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.


Middle East airlines’ passenger traffic nosedive in April

Updated 06 June 2020

Middle East airlines’ passenger traffic nosedive in April

  • UAE-based Emirates and Etihad Airways will resume some transit flights
  • IATA said the global demand for air services is starting to show recovery

DUBAI: Passenger traffic for Middle East airlines plummeted 97.3 percent in April, versus a less-steeper dive of 50.3 percent a month earlier, the International Air Transport Association (IATA) said in a report.
“April was a disaster for aviation as air travel almost entirely stopped. But April may also represent the nadir of the crisis,” Alexandre de Juniac, IATA’s director general and CEO, said in a statement
“Flight numbers are increasing. Countries are beginning to lift mobility restrictions. And business confidence is showing improvement in key markets such as China, Germany, and the US.”
UAE-based Emirates and Etihad Airways will resume some transit flights after the country lifted a suspension on services where passengers stop off in the country to change planes, or for refueling.
Emirates, one of the world’s biggest long-haul airlines, would operate transit flights to 29 destinations in Asia, Europe and North America by June 15 while Etihad would carry transit passengers to 20 cities in Europe, Asia and Australia from June 10.
With aircraft of Middle East airlines grounded, and replicated globally due to the coronavirus pandemic, capacity tumbled 92.3 percent while the load factor decreased to 27.9 percent in April.
But IATA said the global demand for air services is starting to show recovery “after hitting bottom in April.”
There “are positive signs are we start to rebuild the industry from a stand-still. The initial green shoots will take time – possibly years – to mature,” de Juniac added.
Meanwhile, the Abu-Dhabi based carrier will extend salary cuts for employees until September even as other UAE airlines Emirates and Air Arabia confirmed job cuts due to the effects of the coronavirus pandemic.
“Etihad is continuing to consider all options to protect jobs and preserve cash at this challenging time. Regretfully, Etihad has extended its salary reduction until September 2020, with 25 percent reduction for junior staff and cabin crew, and 50 percent for employees at manager level and above. Housing allowance and a number of benefits continue to be paid,” a statement from Etihad said.