Gold Rebounds from One-week Low as Dollar Slips

Gold bracelets and necklaces on display for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
Gold bracelets and necklaces on display for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
TT

Gold Rebounds from One-week Low as Dollar Slips

Gold bracelets and necklaces on display for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
Gold bracelets and necklaces on display for sale at a gold shop in Istanbul's Grand Bazaar (AFP)

Gold prices climbed 1% on Thursday, rebounding from a one-week low hit in the previous session as the US dollar eased, while investors assessed the likelihood of a Federal Reserve interest rate increase this month after a hot inflation report.

Spot gold rose 1% to $4,146.74 per ounce by ‌0501 GMT, after hitting ‌its lowest since October 7 on Wednesday. ‌US ⁠gold futures for December ⁠delivery gained 1.5% to $4,167.30.

The dollar slipped after scaling an 18-month peak overnight. A softer dollar makes greenback-priced bullion more affordable for buyers overseas.

"What we're seeing here is just the symptoms of a market uncertain about US interest rate policy, and that is resulting in a bit of volatility," said Kyle Rodda, senior ⁠financial market analyst at Capital.com.

"We're coming up to ‌a really critical level for ‌gold, which is just below the $4,000 level. If we see, again, some ‌really strong data, then there's a view that the Fed ‌will have to hike relatively urgently, then that will be the level of focus."

US consumer prices accelerated in September as the cost of gasoline surged. Traders are pricing in about a 29% chance of ‌a rate hike later this month, compared with 22% before the data, according to CME's FedWatch ⁠Tool.

San Francisco ⁠Fed President Mary Daly said the US central bank will probably need to increase short-term interest rates further, though she signaled no need for a hike at the October 27-28 meeting. Vice Chair for Supervision Michelle Bowman said there's time to wait and see before any more action.

Although gold is viewed as an inflation hedge, higher interest rates reduce its appeal because it does not pay interest.

Market focus now turns to the Producer Price Index (PPI) and retail sales data due at 1230 GMT.

Among other metals, spot silver gained 0.7% to $56.01, platinum rose 1% to $1,608.20 and palladium climbed 1.3% to $1,108.14.



Saudi Non-Oil Sector Expands for Seventh Straight Month

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

Saudi Non-Oil Sector Expands for Seventh Straight Month

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

Saudi Arabia’s non-oil private sector continued to expand in October, with business activity and output growth accelerating despite a decline in the Riyad Bank Purchasing Managers’ Index (PMI) to 54.0 from 55.3 in September, according to data compiled by S&P Global.

The seasonally adjusted index remained above the neutral 50-point threshold for the seventh consecutive month, signaling continued improvement in operating conditions. Although it eased from September’s seven-month high, October’s reading was the second-highest since February.

Output growth accelerated to a strong pace from the previous month, supported by improving underlying demand and increased sales and marketing efforts. New orders also continued to rise, although more slowly than in September and at a rate below the survey’s historical average.

Domestic demand remained the main driver of growth, while export orders declined for the eighth consecutive month, with the contraction accelerating.

Survey respondents cited shipping disruptions, higher transport and insurance costs, and competitive market conditions as factors weighing on overseas sales. About a quarter of firms reported a decline in export orders in October.

Employment increased for the fourth consecutive month, although hiring remained modest and slowed from September. Backlogs of work rose slightly for the second straight month, reflecting higher sales and some delays in supplier deliveries.

Supplier delivery times improved only marginally, marking the weakest improvement since April, as disruptions to maritime routes continued to affect shipments. Some businesses consequently increased their reliance on domestic suppliers to secure production inputs.

Cost pressures intensify

Cost pressures mounted at the start of the final quarter, with purchase prices rising at their fastest pace in six months, driven by higher shipping, insurance, raw material and energy costs. Staff cost inflation also reached its highest level since February.

Despite rising input costs, the rate of increase in selling prices slowed to a nine-month low as companies offered larger discounts amid intensifying competition. Nevertheless, selling prices continued to rise at a strong pace.

