Daily Economic Update

New Kuwait-Saudi oil discovery in the PNZKuwait-Saudi: New oil well discovered in the Partitioned Neutral Zone. Kuwaiti and Saudi authorities announced yesterday the discovery of Wara-Burgan-1, a new onshore oil well in the Partitioned Neutral Zone (PNZ). The flow rate from the well exceeded 500 b/d and the oil had an API gravity of 26-27°, characterizing it as a medium-grade crude that is heavier than Kuwait’s benchmark medium-sour blend, Kuwait Export Crude. This represents the first discovery in the zone since production was resumed in 2020 after a five-year shut-in. The discovery of new wells in the PNZ follows appraisal work done on both the onshore Wafra field and the offshore Khafji field as part of Kuwait and Saudi Arabia’s plans to boost oil production from the PNZ. Oil output in the PNZ is shared 50:50. State operator Kuwait Petroleum Corporation has plans to raise its crude oil production capacity to 4.0 mb/d by 2035 (“Strategy 2040”) from the current 3.0 mb/d, as stated by KPC’s CEO Nawaf Al-Sabah, with Kuwait’s share of production in the PNZ expected to rise to 350 kb/d from around 200-250 kb/d at present. Wara-Burgan-1 and the giant offshore Nokhitha field discovered last year will be useful contributors in that regard.

Saudi Arabia: Trade surplus narrowed in March on lower exports. The trade surplus narrowed by 34% y/y (11% m/m) to SR19.8 billion in March from a downwardly revised SR22.3 billion the previous month, marking the lowest surplus since December 2024. Total exports fell by 9.8% y/y to a four-month low of SR93.8 billion on a drop in oil exports (16% y/y) which accounts for the bulk (71%) of the total. This was partly offset by the sustained increase in non-oil exports (11% y/y), which posted a sixteenth consecutive month of solid growth, with strong re-export growth (21% y/y) and notable gains in the exports of plastics and rubber (22%), machinery and mechanical appliances (25%) and vehicles/ aircraft (39%). Meanwhile, import growth fell for the third consecutive month to a minimal 0.1% y/y from the recent peak of 32% in December, helping to alleviate some of the pressure on the trade balance. On the other hand, lower oil prices could cap a possible recovery in exports from the scheduled increases in oil output, keeping the surplus at a relatively low level.  

Chart 1: Saudi trade balance   Source: Haver

China: Industrial profits rise in April; Moody’s maintains negative outlook. Official data showed that in the four months to April industrial profits were up 1.4% y/y (cumulative), edging up on the YTD increase recorded at end-March (0.8%). Despite US tariffs on Chinese products reaching a peak of 145% on April 2nd (and remaining there until May 14th), private sector profits (YTD) were up 4.3% y/y in April, significantly reversing course after March’s 0.3% decline. Two weeks earlier, the Chinese government also pledged support for tariff-hit exporters and announced interest rate cuts, limiting the damage to the country’s export-led economy. Nevertheless, rating agency Moody’s has maintained its negative credit outlook on China, citing concerns about government debt and tensions with major trading partners. 

Japan: Government unveils stimulus package to shield economy from rising cost pressures. The government has approved a new stimulus and relief package of JPY2.8 trillion ($20.4bn) to support households grappling with the rising cost of living and to counter the negative effects of higher US tariffs. Around JPY600 billion will be allocated to reinstate electricity and gas subsidies during the summer (July-September), helping to curb the sharp increase in bills, while about JPY300 billion will be utilized to support financially struggling businesses. The government also said that they would use JPY388 billion ($2.7bn) from a reserve fund to finance the package. The structure of the relief package is similar to the 2023 scheme to address rising energy prices. In other news, in a move designed to reduce food costs and improve market efficiency, the ministry of agriculture will introduce early next month a transparent rice pricing mechanism featuring standardized trading data for various rice brands. This follows a government pledge to release 300k tons of stockpiled rice to halve retail prices and mitigate the burden on households.

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