Oil prices fall on supply fears

Demand for crude oil is set to rise in the coming weeks as refineries around the world return from seasonal maintenance ahead of peak summer demand. (Reuters)
Updated 21 April 2017
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Oil prices fall on supply fears

LONDON: Oil fell on Friday and was on course for its biggest weekly drop in a month due to doubts that the production cut led by the Organization of the Petroleum Exporting Countries (OPEC) will restore balance to an oversupplied market.
Brent futures were down $1.11, or 2.1 percent, at $51.88 a barrel at 1526 GMT. It was below its 50-day moving average of $54.01 but holding above its 200-day average of $51.20.
US crude futures, which rolled over on Friday, were at $49.56 a barrel, down $1.15, or 2.3 percent. At that level, the contract is well below its 50-day moving average of $51.28 and approaching its 200-day moving average at $48.87.
Both contracts were on course for a roughly 7 percent weekly decline.
Some OPEC members reportedly favor extending their production-limiting deal with non-member producers into the second half of the year. Russia’s Energy Minister Alexander Novak, however, declined to say whether the top oil producer would adhere to an extension before a joint meeting on May 25, saying global stocks were declining.
“The situation has gradually been improving since the beginning of March,” Novak said.
Both oil benchmarks fell this week as doubts emerged over the effect of the OPEC/non-OPEC production cut by almost 1.8 million barrels per day (bpd) during the first half of the year.
Thomson Reuters Eikon data shows that a record 48 million bpd of crude is being shipped across ocean waters in April, up 5.8 percent since December.
The market is taking note: The value of the Brent forward curve has slumped steadily since the start of the OPEC-led cuts in January. The two-year calendar strip for Brent futures, or the average value of all contracts over that period, is down more than $4 since January at around $54.10 a barrel.
Demand for crude oil is, however, set to rise in the coming weeks as refineries around the world return from seasonal maintenance ahead of peak summer demand.
Also supporting the market, exports from OPEC member Iran, which was exempt from the cuts, are set to hit a 14-month low in May, suggesting the country is struggling to raise exports after clearing out stocks stored on tankers.


China, EU to form group to modernize global trade rules

Updated 57 min 2 sec ago
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China, EU to form group to modernize global trade rules

  • China and the EU agreed to launch a group that will work to update global trade rules
  • Companies worry the US-Chinese dispute could chill global trade and economic growth if other governments respond by raising their own import barriers

BEIJING: China and the European Union agreed Monday to launch a group that will work to update global trade rules to address technology policy, subsidies and other emerging irritants and preserve support for international trade amid US threats of import controls.
Actions such as US President Donald Trump’s unilateral tariff hikes in a technology dispute with Beijing show World Trade Organization rules need to keep pace with changes in business, said an EU vice president, Jyrki Katainen.
Katainen said Europe was not siding with Beijing in its dispute with Trump but was taking action to protect the global system of regulating free trade. He said the EU wants other governments to join the WTO group.
Companies worry the US-Chinese dispute could chill global trade and economic growth if other governments respond by raising their own import barriers. Even before Trump took office, economists were warning countries were tightening import restrictions and taking steps to favor their companies over foreign rivals.
US officials complain the WTO, the Geneva-based arbiter of trade rules, requires an overhaul because it is bureaucratic, rigid and slow to adapt to changing business conditions.
Katainen said Europe wants to focus on issues including subsidies to industry, government pressure on foreign companies to hand over technology and the status of state-owned industry — all areas in which Beijing faces complaints by Trump as well as other trading partners.
“I don’t expect these negotiations to be easy,” Katainen said at a news conference. But if nothing is done, “the environment for multilateral trade will vanish.”
Trump has threatened to impose tariffs of 10 percent to 25 percent on up to $450 billion of Chinese goods. Beijing responded to Washington’s first round of hikes on $34 billion of imports by raising duties on US soybeans, whiskey and other products.
Other governments have similar complaints but Trump has been more direct about challenging Beijing and threatening to disrupt exports.
Beijing might agree to talks to deflect further sanctions but is unlikely to agree to changes that hamper its technology plans, said Mark Williams of Capital Economics.
“I very much doubt they would agree to anything that would have teeth and punish them,” said Williams. Policies companies object to are “integral to the growth model China is pursuing,” he said.
Beijing agreed to narrow its multibillion-dollar trade surplus with the United States by purchasing more American goods but scrapped that after Trump went ahead two weeks ago with a tariff hike on $34 billion of imports.
Beijing also has cut import duties on autos and some consumer goods and promised to remove limits on foreign ownership in its auto, insurance and finance industries.
But the Communist government has resisted any change to its plans that call for challenging US and European technology dominance by creating Chinese companies capable of competing in fields including clean energy, biotech and aerospace.
Chinese officials deny foreign companies are required to give up technology. But in many industries they are compelled to work through state-owned partners, which requires them to share know-how with potential competitors.
One in five companies that responded to a survey by the European Union Chamber of Commerce in China released last week said they felt compelled to hand over technology in exchange for market access.
Trump infuriated US allies — from the EU to Canada and Mexico — last month by imposing tariffs of 25 percent on imported steel and 10 percent on aluminum. He said imports threatened America’s national security — a justification countries use rarely because it can be easily abused.
Beijing has tried to recruit European allies in its dispute with Washington, promising visiting leaders including Germany’s Chancellor Angela Merkel in May to open industries wider to their companies.
On Monday, Premier Li Keqiang, China’s No. 2 leader, told visiting French Premier Edouard Philippe that Beijing would allow more imports of beef and other food from France. Li said French companies were welcome to invest.
“China takes a positive attitude to cooperation with the French side,” Li said.