- Malaysian Minister Sees No Need for More Currency Measures
Malaysia’s economic growth should provide ammunition for the currency to strengthen and measures to curb volatility in the ringgit are currently sufficient, according to one of the nation’s top finance officials.
There’s no need to impose further steps to reduce movements in the ringgit and the gap between prices quoted offshore and in domestic markets is now “quite stable,” Second Finance Minister Johari Abdul Ghani said in an interview with Bloomberg Television’s Haslinda Amin on Thursday.
Bank Negara Malaysia warned foreign banks late last year against using offshore non-deliverable forwards to bet against the ringgit and vowed to limit speculation. Some investors fled in the wake of the crackdown and global funds pulled more than 35 billion ringgit ($7.9 billion) from Malaysian sovereign bonds in the four months through February, the longest stretch of outflows since 2014.
“Our measures have worked,” Johari said in Cebu, Philippines at a gathering of Southeast Asian finance officials. He said there are misconceptions that authorities are restricting money flows and reiterated that Malaysia is “very committed to free flow of capital, we are very committed in terms of not engaging in pegging or currency controls.”
Asked if it’s necessary to impose further currency measures, he said, “No need, no need. I think we’re happy at this moment.”
The gap between the onshore ringgit prices and 1-month non-deliverable forwards has narrowed since reaching a record in November.
Malaysia’s exports in February expanded at the fastest pace in seven years, helped by a surge in demand for electrical and electronic products. The economy grew 4.2 percent last year and is forecast by the central bank to expand 4.3 percent to 4.8 percent in 2017.
“We’re promoting our exports, we’re going into markets that are non-traditional for us,” Johari said. “If things work where they are today and if our GDP continues to grow, I can only see strengthening of the ringgit.”
Malaysia’s finance minister is Prime Minister Najib Razak and Johari assists him as second finance minister.
The country would be “comfortable” with oil prices at around $55 a barrel and a level higher than that would provide more economic stimulation and facilitate development spending, Johari said. Malaysia is Asia’s only major net oil exporter.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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