Posts Tagged ‘OPEC’

Saudi king to start Russia visit on Thursday

October 2, 2017

Reuters

DUBAI (Reuters) – Saudi Arabia’s King Salman will begin a visit to Russia on Thursday at the invitation of President Vladimir Putin, Saudi state news agency SPA said, the Gulf ruler’s first trip to Moscow since becoming king in 2015.

During the visit the two countries plan to set up a $1 billion fund to invest in energy projects as part of efforts by two of the world’s biggest oil producers to expand cooperation, Russian Energy Minister Alexander Novak said earlier on Monday.

SPA said the two leaders would discuss bilateral and regional issues, but gave no details.

Saudi Arabia, the biggest oil producer in the Organization of the Petroleum Exporting Countries, and Russia helped forge a deal between OPEC and other producers to cut output by 1.8 million barrels per day from January to lift crude prices.

Reporting by Sylvia Westall; Editing by Gareth Jones

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US dollar shines, Asia shares slip after Fed signals December rate hike

September 21, 2017

Image may contain: 1 person

Federal Reserve chair Janet Yellen

TOKYO (REUTERS) – The US dollar shone while Asian shares slipped on Thursday (Sept 21) after the US Federal Reserve announced a plan to start shrinking its balance sheet and signalled one more rate hike later this year.

European shares are expected to benefit from a fall in the euro against the dollar with spread betters looking at a higher opening of 0.5 per cent in Germany’s DAX and France’s CAC.

Japan’s Nikkei gained 0.2 per cent as a rise in US bond yields lifted financial shares, while the yen’s fall against the dollar after the Fed’s decision helped exporters.

The Bank of Japan, as widely expected, left its policy settings unchanged, with markets awaiting a news conference by its governor later in the day.

MSCI’s broadest dollar-denominated index of Asia-Pacific shares outside Japan fell 0.5 per cent, with Australian shares among the hardest hit with fall of 0.8 per cent.

Major US share indexes recovered quickly from initial losses following the Fed’s announcement, with the S&P 500 ending slightly higher, helped in part by gains in financials and energy shares.

“While a rate hike is negative, the fact that the Fed’s confidence in the economy is strong enough to expect a rate hike can be taken as supportive of market sentiment,” said Soichiro Monji, chief strategist at Daiwa SB Investments.

The Fed’s view also prompted a rotation from tech shares into financial shares, which benefit from higher interest rates, he added. “In a way, what the Fed did was not much of a surprise. From now, the markets will be focusing on individual earnings rather than macro themes,” said Hisashi Iwama, senior portfolio manager at Asset Management One.

As expected, the Fed said it would begin in October to trim its massive holding of U.S. Treasury bonds and mortgage-backed securities acquired in the years after the 2008 financial crisis.

The Fed signalled it still expects one more interest rate hike by the end of the year, despite a recent bout of low inflation, but ratcheted down its long-term interest rate forecasts.

Fed fund rate futures are now pricing in about a 65 per cent chance of a rate hike by December compared to around 50 percent before the latest meeting. Markets expect the Fed move to coincide with revisions of its economic projections.

The yield on two-year US Treasury notes jumped to 1.451 per cent, its highest level since November 2008 late on Wednesday. The 10-year US Treasuries yield rose to 2.278 per cent, briefly hitting a six-week high of 2.289 per cent.

“The markets reacted to the Fed quite straightforwardly, with shorter yields rising more than long-dated bond yields. The bond markets have fairly strong conviction that low inflation and low growth will persist,” said Hiroko Iwaki, senior strategist at Mizuho Securities.

In the currency market, the rise in Treasury yields boosted the dollar’s attractiveness.

The euro dropped to US$1.1883 from above US$1.20 just before the Fed’s policy announcement.

Likewise the dollar jumped to 112.595 yen, a two-month high, from around 111.30.

Against the Singapore dollar, the greenback was up 0.63 per cent to S$1.3525 as of 2:45pm in Singapore, from it’s Wednesday’s close of S$1.3441.

With the dollar advancing, gold slipped to a three-week low of US$1,296 per ounce.

Oil prices flirted with multi-month highs, despite a rise in US crude inventories, after the Iraqi oil minister said Opec and its partners were considering extending or deepening output cuts, ahead of the planned meeting between OPEC and non-Opec nations on Friday.

Brent crude futures rose to a five-month high of US$56.48 a barrel on Wednesday and last stood at US$56.17, down slightly from late US levels.

US benchmark West Texas Intermediate (WTI) crude futures hit a four-month high of US$50.79 per barrel and last traded at US$50.64, down slightly from the US close on Wednesday.

