News for May 21.
Saudi Arabia intends to put an end to the practice of creating an artificial shortage of its oil in the market when actual deliveries are made in a volume less than the demand presented by customers. According to Reuters sources familiar with the plans of the kingdom, Riyadh plans to turn the valve to full capacity over the next two months. Under pressure from the US administration and President Donald Trump, who again infuriated OPEC tweets demanding lower prices, production in Saudi Arabia will be increased in May; they say: from 9.8 million barrels per day to about 10 million barrels.
However, this will not lead to an immediate increase in exports. Additional oil is likely to be used inside Saudi Arabia itself, which in summer requires more electricity, including room conditioning. However, in June or July, Saudi oil will spill onto the world market. "The Saudis want oil prices to remain at current levels another one or two months," a source told Reuters. After that, the policy of Riyadh may change. "If customers request more oil supply, the Saudis will increase production," the source adds.
The state-owned oil company Saudi Aramco began artificially limiting supplies in April, denying customers about 10% of bids. In terms of physical oil, non-deliveries amounted to about 635 thousand barrels per day. The total volume of Saudi exports has been cut to a minimum of 6.5 million barrels per day since 2015. This is 2 million barrels or 25% below November levels of last year. As a result, prices soared to 6-month highs, exceeding $ 75 per barrel for Brent in late April.
Now, almost all the oil seized will return to the market. According to Bloomberg, the United Arab Emirates will join Saudi Arabia. In sum, the Middle Eastern members of OPEC agreed in a short time to throw out 1.5 million barrels of additional daily supplies in order to compensate for the volumes lost due to the anti-Iran sanctions.
For the time being, Saudi Arabia's hands are tied up by the OPEC + pact, which allocates a quota of 10.3 million barrels per day to it. But the term of this agreement expires in June, and it is not necessary to wait for its extension, says Matthew Reed, Vice-President of Foreign Reports: "The decision on anti-Iran sanctions will end the OPEC deal. They cannot simultaneously hold 1.2 million barrels (their production) And replace Iranian oil by 1 million. "The fact that Russia, another key participant in the transaction, instead of restricting exports in April, increased it to a 2-year high of 5.7 million barrels per day, says ESAI chief analyst Andrew Reed, will not escape the attention of the Saudis."
Russia has also not fulfilled its quota: even in April, despite numerous promises from the head of the Ministry of Energy Alexander Novak, production cuts amounted to 190 thousand barrels per day instead of the required 228 thousand.
Defaults epidemic threatened Chinese economic growth.
This year promises to be the record for defaults on the Chinese bond market in the amount of $ 13 trillion, indicating a heightened impact of the government campaign to limit the level of borrowed funds.
In the first four months of the year, the volume of defaults on corporate debt in national currency reached 39.2 billion yuan ($ 5.8 billion), which is about 3.4 times more than in the same period of 2018, according to data analyzed by Bloomberg. The rate of growth in the number of defaults is more than three times higher than in 2016, when non-payments were mainly in the first half of the year, in contrast to 2018. The trend is clear: if nothing changes, in 2019, the PRC will update the record for defaults.
Authorities continue to require private sector loans from banks, especially small and medium-sized businesses. On Monday, for example, the central bank eased the requirements for bank reserves. At the same time, President Xi Jinping's team is taking measures aimed at reducing the share of shadow banking, where credit decisions are less regulated by the authorities and where the debt burden more easily grows to a dangerous level.
The growth in the number of defaults, which began at the end of 2017 and continues to this day, is due to a lack of funding. In 2016, for example, the credit markets were adversely affected by the efforts of the authorities to reduce excess production capacity.
Central banks buy gold at a record speed in 6 years.
Global central banks, including in Russia and China, have increased their purchases of gold in the first three months of this year to a maximum of six years against the backdrop of de-dollarization of assets by regulators.
World gold reserves rose by 145.5 tons in the first quarter, which is 68 per cent more than a year earlier, according to a review of the World Gold Council, published on Thursday. Russia remains the largest buyer of this precious metal, as the country reduces its investments in US government bonds. “We see continued high demand from central banks,” said Alistair Hewitt, head of market analytics at the World Gold Council. “We expect another major year for purchases by central banks, although I will be pleasantly surprised if they reach the 2018 level.”
Central bank purchases are a vital source of support for the gold market, partially offsetting a decline in demand from investors in bullion and coins, as well as from industrial consumers of this metal. Gold from the beginning of the year fell by about 1 per cent.
Bitcoin soared to $8000 for the first time in six months.
The cryptocurrency market continues to attempt to rise from the ashes after the collapse of last year, when the total capitalization of tokens collapsed 4 times, providing investors with losses amounting to Switzerland's GDP ($685 billion).
Contrary to pessimistic forecasts, the bitcoin rate, which pushed off from the bottom of $3400 per unit, continues to climb up. According to Coinmarketcap, at the auction on Tuesday, for the first time since November, he touched the mark of $8000, showing an increase of 88% since the beginning of the year.
The Ethereum rate jumped to $259, making out a 2-week maximum. The total capitalization of the crypto market has reached 189 billion dollars (+ 60% since January) and returned to the level of half a year ago. However, they are still 4 times lower than the peaks of the crypto-fever, shown in January 2018 ($ 820 billion).
The growth of Bitcoin is associated with hopes for the influx of large new investors into the crypto active assets market, notes Oriole Capital CEO Andrei Hohrin.
So, Fidelity Digital Assets, a subsidiary of Fidelity, announced that in the near future will begin to offer futures on bitcoins for large customers. "In fairness, it should be noted that the news about the "imminent" start of sales is not the first time we hear it," recalls Hohrin. "One thing is certain, at the moment when lobbyists from the United States break through bureaucratic barriers and start selling futures to institutional investors, we will see BTC prices skyrocketing."
"During the second quarter, we can expect price breakdowns at BTC to $ 9,000 against the background of the next rush, but then price adjustments will follow with a possible reduction to levels of $ 7300-7500," the expert predicts.
Turkey overtakes Argentina in terms of losses for government-debt investors.
Turkey was ahead of Argentina in the status of a developing market, which attracted investors the maximum losses on local bonds this year. As of May 17, investors lost 20.7 per cent on liabilities in lire this year against losses of 16.5 per cent on Argentine bonds, according to Bloomberg Barclays indexes, which track bonds of developing countries.
In February, lira bonds were leading at the highest rates among leading emerging markets. However, the collapse of the lira, which dropped the worst currency in the world by almost 10 per cent this quarter to a seven-month low, spoiled the demand for debt. Losses on the bonds of Turkey and Argentina are the highest among developing countries, where this year investors earned an average of 1.74 per cent on local bonds. Egypt and Russia topped the rating with a return of 16 per cent and 12 per cent respectively, according to these data.
Read also