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MENA Monthly Compendium

EHSAN KHOMAN
Head of Commodities, ESG and
Emerging Markets Research –
EMEA
DIFC Branch – Dubai
T:+971 (4)387 5033
E: ehsan.khoman@ae.mufg.jp

 

SOOJIN KIM
Research Analyst
DIFC Branch – Dubai
T: +44(4)387 5031
E: soojin.kim@ae.mufg.jp

 

MUFG Bank, Ltd.
A member of MUFG, a global financial group

MENA Monthly Compendium

We are pleased to share in the link our latest MUFG MENA monthly compendium which aims to organise and highlight the array of themes surrounding the MENA region, from standalone thought leadership research, market developments and events to MUFG’s involvement on MENA related transactions as well as broader activities.

MUFG’s leading MENA regional financing for our clients

In October, MUFG was involved in the following prominent capital markets transactions:

• MUFG acted as Joint Bookrunner & Joint Lead Manager as well as Joint Green Structurer on the USD1.75bn 7-year long 12-year Green 144A/RegS bond offering from Abu Dhabi National Energy Company PJSC (“TAQA”).

 

MENA market perspectives

• Lowering our oil price forecasts for 2025. Since 2022, our forecasts for the Middle East energy exporters have assumed oil will trade through the cycle in a USD80-100/b range. The range has been deliberately broad to allow us to frame a medium-term macro view without reference to short-term market volatility. With 2025 coming into view, we are cognisant that Brent crude year-to-date is averaging close to the USD80/b floor of that longstanding range. We also mindful that the absence of supply disruptions stemming from heightened geopolitical tensions has capped oil price gains. We equally recognise that the underlying downside risks to oil prices have built this year as demand growth has disappointed, non-OPEC+ supply has gained, and OPEC+ has relied on Saudi-led “voluntary cuts” to keep the market in-check. Beyond the tepid cyclical nature of the market, the build-up in substantial OPEC+ spare capacity (~6m b/d) is reinforcing the ceiling for sustainable price gains. This creates conditions where prices are likely to soften into next year, particularly with OPEC+ looking set to lift production in a bid to regain market share. As a result, we  mark-to-market lower our oil price range into 2025 within a USD65-80/b corridor, but critically remain confident in the region’s capability to absorb any revenue loss this lower range would bring. Indeed, not only are regional policymakers highly experienced in managing the ebbs and flows of energy receipts without compromising stability, but the sheer velocity of the balance sheet strength that regional energy exporters command will continue to guard economic order over the long-term.

• Sustainable bond issuances in the Middle East are down in the first nine months of 2024. Total sustainable bond (green, social, sustainability, and sustainability-linked bonds) issuance in the Middle East reached USD16.7bn in the first nine months of 2024, down 18% y/y. Part of the rationale are due to higher interest rates as well as some normalisation from the halo effect surrounding COP28 that took place in the UAE in Q4 2023. Equally, transparency and disclosure within ESG reporting are in the early stages of development, which may impact funding and regulations. From a composition perspective, whilst funding climate transition and adaptation remains top of mind in the region given the exposure to hydrocarbons, sustainability issuances (that’s inclusive of social projects) have increased year-to-date, compared with only green projects previously. This is in contrast with global trends, where green bonds remain dominant (~60% of sustainable bonds). Part of this reason lies in the issuer profile, with most issuers year-to-date being financial institutions, where adding a social dimension to the framework is aligned with over respective sector exposure.