A bearish week in oil — but the bulls will run for the rest of quarter one

Last week saw several developments in the oil market that should have raised prices — yet it ended with bearish sentiment. (Reuters/File Photo)
Updated 11 February 2019
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A bearish week in oil — but the bulls will run for the rest of quarter one

  • The signals for the rest of the first quarter of 2019 are on the upside
  • The US sanctions on Venezuelan oil exports are also affecting the market

RIYADH: Last week saw several developments in the oil market that should have raised prices — yet it ended with bearish sentiment, with Brent easing to $62.10 per barrel, and WTI falling to $52.72.
The signals for the rest of the first quarter of 2019 are, however, on the upside. The market is extremely tight — especially in medium and heavy crude grades. If that continues, the global market will face a huge supply shortage, exceeding the conditions that drove oil prices above $86 last year.
There are several factors behind this. According to a S&P Global Platts survey, OPEC production in January was at its lowest level since March 2015. Crude output plunged to 30.86 million barrels per day (bpd), a fall of 970,000 bpd from December, as new supply quotas went into force on Jan. 1.
On top of that, a potential return of supply from Libya has not yet materialized in the market — with ongoing unrest at the El Sharara oilfield, further restricting supply.
Strong imports from China are also deepening market tightness, with total crude imports at 10.4 million bpd, up around 2.3 million bpd from last year.
This a bullish development. China crude oil imports are still rising despite the trade dispute with the US. This means that the oil-price deterioration due to a global economic slowdown, as predicted by some, is completely wrong.
The US sanctions on Venezuelan oil exports are also affecting the market. Venezuelan oil production had already experienced problems prior to the sanctions, given the deterioration of infrastructure and internal labor problems. S&P Global Platts expects oil output to further fall to below 800,000 bpd by the end of February.
Counter to all this is that US producers continue to put more oil on the market, with output at a record 11.9 million bpd lately, with exports reaching 2.8 million bpd, the fourth-highest number on record.
Yet given the other factors at play, it is intuitive that the tightness in the market will transform into shortage before the end of the first quarter of 2019 — and that will boost prices.


Funds managing $2 trillion urge cement makers to act on climate impact

A general view of Gulf Cement Company in Ghalilah, Ras al Khaimah, United Arab Emirates July 16, 2019. (REUTERS)
Updated 56 min 37 sec ago
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Funds managing $2 trillion urge cement makers to act on climate impact

  • The cement industry produces 7 percent of the world’s carbon dioxide emissions, according to the International Energy Agency, meaning that if it were a country, it would be the third largest emitter, behind the US and China

LONDON: European funds managing $2 trillion in assets called on cement companies to slash their greenhouse gas emissions on Monday, warning that a failure to do so could put their business models at risk.
Some asset managers are ramping up engagement with heavy polluters to demand a faster transition to a cleaner economy.
“The cement sector needs to dramatically reduce the contribution it makes to climate change,” said Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change, which has more than 170 members, mainly European pension funds and asset managers. “This is ultimately a business-critical issue for the sector,” Pfeifer said in a statement.
The group said investors had written to cement or construction materials companies including Ireland’s CRH, Franco-Swiss group LafargeHolcim and France’s St. Gobain to demand they achieve net zero carbon emissions by 2050.
They also noted that Germany’s HeidelbergCement had already adopted the target. The funds urged all cement companies to align themselves with the 2015 Paris agreement to combat global warming, engage with policymakers to ensure an orderly transition to a low carbon economy, and increase their reporting of climate risk.
“Construction materials companies may ultimately risk divestment and lack of access to capital as an increasing number of investors seek to exclude highly carbon-intensive sectors from their portfolios,” said Vincent Kaufmann, CEO of the Ethos Foundation.

FASTFACT

The cement industry produces 7 percent of the world’s carbon dioxide emissions, according to the International Energy Agency.

Signatories collectively manage assets worth $2 trillion and include Aberdeen Standard Investments, BNP Paribas Asset Management, Sarasin & Partners and Hermes EOS.
Although funds are increasingly engaging with companies from airlines to carmakers on emissions, few are calling for the systemic transformation of the global economic system that scientists increasingly argue is needed to prevent runaway climate breakdown.
The cement industry produces 7 percent of the world’s carbon dioxide emissions, according to the International Energy Agency, meaning that if it were a country, it would be the third largest emitter, behind the US and China.
With climate campaigners traditionally focused on fossil fuel companies, the European cement sector has received comparatively little scrutiny until recently.
On Tuesday, police arrested six climate activists from civil disobedience group Extinction Rebellion at a protest aimed at disrupting a site in east London belonging to London Concrete, a unit of LafargeHolcim.
In June last year, a report from think-tank Chatham House concluded that although there was no “silver bullet” to reduce emissions from cement, it should be possible to deploy a range of policies and technologies to achieve deep decarbonization.