Oil price leap to boost Gulf markets

An overnight leap in oil prices is set to boost Gulf stock markets on Wednesday, while the start of the Saudi Arabian third-quarter earnings reporting season may spur interest in that market.

Brent crude jumped 5.4 percent on Tuesday, closing above $50 a barrel for the first time in a month, and rose further to $52.33 in Asian trade on Wednesday morning.

The U.S. Energy Information Administration predicted in a report that global oil demand would grow by the most in six years in 2016 while non-OPEC supply would stall. Overall, the report suggested a global supply glut might be easing.

If oil prices have indeed bottomed out – which remains uncertain – that would be very good news for Gulf equities, since much of their weakness in recent months has been due not to the absolute level of oil prices but to fears that they could sink further.

High valuations may continue to restrain any extended rebound by Saudi stocks, but the index, last at 7,462 points, may soon test immediate chart resistance at 7,812 points, where it peaked in mid-September.

Earnings reported by a couple of Saudi banks on Wednesday appared strong. Banque Saudi Fransi posted a 10.2 percent rise in third-quarter net profit; analysts had been expecting growth of around 5 percent, according to Thomson Reuters data.

Alinma Bank reported a 13.3 percent rise in quarterly profit, while analysts had expected roughly flat earnings.

However, Riyad Bank announced a 16.5 percent fall in profit that it blamed on declining operating income; analysts had also predicted flat earnings for Riyad.

Dubai’s stock index, which last closed at 3,660 points, looks set to break chart resistance around 3,700 points, which capped it repeatedly in September. Any break of its recent range would point it up to around 3,900 points.

Egypt’s market has been soft this week because of poor purchasing managers’ data and the move by EFG Hermes to downgrade the market to neutral. However, strength in Asian stocks on Wednesday – MSCI’s broadest index of Asia-Pacific shares outside Japan has gained 1.1 percent – is likely to buoy Egypt too. Arabian Business