From Middle East to USA, coronavirus impact transforms oil industry’s dynamics

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The fossil fuel industry will inevitably feel the pain from the coronavirus impact more acutely than other economic sectors. (Reuters)
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Updated 01 August 2020
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From Middle East to USA, coronavirus impact transforms oil industry’s dynamics

  • March 2020 will go down in oil history as the month that changed the energy world
  • Demand for energy products, stable oil prices and market alliances have been upended

DUBAI: March 2020 will go down in oil history as the month that changed the energy world. 

What seemed to be certainties at the beginning of the month — growing demand for energy products, reasonably stable oil prices, business-like alliances in the crude markets — have all been upended. The industry will never be the same again. 

Daniel Yergin, the pre-eminent historian of the oil industry, described the past month as “unlike anything in the history of the oil industry,” as the world has locked itself down in the face of the outbreak of the coronavirus disease (COVID-19). 

Measures taken against the virus have affected the economy of virtually every country on earth. 

FASTFACTS

20%

Contraction in global oil demand 

Goldman Sachs, the US investment bank, estimated in a recent research paper that 92 percent of global gross domestic product (GDP) had been impacted by social-distancing measures. 

The fossil fuel industry will inevitably feel the pain more acutely than other economic sectors. 

“Not only is this the largest economic shock of our lifetimes, but carbon-based industries like oil sit in the cross-hairs, as they have historically served as the cornerstone of social interactions and globalization — the prevention of which are the main defense against the virus,” Goldman said. 

These measures have led to a contraction of global demand of at least 20 percent, as factories fall idle, trucks stop hauling and planes are grounded. Some experts believe the demand loss will be even greater as the virus peaks in Europe and the US. 

But what made this unprecedented health crisis all the more problematic for oil producers were the events of March 6 in Vienna. 

There the three-year old pact between the Organization of Petroleum Exporting Countries and non-OPEC producers — led respectively by Saudi Arabia and Russia, known as OPEC+ — fell apart over Saudi proposals to deepen and prolong output cuts in order to prop up the price of crude. 

Some commentators at the time thought the Saudis were bluffing, and had “painted themselves into a corner,” but they were given reason for second thoughts a few days later when the Kingdom unveiled a “shock and awe” campaign to dramatically increase output and offer big discounts to global customers. 

“They mean it,” one expert tweeted. 

Since then, Saudi Arabia has relentlessly upped the stakes. 

The Kingdom announced it intended to increase its “maximum sustainable capacity” — the amount of all the oil it can produce at full-out capacity — to 13 million barrels per day (bpd) in the long term. Just this week it said it would increase exports to an unprecedented 10.6 million bpd from next month. 

Other big producing countries like Russia, the UAE, Iraq and Nigeria said they would also increase output dramatically — though none have the same capacity as Saudi Arabia, with its easily accessible fields and low production costs. 

The immediate effect was been the sharpest fall of the price of crude in decades. 

In the last three weeks Brent crude has halved in price, and is standing at around one-third of its average price over the past year. 

On March 9 — the first day trading after the Vienna collapse — it fell by 30 percent, the biggest one-day amount in 30 years. 

This shock has sent convulsions through the global oil industry. 

Refineries, pipeline and storage facilities are awash with crude; the maritime crude carriers that can store crude on the high seas have been rented out for the duration at big premiums. 

In some landlocked American oilfields — where production costs are much higher than in Saudi Arabia — it has been reported that producers are paying customers to take crude away, rather than charging them for the goods supplied. 

In an era when negative interest rates loom larger each day, we now have “negative oil.” 




The fossil fuel industry will inevitably feel the pain from the coronavirus impact more acutely than other economic sectors. (Reuters)

Goldman Sachs estimated that the world has spare storage capacity for around 1 billion barrels of oil but not all of that will be accessed because transportation systems — pipelines, haulage and shipping — will seize up first. 

What remains open will be quickly swamped if there are 20 million surplus barrels being produced per day, as Goldman estimates. 

The unavoidable fate for some oil fields will be to “shut in” — to physically stop producing and leave the oil in the ground as long as prices stay so low. But this option is fraught with risks too. 

Oil corporations and governments need the revenue from crude sales, and their reserves could deteriorate quickly and their wells suffer serious long-term damage. 

The other negative effect of full storage tanks for some parts of the industry is that, once economies restart and oil demand eventually picks up, there will be a glut of cheap oil ready to flood the world’s markets, further endangering the high-cost producers’ hopes of recovery. 

Another set of US experts, the energy research team Bank of America Merrill Lynch, summed up the prospects in the three-word headline of a research note: “Into the Abyss.”

