oil market

 
 

Oil ebbs as China’s slowest GDP growth in almost 3 decades stokes demand fears

SEOUL: Oil prices slid on Friday on jitters over demand from China after the world’s largest oil importer recorded its weakest quarter of economic growth in nearly three decades, dragged down by a trade dispute with the United States.

Global benchmark Brent crude oil futures fell by 21 cents, 0.4%, to $59.70 a barrel by 0646 GMT.

U.S. West Texas Intermediate (WTI) crude futures edged down by 4 cents, or 0.1%, to $53.89 per barrel.

In the third quarter, China’s gross domestic product (GDP) growth slowed to 6% year-on-year, its weakest pace in 27-1/2 years and below expectations, dogged by soft factory production amid ongoing trade tensions with United States and sluggish domestic demand.

“The (China) GDP print has weighed on short-term sentiment and we have seen regional stock markets and oil contracts edge lower because of that,“ said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA.

Crude demand growth tends to track economic growth trends, but Halley said China’s need for oil would not recede any time soon.

Underlining that view, Chinese official data released on Friday showed robust refinery throughput in September, rising 9.4% from a year earlier to 56.49 million tonnes, on increases from new refineries and some independent refiners resuming operations after maintenance.

“There’s a lot of demand pessimism already priced into the oil markets … China GDP (growth) was not negative enough (below 6%) to alter the positive effects for the trade talks,“ said Stephen Innes, Asia Pacific market strategist at AxiCorp.

U.S. and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month, U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

Adding to the downward pressure, U.S. crude oil stockpiles surged last week by 9.3 million barrels as refinery output dropped to a two-year low, while gasoline and distillate fuel inventories decreased, the Energy Information Administration said on Thursday.

Elsewhere, the joint technical committee monitoring a global deal to cut output between the Organization of the Petroleum Exporting Countries (OPEC) and partners, including Russia, found compliance with cuts for September stood at 236%, according to four OPEC sources.

“Concerns about softer growth in the demand for oil and doubts about OPEC’s ability to rebalance the market on the current production cut rate will be key drags on prices in the near term,“ ANZ Research said in a note.

OPEC and its allies have agreed to limit their oil production by 1.2 million barrels per day (bpd) until March 2020.

OPEC lowered its 2019 global oil demand growth forecast to 0.98 million bpd, while leaving its 2020 demand growth estimate unchanged at 1.08 million bpd, according to OPEC’s latest monthly report. -Reuters


Opec, allies committed to maintaining oil market stability beyond 2020

NEW DELHI: The Organization of the Petroleum Exporting Countries (Opec) and its allies are committed to maintaining oil market stability beyond 2020, with physical supplies relatively tight globally, Opec secretary-general Mohammad Barkindo (pix) said today.

He added that compliance with production quotas among Opec and its allies was at 136%, curbing global supplies, while production growth in North America including US shale basins was decelerating.

Opec, Russia and other oil producer allies, a grouping known as Opec+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020 to support oil prices. The producers are scheduled to meet again on Dec 5-6.

“I have been hearing a resounding chorus from all the players that they are determined not to allow a relapse to the downturn that we just navigated out of,” Barkindo told the India Energy Forum by CERAWeek, referring to a period of low oil prices in 2014-2015 that had led Opec to cut output.

“They will do whatever is possible within their powers to ensure relative stability is sustained beyond 2020,” Barkindo said.

In its latest monthly report for October, Opec trimmed its forecast for world economic growth in 2020 to 3% from 3.1%, saying “it seems increasingly likely that the slowing growth momentum in the US will carry over to 2020”.

A poor economic outlook has depressed oil prices, with Brent down about 22% from its 2019 peak of US$75.60 a barrel reached on April 25.

The US-China trade war is affecting the global economy and oil demand, and financial markets have an increasingly bearish view of economic growth, Barkindo said. Still, India remains a major driver of global oil demand with growth of 127,000 bpd in August, he said.

