Global oil prices plunged to yet another four-year low after the OPEC oil producing cartel decided to maintain crude output in an oversupplied market, dealers said.]]> |||
London - Global oil prices plunged Friday to yet another four-year low after the OPEC oil producing cartel decided to maintain crude output in an oversupplied market, dealers said.
London Brent oil for January delivery sank in early deals to $71.12 (R784) per barrel - the lowest level since July 7, 2010.
US benchmark West Texas Intermediate (WTI) for January had meanwhile slumped to a similar trough at $67.75.
The 12-nation Organization of Petroleum Exporting Countries (OPEC) opted Thursday to maintain its collective output ceiling at 30 million barrels per day, where it has stood for three years, sending prices plunging.
OPEC refused to cut production despite oversupply that has sent prices tumbling by more than a third since June, with analysts warning of further falls to come.
“As expected, OPEC confirmed what many market participants had expected by leaving their official production quota unchanged,” said Sucden analyst Kash Kamal.
“Many investors had hoped for some positive steps forward as the global supply glut continues to exert considerable downward pressure on futures prices,” he added.
At Thursday's OPEC gathering in Vienna, the cartel came under pressure from its poorer members, including Venezuela and Ecuador, to trim production as tumbling prices were eating into revenues and raising fears over their economies.
However, the group's powerful Gulf members led by kingpin Saudi Arabia resisted the calls to turn down the taps unless they are guaranteed market share, particularly in the United States, where cheap shale gas has contributed to the global supply glut.
Another member, Kuwait, supported the move with the country's oil minister Ali Omair saying: “We decided that price will adjust itself based on supply and demand and that OPEC is supposed to safeguard its market share in order not to lose its clients.”
He suggested the United States should also bear responsibility and lower its own output of shale oil.
Venezuelan President Nicolas Maduro declared Thursday that he would keep pushing OPEC to slash output.
The oil market has plunged in recent months, depressed by plentiful supplies, the stronger dollar and demand fears in a weakening global economy.
“OPEC's decision to keep output is the main reason for prices to drop quite rapidly,” said Daniel Ang, an investment analyst with Phillip Futures in Singapore.
“Prices are likely to be going down for the rest of the year,” he told AFP.
Ang, who closely tracks the oil market, said he expects WTI to end 2014 in the “low 60s” and Brent in the “mid-60s”.
This week's OPEC decision was meanwhile perceived by some analysts as an attack on the booming US shale energy sector.
“OPEC is dominated by Saudi Arabia and Kuwait, who also have the highest tolerance for low oil prices due to the economies of scale generated by their huge super fields,” said analyst Nick Campbell at consultancy Inspired Energy.
“Therefore, in order to combat low demand and a new supply threat - both mainly in the United States - the trick is to drop your price.”
Technological innovations have unlocked shale resources in North America and raised daily US oil output by more than 40 percent since 2006, but at a production cost which can be three or four times that of extracting Middle Eastern oil.
“US shale producers costs are estimated to be much higher than most OPEC producers and, therefore, by pushing the oil price lower they are hoping to drive the higher cost current producing wells to the margin and, more importantly, stop new sites developing,” added Campbell.
US oil output is soaring thanks to shale energy, which involves blasting a high-pressure blend of water, sand and chemicals deep underground in order to release hydrocarbons trapped between layers of rock. - Sapa-AFP]]>
Brait is seeking investment targets for the 26.4 billion rand windfall it received from the sale of its stake in Pepkor.]]> |||
Johannesburg - Brait is seeking investment targets for the 26.4 billion rand windfall it received from the sale of its stake in Pepkor as shareholders pressure the company to spend the cash.
The South African investor plans to make as many as three acquisitions after 12-18 months, chief executive John Gnodde said by phone today.
Brait will look for companies in the food and consumer-goods market at the “value end of the equation,” he said.
Steinhoff International, South Africa’s biggest furniture company, agreed to buy closely held clothing retailer Pepkor for 62.8 billion rand earlier this week to expand in the discount market.
The deal, the largest purchase of a South African company in more than a decade, will create a retailer with more than 6 000 stores across three continents.
