Brent plunge fails to displace Russian crude for Asian buyers

Brent plunge fails to displace Russian crude for Asian buyers
A pump jack drills oil crude from the Yates Oilfield in West Texas' Permian Basin near Iraan, Texas, on March 17, 2023. (REUTERS/Bing Guan)
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Updated 23 March 2023

Brent plunge fails to displace Russian crude for Asian buyers

Brent plunge fails to displace Russian crude for Asian buyers
  • Middle East crude prices in Asia appear to be resilient as the market bets on robust demand from China
  • With Russian crude so cheap, a move of a few dollars on Brent-Dubai EFS or even freight would not make a difference

SINGAPORE/LONDON: A plunge in Brent crude prices has narrowed the spread between Atlantic Basin and Middle East benchmarks but has failed to spur interest from Asian refiners, which are instead buying up discounted Russian oil, leaving an overhang in African supply.
Global oil benchmark Brent tumbled more than 10 percent over the past two weeks, touching a 15-month-low of $70.12 a barrel on Monday, as investors have fretted over banking sector turmoil in the US and Europe and as strikes in France have dented oil demand.
Middle East crude prices in Asia appear to be resilient as the market bets on robust demand from China, which is rebounding from zero-COVID restrictions that formerly squeezed its economy.
The Brent-Dubai Exchange for Swaps (EFS), representing the premium of light sweet Brent over Middle East sour crude Dubai, shrank to $1.40 a barrel this week, its narrowest in more than two years.
A tighter EFS typically means Brent-linked crude produced in the Atlantic Basin, including from West African countries, becomes more economical for Asian buyers.

But traders have not seen a significant uptick in Asian demand for West African crude, because the cargoes remain much more expensive than Russian oil, even though they have gained competitiveness over Middle Eastern crude.
With Russian crude so cheap, a move of a few dollars on Brent-Dubai EFS or even freight would not make a difference, other than providing Chinese buyers with a tool to drive prices lower, said a West African crude trader.
Russia’s light sweet ESPO crude for May delivery is traded at a discount of about $6.80 a barrel against the ICE Brent on the deliver-ex-ship (DES) basis to northern China, trading sources said. Meanwhile, Congo’s Djeno, a medium sweet crude favored by Chinese refiners, is assessed at a premium of $1.50 a barrel above ICE Brent for May delivery on DES basis.
The pattern is similar in India, where Russian crude is delivered at discounts to Dubai quotes while West African oil is loaded at parity or a slight discount to dated Brent, an Indian trader said.
Russia became the top crude supplier to China and India in recent months, eroding the market share of other suppliers such as West African countries.
Just over 30 million barrels of West African crude have been loaded for Asia in March, the smallest volume since 2014 or earlier, shipping data from Refinitiv and Kpler showed.
The slowing exports of West African crude are exacerbating a supply overhang in the West of Suez market and weighing down the Brent prices that the West African grades are pegged to.
On Tuesday, about 20 million barrels of Nigerian crude for April loading were still unsold, just as the trade cycle for May cargoes was about to kick off. About four April-loading Angolan crude cargoes were also awaiting buyers.
In the past three months, Nigeria has exported around 42 million barrels of crude on average each month while Angola’s average monthly exports have been around 33 million barrels.


Top Saudi banks maintain profitability in Q1 despite global headwinds: Alvarez & Marsal

Top Saudi banks maintain profitability in Q1 despite global headwinds: Alvarez & Marsal
Updated 28 sec ago

Top Saudi banks maintain profitability in Q1 despite global headwinds: Alvarez & Marsal

Top Saudi banks maintain profitability in Q1 despite global headwinds: Alvarez & Marsal

RIYADH: Saudi Arabia’s top banks have continued to register steady earnings growth while maintaining profitability despite global headwinds amid rising interest rates, according to global professional services firm Alvarez & Marsal.

The analysis by the New York-headquartered company revealed the Kingdom’s leading 10 banks collectively recorded 2.7 percent quarter-on-quarter growth in net profits during the first three months of the year to hit SR17.3 billion ($4.61 billion).

The report noted that the boost in profitability was driven by significant growth in non-core income and a rise in cost efficiencies.  

The Saudi banks managed to enhance and maintain the return on equity well above the pre-pandemic levels as their aggregate RoE increased by 67 basis points to 15.2 percent in the first quarter against the previous three months. 

Their return on assets remained stable at 2 percent, with average total assets growing by 3.7 percent during the same period, the report noted. 

“We consider the Saudi banks’ capital position to be strong. Profitability for the quarter marginally improved due to an increase in operating income, mainly owing to a growth in non-core income which was further supported by higher impairments,” said Asad Ahmed, managing director and head of Middle East financial services at Alvarez & Marsal, in a statement. 

He noted the higher interest rate environment is causing customers to migrate to interest-bearing instruments that could likely affect the cost of funding for some banks in the coming months.  

“Looking ahead, we expect banks to face a slowdown in credit growth and a possible uptick in non-performing loans due to the higher interest rate environment. Saudi Central Bank has maintained its interest rates in line with the US Federal Reserve, and we expect this to continue,” added Ahmed.  

