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Tuesday, 13 July 2021

Oil supply looks like it will remain tight through August

Oil supply looks like it will remain tight through August: Saudi Arabia and the UAE have both fixed supply volumes for August, meaning that even if the two countries did find a way to resolve their dispute and agree to raise production, it’s unlikely the market will see new supply next month, Bloomberg suggests. Complicating matters further is Eid Al Adha, which will see most government offices and businesses closed next week, likely delaying the next OPEC+ gathering until the end of the month or early August.

This will likely mean at least another two weeks of uncertainty for the market, with participants unsure about whether new supply will be made available or even when producers will next meet to discuss the matter. The price of Brent has fallen a little over 1% since before the ill-fated meeting last Monday, now hovering above USD 75/bbl. But with no extra barrels hitting the market, supply remains tight, making higher prices in the coming days and weeks a distinct possibility.

Not that this is a bad outcome for the GCC, whose economies stand to benefit from higher oil prices, Daman Investments head of asset management Ali El Adou told Bloomberg. “The market is trying to price in a [agreement] from OPEC+, although we’re still seeing higher demand for oil, and this is impacting GCC economies positively,” El Adou said. With high vaccination rates across most GCC nations, economies are set to imminently reopen, and GCC banks can expect to see gains, while balance sheets could reflect surpluses if oil remains high.

Also worth noting this morning;

  • Saudi green bonds coming in 4Q: Saudi sovereign fund the Public Investment Fund plans to go ahead with its first green bond issuance in 4Q2021, banking sources told CNBC Arabia without providing further information.
  • China’s economy is slowing: China’s GDP is now expected to slow to 8% in 2Q, from a record 18.3% in the first quarter, leading Bloomberg to warn that this should be a wakeup call to other countries to not assume that their economies have entirely escaped the shock of the pandemic.
  • ByteDance’s IPO has been shelved indefinitely, perhaps under pressure from Chinese regulators. According to the Wall Street Journal, the Tiktok owner abandoned its IPO plans after regulators told it that it needs to focus on improving data-security risks. The news comes a week after Beijing launched a probe into newly US-listed ride-hailing firm Didi and forced tech companies to remove its app from their stores.
Up EGX30 10,234 +0.8% (YTD: -5.6%)
None USD (CBE) Buy 15.64 Sell 15.74
None USD at CIB Buy 15.64 Sell 15.74
None Interest rates CBE 8.25% deposit 9.25% lending
Up Tadawul 10,698 +0.1% (YTD: +23.1%)
Up ADX 7,022 +0.4% (YTD: +39.2%)
Down DFM 2,758 -0.1% (YTD: +10.7%)
Up S&P 500 4,384 +0.4% (YTD: +16.7%)
Up FTSE 100 7,125 +0.1% (YTD: +10.3%)
Down Brent crude USD 75.17 -0.5%
Up Natural gas (Nymex) USD 3.75 +2.0%
Down Gold USD 1,805.90 -0.3%
Down BTC USD 32,905 -4.5% (as of midnight)

THE CLOSING BELL-

The EGX30 rose 0.8% at yesterday’s close on turnover of EGP 1.19 bn (2.1% below the 90-day average). Regional investors were net buyers. The index is down 5.6% YTD.

In the green: EFG Hermes (+3.3%), Telecom Egypt (+2.8%) and Orascom Financial Holding (+2.1%).

In the red: Palm Hills Development (-2.7%), Export Development Bank of Egypt (-1.3%) and MM Group (-1.1%).

Asian markets are up in early trading this morning and futures suggest that US shares will fall in early trading. European shares are mixed, with the FTSE and the Dax both expected to fall while other European bourses see early gains.

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