OPEC July oil output surges as Gulf voluntary cuts end

An easing of lockdowns and lower supply have helped oil prices to climb above $40 from April’s 21-year low of below $16 a barrel. (Reuters)
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Updated 01 August 2020

OPEC July oil output surges as Gulf voluntary cuts end

  • Lockdown easing and lower supply have helped rise, although second wave concerns keep lid on gains

LONDON: OPEC oil output has risen by more than 1 million barrels per day (bpd) in July as Saudi Arabia and other Gulf members ended their voluntary extra supply curbs on top of an OPEC-led deal, and other members made limited progress on compliance.
The 13-member Organization of the Petroleum Exporting Countries pumped 23.32 million bpd on average in June, the survey found, up 970,000 bpd from June’s revised figure, which was the lowest since 1991.
OPEC and allies agreed in April to a record output cut as the coronavirus crisis hammered demand.
An easing of lockdowns and lower supply have helped oil to climb above $40 from April’s 21-year low of below $16 a barrel, although concerns of a second wave are keeping a lid on gains.
“Upside potential will continue to be in short supply so long as the COVID hangover lingers,” said Stephen Brennock of oil broker PVM.
OPEC, Russia and other producers, a group known as OPEC+, agreed to cuts of 9.7 million bpd, or 10 percent of global output, from May 1.
OPEC’s share, to be made by 10 members from October 2018 levels in the case of most countries, is 6.084 million bpd.
In July, they delivered 5.743 million bpd of the pledged reduction, equal to 94 percent compliance, the survey found. Compliance in June was revised up to 111 percent.
July’s increase is the biggest since April, when OPEC briefly pumped at will before the latest supply cut was agreed.

HIGHLIGHTS

• Record OPEC+ oil supply cut took effect on May 1.

• Saudi Arabia boosts supply close to quota levels.

• Easing lockdowns help oil climb above $40.

To further support the market, Saudi Arabia, Kuwait and the UAE had pledged to cut by an extra 1.18 million bpd in June only.
This helped to curb output last month to OPEC’s lowest since 1991, excluding membership changes, based on Reuters surveys and OPEC figures.
The biggest rise in supply in July came from Saudi Arabia, which pumped 8.4 million bpd, up 850,000 bpd from June and close to its quota, the survey found.
The UAE and Kuwait also boosted output close to their targets. Iraq and Nigeria, which boosted compliance in June and were laggards in previous OPEC+ deals, did not make any further cuts in July, the survey found, with Iraq boosting exports. Both have pledged to make additional reductions in
later months. “The low prices are making life difficult for those OPEC countries that are required to cut their production additionally,” said Eugen Weinberg, analyst at Commerzbank.
Iranian and Libyan supply held steady in July and Venezuelan output dropped further. All three are exempt from voluntary cuts because of US sanctions or internal issues limiting output. Libyan output has plunged since January due to a blockade of ports and fields by groups loyal to eastern-based commander Khalifa Haftar.
The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker-trackers such as Petro-Logistics and Kpler, and information provided by sources at oil companies, OPEC and consultants.


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.