Oil prices slip on concerns of looming oversupply, economic downturn

The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to November 9 to 440.7 million. (Reuters)
Updated 15 November 2018
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Oil prices slip on concerns of looming oversupply, economic downturn

  • Since early October, oil prices have lost around a quarter of their value as supply soars
  • China is the world’s biggest oil importer and the second-largest crude consumer

SINGAPORE: Oil prices slipped on Thursday, weighed down by rising supply going into a market in which consumption is expected to slow down amid a glum economic outlook.
Front-month Brent crude oil futures were trading at $65.88 per barrel at 0441 GMT, down 24 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $55.96 a barrel, down 29 cents, or 0.5 percent.
Since early October, oil prices have lost around a quarter of their value as supply soars just as demand is expected to slow down along with an economic downturn.
“Asian refiners and consumers we speak with are mentioning initial concerns of slowing demand,” said Mike Corley, president of Mercatus Energy Advisers.
US bank Morgan Stanley said in a note on Wednesday that China’s economic “conditions deteriorated materially” in the third quarter of 2018, while analysts at Capital Economics said China’s “near-term economic outlook still remains downbeat.”
China is the world’s biggest oil importer and the second-largest crude consumer.
Meanwhile, data released this week showed economic contraction in industrial powerhouses Japan and Germany in the third quarter.
At the same time, supply has been surging, especially due to a 22 percent rise in US crude oil production this year to a record 11.6 million barrels per day (bpd).
“Producers...have more barrels than they can sell at the moment,” said Mercatus Energy Advisers’ Corley.
As a result, oil inventories are rising. The American Petroleum Institute said late on Wednesday that crude inventories rose by 8.8 million barrels in the week to Nov. 9 to 440.7 million, compared with analyst expectations for an increase of 3.2 million barrels.
Fearing a renewed glut like in 2014, when prices crashed under the weight of oversupply, the Organization of the Petroleum Exporting Countries (OPEC) is discussing supply cuts.
To do so successfully, OPEC — under the de-facto leadership of Saudi Arabia — will need Russia on its side, which is not an OPEC member.
A joint effort between OPEC and Russia to withhold supply from 2017 was a major contributor to crude price rises last year and in the first half of 2018.
“Russia and OPEC and Saudi Arabia — they are observing the market. If they see that there is dis-balance between supply and demand, (they) will of course take a joint action to reduce supply,” said Kirill Dmitriev, head of Russian Direct Investment Fund, the country’s sovereign wealth investment body.


UAE property developers’ earnings give Gulf markets a boost

Updated 17 February 2019
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UAE property developers’ earnings give Gulf markets a boost

  • Real estate sector gets confidence boost
  • DAMAC gains despite 87 pct drop in Q4 net profits

DUBAI: Most stock markets in the Middle East closed higher on Sunday, reflecting a rally in global stock markets on Friday, and were also boosted by better-than-expected company results, particularly in real estate.

The Abu Dhabi index gained 0.7 percent and the Dubai index 0.6 percent, as two of the largest property developers in the United Arab Emirates posted positive fourth-quarter financial results last week that beat market expectations.

“The market is starting to rebuild confidence in earnings as a driver for sentiment,” said Arqaam Capital in a research note. “Sentiment on the UAE was very weak in 2018, specifically for real estate, on concerns over oversupply risk, pricing pressure that is leading to extended payment plans, and a rental yield compression that is continuing to fall,” Arqaam said.

“But Q4 numbers provided evidence that a few developers have emerged as winners (Emaar Co’s, Aldar) out of market consolidation.” Emaar Properties, Dubai’s largest listed developer, reported a 27 percent rise in fourth-quarter profit.

The stock rose 2 percent on Sunday. DAMAC Properties closed up 0.8 percent, despite having reported a nearly 60 percent fall in full-year profit and an 87 percent drop in fourth-quarter net profits.

In Abu Dhabi, Aldar Properties gained 3.6 percent. Last week, the developer reported a rise in fourth-quarter earnings and higher dividends for 2018. In other sectors, Abu Dhabi Islamic Bank rose 0.5 percent after saying it had no merger and acquisition plans. This was in response to a Bloomberg report last week which said the bank was considering such options.

The Saudi index closed 0.4 percent down, in contrast to the rest of the region’s markets. Arab National Bank reported an increase in full- year net profit to 3.13 billion riyals ($834.62 million) from 3.03 billion riyals one year earlier.

The stock remained unchanged and this failed to give support to the banking sector. Alinma Bank < 1150.SE> and Al Rajhi Banking & Investment Corp. lost 0.3 percent and 0.6 percent, respectively.

In Egypt, where the main index gained 1.4 percent, Orascom Investment Holding, up 3.2 percent, was among the stocks attracting the highest trading volume. Shares in the company jumped last week after its chairman, Egyptian billionaire businessman Naguib Sawiris, said he saw possible investment opportunities in North Korea if a summit between its leader Kim Jong Un and US President Donald Trump later this month was successful.

SAUDI The index lost 0.4 pct to 8,592 points ARABIA DUBAI The index rose 0.6 pct to 2,550 points ABU DHABI The index rose 0.7 pct to 5,070 points QATAR The index gained 0.7 pct to 10,011 points EGYPT The index rose 1.4 pct to 15,199 points KUWAIT The index gainedd 0.1 pct to 5,427 points OMAN The index was down 0.8 pct at 4,077 points BAHRAIN

The index went up 0.6 pct to 1,381 points ($1 = 3.7502 riyals)