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Oil Extends Drop on Easing Libyan Dispute, Demand Concerns

Representation photo: A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
Representation photo: A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
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Oil Extends Drop on Easing Libyan Dispute, Demand Concerns

Representation photo: A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
Representation photo: A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo

Oil prices fell on Wednesday, extending a plunge of more than 4% the previous day, on expectations that a political dispute halting Libyan exports could be resolved and concerns over lower global demand growth.
Brent crude futures for November fell 37 cents, or 0.5%, to $73.38 by 0330 GMT, after the previous session's fall of 4.9%. US West Texas Intermediate crude futures for October were down 41 cents, or 0.6%, at $69.93, after dropping 4.4% on Tuesday.
Both contracts fell to their lowest since December on signs of a deal to resolve the political dispute between rival factions in Libya that cut output by about half and curbed exports.
"Selling continued in Asia amid expectations of a potential deal to resolve the dispute in Libya," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
"The market remained under pressure also because of concerns over sluggish fuel demand following weak economic indicators from China and the United States."
Libya's two legislative bodies agreed on Tuesday to jointly appoint a central bank governor, potentially defusing the battle for control of oil revenue that set off the dispute.
Libyan oil exports at major ports were halted on Monday and production cut nationwide. Libya's National Oil Corp (NOC) declared force majeure on its El Feel oilfield from Sept. 2.
"Easing political tension in Libya potentially seeing some supplies return and economic weakness in the world's largest oil consumers, US and China, serve as a confluence of headwinds for oil prices," said Yeap Jun Rong, a market strategist at IG.
"The faster contraction in new orders and production, along with increasing prices, presented in the US manufacturing PMI data seems to be renewing growth fears, which does not offer much reassurance around the oil demand outlook."
Market sentiment weakened after Tuesday's Institute for Supply Management data showing that US manufacturing remained subdued, despite a modest improvement in August from an eight-month low in July.
In China, the world's biggest importer of crude, recent data showed that manufacturing activity sank to a six-month low in August, when growth in new home prices slowed.
Weekly US inventory data has been delayed by Monday's Labor Day holiday. The report from the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Wednesday and data from the Energy Information Administration will be published at 11:00 a.m. EDT (1500 GMT) on Thursday.
US crude oil and gasoline stockpiles were expected to have fallen last week, while distillate inventories probably rose, a preliminary Reuters poll showed on Tuesday.

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IMF: Financial, Regulatory Reform Agenda Contributed to Accelerating Growth of Saudi Economy

A night view of Riyadh, Saudi Arabia. (Getty Images)
A night view of Riyadh, Saudi Arabia. (Getty Images)
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IMF: Financial, Regulatory Reform Agenda Contributed to Accelerating Growth of Saudi Economy

A night view of Riyadh, Saudi Arabia. (Getty Images)
A night view of Riyadh, Saudi Arabia. (Getty Images)

The International Monetary Fund (IMF) issued on Wednesday a favorable report on Saudi Arabia following the conclusion of the Article IV consultations with the Kingdom. The IMF report confirmed that Saudi Arabia's financial and regulatory reform agenda contributed to accelerating the Saudi economy's growth, containing inflation, and reducing the unemployment rate to its lowest levels ever.

The IMF praised the ongoing economic transformation and efforts to diversify the economy under the Saudi Vision 2030.

The IMF Article IV Consultation report commended the macroeconomic policies and transformational changes implemented by the Kingdom, which contributed to boosting the growth of non-oil activities.

The report noted that Saudi reforms led to rising employment, which now exceeds pre-Covid figures, and that the rate of women's participation in the labor market rose to more than 35%, exceeding the Saudi Vision 2030 target of 30%.

The IMF welcomed Saudi Arabia's measures of conducting long-term financing planning that supports the implementation of the initiatives, programs, and projects of Vision 2030 while mitigating the risks of overheating. It stressed that the Kingdom's fiscal space is strong and that sovereign debt risks are low, adding that the abundance of financial reserves in Saudi Arabia has limited the impact of global and regional challenges.

The IMF report noted that the ongoing reforms in the Kingdom - which include ensuring the effective implementation of regulations, streamlining fees, boosting human capital, increasing the participation of Saudi women in the labor market, facilitating access to land and financing, and improving governance - have contributed to enhancing private sector growth and attracting more foreign direct investment, in addition to the significant progress in the field of digital transformation and artificial intelligence that support these efforts.

The IMF Executive Directors commended Saudi Arabia's leadership role in multilateral fora, including its chairmanship of the International Monetary and Financial Committee (IMFC) in the IMF, which contributed to efforts to address global challenges.

Moreover, the report noted increased activity in the services sector - including transportation, trade, tourism, and finance - as consumption growth reached 5.7%.

The IMF said foreign investment license applications reached record levels in 2023, as they approximately doubled from 2022, including the 330 companies applying for licenses to establish their regional headquarters in the Kingdom.

The report reviewed the banking sector developments in the Kingdom, stressing its strong levels of solvency and liquidity and its flexibility to shocks. The banking sector is on a strong footing and also noted the efficiency of banking mediation according to indicators of profitability, infrastructure, and competitiveness.

The report highlighted the rise in the Saudi Stock Exchange (Tadawul) index of 14.2% in 2023, surpassing the Morgan Stanley Emerging Markets Index of 7%. It noted the progress in the technical environment enabling investment and the licensing of three digital banks. The IMF stressed their contribution to bolstering financial inclusion and competitiveness as these banks are characterized by flexibility and innovation.

Furthermore, it noted the Kingdom's containment of risks resulting from the rapid growth of real estate lending through diverse government support, the strength of banks, full recourse mortgages, and other supportive measures. It highlighted improvements in automating the national assessment matrix for money laundering and terrorist financing risks and boosting the accuracy of data analysis related to risks received from reporting entities, including fintech companies.

The report said the increase in non-oil revenues reflects the effectiveness of existing reforms, which directly contributed to enhancing compliance. It also praised the alignment of customs procedures with international best practices.

The IMF expected the non-oil sector, which includes government activities, to grow by 3.5% in 2024, supported by strong domestic demand. The inflation rate in the Kingdom is probable to remain stable at around 2% over the medium term, supported by the Saudi riyals' peg to the US dollar and local policies consistent with Vision 2030.

The IMF confirmed that the Kingdom has one of the lowest carbon intensity levels among all major producers due to ongoing environmental reforms and its efforts to achieve net zero by 2060. The report noted the Kingdom's success in securing a 30-year purchase agreement for the green hydrogen project in NEOM to achieve its efforts to utilize renewable energy sources.

In order to sequester approximately 44 million tons annually by 2035, the IMF said the Saudi government intends to build one of the world's largest carbon capture and storage plants, which will be operational by 2027, with a capacity of 9 million tons of carbon dioxide annually. It underscored the Kingdom's current efforts to sequester 1.3 million tons of carbon annually through the SABIC Plant and Uthmaniyah Gas Plant Department.