Saudis contributed to July boost in oil output: OPEC

August 10, 2017

AFP

© AFP/File | OPEC increased output in July despite pledges to restrain production

PARIS (AFP) – Crude oil production by OPEC members increased slightly in July, including Saudi Arabia, which had championed efforts by the oil cartel and allies to extend an output freeze.Output from the 14 cartel members hit 32.87 million barrels per day (mbd) in July according to secondary sources, OPEC said in its monthly report on the oil market, up from 32.69 mbd in June.

“Crude oil output increased mostly in Libya, Nigeria, and Saudi Arabia,” said the report.

OPEC and a number of other producers including Russia agreed in May to extend production cuts, originally agreed last year, into 2018 to ease a global supply glut and support the price of crude.

But oil prices haven’t been able to push up durably from around $50 a barrel as some exporters have produced more oil than agreed under the November deal, raising doubts about OPEC’s ability to enforce it.

While both Libya and Nigeria were exempted from the production cuts, Saudi Arabia was the motor behind the effort in May to extend the limits and is OPEC’s largest producer by far.

Its output increased to 10.067 mbd in July from 10.035 mbd in June, according to secondary sources, which would put it just above its agreed output ceiling.

Saudi Arabia did not supply production figures directly to OPEC.

Technical experts from OPEC and its allies met in Abu Dhabi this week and the cartel said after the talks that they “remain steadfast in their commitment to fulfil” the November deal.

Decisions at the meeting, attended by Russia and Saudi Arabia, will “help facilitate full conformity” with production cuts, it said.

Last month, OPEC said there was “room for improvement” in implementing the deal and called on countries that signed the deal to “promptly reach full conformity”.

OPEC increased slightly its forecast for growth in global oil demand to an increase of 1.37 mbd this year, with overall demand at 96.49 mbd. It also rose its forecast for demand growth in 2018 to 1.28 mbd, with demand hitting 97.77 mbd.

Oil Prices Return To Bear Market

June 21, 2017

Price declines more than 20% since Feb. 23 despite OPEC’s production cuts

Lower prices in the futures market are also likely to show up at gasoline pumps in the months ahead.

Lower prices in the futures market are also likely to show up at gasoline pumps in the months ahead. PHOTO: MARK HUMPHREY/ASSOCIATED PRESS

Oil prices are back in bear-market territory, frustrating OPEC members that cut production in an attempt to boost prices and renewing fears that falling prices could spill into stocks and other markets.

A persistent glut has weighed on prices for most of the past three years, a blow to investors who believed that the Organization of the Petroleum Exporting Countries’ move this year to limit production would provide relief.

Instead, U.S. producers ramped up production when the world was already swimming in oil as OPEC members, Russia and other producing nations curtailed output.

U.S. oil production is up 7.3% to 9.3 million barrels a day since OPEC announced plans in November to cut output, and the number of active rigs in the U.S. is at a two-year high.

The cartel’s output cut “has been deemed an OPEC failure and a U.S. production win,” said Tony Headrick, energy analyst at CHS Hedging.

While oil prices have enjoyed gains in short spurts over the past year, U.S. prices closed down 2.2% to $43.23 a barrel Tuesday. They have fallen in four of the past five sessions to a new low for the year.

Prices are down 20.6% since Feb. 23, marking the sixth bear market for crude in four years and the first since August. Crude prices have lost 62% since settling at $115.06 a barrel three years ago. A bear market is typically defined as a decline of 20% or more from a recent peak, while a bull market is a gain of 20% or more from a recent trough.

“We’re seeing this decline amid some major OPEC production restraints,” said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates. “That’s the huge difference” compared with previous bear markets.

The oil market has also been more volatile this spring. Traders have crowded into bullish positions, only to reverse suddenly when the market failed to respond to positive data or news that OPEC was extending its cuts. Tuesday’s move marked oil’s eighth loss of more than 2% in the past two months.

Investors are starting to worry that oil’s steady declines may start to drag down other markets. When the oil-price plunge gathered steam at the end of 2015, analysts blamed crude in part for sparking selloffs in other commodities, emerging markets and other risky assets.

The S&P GSCI index, which broadly tracks commodity prices, fell 1.2% Tuesday. The S&P 500’s energy sector, already the worst-performing group of stocks in the index, dropped an additional 1.2%. Seven out of the 10 worst-performing stocks in the S&P 500 this year are energy stocks, according to FactSet.

