Oil’s Crash Deepens in Tug-of-War Between Virus and Stimulus - Bloomberg

Oil’s Crash Deepens in Tug-of-War Between Virus and Stimulus - Bloomberg:

Oil’s spectacular collapse deepened in early Asian trade on Monday as investors weighed measures by governments and central banks to help shore up the global economy against the unprecedented demand shock from the fast-spreading coronavirus.

Futures in London fell as much as 6% after plunging by a quarter last week -- the market’s biggest weekly drop since 2008. Travel restrictions across the globe tightened further over the weekend in efforts to contain the spread of the virus, with the U.S. extending its travel ban to include Britain and Ireland. Australia said anyone entering the country must self-isolate for two weeks, Spain imposed a lockdown and France closed cafes and restaurants.

The sharp slow down in activity brought on by the virus is being compounded by a potential flood of supply in April, with top producers Saudi Arabia and Russia pledging to ramp up production. The Middle East kingdom doubled down on the war for market share last week by sending a wave of crude to Europe, Russia’s traditional market, further dimming the likelihood of a reconciliation.

Stock Market Today: Dow, S&P Live Updates for March 16 - Bloomberg

Stock Market Today: Dow, S&P Live Updates for March 16 - Bloomberg:

U.S. equity futures tumbled in the start to another volatile week, giving up much of a Friday rebound, after the Federal Reserve announced a massive easing in policy in an emergency move.

Futures on the S&P 500 Index fell about 5%, hitting limits on trading, after stocks climbed more than 9% on Wall Street Friday, recouping most of their 10% plunge the previous day. Wild swings have become an almost daily occurrence as investors assess the efficacy of actions by authorities to contain the coronavirus, moves that have had a crippling economic impact. The yen soared after the Fed cut its key interest rate by a full percentage point to near zero and said it will boost its bond holdings by $700 billion.

“The Fed made an emergency drop this weekend -- I think that says they’re very worried about the larger economy,” Kim Forrest, chief investment officer at Bokeh Capital Partners, said by phone. “People are really freaked out by this and I think they’re trying to keep the economy going.”

The U.S. central bank also announced several other actions, including letting banks borrow from the discount window for as long as 90 days and reducing reserve requirement ratios to zero percent.

Nothing’s Certain as Shell-Shocked Markets Hope for Salvation - Bloomberg

Nothing’s Certain as Shell-Shocked Markets Hope for Salvation - Bloomberg:

As traders limp back to work, the question is whether Friday’s turnaround will prove more than a moment of relief for the world’s shell-shocked markets.

The evidence suggests it won’t.

While governments and central banks around the world announce unprecedented economic-stimulus measures -- indicating a growing willingness to coordinate their actions -- economists say virus-triggered closures and national lockdowns are making a global recession all but unavoidable. That means further market gyrations in the week ahead, gains for havens such as U.S. Treasuries, the dollar and the yen, and more nervousness in stocks, commodities and emerging markets.

Middle East markets probably set the tone on Sunday as efforts to shore up the region’s economies failed to lift confidence. Dubai’s main index fell 3.4% and Abu Dhabi’s dropped 1.9%. Egyptian stocks had their worst day since 2012, weakening more than 9%, while gauges in Saudi Arabia and Kuwait retreated.

MIDEAST STOCKS-Major Middle East indexes decline on coronavirus impact - Reuters

MIDEAST STOCKS-Major Middle East indexes decline on coronavirus impact - Reuters:

Most major Middle Eastern stock markets
closed lower on Sunday amid fears of economic fallout from
coronavirus precautions, with Egypt falling the most and Saudi
Aramco slipping after it missed profit forecasts.

Gulf Arab states, with nearly 900 virus cases, expanded
measures to contain the spread of the infection with Abu Dhabi's
bourse closing trading halls and Dubai shuttering cinemas, gyms
and arcades. Kuwait and Saudi Arabia have halted international
passenger flights.

Egypt, with more than 100 virus cases, announced the closure
of schools and universities for two weeks.

The Egyptian index, which traded after a session
break, plunged 9.3%, its biggest intra-day fall since November
2012. All the constituents closed in the red, with Commercial
International Bank plummeting 9.9%.

