WEEKLY ENERGY RECAP: Arabian crude demand picture improves

WEEKLY ENERGY RECAP: Arabian crude demand picture improves
A maze of crude oil pipes and valves is pictured during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. (REUTERS)
Updated 07 July 2019

WEEKLY ENERGY RECAP: Arabian crude demand picture improves

WEEKLY ENERGY RECAP: Arabian crude demand picture improves
  • Before the trade war, China was the largest oil importer of US shale oil, with almost 500,000 bpd last year that went to zero once the trade dispute started even though Beijing has not imposed tariffs on US crude imports

Despite two major news events that should have supported the oil price, the market finished the week on a bearish note.
At the G20 summit, the US and China agreed not to escalate tariffs and instead resume trade talks. Meanwhile OPEC and its allies outside the group agreed a nine-month extension of production cuts taking us through the first quarter of 2020.
OPEC+, as the enlarged group has come to be known, also sealed a long-term cooperation agreement “the Charter of Cooperation,” which aims to bring the 24 oil producing countries together to promote stability to a market that has been characterized by intense volatility in recent months.
So that all makes for a higher oil price? Well, not quite — as broader macroeconomic concerns kept a lid on prices as traders looked to the overall global demand picture.
Brent crude fell to $64.23 per barrel at the end of the week. The grade remains some 15 percent off its late-April high, despite escalating tensions in the Arabian Gulf as shipping premiums soar because of the increased risk of attacks on tankers.
Still, the OPEC+ output cuts extension has made sour crude oil grades from the Arabian Gulf firmer amid a stronger physical spot market for medium and heavy sour crude grades.
This was clearly shown in a narrower Brent/Dubai spread that points to stronger demand for Arabian Gulf sour crude grades.
The resumption of trade negotiations between the world’s two largest economies should pave the way for the recovery of commodity trade flows between the pair.
 So though we have not seen it yet, that should eventually be reflected in a stronger oil price.
Despite the expected positive recovery of commodity trade flows, oil traders seem focused on the volatile geopolitical situation.
Some suggest that shale oil producers are the biggest beneficiary in gaining market share as US shale will likely continue to define the future of OPEC+.
However, it is questionable whether US shale producers will continue to pump more oil at lower prices, given that they are not profitable at current price levels.
Before the trade war, China was the largest oil importer of US shale oil, with almost 500,000 bpd last year that went to zero once the trade dispute started even though Beijing has not imposed tariffs on US crude imports.
A resumption of more normalized trade flows between the US and China should benefit demand for US oil, especially after the removal of Iranian and Venezuelan barrels from the market.
Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


China was largest recipient of FDI in 2020 — Report

China was largest recipient of FDI in 2020 — Report
Updated 27 min 32 sec ago

China was largest recipient of FDI in 2020 — Report

China was largest recipient of FDI in 2020 — Report
China was the largest recipient of foreign direct investment in 2020 as the coronavirus outbreak spread across the world during the course of the year, with the Chinese economy having brought in $163 billion in inflows.
China’s $163 billion in inflows last year, compared to $134 billion attracted by the United States, the United Nations Conference on Trade and Development (UNCTAD) said in a report released on Sunday.
In 2019, the United States had received $251 billion in inflows and China received $140 billion.
China’s economy picked up speed in the fourth quarter, with growth beating expectations as it ended a rough coronavirus-striken 2020 in remarkably good shape and remained poised to expand further this year even as the global pandemic rages unabated.
China’s gross domestic product grew 2.3% in 2020, official data showed last week, making China the only major economy in the world to avoid a contraction last year.
The world’s second-largest economy has surprised many with the speed of its recovery from the coronavirus jolt, especially as policymakers have also had to navigate tense US-China relations on trade and other fronts.
Overall, global FDI had collapsed in 2020, falling by 42% to an estimated $859 billion, from $1.5 trillion in 2019, according to the UNCTAD report.
“FDI finished 2020 more than 30% below the trough after the global financial crisis in 2009,” the UNCTAD said on Sunday.
FDI flows fell by 37% in Latin American and the Caribbean, by 18% in Africa, and by 4% in developing Asia, the report added.
East Asia accounted for a third of global FDI in 2020, while FDI flows to developed countries fell by 69%.