The report further revealed that Saudi banks recorded a 4.7 percent growth in deposits and a 3.2 percent rise in loans and advances. 

Highlighting the growth of the private sector in the Kingdom, the analysis found that retail loans and corporate loans witnessed a quarter-on-quarter growth of 2 percent and 4.2 percent, respectively.  

The report further pointed out that the net interest margin of these top banks in Saudi Arabia during the first quarter remained stable at 3.08 percent, although it is slightly down from the 3.15 percent recorded in the previous three-month period.  

Saudi Arabia’s top 10 listed banks analyzed in the report include Saudi National Bank, Al Rajhi Bank, and Riyad Bank, as well as Saudi British Bank, Banque Saudi Fransi, and Arab National Bank.  

The other banks examined by Alvarez & Marsal were Alinma Bank, Bank Albilad, Saudi Investment Bank, and Bank Aljazira. 

The analysis looked at these banks’ key performance areas, including size, liquidity, income, operating efficiency, risk, profitability, and capital.


UAE In-Focus — Air Arabia to double fleet capacity in 12 months

UAE In-Focus — Air Arabia to double fleet capacity in 12 months
Updated 22 min 24 sec ago

UAE In-Focus — Air Arabia to double fleet capacity in 12 months

UAE In-Focus — Air Arabia to double fleet capacity in 12 months

RIYADH: Air Arabia Abu Dhabi, the UAE’s low-cost airline, has unveiled plans to double its current fleet capacity within the next 12 months, state-run news agency WAM reported. 

According to Adel Al-Ali, group CEO of Air Arabia, the expansion will strengthen both inbound tourism and the emirate’s long-term vision of attracting regional and global visitors. 

Al-Ali also highlighted the significant growth of visitors to Abu Dhabi, which witnessed 15.9 million guests in 2022, nearly triple the number seen in 2021.  

“Air Arabia Abu Dhabi is supporting the UAE capital’s growing prominence as a global tourism and business hub. Doubling the fleet strength will be crucial to meet growing passenger demand for low-cost travel as the city records a new wave of tourism growth,” said Al-Ali. 

In collaboration with Etihad Airways, Air Arabia has been playing a crucial role in catering to the growing low-cost travel market segment in the region. 

“Committed to providing the highest quality of service to our customers, we are exploring new and agile technologies and services to enhance customer experience and provide a distinctive value proposition to all our passengers,” he added. 

UAE’s Ministry of Finance imposes new tax 

The UAE’s Ministry of Finance has announced a new decision regarding taxing income earned by foreign companies and non-resident juridical persons from real estate and other immovable properties. 

According to the new decision, such entities will be subject to corporate tax on income generated from these dead assets, WAM reported. 

However, income from real estate investments earned by foreign individuals or UAE residents, directly or through any legitimate bodies, will not be subject to corporate tax, provided they are not involved in a licensed business activity. 

UAE and Vietnam eye stronger trade ties  

The UAE and Vietnam have started discussing a comprehensive economic partnership agreement to boost bilateral trade. 

Thani Al-Zeyoudi, the UAE minister of state for foreign trade, discussed the agreement while attending a bilateral meeting with Vietnamese Prime Minister Pham Minh Chin during a visit to Hanoi, WAM reported. 

“Vietnam is the UAE’s leading trade partner among the Association of Southeast Asian Nations, with bilateral non-oil trade totaling $8.7 billion in 2022, which accounts for 27 percent of trade with the bloc,” Al-Zeyoudi said. 

The purpose of the meeting was to mark the initiation of negotiations for the agreement. 

The discussions also touched on the World Trade Organization’s 13th Ministerial Conference, which will be held in Abu Dhabi next year. 

“The proposed UAE-Vietnam comprehensive economic partnership agreement will push these figures even higher and underline the benefits of open, rules-based trade,” Al-Zeyoudi added. 

Dubai empowers startups to fuel digital transformation  

Dubai Chamber of Digital Economy announced it attracted 30 startups in the technology sector in the first three months of 2023 to boost the development of the digital economy and enhance investor appeal.  

The chamber has also successfully conducted 10 interactive workshops designed specifically for the private sector, concentrating on distinct aspects of the digital economy, WAM reported.  

These workshops provided valuable insights and practical guidance to help businesses thrive in the rapidly evolving digital landscape.

“We aim to chart a roadmap for strengthening the emirate’s digital infrastructure, develop legislation that supports the growth of tech companies, and enhance the digital economy’s competitiveness and contribution to Dubai’s overall economic growth,” said Omar Al-Olama, chairman of Dubai Chamber of Digital Economy.

With an ambitious strategy, the chamber is set to attract 300 new digital startups in the years ahead. 

It will host the highly anticipated Expand North Star summit in October as part of this initiative.   

The event, recognized as the region’s largest gathering of startups, will serve as a platform to highlight the emerging growth opportunities within Dubai’s thriving digital economy.


