OPEC: Low oil prices hurting world economy

Updated 10 February 2016
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OPEC: Low oil prices hurting world economy

LONDON: OPEC pointed to a larger oil supply surplus on the world market this year than previously thought as Saudi Arabia and other members pump more oil, helping to make up for losses in non-member producers hurt by the collapse in prices.
The monthly report from the Organization of the Petroleum Exporting Countries indicates supply will exceed demand by 720,000 barrels per day (bpd) in 2016, up from 530,000 bpd implied in the previous report.
A persistent surplus could weigh on prices, which have collapsed to a 12-year low of $27.10 a barrel last month from over $100 in mid-2014. OPEC’s 2014 strategy shift to defend market share and not prices helped deepen the decline.
OPEC also cut its forecast for world economic growth in 2016 to 3.2 percent from 3.4 percent and said low oil prices were hurting the economy, in contrast to previous price slides that were supportive of global growth.
“It seems that the overall negative effect from the sharp decline in oil prices since mid-2014 has outweighed benefits in the short-term,” OPEC said.
“There seems to be a ‘contagious’ effect taking place across many aspects of the global economy.”
OPEC cited factors including the financial strain on producers dependent on oil income, the inability of central banks to lower interest rates and impacts on sectors from manufacturing to agriculture.
The report added to signs that the price drop is hitting relatively expensive non-OPEC supply. Companies have delayed or canceled billions of dollars worth of projects, putting some future supply at risk.
OPEC now forecasts supply from non-member producers will decline by 700,000 bpd in 2016, led by the United States. Last month, OPEC predicted a drop of 660,000 bpd.
But OPEC produced 32.33 million bpd according to secondary sources, up 130,000 bpd from December, offsetting the forecast decline from outside the group.
Top OPEC exporter Saudi Arabia told OPEC it increased production to 10.23 million bpd from 10.14 million bpd in December. The secondary sources also reported higher output from major producers Iran and Iraq.
Supply from OPEC could rise further due to the lifting of sanctions on Iran. Tehran is aiming to increase output by 500,000 bpd, which would fill most of the hole left by non-OPEC members.
OPEC left its 2016 global oil demand growth forecast little changed, predicting demand would rise by 1.25 million bpd, marking a slowdown from 1.54 million bpd in 2015.


US-China trade war to weigh on South Korean economy

Updated 18 July 2018
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US-China trade war to weigh on South Korean economy

  • The South Korean economy is expected to grow 2.9 percent this year, lower than an earlier estimate of three percent
  • The International Monetary Fund said this week the growing trade confrontation is the ‘greatest near-term threat to global growth’

SEOUL: South Korea’s finance minister warned that an all-out trade war between the US and China would have grim implications for the country, as he lowered this year’s growth outlook Wednesday.
The world’s 11th largest economy is expected to grow 2.9 percent this year, lower than an earlier estimate of three percent, Kim Dong-yeon said, citing slowing demand at home and abroad as well as rising unemployment.
The latest estimate is also lower than last year’s figures, when the export-reliant economy expanded 3.1 percent, and comes as the South’s top two trading partners China and the US engage in a bitter spat that has seen them impose hefty tariffs on billions of dollars in goods.
“The economic situation down the road does not seem to be bright,” Kim told reporters.
“The situation may get worse if anxiety in the international financial markets spreads due to the US-China trade dispute... and market and corporate sentiment does not improve,” he said.
Overseas shipments account for more than half of the South’s economy, with more than a quarter of exports shipped to China and about 12 percent to the US.
Kim vowed to “closely monitor international trade situations including the US-China trade row” and announced measures to encourage job creation and spur domestic spending.
US President Donald Trump has taken a confrontational “America First” stance on trade policy, imposing steep tariffs on steel and aluminum, which angered allies and prompted swift retaliation, as well as 25 percent duties on $34 billion of Chinese goods, with more on the way.
China has matched US tariffs dollar-for-dollar and threatened to take further measures, while US exports face retaliatory border taxes from Canada, Mexico and the European Union.
The International Monetary Fund said this week the growing trade confrontation is the “greatest near-term threat to global growth” and in the worst case could cut a half point off world GDP.