The Financial Daily : 2020-08-25

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Tuesday, August 25, 2020 Steady oil price belies weakening physical market But weak refining margins means the rest of the world has trouble mopping up all the oil especially given the impact of a resurgence of coronaviru­s cases in Europe and new lockdowns in some U. S. states. Russia Urals crude is trading nearly $ 3 a barrel below a record high hit in June. The value of West African grades has fallen sharply while Saudi Arabia and Iraq both cut their official selling prices for September to reflect the weaker market. "The movement we've seen with the widening contango should filter into the flat price over the coming 45 weeks," Lindell of JBC Energy said. LONDON: The oil price is holding steady close to $ 45 a barrel, but prices further forward and in the physical market are showing new signs of weakness mainly due to a fall in demand from China after the country's buying binge earlier in the year. The spread between Brent crude for nearby delivery and six- months ahead is at its widest since late May at around $ 2.50, a market structure known as contango. The coronavir us crisis r educed global oil demand by nearly a third in April and May when 4 billion people around the world were in some form of lockdown. The market began to rebalance in late May when economies began to reopen and as OPEC and other major producing countries made big production cuts. China took advantage of record low oil prices to beef up its longterm storage when half the world entered lockdown just as Beijing was easing its own restrictio­ns. "In April and May, ( the Chinese) were basically clearing up the global market oversupply and China is still chewing through the resulting logistical bottleneck­s," Eugene Lindell, senior crude market analyst at JBC Energy, said. "The world excluding China now needs to cope with ri sing crude availabili­ty ... as Saudi and other producers have increased production a bit." The pace of Chinese buying has flattened to its historical average, Lindell said. Data analytics firm Vortexa said the unwinding of floating storage of crude globally has slowed since a 50 million barrel drawdown between the end of June and July. About 90 million barrels of crude and condensate is still sitting in floating storage offshore China ports as of 21 August, Vortex said. OPEC and its allies, including Russia, known as OPEC+, decided to cut output by a record 9.7 million barrels per day in May before tapering this to 7.7 million bpd in August. Sterling slips vs euro after scant progress in Brexit talks Oil prices edge higher as storms bear down on Gulf of Mexico Don't leave Britain's food strategy to the market, says Tesco boss SINGAPORE: Crude oil prices rose on Monday as storms closed in on the Gulf of Mexico, shutting more than half its oil production, and on coronaviru­s optimism after U. S. regulators approved the use of blood plasma from recovered patients as a treatment option. Brent futures ( LCOc1) had gained 9 cents, or 0.2%, to $ 44.44 a barrel by 0634 GMT, while U. S. West Texas Intermedia­te crude ( CLc1) was up 9 cents, or 0.2%, to $ 42.43 a barrel. Both benchmark contracts had risen early on Monday. On Sunday, Hurricane Marco and Tropical Storm Laura tore through the Caribbean and Gulf of Mexico, forcing energy companies to pull workers from offshore platforms and shut down oil output. Producers had shut 58% of the Gulf's offshore oil output and 45% of natural gas supply on Sunday. The region accounts for 17% of total U. S. oil production and 5% of U. S. natural gas output. "Crude prices rose as double trouble in the Atlantic could lead to huge disruption­s with oil operations in the Gulf of Mexico," said Edward Moya, senior market analyst at OANDA in New York. "Oil's gains, however, are likely to be muted as virus uncertaint­y continues to weigh on the crude demand outlook." U. S. President Donald Trump on Sunday hailed FDA authorizat­ion of a coronaviru­s treatment that uses blood plasma from recovered patients, a day after accusing the agency of impeding the rollout of vaccines and therapeuti­cs for political reasons. Also supporting prices was a report by members of the Organizati­on of the Petroleum Exporting Countries ( OPEC) and other oil powers, including Russia, that countries in the OPEC+ group that pumped above supply targets from May to July will need to slash output by over a million barrels per day for two months to compensate. Acting as a check on further price gains, the U. S. oil and natural rig count increased this week for the first time since March, with energy firms adding the most oil rigs in seven months, as shale producers start drilling again. LONDON: July 16 The boss of Tesco TSCO. L, Britain's biggest supermarke­t group, on Thursday called for a comprehens­ive UK food strategy that does not rely on market forces but instead brings together health, environmen­t and the economy. Dave Lewis worked for consumer goods group Unilever ULVR. L f or 27 years before joining Tesco as chief executive in 2014. He is stepping down on Oct. 1 and will be succeeded by Ken Murphy, a former executive of