Oil rises on surprise draw in US stocks, prospect of OPEC action

A pumpjack in Signal Hill, California. (AFP)
Updated 23 October 2019

Oil rises on surprise draw in US stocks, prospect of OPEC action

  • OPEC, allies to mull deeper production cuts
  • Weak demand growth outlook weighs on sentiment

HOUSTON: Oil rose above $60 a barrel on Wednesday after government data showed a surprise draw in US crude stocks and as the prospect of deeper output cuts by OPEC and its allies offered support.
US crude stocks fell by 1.7 million barrels last week as refineries hiked crude runs by 429,000 barrels per day (bpd), the Energy Information Administration said. Analysts had expected an increase in US inventories of 2.2 million barrels.
Brent crude futures were up 44 cents, or 0.74%, to $60.14 a barrel at 10:13 a.m. CDT . West Texas Intermediate (WTI) crude futures for December delivery were up 48 cents, or 0.88%, to $54.96 per barrel.
Oil prices had fallen earlier in the session on data from industry group the American Petroleum Institute showing US stocks rising more than analysts had expected, by 4.5 million barrels to 437 million barrels.
The US Energy Department’s report “has put some buyers in the market, but it will be interesting to see if it lasts. While this will distract from demand destruction, the market will eventually come back to it,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
The draw in US oil stocks appeared to have been caused by temporary market factors including higher refinery runs, rather than a fundamental firming of oil demand, and investors are still concerned about the global economy following reports of slowing growth in China and Europe, McGillian added.
A larger-than-expected decline in US gasoline stocks also supported prices, analysts said. Gasoline stocks fell by 3.1 million barrels, compared with analysts expectations of a 2.3 million-barrel drop.
“The continued decline in product inventory makes for a bullish report,” said John Kilduff, a partner at Again Capital LLC in New York. “Gasoline numbers are summer-like; that’s endemic of a good economy (in the US) and people driving to work.”
Also helping to underpin prices, the Organization of the Petroleum Exporting Countries is mulling whether to deepen production cuts amid concerns of weak demand growth next year.
OPEC and other oil producers including Russia, a group known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020. OPEC and other non-members are scheduled to meet again Dec. 5-6.
“With the headwinds of strong US producer hedging and high freight rates fading, we expect stronger Brent timespreads and higher prices in coming weeks, with upside risk to our year-end $62 per barrel forecast,” Goldman Sachs said in a note.
The investment bank expects Brent prices to continue trading around $60 a barrel in 2020.


New Delhi to sell full stake in debt-ridden Air India

Updated 27 January 2020

New Delhi to sell full stake in debt-ridden Air India

  • The airline, which owes more than $8 billion, has been struggling to pay salaries and buy fuel
  • Formerly India’s monopoly airline, carrier was once known affectionately as the ‘Maharaja of the skies’

MUMBAI: New Delhi intends to sell its entire stake in the debt-crippled national carrier Air India, the government announced Monday, after failing previously to secure any bids for a majority share.
The airline, which owes more than $8 billion, has been struggling to pay salaries and buy fuel, with officials recently warning that it would have to shut down unless a buyer was found.
On Monday the civil aviation ministry released a document inviting bids for a 100 percent stake, setting March 17 as the deadline for initial submissions.
Potential buyers would have to assume around $3.26 billion in debt, the document said.
The government was forced in 2018 to shelve plans to sell a 76 percent stake in Air India after failing to attract any bidders.
India’s Tata Group, Singapore Airlines (SIA) and IndiGo were all linked to a takeover but subsequently ruled themselves out.
Founded in 1932 and formerly India’s monopoly airline, the company was once known affectionately as the “Maharaja of the skies.”
But it has been hemorrhaging money for more than a decade and has lost market share to low-cost rivals in one of the world’s fastest-growing but most competitive airline markets.
In November aviation minister Hardeep Singh Puri had said the airline would “have to close down if it is not privatized.”
State-run oil companies halted fuel supplies to Air India in August after it fell behind on payments, though the firms agreed to lift the suspension a month later after talks brokered by the government.
The country’s aviation sector has been stuck in a slump since the collapse of Jet Airways last year.