Slower-than-expected economic growth in China coupled with the first sale of crude from the United States' strategic stockpile in more than two decades has dampened the outlook for oil prices, analysts said yesterday.
Despite increased geopolitical risks from the crisis in Crimea, West Texas Intermediate yesterday traded near its lowest levels in a month at US$98.13 a barrel. It fell 2 per cent on Wednesday to $97.99 a barrel, the biggest drop since January 2 and the lowest close since February 6. Brent futures for April slipped 0.07 per cent to $107.94 a barrel.
“The combination of these events will slow down prices,” said Luay Al Khateeb of the London-based Iraq Energy Institute. “With regards to Crimea, these events did not shock the world, as in market speculators could not defeat politics this time.”
Factory output in China showed growth of 8.6 per cent in January and February compared with the year-earlier period, according to the National Bureau of Statistics. By contrast, analysts had forecast a 9.5 per cent increase.
The US announced a test sale of 5 million barrels of oil from the Strategic Petroleum Reserve (SPR), the first time such a move has been made since Iraq invaded Kuwait in 1990. While the White House said the move had been planned for some time and was not related to the Crimean crisis, Société Générale in New York said the sale appeared to be a way to test the system in the case of a possible disruption to supply.
“We don’t believe in coincidences,” said Michael Wittner, the head of oil market research at Société Générale. “We do believe that the SPR release is meant as a warning shot across Russia’s bow.”
Arabian Gulf economies are well-cushioned to manage any downside risk from oil prices as a result of non-oil revenues, but countries such as Iraq would be vulnerable, the Mr Al Khateeb said.
The reaction to the Crimean crisis can be compared to the response during the Arab Spring, when the market had time to price in a gradual build-up of tensions.
The shocks from the Arab Spring “reduced supply from the countries directly affected by three to four million barrels per day, or roughly half the current level of Russia’s exports,” wrote the London-based research house Capital Economics in a note to clients. “The price of Brent crude then rose to peaks of about $125 per barrel, which seems a reasonable target if the Ukrainian crisis does result in serious damage to Russian supply.”
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COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
