WEEKLY ENERGY RECAP: Contrasting notes — but the story is the same

WEEKLY ENERGY RECAP: Contrasting notes — but the story is the same
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Updated 23 August 2020

WEEKLY ENERGY RECAP: Contrasting notes — but the story is the same

WEEKLY ENERGY RECAP: Contrasting notes — but the story is the same

The two international oil benchmarks ended the week on contrasting notes as Brent edged lower after two weeks of gains to $44.35 per barrel. Meanwhile, WTI advanced to $42.34 per barrel.

Still, the broader narrative of downward pressure on prices remained the same and oil remained steadfastly stuck in its current trading range.

The 21st OPEC Joint Ministerial Monitoring Committee (JMMC) meeting ended positively and emphasized the beneficial contribution of OPEC+ in rebalancing the global oil market.

Tellingly, prices did not rise in response the latest demonstration of the group’s continued commitment to output cuts, which perhaps reflects wider concerns about the pace of recovery from the coronavirus pandemic and the danger of a second wave. US crude oil exports to China will hit a record in September.

It coincides with lower refining runs in the US as the market is defined by weakness not only in the shale sector but also across the medium sour crude grades that are produced in the US Gulf coast. 

US refining utilization was 80.9 percent, which is the weakest seasonally adjusted figure in decades, after refiners shut down crude distillation units following the collapse in demand.

Another sign of the weakness in demand is the “contango” market structure which signals concerns about oversupply and describes a situation where the price of oil for future delivery is lower than for the current month.

This encourages storing barrels rather than selling them until prices improve.

This could yet lead to a repeat of the “super-contango” scenario witnessed in April when prices plummeted to historical lows.

Persistent weak demand continues to force refineries to shut down, with margins likely to remain depressed for some time.


Asia to dominate Davos virtual forum as virus-hit West struggles

Asia to dominate Davos virtual forum as virus-hit West struggles
The 2020 WEF, which took place in its usual Swiss Alpine resort of Davos, saw the global elite just starting to worry about a pandemic that surfaced in China a month earlier. (Shutterstock)
Updated 58 min 3 sec ago

Asia to dominate Davos virtual forum as virus-hit West struggles

Asia to dominate Davos virtual forum as virus-hit West struggles
  • Spotlight will be on Chinese President Xi Jinping, who will give a speech on Monday — the opening day of the event

PARIS: Emerging stronger from the COVID-19 pandemic, Asia is set to dominate this year’s virtual World Economic Forum as a virus-battered West struggles and a new US president faces particularly daunting challenges.

The 2020 WEF, which took place in its usual Swiss Alpine resort of Davos, saw the global elite just starting to worry about a pandemic that surfaced in China a month earlier.
While the coronavirus leaves a mounting death toll and upends economies, depriving millions of people of work, China and Asian countries in 2021 are making a strong comeback from the virus that hit them first.
In virtual format because of the pandemic, next week’s event is headlined: “A Crucial Year to Rebuild Trust.”
The spotlight will be on Chinese President Xi Jinping, who will give a speech on Monday, the opening day of the event that will last through next Friday.
The big names from Europe will be German Chancellor Angela Merkel, French President Emmanuel Macron and European Commission President Ursula von der Leyen, who heads the EU executive.
US President Joe Biden will not appear at the virtual Davos, which has never been a fixture on the White House calendar — even if the new administration has pledged to revive a US multilateral foreign policy after four years of Donald Trump’s America First approach.
Trump had been an exception as he stopped in Davos twice, with the real estate billionaire enjoying mixing with the global business elite.
Before him, Bill Clinton was the only American president who had traveled to Davos, and that was just once.
Showing up from Asia are China’s and South Korea’s presidents as well as the prime ministers of India and Japan.
Following the first virtual session, Davos will move in May to Singapore, far from the luxury Swiss ski resort where it has taken place since it was launched in 1971, the brainchild of German professor Klaus Schwab.
The stated reason for the changes is health safety.

FASTFACT

The big names from Europe will be German Chancellor Angela Merkel, French President Emmanuel Macron and European Commission President Ursula von der Leyen, who heads the EU executive.

But a virtual forum is not particularly attractive for the world’s well-heeled movers and shakers, who value huddles behind closed doors in fancy hotels over meetings in formal settings.
French insurance-credit group Euler Hermes said in a study this month that the “world’s economic center of gravity” (WECG) has been moving toward Asia since 2002.
“The COVID-19 crisis could accelerate the shifting global balance toward Asia,” it added.
“By 2030, we forecast the WECG, could be located around the confluence of China, India and Pakistan,” the study projected.
The speech by Xi, who addressed Davos back in 2017, seems almost to set the clock back, as if the business world seeks to erase the Trump era.
Four years ago, he presented himself as the champion of free trade, much to the joy of Davos participants who feared the newly elected Trump’s protectionist moves.
Biden is nevertheless sending John Kerry, the special climate envoy who will be welcomed after the new Democratic president has brought Washington back into the Paris climate accord.
The agenda includes workshops titled: “Stakeholder Capitalism: Building the Future” as well as “Advancing a New Social Contract” and “Resetting Consumption for a Sustainable Future.”
In a column published in mid-January, Schwab said 2021 could be a positive and historic year, 75 years after the original “Year Zero” following the devastation of World War II.
“We once again have a chance to rebuild,” he said, calling for rethinking capitalism in the light of a pandemic that has worsened inequality.
He said “COVID-19 has delivered the final blow” to the post-war model where free markets and limited government produced prosperity and progress that now is “no longer sustainable, environmentally or socially.”