Recovering oil exports and a sharp increase in re-exports maintained Saudi Arabia’s trade surplus in October. The trade balance rose by 47.4% y-o-y to SAR 23.9 bn, the second-highest monthly surplus this year.

The rise fueled growth in total merchandise exports, rising 11.8% y-o-y to SAR 104 bn during the month.

!_Subhed_! Output hikes are propping up oil revenues

Oil exports hit their highest level since January at SAR 70.1 bn, up 4% y-o-y, according to preliminary data (pdf) from Gastat.

IN CONTEXT- Opec+ began rapidly unwinding voluntary output cuts this year, raising the production ceiling by some 2.5 mn bbl / d through October. While the hikes initially pressured oil prices, causing y-o-y declines in Saudi oil revenues, earnings began to recover in August as more of our barrels hit the market while oil prices held relatively steady.

Re-exports are booming

Non-oil exports, including re-exports, grew at eight times the rate of oil exports in October, buoyed by re-exports jumping 131% y-o-y to SAR 13.8 bn.

The main driver? A 387.5% increase in transportation equipment, which accounted for 37.4% of total re-exports.

Our re-exports strategy is bearing fruit: Saudi has been pivoting from a pure import destination to a regional transshipment hub, through overhauled Special Economic Zones which offer 0% customs duty deferrals and VAT suspensions for goods that never enter the mainland. Zatca’s bonded zone regs also allow non-resident merchants to warehouse and re-export goods without triggering customs duties, VAT, or the need for a local commercial license.

The boom is masking a slowdown in non-oil exports

Excluding re-exports, non-oil exports growth slowed down to 2.4% y-o-y, compared with 2.8% increase in September. Subdued growth was expected due to a weak global demand environment — particularly in chemicals — rather than a slowdown in Saudi manufacturing, Argaam Investments’ Ahmed Ramzy told us last month.

Machinery and electrical equipment topped the export list, comprising 23.6% of the total non-oil exports and jumping 82.5% y-o-y to just under SAR 8 bn. Chemical products followed, accounting for 19.4% of non-oil exports, despite recording a 5% y-o-y decrease to just under SAR 6.6 bn.

MEANWHILE- Imports grew at 4.3% y-o-y, with machinery and electrical equipment leading the Kingdom’s import mix at a 30% share. Transportation equipment came in second, representing 12% of total imports despite dipping 23% y-o-y.

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