Decline in oil prices hit Gulf stock markets

By Al Mayadeen English
Source: Al Mayadeen English + Agencies
16 Oct 2022 19:15
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Most Gulf stock markets witnessed a negative impact following the price of crude oil falling despite OPEC+ cuts while Egypt's markets went blue as the deal with IMF gets closer.

A photographer takes pictures of the Khurais oil field during a tour for journalists, 150 km east-northeast of Riyadh, Saudi Arabia, June 28, 2021 (AP Photo/Amr Nabil, File)

Following a more than 3% decline in oil stocks and on Wall Street on Friday, most Gulf stock markets recorded a decrease on Sunday. The market index in Saudi Arabia, Tadawul All Share Index TASI, declined by 0.1% after Aramco was down by 1.1%, while Qatar's index QSI extended previous session losses after it was hit by a 0.7% decrease, according to Reuters.

Fears of global recession and weaker demand for oil, especially by China, the largest importer of crude oil in the world, resulted in crude prices falling despite the OPEC+ production cut, which in turn impacted the Gulf stock markets that rely mostly on oil sales revenue.

On the other hand, after a statement made by the IMF announcing "big policy issues" resolved in Egypt, the country's index rose. Managing Director of the IMF, Kristalina Georgieva, stated that major policy issues have been resolved upon discussions with the country's officials regarding the lending program.

The stock index in Egypt witnessed an overall increase, including a 3.5% rise for the Commercial International Bank Egypt, the top lender in the country, in addition to Egypt's blue-chip index which inclined by 2%.

China's commitment to a zero-Covid policy has affected the economic activity in the country, which in turn decreased the demand for oil as China continues to fight a spike in cases following a recent holiday.

In an attempt to respond to the currency crisis that has created import restrictions and unstable markets due to foreign debt, the Egyptian authorities are trying to attain a new IMF package during the annual meetings of the IMF and World bank that is set to convene this week in the US, Washington.

It's noteworthy that the Organization of the Petroleum Exporting Countries (OPEC)'s member states voted last Wednesday on cutting their production of oil and agreed to reduce their oil production by 2 million barrels a day in light of the world's surging energy crisis.

Attempting to curve the prices of oil in the US when all else failed, Washington has been actively using its Strategic Petroleum Reserve (SPR) for over a year.

At the current pace of oil production, the reserves will shrink to a 40-year low with only 358 million barrels remaining by the end of October. Last year, the SPR location in Texas and Louisiana reportedly contained 621 million barrels. According to official information, the US is set to stop extractions from SPR in October.

In light of Saudi Arabia's decision to support OPEC+ oil production cuts, legislation was proposed in the US to stop Washington from providing weapons to Riyadh, as proposers argued that what the US regards as the kingdom's support for Russia deserves a "far-reaching review of the US-Saudi relationship."