Commenting on the findings, Naif Al-Ghaith, chief economist at Riyad Bank, said the non-oil private sector demonstrated resilience in October, supported by sustained domestic demand, stronger business activity and continued employment growth.

He noted that the PMI’s position above the 50-point threshold indicated improving operating conditions despite its decline from the previous month.

Al-Ghaith explained that faster output growth reflected Saudi businesses’ ability to respond to domestic demand through operational efficiency, marketing initiatives and increased sales activity.

New orders maintained strong growth, although demand had become more selective, he added.

Continued hiring, inventory accumulation and purchasing activity reflected companies’ readiness to meet demand, while expectations for output over the coming year remained only mildly positive and below the survey’s historical average.


Growth in Non-Oil Revenue Bolsters Saudi Budget Resilience

 A general view of Riyadh city during the early hour of evening at Riyadh, Saudi Arabia, May 28, 2025. (Reuters)
A general view of Riyadh city during the early hour of evening at Riyadh, Saudi Arabia, May 28, 2025. (Reuters)
TT

Growth in Non-Oil Revenue Bolsters Saudi Budget Resilience

 A general view of Riyadh city during the early hour of evening at Riyadh, Saudi Arabia, May 28, 2025. (Reuters)
A general view of Riyadh city during the early hour of evening at Riyadh, Saudi Arabia, May 28, 2025. (Reuters)

Saudi Arabia’s non-oil revenue surpassed oil revenue in the third quarter of 2026 for the first time since 2020, highlighting progress in diversifying government income and strengthening the budget’s resilience to energy market volatility.

The shift came as the Kingdom continued to control spending and allocate resources according to priorities, while maintaining funding for essential services and development projects in support of Vision 2030.

According to the Saudi Ministry of Finance, total revenue fell 4% year on year to SAR 259.1 billion ($69.1 billion) in the third quarter, while expenditure declined by the same percentage to SAR 343.4 billion ($91.6 billion), resulting in a deficit of SAR 84.3 billion ($22.5 billion).

For the first nine months of the year, revenue totaled SAR 858.9 billion ($229 billion), against expenditure of SAR 1.103 trillion ($294.2 billion), representing about 84% of the approved annual budget of SAR 1.3128 trillion.

Non-oil revenue strengthens revenue diversification

Non-oil revenue rose 20% in the third quarter to SAR 142.6 billion ($38 billion), helping offset a 23% decline in oil revenue to SAR 116.5 billion ($31.1 billion).

Over the first nine months, non-oil revenue reached SAR 412.5 billion ($110 billion), up 8% year on year, reflecting the expanding government revenue base and the growing contribution of non-oil sources to public finances.

Among non-oil revenue components, other revenue recorded the strongest growth in the third quarter, rising 68% to SAR 49.1 billion ($13.1 billion), from approximately SAR 29.3 billion a year earlier.

Taxes on international trade and transactions increased 26% to SAR 7.2 billion ($1.9 billion), while taxes on income, profits and capital gains rose 16% to SAR 7.7 billion ($2.1 billion). Taxes on goods and services totaled SAR 75.2 billion ($20.1 billion).

Essential and development sectors

Health and social development accounted for the largest share of cumulative government spending through the end of the third quarter, receiving SAR 230.8 billion ($61.5 billion), or 89% of the sector’s allocated budget.

The military sector ranked second, with spending of SAR 187.5 billion ($50 billion), followed by education at SAR 159.3 billion ($42.5 billion) and security and regional administration at SAR 99.4 billion ($26.5 billion).

Spending on economic resources reached SAR 75.7 billion ($20.2 billion), up 11% from the same period last year, reflecting continued allocation of resources to economic and development-related activities.

The figures show that funding for priority sectors was maintained despite the decline in overall quarterly expenditure, underscoring the importance of managing spending and balancing operational needs with development priorities.

