Oil plunges again as virus ravages energy markets

SINGAPORE - Brent crude plunged more than 12 percent to below $17 a barrel Wednesday while US oil erased early gains and fell, as the coronavirus strangles demand and ravages energy markets, while storage facilities approach full capacity. 

In another day of volatile trading, US benchmark WTI surged in early Asian deals while Brent also edged up on news that top producers had held talks -- only for prices to suddenly change course.

Brent dropped 12.31 percent to $16.98 a barrel, extending heavy losses from a day earlier. 

WTI for June delivery, which had rebounded about 20 percent at the open, was down around five percent at $11 a barrel in the afternoon.

On Monday, WTI for May delivery collapsed to an unprecedented low of minus $40.32 as traders scrambled to sell it before the contract expired Tuesday, but could find few buyers with storage capacity fast filling up. 

The negative prices meant that traders were forced to pay to have the crude taken off their hands.

Analysts said the morning bounce was driven by news that members of exporting group OPEC, as well as some allies in the OPEC+ grouping, held a teleconference Tuesday -- but grim reality soon returned to the markets. 

Prices have plunged as lockdowns and travel restrictions introduced worldwide to stem the spread of the virus hammer demand, and observers believe there is little way out for oil except bringing an end to the pandemic. 

"The overtly bearish sentiment may well keep prices suppressed in the near-term until we find the light at the end of the tunnel with progressive resumption of halted economic activities across the globe," said Jingyi Pan, a market strategist with IG.

US crude has been particularly hard-hit because of storage problems, as WTI is delivered at a single, inland point, although the sell-off has now spread to Brent. 

The crisis was worsened by a price war between Saudi Arabia and Russia. They drew a line under the dispute earlier this month and, along with other top producers, agreed to slash output by almost 10 million barrels a day to shore up virus-hit markets. 

But that has had little effect, with prices continuing to plummet, as analysts predict it will not make up for the massive hit to demand. 

Agence France-Presse

Despite Saudi turmoil, new oil shock unlikely

NEW YORK -- The past week's sudden surge in oil prices brought to mind the nightmare of shortages, but it's not too likely motorists will be queueing to fill up around the world, analysts say.

All it took was a September 14 strike on key oil infrastructure in Saudi Arabia to abruptly leave the world's main supplier producing just half its normal amount. That sent the price of Brent crude flying 15 percent higher in a single day.

The price on a barrel of crude has come back down since then and by Friday was trading around $65. 

Given the slowdown in the global economy and the abundance of crude produced worldwide, the prospect of a $100 barrel, for now, doesn't look too likely.

"In essence, the world is far better equipped to handle oil shocks than it was in the '70s," explained Harry Tchilinguirian, the head of commodity research at BNP Paribas.

In 1973, after an embargo by the Organization of the Petroleum Exporting Countries (OPEC) against Israel's allies in the midst of the Yom Kippur War, and in 1979, after the Iranian revolution, crude oil prices soared in just a few months, bringing developed economies to their knees.

Reduced dependence

"Currently, an oil shock would hardly have the same devastating effects" because countries grew accustomed to such events, economists at Commerzbank said in a note.

On top of that, "central banks would not react to a supply shock with massive interest rate hikes to combat rising inflation," they said.

Most importantly, however, economies have reduced their dependence on oil.

Consumption in the United States, for example, rose from 17.3 million barrels per day (mbd) in 1973 to 20.5 mbd in 2018, an increase of only 18 percent even as the country's real gross domestic product jumped 230 percent. 

In Germany, households spent only 2.6 percent of their budget on fuel in 2018.

Many economies have taken strides away from heavy oil consumption, thanks to transport and energy-efficient industries, and alternative sources such as natural gas or renewable energy.

When oil prices held well above $100 a barrel between 2011 and 2014, it did not lead to economic collapse. The world has also now become less dependent on a few huge producers.

The first oil crisis led to the creation in 1974 of the International Energy Agency, which requires OECD countries to keep in reserve the equivalent of at least 90 days of their net imports of crude.

On top of that, oil production has branched far beyond the Middle East, said Tchilinguirian, referring to North Sea oil exploited since the 1980s, deep-sea exploitation off the coast of West Africa and Brazil, and the oil sands of Canada.

The United States, long deeply dependent upon imports, has become a major producer and exporter thanks to shale oil and new technologies.

Such factors help smooth things out in the event of a major disruption like the attack on Saudi facilities.

As such, a country like Saudi Arabia would probably no longer decide to voluntarily suspend its exports "because it could lose its status as a reliable supplier," says Alan Gelder, refined products specialist for Wood Mackenzie.

Even if an oil shock is unlikely, "you can never say there is zero risk," said Andrew Lebow, oil market specialist for Commodity Research Group.

