Brent eases from 2019 highs as markets await US-China trade talks outcome

US sanctions against petroleum exporter Venezuela provided support to the oil markets. Above, an oil facility in Venezuela. (Reuters)
Updated 19 February 2019
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Brent eases from 2019 highs as markets await US-China trade talks outcome

  • The slight downward correction was driven by concerns about the health of the global economy this year
  • Bank of America Merrill Lynch expects Brent prices to average between $50 and $70 per barrel

SINGAPORE: Brent crude oil prices eased away from 2019 highs on Tuesday on caution that economic growth may dent fuel demand this year, although supply cuts led by OPEC still meant markets were relatively tight.
International Brent crude oil futures were at $66.08 per barrel at 0220 GMT, down 42 cents, or 0.6 percent from their last close, but still not far off the 2019 high of $66.83 a barrel hit in the previous session.
US West Texas Intermediate (WTI) crude futures were at $55.71 per barrel. While that was up 12 cents from their last settlement, it was below the $56.33 2019 high from the previous day.
Traders said the slight downward correction was driven by concerns about the health of the global economy this year.
Bank of America Merrill Lynch said in a note that the Sino-American trade dispute was hurting economic growth globally.
“Addressing global trade tensions is key for improving the economic outlook,” it said in a note.
China’s vice premier and chief trade negotiator, Liu He, and US Trade Representative Robert Lighthizer lead a round of trade talks this week in Washington.
Considering the economic outlook and supply and demand balances, the bank said it expects Brent prices to average between $50 and $70 per barrel, “anchored around $60.”
Despite some caution around trade, global oil markets remain relatively tight because of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), with top crude exporter Saudi Arabia cutting the most.
Saudi seaborne crude exports fell in the first half of February, with departures standing at 6.204 million barrels per day (bpd), a 1.341 million bpd decline on the previous month and 0.91 million bpd decline on the year, data intelligence firm Kpler said.
Further providing oil markets with support are US sanctions against petroleum exporters Iran and Venezuela.
Venezuela is a major crude supplier to US refineries while Iran is a key exporter to major demand centers in Asia, especially China and India.


Foreign investors hope India dials back policy shocks after Modi win

Updated 24 May 2019
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Foreign investors hope India dials back policy shocks after Modi win

  • Modi’s pro-business image and India’s youthful population have lured foreign investors
  • After Modi’s win, about a dozen officials of foreign companies in India and their advisers said they hoped he would ease his stance and dilute some of the policies

NEW DELHI: Foreign companies in India have welcomed Prime Minister Narendra Modi’s election victory for the political stability it brings, but now they need to see him soften a protectionist stance adopted in the past year.
Modi’s pro-business image and India’s youthful population have lured foreign investors, with US firms such as Amazon.com , Walmart and Mastercard committing billions of dollars in investments and ramping up hiring.
India is also the biggest market by users for firms such as Facebook Inc, and its subsidiary, WhatsApp.
But from around 2017, critics say, the Hindu nationalist leader took a harder, protectionist line on sectors such as e-commerce and technology, crafting some policies that appeared to aim at whipping up patriotic fervor ahead of elections.
“I hope he’s now back to wooing businesses,” said Prasanto Roy, a technology policy analyst based in New Delhi, who advises global tech firms.
“Global firms remain deeply concerned about the lack of policy stability or predictability, this has sent a worrying message to global investors.”
India stuck to its policies despite protests and aggressive lobbying by the United States government, US-India trade bodies and companies themselves.
Small hurdles
Modi was set to hold talks on Friday to form a new cabinet after election panel data showed his Bharatiya Janata Party had won 302 of the 542 seats at stake and was leading in one more, up from the 282 it won in 2014.
After Modi’s win, about a dozen officials of foreign companies in India and their advisers told Reuters they hoped he would ease his stance and dilute some of the policies.
Other investors hope the government will avoid sudden policy changes on investment and regulation that catch them off guard and prove very costly, urging instead industry-wide consultation that permits time to prepare.
Protectionism concerns “are small hurdles you have to go through,” however, said Prem Watsa, the chairman of Canadian diversified investment firm Fairfax Financial, which has investments of $5 billion in India.
“There will be more business-friendly policies and more private enterprise coming into India,” he told Reuters in an interview.
Tech, healthcare and beyond
Among the firms looking for more friendly steps are global payments companies that had benefited since 2016 from Modi’s push for electronic payments instead of cash.
Last year, however, firms such as Mastercard and Visa were asked to store more of their data in India, to allow “unfettered supervisory access,” a change that prompted WhatsApp to delay plans for a payments service.
Modi’s government has also drafted a law to clamp similar stringent data norms on the entire sector.
But abrupt changes to rules on foreign investment in e-commerce stoked alarm at firms such as Amazon, which saw India operations disrupted briefly in February, and Walmart, just months after it invested $16 billion in India’s Flipkart.
Policy changes also hurt foreign players in the $5-billion medical device industry, such as Abbott Laboratories, Boston Scientific and Johnson & Johnson, following 2017 price caps on products such as heart stents and knee implants.
Modi’s government said the move aimed to help poor patients and curb profiteering, but the US government and lobby groups said it harmed innovation, profits and investment plans.
“If foreign companies see their future in this country on a long-term basis...they will have to look at the interests of the people,” Ashwani MaHajjan, an official of a nationalist group that pushed for some of the measures, told Reuters.
That view was echoed this week by two policymakers who said government policies will focus on strengthening India’s own companies, while providing foreign players with adequate opportunities for growth.
Such comments worry foreign executives who fear Modi is not about to change his protectionist stance in a hurry, with one offical of a US tech firm saying, “I’d rather be more worried than be optimistic.”