Oil recoups losses as OPEC, US Fed see robust economy

In the US, crude oil inventories were forecast to have risen for a third straight week last week, a preliminary Reuters poll showed. (AFP)
Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.

 


US trade offensive takes out WTO as global arbiter

Updated 10 December 2019

US trade offensive takes out WTO as global arbiter

  • Two years after starting to block appointments, the US will finally paralyze the WTO’s Appellate Body
  • Two of three members of Appellate Body exit and leave it unable to issue rulings

BRUSSELS: US disruption of the global economic order reaches a major milestone on Tuesday as the World Trade Organization (WTO) loses its ability to intervene in trade wars, threatening the future of the Geneva-based body.
Two years after starting to block appointments, the United States will finally paralyze the WTO’s Appellate Body, which acts as the supreme court for international trade, as two of three members exit and leave it unable to issue rulings.
Major trade disputes, including the US conflict with China and metal tariffs imposed by US President Donald Trump, will not be resolved by the global trade arbiter.
Stephen Vaughn, who served as general counsel to the US Trade Representative during Trump’s first two years, said many disputes would be settled in future by negotiations.
Critics say this means a return to a post-war period of inconsistent settlements, problems the WTO’s creation in 1995 was designed to fix.
The EU ambassador to the WTO told counterparts in Geneva on Monday the Appellate Body’s paralysis risked creating a system of economic relations based on power rather than rules.
The crippling of dispute settlement comes as the WTO also struggles in its other major role of opening markets.
The WTO club of 164 has not produced any international accord since abandoning “Doha Round” negotiations in 2015.
Trade-restrictive measures among the G20 group of largest economies are at historic highs, compounded by Trump’s “America First” agenda and the trade war with China.
Phil Hogan, the European Union’s new trade commissioner, said on Friday the WTO was no longer fit for purpose and in dire need of reforms going beyond just fixing the appeals mechanism.
For developed countries, in particular, the WTO’s rules must change to take account of state-controlled enterprises.
In 2017, Japan brought together the United States and the European Union in a joint bid to set new global rules on state subsidies and forced technology transfers.
The US is also pushing to limit the ability of WTO members to grant themselves developing status, which for example gives them longer to implement WTO agreements.
Such “developing countries” include Singapore and Israel, but China is the clear focus.
US Commerce Secretary Wilbur Ross told Reuters last week the United States wanted to end concessions given to then struggling economies that were no longer appropriate.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” he said.
The trouble with WTO reform is that changes require consensus to pass. That includes Chinese backing.
Beijing has published its own reform proposals with a string of grievances against US actions. Reform should resolve crucial issues threatening the WTO’s existence, while preserving the interests of developing countries.
Many observers believe the WTO faces a pivotal moment in mid-2020 when its trade ministers gather in a drive to push through a multinational deal — on cutting fishing subsidies.
“It’s not the WTO that will save the fish. It’s the fish that are going to save the WTO,” said one ambassador.