The oil price rose on Thursday, heading for its largest weekly increase in a month, as the market prepared for potential disruption to crude flows from major exporter Iran in the face of US sanctions.
The US plans to impose new sanctions against Iran, which produces about 4 percent of global oil supplies, after abandoning an agreement reached in late 2015 that curbed Tehran’s nuclear activities in exchange for removal of US and European sanctions.
Brent crude futures rose 27 cents to $77.48 a barrel by midday in London, having gained 3.5 percent so far this week.
US West Texas Intermediate crude futures were up 45 cents at $71.59.
The oil price is at its highest since late 2014 and on track for its fourth consecutive quarterly gain, the longest such stretch for more than 10 years.
Analysts had little hope that opposition to the US action would prevent sanctions from going ahead.
“Europe and China will not fight against the US sanctions. They will grumble and accept it. There is no one who will realistically choose Iran over the US,” said energy consultancy FGE.
“We believe the previous 1 million bpd limit for exports (imposed during previous sanctions) will be reimposed. As before, it may take several rounds of reductions to reach target levels,” FGE’s founder and chairman Fereidun Fesharaki wrote in a note.
Even without disruption to Iran’s crude flows, the balance between supply and demand in the oil market has been tightening steadily, especially in Asia, with top exporter Saudi Arabia and No.1 producer Russia having led efforts since 2017 to cap output to prop up prices.
Saudi Arabia is ready to offset any supply shortage but it will not act alone to fill the gap, an OPEC source familiar with the kingdom’s oil thinking said on Wednesday.
“What the full impact on Iranian flows will be is still difficult to estimate,” Petromatrix strategist Olivier Jakob said.
One factor that could partially mitigate any shortfall from Iran is soaring US oil output.
The EIA on Tuesday raised its forecast for US output in its monthly report to 12 million bpd late next year. The agency has raised its forecasts every month since last August.
This would make the US the world’s largest producer, ahead of both Russia and Saudi Arabia.
Oil heads for biggest weekly rise in a month as Iran sanctions loom
Oil heads for biggest weekly rise in a month as Iran sanctions loom
- Brent rises 27 cents after 3.5 percent gain this week
- Oil at highest since late 2014
Saudi-Chinese financial ties to strengthen as top officials meet in Beijing
RIYADH: Saudi and Chinese top officials are holding joint meetings in Beijing focused on fostering international economic growth.
The sessions, which are slated to take place from May 20 - 21 in Beijing, include the Kingdom’s Minister of Finance Mohammed Al-Jadaan, the newly appointed Vice Minister of Finance Abdulmuhsen Al-Khalaf, along with officials from the Ministry of Finance, the National Center for Privatization, and the Saudi Central Bank.
Officials from the Capital Market Authority, Zakat, Tax and Customs Authority as well as the National Development Fund, are also part of the delegation, as well as representatives from the Saudi Fund for Development, and the National Infrastructure Fund.
In a post on his X account, Al-Jadaan said: “Today (May 20), as part of my visit to China, I met with the Chinese Minister of Finance, Lan Fo’an. We discussed ways to enhance the finance, trade and investment cooperation between Saudi Arabia and China to advance prosperity and growth for the global economy.”
The Saudi finance minister and his Beijing counterpart co-chaired the third meeting of the Financial Sub-Committee for the High-level Chinese-Saudi Joint Committee, where Al-Jadaan emphasized that China is a key partner in the Kingdom’s transformation under Vision 2030, according to a statement by the Saudi Finance Ministry.
The release added that the minister would participate in a roundtable discussion organized by the NCP in cooperation with the Industrial and Commercial Bank of China.
Al-Jadaan will also speak with various Chinese ministers, officials, and investors, focusing on recent economic and financial developments, shared interests, and investment prospects in Saudi Arabia, aligning with the Kingdom’s Vision 2030 goals.
Meanwhile, Al-Khalaf and the Chinese Vice Minister of Finance, Liao Min, will co-chair a roundtable meeting hosted by the Chinese Ministry of Finance and organized by the China Development Bank and the China Investment Corp.
Al-Jadaan’s visit to the Asian powerhouse comes after he used a panel discussion at the Qatar Economic Forum on May 14 to urge financial planners to optimize their strategies to curb “economic leakage” and prevent resources or funds from being wasted.
Calling for the adoption of prudent fiscal policies, the minister said at the event that spending during a time of global inflation results in increased project costs, which he believes further fuels inflation and “overheats” the economy.
Diplomatic and economic ties between Saudi Arabia and China have been strengthening in recent years, and in November the Kingdom’s central bank, also known as SAMA, and the People’s Bank of China signed a local currency swap agreement worth $6.93 billion.
The agreement will last three years, but China’s central bank said at the time it can be extended after two years by mutual agreement.
Saudi Arabia’s first quantum computer on its way after Aramco, Pascal deal
RIYADH: Saudi Arabia's first quantum computer is set to be installed after energy giant Aracmo signed an agreement with computing firm Pasqal.
Under the deal, the French company will install, maintain and operate a 200-qubit device, scheduled for deployment in the second half of next year, according to a press statement.