Brait, about 35 percent owned by South African billionaire Christo Wiese, will get 15 billion rand in cash from the sale, with the rest in Steinhoff shares.
Smaller shareholders may demand the company spend the proceeds quicker than Gnodde’s timeframe, according to Momentum Asset Management.
“Investors don’t want Brait sitting on a cash pile,” Wayne McCurrie, a money manager at Momentum, said by phone from Johannesburg.
“The pressure will be on to look for something sooner than later.”
Momentum owns almost 44 000 Brait shares valued at about 3.1 million rand, according to data compiled by Bloomberg.
The stock, which fell 19 percent the day the Steinhoff deal was announced, rose 2.7 percent to 72.40 rand as of 3:38 pm in Johannesburg.
Brait is considering acquisitions in South Africa and Europe, Gnodde said.
Following the Pepkor sale, Brait’s three largest investments will include Premier Group, the South African maker of Blue Ribbon bread and Snowflake flour, Iceland Foods, the UK supplier of frozen foods, and Steinhoff. - Bloomberg News]]>
India said Friday the economy grew by 5.3 percent in the three months to September year-on-year.]]> |||
New Delhi - India said Friday the economy grew by 5.3 percent in the three months to September year-on-year - weaker than the previous quarter and stirring hopes of an interest rate cut to spur investment.
Growth was below the 5.7 percent logged in the previous three months but the performance still beat consensus market forecasts of 5.1 percent expansion in the second quarter of the financial year, the government said.
The data was released days before the hawkish central bank, which has held its benchmark lending rate at a steep eight percent since last January, meets for its regular policy review.
Most economists expect the Reserve Bank of India, which has vowed to “break the back of chronic inflation”, to hold rates until the next financial year starting in April.
But some expect it to begin lowering rates as early as the next policy meeting Tuesday as growth slows.
India's benchmark Sensex share index closed up nearly one percent at a record high of 28 693.99 points on hopes that slowing growth, easing inflation and a slide in crude oil prices will pave the way for a rate cut.
India's Finance Minister Arun Jaitley has been pressing central bank governor Raghuram Rajan to lower interest rates at the monetary policy review to boost the stuttering economy.
Jaitley has suggested that with India's inflation now finally appearing to be on a downward track, the bank can bring down borrowing costs for businesses to help drive investment.
India's economy has been mired in its worst slowdown in two decades.
Growth was 4.7 percent in the last financial year - around half of the near double-digit levels seen a few years ago - hit by high interest rates to curb inflation, a lacklustre global economy and a fall in foreign investment amid corruption scandals which embroiled the previous Congress government.
Jumpstarting growth is key for India's new Prime Minister Narendra Modi, who led his party to the first single-party parliamentary majority in three decades in May on promises to revive Asia's third-largest economy.
The central bank has forecast growth of 5.5 percent this year, slightly below the government's target of 5.8 percent.
Economists say India needs at least eight-to-nine percent growth to create jobs for a ballooning youth population. - Sapa-AFP]]>
Germany signed off on its 2015 draft budget which foresees a balanced bottom line for the country's public finances for the first time since 1969.]]> |||
Berlin - Germany signed off Friday on its 2015 draft budget which foresees a balanced bottom line for the country's public finances for the first time since 1969.
Lawmakers in the Bundestag lower house of parliament voted overwhelmingly to approve the budget blueprint for next year which will entail no new debt, a first in 46 years.
The move was a campaign pledge by conservative Chancellor Angela Merkel in last year's general election.
Finance Minister Wolfgang Schaeuble said on public radio Deutschlandfunk that Germany was living up to its responsibility for future generations and contributing to sustainable growth.
He later said during a debate in parliament that agreeing on balanced budgets with no new debt was also a “commitment for the future”.
Opposition parties and some economists have criticised Berlin's drive to achieve the 2015 balanced budget, claiming it makes no economic sense and has a restraining effect on growth and investment.
