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Oil fluctuates with fuel build up dimming tighter crude supply

EconJan 14. 2021An oil pumping jack in an oilfield near Neftekamsk, in the Republic of Bashkortostan, Russia, on Nov. 19, 2020. MUST CREDIT: Bloomberg photo by Andrey Rudakov.

By Syndication Washington Post, Bloomberg · Andres Guerra Luz, Alex Longley

Oil clawed back some of its earlier losses as shrinking U.S. crude supplies added to an already tightening global supply outlook, though a stronger dollar and rising refined products supplies exerted downward pressure.

Futures were little changed in New York after falling as much as 1.2% earlier in the session. An Energy Information Administration report showed U.S. crude inventories fell by 3.248 million barrels last week, its fifth drop in a row. However, the EIA report also showed builds in gasoline and distillate stockpiles. The Bloomberg Dollar Spot Index strengthened as much as 0.3%, reducing the appeal for commodities priced in the greenback.

“It’s good to see another crude draw” and the remainder of the year should “continue to have drawdowns in overall inventories, especially if OPEC compliance remains pretty strong,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets. Still, “the refined products side was a little bit disappointing for those people who wanted to be more bullish.”

Prices earlier were boosted by expectations for cold weather to buoy demand at a time when the supply outlook has already been tightening, with Goldman Sachs seeing demand getting a boost of at least 1 million barrels a day. In Japan, power generators have been buying cargoes of low-sulfur fuel oil for the purpose of direct burning, according to traders. Meanwhile, Saudi Arabia trimmed February supplies to at least 11 refiners in Asia and Europe after announcing surprise production curbs last week.

Following recent covid-19 vaccine breakthroughs and Saudi Arabia’s pledge to deepen cuts, oil markets still face a precarious demand picture as the world tries to emerge from the pandemic. U.K. road vehicle use was down 42% on pre-covid levels last week, while aircraft tracking in early 2021 shows little sign of any meaningful rebound in flight numbers. However, the market’s been looking ahead of the near-term virus risks and toward demand returning in the longer term.

“We have a positive outlook,” Russell Hardy, chief executive officer of trading house Vitol Group, said in a Bloomberg Television interview. “The market as usual is racing ahead and factoring in that positive news of a vaccine and the expectation of a better summer and a better second half of 2021.”

A trading executive at Total also said Wednesday that by the northern hemisphere’s summer, oil-product demand should be back at 2019 levels, excluding jet fuel. Use of aviation fuel is unlikely to recover until the third quarter, Mike Muller, Vitol’s head of Asia, said Wednesday.

While crude prices should continue “trading higher over the coming months, investors need to be mindful that the road to higher oil demand and prices will remain bumpy,” said Giovanni Staunovo, a commodity analyst at UBS Group.

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Stocks rise for second day; Treasury yields drop

EconJan 14. 2021A pedestrian stands against an electronic stock board outside a securities firm in Tokyo on Jan. 4, 2021. MUST CREDIT: Bloomberg photo by Noriko Hayashi.

By Syndication Washington Post, Bloomberg · Claire Ballentine, Vildana Hajric

Stocks rose and benchmark Treasury yields retreated for a second day amid optimism the economy will continue to benefit from government support.

Technology shares led gains, with the Nasdaq 100 outperforming the benchmark S&P 500. Intel jumped 7% after the chipmaker named a new chief executive. Treasurys received strong demand for a second consecutive day at a government debt sale, helping to send yields down from the highest levels since March.

“Investors continue to focus on growing expectations for increased fiscal spending and promising economic prospects as the vaccine rolls out later this year,” said Ryan Nauman, market strategist at Informa Financial Intelligence’s Zephyr. “It’s all about resiliency here right now and equity markets continue to overlook and not be phased by all the chaos that’s out there.”

In Washington, the House of Representatives is voting to impeach President Donald Trump for a second time. A Senate trial for Trump probably will not begin before his term ends Jan. 20.

European Central Bank council member Francois Villeroy de Galhau said the ECB will keep an easy stance for as long as needed, and U.S. investors took comfort from remarks by two Federal Reserve officials that pushed back on the possibility of tapering bond purchases anytime soon.

