Latest news with #EdwardBell
The National
24-04-2025
- Business
- The National
Why are oil prices so volatile and where are they heading?
Oil prices have been extremely volatile in recent weeks and could drop further if Opec+ decides to boost supply when it meets early next month, analysts say. Increased trade war concerns led by US tariffs and the possibility of a nuclear deal with Iran have led to fears about reduced demand and a supply glut. Prices fluctuated on Thursday after falling nearly 2 per cent in the previous session as investors weighed the prospect of an Opec+ supply boost against the fallout from trade tensions between the US and China, and Iran talks. Brent, the benchmark for two thirds of the world's oil, was trading 0.51 per cent higher at $66.46 a barrel at 10.54am UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 0.59 per cent at $62.64 per barrel. 'Oil prices weakened overnight as discord bubbled to the surface within Opec+,' said Edward Bell, acting group head of research and chief economist at Emirates NBD. This came after Kazakhstan's Energy Minister Erlan Akkenzhenov said the country couldn't make substantial cuts to its output and would 'prioritise national interests', a Reuters report said. Other Opec+ members are also reportedly considering whether to accelerate output increases in June, it said. Oil's quiet ascent since its tariff-induced trough on April 9 'has been stymied' by renewed concerns that Kazakhstan has defied Opec+ by prioritising national production targets over group quota levels, Japanese bank MUFG said on Thursday. 'This growing internal discord within Opec+ comes as oil bulls have been relishing on the recent risk-on mood reflecting easing Fed independence apprehensions, softer US rhetoric on China tariffs and a clearing of short positions in the midst of the first quarter's earnings season,' it said. Earlier this month, the producers group decided to add 411,000 barrels per day to the market in May, more than the 138,000 bpd initially planned, on expectations of a rise in demand. The group will hold a meeting on May 5 to decide its output plans for June. 'Brent's upside should remain capped as long as global trade tensions keep feeding demand-side fears,' Han Tan, chief market analyst at Exinity Group, told The National. 'Oil benchmarks could also sink to fresh four-year lows below $60 per barrel if Opec+ proceeds with yet another bumper-sized production hike in June.' The consistent uncertainty surrounding US-China trade tensions over tariffs has been a key driver for oil price volatility. On Wednesday, The Wall Street Journal reported that the White House was considering slashing steep tariffs on Chinese imports – in some cases by more than half – in a bid to de-escalate tensions with Beijing. US President Donald Trump is also reportedly considering tariff exemptions on car part imports from China, which could support oil prices. However, the outlook remains bearish for now, analysts said. 'Oil prices face downward pressure as US talks with Iran, US tariffs, rising Opec+ supply projections and lowered oil demand estimates from the International Energy Agency and Opec create the perfect storm for low investor confidence,' Rystad Energy said on Wednesday. Opec this month slashed its oil demand forecast for 2025 to 1.3 million barrels per day, mainly due to tariff uncertainty. The prolonged US-China trade war could cut China's oil demand growth in half this year to 90,000 barrels per day from 180,000 bpd, according to Rystad. China is the world's second-largest economy and a leading crude importer. The progress in US and Iran nuclear talks are also affecting oil markets. Iran this week said a nuclear deal was possible 'in the short term' following two rounds of indirect negotiations between the US and Tehran. If a deal is reached between the two countries, it could lead to a boost in supply from Iran on possible sanctions relief. Meanwhile, the US Department of the Interior on Wednesday said it will issue emergency permits to accelerate the development of domestic energy resources including crude oil and critical minerals. 'We are cutting through unnecessary delays to fast-track the development of American energy and critical minerals – resources that are essential to our economy, our military readiness and our global competitiveness,' said Secretary of the Interior Doug Burgum. 'By reducing a multi-year permitting process down to just 28 days, the department will lead with urgency, resolve and a clear focus on strengthening the nation's energy independence.' Prolonged low oil prices could also hit investment in the energy sector, according to a report from Wood Mackenzie. 'If operators and the supply chain anticipate a period of prolonged low prices, it would send shockwaves through the industry," said Fraser McKay, the company's head of upstream analysis. 'This near-term uncertainty becomes an investment killer, precisely when the focus should be on potential long-term demand growth.'
Zawya
17-04-2025
- Business
- Zawya
With oil around $66, what are Saudi Arabia's options?