Reserves and debt management

Saudi Arabia’s general reserve balance stood at SAR 399.5 billion ($106.5 billion) at the end of the third quarter, while the current account balance reached SAR 50.8 billion ($13.5 billion).

Total public debt amounted to approximately SAR 1.774 trillion ($473 billion), comprising SAR 1.136 trillion ($302.9 billion) in domestic debt and SAR 637.6 billion ($170 billion) in external debt.

New debt issuance during the period totaled SAR 298.3 billion, as part of efforts to finance the planned budget deficit, manage funding requirements and support development and strategic projects.

Dr. Salem Baajajah, professor of economics at King Abdulaziz University, told Asharq Al-Awsat that the first nine months of 2026 reflected the government’s continued support for economic activity and development projects, with expenditure rising 8% to approximately SAR 1.1 trillion, compared with revenue growth of 3% to SAR 858.9 billion.

The widening gap between revenue and expenditure underscored the need to balance development spending with fiscal sustainability, he explained.

Government expenditure remains an important driver of growth by financing projects and infrastructure, supporting non-oil sectors and strengthening the private sector’s contribution to economic activity, Baajajah noted.

However, the next phase requires greater emphasis on spending efficiency and maximizing the economic returns of projects to ensure their long-term development impact.

Baajajah stressed that assessing fiscal performance should go beyond revenue and expenditure growth rates to examine revenue sources, the size of the deficit and how it is financed, and the extent to which spending generates economic growth and jobs.

Overall, the third-quarter results reflect a two-pronged approach to fiscal management: expanding non-oil revenue to broaden the income base while aligning expenditure with available resources, without neglecting essential sectors or development projects.

This approach strengthens the budget’s ability to withstand fluctuations in oil revenue while supporting economic diversification targets and maintaining fiscal discipline.


Aramco's Resilience Pays Off as Profit Rises to $31.2 Bn, East-West Pipeline Expansion Advances

Visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in the Saudi capital Riyadh on November 13, 2019. (AFP)
Visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in the Saudi capital Riyadh on November 13, 2019. (AFP)
TT

Aramco's Resilience Pays Off as Profit Rises to $31.2 Bn, East-West Pipeline Expansion Advances

Visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in the Saudi capital Riyadh on November 13, 2019. (AFP)
Visitors stop at the Aramco exhibition section at the Misk Global Forum on innovation and technology held in the Saudi capital Riyadh on November 13, 2019. (AFP)

Saudi Aramco turned a turbulent third quarter into stronger earnings, defying war-related disruptions to energy markets, production facilities and export routes as higher oil prices, a surge in refining margins and operational flexibility helped lift profits.

The Saudi oil giant's adjusted net income rose 9% year-on-year to 117 billion riyals ($31.2 billion), beating analysts' forecasts of $28.7 billion. Free cash flow jumped 20%, allowing Aramco to maintain its base dividend and raise it by 3.5% to 82.07 billion riyals ($21.89 billion).

Aramco also began preliminary engineering work to expand its East-West pipeline, aiming to strengthen export flexibility and protect supplies against future disruptions.

The move comes as Aramco President and CEO Amin Nasser warned that dangerously low global oil inventories, particularly diesel stocks, could intensify pressure on energy markets this winter. Rebuilding depleted inventories could take up to two years, he said.

Aramco's reported third-quarter net income attributable to shareholders surged 41.3% to 137.39 billion riyals ($36.64 billion), while adjusted net income climbed 9% to 117 billion riyals ($31.2 billion).

The gap largely reflected exceptional items, including a gain of about 25.9 billion riyals ($6.9 billion) from the sale of Aramco's stake in Malaysia's PRefChem refining and petrochemicals venture, alongside other adjustments excluded from adjusted earnings.

Aramco completed the sale of its 50% stake in joint ventures with Malaysia's Petronas in September as part of a broader portfolio restructuring.

