Oil slumps as OPEC, Russia look to raise output amid US surge

Updated 28 May 2018
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Oil slumps as OPEC, Russia look to raise output amid US surge

SINGAPORE: Oil prices slumped on Monday, extending steep declines from Friday, as Saudi Arabia and Russia said they may increase supplies and as US production gains show no signs of abating.
Brent crude futures were at $75.09 per barrel at 0452 GMT, down $1.35, or 1.8 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.22 a barrel, down $1.66, or 2.5 percent.
Brent and WTI have fallen by 6.4 percent and 9.1 percent respectively from peaks touched earlier in May.
In China, Shanghai crude oil futures tumbled by 4.8 percent to 457.7 yuan ($71.64) per barrel.
The Organization of the Petroleum Exporting Countries (OPEC), as well as top producer but non-OPEC member Russia, started withholding supplies in 2017 to tighten the market and prop up prices, which in 2016 fell to their lowest in more than a decade at less than $30 per barrel.
But prices have soared since the start of the cuts last year, with Brent breaking through $80 per barrel earlier in May, triggering concerns that high prices would crimp economic growth and stoke inflation.
“The pace of the recent rise in oil prices has sparked a debate among investors on whether this poses downside risks to global growth,” Chetan Ahya, chief economist at US bank Morgan Stanley, wrote over the weekend in a note.
To address potential supply shortfalls, Saudi Arabia, de-facto leader of producer group OPEC, as well as top producer Russia said on Friday they were discussing raising oil production by some 1 million bpd.
“Crude oil prices collapsed ... after reports emerged that Saudi Arabia and Russia had agreed to increase crude oil production in the second-half of the year to make up for losses elsewhere under the production cut agreement,” ANZ bank said on Monday.
Meanwhile, surging US crude production also showed no sign of abating as drillers continue to expand their search for new oil fields to exploit.
US energy companies added 15 rigs looking for new oil in the week ended May 25, bringing the rig-count to 859, the highest level since 2015, in a strong indicator that American crude production will continue to rise.
US crude production has already surged by more than 27 percent in the last two years, to 10.73 million barrels per day (bpd), bringing its output ever closer to Russia’s 11 million bpd.
“Oil prices are showing symptoms of a falling knife as investors are jittery on the prospect of increased production from three of the world’s top producers,” Singapore-based brokerage Phillip Futures said on Monday.


Moody’s raises GDP growth forecasts for Saudi Arabian economy

Updated 18 October 2018
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Moody’s raises GDP growth forecasts for Saudi Arabian economy

  • The Moody’s report released on Wednesday maintained the Kingdom’s A1 rating
  • he agency expects higher oil production to boost the Saudi economy

LONDON: Moody’s has raised Saudi Arabia’s GDP growth forecast for 2018 to 2.5 percent from 1.3 percent as it maintains a “stable outlook” for the Saudi economy.
The ratings agency also increased its 2019 GDP forecast to 2.7 percent, well above the 1.5 percent previously predicted, the Kingdom’s Ministry of Finance said.
Moody’s numbers exceed the forecasts of the Saudi Arabian government for the 2019 budget announced in September.
The Moody’s report released on Wednesday maintained the Kingdom’s A1 rating.
The agency expects higher oil production to boost the economy, but also said developments in the non-oil sector will contribute to stronger GDP growth in the medium and long-term.
Moody’s said the Saudi government deficit for the 2018 and 2019 will hover between 3.5 percent and 3.6 percent, a far cry from its previous expectations of 5.8 percent and 5.2 percent.
Moody’s commended Saudi Arabia’s reasonable control of expenditure, even in the face of higher oil revenues.
“In addition to the moderate funding requirements, the government is able to access ample sources of liquidity, from both domestic or international capital markets and financial reserves. It is unlikely to face problems in financing the fiscal deficit,” the report said.
Last week, the IMF lifted its projections for economic growth in Saudi Arabia saying the Kingdom’s economy is expected to grow by 2.2 percent in 2018 and 2.4 percent next year, raising previous projections by 0.5 percent.