Stocks, oil fall as second wave fears cloud recovery prospects

Stocks, oil fall as second wave fears cloud recovery prospects
Monday’s losses follow a strong global rally since late March. (File/AFP)
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Updated 15 June 2020

Stocks, oil fall as second wave fears cloud recovery prospects

Stocks, oil fall as second wave fears cloud recovery prospects
  • Oil fell more than 3% on Monday, extending losses from last week

SYDNEY/HONG KONG: Asian shares and Wall Street futures fell on Monday as growing fears of a second wave of coronavirus infections revived economic worries, while underwhelming data from China also weighed on investor sentiment.
Monday's losses follow a strong global rally since late March, fuelled by central bank and fiscal stimulus and optimism as countries gradually lifted restrictions put in place to curb the spread of the novel coronavirus.
However, concerns are now swirling about a second wave with Beijing on Monday reporting its second consecutive day of record numbers of COVID-19 cases, while new cases and hospitalisations in record numbers swept through more U.S. states.
The risk-off sentiment is also likely to weigh on global markets, with e-Minis for the S&P 500 extending losses in Asia to be down 2.7% at 0633 GMT, from 1% earlier.
European markets were also set to open lower with pan-region EuroSTOXX 50 futures and German DAX futures each dropping 2.5% and FTSE futures falling 2%.
"Any new outbreak will be looked at very, very cautiously by investors. The market is putting into perspective that the COVID-19 issue has not been resolved yet. It's a reality check," said James McGlew, analyst at stockbroker Argonaut.
McGlew expects a further correction "as markets quantify what lies ahead of us."
Worldwide coronavirus cases have crossed 7.86 million with 430,501​ deaths, according to a Reuters tally.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 2.3%, extending its losses from 0.3% earlier in the day, with Australian shares off 2.2% and South Korea falling 4.8%.
Japan's Nikkei also extended losses to 3.5%. Chinese shares joined the sell-off with the blue-chip CSI300 index down nearly 1%.
"A more balanced assessment of economic risks and the probable recovery profile is materialising, at least in the short term. That makes it difficult to see the previous dynamism of upward momentum in risk appetite returning immediately," ANZ Research said in a report.
Economic data from China did little to revive risk appetite.
China's industrial output rose 4.4% in May from a year ago, less than expected, while retail sales fell a larger-than-expected 2.8% in a sign of weak domestic demand.
The Chinese yuan extended losses in offshore trade after the data to be last at 7.0883 per dollar.
Some analysts were still hopeful of a revival in sentiment.
"We assume that any second wave is likely to be more manageable than the first given earlier policy experience," analysts at Morgan Stanley wrote in a note.
"Policy easing will also help Asia (excluding Japan) get back on its feet better."
The risk-sensitive currencies of Australia hit $0.6779, the lowest level since June 2, after breaking below Friday's low of $0.6800.
Elsewhere, the safe haven Japanese yen rose on the greenback to 107.17 yen.
Analysts said further tests awaited global markets this week – in particular whether re-opening hopes could still push equities higher.
Federal Reserve Chairman Jerome Powell is also due to testify before Congress where "he may try to spin a more upbeat/hopeful outlook – but whether markets listen remains to be seen," said Betashares chief economist David Bassanese.
Oil fell more than 3% on Monday, extending losses from last week, on worries renewed outbreaks of the coronavirus could weigh on the recovery of fuel demand.
Brent crude futures fell 3.5%, to $37.39 a barrel by 0612 GMT, while U.S. West Texas Intermediate crude futures were down 4.9%, to $34.49 a barrel.
Oil investors await OPEC+ committee meetings of experts later this week who will advise the producer group and its allies on output cuts.


Oil prices rise further on tight supply outlook, eyes on OPEC+

Oil prices rise further on tight supply outlook, eyes on OPEC+
Updated 31 min 19 sec ago

Oil prices rise further on tight supply outlook, eyes on OPEC+

Oil prices rise further on tight supply outlook, eyes on OPEC+
  • U.S. infrastructure bill brightens demand outlook - analysts
  • OPEC+ meeting on July 1, seen cautious with easing output cuts

