- Foreign Bank Deposits in Qatar Fall Most Since 2015 on Spat
Foreign deposits at Qatar’s banks fell the most in almost two years last month as customers withdrew funds following a diplomatic row with four Arab nations led by Saudi Arabia.
Non-resident deposits with the 18 lenders in the world’s biggest liquefied natural gas exporting nation dropped 7.6 percent to 170.6 billion riyals ($47 billion) in June from a month earlier, according to data posted on the Qatar Central Bank’s website on Wednesday. The decline is the biggest since November 2015, the data show. Overall deposits climbed 1.1 percent in June helped by a jump in domestic funds.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut ties with Qatar on June 5, accusing it of supporting extremist groups. Qatar denies the charge and says the move was an attempt by Saudi Arabia to impose its will on smaller nations in the Gulf. Qatar Investment Authority, the country’s sovereign wealth fund, has placed billions of dollars in deposits in local banks since then to shore up liquidity and soften the blow, people familiar with the development said last month.
“Qatar’s domestic liquidity was expected to come under pressure due to the diplomatic rift, given that Qatar banks have grown more reliant on external funding in light of lower energy prices,” Carla Slim, an economist for the Middle East and North Africa at Standard Chartered Plc, said in an email.
The slide in non-resident holdings, which account for 22 percent of overall deposits, comes even after local lenders raised interest rates to try and attract foreigners. The Qatar three-month interbank offered rate, a benchmark used to price some loans, climbed to 2.52 percent on July 17, the highest since at least September 2010, when Bloomberg began collecting the data.
Overall bank credit within Qatar fell 0.6 percent in June to 780 billion riyals, according to the data. Qatar has a $200 billion spending plan in preparation for the 2022 soccer World Cup.
Efforts to resolve the standoff between Qatar and the Saudi-led alliance reached an impasse, a Gulf official with direct knowledge of the matter said on Wednesday, amid signs the bloc wants to extract more concessions from Doha. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have yet to respond to proposals by the U.S. and the U.K. that aimed to start direct negotiations, the official said, speaking on condition of anonymity because of the sensitivity of the matter.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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