Saudi Arabia to Supply Full Crude Contract Volumes to Asia

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah//File Photo
General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah//File Photo
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Saudi Arabia to Supply Full Crude Contract Volumes to Asia

General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah//File Photo
General view of Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia May 21, 2018. REUTERS/Ahmed Jadallah//File Photo

Several informed sources said that the giant Saudi Aramco plans to supply full crude contract volumes loading in May to several North Asian buyers despite its pledge to cut output by 500,000 barrels per day, Reuters reported.

This comes after the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+, surprised markets last week by announcing an extra output cut of 1.16 million barrels per day (bpd) from May for the rest of the year.

Investors are closely watching the quantities Aramco supplies each month as an indication of whether the planned production cuts will reduce supplies to Asia - the world’s largest crude oil import market.

A source at an Asian refiner, who declined to be named because he was not authorized to speak to the media, told Reuters that observers were wondering whether the voluntary production cut would really affect supply or if it was only intended to support oil prices.

The OPEC+ announcement caused Brent and US West Texas Intermediate crude futures to jump 6% last week, returning to levels last seen in November.

Last week, Saudi Aramco also surprised the market by raising prices for the Arab Light crude it sells to Asia for a third month in May. It also increased the prices of other oil grades to Asian clients amid expectations of tighter market supply.

Oil demand in Asia was expected to decline in the second quarter, with several Asian refineries cutting their refining capacity by a total of 1.15 million barrels per day.

Meanwhile, trade sources cited by Reuters said that Abu Dhabi National Oil Company (ADNOC), the UAE’s state-owned oil giant, has told at least three buyers in Asia that it will supply the full contracted volumes of oil to them in June.

The UAE intends to reduce its production by 144,000 barrels per day, starting in May, as part of the OPEC Plus production cuts.

Oil fell during Monday’s trading, after achieving gains last week for the third time in a row, due to investors’ concern about increasing interest rates that may curb the demand for oil.

The US dollar rose after US jobs data pointed to a tight labor market, heightening expectations of another Federal Reserve rate hike.

Reuters also reported that Brent crude settled down 96 cents, or 0.2%, at $84.58 a barrel while US West Texas Intermediate also fell 94, or 0.1%, to $79.74.



Euro Zone Poised to Enter Trade Quagmire as Trump Wins

A container ship unloads its cargo in the German port of Hamburg (Reuters)
A container ship unloads its cargo in the German port of Hamburg (Reuters)
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Euro Zone Poised to Enter Trade Quagmire as Trump Wins

A container ship unloads its cargo in the German port of Hamburg (Reuters)
A container ship unloads its cargo in the German port of Hamburg (Reuters)

As Trump 2.0 becomes a reality, Europe is poised to enter a new geopolitical and trade quagmire with its biggest trading partner.

Donald Trump's victory may harm Europe's economy as proposed 10% US tariffs risk hitting European exports such as cars and chemicals, eroding Europe's GDP by up to 1.5% or about €260 billion.

Analysts warn of European Central Bank (ECB) rate cuts, euro weakness, and a recession risk.

According to several economic analyses, there is broad agreement that Trump's proposed 10% universal tariff on all US imports may significantly disrupt European growth, intensify monetary policy divergence, and strain key trade-dependent sectors such as autos and chemicals.

The long-term effects on Europe's economic resilience could prove even more significant if tariffs lead to protracted trade conflicts, prompting the European Central Bank (ECB) to respond with aggressive rate cuts to cushion the impact, according to Euronews.

Trump's proposed across-the-board tariff on imports, including those from Europe, could profoundly impact sectors such as cars and chemicals, which rely heavily on US exports.

Data from the European Commission shows that the European Union exported €502.3 billion in goods to the US in 2023, making up a fifth of all non-European Union exports.

European exports to the US are led by machinery and vehicles (€207.6 billion), chemicals (€137.4 billion), and other manufactured goods (€103.7 billion), which together comprise nearly 90% of the bloc's transatlantic exports.

ABN Amro analysts, including head of macro research Bill Diviney, warn that tariffs “would cause a collapse in exports to the US,” with trade-oriented economies such as Germany and the Netherlands likely to be hardest hit.

According to the Dutch bank, Trump's tariffs would shave approximately 1.5 percentage points off European growth, translating to a potential €260 bn economic loss based on Europe's estimated 2024 GDP of €17.4 tn.

Should Europe's growth falter under Trump's tariffs, the European Central Bank (ECB) may be compelled to respond aggressively, slashing rates to near zero by 2025.

In contrast, the US Federal Reserve may continue raising rates, leading to “one of the biggest and most sustained monetary policy divergences” between the ECB and the Fed since the euro's inception in 1999.

Dirk Schumacher, head of European macro research at Natixis Corporate & Investment Banking Germany, suggests that a 10% tariff increase could reduce GDP by approximately 0.5% in Germany, 0.3% in France, 0.4% in Italy, and 0.2% in Spain.

Schumacher warns that “the euro area could slide into recession in response to higher tariffs.”

According to Goldman Sachs' economists James Moberly and Sven Jari Stehn, the broad tariff would likely erode eurozone GDP by approximately 1%.

Goldman Sachs analysts project that a 1% GDP loss translates into a hit to earnings per share (EPS) for European firms by 6-7 percentage points, which would be sufficient to erase expected EPS growth for 2025.