With global oil prices down to a four-year low last week, Saudi Arabia--which depends heavily on its oil revenues to balance its budget and to finance its massive economic transformation plan--could be forced to tighten fiscal policy further or seek recourse in the debt market; alternatively, it may even look to raise new taxes. The prospect of a US–China trade war and its gloomy consequences on the global economy, in addition to the unexpected output increase by OPEC+ members in the first weeks of April, have driven oil prices down. Additionally, the IEA has lowered oil demand growth forecasts substantially for 2025 and 2026. Brent, the key benchmark for Middle East producers, and the US West Texas Intermediate crude have both lost around $10 since the beginning of the month. Brent has since recovered slightly and is trading around $66 per barrel on Thursday. Goldman Sachs now expects Brent to average $63 for the remainder of 2025 while BMI has forecast the benchmark at $68. Also weighing on the government's finances is state-backed energy producer Saudi Arabian Oil Company's guidance for lower dividend payment of about $85 billion in 2025 compared with $124 billion last year. Saudi Arabia needs oil at over $90 per barrel to balance its books, according to the IMF. While the government already runs both current and fiscal account deficits, Fitch Ratings expects the fiscal deficit to widen to 4.1% of GDP in 2025 based on Brent at an average $70 and the lower dividend from Aramco. All else being equal, 'a $10 per barrel drop in the oil price would add around 3 percentage points to the budget deficit', said Paul Gamble, Senior Director, Sovereigns, at Fitch Ratings. Edward Bell, Acting Group Head of Research and Chief Economist at Dubai-based Emirates NBD, said: 'Prior to the sell-off that started in April we had already been projecting a fiscal deficit for Saudi Arabia in 2025 and with oil prices set to hold at lower levels for the rest of this year we now expect that the fiscal deficit will widen.' Non-oil growth Much of the growth in the kingdom was expected to come from the non-oil sector this year, which rose 4.3% in 2024 and outperformed overall GDP growth of 1.3%. While Saudi finance minister Mohammed Al Jadaan has reiterated that the kingdom's focus is now on raising non-oil GDP, any fiscal policy measure to curb overall spending could rein back growth in the non-oil sector too. 'Non-oil growth has remained robust so far this year and there still looks to be a solid pipeline of new orders in the domestic market for 2025. Government spending may slow later on in the year and into 2026, edging the overall economy's pace of growth lower,' said Bell. The Saudi sovereign wealth fund, the Public Investment Fund, which is spearheading the country's economic transformation programme, is reported to have scaled back or recalibrated some of the loftier mega projects. Companies that have been contracted to build NEOM, the Red Sea development that is the keystone of Crown Prince Mohammed bin Salman's Vision 2030, are said to have reduced budgets and laid off personnel as part of the recalibration. However, arenas and stadia that are expected to host prestigious international sports events like the FIFA World Cup and Asian Winter Games have been moved to the top of the queue. 'Many projects that Saudi Arabia has committed to have externally imposed timelines, such as the Asia Winter Games in 2029; Expo 2030, to be held in Riyadh; or the [FIFA] World Cup, to be held in 2034. Projects related to these events will include logistics, event venues, hospitality and infrastructure, and we would expect that spending to be maintained. Other projects may face some lengthening of timelines or scaling back of the scale of initial delivery,' said Bell. Debt market Saudi Arabia, which has announced plans to raise $37 billion this year across domestic and global markets to finance the budget shortfall, might step up borrowing under the low oil price scenario. It helps that its sovereign rating was upgraded to Aa3 from A1 by Moody's Investors Services last November based on the positive momentum in the economic diversification programme. The upgrade, however, came with a caveat. 'A large decline in oil prices or production could intensify the trade-off between progress in economic diversification and fiscal prudence, potentially leading to a weaker sovereign balance sheet,' Moody's noted. Emirates NBD's Bell said Saudi Arabia has strong access to financial markets and 'we would expect them to continue to raise both local and foreign currency debt to help maintain spending commitments. Overall public debt to GDP levels are relatively low compared with economies of similar size, with the Ministry of Finance estimating debt at about 30% of GDP in 2024'. According to Hekmat El Matbouly, Senior Economist at Egyptian investment bank CI Capital, the controlled public debt will enable continued borrowing, rising to 35% of GDP in 2025 versus 30% last year. 