LONDON: Saudi Arabian and Russian oil market policy is set to dominate the Vienna OPEC meeting next week.
The summit, to include Russia and other non-OPEC members known as “OPEC+” will gather to review a production-cuts agreement, hammered out in 2016 — amid fears of a supply crunch.
Output cuts have helped crude to rise from below $40 per barrel in early 2015 to $76 on June 15. But severe outages from crisis-hit Venezuela are also a major factor behind the rise in the price, according to the International Energy Agency.
Richard Mallinson, chief geopolitical analyst at London-based Energy Aspects, told Arab News: “The Saudis and Russians have been talking extensively throughout this process about aligning their goals and achieving a long-term impact. The OPEC+ arrangement is not a short-term deal which expires (at the end of 2018) and then everyone goes their separate ways.”
On June 14, Saudi Arabia’s energy minister, Khalid Al-Falih, said it was “inevitable” OPEC+ participants would vote to boost oil production gradually at next week’s meeting .
Speaking to reporters in Moscow, Al-Falih said “as usual we will do the right thing … I think we’ll come to an agreement that satisfies most importantly the market.”
The deal leaders, Saudi Arabia and Russia, are said to have proposed plans for the group to add as much as 1 million barrels per day to production.
When the time comes to unwind their accord, “they will do so in an orderly way as possible to maintain their influence on the market,” said Mallinson.
Carsten Fritsch, senior oil analyst at Germany’s Commerzbank, said the June meeting would probably see the signatories agree to comply at 100 percent, rather than current over-compliance at 170 percent.
But that may not happen immediately as it remains to be seen how much Iranian crude will be lost following President Donald Trump’s decision to reimpose sanctions on Tehran last month.
“I don’t see any reason to continue these production cuts at the current scale (the target was to reduce supply by 1.8 million barrels per day) into the new year,” Fritsch told Arab News in a phone interview from Frankfurt.
But there will be ongoing, joint-policy cooperation to avoid price and production spikes, he suggested.
“What I see developing is ‘informal guidance,’ much like comments from the chairman of the US Federal Reserve with regard to interest rate policy, in order to try to anchor market expectations,” said Fritsch.
Looking at the Vienna meeting, he said the message would probably be that production increases would be gradual and depend on the extent of further losses from Venezuela and the magnitude of shortfalls from Iran. These wouldn’t become apparent until the end of the year, and so it was “impossible to predict production levels that will hold in 2019,” he said.
With prices spiking at $80 per barrel in May in the wake of President Donald Trump’s decision to terminate the nuclear deal with Iran and reimpose sanctions, “the world has woken up to the fact that oversupply is no longer an issue,” and that there are looming fears of a supply squeeze, said Mallinson.
“Some of us have been saying for quite a while that the overhang would disappear and we would come back into this sort of world … a supply crunch,” he said. “What we are hearing is that there is no desire from OPEC and others to pre-empt the supply losses coming later this year.
“Iranian exports will start falling soon, but only when the world feels the ‘actual’ loss, will the Saudis, Russians and others begin to ramp up production,” said Mallinson.
Shakil Begg, global head of oil research at Thomson Reuters, said the message from producers seemed to be that they still wanted to maintain some sort of coordinated agreement.
“GCC countries are thinking about the need to replace lost Iranian barrels. They may maintain an output agreement, but the quotas for the individual countries could change.”
Begg said peak OECD inventories had been cut from around their 5-year average, at a level targeted by OPEC+ to get rid of the overhang built up between 2010-14.
Those inventory figures, however, did not fully capture what was happening in Asia where there was quite a lot of crude that had been put into storage. “If you look at China, for example, they are refining a lot more crude than they actually need, so inventories are going up there,” Begg said.
OPEC+ is under pressure to manage market expectations, but will likely indicate at Vienna that its response will come later, when supplies tighten further, he said.
As OPEC and Russia are producing significantly less oil than intended by the cuts agreement — and less than the market needs — thanks to production outages in Venezuela, observers agree that output could easily be expanded by Saudi Arabia, Russia, Kuwait and others.
“That would rebalance the oil market, driving Brent down to $65 by year’s end,” according to a Commerz-bank circular on May 21.
