Saudi extends oil production cut as Russia reduces exports

RIYADH, Saudi Arabia - Saudi Arabia said on Monday it was extending a voluntary oil production cut of one million barrels per day, and Russia said it was slashing exports by 500,000 bpd.

The moves were the latest attempts by major producers to stabilize markets rocked by factors including continued fallout from the Russian invasion of Ukraine and China's faltering economic recovery.

The cut by Saudi Arabia, the world's biggest crude exporter, was first announced after a June meeting of oil producers and took effect at the weekend.

Saudi Energy Minister Prince Abdulaziz bin Salman noted at the time that it was "extendable".

In a report on Monday announcing that the cut would continue through August, the official Saudi Press Agency said it "can be extended" further, citing an energy ministry source.

"The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC+ countries with the aim of supporting the stability and balance of oil markets," SPA said.

Monday's extension announcement leaves the kingdom's production at approximately nine million bpd.

Also on Monday, Russia unveiled its export cut of 500,000 bpd for August "as part of efforts to ensure that the oil market remains balanced".

The announcement by Alexander Novak, Russian deputy prime minister responsible for energy policy, came on the back of cuts to Russian oil production this year by the same volume as part of Moscow's response to Western sanctions levied over the conflict in Ukraine.

Since the beginning of large-scale hostilities in Ukraine last February, Moscow has pivoted energy exports from Europe to India and China.

The initial market reaction to Monday's announcements by Riyadh and Moscow was muted.

Brent was up 0.98 percent to $76.15 per barrel, and West Texas Intermediate was up 1.02 percent to $71.36 per barrel.

Recent efforts by OPEC+ to bolster prices by reducing output have not succeeded.

In April, several OPEC+ members opted to slash production voluntarily by more than one million bpd -- a surprise move that briefly raised prices but failed to bring about lasting recovery.

Brent is down 11 percent since the beginning of the year and WTI is down 7 percent, as a sluggish recovery in China and worries about the US economy weigh on demand forecasts.

Saudi Arabia is counting on high oil prices to fund an ambitious reform agenda that could shift its economy away from fossil fuels.

Oil giant Saudi Aramco, the jewel of the kingdom's economy, said it recorded profits totaling $161.1 billion last year, allowing Riyadh to notch up its first annual budget surplus in nearly a decade.

Analysts say the kingdom needs oil to be priced at $80 per barrel to balance its budget, which is well above recent averages.

Agence France-Presse

OPEC+ agrees oil output cut to prop up prices

VIENNA, Austria - The OPEC+ oil cartel agreed Monday to cut production for the first time in more than a year as it seeks to lift prices that have tumbled due to recession fears.

The move could irk the United States as it has pressed the group to increase output in order to bring down energy prices that have fuelled decades-high inflation.

OPEC+, a 23-nation coalition led by Saudi Arabia and Russia, had agreed to huge cuts in output in 2020 when the Covid pandemic sent oil prices crashing, but it began to increase production modestly again last year as the market improved.

Oil prices soared to almost $140 a barrel in March after Russia invaded Ukraine.

But they have since receded below $100 per barrel amid recession fears, Covid lockdowns in major consumer China and Iran nuclear talks that could bring Iranian crude back into the market.

While analysts had expected another modest increase at Monday's ministerial meeting, OPEC+ said in a statement that it decided to reduce output by 100,000 barrels per day in October, returning to the production level of August.

"An output cut won't make them any friends at a time when the world is facing a cost-of-living crisis already and the group has failed to keep up with demand this year," Craig Erlam, analyst at OANDA trading platform, warned prior to the OPEC+ announcement.

Oil prices rose by more than three percent following the announcement, with the international benchmark, Brent, exceeding $96 per barrel while the US contract, WTI, reached almost $90.

At its last meeting, OPEC+ agreed to a small rise of 100,000 barrels per day for September after US President Joe Biden traveled to Saudi Arabia to plead for a production bump -- although it was six times lower than its previous decisions. 

Energy Minister Abdulaziz bin Salman last month had appeared to open the door to the idea of cutting output, which has since received the support of several member states and the cartel's joint technical committee.

