OPEC scales back 2016 oil forecast as emerging markets disappoint

The OPEC oil cartel on Monday trimmed its forecast for global oil demand next year as emerging markets, which have been the motor of world growth in recent years, splutter. 

PHOTO: REUTERS

SEP 14, 20157:15 PM

[PARIS] The OPEC oil cartel on Monday trimmed its forecast for global oil demand next year as emerging markets, which have been the motor of world growth in recent years, splutter.

Cheap oil prices should be enough to keep oil demand growing slightly in volume terms next year, but also nearly halt the expansion of non-OPEC resources, the group said in its monthly report.

Better than expected growth in the United States and the eurozone prompted the Organization of the Petroleum Exporting Countries to nudge up its forecast for world oil demand growth this year to 1.46 million barrels per day (bpd) to 92.79 million bpd.

Oil demand was stronger than it had forecast in the main consuming countries "mainly driven by lower oil prices".

However OPEC cut its 2016 forecast to a 1.29 million bpd gain to 94.08 million bpd "due to the projected slower economic momentum in Latin America and China".

The slowdown in China, which has dampened the prospects for commodities producers and sparked volatility in markets in recent weeks, led OPEC to trim its forecast for global economic growth to 3.1 per cent this year and 3.4 per cent in 2016.

"While the group of emerging and developing economies has been the main growth engine in recent years, it has become clear that growth in this group is slowing down," said OPEC.

Low oil prices were also beginning to have an impact on production, it said.

The global oil market has been driven for the past year and half by an increasingly transparent policy by OPEC kingpin Saudi Arabia to safeguard its market influence against upstart shale producers who could change global dynamics by cutting US dependence on imported oil.

The refusal of Saudi Arabia and its OPEC partners to cut production has seen crude oil prices slump from more than US$100 per barrel in 2013 to less than US$40 last month, putting the squeeze on high-cost US producers.

"US oil production has shown signs of slowing," said OPEC.

"This could contribute to a reduction in the imbalance of oil market fundamentals, however, it remains to be seen to what extent this can be achieved in the months to come," it said.

However OPEC still sees a marginal increase of US oil production to 13.97 mbpd next year from 13.75 mbpd, with output from shale producers also to nudge up if prices hold at current levels.

That contrasts with a forecast made last week by the International Energy Agency, which analyses energy markets for oil consuming nations, that non-OPEC oil output may drop by half a million barrels per day next year - the biggest decline in 24 years - with US shale producers accounting for four-fifths of that drop.

AFP

      

Platts includes Singapore oil terminal in gas oil pricing process

Oil pricing agency Platts said on Monday it will include the Pulau Seraya Power Station Terminal in Singapore in its Singapore gasoil price assessment process from late September. 

PHOTO: REUTERS

SEP 14, 20152:52 PM

[SINGAPORE] Oil pricing agency Platts said on Monday it will include the Pulau Seraya Power Station Terminal in Singapore in its Singapore gasoil price assessment process from late September.

The move is expected to offer traders more flexibility in loading cargoes and improve market liquidity, traders said.

Following positive feedback from the industry to its proposal in August that Pulau Seraya terminal deliveries be included in its price assessment, Platts will go ahead with the move effective Sept 25, it said in a note to its subscribers.

Platts, a unit of McGraw Hill Financial Inc, provides Asian benchmark price assessments for most oil products traded in the region.

Apart from terminals in Singapore, Platts also recognises Malaysia's Pasir Gudang, Tanjung Langsat, Tanjung Bin, Pengerang and a few floating storage units in nearby waters for its Singapore price assessment process.

The Pulau Seraya terminal has four berths and an overall storage capacity of 835,000 cubic metres, of which 180,000 cubic metres is set aside for clean oil product storage, Platts said.

At one metre tide, the approaching draft is about 12.6 metres and is able to accommodate Aframax and partially-laden Suezmax-sized vessels, it added.

REUTERS

    
 

JPMorgan sees new normal in bonds as slowing China crimps yields

China's slowing economy will suppress global bond yields even as the Federal Reserve considers a rate increase, threatening returns for investors who rely on higher coupon payments, according to JPMorgan Chase & Co and Nomura Holdings Inc. 

PHOTO: BLOOMBERG

SEP 14, 20155:06 PM

[HONG KONG] China's slowing economy will suppress global bond yields even as the Federal Reserve considers a rate increase, threatening returns for investors who rely on higher coupon payments, according to JPMorgan Chase & Co and Nomura Holdings Inc.

Average yields on bonds globally have dropped 8 basis points this quarter to 1.64 per cent, according to a Bank of America Merrill Lynch index. The decline comes after China's factory output slid to a three-year low and exports slumped. The International Monetary Fund said earlier this month that the global expansion outlook is worse than it anticipated, after China's US$5 trillion equity rout and currency devaluation sparked turmoil in global markets.

"As China's growth slows, returns on both global equity and fixed income may come down in the next few years because China accounts for a significant portion of global growth," said Ben Sy, the Hong Kong-based head of Asia fixed income, currencies and commodities at JPMorgan's private banking unit. "We will be facing a new normal of lower returns."

