Good morning, wonderful people, and happy almost-weekend.It’s a busy morning for business news, from word that Aramco could be mulling another blockbuster share sale to a USD 8 bn Neom housing contract, and insight into the minds of Saudi shoppers and homebuyers.

Let’s jump right in.

SMART POLICY- The Oil Ministry’s priority for 2024 and 2025 will be price management, Reuters writes a day after Aramco said it would cap its maximum sustained production capacity at 12 mn barrels of oil per day (about 1 mn bpd below the target toward which it had been working since 2020).

But that doesn’t mean that the ministry’s long-term view on oil demand has changed. Instead, the decision to cap investment in production capacity reflects a view by policymakers that the current “vast spare capacity was enough to supply markets during crises and further investments in new fields would make no economic sense.”

In context: The new maximum capacity target is 12 mn bpd — and we’re currently pumping about 9 mn.

SOUND SMART- Cabinet members including Finance Minister Mohamed Al Jadaan have for months now flagged that they’re pacing out investment in some high-profile megaprojects, as we’ve previously reported. There’s no backing away from critical investments, and we’ll run modest deficits as necessary, but officials have no interest in digging a particularly large hole in the budget for the sake of a couple of years.

AND- A separate Reuters poll of more than three dozen analysts sees oil prices staying flat this year. OPEC+ production cuts and tensions in the Red Sea will prop-up pricing, as will turmoil in Libya that has taken production capacity off the board. On the other hand, the International Energy Agency sees total supply rising this year thanks to the US shale industry, Canada, Brazil and Guyana.

OPEC’s production cuts are now registering: Total output fell 410k bpd to 23.3 mn in January, the biggest dip since July.

WATCH THIS SPACE- Aramco could raise the price of its flagship Arab Light crude for Asian clients next month as market fundamentals recover despite continuing tensions in the Red Sea, Reuters writes after polling traders.

MEANWHILE- Get ready for weather over the coming 48 hours. The national weather center is warning (pdf) that we can expect blowing dust and some rainfall in Riyadh today, snowfall in Tabuk and Al Jouf, and moderately heavy winds in Jeddah. Dammam, meanwhile, will escape with scattered clouds.

  • Riyadh: 24°C daytime / 12°C overnight
  • Jeddah: 24°C daytime / 17°C overnight
  • Dammam: 24°C daytime / 15°C overnight

FOREIGN POLICY-

#1- Are we or aren’t we members of the Brics? South African Foreign Minister Naledi Pandor says Saudi, Iran, Ethiopia, Egypt and the UAE are now full members of the alliance, Bloomberg reported yesterday. Argentina rejected the invitation to join the bloc, Pandor said.

But, but, but… Officials in Riyadh said as recently as two weeks ago that it wasn’t a sure thing that the Kingdom would join the alliance, noting that the 1 January date for accession was not a deadline. No Saudi official has publicly commented in Pandor’s remarks as of dispatch time this morning.

#2- Riyadh will play host to the United Nations Convention to Combat Desertification (UNCCD) COP16 from 2-13 December, a statement by the UNCCD read yesterday. The event is set to be the largest-ever meeting of the UNCCD’s 197 members and the first in the Middle East. COP16 will focus on “mobilizing governments, businesses and communities worldwide to accelerate action on land restoration and drought resilience as a cornerstone of food, water and energy security,” the statement read.

DATA POINTS-

#1- Net inflows of foreign direct investment into Saudi dropped 10% q-o-q in 3Q 2023 to SAR 11 bn, data from the General Authority for Statistics showed yesterday. Total FDI inflows fell 14.4% q-o-q in Q3, while total outflows of FDI were down 22.5% q-o-q to SAR 5 bn.

SOUND SMART- Yesterday’s data dump is the first time Gastat has released FDI numbers since it moved to a new methodology for FDI calculation back in October. The approach, approved by the IMF, takes into account the standards of the Washington-based lender’s balance of payments manual. It will pave the way for “investors to make investment decisions based on reliable results that support decision-makers and policymakers,” according to officials.

#2- Saudi-based issuers topped the GCC bond and sukuk market in 2023, raising USD 52.5 bn in 69 issuances, a report by the Kuwait Financial Center (Markaz). Issuers in the Kingdom accounted for more than 55% of total debt raised in the GCC last year.

#3-The General Authority for Competition (GAC) has issued a non-objection on 13 “economic concentration requests” since the beginning of the year, M&A Unit Head Talal Alhogail told Asharq News in an interview (watch,runtime: 3:00). Most were for manufacturers looking to go ahead with mergers or acquisitions.

Another 20 M&As are now under review, Alhogail added, in sectors including pharma, steel, and cement.

Some color: Alhogail sees foreign appetite for acquisitions in fashion and healthcare (hospitals and pharmacies).

WHISPERS-

#4- PIF-backed jet lessor AviLease will “slow its growth” this year as it seeks a safe approach to acquisitions after its USD 3.6 bn acquisition of Standard and Chartered’s aviation finance leasing business in 2022, Reuters reported yesterday, citing statements by CEO Ted O’Byrne. “We’re not trying to grow for the sake of growing. This year we expect to, I won’t say take a pause, but slow the growth, the glide path, so that we can consolidate the operation,” he told an aviation forum in Dublin.

