Oil prices gain as Saudi Arabia cuts oil supply to Asia

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  • Prices of Oil begin to rise again as Trump is set to take over January 20th

Oil prices rose for the first time in three days on Wednesday, boosted by an early Wall Street rally ahead of a news conference by U.S. President- elect Donald Trump, and also lifted by news of Saudi supply cuts to Asia.

Oil’s gains came despite government data showing a bigger-than-expected weekly build in U.S. crude and fuel inventories. Wall Street shares rose early ahead of the speech in which Trump was expected to provide more details about his plans for the world’s largest economy.

Once Trump started speaking, stocks pared gains and the S&P 500 index slipped into negative territory.

Brent was up $1.42, or 2.7 per cent, at $55.06 a barrel by 11:17 a.m. EST. U.S. West Texas Intermediate (WTI) rose $1.30, or 2.6 per cent, to $52.12 per barrel.

That put both contracts on track for their biggest daily percentage gains since December 1. On Tuesday, Brent and U.S. crude futures settled at their lowest levels in a month.

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“We expect some bullish OPEC rhetoric to ramp up in an attempt to neutralize the bearish vibes that have emanated from the recent production increases indicated out of Libya, Iran, Iraq and Nigeria,” Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Saudi Arabia, the world’s top oil exporter, has told some of its Asian customers that it will reduce their crude supplies slightly in February.

Still, there is plenty of oil to fill gaps left by OPEC. North American drilling is on the rise, while European and Chinese traders are shipping a record 22 million barrels of crude from the North Sea and Azerbaijan to Asia this month.

OPEC’s No. 2 producer Iraq plans to raise crude exports from its southern port of Basra to an all-time high of 3.641 million bpd in February.

U.S. crude production was projected to rise by 110,000 barrels per day in 2017 to 9 million bpd, according to U.S. Energy Information (EIA) data. Separately, EIA said Wednesday U.S. crude inventories increased by 4.1 million barrels last week.

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That topped both the 1.2 million barrel build that analysts forecast in a Reuters poll and the 1.5 million barrel build in data Tuesday from the American Petroleum Institute, an industry group.

“It is one the most uniformly bearish reports in some time,” said John Kilduff, partner at energy hedge fund Again Capital in New York.

Africa Finance Corp plans maiden sukuk soon – sources Africa Finance Corp (AFC), a pan-African multilateral institution based in Nigeria, is likely to make a debut U.S. dollar sukuk issue by early February, banking sources close to the deal said this week.

If AFC makes a final decision to go ahead with the proposed debt sale over coming days, the sukuk will be issued in two or three weeks through a private sale, a banking source familiar with the transaction said. At least one of the banks arranging the transaction is based in the United Arab Emirates, the source added.

A spokeswoman at AFC declined to comment. A private placement normally requires less documentation than a bond listed on a public exchange.

The sukuk would be structured with a murabaha format, a popular cost-plus structure in Islamic finance, and use Nasdaq Dubai’s platform for murabaha transactions, according to a report by Moody’s Investors Service, which assigned a provisional A3 credit rating to the Cayman-domiciled special purpose vehicle.

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“We will see more sukuk issuance from Africa-based issuers over the next few years” as borrowers seek to expand their investor bases, said Dr. Mohamed Damak, global head of Islamic finance at S&P Global Ratings.

“Another reason for issuers in Africa to choose the sukuk route is that sometimes sukuk can be cheaper than (conventional) bonds in terms of cost of funding, especially when it attracts significant interest from the market.”

AFC obtained a 15-year, $50 million line of financing from the Saudi Arabia-based Islamic Development Bank in 2015. It issued a debut $750 million conventional bond in 2015, a five-year deal that offered a 4.375 per cent coupon.

Last year it issued a 100 million Swiss franc bond. That paper, with a maturity of three years and 150 days, pays a 0.85 per cent coupon and was arranged by Deutsche Bank and UBS.

 

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