WEEKLY ENERGY RECAP: China deal should improve oil outlook

Chinese Vice Premier Liu He is handed a pen by U.S. President Donald Trump after signing "phase one" of the U.S.-China trade agreement during a ceremony in the East Room of the White House in Washington, U.S., January 15, 2020. (Reuters)
Short Url
Updated 19 January 2020

WEEKLY ENERGY RECAP: China deal should improve oil outlook

Crude oil prices traded flat over the week with Brent crude edging slightly lower to $64.85 per barrel and WTI weakening to $58.54. 

China was a major focus for traders. On one level, the US-China phase one trade deal injected some optimism into the market, but that was countered by troubling economic data. China’s 2019 gross domestic product rate grew by 6 percent, the slowest in 29 years.

Chinese refineries still processed a record high 13.04 million bpd of crude oil last year, which was an increase of 7.6 percent on 2018. 

Its 2019 crude oil imports grew 9.5 percent to 10.2 million bpd.

As the US-China trade dispute was the main reason for downward price movements throughout the year, a deal should produce optimism for a revival in global manufacturing, and thus stronger oil demand.

A short-term energy outlook report from the US Energy Information Administration (EIA) was relatively bullish. It also highlighted risk factors including supply disruptions and the pace of global economic growth that could push Brent prices out of the expected $60-$70 per barrel range in 2021.

The EIA expects US oil production growth to slow to 1.06 million bpd in 2020, dropping to 410,000 bpd in 2021 as rig counts stay low.

It estimates US oil production averaging 13.3 million bpd in 2020 and 13.71 million bpd in 2021. 

It expects Brent crude to average $64.83 per barrel and WTI at $59.25 per barrel in 2020. 

US oil output growth has dropped from the 1.64 million bpd year-on-year increase in 2018.

The IEA does not see any supply risks amid tension in the Arabian Gulf, but points to a sizable buffer against supply disruption because of the strong output and inventories of non-OPEC producers. 

This view may be questionable, though, especially given that oil inventories in OECD countries are currently only 9 million barrels above their five-year average — not the biggest of cushions.

 


NMC Health removes CEO amid investigation of UAE firm’s finances

Updated 27 February 2020

NMC Health removes CEO amid investigation of UAE firm’s finances

  • Chief Executive Prasanth Manghat was dismissed with immediate effect
  • Chief Operating Officer Michael Davis was appointed as interim CEO

NMC Health has removed Chief Executive Prasanth Manghat with immediate effect and granted its finance chief extended sick leave, as more details emerge from an investigation into the UAE health care firm’s finances.
Abu-Dhabi based NMC said after Wednesday’s market close that it had appointed Chief Operating Officer Michael Davis as interim CEO to succeed Manghat and said Chief Financial Officer Prashanth Shenoy had been placed on longer leave.
Manghat had been with NMC for about 10 years in various roles, including deputy CEO and CFO, and had seen the company through its 2012 listing on the London Stock Exchange.
The moves are the latest blow for the firm whose shares have lost about two thirds of their value since US-based short-seller Muddy Waters late last year questioned its financial statements.
NMC had said at the time that the report was “false and misleading,” but had opened its own investigation into company finances. The review is being led by Louis Freeh, who was director of the Federal Bureau of Investigation in the United States from 1993 to mid-2001.
NMC on Wednesday said the investigation committee had identified supply chain financing arrangements that were entered into by the company and “which are understood to have been used” by entities controlled by founder BR Shetty and former vice-chair Khaleefa Butti Omair Yousif Ahmed Al Muhairi.
Reuters was unable to reach Manghat, Shetty and Muhairi for comment outside business hours on NMC’s latest statement.
The company, which operates clinics and hospitals, specialized maternity and fertility clinics, and long-term care homes in 19 countries, said the committee was reviewing a drawdown of its facilities that had not been disclosed or approved by the board.
Its shares closed 6.6% higher before Wednesday’s statement.
NMC also said it had suspended a member of its treasury team over possible discrepancies in its bank statements and ledger entries, and said it would be unable to publish its annual results till at least the end of April.
Indian billionaire Shetty resigned as NMC’s co-chairman this month, after British regulators said they were looking into NMC following a disclosure that he had misstated the size of his stake.
Shetty had said this month that his NMC shareholdings were under a legal review looking into a large portion of his shares signed to two of NMC’s top investors in 2017, while some of his other stock had been pledged as security against loans.