Oil prices hit 2019 highs amid supply cuts, trade talk hopes

There has been a surge in US crude oil by more than 2 million barrels per day (bpd) in 2018, to a record 11.9 million bpd. (Reuters)
Updated 18 February 2019
0

Oil prices hit 2019 highs amid supply cuts, trade talk hopes

  • Prices have been bolstered by a tightening market because of supply cuts
  • Further supporting crude prices have been US sanctions against oil exporters

SINGAPORE: Oil prices on Monday hit their highest levels since November last year, lifted by OPEC-led supply cuts, US sanctions on Iran and Venezuela, and hopes that the Sino-US trade dispute may soon end.

International Brent crude futures were at $66.66 per barrel at 0746 GMT, up 41 cents, or 0.6 percent, from their last close. Brent earlier climbed to its highest since November 2018 at $66.78 a barrel.

US West Texas Intermediate (WTI) crude oil futures were at $56.07 per barrel, up 48 cents, or 0.9 percent, from their close. WTI prices also rose to their highest since November, at $56.13 per barrel, earlier on Monday.

Prices have been bolstered by a tightening market because of supply cuts organized by the Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers like Russia. The group of producer countries agreed late last year to cut output by 1.2 million barrels per day (bpd) to prevent a large supply overhang from swelling.

Further supporting crude prices have been US sanctions against oil exporters and OPEC-members Iran and Venezuela.

Financial markets, including crude futures, were also generally supported by hopes that the United States and China would soon resolve their trade disputes, which have dragged on global economic growth.

“OPEC production cuts and US sanctions on both Iran and Venezuela are limiting supply. Trade tensions which have weighed on global growth are showing signs of easing boosting sentiment across markets and lifting oil demand prospects,” said Jasper Lawler, head of research at futures brokerage London Capital Group.

Earlier in the trading day, news of a fall in Chinese car sales in January had raised concerns about how fuel demand in the world’s second-largest oil user might fare.

China’s vehicle sales last month fell by 15.8 percent versus the same month in 2018, an industry association said on Monday. This continued the 2018 trend, in which China recorded the first annual drop in vehicle sales on record.

So-called new energy vehicle sales in January, which include electric vehicles, registered a 140 percent increase, underlining expectations that oil demand from cars may peak in China in the coming years.

Looming over oil markets in the near term, meanwhile, is the rise in US crude oil production of more than 2 million bpd in 2018, to a record 11.9 million bpd — with signs that US output will rise further.

US energy firms last week increased the number of oil rigs looking for new supply by three, to a total of 857, energy services firm Baker Hughes said in a weekly report last Friday.

That means the US rig count is higher than a year ago when fewer than 800 rigs were active.


FedEx confirms Huawei mail ban as new “mistake” reignites Chinese ire

Updated 1 min 40 sec ago
0

FedEx confirms Huawei mail ban as new “mistake” reignites Chinese ire

  • The incident comes as Chinese authorities investigate FedEx for misrouting packages sent by Huawei last month

FedEx Corp. has apologized for another Huawei delivery “mistake,” reigniting Chinese ire and drawing the fire of state media which suggested the US delivery firm could end up on China’s upcoming list of companies that harm national interests.
The firm on Sunday said it returned a package — identified as containing a Huawei phone — due to an “operational error,” and that it would deliver all products made by Huawei Technologies Co. Ltd. to addresses other than those of Huawei and affiliates placed on a US national security blacklist.
China’s foreign ministry on Monday nevertheless asked for a full explanation. Technology news outlet PCMag, formerly known as PC Magazine, reported https://www.pcmag.com/news/369155/are-huawei-phones-now-banned-from-themail that its writer in Britain had attempted to send a Huawei P30 handset to a colleague in the United States. Fedex returned the phone and told the sender that it could not deliver the package because of a “US government issue” with Huawei and the Chinese government, PCMag reported.
The incident comes as Chinese authorities investigate FedEx for misrouting packages sent by Huawei last month. Meanwhile, China is also drawing up an Unreliable Entities List of foreign firms, groups and individuals.
The list mirrors the US Entity List that Huawei was added to in May, essentially barring it from buying US technology upon which it was heavily reliant. The US added more Chinese entities to the list on Friday.
The Beijing News, a municipal government-run newspaper, in an editorial on Monday, said FedEx had misinterpreted the US ban and called on US firms to be “rational” and not to over-react.
FedEx rival United Parcel Service Inc. also confirmed it would not ship to Huawei addresses on the Entity List but had no “general ban” on Huawei products.
A Huawei spokesman said the Chinese firm was not currently using either FedEx or UPS services. On Sunday, Huawei tweeted it was not within FedEx’s right to prevent the delivery and said the courier had a “vendetta.”

Unreliable
The latest incident sparked renewed criticism of FedEx on Chinese social media, with the topic “FedEx apologizes again” trending on Weibo, China’s Twitter-like microblog platform.
State-run newspaper Global Times on Sunday tweeted that FedEx is likely to be added to China’s Unreliable Entities List.
Neither China’s commerce ministry nor FedEx responded to Reuters’ requests for comment on the likelihood of FedEx being added to the list. State news agency Xinhua previously said authorities’ investigation into FedEx misrouting Huawei packages should not be regarded as retaliation.
Being in the “crosshairs” of the Chinese government “is a tremendous headwind and risk” for FedEx, Trip Miller, said managing partner at Memphis-based Gullane Capital Partners, which holds a FedEx position valued at roughly $7 million.
“Can you imagine if FedEx was banned from doing business? China could get our attention pretty quick if it did something like that,” said Miller, adding that such a move would significantly disrupt global trade networks.
FedEx’s operational error comes against a backdrop of increasing tension between the world’s two biggest economies. The United States and China have been engaged in a trade fight for nearly a year on issues such as tariffs, subsidies, technology, regulations and cybersecurity.
A telephone call between US President Donald Trump and Chinese President Xi JinPing last week, as well as confirmation the two will meet in Japan on the sidelines of a Group of 20 summit, have rekindled hopes of a detente.