Oil prices drop on swelling US stockpiles, but markets remain tense

The American Petroleum Institute that US crude stockpiles rose by 2.4 million barrels last week, to 480.2 million barrels. (AFP)
Updated 22 May 2019
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Oil prices drop on swelling US stockpiles, but markets remain tense

  • US crude stockpiles rose by 2.4 million barrels last week, to 480.2 million barrels
  • US bank Morgan Stanley said it expected Brent prices to trade in a $75-$80 per barrel range in the second half of this year

SINGAPORE: Oil prices fell on Wednesday after industry data showed an increase in US crude inventories and as Saudi Arabia pledged to keep markets balanced.
However, analysts said oil markets remained tight amid supply cuts led by producer group OPEC and as political tension escalates in the Middle East.
Brent crude futures were down 39 cents, or 0.5 percent, at $71.79 a barrel by 0658 GMT.
US West Texas Intermediate (WTI) crude futures for July delivery were down 59 cents, or 0.9 percent, at $62.54. The June contract expired on Tuesday, settling at $62.99 a barrel, down 11 cents.
The American Petroleum Institute (API) said on Tuesday that US crude stockpiles rose by 2.4 million barrels last week, to 480.2 million barrels, compared with analyst expectations for a decrease of 599,000 barrels.
Official data from the US Energy Information Administration’s oil stockpiles report is due later on Wednesday.
Outside the United States, Saudi Arabia on Wednesday said it was committed to a balanced and sustainable oil market.
Saudi Arabia has been at the forefront of supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), of which the kingdom is the de-facto leader, that began in January and are aimed at reducing global oversupply.
Because of the cuts, Bank of America Merrill Lynch said crude output by OPEC and its allies fell by 2.3 million barrels per day (bpd) between November 2018 and April 2019. That has helped push up Brent crude prices by more than a third since the start of the year.
The bank said some of the impact of the cuts was offset by a slowdown in global oil demand growth due to trade tensions to just 0.7 million bpd in the fourth quarter of 2018 and the first quarter of this year, versus a five-year average of 1.5 million bpd.
Despite the slowdown, US bank Morgan Stanley said it expected Brent prices to trade in a $75-$80 per barrel range in the second half of this year, pushed up by tight supply and demand fundamentals.
The physical oil market is also showing signs of tightness.
Qatar Petroleum has sold Al-Shaheen July delivery crude at the highest average premium since 2013 — $3.06 per barrel above the benchmark Dubai quote — on robust demand for medium-heavy grades in Asia, according to multiple trade sources.
Beyond market fundamentals, oil traders are looking to the tensions between the United States and Iran.
US President Donald Trump on Monday threatened Iran with “great force” if it attacked US interests in the Middle East.
On Tuesday, acting US Defense Secretary Patrick Shanahan said threats from Iran remained high.
Tensions have risen since Trump re-imposed sanctions on Iranian oil exports to try to strangle the country’s economy and force Tehran to halt its nuclear program.


Lebanon’s Hariri calls for cabinet solidarity in budget debate

Updated 18 June 2019
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Lebanon’s Hariri calls for cabinet solidarity in budget debate

  • The PM said cabinet ministers need to be united and responsible
  • Lebanon’s debt is almost 150% of its GDP

BEIRUT, June 18 : Lebanon Prime Minister Saad Al-Hariri on Tuesday called for parliament to quickly approve the country’s 2019 budget and urged his coalition government to avoid internal disputes.
The cabinet this month agreed a budget plan that shrinks the projected fiscal deficit by 4 percentage points from last year to 7.6% by cutting spending and raising taxes and other fees.
“What I want during the debate is for us to be responsible and united, and not contradictory,” Hariri said in a statement, addressing cabinet ministers as to their comportment during the parliament debate.
Parliament’s finance committee is debating the draft budget and has suggested amendments, local newspapers reported. It will then put the budget to the full assembly to ratify it.
Parliament is mostly composed of parties that are also present in the coalition government and which supported the budget there.
Since the budget was agreed there have been fierce arguments between parties in the coalition over several subjects, though these have not targeted the budget.
Lebanon has one of the world’s heaviest debt burdens, equivalent to about 150% of GDP, and the International Monetary Fund has urged it to cut spending.
“We have held 19 cabinet meetings to agree on this draft budget and these sessions were not for fun, but for deep, detailed debate over every clause and every idea,” Hariri said.
“For this reason, I consider it the responsibility of each of us in government to have ministerial solidarity...to defend in parliament the decision that we have taken together,” he added.
After the 2019 budget is agreed, the cabinet must quickly start working on the 2020 budget and on approving the first phase of a program of investments toward which foreign donors have offered $11 billion in project financing. (Reporting by Angus McDowall, editing by Ed Osmond)