Oil drops to 3-week low below $ 114

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Updated 22 February 2013

Oil drops to 3-week low below $ 114

LONDON: Oil fell to a three-week low around $ 114 a barrel, hit by weak euro zone economic data, dampening the prospect of an early recovery and concern the US Federal Reserve might end its stimulus program sooner than thought.
The drop extended Brent crude’s largest one-day slide in 2013 on Wednesday, alongside declines in other commodities and equities.
Brent crude LCOc1 fell as low as $ 113.34, the lowest intra-day since the end of January. It pared losses slightly after US government data showed a bigger-than-expected drop in gasoline and distillates stocks to trade down $ 1.50 at $ 114.10 a barrel as of 1630 GMT.
US crude CLc1 dropped by $ 2.04 to $ 93.18.
“Yesterday was a major sell-off, not just in oil but in other commodities,” said Tony Machacek, a broker at Jefferies Bache in London.
“We’ve come off a long way, and just looking at the charts, Brent could come down to the $ 113 area.”
Since mid-December, hedge funds and other large speculators have nearly doubled their bets that oil prices will rise, amassing positions in Brent and US crude futures and options equivalent to around 440 million barrels of oil, regulatory and exchange data show.
The price of Brent rose by $ 10 a barrel in the first six weeks of 2013 to hit a nine-month high above $ 119 on Feb. 8 as signs of strong demand from China and lower Saudi supply raised expectations of a tighter market.
“Brent was overbought amid overwhelming investor interest, an increased geopolitical premium and bullish macro sentiment, while short-term fundamentals simply do not justify sustained gains past $ 120,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.
A key level of technical support for Brent on Thursday was around $ 113.10, the 50-day moving average and the lower Bollinger band, said Olivier Jakob, an analyst at Petromatrix. Another to watch was $ 113.07, the low from Jan. 29.
Brent’s price decline stopped short of that zone of support by Thursday afternoon, while US crude traded below its own 50-day moving average for the first time since December.
Equities and the euro also fell sharply as surveys showed the downturn in the euro-zone’s businesses worsened unexpectedly this month.
Economists had forecast the euro zone purchasing managers’ indexes (PMIs) would add to tentative signs a recovery was under way, but instead they pointed to a first-quarter contraction of up to 0.3 percent.
The US Labor Department said initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 362,000 last week, but still held at levels consistent with a steady improvement in labor market conditions.
On Wednesday, minutes of the US Federal Reserve’s last policy meeting cast doubt over how much longer the US central bank would stick to its stimulus plan, leading to declines in the euro, equities and commodities.
A day earlier, oil industry sources said Saudi Arabia, which cut supplies in the last two months of 2012, could raise its output in the second quarter to satisfy higher demand.
Investors also assessed the prospect of reduced tension between Iran and the West over Tehran’s nuclear work. A Western diplomat said on Wednesday major powers were ready to make “a substantial and serious offer” to Iran during talks next week.
Slightly offseting the bearish sentiment, US refined fuel inventories fell more than expected in the week to Feb. 15, US government data from the Energy Information Administration showed on Thursday, although US crude inventories rose as refineries processed less oil and imports rose.

Wealthy Gulf individuals feel more confident about regional prospects

Updated 38 min 29 sec ago

Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.