Oil stable on talk of possible OPEC output cuts

US crude inventories rose by 5.8 million barrels in the week ending Nov. 2, to 431.79 million barrels, the Energy Information Administration said. (Reuters)
Updated 08 November 2018
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Oil stable on talk of possible OPEC output cuts

  • Iran sanctions are now in place but oil is still in ample availability
  • OPEC-led production cuts next year cannot be ruled out

SINGAPORE: Oil prices were stable on Thursday, supported by rumblings from within OPEC that production curbs may become necessary again to prevent a return of global oversupply.
But soaring US crude output, which hit a record 11.6 million barrels per day (bpd) last week, kept a lid on prices.
US West Texas Intermediate (WTI) crude oil futures were at $61.69 per barrel at 0221 GMT, 2 cents above their last settlement.
Front-month Brent crude oil futures were down 6 cents at $72.01 a barrel.
A group of producers around the Organization of the Petroleum Exporting Countries (OPEC) as well as Russia decided last June to relax output curbs in place since 2017, after pressure from US President Donald Trump to reduce oil prices and make up for supply losses from Iran.
But with Iran sanctions now in place and oil still in ample availability, OPEC-led production cuts next year cannot be ruled out, two OPEC sources said on Wednesday.
“OPEC and Russia may use cuts to support $70 per barrel,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“The introduction of US sanctions earlier this week against Iran failed to lift the market given the announcement that eight countries, including three of the world’s biggest importers, would receive waivers to carry on buying Iranian crude for up to six months,” Hansen said.
Preventing oil prices from rising any further has been a relentless rise in US crude output, which hit a record 11.6 million bpd in the week ending Nov. 2, according to Energy Information Administration (EIA) data released on Wednesday.
That’s a threefold increase from the US low reached a decade ago, and a 22.2 percent rise just this year. It makes the United States the world’s biggest producer of crude oil.
More US oil will likely come. The EIA expects output to break through 12 million bpd by mid-2019, thanks largely to a surge in shale oil production.
Meanwhile, US crude inventories rose by 5.8 million barrels in the week ending Nov. 2, to 431.79 million barrels, the EIA said.
Crude stocks moved back above their five-year average levels in October.
Production has not just risen in the United States, but also in many other countries, including Russia, Saudi Arabia, Iraq and Brazil, stoking producer concerns of a return of oversupply that depressed oil prices between 2014 and 2017.
“Producers are concerned about the potential oversupply ... after EIA reported that crude inventories rose by 5.8 million barrels,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.


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.