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.


Saudi private sector rebounds with growth at 10-month high

Updated 04 December 2020

Saudi private sector rebounds with growth at 10-month high

  • Steep rise in sales and growing business confidence spark jump in purchasing, hiring activity

RIYADH: Business activity in Saudi Arabia has risen to its highest level since January this year, showing the Kingdom’s economy is beginning to overcome the worst effects of the coronavirus pandemic.

According to IHS Markit’s Purchasing Managers’ Index (PMI) Survey, the acceleration of output growth in the Saudi economy in November was driven by a steep rise in sales and strengthening business confidence.

The survey found that input purchasing rose, while employment growth also returned for the first time since January. Input cost inflation also quickened, leading to a stronger increase in average output charges.

The index has now registered above the 50.0 no-change mark for three months in a row, highlighting a sustained recovery after the economic downturn due to the pandemic.

The Saudi PMI rose to 54.7 in November from 51 the previous month — the strongest improvement since January. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared with the previous month, and below 50 an overall decrease.

Both domestic and foreign sales rose last month, marking only the second upturn in new export orders since February.

Business confidence for the year ahead also improved notably during the month. In particular, firms were encouraged by the Saudi government’s easing of lockdown curbs and news of a breakthrough in the development of a vaccine.

Accelerated rises in output and new orders led Saudi firms to sharply expand purchasing activity during November. In addition, hiring activity turned positive and a number of companies linked increased employment to rising demand.

Commenting on the latest survey, David Owen, an economist at IHS Markit, said: “A third successive rise in the Saudi Arabia PMI pointed to an economy getting back on its feet in November. Supported by output and new business growth reaching 10-month highs, the data suggests a strong end to the year for the non-oil private sector. Notably, employment started to rise, while business confidence strengthened in the wake of encouraging vaccine news and sharper demand growth.”

Saudi economist and financial analyst Talat Zaki Hafiz told Arab News: “The improvement is due to many factors, such as the reopening of the market with the ease in lockdown and, finally, the lifting of the curfew. The return to normality has had a significant impact on private sector performance.”

Hafiz added: “Things will get much better by the next year. We have also noticed an improvement in oil prices recently and this will improve things significantly.”