SINGAPORE: Oil prices edged higher on Friday but were on track for a weekly decline amid fears of sharp interest rate hikes that would slam global growth and hit fuel demand.
Brent crude futures were up 24 cents, or 0.3 percent, to $91.08 a barrel as at 0315 GMT, but were down 1.9 percent for the week so far.
US West Texas Intermediate (WTI) crude futures gained 10 cents, or 0.1 percent, to $85.20 a barrel, but were also down 1.9 percent on a weekly basis.
“Today’s morning rebound for oil prices can only be described as a short-term correction, as the Fed will raise interest rates by 75bp or 100bp next week,” said Leon Li, an analyst at CMC Markets.
“Although the probability of a 100 bp rate hike is relatively small, it would bring uncertainty to market sentiment. So there is still a risk that oil prices could drop lower next week.”
Both benchmarks are headed for a third consecutive weekly loss, hurt partly by a strong US dollar, which makes oil more expensive for buyers using other currencies. The dollar index ticked down on Friday but held near last week’s high above 110.
Investors are bracing for a US rate hike next week after data showed underlying inflation broadening out, and amid growing concerns of a global recession.
The market was also rattled by the International Energy Agency’s outlook for almost zero growth in oil demand in the fourth quarter due to a weaker demand outlook for China.
“Oil fundamentals are still mostly bearish as China’s demand outlook remains a big question mark and as the inflation fighting Fed seems poised to weaken the US economy,” OANDA analyst Edward Moya said in a note.
Analysts said sentiment suffered from comments by the US Department of Energy that it was unlikely to seek to refill the Strategic Petroleum Reserve until after fiscal 2023.
On the supply side, the market has found some support on dwindling expectations of a return of Iranian crude, as Western officials played down prospects of reviving a nuclear accord with Tehran.
Commonwealth Bank analyst Vivek Dhar said that supported the bank’s view that oil markets will tighten by the end of the year and Brent will return to $100 a barrel in the fourth quarter.
Oil prices may also be supported in the fourth quarter as OPEC+ members are likely to discuss production cuts at its October meeting, and as Europe would face an energy crisis amid uncertainty on oil and gas supply from Russia, added CMC’s Li.
World food prices decline for 10th month running in January, says UN Food Agency
Updated 03 February 2023
ROME: World food prices fell in January for a 10th consecutive month, and are now down some 18 percent from a record high hit last March following Russia’s invasion of Ukraine, the UN's food agency said on Friday.
The December figure was revised down from an original estimate of 132.4.
Falls in the prices of vegetable oils, dairy and sugar helped pull down the index, while cereals and meat remained largely stable, the FAO said.
In separate cereal supply and demand estimates on Friday, the FAO raised its forecast for global cereal production in 2022 to 2.77 billion tons from a previous estimate of 2.76 billion tons.
The FAO cereal price index rose just 0.1 percent month-on-month in January to give a 4.8 percent increase on the year.
International wheat prices declined 2.5 percent as production in Australia and Russia outpaced expectations. Rice, by contrast, jumped 6.2 percent, driven in part by strong local demand in some Asian exporting countries.
Vegetable oil prices fell 2.9 percent in January, the dairy index dipped 1.4 percent and sugar declined 1.1 percent. Meat slipped a mere 0.1 percent.
Looking at supply and demand for cereals, FAO said it expected a record global output of wheat in 2022 thanks to revised crop forecasts from Australia and Russia.
The forecast for world rice production was revised down on the back of lower-than-expected output in China, and is now predicted to decline 2.6 percent from its all-time high in 2021.
Looking ahead to 2023, FAO said early indications pointed to a likely expansion of winter wheat cropping in the northern hemisphere. However, it warned that high fertilizer costs may impact yields.
