Markets rebound but still on edge as virus fears intensify

People walk on a bridge in Dubai. The stock markets in the region — which often track each other’s movements — went in different directions on Tuesday. (AFP)
Short Url
Updated 18 March 2020

Markets rebound but still on edge as virus fears intensify

  • Stocks pulled back from the steep fall, but oil suffered another day of decline

DUBAI: Most global and regional financial markets saw a modest rebound as stocks pulled back from the steep falls of Monday, but oil suffered another day of decline.

Financial experts warned that sentiment was fragile and uncertain across financial markets in light of the ongoing coronavirus crisis and its effects on the global economy, despite an $850 billion stimulus proposed by US authorities.

Wall Street opened with a modest increase, with the main index — the S&P 500 — a couple of percentage points better off, after the big European bourses had experienced volatility throughout the day.

In the Middle East, the big markets — which often track each other’s movements — went in different directions.

Saudi Arabia’s Tadawul closed 2.47 percent ahead, while the indices in the UAE were significantly in the red. Abu Dhabi was more than 6 percent lower and Dubai nearly 5 percent.

Analysts said the Saudi improvement was largely due to a better performance from its biggest stock, Saudi Aramco, which rose 4.68 percent to SR29.10 ($7.75) per share.

Aramco’s improvement came after a webcast conference between executives and investment analysts on Monday, and was achieved despite another worrying day in oil markets.

Brent crude, the Middle East benchmark, was trading below the psychologically significant $30-per-barrel mark most of the day, edging ever closer to the US West Texas International standard.

On both stock and oil, however, investment experts warned that financial markets were still on the brink as the economic effects of coronavirus continued to spread.

Investors were especially nervous by Chinese economic data showing much bigger falls in industrial output in the first two months of the year.

Tarek Fadlallah, chief executive of Nomura Asset Management’s Middle East business in Dubai, told Arab News: “Pricing financial assets during a period of unprecedented economic uncertainty is virtually impossible. There’s no way to know what will end up being cheap, or what may still be expensive.”  

Nouriel Roubini, the economist credited with having predicted the 2009 financial crisis, said “the mainstream convention wisdom is now that we will have two quarters of rolling recession,” spreading from Asia across the Middle East to Western markets. He pointed to worrying trends in global credit markets.

Oil sentiment was just as pessimistic as producers ramp up supply even as demand falls significantly.

Analysts at Goldman Sachs changed their forecast for Brent by mid-year to $20 per barrel, down from $30, because of “large commitments from core-OPEC for April/May deliveries.”


Oil surges on hopes of new deal on output cuts

Updated 02 June 2020

Oil surges on hopes of new deal on output cuts

  • Brent price has doubled in five weeks
  • OPEC talks may be brought forward

DUBAI: Oil prices surged toward $40 a barrel on Monday as hopes rose for an early agreement to extend the big production cuts agreed by Saudi Arabia and Russia under the OPEC+ alliance.

Brent, the global benchmark, jumped by more 9 percent to nearly $39, continuing the surge that has doubled the price in five weeks — the best performance in its history. It recovered after record supply cuts agreed between the 23 countries of the OPEC+ partnership, and enforced cuts in US shale oil.

DME Oman crude, the regional benchmark in which a lot of Saudi Aramco exports are priced, rose above $40 a barrel for the first time since early March.

Market sentiment was buoyed by the possibility that the Organization of Petroleum Exporting Countries would agree with non-OPEC members to extend the cuts for a longer period than was agreed in April.

Oil analysts expect OPEC to fast track a “virtual” meeting to formally agree to maintaining cuts at the record 9.7 million barrels a day level. The meeting was scheduled for June 9, but bringing it forward would allow producers more time to set pricing levels.

Opinion

This section contains relevant reference points, placed in (Opinion field)

An official with one OPEC delegation told Arab News there was consensus among the 23 OPEC+ members for the new date, which could be as early as June 4. The meeting will also consider how long the current level of cuts would be maintained. Some OPEC members want it to run to the end of the year, other producers would prefer a two-month extension.

Omar Najia, global head of derivatives with trader BB Energy, told a forum run by Gulf Intelligence consultancy: “I’d be amazed if OPEC did not extend the higher level of cuts. As long as Saudi Arabia and Russia continue saying nice things to each other I’d expect the rally to continue.”

A Moscow source close to the oil industry said energy officials there had come to the conclusion that “the deal is working” and it was important to keep prices at an “acceptable” level.

Sentiment was also affected by a comparatively high level of compliance with the new cuts, running at about 75 percent among OPEC+ members, with only Iraq and Nigeria noticeable under-compliers.

Robin Mills, chief executive of Qamar Energy, said: “That’s where I’d expect it to be after two months in such a fluid situation. It will be even better in June.”