Oil dips as IMF lowers global growth outlook; eyes on US hurricane

Nearly 40 percent of daily crude oil production was lost from offshore Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael. (Reuters)
Updated 10 October 2018
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Oil dips as IMF lowers global growth outlook; eyes on US hurricane

  • The IMF downgraded its global economic growth forecasts for 2018 and 2019
  • ‘Prices are peaking at the most opportunistic time given waning global growth narrative’
TOKYO: Oil prices edged lower on Wednesday after the IMF lowered its global growth forecasts but prices were supported as Hurricane Michael churned toward Florida, causing the shutdown of nearly 40 percent of Gulf of Mexico crude output.
Brent crude futures were down 21 cents at $84.79 a barrel by 0434 GMT, after a 1.3 percent gain on Tuesday.
US West Texas Intermediate crude was down by 34 cents, or 0.5 percent, at $74.62 a barrel, after rising nearly 1 percent in the previous session.
The International Monetary Fund downgraded its global economic growth forecasts for 2018 and 2019 on Tuesday, raising concerns that demand for oil products may slump as well.
Trade tensions and rising import tariffs were taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows, the IMF said.
“Prices are peaking at the most opportunistic time given waning global growth narrative,” said Stephen Innes, head of trading APAC at OANDA in Singapore.
In the United States, nearly 40 percent of daily crude oil production was lost from offshore Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.
Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday on the Florida Panhandle.
The country’s largest privately-owned crude terminal, the Louisiana Offshore Oil Port, said late on Tuesday it had halted operations at its marine terminal.
The facility is the only US port able to fully load and unload tankers with a capacity of 2 million barrels of oil.
Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.
Iran’s crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of US sanctions that take effect on November 4.
Industry and government data on US crude inventories will be delayed by one day this week because of a public holiday on Monday. The American Petroleum Institute is due to release data on Wednesday, while the US Energy Information Administration is due to publish on Thursday.
“There seems to more positive supply chatter in the equation this week, and even although we know its maintenance season the markets are so long positioned that we could see an outsized move on a big build,” Innes said.


No need for more talks over draft budget: Lebanon finance minister

Updated 21 May 2019
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.