Oil rises 1% on supply cuts, but economic slowdown weighs on outlook

Looming over oil and financial markets is prospects of a global economic slowdown. (Reuters)
Updated 15 January 2019
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Oil rises 1% on supply cuts, but economic slowdown weighs on outlook

  • OPEC and Russia cut supply and Iran is restrained by sanctions
  • But crude oil production in the US hit a record 11.7 million bpd late last year

SINGAPORE: Oil prices rose 1 percent on Tuesday amid supply cuts led by producer club OPEC and Russia, although a darkening economic outlook capped gains.
International Brent crude oil futures were at $59.64 per barrel at 0257 GMT, up 65 cents, or 1.1 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $51.09 per barrel, up 58 cents, or 1.2 percent.
“The impact of OPEC+ (OPEC and others including Russia) cuts, Iran sanctions and lower month-on-month growth in US production should help to support oil prices from current levels,” US bank J.P. Morgan said in a note.
The Middle East-dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, agreed in late 2018 to cut supply to rein in a global glut.
Meanwhile, the US last November re-imposed sanctions against Iran’s oil exports. Although Washington granted sanctions waivers to Iran’s biggest oil customers, mostly in Asia, the Middle Eastern country’s exports have plummeted since.
“Iranian exports have already fallen sharply and are likely to remain at around 1.3 million barrels per day (bpd) in 2019, 1.3 million bpd down vs their 1H18 average,” HSBC said in its 2019 oil market outlook.
While OPEC and Russia cut supply and Iran is restrained by sanctions, crude oil production in the US hit a record 11.7 million bpd late last year.
The surging output increasingly allows US oil producers to export crude, including to top importer China.
Three cargoes of US crude are currently heading to China from the US Gulf Coast, the first departures since late September and a 90-day pause in the two countries’ trade war that began last month.
The tankers are scheduled to arrive at Chinese ports between late January and early March, according to shipbrokers and vessel tracking data.
Looming over oil and financial markets, however, is an economic slowdown.
Tuesday’s oil price increases came after crude futures fell by more than 2 percent the previous session, dragged down by weak Chinese trade data which pointed to a global economic slowdown.
“The outlook for the global economy continues to be highly uncertain,” HSBC said.
The bank said it had cut its average 2019 Brent crude oil price forecast by $16 per barrel, to $64 per barrel, citing surging US production and an “increasingly uncertain demand backdrop.”


India suspends Kashmir border trade with Pakistan

Updated 19 April 2019
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India suspends Kashmir border trade with Pakistan

  • Kashmir has been on edge since a February suicide attack that killed 40 Indian paramilitaries
  • India said it had reports that trade on the border was being “misused by Pakistan-based elements for funnelling illegal weapons, narcotics and fake currency”

NEW DELHI: India has suspended trade across its disputed Kashmir border with Pakistan, alleging that weapons and drugs are being smuggled across the route, as tensions simmer between the nuclear-armed neighbors.
Kashmir has been on edge since a February suicide attack that killed 40 Indian paramilitaries and brought the two countries to the brink of war with cross-border air strikes.
On Thursday, India’s government, which is in the middle of a tough national election, said it had reports that trade on the border was being “misused by Pakistan-based elements for funnelling illegal weapons, narcotics and fake currency.”
It also said many of those trading across the Line of Control, which divides Kashmir into zones under Indian and Pakistani control, had links to militant organizations.
The home ministry said trade would be suspended until a stricter inspection mechanism is in place.
The cross-border trade is based on a barter system, with traders exchanging goods including chillies, cumin, mango and dried fruit.
It began in 2008 as a way to improve strained relations between New Delhi and Islamabad, who have fought two of their three wars over the disputed region.
The Indian Express newspaper said Friday that 35 trucks carrying fruit traveling from the Indian side of the border had been stopped after the government order.
Trade on the border has been suspended before, including in 2015, when India accused a Pakistani driver of drug trafficking.
The latest move comes after India withdrew “Most Favoured Nation Status” — covering trade links — from Pakistan after the February attack, which was claimed by the Pakistan-based Jaish-e-Mohammed Islamist group.
Islamabad has denied any involvement in the attack.
India’s Hindu nationalist Prime Minister Narendra Modi has made national security a key plank of his re-election campaign, pointing to the recent flare-up of violence as he battles the center-left opposition Congress party.
He is seeking a second term from the country’s 900 million voters in the mammoth election which kicked off on April 11 and runs till May 19. The results will be out on May 23.