Oil falls on lower China refining activity, fresh US crude output record

OPEC, together with Russia, will officially meet in Vienna on June 22 to discuss production policy. (Reuters)
Updated 14 June 2018
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Oil falls on lower China refining activity, fresh US crude output record

SINGAPORE: Oil prices eased on Thursday, dragged down by rising output and a decline in China’s refining activity, although strong fuel consumption in the US and a drop in its crude inventories provided the market with some support.
Brent crude futures were at $76.55 per barrel at 0445 GMT, down 19 cents, or 0.25 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.62 a barrel, down 2 cents from their last settlement.
China on Thursday reported a drop in its refinery activity, from 12.06 million barrels per day (bpd) in April to 11.93 million bpd in May, although year-on-year runs were still up by 8.2 percent.
Also weighing on prices was another rise in US oil production, which hit a weekly record of 10.9 million bpd last week, according to the Energy Information Administration (EIA) on Wednesday.
US crude output has risen by almost 30 percent in the last two years, and it is now close to top global producer Russia, which produced 11.1 million bpd overall in the first two weeks of June.
But the rising output came amid strong demand, which traders said prevented crude prices from falling further.
US consumption of gasoline in the US rose to a historic high of 9.88 million bpd last week, according to the EIA.
US crude inventories fell by 4.1 million barrels in the week to June 8, to 432.4 million barrels.
Still, US output is now above that of top exporter Saudi Arabia, which currently churns out slightly above 10 million bpd.
The surge in American output puts pressure on other producers, who are losing market share.
Russian and Saudi production has been held back voluntarily since 2017, when the Organization of the Petroleum Exporting Countries (OPEC), together with some non-OPEC producers including Russia, started supply cuts aimed at propping up prices.
With Brent prices up by around 180 percent from their 2016 lows and demand strong, OPEC and Russia may soon end their voluntary supply cuts.
OPEC, together with Russia, will officially meet in Vienna on June 22 to discuss its production policy.
US bank Morgan Stanley said OPEC and its partners had “largely achieved their stated objective of rebalancing the oil market.”
With demand for oil strong, Morgan Stanley said the group’s “production is likely to creep higher.”
OPEC’s de-facto leader Saudi Arabia and Russia will also have the chance to talk before the Vienna meeting.
Russia and Saudi Arabia are set to open the football world cup, which kicks off in Russia on Thursday.
“The two producers’ ministers plan to discuss the issue during tomorrow’s World Cup game between the two countries,” ANZ bank said.


Australian telecom giant Telstra to cut 8,000 jobs

Updated 13 min 10 sec ago
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Australian telecom giant Telstra to cut 8,000 jobs

SYDNEY: Australia’s dominant telecommunications company Telstra Wednesday announced plans to axe 8,000 jobs — a quarter of its workforce — as part of a drastic new strategy to cope with an increasingly competitive industry.
The decision by the company, one of Australia’s largest employers, is part of a shake-up targeting an extra Aus$1 billion ($750 million) in cost-cutting by 2022, on top of Aus$1.5 billion previously announced.
To create a leaner operation, it will also split its mobile and infrastructure divisions into separate businesses.
“We are creating a new Telstra that is able to continue to lead the market,” said chief executive Andrew Penn.
“In the future our workforce will be a smaller, knowledge-based one with a structure and way of working that is agile enough to deal with rapid change.
“This means that some roles will no longer be required, some will change and there will also be new ones created.”
The cuts come less than a month after Telstra said its 2017/18 earnings will likely be at the bottom of its guidance range of Aus$10.1 billion to Aus$10.6 billion, blaming increasing competition in mobile and fixed broadband.
The warning sent its shares tumbling to a more-than six-year low of Aus$2.71.
Telstra employs 32,000 people across 20 countries, according to its most recent annual report. Of the jobs to go, one in four will be executive and middle management roles.
Penn said the company had to take action to stay on top in a highly competitive market.
“The rate and pace of change in our industry is increasingly driven by technological innovation and competition,” he said.
“In this environment traditional companies that do not respond are most at risk.
“We have worked hard preparing Telstra for this market dynamic while ensuring we did not act precipitously. However, we are now at a tipping point where we must act more boldly if we are to continue to be the nation’s leading telecommunications company.”

Telstra has a range of businesses including fixed broadband, mobile, data and IP, network application and services, digital media and international.
Part of its new strategy will see it create a wholly-owned standalone infrastructure business unit from July 1.
Called Telstra InfraCo, it will comprise the telecom’s fixed-network infrastructure including data centers, non-mobiles related domestic fiber, international subsea cables, exchanges, poles, ducts and pipes.
Its services will be sold to Telstra, wholesale customers and Australia’s National Broadband Network, controlling assets with a book value of about Aus$11 billion.
“As technology innovation is increasingly relying on connectivity, the role of telecommunications infrastructure is becoming more important,” said Penn.
“There is virtually no technological innovation happening today that does not rely on a high-quality, reliable, safe and secure telecommunications network.
“In this world our infrastructure assets are becoming more valuable. By creating a new infrastructure-focused business unit we will better optimize and manage these assets.”
Telstra also intends to “monetise assets of up to Aus$2 billion over the next two years to strengthen the balance sheet,” and has set aside Aus$600 million in restructuring costs.