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.


RBS quarterly profit higher than expected as legal costs fall

Updated 48 sec ago
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RBS quarterly profit higher than expected as legal costs fall

LONDO: Royal Bank of Scotland on Friday reported a much stronger than expected attributable pre-tax profit of £792 million in the first quarter, as costs from legal fines and restructuring fell.
Analysts had expected the state-backed bank, which returned to annual profit for the first time in a decade last year, to deliver £319 million in profit before tax.
Even after ten years of restructuring following the financial crisis, RBS is still not entirely back to normal. An outstanding multi-billion pound fine from the US Department of Justice (DOJ) is expected to put the bank back into the red at full-year results this year.
RBS said on Friday it had no news on concluding the DOJ talks, which it has said are a prerequisite for it to resume paying dividends and for the British government to start to sell its 71 percent stake in the bank.
Restructuring costs for the first quarter fell to £209 million from £509 million in the same period a year ago, while conduct and litigation charges were just £19 million, down from £764 million a year ago.
RBS also reported a common equity tier one capital ratio of 16.4 percent, up from 15.9 percent in February. That did not include the impact of a £2 billion payment into the bank’s group pension fund that will be booked in the second quarter.
While the bank’s headline profit figure showed a healthy business emerging from its years of restructuring and legal costs, the bank also showed some signs that increasingly competitive British banking market is squeezing its returns.
RBS’s net interest margin, a measure of the gap between what it pays savers and charges borrowers, fell by 0.2 percentage points from the same period a year ago amid competitive pressure on loan margins.
A long period of low interest rates in Britain and competition from upstart new lenders have combined to squeeze rates on mortgages and business loans in recent years, eroding bank profit margins.