Bears ignore tight market as oil prices stay volatile

The Total Culzean platform is pictured on the North Sea, about 70 kilometers east of the Aberdeen, on April 8, 2019. Oil prices have continued to fall since the second half of May. (AFP / ANDY BUCHANAN)
Updated 09 June 2019
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Bears ignore tight market as oil prices stay volatile

RIYADH: Oil prices have continued to fall since the second half of May as some commentators described the volatile market as the worst four-week run since the 2008 financial crisis. 

If that is an accurate description of the market, then we should also consider the retreat in major equity share indexes such as the S&P 500 and the Dow Jones.

Oil prices rebounded slightly at the end of the week on the news that OPEC+ will probably continue its output cuts throughout the year. Brent and WTI crude prices rose to $63.29 and $53.99 per barrel respectively.

However, falling oil prices for the past month have not taken the strength out of the forward curves, which still suggest tight physical crude oil markets. 

We can observe the tightness in the market in the forward curve of Brent futures, where deliveries in future months are cheaper than current prices. 

This scenario, known in the oil trading sector as “backwardation,” is a fundamental support to the market that is not reflected in oil prices.

The latest data from the Energy Information Administration (EIA), shows US inventories featured more than 22 million barrels in crude, gasoline and diesel stocks. 

Crude inventories have risen in three of the last four weeks despite expectations for declines.

Strong China oil imports and increased US refinery utilization that reached a 4-month high above 90 percent, hardly denote an economic slowdown.

The rise in US inventories has acted to either drive speculators away from bets on higher prices or to encourage bearish speculators to short the market and bet on lower prices, which is one of the factors behind oil price weakness in recent months.

Speculators have taken advantage of the price fall by increasing their bearish bets, a change from recent weeks that was more about these same speculators closing out bets that prices would rise. 


Urgency needed to boost Palestinian economy: IMF chief

Updated 26 June 2019
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Urgency needed to boost Palestinian economy: IMF chief

  • The MF has been warning of severe deterioration in the Palestinian economy
  • ‘If there is an economic plan, if there is urgency, it’s a question of making sure that the momentum is sustained’

MANAMA: IMF chief Christine Lagarde said Wednesday that major economic growth was possible in the Palestinian territories if all sides showed urgency, as she took part in a US-led conference boycotted by the Palestinian leadership.
The International Monetary Fund has been warning of severe deterioration in the Palestinian economy, with tax revenue blocked in a dispute with Israel which has also imposed a crippling blockade on the Gaza Strip for more than a decade.
“If there is an economic plan, if there is urgency, it’s a question of making sure that the momentum is sustained,” said Lagarde.
The IMF chief is attending a conference in Bahrain to discuss the economic aspects of a United States plan for Israeli-Palestinian peace, which has already been rejected by the Palestinians as it fails to address key political issues.
Lagarde said for the US plan to work “it will require all the goodwill in the world on the part of all parties — private sector, public sector, international organizations and the parties on the ground and their neighbors.”
Citing examples of post-conflict countries, Lagarde said that private investors needed progress in several sectors including strengthening the central bank, better managing public finance and mobilizing domestic revenue.
“If anti-corruption is really one of the imperatives of the authorities — as it was in Rwanda, for instance — then things can really take off,” she said.
The plan presented by White House adviser Jared Kushner calls for $50 billion of investment in the Palestinian territories and its neighbors within a decade.
The proposals for infrastructure, tourism, education and more aim to create one million Palestinian jobs.
Gross domestic product in the Gaza Strip declined by eight percent last year, while there was only minor growth in the West Bank.
Kushner, opening the conference on Tuesday, called the plan the “Opportunity of the Century” — and said the Palestinians needed to accept it before a deal can be reached on political solutions.
The Palestinian Authority has rejected the conference, saying that the US and Israel are trying to dangle money to impose their ideas on a political settlement.
Washington says it will unveil the political aspects of its peace deal at a later date, most likely after Israel’s September election.