Oil slips on rising US rig count, China industrial slowdown

The US is now the world’s largest producer, and the economic slowdown are weighing on the oil price outlook. (AP)
Updated 28 January 2019
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Oil slips on rising US rig count, China industrial slowdown

  • High US crude oil production has been weighing on oil markets
  • Beyond oil supply, a key question for this year will be demand growth

SINGAPORE: Oil prices fell on Monday after US energy firms added rigs for the first time this year in a sign that crude production there may rise further, and as China, the world’s second-largest oil user, reported additional signs of an economic slowdown.
US crude oil futures were at $53.43 per barrel at 0253 GMT, down 26 cents, or 0.5 percent, from their last settlement.
International Brent crude oil futures were at $61.50 a barrel, down 14 cents, or 0.2 percent.
High US crude oil production, which rose to a record 11.9 million barrels per day (bpd) late last year, has been weighing on oil markets, traders said.
In a sign that output could rise further, US energy firms last week raised the number of rigs looking for new oil for the first time in 2019 to 862, an additional 10 rigs, Baker Hughes energy services firm said in its weekly report on Friday.
Beyond oil supply, a key question for this year will be demand growth.
Oil consumption has been increasing steadily, likely averaging above 100 million bpd for the first time ever in 2019, driven largely by a boom in China.
However, an economic slowdown amid a trade dispute between Washington and Beijing is weighing on fuel demand-growth expectations.
Earnings at China’s industrial firms shrank for a second straight month in December on falling prices and sluggish factory activity, piling more pressure on the world’s second-largest economy, which reported the slowest pace of growth last year since 1990.
China is trying to stem the slowdown with aggressive fiscal stimulus measures.
But there are concerns that these measures may not have the desired effect as China’s economy is already laden with massive debt and some of the bigger government spending measures may be of little real use.
The increased US supply, the country is now the world’s largest producer, and the economic slowdown are weighing on the oil price outlook.
“We expect US crude oil prices to range between $50-$60 per barrel in 2019 and about $10 more per barrel for Brent,” Tortoise Capital Advisers said in its 2019 oil market outlook.
However, Tortoise added that oil prices would be supported above $50 per barrel as it was “very clear that Saudi Arabia will no longer be willing to accept these lower oil prices.”
The Organization of the Petroleum Exporting Countries started supply cuts late last year to tighten markets and buoy prices.


RBS says Saudi bank merger boosts its core capital

Updated 16 June 2019
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RBS says Saudi bank merger boosts its core capital

  • RBS had a 15.3% interest in Alawwal bank
  • The changes would boost the banks CET1 core capital ratio by 60 basis points

Royal Bank of Scotland (RBS) said on Sunday the completion of a merger between Alawwal bank and Saudi British Bank would lead to RBS shedding $5.9 billion of risk weighted assets and boost its core capital.
RBS, through Dutch subsidiary NatWest Markets N.V., was part of a consortium including NLFI and Banco Santander S.A. that held an aggregate 40% equity stake in Alawwal bank, the British bank said in a statement. RBS also had an interest equivalent to a 15.3% stake in Alawwal bank.
RBS said that as a result of the merger completion, it would recognise an income gain on disposal of the Alawwal bank stake for shares received in Saudi British Bank of almost $503 million and a reduction in risk weighted assets of nearly $5 billion.
RBS also said the deal would extinguish legacy liabilities of almost $377.
The changes would increase the bank's CET1 core capital ratio by 60 basis points, it said.
The merger will also help RBS to focus on its target markets, RBS chief executive Ross McEwan said in a statement.
RBS, which was rescued in 2008 with a nearly $57 billion capital injection by the British government, has been shrinking its overseas operations since the financial crisis to focus on its UK lending operations.