Oil world cautious on Trump’s next move

Signs have begun to emerge that traders are depleting storage levels that soared while oil prices were weak. (Reuters)
Updated 25 February 2017

Oil world cautious on Trump’s next move

LONDON: Oil bigwigs are trying to figure out strategies to deal with the impact that President Donald Trump’s blizzard of plans to boost the US industry will have on the world market.
If Trump keeps his promises on lower corporation tax, oil sector deregulation and tax incentives on exports, it could lead to an influx of US crude oil — something, which may challenge the price rises of the last six months after two years of weakness.
At the International Petroleum Week conference in London, the new US administration’s policies were cited as one of the most influential factors on oil in 2017, along with growth of the Asian market and tensions in the Middle East.
Abhishek Deshpande, an analyst at French corporate and investment bank Natixis, told AFP that even if Trump’s policies were imposed, they would not necessarily be favorable to the US petrol industry.
“The oil producers may look at it positively, as it will make the US crude oil jump higher. But for the rest of the US, the refiners would feel the pain, and possibly pass on the impact to the public,” he said.
“For the rest of the world, the Middle East would have to find new markets, which means more crude to sell,” potentially lowering the price, he added.
Energy Security Analysis, Inc. (ESAI) President Sarah Emerson also warned that Trump’s ideas could be difficult to implement.
“All of that is working against the huge question about deficit, and some Republicans and all the Democrats would have to object,” she said during a speech at IP Week.
She said political change in the US “could bring about a marginal deterioration in our market.”
Trump could also tackle deregulation in the energy sector, wiping out the regulations put in place by his predecessor Barack Obama, without a vote in Congress.
Last but not least, oil industry insiders said Trump’s unpredictability in geopolitics could give rise to dramatic swings in the market.
“The most significant problem would be the tense relationship with Iran, but there is also Mexico,” Deshpande said.
The uncertainties surrounding the new US president did not seem to trouble Mohammed Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries (OPEC).
“Republicans tend to like the oil industry. We welcome the new Republican administration,” he said, reminding his audience that the US is OPEC’s most important export market.
Oil prices
Oil prices fell on Friday after US crude inventories rose for a seventh week, showing that the market is still struggling to ease oversupply despite many producers’ efforts to rein in production.
US crude stocks rose by 564,000 barrels in the week to Feb. 17, the Energy Information Adminis-tration (EIA) said, though the increase was less than the 3.5 million barrels expected by analysts.
The continued rise in US inventories comes as members of OPEC and other producers have cut output.
Benchmark Brent crude oil was down 30 cents at $56.28 a barrel by 1149 GMT, while US West Texas Intermediate dropped by 26 cents to $54.19.
Signs have begun to emerge that traders are depleting storage levels that soared while oil prices were weak.
In the US, traders are draining the priciest storage tanks as strengthening markets make it unprofitable to store for future sale and as cuts in global production open export opportunities.

Easy credit poses tough challenge for Russian economy minister

Updated 18 August 2019

Easy credit poses tough challenge for Russian economy minister

  • Measures being prepared to help indebted citizens; situation might blow up in 2021

MOSCOW: New machines popping up in Russian shopping centers seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes.

But the devices, which dispense credit in Saint Petersburg malls at a sky-high annual rate of 365 percent, are another sign of a credit boom that has authorities worried.

Russians, who have seen their purchasing power decline in recent years, are borrowing more and more to buy goods or simply to make ends meet.

The level of loans has grown so much in the last 18 months that the economy minister warned it could contribute to another recession.

But it’s a sensitive topic. Limiting credit would deprive households of financing that is sometimes vital, and could hobble already stagnant growth.

The Russian economy was badly hit in 2014 by falling oil prices and Western sanctions over Moscow’s role in Ukraine, and it has yet to fully recover.

“Tightening lending conditions could immediately damage growth,” Natalia Orlova, chief economist at Alfa Bank, told AFP.

“Continuing retail loan growth is currently the main supporting factor,” she noted.

But “the situation could blow up in 2021,” Economy Minister Maxim Oreshkin warned in a recent interview with the Ekho Moskvy radio station.

He said measures were being prepared to help indebted Russians.

According to Oreshkin, consumer credit’s share of household debt increased by 25 percent last year and now represents 1.8 trillion rubles, around $27.5 billion.

For a third of indebted households, he said, credit reimbursement eats up 60 percent of their monthly income, pushing many to take out new loans to repay old ones.

Orlova said other countries in the region, for example in Eastern Europe, had even higher levels of overall consumer debt as a percentage of national output or GDP.

But Russian debt is “not spread equally, it is mainly held by lower income classes,” which are less likely to repay, she said.

The situation has led to friction between the government and the central bank, with ministers like Oreshkin criticizing it for not doing enough to restrict loans.

Meanwhile, economic growth slowed sharply early this year following recoveries in 2017 and 2018, with an increase of just 0.7 percent in the first half of 2019 from the same period a year earlier.

That was far from the 4.0 percent annual target set by President Vladimir Putin — a difficult objective while the country is subject to Western sanctions.

With 19 million people living below the poverty line, Russia is in dire need of development.

“The problem is that people don’t have money,” Andrei Kolesnikov of the Carnegie Center in Moscow wrote recently.

“This is why we can physically feel the trepidation of the financial and economic authorities,” he added. Kolesnikov described the government’s economic policy as something that “essentially boils down to collecting additional cash from the population and spending it on goals indicated by the state.”

At the beginning of his fourth presidential term in 2018, Putin unveiled ambitious “national projects.”

The cost of those projects — which fall into 12 categories that range from health to infrastructure — is estimated at $400 billion by 2024, of which $115 billion is to come from private investment.