Saudi Arabia's Oil Giant Boss Speaks Up for China, Saying Its Massive Production of Solar Panels and EVs Helps Affordability

Economic

Political

Summary:

Saudi Aramco CEO Amin Nasser praised China for making solar panels and electric vehicles affordable...

Saudi Aramco CEO Amin Nasser praised China for making solar panels and electric vehicles affordable.The West has recently stepped up criticism over China's dumping of cheap green products on the global markets.Saudi Arabia is fostering closer ties with China and wooing Chinese investments and business partnerships.

China's green industries have an unlikely ally in Saudi Aramco — the world's largest oil company — who praised the world's second-largest economy for making solar panels and electric vehicles affordable.

"China really helped by reducing the cost of solar energy," Amin Nasser, the CEO of state-owned Saudi Aramco, said at the World Energy Congress in Rotterdam on Monday, according to the Financial Times.

"We can see the same now in electric vehicles. Their cost is one-third to one-half the cost of other electric vehicles," Nasser added, as he called for globalization and collaboration, per the FT.

Because China has made these green products so affordable, they will help the West achieve its target of cutting carbon emissions to a net zero level by 2050, said Nasser.

The West has hit out against China's overcapacity

Nasser's comments came amid the West's criticism that China has been dumping cheap solar panels and EVs on the global markets.

Earlier this month, US Treasury Secretary Janet Yellen slammed overcapacity and overproduction in China during a visit to the East Asia nation.

"China is now simply too large for the rest of the world to absorb this enormous capacity," said Yellen. She warned China against repeating its actions over a decade ago when it dumped products like steel on the global markets, decimating industries and communities.

Last week, German Chancellor Olaf Scholz, too, echoed Yellen's concerns during a visit to China when he called for fair competition.

Beijing has hit back against the West's accusations of dumping, framing the criticism as a tactic to limit China's economic development.

China, the world's second-largest economy, is undergoing a painful transition from its previous growth drivers of real-estate and lower-end manufacturing to the hot new sectors of EVs, solar cells, and lithium batteries.

Saudi Arabia looks to foster closer ties with China

Nasser's praises of China also came at a strategic time for Riyadh's relationship with Beijing.

Unlike the West, Saudi Arabia is cozying up to China.

In January, Faisal Alibrahim, the Saudi Arabian minister of economy and planning, told the Nikkei that his country thinks it's "very wise" to strengthen its relationship with China, among other partners.

"There are lots of opportunities for China to invest in Saudi Arabia," Alibrahim told the media outlet. "At the same time, we are prioritizing, investing all around the world, including China in terms of the opportunities there."

Saudi Arabia is trying to attract Chinese investors to pump money into its Neom megacity project on the Red Sea, which aims to drive the kingdom's economic diversification away from oil to sectors including tech and tourism.

As a key contributor to Saudi Arabia's economy, Aramco has good reasons to build closer ties with China amid the West's commitment to reduce fossil fuel consumption.

On Monday, Aramco announced it's in talks to acquire a 10% stake in China's Hengli Petrochemicals — the latest in a string of deals with Chinese refiners in less than 12 months. The deals are poised to expand Aramco's footprint in China.

In March last year, China brokered a détente between Saudi Arabia and Iran, prompting concerns over waning US influence in the Middle East.

Despite Saudi Arabia and China's developing relationship, the Chinese aren't quite present on the ground in Saudi Arabia, Jon Alterman, the director of the Middle East program at the Center for Strategic and International Studies, said in a testimony before the US-China Economic and Security Review Commission on Friday.

"It is clear to Saudis that the country needs a robust relationship with China," said Alterman. "Even if China doesn't replace the United States, Saudi Arabia sees China as an important check on the United States, and an important supplement to what the United States is willing to provide to China."

