Crude drops as trade war rumbles on and output swells

An oil terminal in Novorossiysk, Russia. Oil prices fell by 2 percent on Tuesday, weighed down by rising OPEC and Russian oil output. (Reuters)
Updated 04 September 2019

Crude drops as trade war rumbles on and output swells

LONDON: Oil prices fell by 2 percent on Tuesday, weighed down by rising OPEC and Russian oil output as well as the protracted US-China trade dispute that has dragged on the global economy. US crude was down $1.26 at $53.84 a barrel while Brent crude was down 96 cents at $57.70 in
afternoon trade.

The US this week imposed 15 percent tariffs on Chinese goods and China began to impose new duties on a $75 billion target list in a trade war that has rumbled on for more than a year. Though the trade conflict has intensified, US President Donald Trump said both sides would meet for talks this month.

Meanwhile, South Korea’s economy expanded less than expected in the second quarter, with exports revised down in the face of the US-China dispute, central bank data showed on Tuesday.

FASTFACT

Russian oil production in August rose to 11.294 million barrels per day (bpd) hitting its highest since March.

A move on Sunday by Argentina to impose capital controls also cast a spotlight on emerging market risks. “Oil will struggle to make substantial headway topside this week with no progress on trade talks or meetings even, soft data from Asia and a possible cracking of OPEC’s resolve to control production,” said Jeffrey Halley, senior market analyst at OANDA.

Output OPEC rose in August for the first month this year as higher supply from Iraq and Nigeria outweighed restraint by Saudi Arabia and losses caused by US sanctions on Iran. Russian oil production in August rose to 11.294 million barrels per day (bpd), topping the rate cap pledged by Moscow in a pact with other producers and hitting its highest since March, data showed on Monday.

“What’s bad for the outlook for global growth is bad for oil at the moment and only big draws in inventories can delay that drift lower,” said Greg McKenna, strategist at McKenna Macro.


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.