Walgreens Boots Alliance WBA. O. Tesco has a 27% share of Britain's grocery market. "What's clear t o me is that we do not take a whole- society approach to food," Lewis wrote in an opinion piece published on the FT Online website. "We face the worst public health crisis in generation­s. Economic contractio­n threatens the livelihood­s of millions. And the point of no return on climate rapidly approaches," he said. Lewis s aid the government- commis- sioned independen­t review of a UK national food strategy, which will soon publish its first report, must address these issues. "But heavy- duty change cannot be l eft to the market. The right regulatory context, access to capital and incentives t o innovate are critical." Lewis said previous government­s had missed opportunit­ies for change. "The UK's in dustrial s tra tegy didn't focus enough on food despite t he food and farming industry being worth 122 billion pounds," he said. Lewis said land needed to be used more efficientl­y, soil health improved, forests and habitats protected, carbon emission targets met, animal welfare and food safety standards upheld through trade negotiatio­ns and more healthy eating encouraged. "There is a new context now. Covid- 19 cruelly exposes the relationsh­ip between obesity and health outcomes. Brexit creates the opportunit­y to reshape production and standards. A growing consensus across business points to willingnes­s to act on climate," he added. LONDON: Sterling slipped against the euro on Monday on lingering concerns over Brexit, after British and European Union negotiator­s said on Friday they had made no real progress in their latest talks on relations after Dec. 31. Against the euro, the pound was down 0.2% at 90.28 pence. Sterling was slightly up against the U. S. dollar, having fallen more than 1% on Friday, when British and EU chief negotiator­s blamed each other for the Brexit stalemate as time ticks down to an end- of- year deadline. The pound was trading at $ 1.3103 up 0.1% at 0917 GMT, after touching a oneweek low of $ 1.3059 on Friday. Given the lack of clarity over Britain's future relations with its biggest trading partner, investors will turn their focus this week to the Bank of England and any signs it may be willing to cut interest rates below zero, wrote ING analysts. "The collapse of Brexit negotiatio­ns has triggered a relatively contained correction in GBP," ING wrote. "And focus this week will turn to BoE speakers t hat may shed some l ight around a possible move into negative rates". Also on Frid ay came news t hat Britain's public debt rose above 2 trillion pounds ($ 2.65 trillion) for the first time in July as the government ramped up public spending to cope with the coronaviru­s pandemic and tax revenues fell. Britain's o ffic ia l budget forecaster­s raised their estimate for the size of the country's public debt pile at the end of the current financial year, after data showed t hat it had passed 100% of annual economic output for the first time. Gold and silver prices move higher on bargain hunting Dollar weakens as market awaits Fed's Jackson Hole symposium LONDON: Gold futures on Monday were headed higher to start the week, even as global equity markets were seeing sharp gains, with commodity experts attributin­g some of the buying in bullion to opportunis­tic investing after the metal on Friday registered its first back- to- back weekly loss since March. "Gold prices are higher Monday morning, on some perceived bargain hunting as prices have backed down from the record high scored in early August and are trading below $ 2,000," wrote Jim Wyckoff, senior analyst at Kitco. He noted that a weaker U. S. dollar index Monday also was aiding "the precious metals market bulls." The U. S. dollar was off 0.4% against a half- dozen rivals, as measured by the ICE U. S. Dollar DXY, - 0.24%. The buck notched a weekly gain of 0.2% last week, producing a headwind for gold buyers. "Gold is a little higher, trading around $ 1,950 this morning, with the weaker dollar giving it some reprieve," wrote Craig Erlam, senior market analyst at Oanda. "The rebound in the greenback really took the wind out of the sails of the gold recovery trade just as it was trying to break $ 2,000 again," he wrote. December gold GCZ20, 0.15% GC00, 0.15% gained $ 13.90, or 0.7%, to reach $ 1,960.80 an ounce, after marking a weekly decline of 0.1%, based on last Friday's settlement for the most- active contract. That as sufficient a decline for the second straight weekly drop since a similar stretch ended March 20, accord- ing to FactSet data. Meanwhile, September silver prices SIU20, 0.52% rose 55 cents, or 2.1%, to $ 27.255 an ounce, with the metal notching a weekly decline of 3% on Friday, based on the most active contract. Gains for gold and silver came as Food and Drug Administra­tion on Sunday said it authorized use of convalesce­nt plasma, the antibody- rich blood component taken from recovered COVID- 19 patients, for the t reatment of serious coronaviru­s cases, which was giving some life to risky assets like stocks. Precious metals have been viewed as a hedge against the uncertaint­y fostered by the COVID- 19 pandemic and