SPORTS-

#1- Coach Roberto Mancini in hot water: Saudi Football Federation head Yasser Al Misehal said coach Roberto Mancini leaving the pitch before the end of a penalty shootout in the Asian Cup was “completely unacceptable,” according to local media. His statements come as Mancini apologized for his exit, claiming that he thought “it was finished.” The Green Falcons exited the tourney after losing 2-4 to South Korea, as we reported yesterday.

#2- Football GOATs and rivals Lionel Messi and Cristiano Ronaldo will face off on the same pitch today when Inter Miami meets Al Nassr in the Riyadh Season Cup at 9pm KSA. The clash has seen ticket prices for platinum seating soar to USD 11.2k, according to Al Arabiya. However, fans can still catch the action without breaking the bank with regular ticket prices starting at USD 200.

#3- The national cricket team is in Thailandto compete in the cricket ACC T20 Men’s Challenger Cup today where it will play against Cambodia at 4:30am KSA. They will also play Bhutan and Indonesia as they look to secure a spot in the ACC T20 Men Premier Cup in Oman.

THE BIG STORY ABROAD-

Two big stories are vying for your attention this morning, one of them in our neighborhood, and one in the US of A.

#1- Is Egypt about to devalue its currency? Speculation is rampant in Cairo that the Sisi administration is closing in on a much larger financing agreement with the International Monetary Fund, giving it as USD 9 bn or more in funding over a multi-year period in return for a commitment to reforms including devaluing (or floating) its embattled currency.

Egyptian shares closed sharply down yesterday as traders “adopted a ‘sell the fact’ mood, with equities being sold off as rumors about an impending pound depreciation intensify,” Bloomberg writes, citing Dubai-based Emre Akcakmak, a portfolio manager at East Capital International.

EnterpriseAM Egypt has reported that an IMF delegation in Cairo has extended its stay until today in the hope of reaching a staff-level agreement. The news comes as Egypt’s central bank moved to sop up excess local-currency liquidity in the market amid long lines at banks, reminding financial institutions yesterday of longstanding limits on cash withdrawals for both companies and individuals.

#2- The US Federal Reserve has left rates unchanged — and signaled that a rate cut in March is unlikely. It’s the fourth meeting in a row to see the Fed leave rates at a nearly 23-year high of 5.25%-5.50%. “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting,” Fed boss Jay Powell said at a presser after the meeting.

SAMA and the Central Bank of the UAE, which maintain pegs to the USD,have both left their benchmark rates unchanged.

The story is on every front page this morning: Reuters | FT | CNBC | WSJ | Associated Press | NYT | Bloomberg.

#3- On the issue of regional tensions and the Red Sea:

  • Iran has threatened a “decisive response” if the US strikes its “territory, or its interests or citizens abroad,” Iran’s UN Ambassador Amir Saeid Iravani said, according to Iranian state media. The statement came as the US Navy launched another attack against Houthi infrastructure in Yemen.
  • The European Union is set to send ships into the Red Sea by mid-February, Reuters writes, in a bid to help deter Houthi attacks on shipping. EU forces will not participate in attacks on Houthi positions, the bloc’s foreign policy chief added.

MORNING MUST READ-

It hurts — physically and psychically — to make Tom Friedman a Morning Must Read, but… The New York Times columnist has articulated what he sees as a three-pronged “Biden Doctrine” that he believes will shortly become the core of American foreign policy toward our part of the world.

Why you should care: Friedman is now seen in Western policymaking circles as relevant in a way that he hasn’t been in more than two decades, thanks to his columns in the wake of the Hamas attack on Israel and the latter’s invasion of Gaza.

Based on his reporting, Friedman thinks the three points of the so-called Biden Doctrine will be:

  • Aggressively contain Iran, including “robust military retaliation against Iran’s proxies and agents in the region” for stepping out of line.
  • Create a Palestinian state: “An unprecedented US diplomatic initiative to promote a [demilitarized] Palestinian state — NOW” is in the works, he thinks.
  • “A vastly expanded US security alliance with Saudi Arabia, which would also involve Saudi normalization of relations with Israel,” would be the capstone.

READ:A Biden Doctrine for the Middle East is forming. And it’s big.

CIRCLE YOUR CALENDAR-

Filipino exporters are coming to town next month: A business-matching tour will kick off on Saturday, 10 February, where a group of Filipino exporters of food, beverage and personal care products will tour Riyadh, Jeddah, and Dammam to market their businesses, Arab News reports.

The AlUla Tour 2024 will wrap up on 3 February.

In the mood for some Picasso? Riyadh will host the international interactive art exhibition Imagine Picasso starting Saturday, 3 February, and running for one month. The exhibition will feature projections of 200 of Pablo Picasso’s most famous works, pulled from the collections of museums around the world.

The PIF Private Sector Forum takes place in Riyadh on Tuesday, 6 February to Wednesday, 7 February, the PIF said on Linkedin. The event will bring together the fund, portfolio companies, private sector and others to help advance economic growth.

The Hail Toyota International Rally which will kick off on 8 February and wrap up on 10 February. You have until Saturday, 27 January to register.

TheSaudi Capital Market Forum will kick off on Monday, 19 February and wrap up the next day.

Riyadh will host the International Conference on Sand and Dust Storms in the Arabian Peninsulafrom Monday, 4 March to Wednesday, 6 March. The conference will address regional challenges caused by sand and dust storms and discuss monitoring systems, mitigation strategies, economic and infrastructural impacts, and more.

Tickets are on sale for the 2024 Saudi Arabian Grand Prix, scheduled for Jeddah from 7-9 March.

Riyadh will host a World Economic Forum special meeting on 28-29 April.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

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