Oil prices fall as increased US drilling points to higher output

Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the OPEC to curb supplies and bolster prices. (Reuters)
Updated 19 March 2018
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Oil prices fall as increased US drilling points to higher output

SINGAPORE: Oil prices fell on Monday as increased drilling in the United States pointed to more output, raising concerns about a return of oversupply.
US West Texas Intermediate (WTI) crude futures were at $62.02 a barrel at 0350 GMT, down 32 cents, or 0.5 percent, from their previous close.
Brent crude futures were at $65.85 per barrel, down 36 cents, or 0.5 percent.
Monday’s price falls in part reversed increases last Friday, which came on concerns over tensions in the Middle East.
On a simple supply versus demand basis, however, oil markets are facing the possibility of a renewed glut after being in a slight deficit for much of last year.
US drillers added four oil rigs in the week to March 16, bringing the total count to 800, the weekly Baker Hughes drilling report said on Friday.
“Surging US production will hamper exponential growth in crude oil prices,” Singapore-based brokerage Phillip Futures said on Monday.
The US rig count, an early indicator of future output, is much higher than a year ago as energy companies have boosted spending.
Thanks to the high drilling activity, US crude oil production has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia.
Only Russia produces more, at around 11 million bpd, although US output is expected to overtake Russia’s later this year as well.
Soaring US output, as well as rising output in Canada and Brazil, is undermining efforts by the Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) to curb supplies and bolster prices.
Many analysts expect global oil markets to flip from slight undersupply in 2017 and early this year into oversupply later in 2018.
One risk to supplies, however, is Venezuela.
“Concerns that Venezuelan output is on the verge of collapse continue to swirl around the market,” ANZ bank said.
The International Energy Agency said last week that Venezuela, where an economic crisis has cut oil production by almost half since early 2005 to well below 2 million bpd, was “clearly vulnerable to an accelerated decline,” and that such a disruption could tip global markets into deficit despite soaring US output.
“We remain bearish on the future direction of its (Venezuela’s) oil sector, with production ... averaging 1.535 million bpd, down 379,000 bpd on average over the year,” BMI Research said.


Global carmakers show off SUVs, electrics as China promises reforms

Updated 15 min 36 sec ago
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Global carmakers show off SUVs, electrics as China promises reforms

BEIJING: Global carmakers touted their latest electric and SUV models in Beijing on Wednesday, as China promises a more level playing field in the world’s largest auto market where domestic vehicles are making major inroads.
Industry behemoths like Volkswagen, Daimler, Toyota, Nissan, Ford and others are displaying more than 1,000 models and dozens of concept cars at the Beijing auto show.
Thousands of Chinese auto enthusiasts are expected to wander the halls of the mega exhibition center this week, with electric cars and gas-guzzling sport-utility vehicles grabbing the spotlight.
Nissan presented its first Made in China electric car produced for Chinese consumers, the four-door Sylphy Zero Emission, with a drive range of 338 kilometers.
“The new Sylphy Zero Emission is the next step in our electrification strategy for China,” said Jose Munoz, Nissan’s chief performance officer, adding that the company will unveil 20 electrified models over the next five years.
Auto executives may have their minds on the boiling trade war between Beijing and Washington, with every twist and turn fanning fears that it could bring their plans for China to a screeching halt.
But last week Beijing announced it will liberalize foreign ownership limits in the sector, a move seen as a possible olive branch to President Donald Trump, who has railed against China’s policies in the sector.
China currently restricts foreign auto firms to a maximum 50 percent ownership of joint ventures with local companies.
The changes will end shareholding limits for new energy vehicle firms as soon as this year, followed by commercial vehicles in 2020 and passenger cars in 2022.
Foreign automakers who account for more than half of vehicle sales in China have cautiously welcomed the changes, with VW saying it has “strong” local partners in their joint ventures.
“This will have no impact on our JVs. But the overreaching principle is important. Hopefully, liberalization will as well help for fair competition, and having a level playing field,” Jochem Heizmann, CEO of Volkswagen Group China, told reporters.
The show comes as China’s market hits a transition period — the explosive growth in car sales seen over the last decade slowed last year and data from early this year point to a continued slump for many vehicle types.
Chinese consumers are following their American peers toward SUVs while policymakers in Beijing push an all-electric future.
Ride-sharing is also on the up. On Tuesday Didi — China’s answer to Uber — announced it had joined forces with some 30 partners, including Renault and Volkswagen, to develop vehicles and products specifically tailored for ride-sharing.
Accounting for some 28.9 million car sales last year, the Chinese market could soon match those of the European Union and United States combined.
General Motors sold over four million cars here last year, more than in the US. Volkswagen sold more than three million, roughly six times its home market.
But domestic firms are outselling foreign firms in the SUV segment.
In the electric car market the figures are even more lopsided, as Beijing has heaped money on projects to dominate what it sees as the future.
At the auto show, the domestic upstarts have a separate exhibition hall mostly to themselves — 124 of the 174 electric car models on display are homegrown.
Government subsidies help consumers purchase the green cars, while policymakers are planning a quota system to force producers to build electric vehicles, with plans to one day phase out gas vehicles altogether.
Volkswagen announced Tuesday investments of €15 billion in electric and autonomous vehicles in China by 2022.
“China is our second home,” recently installed chief executive Herbert Diess said at a Beijing press conference, with its market set to be “the biggest” worldwide for electric cars.