Oil rises as US drilling stalls, Washington sanctions on Iran loom

Violence in Iraq, including a rocket attack on Basra airport on Saturday, also sparked fears of supply disruptions, although so far there have been no interruptions to oil exports. (File/Shutterstock)
Updated 10 September 2018
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Oil rises as US drilling stalls, Washington sanctions on Iran loom

  • US energy companies cut two oil rigs last week, bringing the total count to 860
  • New US sanctions against Iran’s crude exports from November were helping push up prices

SINGAPORE: Oil prices rose on Monday as US drilling for new production stalled and as the market eyed tighter conditions once Washington’s sanctions against Iran’s crude exports kick in from November.
US West Texas Intermediate (WTI) crude futures were at $68.23 per barrel at 0640 GMT, up 48 cents, or 0.7 percent, from their last settlement.
Brent crude futures climbed 64 cents, or 0.8 percent, to $77.46 a barrel.
US energy companies cut two oil rigs last week, bringing the total count to 860, energy services firm Baker Hughes said on Friday.
The US rig count has stagnated since May, after staging a recovery since 2016, which followed a steep slump the previous year amid plummeting crude prices.
Outside the United States, new US sanctions against Iran’s crude exports from November were helping push up prices.
Energy consultancy FGE said several major Iran customers like India, Japan and South Korea were already cutting back on Iran crude.
“Governments can talk tough. They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to ... say they won’t risk it,” FGE said.
“US financial penalties and the loss of shipping insurance scares everyone,” it said in a note to clients.
Violence in Iraq, including a rocket attack on Basra airport on Saturday, also sparked fears of supply disruptions, although so far there have been no interruptions to oil exports.
Tighter outlook?
With US rig activity stalling and Iran sanctions looming, the oil market outlook is tightening.
“Investors have largely turned positive again ... likely welcoming the return of backwardation,” said Edward Bell, commodity analyst at Emirates NBD bank.
Backwardation describes a market in which prices for immediate delivery are higher than those for later dispatch. It is considered a sign of tight conditions giving traders an incentive to sell oil immediately instead of storing it.
The Brent backwardation between October this year and mid-2019 is currently around $2.20 per barrel.
While Washington exerts pressure on other countries to fall into line and also cut imports from Iran, it is also urging other major producers to raise their output in order not to create too strong a price spike.
US Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday, respectively, as the Trump administration seeks the world’s biggest exporter and producer to keep output up.
One key question going forward is how demand develops amid the trade dispute between the United States and China, as well as general emerging market weakness.
Asian shares on Monday were on track for their eighth straight session of declines, while China’s yuan and India’s rupee also came under renewed pressure as US President Donald Trump threatened yet more import tariffs on Chinese goods.
Consultancy FGE warned that “trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth.”
Despite this, FGE said the likelihood of significantly weaker oil prices was relatively low as the Organization of the Petroleum Exporting Countries (OPEC) would withhold output to prevent prices from plunging.
“We see $65 per barrel as a trigger for cuts,” FGE said.


US intelligence says Huawei funded by Chinese state security: report

Updated 20 April 2019
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US intelligence says Huawei funded by Chinese state security: report

  • The accusation comes at a time of trade tensions between Washington and Beijing
  • Huawei dismissed the allegations

US intelligence has accused Huawei Technologies of being funded by Chinese state security, The Times said on Saturday, adding to the list of allegations faced by the Chinese technology company in the West.
The CIA accused Huawei of receiving funding from China’s National Security Commission, the People’s Liberation Army and a third branch of the Chinese state intelligence network, the British newspaper reported, citing a source.
Earlier this year, US intelligence shared its claims with other members of the Five Eyes intelligence-sharing group, which includes Britain, Australia, Canada and New Zealand, according to the report.
Huawei dismissed the allegations in a statement cited by the newspaper.
“Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources,” a Huawei representative told The Times.
The company, the CIA and Chinese state security agencies did not respond immediately to requests for comment.
The accusation comes at a time of trade tensions between Washington and Beijing and amid concerns in the United States that Huawei’s equipment could be used for espionage. The company has said the concerns are unfounded.
Authorities in the United States are probing Huawei for alleged sanctions violations.
Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, was arrested in Canada in December at the request of the United States on charges of bank and wire fraud in violation of US sanctions against Iran.
She denies wrongdoing and her father has previously said the arrest was “politically motivated.”
Amid such charges, top educational institutions in the West have recently severed ties with Huawei to avoid losing federal funding.
Another Chinese technology company, ZTE Corp. , has also been at the center of similar controversies in the United States.
US sanctions forced ZTE to stop most business between April and July last year after Commerce Department officials said it broke a pact and was caught illegally shipping US-origin goods to Iran and North Korea. The sanctions were lifted after ZTE paid $1.4 billion in penalties.
Reuters reported earlier this week that the United States will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for Huawei to dominate 5G telecommunications networks.