“You’ve got a buyer’s strike out there on the equities side,” said Dan Pickering, head of the asset-management arm of Tudor, Pickering, Holt & Co. “I love the values I see, but I’m scared to death to put money to work.”

There are also signs that anxiety is spreading to the debt market. Bonds of oil and gas companies with below-investment-grade credit ratings, or junk bonds, have held up for most of this year, but anxiety is starting to creep in, analysts and investors say. The Bloomberg Barclays high-yield energy index has returned negative 1.6% since the beginning of June, through Monday.

The deepening oil rout brought strong demand for long-term U.S. government bonds, sending the yield on the 30-year Treasury debt to the lowest level this year Tuesday. Lower energy prices tend to deflate inflation expectations, making long-term Treasury debt more appealing.

Falling oil prices are typically helpful to U.S. consumers and the companies that serve them. Airlines made record profits last year in part from lower oil prices and were girding for profits to fall this year if oil rose. Lower prices in the futures market are also likely to show up at gasoline pumps in the months ahead, potentially lowering costs for drivers at the end of summer driving season.

But as the U.S. energy production has grown and become a bigger part of the overall economy, many companies have recently been touting the benefits of higher oil prices. They now stand to lose out.

Neiman Marcus Group Ltd., for one, a week ago credited higher oil prices with improving traffic in its Texas stores. Railroad executives have been concerned about shrinking oil shipments on their lines after low prices forced drillers to cut back two years ago. A continuing rebound in drilling could end or slow with lower prices.

“That’s something that we monitor, just given how radical the [last] decline was and how prolonged it was,” Keith Cline, chief executive of hotel operator La Quinta Holdings Inc.,said at a recent lodging conference. “We’re keeping a close eye on the 11% of our rooms that could be impacted in some way by oil production.”

Oil returned to a bear market for the first time since August 2016, before the historic agreement between OPEC and other major oil-producing nations to limit output by about 1.8 million barrels a day at the end of last year. In May, the group decided to extend the deal into March 2018.

Morgan Stanley said Monday the oil glut wouldn’t go away and would grow again next year unless OPEC cuts deeper or extends its cuts through 2018. Along with the U.S., rising production from OPEC members that are exempt from the deal, such as Libya and Nigeria, has offset progress by the group.

Traders are bracing for crucial data released on Wednesday by the U.S. Energy Information Administration about the latest inventories.

Analysts and traders surveyed by The Wall Street Journal expect crude stockpiles to have fallen by 2 million barrels, on average, in the week ended June 16, which could provide some support to falling prices.

Yet even amid falling crude stockpiles in the U.S., oil prices have dropped as modest stock drawdowns have failed to impress investors.

The data “is probably not going to provide much in the way of support,“ said John Saucer, vice president of research and analysis at Mobius Risk Group. ”The market’s definitely been very receptive to bearish news.”

Appeared in the June 21, 2017, print edition as ‘Oil Prices Return To Bear Market.’

https://www.wsj.com/articles/oil-returns-to-bear-market-1498001993?mod=e2tweu

Saudi Arabia Cuts U.S. Oil Exports to Work Down Global Supply Glut

June 13, 2017

Kingdom is slashing exports to a near three-decade low for this time of the year; move could reinforce OPEC’s production cuts

A view of Saudi Aramco’s Manifa oil field in 2015.

A view of Saudi Aramco’s Manifa oil field in 2015. PHOTO: SAUDI ARAMCO/REUTERS

Saudi Arabia is slashing its U.S. oil exports to a near three-decade low for this time of the year, intensifying its efforts to reduce a global supply glut that has been pummeling crude prices.

The state-owned Saudi Arabian Oil Co. expects its sales to the U.S. will drop below one million barrels a day in June, then slide to about 850,000 barrels a day in July, according to people familiar with the matter. The July figure would be the its lowest export total to the U.S. for that month since 1988, based on figures from the U.S. Energy Information Administration.

Saudi Aramco expects its August exports to decline by another 100,000 barrels a day, these people said, which would be the lowest export amount for that month since 2009.

Many oil traders have questioned whether production cuts by the Organization of the Petroleum Exporting Companies have done much to reduce a persistent global supply imbalance, in part because U.S. companies have rushed to fill any void left by OPEC.

Crude prices have tumbled 9% over the past three weeks and are down about 14% this year, back near where they were before OPEC’s deal was first announced in November.

But some analysts say these reductions in Saudi exports to the U.S. could be a step toward ensuring that OPEC’s cuts have the intended effect of reducing bloated inventories of oil around the world, and particularly in the U.S.

