Weekly GCC news to 17 May

• OPEC has shifted its core unit of analysis in its oil market reports to OPEC+ for the first time. [see (1) below]
• Half of Rafah’s population has been displaced and Israel’s cabinet is divided over postwar planning.
• UK-GCC free trade talks continued but Saudi import concerns are threatening a deal with China.
• PIF merged two of its major entertainment subsidiaries, Qiddiya and SEVEN.
• Inflation continued to diverge between Abu Dhabi and Dubai, which has much higher growth in rents.
• Mubadala grew assets by 9.5% in 2023 to $302bn and deployed $24bn in new investments.
• Emirates Airline achieved record profits of $4.7bn, up by nearly two-thirds.
• The UAE transferred $14bn to Egypt, the balance of its investment in Ras El-Hekma.
• Qatar’s detailed Q3 GDP data showed a surge in hospitality (13%) but weak construction (-3%).
• Kuwait’s Amir suspended parliament for up to four years and plans to revise the constitution. [see (2) below]
• The change may lead to a debt law and improved administration but probably not fiscal reforms.
• Oman’s spending fell by -7% y/y in Q1 and it achieved a 1.5% of GDP surplus. An IMF mission praised Oman’s reforms.
• Oman’s Sultan made a return visit to Kuwait and various MoUs were signed including for investment.
• Moody’s doubled its 2023 estimate for Bahrain's deficit to -11% of GDP and sees debt rising to 140%.
• OPEC’s reports now include monthly oil data for Bahrain, which recovered in April, after a weak Q1.
• The IMF’s Article IV report on Iraq warned that without reform there is a high risk of stressed debt.

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Here are two brief snippets from the report:

(1) OPEC shifts its analysis to OPEC+

• For the last seven years there has been a strange disconnect between OPEC's monthly Oil Market Report, which forecasts the "call on OPEC" (meaning the balance between global demand and expected supply from non-OPEC countries) and the OPEC+ cartel that sets production quotas. This is because three longstanding members of OPEC (Iran, Libya and Venezuela), representing about a fifth of its production, are not participating in OPEC+ cuts due to their political troubles, whereas 10 countries outside of the organisation are participating, ranging from Bahrain and Oman to Russia and Kazakhstan, with output greater than Saudi Arabia, UAE and Kuwait combined.
• Whereas in the past, the call on OPEC forecasts may have given a useful indication about what the cartel might need to do if its other forecasts were accurate, it had become a relatively meaningless number.
• In the latest month, for the first time, the Oil Market Report has been reorganised to forecasting non-OPEC+ supply and hence the call on OPEC+. This gives a clearer sense of how effectively the?cartel is meeting its goals and what it?may need to do next. It is currently producing about 41m b/d whereas it is forecasting an average demand of 43m this year and 44m next year. In Q1 it estimates that the market was undersupplied by -1.5m b/d. This implies space to roll back the 2m b/d voluntary cuts introduced in June.
• However, other forecasters, such as the IEA, which also released its monthly report this week, have a less rosy view. Whereas OPEC sees demand growing by on average 2.25m b/d this year, the IEA only expects 1.1m, cutting its forecast by -140k b/d in the latest report. If this is the case then there will be less space for OPEC+ to end or taper its cuts.

(2) Kuwait's Amir suspends parliament

• On Friday 10th, the Amir announced in a TV address that he was dissolving the National Assembly for up to four years. This came five weeks after elections that did not substantively alter the configuration of parliament (KUNA).
• He has suspended 7 of the 183 articles of the 1962 Constitution that relate to the Assembly, including Article 107, which requires that a new Assembly be elected within two months of a dissolution). The Assembly was previously suspended in 1976-81 and 1986-92.
• The Amir justified his action on the basis of abuses by both the Assembly, accusing some members of interfering in the selection of ministers and the crown prince, and previous governments. He also referenced corruption and the ineffectiveness of the system.
• The problems in Kuwait are clear from the recent political churn. In the last two decades it has seen 5 amirs, 11 elections and 26 cabinets - more than in the previous sixty years. In just the last four years alone there have been 3 amirs, 4 elections and 11 cabinets (see the graph).
• The Amir said that there would need to be a “revision of the democratic process in its entirety” and announced plans for a committee to revise the Constitution. There has been no indication of which specific changes Sheikh Mishaal has in mind, but it seems likely that he would look to reduce the Assembly’s power, emulating Gulf peers, rather than increase it.
• A cabinet was formed by PM Ahmad al-Abdullah al-Sabah which contained most of the ministers from the previous cabinet, which was only formed in January (KUNA).
• The key question now is what the government will do now that it no longer faces parliamentary constraints. There is a long list of overdue laws and reforms. It is likely that a debt law will be passed and the "vacuum in appointments", such as in the Tenders Board, may be rectified. However, spending will also likely increase and cuts to subsidies and new non-oil revenue measures, which Kuwait needs to balance its budget, are less likely.