Oil at 6-week high on Gulf of Mexico storm, Iran tensions

US oil producers cut nearly a third of their output in the Gulf of Mexico, above, ahead of what could be one of the first major storms of the Atlantic hurricane season. (Reuters)
Updated 11 July 2019
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Oil at 6-week high on Gulf of Mexico storm, Iran tensions

  • Oil prices were also supported by a decline in US inventories
  • Stocks have now fallen for four consecutive weeks, the Energy Information Administration said

LONDON: Oil prices hit a six-week high on Thursday as oil rigs in the Gulf of Mexico were evacuated ahead of a storm, while an incident with a British tanker in the Middle East highlighted tensions in the region.
Brent crude futures reversed early losses and were up 40 cents at $67.41 a barrel by 0852 GMT. Earlier in the session they hit their highest since May 30 at $67.65, after ending Wednesday up 4.4 percent.
US West Texas Intermediate crude futures were up 33 cents, at $60.76 a barrel, having earlier touched their highest since May 23 at $60.94. They gained 4.5 percent in the previous session.
A day after Iran warned Britain would face “consequences” over the seizure of an Iranian oil tanker, three Iranian vessels tried to block the passage of a British ship run by BP through the Strait of Hormuz, the British government said. They withdrew after warnings from a British warship.
“What happened was partially expected. We pointed out last week that Iran was likely to do something of the sort,” Petromatrix oil analyst Olivier Jakob said.
“They might have created a little bit of disturbance, but nothing came out of it. For now, we are in the process of intimidation and psychological warfare ... To have a strong price reaction you need something to really happen.”
Oil prices were also supported by a decline in US inventories. US crude stocks fell 9.5 million barrels in the week to July 5, the Energy Information Administration (EIA) said, more than the 3.1 million-barrel draw analysts had expected as refineries ramped up output.
US oil producers on Wednesday also cut nearly a third of their output in the Gulf of Mexico ahead of what could be one of the first major storms of the Atlantic hurricane season.
Fifteen production platforms and four rigs were evacuated in the north central Gulf of Mexico, according to a US regulator, as oil firms moved workers to safety ahead of a storm expected to become a hurricane by Friday.
“There is nothing like an early start to the hurricane season to support oil prices, but looking under the hood of the EIA data, it paints an even rosier picture for US oil markets,” said Stephen Innes, managing partner, Vanguard Markets in Bangkok.
“Imports down, exports likely up and refinery utilization at yearly highs,” he said.
Stocks have now fallen for four consecutive weeks, according to the EIA.
US output is rising again after a brief drop from record levels, according to the EIA. Production last week rose to 12.3 million barrels a day.
“Rising US shale production levels, subdued global economic momentum and existing trade uncertainties will cap bullish gains for crude oil futures,” said Benjamin Lu, analyst at Phillip Futures in Singapore.


Debut of China’s Nasdaq-style board adds $44bn in market cap

Updated 22 July 2019
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Debut of China’s Nasdaq-style board adds $44bn in market cap

  • Activity draws attention away from main board

BEIJING: Trading on China’s new Nasdaq-style board for homegrown tech firms hit fever pitch on Monday, with shares up as much as 520 percent in a wild debut that more than doubled the exchange’s combined market capitalization and beat veteran investors’ expectations.

Sixteen of the first batch of 25 companies — ranging from chip-makers to health care firms — increased their already frothy initial public offering (IPO) prices by 136 percent on the STAR Market, operated by the Shanghai Stock Exchange.

The raucous first day of trade tripped the exchange’s circuit breakers that are designed to calm frenzied activity. The weakest performer leapt 84.22 percent. In total, the day saw the creation of around 305 billion yuan ($44.3 billion) in new market capitalization on top of an initial market cap of around 225 billion yuan, according to Reuters’ calculations.

“The price gains are crazier than we expected,” said Stephen Huang, vice president of Shanghai See Truth Investment Management. “These are good companies, but valuations are too high. Buying them now makes no sense.”

Modelled after Nasdaq, and complete with a US-style IPO system, STAR may be China’s boldest attempt at capital market reforms yet. It is also seen driven by Beijing’s ambition to become technologically self-reliant as a prolonged trade war with Washington catches Chinese tech firms in the crossfire.

Trading in Anji Microelectronics Technology (Shanghai) Co. Ltd., a semiconductor firm, was briefly halted twice as the company’s shares hit two circuit breakers — first after rising 30 percent, then after climbing 60 percent from the market open.

HIGHLIGHTS

• 16 of 25 STAR Market firms more than double from IPO price.

• Weakest performer gains 84 percent, average gain of 140 percent.

• STAR may be China’s boldest attempt at capital market reforms yet.

The mechanisms did little to keep Anji shares in check as they soared as much as 520 percent from their IPO price in the morning session. Anji shares ended the day up 400.2 percent from their IPO price, the day’s biggest gain, giving the company a valuation of nearly 242 times 2018 earnings.

Suzhou Harmontronics Automation Technology Co. Ltd., in contrast, triggered its circuit breaker in the opposite direction, falling 30 percent from the market open in early trade before rebounding. But by the market close, the company’s shares were still 94.61 percent higher than their IPO price.

Wild share price swings, partly the result of loose trading rules, had been widely expected. IPOs had been oversubscribed by an average of about 1,700 times among retail investors.

The STAR Market sets no limits on share prices during the first five days of a company’s trading. That compares with a cap of 44 percent on debut on other boards in China.

In subsequent trading sessions, stocks on the new tech board will be allowed to rise or fall a maximum 20 percent in a day, double the 10 percent daily limit on other boards.

Regulators last week cautioned individual investors against “blindly” buying STAR Market stocks, but said big fluctuations were normal.

Looser trading rules were aimed at “giving market players adequate freedom in the game, accelerating the formation of equilibrium prices, and boosting price-setting efficiency,” the Shanghai Stock Exchange (SSE) said in a statement on Friday.

The SSE added that it was normal to see big swings in newly listed tech shares, as such companies typically have uncertain prospects, and are difficult to evaluate.