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Sanctions, OPEC cuts push Asia’s sour crude oil prices above Brent

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SINGAPORE (Reuters) – Middle East oil benchmarks Dubai and DME Oman have nudged above prices for Brent crude, an unusual move as U.S. sanctions on Venezuela and Iran along with output cuts by OPEC tighten supply of medium to heavy sour oil, traders and analysts said.

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at its headquarters in Vienna, Austria, December 5, 2018. REUTERS/Leonhard Foeger

Sour crudes, mainly produced in the Middle East, Canada and Latin America, have a high sulphur content and are usually cheaper than Brent, the benchmark for low-sulphur oil in the Atlantic Basin.

But Dubai spot prices and DME Oman crude futures for April have held above ICE Brent at Asia’s market close since the start of February, data from the Intercontinental Exchange (ICE), Dubai Mercantile Exchange and Refinitiv Eikon showed.

“The forceful implementation of U.S. sanctions on Venezuelan crude exports, the greater-than-expected recent Saudi crude output cut … and the uncertainty over U.S. sanction exemptions on Iranian crude have all served to strengthen sour crudes relative to sweet benchmarks such as Brent,” said Tilak Doshi, a Singapore-based analyst at consultancy Muse, Stancil & Co.

U.S. sanctions on Venezuela suddenly halted its crude exports to the United States last month and created a strong pull for medium and heavy sour crude from other places, said the traders and analysts.

The sanctions, aimed at blocking Venezuelan President Nicolas Maduro’s access to the nation’s oil revenue, will be extended to non-U.S. oil buyers from April 28, potentially stopping them from paying for Venezuelan oil in U.S. dollars.

Elsewhere, uncertainty over whether Washington will in May extend waivers to sanctions on Tehran’s oil exports that it previously granted to top Iranian crude buyers – China, India, Japan and South Korea – is also boosting Middle East oil prices.

And a decision by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to rein in oil output has buoyed sour crude prices as well. Market observers expect Middle East producers to cut output of heavier oil to meet the curbs.

MISSION TO BUY MARS

Strong demand from the United States for heavy oil to replace Venezuelan supplies has boosted prices for U.S. Mars crude and Latin American grades, restricting supplies of those cargoes to Asia, traders said.

Offers of Mars crude for April delivery to North Asia have risen more than $1 a barrel, while spot premiums for Latin American grades such as Castilla from Colombia, have climbed by $2 a barrel, traders said.

Castilla was sold out even before its loading program was released, said one of the traders. The sources declined to be identified as they were not authorized to speak with media.

U.S. refiners are also seeking more supplies from the Middle East, creating a pull for such barrels at a time when Asia’s sour oil demand is growing as two new refineries have started trial runs in China and Malaysia.

Meanwhile, refiners globally are also processing more medium and heavy crude to reap higher profits from fuel oil and middle distillates. That has kept the price gap between Saudi’s Arab Light and Arab Heavy crude in Asia close to the narrowest in a decade.

“Heavy sour strength is bolstered through the first-half of 2019 by continued complex refinery capacity growth and tight fuel oil markets, before IMO 2020 presents a cliff for (high-sulphur fuel oil) demand,” Citi analysts said.

IMO 2020 refers to a mandate by the International Maritime Organization requiring ships to switch to low-sulphur marine fuel from 2020.

Reporting by Florence Tan; Editing by Joseph Radford

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S&P 500 posts highest close since November 8 on trade optimism

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NEW YORK (Reuters) – The S&P 500 posted its highest closing level since Nov. 8 on Friday as investors clung to signs of progress in the ongoing trade talks between the United States and China.

Investors assessed a slew of headlines on the talks, with top trade negotiators from the two countries meeting to wrap up a week of discussions on some of the thorniest issues in their trade war.

If the two sides fail to reach a deal by midnight on March 1, then their seven-month trade war could escalate.

“People are expecting some sort of positive news on trade and tariffs with China fairly soon,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“But we won’t know until the end of next week,” he said, and, “there has been a lack of specifics.”

Optimism on the trade front and dovish signals from the U.S. Federal Reserve have driven the recent gains and left indexes well above their lows of December, when the market swooned on fears of an economic slowdown. The S&P 500 is now up about 19 percent since its late-December low.

The S&P 500 technology index was up 1.3 percent, leading gains among the 11 major S&P sectors, while the trade-exposed industrials index climbed 0.6 percent.

