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Friday December 9th, 2022

Oil collapses to $12 as world awash with crude

AFP – US oil prices dived to 21-year lows Monday, giving up more than 30 percent in a market flooded with crude and hit by evaporating demand in the face of the coronavirus pandemic.

The US benchmark West Texas Intermediate (WTI) crude for May delivery tanked more than 32 percent to $12.41 — the lowest level since 1999.

Trade, however, and the very sharp losses were technically driven as investors closed out their positions ahead of the May contract expiry due later Monday so that they would not be obliged to actually take delivery of the oil.

“The real problem of the global supply-demand imbalance has started to really manifest itself in prices,” said Rystad Energy analyst Bjornar Tonhaugen.

“As production continues relatively unscathed, storage is filling up by the day. The world is using less and less oil and producers now feel how this translates in prices.”

The European benchmark contract, London Brent North Sea oil for June delivery, was meanwhile down 3.8 percent at $27.01 per barrel.

Signs that the coronavirus may have peaked in Europe and the United States failed to lift Asian and European financial markets generally.

Traders are instead becoming more and more concerned that oil storage facilities are reaching their limits, as stockpiles continue to build owing to the crash in demand caused by the COVID-19 pandemic.

Analysts said this month’s agreement between OPEC and its peers to slash output by 10 million barrels a day was having little impact because of the virus lockdowns and travel restrictions that are keeping billions of people at home.

WTI was hit particularly hard as its main US storage facilities in Cushing, Oklahoma, were filling up, with Trifecta Consultants analyst Sukrit Vijayakar saying refineries were not processing crude fast enough.

There are also plenty of supplies from the Middle East with no buyers as “freight costs are high”, he told AFP.

Some analysts predict that WTI could soon test 1998 lows of just $11.

AxiCorp’s Stephen Innes said: “It’s a dump at all cost as no one… wants delivery of oil, with Cushing storage facilities filling by the minute.

“It hasn’t taken long for the market to recognise that the OPEC+ deal will not, in its present form, be enough to balance oil markets.”

Stock markets were mostly lower despite governments starting to consider how and when to ease the lockdowns that have crippled the global economy.

Italy, Spain, France and Britain reported drops in daily death tolls and slowing infection rates, while Germany began allowing some shops to reopen and Norway restarted nurseries.

– ‘No time to get cocky’ –

In the US, Andrew Cuomo, governor of badly hit New York state, said the disease was “on the descent”, though he cautioned it was “no time to get cocky”.

Mounting evidence suggests that the lockdowns and social distancing are slowing the spread of the virus.

That has intensified planning in many countries to begin loosening curbs on movement and easing the crushing pressure on national economies.

Investors are keeping an eye on Washington, where Congress and the White House are working towards a $450 billion economic relief plan for small business to add to the trillions already pledged to support the economy.

Big-name companies including IBM, Netflix and Coca-Cola are also due to deliver their earnings reports.

– Key figures around 1115 GMT –

West Texas Intermediate: DOWN 32 percent at $12.41 per barrel

Brent North Sea crude: DOWN 3.8 percent at $27.01 per barrel

London – FTSE 100: DOWN 0.6 percent at 5,750.30 points

Frankfurt – DAX 30: DOWN 0.4 percent at 10,588.95

Paris – CAC 40: DOWN 0.6 percent at 4,474.04

Milan – FTSE MIB: DOWN 0.7 percent at 16,947.98

Madrid – IBEX 35: DOWN 1.2 percent at 6,792.30

EURO STOXX 50: DOWN 0.4 percent at 2,877.81

Tokyo – Nikkei 225: DOWN 1.2 percent at 19,669.12 (close)

Hong Kong – Hang Seng: DOWN 0.2 percent at 24,330.02 (close)

Shanghai – Composite: UP 0.5 percent at 2,852.55 (close)

New York – Dow: UP 3.0 percent at 24,242.49 (Friday close)

Euro/dollar: UP at $1.0876 from $1.0875 at 2100 GMT Friday

Dollar/yen: UP at 107.72 yen from 107.54

Pound/dollar: DOWN at $1.2454 from $1.2499

Euro/pound: UP at 87.31 pence from 87.01 pence

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Sri Lanka president slams power regulator chief after conflicting with minister

ECONOMYNET – The powers to change the electricity tariff in Sri Lanka is vested with the Minister of Power and not the Public Utilities Commission (PUCSL), President Ranil Wickremesinghe told the Parliament.

The minister of Power and Energy, Kanchana Wijesekara has requested an upward price revision to be implemented in two phases both in January and July next year, saying the recent tariff hike was not enough for the state-run utility provider Ceylon Electricity Board (CEB) to continue uninterrupted power supply.

However, Jaynaka Ratnayake, the Chairman of the PUCSL had said  the recent tariff hike is enough for the CEB to cover the cost of production and it will not allow another price hike. However, he has said a twice a year price revision is necessary though it should be in April and October instead of January and July.