Source: Business Insider

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

ING

Commodity

Economic

Energy – Oil trades in a narrow range

Both ICE Brent and NYMEX WTI continue to trade in a narrow range this morning as Middle East tensions have eased, while the Federal Reserve has signalled it might keep the rates higher for longer raising demand concerns. Recent reports suggest that both Iran and Israel consider the current operations concluded against one another, with no follow-up action required for now. Meanwhile, the US and Europe are preparing for new sanctions against Iran – although these may not have a material impact on oil supply in the immediate term. Timespreads continue to signal strength, with Brent prompt spread trading in a backwardation of US$0.95/bbl as of today, compared to a backwardation of US$0.79/bbl a week ago following geopolitical uncertainty and OPEC+ supply cuts.

European natural gas prices declined for a second straight session today, with front-month TTF futures falling 4.7% to trade around EUR29/MWh in the early trading session. The recent decline is largely due to higher inventories and soft demand. Meanwhile, inventory remains very comfortable with storage tanks filled at 62% of capacity, which is above the five-year average of 44% full for this time of the year. While European natural gas prices declined, US prices managed to trade flat this morning (after ending higher in the previous trading session) on expectations of warmer-than-usual temperatures for the next few days. Market participants will now be watching this week's EIA inventory report closely to gauge the domestic market balance.

Metals – Global aluminium output recovers

Recent numbers from the International Aluminium Association (IAI) show that the average daily global primary aluminium output rose to 195.9kt in March, compared to 195.4kt reported a month earlier. Total monthly aluminium output rose 7.2% month-on-month and 3.5% year-on-year to 6.1mt last month (the highest since October 2023) amid higher production across all major producing regions. Cumulatively, production rose 4.1% YoY to 17.8mt over the first quarter of the year. Chinese output increased by 7% MoM and 5% YoY to 3.6mt last month, while cumulative production rose 5.2% YoY to 10.5mt between January and March 2024. Meanwhile, aluminium production in Asia (ex-China) rose 7% MoM and 3.3% YoY to 409kt in March. Production in Western and Central Europe also increased by 7.4% MoM to 232kt last month.

LME data shows that cancelled warrants for aluminium rose for a fifth straight session by 15,200 tonnes to 348,000 tonnes as of yesterday, the highest since 8 February 2022. The majority of the cancellations came from warehouses in Gwangyang, South Korea. On-warrant stocks for aluminium fell by 19,200 tonnes for a seventh consecutive day to a record low of 152,000 tonnes as of Monday. The aluminium tom-next spread traded at a premium of US$25.25/t at one point yesterday, the biggest backwardation since May 2021. Meanwhile, the cash/3m spread for aluminium moved to a backwardation of US$27.1/t (versus a contango of US$10.1/t a day earlier) as of yesterday, the largest backwardation recorded since the start of June 2023.

In its latest quarterly report, MMC Norilsk Nickel shows that nickel output fell 10% YoY to 42kt in the first quarter of 2024, primarily due to a build-up of work-in-progress inventory. The company further forecasts the production guidance for nickel between 184kt-194kt in 2024, which is down 9% from 208.6kt produced a year earlier. Among other metals, copper output rose 1% YoY to 10kt in the first quarter of this year, while the company expects to produce 334kt-354kt of copper in 2024.

Agriculture – EU raises wheat yield estimates slightly

In its monthly crop monitoring MARS report, the European Commission estimates that total wheat yields could rise slightly to 5.72t/ha, compared to the previous projection of 5.7t/h and the five-year average of 5.65t/ha. Exceptionally dry weather conditions along with adequate water supply in major parts of Europe led to an upward revision of the yield projections. However, overly wet conditions in northwestern Europe restricted any major upward revision of the yield projections.

Recent data from Thailand's Office of the Cane and Sugar Board shows that Thailand crushed 82.2mt (with 70% of fresh sugar cane) of sugar cane in the 2023/24 season end, down 12.5% compared to the previous year. The decline in production could be largely attributed to the drought conditions in the country. This has resulted in a sugar output of around 8.8mt, marginally higher than expectations. The board projects higher sugar cane production for the 2024/25 season, as farmers are likely to shift from cassava to sugar cane harvest due to stronger prices.