SINGAPORE: Oil prices climbed for a third straight session on Friday, on track for a fifth consecutive weekly gain, as demand growth is expected to outstrip supply on bets that OPEC+ producers will be cautious in returning more output to the market from August.
Brent crude futures rose 6 cents, or 0.1 percent, to $75.62 a barrel at 6:46 a.m. GMT, heading for a 2.9 percent jump for the week.
US West Texas Intermediate (WTI) crude futures were up 5 cents, or 0.1 percent, at $73.35 a barrel, headed for a 2.4 percent weekly gain.
Both benchmark contracts settled at their highest levels since October 2018 on Thursday.
“Expectations of tightness in global market is the major factor supporting crude oil as demand is recovering while OPEC+ has constrained supply and US stocks are falling,” said Ravindra Rao, vice president for commodities at Kotak Securities.
Oil also got some support on Friday as the approval of US infrastructure bill boosted optimism for energy demand outlook, analysts said.
All eyes are on the Organization of the Petroleum Exporting Countries, Russia and allies — together called OPEC+ — who are due to meet on July 1 to discuss further easing of their output cuts from August.
“(The market) certainly has momentum behind it...It’s really in the hands of OPEC+,” said Commonwealth Bank commodities analyst Vivek Dhar.
On the demand side, the key factors OPEC+ will have to consider are strong growth in the United States, Europe and China, bolstered by vaccine rollouts and economies reopening, offset by rising COVID-19 cases and outbreaks in other locations, analysts said.
“I think OPEC+ will carefully calibrate production hikes from August onwards to meet rising demand without causing significant price fluctuations,” said Margaret Yang, a strategist at Singapore-based DailyFX.
“The market has likely priced-in an August hike in advance,” she added.
ANZ analysts have predicted OPEC+ would step up supply with a small increase of 500,000 barrels per day in August, adding to the 2.1 million bpd they agreed to return to the market from May through July.
The prospect of sanctions being lifted on Iran and more of its oil hitting the market anytime soon has dimmed, with a US official saying “serious differences” remain over a range of issues over Iran’s compliance with the 2015 nuclear deal.


Iraq, UAE’s Masdar sign solar power agreement

Iraq, UAE’s Masdar sign solar power agreement
Updated 47 min 8 sec ago

Iraq, UAE’s Masdar sign solar power agreement

Iraq, UAE’s Masdar sign solar power agreement
  • 2,000 MW of solar to be built according to agreement
  • Cost of deal undisclosed by Iraqi Oil Ministry

DUBAI: The Iraqi electricity ministry signed with Masdar, a United Arab Emirates-based renewable power developer, an agreement to build solar power projects in central and southern Iraq, with a total capacity of 2,000 Megawatts, the Iraqi oil ministry said on Thursday in a statement.
The project is the biggest investment in Iraq’s renewable energy industry, the statement said, without indicating its total cost.
Iraq is planning to build a number of power plants in the coming years in partnership with international and Arab companies. Some will use solar energy, while others will run on fossil fuels, including gas that is produced during the extraction of oil, by introducing it into the electricity production system, Iraq Oil Minister Ihsan Abdul Jabbar told Asharq recently.


Lebanon caretaker PM approves financing fuel imports at weaker exchange rate

Lebanon caretaker PM approves financing fuel imports at weaker exchange rate
Updated 25 June 2021

Lebanon caretaker PM approves financing fuel imports at weaker exchange rate

Lebanon caretaker PM approves financing fuel imports at weaker exchange rate
  • Lebanon is in the throes of a financial crisis described by the World Bank as one of the deepest depressions of modern history
  • Lebanon’s central bank asked the government on Thursday to provide it with a legal basis to lend it foreign currency from its mandatory reserves to fund the subsidised fuel imports

BEIRUT: Lebanon’s caretaker prime minister on Friday approved a proposal to finance fuel imports at the rate of 3,900 Lebanese pounds to the dollar, instead of the previous 1,500 pound rate, amidst worsening gasoline shortages.
The weaker exchange rate, which will effectively decrease the subsidy on fuel, is expected to raise the price of gasoline for consumers but enable the government to supply fuel for a longer period of time.
Lebanon is in the throes of a financial crisis described by the World Bank as one of the deepest depressions of modern history. Fuel shortages in past weeks have forced motorists to queue for hours for dribbles of gasoline.
Lebanon’s subsidy program, introduced last year as the country’s economic meltdown translated to harsher living conditions, covers basic goods such as wheat, medicine and fuel and costs around $6 billion a year.
Half of that amount is spent on fuel.
Lebanon’s central bank asked the government on Thursday to provide it with a legal basis to lend it foreign currency from its mandatory reserves to fund the subsidised fuel imports, an indication that the bank has all but run out of reserves.
Mandatory reserves — hard currency deposits parked by local lenders at the central bank — represent a percentage of customer deposits and are usually not drawn upon except in exceptional circumstances, with the correct legal permission.
Lebanon’s foreign currency reserves stood at slightly more than $15 billion in March. The Central Bank has not given an updated figure since then. 


