Fall in oil prices reflects fears over economic slowdown

Crude prices continued to slide despite the first drawdown on US crude stocks in several weeks. Above, a maze of crude oil pipes and valves at the Strategic Petroleum Reserve in Freeport, Texas (Reuters)
Updated 02 June 2019

Fall in oil prices reflects fears over economic slowdown

  • Markets found themselves torn once again between supply fears and a looming economic slowdown
  • OPEC’s oil production dropped to a four-year low of 30.17 million barrels per day (bpd) in May

RIYADH: The downward movement in oil prices last week seemed unjustified given the current strong market fundamentals, as markets found themselves torn once again between supply fears and a looming economic slowdown. The Brent crude price closed the week closer to $60 per barrel.
OPEC’s oil production dropped to a four-year low of 30.17 million barrels per day (bpd) in May, according to a Reuters survey, with exports from Iran tumbling to around 400,000 bpd.
Crude prices continued to slide despite the first drawdown on US crude stocks in several weeks. Prices mostly dip on macroeconomic growth concerns, with the US-China trade dispute continuing to overshadow sentiment on the global oil markets.
However, Chinese crude oil imports hit a record 10.2 million bpd, marking a massive increase of 1.2 million bpd year-on-year, tempering concerns over the impact of a trade war on the global economy and oil demand.
One of the main reasons that no oil shortages have materialized yet is that Asia refiners have already shut down 2-3 million bpd of refining capacity for planned maintenance, which will continue throughout June. This seasonal maintenance contributed to relatively lower demand.
Since Asian refiners buy almost 60 percent of their crude intake from the Arabian Gulf, relative prices for sour crudes have been robust. After those facilities’ initial runs on mostly light sweet crude oil from the US shale exports, they began taking more sour medium crude as upgrading units have gone into service.

  • Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Reach him on Twitter: @faisalmrza


Lebanon central bank reassures foreign investors about deposits

Updated 25 January 2020

Lebanon central bank reassures foreign investors about deposits

  • Khalaf Ahmad Al-Habtoor asked if there was any risk to dollar deposits
  • The heavily indebted country’s crisis has shaken confidence in banks

BEIRUT: Lebanon’s central bank said on Saturday there would be no “haircut” on deposits at banks due to the country’s financial crisis, responding to concerns voiced by a UAE businessman about risks to foreign investments there.

Emirati Khalaf Ahmad Al-Habtoor, founder of the Al-Habtoor Group that has two hotels in Beirut, posted a video of himself on his official Twitter account asking Lebanon’s central bank governor if there was any risk to dollar deposits of foreign investors and whether there could be any such haircut.

“The declared policy of the Central Bank of Lebanon is not to bankrupt any bank thus preserving the depositors. Also the law in Lebanon doesn’t allow haircut,” the Banque Du Liban (BDL) said in a Twitter post addressed to Al-Habtoor, from Governor Riad Salameh.

“BDL is providing the liquidity needed by banks in both Lebanese pound and dollars, but under one condition that the dollars lent by BDL won’t be transferred abroad.”

“All funds received by Lebanese banks from abroad after November 17th are free to be transferred out,” it added on its official Twitter account.

The heavily indebted country’s crisis has shaken confidence in banks and raised concerns over its ability to repay one of the world’s highest levels of public debt.

Seeking to prevent capital flight as hard currency inflows slowed and anti-government protests erupted, banks have been imposing informal controls on access to cash and transfers abroad since last October.

A new government was formed this week, and its main task is to tackle the dire financial crisis that has seen the Lebanese pound weaken against the dollar.

Al-Habtoor had asked Salameh for clarity for Arab investors concerned about the crisis and those thinking of transferring funds to Lebanon to try to “help the brotherly Lebanese.”