Against this background, many industry experts have struggled to understand why Saudi Arabia effectively declared “oil price wars” once the Russians refused to get involved in deeper cuts in Vienna. 

Some have highlighted the destabilizing effect on the global energy industry which the Kingdom has long sought to stabilize. 

FASTFACT

30%

Drop in price of crude on March 9 

Others have pointed to the undoubtedly negative effects of “price wars” on the Kingdom’s own revenues from oil, which are significantly impacted by lower oil prices, even if securing a bigger long-term market share. 

The complaints about Saudi Arabia’s new initiative have reached a crescendo in the US, which has by far the most to lose from a prolonged price war. 

American senators from oil-producing states have written strongly worded letters to US President Donald Trump demanding action against their ally. 

But the Kingdom has stuck resolutely to its position: Its deal with the Russians stabilized the industry for three full years, even as other producers were honoring it only in word. 

The US shale industry got a very good deal out of the OPEC+ arrangement for a long time and should be grateful for that; and it was the Russians, rather than the Saudis, who precipitated the current situation. 

Many experts are beginning to agree with the Kingdom. Omar Najia, head of derivatives at global trading group BB Energy, said: “Shale has been sick for so long and has been having a free ride on the back of OPEC+ for so long, the shoe had to drop.” 

Against the charge of recklessness leveled against the Kingdom and Russia for starting the price war, some experts are beginning to discern a pretty shrewd long-term strategy. 

Writing in the Financial Times, Antoine Halff, research scholar at the Columbia University Center on Global Energy Policy in New York, said; “From a game theory perspective, it is a masterstroke.” 

He argued the real target of the strategy is the US shale industry, which has thrived on prices kept artificially high by OPEC+. 

“The sell-off will hurt producers all around but will bring Riyadh and Moscow longer term benefits. The real prize for OPEC is the taming of shale oil,” Halff said. 

While the US share industry was aware of the danger from March 6, with dire noises immediately coming from Texas, home of the US oil industry, about the financial dangers, it has taken longer for policymakers to react. 

Trump, caught in an election cycle with gas-consuming voters and oil-producing supporters to satisfy at the same time, initially said falling oil prices were “good for the consumer,” but recently changed his mind as the oil lobby has increasingly got its point across. 

“I never thought that I’d be saying that maybe we need to have an oil increase, because we do. The price is too low,” Trump said, before talking to Russian President Vladimir Putin about oil and agreeing ministerial level talks about the possibility of some kind of stabilization. 

Yergin told Arab News: “Trump has now engaged directly with the crisis in the oil industry. The administration is very concerned about the price collapse and its threat to the future of the US oil and gas industry. 

“And it’s not just the administration. It’s also some of the most influential and important US senators who have become alarmed about the impact on their states.” 

Trump has also named a special oil envoy, Victoria Coates, former adviser to US Energy Minister Dan Brouillette, to handle US-Saudi oil relations, raising hopes that a three-way pact between the US, Russia and Saudi Arabia — a kind of super-OPEC+ — might be a possibility. 

Some oil experts do not share that optimism. Robin Mills, chief executive of consultancy Qamar Energy, said: “It’s hard to see there would be a deal. Co-ordinating US producers and getting them to co-operate with Russia and Saudi Arabia is problematic, and it is all politically difficult for Trump.” 

But it is also hard to see any deal on oil output that could outweigh the dramatic destruction of oil demand that has taken place in the past few weeks because of the virus lockdown. 

The month of March has transformed the economics, dynamics and power relationships of the oil industry, and it is hard to see how the old certainties can ever return.


Saudi Arabia raises $628m in June sukuk offering

Updated 24 June 2025
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Saudi Arabia raises $628m in June sukuk offering

JEDDAH: Saudi Arabia’s National Debt Management Center has completed its June issuance under the government’s riyal-denominated sukuk program, raising SR2.355 billion ($628 million).

The figure marks a decline of 42 percent from May’s SR4.08 billion, which was the highest monthly total recorded this year. The drop reflects typical fluctuations in the government’s monthly funding activity.

The June offering was divided into five tranches. The first amounted to SR25 million and will mature in 2027. The second, totaling SR1.175 billion, will mature in 2029. The third tranche stood at SR500 million and is set to mature in 2032. The fourth was SR5 million, maturing in 2036, while the fifth and final tranche reached SR650 million, due in 2039.

Sukuk, which are structured to comply with Islamic finance principles, offer investors returns generated from tangible assets or projects, rather than traditional interest payments. These instruments continue to attract strong demand from investors seeking stable, Shariah-compliant returns.

