Oil Prices Boosted By Saudi Arabia Pledge To Deepen Output Cut

Oil futures rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June in a bid to help drain the glut in the global market that has built up as the coronavirus pandemic crushed fuel demand.

Brent crude (LCOc1) futures advanced 0.5%, or 15 cents, to $29.78 at 0500 GMT, after hitting an intraday high of $30.11 a barrel.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were up 1%, or 26 cents, at $24.40 after touching an intraday high of $24.77.

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Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” Stephen Innes, chief global market strategist at AxiCorp, said in a note. OPEC+ is a group comprised of members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia.

The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total. Kazakhstan has also ordered producers in large and mid-sized oil fields including Tengiz and Kashagan to cut oil output by around 22% in the May to June period.

Still, the moves to deepen cuts raised questions for some about why the further cuts were needed.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?'” said Vivek Dhar, Commonwealth Bank’s mining and energy economist.

The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.

However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of COVID-19 cases spurring renewed lockdowns.

Data showing China’s April factory prices fell at the sharpest rate in four years also added to investor jitters as it revealed weak industrial demand.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” said Commonwealth Bank’s Dhar.

Inventory data this week will be key to extending the recent rally in oil prices, analysts said.

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U.S. crude inventories likely rose by about 4.3 million barrels in the week to May 8, a preliminary Reuters poll showed, ahead of reports from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday.


Aramco Achieved The $2 Trillion Valuation, Shares Rose Sharply On Their Second Day Of Trading

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The Saudi Crown Prince has made the Aramco initial public listing (IPO) the centerpiece of his plan to diversify the Kingdom’s economy away from its dependence on oil production by using the $25.6 billion raised to develop other sectors.

But that was well below the Crown Prince’s plan announced in 2016 which called for raising as much as $100 billion via international and domestic listings of a 5% stake in Aramco.

Bernstein analysts initiated Aramco with an “underperform” rating, estimating its value at around $1.36 trillion. This compares with U.S. energy giant Exxon Mobil’s valuation of less than $300 billion.

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Saudi Aramco is the largest, most profitable oil company in the world – but size is not everything,” they wrote, flagging the risk of slow net income growth if oil prices stay flat.

Bernstein’s note said Saudi Arabian Oil Co (Aramco) should trade at a discount rather than premium to international oil majors, with corporate governance “the key risk for investors” as Saudi Arabia will own more than 98% of the company.

“A valuation discount to western oil majors seems warranted,” Bernstein said of Aramco, whose shares gained the maximum 10% allowed by the Riyadh exchange on their Wednesday debut. They hit 38.7 riyals ($10.32) on Thursday, before easing to 37.5 riyals, putting its market value at $2 trillion.

Aramco has become the world’s biggest IPO, topping the $25 billion 2014 listing of China’s Alibaba, despite limited interest from foreign investors leading it to cancel roadshows in New York and London.

It opted instead to sell just a 1.5% stake in Riyadh and rely mainly on domestic and regional buyers. Some analysts said there could be a lag before the Aramco price settles and some investors take profits from the IPO.

“After Aramco hits $2 trillion, investors will debate: why should it go higher … while its owners value it at $2 trillion?” a Gulf analyst who asked not to be identified said.

The analyst added that when National Commercial Bank (NCB) was listed in 2014 its shares rose by the maximum limit for 10 days before investors started selling. Saudi Aramco tops $2 trillion, defying valuation sceptics

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Oil prices plunged to their lowest since late 2017 on Friday in choppy trading, weighed down by an emerging crude supply overhang and a darkening economic outlook

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Oil prices plunged to their lowest since late 2017 on Friday in choppy trading, weighed down by an emerging crude supply overhang and a darkening economic outlook. To counter bulging supply, the Organization of the Petroleum Exporting Countries (OPEC) is expected to start withholding output after a meeting planned for Dec. 6.

International benchmark Brent crude oil futures fell their lowest since December 2017 at $61.52 per barrel, before recovering to $62.13 by 0741 GMT. That was 47 cents, or 0.8 percent below their last close. U.S. West Texas Intermediate (WTI) crude futures slumped 2.3 percent, to $53.38 a barrel. Prices earlier fell to as low as $52.82, only 5 cents about the $52.77 level reached on Tuesday, which was the lowest since October 2017.

Amid the plunge, Brent and WTI price volatility has jumped in November to approach levels not seen since the market slump of 2014-2016 and, before that, the financial crisis of 2008-2009.

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The divergence between U.S. and international crude comes as surging North American supply is clogging the system and depressing prices there, while global markets are somewhat tighter, in part because of reduced exports from Iran due to newly imposed U.S. sanctions.

Overall, however, global oil supply has surged this year, with the top-three producers – the United States, Russia and Saudi Arabia – pumping more than a third of global consumption, which stands at around 100 million barrels per day (bpd).

