Latest news with #Opec+
Free Malaysia Today
15 minutes ago
- Business
- Free Malaysia Today
European shares pressured by Trump's new tariff threats
Most regional bourses were trading lower, with Germany's DAX down 0.6%. (EPA Images pic) FRANKFURT : European shares retreated today after rounding off monthly gains in May, as US President Donald Trump's new tariff plans threatened to rekindle global trade tensions. The continent-wide STOXX 600 was down 0.5% as of 7.59am, after recording about a 4% gain in May. Late on Friday, Trump said he planned to increase tariffs on imported steel and aluminum to 50% from 25%, to which the EU said it was prepared to retaliate. Steel companies such as ArcelorMittal and Aperam were down about 1% each. Automakers saw the biggest impact, with Milan-listed Stellantis down 3%. Mercedes-Benz, BMW and Volkswagen fell between 1.4% and 2%. The sector dipped 1.6%. Luxury stocks, among Europe's exports, also dipped with the broader gauge down 1.6%. An index measuring volatility in the market was up 1.7 points at 20.88, its highest in a week. 'The latest announcement renews tensions… it's also an indication that the trade negotiations may not be going toward the right direction,' said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. 'The trade tensions have a very direct impact on the luxury sales, because for the biggest exports of the major European companies, America is one of the biggest markets,' Ozkardeskaya said. Most regional bourses were trading lower, with Germany's DAX down 0.6%. However, oil stocks tracked prices of the commodity sharply higher, after producer group Opec+ decided to increase output in July by an amount which is less than feared by many. An index tracking defence companies also ticked higher as tensions between Russia and Ukraine flared again over the weekend, but representatives were due to meet today. Among other stocks, Sanofi agreed to buy US-based Blueprint Medicines Corporation, paying US$129 per share, representing an equity value of approximately US$9.1 billion. Shares in the French pharma group fell 1.2%. Elsewhere, stocks in Poland fell 1.4%, after nationalist opposition candidate Karol Nawrocki won the second round of the country's presidential election. Ozkardeskaya said that Poland's election outcome will not have an impact on its position within the EU. Hensoldt topped the STOXX with a 7.2% gain after JPMorgan upgraded the defence company's stock to 'overweight' from 'underweight'. This week, the spotlight will be on the European Central Bank's (ECB) interest rate decision on Thursday, and a crucial set of US jobs data on Friday. Comments from Federal Reserve chair Jerome Powell and ECB president Christine Lagarde will be on tap, alongside a slew of economic data out of the trade bloc.
The Star
8 hours ago
- Business
- The Star
Oil output increase a potential bane
PETALING JAYA: Corporate Malaysia's fiscal position may come under pressure if the Organisation of the Petroleum Exporting Countries and its allies (Opec+) decide to further open the taps to boost oil output. Although Opec+ has agreed for now to keep its output policy unchanged, analysts opined that another production increase of 411,000 barrels per day in July is likely, matching the additional output in May and June. If the increase in oil output further gains momentum this year, it could put a strain on Malaysia's oil and gas (O&G) export earnings as the country is a net exporter of O&G, which could in turn impact its fiscal position and fiscal consolidation initiatives. The lower oil prices coupled with US tariffs and global recessionary risks are seen as hurdles in Malaysia's fiscal consolidation landscape. The government's oil price assumption for Budget 2025, announced last October, was set at US$75 to US$80 per barrel. As at press time, the international benchmark Brent crude was down by 0.35% to US$61.88 per barrel. Fiscal consolidation refers to government policies aimed at reducing deficits and debt accumulation. It involves measures to balance government revenue with expenditure, minimising deficits, controlling public debt, and promoting sustainable economic growth. Economist Anthony Dass told StarBiz that an increase in oil supply by Opec+ can add downward pressure on global crude oil prices. He said Malaysia, as a net exporter, would experience a direct impact from a loss of revenue. 'While the exact scale of the Opec+ increase is still under discussion, potentially around 411,000 barrels per day in July, with more unwinding of cuts by November, any significant addition to supply, especially if it outstrips demand growth, will negatively impact Malaysia's O&G export earnings. 'Looking at the petroleum-related revenue, for every US$10 per barrel drop in oil prices, it is estimated to reduce federal revenue by RM2bil to RM3bil. 'Should global recession drag Brent crude down to US$65 to US$70 per barrel versus (the) US$80 to US$85 baseline, there would be a drop in petroleum-related revenue,' said Dass, who is the senior economic adviser at KSI Strategic Institute for Asia Pacific and a member of the SME Association of Malaysia's National Council. The government aims to reduce its fiscal deficit from 5% of gross domestic product (GDP) in 2023 to 4.3% in 2024 and 3.8% in 2025. Dass is projecting Brent crude to hover at US$60 to US$65 per barrel this year. HSBC Asean economist Yun Liu said the current oil price is lower than the government's oil price assumption of US$75 to US$80 per barrel as announced in Budget 2025 last October. She said this may raise questions on energy-related revenue. 'But there are still a lot of moving parts of the fiscal consolidation plan. For example, we are still waiting for clarity on the sales and service tax (SST) expansion plan. 'It has reportedly been delayed for a month, so eyes are on any concrete plans to implement it. The other elephant in the room is the RON95 subsidy rationalisation. 