Declining U.S. exports show that Saudi Arabia is “getting serious” about addressing the supply glut, said Jan Stuart, global energy strategist at Credit Suisse Group AG . “And what we in the markets are looking for are concrete signs they are getting serious.”

The fall in Saudi exports could reflect a number of other factors. Rising U.S. production means domestic refiners need less of Saudi Arabia’s crude, and the end of Aramco’s refining joint venture with Royal Dutch Shell PLC leaves the Saudi company with fewer buyers of its crude output. Saudi exports usually fall during the hot summer months because the kingdom requires more crude to generate electricity.

Khalid Bin Abdulaziz Al-Falih, Saudi Arabia’s energy minister and president of the Organization of the Petroleum Exporting Countries, center, speaking ahead of an OPEC meeting in Vienna on May 25.

Khalid Bin Abdulaziz Al-Falih, Saudi Arabia’s energy minister and president of the Organization of the Petroleum Exporting Countries, center, speaking ahead of an OPEC meeting in Vienna on May 25. PHOTO: AKOS STILLER/BLOOMBERG NEWS

But Aramco has also been raising prices to its U.S. customers as part of its effort to stop them from stockpiling so much oil in the world’s most closely watched storage tanks. Earlier this month it boosted prices for its light and medium grades by 50 cents for July shipments.

OPEC’s cuts have struggled to bring about the desired results. When the cartel announced late last year that it would cut output in coordination with Russia and other major producers, many believed it would help work off the global glut relatively quickly. That briefly sent crude prices rising.

But U.S. producers quickly took advantage of those higher prices, and their output has increased rapidly. Global stockpiles have come down but remain well above the levels OPEC is targeting. Even the group’s announcement last month that it would continue to curtail production through March failed to excite investors.

Some analysts say OPEC has undermined its own efforts. Members ramped up production at the end of the year as they negotiated their new production caps.

Once the cuts went into effect and OPEC members curtailed output, they still continued to ship oil around the world. That became a source of consternation to those oil traders who have been watching anxiously for signs that the production cuts were bringing global supplies down.

Traders are increasingly focused on U.S. inventories, in part because data there is easier to come by than in other places. When the EIA reported an unexpected increase in U.S. oil supplies last week, prices fell by more than 5%.

Analysts say OPEC is getting more serious about holding crude back from the global market. U.S. imports from Saudi Arabia declined to 1.17 million barrels a day in March from 1.34 million barrels a day in January. ClipperData, a vessel tracking firm, said they averaged about 1.1 million barrels a day in April and May.

“I know the last two weeks there have been reports to the contrary but if you look at it not on a weekly basis, but monthly averages, you will see Aramco exports declining measurably into the U.S.,” Saudi Energy Minister Khalid al-Falih told reporters last month following OPEC’s meeting in Vienna.

Aramco raised the prices it charges its Asian customers even more than it did to the U.S., lifting its official selling price by 60 cents a barrel for July shipments to Asian refiners. But it is more difficult for market participants to get a clear picture of the level of oil in inventories in Asia, so the effect of increasing prices there may not be felt as clearly as in the U.S.

Even with the falling exports, many analysts remain skeptical after years of oversupply.

“The market will only believe it when they see it,” said Amrita Sen, chief oil analyst at Energy Aspects. “Right now sentiment is very bearish. It’s going to take awhile to turn this around.”

Write to Alison Sider at alison.sider@wsj.com, Summer Said at summer.said@wsj.com and Timothy Puko at tim.puko@wsj.com

Hedge Funds Turn Against OPEC After Oil Gains Slip Away — “Basically, their mistake is to think they can fix prices—they cannot anymore.”

May 17, 2017

Traders tally up losses as cartel falls short in its effort to boost prices and reduce global glut

OPEC Secretary-General Mohammad Barkindo speaks with journalists in April in Abu Dhabi.

OPEC Secretary-General Mohammad Barkindo speaks with journalists in April in Abu Dhabi. PHOTO: NEZAR BALOUT/AGENCE FRANCE-PRESSE/GETTY IMAGES

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May 17, 2017 5:30 a.m. ET

OPEC is trying harder than ever to woo big investors, but the cartel is finding that falling oil prices are making that a tough sell.

Dozens of hedge-fund managers and oil traders attended a series of closed-door meetings in recent months with OPEC leaders—the first of their kind, according to Ed Morse, Citigroup’s global head of commodities research, who helped organize some of the events.