He said "volatility and thin liquidity send erroneous signals to markets at times when clarity is most needed".

Caroline Bain, commodities expert at Capital Economics, said the cut was not a total surprise a "little more than symbolic" as OPEC+ has struggled to meet its quotas due to lackluster production in some of its member countries.

"The bigger picture is that OPEC+ is producing well below its output target and this looks unlikely to change given that Angola and Nigeria, in particular, appear unable to return to pre-pandemic levels of production," Bain said.

In efforts to curb rising oil prices, the United States and its allies have released crude from their emergency reserves.

And in a bid to curb Russia's war funding, the G7 group of industrialized powers agreed Friday to move "urgently" towards capping the price of Russian oil. 

Moscow has warned that it will no longer sell oil to countries that adopt the unprecedented mechanism.

Another geopolitical issue is clouding the outlook.

Negotiations aimed at reviving a landmark nuclear deal between Tehran and world powers could lead to an easing of oil sanctions in return for curbs to its atomic activities.

However, Washington said Thursday that Tehran's latest response to a European Union draft was "unfortunately... not constructive". 

Agence France-Presse

Oil prices jump, stocks mixed with spotlight on surging inflation

LONDON - Oil prices rallied Wednesday, adding to soaring inflation concerns, while stock markets diverged.

Crude futures jumped 2.5 percent with Brent North Sea headed towards $120 per barrel.

Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war would drive the world's energy markets to a "collapse". 

"It is absolutely obvious that without Russian hydrocarbons, if sanctions are introduced, there will be a collapse of the oil and gas markets," Novak told Russia's lower house State Duma as reported by Russian news agencies.

"The rise in energy prices may be unpredictable," Novak added. 

On stock markets, London's benchmark FTSE 100 index was up after official data showed UK annual inflation had surged to 6.2 percent last month, the highest level in 30 years. 

While inflation increases company costs it can boost their revenues by sizeable amounts. 

The British data were published ahead of a UK budget update Wednesday that could ease a cost-of-living crisis for millions of Britons as inflation rockets worldwide largely owing to soaring energy prices. 

"Today's data confirm a worsening squeeze on consumer incomes," said Yael Selfin, chief economist at KPMG UK.

"These price rises were dominated by increases in energy, and we expect further rises this year as global energy, food, and other commodities markets are impacted by Russia's invasion of Ukraine."

Elsewhere, eurozone stock markets fell Wednesday after Asia's top indices closed higher.

Wall Street had rallied Tuesday on optimism that the Federal Reserve's plan to hike interest rates would help to bring inflation under control.

While there remains plenty of concern about the war in Ukraine, analysts said some confidence had seeped back into trading floors as investors bet on consumer resilience and economies continue to reopen.

Federal Reserve boss Jerome Powell this week said that the US central bank was prepared to act more aggressively on lifting borrowing costs should American inflation -- already at a 40-year high -- not fall quickly enough.

Officials lifted US rates last week by a quarter of a point but some have advocated bigger increases, a view Powell suggested he was open to believing that the world's biggest economy was strong enough to withstand such a move.

Agence France-Presse

Russia sanctions ripple across world markets, rouble tanks

LONDON - World stocks slid, oil prices jumped and the rouble tanked to fresh record lows on Monday, as the West ramped up sanctions against Russia for its attack on Ukraine that included blocking banks from the SWIFT global payments system.

Russia's central bank raised its key interest rate to 20 percent from 9.5 percent in an emergency move, and authorities told export-focused companies to be ready to sell foreign currency as the rouble slid almost 30 percent to record lows versus the dollar. 

As an economic crisis loomed in Russia, the fallout of tougher sanctions from the West imposed over the weekend rippled out across financial markets.

European stocks slumped 2 percent. European banks most exposed to Russia, including Austria's Raiffeisen Bank, UniCredit and Societe Generale, dropped between 9 and 15 percent, while the wider euro zone banking index fell 7 percent.

US stock futures were deep in negative territory, although MSCI's broad gauge of Asia shares and Japan's Nikkei eked out small gains.

