Oil prices climb to 2019 high

OPEC and its allies started voluntary production cuts last month, aiming to tighten the market. Above, flames emerge from flare stacks at oil fields in Kirkuk, Iraq. (Reuters)
Updated 15 February 2019
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Oil prices climb to 2019 high

  • Leading exporter and de facto OPEC leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day (bpd) more in March
  • Bank of America Merrill Lynch: Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply

LONDON: Brent crude oil climbed above $65 a barrel to its highest this year as OPEC-led supply cuts and this week’s announcement of a higher-than-expected cut by Saudi Arabia encouraged investors.
The international oil benchmark reached $65.20 late on Friday, the 63 cent gain equating to a rise of about 1 percent. Brent approached near three-month highs and was set for a gain of nearly 5 percent on the week.
US West Texas Intermediate crude futures were also up about 1 percent, rising 53 cents to $54.94.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia started voluntary production cuts last month, aiming to tighten the market.
Leading exporter and de facto OPEC leader Saudi Arabia said on Tuesday it would cut more than half a million barrels per day (bpd) more in March than the deal called for, sending prices surging.
Prices were also buoyed by reports of a partial closure of Saudi Arabia’s Safaniya, its largest offshore oilfield with production capacity of more than 1 million bpd. The shutdown occurred about two weeks ago, a source said.
State oil giant Saudi Aramco said in a statement to Reuters that all of its facilities and operations — including Safaniyah — are safe and normal.
“Brent should average $70 per barrel in 2019, helped by voluntary (Saudi, Kuwait, UAE) and involuntary (Venezuela, Iran) declines in OPEC supply,” Bank of America Merrill Lynch said.
The bank said it expects a drop of 2.5 million bpd in OPEC supply in the fourth quarter of 2019 from a year earlier.
However, the global supply picture remains uncertain.
US oil production is on the rise, while the seizure of Libya’s main oilfield by Eastern armed forces this week could soon lead to its reopening.
But US sanctions on Venezuela and Iran have have helped to tighten global supply and security threats could threaten Nigerian production after general elections this weekend.
“Looking ahead, the prognosis for Venezuela and Iran remains skewed to the downside. As such, they should continue to act as important pillars of price support. The same, however, can’t be said for Libya,” said Stephen Brennock, of oil broker PVM.
“This risks throwing a spanner in the works for OPEC’s rebalancing ambitions and, therefore, the price recovery.”
Faltering global economic growth is also a concern, with signs of a slowdown now abundant in Europe, Asia and the US, which could lead to slowing growth in fuel demand.


US economists less optimistic, see slower growth: survey

Updated 25 March 2019
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US economists less optimistic, see slower growth: survey

  • While the odds of a US recession by 2020 remain low, they are rising
  • The odds of a recession starting in 2019 is at around 20 percent, and for 2020 at 35 percent

WASHINGTON: US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published Monday.
And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics said in their quarterly report.
The panel of 55 economists now believe “the US economy has reached an inflection point,” said NABE President Kevin Swift.
The consensus forecast for real GDP growth was cut by three tenths from the December survey, to 2.4 percent after 2.9 percent expansion in 2018.
The economy is expected to slow further in 2020, with growth of just 2 percent, the report said.
Three-quarters of respondents cut their GDP forecasts and believe the risks of to the economy are weighted to the downside.
“A majority of panelists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth,” NABE survey chair Gregory Daco said in a statement.
“Nonetheless, recession risks are still perceived to be low in the near term.”
Panelists put the odds of a recession starting in 2019 at around 20 percent, and for 2020 at 35 percent, slightly higher than in December.
Daco said that “reflects the Federal Reserve’s dovish policy U-turn in January” when the central bank said it would keep interest rates where they are for the foreseeable future, a message reinforced this week.
After four rate increases last year, Daco said a “near-majority of panelists anticipates only one more interest rate hike in this cycle compared to the three hikes forecasted in the December survey.”
Panelists see wage growth as the biggest upside risk to the economy, despite expected increase of just 3 percent this year, as inflation holds right around the Fed’s 2 percent target.
Meanwhile, amid President Donald Trump’s aggressive tariff policies, the panel projects the trade deficit will rise to a record $978 billion this year, beating last year’s record $914 billion.
In an interesting twist in the survey, only 20 percent said they expected to see the dreaded “inverted yield curve” — when the interest rate on the 10-year Treasury note falls below the 3-month bill — this year.
In fact, the yield curve inverted on Friday for the first time since 2007.