Cartel officials made the case for how OPEC supply cuts would reduce the global glut and boost crude prices, according to people familiar with the meetings. Instead, oil prices are down more than 10% from their February high, and some prominent hedge-fund traders are reeling.

Investors placed a record number of bets on rising oil prices this year, but oil bulls havesince retreated.THE WALL STREET JOURNALSource: The Commodity Futures Trading Commission
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Pierre Andurand, a French hedge-fund manager with a history of double-digit returns, met with a Saudi official from the Organization of the Petroleum Exporting Countries just before the Nov. 30 decision to cut production, said people familiar with the meeting. After a series of bullish bets, his main fund at Andurand Capital is down around 16% this year through May 5, according to a person who had seen the performance numbers.

Oil rose 2.1% on Monday after Russian and Saudi Arabian energy ministers said they would support another nine months of production cuts. That helped crude rebound from recent five-month lows and paved the way for an extension of the output cuts when the cartel meets on May 25.

But the rally fizzled on Tuesday when U.S. oil prices fell 0.4% to $48.66. Many traders see any extension as OPEC’s acknowledgment that the first round of cuts haven’t been effective. Some are starting to wonder whether OPEC’s ability to influence the market is waning.

OPEC officials couldn’t immediately be reached for comment.

Saudi Arabia’s energy minister Khalid al-Falih said Monday that while “there has been a marked reduction to the inventories, we’re not where we want to be.” Mr. Falih, speaking after a meeting of the G20 countries in China, said that a “general consensus” was emerging that extending the cuts “is the right approach and the right thing to do.”

“In my view, it’s the wrong response,” Doug King, chief investment officer at RCMA Asset Management and manager of that firm’s $200 million Merchant Commodity hedge fund, said of extending the current cuts. “We’re not seeing what we needed to see.”

Mr. Morse said he arranged introductions between OPEC Secretary-General Mohammad Barkindo and more than 100 hedge-fund managers and other oil buyers who met with Mr. Barkindo in Washington, D.C., New York and London since October.

Oil production from the U.S. has surged this year, blunting the impact of OPEC’sproduction cuts.THE WALL STREET JOURNALSource: U.S. Energy Information Administration

The coordinated outreach was a new effort by the cartel to build bridges between its members and Wall Street, aiming to convince investors that producers were serious about reining in supply, say people close to the matter. After asking what OPEC planned to do boost prices, fund managers came away impressed, Mr. Morse said, adding that some still text with the OPEC leader.

OPEC’s cuts started in January, and oil prices jumped 8.7% in December as traders anticipated an easing supply glut. Bullish bets by money managers hit a record for the 10 years of data from the Commodity Futures Trading Commission early this year.

Many analysts agreed with the upbeat mood, forecasting that crude prices would hit $60 a barrel or higher by the end of 2017.

U.S. oil inventories have declined since OPEC’s output cuts, but they remain near historic highs. That is in part because U.S. production has increased by more than 200,000 barrels a day during the past two months. If output continues to ramp up at that pace, U.S. producers could end the year producing 800,000 barrels-a-day more than at the end of last year. That would replace much of what OPEC has taken off the market, analysts say.

In recent weeks, hedge funds have cut their bullish position on oil prices to the lowest level since November as a gasoline glut raised worries that demand could falter.

Andrew Hall of Astenbeck Capital bet heavily that OPEC’s strategy would work.

Andrew Hall of Astenbeck Capital bet heavily that OPEC’s strategy would work. PHOTO:AMANDA GORDON/BLOOMBERG NEWS
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Mr. Andurand informed investors in an April 24 letter reviewed by The Wall Street Journal that oil prices “will reach new highs.” But three weeks later, he had abandoned most of his bullish bets, said a person familiar with the matter.

Veteran oil trader Andrew Hall also bet heavily that OPEC’s strategy would work. A fund managed by his Astenbeck Capital Management LLC, a Southport, Conn., hedge-fund firm, lost 17.3% this year through April, said a person familiar with the matter.

Mr. Hall is one of a few still preaching patience. He recently wrote to investors predicting that inventory excesses would be eliminated, said the person familiar with the matter.

Astenbeck and Mr. Hall didn’t respond to a request for comment. It isn’t clear if he or anyone at his fund attended meetings with OPEC.

Oil reclaimed some momentum last week after the U.S. Energy Information Administration reported the biggest stockpile decline of the year and prices rose more than 3%.

