Oil recovers some losses after 6% plunge but markets remain wary

The International Energy Agency warned of unprecedented uncertainty in oil markets due to a difficult economic environment and political risk. (Reuters)
Updated 21 November 2018
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Oil recovers some losses after 6% plunge but markets remain wary

  • Investors remained on edge, with the International Energy Agency warning of unprecedented uncertainty in oil markets
  • ‘The global economy is still going through a very difficult time and is very fragile’

SINGAPORE: Oil prices on Wednesday clawed back some of the previous day’s more than 6 percent plunge, lifted by a report of an unexpected decline in US commercial crude inventories as well as record Indian crude imports.
But investors remained on edge, with the International Energy Agency (IEA) warning of unprecedented uncertainty in oil markets due to a difficult economic environment and political risk.
International Brent crude oil futures were at $63.19 per barrel at 0239 GMT, up 66 cents, or 1.1 percent from their last close.
US West Texas Intermediate (WTI) crude futures, were up 66 cents, or 1.2 percent, at $54.09 a barrel.
Wednesday’s gains came after a report by the American Petroleum Institute late on Tuesday that US commercial crude inventories last week fell unexpectedly by 1.5 million barrels, to 439.2 million, in the week to Nov. 16.
Record crude imports by India of almost 5 million barrels per day (bpd) also supported prices, traders said.
Yet Wednesday’s bounce was small in the context of the general market weakness, which saw crude tumble by more than 6 percent the previous session amid a selloff in global stock markets.
“The global economy is still going through a very difficult time and is very fragile,” IEA chief Fatih Birol said on Tuesday.
“Rising global growth fears smashed oil markets and saw European and US shares slide,” futures brokerage CMC Markets said in a daily note.
With output surging and the demand outlook deteriorating, the Organization of the Petroleum Exporting Countries (OPEC) is pushing for a supply cut of between 1 million and 1.4 million bpd to prevent a repeat of the 2014 glut.
“We would anticipate further weakness until the reaction from OPEC+ (Dec. 6) and the G20 summit is clearer (Nov. 30/Dec. 1),” said Ashley Kelty, oil analyst at investment bank Cantor Fitzgerald Europe.
Despite an expectation of OPEC-led cuts, Brent and WTI prices have slumped by 28 and 30 percent respectively since early October, and the entire structure of the forward price curve has changed.
The Brent forward curve was in steep backwardation in October, implying a tight market with prices for spot delivery higher than those for later dispatch. This makes it unattractive to store oil.
Since then, however, the curve has moved into contango for most of 2019, implying oversupply as higher prices further out make it attractive to store oil for later sale.
“Investors are becoming increasingly concerned that any potential production cuts by OPEC will be insufficient to cover the surplus in the market,” ANZ bank said on Wednesday.
“The list of reasons for the decline are pretty specific ... too much supply and a risk of slowing demand growth,” said James Mick, Energy Portfolio Manager with US investment firm Tortoise.
“Part of the supply issue has been surging US production,” he added.
US crude oil production has jumped by almost a quarter this year, to a record 11.7 million bpd largely because of a surge in shale output.


Shuaa Capital begins consolidation after buying Kuwait’s Amwal

Updated 31 min 36 sec ago
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Shuaa Capital begins consolidation after buying Kuwait’s Amwal

LONDON: The Dubai-based financial services firm Shuaa Capital has started “consolidation efforts” following its acquisition of the Kuwait-based Amwal International Investment Company, according to a statement.
The move follows the recent completion of a public tender process, and Amwal shareholders’ general assembly on Dec. 12, according to a statement from UAE state news agency WAM.
Shuaa said earlier this year that it had struck a deal to boost its stake in Amwal to more than 87 percent.
Amwal’s key subsidiary is Noor Capital Markets, a brokerage with operations in Kuwait, Abu Dhabi, Turkey and Jordan.
Fawad Tariq-Khan, CEO of Shuaa Capital, said the acquisition will allow his company to boost its presence in some of those markets.
“The commencement of this consolidation exercise represents the culmination of our efforts in establishing a broad geographic footprint across the region’s strongest markets. From our heritage in the UAE, and now in our six well-placed jurisdictions, we are well positioned to tap into a diverse range of growing markets,” he said. “We are excited about the potential to take our expertise into Kuwait, Turkey and Jordan, as well as bringing Noor Capital Markets’ services and offerings to our home territories. We believe that we have a winning combination which will support our continued transformation on the path to sustainable profitability.”
Khurram Sayeed, CEO of Noor Capital Markets, said the consolidation had “tremendous prospects” for the businesses.