'When and how it will be implemented will impact this year's fiscal plan,' Liu said. HSBC chief economist for Australia, New Zealand and global commodities Paul Bloxham said he expects the oil price to be on a downward trajectory, with a forecast average of US$68.50 a barrel in 2025 and US$65 a barrel in 2026. That said, he said he sees the upcoming Opec+ meetings as a downside risk to these forecasts, with a high chance that another accelerated supply hike will be announced for July. 'A key driving force for these decisions is expected to be lack of compliance with current quotas by some of the smaller Opec+ producing countries. 'The Opec+ members have also been encouraged by recent announced cuts to capital expenditure by US shale producers, and are expected to continue to aim to gain market share by putting downward pressure on prices. 'There are limited upside risks to the demand for oil, with the key challenge being the global economic slowdown that is underway due to the trade policy shock. 'The upside risks are mostly related to possible supply shocks. These include potential disruption to supply from Venezuela and Libya, and risks of a rebound in supply from Iran, given the risk that an Iran-US nuclear deal does not arrive,' Bloxham noted. Juwai IQI global chief economist Shan Saeed said with Opec+ increasing output, global oil prices might face downward pressure in the short run and recover sooner than expected. He said Malaysia relies significantly on O&G earnings for its fiscal plans and can move smartly to generate revenues from other sources. Increasing the GDP size is a proven strategy to enhance the revenue base and consolidate the fiscal position to bolster the balance sheet of the government, he said. 'We expect Brent crude oil prices to move into two phases in the short and long run. In the short run, we expect the price to be around US$64 to US$67 per barrel. 'However, in the long run it is expected to trade at US$77 to US$83 a barrel based on a few factors. 'They include geopolitical risks, US dollar debasement, supply disruption from shale gas myth, and Opec+ production cuts,' Shan noted. US dollar debasement means the depreciation of the dollar due to the Federal Reserve (Fed) cutting interest rates. Shan anticipates the Fed will start cutting rates from July of this year onwards. He said the greenback has already depreciated 8% year-to-date, and foresees it to further depreciate upon the Fed cutting rates. Malaysia, according to Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid, has been recording trade deficits in crude oil for the past three years. Last year, he said the trade deficits stood at RM37.1bil on the back of total exports and imports of RM26.1bil and RM63.2bil respectively. 'On that note, the contribution from O&G-related revenue to the government is going to be increasingly challenging. Not to mention that Petroliam Nasional Bhd may also need to allocate more capital expenditure for developing the renewable energy space and its overseas investments. 'In a nutshell, the government's revenue stream is expected to be more challenging, leading to more discussion to have other revenue streams to ensure the sustainability of the government finances,' he said, adding that he is projecting on the average for Brent crude to be at US$67 to US$68 per barrel for 2025. Mohd Afzanizam said on the whole the government has done well in managing its fiscal position. The first quarter of financial year 2025 (1Q25) fiscal deficits have been narrowed to 4.5% of GDP from 5.7% in the same period last year, he said. The upward revision in the service tax from 6% to 8% on March 1, 2024, has led to a 30.3% growth in SST collection in 1Q25 and the diesel subsidies rationalisation on June 10, 2024, has resulted in the decline of subsidies and social assistance expenditure from RM16bil in 1Q24 to RM12.9bil in 1Q25, he said. 'I suppose the fiscal consolidation momentum needs to be maintained and the communication will always need to be improved in general in order to get the total buy-in from the masses. 'It's also about the mechanism where it should be easily implemented where the general public can see the positive outcome almost immediately,' he said. OCBC Asean economist Jonathan Ng said the bank has revised its 2025 oil price forecasts downward, with West Texas Intermediate and Brent crude projected to average US$63 per barrel and US$67 per barrel respectively – about US$13 per barrel lower than the average oil prices in 2024. He said the reasons for the downward revision are predicated on slowing global economic growth amid uncertainties in global trade policies and higher-than-expected oil supplies from Opec+ countries. As to the positive growth drivers for the oil market this year in the current environment, Ng said an escalation in geopolitical tensions in Eastern Europe (for example, the Russia-Ukraine war) and the Middle East could lead to the implementation of further sanctions on the Russian and Iranian energy sectors. As a result, he said the supply disruptions are likely to support higher oil prices in the short-term, given the reconfiguration of trade flows. To strengthen the government's fiscal position in the short term Dass said, among others, there is a need to accelerate targeted cash aid for vulnerable groups and micro, small, and medium enterprises, fast-track high-multiplier development projects (especially in digital, green, and transport), and improve targeting of fuel subsidies to reduce fiscal leakage. Over the medium term, he said the government needs to continue fiscal base broadening: e-invoicing and subsidy rationalisation, maintain fiscal discipline to avoid rating downgrades (currently A–/A3 with stable outlook), and reaffirm fiscal consolidation roadmap and medium-term fiscal framework. To boost Malaysia's revenue and have a better grip on its fiscal consolidation, HSBC's Liu said the country should consider raising the tax coffers. 'Its tax receipts amounted to around 12% of GDP, lower than those of peers, so there's still the potential to raise the tax coffers. 'In the absence of a reintroduction of the goods and services tax, the tax tweaks and measures are necessary to boost fiscal coffers,' she said.
