World stocks rises up from two and a half month low, China soothes currency markets

Global Stock Markets

World stocks rose on Tuesday, supported by gains in Europe and three straight days of tech-driven rises in the United States, even though markets across Asia and especially China remained in the grip of trade turbulence. 

Wall Street was set for another firmer session as investors positioned for strong Silicon Valley earnings before the reporting season starts next week, while European shares also rose after a deal on settling a migration policy row that had threatened Germany’s coalition government.

But a July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on U.S. products. President Donald Trump also threatened on Monday to “do something” if the United States was not better treated by the World Trade Organisation.

The prospects of a full-blown trade war and relentless yuan weakening CNY= -- it has fallen 5 percent in the past two weeks to 10-month lows -- reportedly forced China into intervention via state-run banks.. The currency then reversed earlier losses to move back into positive territory for the day against the dollar.

Other Asian currencies weakened, especially those such as the Indonesian rupiah that are doubly exposed — to trade and oil prices approaching $80 a barrel LCOc1.

Wall Street was set for another firmer session as investors positioned for strong Silicon Valley earnings before the reporting season starts next week, while European shares also rose after a deal on settling a migration policy row that had threatened Germany’s coalition government.

But a July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on U.S. products. President Donald Trump also threatened on Monday to “do something” if the United States was not better treated by the World Trade Organisation.

On equity markets, Hong Kong dived as much as 3.3 percent at one point to nine-month lows .HSI, hit also by a U.S. move to block China Mobile (0941.HK) from offering services to the U.S. market. Shanghai's bourse hit a 2-year trough .SSEC though both indexes inched higher towards the close as the yuan recovered. Japan's Nikkei .N225 edged to a near three-month closing low.

The mood was more cheerful in Europe where a pan-European equity index rose half a percent , the euro firmed marginally and bond yields rose after German Chancellor Angela Merkel struck the deal with her Bavarian conservative coalition partners.

Equity futures for the U.S. S&P500 and Nasdaq ESc1 NQc1 indicated a firmer session after Wall Street ended higher on Tuesday for the third day in a row. Gains of around 1 percent in tech firms such as Microsoft and Apple offset concerns about trade and its impact on growth.

Tech shares have been relatively resilient to trade fears - the New York Stock Exchange’s index of 10 tech giants including China’s Alibaba has gained over 30 percent this year. They are seen delivering another set of robust quarterly earnings.

While U.S. growth and company earnings seem unassailable, tit-for-tat tariffs from China and Europe may ultimately prove detrimental for American businesses and jobs.

U.S. Treasury bond yields rose slightly amid the easier mood but concern about the trade row has pushed the gap between two- and 10-year yields to the narrowest since 2007 US2US10=RR

Oil prices dip with possiblity of easing OPEC supply curbs

Oil Stock Markets

Oil prices edged lower on Wednesday with the possibility of higher OPEC output weighing on the market, although geopolitical risks are expected to keep prices near multi-year highs.

Brent LCOc1 futures fell 43 cents, or 0.5 percent, to $79.14 a barrel by 0218 GMT, after climbing 35 cents on Tuesday. Last week, the global benchmark hit $80.50 a barrel, the highest since November 2014.

U.S. West Texas Intermediate (WTI) crude CLc1 futures eased 25 cents, or 0.4 percent, to $71.95 a barrel, having climbed on Tuesday to $72.83 a barrel, the highest since November 2014.

The Organization of the Petroleum Exporting Countries (OPEC) may decide to raise oil output as soon as June due to worries over Iranian and Venezuelan supply and after Washington raised concerns the oil rally was going too far, OPEC and oil industry sources familiar with the discussions

The OPEC-led supply curbs have largely cleared an inventory surplus in industrialized countries based on the deal’s original goals, and stocks continue to decline.

Rising supply in the United States, where shale production is forecast to hit a record high in June, has limited the upward move in prices.

