Oil prices drop almost 1% on concerns US recession may be looming

A potential US recession weighed on crude prices. Above, a refinery near the Corpus Christi ship channel in Corpus Christi, Texas. (AFP)
Updated 25 March 2019
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Oil prices drop almost 1% on concerns US recession may be looming

  • Concerns about a potential US recession resurfaced late last week after bearish remarks by the US Federal Reserve
  • Ten-year treasury yields slipped below the three-month rate for the first time since 2007

SINGAPORE: Oil prices dropped by almost 1 percent on Monday, with concerns recession could be looming outweighing supply disruptions from OPEC’s production cutbacks and from US sanctions on Iran and Venezuela.
Brent crude oil futures were at $66.56 per barrel at 0410 GMT, down 47 cents, or 0.7 percent, from their last close.
US West Texas Intermediate (WTI) futures were at $58.52 per barrel, down 52 cents, or 0.9 percent, from their previous settlement.
Both crude oil price benchmarks have slumped by more than 3 percent since last week hitting their highest since November 2018.
Concerns about a potential US recession resurfaced late last week after bearish remarks by the US Federal Reserve, with 10-year treasury yields slipping below the three-month rate for the first time since 2007.
Historically, an inverted yield curve — where long-term rates fall below short-term — has signaled an upcoming recession.
Adding to the fears of a more widespread global downturn, manufacturing output data from Germany, Europe’s biggest economy, shrunk for the third straight month.
“Estimates for growth and earnings have been revised down materially across all major regions,” said US bank Morgan Stanley.
ANZ bank said the darkening economic outlook “overshadowed the supply-side issues” the oil market was facing amid supply cuts led by producer club OPEC as well as the US sanctions on Venezuela and Iran.
The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, together referred to as ‘OPEC+’, have pledged to withhold around 1.2 million barrels per day (bpd) of oil supply this year to prop up markets, with OPEC’s de-facto leader seen to be pushing for a crude price of over $70 per barrel.


US wins WTO ruling against China grain import quotas

Updated 19 April 2019
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US wins WTO ruling against China grain import quotas

GENEVA: The United States won a World Trade Organization (WTO) ruling on Thursday against China’s use of tariff-rate quotas for rice, wheat and corn, which it successfully argued limited market access for US grain exports.
The case, lodged by the Obama administration in late 2016, marked the second US victory in as many months. It came amid US-China trade talks and on the heels of Washington clinching a WTO ruling on China’s price support for grains in March.
A WTO dispute panel ruled on Thursday that under the terms of its 2001 WTO accession, China’s administration of the tariff rate quotas (TRQs) as a whole violated its obligation to administer them on a “transparent, predictable and fair basis.”
TRQs are two-level tariffs, with a limited volume of imports allowed at the lower ‘in-quota’ tariff and subsequent imports charged an “out-of-quota” tariff, which is usually much higher.
The administration of state trading enterprises and non-state enterprises’ portions of TRQs are inconsistent with WTO rules, the panel said.
Australia, Brazil, India, and the European Union were among those reserving their rights in the dispute brought by the world’s largest grain exporter.
In a statement, US Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue welcomed the decision, saying China’s system “ultimately inhibits TRQs from filling, denying US farmers access to China’s market for grain.”
If China’s TRQs had been fully used, $3.5 billion worth of corn, wheat and rice would have been imported in 2015 alone, it said, citing US Department of Agriculture estimates.
The two WTO rulings would help American farmers “compete on a more level playing field,” the USTR statement said, adding: “The (Trump) Administration will continue to press China to promptly come into compliance with its WTO obligations.”
The latest WTO panel said that the United States had not proven all of its case, failing to show that China had violated its public notice obligation under the General Agreement on Tariffs and Trade (GATT) in respect to TRQs.
China’s Ministry of Commerce said in a statement on Friday it “regrets” the panel’s decision and that it would “earnestly evaluate” the panel’s report.
China would “handle the matter appropriately in accordance with WTO dispute resolution procedures, actively safeguard the stability of the multilateral trading system and continue to administer the relevant agricultural import tariff quotas in compliance with WTO rules,” it said.
Either side can appeal the ruling within 60 days.