WEEKLY ENERGY RECAP: Oil sees big weekly loss as Iran struggles to store crude

Oil prices ended last week with the biggest weekly losses of the year. Brent fell below the $70 psychological barrier to $68.69 a barrel. (Reuters/File Photo)
Updated 25 May 2019

WEEKLY ENERGY RECAP: Oil sees big weekly loss as Iran struggles to store crude

  • The market remained under pressure from US stock-build for the third week in a row

RIYADH: Oil prices ended last week with the biggest weekly losses of the year. Brent fell below the $70 psychological barrier to $68.69 a barrel, while WTI dropped under $60 to $58.63.
The market remained under pressure from US stock-build for the third week in a row. But what mostly pushed prices lower was the low speculator activity, amid hesitation to add bets on almost flat price fluctuations.
The direction of oil prices has apparently ignored the tight physical market, amid signs that OPEC+ may extend its output cuts extensions, US sanctions against Iran and Venezuela, and slower Russian exports due to a contamination of some of its crude.
While Iran said it has already resumed oil sales to China, its biggest buyer, tanker tracker data suggests its total exports have plummeted. Iranian exports fell to 500,000 barrels per day or lower in May, more than half the level seen in April, the data suggest. However, Iran needs to keep oil flowing as any suspension would damage its future operations at its aging oil fields.
To keep its operations going as exports slump and sanctions block purchases, Iran has been forced to store more oil on land and at sea.
But that brings myriad problems. Iran’s land storage is very limited due to poor oil infrastructure and logistics that haven’t been developed since the mid-1970s. At sea, it has an aging fleet of ships, and it will face difficulties with insurance and in striking agreements with shipping companies.


Economists fear a US recession in 2021

Updated 15 min 55 sec ago

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.