Concerns about a potential drop in Iranian oil exports following Washington’s exit from a nuclear arms control deal with Tehran have driven prices to multi-year highs.

On Monday, the United States demanded Iran make sweeping changes - from dropping its nuclear programme to pulling out of the Syrian civil war - or face severe economic sanctions.

Iran dismissed Washington’s ultimatum and one senior Iranian official said it showed the United States is seeking “regime change” in Iran.

In addition, Venezuela’s crude output could drop further following a disputed presidential election.

The United States is actively considering oil sanctions on Venezuela, where output has dropped by a third in two years to its lowest in decades.

U.S. crude and distillate stockpiles fell last week, while gasoline inventories increased unexpectedly, data from industry group the American Petroleum Institute showed on Tuesday.

Brent oil hits highest since late 2014 as supplies tighten amid strong demand

Oil Markets

Brent crude oil rose for a sixth day on Tuesday to hit its highest since November, 2014 at over $75 a barrel, buoyed by expectations that supplies will tighten just as demand reaches record levels. 

Brent crude futures LCOc1 marked $75.27 a barrel on Tuesday, their highest since Nov. 27, 2014. Brent was still at $75.07 a barrel at 0708 GMT, up 36 cents, or 0.5 percent, from its last close.

Brent’s six-day rising streak is the longest such string of gains since December, with prices up more than 20 percent from 2018-lows plumbed in February.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $69.17 a barrel, up 53 cents, or 0.8 percent, from their last settlement. On Thursday, WTI rose to its strongest since Nov. 28, 2014 at $69.56.

Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.

The potential of renewed U.S. sanctions against Iran is also pushing prices higher.

Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel”.

The United States has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.

“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.

OPEC’s efforts to tighten markets are being led by top exporter Saudi Arabia, where state-controlled oil firm Saudi Aramco is pushing for higher prices ahead of a partial listing planned for later this year or 2019.

OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.

One of the few factors that has limited oil prices from surging even more is U.S. production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.

As a result of its rising output, U.S. crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.

Oil dips as U.S. drilling tempers otherwise bullish sentiment

Oil Markets

Oil prices dipped on Monday as a rising U.S. rig count implied further increases in output, marking one of the few factors tamping back crude in an otherwise bullish environment. 

Brent crude futures LCOc1 were at $73.91 per barrel at 0630 GMT, down 15 cents, or 0.2 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 18 cents, or 0.3 percent, at $68.22 a barrel.

U.S. drillers added five rigs drilling for new production in the week ended April 20, bringing the total to 820, the highest since March 2015, according Baker Hughes energy services firm.

The rising rig numbers point to further increases in U.S. crude production C-OUT-T-EIA, which is already up by a quarter since mid-2016 to a record 10.54 million barrels per day (bpd).

Only Russia produces more, at almost 11 million bpd.

Despite slipping on Monday, overall the oil market remains well supported, especially by strong demand in Asia.

Brent is up by 20 percent from its 2018 low in February.

Prices are also being supported by supply cuts led by the Organization of the Petroleum Exporting
Countries (OPEC) that were introduced in 2017 to prop up the market.

The United States has until May 12 to decide whether it will leave the Iran nuclear deal and instead impose new sanctions against Tehran, including potentially on its oil exports, which would further tighten global supplies.

The U.S. trade action against Russia and, potentially, against Iran has resulted in a slump in Russia's ruble RUB= and Iran's rial IRR=.

This means costs for any imported goods become more expensive for its citizens or companies, but it has also pushed up the value of Russia’s and Iran’s oil sales as all of their production costs are in the local currencies, while foreign sales are largely made in the U.S. dollar.

The generally elevated oil prices have also sparked a spat between U.S. President Donald Trump and producer cartel OPEC.

Trump on Friday accused OPEC of “artificially” boosting oil prices, threatening on Twitter that this “will not be accepted”, drawing rebukes from several of the world’s top oil exporters within OPEC.