A quantum computer uses qubits to run multidimensional algorithms, and these machines are capable of solving complex problems faster than traditional computers.
Ahmad Al-Khowaiter, executive vice president of technology and innovation at Aramco, said the deal with Pasqal is expected to bring high-performance information processing to Saudi Arabia.
“In a rapidly evolving digital landscape, we believe it is crucial to seize opportunities presented by new, impactful technologies and we aim to pioneer the use of quantum computing in the energy sector,” said Al-Khowaiter.
He added: “Our agreement with Pasqal allows us to harness the expertise of a leading player in this field as we continue to build state-of-the-art solutions into our business. It is also further evidence of our contribution to the growth of the digital economy in Saudi Arabia.”
The quantum computer that will be installed in Saudi Arabia will initially use an approach called “analog mode.”
Within the following year, the system will be upgraded to a more advanced hybrid “analog-digital mode,” which is more powerful and able to resolve more complex tasks, the statement added.
The agreement follows a memorandum of understanding signed between Aramco and Pasqal in 2022 to collaborate on quantum computing capabilities and their applications in the energy sector.
Georges-Olivier Reymond, CEO and co-founder of Pasqal, noted that the agreement would see the commercial adoption of quantum computers in the Kingdom.
“This isn’t just any quantum computer; it will be the most powerful tool deployed for industrial usages, unlocking a new era of innovation for businesses and society,” said Reymond.
Earlier this month, Aramco also signed three MoUs with US firms, including Aeroseal, Spiritus, and Rondo, to accelerate the development of potential lower-carbon solutions.
In May, Aramco also announced its financial results for the first three months of this year.
The company revealed that its net profit reached $27.27 billion in the first quarter, representing a rise of 2.04 percent compared to the last quarter of 2023.
Closing Bell: Saudi main index edges down to close at 12,198
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Sunday losing 0.06 points to close at 12,198.38.
The total trading turnover of the benchmark index was SR4.42 billion ($1.18 billion) as 60 stocks advanced, while 160 retreated.
On the other hand, Nomu, the parallel market, rose 577.98 points, or 2.18 percent, to close at 27,062.01. This comes as 28 stocks advanced while as many as 33 retreated.
Meanwhile, the MSCI Tadawul Index slipped 1.45 points, or 0.09 percent, to close at 1,528.60.
The best-performing stock of the day was Lazurde Co. for Jewelry. The company’s share price surged 10.00 percent to SR16.06.
Other top performers included Middle East Specialized Cables Co. as well as Aldrees Petroleum and Transport Services Co.
The worst performer was Zahrat Al Waha for Trading Co., whose share price dropped by 10 percent to SR45.45.
Makkah Construction and Development Co. as well as Jazan Development and Investment Co also performed poorly.
On the announcements front, Kingdom Holding Co. announced its interim financial results for the period ending March 31.
According to a Tadawul statement, the company’s net profit hit SR196 million in the first quarter of 2024, reflecting a 14.6 percent surge when compared to the similar quarter last year.
The increase is mainly due to a rise in the sale of investment property, a surge in the share of results from equity-accounted investees, and a decrease in financial charges.
It is also linked to an increase in finance income as well as a drop in withholding and income tax.
Moreover, Dar Alarkan Real Estate Development Co. announced its interim financial results for the first three months of 2024.
A bourse filing revealed that the firm’s net profit reached SR153.5 million by the period ending March 31, up 30.57 percent from the corresponding period in 2023. This surge is primarily attributed to higher property sales.
Furthermore, Middle East Paper Co. announced its interim financial results for the year’s first quarter.
According to a Tadawul statement, the company recorded a net loss of SR18 million in the first three months of 2024, compared to a net loss of SR7 million in the same period of the previous year.
This is mainly owed to reduced gross profit, a jump in general and administrative dues, and increased finance and zakat expenses.
Red Sea International Co. also announced its interim financial results for the period ending on March 31.
A bourse filing revealed that the firm’s net profit stood at SR13.3 million at the end of the first quarter of 2024, compared to a net loss of SR19.5 million recorded in the same quarter a year ago.
This is mainly the result of the strategic business transformation, which included acquiring 51 percent of First Fix and effectively executing and delivering projects.
Meanwhile, Saudi Manpower Solutions Co., announced the completion of the institutional book-building process and the determination of the final offer price for its initial public offering on the main market of the Saudi Exchange.
According to a company statement, the final offer price has been set at SR7.5 per share, with a market capitalization of SR3 billion at listing. The price range for the offering was set at SR7 to SR7.5.
The institutional book-building process generated an order book of around SR115 billion and was 128 times oversubscribed, indicating strong investor demand.
Baheej unveils waterfront development project in Yanbu
RIYADH: Saudi Arabia’s tourism sector continues to expand, with Baheej Tourism Development Co. unveiling a new waterfront development project in Yanbu.
This joint venture between ASFAR, a Saudi tourism investment company owned by the Public Investment Fund, and the Tamimi-AWN Alliance, aims to develop the waterfront area of the Royal Commission at Yanbu.