The level of debt already held by Europe's top economy, however, exceeds EU rules which lay out a ceiling of 60-percent of gross domestic product. - Sapa-AFP]]>
Brazil's economy grew 0.1 percent in the third quarter compared with the second, crawling timidly out of recession.]]> |||
Brasilia - Brazil's economy grew 0.1 percent in the third quarter compared with the second, crawling timidly out of recession, the government said Friday.
The manufacturing sector in particular, which had been hard hit by an economic slowdown, began to grow in the third quarter, said the Brazilian Institute of Geography and Statistics.
The services sector has also started to expand, it added.
However, compared with the same quarter last year, GDP was still down 0.2 percent in the third quarter.
Brazil's economy is the world's seventh largest.
It contracted for two consecutive quarters in the first half of the year, officially entering recession.
The return to growth in the third quarter, though underwhelming, is welcome news for leftist President Dilma Rousseff, who narrowly won re-election last month after presiding over four years of sluggish growth.
Rousseff, who is deeply unpopular in the financial world, shook up her economic team Thursday in a bid to revive market confidence.
She named Joaquim Levy, a bank executive nicknamed “Scissorhands” for his steely budgetary management, as her finance minister.
Levy vowed to rein in the government's books and set a primary surplus target of 1.2 percent of GDP next year.
As of September, Brazil had managed to save just 0.61 percent of GDP this year.
Central bank chief Alexandre Tombini, who kept his post through the shake-up, vowed to tackle inflation that is stubbornly hovering above the official target ceiling of 6.5 percent.
Rousseff, 66, has struggled to rekindle the economic magic of her predecessor and mentor, Luiz Inacio Lula da Silva, who presided over strong growth during his eight-year administration - peaking at 7.5 percent in 2010, the year Rousseff was elected to succeed him.
Under Rousseff, Brazil has posted growth of 2.7 percent in 2011, 1.0 percent in 2012 and 2.5 percent last year.
This year, the central bank is forecasting growth of just 0.7 percent, it said in September, slashing its previous forecast of 1.6 percent.
The International Monetary Fund also cut its 2014 growth forecast for Brazil, from 1.3 percent to 0.3 percent. - Sapa-AFP]]>
Gold fell on the back of a slump in oil prices, with strength in the dollar piling further pressure on the metal ahead of a referendum on the management of Swiss bullion reserves this weekend.]]> |||
London - Gold fell on Friday on the back of a slump in oil prices, with strength in the dollar piling further pressure on the metal ahead of a referendum on the management of Swiss bullion reserves this weekend.
Oil prices posted their sharpest losses since 2011 on Thursday after OPEC refrained from cutting its output following a more than 30 percent plunge in prices since June.
Oil steadied on Friday, but remained under pressure.
Spot gold was down 0.6 percent at $1 184.44 (R13 052) an ounce at 12:33 SA time, while US gold futures for December delivery were down $13.10 an ounce at $1 183.50.
“Weakness in oil prices isn't good for gold, because inflation expectations are adjusted downwards,” ABN Amro analyst Georgette Boele said.
“We've been looking at inflation expectations and oil prices and gold, and there has been a very strong relationship this year.”
A broad-based rally in the dollar, in which gold is denominated, also hurt prices.
The dollar rose versus commodity currencies like the Canadian dollar and Norwegian crown on OPEC's decision not to reduce output.
The OPEC decision also hurt stock markets and other commodities, with copper falling to an 8-month low.
Sliding oil prices are set to remain in focus as US markets reopened after the Thanksgiving holiday.
Traders are awaiting the outcome of a referendum in Switzerland this weekend on a motion to force the Swiss National Bank to raise gold holdings to 20 percent of its forex reserves, repatriate its bullion, and undertake never to sell it.
The most recent opinion poll showed support among Swiss voters for the initiative had slipped to 38 percent.
A surprise 'yes' vote could prompt the Swiss central bank to buy about 1 500 tonnes of gold over the next few years, analysts say.
“The market appears not to have priced in the chance of a 'yes' vote, and we expect the risks for the Swiss franc and gold are skewed to the upside,” ETF Securities said in a note.
