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

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

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.


Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
Updated 19 January 2021

Market traders ready to ride ‘Biden bounce’

Market traders ready to ride ‘Biden bounce’
  • "Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations," a financial expert says

DUBAI: Investors are expecting a “Biden bounce” in global markets following the inauguration on Wednesday of Joe Biden as the 46th US president.

“History teaches us that we can expect the markets to react favorably to the inauguration of a new US president — and this time around it is likely to be no different,” said Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisers, with over 80,000 clients and $12 billion under advisement.

“Indeed, Biden moving into the White House could drive markets into a bull run more sharply than previous inaugurations because it is hoped the incoming administration will bring stability and, possibly, a halt to the uncertainty following the fiercely contested election. 

“Investors will also be buoyed by the $1.9 trillion fiscal stimulus announced by Biden, the Federal Reserve’s willingness to support markets, the new president’s multilateral trade agenda and his plans for stepping up the vaccine rollout. All of this will encourage confidence and optimism,” Green said.

Mazen Al-Sudairi, head of research at Riyadh-based financial services company Al Rajhi Capital, agreed with the optimism regarding a “Biden bounce.”

“One of the important outcomes with Biden is stability in the market. But there is also the stimulus factor coupled with the vaccine that is giving an indication of recovery in the market. This perceived unity in the US will be healthy for the global and Saudi market,” he told Arab News.

However, Green said that investors should be cautious for three reasons: “First, a market rally is going to be difficult to sustain indefinitely due to the enormous economic scarring caused by the pandemic.

“The major long-term headwind is mass unemployment, which is hitting demand, growth and investment on Main Street and which, ultimately, will have to impact Wall Street.

“Second, the new administration will have policies that will have an effect on different sectors of the economy. There will be a readjustment period that needs to be taken into account.

“And, third, not all shares are created equal and stock markets are heavily unbalanced at the moment. A handful of sectors are bringing up entire indexes,” he said.