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Opec hopes for further oil price recovery despite glut

      

JUN 2, 201510:21 PM

[VIENNA] Angola's oil minister said on Tuesday that US$80 per barrel may be right for crude, joining a chorus of Opec officials and delegates hoping for a further price recovery in months to come despite a global glut.

"I would like the price (to) go up, but it is not easy," Jose Botelho de Vasconcelos told reporters.

Opec meets on Friday and is widely expected to maintain its production policy. Last November, Opec refused to cut output and chose instead to defend market share, adding to the supply surplus arising from booming US oil output.

The decision prompted a crash in oil prices to as low as US$46 per barrel in January, although crude has recovered to US$65 in recent weeks on hopes of a slowdown in US output growth.

On Monday, Saudi Arabia's oil minister Ali al-Naimi said he saw supply thinning and demand improving although he added that it could take time for the markets to rebalance as supply was still seriously exceeding consumption.

Mr Naimi gave no oil price outlook. However, several Opec officials who asked not to be identified told Reuters they saw crude rising to US$70-80 a barrel in coming months and 2016.

In the United States, the upcoming driving season would encourage a further increase in demand, one of the officials said.

The message will please some of the poorer Opec members who suffered badly from the price crash and a drive by wealthy Gulf Opec countries to embark on a market-share battle with non-Opec producers.

But higher prices might also throw a lifeline to the high-cost producers - some US oil firms have said they would start drilling actively again if crude went above US$60 per barrel.

"What has helped clean up the market somewhat is demand strength, which has surprised everyone including Opec, together with commercial and SPR (strategic petroleum reserve) stockpiling by China," analysts from Energy Aspects said in a note on Tuesday.

"But China's storage needs are ultimately finite, and unlikely to last in the same scale much beyond 2016 ... So, for Saudi Arabia's strategy to work, prices and expectations of future prices cannot rise too quickly, as that could reverse a lot of the work already in motion," it added.

Brent crude oil for July was up 40 cents at US$65.29 a barrel by 1315 GMT.

Some of the poorer Opec members, including Venezuela, had hoped to persuade the group to cut output by bringing non-Opec on board. However, non-members such as Russia have shown little willingness to coordinate their energy policies with the cartel, meaning the dialogue has all but died down in recent weeks.

On Tuesday, Venezuela's oil minister Asdrubal Chavez issued a statement calling for the establishment of a technical working group between all producers.

No special meeting between Saudi Arabia and Russia is planned for this week, although Russian energy minister Alexander Novak is due to attend an Opec seminar on June 3.

"It is unrealistic to ask countries to shut in the lowest-cost production in the world so that the high-cost production can stay, so what we are seeing is just natural economics," the head of oil major BP, Bob Dudley, said on Tuesday when asked whether Opec would cut output at its meeting.

REUTERS

      

Opec is winning the oil price war

JUN 2, 20157:03 PM

[NEW YORK] As Opec ministers meet in Vienna this week they'll be debating whether the strategy that's upended oil markets is working.

The last time the Organization of Petroleum Exporting Countries met, in November, it jolted markets by leaving production unchanged instead of staunching a glut by trimming output. Prices collapsed to the lowest in six years.

Opec said it wanted to "restore market equilibrium" with stable prices. That means flooding the market so oil drops to a level that forces higher-cost producers to scale back, ultimately pushing prices back up.

Now the 12-member group, which controls about 40 per cent of world supplies, has to decide whether to change course or stick to its target.

From Canada to Qatar and the Barents Sea to the Gulf of Mexico, energy companies are shelving or delaying projects following crude's collapse. Some of the world's biggest explorers have cut capital budgets from last year by as much as a third. In the US, the number of rigs drilling for oil plunged 60 per cent since October to the lowest in almost five years. US shale production started falling in May and the government expects the decline to continue.

Investors are punishing US drillers, and their stocks are missing out on the broader rally in US equities. That makes it challenging for companies to continue raising the money they need to keep drilling. Opec also has to watch its finances: Prices are too low for most member countries to break even, according to the International Monetary Fund and ING Bank NV. While Saudi Arabia, the biggest exporter, is burning through currency reserves, it still has US$686 billion in store.

