Oil prices fall amid weak US energy demand

Updated 08 January 2013
0

Oil prices fall amid weak US energy demand

LONDON: Oil prices retreated slightly as weak energy demand and concerns over more fiscal battles in Washington tempered news of growth in the US jobs market, analysts said.
New York’s main contract, light sweet crude for delivery in February shed 11 cents to $ 92.98 a barrel.
Brent North Sea crude for February dropped 30 cents to $ 111.01 in late London deals.
Official data on Friday showed that the US economy generated 155,000 jobs in December, and the unemployment rate held at 7.8 percent.
However, a separate US government report last week showing softer fuel demand outweighed that news, Phillip Futures said in a market commentary.
Weaker US energy demand “added to bearish concerns about oil markets, which have been closely monitoring economic data for signals about consumption, which is under pressure because of the struggling economy,” the broker added.
The US is the world’s biggest oil consuming nation and the health of its economy is a key influence on crude prices.
Other analysts said that markets remained concerned over more brinkmanship in the US Congress after last week’s 11th-hour deal that averted the fiscal cliff of tax rises and spending cuts which threatened to tip the economy into recession.
While the lawmakers put off the huge tax rises on many wage earners, an agreement on spending cuts was put off until the end of February, when they must also hammer out a deal to raise the country’s borrowing limit.
Iran revealed that its oil exports had slumped by 40 percent in the past nine months because of tough Western sanctions.
Traders also eyed the anticipated start-up of a Midwest pipeline.
The Seaway Pipeline expansion project, which will increase the amount of crude oil flowing from the bottlenecked midcontinent market around Cushing, Oklahoma, to premium-priced refiners on the Gulf Coast, is due to be completed by Friday, the companies involved said last week.

The pipeline's expansion to 400,000 barrels per day (bpd) from 150,000 bpd should help reduce the crude oil glut around Cushing - delivery point of the US benchmark futures contract - created by rapid increases in US and Canadian production over the past three years.
Both crude benchmarks rose last week after US lawmakers reached a last-minute agreement to avert the so-called "fiscal cliff," or tax increases and spending cuts that would have threatened growth in the world's top oil consumer.
"There is a bit of risk-off sentiment in the market today," Carsten Fritsch, an analyst at Commerzbank, told Reuters "Maybe also a bit of profit-taking after the gains late last year and early this year."
Still, reports on Friday showed US employers kept up an even pace of hiring in December and the services sector expanded briskly. This, as well as earlier data showing expansion in US and Chinese manufacturing, bolstered the outlook for oil demand.
This week's focus for financial markets will be on the European Central Bank. Investors are looking to the central bank's monthly meeting on Thursday to see if it hints at an interest rate cut early this year.
New figures showed euro zone factory prices fell for the first time in five months in November, pulled down by a slide in the cost of energy and giving the ECB room to consider a possible interest rate cut.
Investors will also be watching the US Federal Reserve's stance on monetary easing, after top Fed officials and some US economists suggested the central bank might halt its asset purchases this year. The euro rose slightly against the dollar.


Starbucks blames slower China growth on drop in third-party delivery orders

Updated 20 min 6 sec ago
0

Starbucks blames slower China growth on drop in third-party delivery orders

SINGAPORE/SHANGHAI: Starbucks Corp. has reported a sudden slowdown in China growth just weeks after trumpeting rapid expansion in the country, citing a drop-off in unapproved third-party delivery services whose bulk orders had been clogging up its cafes.
The US cafe chain on Tuesday same-store sales would be flat to slightly negative in its second-biggest market in April-June, versus 7 percent growth a year earlier. The announcement was followed by a 9 percent drop in Starbucks’ share price.
China has been a sweet spot for Starbucks for the past few years, as the country embraces cafes and opens up to drinking coffee over tea while growth saturates back home. Last month, the firm said it aimed to triple China revenue and double cafe numbers to 6,000 by 2022.
But on Tuesday, the company said new cafe openings were cannibalizing customer visits at other stores, as also happened in the United States. However, Starbucks particularly noted a decline in third-party firms — with whom it had no formal arrangements — that placed large orders for delivery to their own customers, often resulting in long in-store queues.
“I think it was driven by the government to want to stop having third parties do that because it was creating annoyances,” Chief Executive Kevin Johnson said on a call with analysts on Tuesday. He said the remedy was to seal a delivery partnership with a “large tech company” by the end of the year.
Reuters was unable to confirm any government measures on the matter.
Third-party “daigou” shopping agents in China offer services via delivery platforms such as Ele.me, backed by Alibaba Group Holding Ltd, and Meituan-Dianping, backed by Tencent Holdings Ltd. Restaurants and cafes can also have official accounts on such platforms, though Starbucks does not.
Mizuho Securities analyst Jeremy Scott in a research note said Starbucks would have been happy for the no-cost custom generated by third-party delivery services, but an official arrangement will likely push up costs.
“While the Street may be willing to forgive a tough May ... the soft comp (comparable store sales) in China is more disheartening given that management is hyper-focused on the market,” said Scott.
Starbucks also on Tuesday said it planned to close 150 cafes in the United States and open fewer locations in its financial year beginning in October, in response to competition that has seen new coffee chains, convenience stores and fast-food restaurants improve quality and cut prices.