OPEC postponses technical meetings to evaluate Omicron impact: sources

LONDON - OPEC and its allies have postponed technical meetings to later this week, giving themselves more time to assess the impact of the new Omicron coronavirus variant on oil demand and prices, according to OPEC+ sources and documents.

Oil prices crashed together with other financial markets on Friday by more than 10 percent, their largest one-day drop since April 2020, as the new variant spooked investors and added to concerns that a supply surplus could swell in the first quarter.

Friday's fall was exacerbated by low liquidity due to a US public holiday.

Before Friday, OPEC had already predicted the surplus would grow steeply after the United States and other major consumers decided to released oil stocks to help cool down prices.

OPEC and allies known as OPEC+ have move their joint technical committee to Wednesday from Monday, according to the documents. OPEC would hold a meeting the same day.

A joint ministerial monitoring committee will meet on Thursday instead of Tuesday, the documents showed, OPEC+ will also meet the same day, when a policy decision will likely be announced.

"We need more time to understand what this new variant is and if we need to overreact or not," one OPEC+ source said.

OPEC+ has been releasing 400,000 barrels per day of oil per month while winding down its record cuts from last year, when it cut production by as much as 10 million bpd to address lower demand caused by the virus lockdowns.

OPEC+ has some 3.8 million bpd of cuts still in place and some analysts have suggested the group could pause with the increases after the release of stocks and possible repercussions for demand from new lockdowns to contain the new variant.

-reuters- 

Crude crash brings down Singapore oil tycoon

SINGAPORE -- Singapore tycoon O.K. Lim built up his oil empire from a single-truck outfit through hard work and high-risk gambles, a rags-to-riches tale that made him a legend among crude traders.

But it all came crashing down when oil markets were plunged into unprecedented turmoil by the coronavirus pandemic and revealed the keen poker player appeared to have overplayed his hand.

Lim -- who projected a down-to-earth image but was, according to people who knew him, a "major risk-taker" -- dashed to court seeking protection from creditors for his firm Hin Leong Trading last month.

In a bombshell affidavit seen by AFP, Lim revealed the oil trader had "in truth... not been making profits in the last few years" -- despite having officially reported a healthy profit in 2019.

He admitted the firm he founded in the 1960s after emigrating from China had hidden $800 million in losses over the years, while it also owes almost $4 billion to banks.

Lim took responsibility for ordering the company, one of Asia's biggest oil traders, not to report the losses and also confessed it had sold off inventories that were supposed to backstop loans.

Hin Leong -- meaning "prosperity" in Chinese -- is one of the biggest industry casualties yet of the crude market collapse, and its demise last month marks an ignominious fall from grace for Lim.

'Major risk-taker'

The businessman -- whose full name is Lim Oon Kuin -- started the company with a single delivery truck shortly before Singapore became independent in 1965.

It grew into a major supplier of fuel used by ships, and its rise in some ways mirrored Singapore's growth from a gritty port to an affluent financial hub.

The firm played a key role in helping the city-state become the world's top ship refuelling port, observers say, and it expanded into ship chartering and management with a subsidiary that has a fleet of more than 150 vessels.

The picture that emerges of Lim himself, now in his 70s, is complex.

On one hand, he was a low-profile individual who sought to project a humble image -- you would not know he was a wealthy tycoon if you saw him walking down the street, according to those who knew him.

But he maintained a firm grip on Hin Leong, with one oil trader in Singapore -- who spoke anonymously -- describing him as a "typical Asian patriarch making all the decisions for the family business".

Jorge Montepeque, a veteran crude market executive who did business with Lim for a decade until 2001, said the Hin Leong founder could appear "almost detached" in meetings, as if unaware of what was happening.

"But that's not true, he very much knows what is going on... The reality is that he has been a major risk-taker," he told AFP.

'Too big to fail'

The firm's collapse has prompted a police investigation and sent shockwaves through the financial community, with a government agency offering assurances that the city-state's "oil-trading sector remains resilient".

The Singapore oil trade told AFP: "Nobody appeared to have thought that anything was amiss.

"The sentiment was that Hin Leong was too big to fail."

But it appears that taking risks and failing to hedge against a downturn came back to bite Hin Leong when it was hit by a double blow -- a Saudi-Russia price war and a virus-triggered demand shock.

Global oil demand has collapsed by around a third, according to some estimates, as the virus pandemic brings economic activity to a standstill.


A slide presentation made by Hin Leong for creditors before it went to court showed the company had total liabilities of $4.05 billion against assets of $714 million.

Bank debts of $3.85 billion comprised the lion's share of its liabilities -- with large sums owed to lenders including HSBC, Dutch bank ABN Amro and France's Societe Generale.

"What caught many by surprise was that they didn't have the cash. I mean, these guys were big," the oil trader said.