U.S. crude stockpiles have started to drop, but remain near historic highsTHE WALL STREET JOURNALSource: U.S. Energy Information Administration
.million barrelsWeekly U.S. ending stocksJan. ’16MarchMayJulySept.Nov.Jan. ’17MarchMay440450460470480490500510520530540May 6, 2016×508.5 million barrels

“It’s one thing to talk about cuts. It’s another thing to see them,” said Gary Ross, head of global oil at PIRA Energy, a forecasting and analytics unit of S&P Global Platts. He dismissed bearish traders doubting OPEC’s influence. “Their idea is that OPEC is irrelevant, and that doesn’t make sense,” he said.

But funds betting against OPEC have done well. Switzerland-based GZC Investment Management, which oversees just under $200 million, is up nearly 10% this year, in part due to a bet on falling oil prices.

“Basically, their mistake is to think they can fix prices—they cannot anymore,” Vincent Elbhar, GZC’s managing partner said of OPEC.

Write to Alison Sider at alison.sider@wsj.com, Timothy Puko at tim.puko@wsj.com and Laurence Fletcher at laurence.fletcher@wsj.com

https://www.wsj.com/articles/hedge-funds-turn-against-opec-after-oil-gains-slip-away-1495013401

Kuwait backs call to extend oil output cuts — Asian energy firms fired up by rally in oil prices — Stock markets up Tuesday

May 16, 2017

AFP

© AFP | Kuwait, whose Shuaiba oil refinery is shown here, has backed a call by top oil producers Saudi Arabia and Russia to extend a deal on crude production cuts for nine more months

KUWAIT CITY (AFP) – 

Kuwait on Tuesday backed a call by top oil producers Saudi Arabia and Russia to extend a deal on crude production cuts for nine more months.

“Kuwait gives its full backing and support to the joint position of Saudi Arabia and Russia to extend the oil output cuts deal between OPEC and other producers until March 2018,” Oil Minister Essam al-Marzouk said in a statement.

Russia and Saudi Arabia on Monday called for extending the deal struck late last year, ahead of an OPEC meeting on May 25.

In a joint statement the two countries said an extension to March 31, 2018 was needed “to ensure market stability, predictability and sustainable development”.

World oil prices leapt after the Saudi-Russian announcement and made further gains on Tuesday in Asian trade, with benchmark West Texas Intermediate up 19 cents at $49.04 per barrel.

OPEC members agreed in November to cut production by 1.2 million barrels per day for six months beginning from the start of the year, in a bid to reduce the glut in oil supplies and shore up prices that had fallen to historic lows.

The move was partly matched by non-cartel producers led by Russia.

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Asian energy firms fired up by rally in oil prices

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© GETTY IMAGES NORTH AMERICA/AFP | Hopes that an OPEC-Russia production cut could be extended into next year sent oil prices rallying Monday, boosting the share prices of global energy firms

HONG KONG (AFP) – Oil prices pressed on with fresh gains in Asian trade Tuesday, boosting energy firms, after Russia and Saudi Arabia indicated they could extend an output cut into next year.The world’s top two crude-producing nations raised the idea at the weekend, with a deal agreed between OPEC — of which Saudi Arabia is the key player — and Russia coming to an end in six weeks.

The news sent oil prices soaring about two percent on Monday, in turn dragging global energy firms with them.

Monday’s gains come after the commodity was battered earlier this month on worries that the production cut was not enough to make a dent in a worldwide supply glut and increasing output from the US and other nations.

“The comments from Saudi Arabia and Russia are driving prices up but I’m sceptical that crude will see a new level,” Hong Sung Ki, a commodities analyst at Samsung Futures, told Bloomberg News.

“As producers in the US are expected to increase output, prices will continue to be restricted from rising.”

But Greg McKenna, chief market strategist at AxiTrader pointed out that traders were overlooking the fact that the need for a further cut in oil output suggested problems persisted.

“That such a large output cut extension is a tacit admission of failure is for another day and discussion,” he said in a note.

Hong Kong-listed PetroChina gained almost one percent and CNOOC put on 0.4 percent, while Woodside Petroleum in Sydney was up 0.2 percent and Rio Tinto jumped 1.4 percent.

– Euro extends gains –

On equity markets Tokyo edged up 0.3 percent by the close, Hong Kong slipped 0.2 percent on profit-taking in the afternoon following a six-day rally, while Shanghai finished up 0.7 percent, marking a fourth straight day of gains.

Seoul and Sydney each added 0.2 percent.

But Singapore, Taipei and Wellington were all lower.

In New York the S&P 500 and Nasdaq each ended at record highs, as did London and Frankfurt, with German traders cheering a strong win for Chancellor Angela Merkel’s party in a regional vote.