Mawani inks deal with Saudi Post in logistics development boost

Mawani inks deal with Saudi Post in logistics development boost
Updated 06 June 2023

Mawani inks deal with Saudi Post in logistics development boost

Mawani inks deal with Saudi Post in logistics development boost

RIYADH: In a bid to materialize the goals outlined in Saudi Arabia’s National Transport and Logistics Strategy, Saudi Ports Authority, also known as Mawani, has entered into a strategic partnership agreement with Saudi Post to manage the authority’s postal requirements. 

The agreement was signed by Majid Al Malik, vice president for Shared Services and Digital Transformation at Mawani, and Rakan Al-Daifallah, general manager of Government Sales, the Saudi Press Agency reported. 

According to the report, this new collaboration between these public sector entities will leverage the latest technologies and advanced capabilities to create a high-performing and cost-efficient logistics sector in Saudi Arabia. 

The partnership also aligns with Saudi Arabia’s efforts to improve its ranking in the World Bank Logistics Performance Index. 

Saudi Arabia’s National Transport and Logistics Strategy aims to position the Kingdom as a global logistics hub connecting three continents by improving all transport services,  including boosting the capabilities of the air cargo sector by doubling capacity to more than 4.5 million tons by 2030. 

Under this new strategic agreement, Saudi Post will manage Mawani’s postal requirements through its Express Mail Service, therefore providing a customized solution that caters to both government and non-government sectors. 

It will also ensure a cost-effective distribution channel for domestic and international operations.

In April, it was reported that Saudi Arabia has jumped 17 places to claim 38th rank in the World Bank’s Logistics Performance Index 2023. 

According to the World Bank report, the Kingdom has made great strides in performance efficiency through several sub-indicators, such as trade and transport infrastructure, shipment frequency tracking and tracing facilities, customs clearance, and quality of maritime freight. 

“This progress came with the support of the Crown Prince and the ambitious goals of the National Strategy for Transport and Logistics Services,” said Minister of Transport and Logistics Saleh Al-Jasser at the time.

The minister added that the strategy contains broad structural reforms and qualitative strategic initiatives, to strengthen operational efficiency, which will ultimately affirm the position of the Kingdom in the global logistics map.


Turkey rate hike to 25% in June is ‘on the table’ — JPMorgan 

Turkey rate hike to 25% in June is ‘on the table’ — JPMorgan 
Updated 06 June 2023

Turkey rate hike to 25% in June is ‘on the table’ — JPMorgan 

Turkey rate hike to 25% in June is ‘on the table’ — JPMorgan 

NEW YORK: An interest rate hike to 25 percent from the current 8.5 percent is on the cards for Turkey’s Monetary Policy Committee’s upcoming meeting on June 22, “if not earlier,” JPMorgan economists said on Monday. 

“A policy rate hike to 25 percent, from the current level of 8.5 percent, is on the table for 22 June or earlier, along with forward guidance suggesting smaller rate hikes if needed,” the Wall Street bank said to clients in an economic research note. “We maintain our year-end policy rate forecast at 30 percent.” 

Years of unconventional policies such as cutting interest rates despite hot inflation have weighed on investor views of Turkey, as well as on voter sentiment ahead of President Tayyip Erdogan’s reelection late last month. 

But there has been guarded optimism for a shift in monetary policy since veteran policy maker Mehmet Simsek returned to head Turkey’s Finance Ministry. 


Oil Updates — crude down as global economic backdrop outweighs Saudi output cut 

Oil Updates — crude down as global economic backdrop outweighs Saudi output cut 
Updated 06 June 2023

Oil Updates — crude down as global economic backdrop outweighs Saudi output cut 

Oil Updates — crude down as global economic backdrop outweighs Saudi output cut 

RIYADH: Oil prices edged lower early on Tuesday, coming off gains made the previous day as concerns about the global economic backdrop outweighed the supply worries raised when Saudi Arabia announced its biggest output cut in years. 

Brent crude futures slipped 70 cents, or 0.91 percent, to $76.01 a barrel by 10:00 a.m. Saudi time, while US West Texas Intermediate crude fell 74 cents, or 1.03 percent, to $71.41 a barrel. 

Brent gained as much as $2.60 on Monday and US crude as much as $3.30 after Saudi Arabia, the world’s top exporter, said at the weekend its output would drop by 1 million barrels per day to 9 million in July. 

The benchmarks pulled back, though, to more modest gains by the end of the day. 

Saudi Arabia raises July flagship crude price for Asia 

Saudi Arabia has increased the price of its flagship crude Arab Light to Asian buyers in July to a six-month high.  

The official selling price for July-loading Arab Light to Asia was increased by 45 cents a barrel from June to $3 a barrel over Oman/Dubai quotes, according to a statement issued by state oil giant Saudi Aramco. 

Meanwhile, Russian crude oil continued flooding into Asia at steep discounts. In May, China and India brought in an all-time-high volume of Russian crude, according to preliminary assessments from ship trackers. 

Saudi Arabia also raised the July OSPs of other grades to Asia, all by 45 cents from the June levels. For the second straight month, the price for Arab Extra Light is set lower than Arab Light, according to the price document, Reuters reported.  

For other regions, the top oil exporter increased its July Arab Light OSP to northwest Europe by 90 cents to $3 a barrel above ICE Brent. 

(With input from Reuters)