"Especially," he added "if there is a major war that closes the Strait of Hormuz," which a third of all petroleum products shipped by sea pass through.

The effects of a possible oil shock, however, "should not be underestimated," the Commerzbank economists warned. 

"Many economies are currently struggling with problems anyway and the central banks have little room for maneuver (...) to help the affected economies," they said.

source: news.abs-cbn.com

US crude oil hits 2019 high on tight supply

LONDON - US crude oil hit a 2019 high on Monday and Brent gained a dollar after tight supply and positive signs for the global economy drove both benchmarks' largest first-quarter gains in nearly a decade.

US West Texas Intermediate (WTI) futures were up 68 cents, or 1.13 percent, at $60.82 by 1125 GMT, after briefly reaching their highest in more than four months at $60.90. WTI gained 32 percent in the first quarter.

Brent crude for June delivery was up $1.03, or 1.52 percent, at $68.54, having risen 27 percent in the January-March period.

Positive Chinese factory gauges and signs of progress in Sino-US trade talks have boosted sentiment, helping to buoy regional stock markets.

"Better-than-expected Chinese manufacturing data has helped markets begin the first day of the new quarter on a bullish note, with major stock indices across Asia surging," said Mihir Kapadia, chief executive of Sun Global Investments.

"Chinese manufacturing output is quite reflective of global demand, and any increase indicates a flurry of economic activity across major economies."

The United States and China said they made progress in trade talks that concluded on Friday in Beijing, with Washington saying the negotiations were "candid and constructive" as the world's two largest economies try to resolve their trade war.

Analysts have turned cautiously optimistic on the oil market, a monthly Reuters poll showed on Friday, lifting their forecast for the average Brent price in 2019 for the first time in five months to $67.12.

Hedge funds and other money managers raised their net long US crude futures and options positions to 243,209 in the week to March 26, the US Commodity Futures Trading Commission said.

On the supply front, booming American production has steadied, with the US government reporting on Friday that domestic output in the world's top crude producer edged lower in January to 11.9 million barrels per day.

US energy companies last week reduced the number of oil rigs operating to the lowest level in nearly a year, cutting the most rigs during one quarter in three years, energy services firm Baker Hughes said.

Meanwhile, oil prices are being propped up by US sanctions on Iran and Venezuela along with voluntary supply cuts by the Organization of the Petroleum Exporting Countries and other major producers.

Washington has instructed oil trading houses and refiners to further cut dealings with Venezuela or face sanctions themselves, sources told Reuters, and has urged Malaysia and Singapore to be vigilant for illicit Iranian crude in its waterways.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson)

source: news.abs-cbn.com

Oil slump sends stocks, bond yields sliding

LONDON - A renewed slump in oil prices to seven-month lows dragged down world stocks on Wednesday and flattened bond curves as bets that inflation and interest rates will stay lower for even longer began to build again.

Signs of a growing glut of supply sent Brent crude futures skidding back to $45.50 a barrel as European trading gathered momentum. Poorly performing banking stocks also made for a weak start for London, Paris and Frankfurt's stock markets.

The slide in energy costs boosted bond prices and flattened yield curves as investors priced in lower inflation for longer, while safe-haven flows underpinned the Japanese yen.

The spread between yields on U.S. five-year notes and 30-year bonds shrank to the smallest since 2007 as investors wagered the Federal Reserve might have to delay further rate hikes.

Thirty-year German debt yields bonds also tumbled back towards two-month lows, adding to a more than 20-basis-point drop over the past month and ahead of what will now be a closely watched sale of 30-year debt in Berlin later.

"The plunge in oil prices ignited a bull flattening on the German and U.S. curve," analysts at UniCredit said in a note adding that it suggested "reflation trades are finally deflated."

The recent setback for crude and commodity prices as well some equity markets is partly down to doubts over U.S. President Donald Trump's promised multi-trillion dollar stimulus program, which had raised hopes of boosted inflation and growth.

"Brent now the lowest since mid-November: remember that whole reflation thing? No, neither does the market," Rabobank analysts told clients in a reference to Brent crude futures, which have slid almost 10 percent this month.

Oil had shed 2 percent on Tuesday, taking U.S. crude futures 20 percent off recent highs and thus into official bear territory, a red flag to investors who follow technical trends.

In Asia there had been muted reaction to global index provider MSCI's decision to add the first batch of mainland Chinese stocks to its popular emerging equity benchmark.

Indexes in Shanghai and Shenzen moved around 0.5 percent higher after the decision, which could ultimately bring $340 billion of foreign capital to the so-called A-share market.

The commodity and bond market turbulence and falls in Europe pushed MSCI's all-country share index down 0.3 percent after its 0.7-percent slide on Tuesday compounded by a weak close on Wall Street .

