Oil prices rise as market awaits deal output deal

Oil prices rise as market awaits deal output deal
OPEC and OPEC+ postponed talks on next year’s oil output policy from Tuesday to Thursday. (Shutterstock)
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Updated 03 December 2020

Oil prices rise as market awaits deal output deal

Oil prices rise as market awaits deal output deal
  • OPEC and its allies create uncertainty with two-day delay to meeting to decide whether to increase production

LONDON: Oil prices rose on Wednesday as the market awaited a pact from producers on output, which many traders expect will continue to be reined in, and Britain’s approval of a COVID-19 vaccine gave hopes for a demand recovery a boost.

Prices were hit earlier by a surprise build in oil inventories in the US and as OPEC and its allies created uncertainty with a two-day delay to a formal meeting to decide whether to increase production in January.

Brent crude oil futures were up 1.9 percent at $48.31 in late afternoon trade in London, while West Texas Intermediate crude was also up about 2 percent to $45.46.

Industry data from the American Petroleum Institute showed US crude inventories rose by 4.1 million barrels last week, compared with analysts’ expectations in a Reuters poll for a draw of 2.4 million barrels.

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies, a group known as OPEC+, postponed talks on next year’s oil output policy to Thursday from Tuesday, according to sources.

The group this year imposed production cuts of 7.7 million barrels per day (bpd) as the coronavirus pandemic hit fuel demand.

It had been widely expected to roll those reductions over into January-March 2021 amid spikes in COVID-19 cases.

But the UAE said this week that even though it could support a rollover, it would struggle to continue with the same deep output reductions into 2021.

“Energy markets will remain on edge until OPEC+ gets past tomorrow’s meeting. Oil prices should continue to have underlying support as vaccine makers announce start dates for beginning immunizations,” he added.

Britain on Wednesday became the first western country to approve a COVID-19 vaccine, jumping ahead of the US and the EU in what may be a first step toward a return to normal life and boost to oil consumption.


Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
Updated 53 min 2 sec ago

Jack Ma video reappearance fails to soothe all investor concerns

Jack Ma video reappearance fails to soothe all investor concerns
  • Ma had not appeared in public since Oct. 24, after he blasted China’s regulatory system
  • Chinese regulators have set about reining in Ma’s financial and e-commerce empires

HONG KONG: Billionaire Jack Ma’s 50-second video reappearance has done little to resolve Alibaba Group’s troubled relationship with regulators that is making some investors hesitate about owning the Chinese e-commerce giant’s stock.

Relief at Ma’s first public appearance added $58 billion in market value on Wednesday as Alibaba’s Hong Kong-listed stock soared, though doubts crept in a day later and the stock fell more than 3 percent as the broader market steadied near two-year highs.

Ma had not appeared in public since Oct. 24, when he blasted China’s regulatory system. That set him on a collision course with officials and led to the suspension of Alibaba fintech affiliate Ant Group’s blockbuster $37 billion IPO.

A source familiar with the matter said Ma cleared his schedule late last year to keep a low profile, prompting discussion at Alibaba about when and how he should reappear to assure investors.

It was decided he should do something that would appear as part of his normal routine, rather than anything overt that could irk the government.

While Ma has stepped down from corporate positions, he retains significant influence over Alibaba and Ant, and the regulatory crackdown on his business empire coupled with his absence was a concern for some investors.

There was skepticism that Ma’s brief reappearance meant all was well with his businesses.

“The coast is not all clear for Alibaba and it is a judgment call whether you believe the company can still thrive in the changing environment,” said Dave Wang, a portfolio manager at Singapore’s Nuvest Captial, which owns Alibaba stock.

“Without some skepticism, the price would be a lot higher,” he said, adding his firm had increased exposure to China and with it Alibaba, which he believes can prosper over the medium to longer term.

Two of the company’s investors in the US who have sold out or reduced positions in Alibaba said they needed more reassurance about the company and the regulatory environment before reconsidering the stock.

“One of our top criteria is leadership and we were investing in Alibaba because I really respect Jack Ma as a leader,” said William Huston, founder and director of institutional services at independent investment advisory firm Bay Street Capital Holdings in Palo Alto, CA, with assets under management of $86 million.

“We all know that just because he showed up ... doesn’t necessarily explain what is going on.”

Huston, whose firm cut its holding in the Chinese firm last year from 8 percent of its portfolio to less than 1 percent, said the halting of the Ant IPO in November had caused uncertainty, and that Alibaba was “not a prudent investment” for it going forward.

David Kotok, chairman and chief investment officer at Cumberland Advisers, Florida, which has about $4 billion in assets, said he held Alibaba last year but also sold as the Ant IPO was pulled.

“When you don’t know what to do in an evolving situation like this you can’t use traditional securities analytics to reach decisions. We are standing aside and watching,” Kotok said.

Chinese regulators have set about reining in Ma’s financial and e-commerce empires since the Ant IPO suspension, which has weighed on its stock that remains below levels prior to the cancelation of the Ant IPO.

“What his actual state is will be completely up to Beijing to reveal to us,” Leland Miller, CEO of US-based consultancy China Beige Book.

“What we do know is whether Jack is running around, Jack is hiding or something else, Alibaba is not in the clear. There is a lot more of the story still to see.”

Some investors are, however, betting on long-term potential for Alibaba in the world’s second-largest economy.

Dennis Dick, a proprietary trader at Bright Trading, who holds Alibaba shares, said he had protected against a potential fall when speculation about Ma’s whereabouts began by buying put options.

He covered those puts earlier in January on a report that Ma was OK and retains a long position in the stock.

“We have been investors for many years ... there’s a very strong team of executives and Alibaba is bigger than just one person,” said a Hong Kong based long-only investor, declining to be named as he was not authorized to speak to the media.