Oil Updates — crude prices rise on OPEC+ cuts, weaker dollar

Oil Updates — crude prices rise on OPEC+ cuts, weaker dollar
Brent crude futures rose 38 cents, or 0.49 percent, to $78.07 a barrel at 8:38 a.m. Saudi time, while US West Texas Intermediate crude was up 40 cents, or 0.55 percent, at $73.39. (Shutterstock)
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Updated 11 July 2023

Oil Updates — crude prices rise on OPEC+ cuts, weaker dollar

Oil Updates — crude prices rise on OPEC+ cuts, weaker dollar

RIYADH: Oil prices edged higher on Tuesday, recouping some of the losses from the previous session, as traders focused on supply cuts by the world’s biggest oil exporters, Saudi Arabia and Russia, and a weaker dollar. 

Brent crude futures rose 38 cents, or 0.49 percent, to $78.07 a barrel at 8:38 a.m. Saudi time, while US West Texas Intermediate crude was up 40 cents, or 0.55 percent, at $73.39. 

Prices had eased 1 percent on Monday on higher expectations that further US interest rate hikes are coming and as investors booked profits after last week’s 4.5 percent rise. 

Supply cuts by Saudi Arabia and Russia set for August helped to lift the benchmark prices, which were also supported as the US dollar fell to a two-month low. A weaker dollar makes crude cheaper for holders of other currencies and often boosts oil demand. 

Saudi Arabia last week said it would extend the cuts of 1 million barrels per day at least to August, and Russia said it would cut its oil exports next month by 500,000 bpd. 

Oil market to tighten with China demand and OPEC+ cuts: IEA 

Oil demand from China and developing countries, combined with the output cuts of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, is likely to keep the market tight in the second half of the year despite a sluggish global economy, the head of the International Energy Agency said on Monday. 

“Even in sluggish economic growth, China and other developing countries’ demand is strong,” IEA Chief Fatih Birol told Reuters. 

He added: “Taken together with the production cuts coming from key producing countries, we still believe that we may see tightness in the market in the second half of this year.” 

Global energy demand to rise 23% by 2045: OPEC 

Global demand for all energy forms is forecast to rise by 23 percent through 2045, OPEC Secretary-General Haitham Al-Ghais told a Nigerian oil and gas conference on Tuesday. 

Oil executives and officials from the OPEC have repeatedly made the case for continued investment in oil, warning that prices will otherwise spike higher. 

Al-Ghais also said calls to limit or stop funding new oil projects were unrealistic and unwise. He acknowledged the need for technology to tackle continued fossil fuel emissions. 

“Global primary energy demand is forecast to increase by a significant 23 percent in the period up to 2045, which means we will need all forms of energy,” he said. 

Al-Ghais added: “We will require innovative solutions such as carbon capture utilization and storage and hydrogen projects in addition to a circular carbon economy, which has received a positive endorsement from the G20.” 

The global oil industry needs $12.1 trillion in investment during the same period, he said, adding the sector was still not on track to reach that level of investment. 

BP settles US market manipulation case for $10.75m 

Oil major BP agreed to pay a civil penalty of $10.75 million to cover allegations company traders manipulated natural gas markets in 2008, which is less than BP has already settled in the case, US energy regulators said in a filing. 

The US Federal Energy Regulatory Commission alleged that BP violated the Natural Gas Act by manipulating the next-day gas market at Houston Ship Channel from mid-September through Nov. 30, 2008. 

BP paid a civil penalty of $24.35 million in December 2020 and a disgorgement of unjust profits of $250,295 in January 2021 in the case. But the company paid those penalties under protest and appealed the case to the US Court of Appeals for the Fifth Circuit, which remanded the matter back to FERC to reassess the civil penalty. 

The settlement announced in the filing late on Friday resolves the case. 

Under the settlement, FERC said BP would not seek a return of the $250,295 of disgorgement it has paid. 

The regulator also said its Office of Enforcement “will not object should BP choose to seek to reclaim the excess payment of $13,606,686 through a suit” in the US Court of Federal Claims or any other forum of competent jurisdiction. 

The case related to actions by BP traders to take advantage of market dislocations around the time Hurricane Ike smashed into the Houston area in September 2008. 

FERC’s Office of Enforcement alleged BP traders made uneconomic physical gas sales to suppress the Houston Ship Channel Gas Daily index and boost the value of BP’s financial position. 

Poland wants NATO pipelines to reach further east: president 

Poland wants NATO to discuss extending its Cold War-era oil pipeline system further east, President Andrzej Duda said on Monday before leaving for Vilnius for a NATO summit that will start on Tuesday. 