“Coordinated comments from Fed governors” are helping to deflate bond yields, said Deutsche Bank strategists including Jim Reid in a note to clients. “We’ve only had seven business days this year, and we’ve already had a full 360-degree tapering debate played out by the Fed.”

Europe’s Stoxx 600 was flat, with losses in banks and travel shares outweighing M&A announcements. Among the day’s winners, French grocer Carrefour rallied after Alimentation Couche-Tard, the convenience-store giant that owns the Circle K chain, said it’s exploring a transaction.

In Japan, the Nikkei 225 outperformed, reaching a record in dollar terms. Equities also ticked up in South Korea, while Hong Kong shares were flat.

Oil fell as a stronger dollar and rising refined products supplies offset shrinking U.S. crude supplies, capping the price under a key technical indicator.

Here are some key events coming up:

– JPMorgan Chase & Co., Citigroup and Wells Fargo are among firms due to report earnings.

– President-elect Joe Biden plans to lay out proposals for fiscal support Thursday.

– Federal Reserve Chairman Jerome Powell takes part in a webinar Thursday.

– U.S. initial jobless claims data is due Thursday.

– U.S. retail sales, industrial production, business inventories and consumer sentiment figures are due Friday.

These are some of the main moves in markets:

Stocks

– The S&P 500 index climbed 0.3%, to 3,809.84, as of 4:02 p.m. New York time.

– The Dow Jones industrial average increased 0.1%, to 31,060.47.

– The Nasdaq Composite index jumped 0.5%, to 13,128.95.

– The Stoxx Europe 600 index rose 0.1%, to 409.07.

– The MSCI All-Country index rose 0.3%, to 661.44.

Currencies

– The Bloomberg Dollar Spot Index rose 0.2%, to 1,122.79.

– The euro decreased 0.4%, to $1.2157.

– The British pound fell 0.3%, to $1.3634.

– The Japanese yen weakened 0.1%, to 103.87 per dollar.

Bonds

– The yield on 10-year Treasurys dipped four basis points, to 1.09%, the biggest decrease in five weeks.

– Germany’s 10-year yield decreased five basis points, to -0.52%, the largest dip in seven months.

– Britain’s 10-year yield fell five basis points, to 0.307%, the first retreat in more than a week and the biggest drop in more than a month.

Commodities

– West Texas Intermediate crude fell 0.6%, to $52.88 a barrel, the first retreat in more than a week and the largest fall in a week.

– Silver weakened 1.5%, to $25.25 per ounce.

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KResearch worried over rising debt, says policy rate cut possible

EconJan 14. 2021

By The Nation

The Bank of Thailand (BOT) may cut its benchmark interest rate to a new historic low of 0.25 per cent, Kasikorn Research said on Wednesday. It also warned that households and businesses remain vulnerable to debt, but insisted that Thailand’s banks were still strong amid the second wave of Covid-19.

Thanyalak Vacharachaisurapol, deputy managing director at Kasikorn Research Centre, expressed concern that household debt in the third quarter last year stood at 86.6 per cent of GDP, and is expected to rise above 91 per cent by the end of this year.

High household debt has hit many countries, following low or falling GDP growth amid the pandemic. The Thai government has responded by helping debtors facing liquidity problems, while trying to alleviate household debt levels.

The BOT and financial institutions are implementing additional assistance measures, while extending existing measures such as the debt holiday (until mid-2021) and debt restructuring. 

As for the BOT’s benchmark policy rate, KBank forecasts it may fall from 0.5 per cent to 0.25 per cent given the highly uncertain situation, but sees a zero-interest rate as unlikely given the BOT is equipped with other tools to ease financial costs for businesses. 

“Regarding the outlook for the baht, although the Thai currency is expected to soften slightly over the next two weeks, from the Bt29.50 per US dollar reported at 2020 year-end due to the US presidential election results and new economic stimulus measures. The baht will likely strengthen during the remainder of 2021 when the market gives more weight to the greenback’s fundamentals, such as the US budget and trade deficits, and the Fed’s quantitative easing programme.

Meanwhile, financial institutions overall are now more robust and have more liquidity than during the 1997 financial crisis, though they remain vigilant towards risks from potential asset-quality problems, said KBank. However, the business and household sectors have become more fragile due to mounting debt and eroding competitiveness. Despite this, KBank views that there are opportunities in every crisis for those prepared in advance and able to grab opportunities when they arrive – for instance, by developing mobile banking, online shopping and food delivery, all of which have been enjoying rising profits during lockdown periods. 