As Chinese Premier Li Keqiang likens managing the weakest growth since 1990 in the world's second-biggest economy to a "Chinese chess game," analysts have cut their forecast for global expansion to 3.1 per cent for this year from 3.4 per cent in 2014. Commodity prices have slumped to the lowest in 14 years, adding to a surge in corporate defaults to at least 65 after 60 for the whole of last year, according to Standard & Poor's.

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"Since China is such a big part of global gross domestic product growth, slowing China will likely suppress both equity and fixed income yields," said Gaurav Singhal, credit analyst at Nomura in Hong Kong. China contributes about one third to global GDP growth, Bloomberg-compiled data show.

As the Fed meets this week to consider raising interest rates from near zero, it faces other central banks that have recently declined to do so.

Last week, the Bank of England decided to keep rates on hold, saying slower growth in Chinese demand, weak commodity prices and the prospect of Fed tightening will likely have an adverse effect on a number of emerging markets. The European Central Bank unveiled a revamp of quantitative easing recently, citing weaker global outlook.

Traders are pricing in an almost 60 per cent chance the Fed will raise interest rates in December, the first increase since 2006. Some 28 per cent say a rise could come as early as Thursday. Yields on 10-year Treasuries have dropped 17 basis points this quarter to 2.18 per cent.

Fitch Ratings Ltd expects China's trend growth rate to decline further as the country adjusts and rebalances. One scenario of gradual rebalancing could see the growth rate decline gradually to about 5 per cent on average in 2016-2020.

"Slower China growth means low growth globally," said Xia Le, the chief Asian economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. "Combined with low real interest rate and low inflation, global bond yields will likely remain low."

BLOOMBERG

      

US inflation expectations lowest in years, Fed survey shows

SEP 14, 201511:45 PM

[NEW YORK] Consumer expectations for inflation three years ahead fell last month to the lowest level in records going back to June 2013, according to a Federal Reserve Bank of New York survey released Monday.

The median respondent to the New York Fed's August Survey of Consumer Expectations predicted annual consumer price inflation three years hence would be 2.9 per cent, down from 3 per cent the month before. Median expected inflation a year ahead fell to 2.8 per cent from 3 per cent, marking the second-lowest response in the history of the survey.

The results come ahead of Sept. 16-17 meeting of Fed policy makers in Washington at which Fed Chair Janet Yellen and her colleagues will debate whether to raise interest rates for the first time in nearly a decade.

Officials said in a statement following their last meeting in July that they needed to see "some further improvement" in the job market and be "reasonably confident" in the inflation outlook. Their preferred measure of prices, the personal consumption expenditures price index, was up 0.3 per cent in July from a year earlier and has run below the central bank's 2 per cent target for over three years.

Fed Vice Chairman Stanley Fischer attributed much of the current shortfall to the recent drop in oil prices and appreciation of the US dollar during an Aug 29 speech in Jackson Hole, Wyoming.

"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further," Mr Fischer said.

BLOOMBERG

      

Singapore says Indonesia to share names of companies causing forest fires   

Indonesia has agreed to share with Singapore the names of companies suspected of causing forest fires that have led to a deterioration of air quality in the city state. 

PHOTO: REUTERS

SEP 14, 201511:07 PM

[SINGAPORE] Indonesia has agreed to share with Singapore the names of companies suspected of causing forest fires that have led to a deterioration of air quality in the city state.

Indonesia's Minister of Environment and Forestry, Siti Nurbaya Bakar, told Singapore's Minister for the Environment and Water Resources, Vivian Balakrishnan, that the names would be shared once the information had been verified, Singapore's National Environment Agency (NEA) said in a statement.

Haze has engulfed Singapore and Malaysia for several days, pushing the PSI air quality index to unhealthy levels of over 100 in the city state on a 24-hour basis. The three-hour gauge of PSI hit a high of 249 late on Monday night, the NEA said.

Singapore passed a cross-border air pollution law last year that makes those who cause haze both criminally and civilly liable. The law also provides law enforcers with a relatively low threshold to prove that a company outside Singapore has polluted the air.

The haze this week is also clouding the build-up to the city-state's glamour sporting spectacle - the Formula One night motor race that will be held next weekend.

REUTERS

      

China says crackdown on illegal financing will have no significant impact on markets

A crackdown in China on grey-market margin financing will not have significant impact on markets, because the level of forced liquidation in the clean up is low, China's securities regulator said on Monday. 

PHOTO: AFP

SEP 14, 201511:05 PM

[HONG KONG] A crackdown in China on grey-market margin financing will not have significant impact on markets, because the level of forced liquidation in the clean up is low, China's securities regulator said on Monday.

China Securities Regulatory Commission (CSRC) punished four of the country's largest brokerages last week for failing to properly verify clients.

That came after Chinese authorities launched a series of investigations into the wild fluctuations in the country's stock markets and a crackdown on alleged "malicious" short-selling or market manipulation.

The overall risk of derived from brokerages using stock as collateral is controllable, the spokesman of CSRC added in an online question and answer statement published on Monday evening.

REUTERS