The USDA's latest weekly crop progress report shows that corn and soybean plantings appear to be progressing well. The USDA reported that domestic corn plantings stood at 12% for the week ending 21 April, in line with the previous year's plantings and above the five-year average of 10%. Similarly, US soybean plantings were reported to be 8% complete, in line with levels seen last year and 4% ahead of the five-year average. The winter wheat crop conditions deteriorated over the last week, however still remain above levels seen a year ago. The USDA rated 50% of the winter wheat crop in good-to-excellent condition as of 21 April, compared to 55% a week ago and 26% at this point in the season last year.

The USDA's weekly export inspection data for the week ending 18 April shows that US exports for corn remained strong while soybean and wheat shipments slowed over the last week. US weekly inspections of wheat for export stood at 450.3kt, down from 620.1kt in the previous week but up from the 363.8kt reported a year ago. Similarly, export inspections for soybeans stood at 435.3kt over the week, marginally lower than 446.6kt in the previous week but up from the 379.7kt reported a year ago. US corn export inspections rose to 1,623.5kt, compared to 1,353.5kt a week ago and 938.8kt a year ago.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Ukadike Micheal

Economic

Commodity

Oil prices experienced fluctuations on Tuesday, initially rising before retracing gains, with Brent trading lower near $86 after an earlier increase of up to 1.4%. Concurrently, options markets began to factor in reduced risks of further escalation in the Middle East. Additionally, U.S. crude futures dipped below their 50-day moving average for the first time since February, signaling a potential for additional selling pressure.

The surge in prices earlier in the day was driven by gains in equities and positive economic data from Europe, where euro-area private sector activity reached its highest level in nearly a year, primarily due to Germany's return to growth. However, the manufacturing sector continued to face challenges, with premiums for diesel over crude in Europe decreasing.

Despite recent volatility, oil prices have remained below the $90 per barrel mark, a notable observation considering the approaching summer period, typically characterized by heightened demand. Nevertheless, many analysts anticipate a potential uptick in prices later in the year, even following a recent minor pullback, shifting attention to the upcoming OPEC+ alliance meeting on production.

The decline in prices since last week is attributed to diminishing immediate risks associated with tensions between Iran and Israel, according to Bjarne Schieldrop, chief commodities analyst at SEB AB. However, he emphasized that the pivotal factor influencing oil prices remains the decisions made by OPEC+ during its meeting in June.

Despite consecutive weekly losses, oil futures have maintained higher levels this year, largely due to geopolitical tensions and supply cuts implemented by OPEC+. The U.S. Congress has also taken steps to further restrict Iran's oil sector, although analysts anticipate limited impact on exports.

Recent developments in key timespreads indicate renewed strength in crude markets, prompting speculation among experts like Jeff Currie, chief strategy officer of energy pathways at Carlyle Group, who remarked on the likelihood of oil prices surpassing $100. However, questions persist regarding the threshold at which OPEC may intervene to adjust the market dynamics.

Meanwhile, concerns over potential disruptions in Iran's oil exports loom large, particularly amid discussions in the U.S. Senate regarding sanctions targeting key components of Iran's oil infrastructure, including ships, ports, and refineries.

Market participants are eagerly awaiting the release of U.S. gross domestic product figures and March personal consumption expenditure data, crucial indicators that will shape perceptions of the monetary policy trajectory. Additionally, expectations for an increase in U.S. crude oil inventories, coupled with a likely decline in refined product stockpiles, add to the current market sentiment.

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Cohen

Economic

Central Bank

European Central Bank (ECB) officials remain committed to their plans of implementing multiple interest rate cuts throughout the year, despite the U.S. Federal Reserve’s delay in transitioning to a looser policy due to higher inflation and ongoing tensions in the Middle East leading to elevated oil prices.

Investors are reconsidering their expectations of a global easing cycle, as the Fed’s decision to slow down its plan to reduce borrowing costs, which was perceived as a signal for other central banks, was influenced by the persistence of robust U.S. price growth.

ECB President Christine Lagarde has strongly suggested that the central bank of the euro zone is likely to commence the reduction of its deposit rate from the current record-high of 4 percent in June. However, she has been cautious in keeping the options open for the future course of action.