Business Times
9 hours ago
- Business
- Business Times
Oil advances as Opec+ supply boost vies with geopolitical risk
[SINGAPORE] Oil gained as a third straight production increase by the Organization of the Petroleum Exporting Countries and its allies (Opec+) vied with heightened geopolitical risk in Ukraine and Iran. Brent crude for August rose as much as 2.1 per cent to US$64.09 a barrel, after losing 2.2 per cent last week, while West Texas Intermediate was below US$62. The Opec+ agreed on Saturday to add 411,000 barrels a day of supply in July, according to a statement. The decision defied reports late last week that the group was considering accelerating the return of shuttered-in production by an even larger amount, which had damped prices on Friday (May 30). The quota boost matched those scheduled for May and June, and was in line with expectations in a Bloomberg survey of 32 traders and analysts. Escalating geopolitical concerns helped support prices. Ukraine staged a dramatic series of strikes across Russia, deploying drones hidden in trucks deep inside the country to hit strategic airfields as far away as eastern Siberia. Meanwhile, Moscow launched one of its longest drone and missile attacks against Kyiv, escalating tensions ahead of crucial peace talks this week. Iran manufactured a record volume of uranium enriched just below the levels needed for nuclear weapons, The International Atomic Energy Agency said. The Islamic Republic criticised the report, which complicates efforts to negotiate a peaceful resolution to international concerns over the Islamic Republic's atomic ambitions. Crude remains almost 15 per cent lower this year, pressured by an ongoing trade war between the US and China, as well as the abandoning by Opec+ of their former strategy of defending higher prices by curbing output. Opec+ officials said the quota boost reflected Saudi Arabia's desire to punish over-producing members such as Kazakhstan and Iraq. Some members – including Russia, Algeria and Oman – had wanted a pause in the increases, delegates said. The group next meets on Jul 6 to discuss output levels for August. BLOOMBERG
The Star
2 days ago
- Business
- The Star
Oil settles down on possible Opec+ output hike
Brent crude futures settled down 25 cents, or 0.39%, at US$63.90 a barrel. US West Texas Intermediate crude finished down 15 cents, or 0.25%, at US$60.79 a barrel. HOUSTON: US crude futures fell on Friday as traders expected Opec+ would decide on Saturday to boost oil output for July beyond previous forecasts. Brent crude futures settled down 25 cents, or 0.39%, at US$63.90 a barrel. US West Texas Intermediate crude finished down 15 cents, or 0.25%, at US$60.79 a barrel, having earlier dropped more than US$1 a barrel.
Business Times
2 days ago
- Business
- Business Times
Oil finishes down on possible OPEC+ output hike
[HOUSTON] US crude futures fell on Friday (May 30) as traders expected Opec+ would decide on Saturday to boost oil output for July beyond previous forecasts. Brent crude futures settled down 25 cents, or 0.39 per cent, at US$63.90 a barrel. US West Texas Intermediate crude finished down 15 cents, or 0.25 per cent, at US$60.79 a barrel, having earlier dropped more than US$1 a barrel. The Brent July futures contract is due to expire on Friday. The more liquid August contract was down 71 cents, or 1.12 per cent, at US$62.64 a barrel. At these levels, the front-month benchmark contracts were headed for weekly losses over 1 per cent. Prices dipped into negative territory after Reuters reported that Opec+ may discuss an increase in July output larger than the 411,000 barrels per day (bpd) rise that the group decided on for May and June. 'What Opec+ is planning doesn't look particularly supportive for the oil market,' said Matt Smith, Kpler's lead analyst for the Americas. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The potential Opec+ output hike comes as the global surplus has widened to 2.2 million bpd, likely necessitating a price adjustment to prompt a supply-side response and restore balance, said JPMorgan analysts in a note, adding that they expected prices to remain within the current range before easing into the high US$50s by year-end. Phil Flynn, a senior analyst with Price Futures Group, said an online post on Truth Social by US President Donald Trump that seemed to threaten more changes in tariff levels for Chinese imports also put pressure on crude prices. 'Trump's Truth Social message on China failing to observe a truce on tariffs also combined with the Reuters headline to push prices down,' Flynn said. Trump's tariffs were expected to remain in effect after a federal appeals court temporarily reinstated them on Thursday, reversing a trade court's decision a day earlier to put an immediate block on the sweeping duties. US energy firms this week cut the number of oil and natural gas rigs operating for a fifth week in a row to the lowest since November 2021, energy services firm Baker Hughes said in its closely followed report on Friday. It was the first time since September 2023 that the number of rigs declined for five straight weeks. Baker Hughes said this week's decline put the total count down by 37 rigs, or 6 per cent, from this time last year. Oil rigs fell by four to 461 this week, their lowest since November 2021, the company said. Gas rigs rose by one to 99. REUTERS
