The Middle East oil exporters are grappling with depressed demand in their key market, China, due to the coronavirus outbreak.
The economies of the Arab Gulf countries are feeling the double sting of a sizeable loss of oil demand in Asia and a plunge in oil prices as the markets fear a significant slowdown in global economic growth because of the outbreak.
If that wasn’t bad enough for the biggest economies in the Gulf, business activity in the non-oil sector continues to deteriorate in OPEC’s biggest producer Saudi Arabia and in OPEC’s third-largest producer, the United Arab Emirates (UAE).
The start to 2020 hasn’t been good for the Saudi and UAE economies as they cut oil production in the new round of OPEC+ cuts, and they cut more than they are expected to, as they are trying to lead by example in the OPEC+ group’s efforts to draw down oil oversupply.
But then China began reporting cases of coronavirus at the end of January, sending oil prices tumbling to more than a year-low last week. Saudi Arabia and the UAE are not only exporting much-lower-than-typical volumes of crude oil, but they are also getting less money for it.
The coronavirus outbreak added more pain to the Gulf economies—it slammed China’s factory output, delayed supplies to export destinations, and depressed business sentiment worldwide. In this way, even the non-oil sectors of the largest oil producers in the Gulf suffered. The ‘diversification’ of economies away from oil didn’t spare the Saudi and UAE economies in February. Related: The $4 Trillion Carbon Capture Opportunity
In Saudi Arabia, factory output, new orders, and employment trends all lost momentum since the start of 2020, IHS Markit said in its Purchasing Managers’ Index (PMI) survey this week.
The overall expansion of non-oil private sector business activity in February was the weakest on record since the survey began in August 2009, IHS Markit said.
The Saudi Arabia PMI was at its lowest level since April 2018, growth in factory output and in new orders sharply slowed down, and business confidence was at its most pessimistic in a year and a half, with concerns about China and the coronavirus outbreak, according to the survey.
The deterioration in Saudi Arabia’s non-oil sector comes after a strong 2019 performance of the non-oil sector, whose 3.3.-percent growth—the highest in five years—helped the Saudi economy to grow by 0.3 percent last year, despite a 3.6-percent drop in the oil sector.
Prospects for this year were brighter two months ago, when the IMF expected the Saudi economy to grow by 1.9 percent, although it was a downward revision from a previous forecast because of the OPEC+ cuts.
After the coronavirus outbreak, Goldman Sachs slashed its forecast for Saudi economic growth in 2020 to 0.6 percent from 2.1 percent, Bloomberg reports.
In the UAE, the IHS Markit PMI survey showed further deterioration in the business conditions in the non-oil sector, with output contracting for the first time in ten years.
“Supplier performance was meanwhile hit by the coronavirus outbreak in China, with PMI surveys globally noting significant delays to freight deliveries, as well as weaker export demand. With many UAE firms also suffering from credit issues, backlogs rose for the fifth month running,” David Owen, Economist at IHS Markit, said, commenting on the survey results. Related: How Fossil Fuels Power The Internet
The deterioration of the non-oil sector activity in the UAE and in Saudi Arabia, where the non-oil sector rescued the economy from contracting in 2019, doesn’t bode well for the two major Middle Eastern oil producers this year.
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They desperately need higher oil prices because the coronavirus outbreak is battering their non-oil economic activity, on top of slamming global oil demand growth and making their key export item and major budget revenue generator—crude oil—cheaper.
It won’t come as any surprise then that the UAE and Saudi Arabia could be the most motivated OPEC+ producers pushing for cutting the group’s collective oil production as much as possible when the partners meet in Vienna later this week.
By Tsvetana Paraskova for Oilprice.com
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How is it possible for only a few hundred thousand to become infected with a highly contagious virus in a country of nearly 1.4 billion people? The other possibility is that China is lying about the number of cases, but Tim Cook doesn’t think that China is lying that it has stopped the spread of the virus and I believe Tim.
So the virus is effectively stopped in China, and Mr. Cook has confirmed it. An effective vaccine can certainly stop this highly contagious virus. Nothing else can….because COVID-19 can be spread by people without symptoms…which makes it much more contagious than the flu.
Mr. Cook has thousands of employees in China…and access to hundreds of millions of e-mails between Chinese people on a daily basis. The only way he would make such a definitive statement about the state of COVID-19 in China is if he knew for a fact that China has already been vaccinating its people.
There is only one explanation for China already having tens of millions of doses of vaccines: COVID-19 was engineered in a bio lab.
The release of the COVID-19 was not accidental... but guess what....it was not ordered by China... but it was from a Chinese bio lab... and this lab also had the capability to make vaccines from day zero. Clearly there was foul play.
So why would anyone do this? Why would an operative inside a Chinese bio weapon lab unleash the virus in order to force China to vaccinate its population against a virus made in China's labs?
Well, I have my opinions as to who did it and why. What is certain is that those responsible for this evil plot will easily triple their net worth.
So, China is pretending to be working on vaccines that it already has, and soon Xi will lie to the world that they finally succeeded in making a vaccine….because China doesn’t want to look bad and admit to what has happened. China is acting exactly how the “illuminated architects” responsible for this COVID-19 calamity have predicted China would behave.
Meanwhile, innocent people are dying all over the world.
The year of the rat indeed.
In other news, top Iranian leaders are falling ill due to COVID-19, some are dying.
Ahhhh….the icing on the cake.