Oil markets tense on Middle East crisis, U.S.-China trade spat

Oil Stock Markets

Oil markets remained tense on Thursday on concerns over a military escalation in Syria, although prices were some way off Wednesday’s late-2014 highs as bulging U.S. supplies weighed. 

A trade dispute between the United States and China also kept markets on edge.
Brent crude futures LCOc1 were at $72.33 per barrel at 0648 GMT, up 27 cents, or 0.4 percent from their last close.

U.S. WTI crude futures CLc1 were at $67.20 a barrel, up 38 cents, or 0.4 percent from their last settlement.

In China, Shanghai crude futures ISCc1 rose by 10.5 yuan to 428.7 yuan (£48.1) per barrel, up 2.5 percent, with record volumes traded.

Both Brent and WTI on Wednesday hit their highest since late 2014 of $73.09 and $67.45 per barrel, respectively, after Saudi Arabia said it intercepted missiles over Riyadh and U.S. President Donald Trump warned Russia of imminent military action in Syria.

China lashed out at the United States on Thursday saying that the trade disputes, in which both sides have threatened to impose tariffs on imports of several products, were “single-handedly provoked by the U.S.” and that Beijing was prepared to escalate the spat if Washington did not back off from its threatened import tariffs.

The Chinese Commerce Ministry also said there had been no bilateral negotiations with the United States on the trade frictions.

Although markets were tense, supplies remain ample especially due to the United States, and analysts said this would likely weigh on prices at some point.

Barclays said it expected Brent to average $63 per barrel in 2018 and $60 in 2019. For WTI, the bank forecast prices of $58 and $55 a barrel for this year and next.

U.S. crude oil inventories C-STK-T-EIA rose by 3.3 million barrels to 428.64 million barrels.
Meanwhile, U.S. crude production C-OUT-T-EIA last week hit a fresh record of 10.53 million barrels per day (bpd), up by a quarter since mid-2016.

The United States now produces more crude than top exporter Saudi Arabia. Only Russia, at currently just under 11 million bpd, pumps out more.

“Barring any geopolitical shocks, we see limited upside potential for oil prices from current levels due to ongoing oversupply, mainly from the U.S. and Russia, and also a slowing demand growth outlook,” said Georgi Slavov, head of research at commodities brokerage Marex Spectron.

Oil dips on rising U.S. supplies, market still tense on conflict in Syria

Oil Markets

Oil prices on Wednesday eased away from 2014 highs reached the previous session as escalating Middle East tensions were offset by increasing inventories and production in the United States.
FILE PHOTO: Pump jacks pump oil at an oil field on the shores of the United States.

Brent crude futures LCOc1 rose to $70.78 per barrel at 0154 GMT, down 26 cents, or 0.4 percent, from their last close. Brent surged more than 3 percent on Tuesday to hit its highest level since late 2014, at $71.34 a barrel.

U.S. WTI crude futures CLc1 were at $65.38 a barrel, down 13 cents, or 0.2 percent from their last settlement.

Markets have been tense on escalating tensions in the Middle East.

The United States and its allies are considering air strikes against Syrian President Bashar al-Assad’s forces following a suspected poison gas attack last weekend.

Pan-European air traffic control agency Eurocontrol said late on Tuesday that air-to-ground and/or cruise missiles could be used within the next 72 hours, warning of intermittent disruption of radio navigation equipment.

Though Syria is not a significant oil producer itself, the wider Middle East is the world’s most important crude exporter and tension in the region tends to put oil markets on edge.

There are also concerns that the United States could renew sanctions against Iran, a major Middle East oil producer.


Not all oil market indicators pointed to ongoing price rises, however.

U.S. crude inventories rose by 1.8 million barrels in the week to April 6 to 429.1 million, according to a report by the American Petroleum Institute (API) on Tuesday, compared with analysts’ expectations for a decrease of 189,000 barrels.

OANDA’s Innes said the API report had “temporarily taken a bit of wind out of the market”.
Adding to rising storage levels, the U.S. Energy Information Administration (EIA) said on Tuesday that it expects domestic crude oil production in 2019 to rise by more than previously expected, driven largely by growing U.S. shale output.

