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Middle East Daily
SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +44(4)387 5031
E: soojin.kim@ae.mufg.jp
MUFG Bank, Ltd. and MUFG Securities plc
A member of MUFG, a global financial group
Middle East Daily
COMMODITIES / ENERGY
Oil prices edge higher amid ceasefire hopes and oversupply concerns. Oil extended a two-day rally as investors balanced optimism around potential ceasefire talks in Ukraine against growing concerns over a deepening global supply glut. Brent traded above USD63/b, while WTI hovered near USD60/b, as Ukrainian negotiators prepared for new discussion in Florida even as President Putin signalled resistance to elements of a US-backed peace proposal. Markets continue to watch for any breakthrough that could open the door to a partial easing of sanctions on Russia and an increase in oil exports, although a concrete agreement still appears some way off. Any additional supply would add pressure to prices already facing downward risks amid expectations of oversupply, highlighted by Saudi Aramco’s decision to cut the price of its flagship Arab Light crude to its lowest level since 2021 for January deliveries and recent decline in Canadian oil prices.
Copper hits record on supply deficit fears. Copper surged to a new record above USD11,580 per ton as expectations of tightening supply and strong demand lifted prices, fuelled by stockpiling in the US ahead of potential import tariffs that is draining availability elsewhere. Traders are increasingly positioning for supply disruptions and a developing structural deficit, with forecasts pointing to a widening shortfall over the coming years due to constrained production and steady consumption growth. Large withdrawals of copper from global exchange warehouses have reinforced concerns about near-term availability, even as current price levels may prove unsustainable given still-ample global inventories, which had climbed to their highest level since 2018. Overall, the market remains volatile, balancing bullish long-term supply risks against short-term signs of sufficient physical stocks.
MIDDLE EAST - CREDIT TRADING
End of day comment – 04 December 2025. Another mixed day. Flows were balanced but ETFs now are net sellers. With the UST move and yields higher spreads tightened in overall but the undercurrent paints a mixed picture. What definitely has found its feet are belly bonds in general and new issue bonds which underperformed and now look may be cheap enough. Take DHBKQD 31s which didn't see many upgrades since it was issued closing +0.125pt/3bp. Also in the belly ADGLXY 34s were bought aggressively today closing +0.25pt/-5bp. Against this though long end bonds remained for sale throughout the day, nevertheless on slightly lower cash price levels most bonds found clearing levels. Closing the likes of QATAR long end, ADGB long end, ADNOCM 54s or ADQABU 54s -0.25pt/unch. Higher beta credit still are better bid although the ETF outflows provided some OMAN belly bonds. Closing the OMAN and MOROC curve about unch in cash and 2/3bp tighter. CORPS like ALDAR and DPWDU which widened out sharply yesterday also seem to have found some buying interest at wider level but overall still feel offered, closing those also unch/-2bp.
MIDDLE EAST - MACRO / MARKETS
Algeria’s expanding budget and turn toward debt financing. Algeria plans to raise state spending to 17.69 trillion dinars (USD136bn) in 2026, marking a third consecutive annual increase of about 5%, largely to sustain its extensive social safety net – including wages, pensions, benefits, and subsidies that make up over 40% of expenditures, even as energy export volumes decline due to rising domestic demand and overall state revenue is projected to fall 6% to 8.01 trillion dinars, covering less than half of spending and widening the fiscal deficit. Temporary gains from post-Ukraine war energy exports have faded, while limited diversification and stagnant hydrocarbon output continue to constrain revenue. In a notable policy shift for the traditionally debt-averse OPEC member, authorities are preparing to issue a rare Islamic bond (sukuk) in early 2026, potentially around USD2.3bn, to diversify public funding as financing pressures grow. Despite these fiscal strains, the government forecasts accelerating growth to 4.5% by 2028, driven by non-hydrocarbon sectors such as mining, manufacturing, and tourism, although the central bank warns that sustained pressure on energy prices poses ongoing risks to public finances.
Gulf PMI signals broad non-oil business expansion. Recent PMI data point to continued strength in the GCC’s non-oil private sectors, with the UAE PMI rising to 54.8 in November from 53.8, its fastest output growth in almost a year as new orders surged and hiring reached an 18-month high, despite rising input costs. Within the UAE, Dubai PMI remained robust at around 54.5, supported by strong activity in services and construction alongside solid demand. Saudi Arabia continued to lead the region, with the PMI at about 58.5, signalling rapid expansion in business activity and output even as the pace of new-order growth moderated slightly from October’s highs. Qatar’s PMI rose to 51.8 from 50.6, reflecting sustained growth in services, tourism, and projects tied to diversification. Altogether, the PMI surveys indicate broad-based momentum across the Gulf’s non-oil economies.