Despite the month-on-month decline, the latest issuance underscores Saudi Arabia’s efforts to diversify its funding base and develop the domestic debt market.

The NDMC has maintained a steady pace of monthly issuances this year, including SR3.72 billion in January, SR3.07 billion in February, SR2.64 billion in March, and SR4.08 billion in May.

Saudi Arabia continues to lead the Gulf Cooperation Council in sukuk and bond activity. In the first quarter of 2025, the Kingdom accounted for more than 60 percent of all primary debt issuances in the region, raising $31.01 billion from 41 offerings, according to the Kuwait Financial Center, known as Markaz.

In a broader outlook, S&P Global has highlighted Saudi Arabia’s expanding non-oil economy and strong sukuk activity as key drivers for growth in global Islamic finance.

The agency forecasts total sukuk issuance could reach between $190 billion and $200 billion in 2025, with up to $80 billion in foreign-currency issuances, assuming stable market conditions.

Looking ahead, Kamco Invest projects that Saudi Arabia will lead the GCC in bond maturities over the next five years. Between 2025 and 2029, about $168 billion in Saudi bonds are expected to mature, underscoring the Kingdom’s prominent role in the region’s debt landscape.


Closing Bell: TASI rises 2.37% to close at 10,964 

Updated 24 June 2025
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Closing Bell: TASI rises 2.37% to close at 10,964 

RIYADH: Saudi Arabia’s Tadawul All Share Index rose 254.04 points, or 2.37 percent, to close at 10,964.28 on Tuesday. 

Total trading turnover reached SR8.48 billion ($2.26 billion), with 248 stocks posting gains and five declining. 

The Kingdom’s parallel market Nomu also recorded an increase, gaining 492.72 points, or 1.87 percent, to settle at 26,850.79, as 73 stocks advanced and 22 retreated.

The MSCI Tadawul 30 Index, meanwhile, gained 29.06 points, or 2.11 percent, to finish at 1,406.69. 

Red Sea International Co. was the best-performing stock of the session, with its share price rising 9.97 percent to SR42.45. Salama Cooperative Insurance Co. followed with a 9.92 percent increase to SR13.52. 

Other gainers included Saudi Cable Co., which rose to a fresh year high on Tuesday, closing at SR147.20 with a 6.05 percent increase. 

On the losing side, SABIC Agri-Nutrients Co. saw the steepest decline, falling 4.58 percent to SR104.2. Saudi Arabian Oil Co. dropped 1.62 percent to SR24.34, and Taleem REIT Fund declined 0.85 percent to SR9.30. 

Dar Al Arkan Real Estate Development Co. announced its intention to issue a dollar-denominated, fixed-rate, Shariah-compliant sukuk under Regulation S, as it seeks to broaden its funding base and support general corporate purposes. 

The Riyadh-based property developer has appointed a consortium of regional and international banks to act as joint lead managers and bookrunners for the issuance. 

These include Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, and Alkhair Capital, as well as Al Rayan Investment and Arqaam Capital. Other participants are Bank ABC, Dubai Islamic Bank, Emirates NBD Capital, and First Abu Dhabi Bank.

The list also features J.P. Morgan, Mashreq, and Sharjah Islamic Bank, as well as Standard Chartered Bank, and Warba Bank. 

The appointed banks will arrange a series of fixed income investor calls starting June 24, ahead of the planned sukuk offering in global capital markets. 

The transaction remains subject to market conditions and regulatory approvals, including compliance with Financial Conduct Authority and International Capital Market Association stabilization rules. 

The offering is classified as a benchmark senior unsecured sukuk under Regulation S, which allows for international placement with institutional investors. The value of the sukuk will be determined based on market conditions at the time of issuance. 

According to the company’s statement on Tadawul, the proceeds from the issuance will be used for general corporate purposes. The board of directors approved the sukuk issuance on May 29. 

Dar Al Arkan’s share price closed the session 2.70 percent higher to reach SR19. 


Oman’s sovereign fund nets $4.1bn profit with disciplined, future-focused strategy: Report

Updated 24 June 2025
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Oman’s sovereign fund nets $4.1bn profit with disciplined, future-focused strategy: Report

  • OIA ranked 35th globally by assets under management among sovereign wealth funds
  • Around 61.3% of its portfolio is invested locally

RIYADH: Oman’s sovereign wealth fund posted a record profit of 1.59 billion Omani rials ($4.1 billion) in 2024 and grew its assets above 20 billion rials, Global SWF reported.

The additional revenue enabled the Oman Investment Authority to transfer 800 million rials into the national budget, according to the report, providing a vital fiscal cushion and underscoring the fund’s expanding dual role as both an economic engine and a diplomatic asset.

