Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi on Monday said he expects oil demand to pick up in the second half of this year while supply decreases, in a sign that the kingdom’s strategy of defending market share is working.
The comment indicates Saudi Arabia is likely to propose not to change output policy at producer group OPEC’s meeting on Friday, although Naimi declined to speak directly on the issue.
“The answer is yes,” al-Naimi said in his first public comment upon arrival in Vienna, where the meeting is scheduled to take place, when asked whether the strategy of defending market share through higher supplies and lower oil prices was working.
“Demand is picking up. Good. Supply is slowing, right? That is a fact,” he told reporters. “You can see that I’m not stressed, I’m happy.”
Naimi was the key architect of OPEC’s decision at its last meeting in November last year not to cut crude production despite a growing global glut, exacerbated by a boom in US shale oil.
Instead, OPEC kingpin Saudi Arabia raised production to win back market share and depress the output of higher-cost producers through lower oil prices, which fell from as much as US$115 in June last year to as low as US$46 in January.
However, prices have recovered in recent weeks to between US$60 and US$65 per barrel on the possibility of a major slowdown in US oil output and signs of stronger global demand.
Al-Naimi said it would take time for the oil markets — still heavily oversupplied — to rebalance.
“I don’t have a crystal ball, but it is [going] in the right direction,” he said.
He added that he was not concerned by prospects of an increase in Iraqi or Iranian supplies later in the year.
He said he doubted that millions of barrels of oil stored in recent months by traders and oil companies would be offered anew in the market, thus leading to a fresh drop in prices.
He said one reason why that would not happen was the narrowing contango — a market structure in which future prices are higher than current prices, encouraging the storage of oil for resale at a profit in the future. The opposite structure, backwardation, has current prices higher than future prices.
“This is not a good time to sell the surplus. So they [traders] have to keep it, and as the contango goes down and they see the backwardation coming forward they will hang on to it. They are not going to dump it on the market,” al-Naimi said.
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
Rick Cassidy, the chairman of Taiwan Semiconductor Manufacturing Co's (TSMC, 台積電) US subsidiary, TSMC Arizona Corp, plans to retire, but the company has yet to name a successor. After Cassidy made his intention to retire known, TSMC Arizona held a special general meeting and approved a resolution that Cassidy would not continue as chairman and would not remain as a director, TSMC said in a statement filed with the Taiwan Stock Exchange last night. The meeting also approved a plan to appoint TSMC Arizona president Rose Castanares as a director, the company said, adding that Cassidy has been named as an advisor
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The
RSS