Plans to vaccinate half of Thailand’s population against Covid-19 through 2021 and in early 2022 should mean consumer and business confidence, in particular tourism, will bounce back, said Thanyalak. However, she warned they may not recover to pre-pandemic levels in 2022. People are also expected to maintain “new normal” and social distancing habits, such as working from home and using digital communication technology. International travel may take at least 2-3 years to return to normal, she added.

Nattaporn Triratanasirikul, KResearch assistant managing director, said the second wave of Covid-19 differed from the first wave in three aspects. First, the number of daily infections is higher. Second, the infection scope is more extensive. And third, the origin of the outbreak is in the industrial sector. In addition, the government’s control measures are different, with a “non-lockdown” or a partial lockdown employed this time to maintain a balance between economic and public health impacts. However, the daily infection rate must be monitored to see if it decreases or falls to zero within 60 days, he added. “With a faster end to this round of infections, our economic growth may not fall too steeply from KResearch’s previous estimate of 2.6 per cent.”

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Transport Ministry wants Bt325bn for 2022 infrastructure plans

EconJan 14. 2021Transport Minister Saksayam Chidchob

By The Nation

Transport Ministry has asked for a budget of Bt325 billion for 2022, of which Bt324 billion is earmarked for 50 infrastructure projects, said minister Saksayam Chidchob.

The remaining Bt1 billion is for upgrading the transport system, he added.

Of the 50 projects, six will be developed by the Highways Department at a cost of Bt240 billion, two by the Rural Roads Department at a cost of Bt28 billion and one by the Expressway Authority of Thailand worth Bt955 million.

The State Railways of Thailand will develop 16 projects (Bt18 billion), the Mass Rapid Transit Authority of Thailand has 13 projects (Bt20 billion), the Department of Land Transport has four projects (Bt818 million) and the Department of Airports two projects worth Bt11 billion.

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BCG economic strategy to drive Thailand for next 5 years: Prayut

EconJan 14. 2021Prime Minister Prayut Chan-o-cha

By The Nation

The strategy for national development under the BCG Model – bio-economy, circular economy and Green economy – was approved by the BCG committee on Wednesday.

The five-year strategy will begin this year.

Prime Minister Prayut Chan-o-cha, who chaired the committee meeting, said the BCG Model will be included in the national development agenda.

The model seeks to capitalise on Thailand’s abundant agricultural products and vast farming zones. It covers the farm, food, health, medical, energy, biochemical and tourism sectors, which account for half of the country’s total employment.

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Thai bond market ‘unaffected’ by second-wave contagion

EconJan 14. 2021

By The Nation

The new Covid-19 outbreak will have not affect the Thai bond market, the Thai Bond Market Association (ThaiBMA) said on Wednesday.

ThaiBMA president Tada Phutthitada said the pandemic would not trigger debt-payment defaults since debtors can request loan or debt moratoriums.

Meanwhile he did not expect foreign funds to flow into the bond market, explaining that the US 10-year bond yield has risen to 1.12 per cent compared to the Thai bond yield of 1.34 per cent, while foreign investors were focusing on risk assets whose value was increasing, such as Bitcoin and tech shares.

“From January 1 to January 13, foreign investors made net sales in bonds worth Bt8.26 billion, compared to net sales of Bt6.4 billion at the end of 2020,” he said.

The total value of Thai bonds issued this year will rise to Bt750 billion from Bt680 billion last year, he added.

“Meanwhile, the bond market’s total outstanding value this year will be Bt14.13 trillion, up 4.5 per cent from Bt13.52 trillion last year thanks to the increase in government bonds,” he said.

Tada added that the number of corporate bond issuances would decline as companies turned to loans from financial institutions at attractive interest rates.

“However, we expect private companies will still want to issue long-term bonds to deal with uncertainty,” he added.

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Thai stock market up 0.48% on hopes of US stimulus, rising oil price

EconJan 13. 2021

By The Nation

The Stock Exchange of Thailand (SET) Index closed at 1,547.31 on Wednesday, up 7.46 points or 0.48 per cent. Total transactions amounted to Bt106.7 billion with an index high of 1,561.66 and a low of 1,542.42.