In Saudi Arabia, the index was down 1.1% in a third
straight day of declines. Al Rajhi Bank shed 1.1%. 

Aramco closed down 1% at 28.7 riyals ($7.65) after posting a
21% decline in 2019 net profit to $88.2 billion. Analysts had
expected net profit of $92.6 billion, based on 15 analysts
polled by Refinitiv.

Global Oil Demand: Record Annual Drop Expected - Bloomberg

Global Oil Demand: Record Annual Drop Expected - Bloomberg:

Global oil consumption is in free-fall, heading for the biggest annual contraction in history, as more countries introduce uprecedented measures to fight the coronavirus outbreak.

Travel bans, work-from-home, canceled vacations and disrupted supply chains all mean reduced demand for fuel. As societies respond to the virus, oil demand -- already hammered by China’s decision to shut down swathes of the economy -- is falling further. Oil traders, executives, hedge fund managers and consultants are revising down their forecasts dramatically.

The growing fear among many traders is that oil demand, which averaged just over 100 million barrels a day in 2019, may contract by the most ever this year, easily outstripping the loss of almost 1 million barrels a day during the great recession in 2009 and even surpassing the 2.65 million barrels registered in 1980, when the world economy crashed after the second oil crisis.

“This global pandemic is something the world hasn’t witnessed since 1918,” said Pierre Andurand, who runs oil hedge fund Andurand Capital Management LLP. “I do not see how the the demand drop wouldn’t be multiples of the drop witnessed during the global financial crisis.”

By Pumping At Will #SaudiArabia Hurts Oil Investment Everywhere - Bloomberg

By Pumping At Will Saudi Arabia Hurts Oil Investment Everywhere - Bloomberg:

There will be long-term consequences.

 

Photographer: Dado Galdieri via Getty Images

It’s just become a lot harder to make long-term investment decisions in the oil industry. And no, I’m not talking about the need to transition to a low-carbon economy, or the backlash from climate activists and investors. Any veneer of certainty about the future path of oil prices has evaporated.

This is the second time in six years that Saudi Arabia has embarked on a pump-at-will oil production policy that has hammered prices. Whether it’s aimed at Russia or the U.S. shale sector, producers everywhere — from OPEC members such as Angola to corporate behemoths like Exxon Mobil Corp. — have been warned that they can no longer count on the kingdom to keep a floor under oil prices. And that will impact decisions on future investments around the world.

Even if the de facto leader of OPEC steps back from its threat to boost oil supply by more than 2.5 million barrels a day next month, which seems unlikely, Saudi Arabia has shown that it is willing to use its production capacity as a weapon — not to restrict supply and raise prices, but to boost it and crash them. That introduces a whole new challenge for would-be investors in oil projects that might have a lifespan of decades and even for those in the U.S. shale patch, where initial investments can be recouped much more quickly.

Oil at $30 a barrel, or even at $20, won’t stop most fields that are already in production from pumping, no matter where they are. Some will certainly be in peril, but they are not the huge high-cost deep-water projects beneath the waters of the Atlantic Ocean or in the Arctic. The most vulnerable will be the so-called “stripper wells” in the U.S. that pump less than 15 barrels of crude a day. They accounted for 10% of all U.S. production in 2015, but their importance has diminished as production from shale deposits has boomed.

Mideast Stocks Drop Despite $47 Billion of Central Bank Aid - Bloomberg

Mideast Stocks Drop Despite $47 Billion of Central Bank Aid - Bloomberg:

Most equity markets in the Middle East fell on Sunday, despite efforts by central banks across the region to support economies from shocks related to the coronavirus and plunging oil prices.

Dubai’s main index fell 3.4% by the close and Abu Dhabi’s dropped 1.9%, even after the United Arab Emirates announced 100 billion dirhams ($27.2 billion) of monetary stimulus over the weekend. Egyptian stocks had their worst day since 2012, weakening more than 9%. Gauges in Saudi Arabia and Israel also traded lower.

The U.A.E.’s Targeted Economic Support Scheme includes 50 billion dirhams of zero-interest, collateralized loans for banks. In addition, lenders will be allowed to reduce their capital buffers, which will inject 50 billion dirhams of liquidity.