In early European trade Tuesday London opened slightly higher but Frankfurt lost 0.2 percent while Paris was 0.5 percent lower.

On currency markets the euro extended gains to break above $1.10 after the German election result while the dollar’s weakness has also been caused by a series of below-par results out of the US, including on inflation.

“The euro is strengthening as political concerns in Europe ease while the dollar is being sold” after the weak economic data, Marito Ueda, a senior dealer at FX Prime, told AFP.

The greenback was also down against most other higher-yielding currencies, with the South Korean won 0.7 percent higher, the Thai baht up 0.2 percent and the Malaysian ringgit 0.5 percent stronger.

– Key figures around 0720 GMT –

Tokyo – Nikkei 225: UP 0.3 percent at 19,919.82 (close)

Hong Kong – Hang Seng: DOWN 0.2 percent at 25,328.02

Shanghai – Composite: UP 0.7 percent at 3,112.96 (close)

London – FTSE 100: FLAT at 7,546.63

Euro/dollar: UP at $1.1010 from $1.0977 at 2100 GMT

Dollar/yen: DOWN at 113.40 yen from 113.75 yen

Pound/dollar: UP at $1.2921 from $1.2897

Oil – West Texas Intermediate: UP 23 cents at $49.08 per barrel

Oil – Brent North Sea: UP 24 cents at $52.06 per barrel

New York – Dow: UP 0.4 percent at 20,981.94 (close)

Commodities Slump Fueled by Softening Demand From China

May 5, 2017

By Jenny W. Hsu and Yifan Xie
The Wall Street Journal

May 5, 2017

01:37pm CEST

A global commodities slump deepened Friday, with oil and iron ore hitting their lowest levels since November on continuing worries about an excess of world-wide supply, as well as concerns over weakening demand in the key China market.

Market jitters pushed crude futures down more than a $1 a barrel, or 3%, in the space of 10 minutes in early Asia trading, although prices recovered to trade slightly higher by midmorning in Europe. The slide briefly took oil prices down 10% for the week, the kind of drop last seen in January 2016, when global markets were plummeting on concern about the health of China’s economy.

The price of iron-ore futures, seen as an indicator of demand for the key steelmaking ingredient, fell 7.5% Friday on China’s Dalian Commodity Exchange, following an 8% tumble to their trading limit the previous day. Iron-ore futures are now at their lowest levels since November and down 31% from the two-and-half-year high hit in February. Futures prices for a pair of steel products traded in Shanghai fell as much as 8% for the week.

To be sure, some of the wild swings were on Chinese markets, which are notorious for speculative trading and roller-coaster moves. And investors aren’t nearly as skeptical about the outlook for China’s economy as they were during the commodities- and global-equities meltdown early last year.

But analysts say concerns over softening demand in China for construction materials such as steel are once again a big factor in the falling prices. Those concerns have been fed by weaker manufacturing data and recent moves by Chinese regulators that could curb growth in areas such as housing and infrastructure construction.

Inventories of imported iron ore at China’s 45 major ports hit a record high of more than 130 million yuan at the end of March, and climbed to more than 135 million tons this week, according to the China Iron and Steel Industry Association.

“There has been a visible shift of sentiment in the financial market,” said Sun Yonggang, an analyst at Chaos Ternary Futures Co. “Over 80% of the steel traders we talked with were upbeat about the outlook in the first quarter. But now they have all turned pessimistic.”

The fall in oil prices on Friday took crude to its lowest intraday level since mid-November, a few weeks before the Organization of the Petroleum Exporting Countries and other oil producers such as Russia supported the market by announcing a six-month agreement to cut production.

A decision on whether to extend and possibly increase those cuts is due later this month. But traders in recent days have lost faith that the current production caps are doing much to reduce the global oil glut that has pressured prices since 2014. Global oil inventories are still robust. And American shale-oil producers are producing even more than many analysts had expected in the wake of the OPEC cuts.

Moreover, some estimates show that despite the November deal, OPEC’s total production is still above the agreed cap. That could be confirmed by the cartel’s production report for April, which is due next week.

“OPEC’s failure to raise oil prices is fundamentally linked to their failure to bring down petroleum inventories,” Bernstein Research said in a report Friday.

Another factor depressing oil prices is that China–whose average 7.7 million barrels a day in crude imports were an important prop for the global market last year–could be buying less than previously expected. That is because of a new rule, announced last week, that the country will no longer accept applications from privately owned refineries, known as “teapots,” for the right to import crude. The rule doesn’t apply to 21 refiners that have already been issued the necessary permits.