Silver was down 1.1 percent at $16.04 an ounce, while spot platinum was down 0.2 percent at $1 209.55 an ounce and spot palladium was down 0.4 percent at $801.50 an ounce. - Reuters]]>
US stock index futures were mostly flat, as the market's recent upward bias looked to continue in a holiday-shortened session.]]> |||
New York - US stock index futures were mostly flat on Friday, as the market's recent upward bias looked to continue in a holiday-shortened session, though energy shares saw heavy pressure as crude oil tumbled to a four-year low.
Wall Street was closed for the US Thanksgiving holiday on Thursday and will shut three hours earlier on Friday.
Trading volatility could spike since many market participants were extending the holiday.
US crude futures slumped 6.3 percent to $69.06 (R761) per barrel.
It was the biggest one-day drop for crude since August 2011, and the decline brought prices to their lowest since 2010.
On Thursday, OPEC decided not to cut output, which could leave oil markets heavily oversupplied.
Energy shares have been under pressure throughout 2014 as crude prices have slid more than 30 percent from a recent closing high.
The S&P energy sector is the only S&P 500 industry group to be lower for the year, down 4.3 percent.
The Energy Select Sector SPDR exchange-traded fund fell 4.3 percent to $81.60 in pre-market trading.
Exxon Mobil lost 3.5 percent to $91.20 while Chevron fell 4 percent to $110.55; both stocks are Dow components.
Halliburton lost 4.2 percent to $45.35.
The weakness in oil could be a boon for the holiday shopping season, with lower gas prices possibly sparking increased consumer spending.
The decline in oil boosted airline shares ahead of the market open.
American Airlines rose 3.8 percent to $46.67 before the bell, while JetBlue Airways was up 4.8 percent to $14.25.
Delta Air Lines jumped 4 percent to $46.
Despite the energy weakness, major indexes could eke out a sixth straight weekly advance.
For the week so far, the Dow is up 0.1 percent and the S&P is up 0.5 percent.
The Nasdaq is up 1.6 percent, boosted by strength in technology shares, a trend that continued on Friday and lifted Nasdaq futures, which count few energy names as major components.
Cisco Systems rose 0.6 percent to $27.59.
Equities have been strong of late, with the Dow and S&P 500 both closing at records on Wednesday.
Recent gains have been fueled by actions from central banks around the world, as well as strong economic data and corporate results.
* S&P 500 e-minis were down 3 points, or 0.14 percent, with 161 532 contracts changing hands.
* Nasdaq 100 e-minis were up 8.75 points, or 0.2 percent, in volume of 28 101 contracts.
* Dow e-minis were down 3 points, or 0.02 percent, with 30 229 contracts changing hands. - Reuters]]>
State-owned airline South African Express is seeking government approval for a bank loan after entering insolvency and being unable to pay debts.]]> |||
Johannesburg - State-owned airline South African Express is seeking government approval for a bank loan after entering insolvency and being unable to pay debts.
An application has been sent to the National Treasury to allow the regional carrier to borrow the money, Dipuo Letsatsi-Duba, chairman of the government’s portfolio committee on public enterprises, said today in a statement.
The airline has put cost-saving measures in place to curb waste, she said.
The carrier’s management said “agreements had been reached with service providers to address the challenge,” according to the statement.
“The entity needed to raise funds with the bank but the bank needed a shareholder agreement to secure the loan.”
The company didn’t immediately return a voice message seeking comment.
South African Express joins larger state-owned airline South African Airways in needing funds to stay afloat.
SAA is “technically bankrupt” and surviving off state-guaranteed loans, Public Enterprises Minister Lynne Brown has said.
A 90-day recovery plan for SAA was handed to South Africa’s government earlier this month.
South African Express operates a fleet of 24 Bombardier jets ranging in size from 50 to 74 seats, according to the company’s website.
It flies within South Africa and to neighbouring countries including Zimbabwe, Namibia and Mozambique.
Mango Airlines, SAA’s low cost unit, is profitable and adding routes. - Bloomberg News]]>
Sasol fell the most in almost six years as oil’s slump to a five-year low put pressure on spending plans.]]> |||
Johannesburg - Sasol, the South African fuel producer, fell the most in almost six years as oil’s slump to a five-year low put pressure on spending plans.