Comments from Saudi and Russian ministers at a recent energy forum in St. Petersburg have put pay to soaring prices with Brent plunging by more than 6 percent to $75 per barrel within days.
Still, compared to where we were, this looks like a suppliers market by any other name.
“Yes, but we think the Saudis will be more focused on preventing a really big price spike than they are on limiting or stopping prices at $75, $80 or $85, we don’t think they are concerned at the moment,” said Mallinson.
“What worries the Saudis is a massive price hike that could see crude smash through the $100 barrier.”
If that happened, he said, it could have a damaging impact on the global economy and this was not lost on OPEC and Russia. Price stability was viewed as critical for longer term demand for oil and a big spike would undermine their claims to be responsible participants, able to manage both the downside and upside of the price cycle.
Mallinson said the lurking danger was that another upward surge in the price would boost technological advances and energy efficiency gains, bolster consumer purchases of electric vehicles, and accelerate rapid shifts to alternative technologies and fuels.
Neil Atkinson, head of oil industry and markets at the International Energy Agency, said Venezuela’s production could fall by the end of this year by another several hundred thousand barrels a day, given the degradation of the oil industry there. “And that is a prognosis that is quite widely accepted,” he said.
Then factor in probable Iranian losses. “If for the sake of argument, Iranian barrels fell by about 1 million barrels a day like last time around, combined with the Venezuelan collapse, you are in a situation where unless there are compensatory increases from elsewhere, the market could tighten very rapidly. Indeed, the market is already tightening today,” said Atkinson.
US shale production is rising significantly, with the IEA forecasting an extra 1.3 million barrels per day more in 2018 compared with 2017.
“To some extent, US supply is held back by bottlenecks, but not significantly. “But US production by itself was never going to be enough to plug gaps left by Iran and Venezuela.”
Atkinson said: “Maybe at the next OPEC meeting, they will formalize some sort of relaxation of the agreement, by some given volume, at some given time. But I don’t think the intention is for prices to rise significantly above where they are today, because at that point there is the risk of ‘demand destruction.’”
Whether action will take crude down to $60 or $75 is anyone’s guess.
Mallinson believes we are no longer in the mantra of “lower for longer.”
And there is a bigger point to be made, he suggested. It’s now clear there is more influence in OPEC’s hands than some had been claiming.
“Remember a couple of years ago they were writing off the group as irrelevant, because of US shale … because people thought oversupply would last forever. Now, OPEC is back in the spotlight, it has some difficult challenges ahead. But, together with Russia, it has reconfirmed it has influence in the market.
“The big overhang is done. But the fact that OPEC members are not doing a victory dance indicates they don’t see the job as yet finished,” he said.
Saudi Arabia, Russia oil pact in focus at OPEC summit in Vienna
Saudi Arabia, Russia oil pact in focus at OPEC summit in Vienna
- Saudi Arabian and Russian oil market policy is set to dominate the Vienna OPEC meeting next week
- The summit will gather to review a production-cuts agreement, hammered out in 2016 — amid fears of a supply crunch
BNPL emerges as the preferred payment option for Saudi consumers
RIYADH: The fintech landscape in Saudi Arabia is rapidly transforming daily financial practices, with buy now, pay later services gaining significant popularity. This shift is simplifying access to flexible payment options, reshaping how people manage their finances and make purchases across the nation.
According to a recent report from leading BNPL provider Tabby, 77 percent of Saudi consumers now use BNPL for essential purchases.
Data from Tabby shows that first-time BNPL transactions are twice as likely to be for necessary items rather than discretionary ones, with education and medical expenses at the forefront. This indicates that a large portion of BNPL usage is dedicated to essential transactions rather than non-essential wants.
Tabby’s data also reveals that the average value of essential purchases made through BNPL is higher than that of discretionary spending. This suggests that while consumers are prioritizing needs, BNPL offers an accessible and affordable way to purchase high-value necessities, such as insurance and home goods.
Impact of BNPL
By allowing payments to be spread over an extended period, BNPL has revolutionized shopping habits. Not only does it provide consumers with more control over their finances, but it also alters their relationship with businesses.
