Oil ends week on a high thanks to Saudi output cuts, US jobs lift

Saudi production cuts helped halt a three-week decline in oil prices, but markets remained nervous and focused on trade talks between the US and China. (AP Photo)
Updated 05 January 2019
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Oil ends week on a high thanks to Saudi output cuts, US jobs lift

  • Global oil benchmark rallies almost 10 percent after worst quarter in four years and fears of a market glut
  • Oil has risen for five sessions amid hopes that the US and China are working toward reconciling trade tensions

LONDON: Brent crude had its best week in two years, helped by Saudi production cuts and positive US jobs data.
The global benchmark gained almost 10 percent this week after three consecutive weeks of declines.
Despite the rally, markets remain jittery and focused on the outcomes of talks between the US and China aimed at ending an ongoing trade war.
“Underpinning this wave of buying is mounting evidence that Saudi Arabia has taken an axe to its oil production,” Stephen Brennock, an analyst at PVM Oil Associates, told Bloomberg.
The oil market is coming off its worst quarter in four years after prices fell by a fifth last year over concerns about a global glut of crude oil.
Saudi Arabia, the world’s biggest crude exporter, trimmed production last month, bringing overall output in OPEC down 530,000 barrels per day (bpd) to 32.6 million a day, according to a Bloomberg survey of officials, analysts and ship-tracking data.

 

Positive jobs data from the US published on Friday helped to lift the Brent oil price above $57 and helped to distract the market from worries about domestic demand in China as well as the country’s trading relationship with the US.
Oil has risen for five sessions amid hopes that the US. and China are working toward reconciling trade tensions.
China said a US delegation will visit next week for trade talks, which boosted market sentiment.
“Recent Chinese data is not confirming the doom-and-gloom trend,” said Olivier Jakob, oil analyst at Petromatrix. “And you’ve got OPEC cutting.”
Saudi Arabia raised pricing for most crude grades to Asia and for all blends to buyers in the US for delivery in February, Bloomberg reported.
A survey by Reuters on Thursday found OPEC supply fell by 460,000 bpd in December.
“The market is likely to take some comfort from the fact that crude oil production from the OPEC+ will continue to drop,” said Ole Hansen of Saxo Bank.
US employers lifted their hiring in December, according to data published on Friday. The US added 312,000 jobs, beating expectations.
The Labor Department said that the unemployment rate also rose slightly to 3.9 percent, but that the rise reflected an increase in jobseekers.

FASTFACTS

460,000 – A survey by Reuters on Thursday found OPEC supply fell by 460,000 bpd in December.


German economy ‘in better shape’ than thought in Q4

Updated 2 min 17 sec ago
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German economy ‘in better shape’ than thought in Q4

  • Destatis confirmed preliminary readings of 0.0 percent expansion between October and December, adjusted for price, seasonal and calendar effects
  • Europe’s powerhouse only just escaped a technical recession — two successive quarters of negative growth — in the second half of 2018
FRANKFURT AM MAIN: The German economy is “in better shape” than feared, analysts said Friday, after detailed data for the fourth quarter of 2018 showed a dashboard with few red lights despite flat growth.
Figures from federal statistics authority Destatis confirmed preliminary readings of 0.0 percent expansion between October and December, adjusted for price, seasonal and calendar effects.
“German economic growth has stalled,” the statisticians said in a statement, with the flatline in the final three months of last year following contraction of 0.2 percent between July and September.
That meant Europe’s powerhouse only just escaped a technical recession — two successive quarters of negative growth — in the second half of 2018.
Nevertheless, “the German economy is in a better shape than its current reputation,” economist Carsten Brzeski of ING Diba bank commented on the release.
Private consumption, government spending and investments all picked up, while both imports and exports grew at around the same pace, leaving the country’s trade surplus almost flat.
“None of the traditional growth components” were negative, Brzeski noted, arguing the data showed the massive car industry’s struggles to adapt to new tougher emissions tests were the main culprit for the slowdown.
Stocks of newly-built cars had piled up in the second and third quarter, he pointed out, before being finally delivered in the fourth after passing the so-called WLTP process introduced in September.
“Inventories were a massive drag” on growth in the final three months, Unicredit analysts agreed, calculating the effect slowed the economy by “a whopping 0.6” percentage points.
“The temporary problems in the car industry mask solid fundamentals,” Brzeski said.
“In a couple of months, the German economy should be able again to show its true colors.”