Oil rises on tightening supplies; ample US output caps gains

Prices have been supported this year by an agreement between OPEC and its allies to limit their oil output by 1.2 million barrels per day. (Reuters)
Updated 18 April 2019

Oil rises on tightening supplies; ample US output caps gains

  • Prices have been supported this year by an agreement between OPEC and its allies to curb oil output
  • Global supply has also been tightened further by US sanctions on OPEC members Venezuela and Iran

TOKYO/SYDNEY: Oil prices edged higher, supported by ongoing OPEC-led supply cuts and a surprise fall in US crude inventories, although gains were capped by strong US production.
Brent crude futures were at $71.71 a barrel at 0500 GMT, up 9 cents, or 0.1 percent, from their last close and not far off Wednesday’s five-month high of $72.27 a barrel.
US West Texas Intermediate (WTI) crude futures were at $63.81 per barrel, up 5 cents, or 0.1 percent.
US crude inventories fell by 1.4 million barrels in the week to April 12, compared with analyst expectations for an increase of 1.7 million barrels, Department of Energy (DoE) showed on Wednesday.
“The fundamental backdrop for oil prices remains broadly positive amidst tighter global supply for the current term.” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.
Prices have been supported this year by an agreement reached by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to limit their oil output by 1.2 million barrels per day.
Global supply has also been tightened further by US sanctions on OPEC members Venezuela and Iran.
Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.
But rising US oil production and concerns over the US-China trade dispute kept gains in check.
“A persistent rise in US oil output, together with lingering demand-side concerns emerging from the US-China trade dispute, is limiting price gains,” Abhishek Kumar, Head of Analytics at Interfax Energy in London.
US crude oil output from seven major shale formations was expected to rise by about 80,000 bpd in May to a record 8.46 million bpd, the US Energy Information Administration said in its monthly report on Monday.
Surging US production has filled some of the gap in supplies, although not all of the lost production can be immediately replaced by US shale oil due to refinery configurations.
“The unexpected drawdown in US commercial crude oil stocks was balanced by lower-than-expected withdrawals in the country’s gasoline and distillate inventories,” Kumar said.
Gasoline stocks fell by 1.2 million barrels, less than analysts’ expectations in a Reuters poll for a 2.1 million-barrel drop.
Distillate stockpiles, which include diesel and heating oil, fell 362,000 barrels, also not as much as forecasts for a 846,000-barrel drawdown, the EIA data showed.


Oman’s sultan says government will work to reduce debt

Updated 23 February 2020

Oman’s sultan says government will work to reduce debt

DUBAI: Oman's Sultan Haitham bin Tariq al-Said said on Sunday the government would work to reduce public debt and restructure public institutions and companies to bolster the economy.
Haitham, in his second public speech since assuming power in January, said the government would create a national framework to tackle unemployment while addressing strained public finances.
"We will direct our financial resources in the best way that will guarantee reducing debt and increasing revenues," he said in the televised speech.
"We will also direct all government departments to adopt efficient governance that leads to a balanced, diversified and sustainable economy."
Rated junk by all three major credit rating agencies, Oman's debt to GDP ratio spiked to nearly 60% last year from around 15% in 2015, and could reach 70% by 2022, according to S&P Global Ratings.
The small oil producing country has relied heavily on debt to offset a widening deficit caused by lower crude prices. Also, the late Sultan Qaboos, who ruled Oman for nearly 50 years, held back on austerity measures.
The country has delayed introducing a 5% value added tax from 2019 to 2021, and economic diversification has been slow, with oil and gas accounting for over 70% of government revenues.
Last week, rating agency Fitch said Oman was budgeting for a higher deficit of 8.7% for 2020 despite its expectation of further asset-sale proceeds and some spending cuts.
"We are willing to take the necessary measures to restructure the state's administrative system and its legislation," Haitham said in his first speech since the mourning period for Qaboos ended, without elaborating.
He said there would be a full review of government companies to improve their business performance and competence.
Oman observers have said that if Haitham moves to decentralise power it would signal willingness to improve decision making. Like Qaboos, he holds the positions of finance minister and central bank chairman as well as premier, defence and foreign minister.