Oil prices steadied today after two days of losses. Brent crude fell 4 cents, or 0.07%, to US$59.31 a barrel by 1230 GMT, while US West Texas Intermediate crude dropped 15 cents, or 0.28%, to US$53.44. – Reuters


Mixed earnings outlook for transport & logistics sector

PETALING JAYA: There appear to be no major catalysts for the transport and logistics sector from the Budget 2020 announcement, with the feasibility studies on infrastructure projects at Port Klang and the Visit Malaysia 2020 campaign already anticipated.

In a report, Affin Hwang Research said it was maintaining its neutral stance on the sector, with a mixed earnings outlook on the players in the space.

“Positively, we expect Westports and Malaysia Airports to report firmer 2020 earnings on volume growth, improving operational efficiencies, and higher passenger service charges Meanwhile, the airline operators should continue to see a subpar (but improving) margin trend due to stiff competition.

“Lastly, the logistics companies’ earnings should remain weak due to stiff competition and high operational costs,” it said.

Affin Hwang is raising AirAsia’s 2020-21 earnings forecasts by 2-3% and forecasting AirAsia X to report a smaller loss of RM41 million in 2020, from a RM68 million net loss.

“In tandem with our earnings revisions, we are raising AirAsia’s target price to RM1.91, from RM1.87, while maintaining our ‘hold’ rating. We are also revising AirAsia X’s target price to 16 sen from 14 sen with a rating upgrade to hold from sell,” the report said.

The research house is also lowering its Brent crude and ringgit projections in view of a more modest oil-demand outlook, normalisation of supply from Saudi Arabia and not-so-aggressive easing by the US Federal Reserve.

“On the whole, the oil market in 2H19 is still projected to see a 200,000 bpd (barrels per day) oversupply, and projected to widen to an average of 620,000 bpd in 1H20 based on the EIA’s Short Term Energy Outlook report in October 2019.

“With full recovery guided now to be by November and weak global demand expected to prevail, we believe any upside to oil prices could be relatively contained,” it said.

Affin Hwang’s 2020 Brent crude oil price assumption has been lowered to US$60-65/bbl from US$65-70/bb, while its ringgit projection now stands at RM4.20/US dollar by end 2020 from its previous projection of RM4.10/US dollar.

“Although Malaysia was retained in the FTSE Russell’s World Government Bond Index, its position remains in the Watch List, which reflects some lingering uncertainty about Malaysia’s position in the upcoming interim review in March 2020.”

Overall for the sector, Affin Hwang’s top pick is Westports with a target price of RM4.22 and a hold call.

“For exposure, we like Westports for its strategically located assets, strong management team and good earnings growth trajectory. These positives are, however, largely priced-in. Avoid logistics companies due to stiff competition and rising costs,” it said.


OPEC, allies to maintain oil market stability beyond 2020

NEW DELHI: The Organization of the Petroleum Exporting Countries and its allies are committed to maintaining oil market stability beyond 2020, with physical supplies relatively tight globally, OPEC Secretary-General Mohammad Barkindo said on Tuesday.

He added that compliance with production quotas among OPEC and its allies was at 136%, curbing global supplies, while production growth in North America including U.S. shale basins was decelerating.

OPEC, Russia and other oil producer allies, a grouping known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020 to support oil prices. The producers are scheduled to meet again on Dec. 5-6.

“I have been hearing a resounding chorus from all the players that they are determined not to allow a relapse to the downturn that we just navigated out of,” Barkindo told the India Energy Forum by CERAWeek, referring to a period of low oil prices in 2014-2015 that had led OPEC to cut output.

“They will do whatever is possible within their powers to ensure relative stability is sustained beyond 2020,” Barkindo said.

In its latest monthly report for October, OPEC trimmed its forecast for world economic growth in 2020 to 3% from 3.1%, saying “it seems increasingly likely that the slowing growth momentum in the U.S. will carry over to 2020”.

A poor economic outlook has depressed oil prices, with Brent down about 22% from its 2019 peak of $75.60 a barrel reached on April 25.

The U.S.-China trade war is affecting the global economy and oil demand, and financial markets have an increasingly bearish view of economic growth, Barkindo said.

Still, India remains a major driver of global oil demand with growth of 127,000 bpd in August, he said. – Reuters


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