Industry watchers had already anticipated that Chinese crude-import growth this year wouldn’t match 2016’s 14% increase because of slowing demand from teapots.

Government curbs on property purchases in China have weakened construction demand from the real-estate sector, a pillar industry that feeds appetite for steel-related commodities.

On Wednesday, concern mounted that China’s construction of infrastructure projects may also be curtailed, after authorities pledged to rein in risky local funding for bridges and dams.

The tough-worded pledge was the latest in a string of government policies aimed at stopping asset bubbles in China’s markets, in which speculative funds flowed through stocks, bonds and commodities.

Jenny W. Hsu and Yifan Xie

Related:

China’s Economy may be slowing more sharply than widely assumed — OPEC sees oil prices at five-month low — Commodities see biggest one-day fall this year on fears of a supply glut

May 5, 2017

Commodities

China’s red-hot industrial boom is suddenly cooling, sending tremors through the commodity markets

By Ambrose Evans-Pritchard

Brent oil prices have plunged to a five-month low beneath $50 a barrel and industrial metal prices have suffered the biggest one-day fall this year on fears of a supply glut, tipping the commodity nexus into a bear market.

Iron ore crashed by its maximum trading limit in Dalian and steel dropped 6pc in Shanghai, suggesting that China’s economy may be slowing more sharply than widely assumed in the West as regulators tighten credit and investment projects are shelved.

The IHS Materials Price Index has fallen by 10.3pc since peaking in mid-February and has given up all the gains since the election of US President Donald Trump, closing the chapter on the dying reflation rally.

Read the rest:

http://www.telegraph.co.uk/business/2017/05/04/commodities-slump-china-tremors-opec-failure/

Related:

Energy Shares Lead Asian Stock Losses as Oil Falls Under $45 — oil prices fell to their lowest levels in nearly six months — oversupply concerns

May 5, 2017

HONG KONG — Energy shares led declines on Asian stock markets Friday after oil prices fell to their lowest levels in nearly six months on oversupply concerns.

KEEPING SCORE: Hong Kong’s benchmark Hang Seng index lost 1.2 percent to 24,396.85 while the Shanghai Composite index in mainland China shed 0.7 percent to 3,104.02. Australia’s S&P/ASX 200 fell 0.7 percent to 5,835.20. Taiwan’s benchmark fell and Southeast Asian indexes were mixed. Markets in Japan and South Korea were closed for holidays.

CRUDE CONCERNS: U.S. benchmark crude futures fell under the key $45 level after tumbling nearly 5 percent during U.S. trading. Oil is being hammered by uncertainty over whether OPEC will extend an agreement to cut production and worries that renewing the deal wouldn’t be enough to counter a growing glut. Member nations of the Organization of the Petroleum Exporting Countries are due to discuss the deal later this month. Crude fell $1.36, or 3 percent, to $44.16 a barrel after falling as low as $43.76 in Asian trading, wiping out all gains since the production cut agreement in November. The contract lost $2.30, or 4.8 percent, to settle at $45.52 a barrel on Thursday. Brent crude, the standard for international oils, fell $2.75 to $47.05 a barrel in London.

Image result for oil wells, photos

QUOTEWORTHY: “The collapse in oil prices saw (benchmark West Texas Intermediate) plunge as the market continues to probe for a bottom amid oversupply concerns,” said Stephen Innes, senior trader at OANDA. He said traders saw $45 as an important level because the Saudi oil minister said earlier this week that prices would be kept in the $45-55 range. “If $45 was OPEC line in the sand, well it’s been breached so let us see how strong OPEC resolve is,” he said.

ENERGY SHARES: Oil company stocks led declines. PetroChina, China’s biggest oil producer, lost 3.2 percent and Sinopec, the country’s largest refiner, fell 2.8 percent. Australia’s Woodside Petroleum slid 3 percent.

JOB REPORT: Investors’ attention now turns to U.S. jobs data due after Asian markets close, when the Labor Department releases nonfarm payrolls for April. Economists forecast that job-creating bounced back last month after a disappointing March, in the latest sign of U.S. economic strength supporting the Fed’s plans for more interest rate increases this year.

WALL STREET: Major U.S. benchmarks were little changed. The Standard & Poor’s 500 index rose 0.1 percent to close at 2,389.52. The Dow Jones industrial average lost 6.43 points to 20,951.47. The Nasdaq composite added 2.79 points to 6,075.34.

CURRENCIES: The dollar weakened to 112.17 yen from 112.46 yen. The euro edged up to $1.09876 from $1.0984.