Oil prices pressured by economic slowdown, but OPEC cuts support

OPEC member Iraq has cut its oil exports average to 3.5 million barrels per day in compliance with an ongoing production curb agreement. (Reuters)
Updated 20 March 2019

Oil prices pressured by economic slowdown, but OPEC cuts support

  • Analysts said an economic slowdown could soon dent fuel consumption
  • OPEC has pledged to withhold around 1.2 million barrels per day of crude supply

SINGAPORE: Oil prices were on Wednesday weighed down by economic growth concerns that dampened the outlook for fuel consumption, but supported by voluntary supply cuts led by producer club OPEC and by US sanctions against Iran and Venezuela.
International Brent crude oil futures were at $67.55 a barrel at 0432 GMT, down 6 cents, or 0.1 percent, from their last close. Brent on Tuesday touched its highest since Nov. 16 at $68.20 a barrel.
US West Texas Intermediate (WTI) crude futures were at $58.92 per barrel, down 11 cents, or 0.2 percent, from their previous settlement. WTI on Tuesday reached its strongest level since Nov. 12 at $59.57 a barrel.
Analysts said an economic slowdown could soon dent fuel consumption.
“Global growth concerns and ongoing oversupply fears (are) creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Asian business confidence held near three-year lows in the first quarter as a US-China trade dispute dragged on, pulling down a global economy that is already on a downward path, a Thomson Reuters/INSEAD survey found on Wednesday.
The dips come after crude prices rose by more than a quarter this year, pushed up by a pledge led by the Organization of the Petroleum Exporting Countries (OPEC) to withhold around 1.2 million barrels per day (bpd) of supply as well as by US sanctions against oil exporters Iran and Venezuela.
“The shaky supply outlook with regard to Venezuela and Iran, as well as the petro-nations’ output restrictions are top of mind in the oil market,” said Norbert Ruecker, head of economics at Swiss bank Julius Baer.
Ruecker said oil prices were likely capped around $70 per barrel as fuel price inflation, as seen last year, would hit demand at that level.
At the same time, he said oil prices were supported above $50 per barrel as investment into US shale output growth would cease below that price.
Between those price levels, Ruecker said “the US shale boom almost fully meets global oil demand growth mirrored by the strongly expanding crude oil exports,” which hit a record 3.6 million bpd in February.
“We see ... roughly 1.2 million bpd of US shale oil growth over the coming year,” Ruecker said, which is in line with most global oil demand growth forecasts of 1 million to 1.3 million barrels per day for 2019.
The US Energy Information Administration is due to publish its weekly crude production and storage level report around 1700 GMT on Wednesday.


Huawei's third-quarter revenue jumps 27% as smartphone sales surge

Updated 16 October 2019

Huawei's third-quarter revenue jumps 27% as smartphone sales surge

  • American companies, significantly disrupting its ability to source key parts
  • Huawei was all but banned by the United States in May from doing business with American companies

SHENZHEN, SHANGHAI: Huawei Technologies Co. Ltd’s third-quarter revenue jumped 27%, driven by a surge in shipments of smartphones launched before a trade blacklisting by the United States expected to hammer its business.
Huawei, the world’s biggest maker of telecom network equipment and the No. 2 manufacturer of smartphones, was all but banned by the United States in May from doing business with American companies, significantly disrupting its ability to source key parts.
The company has been granted a reprieve until November, meaning it will lose access to some technology next month. Huawei has so far mainly sold smartphones that were launched before the ban.
Its newest Mate 30 smartphone — which lacks access to a licensed version of Google’s Android operating system — started sales last month.
Huawei in August said the curbs would hurt less than initially feared, but could still push its smartphone unit’s revenue lower by about $10 billion this year.
The tech giant did not break down third-quarter figures but said on Wednesday revenue for the first three quarters of the year grew 24.4% to 610.8 billion yuan.
Revenue in the quarter ended Sept. 30 rose to 165.29 billion yuan ($23.28 billion) according to Reuters calculations based on previous statements from Huawei.
“Huawei’s overseas shipments bounced back quickly in the third quarter although they are yet to return to pre-US ban levels,” said Nicole Peng, vice president for mobility at consultancy Canalys.
“The Q3 result is truly impressive given the tremendous pressure the company is facing. But it is worth noting that strong shipments were driven by devices launched pre-US ban, and the long-term outlook is still dim,” she added.
The company said it has shipped 185 million smartphones so far this year. Based on the company’s previous statements and estimates from market research firm Strategy Analytics, that indicates a 29% surge in third-quarter smartphone shipments.
Still, growth in the third quarter slowed from the 39% increase the company reported in the first quarter. Huawei did not break out figures for the second quarter either, but has said revenue rose 23.2% in the first half of the year.
“Our continued strong performance in Q3 shows our customers’ trust in Huawei, our technology and services, despite the actions and unfounded allegations against us by some national governments,” Huawei spokesman Joe Kelly told Reuters.
The US government alleges Huawei is a national security risk as its equipment could be used by Beijing to spy. Huawei has repeatedly denied its products pose a security threat.
The company, which is now trying to reduce its reliance on foreign technology, said last month that it has started making 5G base stations without US components.
It is also developing its own mobile operating system as the curbs cut its access to Google’s Android operating system, though analysts are skeptical that Huawei’s Harmony system is yet a viable alternative.
Still, promotions and patriotic purchases have driven Huawei’s smartphone sales in China — surging by a nearly a third compared to a record high in the June quarter — helping it more than offset a shipments slump in the global market.