Oversupply to depress oil prices next year

Updated 01 December 2012
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Oversupply to depress oil prices next year

LONDON: Oil prices are expected to fall slightly over the next year as high production feeds softening demand at a time of slowing global economic growth, a Reuters poll shows.
Reuters’ monthly oil price survey of 29 analysts forecasts North Sea Brent crude oil will average $ 107.50 per barrel in 2013, down $ 1.30 from the forecast in the October poll and compared with an average of around $ 111.90 so far in 2012.
Five analysts now expect Brent to average less than $ 100 in 2013, compared with three in last month’s poll.
Only three analysts forecast Brent will average more than $115 next year, compared with five analysts last month.
“We are notably bearish on the near term oil price environment given that we see a fundamental oversupply of oil,” said Raymond James analyst Praveen Narra, who has the lowest 2013 Brent price forecast of $ 80 per barrel in the poll.
Gain Capital Group analyst Chris Tevere is also bearish. “Our overriding outlook continues to foresee slowing global growth (which) consequently should persist in undermining (oil)demand,” Tevere said.
The Organization for Economic Cooperation and Development has cut its outlook for global growth, reducing its forecast for 2013 to 3.4 percent from 4.2 percent, saying the euro zone debt crisis was a serious threat to the world economy.
Expectations of slowing growth have led many analysts to trim their oil price projections, although most institutions are less bearish than Narra at Raymond James.
“Our analysis of supply and demand in 2013 suggests the oil market will be in comfortable surplus next year (barring an unforeseen disruption to supply) and thus we expect prices to fall back,” said Caroline Bain at the Economist Intelligence Unit.
Many analysts argue loose monetary policies being followed by leading central banks should keep a floor on oil prices, and geopolitical tensions may lead to price spikes, but most say upside risks have diminished.
“While geopolitical concerns in the Middle East have increased of late, namely in the Gaza strip, since this is not an export heavy region, it is unlikely to lead to supply disruptions,” Gain Capital’s Tevere said.
“Tensions between Turkey and Syria still persist, and this could potentially effect the supply of oil should this escalate to other nations within the Middle East. While we ultimately believe cooler heads will prevail, these elevated risks could see crude spike at times,” he added.
Harry Tchilinguirian, head of commodity market strategy at BNP Paribas, said the prospect for further quantitative easing in the US with a resulting weakening of the US dollar and a seasonal upturn in demand could support oil prices this northern hemisphere winter.
Barclays had the highest Brent price forecast in the poll with $ 125 per barrel for 2013.
Analysts also saw a narrowing of the Brent/WTI spread due to easing geopolitical tensions in the course of next year. The poll projected a spread of $ 12.8 for next year.
“New pipeline capacities in the US should help to reduce oversupply in the US Midwest and to narrow the price gap between Brent and WTI next year,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.


Pompeo says China is engaging in ‘predatory economics 101’

Would China have allowed America to do to it what China has done to America asked US Secretary of State Mike Pompeo. (AP)
Updated 18 June 2018
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Pompeo says China is engaging in ‘predatory economics 101’

  • He said China’s recent claims of “openness and globalization” are “a joke.”

DETROIT: China is engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property, Secretary of State Mike Pompeo told a business audience Monday.
Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the US and China. Both nations started putting trade tariffs in motion that are set to take effect July 6.
He said China’s recent claims of “openness and globalization” are “a joke.” He added that China is a “predatory economic government” that is “long overdue in being tackled,” matters that include IP theft and Chinese steel and aluminum flooding the US market.
“Everyone knows ... China is the main perpetrator,” he said. “It’s an unprecedented level of larceny.”
“Just ask yourself: Would China have allowed America to do to it what China has done to America?” he said later. “This is predatory economics 101.”
The Chinese Embassy in Washington did not immediately respond to a request for comment.
Pompeo raised the trade issue directly with China last week, when he met in Beijing with President Xi Jinping and others.
“I reminded him that’s not fair competition,” Pompeo said.
President Donald Trump has announced a 25 percent tariff on up to $50 billion in Chinese imports. China is retaliating by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey. Trump also has slapped tariffs on steel and aluminum imports from Canada, Mexico and European allies.
Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Trump’s watch. Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt — “historic ingredients for an economic slowdown.”
Pompeo on Monday described US actions as “economic diplomacy,” which, when done right, strengthens national security and international alliances, he added.
“We use American power, economic might and influence as a tool of economic policy,” he said. “We do our best to call out unfair economic behaviors as well.”