Oil edges higher on upcoming China-US trade talks, OPEC cuts

OPEC, Russia and other non-members agreed last December to reduce supply by 1.2 million bpd in 2019 versus October 2018 levels to rein in an emerging oil glut. (Reuters)
Updated 04 January 2019
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Oil edges higher on upcoming China-US trade talks, OPEC cuts

  • US and China have been locked in a trade war for much of the past year
  • Traders said prices are expected to receive some support as supply cuts announced late last year by OPEC start to kick in

SINGAPORE: Oil prices edged up on Friday, shaking off previous losses after China said it would hold talks with the US government on January 7-8 to look for solutions to the trade disputes between the world’s two biggest economies.
International Brent crude futures were at $56.12 per barrel at 0542 GMT, up 17 cents, or 0.3 percent, from their last close.
US West Texas Intermediate (WTI) crude oil futures were at $47.25 per barrel, up 16 cents, or 0.3 percent.
Both crude benchmarks were down earlier in the session on concerns that the Sino-American trade war would lead to a global economic slowdown.
Traders said the firmer prices came after China’s commerce ministry said on Friday that it would hold vice ministerial level trade talks with US counterparts in Beijing on Jan. 7-8, as the two sides look to end a dispute that is inflicting increasing pain on both economies and roiling global financial markets.
The two nations have been locked in a trade war for much of the past year, disrupting the flow of hundreds of billions of dollars worth of goods and stoking fears of a global economic slowdown.
Data for December from the Institute for Supply Management (ISM) on Thursday showed the broadest US slowdown in growth for more than a decade, as the trade conflict with China, falling equity prices and increasing uncertainty started to take a toll on the world’s biggest economy.
Leading economies in Asia and Europe have already reported a fall in manufacturing activity.
“Led by a sharp fall in the US ISM and China’s PMI falling below 50, the global manufacturing PMI fell to 51.5 in December (52.8 previously), a 27-month low,” Morgan Stanley said in a note following the release of the ISM data.
“The recent run of incoming data, coupled with global tightening financial conditions, has increased the downside risks to an already moderating global growth outlook,” the US bank said.
Despite the global market turmoil, traders said oil prices are expected to receive some support as supply cuts announced late last year by the Organization of the Petroleum Exporting Countries (OPEC) start to kick in.
OPEC oil supply fell by 460,000 barrels per day (bpd) between November and December, to 32.68 million bpd, a Reuters survey found on Thursday, as top exporter Saudi Arabia made an early start to a supply-limiting accord, while Iran and Libya posted involuntary declines.
OPEC, Russia and other non-members — an alliance known as OPEC+ — agreed last December to reduce supply by 1.2 million bpd in 2019 versus October 2018 levels to rein in an emerging fuel glut. The fuel surplus was in part depicted by light distillate fuel stocks at Asia’s refining hub in Singapore climbing to a record 16.1 million barrels in early January.
“If OPEC is faithful to its agreed output cut together with non-OPEC partners, it would take 3-4 months to mop up the excess inventories,” energy consultancy FGE said.
Considering the planned cuts versus ongoing increases in US crude production, which hit a record 11.7 million bpd by late 2018, FGE said it expected Brent prices to range between $55-$60 per barrel in the first months of 2019.


Daimler, BMW to invest $1.13 billion in venture to rival Uber

Updated 2 min 50 sec ago
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Daimler, BMW to invest $1.13 billion in venture to rival Uber

  • Carmakers Shifting beyond manufacturing and car sales toward pay-per-minute or pay-per-mile systems
  • Carmakers face marginalization by cash-rich technology firms unless they develop services based on vehicle usage
BERLIN: German carmakers Daimler and BMW unveiled a joint ride-hailing, parking and electric car charging business on Friday to compete with mobility services provided by Uber and other tech firms.
The luxury car firms said they would invest more than €1 billion ($1.13 billion) to expand the joint venture, shifting beyond manufacturing and car sales toward pay-per-minute or pay-per-mile systems.
Consultancy PwC has said carmakers face marginalization by cash-rich technology firms unless they develop services based on vehicle usage.
Established ride-hailing firms have been expanding. China’s Didi Chuxing aims to build its business in Latin America and Uber is gaining a stranglehold on its US market.
“Further cooperation with other providers, including stakes in startups and established players, are also a possible option,” Daimler’s Chief Executive Dieter Zetsche said.
Daimler’s Car2Go car-sharing brand will be combined with BMW’s DriveNow, ParkNow and ChargeNow businesses, with both carmakers holding 50 percent stake in the venture.
The venture has five strands: REACH NOW, a smartphone-based route management and booking service, CHARGE NOW for electric car charging, FREE NOW for taxi ride-hailing, PARK NOW for parking services and SHARE NOW for car-sharing.
“These five services will merge ever more closely to form a single mobility service portfolio with an all-electric, self-driving fleet of vehicles that charge and park autonomously,” said BMW Chief Executive Harald Krueger.
BMW and Daimler are working to develop autonomous cars, vehicles which could enable them to up-end the market for taxi and ride-hailing services.