Oil rises on US-China trade talks, supply cuts

US crude oil production stayed at a record 11.7 million barrels per day in the last week of 2018. (Reuters)
Updated 07 January 2019
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Oil rises on US-China trade talks, supply cuts

  • The US and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other’s goods
  • ‘The US supply glut remains a bearish concern’

SINGAPORE: Oil prices rose by more than 1 percent on Monday, lifted by optimism that talks could soon resolve the trade war between the United States and China, while supply cuts by major producers also supported the market.
Brent crude futures were at $57.75 per barrel at 0404 GMT, up 69 cents, or 1.2 percent, from their last close.
US West Texas Intermediate (WTI) crude oil futures were at $48.67 per barrel, up 71 cents, or 1.5 percent.
Financial markets were riding a relief rally on Monday on expectations that face-to-face trade negotiations between delegates from Washington and Beijing, due to start on Monday, would lead to an easing in tensions between the two biggest economies in the world.
The United States and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other’s goods. The dispute has weighed on economic growth.
Goldman Sachs said in a note on Monday it had downgraded its average Brent crude oil forecast for 2019 from $70 per barrel to $62.50 a barrel because of “the strongest macro headwinds since 2015.”
J.P. Morgan, another US bank, said in a note late last week that “the 3 percent global growth pace we have been anticipating for the next two quarters looks increasingly challenging.
The bank also said that “bond and commodity markets appear to be pricing in on average close to a 60 percent chance of a US recession over the coming year compared to a 40 percent chance by our economists and 27 percent chance by the consensus.”
Despite the likelihood of a slowdown, crude future prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC Russia.
OPEC oil supply fell in December by 460,000 barrels per day (bpd), to 32.68 million bpd, a Reuters survey found last week, led by cuts from top exporter Saudi Arabia.
Potentially undermining OPEC’s efforts is swelling US oil supply.
US crude oil production stayed at a record 11.7 million bpd in the last week of 2018, according to weekly data by the Energy Information Administration (EIA) released on Friday.
That makes the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.
Record output is also swelling US fuel stockpiles.
Crude oil inventories rose by 7,000 barrels in the week ending Dec. 28, to 441.42 million barrels.
Distillate and gasoline stocks, however, rose by a whopping 9.5 million and 6.9 million barrels, to 119.9 million and 240 million barrels respectively, the EIA data showed.
“The US supply glut remains a bearish concern,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.


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)