the trillions that central banks and government­s have spent to limit the debilitati­ng impact to businesses globally. Medical experts said the treatment may provide benefits to those battling the disease, but that there isn't conclusive evidence of its effectiven­ess, while questions remain about when it should be administer­ed and dosage. NEW YORK: The dollar weakened slightly in early European trade Monday, weighed down a touch by U. S. authorizat­ion of a new coronaviru­s treatment, but losses have been minimal as t raders look for guidance to future U. S. monetary policy from the Federal Reserve's annual Jackson Hole retreat l ater in the week. At 2: 55 AM ET ( 0655 GMT), t he Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 93.135. USD/ JPY was largely fla t at 105.8 1 and GBP/ USD was up 0. 2% at 1.3107. The U. S. Food and Drugs Administra­tions on Sunday said t hat i t had issued ' emergency use approval' for the use of blood plasma from recovered patients as a treatment option for certain patients suffering from the effects of the Covid- 19 virus. The announceme­nt comes at the start of a week t hat will see President Donald Trump formally receive the Republican Party's nomination for re- election at i ts national convention. This has helped the ' risk- on' tone, to the detriment of the greenback, but losses have look- out for any indication­s t hat the Fed i s close to adopting Average Inflation Targeting and to better understand the condit ions that would prompt Yield Curve Control," said analysts at ING, in a research note. The quantitati­ve easing that the Fed has deployed so far has flooded fi nancial markets with excess liquidity and weighed on the dollar. Last week t he dollar index fell to t he lowest level in more t han t wo years. Elsewhere, EUR/ USD ed ged hi gher Monday, gaining 0.1% to 1.1802, but the single currency has pulled back sli ghtly from a two- year high versus the dollar reached last week followi ng disappoint­ing manufactur­ing and services sector data for Europe released on Friday, against a backdrop of rising numbers of Covid- 19 cases. "With Covid cases resurgent in many parts of the world, the fear i s now that we've seen the best of t he recovery fi gures and that Vshap e expectatio­ns will t ake a knock in September," added ING. The common currency's next major hurdle is the release of the closely- watched German Ifo sentiment survey on Tuesday. been minor as many investors are waiting for more defini tive news of a credible vaccine. Additional­ly, the main focus this week is likely to be on t he Federal Reserve, and Governor Jerome Powell's opening speech at the Jackson Hole conference, even i f it' s a virtual event. Investors are expecting to hear news about the central bank's long- awaited review of its monetary policy framework. "Once again, the market will be on the Daily opening & closing rates Metals, Energy, COTS/ FX and US Indices On Friday, PMEX traded value of Metals, Energy, COTS/ FX and indices was recorded at PKR 7.825 billion and the number of lots traded was 9,407. Major business was contribute­d by Gold amounting to PKR 5.022 billion, foll owed by Silver ( PKR 880.762 million), Currencies through COTS ( PKR 565.118 million), NSDQ 100 ( PKR 402.571 million), Copper ( PKR 380.758 million), Natural Gas ( PKR 199.869 million), Crude Oil ( PKR 184.857 million), Platinum ( PKR 141.378 million), DJ ( PKR 28.034 million) and SP500 ( PKR 19.920 million). In agricultur­e commoditie­s 2 lots of Wheat amounting to PKR 4.304 million were traded. PMEX Index 5,032 Total Volume ( Lots): 9,407 Traded Value ( Rs): 7,825,383,021 Commodity Price Quotation Open Close Commodity Price Quotation Open Close GOLDEURJPY ( COTS) GOLDGBPJPY ( COTS) GOLDCHFJPY ( COTS) GOLDAUDJPY ( COTS) GOLDEURCAD ( COTS) GOLDEURAUD ( COTS) GOLDEURCHF ( COTS) GOLDGBPCHF ( COTS) GOLDAUDCAD ( COTS) DJ NSDQ100 SP500 JPYEQTY ICOTTON ICORN IWHEAT ISOYBEAN RED CHILI JPY ¥ JPY ¥ JPY ¥ JPY ¥ CAD$ AUD$ CHF CHF CAD$ Index Value Index Value Index Value Index Value US Cents per pound US Cents per bushel US Cents per bushel US Cents per bushel Rs Per Kg 125.485 139.867 116.574 76.126 1.5630 1.648 1.0760 1.2 0.9480 27691 11,483.25 3383.25 23005 64.64 338.25 517.5 906.25 273 124.816 138.494 116.058 75.768 1.5560 1.6470 1.0760 1.1930 0.9440 27865 11,565.25 3393.00 22905 64.19 339.50 525.00 905.00 273 WTI CRUDE OIL BRENT CRUDE OIL NATURAL GAS SILVER GOLD GOLD MTOLAGOLD TOLAGOLD PLATINUM COPPER PALLADIUM GOLDEURUSD ( COTS) GOLDGBPUSD ( COTS) GOLDUSDJPY ( COTS) GOLDAUDUSD ( COTS) GOLDUSDCAD ( COTS) GOLDUSDCHF ( COTS) GOLDEURGBP ( COTS) $ Per Barrel $ Per Barrel US $ Per mmbtu $ Per Ounce $ Per Ounce Rs Per 10 gms Rs Per Tola Rs Per Tola $ Per Ounce US $ per pound $ Per Ounce US$ US$ JPY ¥ US$ CAD$ CHF GBP 42.76 44.90 2.348 27.582 1,957.4 105,556 118,476 118,476 930.2 2.994 2,190.5 1.1860 1.3220 105.791 0.7200 1.3170 0.9080 0.8970 42.29 44.31 2.432 26.705 1,945.2 105,124 117,716 117,716 928.2 2.925 2,179.8 1.1800 1.3090 105.817 0.7160 1.3190 0.9120 0.9010 PRINTED AND DISTRIBUTE­D BY PRESSREADE­R PressReade­r. com + 1 604 278 4604 O R I G I N A L C O P Y . 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