World cereal utilization in 2022/23 was forecast to dip 0.7 percent from the previous year to 2.78 billion tons. The estimate for world cereal stocks was pegged at 844 million tons, pushing down the world stock-to-use ratio for 2022/23 to 29.5 percent from 30.8 percent in 2021/22
Oil steadies as market eyes China recovery and EU embargo
Updated 03 February 2023
LONDON: Oil prices steadied on Friday but were on track for a second week of losses as the market awaited further signs of fuel demand recovery in China and the impact of an EU embargo and price cap on Russian oil products.
Brent crude LCOc1 futures fell 18 cents, or 0.2 percent, to $81.99 a barrel by 1043 GMT, having dropped by about 1 percent in the previous session. US West Texas Intermediate crude CLc1 futures slipped by 14 cents, or 0.2 percent, to $75.74.
Brent is poised to register a more than 5 percent decline this week while WTI is on course for a 4 percent drop.
"Oil prices are likely to tread water until it becomes clear how dynamically Chinese demand will recover or what the consequences of the EU embargo and price caps will be," Commerzbank said.
ANZ analysts pointed to a sharp jump in traffic in China's 15 largest cities after the Lunar New Year holiday but also noted that Chinese traders had been "relatively absent".
A slightly stronger dollar ahead of US job data kept a lid on gains. A stronger U.S. currency can curb oil demand because it usually makes the dollar-priced commodity more expensive for those holding other currencies.
US job growth in January is likely to have remained strong thanks to a resilient labour market, but expectations of a continued slowdown in wage gains offer the Federal Reserve some comfort in its fight against inflation, a Reuters survey showed.
The US central bank scaled back to a milder rate increase than those over the past year, but policymakers also projected that "ongoing increases" in borrowing costs would be needed.
Increases to interest rates in 2023 are likely to weigh on the US and European economies, boosting fears of an economic slowdown that is highly likely to dent global crude oil demand, said Priyanka Sachdeva, market analyst at Phillip Nova.
Investors are also eyeing developments on the Feb. 5 EU ban on Russian refined products, with member countries seeking a deal on Friday to set price caps for Russian oil products.
The Kremlin on Friday said that the EU embargo on Russia's refined oil products would lead to further imbalance global energy markets.
Who is Hindenburg, the firm targeting India’s Adani?
Hindenburg is an investment research firm with a focus on activist short-selling. It looks for corruption or fraud in the business world, such as accounting irregularities and bad actors in management, and It can make money out of its work
Updated 03 February 2023
NEW YORK: Hindenburg Research, the financial research firm with an explosive name and a track record of sending the stock prices of its targets tumbling, is taking on one of the world’s richest men.
Hindenburg is back in the headlines after last week accusing Indian conglomerate Adani Group of “a brazen stock manipulation and accounting fraud scheme.” It cited two years of research, including talks with former Adani senior executives and reviews of thousands of documents.
The Adani Group has blasted the accusations, calling them “a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts.”
Nevertheless, Hindenburg’s scorching allegations have caused the fortune of Adani Group’s founder, Gautam Adani, to slide by nearly $47 billion in just over a week, according to the Bloomberg Billionaires index. Here’s a look at the firm behind all the movement: What is it?
Hindenburg says it specializes in “forensic financial research.” In layman’s terms, it looks for corruption or fraud in the business world, such as accounting irregularities and bad actors in management.
Hindenburg has even come to be known as Ponzi hunters in some circles, according to the Washington Post, which detailed how it helped bring down an alleged $500 million scheme that targeted Mormons. Where did its name come from?
The firm says it sees the Hindenburg, the airship that famously caught fire in the 1930s to the cry of “Oh, the humanity,” as the “epitome of a totally man-made, totally avoidable disaster.” It says it looks for similar disasters in financial markets “before they lure in more unsuspecting victims.” Who else has Hindenburg gone after?
It’s perhaps most famous for a 2020 report on Nikola, a company in the electric-vehicle industry whose founder Hindenburg said made misleading claims to ink partnerships with top auto companies hungry to catch up to Tesla.
