Oil up on OPEC uncertainty regarding production levels

OPEC is meeting together with non-OPEC members including No.1 producer Russia at its headquarters in the Austrian capital to discuss output policy. (Reuters)
Updated 22 June 2018
0

Oil up on OPEC uncertainty regarding production levels

  • Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting
  • Phillip Futures said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively”

SINGAPORE: Oil prices rose by around 1 percent on Friday, lifted by uncertainty over whether OPEC would manage to agree a production increase at a meeting in Vienna later in the day.
Brent crude oil futures were at $73.78 per barrel at 0502 GMT, up 73 cents, or 1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $66.26 a barrel, up 72 cents, or 1.1 percent.
The Organization of the Petroleum Exporting Countries (OPEC), a producer group with top exporter Saudi Arabia as the de facto head, is meeting together with non-OPEC members including No.1 producer Russia at its headquarters in the Austrian capital to discuss output policy.
The group started withholding supply in 2017 to prop up prices. This year, amid strong demand, the market has tightened significantly, pushing up crude prices and triggering calls by consumers to increase supplies.
Saudi Arabia and Russia are in favor of raising output. Other OPEC-members including Iran have opposed this, resulting in a flurry of backdoor diplomacy ahead of the meeting.
“The actual decision by OPEC and its partners — which may not actually become apparent until Saturday — is the big one traders are watching,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.
Phillip Futures, another brokerage, said in a note that it expected “an approximate 300,000–600,000 barrels per day (bpd) hike by Saudi Arabia and Russia collectively.”
US investment bank Jefferies said an increase in “the range of 450-750,000 bpd seems the most likely outcome” of the meeting, driven largely by Russia and Gulf OPEC members Saudi Arabia, the United Arab Emirates and Kuwait.
Jefferies said these increases “would essentially offset Venezuelan declines and falling Iranian exports,” but the bank warned that global “spare capacity could fall globally to around 2 percent of demand – its lowest level since at least 1984.”
That would leave markets prone to supply shortages and price spikes in case of large, unforeseen disruptions.
The other big uncertainty is potential Chinese tariffs on US crude imports that Beijing may impose in an escalating trade dispute between the United States on one side and China, the European Union and India on the other.
Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their economic toll.
Should the 25 percent duty on US crude imports be implemented by Beijing, American oil would become uncompetitive in China, forcing it to seek buyers elsewhere.
Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.
“If China’s import demand dries up, more than 300,000 bpd of US crude will have to find a new destination,” energy consultancy FGE said.
“This will certainly depress US Gulf Coast prices,” it said.


China sorghum imports jump after Beijing dropped probe into US shipments: Customs

Updated 2 min 19 sec ago
0

China sorghum imports jump after Beijing dropped probe into US shipments: Customs

  • China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons
  • Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices

BEIJING: China’s sorghum imports in June surged 38.1 percent on year, boosted by a temporary easing of Sino-US trade tensions, while corn imports for the month rose to one of highest levels in the past decade, customs data showed on Monday.
China brought in 450,000 tons of sorghum in June, up from last year’s 324,301 tons. Volumes were still down slightly from 470,000 tons in May, data from the General Administration of Customs showed.
Beijing announced in mid-April that importers of sorghum from the United States would have to put up a 178.6 percent deposit on the value of shipments. Several cargoes already on the way changed course and were diverted to other markets.
A month later in a goodwill measure, however, China dropped the deposit and an anti-dumping probe into US sorghum imports as the two sides appeared to be reaching consensus on resolving trade issues.
“Some cargoes were already on the way to China when Beijing dropped the deposit. Then they cleared customs in weeks after. That should have pushed up the June volumes,” said Cherry Zhang, an analyst with Shanghai JC Intelligent Co. Ltd, before the data release.
Corn buyers, meanwhile, scooped up cargoes on worries over the return of US-China trade policy tit-for-tat amid high domestic prices.
Corn imports in June hit 520,000 tons, up 34.6 percent from a year ago and the second highest since July last year. The figures were down from 760,000 tons in May, the data showed.
The corn imports in the first six months tripled to 2.21 million tons, already close to China’s total 2017 purchase of 2.82 million tons of the grain, according to the data.
“There were margins importing corn as domestic corn prices were relatively high. And buyers were buying more corn in recent couple of months to prepare for the Sino-US trade tension in advance,” said Meng Jinhui, an analyst with Shengda Futures.
UScorn and sorghum shipments to China should drop significantly in July and August, analysts and traders said, as Beijing imposed a 25 percent tariff on US grains on July 6.
China buys almost all its sorghum imports from the United States.
In the first half of this year, China has brought in 3.25 million tons of sorghum, up 8.7 percent from the same period of 2017, the data showed.
China also brought in 590,000 tons of barley in June, down 5.6 percent from a year ago. Barley imports for the first half of the year were at 4.4 million tons, down 2.7 percent.
Wheat imports were at 310,000 tons in June, down 33.6 percent from a year ago. Wheat imports for the first half were at 1.95 million tons, down 26.4 percent, the data showed.
China bought 280,000 tons of sugar and 98,566 tons of pork in June. In the first half of the year, China’s sugar imports were at 1.38 million tons, and shipments of pork were at 647,985 tons, both down from last year’s levels.