Saudi Arabia regains position as world’s top oil exporter

Workers at an Aramco onshore rig. Saudi Arabia exported nearly 11 million barrels of oil per day in April. (Aramco)
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Updated 16 June 2020

Saudi Arabia regains position as world’s top oil exporter

  • Kingdom knocks US off top spot it gained last year
  • IEA forecasts less dramatic fall in demand

DUBAI: Saudi Arabia has emerged from three months of oil market volatility as the world’s biggest oil exporter once more, knocking the US off the top slot it gained last year.

Industry experts calculated that in April — when oil prices crashed because of pandemic lockdowns — the Kingdom exported nearly 11 million barrels of oil per day, a record, and the US about 8.6 million barrels.

Both countries’ exports fell in May, after the historic OPEC+ deal to cut output, but the Kingdom was still ahead.

The trend is likely to continue for most of this year, as American production suffers from shut-ins and bankruptcies in its price-sensitive shale oil operations, despite continuing Saudi cuts.

“Over the course of the second quarter of 2020 as a whole Saudi Arabia ought to easily stay ahead of the chasing pack,” said the Middle East Economic Survey, which published the figures compiled by industry experts.

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The US overtook Saudi Arabia as the world’s top exporter in the middle of last year. Since the price of the US benchmark, West Texas Intermediate, collapsed in April, many shale producers have cut back on their “rig count” and some have filed for bankruptcy.

Oil prices shrugged off weekend worries over a possible second wave of virus infection in China. Brent crude, the global benchmark, rose back above $40, while West Texas Intermediate stood at $37.

A report from the International Energy Agency forecast a less dramatic fall in 2020 oil demand than expected. Demand would be 91.7 million barrels per day, about 500,000 more than the agency’s previous forecast, but still the biggest fall in history. There would be no recovery in pre-pandemic air fuel demand until 2022 because of the “dire situation” in the aviation industry, the IEA said.

In China, oil demand had recovered fast in March and April, and Indian demand rose sharply in May. “While the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 is ending on a more optimistic note,” the agency said.

“Initiatives in the form of the OPEC+ agreement and the meeting of G20 energy ministers have made a major contribution to restoring stability to the market.”

The joint ministerial monitoring committee of the OPEC+ alliance meets at the end of this week to assess compliance with agreed cuts, amid some speculation that they could be extended for at least another month.


HSBC reports lighter-than-expected third-quarter profit fall

Updated 27 October 2020

HSBC reports lighter-than-expected third-quarter profit fall

  • HSBC has a further headache – geopolitical tensions via its status as a major business conduit between China and the West

HONG KONG: HSBC said Tuesday its third-quarter post-tax profits fell 46 percent on-year as the Asia-focused banking giant continued to take a hammering from the coronavirus pandemic and spiraling China-US tensions.
However, the profit falls were not as bad as some analysts had predicted and HSBC said it expected credit losses to be at the lower end of a previously announced $8 billion to $13 billion range.
The global economic slowdown caused by the virus has hit financial giants hard and there is limited optimism on the horizon as Europe and the United States head into the winter with infections soaring once more.
HSBC has a further headache — geopolitical tensions via its status as a major business conduit between China and the West.
As a result, the lender is in the midst of a worldwide overhaul, aiming to slash some 35,000 jobs by 2022, primarily in its less profitable European and American divisions.
“We are accelerating the transformation of the Group, moving our focus from interest-rate sensitive business lines toward fee-generating businesses, and further reducing our operating costs,” chief executive Noel Quinn said in a statement accompanying the results.
Reported post-tax profit for the third quarter came in at $2 billion with revenue down 11 percent at $11.9 billion, the statement said.
Adjusted pre-tax profit slid 21 percent to $4.3 billion in the period, beating a $2.8 billion estimate by Bloomberg analysts.
Quinn described the latest figures as “promising results against a backdrop of the continuing impacts of Covid-19 on the global economy” as well as low interest rates.
In the first six months of 2020, HSBC’s post-tax profits were down 69 percent, meaning the third-quarter results were something of an improvement as some major economies relaxed some of their coronavirus restrictions.
The bank said its board would consider whether to pay “a conservative dividend” for 2020 based on final end of year results and how the global economy looks in early 2021.
Earlier this year, UK regulators called on British banks to scrap dividends for the year to preserve capital during the pandemic crisis.
HSBC makes 90 percent of its profit in Asia, with China and Hong Kong being the major drivers of growth.
As a result, it has found itself more vulnerable than most to the crossfire caused by the increasingly bellicose relationship between Beijing and Washington.
The bank has tried to stay in Beijing’s good graces.
It vocally backed a tough national security law that Beijing imposed on Hong Kong in June to end a year of unrest and pro-democracy protests.
The move sparked criticism in Washington and London but analysts saw it as an attempt to protect its access to China, which has a track record of punishing businesses that do not toe Beijing’s line.
“Geopolitical risk, particularly relating to trade and other tensions between the US and China, remains heightened,” HSBC said in Tuesday’s profit statement.
The US has sanctioned nearly a dozen key Hong Kong and Chinese officials over the national security law, telling international banks to stop doing business with them.
China’s national security law, however, forbids businesses in Hong Kong from adhering to foreign sanctions regimes, leaving many in an unclear regulatory tight spot.
“Investor and business sentiment in some sectors in Hong Kong remains dampened and ongoing tensions could result in an increasingly fragmented trade and regulatory environment,” HSBC said in its statement.
The bank also highlighted the uncertainty over Britain’s withdrawal from the European Union as another potential headwind.
Talks for a post-Brexit trade deal have made little headway with a 31 December deadline fast approaching.
“There is a risk of additional ECL (expected credit losses) charges, particularly in the UK in 4Q20, if the UK and the EU fail to reach a trade agreement,” the bank said.