The Dow Jones Industrial Average rose 181.18 points, or 0.7 percent, to 26,031.81, the S&P 500 gained 17.79 points, or 0.64 percent, to 2,792.67 and the Nasdaq Composite added 67.84 points, or 0.91 percent, to 7,527.55.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 22, 2019. REUTERS/Brendan McDermid

All three indexes registered gains for the week, with both the Dow and Nasdaq posting a ninth week of increases.

The number of New York Stock Exchange and Nasdaq stocks hitting 52-week highs hit 367, the most since mid-September and outnumbered those hitting year lows by the widest margin in six months.

Stocks briefly pared gains after U.S. officials briefed on the negotiations said more time is likely needed in the talks given China’s resistance this week to American demands for specific steps by Beijing to end forced transfers of U.S. technology and certain other policies.

Afterward, President Donald Trump said there was a very good chance the United States would strike a deal with China to end the trade war, and that he was inclined to extend his March 1 deadline to reach an agreement.

“Right now the downside risk has been not as steep, but there’s always a concern that something happens last-minute,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“Having a Chinese economy that stabilizes is constructive for global markets,” she said. “That’s what is key in terms of the market looking at the results.”

Kraft Heinz Co tumbled 27.5 percent, and was the biggest drag on the S&P along with a 1.7 percent fall in Class B shares of the company’s controlling stakeholder, Berkshire Hathaway Inc.

The packaged food company posted a quarterly loss, disclosed a Securities and Exchange Commission probe and wrote down the value of its iconic Kraft and Oscar Mayer brands.

Slideshow (2 Images)

Advancing issues outnumbered declining ones on the NYSE by a 2.99-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favored advancers.

The S&P 500 posted 64 new 52-week highs and three new lows; the Nasdaq Composite recorded 112 new highs and 21 new lows.

About 6.9 billion shares changed hands on U.S. exchanges. That compares with the 7.3 billion-share daily average for the past 20 trading days.

Additional reporting by Shreyashi Sanyal and Sruthi Shankar in Bengaluru; Editing by Chizu Nomiyama and Jonathan Oatis

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FCA sets $14 million annual target compensation for CEO Manley: filing

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FILE PHOTO: Fiat Chrysler Automobiles (FCA) CEO Mike Manley arrives at the memorial service held in honor of former CEO Sergio Marchionne in Turin, Italy, September 14, 2018. REUTERS/Massimo Pinca/File Photo

DETROIT (Reuters) – Fiat Chrysler Automobiles NV (FCA) has set an annual compensation target for Chief Executive Officer Mike Manley consisting of pay, cash and equity bonuses of $14 million, the automaker said in a regulatory filing on Friday.

Manley took over as the head of FCA last July after the abrupt departure of his predecessor Sergio Marchionne. The company paid its new CEO 600,442 euros ($680,240) for 2018 and he will receive a bonus for 2018 of $367,000 to be paid this year.

Manley also was granted FCA 180,364 shares for his work in 2018, which will vest in 2019 if the company meets certain targets. The fair value per share on the date those were granted was $16.61, FCA said.

His target annual compensation consists of a base salary of $1.6 million, and a bonus of $2.4 million and an equity award valued at $10 million, both linked to the company hitting certain performance targets.

Former CEO Marchionne received 6.6 million euros in compensation for 2018, which consisted of nearly 2 million euros in base pay and an annual bonus for 2017 of just over 4.6 million euros.

For the 2014 to 2017 time period, Marchionne also received 2.8 million FCA shares. The fair value per share was $14.84, FCA said.

FCA chairman John Elkann received a base salary of 1.7 million euros and no annual bonus.

Reporting by Nick Carey; Editing by Sonya Hepinstall

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Flattening U.S. yield curve in late 2018 ‘flashing red’ on economy: Fed’s Williams

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President and Chief Executive Officer of the U.S. Federal Reserve Bank of San Francisco, John Williams, addresses a news conference in Zurich, Switzerland September 22, 2017. REUTERS/Arnd Wiegmann/File Photo

NEW YORK (Reuters) – A flattening U.S. yield curve in December, which was close to being inverted, was “flashing red” about a deceleration in U.S. economic growth heading into 2019, despite some solid data at the time, New York Federal Reserve President John Williams said on Friday.

The yield curve flattens as the gap between short and long-dated yields narrow, suggesting investors’ worries about a slowing economy.

The yield curve inverts when shorter-dated yields rise above longer-dated ones. An inverted yield curve has preceded all U.S. recessions in the past 50 years.

Williams was giving closing remarks at a conference about quantitative tools, jointly sponsored by the New York Fed and the Atlanta Federal Reserve.

Reporting by Richard Leong; editing by Diane Craft

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