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.


Infectious diseases are set to become as great a risk for global business as climate change

Updated 19 January 2019
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Infectious diseases are set to become as great a risk for global business as climate change

LONDON: The Global Risks Report 2019 jointly compiled by the World Economic Forum (WEF) and the Harvard Global Heath Institute describes a world that is woefully ill-prepared to detect and respond to disease outbreaks.
In fact, the world is becoming more vulnerable to pandemics, despite advances in medicine and public health.
Global GDP will fall by an average of 0.7 percent or $570 billion because of pandemics — a threat that is “in the same order of magnitude” to the losses estimated to be caused by climate change in the coming decades.
“Outbreaks are a top global economic risk and — like the case for climate change — large companies can no longer afford to stay on the sidelines,” said Vanessa Candeias, who heads the committee on future health and health care at the WEF.
Potential catastrophic outbreaks of disease occur only every few decades but regional and local epidemics are becoming more common. There have been nearly 200 a year in recent times and outbreaks of diseases such as influenza, Ebola, zika, yellow fever, SARS, and MERS have become more frequent over the last 30 years.
At the same time antibiotics have become less effective against bacteria.
The impact of influenza pandemics is estimated at $60 billion, according to a report by the Commission on a Global Health Risk Framework for the Future — more than double previous estimates.
The trend is expected to get worse as populations increase and become more mobile due to travel, trade or displacement. Deforestation and climate change are also factors.
Businesses need to bone up on the risk of infectious diseases and how to manage them if the overall economy is to remain resilient.
Peter Sands, research fellow at the Harvard Global Health Institute and executive director of the Global Fund to Fight Aids, Tuberculosis and Malaria, said, “When business leaders are more aware of what’s at stake, maybe there will be a different dialogue about global health, from being a topic that rarely touches the radar screen of business leaders to being a subject worthy of attention, investment and advocacy.”
Predicting where and when the next outbreak will come is an evolving science but it is possible to identify certain factors that would leave companies vulnerable to financial losses, such as the nature of the business, geographical location of the workforce, the customer base and supply chain.
Disease is not the only threat. There is also fear uninformed panic. Past epidemics have shown that misinformation spreads as fast as the infection itself and can undermine and disrupt medical response.
The report advises planning for such emergencies by “trusted public-private partnerships” so that “businesses can help mitigate the potentially devastating human and economic impacts of epidemics while protecting the interests of their employees and commercial operations.”
It is estimated that the outbreak of Ebola in West Africa in 2014-2016 cost $53 billion in lost commercial income and the 2015 MERS outbreak in South Korea cost $8.5 billion. According to the World Bank, disease accounts for only 30 percent of economic losses. The rest is largely down to healthy people changing their behavior as they seek to avoid becoming infected themselves.
The authors of the report will make recommendations next week at the World Economic Forum annual meeting in Davos.