In an interview with Arab News, Tarabut CEO Abdulla Al-Moayed explained that the rise of BNPL among Saudi consumers can be attributed to several factors.
“BNPL’s interest-free installment structure makes it an attractive and Shariah-compliant payment option for many Saudi consumers — a positive shift from traditional credit cards or loans,” he said.
“Because BNPL offers a low-barrier alternative to traditional credit, it doesn’t require a high credit score or lengthy approval process, making it accessible to a wider population, particularly younger and lower-income individuals. The ease of using BNPL through mobile apps and online platforms also aligns well with a generation that values convenience and speed,” Al-Moayed added.
He also pointed out that the supportive regulatory environment in Saudi Arabia has fueled the rapid growth of fintech solutions, leading to the emergence of various local BNPL providers. This increased competition has ultimately led to better services and offerings for consumers.
Arjun Vir Singh, partner and global head of fintech at business intelligence firm Arthur D. Little, offered another perspective on the surge in BNPL adoption. He noted that the e-commerce boom, accelerated by COVID-19, has significantly driven the growth of BNPL among consumers. Singh also emphasized the growing convergence of online and offline shopping experiences.
“As customers’ journeys and payment methods in-store and offline become increasingly digital, we expect BNPL adoption to expand into this segment as well,” he said.
Singh further explained that digital payments, seamless integration, merchant sponsorship, and the rising cost of living have all contributed to BNPL’s rapid growth.
BNPL vs. traditional credit
Singh noted that BNPL is beginning to disrupt traditional credit models in consumer finance, a trend that is expected to expand as BNPL adoption spreads across sectors like travel, real estate, and automotive. “Arguably, the biggest impact will come if BNPL successfully expands into the B2B credit and financing segment,” he stated.
Singh also highlighted that banks and credit card companies are already responding to the rise of BNPL by adjusting their consumer finance offerings. Many are now partnering with BNPL providers or collaborating with major players like Visa and Mastercard, which are concerned about losing consumer spending. Some banks are even developing their own flexible payment solutions that mimic the BNPL model.
For Al-Moayed, the simplicity, transparency, and digitalization of consumer credit will force traditional credit models to adapt.
“Traditional credit models that rely on rigorous background checks and higher entry barriers need to evolve quickly while still managing risk effectively, in order to appeal to a broader consumer base and offer more flexible, secure, and customer-friendly credit options,” he said.
He also emphasized the role of Open Banking in this evolution, saying it could revolutionize credit risk management by utilizing real-time and historical behavioral data. “Open Banking has the potential to make a significant impact by giving lenders more agile and secure access to data, enabling personalized credit solutions,” Al-Moayed added.
As BNPL expands consumer spending power, he believes that as the market matures, empowered consumers will become more financially literate, leading to better-informed financial decisions.
“Open Banking will help by providing enriched data to improve insights into consumers’ financial health, preventing unsustainable debt,” he said.
Al-Moayed also pointed out that early adopters of Open Banking will gain a competitive edge by providing more intelligent financial services, better user experiences, and faster, more affordable options for all consumers.
Singh concurs, noting that as traditional players adjust to the changing landscape, innovation in consumer finance will continue to flourish. “This shift includes segmenting customers based on different criteria, using alternative data to enhance credit models, and adapting models to the nature of the spend. Innovation is also extending to customer service, not just credit models,” Singh said.
Merchants and BNPL
“Retailers have been the greatest sponsors of BNPL, helping to legitimize and drive the growth of e-commerce,” said Singh. This was initially true for e-commerce platforms, but as more retail experiences shift online, BNPL adoption among merchants has grown exponentially. “The adoption of digital payment solutions across all retail models is driving BNPL growth,” Singh added.
Arthur D. Little’s proprietary research has shown that merchants are seeing substantial benefits from BNPL, including increased average transaction values, more frequent purchases, access to new customers, and lower customer acquisition costs. Merchants also enjoy a differentiated offering compared to their competitors.