Iraq targets 90% self-sufficiency in natural gas by 2025

Iraq targets 90% self-sufficiency in natural gas by 2025
Updated 25 June 2021

Iraq targets 90% self-sufficiency in natural gas by 2025

Iraq targets 90% self-sufficiency in natural gas by 2025
  • Iraq currently consumers 3,5000 cubic feet of gas, produces 1,300 cubic feet
  • Iraq imports the rest of its gas from Iran

RIYADH: The Iraqi Ministry of Oil plans to attract a contractor to invest in Akkas gas field, to produce 4,000 million cubic feet of gas by 2025, which represents 90 percent of Iraq’s need for electric power production, said Minister Ihsan Abdul Jabbar.

Iraq will need more gas for electric power by 2030 to keep pace with the rise in the population, which is expected to increase by 10 million people to 50 million by then, he told Asharq.

Iraq will still need to import 15 percent of the gas fuel it needs, he said. Infrastructure is being built in the south to open new outlets to import gas from other countries such as Qatar when needed, he said.

There are currently new projects in the governorates of Dhi Qar and Maysan, Abdul Jabbar said.

Iraq currently consumes about 3,500 million standard cubic feet of natural gas, of which 1,300 cubic feet is produced in Iraq and the rest imported from Iran, while the actual need for Iraq amounts to 4,500 million cubic feet, he said.

Iraq is planning to build a number of power plants in the coming years in partnership with international and Arab companies. Some will use solar energy, while others will run on fossil fuels, including gas that is produced during the extraction of oil, by introducing it into the electricity production system, Abdul Jabbar said.

Iraq plans to end gas flaring altogether by 2025, he said.


UAE may become first major oil exporter to target net zero by 2050

UAE may become first major oil exporter to target net zero by 2050
Updated 25 June 2021

UAE may become first major oil exporter to target net zero by 2050

UAE may become first major oil exporter to target net zero by 2050
  • UAE can hit target while continuing to sell oil and gas
  • UAE may announce plan before Glasgow climate summit

ABU DHABI: The UAE is considering a 2050 target to align with a global push to keep temperatures from rising more than 1.5 degrees Celsius from pre-industrial levels, Bloomberg reported citing people familiar with the matter.

If the discussions succeed, the UAE could become the first among OPEC countries to technically reach net zero while continuing with plans to invest billions in oil extraction.

This move would please Western countries pushing for stronger climate commitments but won’t require it to sell less oil.

The net-zero charge is being led by Sultan Ahmed Al Jaber, the UAE’s special envoy for climate change and its minister of industry and advanced technology.

We are “certainly working on a whole-of-government approach to see at what point it would be feasible to achieve net zero,” Hana AlHashimi, who heads Al Jaber’s office, said on a call hosted by the US-UAE Business Council on Wednesday, according to Bloomberg. “I’d encourage you to stay tuned,” she said.

The country aims to make an announcement before the UN climate summit in Glasgow in November, the people said, asking not to be identified for the privacy of the ongoing talks.

Emissions from burning fossil fuels after they’re shipped abroad aren’t included in such country-level targets. The fossil fuels remain UAE’s biggest source of revenue, contributing about 30 percent to GDP. Still, the nation has taken steps to bolster its green credentials.

Only half of all power capacity is set to be emission free by 2050, consisting of renewables and nuclear, according to the UAE’s long-term energy plan. The country plans to meet the rest of its energy needs with gas and coal.

Climate Action Tracker, a nonprofit that analyzes climate goals, rates the UAE’s policies “highly insufficient.”

The UAE is now bidding to host the UN’s global climate talks in 2023. It’s up against South Korea, which has already set a net-zero by 2050 goal.

The UAE has been a target of US lobbying for stronger green commitments. It’s among the few countries to host special climate envoy John Kerry twice since he took office earlier this year, Bloomberg said.

Kerry expressed optimism that Saudi Arabia will agree to a net-zero emissions target of around 2050 after visiting the nation on his most recent trip to the region.