Hin Leong did not respond to requests to comment from AFP.

Lim has stepped down from his positions as director and managing director, although Hin Leong's final fate is still uncertain at this stage.

Observers say that the firm had likely hoped China would contain the virus and the oil market turmoil would be short-lived.

But such a strategy, said oil executive Montepeque, was like "taking all your assets and putting them all on the red on the casino roulette".

And after reading Lim's confessions, Montepeque said he believed the "game was up" for Hin Leong.

Agence France-Presse

Oil crash piles pressure on virus-hit Saudi economy

RIYADH - From empty hotels to shuttered beauty salons, oil-dependent Saudi Arabia is bracing for a coronavirus-led economic slump on top of possible austerity measures as crude prices go into free fall.

Huge losses are expected after the Arab world's biggest economy shut down cinemas, malls and restaurants, halted flights, suspended the year-round umrah pilgrimage and locked down eastern Qatif region -- home to around 500,000 -- in a bid to contain the deadly virus.

The top crude exporter also faces plummeting oil prices, which slipped below $30 a barrel this week for the first time in four years, on the back of sagging demand and a price war with Russia.

The shock of this liquidity sapping cocktail of events has necessitated austerity measures which are likely to imperil grandiose diversification projects.

Adding to the chain of events are the recent arrests of King Salman's brother and nephew, which triggered speculation of political instability amid the government's public silence on the royal purge.

"It's crisis time," said a Saudi government employee, explaining why he had begun converting part of his salary into US dollars and gold coins.

"Everything is unpredictable and we should be ready for the worst."

The central bank has shrugged off fears that plunging oil prices were straining the kingdom's currency, pegged for decades to the US dollar.

A jeweller in Riyadh told AFP he had fielded a number of enquiries to convert "substantial amounts of cash" into gold bars and coins.

SPENDING CUTS

Many government workers fear cuts to state allowances are coming despite rising living costs.

Some Saudis also worry that recruitment in the public and private sectors will freeze, just as unemployment was already high. 

Meanwhile, Saudi students are worried that government scholarships for overseas education will take a hit.

The finance ministry has instructed government bodies to submit proposals to slash this year's spending by 20 to 30 percent, the economic consultancy Nasser Saidi and Associates said in a research note.

"This will likely take the shape of postponed projects and delays in awarding contracts" among other economizing measures, the note said.

The kingdom is now preparing budget scenarios in which crude prices could drop as low as $12 to $20 per barrel, according to the Energy Intelligence Group.

"Public confidence depends on government spending and oil sentiment -— both are down," said a consultant advising a Saudi ministry on a major project.

"We don't know if we will have our jobs tomorrow."

The once free-spending OPEC kingpin has instructed Saudi ministries that they need to account for "every penny" they spend, the consultant added.

Saudi authorities did not respond to requests for comment.

Several Riyadh hotels —- many of them empty amid falling tourist numbers —- have been forced to send their staff on unpaid leave.

But providing some support, the health ministry has booked multiple Riyadh hotels to quarantine people after the coronavirus scare, according to several staff and guests who were forced to empty the properties at short notice.

'SURVIVAL OF FITTEST'

The oil crash follows the crude exporter's decision to hike production from April and offer the biggest price cuts in two decades, in retaliation for Russia's refusal to tighten supply as the virus saps demand.

Saudi Arabia has shrugged off criticism that the move could bankrupt its oil-producing rivals, indicating it was no longer willing to play the role of "swing producer" that bears the burden of stabilizing the markets.

"The days of Saudi Arabia absorbing oil market shocks on behalf of the global economy and other producers are probably over," said Saudi expert and author Ali Shihabi. 

"The energy game... is now a survival of the fittest."

The deep-pocketed kingdom, with fiscal reserves of around $500 billion, has reiterated it is an ultra low-cost producer of crude and can withstand low prices for years.

But Riyadh has posted a budget deficit every year since the last oil price rout in 2014. It has borrowed over $100 billion and drawn from its reserves to plug the deficit.

Crown Prince Mohammed bin Salman's multi-billion dollar projects to wean the economy away from oil remain vulnerable, and Saudi Arabia needs a crude price of about $80 a barrel to balance its budget.

As economic challenges rise, the detention of royal princes Ahmed bin Abdulaziz al-Saud and Mohammed bin Nayef has fueled fears of instability.

One source close to the royal court dismissed such concerns and said the detentions were meant to send a stern warning within the royal family not to oppose the crown prince.

Yet "the threat to Prince Mohammed isn't coming from his royal rivals," said Kristin Diwan of the Arab Gulf States Institute in Washington.

"It's from the collapse of oil revenues and with them his ambitious economic plans."

source: news.abs-cbn.com