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Oil prices climb to highest in years as COVID...

October 18, 2021: Oil prices hit their highest in years on Monday as demand continues its recovery from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.

Brent crude oil futures rose 87 cents, or 1%, to $85.73 a barrel by 0111 GMT, the highest price since October 2018.

U.S. West Texas Intermediate (WTI) crude futures climbed $1.12, or 1.4%, to $83.40 a barrel, the highest since October 2014.

Both contracts rose by at least 3% last week.

"Easing restrictions around the world are likely to help the recovery in fuel consumption," analysts from ANZ bank said in a note on Monday.

"The jet fuel market was buoyed by news that the U.S. will open its borders to vaccinated foreign travellers next month. Similar moves in Australia and across Asia followed."

They added that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.

Still, supply could also increase from the United States, where energy firms last week added oil and natural gas rigs for a sixth week in a row as soaring crude prices prompted drillers to return to the wellpad.

The U.S. oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to Oct. 15, its highest since April 2020, energy services firm Baker Hughes Co said last week.

China's economy, meanwhile, likely grew at the slowest pace in a year in the third quarter, hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.

The world's second-largest oil consumer issued a new batch of oil import quotas for independent refiners for 2021 that show total annual allowances were lower than last year, a first reduction of import permits since these firms were allowed into the market in 2015.

Reuters

Palm oil gains over 1% tracking rival oils

October 18, 2021: Malaysian palm oil futures rose on Monday as the contract rolled over to a new month, supported by strength in rival oils on the Dalian and Chicago exchanges.

The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange gained 61 ringgit, or 1.26%, to 4,920 ringgit ($1,183.83) a tonne during early trade.

FUNDAMENTALS

* Global vegetable oil prices, which have hit multi-year highs in recent months, are set to decline during the first half of 2022 due to a strong recovery in production and inventories, according to a forecast from leading analyst Thomas Mielke.

* The Indian Vegetable Oils Producers Association says it is seeing early signs of demand shifting from palm oil to soft oils after India's duty cut made soft oil more attractive.

* Malaysia's crude palm oil production in 2021 is forecast to decline to 18.4 million tonnes due to a labour shortage and will keep prices above 4,600 ringgit a tonne for the rest of the year, the Malaysian Palm Oil Council said.

* Dalian's most active soyoil contract rose 1.3%, while its palm oil contract gained 1.4%. Soyoil prices on the Chicago Board of Trade were up 0.2%.

* Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.

* Palm oil may retest a resistance zone of 5,032-5,048 ringgit per tonne, a break above which could lead to a gain into a range of 5,187-5,274 ringgit, Reuters technical analyst Wang Tao said.

* The Malaysian bourse will be closed on Tuesday for a public holiday.

Reuters

 

 

 

Chinese and HK shares fall as China Q3 GDP...

October 18, 2021: Mainland Chinese and Hong Kong equity markets fell on Monday after data showed China's economy grew more slowly than expected in the third quarter, weighing on regional stocks, although losses were capped by hopes of support from policymakers.

Oil prices, meanwhile, hit new multi-year peaks, continuing their recent surge amid a global energy shortage, with U.S. crude at a fresh seven-year high and Brent at a three-year high.

China's gross domestic product (GDP) grew 4.9% in July-September from a year earlier, the weakest pace since the third quarter of 2020, as China grappled with power shortages, supply bottlenecks and sporadic COVID-19 outbreaks as well as rising jitters over the property sector.

Chinese blue chips were down 1.53% and the Hong Kong benchmark lost 0.56%, although most of the falls came right after the bell, prior to the release of the data.

"In response to the ugly growth numbers we expect in the coming months, we think policymakers will take more steps to shore up growth," said Louis Kuijs, head of Asia economics, Oxford Economics.

"We think the electricity shortages and production cuts will become less of a problem later in Q4. In line with our expectation, senior policymakers have started to stress growth and we expect them to start calling for the pursuit of climate targets on a more measured timeline."

The weaker-than-expected data weighed on regional benchmarks. MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.2%, while Japan's Nikkei lost 0.3%. U.S. stock futures, the S&P 500 e-minis , were steady.

The Asian declines come after stocks globally finished last week in a bullish mood posting their best day in five months on Friday as strong U.S. corporate earnings reports fuelled optimism about the economy, although firm oil prices kept inflation risks alive and lifted government bond yields.