'A sustained weakening USD poses an upside to borrowing activities (by easing pressure on the peg from higher for longer borrowing costs).' According to LSEG data, the kingdom has raised $14.1 billion from two eurobond issuances year-to-date. New taxes James Swanston of the London-based consultancy Capital Economics thinks 'cuts to capital spending will be the first port of call' for the Saudis. 'But there may also be fresh efforts to raise non-oil revenues and, possibly, to push through new taxes, such as property or personal income taxes,' he said in a recent note. Gamble agreed that new taxes are a possibility. 'Saudi Arabia has broadened its range of revenue raising tools in recent years, but introducing new taxes anywhere takes preparation. Another option for the authorities is to change the rates of existing taxes,' he added. With no easy solution at hand, Saudi Arabia must navigate a complex economic landscape, balancing immediate fiscal needs with long-term strategic goals. The kingdom's ability to adapt to these challenges will be crucial in maintaining economic stability and achieving its Vision 2030 objectives. (Reporting by Brinda Darasha; editing by Seban Scaria)
Khaleej Times
11-04-2025
- Business
- Khaleej Times
Oil markets face downside volatility on tariffs, increased supply
A double whammy of demand threats from global tariff war and increased supply has opened up the way for considerable downside volatility in oil markets, analysts say. 'Premiums for downside protection have spiked to their widest levels since the pandemic. Time spreads has also shifted considerably. The 1-6 month spread in Brent futures has fallen from more than a $3 per barrel backwardation as the start of April to barely more than $1 per barrel now,' Edward Bell, acting group head of research and chief economist, Emirates NBD, wrote in a note. Emirates NBD has downgraded its Brent oil price forecast to $68 per barrel, down from $73 per barrel previously while for WTI it now expects prices at an average of $65 per barrel, down from $71 per barrel previously. Both the WTI and Brent curves are still someways from moving into contango but if demand fades substantially this year as a result of the trade dispute then curves are likely to fall out of the backwardation they have held for several years. 'Prices have recovered and downside premiums have narrowed following the announcement of a 90-day pause on widespread tariffs but the risk of further downside moves is high,' Bell said. Oil markets are in flux in the wake of US President Donald Trump's whipsaw announcements on tariffs. Prices for Brent and WTI futures have tumbled since the start of April thanks to anxiety that a damaging global trade war will spark a major global slowdown and vastly reduce oil demand growth. Brent prices briefly moved below $60 per barrel on April 9, their lowest level since Q1 2021, in response to President Trump announcing more than 100% tariffs on imports from China. Prices have since recovered as the US has delayed tariffs on dozens of countries for 90 days though it has maintained high levies on Chinese goods. At the same time that the US unveiled a substantial shift in its trading posture relative to the rest of the world, Opec+ announced on April 3 that it would bring forward some of its planned production increases. In a statement a day after the initial US reciprocal tariff announcement, those Opec+ countries that are contributing voluntary additional cuts said they will deliver three months' worth of production increases in May to enforce discipline with production targets or in their words providing over-producers 'an opportunity…to accelerate their compensation.' The Several Opec+ national oil companies have also cut official selling prices in the past week, 'which may be an effort to preserve market share and could be an early warning of a price war', Bell said. ' market share battle is not a core assumption for oil markets this year but a disorderly breakdown of Opec+ is a real risk that could open much more downside for prices, he added. 'Our forecast for oil prices was that they would slide in 2025 on average relative to 2024 as we expected modest demand growth to fail to absorb supply additions from Opec+ as well as producers like the US, Canada and Guyana. There are more meaningful downside risks to demand this year as slowdown or recession fears build and we are now expect a steeper trajectory for oil prices on the way down.' Bell said. The direct effect of tariffs on many of the GCC economies is relatively limited as at 10 per cent the rate is lower compared with the rate threatened and now paused for other US trading partners and overall exposure to the US in terms of export flows is largely dominated by oil and natural gas which are currently exempt from tariffs. 'However, our expectation of a lower oil price pathway this year means that fiscal and external positions across the GCC will be weaker,' Bell said.
