Oil falls on China concerns

Oil prices fell on Friday and were on track to end the week lower on lingering doubts over the extent of the Organization of the Petroleum Exporting Countries’ (OPEC) cuts, with sentiment worsened by concerns over the economic health of the world’s second-largest oil consumer China after it reported the steepest falls in overall exports since 2009.
Record Chinese crude imports of 8.6 million barrels per day (bpd) in December helped to buoy prices somewhat, traders said, but they could not hide underlying fears over the overall health of the world’s second-biggest economy.
Despite China’s oil thirst, overall exports — the country’s economic backbone — declined by 7.7 percent last year in what was the second annual decline in a row and the worst since the depths of the global crisis in 2009.
Brent crude futures were trading 31 cents lower at $55.70 a barrel by 10:28 a.m. EST (1528) GMT and were on track for a weekly loss of 2.5 percent. US West Texas Intermediate crude futures fell by 41 cents to $52.60, set for a weekly drop of 2.6 percent.
Exports of Chinese refined oil products last month rose nearly 25 percent year-on-year to a record 5.4 million tons, well above November’s previous record of 4.9 million tons.
“China right now seems more interested in keeping capital in the country than focusing on growth overall,” Phil Flynn, analyst at Price Futures Group in Chicago said.
“We have to watch this situation develop because this is one threat to what is an otherwise wildly bullish scenario for oil in the coming year.”
On the supply side, there was some market support from top crude exporter Saudi Arabia, which said that its output had fallen below 10 million bpd to levels last seen in February 2015 and that it expects to make even deeper cuts next month.
However, hard evidence of export reductions has yet to emerge, two weeks into the month in which the cuts by the OPEC and other producers, such as Russia, were supposed to start. Many analysts expect compliance of 50 percent to 80 percent at best. “As the Saudis hint at even deeper reductions in February, assumptions are rife that its enthusiastic approach to output cuts is an admission that cheating is expected on the part of other producers,” said Stephen Brennock of oil brokerage PVM.
The US Energy Information Administration said in its January outlook that it expects Brent and WTI to average $53 and $52 a barrel respectively in 2017.
Even if OPEC cuts its output as agreed, traders said that rising US shale output and increasing supply from OPEC members Nigeria and Libya, which were exempt from the pact, might offset any reductions.
The market also awaited US drilling rig count data from energy services firm Baker Hughes Inc. at 1 p.m. EST (1800 GMT), the indicator future US production.
US stocks gain
US stocks advanced on Friday, on track to close the week on a firmer note, while the dollar recovered as investors were encouraged by upbeat bank earnings and positive US economic data.
Investors largely shrugged off the biggest fall in Chinese exports since 2009 to focus on US data that suggested stronger growth. Market participants largely resumed buying across equity markets based on higher growth expectations that had tailed off this week, with auto and bank shares leading the way.
Bank of America Merrill Lynch kicked off the US bank-earning season, reporting a 47 percent rise in fourth-quarter profit thanks to an upswing in market activity following the election of Donald Trump as US president on Nov. 8.
JP Morgan Chase also reported strong earnings, with a 24 percent rise in fourth-quarter profits.
In late morning trading, the Dow Jones Industrial Average edged up 0.1 percent to 19,907.7, while the S&P 500 gained 0.3 percent to 2,276.72. The Nasdaq Composite, on the other hand, added 0.57 percent to 5,579.15.
The dollar, meanwhile, rebounded from losses against a basket of major currencies the previous day to trade slightly higher at 101.390, while it rose 0.3 percent against the yen to 115.07 yen. In the bond market, US Treasury yields rose across the board bolstered by Friday’s better-than-expected data such as the big rise in US inflation expectations as shown in the University of Michigan consumer sentiment report.
Gold slips
The price of gold eased on Friday from a seven-week high touched in the previous session, as strong US retail sales drove the dollar and US bond yields higher, but was still on track for a third straight weekly gain.
Spot gold was down 0.1 percent at $1,194.62 an ounce by 1538 GMT, having fallen as low as $1,188.04 after the US data was published. It was still up 1.9 percent on the week. US gold futures were down 0.4 percent at $1,194.80. The gold price has risen 6.5 percent since a mid-December low, and touched $1,206.98 on Thursday to reach its highest level since Nov. 23, after Trump failed to elaborate on his plans to cut taxes and boost infrastructure spending.

Source: Arab News