Gulf markets are experiencing mixed reactions to the US Federal Reserve's potential slowdown in interest rate cuts, impacting stocks tied to the US dollar. Dubai's index fell 0.6%, with significant losses in utilities and industrials, while Abu Dhabi also dropped 0.6%, despite optimism from Lulu Retail's IPO. Conversely, Qatar rose 0.4% and Saudi Arabia nudged up 0.2%, supported by positive developments in the energy sector.
Saudi Aramco faces a critical decision regarding its $31 billion quarterly dividend as its debt increases. The company must choose between cutting the dividend, which could exacerbate the kingdom's budget deficit, or continuing to borrow to sustain the payout. This dilemma arises as oil prices remain low and production is at a three-year low, impacting the financial support for Crown Prince Mohammed Bin Salman’s ambitious spending plans.
Saudi Aramco, the world's largest oil company, is facing financial strain as it struggles to maintain its hefty dividend payments amid constrained production and lower oil prices. With year-to-date dividends of $93.2 billion against a free cash flow of only $63.7 billion, the company is burning through over $100 million daily to satisfy shareholders. This unsustainable financial practice raises concerns about the longevity of its current dividend strategy.
OPEC+ has decided to delay its planned December production increase by one month, marking the second postponement as oil prices remain under pressure amid a weak economic outlook. The coalition, led by Saudi Arabia and Russia, will maintain supply constraints instead of adding 180,000 barrels per day as initially intended.
OPEC and its allies are unlikely to increase oil production this year, as they are benefiting significantly from refined products. Rystad Energy's Mukesh Sahdev indicated that the group, led by Saudi Arabia and Russia, aims to maintain global oil prices between $75 and $80 per barrel by continuing to limit output.
Saudi Arabia is actively pursuing global investments in chemical production to secure buyers for its crude oil. The kingdom is in discussions to acquire stakes in companies in China and aims to finalize more deals this year and next, viewing chemical production as essential for future oil demand growth.
Saudi Arabia's oil export revenue has fallen to its lowest level in over three years, reaching $17.4 billion in August, a 6% decrease from the previous month. This decline is attributed to sluggish demand growth impacting crude prices, marking the lowest monthly revenue since June 2021.
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