Bank of America: Saudi Arabia faces liquidity pressure despite recovering oil exports

Bank of America said Saudi banks face liquidity shortages as deposit growth slows and the region feels the fallout from the war on Iran, despite the kingdom’s oil output returning to prewar levels.

A Bank of America report said Saudi Arabia is facing liquidity pressure in its banking sector as deposit growth slows and regional economies feel the fallout from the US-Israeli war on Iran, Bloomberg and Middle East Eye reported.

The report said Saudi banks are affected by the liquidity shortage spreading from the UAE because of the close ties between the two countries’ banking sectors. Government entities are also withdrawing funds from local banks while demand for loans remains high, raising funding costs.

أبراج مركز الملك عبدالله المالي في الرياض (أرشيف)

Oil production returns to prewar levels

Meanwhile, Saudi Arabia told OPEC that it pumped 10.6 million barrels per day in October, up from 8.372 million barrels per day in September, its highest level since February. The East-West pipeline, which ends at the Red Sea port of Yanbu, helped bypass disruptions in the Strait of Hormuz.

The Saudi riyal is pegged to the US dollar, limiting the central bank’s ability to inject additional liquidity independently, as interest rates in the Gulf states follow decisions by the US Federal Reserve.

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