Oil slides on China trade slump, but crude imports remain high

OPEC and some non-OPEC allies have been cutting supply since late 2018, providing oil prices with some support. (Reuters)
Updated 14 January 2019
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Oil slides on China trade slump, but crude imports remain high

  • China’s December overall exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years
  • In the US, drillers cut four oil rigs in the week to January 11

SINGAPORE: Oil prices fell by almost 1 percent on Monday, with Brent crude slipping below $60 per barrel, after Chinese data showed weakening imports and exports in the world’s biggest trading nation and second-largest crude oil consumer.
International Brent crude oil futures were at $59.91 per barrel at 0403 GMT, down 57 cents, or 0.9 percent from their last close.
US West Texas Intermediate (WTI) crude futures were down 47 cents, or 0.9 percent, at $51.12 a barrel.
China’s December overall exports fell by 4.4 percent from a year earlier, the biggest monthly drop in two years, official data showed on Monday, pointing to further weakening in the world’s second-largest economy. Imports last month also contracted, falling 7.6 percent, the biggest decline since July 2016.
“Crude futures were back in the red as trading began for a fresh week in Asia, in tandem with most of the region’s stock markets ... (as) China early Monday reported $351.76 billion trade surplus in dollar terms for 2018, the lowest since 2013,” said energy consultant Vandana Hari of Vanda Insights in a note on Monday.
The weak trade figures confirm a raft of indicators that have been pointing to an economic slowdown since the second half of 2018.
“Producer price inflation has decelerated for six consecutive months, adding to other signs of cooling industrial activity (in China) amid weakening global demand,” rating agency Moody’s said in a note.
Traders said the data pulled down crude oil futures and Asian stock markets alike, which had both posted modest gains earlier on Monday.
Economic research firm TS Lombard said oil prices were capped as “the world economy is now slowing ... limiting the scope for positive surprises in oil demand and hampering inventory reduction.”
Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, said “the deterioration seen recently in forward-looking economic data from the US to Europe and China” meant that the upside for crude oil futures was likely limited to $64 per barrel for Brent and for $55 for WTI.
Despite the weak Chinese trade data, the country’s oil imports remained sky-high in December at 10.31 million barrels per day (bpd), holding above the 10 million bpd mark for the second month in a row, on stockbuilding by small independent refiners who were trying to use up annual quotas.
Amid this strong demand from the world’s biggest oil importer, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, have been cutting supply since late 2018, providing crude prices with some support.
In the United States, drillers cut four oil rigs in the week to Jan. 11, bringing the total count down to 873 energy services firm Baker Hughes said in a weekly report on Friday.


Etihad proposes to invest in Jet Airways at 49% discount

Updated 16 January 2019
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Etihad proposes to invest in Jet Airways at 49% discount

  • The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors
  • Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met

Etihad Airways has offered to pick up shares of debt-laden Indian carrier Jet Airways Ltd. at a 49 percent discount and to immediately release $35 million after certain conditions are met, CNBC-TV18 reported on Wednesday.
Shares of Jet Airways, in which Etihad already owns a 24 percent stake, tumbled as much as 7.5 percent to 271.75 rupees ($3.83) in their biggest intraday drop since early December.
The Abu Dhabi carrier has offered 150 rupees for each Jet share, CNBC-TV18 said, citing a letter from Etihad’s CEO.
Tony Douglas has written to the State Bank of India (SBI) , Jet’s biggest lender, on the restructuring plan for the Indian airline, the report added.
The 25-year-old Indian airline has been roiled by financial difficulties, racking up a pile of dues to pilots, lessors and vendors, at a time when intense pricing competition, a weak rupee and rising fuel costs are weighing on the broader airline sector in the country.
Jet will not be able to continue funding operations beyond the next week and Etihad is willing to inject $35 million if some conditions are met, the CNBC-TV18 report cited Douglas as saying in his letter.
Jet and Etihad representatives are due to meet in Mumbai with lenders, led by SBI, on Wednesday to discuss the restructuring proposal that involves Etihad increasing its stake, a source with knowledge of the matter told Reuters on condition of anonymity.
Etihad wants Jet’s founder and Chairman, 69-year-old Naresh Goyal to step down from the board and his stake to be slashed to 22 percent from 51 percent, according to CNBC-TV18.
Goyal’s penchant for control, according to people who have worked with him, has emerged as a major obstacle as the airline tries to negotiate a rescue deal, Reuters reported last month.
Etihad is also seeking an exemption from the market regulator on preference pricing and open offer guidelines to invest more for the bailout, the report added.
Under India’s capital markets regulations, Etihad is required to make an open offer to shareholders for a majority of the shares once its stake goes past 25 percent, unless it obtains a rare exemption from the market regulator.
India Ministry of Civil Aviation Secretary R N Choubey on Wednesday told reporters that the aviation ministry had not yet received an official request from Jet and Etihad for an exemption from an open offer.
Jet and Etihad were not immediately available for comment.