"The trading environment is highly dynamic, and we maintain a defensive stance as things could get a lot worse from here," said Peter Garnry, head of equity strategy at Saxo Bank.

Oil prices meanwhile surged after Russian President Vladimir Putin put nuclear-armed forces on high alert on Sunday, the fourth day of the biggest assault on a European state since World War Two. 

The ramp-up in tensions heightened fears that oil supplies from the world's second-largest producer could be disrupted, sending Brent crude futures up 5 percent to $102.86. US. West Texas Intermediate crude futures were up $4.62 or almost 5.0 percent at $96.24 a barrel.

"I am telling clients all we know for certain is that energy prices are going to be higher, and there are going to be some beneficiaries," said John Milroy, Ord Minnett financial advisor in Sydney.

"It's an old cliché, but it's true that uncertainty drives moves in both directions." 

SAFE-HAVENS SHINE

As uncertainty continued to grip markets, investors plumped for the safety of the dollar, Swiss franc and Japanese yen.

The euro slid 1 percent to $1.1168 and 0.9 percent to 129.08 yen, while the risk-sensitive Australian and New Zealand dollars fell 0.5 percent and 0.3 percent, respectively.

Sovereign bonds such as the US. Treasuries and German Bunds -- regarded as among the most safest assets to hold globally -- remained in strong demand.

The 10-year US. Treasury yield was down around 7 basis points to 1.90 percent in London trade, and equivalent German yields were down 6 basis points to 0.16 percent.

Money markets continued to push back rate hike expectations with investors now pricing roughly 30 basis points worth of tightening from the European Central Bank in total this year, down from 35 bps late last week. 

Gold was last up 0.61 percent to around $1,899.

Russia's rouble dived almost 30 percent to a record-low 120 per dollar, but recovered some ground to last trade at just over 100 to the dollar.

MSCI's Russia equity index slid 25 percent, while London and Frankfurt-listed Russian equity exchange traded funds (ETFs) tanked more than 35 percent as investors dumped Russian assets.

(Reporting by Dhara Ranasinghe; Additional reporting by Kevin Buckland in TOKYO; editing by Jason Neely)

-reuters

Omicron panic pummels equities, oil

NEW YORK - Global equity and oil markets slumped Monday on investor panic over the impact of worldwide measures to contain the fast-spreading Omicron coronavirus variant, dealers said.

Asia tanked due to concerns over a fresh global surge in coronavirus infections, sparking a fierce renewed selloff in Europe, while Wall Street indices also closed lower.

Oil tumbled as traders fretted over how the latest Covid-19 strain might hit the world's appetite for energy, which has already suffered a heavy blow since the pandemic erupted early last year.

In New York, sentiment was jarred by a crucial moderate Democratic senator's announcement that he would not support President Joe Biden's social spending bill, imperiling the measure that some analysts view as a positive for US growth.

"It does not feel like the most wonderful time of the year for Wall Street," Oanda's Edward Moya said in a note.

OMICRON PANIC MODE

The British pound fell sharply after the surprise weekend departure of Prime Minister Boris Johnson's Brexit minister David Frost.

"After battling endless headwinds in recent weeks, markets have finally been knocked over as the rapid spread of Omicron finally reaches panic mode," said AJ Bell investment director Russ Mould.

Meanwhile, the EU's drug regulator approved a fifth Covid jab as the United States warned of a bleak winter with the Omicron variant spurring new waves of infections globally.

Since it was first reported in South Africa in November, Omicron has been identified in dozens of countries, prompting many to reimpose travel restrictions and other measures.

The Netherlands imposed a Christmas lockdown, and Germany tightened restrictions notably affecting the unvaccinated, while media speculation swirls over the re-imposition of tougher UK curbs.

STOLEN CHRISTMAS?

The rapid spread of Omicron has also slammed the oil market and travel stocks, since a return to containment measures and travel curbs would hit the aviation and tourism industries as well as dampen demand for fuel.

"There is some de-risking in the face of headline news that has market participants thinking the Omicron Grinch might steal Christmas after all," said analyst Patrick J. O'Hare at Briefing.com.

