WEEKLY ENERGY RECAP: OPEC+ keeps market in check

Workers walk past storage tanks at Tullow Oil’s Ngamia 8 drilling site in Lokichar, Kenya. (Reuters)
Updated 20 August 2019

WEEKLY ENERGY RECAP: OPEC+ keeps market in check

  • Brent crude made a slight rebound over the week to finish at $58.64 per barrel
  • While traders continue to worry about a coming global recession and reduced global oil demand as a result, OPEC+ is continuing to stabilize the market

Brent crude remained below the $60 per barrel barrier but made a slight rebound over the week to finish at $58.64 per barrel. WTI also achieved a slight weekly rise to $54.87 per barrel.

Global financial markets wobbled with traders and speculators looking to cash out amid fears of a looming global recession — the same driver for current jitters in the oil markets.

Equity market traders and oil future market speculators have been selling after the US Treasury bond yield curve inverted for the first time since 2007. The US short-term bond yields dipped below 10-year. This is a marker for every recession cycle for the past 50 years.

The EIA reported an increase in US crude oil stocks by 1.6 million barrels while market participants expected a drop in US crude oil inventory as US refining runs remained high and utilization increased to 94.3 percent ahead of October refinery maintenance season.

US Refining margins are still strong enough to encourage refiners to keep runs high. The refiners’ output for both gasoline and middle distillate remains strong amid low unemployment in the US that is expected to bolster gasoline demand.

US crude oil inventories typically decline at this time of the year before heading into the fall refinery maintenance season, which is expected to peak in October. So the surprise gain in US crude stockpiles shouldn’t add to the deepening concerns over the outlook for global oil demand — which remains strong.

In China, even though some one million barrels a day of refining capacity went offline during the maintenance season in June and July, China’s refinery throughput in July stood at 12.4 million bpd as the country added newly built or expanded refineries.

While traders continue to worry about a coming global recession and reduced global oil demand as a result, OPEC+ is continuing to stabilize the market.


Indonesia sells Asia’s first 50-year dollar bond to fight pandemic

Updated 07 April 2020

Indonesia sells Asia’s first 50-year dollar bond to fight pandemic

  • Indonesia will use the cash raised to partially ‘fund its COVID-19 relief and recovery efforts’
  • The deal was carried out virtually, with bankers working on the transaction unable to travel to Jakarta

HONG KONG: Indonesia has raised $4.3 billion, including the longest-dated US dollar bond ever issued by an Asian nation, to help the government fund its battle against coronavirus, according to a term sheet reviewed by Reuters.
The deal was finalized in the United States on Monday and sold in maturities of 10.5 years and 30.5 years, worth $1.65 billion each, with a 50-year tranche worth $1 billion.
It was Indonesia’s largest-ever bond, according to the term-sheet which showed Indonesia will use the cash raised to partially “fund its COVID-19 relief and recovery efforts.”
The decision to sell 50-year bonds by the government came after initial conversations with potential investors found there was appetite for such a tenor, according to two sources with direct knowledge of the matter.
Asian life insurers, especially some based in Taiwan as well as US fund managers were the largest investors, the sources said. The sources could not be named because they were not authorized to speak to media.
“The mood in the market is starting to feel better, investors are starting to think we could be moving toward the end of the tunnel,” a banker working on the deal said.
The deal was carried out virtually, with bankers working on the transaction unable to travel to Jakarta which would have been normal practice.
Bankers working on the deal said the international travel ban put in place to control the coronavirus pandemic made the transaction more efficient to negotiate.
However, for syndicate bankers selling the deal to investors it was logistically more difficult because trading rooms in the major banks have been scaled back.
Indonesia’s coronavirus cases stood at 2,491 on Monday, with 209 confirmed deaths — the highest number of fatalities in Asia outside China.
Fifty-year bond deals priced in local currencies have been held in the past, Refinitiv data showed. South Korea raised 1.1 trillion won through a 50-year bond in September 2016 that at the time was worth $1 billion.
Indonesia’s government said on Monday it had raised its estimated 2020 net bond issuance to 549.6 trillion rupiah ($33.55 billion) to cover the country’s widening deficit.
It also listed a plan for sales of 449.9 trillion-rupiah ($27.47 billion) worth of “pandemic bonds” to cover additional spending for the COVID-19 response.
Citigroup, Deutsche Bank, Goldman Sachs, HSBC and Standard Chartered were the joint book runners for the deal, the term-sheet showed.