Oil firms as China’s slowdown not as steep as some expected

Researchers at Bernstein Energy said the supply cuts led by OPEC ‘will move the market back into supply deficit’ for most of 2019. (Reuters)
Updated 21 January 2019
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Oil firms as China’s slowdown not as steep as some expected

  • In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years
  • ‘Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower US output growth’

SINGAPORE: Oil prices firmed on Monday after data showed China’s economic slowdown was not as big as some analysts had expected, with supply cuts led by the Organization of the Petroleum Exporting Countries also offering support.
International Brent crude oil futures were at $62.83 per barrel at 0259, up 13 cents, or 0.2 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $53.92 a barrel, up 12 cents, or 0.2 percent.
Both oil price benchmarks had dipped into the red earlier in the session on fears that China’s 2018 economic growth figures would be weaker.
In an expected cooling, China’s economy grew by 6.6 percent in 2018, its slowest expansion in 28 years and down from a revised 6.8 percent in 2017, official data showed on Monday. China’s September-December 2018 growth was at 6.4 percent, down from 6.5 percent in the previous quarter.
Although the slowdown was in line with expectations and not as sharp as some analysts had expected, the cooling of the world’s number two economy casts a shadow over global growth.
“The global outlook remains murky, despite emerging positives from a dovish Fed (now boosting US mortgage applications), faster China easing (China credit growth stabilizing) and a more durable US-China truce,” US bank JP Morgan said in a note.
Despite this, analysts said supply cuts led by OPEC would likely support crude oil prices.
“Brent can remain above $60 per barrel on OPEC+ compliance, expiry of Iran waivers and slower US output growth,” JP Morgan said.
It recommended investors should “stay long” crude oil.
Researchers at Bernstein Energy said the supply cuts led by OPEC “will move the market back into supply deficit” for most of 2019 and that “this should allow oil prices to rise to $70 per barrel before year-end from current levels of $60 per barrel.”
In the US, energy firms cut 21 oil rigs in the week to Jan. 18, taking the total count down to 852, the lowest since May 2018, energy services firm Baker Hughes said in a weekly report on Friday.
It was biggest decline since February 2016, as drillers reacted to the 40 percent plunge in US crude prices late last year.
However, US crude oil production still rose by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd.
With the rig count stalling, last year’s growth rate is unlikely to be repeated in 2019, although most analysts expect annual production to average well over 12 million bpd, making the US the world’s biggest oil producer ahead of Russia and Saudi Arabia.


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.