WEEKLY ENERGY RECAP: Breaking through $40 oil

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Updated 05 July 2020

WEEKLY ENERGY RECAP: Breaking through $40 oil

  • The second half of the year may witness an even higher average price

Brent crude oil rebounded to a near 20-week high at $42.80 per barrel as WTI also rose to $40.32 per barrel.

Brent averaged $40 per barrel for the month of June, almost the same as for the entire first half of the year.

Oil prices have moved in a narrow band for most of the past two months as OPEC+ output cuts achieved the desired goal of bringing stability to a market threatened by volatility.

Now that another price plunge of the kind seen in April appears unlikely, the second half of the year may witness an even higher average price.

The second half of 2020 got off to a positive start for oil exporters as global demand started to recover and floating storage also began to deplete. Moreover, positive economic and jobs data from the US added to the upward momentum, more than offsetting worries about the surge in coronavirus cases in the world’s largest economy and largest consumer of crude oil.

The US Energy Information Administration reported the first drop in crude oil inventory data in four weeks. However, stocks still stand at 15 percent above the five-year average for this time of the year at 533.5 million barrels. US refineries continue to operate at a low capacity of 75.5 percent despite the supposedly “high” demand summer for gasoline.

China crude oil imports reflected an increase in buying which coincided with an improvement in the manufacturing purchasing managers’ index (PMI), which followed the easing of lockdowns.

Such positive global manufacturing data was made possible by the OPEC+ output cuts which helped to balance the market.

Saudi Arabia has led from the front in making good on its commitments to cut output. It all bodes well for the second half of 2020.


Huawei: Smartphone chips running out under US sanctions

Updated 08 August 2020

Huawei: Smartphone chips running out under US sanctions

  • Huawei is at the center of US-Chinese tension over technology and security
  • Washington cut off Huawei’s access to US components and technology last year

BEIJING: Chinese tech giant Huawei is running out of processor chips to make smartphones due to US sanctions and will be forced to stop production of its own most advanced chips, a company executive says, in a sign of growing damage to Huawei’s business from American pressure.
Huawei Technologies, one of the biggest producers of smartphones and network equipment, is at the center of US-Chinese tension over technology and security. The feud has spread to include the popular Chinese-owned video app TikTok and China-based messaging service WeChat.
Washington cut off Huawei’s access to US components and technology including Google’s music and other smartphone services last year. Those penalties were tightened in May when the White House barred vendors worldwide from using US technology to produce components for Huawei.
Production of Kirin chips designed by Huawei’s own engineers will stop Sept. 15 because they are made by contractors that need US manufacturing technology, said Richard Yu, president of the company’s consumer unit. He said Huawei lacks the ability to make its own chips.
“This is a very big loss for us,” Yu said Friday at an industry conference, China Info 100, according to a video recording of his comments posted on multiple websites.
“Unfortunately, in the second round of US sanctions, our chip producers only accepted orders until May 15. Production will close on Sept. 15,” Yu said. “This year may be the last generation of Huawei Kirin high-end chips.”
More broadly, Huawei’s smartphone production has “no chips and no supply,” Yu said.
Yu said this year’s smartphone sales probably will be lower than 2019’s level of 240 million handsets but gave no details. The company didn’t immediately respond to questions Saturday.
Huawei, founded in 1987 by a former military engineer, denies accusations it might facilitate Chinese spying. Chinese officials accuse Washington of using national security as an excuse to stop a competitor to US tech industries.
Huawei is a leader among emerging Chinese competitors in telecoms, electric cars, renewable energy and other fields in which the ruling Communist Party hopes China can become a global leader.
Huawei has 180,000 employees and one of the world’s biggest research and development budgets at more than $15 billion a year. But, like most global tech brands, it relies on contractors to manufacture its products.
Earlier, Huawei announced its global sales rose 13.1 percent over a year ago to $65 billion in the first half of 2020. Yu said that was due to strong sales of high-end products but gave no details.
Huawei became the world’s top-selling smartphone brand in the three months ending in June, passing rival Samsung for the first time due to strong demand in China, according to Canalys. Sales abroad fell 27 percent from a year earlier.
Washington also is lobbying European and other allies to exclude Huawei from planned next-generation networks as a security risk.
In other US-Chinese clashes, TikTok’s owner, ByteDance, is under White House pressure to sell the video app. That is due to fears its access to personal information about millions of American users might be a security risk.
On Thursday, President Donald Trump announced a ban on unspecified transactions with TikTok and the Chinese owner of WeChat, a popular messaging service.