Most of her colleagues from the 20 national central banks within the currency bloc have been more explicit in expressing their anticipation of further rate cuts. They believe that inflation in the euro zone will gradually decline and reach the ECB’s target of 2 percent by next year, thereby necessitating additional rate reductions.

ECB’s focus on incoming economic indicators

All officials have highlighted that the ECB’s decisions will be based on incoming data, particularly regarding wages, profits, and productivity. Madis Muller, chief of Estonia’s central bank, stated last week that if economic developments align with their expectations, it is reasonable to anticipate several more rate cuts by the end of the year. Even Klaas Knot, governor of the Dutch central bank known for his hawkish stance, has indicated that he is not opposed to three cuts in 2024.

Gediminas Simkus of Lithuania suggested that more than three rate adjustments were possible, while Germany’s Joachim Nagel referred to a “cautious gliding flight.” Banque de France Governor Francois Villeroy de Galhau argued that although recent developments in the Middle East and the United States called for increased caution, they did not fundamentally alter the economic outlook in the euro zone.

Source:economymiddleeast

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Owen Li

Economic

The decline in the four weeks to 14 April marked the 14th monthly drop in a row, and compares with an annual rate of 4.5% this time last month, according to the retail analysts Kantar. The slowdown in grocery inflation was aided by a big increase in promotional spending, with items bought on offer making up 29% of supermarket sales – the highest level outside Christmas since June 2021. Overall take-home grocery sales rose by about 3%.

Deals helped shoppers save £1.3bn over the four weeks, amounting to £46 a household.

Fraser McKevitt, the head of retail and consumer insight at Worldpanel by Kantar, said: “We've been monitoring steady annual growth in promotions over the past 11 months as retailers respond to consumers' desire for value. This emphasis on offers, coupled with falling prices in some categories like toilet tissues, butter and milk, has helped to bring the rate of grocery inflation down for shoppers at the till.”

An early Easter did not dent seasonal sales, as spending on confectionery topped £100m for the first time in the seven days up to and including Easter Sunday. McKevitt said: “Higher prices have played a role in reaching that record spend figure, but the number of chocolate eggs sold in the seven days to Easter was also 3% higher this spring than last, with 37% of consumers buying one in that week. Hot-cross buns were even more popular, enjoyed by 45% of Britons.”

The growth in confectionery reflected a broader trend towards snacking in Britain. Over the past decade, there has been an increase in almost all types of snacks. Consumers ate chocolate 93m more times in the year to June 2023 than in the 12 months to June 2013. Fruit has also bumped up the list of snack choices – 314m more such items were eaten between meals in 2023 than in 2013.

Ocado was again the fastest-growing grocer this month, improving sales by 12.5% in the 12 weeks to 14 April, ahead of the total online market, which grew by 6.8%. The retailer accounted for 1.9% of take-home grocery sales, up from 1.7% a year ago. Total online sales reached a share of 12% of the whole market for the first time since July 2022.Britain's two largest grocers, Tesco and Sainsbury's, gained market share to 27.4% and 15.3% respectively.

Sainsbury's' sales increased by 6.8% and Tesco grew by 5.9%. Lidl achieved a record 8% share of the market, also up by 0.4 percentage points compared with a year ago, fuelled by sales growth of 9.1%. Its fellow discounter Aldi reclaimed the 10% market share it last held in September 2023, increasing sales by 2.8%. Morrisons' slice of the market was flat at 8.7%, with spending through its tills up by 3.8%. Waitrose and Iceland also retained their market share positions at 4.5% and 2.2% respectively. Both retailers recorded sales growth of 3.7%. Asda holds 13.4% of the market, while Co-op accounts for 5.4%.

Source: The Guardian

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Alex

Economic

Central Bank

Fed Chair Jerome Powell confirmed as much on April 16, when he signaled that policymakers would wait longer than previously anticipated to cut rates following a series of surprisingly high inflation readings.