JOINING THE CLUB

The acceptance of some Chinese "A" shares into MSCI's Emerging Markets Index was seen as a symbolic win for Beijing after three failed attempts. Yet the step is still a small one.

Only 222 stocks are being included and, with a weighting of just 5 percent, they will account for only 0.73 percent of the Emerging Markets Index.

MSCI estimated the change, due around the middle of next year, would drive inflows of between $17 billion and $18 billion. China's market cap is roughly $7 trillion.

The index provider set out a laundry list of liberalization requirements before it would consider further expansion.

"We suspect that it will be a long time before this happens," wrote analysts at Capital Economics in a note.

"While China's weighting in the MSCI Emerging Markets Index may ultimately rise to 40 percent or so, this rise is likely to be slow," they added. "The upshot is that any initial boost to equities is likely to be small."

The initial reaction was indeed restrained, with China's CSI300 index up 0.5 percent.

MSCI also said it would consult on adding Saudi Arabia to the emerging markets benchmark and that Nigeria will remain a frontier market, but it shocked many emerging market investors by declining to upgrade Argentina from the frontier market category.

In currency markets, the flight from oil and into long-dated government bond benefited the safe-have yen which climbed to 111.120 per dollar. The U.S. currency was holding its own elsewhere though - oil and the greenback often move inversely. Against a basket of currencies, it was steady at 97.736 having touched a five-week peak overnight.

The euro stood at $1.1131 after hitting a three-week low, while the dollar eased a touch on the yen to 111.27.

Sterling was still in the firing line sliding back under $1.26 and towards 90 percent per euro.

It took a spill after Bank of England Governor Mark Carney hosed down speculation that he might soon back higher interest rates, saying he first wanted to see how the economy coped with Brexit talks.

(Reporting by Wayne Cole; Editing by Eric Meijer and Andrew Heavens)

source: news.abs-cbn.com

Global markets: Asian shares firm, betting China won't disappoint

SYDNEY - Asian shares inched ahead on Wednesday after Wall Street got a lift from encouraging corporate earnings and investors wagered a coming barrage of Chinese data would confirm the economy had at least stabilized.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 percent, on top of a jump of 1.4 percent on Tuesday.

Australian shares firmed 0.3 percent, while Nikkei futures pointed to a steady start for the cash index Nikkei.

All eyes were on the Chinese gross domestic product (GDP) report due at 0200 GMT. While there are some doubts about the reliability of the data, markets tend to take them on face value.

The economy is forecast to have expanded by 6.7 percent in the year to September, underpinned by government stimulus and a hot property market.

Other data due is expected to show a slight pick-up in retail sales, industrial output and urban investment.

Figures out on Tuesday showed Chinese banks extended a surprisingly strong 1.22 trillion yuan ($181 billion) of new loans in September, capping a record nine-month lending spree.

Much of that growth has been driven by a booming housing market, that authorities are now trying to clamp down on without triggering a price collapse.

On Wall Street, the Dow ended Tuesday up 0.42 percent, while the S&P 500 added 0.62 percent and the Nasdaq 0.85 percent. The pan-European STOXX 600 index rose 1.5 percent to its highest level in nearly a week.

Of the 52 S&P 500 companies that have reported results to date for the third quarter, 81 percent had earnings that topped average analyst estimates, according to Thomson Reuters I/B/E/S.

One company seemingly disappointing investors was Intel , which slid 5.4 percent after the bell despite beating expectations on its earnings.

POUND UP AMID BREXIT CONFUSION

A report on US consumer prices showed underlying inflation moderated slightly in September to 2.2 percent, leading the market to slightly pare back bets on a December rate hike.

Fed fund futures imply around a 65 percent probability of a move, down from 70 percent.

Federal Reserve Chair Janet Yellen said last week the US central bank could allow inflation to run above its target.

US Treasury yields dipped, in line with their UK counterparts, amid confusion on whether parliament will have to ratify Britain's exit from the European Union.

British lawmakers are seen as less inclined to take a hard line on Brexit than Prime Minister Theresa May.

The news headlines caught the market very short of sterling and left the pound up at $1.2297, after a rally of 1 percent on Tuesday.

The dollar was steady on the yen at 103.85, after edging back from 104.20 the previous session. Against a basket of currencies it was steady at 97.861.

The euro remained vulnerable at $1.0977 ahead of Thursday's meeting of the European Central Bank where some investors wager President Mario Draghi will push back against talk of a tapering in its asset buying.

In commodity markets, oil prices extended gains as an industry group's data showed an unexpected draw in US crude inventories last week.

Brent crude was quoted around $52.10 a barrel, while US crude added 50 cents to $50.79.

source: www.abs-cbnnews.com