The market is currently oversupplied,” said U.S. investment bank Jefferies on Friday, adding that “an oversupplied market has a difficult time setting a (price) floor.” High production comes as the demand outlook weakens on the back of a global economic slowdown.

Shanghai stocks fell the most in five weeks on Friday, by 2.5 percent, amid worries over China’s economic growth and doubts over the chances of President Xi Jingping and U.S. President Donald Trump achieving a de-escalation in the Sino-U.S. trade war when they meet next week.

Oil prices have plunged by around 30 percent since their last peaks in early October, as global production started to exceed consumption in the fourth quarter of this year, ending a period of undersupply that started in the first quarter of 2017, according to data in Refinitiv Eikon. Adjusting to lower demand, top crude exporter Saudi Arabia said on Thursday that it may reduce supply.

“We will not sell oil that customers don’t need,” Saudi Energy Minister Khalid al-Falih told reporters. Saudi Arabia is pushing OPEC to cut oil supply by as much as 1.4 million bpd to prevent a supply glut.


The group officially meets on Dec. 6 to discuss its supply policy. U.S. bank Morgan Stanley (NYSE:MS) said it saw “a far greater probability that OPEC reaches an agreement to balance the market in 2019” than not, adding that this would likely support oil prices “in the high-$50s, at least near term.”

Stock Market News Today: UK trade secretary Liam Fox thinks the chances of Britain crashing out of the EU without a Brexit deal are high.

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UK trade secretary Liam Fox thinks the chances of Britain crashing out of the EU without a Brexit deal are high — 60-40 to be exact. He was not the only one making Brexit warnings at the weekend. Philip Hammond, UK chancellor, warned of a French effort to stifle Britain’s financial services sector in red tape after the UK leaves the bloc.

The EU is looking at limiting the legal power it would wield over Northern Ireland to avoid a “no deal“ outcome. Finally, the UK’s biggest companies have become more optimistic about the impact of Brexit on the UK economy.


Brexit News Today. The complications of the UK leaving the EU aside, many bankers and analysts are more worried about moving global finance away from its reliance on disgraced interest rate benchmark Libor. “In many ways this is potentially bigger than Brexit,” Dixit Joshi, group treasurer at Deutsche Bank, said.

HSBC News Today. Higher operating expenses continued to bite at HSBC’s profitability in the first half of 2018 as the bank invested in its retail and investment banking operations. The bank closed its morning session in Asia up 1.5 per cent at HK$73.40, compared with a 0.7 per cent gain by the Hang Seng Index.

Saudi Arabia and Canada News Today. Saudi Arabia is expelling the Canadian ambassador and freezing new trade with the country. The move comes after Canada said it was “gravely concerned” about the arrest of several human rights activists in the Gulf kingdom. Saudi Arabia did not appreciate the “interference”. Staying in the Middle East, Donald Trump’s hopes of delivering the “ultimate deal” to resolve the Israeli-Palestinian conflict are foundering.

UK Insurance Companies News Today. Three large UK insurance companies have been accused of failing to properly spell out the risks their businesses face from climate change. If the complaints against Lancashire, Admiral and Phoenix are upheld, the companies could face fines. This comes after a weekend of extreme hot weather in Europe.

Iran Sanctions News Today. US sanctions on Iran, which had been lifted under the 2015 nuclear accord, go back into effect from today. They cover Iranian trade in automobiles and metals including gold.


Stock Market Overview. European stocks are set to start the week on a solid footing as Asia-Pacific markets shrug off concerns over a fresh round of trade war rhetoric between the US and China.

Asian equities are mostly gaining ground, though stocks in China are down after President Donald Trump’s claim the US is winning its deepening trade war with China, which on Saturday threatened retaliatory tariffs on $60bn of imports from the US.

In Hong Kong the Hang Seng index is up 0.6 per cent thanks to gains for utilities and technology stocks, which are 1 per cent and 0.9 per cent higher respectively.

In China, however, the CSI 300 index of major stocks in Shanghai and Shenzhen is off 0.8 per cent.

Tokyo’s Topix has slipped 0.6 per cent with a 1 per cent fall by financials offsetting gains of 1 per cent in the telecoms segment.

Sovereign bonds are steady, with the yield on 10-year Japanese government bonds hovering above 0.1 per cent following a volatile week that saw it range between 0.053 per cent and 0.142 per cent following the Bank of Japan’s tweaks to its quantitative easing policy. The yield on 10-year US Treasuries is up 1 basis point at 2.956 per cent.

Investors are waiting to see whether the Italian government’s bond-buying operation — which was announced late on Friday — is sufficient to stabilise the country’s bond yields, which climbed late last week as political turmoil once again hit the markets.

Oil prices are rising following news that some US sanctions on Iran will be reinstated.