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Oil prices to stabilise at current levels for 2019

PETALING JAYA: Oil prices are expected to see some stabilisation at the current US$60 per barrel (RM250) level for 2019, supported by demand and supply fundamentals.

Prices for Brent crude added 0.2%, while West Texas Intermediate was slightly lower by 0.5% to US$61.67 and US$52.61 per barrel respectively post-Opec (Organisation of the Petroleum Ex-porting Countries) meeting, but are still 7.8% and 12.9% lower year to date, said PublicInvest Research in its report today.

It reaffirmed its “overweight” stance on the oil and gas sector, based on oil price stability en-couraging greater levels of activity.

On Friday, Opec and non-Opec members (Opec+) agreed to extend oil output cuts till June 2019, adjusting the overall production by 1.2 million barrels per day (bpd) from October 2018 levels.

“This will, at once, help reduce concerns towards an oversupply situation after the US president exempted eight countries including China from bruising sanctions that the country was re-imposing on Iran against the backdrop of strong supply from US shale oil,” said Public-Invest Research.

It noted that the Opec+, which includes Russia and Kazakhstan, possesses unprecedented influence over the world economy with control over 55% of global oil supplies and 90% of proven reserves.

The research house said the Opec meeting outcome was in line with expectations for the allies to throttle back on output by 1 million to 1.4 million bpd. Opec members agreed to reduce output by 800,000 bpd while Russia and the allied producers will reduce output by 400,000 bpd.

To recap, Opec+ had reversed course and agreed to increase output in June this year after it had removed more barrels from the market than it intended, which was mainly due to the ongoing freefall in Venezuelan output.

“Since then, sustained production increases from Russia and Saudi Arabia have been seen, resulting in overall conformity levels reaching the lowest in a year. While Opec+ did not release specific quotas for individual countries, both Russia and Saudi have promised to deliver on its commitments,” said PublicInvest Research.

Russia will reduce production by 2% from October’s output of 11.4 million bpd, equalling 228,000 to 230,000 bpd. However, its Energy Minister warned that Russia would reduce supply gradually due to the impact of winter on its oil fields.

Meanwhile, Saudi Arabia’s production hit an all-time high at 11.1 million bpd in November, which is likely to fall to 10.7 million bpd in December and 10.2 million bpd in January.

Next year, world oil demand growth is forecast to grow by 1.29 million bpd year-on-year with total world consumption expected to reach 100.08 million bpd .

The Organisation for Economic Co-operation and Development (OECD) region will contribute positively to oil demand growth, increasing by 0.25 million bpd year on year, while the non-OECD region is assumed to see larger growth by 1.04 million bpd in 2019.


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US, China agree on trade war ceasefire

BUENOS AIRES: China and the United States agreed to a ceasefire in their bitter trade war on Saturday after high-stakes talks in Argentina between US President Donald Trump and Chinese President Xi Jinping, including no escalated tariffs on Jan 1.

Trump will leave tariffs on US$200 billion (RM835.8 billion) worth of Chinese imports at 10% at the beginning of the new year, agreeing to not raise them to 25% “at this time”, the White House said in a statement.

“China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries,“ it said.

“China has agreed to start purchasing agricultural product from our farmers immediately.”

The two leaders also agreed to immediately start talks on structural changes with respect to forced technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture, the White House said.

Both countries agreed they will try to have this “transaction” completed within the next 90 days, but if this does not happen then the 10% tariffs will be raised to 25%, it added.

The Chinese government’s top diplomat, state councillor Wang Yi, said the negotiations were conducted in a “friendly and candid atmosphere”.

“The two presidents agreed that the two sides can and must get bilateral relations right,“ Wang told reporters, adding they agreed to further exchanges at appropriate times.

“Discussion on economic and trade issues was very positive and constructive. The two heads of state reached consensus to halt the mutual increase of new tariffs,“ Wang said.

“China is willing to increase imports in accordance with the needs of its domestic market and the people’s needs, including marketable products from the United States, to gradually ease the imbalance in two-way trade.”

“The two sides agreed to mutually open their markets, and as China advances a new round of reforms, the United States’ legitimate concerns can be progressively resolved.”

The two sides would “step up negotiations” toward full elimination of all additional tariffs, Wang said.

The announcements came after Trump and Xi sat down with their aides for a working dinner at the end of a two-day gathering of world leaders in Buenos Aires, their dispute having unnerved global financial markets and weighed on the world economy.

After the 2½ hour meeting, White House chief economist Larry Kudlow told reporters the talks went “very well,“ but offered no specifics as he boarded Air Force One headed home to Washington with Trump.

China’s goal was to persuade Trump to abandon plans to raise tariffs on US$200 billion of Chinese goods to 25% in January, from 10% at present. Trump had threatened to do that, and possibly add tariffs on US$267 billion of imports, if there was no progress in the talks.

With the United States and China clashing over commerce, financial markets will take their lead from the results of the talks, widely seen as the most important meeting of US and Chinese leaders in years.

The encounter came shortly after the Group of 20 industrialised nations backed an overhaul of the World Trade Organisation, which regulates international trade disputes, marking a victory for Trump, a sharp critic of the organisation.

Trump told Xi at the start of their meeting he hoped they would achieve “something great” on trade for both countries. He struck a positive note as he sat across from Xi, despite the US president’s earlier threats to impose new tariffs on Chinese imports as early as the next year.

He suggested that the “incredible relationship” he and Xi had established would be “the very primary reason” they could make progress on trade.


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