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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 pressured by oversupply fears despite US inventory draw. Oil prices remained under pressure after their steepest two-day decline in a month, with persistent fears of a global supply glut weighing on investor sentiment. Brent hovered near USD62/b after falling about 3% over the prior two sessions, while WTI traded above USD58/b. The outlook was further pressured by US projections that domestic crude output will reach a record 13.6mb/d this year, adding to already abundant global supply. Industry data from the American Petroleum Institute showed US crude inventories felt by 4.8 million barrels last week, though stocks of refined products rose sharply, highlighting soft end-user demand. Prices have remained confined to a narrow USD4/b range since early November, as oversupply concerns compete with risks tied to Russian export flows to buyers such as India. Attention now turns to upcoming market outlooks from the International Energy Agency and OPEC, which may provide clearer direction for prices.
Silver breaks above USD60 as Fed rate cut bets and supply tightness drive rally. Silver surged above USD60/oz for the first time, reaching a new record near USD60.79 as investor bet on near-term Fed rate cuts and continued market tightness. The rally was fuelled by expectations of a 25bps Fed cut this week, alongside lingering physical supply constraints following October’s historic supply squeeze driven by strong demand from India and silver-backed ETFs. Although inventory pressures have eased as shipments boosted London vault stocks, tight conditions in the over the counter market and tariff-related concerns after silver was added to the US critical minerals list have limited arbitrage and kept prices elevated, even as Comex inventories remain high. Gold followed higher on easing expectations and remains up about 60% this year, supported by central bank buying and ETF inflows.
MIDDLE EAST - CREDIT TRADING
End of day comment – 09 December 2025. Busy day considering its a pre FOMC Tuesday. Flows remain mixed with sellers slightly edging buyers. By and large though prices remain sticky and spreads move with UST, e.g wider in the morning and tighter in the afternoon. What still sees sellers are duration bonds which underperformed another day, long end QATAR and ADGB closes -0.125pt/+3bp. There is also a good amount of trading in the short end of the curves as yield buyers/mmkt funds absorb dealer inventories ahead of the FOMC. Overall though the undercurrent seems to be that position squaring ahead of year end has started and resulting technicals rule the price action. Take SHRJGOV/SHARSK were early morning selling took some bonds down 0.25pt without much volume, indicative of dealers shunning to take new positions ahead of the FOMC/ year end and price action becoming a little bit 'gappy'. Primary markets seem to have shut for the year, so all eyes on tomorrow as next catalyst.
MIDDLE EAST - MACRO / MARKETS
Saudi Arabia’s 2026 deficit outlook faces market scepticism. Saudi says it can reduce its budget deficit to 3.3% of GDP in 2026 (IMF forecast is 3.7%) after a year of elevated spending and heavy bond issuance to fund large infrastructure projects, supported by expectations of stronger non-oil revenue growth and higher oil production. However, external analysts remain unconvinced, forecasting a wider 5-6% deficit due to subdued oil prices near USD63/b, well below the USD92.3 fiscal breakeven level. To manage fiscal pressures, the government has delayed or scaled back several megaprojects, including parts of Neom, to prevent economic overheating, while continuing to rely on international borrowing rather than drawing down reserves. Saudi Arabia has already issued about USD20bn in foreign currency bonds this year, with further borrowing expected in 2026, though officials stress caution to avoid oversupplying markets.
Private credit emerges as a growing financing channel in Saudi Arabia. Private capital financing is gaining traction in Saudi Arabia as the large funding needs of Vision 2030 and the expanding SME sector create new opportunities beyond traditional bank lending, according to S&P Global Ratings. Between 2021 and 20204, total public and private sector debt rose at a 12% compound annual rate, driven by bond and sukuk issuance, higher bank lending, and the rise of non-bank private credit. Although the segment remains small, just 2% of total debt, or roughly USD3.7bn in 2024, its size has grown tenfold since 2020 and now spans sectors from petrochemicals and aviation to digital payments, with borrowers ranging from state-linked firms and major conglomerates to small businesses. Investment comes from a diverse base including regional and international investors. Demand is expected to keep rising, particularly as SME leverage climbed from 22% in 2020 to 28% in 2023, and policy targets aim to lift SME's GDP contribution to 35% by 2030, implying significant additional funding needs. However, the market faces constraints from limited transparency, low liquidity, valuation uncertainty, and weak M&A and exit activity, which may hinder confidence and growth.