Among its allegations, Hindenburg accused Nikola of staging a video to calm skepticism about its truck, one that showed the vehicle cruising on a road. Hindenburg said the video was actually just showing the truck rolling down a hill after getting towed to the top. What has come of such accusations?
For Nikola, quick scrutiny from the government and investors.
The company and its founder, Trevor Milton, received grand jury subpoenas from the US Attorney’s office for the Southern District of New York and the N.Y. County District Attorney’s Office shortly after Hindenburg released its report.
The Securities and Exchange Commission also soon issued subpoenas to Nikola’s directors.
Milton was convicted this past October of charges he deceived investors with exaggerated claims about his company’s progress in producing zero-emission 18-wheel trucks fueled by electricity or hydrogen.
And Nikola in late 2021 agreed to pay $125 million to settle SEC charges that it defrauded investors by misleading them about its products, technical advancements, and commercial prospects. What does Hindenburg get out of this?
It can make money. In its Adani report, it said that it had taken a “short position in Adani Group Companies” through bonds that trade in the US and other investments that trade outside India.
It has made similar “short” bets against other companies it published unflattering reports on. A “short” trade is a way for someone to make money if an investment’s price falls. Afterward, if the price of a company’s stock or bonds falls because of the negative attention from the report, Hindenburg can profit.
Such short sellers have been criticized for unfairly pushing down prices of stocks with potentially unfounded allegations. But proponents also call them a healthy part of a stock market, keeping stock prices in check and preventing them from running too high.
Adani’s market losses top $100 billion as crisis shockwaves spread
Mukesh Ambani of Reliance Industries is now Asia’s richest person as Adani Group chairman's net worth plunges
S&P Dow Jones Indices said it would remove Adani Enterprises from widely used sustainability indices
Updated 03 February 2023
NEW DELHI/MUMBAI: Adani’s market losses swelled above $100 billion on Thursday, sparking worries about a potential systemic impact a day after the Indian group’s flagship firm abandoned its $2.5 billion stock offering.
Another challenge for Adani on Thursday came when S&P Dow Jones Indices said it would remove Adani Enterprises from widely used sustainability indices, effective Feb. 7, which would make the shares less appealing to sustainability-minded funds.
In addition, India’s National Stock Exchange said it has placed on additional surveillance shares of Adani Enterprises , Adani Ports and Ambuja Cements .
However, Adani Group Chairman Gautam Adani is in talks with lenders to prepay and release pledged shares as he seeks to restore confidence in the financial health of his conglomerate, Bloomberg News reported on Thursday.
The shock withdrawal of Adani Enterprises’ share sale marks a dramatic setback for founder Adani, the school dropout-turned-billionaire whose fortunes rose rapidly in recent years but have plunged in just a week after a critical research report by US-based short-seller Hindenburg Research.
Aborting the share sale sent shockwaves across markets, politics and business. Adani stocks plunged, opposition lawmakers called for a wider probe and India’s central bank sprang into action to check on the exposure of banks to the group. Meanwhile, Citigroup’s wealth unit stopped making margin loans to clients against Adani Group securities.
The crisis marks an dramatic turn of fortune for Adani, who has in recent years forged partnerships with foreign giants such as France’s TotalEnergies and attracted investors such as Abu Dhabi’s International Holding Company as he pursues a global expansion stretching from ports to the power sector.
In a shock move late on Wednesday, Adani called off the share sale as a stocks rout sparked by Hindenburg’s criticisms intensified, despite it being fully subscribed a day earlier.
“Adani may have started a confidence crisis in Indian shares and that could have broader market implications,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Adani Enterprises shares tumbled 27 percent on Thursday, closing at their lowest level since March 2022.
Other group companies also lost further ground, with 10 percent losses at Adani Total Gas, Adani Green Energy and Adani Transmission, while Adani Ports and Special Economic Zone shed nearly 7 percent.