Beyond headline profits, OIA is executing a strategic shift, prioritizing domestic investments to generate local value while forming global partnerships to secure future-ready capabilities in areas such as artificial intelligence, clean energy, logistics, and manufacturing.

Ranked 35th globally by assets under management among sovereign wealth funds, the OIA is increasingly being viewed as a nimble but ambitious player.

According to Global SWF, its disciplined portfolio strategy, increased transparency, and joint fund architecture are transforming the fund into a networked sovereign investor with a growing international footprint.

At home, OIA’s economic impact is significant. Around 61.3 percent of its portfolio is invested locally, mainly through its National Development Fund, which exceeded its 2024 target by deploying 2.1 billion riyals in strategic projects, according to Global SWF.

These include infrastructure ventures such as the Duqm Refinery, new mining operations in Lasil and Al Baydha, and solar energy plants in Manah.

Over the past year, the fund has inked a $300 million joint investment platform with Algeria and expanded its Vietnam-Oman Investment Fund. 

These investments signal a shift in Gulf sovereign wealth funds— from passive holdings to active, technology-driven deal-making aligned with national objectives.

In parallel, OIA has launched the Future Fund Oman with an allocation of $5.2 billion, targeting large-scale domestic projects, small and medium-sized enterprises, and startups, according to a separate May report by Global SWF.

In its first year, the fund approved over $2 billion in deals, with 75 percent of capital coming from foreign investors, underlining investor confidence in Oman’s diversification agenda.

Investing for Vision 2040

OIA’s 2024 performance also reflected its focus on human capital and job creation, with nearly 1,400 new roles generated and the Omanization rate across OIA-linked entities reaching 77.7 percent.

Through programs like Jadarah, Nomou, and Eidaad, the fund is aligning education, training, and employment with Vision 2040’s long-term growth objectives.

Meanwhile, the fund is moving from asset accumulation toward strategic exits. Since 2022, it has divested 19 assets, including three major IPOs: Abraj Energy Services, OQ Gas Networks, and Pearl REIF— raising over $2.5 billion, according to the release.

The October listing of 25 percent of OQ Exploration & Production marked Oman’s largest-ever IPO, signaling deepening liquidity in Muscat’s capital markets, according to the Global SWF May report.

OIA’s roadmap includes 30 more divestments through 2029 across sectors, including logistics, utilities, and aquaculture, aiming to crowd in private capital and raise governance standards. These IPOs are structural tools to deepen Oman’s market while supporting the transition to a knowledge-based economy.

Global investment, local value

Even as it expands abroad, OIA insists every foreign investment must deliver back home— whether in skills, supply chain resilience, or technology transfer. Recent deals illustrate this ethos.

In the US, OIA invested in Tidal Vision, a company developing climate-smart biopolymers. In Singapore, it joined a $100 million venture capital fund with Golden Gate Ventures and helped establish a Muscat-based venture office to incubate deep-tech startups.

In one of its most high-profile moves, OIA took a stake in Elon Musk’s xAI, joining fellow Gulf players like Saudi’s Kingdom Holding and Qatar Investment Authority.

The move links Omani capital to frontier technology while reinforcing the fund’s mandate to back high-potential sectors shaping the global economy.

The OIA’s operational discipline has not gone unnoticed. Since 2021, it has reduced its subsidiary debt by nearly $5.6 billion, standing at $23.92 billion as of the end of the third quarter of 2024. It also refused to issue any new government guarantees last year, according to Global SWF, boosting investor confidence. Ratings agency S&P cited OIA’s reforms and transparency in reaffirming Oman’s BBB- rating with a positive outlook.


Mawani names Al-Mazroua as new president

Updated 24 June 2025
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Mawani names Al-Mazroua as new president

JEDDAH: Saudi Ports Authority has appointed Suliman bin Khalid Al-Mazroua as its new president, effective June 29, as part of its push to strengthen leadership and advance key strategic goals.

Al-Mazroua succeeds Mazen bin Ahmed Al-Turki, who had been serving as acting president and played a key role in several initiatives aimed at developing logistics zones and parks across the Kingdom.

Al-Turki’s most recent contribution included overseeing the signing of a series of new build-operate-transfer contracts valued at more than SR2.2 billion ($586.6 million) to develop multi-purpose cargo terminals at eight Saudi ports.

The appointment of Al-Mazroua, announced by Mawani’s board of directors, underscores the authority’s commitment to supporting the National Transport and Logistics Strategy and Saudi Vision 2030. Both initiatives aim to position the Kingdom as a global logistics hub and a leading industrial power.