Al-Moayed agrees that BNPL offers numerous advantages for merchants but suggests that more value could be unlocked by leveraging the data collected on consumer behavior and spending patterns. “Merchants should explore how to use this valuable data to offer personalized promotions or product recommendations,” he said.
“Hyper-personalized sales and marketing will be key to increasing customer engagement and loyalty. This will soon be expected across the Kingdom’s retail market,” Al-Moayed added.
The future of BNPL
“Over the next few years, BNPL services will become even more integrated into the broader financial ecosystem, using Open Banking to enhance personalization and accessibility,” said Al-Moayed.
He also foresees the global adoption of big data and artificial intelligence further enhancing the BNPL customer experience. “We may see BNPL providers developing educational tools to help consumers manage their financial health effectively while using these services,” he added.
Singh, however, envisions a different future for BNPL. “BNPL will expand into the B2B segment, particularly as a tool to service underserved micro and small businesses,” he said.
Singh also predicts that AI, enhanced regulations, and market consolidation will all play crucial roles in BNPL’s future growth.
Saudi Arabia introduces new laws to streamline business registration and trade names
RIYADH: Saudi Arabia’s new regulations designed to streamline commercial registration and trade name processes have been described as a “game-changer” for entrepreneurs.
Approved in September, the laws are set to come into force in the coming weeks and aim to enhance business efficiency and improve the overall commercial environment.
Experts have told Arab News that the new regulations will help encourage small businesses, particularly those led by women — key components of the Kingdom’s Vision 2030 economic diversification strategy.
In the first quarter of 2024 alone, the trade sector saw 104,000 new commercial registrations, marking a 59 percent increase compared to the same period in 2023. The Ministry of Commerce also issued 65,363 permits during this time last year.
When the changes were announced, Minister of Commerce Majid bin Abdullah Al-Qasabi said they were designed to simplify business operations by offering a unified national registration system.
Ryan Al-Nesayan, partner at business intelligence firm Arthur D. Little, hailed these regulations as a “game-changer,” stating that by simplifying and speeding up the registration process, the new laws eliminate bureaucratic bottlenecks that previously slowed down business launches.
He told Arab News: “This is especially important for startups where every delay can cost momentum. Entrepreneurs can now get their ventures off the ground quickly, focusing on growth rather than navigating paperwork.”
Al-Nesayan noted that the sharp rise in business registrations is a clear indication that Saudi Arabia is becoming a magnet for entrepreneurial activity. He attributes this growth to the government’s focus on business-friendly reforms and Vision 2030 initiatives, which are creating a more streamlined business environment.
Notably, women received 44 percent of the new registrations in the first three months of 2024, underscoring a significant rise in female participation in the business world.
Al-Nesayan emphasized the importance of this statistic, pointing out that the new regulations are removing barriers that previously discouraged female entrepreneurs.
He added: “As the environment becomes more accessible, we’re likely to see continued growth in women-led businesses, which supports gender inclusivity in Saudi Arabia’s economic development.”
The introduction of these regulations brings the total number of commercial certificates issued across Saudi Arabia to over 1.45 million.
Jihad Chidiac, a Lebanon-based attorney, explained that the two new laws, the Commercial Registration Law and the Trade Names Law, are set to take effect 180 days after their publication in the official gazette, which is expected within the next few weeks.
These laws will fully replace older legislation, with the current Law of Commercial Register having been in effect since 1995 and the Trade Names Law issued in 1999.
According to Chidiac, the introduction of these two laws “comes in alignment with the recent legal reforms the Kingdom is undertaking, including the new Investment Law permitting full foreign ownership of companies, and the amendment of the Labor law, while having as the main goal the implementation of Vision 2030 and the attraction of foreign investments into the Kingdom.”
Chidiac further elaborated that the new Trade Names Law specifically enhances the legal protection of intellectual property, making it easier for businesses to reserve, transfer, and protect their trade names.
He noted that the new law “prohibits the registration of names similar to existing ones regardless of different business activities, and simplifies the transfer of trade name ownership without requiring the transfer of the entire business.”
This step, according to Chidiac, is aimed at reducing conflicts and enhancing fair competition by encouraging businesses to adopt unique, distinctive trade names.
The new laws also set guidelines for the resolution of disputes related to trade names and business registration.
