Saudi economy measure hits 19-month high despite geopolitical worries

Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are seeking to introduce rapid economic reforms as their oil revenues come under pressure. (Shutterstock)
Updated 04 July 2019

Saudi economy measure hits 19-month high despite geopolitical worries

  • Purchasing managers’ index reveals that inflows of new orders from abroad rose for the fourth month running

LONDON: A key business output measure has hit a 19-month high in Saudi Arabia driven by new business growth but tempered by geopolitical worries.

The Emirates NBD Purchasing Managers’ Index revealed that inflows of new orders from abroad rose for the fourth month running.

However, overall business confidence in Saudi Arabia and neighboring UAE has suffered from rising regional geopolitical tensions, which has increased in recent months following attacks on shipping.

“While both output and new work increased at a solid rate in June, there was almost no change in private sector employment,”  said Khatija Haque, head of regional research at Emirates NBD. “Firms remained optimistic about future output, although this component of the survey declined to the lowest level since August 2018, possibly reflecting heightened geopolitical tension in the region.”

Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are also seeking to introduce rapid economic reforms as their oil revenues come under pressure amid rising shale production in the US and faltering global demand.

The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May and the highest since November 2017. A reading above 50 indicates expansion.

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The Saudi Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May.

“In contrast to the headline PMI, output growth in Saudi Arabia’s non-oil private sector slowed to a three-month low during June. That said, the rate of expansion remained sharp and was broadly in line with the long-run series average,” Emirates NBD said.

June also saw a second consecutive monthly rise in average cost burdens faced by non-oil private sector businesses in the Kingdom. Despite this, the rate of inflation was fractional and eased from May.

Business confidence towards future growth prospects was strongly optimistic during June, Emirates NBD said.




Sami Al-Obaidi, chairman of the Council of Saudi Chambers.

The Kingdom is seeking to grow foreign direct investment as part of a broader economic reform push.

Sami Al-Obaidi, chairman of the Council of Saudi Chambers, told the Arab British Economic Summit in London yesterday that it was important to boost economic cooperation and investment ties with the UK.

PMI data also released yesterday for the UAE reported a decline from 59.4 in May to 57.7 in June.

Backlogs of work increased amid reports of delays in receiving payments from customers, the bank noted.

Non-oil companies remained strongly optimistic that business activity will increase over the coming year, although sentiment eased again from April’s record high. 

Next year's Expo 2020 was highlighted as a key factor behind overall business optimism.


Russia vows cooperation with OPEC to keep oil market balanced

Updated 21 November 2019

Russia vows cooperation with OPEC to keep oil market balanced

  • Moscow not aiming to be world’s No.1 crude producer, Putin tells annual investment forum

MOSCOW: President Vladimir Putin said on Wednesday that Russia and the Organization of the Petroleum Exporting Countries (OPEC) have “a common goal” of keeping the oil market balanced and predictable, and Moscow will continue cooperation under the global supply curbs deal.

OPEC meets on Dec. 5 in Vienna, followed by talks with a group of other exporters, including Russia, known as OPEC+.

“Our (common with OPEC) goal is for the market to be balanced, acceptable for producers and consumers and the most important — and I want to underline this — predictable,” Putin told a forum on Wednesday.

In October, Russia cut its oil output to 11.23 million barrels per day (bpd) from 11.25 million bpd in September but it was still higher than a 11.17-11.18 million bpd cap set for Moscow under the existing global deal. Putin told the forum that Russia’s oil production was growing slightly despite the supply curbs deal but Moscow was not aiming to be the world’s No. 1 crude producer. Currently, the US is the world’s top oil producer.

“Russia has a serious impact on the global energy market but the most impact we achieve (is) when working along with other key producers,” he said. “There was a moment not that long ago when Russia was the world’s top oil producer — this is not our goal.”

Russia plans to produce between 556 million and 560 million tons of oil this year (11.17-11.25 million bpd), Energy Minister Alexander Novak said separately on Wednesday, depending on the volume of gas condensate produced during cold months.

Russia will aim to stick to its commitments under the deal in November, Novak told reporters.

Russia includes gas condensate — a side product also known as a “light oil” produced when companies extract natural gas — into its overall oil production statistics, which some other oil producing countries do not do.

As Russia is gradually increasing liquefied natural gas production (LNG), the share of gas condensate it is producing is also growing. Gas condensate now accounts for around 6 percent of Russian oil production.

Novak told reporters that in winter, Russia traditionally produces more gas condensate as it is launching new gas fields in the freezing temperatures.

“We believe that gas condensate should not be taken into account (of overall oil production statistics), as this is an absolutely different area related to gas production and gas supplies,” he said.

Three sources told Reuters on Tuesday that Russia is unlikely to agree to deepen cuts in oil output at a meeting with fellow exporters next month, but could commit to extend existing curbs to support Saudi Arabia.

On Wednesday, Novak declined to say that Russia’s position would be at upcoming OPEC+ meeting. Reuters uses a conversion rate of 7.33 barrels per ton of oil.