“We will certainly raise the issue of the expansion of fuel supply pipelines, NATO pipelines. Today they end in Germany because they are the remnants of what was built during the Cold War,” Duda told reporters. 

He added: “We would like, after more than 20 years of our presence in NATO, for the alliance to finally decide that it will finance the expansion so that they reach NATO’s eastern flank.” 

NATO’s Central Europe Pipeline System is a high-pressure pipeline network that transports jet fuel, gasoline, diesel fuel and naphtha across Belgium, France, Germany, Luxemburg and the Netherlands. 

(With input from Reuters) 

GCC countries to lead Mideast energy transition 

GCC countries to lead Mideast energy transition 
Updated 30 May 2024

GCC countries to lead Mideast energy transition 

GCC countries to lead Mideast energy transition 
  • Saudi Arabia, UAE, and Oman to account for two-third of region’s solar capacity

RIYADH: Saudi Arabia, the UAE, and Oman are set to lead the Middle East’s solar transition thanks to several key factors, according to a new report.

In its latest analysis, Norwegian business intelligence and research company Rystad Energy stated that solar power is becoming increasingly important in the energy policies of Middle Eastern countries.

As the cheapest energy source, solar photovoltaics in Saudi Arabia has achieved a world record-low levelized cost of electricity of $10.4 per megawatt-hour, the report stated. It further explained that this is due to factors such as low hurdle rates, large-scale projects, and declining hardware prices, as well as low labor costs and high solar irradiance.
“The region has exceptional solar energy potential, receiving more than 2,000 kilowatt-hours per sq. m. annually in solar irradiation in countries such as Saudi Arabia, the UAE, and Oman,” the report stated.
The total solar capacity in the Middle East at the end of 2023 exceeded 16 gigawatts and is expected to approach 23 GW by the end of 2024, the report added.
Rystad Energy’s projections indicate that by 2030, the capacity will surpass 100 GW, with green hydrogen projects contributing an annual growth rate of 30 percent.
The report stated that Saudi Arabia, the UAE, and Oman are on track to collectively account for nearly two third of the region’s total solar capacity by the end of the decade.
By 2050, renewable sources, including hydro, solar, and wind, are expected to constitute 70 percent of the Middle East’s power generation mix, a significant leap from 5 percent at the end of 2023, the report stated.
Despite this surge, the region will rely heavily on natural gas in the short term, with usage peaking around 2030.
The report added that at the end of 2023, 93 percent of the Middle East’s power generation was from fossil fuels, with renewables at 3 percent and nuclear and hydro at 2 percent each.
By 2030, 30 percent of installed capacity is expected from renewables, potentially reaching 75 percent by 2050.
Rystad Energy predicts battery energy storage will grow significantly in the 2030s, supporting the transition to solar and wind power. The share of gas in power generation is expected to decrease from 74 percent in 2023 to 22 percent by 2050.

Saudi Manpower Solutions Co. eyes expansion following its public listing

Saudi Manpower Solutions Co. eyes expansion following its public listing
Updated 30 May 2024

Saudi Manpower Solutions Co. eyes expansion following its public listing

Saudi Manpower Solutions Co. eyes expansion following its public listing

RIYADH: Various sectors across different parts of Saudi Arabia will soon have greater and easy access to manpower as the country’s first service provider eyes expansion with its initial public offering.

Speaking to Arab News, Abdullah Al-Timyat, CEO of Saudi Manpower Solutions Co., known as SMASCO, said the IPO will help propel SMASCO within the Saudi market, drive growth initiatives, and fortify its presence and stakeholders’ trust.

Al-Timyat said the IPO proceeds will not be utilized for internal operations but will be earmarked for strategic growth initiatives to expand the company’s footprint across the Kingdom’s diverse market. 

He added the company’s capital-light model, fortified by no debt and robust cash management, positions it for agile expansion. “We have zero debt and funding. We have strong cash management, and we have enough internal funds for our operations. So, the IPO will enable SMASCO in its future steps and strategic direction in expanding within the Saudi market, reaching new geographic cities and regions within Saudi Arabia.”

With an eye on deepening market penetration, Al-Timyat outlined SMASCO’s strategic direction, leveraging the IPO’s support to enhance brand awareness and stakeholders’ trust.

“We will even go deeper … within specific sectors, in business industry and professional manpower, depending on a more trusted bond that we have available because of the IPO and the support that we will have.”

The executive outlined the company’s current focus on the Kingdom’s market, emphasizing its vast potential and opportunities for manpower companies, including SMASCO.

He also underscored the entity’s mature model and expertise in technologies, which position it to potentially expand into new markets in the future. While there are no immediate plans to venture beyond Saudi Arabia, SMASCO remains prepared to seize opportunities should they arise, he said.

