Oil Slides on Worries About Lockdowns in China, Release of Reserves

A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
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Oil Slides on Worries About Lockdowns in China, Release of Reserves

A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song
A man climbing a tree looks over barriers, which have been built to separate buildings from a street, amid the coronavirus disease (COVID-19) pandemic in Shanghai, China March 22, 2022. REUTERS/Aly Song

Oil prices slid more than $2 a barrel on Monday, following a second straight weekly decline after world consumers announced plans to release a record volume of crude and oil products from strategic stocks and as China lockdowns continued.

Brent crude was down $2.32, or 2.3%, at $100.46 a barrel by 0427 GMT, while US West Texas Intermediate crude lost $2.37, or 2.4%, to $95.89. Last week, Brent dropped 1.5% while US oil slid 1%. For several weeks, the benchmarks have been at their most volatile since June 2020.

The market has been watching developments in China, where authorities have kept Shanghai, a city of 26 million people, locked down under its "zero tolerance" policy for COVID-19.

China is the world's biggest oil importer.

Concerns about China's growth was the main reason for the fall in oil prices today with Shanghai's lockdown showing no signs of being lifted and Guangzhou looking to start mass virus testing, said Jeffrey Halley, senior market analyst at OANDA.

"Fears are rising now that if China's Omicron wave spreads to other cities, its zero-COVID policy will see mass extended lockdowns that negatively impact both industrial output and domestic consumption," Reuters quoted him as saying.

Member nations of the International Energy Agency (IEA) will release 60 million barrels over the next six months, with the United States matching that amount as part of its 180-million-barrel release announced in March. The moves are aimed at offsetting a shortfall in Russian crude after Moscow was hit with heavy sanctions following its invasion of Ukraine.

"We expect these Strategic Petroleum Reserve (SPR) volumes —about 273 million barrels in total and 1.3 million barrels per day (mbd) over the next six months — to go a long way in the short term toward offsetting the 1 mbd of Russian oil supply we expect to remain permanently offline," said JP Morgan analysts in a note.

However, it is unclear whether that will fully offset the shortfall in Russian oil as exports continued, with India, lured by steep discounts, increasing imports.

On Monday, President Joe Biden will meet virtually with Indian Prime Minister Narendra Modi, the White House said, at a time when the United States has made it clear it does not want to see an uptick in Russian energy imports by India.

In the United States, energy firms last week added oil and natural gas rigs for a third week in a row as Washington seeks more production to help its allies wean themselves off Russian oil and gas.



Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
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Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)

As Saudi companies start reporting their Q2 financial results, experts are optimistic about the transport and logistics sector. They expect a 10% annual growth, with total net profits reaching around SAR 900 million ($240 million), driven by tourism and an economic corridor project.

In Q1, the seven listed transport and logistics companies in Saudi Arabia showed positive results, with combined profits increasing by 5.8% to SAR 818.7 million ($218 million) compared to the previous year.

Four companies reported profit growth, while three saw declines, including two with losses, according to Arbah Capital.

Al Rajhi Capital projects significant gains for Q2 compared to last year: Lumi Rental’s profits are expected to rise by 31% to SAR 65 million, SAL’s by 76% to SAR 192 million, and Theeb’s by 23% to SAR 37 million.

On the other hand, Aljazira Capital predicts a 13% decrease in Lumi Rental’s net profit to SAR 43 million, despite a 44% rise in revenue. This is due to higher operational costs post-IPO.

SAL’s annual profit is expected to grow by 76% to SAR 191.6 million, driven by a 29% increase in revenue and higher profit margins.

Aljazira Capital also expects a 2.8% drop in the sector’s net profit from Q1 due to lower profits for SAL and Seera, caused by reduced revenue and profit margins.

Mohammad Al Farraj, Head of Asset Management at Arbah Capital, told Asharq Al-Awsat that the sector’s continued profit growth is supported by seasonal factors like summer travel and higher demand for transport services.

He predicts Q2 profits will reach around SAR 900 million ($240 million), up 10% from Q1.

Al Farraj highlighted that the India-Middle East-Europe Economic Corridor (IMEC), linking India with the GCC and Europe, is expected to boost sector growth by improving trade and transport connections.

However, he warned that companies may still face challenges, including rising costs and workforce shortages.