President Wickremesinghe said the PUCSL chief was opposing the tariff hike due to his personal reasons.

“The power is vested with the Minister and me. I am the one who made the PUCSL act and I know what is in it,” Wickremesinghe told the parliament on Thursday. quoting a letter from the Attorney General which mentioned provisions in the island nation’s Electricity Act.

Accordingly the Act, the PUCSL would be statutorily obliged to give effect to such policy. It is observed that neither the Act nor the PUCSL Act contains any provisions that empowers the PUCSL to change or act invariant of such policy guidelines.

“The Chairman of the PUCSL is misguiding the general public. I have to meet him and see,” Wickremesinghe said.

WIckremesinghe said the Chairman does not want the tariff hike because he owns one of the highest electricity consuming companies.

“He is the Chairman of the Trillium corporation. It is the firm that takes up the most energy”, he said.

The Trillium group is managed by Janaka Ratnayake and he also holds positions as the chairman and CEO of Trillium Property Management & Services Ltd., City Housing and Real Estate PLC, Trillium Residencies Ltd., Computer Care (Pvt) Ltd., and Rent a Comp Services (Pvt) Ltd., and JR Management Consultants (Pvt) Ltd.

“It means when the electricity bill increases, his expenses increase as well”

He said the CEB still has a loss of 300 billion rupees since 2013 and it needs to be covered.

The CEB issue can be solved only in three ways, either printing more money, increasing value added tax or increasing the tariffm, he said. (Colombo/Dec08/2022)

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Sri Lanka President bemoans over inconsistent LNG deals

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe bemoaned over successive governments’ liquefied natural gas (LNG) deal that has brought in all the world powers into the discussion.

Wickremesinghe’s center-right United National Party (UNP) had discussions with India and Japan between 2002-2004 for an LNG project.

“Following dialogues with India and Japan, the UNP government could come to agreements to get two LNG power plants. After we were defeated the successor government, without cancelling those agreements granted it to New Fortress company in USA,” Wickremesinghe told the parliament.

“Thereafter, as they did not like New Fortress, they gave it back to Pakistan and China. So within the same premises, there were China, Pakistan, India, USA, Japan and only Russia was not there.”

“It was wonderful that a world war did not ignited there as there were five main powers in the world.”

“Now there is no LNG or anything here and now they ask me to solve this issue.”

Wickremesighe’s outburst comes as his government is forced to raise tariffs on power prices after successive governments failed to implement cheap and renewable power generation projects.

He said a total loss for the state-run Ceylon Electricity Board since 2013 was 300 billion rupees and a possible drought next year could increase the 2023 electricity cost to 420 billion rupees.

“If it rained, we need Rs. 352 billion while Rs. 295 is required if rained so much to have floods. How are we going to find this money? We would have to print money, but Rupee would depreciate. We would have to increase VAT but it would increase the price of all commodities or to charge it direct.” (Colombo/Dec08/2022)

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Air quality drop forces Sri Lanka to close schools; public warned

ECONOMYNEXT – A rapid drop in air quality in Sri Lanka has forced the Colombo government to close all schools across the country after a deep depression over Southeast Bay of Bengal, officials said.

The Education Ministry, issuing a special notice on Thursday said, it has decided to close all government schools for Friday, after discussing with the officials in Meteorology Department and Disaster Management Center.

An official said the drop was due to the deep depression over Southeast Bay of Bengal carrying the air from India.

Due to the depression over South east Bay of Bengal (370 km east of Trincomalee) has concentrated into a cyclonic storm “Mandous” by Wednesday night.

“Cyclone in the Bay of Bengal that is the prime reason for the increase in the pollution load as we receive more wind from India,” H.D.S.Premasiri, Senior Scientist, Coordinator-Air Quality, noise and vibrations at National Building Research Organization (NBRO) told EconomyNext on Thursday.

Officials said there is a likelihood of the cyclone moving west-northwestwards and further intensify into a severe cyclonic storm tonight and cross North Tamil-Nadu, Puducherry and South Andhra Pradesh coast around midnight of 09 th December and the maximum wind speeds will be 70-90 km per hour and can increase up to 90 in sea areas.

“Hopefully, today we can expect normalization in the environment and the effects of the fog will disappear”.

According to the NBRO’s real time Air Quality Index Indicator, the quality of air in northwestern coastal district of Puttalam has dropped drastically and indicated a particular matter (PM) 132, while Kegalle (85) and Mannar (84) were the districts which had next worst air quality.

According to NBRO, Battaramulla, Polonnaruwa, Dambulla, Kegalle, Mannar and Puttalam indicate a poor quality of air due to higher PM.

“The fog will lead to lung and breathing issues,” Premasiri said.

“So the public is warned to wear a mask when they travel outside. The pollution highly prevails in city areas and has a less impact on the other parts of the areas.” (Colombo/ Dec08/2022)

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