Experts to Asharq Al-Awsat: Saudi Arabia Playing its Responsible Role in Controlling Oil Market

Workers are seen at a Saudi Aramco facility. (SPA)
Workers are seen at a Saudi Aramco facility. (SPA)
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Experts to Asharq Al-Awsat: Saudi Arabia Playing its Responsible Role in Controlling Oil Market

Workers are seen at a Saudi Aramco facility. (SPA)
Workers are seen at a Saudi Aramco facility. (SPA)

Saudi Arabia announced on Monday its decision to extend the voluntary oil production cut of one million barrels per day until August. Saudi analysts told Asharq Al-Awsat that the Kingdom’s decision would reduce fluctuations in global oil prices and strengthen the efforts of the OPEC+ alliance to support, stabilize and control international markets.

Saudi Arabia’s decision was followed by a similar step by Russia, which also announced reducing its oil exports by 500,000 barrels per day in August.

Experts stressed the importance of voluntary price cuts to achieve price stability and protect producers and consumers alike, noting that the Saudi decision also limits the contraction of global economic growth.

Dr. Mohammad al-Sabban, former senior adviser to the Saudi Energy Minister, told Asharq Al-Awsat that the Kingdom’s decision to extend the voluntary cut achieves stability in oil markets, which are witnessing great fluctuations. He also emphasized that Saudi Arabia was assuming a responsible role in controlling markets, in cooperation with oil-producing countries.

Al-Sabban underscored the importance of the voluntary cut in boosting the role of OPEC+ in the markets, as it confirms that the organization is seeking to achieve stability in the global oil markets.

Economist Dr. Fahd bin Jumaa said the Kingdom, with its recent decision, confirms that it will bear the loss of sales of one million barrels per day, out of concern for market stability.

In remarks to Asharq Al-Awsat, he said: “OPEC+ is making intense efforts to achieve its goals in stabilizing the oil markets, given the global economic situation...”

An official source in the Ministry of Energy said that the Kingdom would extend the voluntary cut of one million barrels per day, which began in July, for another month, adding that the cut could be extended beyond that period.

“The Kingdom’s production for the month of August 2023 will be approximately 9 million barrels per day,” Saudi state news agency SPA quoted an official source in the ministry as saying.

Saudi Energy Minister Prince Abdulaziz bin Salman had previously stated that the cut could be “extendable.”

Shortly after Monday’s announcement, Russian Deputy Prime Minister Alexander Novak said Moscow would cut its oil exports by 500,000 barrels per day in August.

Later on Monday, Algeria said it would cut oil output by an extra 20,000 barrels from Aug. 1-31 to support Saudi Arabia and Russia’s efforts to balance and stabilize oil markets, its energy ministry said.



Dollar Strengthens on Elevated US Bond Yields, Tariff Talks

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
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Dollar Strengthens on Elevated US Bond Yields, Tariff Talks

A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo
A teller sorts US dollar banknotes inside the cashier's booth at a forex exchange bureau in downtown Nairobi, Kenya February 16, 2024. REUTERS/Thomas Mukoya/File photo

The dollar rose for a second day on Wednesday on higher US bond yields, sending other major currencies to multi-month lows, with a report that Donald Trump was mulling emergency measures to allow for a new tariff program also lending support.

The already-firm dollar climbed higher on Wednesday after CNN reported that President-elect Trump is considering declaring a national economic emergency as legal justification for a large swath of universal tariffs on allies and adversaries.

The dollar index was last up 0.5% at 109.24, not far from the two-year peak of 109.58 it hit last week, Reuters reported.

Its gains were broad-based, with the euro down 0.43% at $1.0293 and Britain's pound under particular pressure, down 1.09% at $1.2342.

Data on Tuesday showed US job openings unexpectedly rose in November and layoffs were low, while a separate survey showed US services sector activity accelerated in December and a measure of input prices hit a two-year high - a possible inflation warning.

Bond markets reacted by sending 10-year Treasury yields up more than eight basis points on Tuesday, with the yield climbing to 4.728% on Wednesday.

"We're getting very strong US numbers... which has rates going up," said Bart Wakabayashi, Tokyo branch manager at State Street, pushing expectations of Fed rate cuts out to the northern summer or beyond.

"There's even the discussion about, will they cut, or may they even hike? The narrative has changed quite significantly."

Markets are now pricing in just 36 basis points of easing from the Fed this year, with a first cut in July.

US private payrolls data due later in the session will be eyed for further clues on the likely path of US rates.

Traders are jittery ahead of key US labor data on Friday and the inauguration of Donald Trump on Jan. 20, with his second US presidency expected to begin with a flurry of policy announcements and executive orders.

The move in the pound drew particular attention, as it came alongside a sharp sell-off in British stocks and government bonds. The 10-year gilt yield is at its highest since 2008.

Higher yields in general are more likely to lead to a stronger currency, but not in this case.

"With a non-data driven rise in yields that is not driven by any positive news - and the trigger seems to be inflation concern in the US, and Treasuries are selling off - the correlation inverts," said Francesco Pesole, currency analyst at ING.

"That doesn't happen for every currency, but the pound remains more sensitive than most other currencies to a rise in yields, likely because there's still this lack of confidence in the sustainability of budget measures."

Markets did not welcome the budget from Britain's new Labor government late last year.

Elsewhere, the yen sagged close to the 160 per dollar level that drew intervention last year, touching 158.55, its weakest on the dollar for nearly six months.

Japan's consumer sentiment deteriorated in December, a government survey showed, casting doubt on the central bank's view that solid household spending will underpin the economy and justify a rise in interest rates.

China's yuan hit 7.3322 per dollar, the lowest level since September 2023.