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

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.


Argentine economy minister resigns amid deepening crisis

Updated 9 min 23 sec ago

Argentine economy minister resigns amid deepening crisis

  • The country’s peso ended the week having shed 20 percent of its value against the US dollar

BUENOS AIRES: Argentina’s Economy Minister Nicolas Dujovne resigned after a week of economic tumult caused by President Mauricio Macri’s defeat in a primary poll ahead of a general election.

Dujovne will be replaced by Hernan Lacunza, economy minister for Buenos Aires province, Argentine media reported.

The country’s peso ended the week having shed 20 percent of its value against the US dollar as both Fitch and S&P cut the South American country’s long-term credit rating, citing increased uncertainty and a rising risk of default.

Dujovne said, in a letter posted on the website of La Nacion newspaper, he was “convinced that, under the circumstances, the (government’s) management needs significant renewal in the economic arena.”

He leaves in the middle of a deepening economic crisis following last Sunday’s primary elections in which market-friendly Macri was dealt a huge blow in his bid for re-election when he polled 15 points less than center-left Peronist candidate Alberto Fernandez.

The primaries serve as a bellwether for general elections in October. Dujovne’s announcement marks the first change in Macri’s Cabinet since voters went to the polls.

Fitch, which downgraded Argentina’s credit rating two notches to “CCC,” said the center-right’s defeat “increases risks of a break from the policy strategy of the current administration of Mauricio Macri guided by a program with the IMF.”

Fernandez, now the clear favorite to unseat Macri, has questioned the reform program backed by a $56 billion rescue package from the International Monetary Fund.

Standard & Poor’s dropped Argentina’s rating a single grade from “B” to “B-.”

“My resignation is consistent with a government and political space that listens to the people and that acts accordingly,” Dujovne said, in a clear message to the Argentine electorate.