The Johannesburg-based company, which manufactures synthetic fuels from coal and gas, finalised plans last month to build an $8.1 billion (R89 billion) plant in the US that will convert natural gas into plastics and other chemicals.
Sasol fell as much as 8.3 percent, the most since December 2008, and traded 7.9 percent lower at 463.50 rand by 12:23 pm in the city, with trading volume 1.9 times the three-month daily average.
Brent crude extended its decline from a four-year low after the Organization of Petroleum Exporting Countries decided to keep production steady at yesterday’s meeting in Vienna, resisting calls from Venezuela to cut output.
Sasol’s revenue is linked to the dollar price of oil.
The drop in crude is the key factor pulling Sasol’s stock lower, Mohamed Kharva, a research analyst for Nedbank Capital, said in an e-mail response to questions.
“It’s all a serious concern as they have a huge capex program ahead.”
Sasol fell 10 percent in October and is headed for a 16 percent decline this month.
Yields on dollar bonds due November 2022 rose two basis points to 4.41 percent, the highest on a closing basis since June 12.
Brent crude was little changed at $72.60 a barrel in London, bringing its decrease this year to 34 percent.
“The presently lower oil price does not pose a risk for investors in Sasol’s bond,” acting chief financial officer Paul Victor said in a November 24 e-mailed response to questions.
The fuel producer is considering bringing back an oil-hedging program after years of suspending it because shareholders wanted exposure to crude-price movements, he said.
Sasol needs to raise as much as $7 billion to build the ethane cracker in Lake Charles, Louisiana.
The company received offers from a syndicate of international banks for a dollar-based term-loan facility and is entering into binding commitments, Victor said.
Sasol expects to reach financial close by mid-December, he said.
While the crude selloff is weighing on Sasol’s stock, moves to diversify operations with US projects will be beneficial, Sean Ungerer, a Johannesburg-based analyst at Avior Research (Pty) Ltd, who rates the stock outperform, said.
The chemical facility and a proposed gas-to-liquids plant at the site, which the company will decide on in 2016, are set to gain from a jump in natural gas output from shale formations in North America.
Capital spending over the next three years will increase earnings with less reliance on fuel production in South Africa, “which is good,” Ungerer said in an e-mailed response to questions. - Bloomberg News]]>
South Africa’s trade deficit widened to the highest in at least four years.]]> |||
Johannesburg - South Africa’s trade deficit widened to the highest in at least four years as oil importers increased purchases to benefit from lower prices.
The trade gap swelled to 21.3 billion rand from 2.9 billion rand in September, the Pretoria-based South African Revenue Service said in an e-mailed statement today.
The median estimate of 16 economists surveyed by Bloomberg was for a shortfall of 6.3 billion rand.
The oil price has dropped 37 percent since June, leading to lower inflation forecasts and prompting importers to step up their purchases.
The volume of South African crude purchases rose 72 percent in October from the month before, revenue service data shows.
“Relatively sizable trade deficits are likely to remain a feature in the coming quarters,” Kamilla Kaplan, an economist at Investec in Johannesburg, said in an e-mailed note to clients before the data was released.
The trade shortfall so far this year widened to 95.11 billion rand compared with 73.08 billion rand for the same period in 2013, the revenue service said.
Imports surged by 17.8 percent to 110.32 billion rand as purchases of mineral products, which include oil, rose by 7.16 billion rand, or 33.5 percent.
Machinery and electronics purchases advanced 14.9 percent, while imports of vehicles and transport equipment rose 24 percent.
Exports decreased by 1.8 percent to 89 billion rand in October as shipments of precious metals and stones fell by 2.12 billion rand, or 13.6 percent, and vegetable products dropped by 38 percent.
The monthly trade figures are often volatile, reflecting the timing of shipments of commodities such as oil and diamonds.
The revenue service revised its data in November last year to include trade with Botswana, Lesotho, Namibia and Swaziland. - Bloomberg News]]>