The National
07-04-2025
- Business
- The National
Middle East markets tumble after sharp fall in Asia amid Trump tariff chaos
The global stock market rout deepened on Monday with equities across Middle East markets plummeting after sharp falls in Asia, caused by US President Donald Trump's tariff chaos and slumping oil prices. Equity markets in the Middle East extended losses after suffering their worst rout in five years on Sunday, amid fears of a global trade war and a sharp slowdown in the global economy as US and Beijing hunker down for a tariff showdown. Saudi Arabia's benchmark Tadawul Index fell 2.7 per cent at 11am UAE time, extending an almost 7 per cent fall a day earlier. In the UAE, the Dubai Financial Market General Index slumped by more than 6 per cent, while the Abu Dhabi Securities General Index was down 4.48 per cent. Bourses in Kuwait and Bahrain were also trading down nearly 1 per cent each, while the Qatar Stock Exchange was down almost 2 per cent. Out of 253 companies listed on the main Tadawul exchange, the biggest bourse by market capitalisation in the Arab world, 250 fell while only one advanced, according to exchange data. "Market response to the tariff announcement has been enormously negative as the individual country levels and baseline of 10 per cent were higher than seemingly many market participants had been expecting," said Edward Bell, acting group head of research and chief economist at Emirates NBD. Energy stocks in particular took a beating, while shares of listed property companies as well as banks also tumbled. Saudi Aramco, the largest oil exporting company in the world, stemmed losses after falling by 4.75 per cent on Sunday and was trading 0.4 per cent lower on Monday. However, Adnoc Gas in Abu Dhabi dropped by 9 per cent, while Aldar Properties also fell by almost 8 per cent. Shares of Abu Dhabi Commercial Bank and First Abu Dhabi Bank slumped by 8.4 per cent and 5.2 per cent, respectively. Analysts say volatility would be the new normal in GCC markets, in line with the global risk market moment. "In the case of Dubai stocks specifically, the overall volatility could be much higher than its peers because they were the consistent top performers over the last two-year period," Vijay Valecha, chief investment officer at Century Financial, said. "The initial reaction across the GCC indices suggests that regional risk assets are likely to stay and mimic the movement of the developed market indices. For GCC indices, another headwind factor is the ongoing downfall in oil prices." In Dubai, Emaar Properties, the biggest-listed developer in the emirate, fell by more than 9 per cent while Dubai Islamic Bank slumped by 7.6 per cent. With oil trading below $70 per barrel level, "we are certainly sellers of petrochemicals and commodity stocks, having already started the year with an 'underweight' on both sectors", EFG Hermes analyst Mohammed Abu Basha wrote in a note. However, "raising our heads beyond the short-term volatility/panic, we believe such a macro setting is relatively benign for emerging markets, particularly the Mena region's oil-exporting economies" as they offer investors: "fundamental strong growth stories, driven by structural transformation" as well as strong balance sheets, good access to capital markets and pegged currencies. "We favour fundamentally domestic-demand-driven sectors, led by property, financials, utilities and logistics," Mr Abu Basha said. Asian shares also nosedived on Monday after Wall Street's meltdown on Friday over after Mr Trump revealed his tariff agenda and Beijing's retaliation. Tokyo's Nikkei 225 index closed 7.83 per cent lower on Monday. South Korea's Kospi lost 5.57 per cent, while Australia's S&P/ASX 200 tumbled 4.23 per cent. Hong Kong's Hang Seng index dropped by 13.55 per cent, while China's Shanghai Composite Index fell 7.34 per cent. Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the fall in markets reflects fears that a global trade war could lead to recession, alongside the fall in the oil price. "China's counter measures further add to the concerns, though we believe that it could reflect a negotiation tactic,' Ms Malik said. 'We expect significant volatility in the coming weeks, given the time for countries to negotiate new trade deals with the US.' Mr Trump unveiled his most wide-ranging tariff policies last week, targeting all trading partners of the US with a minimum 10 per cent tariff and much higher rates for countries that the US claims to place high tariffs on US imports. Among the major trading partners hit with new higher tariff rates include China at 34 per cent, the EU at 20 per cent, India at 26 per cent, Japan at 24 per cent and South Korea at 25 per cent. Many smaller, emerging economies have been hit with much higher tariff rates on the US government's claim that they charge near 100 per cent tariffs on imports of US goods. China has already retaliated with its own 34 per cent tariff on imports from the US, while other trading partners are considering their responses to the US's major disruption to global trade. Beijing plans to impose tariffs starting April 10. The baseline 10 per cent rate took effect on April 5, while the higher individual levels will be implemented on April 9. The six-nation GCC bloc – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – along with Middle East and North Africa nations Egypt, Iran, Lebanon, Morocco and Yemen, all received the minimum 10 per cent tariff. Syria was the hardest hit at 41 per ent, followed by Iraq (39 per cent), Libya (31 per cent), Algeria (30 per cent), Tunisia (28 per cent) and Jordan (20 per cent). US futures also signalled further weakness. The futures for the S&P 500 lost 3.47 per cent while that for the Dow Jones Industrial Average dropped 3.05 per cent. The futures for Nasdaq lost 3.76 per cent. The US dollar weakened against the yen and euro, as the market turmoil continues. The Dow Jones index dropped 8 per cent last week, the US dollar index fell 1 per cent and 10-year US Treasury yields fell 25 basis points as markets price in a greater chance of a US recession. Markets have increased their rate cut expectations to four 25bps cuts by the end of the year even amid the inflationary risks the tariffs pose.
