Gulf markets falls on oil slump, Saudi riyal down in forwards market

DUBAI (Reuters) – Gulf stock markets fell on Tuesday and the Saudi currency dropped in the forwards market, after U.S. crude oil futures collapsed below $0 on a coronavirus-induced supply glut.

The Saudi stock index <.tasi> dropped 1.5% at the market open with oil company Aramco down 1.7%.

Shares in the Dubai market <.dfmgi> fell 1.4% while the Abu Dhabi index <.adi> lost 0.5% and the Kuwaiti premier index <.bkp> declined 2%.

The cost of insuring against a potential debt default of Saudi Arabia – the world’s biggest oil exporter – increased slightly to 168 basis points from 166 on Monday, according to data from IHS Markit. It is up 13 bps in the past week.

U.S. crude oil futures fell below $0 on Monday for the first time in history as demand cratered. Brent crude, the international benchmark, also slumped, though that contract was nowhere near as weak. [O/R]

Lower oil prices, combined with other economic pressures caused by the coronavirus outbreak, are hurting the budgets of Gulf countries that rely heavily on crude exports and have strained their currencies.

The Saudi riyal fell in the forwards market against the dollar. It is pegged at 3.75 to the U.S. currency in the spot market, so banks often use the forwards market to hedge against risks.

Nine-month dollar/riyal forwards – trades scheduled to take place in nine months – were at 120 points, up from Friday’s close of 60 points – their highest level since November 2017, Refinitiv data showed.

One-year dollar/riyal forwards rose to 210 points, flirting with a near 2-1/2 year high of 211 hit on Monday.

(Reporting by Davide Barbuscia, Karin Strohecker, Hadeel Al Sayegh; editing by John Stonestreet)