In a post on his X account, Al-Mazroua expressed his appreciation for the board’s trust and pledged to further the authority’s strategic goals.

“I extend my sincere thanks and appreciation to His Excellency the Minister of Transport and Logistics Services and Chairman of the Board of the Saudi Ports Authority, Eng. Saleh bin Nasser Al-Jasser, as well as to their Excellencies and distinguished members of the board for this generous trust,” he said.

Al-Mazroua  added: “I pray to God for success in serving our blessed country and fulfilling the aspirations of our visionary leadership. I am also very pleased to work alongside my colleagues at the Saudi Ports Authority.”

In a statement, the authority said that Al-Mazroua “affirmed his commitment to advancing Mawani’s strategic objectives and enhancing its performance in line with its development plans and transformation programs.”

Before assuming his new role, Al-Mazroua served as CEO of the National Industrial Development and Logistics Program, where he played a key role in driving economic diversification and enhancing infrastructure in key sectors, including industry, mining, energy, and logistics.

“He also played a key role in stimulating investment in these sectors with the aim of increasing their contribution to the Kingdom’s gross domestic product, promoting innovation, enhancing local content, and advancing the Fourth Industrial Revolution,” the statement added.

With more than two decades of professional experience, Al-Mazroua has held several senior leadership positions, including at Saudi Aramco from 2001 to 2017.

Over the years, he progressed from technical roles to executive leadership, contributing to the establishment of research and development centers, strengthening cybersecurity frameworks, and advancing health care sector initiatives.

He also worked at US-based Aruba Networks from November 2006 to July 2007 and previously served as a quality assurance engineer at California-based Caspian Networks.

In addition, Al-Mazroua led the National Transformation Program and the Delivery and Rapid Intervention Center, where he contributed to planning, monitoring, and accelerating the implementation of development initiatives in support of Vision 2030.

He is also a member of several boards, including the Center for the Fourth Industrial Revolution in Saudi Arabia and Marafiq Co.


Saudi Arabia, Bahrain launch 2nd phase of industrial integration 

Updated 24 June 2025
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Saudi Arabia, Bahrain launch 2nd phase of industrial integration 

RIYADH: Saudi Arabia and Bahrain have launched the second phase of their industrial integration initiative, aiming to boost bilateral trade, investment, and cross-border supply chain cooperation. 

Announced on the sidelines of the Saudi Industry Forum 2025 in Dhahran, Khalil Ibn Salamah, the Kingdom’s deputy minister for industrial affairs, emphasized that the new phase would build on prior successes between the two countries. 

This comes amid strengthening economic ties between the countries, with the Saudi Arabia’s direct investments in Bahrain reaching SR35 billion ($9.33 billion) in 2023 — representing approximately 20 percent of total foreign investments — and 1,550 Saudi-registered companies operating in the country, as revealed by the Kingdom’s Minister of Investment, Khalid Al-Falih, during a business forum earlier this year. 

In an official statement marking the latest announcement, the Saudi Ministry of Industry and Mineral Resources stated: “The second phase of industrial integration between the two countries focused on setting specific targets, including enhancing intra-trade in industrial goods, attracting industrial investments.” 

It added that this will help “integration in the field of industrial infrastructure and supply chain integration,” as well as identifying a list of export opportunities for non-oil goods and facilitating procedures for exporters and investors. 

The initiative is part of broader efforts under the Gulf Cooperation Council Economic Agreement, which aims to increase the industrial sector’s contribution to regional GDP and foster industrial coordination among member states “on an integrated basis,” according to the ministry. 

The second phase builds on earlier efforts, including the Future Factories Program, which helped shift production in both countries from labor-intensive to advanced manufacturing, along with aligning policies to treat local products as national goods and streamline customs processes. 

As part of the second-phase launch, Ibn Salamah inaugurated the Bahraini Investors Services Office in Dammam’s Third Industrial City. The event was attended by Bahrain’s Minister of Industry and Commerce, Abdullah bin Adel Fakhro. 

“The office aims to attract quality industrial investments and provide all industrial investment services to investors,” the ministry noted. 

Positioned strategically near Bahrain, approximately 130 km away, Dammam’s Third Industrial City offers a robust industrial ecosystem. 

Spanning 48 million sq. meters, the site features extensive infrastructure including a modern road network, energy and water supply systems, and logistical connectivity through its proximity to King Fahd Port, King Fahd International Airport, and the dry port in the city of SPARK. 

The Saudi Industry Forum also highlighted how the new office will offer a “package of services and enablers from the industrial and mining system to facilitate the journey of Bahraini investors,” further underscoring both countries’ commitment to deepening industrial and economic ties.