IEA may cut its oil demand growth estimates if global economy weakens

If the global economy weakens, for which there are already some signs we may lower oil demand estimates, says Fatih Birol IEA chief expectations. (AFP)
Updated 28 September 2019

IEA may cut its oil demand growth estimates if global economy weakens

SEOUL: The International Energy Agency (IEA) may cut its growth estimates for global oil demand for 2019 and 2020, should the global economy weaken further, its chief said on Friday.

In August the Paris-based agency trimmed its global oil demand growth estimates for 2019 and 2020 to 1.1 million and 1.3 million barrels per day (bpd), respectively, as trade woes weighed on global oil consumption, making demand grow at its slowest pace since the financial crisis of 2008.

“It will depend on the global economy. If the global economy weakens, for which there are already some signs we may lower oil demand expectations,” Fatih Birol told Reuters on the sidelines of the World Knowledge Forum in Seoul.

He said China’s economic growth, which has fallen to the lowest in nearly three decades, could also mean there would be some revisions, as Beijing is “an engine of the demand growth.”

China’s economic growth slowed to 6.2 percent in the second quarter, its weakest pace in at least 27 years, dragged down by weaker demand amid heightened trade tensions with the US.

“But at the same time, we shouldn’t forget low oil prices also (put) upward pressure on the demand,” the IEA chief said.

Global crude benchmark Brent is hovering around $62 a barrel, while U.S. West Texas Intermediate is sitting around $56, weighed down by worries over slowing global economic growth that could dent oil demand.

Asked about how Asian importers could increase their energy security in the midst of the tensions in the Middle East, Birol said diversifying oil and natural gas imports as much as possible is a way to cope with geopolitical risks.

“Especially for natural gas, this is a very lucrative time to diversify. Buyers’ hands are much stronger,” he said. “Definitely it’s a time to make new contracts and good prices ... competition now it’s not among buyers but among sellers.”

A day earlier, the IEA chief said liquefied natural gas (LNG) investments hit a record of $50 billion in 2019, driven by Canada and the US.


HP rejects Xerox takeover bid, says open to acquiring Xerox instead

Updated 9 min 37 sec ago

HP rejects Xerox takeover bid, says open to acquiring Xerox instead

  • In rejecting Xerox's $33.5 billion cash-and-stock acquisition offer, HP said the offer “significantly” undervalued the personal computer maker
  • Xerox made the offer for HP on Nov. 5 after resolving its dispute with its joint venture partner Fujifilm Holdings Corp.
NEW YORK: HP Inc. said on Sunday it was open to exploring a bid for US printer maker Xerox Corp. after rebuffing a $33.5 billion cash-and-stock acquisition offer from the latter as “significantly” undervaluing the personal computer maker.
Xerox made the offer for HP, a company more than three times its size, on Nov. 5, after it resolved a dispute with its joint venture partner Fujifilm Holdings Corp. that represented billions of dollars in potential liabilities.
Responding to Xerox’s offer on Sunday, HP said in a statement that it would saddle the combined company with “outsized debt” and was not in the best interest of its shareholders.
However, HP left the door open for a deal that would involve it becoming the acquirer of Xerox, stating that it recognized the potential benefits of consolidation.
“With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction,” HP said in its statement.
The move puts pressure on Xerox to open its books to HP. Xerox did not immediately respond on Sunday to a request for comment on whether it will engage with HP in negotiations as the potential acquisition target, rather than the acquirer.
HP on Sunday published Xerox CEO John Visentin’s Nov. 5 offer letter to HP, in which he stated that his company was “prepared to devote all necessary resources to finalize our due diligence on an accelerated basis.”
Activist investor Carl Icahn, who took over Xerox’s board last year together with fellow billionaire businessman Darwin Deason, said in an interview with the Wall Street Journal last week that he was not set on a particular structure for a deal with HP, as long as a combination is achieved. Icahn has also amassed a 4% stake in HP.
Xerox had offered HP shareholders $22 per share that included $17 in cash and 0.137 Xerox shares for each HP share, according to the Nov. 5 letter. The offer would have resulted in HP shareholders owning about 48% of the combined company. HP shares ended trading on Friday at $20.18.
Many analysts have said there is merit in the companies combining to better cope with a stagnating printing market, but some cited challenges to integration, given their different offerings and pricing models.
Xerox scrapped its $6.1 billion deal to merge with Fujifilm last year under pressure from Icahn and Deason.
Xerox announced earlier this month it would sell its 25% stake in the joint venture for $2.3 billion. Fujifilm also agreed to drop a lawsuit against Xerox, which it was pursuing following their failed merger.

Test for new HP CEO
In 2011 as the centerpiece of its unsuccessful pivot to software. Little over a year later, it wrote off $8.8 billion, $5 billion of which it put down to accounting improprieties, misrepresentation and disclosure failures.
More recently, HP has been struggling with its printer business segment recently, with the division’s third-quarter revenue dropping 5% on-year. It has announced a cost-saving program worth more than $1 billion that could result in its shedding about 16% of its workforce, or about 9,000 employees, over the next few years.
Xerox’s stock has rallied under Visentin, who took over last year as CEO. However, HP said on Sunday that a decline in Xerox’s revenue since June 2018 from $10.2 billion to $9.2 “raises significant questions” regarding the trajectory of Xerox’s business and future prospects.