Oil rises on stronger financial markets, expectations of extended supply cuts

Global crude oil demand growth could drop below 1 million barrels per day in 2019, energy consultancy FGE said. (AFP)
Updated 11 June 2019

Oil rises on stronger financial markets, expectations of extended supply cuts

  • Crude oil futures on Tuesday were pushed up by a broader lift in financial markets
  • Russia said on Monday it might support an extension of supply cuts that have been in place since January

SINGAPORE: Oil prices rose on Tuesday in line with firmer financial markets and bolstered by expectations that producer group OPEC and its allies will keep withholding supply.
Front-month Brent crude futures, the international benchmark for oil prices, were at $62.71 at 0630 GMT, 42 cents, or 0.7 percent, above Friday’s close.
US West Texas Intermediate (WTI) crude futures were at $53.85 per barrel, 59 cents, or 1.1 percent, above their last settlement.
Prices fell by around 1 percent in the previous session and crude futures are down by some 20 percent from their 2019 peaks in late April, dragged lower by a widespread economic downturn that has started to impact oil consumption.
Traders said crude oil futures on Tuesday were pushed up by a broader lift in financial markets after Beijing eased financing rules to stem an economic downturn.
On the production side, Russia said on Monday it might support an extension of supply cuts that have been in place since January, warning oil prices could fall as low as $30 per barrel if producers supply too much crude.
The Organization of the Petroleum Exporting Countries (OPEC) and some non-affiliated producers including Russia, known collectively as OPEC+, have withheld supplies since the start of the year to prop up prices.
OPEC+ is due to meet in late June or early July to decide output policy for the rest of the year.
“Without OPEC+ adherence to supply discipline in the deteriorating environment prices would drop to $40 in a heartbeat, which suggests the extension deal is a lock,” said Stephen Innes, managing partner at Vanguard Markets.
Energy consultancy FGE said global crude oil demand growth could drop below 1 million barrels per day (bpd) in 2019, down from previous expectations of 1.3 to 1.4 million bpd.
“This effectively gives us an extra 300,000-400,000 barrels per day of supply,” said FGE chairman Fereidun Fesharaki.
Despite Tuesday’s stronger markets, concerns about the health of the global economy remained.
“With China slowing, the EU sickly and the US data starting to wobble, an economic downturn remains a clear and present danger,” said Innes.


China’s tech titans fight for cloud control

Updated 04 July 2020

China’s tech titans fight for cloud control

  • Tencent flexes its muscles in race with arch-rival Alibaba as pandemic opens new business frontiers

HONG KONG: For Chinese cloud services companies, the coronavirus outbreak has become a rainmaker, bringing in new business far and wide as firms shift work online, and authorities develop apps and systems to help contain outbreaks and manage social restrictions.

For Tencent Holdings, in particular, it has also become the perfect time to flex new muscles as it seeks to catch up with Alibaba Group Holding, its arch-rival and the dominant player in the country’s cloud market by far.

Tencent began to display a new level of aggressiveness after positioning its cloud business as a major area of growth in September 2018, and that has only amped up amid the pandemic, employees say.

“The competition with Alibaba is so fierce right now, the sales teams are fighting them for every deal,” said a source in Tencent’s cloud division who was not authorized to speak on the matter and declined to be identified.

This year alone, Tencent has hired more than 3,000 employees for its cloud division. And as China went into lockdown and demand for corporate video bandwidth surged in February, it added 100,000 cloud servers in eight days to support a two-month old product, Tencent Conference — a feat the company says is unprecedented in Chinese cloud computing history.

It has expanded use of cloud servers designed in-house, pledged to speed up construction of a digital industry center in Wuhan to handle cloud and smart city projects in central China and joined a central government initiative to support pandemic-hit small businesses with free cloud services.

The social media and gaming behemoth also announced in May it will invest 500 billion yuan ($70 billion) over five years in technology infrastructure including cloud computing — just weeks after Alibaba said it would invest 200 billion yuan in its cloud infrastructure over three years.

Poshu Yeung, vice president of Tencent’s international business group, notes huge interest in shifting further into the cloud from businesses and for online education.

“We actually see more demands, requests coming in,” he said in an interview in April. “It’s a good wakening call for a lot of businesses.”

During the first quarter, China’s cloud infrastructure services market grew an impressive 67 percent from a year earlier to $3.9 billion, data from research firm Canalys shows.

Alibaba commanded 44.5 percent of the market while Tencent, which started its cloud business in 2013, four years after Alibaba, had just 14 percent. Huawei Technologies also had 14 percent.

“Although Tencent came to the space later than Alibaba, I believe the company is willing to endure a relatively long period of investment cycle for this business, hoping to catch up or one day becoming the No. 1 player in this field,” said Alex Liu, tech analyst at China Renaissance.

Tencent’s cloud division accounted for more than 4.5 percent of its annual revenue last year while Alibaba’s cloud computing division accounted for 8 percent of its overall revenue.

Tencent employees have told Reuters the company is working hard to become more adept in business-to-business sales where products are often designed from the ground up for one client, as well as in government relations.

 Those are areas where Alibaba excels while Tencent’s strength lies more with consumer-centric products and design.

“Tencent has great genes in business-to-consumer, but in business-to-business, we either didn’t have product managers or we just hired folks with a business-to-consumer background so it took a bit of time to convert their thinking,” said a second Tencent source in the company’s cloud business.

Tencent declined to comment on staff observations.

One area where Tencent has gained ground in recent years is government contracts — a relatively small part of the market in revenue terms but one that brings prestige and helps attract private-sector clients.

Underscoring its determination to win tenders, Tencent in 2017 offered to complete a Fujian province government information platform project for 0.01 yuan.

From 2016 to 2017, Alibaba scored 28 cloud-related contracts for government entities, state-owned enterprises, and academic institutions, while Tencent landed just seven, government procurement records show.

But in 2018, they secured 28 each before Alibaba took the lead again last year with 49 compared with Tencent’s 46.