Chidiac commented that the centralized electronic database for business and trade name registrations will reduce duplication, improve transparency, and promote uniformity across the Kingdom.
He explained that the improved registration processes and enhanced legal framework will likely prevent conflicts over similar trade names.
He also mentioned that Saudi Arabia’s legal system encourages alternative dispute resolution methods such as mediation and arbitration, which help reduce the burden on courts and offer flexible options for businesses involved in disputes.
According to Abdulrahman Al-Hussein, spokesperson for the Ministry of Commerce, the new system is based on international best practices.
Arthur D. Little’s Al-Nesayan agreed, noting that the adoption of international best practices in the new registration system will make Saudi Arabia a more attractive market for foreign investors.
He explained: “The unified national registration system is a major win for both local and foreign businesses. It removes the complexity of dealing with multiple agencies and provides a one-stop platform for all business-related registrations.”
This, he added, signals a more predictable and transparent operating environment, aligning with global standards and making market entry far smoother for international companies.
The reforms also provide enhanced trade name protection, which Al-Nesayan highlighted as crucial for businesses looking to scale both domestically and internationally.
“In today’s market, a business’s brand is often one of its most valuable assets,” he said. “By ensuring stronger protection for trade names, companies can confidently invest in their brand, knowing it’s secure. Over time, this will build consumer trust, enhance market presence, and support long-term growth.”
For those with existing sub-registers, a five-year grace period is being offered to either transfer or cancel their registrations. Chidiac pointed out that while this grace period offers flexibility, it also raises challenges for businesses regarding the company’s history and anteriority, particularly if they opt to cancel their sub-registers.
He explained that companies must carefully consider the potential impact on their business identity when making decisions during this transition phase.
Alongside these changes, the cabinet also approved a new real estate transaction tax system and other related measures. Chidiac explained that the new real estate law replaces the previous 15 percent VAT on real estate sales with a 5 percent tax on property ownership transfers.
He noted that this reform will not only ease the financial burden on businesses but also attract local and foreign investment into the real estate sector.
Certain transactions, such as inheritance distribution and charitable transfers, are exempt from this tax, which Chidiac believes will stimulate increased activity in the real estate market.
Al-Nesayan also highlighted the significance of this new real estate transaction tax system, noting that it complements the broader business reforms by promoting a more structured and transparent property market.
He explained that such transparency is essential as Saudi Arabia grows as a business hub, stabilizing property markets and supporting broader economic diversification efforts.
Chidiac added that legal counsel will play a crucial role in helping businesses navigate the transitional period for the new regulations, particularly regarding the five-year grace period for existing registrations.
He emphasized the need for businesses to stay informed and seek professional advice to ensure compliance with the updated regulations.
Al-Nesayan echoed this sentiment, advising businesses to engage with legal and business advisory services early on to fully benefit from the streamlined processes.
He added: “Being agile in adapting to these reforms will give businesses a significant competitive edge in this evolving landscape.”
Egypt central bank keeps overnight interest rates steady
CAIRO: Egypt’s central bank kept its overnight interest rates unchanged on Thursday, as expected, saying that while inflation was set to decelerate sharply in early 2025 it nonetheless remained high.
The bank’s monetary policy committee kept the lending rate at 28.25 percent and the deposit rate at 27.25 percent, it said in a statement.
The unanimous forecast in a Reuters poll of 12 analysts was that the committee would keep rates steady.
Egypt’s headline inflation dipped in November to 25.5 percent, its lowest since December 2022, and has been trending downwards from a record high of 38.0 percent in September 2023.
“Inflation is projected to ease substantially in 2025, as the cumulative impact of monetary policy tightening and favorable base effect materializes, with a notable decline in Q1 2025 and convergence to single digits by H2 2026,” the statement said.
It added that according to leading indicators, economic growth accelerated in the second half of 2024 from the 2.4 percent recorded in the second quarter.
“The committee judges that the current policy rates remain appropriate to maintain a tight monetary stance until a significant and sustained decline in inflation is achieved, and expectations are firmly anchored,” the statement said.
