Oil prices were down on Monday following a sharp drop earlier in the session, after strict Covid-19 curbs affected China’s crude demand in September.
Brent, the benchmark for two thirds of the world’s oil, and West Texas Intermediate, the gauge that tracks US crude, fell more than 2 per cent in the afternoon. Brent was down 0.65 per cent at $92.89 a barrel, while US crude futures were 0.81 per cent lower at $83.46 a barrel, as of 8.05pm UAE time.
China, both the world’s second-largest economy and biggest crude importer, brought in 40.24 million tons of crude oil, or about 9.79 million barrels per day, in September.
Crude shipments were up from 9.5 million bpd in August, but were well below the 10 million bpd China imported a year earlier, data from the country's General Administration of Customs show.
The country’s gross domestic product grew 3.9 per cent year-over-year in the third quarter, a sharp rise from the 0.4 per cent growth reported in the second quarter.
Industrial production in September rose 6.3 per cent, compared to 4.2 per cent in August, signalling an improvement in manufacturing output last month.
“Oil prices settled mixed last week as the negative prospects for demand remain powerful as indicated by China’s insistence on using a zero-Covid policy,” Edward Bell, senior director of market economics at Emirates NBD, said in a research note on Monday.
Xi Jinping, who has backed the government’s zero-Covid policy, secured a third term as China's president on Sunday, cementing his position as the nation's most influential leader since Mao Zedong.
Oil markets are closely watching how a price cap on Russian oil will be enacted by the Group of Seven nations. The cap, which is meant to reduce revenue for Russia’s government, is expected to come into effect on December 5.
A European Union embargo on Russian waterborne crude will be enacted the same day, while a ban on refined products will take effect on February 5.
Crude supply has been tight after the Opec+ alliance of oil-producing countries slashed its collective output by two million bpd earlier this month.
Brent crude, which has gained about 11 per cent over the month, will see “strong” resistance going into the $93-$95 a barrel range as recession expectations could “jeopardise any strong oil rally into the $100 level”, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Recent data has pointed to a nascent recovery in the US shale patch.
Oil production in the Permian Basin of Texas and New Mexico, the biggest shale basin and the focal point of the US shale resurgence, is expected to rise by about 50,000 barrels per day to a record 5.45 million bpd in November, the country's Energy Information Administration said last week.
Four reasons global stock markets are falling right now
There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:
1. Rising US interest rates
The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.
Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”
At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.
2. Stronger dollar
High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.”
3. Global trade war
Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”
4. Eurozone uncertainty
Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.
Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”
The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”
Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
