Oil prices edge lower, tightening supply outlook supports

The Trump administration is blocking all the US revenues of Citgo, a subsidiary of Venezuelan state-owned oil company PDVSA, in an attempt to force President Nicolas Maduro from office. (Getty Images/AFP)
Updated 04 February 2019
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Oil prices edge lower, tightening supply outlook supports

  • OPEC oil supply fell in January by the largest amount in two years despite sluggish production declines from Russia
  • Russian oil output in January missed the target for the output cut

SINGAPORE: Crude oil prices edged lower on Monday after sharp gains during the previous session but were supported by expectations of shrinking supply and signs that China-US trade tensions could ease.
International Brent crude oil futures on Monday were down 20 cents, or 0.32 percent at 0339 GMT to $62.54 a barrel, after closing up 3.14 percent in the previous session to their highest close since Nov. 21.
US West Texas Intermediate (WTI) futures were at $55.13 per barrel, down 13 cents, or 0.24 percent, from their last settlement. WTI settled 2.73 percent higher in the last session at its highest close since Nov. 19.
Output declines from the Organization of the Petroleum Exporting Countries (OPEC) as they make good on their pact to curb a supply overhang were compounded by falling US oil rig counts and sanctions on Venezuelan oil sales.
“While Venezuela’s output reportedly rose last month, fresh US sanctions on the country could see 0.5 to 1 percent of global supply curtailed,” said Vivek Dhar, commodities analyst for Commonwealth Bank of Australia in a note on Monday.
The sanctions will sharply limit oil transactions between Venezuela and other countries and are similar to those imposed on Iran last year, experts said after examining details posted by the Treasury Department.
OPEC oil supply fell in January by the largest amount in two years despite sluggish production declines from Russia, according to a Reuters survey.
However, Russian oil output in January missed the target for the output cuts, Energy Ministry data showed on Saturday. Production last month declined to 11.38 million barrels per day (bpd), but that was only down by 35,000 bpd from its October 2018 level that is the baseline for the pact.
Russian Energy Minister Alexander Novak has said the country’s overall cuts from the October baseline would total 50,000 bpd in January. Russia has pledged to reduce oil output by 230,000 bpd from October.
US energy firms last week cut the number of oil rigs operating to their lowest in eight months as some drillers followed through on plans to spend less on new wells this year.
“The collapse in oil prices late last year has resulted in more cautious spending by US oil explorers,” said Dhar.
Meanwhile, hopes for thawing China-US relations have also helped ease concerns over slowing economic growth.
“While the United States and China have yet to reach a deal, markets were buoyed by reports that they have made significant progress,” ANZ Bank said in a research note.
US President Donald Trump last week said he would meet with Chinese President Xi Jinping, perhaps twice, in the coming weeks to try to seal a comprehensive trade deal with Beijing, but acknowledged it was not yet clear whether a deal could be reached.


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.