The initial project will cover 32,000 sq. m. and feature three leisure assets: a beach, a tourist activation center, and a hotel. It is set for complete unveiling in 2027.
A fourth component is scheduled to be announced at a later date.
According to a release, each aspect of the project aims to provide memorable and sustainable tourism experiences.
Visitors will soon have the opportunity to explore Yanbu, a city with a rich history dating back to the 16th century, renowned for its architectural heritage and sandy beaches.
Baheej envisions Yanbu as an iconic location that showcases Saudi Arabia’s culture, history, and natural beauty, providing a unique destination to tourists.
Nora Al-Tamimi, CEO of Baheej, outlines the project’s development in three phases, emphasizing community engagement, sustainability, and minimal environmental impact.
Al-Tamimi said: “We believe that destinations are not just built but discovered, and Baheej’s commitment lies in uncovering Saudi Arabia’s hidden gems. Our strategic collaborations are aimed at curating unparalleled experiences that showcase Saudi Arabia’s rich culture, history, and natural wonders.”
She added: “Yanbu City’s contemporary infrastructure, captivating environment, and attractive coastal landscapes make it an exceptional gateway to the Red Sea Riviera. We anticipate the complete unveiling of our destination and its components by the end of 2027.”
By analyzing risks and investment opportunities, the project aims to position Yanbu as a locally and internationally sought-after tourist destination, explained Al-Tamimi.
Baheej’s role will involve integrating local culture and promoting protection of the planet, enhancing Yanbu’s appeal and supporting regional development.
This approach aims to transform Yanbu’s hospitality sector, blending community heritage with environmental stewardship.
Established in 2023, Baheej aims to create accessible tourism experiences that meet international standards while remaining contextual and sustainable.
These initiatives are part of a broader strategy to transform Saudi towns into thriving, eco-friendly destinations.
Baheej also plans to announce additional projects in other cities by the end of 2024.
Related
Saudi banks’ money supply surges 8% in March to reach $753bn
RIYADH: Saudi banks’ money supply rose 8 percent in March, as compared to the same month last year, to reach SR2.82 trillion ($753 billion), official data showed.
According to the data released by the Saudi Central Bank, also known as SAMA, the increase was mainly fueled by a roughly 21 percent surge in banks’ term and savings accounts, reaching SR843.25 billion. These deposits represented the second-largest portion, comprising 30 percent of the total money supply, following demand deposits, which constituted 50 percent at SR1.41 trillion.
On the other hand, quasi-money holdings made up 21 percent of the total, experiencing a 1 percent decrease during this period. Meanwhile, currency outside banks accounted for an 8 percent share, showing a 10 percent growth.
Multiple factors influenced the upsurge in term deposits. Firstly, the elevated interest rate environment within the Kingdom, shaped by the US Federal Reserve’s anti-inflationary monetary policy, has spurred individuals and entities to seek higher returns through these accounts.
Moreover, the increase in accounts held by government-related entities played a significant role. As per Fitch Ratings, these entities opted to channel their surplus liquidity into term deposits with commercial banks, thereby boosting the growth trajectory of such accounts.
It is noteworthy that during 2022, SAMA raised key policy rates seven times, followed by an additional four increases in 2023. The central bank’s repo rate was last raised by 25 basis points to 6 percent in its July 2023 meeting, marking its highest level since 2001. Since then, rates have remained unchanged.
Meanwhile, US inflation surged to a six-month high in March, prompting investors to delay their expectations for Federal Reserve rate cuts.
Deposits represent a costly funding source for banks, with heightened competition in the financial market significantly driving up their average cost.
Despite this, the surge in interest rates also strengthened Saudi banks’ profits on the asset side. Higher borrowing rates led to increased income, offsetting the challenges posed by the expensive funding environment.
On the asset side, Saudi bank loans grew by 11 percent during this period to reach SR2.67 trillion; therefore, lending growth among Saudi banks outpaced deposits.
In their April report, S&P Global suggested that Saudi financial institutions would explore alternative funding strategies to manage the rapid increase in lending, driven by rising demand for new mortgages.
The credit-rating agency noted that the funding profiles of financial institutions in the Kingdom will undergo changes, mainly due to a government-supported initiative aimed at boosting homeownership.
According to their analysis, mortgage financing accounted for 23.5 percent of Saudi banks’ total credit allocation by the end of 2023, compared to 12.8 percent in 2019.
They highlighted that the ongoing financing needs of the Vision 2030 economic initiative, coupled with relatively sluggish deposit growth, are likely to prompt banks to seek alternative budget sources, including external funding.
S&P Global anticipated this trend to persist, especially as corporate lending assumes a more significant role in growth in the coming years.
The report indicated that Saudi banks are expected to adopt alternative funding strategies to support this expansion. It also noted that the stability of Saudi deposits mitigates the risk posed by maturity mismatch.
Furthermore, the agency projected an increase in Saudi banks’ foreign liabilities, rising from approximately $19.2 billion by the end of 2023, to meet the funding demands of robust lending growth, particularly amidst slower deposit expansion.
The report emphasized that Saudi banks have already tapped into international capital markets, and S&P Global anticipates this trend to continue over the next three to five years.