Traders now see just one or two rate cuts happening this year. That’s a big letdown from the roughly six they expected to start the year and the three that Fed officials penciled in as recently as March. Some investors and economists say there’s a chance of no cuts at all this year.

The delay in easing monetary policy — and keeping rates “higher for longer” — has big implications for the US economy. It’s also reverberating around the world.

1. What’s keeping inflation elevated?

When inflation peaked above 7% in 2022, it reflected a broad-based increase in the price of goods and services. But now, with inflation back below 3% overall, price increases are being driven mainly by a persistent shortage of housing. Commodity prices and car insurance premiums are also contributing to the stickiness keeping inflation above the Fed’s 2% target.

Some also point to Powell himself for prematurely telegraphing interest-rate cuts, which ignited optimism in financial markets and fueled economic activity. Here’s a closer look at each of those factors:

Shelter, which accounts for about a third of the consumer price index, has proved the most stubborn category. Despite some timelier measures from the Bureau of Labor Statistics, Zillow Group Inc. and Apartment List that show rent growth for new leases coming down, the corresponding components in the CPI have yet to reflect that.Energy prices — specifically oil— climbed in the first quarter after falling for much of last year. An escalation in the war in the Middle East threatens to push them even higher. The rally has translated to more expensive gasoline.

Electricity prices have also climbed. Although central bankers prefer to look at so-called core measures of inflation that strip out energy prices because of their volatility, the surge in the price of oil and other raw materials has proved impossible to ignore, because it can manifest in costlier shipping and merchandise.

Insurance costs are another driver of high inflation. Tenants’ and homeowners’ insurance is rising at the fastest rate in nine years, while auto insurance skyrocketed 22.2% in the year through March, the most since 1976. A key reason: Cars are more technologically complicated now and therefore cost more to repair.

Powell spurred big market bets on rate cuts by saying in December that cuts were “clearly” a topic of discussion at the Fed. The comments’ effect was equal to lowering interest rates by 0.14 percentage point — and also will add about a half percentage point to the CPI this year, according to Anna Wong, chief US economist at Bloomberg Economics. Now Powell “is entertaining the possibility that disinflation has indeed stalled, and that the bar for cutting rates may have increased,” Wong said. “That raises the risk that there won’t be a rate cut this year, if the unemployment rate is little changed from today.” (The current 3.8% rate is low by historical standards.)

2. What are the domestic implications of “higher for longer” rates?

The Fed’s benchmark rate affects borrowing costs across the rate spectrum. Powell’s signaling that the Fed might hold the rate at the current level of 5.25% to 5.5% for longer means that loans for home and car purchases will continue to be much more expensive than they were before the Fed started raising rates in 2022.

Indeed, average mortgage rates in the US climbed past 7% this week for the first time this year. The cost of financing has hindered recent momentum in the housing market as prospective buyers move to the sidelines until financing costs ease. Also, inventory remains low because so many homeowners don’t want to give up the cheap mortgages they got when benchmark rates were near zero. That’s helping to keep listing prices high.

3. How does Fed policy affect the rest of the world?

For the central bank chiefs gathering from around the world in Washington for the spring meetings of the International Monetary Fund and World Bank this week, Powell’s latest pivot created a quandary. If the likes of the European Central Bank, Bank of England and Reserve Bank of Australia move ahead with their own easing cycles, that risks driving down their currencies — raising import prices and undermining progress in getting inflation down. But not easing could risk lost growth.

The ECB, for its part, is plotting a first cut at their June meeting. The BOE pivot to rate cuts is likely to take longer, with traders pricing the first reduction in the fall. Officials at the Bank of Canada, which is getting close to cutting rates, have said there are limits to how far and how fast it can move without getting a clearer sign from the Fed.

“The risk is, the longer we see these big central banks waiting to cut rates, the bigger the risk to the underlying economy,” Lucy Baldwin, global head of research at Citigroup Inc., said on Bloomberg Television.