The company attributed the rise in reported profit mainly to higher revenue, other sales-related income and gains from the disposal of its stake in an associate, partially offset by higher operating costs.

Higher crude prices provided a major boost. Aramco's average realized oil price reached $95.2 a barrel in the third quarter, up from $70.1 a year earlier, although below the second quarter's $108.1.

Production, however, remained under pressure.

Total hydrocarbon output stood at 11.05 million barrels of oil equivalent per day (boepd), down about 17% from 13.3 million boepd a year earlier. Output rebounded 17% from the second quarter, reflecting an operational recovery as Aramco restored part of its production capacity.

Liquids production, including crude oil, natural gas liquids and condensates, fell to 8.7 million barrels per day from 10.8 million, while gas output slipped to 12.3 billion standard cubic feet per day from 12.6 billion.

Lower crude sales volumes weighed on the upstream business. Adjusted earnings before interest, income taxes and zakat fell to $46.8 billion from $51.5 billion a year earlier, mainly due to lower volumes sold and higher production royalties, partially offset by stronger crude prices.

The downstream business told a different story.

Adjusted earnings before interest, income taxes and zakat in refining, chemicals and marketing soared 234% to about $10.3 billion from $3.1 billion, driven by a sharp improvement in refining margins.

Export flexibility helps Aramco navigate supply shock

As war-related disruptions upended oil flows, Aramco relied on its network of export routes and existing infrastructure to keep crude moving to customers.

Central to that effort was the East-West pipeline, which transports oil from Saudi Arabia's Eastern Province to export terminals on the Red Sea.

The company also used Arabian Gulf export terminals and ship-to-ship transfers to reroute shipments and maintain deliveries.

Speaking during Aramco's third-quarter earnings review, Nasser said the company had honored its commitments to customers despite what he called the biggest supply shock in the oil industry's history.

He credited Aramco's integrated operations, operational flexibility and rapid damage assessments for its ability to restore affected facilities.

More than 90% of materials needed for repairs and recovery were sourced locally, he said, while the company's response and asset-restoration speed was about six times better than industry benchmarks.

Aramco has now begun preliminary engineering studies for an expansion of its East-West pipeline and is considering additional storage capacity at major demand centers and along export routes. The aim is to diversify transportation options and reduce reliance on any single route during crises.

Nasser said the company was also examining other ways to strengthen supply resilience. Under current regional trade disruption conditions, the cost of expanding the pipeline could be recovered in about 15 days, according to Aramco's estimates.

The disruptions nonetheless took a toll on supply reliability, which fell to 97.8% in the third quarter from 99.9% a year earlier and 98.4% in the second quarter of 2026.

Low inventories raise risks for winter energy markets

Nasser warned that the global oil market was not yet out of danger, even after alternative supply routes and withdrawals from strategic and commercial reserves helped soften the impact of disruptions.

More than 3 billion barrels of oil liquids supply have been lost since the disruptions began, he said.

Alternative flows and withdrawals from strategic reserves helped narrow the shortfall to about 2 billion barrels. Demand management and commercial inventory drawdowns covered the remaining gap.

But these measures cannot replace sustainable supplies, Nasser cautioned.

He warned that global inventories, particularly diesel and middle distillate stocks, had fallen to worrying levels, leaving energy markets vulnerable to additional pressure as winter fuel demand rises.

Nasser expects global oil liquids demand to grow by about 2.4 million barrels per day in 2027 as demand management measures ease. Replenishing inventories drained during the crisis could take as long as two years.

Aramco targets swift production recovery, invests in AI

Aramco could return to pre-war production levels within days and restore its maximum sustainable capacity of 12 million barrels per day in less than three weeks, Nasser said.

The company has begun increasing production at its Zuluf oilfield, targeting a capacity increase of about 600,000 barrels per day by year-end.

Gas expansion projects are also moving forward, including the second phase of the Jafurah field, which aims to lift production to 2 billion standard cubic feet per day by 2030.