Looking ahead, the CEO highlighted artificial intelligence’s transformative potential emphasizing its role in enhancing efficiency and service delivery. 

He said: “AI and advanced technology is an opportunity for manpower companies. This is how we see it in SMASCO, this will provide us more opportunities, a faster a road to (achieve) our objectives operationally, financially and even for our customers.”

Al-Timyat highlighted the pivotal role of Vision 2030 benchmarks in providing clarity and direction to SMASCO’s future endeavors.

“Since the government launched Vision 2030, we have a clarity where we are going and this makes it easier for any industry, for any investor. We see a persistence of execution by the government, which we have never witnessed before and this is actually aligned with what we are seeing.”

This synergy between technological innovation and national objectives supports industry advancement. The executive noted that it is set to drive economic growth and societal development in alignment with the Kingdom’s ambitious vision.

Al-Timyat also outlined the global demand for various industries, including medical, logistics, tourism, and entertainment, which are also prevalent in Saudi Arabia.

Each of these industries requires specific qualities for talents and specialized manpower services to address their unique needs, he noted.

The executive said SMASCO, specialized in manpower solutions, has created subsectors within its team to cater to diverse industries.

This focus on specialization enables SMASCO to provide high-quality services that align with the economy, market trends, and specific requirements of each industry.

Saudi banks’ risk profiles stronger than GCC counterparts: Fitch 

Saudi banks’ risk profiles stronger than GCC counterparts: Fitch 
Updated 30 May 2024

Saudi banks’ risk profiles stronger than GCC counterparts: Fitch 

Saudi banks’ risk profiles stronger than GCC counterparts: Fitch 

RIYADH: Saudi banks exceed their Gulf Cooperation Council counterparts in terms of risk profiles underpinning their asset quality, according to Fitch Ratings.

The credit rating agency said in a statement that there is a strong correlation between asset quality and risk profile scores among regional banks, particularly in the GCC, due to their lending-focused business models. Saudi banks boast a weighted-average risk-profile score slightly below “bbb+” and a similar asset quality score.

Conversely, in the UAE, Qatar, and Kuwait, both weighted-average scores stand two notches lower, at “bbb-.”

Despite experiencing credit growth around double the GCC average between 2022 and 2023, Saudi banks maintain stronger scores. This surge is attributed to heightened government spending and robust non-oil gross domestic product growth.

However, banking assets remained at 99 percent of GDP by the end of 2023, contrasting with figures of 206 percent in the UAE, 240 percent in Qatar, and 159 percent in Kuwait.

The stronger risk profiles of Saudi banks are evident in their asset quality metrics. From 2019 to 2023, the sector’s cost of risk averaged 60 basis points, lower than the averages observed in the UAE, Qatari, and Kuwaiti banking sectors.

Similarly, the combined Stage 2 and 3 loans ratio of 7.2 percent was the lowest among the four markets.

Fitch’s assessment of Saudi banks’ stronger risk profiles reflects their generally conservative underwriting standards and risk controls.

This evaluation also acknowledges the perception that the Saudi Central Bank,  also known as SAMA, is the region’s strictest and most prudent banking regulator.

“Saudi banks have less borrower concentration than the UAE and Qatari banks, but a similar level to Kuwaiti banks, due to a larger and more diversified economy and strong retail financing in 2021-2023,” the rating agency stated.

It added: “The 20 largest exposures at Saudi and Kuwaiti banks account for about 20 percent of the loan books on average, but significantly more — about 35 percent — at UAE and Qatari banks.”          

Moreover, Saudi banks extend lower levels of financing to companies owned or managed by high-net-worth individuals compared to certain UAE and Qatari banks.

Saudi banks’ exposure to real estate and construction companies rose to 15 percent of gross sector financing by the end of the first quarter of 2024, up from 12 percent at the end of 2021.

This trend is anticipated to persist as non-oil sectors continue to expand. While Saudi banks’ real estate financing proportion now resembles that of Qatari and the UAE banks, it remains below the average for Kuwaiti lenders, standing at 24 percent of gross loans as of end 2023.

“We typically view high exposure to real estate financing as a weakness for GCC banks’ risk profiles and asset quality, as the exposures are mostly long-term and often non-amortizing with final repayment contingent upon full completion of the building,” Fitch said in the statement.

It added: “Potential difficulty in realizing underlying collateral or repossessing prime residences can also weigh on how Fitch views the exposures.”



