Oil prices steady on extended supply cuts, US stocks draw

US crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels. Above, an oil production facility in the Permian Basin near Midland, Texas. (Reuters)
Updated 03 July 2019

Oil prices steady on extended supply cuts, US stocks draw

  • OPEC+ agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices
  • US crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels

SINGAPORE: Oil prices edged higher on Wednesday after a steep fall in the previous session, supported by extended output cuts by OPEC and its allies despite concerns that a slowing global economy could crimp demand.
An expected large draw in US crude oil inventories also underpinned sentiment after a bigger-than-expected stocks fall in a private survey.
Brent crude futures for September delivery were trading up 36 cents, or 0.6 percent, at $62.76 a barrel by 0244 GMT.
US crude futures for August were up 29 cents, or 0.5 percent, at $56.54 a barrel. Both benchmarks fell more than 4 percent on Tuesday as worries about a slowing global economy overshadowed OPEC supply cuts.
The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.
“The OPEC+ meeting showed the members sticking together in tough times, characterized by weakening global demand outlook, aiming for a more balanced oil market, despite clear market share implications,” said Amarpreet Singh, analyst at Barclays Commodities Research in a note.
“This is supportive of oil prices, in our view, even as the market remains squarely focused on weak macro signals.”
Ahead of government data due later on Wednesday, industry group the American Petroleum Institute (API) said that US crude inventories fell by 5 million barrels last week, more than the expected decrease of 3 million barrels.
The OPEC+ agreement to extend oil output cuts for nine months should draw down oil inventories in the second half of this year, boosting oil prices, said analysts from Citi Research in a note.
“Keeping cuts through the end of 1Q aims to avoid putting oil into the market during a seasonal low for demand and refinery runs, as well as providing time to assess the impacts of IMO 2020,” they said.
Still, signs of a global economic slowdown hitting oil demand growth worried investors after global manufacturing indicators disappointed and the US opened another trade front after threatening the EU with more tariffs to offset government aid to the aviation industry.
Barclays expects demand to grow at its slowest pace since 2011, gaining less than 1 million barrels per day year-on-year this year.
Morgan Stanley, meanwhile, lowered its long-term Brent price forecast on Tuesday to $60 per barrel from $65 per barrel, and said the oil market is broadly balanced in 2019.
Crude prices were also capped by signs of a recovery in oil exports from Venezuela in June and growth in oil production in Argentina in May.


Air Arabia in $14bn deal to buy 120 Airbus A320s

Updated 18 November 2019

Air Arabia in $14bn deal to buy 120 Airbus A320s

  • Air Arabia currently operates a total fleet of 53 Airbus A320 and A321 aircraft
  • The new carrier, Air Arabia Abu Dhabi, will be launched in “due course,” Etihad said at the time

DUBAI: Air Arabia said Monday it would buy 120 Airbus A320s in a deal worth $14 billion that represents a major expansion for the United Arab Emirates low-cost carrier.

“The first delivery is expected to start in 2024,” said Adel Al-Ali, the CEO of Air Arabia, based in the emirate of Sharjah which borders Dubai.

Air Arabia currently operates a total fleet of 53 Airbus A320 and A321 aircraft.

Last month it announced an agreement with Abu Dhabi-based giant Etihad Airways to launch a new low-cost airline based in the UAE capital.

The new carrier, Air Arabia Abu Dhabi, will be launched in “due course,” Etihad said at the time.

Etihad, established in 2003 by the oil-rich Gulf emirate’s government, has faced stiff competition from Dubai aviation giant Emirates and Doha-based Qatar Airways.