In its monthly short-term energy outlook, the agency forecast that U.S. crude oil output will rise by 750,000 barrels per day (bpd) to 11.44 million bpd next year. Last month, it expected a 570,000 bpd year-over-year increase to 11.27 million bpd.

That will likely make the United states the world’s biggest oil producer by 2019, surpassing Russia which currently pumps out almost 11 million bpd.

Oil prices firm, but trade dispute and Syria keep market on edge

Oil Markets

Oil markets stabilised on Monday after slumping around 2 percent last Friday on concerns over an intensifying trade dispute between the United States and China, as well as increased U.S. drilling activity. 

Markets on Monday were also eying the situation in Syria after reports - denied by the Pentagon - that U.S. forces had struck a major air base there.

U.S. WTI crude futures CLc1 were at $62.34 a barrel at 0355 GMT, up 28 cents, or 0.45 percent, from their previous settlement.
 
Brent crude futures LCOc1 were at $67.43 per barrel, up 32 cents, or 0.5 percent.

Oil prices fell about 2 percent on Friday after U.S. President Donald Trump threatened new tariffs on China, reigniting fears of a trade war between the world’s two largest economies that could hurt global growth.

With Chinese markets closed last Thursday and Friday, Shanghai crude futures ISCc1 played catch-up on Monday, dropping 0.6 percent to around 400 yuan ($63.43) per barrel.

Oil prices have generally been supported by healthy demand as well as by supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC), which started in 2017 in order to rein in oversupply and prop up prices.

In physical oil markets, OPEC’s number two producer Iraq said on Monday that it is keeping prices for its crude supplies in May steady.

In the United States, drillers added 11 rigs looking for new production in the week to April 6, bringing the total count to 808, the highest level since March 2015.

Oil eases back from 2018 highs above $70 a barrel

Oil Stock Markets

Oil fell on Wednesday as investors took profit on a rally the previous day to this year’s highs after a report showed a surprisingly large increase in U.S. crude inventories.

May Brent crude futures LCOc1, which expire on Thursday, were at $69.70 per barrel, down 41 cents on the day by 0917 GMT, while June futures LCOc2 were down 44 cents at $69.02.

WTI futures CLc1 were down 60 cents at $64.65 a barrel.

Traders said most pressure ensued after the American Petroleum Institute (API) on Tuesday reported a surprise 5.3 million barrels rise in crude stocks in the week to March 23, against expectations for a decline of to 430.6 million barrels.

The oil price has risen in seven out of the last 9 months and has increased by more than 4 percent this year, making this the third consecutive quarter of gains, which is the longest stretch since late 2010.

“This was exacerbated by an appreciating U.S. dollar and an unexpected 5.3 million barrel rise in US crude oil stocks last week, as reported by the API after close of trading yesterday.”
Official U.S. inventory data will be published by the Energy Information Administration (EIA) late on Wednesday.

Robert Carnell, chief economist and head of research at Dutch bank ING in Asia told the  Global Markets Forum on Wednesday that “more supply coming from the U.S.” would also likely weigh on oil prices.

U.S. oil production has risen by nearly 25 percent in the last two years to over 10 million barrels per day, C-OUT-T-EIA, taking it past top exporter Saudi Arabia and within reach of the biggest producer, Russia, which pumps around 11 million bpd
.
Wednesday’s price falls came despite Saudi Arabia saying it was working with Russia on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering greatly extending a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices, with a partnership to manage supplies potentially growing “to a 10-to-20-year agreement.”
In Asia, Shanghai crude oil futures posted high volumes and volatile trade on their third day of trading.

Spot Shanghai crude futures ISCc1 were down 3.75 percent on Wednesday, to 410.4 yuan ($65.37) per barrel by 0700 GMT.

($1 = 6.2782 Chinese yuan renminbi)