Oil prices rise amid risk of supply disruptions

The main market driver in oil has been the US, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day, largely thanks to a booming shale industry. (Reuters)
Updated 17 April 2018
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Oil prices rise amid risk of supply disruptions

  • The main market driver in oil has been the US, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day

SINGAPORE: Oil prices rose on Tuesday amid worries there could be a high risk of disruptions to supply, especially in the Middle East.
Brent crude oil futures were at $71.69 per barrel at 0326 GMT, up 27 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 32 cents, or 0.5 percent, at $66.54 a barrel.
Traders said oil markets were receiving general support due to a sense that there were high risks of supply disruptions, including a potentially spreading conflict in the Middle East, renewed US sanctions against Iran and falling output as a result of political and economic crisis in Venezuela.
“With so many potential supply disruptors in play and few signs that the current market upheaval will end any time soon, traders continue to pay the geopolitical risk premium,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.
“Oil prices should remain bid ... at least through the Iran nuclear deal deadline (May 12) if not for the remainder of 2018,” he added.
Oil markets have generally been well supported this year, with Brent up by around 16 percent from its 2018-low in February, due to healthy demand which comes as the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) leads supply cuts aimed at tightening the market and propping up prices.
Beyond OPEC’s production restraint and concerns about supply disruptions, the main market driver in oil has been the US, where crude production has soared by almost a quarter since mid-2016 to 10.53 million barrels per day (bpd), largely thanks to a booming shale industry.
Only Russia pumps out more oil currently at almost 11 million bpd.
“US shale producers have been quietly capitalizing on higher oil prices with increasing rig counts seen. A staggering amount of 73 rotary rigs have been placed since January 2018,” said Benjamin Lu of Phillip Futures in a note on Tuesday.
“As such, we expect a softening in crude oil prices as markets adjust from a bullish streak,” he added.
The American Petroleum Institute is due to publish weekly US fuel inventory data later on Tuesday while official government data, including on production, is due from the US Energy Information Administration on Wednesday.


OECD warns of global economic slowdown

Updated 21 November 2018
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OECD warns of global economic slowdown

  • ‘We urge policy-makers to help restore confidence in the international rules-based trading system’
  • Trade tensions have already shaved 0.1-0.2 percentage points off global GDP this year

PARIS: The global economy has peaked and faces a slowdown driven by international trade tensions and tighter monetary conditions, the Organization for Economic Cooperation and Development warned Wednesday.
The OECD, which groups the top developed economies, said it had trimmed its growth forecast for 2019 to 3.5 percent from the previous 3.7 percent.
The 2018 estimate was left unchanged at 3.7 percent.
For 2020, the global economy should grow 3.5 percent, it said in its latest Economic Outlook report.
“The shakier outlook in 2019 reflects deteriorating prospects, principally in emerging markets such as Turkey, Argentina and Brazil,” it said.
“The further slowdown in 2020 is more a reflection of developments in advanced economies as slower trade and lower fiscal and monetary support take their toll.”
OECD chief Angel Gurria highlighted problems caused by trade conflicts and political uncertainty — an apparent reference to US President Donald Trump’s stand-off with China which has roiled the markets.
“We urge policy-makers to help restore confidence in the international rules-based trading system,” Gurria said in a statement.
Trade tensions have already shaved 0.1-0.2 percentage points off global GDP this year, the Economic Outlook report said.
If Washington were to hike tariffs to 25 percent on all Chinese imports — as Trump has threatened to do — world economic growth could fall to close to three percent in 2020.
Growth rates would drop by an estimated 0.8 percent in the US and by 0.6 percent in China, it added.
For the moment, the OECD puts US economic growth at 2.9 percent this year and 2.7 percent in 2019, unchanged from previous estimates, but trimmed China by 0.1 percentage point each to 6.6 percent and 6.3 percent.
It warned that “a much sharper slowdown in Chinese growth would damage global growth significantly, particularly if it were to hit financial market confidence.”
Laurence Boone, OECD Chief Economist, said “There are few indications at present that the slowdown will be more severe than projected. But the risks are high enough to raise the alarm and prepare for any storms ahead.”