WEEKLY ENERGY RECAP: Oil price fights infection

China will be able to soften the crude oil demand hit from coronavirus after the government reported the lowest number of new cases. (AP/File)
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Updated 23 February 2020

WEEKLY ENERGY RECAP: Oil price fights infection

  • Of greater concern is the big drop in demand for oil in China — especially from Russia

Crude oil prices recorded their second weekly gain despite the pall of coronavirus hanging over commodity markets. 

Brent crude advanced to $58.50 per barrel and WTI rose to $53.46 per barrel on optimism that China will be able to soften the crude oil demand hit from coronavirus after the government reported the lowest number of new cases.

Nevertheless, oil has lost about 15 percent since the beginning of the year on fears that the outbreak will squeeze global energy demand.  Now the market is wondering if it is possible for the Brent price to break the $60 barrier before OPEC’s much anticipated meeting in early March.

While supply disruptions in Libya continue to affect the market, analysts have grown somewhat weary with their impact.

Of greater concern is the big drop in demand for oil in China — especially from Russia, where the spot price for Russian East Siberia Pacific Ocean crude (ESPO) has weakened further.

Lower Chinese refinery demand has caused floating storage to accumulate offshore in China where most of these idling (anchoring) very large crude carriers have been loaded with March barrels and not yet with April deliveries. 

The market has also started to see the impact on lower refining margins in Asia and Europe.

This is largely as a result of lower demand for petroleum refined products — especially for the Jet fuel which has been affected by global flight restrictions related to coronavirus.

Jet fuel prices are now expected to fall to near-record lows. 

Lower demand for petroleum-refined products in China has led Beijing to cut gasoline and diesel retail prices for the second time in 2020. 

This reflects China crude oil demand, which has fallen by about a third.

The US Energy Information Administration (EIA) lowered its outlook for crude oil demand growth.

That took into account not only coronavirus but also lower-than-expected heating fuel consumption caused by the Northern Hemisphere’s warmer winter.

$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.