In the morning session, an analyst at Krungsri Securities forecast the day’s index would fluctuate between 1,530 and 1,550 points amid signs US President-elect Joe Biden would launch stimulus measures, and a rising oil price after Saudi Arabia cut production capacity by 1 million barrels per day.

However, the index would be pressured by its tight valuation at a price-to-earnings ratio of 30 times, the analyst said.

The 10 stocks with the highest trade value today were PTT, EA, GPSC, PTTEP, KBANK, AEONTS, PTTGC, SCGP, SCB and AOT.

As of 4.30pm, the price of oil rose by US$0.17 or 0.32 per cent to $53.38 per barrel, while gold rose by $6.90 or 0.37 per cent, to $1,851.10 per ounce.

Other Asian indices were mixed:

Japan’s Nikkei Index closed at 28,456.59, up 292.25 points or 1.04 per cent.

China’s Shang Hai SE Composite Index closed at 3,598.65, down 9.69 points or 0.27 per cent, while Shenzhen SE Component Index closed at 15,365.43, down 94.60 points or 0.61 per cent.

Hong Kong’s Hang Seng Index closed at 28,235.60, down 41.15 points or 0.15 per cent.

South Korea’s KOSPI Index closed at 3,148.29, up 22.34 points or 0.71 per cent.

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KTC share price soars amid investor confidence

EconJan 13. 2021

By The Nation

The share price of Krungthai Card (KTC) is skyrocketing on investors’ hopes that the company will grow in line with consumption.

KTBST Securities assistant manager for investment strategy Mongkol Puangpetra said the finance sector will be able to maintain its growth this year and the following years as its debtors are still paying interest regularly.

However, he advised investors who have KTC shares to continue holding them, while advising those who do not to wait for a price drop because the price is higher than the target value of Bt60 per share.

He also said that the securities company expected KTC net profit this year to increase by 6 per cent to Bt5.96 billion as the firm’s loans are expected to grow by 6 per cent, in line with the recovery in card spending.

“Meanwhile, the cost-to-income ratio is expected to be 39 per cent, according to the decline in marketing expenses and synergy with Krungthai Bank,” he added.

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SET extends gains, but tight valuation casts shadow

EconJan 13. 2021

By The Nation

The Stock Exchange of Thailand (SET) Index rose by 5.64 points, or 0.37 per cent, to 1,545.49 in the morning session on Wednesday.

An analyst at Krungsri Securities predicted the day’s index would fluctuate between 1,530 and 1,550 points amid signs US President-elect Joe Biden would launch economic stimulus measures and a rising oil price after Saudi Arabia cut its oil production capacity by 1 million barrels per day.

However, the index would be under pressure due to its tight valuation at a price-to-earnings ratio of 30 times, the analyst said.

He recommended investors buy:

> PTTEP, PTTGC, Top and IVL, which benefit from the rising oil price and improved fourth-quarter performance.

> PSL, TTA and RCL, which would benefit from a rise in the freight rate.

> KBank, SCB, BBL, KTB and BLA, which benefit from a rising US bond yield.

The SET Index closed at 1,539.85 on Tuesday, up 3.36 points, or 0.22 per cent. The volume of total transactions was Bt90.16 billion, with an index high of 1,542.65 points and a low of 1,528.50.

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Gold price drops in opening trade

EconJan 13. 2021

By The Nation

The price of gold dropped by Bt100 per baht weight in morning trade on Wednesday, the Gold Traders Association reported.

As of 9.26am, the buying price of a gold bar was Bt26,350 per baht weight and selling price Bt26,450 while gold ornaments cost Bt25,878.12 and Bt26,950, respectively.

At close on Tuesday, the buying price of a gold bar was Bt26,450 per baht weight and selling price Bt26,550 while gold ornaments cost Bt25,969.08 and Bt27,050, respectively.

The spot gold price moved to US$1,862 (Bt55,929) per ounce in the morning, while the Comex (Commodity Exchange) gold price to be delivered in February dropped by $6.60 to $1,844.20 per ounce on Tuesday due to an increase in the US bond yield.

The Hong Kong gold price rose by HK$10 to $17,180 (Bt66,550) per tael, the Chinese Gold and Silver Exchange Society reported.