Oil Tumbles to 2-Week Low on Ukraine Talks, Fears over China Demand

Men cook a meal in a street in Mariupol, Ukraine, Sunday, March 13, 2022. (AP)
Men cook a meal in a street in Mariupol, Ukraine, Sunday, March 13, 2022. (AP)
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Oil Tumbles to 2-Week Low on Ukraine Talks, Fears over China Demand

Men cook a meal in a street in Mariupol, Ukraine, Sunday, March 13, 2022. (AP)
Men cook a meal in a street in Mariupol, Ukraine, Sunday, March 13, 2022. (AP)

Oil prices extended losses on Tuesday, sliding to a two-week low as ceasefire talks between Russia and Ukraine eased fears of further supply disruptions and surging COVID-19 cases in China fueled concerns about slower demand.

Brent futures dropped $5.95 or 5.6% to $100.95 a barrel by 0747 GMT after tumbling by more than $6 to $100.05 earlier in the session.

US West Texas Intermediate (WTI) crude fell below $100 level for the first time since March 1, dropping $5.49 or 5.3% to $97.52 a barrel. It fell to as low as $96.70 earlier in the session.

Both benchmarks declined by more than 5% the previous day.

Brent has lost nearly $40 since hitting a 14-year high of $139.13 a barrel on March 7. US crude has fallen more than $30 since touching its highest since 2008 of $130.50 a barrel about a week ago.

"Expectations of positive developments in the Russia-Ukraine ceasefire talks bolstered hopes to ease tightness in the global crude market," said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

"Fresh lockdowns to curb the COVID-19 pandemic in China also raised concerns over slower demand," he said.

China posted a steep jump in daily COVID-19 infections on Tuesday, with new cases more than doubling from a day earlier to hit a two-year high, raising concerns about the rising economic costs of the country's tough containment measures.

Further talks between Ukrainian and Russian negotiators to ease the crisis were expected on Tuesday after discussions on Monday via video ended with no new progress announced.

US President Joe Biden is expected to travel to Brussels next week to meet with NATO leaders to discuss Russia's war in Ukraine, US and foreign sources familiar with the situation said on Monday.

The United States has warned China against providing military or financial help to Moscow. But India may take up a Russian offer to buy crude oil and other commodities at a discount, two Indian officials said, in a sign that Delhi wants to keep its key trading partner on board.

"Even if there is a ceasefire, oil prices are expected to remain at high levels as Western attempts to isolate Moscow through sanctions will continue, keeping the global oil market in a tight condition," said Tsuyoshi Ueno, senior economist at NLI Research Institute.

"Still, the recent fall in the oil market comes as some investors unwound their long positions as they became increasingly worried about recent volatility," NLI's Ueno said.

Investors cut bullish bets on oil last week as prices surged to multi-year highs, the economic outlook deteriorated, and extreme volatility made derivatives positions more expensive to maintain.

The voluntary shunning of Russian commodities by Western buyers, or self-sanctioning, was expected to start hitting exports of crude oil, liquefied natural gas (LNG) and coal from April, but there are already signs that flows are weakening.



Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.