Oil prices climb as US threatens sanctions against Venezuela

RBC Europe predicted that US sanctions on Venezuela could nearly double projected output shortfalls from the troubled exporter. (AFP)
Updated 25 January 2019
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Oil prices climb as US threatens sanctions against Venezuela

  • ‘The oil market is partially pricing in the risk to Venezuela’s crude production, which has been plummeting in recent years’
  • RBC Europe predicted that sanctions could nearly double projected output shortfalls from the troubled exporter

LONDON: Oil prices edged up on Friday as turmoil in Venezuela increased the chances of tighter global supply if the US makes good on signals that it could impose sanctions on Venezuelan exports.
But fresh data on surging US fuel stocks and worries about US-China trade talks weighed on prices.
Brent crude oil futures were at $61.17 a barrel at 0955 GMT, up 8 cents, or 0.13 percent. Earlier on Friday, the international benchmark crude rose as high as $61.92.
Brent, however, has shed about 2.4 percent since the start of trade on Monday and is on track to post its first week of losses in four weeks.
US West Texas Intermediate (WTI) crude futures were at $53.34 per barrel, up 21 cents, or 0.4 percent.
Amid violent street protests, Venezuela’s opposition leader Juan Guaido declared himself interim president this week, winning recognition from Washington and parts of Latin America.
Nicolas Maduro, the country’s leader since 2013, responded by breaking relations with the US.
“The oil market is partially pricing in the risk to Venezuela’s crude production, which has been plummeting in recent years,” Vandana Hari of Vanda Insights said.
RBC Europe predicted that sanctions could nearly double projected output shortfalls from the troubled exporter.
“Venezuelan production will decline by an additional 300,000-500,000 barrels per day (bpd) this year but such punitive measures could expand that outage by several hundred thousand barrels.”
Global oil markets are still well supplied, however, thanks in part to surging output in the US.
Record US production would likely offset any short-term disruptions to Venezuelan supply due to possible US sanctions, Britain’s Barclays said in a note. The bank cut its 2019 average Brent forecast to $70 a barrel, from $72 previously.
The output surge has swollen US fuel stocks, and crude inventories rose by 8 million barrels last week, according to official data released on Thursday.
But demand may start to stutter because of a global economic slowdown, which is likely to dent fuel consumption.
A trade dispute between the US and China and tightening financial conditions around the world have hurt manufacturing activity in most economies and dragged China’s growth last year to the weakest in nearly 30 years.
According to Reuters polls of hundreds of economists worldwide, a synchronized global economic slowdown is underway and would deepen if the US-China trade war escalated.


BMW plans massive cost cuts to keep profits from sputtering

Updated 20 March 2019
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BMW plans massive cost cuts to keep profits from sputtering

  • ‘Our business model must remain a profitable one in the digital era,’ chief executive Harald Krueger said
  • Total number of employees is set to remain flat at around 135,000 worldwide

MUNICH: German high-end carmaker BMW warned Wednesday it expects pre-tax profits “well below” 2018 levels this year as it announced a massive cost-cutting scheme aimed at saving $13.6 billion (€12 billion) in total by 2022.
A spokesman said that “well below” could indicate a tumble of more than 10 percent.
The Munich-based group’s 2019 result will be burdened with massive investments needed for the transition to electric cars, exchange rate headwinds and rising raw materials prices, it said in a statement.
Meanwhile it must pump more cash into measures to meet strict European carbon dioxide (CO2) emissions limits set to bite from next year.
And a one-off windfall in 2018’s results will create a negative comparison, even though pre-tax profits already fell 8.1 percent last year.
Bosses expect a “slight increase” in sales of BMW and Mini cars, with a slightly fatter operating margin that will nevertheless fall short of their 8.0-percent target.
“We will continue to implement forcefully the necessary measures for growth, continuing performance increases and efficiency,” finance director Nicolas Peter said at the group’s annual press conference.
BMW aims to achieve €12 billion of savings in the coming years through “efficiency improvements” including reducing the complexity of its range.
“Our business model must remain a profitable one in the digital era,” chief executive Harald Krueger said.
This year, most new recruits at the group will be IT specialists, while the total number of employees is set to remain flat at around 135,000 worldwide.
Departures from the sizeable fraction of the workforce born during the post-World War II baby boom and now reaching retirement age “will allow us to adapt the business even more to future topics,” BMW said.
All the firm’s forecasts are based on London and Brussels reaching a deal for an orderly Brexit and the United States foregoing new import taxes on European cars.
“Developments in tariffs” remain “a significant factor of uncertainty” in looking to the future, finance chief Peter said, adding that “the preparations for the UK’s exit from the EU will weigh on 2019’s results as well.”
In annual results released ahead of schedule last Friday, BMW blamed trade headwinds and new EU emissions tests for net profits tumbling 16.9 percent in 2018, to €7.2 billion.