Oil drops on demand concerns as US shale set for new record

Saudi Arabia is cutting crude exports to drain global oil inventories as surging US shale output and a weakening Chinese yuan cast a shadow over global crude prices. (Shutterstock)
Updated 13 August 2019

Oil drops on demand concerns as US shale set for new record

  • Saudi Arabia to keep crude exports below 7 million bpd in August and September to balance market

LONDON: Oil prices dropped on Tuesday after see-sawing throughout the session as lingering concerns over global demand and rising US output offset expectations for major producers to further curtail supply. Brent crude futures were down 45 cents, or 0.7 percent, from the previous settlement at $58.12 a barrel in London afternoon trade. The international benchmark
has lost more than 20 percent since hitting its 2019 high in April. US West Texas Intermediate (WTI) futures were at $54.34 per barrel, down 59 cents, or about 1 percent.
A deepening trade war between the US and China, the world’s two largest economies and energy consumers, has weighed heavily on oil prices in recent months.
China’s central bank lowered its official yuan midpoint for the ninth straight day to a fresh 11-year low on Tuesday. A weaker yuan raises the cost of dollar-denominated oil imports into China, the world’s biggest crude oil importer.
Booming US shale oil output also continues to chip away at efforts to limit the global supply overhang, weighing on prices.
US oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September to a record 8.77 million bpd, the Energy Information Administration forecast in a report.

HIGHLIGHTS

• US-China trade wars weigh on demand.

• US shale set to rise to new high in September.

• Weaker yuan raises cost of oil imports to China.

The startup of a major pipeline between the Permian shale basin and the Gulf Coast means that more crude can be exported, adding to global supplies.
“The big test now is whether the shale producers can keep growing production at these lower price levels,” said Callum Macpherson, head of commodities at Investec.
“This could be the start of a readjustment process from the artificially high prices OPEC is implicitly trying to maintain down to something more in line with the marginal shale production costs,” Macpherson said.
Saudi Arabia said last week it planned to keep its crude exports below 7 million bpd in August and September to help drain global oil inventories.
OPEC and its allies, known as OPEC+, have agreed to cut 1.2 million bpd of production since Jan. 1.


10 things you need to know on Tadawul today

Updated 26 min 46 sec ago

10 things you need to know on Tadawul today

Here are a few things you need to know as Saudi stocks start trading on Wednesday.

1) Saudi Aramco customers are unaffected by the terrorist attack at a petroleum products distribution plant in the north of Jeddah, a company official said.

2) The Saudi Arabian Monetary Authority (SAMA) imposed penalties on 30 financial institutions due to violations of “responsible finance principles” for individuals.

3) Saudi Arabian Amiantit Co. signed two agreements to sell its stakes in Moroccan units, generating an accounting profit of SAR 14.16 million ($3.89 million).

4) Saudi Arabia moved beyond the concept of relative food security to achieve self-sufficiency in many sectors such as milk and poultry, according to Almarai Co.’s vice president of corporate affairs Faisal Marzouq Al-Fahadi.

5) Al-Khaleej Training and Education Co. signed a binding 30-day memorandum of understanding with the shareholders of Al-Raqi National Schools Co. to acquire 60% of the latter at SAR 12.82 million.

6) Saudi Reinsurance Company (Saudi Re) signed reinsurance contracts with Probitas Corporate Capital Ltd. with estimated gross written premiums of SAR 177 million.

7) Sadara Basic Services Co. said its parent company, Sadara Chemical Co. (Sadara), met the conditions specified by lenders under the Sadara project financing documents to achieve the project completion date.

8) Abdullah Al Othaim Markets Co. announced the opening of a new store in Al-Kharj, bringing the total number of branches across Saudi Arabia to 248.

9) Arabian Pipes Co. shareholders approved amending some of the company’s bylaws during the extraordinary general meeting.

10) Oil prices rose on Wednesday morning. Brent crude edged up 62 cents to $48.48/bbl, while WTI crude gained 52 cents to $45.43/bbl.

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