Since Hindenburg’s report on Jan. 24, group companies have lost nearly half their combined market value. Adani Enterprises — described as an incubator of Adani’s businesses — has lost $26 billion in market capitalization.
Adani is also no longer Asia’s richest person, having slid to 16th in the Forbes rankings of the world’s wealthiest people, with his net worth almost halved to $64.6 billion in a week.
The 60-year-old had been third on the list, behind billionaires Elon Musk and Bernard Arnault.
His rival Mukesh Ambani of Reliance Industries is now Asia’s richest person.
Adani’s plummeting stock and bond prices have raised concerns about the likelihood of a wider impact on India’s financial system.
India’s central bank has asked local banks for details of their exposure to the Adani Group, government and banking sources told Reuters on Thursday.
CLSA estimates that Indian banks were exposed to about 40 percent of the $24.5 billion of Adani Group debt in the fiscal year to March 2022.
Dollar bonds issued by entities of Adani Group extended losses on Thursday, with notes of Adani Green Energy crashing to a record low. Adani Group entities made scheduled coupon payments on outstanding US dollar-denominated bonds on Thursday, Reuters reported citing sources.
“We see the market is losing confidence on how to gauge where the bottom can be and although there will be short-covering rebounds, we expect more fundamental downside risks given more private banks (are) likely to cut or reduce margin,” said Monica Hsiao, chief investment officer of Hong Kong-based credit fund Triada Capital.
In New Delhi, opposition lawmakers submitted notices in parliament demanding discussion of the short-seller’s report.
The Congress Party called for a Joint Parliamentary Committee be set up or a Supreme Court monitored investigation, while some lawmakers shouted anti-Adani slogans inside parliament, which was adjourned for the day. Adani vs Hindenburg
Adani made acquisitions worth $13.8 billion in 2022, Dealogic data showed, its highest ever and more than double the previous year.
The canceled fundraising was critical for Adani, which had said it would use $1.33 billion to fund green hydrogen projects, airports facilities and greenfield expressways, and $508 million to repay debt at some units. Hindenburg’s report alleged an improper use of offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about high debt and the valuations of seven listed Adani companies. The Adani Group has denied the accusations, saying the allegation of stock manipulation had “no basis” and stemmed from an ignorance of Indian law. It said it has always made the necessary regulatory disclosures.
Adani had managed to secure share sale subscriptions on Tuesday even though the stock’s market price was below the issue’s offer price. Maybank Securities and Abu Dhabi Investment Authority had bid for the anchor portion of the issue, investments which will now be reimbursed by Adani.
Late on Wednesday, the group’s founder said he was withdrawing the sale given the share price fall, adding his board felt going ahead with it “will not be morally correct.”
A EU ban on Russian refined products is set to take effect on Feb. 5, potentially dealing a blow to global supply
Updated 02 February 2023
LONDON: Oil prices were steady on Thursday as looming sanctions on Russian oil products added uncertainty over supply but the dollar lost value in a boost to the oil trade.
Brent crude futures fell 18 cents, or 0.2 percent, to $82.66 a barrel by 1415 GMT while West Texas Intermediate US crude futures lost 3 cents to $76.38.
Both benchmarks plunged more than 3 percent overnight after US government data showed a large build in oil stocks. A EU ban on Russian refined products is set to take effect on Feb. 5, potentially dealing a blow to global supply.
EU countries will seek a deal on Friday on a European Commission proposal to set price caps on Russian oil products after postponing a decision on Wednesday because of divisions among member states, diplomats said. The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 a barrel on premium Russian oil products such as diesel and a $45 per barrel cap on discounted products such as fuel oil.
Meanwhile an OPEC+ panel endorsed the producer group’s current output policy at a meeting on Wednesday, leaving production cuts agreed last year unchanged amid hopes of higher Chinese demand and uncertain prospects for Russian supply.
OPEC+ agreed to cut its production target by 2 million barrels per day — about 2 percent of global demand — from November last year until the end of 2023 to support the market.