With traders beginning to wind down ahead of the festive season, analysts said trade was thinner and markets more susceptible to swings, but the mood has become increasingly glum as central banks start paring their huge financial support to fight inflation.

World markets had briefly risen last week after other major central banks took action to combat soaring inflation, even as spiking Covid-19 cases threaten the fragile economic recovery.

The Bank of England delivered the first interest rate hike in three years, while the Federal Reserve said it would speed up the taper of its bond-buying program and indicated three interest rate hikes before the end of 2022.

Dealers were unmoved Monday by news that China had trimmed a key interest rate by five basis points as it looks to reignite the stuttering economy.

Meanwhile, in Chile, the Santiago stock market plunged almost seven percent at the opening bell after leftist Gabriel Boric decisively won the presidential election, with the Chilean peso also taking a beating.

Agence France-Presse

US to release oil from reserves after OPEC+ rebuffs call for more crude

WASHINGTON - The United States said on Tuesday it would release 50 million barrels of oil from strategic reserves in a coordinated move with China, India, South Korea, Japan and Britain to cool prices after OPEC+ producers rebuffed calls for more crude.

The White House issued the statement after a source in the US administration said Washington had been hashing out a plan with major Asian energy consumers to drive down prices from near three-year highs. Britain had not previously been mentioned.

US President Joe Biden, facing low approval ratings amid rising inflation ahead of next year's congressional elections, has repeatedly called on the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to pump more oil.

But the group has rebuffed the requests, as members have already been struggling to meet its existing targets for production increases and amid fears a resurgence of coronavirus cases could once again drive down demand.

The release from the US Strategic Petroleum Reserve would be in the form of a loan sale to companies, which must return the crude at a later date, and was the first time the United States had coordinated a release with some of the world's largest oil consumers, US officials said.

OPEC+ states, including US allies in the Gulf, meet again on Dec. 2 to discuss policy but have shown no sign of any change in tack to heed US calls.

The unprecedented effort by Washington to team up with major Asian economies to lower energy prices sends a warning to OPEC and other big producers that they need to address concerns about high crude prices, up more than 50 percent so far this year.

An OPEC+ source, speaking before the group's December meeting, said a release from reserves would complicate the maths for OPEC+, as it monitors the market on a monthly basis.

Suhail Al-Mazrouei, energy minister of the United Arab Emirates, one of OPEC's biggest producers, said earlier Tuesday he saw "no logic" in increasing UAE supply to global markets.

(Reporting Timothy Gardner; Additional reporting by Sonali Paul in Melbourne and Ghaida Ghantous in the United Arab Emirates; Writing by Richard Valdmanis and Edmumd Blair; Editing by Carmel Crimmins)

-reuters

Saudi Aramco Q3 profits soar 158 percent on higher oil prices

RIYADH - Saudi Aramco's earnings rose 158 percent year-on-year in the third quarter on higher oil prices and volumes sold as the global economy recovered, it said on Sunday.

Aramco's net income was $30.4 billion in the third quarter, up from $11.8 billion in Q3 last year, with free cash flow more than doubling to $28.7 billion. Shareholders will receive $18.8 billion in dividends.

"The increase in net income was primarily the result of higher crude oil prices and volumes sold," the Saudi oil giant said in its earnings statement.

It also cited "stronger refining and chemicals margins in Q3, which were underpinned by rebounding global energy demand and increased economic activity in key markets".

The latest rise comes after profits nearly quadrupled in Q2 as the world economy bounced back from the Covid crisis, lifting demand and pushing oil prices back above $80 a barrel.

"Some headwinds still exist for the global economy, partly due to supply chain bottlenecks, but we are optimistic that energy demand will remain healthy for the foreseeable future," Aramco chief executive Amin Nasser said.

Agence France Presse 

Oil prices gain on expectations OPEC+ will keep lid on output

SINGAPORE - Oil prices rose on Wednesday as investors bet OPEC and its allies would largely agree to extend their supply curbs into May, while strong growth in China's manufacturing activity this month sent out more signals of economic recovery.