Beyond oil and gas, Aramco is expanding into new growth sectors, including artificial intelligence and mining.

Nasser said the company's investment in HUMAIN, through a 49% stake acquired for $2.6 billion in cash alongside the transfer of AI assets, aims to create an integrated platform spanning data centers, cloud services, AI models and applications.

Aramco will contribute its operational expertise, infrastructure and ability to supply low-cost, lower-carbon-intensity energy.

The venture is targeting 3 gigawatts of AI data center capacity by 2030.

Aramco Executive Vice President and Chief Financial Officer Ziad Al-Murshed underscored the financial upside of restoring production.

Every additional 1 million barrels per day of oil output could generate between $12 billion and $14 billion in annual operating cash flow, based on the company's assumptions about prices and market conditions, he said.

Aramco's ability to reach its maximum sustainable capacity of 12 million barrels per day in less than three weeks would also allow it to respond quickly to stronger demand.

Al-Murshed identified execution efficiency, growth and financial strength as the three pillars supporting the company's expansion and balance sheet.

Free cash flow excluding working capital changes reached $87.4 billion in the first nine months of 2026, up 35% from a year earlier.

He also reaffirmed Aramco's commitment to financial discipline and portfolio optimization, pointing to the sale of its stake in Malaysia's PRefChem refinery.

Cash flow jumps as Aramco strengthens its balance sheet

Despite operational headwinds, Aramco delivered stronger cash flow in the third quarter.

Cash generated from operating activities rose to 145.2 billion riyals ($38.7 billion) from 135.4 billion riyals ($36.1 billion) a year earlier. Free cash flow climbed 20% to 105.8 billion riyals ($28.2 billion), compared with 88.4 billion riyals ($23.6 billion) in the same period of 2025.

Excluding working capital movements, quarterly free cash flow reached $27.1 billion, up from $25.3 billion a year earlier.

For the first nine months of 2026, free cash flow excluding working capital changes surged 35% to $87.4 billion, highlighting the company's ability to generate cash from its core operations.

Capital expenditure fell to $10.2 billion in the third quarter from $12.4 billion a year earlier.

Aramco kept its 2026 capital spending guidance unchanged at $50 billion to $55 billion, including costs associated with repairing and restoring assets and its investment in HUMAIN.

Its gearing ratio improved to 5.5% at the end of September from 6.2% at the end of June, while return on average capital employed rose to 22.1% from 20.1% a year earlier.

Mohammed Al-Farraj, senior asset management executive at Arbah Capital, told Asharq Al-Awsat that Aramco was exceptionally well positioned to weather potential supply shortages in 2027.

Its competitive edge rests on low production costs, flexible export infrastructure and the ability to increase output to its maximum sustainable capacity of 12 million barrels per day, he said.

Al-Farraj noted that Nasser had indicated this capacity could become available within days, rather than necessarily taking three weeks.

But he cautioned against assuming that supply shortages would persist.

"Global demand forecasts are not the only factor determining future results," Al-Farraj said.

He pointed to International Energy Agency projections for oil demand growth of about 2.4 million barrels per day in 2027, alongside an expected recovery in global supplies of roughly 8.3 million barrels per day that year, according to the agency's August 2026 report.

Those figures suggest the market could see improving supply conditions rather than prolonged shortages, he said.

Al-Farraj said Aramco remained strategically positioned to benefit from any supply shortfall, but the scale of potential gains in 2027 would depend on demand, oil prices and the pace of the global production recovery.

Higher sales volumes combined with strong prices would likely support revenue and free cash flow. A rapid recovery in supply or weaker prices, however, could limit the financial benefit of increased output.

For Aramco, the latest figures underscore its ability to preserve liquidity, maintain financial flexibility and fund expansion despite supply disruptions and lower production.

Stronger free cash flow and reduced gearing also bolster its capacity to invest, meet shareholder commitments and expand production and export options as it prepares for further challenges in global energy markets.