Oil prices stable amid OPEC supply cuts, but US-China trade war drags

Markets remained tense amid concerns the Sino-US trade war could trigger a broad economic slowdown. Above, a China National Offshore Oil Corporation oil refinery in China’s southern Guangdong province. (Reuters)
Updated 27 May 2019
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Oil prices stable amid OPEC supply cuts, but US-China trade war drags

  • Producers, known as OPEC+, have been withholding supply since the start of the year to tighten the market and prop up prices
  • But Monday’s gain could not make up for falls last week

SINGAPORE: Oil prices were stable on Monday amid ongoing supply cuts by producer club OPEC, although markets remained tense amid concerns the Sino-US trade war could trigger a broad economic slowdown.
Front-month Brent crude futures, the international benchmark for oil prices, were at $68.79 per barrel at 0247 GMT, up 10 cents, or 0.2 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $58.54 per barrel, 9 cents below their last settlement.
“The relative strength of the very short-end of the (price) curve likely reflects the market pricing in a known variable of lower supplies from OPEC+,” said Edward Bell, commodity analyst at Emirates NBD bank.
A group of producers led by the Organization of the Petroleum Exporting Countries (OPEC), known as OPEC+, has been withholding supply since the start of the year to tighten the market and prop up prices.
But Monday’s gain could not make up for falls last week, when both crude futures contracts registered their biggest price declines this year amid concerns that the US-China trade dispute could accelerate a global economic slowdown.
“Sentiment remains fragile and vulnerable to any deterioration in US-China trade frictions,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore.
Money managers cut their net long US crude futures and options positions in the week to May 21, the US Commodity Futures Trading Commission (CFTC) said on Friday.
“Some signs of low confidence are creeping into positioning data,” Bell said.
In oil futures markets, the trade war effect is better seen beyond the spot market.
“The impact from a trade war is a more medium- to long-term issue and December spreads weakened sharply over the last week,” he said.
Beyond financial markets, there are also signs on the ground of a slowdown in growth in oil demand.
Amid the trade disputes between the United States and China, profits for China’s industrial firms dropped in April on slowing demand and manufacturing activity, according to data published by the National Bureau of Statistics (NBS) on Monday.
China’s automobile sales, a key driver of global oil demand growth, will reach around 28.1 million units this year, unchanged from levels seen in 2018, when the country’s auto market contracted for the first time in more than two decades, state news agency Xinhua reported on Sunday.
The outlook for flat car sales may be too optimistic still, as monthly sales have so far declined for 10 consecutive months.
A bright spot for carmakers, although not for the oil industry, is that sales of new energy vehicles are likely to grow by about 27 percent to hit 1.6 million units, from 1.26 units in 2018, the report said.


Gulf stocks extend losses on tanker attacks

Updated 7 min 30 sec ago
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Gulf stocks extend losses on tanker attacks

  • Cautious mood among investors as fears of military confrontation rise

DUBAI: Stock markets in the Gulf extended losses on Sunday reflecting a cautious mood among investors following last week’s oil tanker attacks. 

The attacks on the tankers in the Gulf of Oman on Thursday raised fears of a military confrontation in a vital shipping route for global oil supply and heightened tensions between Iran and the US, which have been in a standoff over Iran’s nuclear program. 

The Saudi index had dropped 1.6 percent on Thursday and fell a further 0.6 percent on Sunday after slight gains in early trade. Most Saudi banks were down, despite Sunday’s announcement by Saudi British Bank that its merger with Alawwal Bank was completed. 

HIGHLIGHTS

• Gulf stocks reverse early gains.

• Gulf of Oman tanker attacks dampen investor mood.

• Saudi banks mostly down despite SABB-Alawwal merger.

The two banks have combined to create the country’s third largest lender, becoming a single listed company after regulatory approvals. SABB’s shares shed 0.1 percent. Alinma Bank, however, gained 0.4 percent, and was one of the stocks registering the highest trading volume on Sunday. 

In the UAE, the Dubai and Abu Dhabi indexes fell 0.7 percent and 0.2 percent, respectively. The Dubai market had risen earlier in the day, boosted by DAMAC Properties and Union Properties, which closed up 2.2 percent and 0.5 percent, respectively. But heavyweight Emaar Properties, the largest developer in the emirate, fell 2.5 percent, weighing on the index. 

Dubai’s telecom operator Du (Emirates Integrated Telecommunications Co) shed 0.4 percent, reversing earlier gains, after it said the UAE sovereign wealth fund Emirates Investment Authority had increased its stake by buying 463.3 million shares from Mamoura Diversified Global Holding and General Investments. 

In Abu Dhabi, blue chip companies Aldar Properties, First Abu Dhabi Bank and Abu Dhabi National Oil Company for Distribution, led losses, dragging down the main index. The other Gulf markets were all in the red, except for the Bahrain index, which rose slightly. 

In Egypt, the index gained 0.2 percent, boosted by a 4.5 percent gain by Pioneers Holding Company for Financial Investments. The company said one of its divisions, Arab Dairy Products, had received a letter of intent from a Netherlands based company about a plan to buy it.