BLOOMBERG

    
 

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Shipping giant Maersk orders 11 'mega' container ships

Danish shipping giant AP Moeller-Maersk said on Tuesday it had agreed to buy 11 "mega" container ships for US$1.8 billion with the option to acquire another six from South Korea's Daewoo. 

PHOTO: SPH

JUN 2, 201510:03 PM

[COPENHAGEN] Danish shipping giant AP Moeller-Maersk said on Tuesday it had agreed to buy 11 "mega" container ships for US$1.8 billion with the option to acquire another six from South Korea's Daewoo.

"These vessels will help us stay competitive in the Asia - Europe trade and will be key in our strategy to grow with the market," chief operating officer Soren Toft said in a statement.

The 'mega' ships are 400 metres (1,312 feet) long and 58.6 metres wide and will each be capable of carrying more than 19,000 containers.

They will replace smaller, less efficient vessels and are due to be deployed between April 2017 and May 2018, the group said.

Maersk Line, the world's largest container transporter, has managed to outperform the market as the sector was hit by overcapacity after the financial crisis.

Last year it partnered with Swiss-Italian MSC under a deal similar to code-sharing agreements among airlines, allowing the companies to put cargo on each others vessels.

AFP

    
 

Bank managers knew about Libor fixing, Hayes told Citigroup HR

Citigroup Inc managers knew about Thomas Hayes's attempts to manipulate benchmark interest rates, the trader said in a 2010 letter written days after he was fired by the US bank. 

PHOTO: BLOOMBERG

JUN 2, 201510:07 PM

[LONDON] Citigroup Inc managers knew about Thomas Hayes's attempts to manipulate benchmark interest rates, the trader said in a 2010 letter written days after he was fired by the US bank.

The note, shown to jurors on the fifth day of Hayes's fraud trial, was sent after Hayes was dismissed following an internal investigation found he had tried to manipulate Libor by making requests of brokers and traders to submit favorable rates.

"My actions were entirely consistent with those of others at senior levels in Citigroup Global Markets Japan," Mr Hayes wrote in the Sept 9, 2010, letter to a human resources executive at the bank shown to jurors by prosecutors Tuesday.

"Senior management at CGMJ were aware of my actions and at no point was I told that my actions could or would constitute any wrong doing."

The 35-year-old Hayes is accused of eight counts of conspiracy to manipulate the London interbank offered rate, the benchmark used to value more than US$350 trillion of loans and securities, from 2006 through September 2010. The former trader, who worked at banks including UBS Group AG and Citigroup, has pleaded not guilty.

On the day of his dismissal three days earlier, Mr Hayes received a letter from Brian McCappin, head of Citigroup's investment bank in Japan, laying out the grounds for his firing.

"You attempted to manipulate the yen Libor and Tibor rates in order to benefit your trading positions," Mr McCappin wrote in the letter.

"Such conduct is in clear violation of provisions of the Citi code of conduct, resulting in the potential for serious regulatory or reputational harm."

Mr Hayes was allowed to retain a signing on bonus of about 2.2 million pounds, which he was awarded when he joined the bank in December 2009, according to the letter from Mr McCappin.

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China central bank issues guidelines for banks to issue large certificates of deposit

China's central bank on Tuesday issued rules governing the transfer of large-scale certificates of deposit (CDs), saying they will pave the way for full interest rate liberalisation. 

PHOTO: REUTERS

JUN 2, 20156:46 PM

[SHANGHAI] China's central bank on Tuesday issued rules governing the transfer of large-scale certificates of deposit (CDs), saying they will pave the way for full interest rate liberalisation.

The announcement, on the central bank's website, said that the CDs will be covered by China's deposit insurance programme.

It said the CDs can be issued to individuals, non-financial firms or institutional investors, subject to different minimum thresholds. Individuals need a minimum of 300,000 yuan (S$65,980), while institutions will need 10 million yuan to participate.

The People's Bank of China (PBOC) said floating rates for the CDs will be based on the Shanghai Interbank Offered Rate (SHIBOR).

It has been driving the use of CDs as a way to free the flow of capital within its financial system and market-determined interest rates.

REUTERS