Oil pares gains as OPEC sees rapid growth in rival supply

Oil rose slightly higher on Wednesday after strong Chinese factory activity, though concern over the pace of growth in US output, as well as other producing nations, meant there were limited gains. (REUTERS)
Updated 14 March 2018

Oil pares gains as OPEC sees rapid growth in rival supply

LONDON: Oil rose slightly higher on Wednesday after strong Chinese factory activity, though concern over the pace of growth in US output, as well as other producing nations, meant there were limited gains.
The Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report it expects supply from non-members to grow more quickly than it had previously expected.
And US oil production is set to rise further this year, OPEC also said on Wednesday, but the crude market will continue to rebalance as cartel members and Russia trim their output in a bid to support prices.
The group also reported the first increase in oil inventories across the world’s most industrialized nations in eight months in January, a sign the impact of its coordinated output cuts may be slowly waning, and cut its forecast for demand for its own crude.
Brent crude oil futures were last up 2 cents at $64.66 a barrel by 1410 GMT, while US West Texas Intermediate (WTI) futures were up 11 cents at $60.82 a barrel.
“The OPEC report seems to illustrate that the speed of the market rebalancing is slowing,” Commerzbank strategist Carsten Fritsch said.
“(It suggests) the rebalancing can’t go much further from here and according to the OPEC report, demand for OPEC’S oil must be 33 million barrels per day for the rest of the year to get rid of any remaining oversupply.”
OPEC cut its forecast for demand for its own crude in 2018 by 250,000 bpd to 32.61 million bpd, marking the fourth consecutive decline.
Earlier in the day, oil prices got a boost from a broader investor push into commodities after Chinese data showed the world’s largest importer of raw materials saw industrial production grow more than expected over the first two months of the year.
ING commodities strategist Oliver Nugent said the Chinese industrial output was “reinforcing that bullish narrative” across the commodities market, including oil.
Rising US output, as well as seasonally low demand, mean US crude inventories rose by 1.2 million barrels in the week to March 9 to 428 million barrels, the American Petroleum Institute said on Tuesday.
Seasonal demand patterns for crude and refined products mean the market may only be weeks away from a run of declines.
“We are now only two to four weeks away from when weekly oil inventory data will start to draw again which should be supportive for oil prices,” SEB commodities strategist Bjarne Schieldrop said.
Weekly US crude production figures will be published by the Energy Information Administration (EIA) later on Wednesday.


Goldman Sachs hit with record $350m fine for 1MDB failings

Updated 5 min 28 sec ago

Goldman Sachs hit with record $350m fine for 1MDB failings

  • Hong Kong watchdog accuses investment bank of ‘serious lapses and deficiencies’ over $2.6bn wealth fund scandal

HONG KONG: Hong Kong’s markets watchdog on Thursday fined Goldman Sachs’s Asian business $350 million for its role in Malaysia’s multibillion-dollar 1MDB scandal, the largest single fine ever levied by the regulator in the Asian financial hub.

The Securities and Futures Commission (SFC) said serious lapses and deficiencies in management controls at Goldman Sachs (Asia) had contributed to the misappropriation of $2.6 billion raised by the Malaysian sovereign wealth fund.

1Malaysia Development Berhad (1MDB) raised the funds in three bond offerings in 2012 and 2013.

A Goldman Sachs spokesman said the Wall Street bank would issue a statement in due course.

The 1MDB scandal has been a costly and long-running sore for the US investment bank.

In July, Goldman agreed to pay $3.9 billion to settle Malaysia’s criminal probe and this week it is expected to agree to pay more than $2 billion to settle US charges over its role in the scandal.

FASTFACT

$4.5 Billion

Malaysian and US authorities estimate $4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe.

Malaysian and US authorities estimate $4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe and implicated high-level officials in the fund, former Malaysian Prime Minister Najib Razak, Goldman staff and others.

The three bond offerings, which raised a combined $6.5 billion, were arranged and underwritten by UK-based Goldman Sachs International, with work conducted by deal team members in multiple jurisdictions, who shared the revenue generated.

The SFC said Goldman Sachs Asia, the bank’s Hong Kong-based compliance and control hub for the region, had significant involvement in the origination, approval, execution and sales process of the three bond offerings.

The bank’s Asia hub had earned $210 million from the offerings, the largest share among the various Goldman entities.

“This enforcement action is the result of a rigorous, independent investigation conducted by the SFC,” said Ashley Alder, the SFC’s CEO.

The 1MDB bond deals were obtained for Goldman by its banker Tim Leissner, who in August 2018 admitted that he had conspired with Malaysian financier Jho Low and others to pay bribes and kickbacks to Malaysian and Abu Dhabi officials to obtain and retain the business from 1MDB for the bank.

US court documents show Low was rejected as a private wealth management client on several occasions as his source of wealth could not be verified, resulting in a potential money laundering risk.

Nonetheless, Goldman’s regional and firm-wide committees that vetted the bond offerings accepted Leissner’s false assertions that Low had no roles in the bond offerings without making further inquiries, the SFC said.

“Apart from the involvement of Low, there were a number of red flags present in the bond transactions which should have called for a closer examination of the corruption and money laundering risks involved,” its statement of disciplinary action said.

These included the fact that the amount raised far exceeded the actual needs of 1MDB, and the sovereign wealth fund’s willingness to pay high fees and repeated emphasis on confidentiality and speed of execution, the SFC said.