The Gulf Trio’s Oil Swing Swipe

OPEC powers Saudi Arabia, the UAE and Kuwait sold off shares as cartel production stayed constant despite the 30 percent global oil price slide in recent months. The Saudi minister in charge hinted at a Vienna headquarters meeting that output may be curtailed to just over 9 million barrels/day next year, which would place the onus on infrastructure spending to extend 3 percent GDP growth. The MSCI component had rallied 10 percent before the decision on a popular IPO from National Commercial Bank offsetting the fallout from the resignation of a telecom firm executive for alleged accounting misrepresentation.  The US-trained regulator has vowed a harsher stance against abuses in the run-up to broader international opening. With the petroleum export blow the exchange rate peg has come under forward pressure in a repeat of the immediate post-2008 aftermath, although Monetary Authority foreign assets have since soared toward $750 billion and could be liquefied in an emergency. The central bank may decide to hike rates before the Fed, which could choke double-digit private sector credit expansion to support the non-energy economy. The UAE’s Emaar real estate listing hit the daily allowable bottom on new overheating fears as Dubai World moved to extend a 2018 repayment lump another 5 years after comfortably meeting 2015 obligations with asset sales. Its draw as an international education hub also came under scrutiny following attacks on teachers and alleged labor standard violations. Headline inflation has worsened to 4 percent on higher property as well as food and health care costs angering middle-class citizens.  Kuwait’s large MSCI frontier weighting is flat with hydrocarbons accounting for 95 percent of revenue, but a 15 percent of GDP budget surplus is still envisioned next year. Relations with Iraq may improve in the fight against ISIS and remaining Iraqi debt may be forgiven as Baghdad tries to marshal military and humanitarian resources for the onslaught.

Middle East oil importers in turn may receive lower Gulf aid and remittance flows, and Egypt after reimbursing a Qatar loan may be preparing for other early demands as it organizes a global donor conference in the coming months, with the IMF prominent after a positive Article IV report. Former president Mubarak was acquitted of murder accusations against Tahrir Square protesters and may soon be freed from jail in failing health.  Tourism has revived and the pound has been firm at 7.15/dollar despite the recent resignation of the central bank deputy governor for alleged policy disputes. Tunisian stocks are stuck awaiting the outcome of the second presidential round run-off which focuses in part on economic issues. Manufacturing has been lackluster and depends on further Eurozone recovery and real interest rates remain negative as state bank recapitalization was delayed. The new government will revisit budget questions including possible mainstream sovereign bond re-entry in a swipe at Maghreb favorite Morocco.