Oil prices rise but still set for third weekly drop on oversupply, US-China trade dispute

Prices have been dragged down by concerns about oversupply as some production returned after outages. (Reuters)
Updated 20 July 2018
0

Oil prices rise but still set for third weekly drop on oversupply, US-China trade dispute

TOKYO: Crude prices rose on Friday but were set to drop for the week as concerns about oversupply and lower demand due to a possible economic slowdown caused by the trade conflict between the United States and China, the world’s two biggest oil users.
Brent oil rose 7 cents to $72.65 a barrel by 0354 GMT, after rising to $73.04 earlier in the day.
US West Texas Intermediate (WTI) was up 14 cents at $69.60 a barrel, after reaching a high of $70.03 earlier.
However, both benchmarks are on track for their third weekly loss, after big declines on Monday, with Brent set to drop 3.6 percent and WTI to fall by 2 percent.
Prices have been dragged down by concerns about oversupply as some production returned after outages, while trade tensions between the US and China stoked fears of damage to their economies and commodities demand.
Saudi Arabia had moved on Thursday to allay fears of oversupply, which had supported prices.
But concerns about US and China are coming to fore again as China’s currency falls, said Stephen Innes, head of trading APAC at OANDA brokerage.
“Risk sentiment is wobbling, which I believe is attributed to PBOC pushing the RMB complex lower via the fix,” Innes said. “Markets are now nervous, not only about a trade war, but also a currency war.”
The People’s Bank of China (PBOC) on Friday lowered its mid-point for the yuan for the seventh straight trading day to the lowest in a year.
With China showing little signs of arresting its currency’s depreciation, the yuan promptly retreated to a near 13-month low.
Lower oil demand in the United States and China caused by an economic slowdown from their trade war would have oversized impacts on the market.
The US accounted for 20.2 percent of global oil demand in 2017 while China consumed 13 percent of the world’s oil last year, according to the BP Statistical Review of Energy.
There was some support for prices based on comments from Saudi Arabia, the world’s biggest oil exporter, that it would cut crude shipments.
The country expects exports to drop by roughly 100,000 barrels per day in August as it works to ensure it does not push oil into the market beyond customers’ needs, the kingdom’s Organization of the Petroleum Exporting Countries Governor Adeeb Al-Aama said.
“Despite the international oil markets being well balanced in the third quarter, there will still be substantial stock draws due to robust demand and seasonality factors in the second half,” Al-Aama said in a statement.
He also said concerns that Saudi Arabia and its partners are moving to substantially oversupply the market are “without basis.”


Hajj season boosts Middle East hotel demand in August

Updated 43 min 17 sec ago
0

Hajj season boosts Middle East hotel demand in August

  • Occupancy rates — a measure of the proportion of available rooms sold — in the region jumped to 63.4 percent from 62.1 percent
  • The average daily room rate — another key industry metric — increased 12.2 percent to reach close to $170 per night

LONDON: Demand for hotel rooms across the Middle East leapt last month providing welcome relief for an industry that has been grappling with an oversupply of hotel accommodation, new data showed.
Occupancy rates — a measure of the proportion of available rooms sold — in the region jumped to 63.4 percent from 62.1 percent, according to data provider STR’s research published on Sept. 24.
The average daily room rate — another key industry metric — increased 12.2 percent to reach close to $170 per night, while revenue per available room (RevPar) increased by 14.5 percent to reach $107.50.
The region’s hotel sector has been under pressure due partly to the impact of low oil prices and geopolitical risks, resulting in a slump in room revenue and occupancy as supply exceeded demand.
“It is true in the broader sense that we have been seeing a softening of market-wide RevPar levels in the hospitality sector across most major cities within the GCC countries,” said Ali Manzoor, partner, hospitality and leisure at property consultancy firm Knight Frank.
Analysts have blamed the year-on-year uptick in August on the earlier Hajj season and Eid Al-Adha holiday, rather than indicative of a change in outlook for the sector.
“The spike in occupancy levels in August was largely attributable to differences between the Gregorian and Hijri calendars,” Manzoor said.
This year, the pilgrimage period took place in August, helping to boost the industry’s performance that month. “It is therefore reasonable to expect hotels to underperform in the month of September in relation to last year,” he said.
Looking at data for the year-to-date, the UAE retains the highest occupancy rate in the Gulf region at 72.2 percent, though this represents a slight decline of 0.8 percent compared to the same time period last year, according to STR data.
Saudi Arabia’s occupancy levels stood at 58.1 percent year-to-date, marginally up by 0.2 percent on last year.