Higher for longer keeps the dollar strong against other currencies, because the prospect of persistently lofty US rates makes investment in US securities more appealing on a relative-value basis, causing the greenback to appreciate. So with every tick higher in the dollar, things gets tougher for developing economies — especially for those that have dollar-denominated debt that becomes more expensive to pay back as their home currency weakens.

Bank Indonesia already had to raise rates in October after an extended bout of currency weakness. The central bank said it intervened in currency markets in the wake of the rupiah weakening beyond 16,000 for the first time in four years. For countries from Malaysia to Vietnam, economists now expect fewer rate cuts. For Malaysia this comes as its output data suggest the economy is regaining momentum. The Vietnamese central bank has had to sell dollars as well to prop up its currency.

Source：Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

Forex

The Pound to Euro exchange rate recovered from a multi-week low in the minutes after it was revealed the UK Services PMI rose to 54.9 from 53.1 in April, surpassing expectations for 53.

"UK private sector activity expanded for the sixth consecutive month in April as a robust recovery in service sector output helped to offset a marginal decline in manufacturing production," said S&P Global, producers of the PMI report.

The Pound to Dollar exchange rallied to 1.2387, having been as low as 1.2331 earlier in the day.

"Output growth was supported by a solid upturn in new order volumes and a modest acceleration in staff hiring, in each case driven by the service economy," added S&P Global.

The Pound has been pressured over recent sessions by a rebound in expectations that a number of interest rate cuts will be forthcoming from the Bank of England in the coming months.

Strong economic data can offset some of the recent weakness if it suggests to markets the Bank might have to proceed cautiously when it comes to cutting interest rates. "The PMI suggests the economy is in rude health," says Rob Wood, Chief UK Economist at Pantheon Macroeconomics.

Indeed, the PMI survey reports a steep increase in average cost burdens across the private sector, "with the rate of inflation up sharply from March and the highest since May 2023." Pound Sterling Recovering Against Euro & Dollar As Inflationary Warnings Sounded by Strong PMI Print_1

Pound Sterling Recovering Against Euro & Dollar As Inflationary Warnings Sounded by Strong PMI Print_1

Above: GBP/EUR at five-minute intervals.

The Bank of England Governor and Deputy Governor have both said in the past week that UK inflation is well on course to hit the 2.0% target, which will justify lower interest rates.

However, should inflationary pressures start building again, the Bank could consider delaying the first rate cut to August.

These PMI figures suggest caution is warranted by a Bank that is increasingly signalling the battle against inflation has been won. "UK PMIs just added to the collection of data that makes recent comments from Bailey and especially Ramsden look out-of-sync. Long GBPEUR positions look good here," says Simon Harvey, Head of FX Analysis at Monex. Pound Sterling Recovering Against Euro & Dollar As Inflationary Warnings Sounded by Strong PMI Print_2

Pound Sterling Recovering Against Euro & Dollar As Inflationary Warnings Sounded by Strong PMI Print_2

Above: The PMI is a leading indicator of official GDP data. Image courtesy of Pantheon Macroeconomics.

Stronger input price inflation was overwhelmingly linked to higher staff wages, says the report, particularly in the hospitality and leisure sector. It adds that many survey respondents noted pressure on labour costs from a near 10% annual increase in the National Living Wage and an indirect impact on pay awards to other employees.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence says the improving economic recovery picture is welcome news, but "the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved."

"UK PMIs underscore strong activity, and output prices continue to decline, even though input prices rose sharply. We maintain our view that the BoE is likely to cut only in August," says George Buckley, an economist at Nomura.

If the market comes around to this view, rate cut expectations can recede a little from here as June is priced out entirely, which could mean the lows for the Pound are at hand.

But Rob Wood, Economist at Pantheon Macroeconomics, says these findings won't provide the weight of evidence required to knock the Bank off its path towards a June cut.

"The timing of the MPC’s first rate cut has become relatively data-independent in our view. Or put another way, the bar to a cut is low. Small data misses and signs of modest extra inflation persistence won’t knock the MPC off course. Accordingly, we continue to expect the MPC to cut Bank Rate in June, then again in September and December. Signs of stubborn services inflation could limit further cuts after that," he says.