Financial markets in Saudi Arabia and the Gulf are recording huge losses after the collapse in oil prices


The financial markets in Saudi Arabia and the other Gulf countries recorded major losses on Monday, for the second day in a row, against the backdrop of the collapse of the # oil prices in the midst of a “price war” that the Kingdom started after the failure of the oil countries to reach an agreement to continue to reduce production.

The Saudi stock market, Tadawul, the largest in the region, closed down 7.8%.

In the beginning of trading, the value of the share of Aramco, the oil giant, fell by 10 percent, which is a record level, to reach 27 riyals. Aramco shares returned to reduce its morning losses by half at the close.

On Sunday and Monday, Aramco lost more than $ 250 billion of its value, which ranged at $ 1.49 trillion, far from the $ 2 trillion level that Saudi Crown Prince Muhammad bin Salman insisted on before listing the company in the market last December.

Aramco’s stock fell Sunday below the main offering price of 32 riyals (8.5 dollars), for the first time since the company was listed on the stock exchange on December 11 in the largest IPO in history.

The Dubai market index fell by about 8.3 percent at the close in its worst rate in seven years, while the Abu Dhabi market index fell by 8.1 percent at the lowest rate in 4 years, and the Qatar Stock Exchange fell 9.7 percent.

The Kuwait Stock Exchange fell 10.3 percent, forcing the financial authorities to suspend trading for the second consecutive day.

As for the Amman Stock Exchange, it decreased by 5.6%, and the Bahrain Stock Exchange recorded a decrease of 5.8%.

The losses came as a result of the collapse of oil prices, which fell by more than 20 percent on Monday, which constitutes a painful blow to the Gulf economies that depend on crude as a main source of their revenues.

The budgets of the countries of the region have witnessed a continuous deficit since 2014, due to the decline in prices.

The price of a barrel of West Texas crude was $ 32 midday, and a barrel of Brent was $ 36. According to Bloomberg, the price collapse is the largest in the world in a single day since 1991.

The Organization of Petroleum Exporting Countries (OPEC) and Russia, its main partner within the “OPEC Plus” coalition, failed to reach an understanding on Friday on an additional reduction in crude production in order to put an end to the decline in oil prices to their lowest levels in four years against the backdrop of the spread of the emerging Corona virus.

OPEC has proposed to Moscow and its nine other partners an additional collective reduction of 1.5 million barrels per day so that the spread of the virus does not undermine what was reached in 2017 to maintain stable prices in a market with surplus production, but Russia refused this.

In response to the Russian position, Saudi Arabia launched a “price war” on Saturday, reducing its oil prices for sale to its lowest level in 20 years, in an attempt to secure a large market share.

The Kingdom reduced the price of selling crude oil for April to Asian customers by about 6 dollars per barrel compared to March and 7 dollars for the United States, and between 6 to 8 dollars for Western Europe and the Mediterranean, where Russia sells a large part of its oil production.

Anas Al-Hajji, an expert in oil affairs in the Gulf and residing in Texas, said, “The message they want to send (Saudi Arabia) is: No matter what it takes,” but he indicated that cooperation between the oil countries may be restored before the OPEC meetings scheduled in July.

Since the beginning of 2017, OPEC Plus countries have pledged to reduce supplies in the market by an average of 1.2 million barrels per day in order to raise prices. In December, the cartel increased the number by 500,000 barrels per day.

But new, tougher measures are necessary, as oil revenues suffer especially from a rapid slowdown imposed by the Covid-19 epidemic on the Chinese economy, the world’s first oil importer.

On Monday, the International Energy Agency announced that the global consumption of oil will decline this year, for the first time since 2009, against the backdrop of the widespread spread of the emerging Corona virus.

In its latest report, in which the price war was not counted, the agency reduced its forecast for the current demand for oil by 1.1 million barrels per day, in a first scenario, while the virus continues to spread throughout the world, which means a slight annual decrease of about 90 thousand barrels per day, for the time The first in 11 years.

These expectations are based on the assumption that China will be able to control the virus outbreak by the end of the month, especially as isolation measures elsewhere in the world have less impact on demand.

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