Oil prices drop almost 1% on concerns US recession may be looming

A potential US recession weighed on crude prices. Above, a refinery near the Corpus Christi ship channel in Corpus Christi, Texas. (AFP)
Updated 25 March 2019

Oil prices drop almost 1% on concerns US recession may be looming

  • Concerns about a potential US recession resurfaced late last week after bearish remarks by the US Federal Reserve
  • Ten-year treasury yields slipped below the three-month rate for the first time since 2007

SINGAPORE: Oil prices dropped by almost 1 percent on Monday, with concerns recession could be looming outweighing supply disruptions from OPEC’s production cutbacks and from US sanctions on Iran and Venezuela.
Brent crude oil futures were at $66.56 per barrel at 0410 GMT, down 47 cents, or 0.7 percent, from their last close.
US West Texas Intermediate (WTI) futures were at $58.52 per barrel, down 52 cents, or 0.9 percent, from their previous settlement.
Both crude oil price benchmarks have slumped by more than 3 percent since last week hitting their highest since November 2018.
Concerns about a potential US recession resurfaced late last week after bearish remarks by the US Federal Reserve, with 10-year treasury yields slipping below the three-month rate for the first time since 2007.
Historically, an inverted yield curve — where long-term rates fall below short-term — has signaled an upcoming recession.
Adding to the fears of a more widespread global downturn, manufacturing output data from Germany, Europe’s biggest economy, shrunk for the third straight month.
“Estimates for growth and earnings have been revised down materially across all major regions,” said US bank Morgan Stanley.
ANZ bank said the darkening economic outlook “overshadowed the supply-side issues” the oil market was facing amid supply cuts led by producer club OPEC as well as the US sanctions on Venezuela and Iran.
The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia, together referred to as ‘OPEC+’, have pledged to withhold around 1.2 million barrels per day (bpd) of oil supply this year to prop up markets, with OPEC’s de-facto leader seen to be pushing for a crude price of over $70 per barrel.


Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

Updated 43 min 4 sec ago

Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

TOKYO: Under-pressure start-up WeWork is considering two huge bailout plans including a cash injection that could see Japanese investment titan SoftBank take control of the firm, according to reports.
The office-sharing giant had been on course for a massive initial public offering until last month when questions began to be asked over its governance and profit outlook.
The firm’s valuation plunged from $47 billion in January to less than $20 billion in September and the listing plans have been dropped, while co-founder Adam Neumann stepped down as chief executive.
With New York-based parent company We Co. not expected to push for the IPO this year, the cash-strapped firm is looking for a financial lifeline.
The Wall Street Journal, New York Times and Bloomberg News cited unnamed sources close to the talks as saying SoftBank — the US firm’s biggest shareholder — had drawn up a proposal that gives it full control of WeWork.
The move would dilute the voting power of Neumann, who remains as chairman of the company he started in 2010 and also currently maintains control a majority of voting shares.
They also reported that WeWork is looking at a deal with Wall Street giant JP Morgan to raise $5 billion in debt, with the Times saying directors of We would be meeting as soon as Monday afternoon to discuss that.
“WeWork has retained a major Wall Street financial institution to arrange financing,” the Journal reported a company spokesman as saying.
“Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”
The New York-based startup that launched in 2010 has touted itself as revolutionizing commercial real estate by offering shared, flexible workspace arrangements, and has operations in 111 cities in 29 countries.
However, the company, which lost $1.9 billion last year, has faced skepticism over its ability to make money, especially if the global economy slows significantly.