Brent crude futures for May, which expires on Wednesday, rose 46 cents, or 0.7 percent, to $64.60 a barrel at 0635 GMT, after falling 1.3 percent on Tuesday. The more active Brent contract for June was up 52 cents, or 0.8 percent, at $64.69 a barrel.

The benchmark has shed more than 2 percent so far this month, compared with a 18 percent rise in February.

US West Texas Intermediate (WTI) crude futures climbed 51 cents, or 0.8 percent, to $61.06 a barrel, after falling 1.6 percent in the previous session.

"Oil prices appear to be underpinned by upbeat Chinese Purchasing Manager's Index (PMI) data from the National Bureau of Statistics (NBS), which underscored the growth momentum of the world's second-largest economy," said Margaret Yang, a strategist at Singapore-based DailyFX.

"Against the backdrop of lowered energy demand in Europe due to a third viral wave, OPEC+ and its allies are likely to extend the current production cut into May until the growth prospects show signs of improvement."

China's manufacturing activity expanded at the quickest pace in three months in March as factories cranked up production after a brief lull during the Lunar New Year holidays. 

But OPEC+ has raised concerns that rising numbers of coronavirus infections globally and lockdown measures will impact the recovery in demand for oil, according to a report from the group's experts panel meeting seen by Reuters. 

The Organization of the Petroleum Exporting Countries and allies, together called OPEC+, are set to meet on Thursday, following a month in which oil prices have whipsawed on concerns about extended pandemic lockdowns in Europe, slow vaccine rollouts and rising COVID-19 cases in India and Brazil, pitted against growing optimism on growth in the United States.

OPEC+ last month surprised the market by agreeing to extend supply curbs, with small exceptions for Russia and Kazakhstan, at a time when fuel demand appeared to be recovering.

"All eyes will be on OPEC+ meeting for May output decisions and considering the surge in COVID-19 cases and lockdowns being implemented in parts of Europe, and the strength in dollar, it may pressure prices by another 2 to 3 percent," said Sunilkumar Katke, head of currencies and commodities at Axis Securities.

Under existing curbs, OPEC, led by Saudi Arabia, and non-OPEC producers, led by Russia, have cut just over 7 million barrels per day (bpd), while Saudi Arabia has made an additional voluntary reduction of 1 million bpd.

Saudi Arabia is prepared to back an extension of the supply cuts into June, including its own voluntary cut, to boost prices, a source briefed on the matter told Reuters this week. 

(Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Simon Cameron-Moore and Richard Pullin)

-reuters

Oil prices fall amid weak China, German trade data

SINGAPORE – Oil prices fell in Asia Wednesday as dealers await the latest US supply report for clues about production levels, while weak Chinese and German trade data also weighed, analysts said.

US benchmark West Texas Intermediate for January delivery slipped 90 cents to $62.92 while Brent crude for January was down $1.01 at $65.83 in mid-morning trade.

“With the global supply glut, the main concern at the moment is the level of production in the US,” Daniel Ang, investment analyst at Phillip Futures in Singapore, told AFP.

“The US stockpiles report will be in focus to see if there is any change in production growth,” he said.

Analysts surveyed by the Wall Street Journal said they expected domestic inventories to have fallen by 2.7 million barrels in the week to December 5.

The American Petroleum Institute, an industry group, in its own survey however said stockpiles likely rose 4.4 million barrels.

It said refinery operations likely increased 1.6 percentage points to 94.6 percent of capacity.

The Department of Energy will release the official stockpiles report later Wednesday.

The department on Tuesday modestly reduced its 2015 US oil production forecast to 9.3 million barrels per day from the previous 9.4 million estimate.

Ang said German and Chinese trade data this week “have shown signs of dropping global demand and put pressure on oil prices”.

German exports slipped 0.5 percent month on month in October, while imports fell 3.1 percent. That came a day after China said exports grew just 4.7 percent year-on-year in November and imports dropped 6.7 percent.

Trade figures out of Germany and China, both major manufacturing giants, are closely watched for their impact on crude prices, especially the more internationally leveraged Brent contract.

source: business.inquirer.net