Oil Updates — prices set for weekly gain on China stimulus optimism
RIYADH: Oil prices were little changed on Friday but were set for a weekly rise amid optimism that economic stimulus efforts will prompt a recovery in China, but a stronger dollar capped gains, according to Reuters.
Brent crude futures fell 2 cents to $73.24 a barrel by 08:35 a.m. Saudi time. US West Texas Intermediate crude was at $69.61, down 1 cent, from Thursday’s close. However, on a weekly basis, Brent was up 0.4 percent and WTI rose 0.2 percent.
The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, but warned that subdued household and business confidence, along with headwinds in the property sector, would keep weighing it down next year.
China, the world’s biggest oil importer, revised upwards its 2023 gross domestic product estimate by 2.7 percent, but also said the change would have little impact on growth this year.
Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year, Reuters reported this week citing sources, as Beijing ramps up fiscal stimulus to revive a faltering economy.
However, a stronger US dollar weighed on oil prices and capped gains. The greenback has risen about 7 percent this quarter and remained pinned at a near two-year peak against major peers after the Federal Reserve signaled slower rate cuts in 2025.
A stronger dollar makes oil more expensive for holders of other currencies.
The latest weekly report on US inventories from the American Petroleum Institute industry group showed crude stocks fell last week by 3.2 million barrels, market sources said on Tuesday. API/S
Traders will be waiting to see if the official inventory report from the US Energy Information Administration confirms the decline. The EIA data is due at 9 p.m. Saudi time on Friday, later than normal because of the Christmas holiday.
Analysts in a Reuters poll expect crude inventories fell by about 1.9 million barrels in the week to Dec. 20, while gasoline and distillate inventories are seen falling by 1.1 million barrels and 0.3 million barrels respectively.
ROSHN launches first residential community in Makkah
JEDDAH: Saudi Arabia’s leading property developer, ROSHN, has officially launched its first residential community in Makkah, marking a significant milestone in the company’s efforts to improve the city’s living standards while supporting the national development goals outlined in Vision 2030.
The launch event for the Al-Manar Community project, which is ROSHN’s inaugural residential development in Makkah, took place under the patronage of Makkah Gov. Prince Khaled Al-Faisal. The groundbreaking ceremony was attended by a host of prominent figures, including Makkah Mayor Musaed bin Abdulaziz Al-Dawood, Royal Commission for Makkah and Holy Sites CEO Saleh bin Ibrahim Al-Rasheed, Real Estate General Authority CEO Abdullah Al-Hammad, and ROSHN’s acting CEO Khaled Jawhar. The event also saw participation from officials across both the public and private sectors.
Strategically positioned, the Al-Manar community is just a 20-minute drive from the Grand Mosque, less than an hour from King Abdulaziz International Airport in Jeddah, and only two minutes from Makkah’s western gateway. The development’s design thoughtfully integrates the region’s rich cultural and architectural heritage, blending modernity with tradition.
The Saudi government, under Vision 2030, has set ambitious targets to boost homeownership among citizens, aiming for 70 percent by the end of the decade.
ROSHN is playing a pivotal role in achieving this goal by developing large-scale residential projects that offer high-quality and affordable housing options for Saudi citizens. These initiatives are in line with the government’s strategy to expand the housing sector, elevate living standards, and provide homes for the country’s growing population.
At the ceremony, attendees were given a tour of model villas and previewed the diverse residential designs available within the community. The Al-Manar development will feature a variety of villas alongside essential amenities such as schools, mosques, shopping centers, healthcare facilities, open spaces, and recreational areas.
Khaled Jawhar, acting CEO of ROSHN, explained that the project spans over 21 million sq. meters and will provide more than 33,000 housing units. Additionally, it will offer more than 150 facilities designed to meet the needs of residents and support community well-being.
Saleh bin Ibrahim Al-Rasheed, CEO of the Royal Commission for Makkah and Holy Sites, emphasized the significance of the Al-Manar community as the first fully integrated ROSHN development in Makkah.
“Located at the city’s western gateway, within the Haram boundaries, this project reflects our commitment to facilitating impactful developments that drive long-term growth and sustainability,” Al-Rasheed said.
