WEEKLY ENERGY RECAP: China highlights demand strength

Oil has been under pressure from concerns over global economic growth amid ongoing US-China trade tensions. (Reuters)
Updated 03 August 2019

WEEKLY ENERGY RECAP: China highlights demand strength

  • Upcoming September crude oil trading was completed without a single unsold Gulf crude cargo

An eventful week ended with downward momentum for oil prices. Brent crude fell to $61.89 and WTI dropped to $55.66 per barrel.

Oil has been under pressure from concerns over global economic growth amid ongoing US-China trade tensions.

However, crude remains healthy, reflected by growing demand from refineries in Asia, where new refining capacity is coming online. 

Exports from the Arabian Gulf to Asian refiners are growing — a key barometer for the overall health of the global crude market.

Though crude oil trading activity in the Gulf region have been threatened amid political turmoil in the Strait of Hormuz, there has been no change in Asian refiner plans from the area.

Upcoming September crude oil trading was completed without a single unsold single cargo for sour crude from the Arabian Gulf.

Gulf sour crude grades have further strengthened on bullish fuel demand amid tighter supply for high sulfur fuel oil and bunker fuels. That has resulted in medium sour crude spreads pushing upwards.

The strength of underlying demand in the market was highlighted by China’s record crude oil imports from Saudi Arabia in July.

OPEC crude oil production fell to an 8-year low, just 29.42 million barrels-per-day (bpd) in July, down 280,000 bpd from June. Voluntary output cuts from Saudi Arabia and steep losses from Iran contributed to this historically low figure.

Libyan crude oil production fell below 1 million bpd to just 950,000  after the Sharara oil field, the largest in the country, went offline for the second time in as many weeks.

There was a huge decline in US crude oil stockpiles for the seventh week in a row. The EIA reported that US crude inventories declined by nearly 49 million barrels in the last seven weeks. It is the longest retreat since the winter of 2017/18 when they fell for a record 10 consecutive weeks. 

Stockpiles of gasoline and distillate fuels also shrank, which should ease concerns about slowing consumption, as strong summer demand in the US continued to drain stockpiles. The EIA report showed total US inventories were at their lowest level since late May.


Pound drops as Johnson faces battle to pass Brexit bill

Updated 18 October 2019

Pound drops as Johnson faces battle to pass Brexit bill

  • The pound rallied almost to $1.30 on Thursday following news that negotiators had hammered out an agreement
  • However, joy was soon tempered by the realization that the British prime minister faces an uphill task in getting the deal past lawmakers

Sterling fell Friday as investors fret over Boris Johnson’s chances of pushing his Brexit deal through parliament, while Asian markets were mostly down after data showed China’s economy expanded at its slowest pace in nearly three decades.
The pound rallied almost to $1.30 on Thursday following news that negotiators had hammered out an agreement that would avoid Britain leaving the EU without a divorce deal — a move many warn would be economically catastrophic.
However, joy was soon tempered by the realization that the British prime minister faces an uphill task in getting the deal past lawmakers, with opposition MPs and even some in his own Conservative party saying they were against it.
Most importantly, Northern Ireland’s Democratic Unionist Party (DUP), which props up Johnson’s government, said it was “unable to support these proposals.”
Forex traders sold sterling, pushing it back down below $1.29, and it extended losses in Asia.
Focus is now on a crucial vote on the deal pencilled in for Saturday.
“Much will depend on the PM’s ability to get some if not all DUP and (Scottish National Party) MPs onside, in addition to also getting the backing from the 21 ex-Conservative MPs he expelled from the party last month,” said National Australia Bank’s Rodrigo Catril.
“Rejection of the deal might well see more political brinkmanship around a ‘no-deal’ Brexit, but the most likely scenario would be yet another extension of the 31 October Brexit date.”
Jeffrey Halley, senior market analyst at OANDA, said whichever way the vote goes, “traders should prepare themselves for some severe volatility on Monday morning, with multiple big-figure moves a strong possibility.”
In early trade London stocks eased 0.4 percent, Paris shed 0.5 percent and Frankfurt was flat.

Pound/dollar: DOWN at $1.2857 from $1.2891 at 2050 GMT
Euro/pound: UP at 86.48 pence from 86.31 pence
Euro/dollar: UP at $1.1122 from $1.1127