Oil up on slowing pace of coronavirus, Venezuela sanctions

The oil market price structure is also showing signs that prompt demand for oil is picking up, as the front-month Brent futures market is moving deeper into backwardation. (Shutterstock)
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Updated 20 February 2020

Oil up on slowing pace of coronavirus, Venezuela sanctions

  • Financial analysts say epidemic is likely to deal a ‘short-term blow’ to global economy

LONDON: Benchmark Brent oil prices rose for a seventh consecutive day after demand worries eased with a slowing of new coronavirus cases in China and supply was curtailed by a US move to cut more Venezuelan crude from the market.

Brent was up 71 cents at $58.46 a barrel at 1510 GMT. The global benchmark has risen nearly 10 percent since falling last week to its lowest this year. US oil was up 53 cents at $52.58 a barrel.

“Those in doubt of the economic impact from the virus should take heed from Apple’s surprise sales warning ... Put simply, this is the surest sign yet of the coronavirus fallout on the global economy,” said PVM analysts in a note.

S&P Global Ratings said it expected coronavirus would deliver a “short-term blow” to economic growth in China in the first quarter, echoing findings by the International Energy Agency.

Official data showed new cases in China fell for a second straight day, although the World Health Organization said there was not enough data to know if the epidemic was being contained.

The oil market price structure is also showing signs that prompt demand for oil is picking up, as the front-month Brent futures market is moving deeper into backwardation, when near-term prices are higher than later-dated prices.

This week, oil prices were also buoyed by a US decision to blacklist a trading subsidiary of Russia’s Rosneft, which President Donald Trump’s administration said provided a financial lifeline to Venezuela’s government.

Hopes that the Organization of the Petroleum Exporting Countries (OPEC) and allied producers would deepen supply cuts also supported prices.

The grouping, known as OPEC+, has been withholding supply to support prices and meets next month to decide a response to the downturn in demand resulting from the coronavirus epidemic.

But in the US, which is not party to any supply cut agreements, oil production has been rising. US shale production is expected to rise to a record 9.2 million barrels a day next month, the Energy Information Administration said.


Kuwait props up coronavirus-hit economy amid low oil prices

Updated 01 April 2020

Kuwait props up coronavirus-hit economy amid low oil prices

  • Kuwait was first Gulf state to halt passenger flights and impose a partial curfew to stem the spread of coronavirus
  • Kuwait has drawn down on its state fund, the General Reserve Fund, to cover its deficit

KUWAIT: Kuwait announced measures early on Wednesday aimed at shoring up its economy against the coronavirus pandemic, including soft long-term loans from local banks, and the central bank asked banks to ease loan repayments for companies affected.
Kuwait, which as of March 31 had registered 289 coronavirus cases, was the first Gulf state to halt passenger flights and impose a partial curfew to stem the spread of the highly infectious respiratory illness.
The sectors most impacted by the pandemic include aviation, hospitality and real estate, a government source told Reuters.
The stimulus package approved by the cabinet aims to provide liquidity for small- and medium-sized enterprises to meet their obligations, a government spokesman said.
That includes directing government agencies to pay obligations to the private sector as soon as possible.
The central bank separately has asked lenders to postpone loan repayments for three months for companies hit by the crisis, the governor, Mohammad Al-Hashel, said in a television interview posted by the central bank on Twitter.
Kuwait is also dealing with the impact of lower oil prices on its finances that is expected to lead to a higher government fiscal deficit this year.
The government source said that, in light of the oil price fall, passing a debt law allowing Kuwait to borrow more has become a “government priority.”
Kuwait has drawn down on its state fund, the General Reserve Fund, to cover its deficit. The source said the government withdrew 43.8 billion Kuwaiti dinars ($139.70 billion) in the five years until the 2018-2019 fiscal year, and 3.7 billion dinars in the 2019-2020 fiscal year.
This means the fund has around 14 billion dinars ($44.65 billion) left, the source said.
Moody’s this week placed Kuwait’s Aa2 rating on review for a downgrade, citing a “significant” decline in government revenues.
The government spokesman said maintaining Kuwait’s credit rating was one of the goals of the new economic measures.