Oil rises on weak dollar, Saudi commitment to cut output

Traders said that oil drew some support from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers, such as Russia. (Reuters)
Updated 17 January 2017

Oil rises on weak dollar, Saudi commitment to cut output

LONDON: Oil prices rose on Tuesday, supported by a falling US dollar and Saudi Arabia saying it would adhere to the Organization of the Petroleum Exporting Countries’ (OPEC) commitment to cut output.
Gains were capped by rising US production and skepticism that OPEC as a whole would comply with its commitments to reduce supplies.
Brent crude futures, the international benchmark for oil prices, were up 66 cents at $56.52 a barrel by 1304 GMT. US West Texas Intermediate (WTI) crude futures were up 78 cents at $53.15.
The dollar, along with stocks and bond yields, fell across the board on Tuesday after US President-elect Donald Trump said that the strong greenback was hurting US competitiveness.
Traders said that oil drew some support from top crude exporter Saudi Arabia, which said it would adhere strictly to its commitment to cut output under the agreement between OPEC and other producers, such as Russia.
Under the agreement, OPEC, Russia and other non-OPEC producers have pledged to cut oil output by nearly 1.8 million barrels per day (bpd), initially for six months, to bring supplies back in line with consumption.
“The market genuinely seems quite happy here (with oil around $55) ... but people are watching with caution as the slightest hint of this OPEC/non-OPEC agreement going wrong is going to drive the market down,” said Matt Stanley, a fuel broker at Freight Investor Services (FIS) in Dubai.
Despite this, crude futures have fallen by 5 percent since their early January peaks on doubts over producers’ willingness to comply fully with the cuts.
Traders are also watching rising US output, which could offset supply cuts elsewhere.
“The market is focused on the build in US production, which is nearly up to 9 million bpd — up from 8.5 million bpd last June and close to 2014 production levels,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“With US crude clearly above $50 a barrel, we are getting a supply-side response, which is pushing production higher,” he said.
Further weighing on crude, at least in the short term, have been refinery outages in the Middle East and Asia over the past week, traders said.
Analysts also said that steps to prop up oil prices through a cut in supplies could be self-defeating.
“For each $10 per barrel increase in oil prices, oil demand will decline by 10 basis points. While consensus expects demand-growth of 1.3 million bpd in 2017 (vs. 1.4 million bpd in 2016), we see risks to the downside as demand growth in China and India starts to moderate,” AB Bernstein said.


German economy rebounding, faces risk from virus resurgence

Updated 24 September 2020

German economy rebounding, faces risk from virus resurgence

  • The Ifo institute’s index released Thursday rose to 93.4 points in September from 92.5 points in August
FRANKFURT: A widely watched indicator of German business confidence has risen for a fifth month in a row as Europe’s largest economy rebounds from the coronavirus shutdowns — but the index remains below its long term average and uncertainty is high with virus cases rising.
The Ifo institute’s index released Thursday rose to 93.4 points in September from 92.5 points in August. The index is based on a survey of thousands of businesses about their view of current conditions and expectations for the future.
In this case the current assessment rose while the expectations part levelled off.
After shrinking 9.7 percent in the second quarter, the worst quarterly figure on record, the economy is rebounding from the severe shutdowns and restrictions on activity and movement of March, April and May.
Carsten Brzeski, chief eurozone economist at ING bank, said growth could rebound sharply with growth between 5 percent and 10 percent in the third quarter. But the recovery still faces hurdles and has a long way to go to regain its pre-pandemic footing.
“Given the recent softening of leading indicators, however, there is a risk of a double-dip in the fourth quarter,” Brzeski wrote in a research note, “unless social distancing rules are eased further; a very unlikely scenario given the latest increase in new COVID-19 cases.”