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.


Palestinians in financial crisis after Israel, US moves

Updated 22 March 2019
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Palestinians in financial crisis after Israel, US moves

  • A Ramallah-based economics professor said the Palestinian economy more generally, remain totally controlled by and reliant on Israel
  • Israeli-Palestinian peace efforts have been at a standstill since 2014

RAMALLAH, Palestinian Territories: The Palestinian Authority faces a suffocating financial crisis after deep US aid cuts and an Israeli move to withhold tax transfers, sparking fears for the stability of the West Bank.
The authority, headed by President Mahmud Abbas, announced a package of emergency measures on March 10, including halving the salaries of many civil servants.
The United States has cut more than $500 million in Palestinian aid in the last year, though only a fraction of that went directly to the PA.
The PA has decided to refuse what little US aid remains on offer for fear of civil suits under new legislation passed by Congress.
Israel has also announced it intends to deduct around $10 million a month in taxes it collects for the PA in a dispute over payments to the families of prisoners in Israeli jails.
In response, Abbas has refused to receive any funds at all, labelling the Israeli reductions theft.
That will leave his government with a monthly shortfall of around $190 million for the length of the crisis.
The money makes up more than 50 percent of the PA’s monthly revenues, with other funds coming from local taxes and foreign aid.

While the impact of the cuts is still being assessed, analysts fear it could affect the stability of the occupied West Bank.
“If the economic situation remains so difficult and the PA is unable to pay salaries and provide services, in addition to continuing (Israeli) settlement expansion it will lead to an explosion,” political analyst Jihad Harb said.
Abbas cut off relations with the US administration after President Donald Trump declared the disputed city of Jerusalem Israel’s capital in December 2017.
The right-wing Israeli government, strongly backed by the US, has since sought to squeeze Abbas.
After a deadly anti-Israeli attack last month, Prime Minister Benjamin Netanyahu said he would withhold $138 million (123 million euros) in Palestinian revenues over the course of a year.
Israel collects around $190 million a month in customs duties levied on goods destined for Palestinian markets that transit through its ports, and then transfers the money to the PA.
Israel said the amount it intended to withhold was equal to what is paid by the PA to the families of prisoners, or prisoners themselves, jailed for attacks on Israelis last year.
Many Palestinians view prisoners and those killed while carrying out attacks as heroes of the fight against Israeli occupation.
Israel says the payments encourage further violence.
Abbas recently accused Netanyahu’s government of causing a “crippling economic crisis in the Palestinian Authority.”
The PA also said in January it would refuse all further US government aid for fear of lawsuits under new US legislation targeting alleged support for “terrorism.”

Finance Minister Shukri Bishara announced earlier this month he had been forced to “adopt an emergency budget that includes restricted austerity measures.”
Government employees paid over 2,000 shekels ($555) will receive only half their salaries until further notice.
Prisoner payments would continue in full, Bishara added.
Nasser Abdel Karim, a Ramallah-based economics professor, told AFP the PA, and the Palestinian economy more generally, remain totally controlled by and reliant on Israel.
The PA undertook similar financial measures in 2012 when Israel withheld taxes over Palestinian efforts to gain international recognition at the United Nations.
Abdel Karim said such crises are “repeated and disappear according to the development of the relationship between the Palestinian Authority and Israel or the countries that support (the PA).”
Israel occupied the Gaza Strip and the West Bank, including now annexed east Jerusalem in the Six-Day War of 1967 and Abbas’s government has only limited autonomy in West Bank towns and cities.
“The problem is the lack of cash,” economic journalist Jafar Sadaqa told AFP.
He said that while the PA had faced financial crises before, “this time is different because it comes as a cumulative result of political decisions taken by the United States.”
Abbas appointed longtime ally Mohammad Shtayyeh as prime minister on March 10 to head a new government to oversee the crisis.
Abdel Karim believes the crisis could worsen after an Israeli general election next month “if a more right-wing Israeli government wins.”
Netanyahu’s outgoing government is already regarded as the most right-wing in Israel’s history but on April 9 parties even further to the right have a realistic chance of winning seats in parliament for the first time.
Israeli-Palestinian peace efforts have been at a standstill since 2014, when a drive for a deal by the administration of President Barack Obama collapsed in the face of persistent Israeli settlement expansion in the West Bank.