UAE, SAUDI ARABIA INCENTIVES $40 BLN

PLATTS - 15 Mar 2020 - The UAE and Saudi Arabia revealed $40.6 billion of stimulus packages aimed at supporting their economies hit hard by the coronavirus outbreak and the oil price crash.

The UAE's central bank on Saturday announced a package of Dirhams 100 billion ($27.3 billion) that will allow banks to provide relief to private sector companies. Saudi Arabia's central bank announced the same day a Riyals 50 billion ($13.3 billion) package to prop up the private sector.

The effective collapse of the OPEC+ coalition when the group and its allies failed to agree on an additional 1.5 million b/d of cuts on March 6 has triggered a 30% collapse in prices, with no floor in sight. Brent crude is now threatening to dip below $30/b and test levels last seen back in 2004. Some industry veterans even fear prices could plummet further to historic lows.

The crash is set to hit most Middle East nations right when oil demand is being hit by the coronavirus. Saudi Arabia, OPEC's biggest producer, has taken drastic measures, including a two-week suspension of all international flights starting Sunday and locking down its oil-producing region of Qatif, where Saudi Aramco has major crude facilities. The UAE, OPEC's third-biggest producer, will stop issuing visas to foreigners, except diplomats, starting March 17.

'Further steps'

"The central bank of the UAE will continue monitoring the situation very closely, and is prepared to take further steps, if necessary," it said in a statement.

The Saudi Arabian Monetary Authority, the country's central bank, said its stimulus package comes as part of its role in "enabling the financial sector to support the growth of the private sector, and supporting the efforts of the government in combating the coronavirus (COVID-19) and mitigating its expected financial and economic impacts on the private sector, especially on SME," or small to medium sized enterprises. Saudi Arabia has 103 cases of the virus, while the UAE has 86 and Kuwait 112.

Qatar has the highest number of cases in the six-member Gulf Cooperation Council, with 337 infected individuals, followed by Bahrain with 210. Oman has the lowest number, with 20 cases. None of the GCC states has reported any deaths from the virus.

Egypt also announced plans to allocate Pounds 100 billion ($6.4 billion) to fight the coronavirus. Elsewhere in the region, Kuwait on March 11 announced a two-week public holiday and suspended flights, while Iraq has closed all nine border posts with Iran, where deaths from the virus have surpassed 600.

Abu Dhabi and Dubai have also closed entertainment centers and theme parks as precautions to halt the spread of the coronavirus. Abu Dhabi is closing the trading hall of its stock exchange.

All these measures are expected to hit oil demand in the Middle East, according to the latest S&P Global Platts Analytics estimates.

Total oil product demand in the Middle East will likely decline by 0.6% year on year to average 9.7 million b/d in the first half of this year, it said. The drop compares with a 1.1% year-on-year growth in the first half of 2019. On an annual basis, total oil product demand will likely drop by 0.2% year on year to 9.8 million b/d compared with 0.9% year-on-year growth last year.

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