“I remain focused on the demand side,” Ali Taqi, the head of equities at Rasmala Investment Bank in Dubai, said in an interview with Bloomberg TV. “How are you going to stimulate demand? Restaurants, cafes are a lot emptier now. Having a relief is good, but business is much more concerned with the decline in footfall. It will take some time for people to feel comfortable again.”

Coronavirus, oil plunge to pressure MEA sovereigns - Fitch | ZAWYA MENA Edition

Coronavirus, oil plunge to pressure MEA sovereigns - Fitch | ZAWYA MENA Edition:

A sharp drop in oil prices, the outbreak of coronavirus as well as a slump in tourism and a weakening demand for non-oil exports add to rating pressures for Middle East and Africa (MEA) sovereigns, Fitch Ratings said.

Earlier in March, OPEC failed to strike a deal with its allies, led by Russia, on oil production cuts. This means members can now pump what they like starting April 1.

Saudi Arabia slashed crude prices for April and planned output hikes after Russia refused to support deeper oil production cuts.

Brent oil prices plunged as a reaction to the news and have been trading close the $35 a barrel since, down from the $51 a barrel level recorded at the beginning of March.

“Fiscal deficits will consequently widen in all oil producers. For countries in the Gulf Cooperation Council (GCC), we estimate that a change of USD10 in the price per barrel of oil tends to affect government revenues by 2%-4% of GDP,” Fitch said in a note.

According to the rating agency, the break-even oil price for Bahrain at $96 a barrel, for Saudi Arabia at $91 a barrel, for Oman at $82 a barrel, for Kuwait at $68 a barrel, for Abu Dhabi at $65 a barrel, for Qatar at $55 a barrel.

#AbuDhabi Securities Exchange temporarily closes trading halls over coronavirus - Reuters

Abu Dhabi Securities Exchange temporarily closes trading halls over coronavirus - Reuters:

The Abu Dhabi Securities Exchange (ADX) said on Sunday it was temporarily closing all its trading halls until further notice due to the global coronavirus outbreak.

The ADX said in a statement it was closing trading halls at its main offices in Abu Dhabi and in other emirates as a precautionary measure to protect public health in the United Arab Emirates (UAE).

The UAE has registered 86 cases of the new coronavirus so far, of which 17 have recovered.

#Saudi Aramco to cut capital spending in 2020, posts drop in 2019 profit - Reuters

Saudi Aramco to cut capital spending in 2020, posts drop in 2019 profit - Reuters:

Saudi Aramco 2222.SE on Sunday said it plans to cut capital spending in the wake of the coronavirus outbreak, as it posted a 21% decline in 2019 net profit due to a drop in oil prices and production, its first earnings announcement as a listed company.

The world’s most profitable company and by far its biggest oil producer, Aramco listed its shares in Riyadh in December in a record $29.4 billion initial public offering that valued it at $1.7 trillion.

Its shares fell below the IPO price last week for the first time, as oil prices crashed after the collapse of an output deal between OPEC and non-OPEC members which led to an oil price war between Riyadh and Moscow. Saudi Arabia has said it plans to ramp up production to gain market share.

Aramco CEO Amin Nasser said in a statement the oil giant has taken steps to rationalize planned capital spending in 2020 following the coronavirus outbreak.

The company expects capital spending for 2020 to be between $25 billion and $30 billion in light of current market conditions and recent commodity price volatility, compared to $32.8 billion in 2019.

MIDEAST STOCKS-Major Gulf stock markets extend losses on coronavirus - Reuters

MIDEAST STOCKS-Major Gulf stock markets extend losses on coronavirus - Reuters:

Gulf stock markets slipped on Sunday, with United Arab Emirates leading the losses as concerns about the impact of coronavirus outweighed its stimulus plan and Saudi Aramco inched lower after profits missed forecasts.

Gulf Cooperation Council (GCC), a group of six Arab states reliant on oil revenues and hit by the drop in crude prices, have reported about 900 virus cases.

The UAE, an international transit hub which has reported 85 coronavirus infections, announced a 100 billion dirham ($27 billion) economic plan to support the economy.

Dubai’s index slid 5%, trading at its lowest since 2013. Emirates NBD bank was among the biggest fallers, dropping 10%.

Emaar Properties fell 5%. It said last week it would stop taking bookings at three hotels for more than five months, effective from Sunday, due to the virus.