SABIC says challenges remain, views Aramco deal positively

SABIC made a net profit of 3.24 billion riyals ($864 million) in the three months to December 31. (AFP)
Updated 27 January 2019
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SABIC says challenges remain, views Aramco deal positively

  • SABIC posted a 12.4 percent drop in fourth-quarter profit compared to the year earlier period
  • Discussions are ongoing for growing SABIC’s business in North America

RIYADH: Saudi Basic Industries Corp. (SABIC) expects to face challenges this year due to uncertainty over the impact of a global trade war on the United States and China, its major markets, the company’s chief executive said on Sunday.
However, the world’s fourth-biggest petrochemicals company said it has the ability to deal with such challenges and started to see stabilization in prices of some products after a steep decline toward the end of 2018.
SABIC reported a 12.4 percent drop in fourth-quarter profit compared to the year earlier period, missing analyst forecasts. The company attributed the fall to lower average selling prices and a decrease in the share of results of associates.
“We’ve seen stabilization for some of the prices, still there are some challenges ahead of us,” Chief Executive Yousef Al-Benyan told a news conference in the Saudi capital.
SABIC will continue to boost its presence in its major markets — the US and China, he added.
“We are part of the global economic system, we are always affected by challenges but we are able to adapt with these challenges in the best way.”
He said SABIC will continue to raise its presence in Africa, as it is seen a very promising market.
SABIC’s biggest shareholder, the Public Investment Fund (PIF), is in talks to sell its majority stake to Saudi national oil giant Aramco <IPO-ARMO.SE>.
Benyan said he views Aramco’s move to “positively,” but further details are a matter for PIF and Aramco, which aims to become a global leader in chemicals.
He added the company will determine later if it needs to increase its 24.99 percent stake in Switzerland’s Clariant after the two companies decided to merge their high-performance materials businesses.
SABIC made a net profit of 3.24 billion riyals ($864 million) in the three months to Dec. 31, down from 3.7 billion riyals in the year-earlier period, the company said in a statement to the stock exchange.
That was lower than the average forecast of three analysts polled by Refinitiv, who expected SABIC to post a net profit of 4.92 billion riyals.
Shares of SABIC were trading 0.3 percent higher in late morning trade, recovering earlier losses.
SABIC results are closely tied to oil prices and global economic growth because its products — plastics, fertilizers and metals — are used extensively in construction, agriculture, industry and the manufacturing of consumer goods.
In 2018, US West Texas Intermediate crude (WTI)futures slumped nearly 25 percent, while Brent tumbled more than 19.5 percent. ($1 = 3.7505 riyals)


Oil prices near 2019 highs after US ends all Iran sanction exemptions

Updated 23 April 2019
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Oil prices near 2019 highs after US ends all Iran sanction exemptions

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

SINGAPORE: Oil prices were near 2019 highs on Tuesday after Washington announced all Iran sanction waivers would end by May, pressuring importers to stop buying from Tehran.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday.
US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
Barclay’s bank said in a note following the announcement that the decision took many market participants by surprise and that the move would “lead to a significant tightening of oil markets.”
The British bank added that Washington’s target to cut Iran oil exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel.”
ANZ bank said in a note on Tuesday that “the decision is likely to worsen the ongoing supply woes being felt with Venezuelan sanctions, the OPEC supply cut, and intensifying conflict in Libya.”
The move to tighten Iran sanctions comes amid other sanctions Washington has placed on Venezuela’s oil exports and also as producer club OPEC has led supply cuts since the start of the year aimed at tightening global oil markets and propping up crude prices.
Ellen Wald, non-resident senior fellow at the Global Energy Center of the Atlantic Council, said the United States “seem to expect” Saudi Arabia and the United Arab Emirates to replace the Iranian oil, but she added “that this is not necessarily the way Saudi Arabia sees it.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de-facto leader. The group is set to meet in June to discuss its output policy.
“Should OPEC decide to end their supply cut program going into the second half of the year, this could limit oil’s upside in the coming months,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Meanwhile, the Atlantic Council said the US move would hurt Iranian citizens.
“We’re going to see their currency collapse more, more unemployment, more inflation,” said Barbara Slavin, director for the Future of Iran Initiative at the Atlantic Council, adding that the US sanctions were “not going to bring Iran back to the (nuclear) negotiating table.”