Riyadh residential market sales surge 77%: CBRE report

Riyadh residential market sales surge 77%: CBRE report
Updated 30 May 2024

Riyadh residential market sales surge 77%: CBRE report

Riyadh residential market sales surge 77%: CBRE report

RIYADH: Saudi Arabia’s residential market experienced robust growth in demand, with Riyadh witnessing a 77 percent year-on-year increase in sales transactions in the first quarter, a new report showed. 

According to global consultancy firm CBRE, Jeddah residential transactions surged by 92.9 percent in the first three months of this year, while Dammam saw a 28.0 percent increase year-over-year. 

Taimur Khan, head of research MENA, said: “Whilst we have seen strong performance across commercial sectors within Saudi Arabia in the recent past, something which continues to date, we are now beginning to see the residential sector also register a significant surge in demand. This is, in turn, underpinning performance in the sector.” 

As new stock continues to be delivered, he said they expect this trend to continue, with demand outpacing supply for some time to come. 

“However, we also expect that there might be some bifurcation in performance within the residential sector, with new quality assets likely to register record rates,” added Khan.

Villa prices in Riyadh, Jeddah, and Khobar rose by 3.6 percent, 0.2 percent, and 3.1 percent, respectively. Meanwhile, Dammam saw a slight decline of 0.5 percent. 

In the apartment segment, prices in Riyadh, Dammam, and Khobar increased by 8.4 percent, 0.9 percent, and 0.4 percent, respectively, compared to the previous year.  

However, Jeddah experienced a 1.1 percent decrease in average apartment prices over the same period.   

Throughout the first quarter of this year, the office sector witnessed a slowdown in rental growth across all market segments.  

Prime rents in Riyadh’s occupier market surged by 14.5 percent, while Grade A and Grade B rents increased by 11.8 percent and 10.3 percent, respectively.  

In Dammam, Grade A rents rose by 8.0 percent, Grade B by 6.2 percent, and Khobar’s Grade A rents saw a 4.6 percent increase.  

Occupancy rates stood at 93.8 percent, 99.7 percent, and 99.4 percent for Prime, Grade A, and Grade B segments in Riyadh, while Dammam and Khobar displayed respective Grade A occupancy rates of 86.3 percent and 85.2 percent as of the first quarter.  

In Jeddah, Grade A and Grade B rents increased by 13.6 percent and 13.1 percent, respectively, with occupancy rates reaching 92.5 percent and 86.6 percent. 

The hospitality sector’s performance remained strong throughout the first quarter due to high visitation levels.  

Year-on-year, from January to March 2024, the average occupancy rate saw a slight uptick of 0.1 percentage points.  

Additionally, the country experienced an 11.8 percent increase in average daily rate, leading to a 12.0 percent rise in revenue per available room.

Closing Bell: TASI dips to close at 11,503 points

Closing Bell: TASI dips to close at 11,503 points
Updated 30 May 2024

Closing Bell: TASI dips to close at 11,503 points

Closing Bell: TASI dips to close at 11,503 points

RIYADH: Saudi Arabia’s Tadawul All Share Index dipped on Thursday, losing 193.02 points, or 1.65 percent to close at 11,503.49

The total trading turnover of the benchmark index was SR13.13 billion ($3.50 billion) as 65 stocks advanced while 161 retreated.   

Similarly, the MSCI Tadawul Index dipped by 24.77 points, or 1.70 percent, to close at 1,436.07.

However, the Kingdom’s parallel market, Nomu, increased by 307.64 points or 1.17 percent, to close at 26,610.57. This comes as 28 stocks advanced, while as many as 30 retreated. 

The best-performing stock was the Mediterranean and Gulf Insurance and Reinsurance Co., as its share price surged by 7.66 percent to SR29.50.

Other top performers included Almasane Alkobra Mining Co. and Alkhorayef Water and Power Technologies Co., whose share prices soared by 5.37 percent and 4.55 percent, to stand at SR62.80 and SR161 respectively.

National Co. for Learning and Education and East Pipes Integrated Co. for Industry also performed well.

The worst performer was ACWA Power Co. whose share price dropped by 9.98 percent to SR402.40.

Share prices of Fawaz Abdulaziz Alhokair Co. as well as the Co. for Cooperative Insurance dropped by 7.89 percent and 6.41 percent to stand at SR8.40 and SR131.40, respectively.

The best-performing stock of the day on the parallel market was Mohammed Hadi Al-Rasheed and Partners Co., as its share price surged by 12.58 percent to SR34.90.

Other top performers included Osool and Bakheet Investment Co. and Abdulaziz and Mansour Ibrahim Albabtin Co., whose share prices soared by 12.38 percent and 6.86 percent, to stand at SR44.95 and SR45.95 respectively.