0.1% of gross domestic product from 50% over the four years through 2018 as crude plunged from levels of around $100 a barrel at the end of 2014. The kingdom is now likely to be a net debtor for the foreseeable future, even if prices rise back above $80.
Over the same four years, net financial assets held by the six Gulf monarchies fell by around half a trillion dollars, to around $2 trillion, according to a study last month by the International Monetary Fund. Even if peak oil demand doesn’t hit until 2040, that remaining sum could be depleted by 2034, according to the Fund. Oil at $20 a barrel would run it down even faster, emptying the coffers as soon as 2027.
With oil prices in the range of $50 to $55 a barrel, Saudi Arabia’s international reserves would fall to about five months of import coverage as soon as 2024, according to an IMF report last year. That should be a deeply alarming prospect, bringing the kingdom within months of an unthinkable balance-of-payments crisis and the abandonment of the dollar peg, which has underpinned the global oil trade for a generation. Yet the prices we’re now seeing make this look almost like an optimistic scenario.
There’s still time to avert this future, but it will involve major changes to our ideas about the Gulf and its the role in the global economy.
Governments in the region enacted vicious budget cuts in the wake of the 2014 price decline, removing subsidies and adding sales taxes in a way that’s fraying the edges of their sumptuous welfare states. If they fall to an even-lower ledge, there will be pressure to add further taxes and shrink bloated civil services. Neither will be popular with citizens who have never been allowed a democratic vote. Lavish defense and security spending, which accounts for nearly a third of Saudi Arabia’s budget, may have to shrink.
The era when the Gulf nations and their sovereign wealth funds were magic cash machines prepared to pay top dollar for assets on every continent may be coming to an end. They may even have to turn into net sellers. That will affect institutions from the U.S. Treasury market, where Saudi Arabia holds about $183 billion of securities; to Softbank Group Corp., which may find Riyadh a less generous partner for funding Masayoshi Son’s expansive visions.
The monarchies have surfed a remarkable tide of wealth over the past half-century or so, but every wave eventually crashes. Future generations will never again see the wealth that current subjects enjoy. Perhaps the Gulf wasn’t spared from oil’s curse, after all. That moment was only deferred.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.
©2020 Bloomberg L.P.
https://business.financialpost.com/...e-and-fall-of-the-gulfs-oil-empire-is-looming
Oil price crash piles pressure on coronavirus-hit Saudi economy
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Published March 21, 2020, 10:00 PM
By Anuj Chopra
RIYADH (AFP) – From empty hotels to shuttered beauty salons, oil-dependent Saudi Arabia is bracing for a coronavirus-led economic slump on top of possible austerity measures as crude prices go into free fall.
Huge losses are expected after the Arab world’s biggest economy shut down cinemas, malls and restaurants, halted flights, suspended the year-round umrah pilgrimage and locked down eastern Qatif region – home to around 500,000 – in a bid to contain the deadly virus.
The top crude exporter also faces plummeting oil prices, which slipped below $30 a barrel this week for the first time in four years, on the back of sagging demand and a price war with Russia.
The shock of this liquidity sapping cocktail of events has necessitated austerity measures which are likely to imperil grandiose diversification projects.
Adding to the chain of events are the recent arrests of King Salman’s brother and nephew, which triggered speculation of political instability amid the government’s public silence on the royal purge.
“It’s crisis time,” said a Saudi government employee, explaining why he had begun converting part of his salary into US dollars and gold coins.
“Everything is unpredictable and we should be ready for the worst.”
The central bank has shrugged off fears that plunging oil prices were straining the kingdom’s currency, pegged for decades to the US dollar.
A jeweller in Riyadh told AFP he had fielded a number of enquiries to convert “substantial amounts of cash” into gold bars and coins.
Spending cuts
Many government workers fear cuts to state allowances are coming despite rising living costs.
Some Saudis also worry that recruitment in the public and private sectors will freeze, just as unemployment was already high.
Meanwhile, Saudi students are worried that government scholarships for overseas education will take a hit.
The finance ministry has instructed government bodies to submit proposals to slash this year’s spending by 20 to 30 percent, the economic consultancy Nasser Saidi and Associates said in a research note.
“This will likely take the shape of postponed projects and delays in awarding contracts” among other economizing measures, the note said.
The kingdom is now preparing budget scenarios in which crude prices could drop as low as $12-$20 per barrel, according to the Energy Intelligence Group.
“Public confidence depends on government spending and oil sentiment – both are down,” said a consultant advising a Saudi ministry on a major project.
“We don’t know if we will have our jobs tomorrow.”
The once free-spending OPEC kingpin has instructed Saudi ministries that they need to account for “every penny” they spend, the consultant added.
Saudi authorities did not respond to requests for comment.
Several Riyadh hotels – many of them empty amid falling tourist numbers – have been forced to send their staff on unpaid leave.
But providing some support, the health ministry has booked multiple Riyadh hotels to quarantine people after the coronavirus scare, according to several staff and guests who were forced to empty the properties at short notice.
‘Survival of fittest’
The oil crash follows the crude exporter’s decision to hike production from April and offer the biggest price cuts in two decades, in retaliation for Russia’s refusal to tighten supply as the virus saps demand.
https://business.mb.com.ph/2020/03/...es-pressure-on-coronavirus-hit-saudi-economy/
Gulf stock markets reel as COVID-19 cases surge
BY DAILY SABAH
ISTANBUL
MID-EAST
MAR 22, 2020 6:23 PM GMT+3
AFP Photo
Stock markets in the Gulf experienced further losses as countries across the Middle East implemented new precautions such as restrictions on the movement of people and shutting public places amid the new coronavirus outbreak.
Markets in Dubai and Abu Dhabi saw losses on Sunday. The United Arab Emirates’ main equity index has fallen by 30% in March. Emirates NBD, the largest lender in Dubai, has lost more than 40% of its value this month, while First Abu Dhabi Bank, the largest lender in the UAE, has plunged by 37%, according to the Bloomberg data.
The worst-hit Middle Eastern country, Iran, alongside Saudi Arabia, announced new cases of COVID-19 on Sunday. The number of deaths in Iran reached 1,685, with the total number of infections at 21,638, while Turkey and Israel neared 1,000 cases.
Israel implemented new rules on Sunday prohibiting most Israelis from leaving their homes for the next seven days.
Saudi Arabia has recorded 119 new coronavirus cases, taking the country's total tally to 511.
Qatar restricted all forms of public gatherings and made a statement saying that individuals who violate these restrictions would be arrested.
The UAE also implemented precautions such as shutting beaches, parks and pools, and imposing new restrictions on restaurants.
The aviation industry in the Middle East is also being battered by the new coronavirus outbreak. Emirates airline announced the suspension of all passenger flights from March 25, while Abu Dhabi’s Etihad Airways also halted the majority of its flights.
Turkey's death toll due to COVID-19 rose to 21 Saturday, while the number of confirmed cases has surged since the first case was announced last week, reaching 947.
Turkey has taken several measures to stem the virus such as temporarily closing schools and universities, halting events and public activities, postponing foreign visits, and barring spectators from sports events.
Interior Ministry on Monday ordered all cafes, gyms, theaters, cinemas, performance centers, concert halls, wedding halls, music halls, beer halls, taverns, hookah lounges, internet cafes, all types of game centers, amusement parks, pools, Turkish baths, saunas and spas to be closed beginning Tuesday.
https://www.dailysabah.com/world/mid-east/gulf-stock-markets-reel-as-covid-19-cases-surge
