- Brent crude rebounded to about $83, above its level before the recent OPEC+ meeting.
- The gap between IEA and OPEC oil demand forecasts widened to 1.3m b/d this year and 5.6m in 2029. [see (1) below]
- There was confusion about the positions of Hamas and Israel on the US-backed ceasefire plan.
- Iran approved presidential candidates, five hardliners led by Qalibaf, and one moderate, Pezeshkian.
- Qatar and Bahrain appointed ambassadors for the first time since 2017, cementing reconciliation.
- Saudi Q1 GDP was led by trade & hospitality while manufacturing narrowly returned to growth. [see (2) below]
- The IMF Saudi Article IV mission cut some forecasts but praised policies, including recalibrating project spending.
- CEER awarded Hyundai a $2.2bn contract for EV parts and ACWA Power plans a $1.9bn rights issue to finance renewables.
- The UAE Central Bank hiked its non-oil growth forecast to 5.4% in 2024-5 from 4.7% previously.
- Adnoc awarded $5.5bn of contracts for Ruwais LNG and Aramco signed an LNG HoA with NextDecade.
- Fitch upgraded TAQA to AA to equalize with Abu Dhabi’s rating, as it is mainly owned by ADQ.
- There has been a surge in family offices setting up in the UAE and more hedge funds are also coming.
- Qatari contractors such as Redco and Power International are winning major contracts in KSA.
- Oman saw a small monthly deficit in April, partly due to a decline in income tax receipts.
- Kuwait’s non-oil GDP contracted by -2.9% in 2023, weighed down by a -17% slump in manufacturing.
- A fire in a residential building killed 49 migrants in Kuwait and a souq fire in Bahrain killed 3.
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Here are two brief snippets from the report:
(1) OPEC and IEA oil demand forecasts further diverge
- Monthly oil market reports were released by OPEC, the IEA and EIA, with updates reflecting the OPEC+ tapering plan announced two weeks ago.
- The oil market had initially reacted negatively to the OPEC+ deal, with Brent crude dipping by -$5 to $76 at the low point last, however this week it has recovered to $83, higher than it was before the meeting. This reflects not only a reassessment of the impact of the deal (I argued that it should be seen as bullish for prices because the cartel is holding together) but other developments.
- OPEC retained its +2.25m barrels/day (b/d) demand growth forecast for this year, but the IEA trimmed its to just +0.96m, so there is a 1.3m b/d difference between the two, more than 1% of total demand and equivalent to the production of Nigeria.
- The difference in demand forecasts widens in the medium term, with the IEA medium-term outlook sees demand peaking at 105.4m b/d in 2029, whereas OPEC forecasts about 5.6m higher that year and doesn't expect a peak until at least 2045. OPEC’s secretary general called the IEA report a “dangerous commentary, especially for consumers, and will only lead to energy volatility on a potentially unprecedented scale” (Rt).
(1) Saudi GDP growth slows in Q1 but manufacturing begins to rebound
- Non-oil GDP (including private and government sectors and refining) grew by 2.9% y/y in Q1, below the 2023 average of 3.5% (GAS). Private non-oil activity growth was 3.4%, down from 4.2% in Q4 but above the Q1 flash reading of 2.8%.
- Growth was led by trade & hospitality (5.9%) and transport (5.0%) with refining (-1.2%) as the only sector contracting.
- Other manufacturing only grew by 0.7%, but this was an improvement following two quarters of contraction and on a quarterly basis output surged by 10.5% q/q. There was further improvement in the sector in April when the industrial production index, which was also released this week, showed that manufacturing (ex-refining) was up 14% y/y, led by small sub-sectors that are not related to the hydrocarbon value chain such as electrical devices, up 22% (GAS).
- Overall GDP contracted by -1.7% y/y because of the OPEC+ cuts which brought oil GDP down by -13.2%.
- The IMF completed its Article IV mission and revised its 2024 forecasts from the April WEO, with non-oil growth now expected to be a little weaker than before (3.5% vs 3.9% previously expected) and oil contracting by more due to the extended OPEC+ cuts (-4.6% vs -2.4%).
- The full Article IV report won't be out for a few months, but the Fund was broadly positive about the policy direction, including the recalibration of Vision 2030 project spending.