Investors, meanwhile, continue to fret over inflation, driven by a reopening from COVID-19 and supply chain issues, said Shane Oliver, chief economist at AMP, pointing as an example to New Zealand, which on Monday reported a 2.2% rise in its consumer price index in the third quarter, the fastest pace in over a decade.

"But in the last two weeks share markets have been shrugging off most things" he added.

Analysts at CBA said as inflation pressure builds, they expect U.S. rates to rise, supporting the U.S. dollar which "has further upside on our view".

The yield on benchmark 10-year Treasury notes rose as high as 1.5930% on Monday, heading back towards the four-month high of 1.6310% hit early Tuesday, before a wobble later in the week.

The pound could gain on the dollar this week as "UK economic and inflation dynamics support the upward shift to the UK interest rates", the CBA analysts added.

In early trading on Monday, most currencies were quiet. The greenback was little changed against a basket its peers at 93.992, off its one-year high of 94.563 hit last Monday, while the yen hovered near its almost three-year low against the dollar.

U.S. crude was last up 1.28% at $83.33 a barrel, while Brent crude was last 0.85% higher at $85.58 per barrel.

Gold was last up 0.14% at $1,769.60 an ounce, after falling 1.5% on Friday on higher U.S. bond yields and a rise in U.S. retail sales.

Bitcoin was within sight of its all-time high, sitting at $62,000 and not far from April's record of $64,895, having gained last week on hopes that U.S. regulators would allow a futures-based exchange-traded fund.

Reuters

 

 

 

Talks with IMF moving forward positively: Finance Division

Rebutting the claim that talks with IMF have stalled, the Finance Division issued a statement saying the negotiations are moving forward.

Weekly Market Roundup

October 17, 2021 (MLN): Following four weeks of negative close, the benchmark KSE-100 index closed this week in green as it gained 344 points (0.77%) over last Friday to settle at 44,821 points.

During the early part of the week, investors resorted to panic selling mainly on the decision on waiving off the 10-Year tax holiday on refineries along with the hike in electricity prices by Rs1.68/unit. Furthermore, lack of clarity on the continuation of the IMF package as well as delay in the process to appoint a new Director-General of the ISI (DG ISI) also caused the KSE100 index to mark an intra-week low of 43,042 index level.

However, with Finance Minister assuring that the government would soon address concerns of the global lender and resume the IMF’s EFF, as well as PM’s statement allaying any rumours of a military-political divide, and the likelihood of civil-military leadership reaching consensus over the appointment of new ISI chief, the KSE-100 index posted two swift back-to-back bull runs, a report by Arif Habib Limited highlighted.

From a sector-specific lens, Commercial Banks emerged as the outperformers during the week amid the increased likelihood of further rate hikes in the upcoming MPS, adding 393 points to the index during the week, followed by Oil & Gas Exploration Companies (136 pts), Cement (98 pts), Fertilizer (90 pts) and Pharmaceuticals (28 pts).

The positive contribution from Cement is attributable likely hike in Cement prices of PKR25-PKR30/bag in the midst of historical high international coal prices.

The sectors that contributed negatively included Technology & Communication (-342 pts), Food & Personal Care Products (-50 pts), Automobile Assembler (-29 pts), and Tobacco (-27 pts).

Scrip-wise major gainers were HBL (153 pts), PPL (87 pts), UBL (67 pts), LUCK (59 pts) and OGDC (42 pts) Whereas major laggards were TRG (-260 pts), SYS (-70 pts) and PAKT (-27 pts).

Meanwhile, the KSE All Share Market Cap increased by a Rs8.66billion or 0.11% over the week, being recorded at Rs7.79trillion as compared to a Market Cap of Rs7.78tr recorded last week.

Flow-wise, foreign investors remained net sellers during the week with an outflow of $13.3mn against an outflow of $3.7mn last week. The major selling was done by Foreign Corporates amounting to a net $35.38mn. Sector-wise, major selling was witnessed in Fertilizer Sectors ($12.1mn), Commercial Banks ($7.8mn) and Cement ($3.11mn)

On the local side, major buying was reported by Insurance Companies ($12.2mn) followed by Mutual Funds ($3.4mn), and Other Organizations ($2.53mn). Other significant transactions included $3.35mn and $3.27mn worth of stocks sold by local Companies and Individuals respectively.

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