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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 holds gains as strong US data and diesel shortage point to market tightness. Oil prices held recent gains as strong US economic data supported broader market optimism and crude market indicators pointed to near term tightness. Brent traded above USD69/b and WTI near USD67/b, buoyed by a risk-on sentiment and gains in global equities. Despite OPEC+ steadily unwinding supply curbs, near-term contracts for crude and gasoil remain in backwardation, signalling supply constraints. Diesel markets, especially in Europe and the US, remain tight, reinforcing upward pressure on prices. European gasoil inventories have dropped to the lowest seasonal level since 2022, while diesel refining margins have climber to a four-month high. Although global crude stockpiles have increased, much of the build has occurred in regions with limited influence on price-setting. The market continues to draw strength from the diesel squeeze, particularly during peak summer demand.
Gold golds steady amid uncertainty over Fed rate cuts and resilient US data. Gold steadied below USD3,340/oz and was on track for a modest 0.5% weekly decline as investors weighed the outlook for US interest rate cuts following resilient economic data, including stronger jobless claims and retail sales. While San Francisco Fed President Mary Daly reiterated expectations for two rate cuts this year, markets remain cautious ahead of the upcoming Fed gathering. High interest rates typically dampen gold’s appeal, yet gold has still gained over 25% this year due to geopolitical risks and concerns over dollar-based assets. Trading has remained rangebound recently, as investors await clarity on US trade negotiations, tariff developments, and monetary policy direction.
MIDDLE EAST - CREDIT TRADING
End of day comment – 17 July 2025. Complete summer lull today. Cash markets ticked more or less up and down with UST moves and spreads closed broadly unchanged. If anything though the bid feels still way stronger than the offer side, so despite most of credits being at YTD tights it feels it could still go tighter. QNBK priced a 5y at T+70bp in 1bn USD, terms are 4.5% coupon at reoffer 99.215. On the back of it seen a bit of activity in the fixed bonds, traded some 26s and 27s today and one should expect some activity around this new issue given the bigger than usual issue size against other fins.
MIDDLE EAST - MACRO / MARKETS
Saudi Arabia exceeds OPEC+ output quota in June, faces pressure for compensation cuts. Saudi Arabia exceeded its OPEC+ crude production target in June by 385,000b/d, reporting an output of 9,752mb/d amid regional tensions sparked by the brief Israel-Iran conflict. Saudi Arabia attributed the increase to precautionary stockpiling, moving excess oil into storage outside the region to ensure supply continuity through the Strait of Hormuz. To remain formally compliant, OPEC published a lower supply to market figure of 9.356mb/d for the kingdom, excluding volumes diverted to storage. While such reporting methods raise transparency concerns, Saudi Arabia now faces the same requirement it has previously imposed on others, compensating for over overproduction. Seaborn crude exports in the first half of July remained elevated, averaging 6.43mb/d, on track for a 16-month high, largely due to continued offloading of June’s excess output. Shipments to China and India surged, while deliveries into Egypt’s Sumed pipeline system declined. Despite the temporary production hike, Saudi Arabia is expected to reduce output in line with OPEC+ commitments moving forward.
Egypt’s diesel imports hit record high amid gas shortage and power strain. Egypt’s diesel and gasoil imports soared to a record high of over 370,000b/d in the first half of July, up 65% from a year earlier and 35% above June levels, according to Vortexa data. The sharp uptick follows the halt of Israel gas pipeline flows due to regional conflict and Egypt’s own declining gas production, forcing a shift to alternative fuels like diesel and fuel oil to keep power plants running during peak summer demand. With limited LNG import capacity, Egypt’s diesel demand has pulled volumes from the Middle East and Russia, diverting shipments away from northwest Europe and tightening supplies in the Mediterranean. European diesel stockpiles have declined further, pushing up refining margins. Looking ahead, diesel supply could remain tight due to upcoming refinery maintenance in September, although reduced demand for power generation after summer may ease the pressure.
