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Oil prices tumble more than $4 ahead of potential large US rate hike

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  • Oil prices have tumbled in past two weeks on recession concerns.
  • Investors focused on the prospect of large US rate hike later this month.
  • Both contracts hit lows today which were below February 23 close.

LONDON: Oil prices fell more than $4 on Thursday as investors focused on the prospect of a large US rate hike later this month that could stem inflation but at the same time hit oil demand.

Brent crude futures for September fell by $4.05 to $95.52 a barrel by 1356 GMT and were on track to finish the third session in a row below $100.

US West Texas Intermediate crude for August delivery was at $91.63 a barrel, down $4.67.

Both contracts hit lows on Thursday which were below the February 23 close, the day before Russia invaded Ukraine, with Brent reaching its lowest since February 21.

Oil prices have tumbled in the past two weeks on recession concerns despite a drop in crude and refined products exports from Russia amid Western sanctions and supply disruption in Libya. 

“Clearly, the focus is now on the demand side of the oil equation. Yesterday’s weekly EIA (US Energy Information Administration) report showed sizeable builds in product inventories,” Tamas Varga, an analyst at PVM Oil Associates, said.

“Collateral damage of growing fears of inflation is the strong dollar, which is also bearish for oil prices. Interestingly, physical markets are still strong but the change in sentiment of financial investors is currently the dominant driving force.”

The US Federal Reserve is seen ramping up its battle with 40-year high inflation with a supersized 100 basis points rate hike this month after a grim inflation report showed price pressures accelerating. The Fed policy meeting is scheduled for July 26-27. 

The Fed rate hike is expected to follow a similar surprise move by the Bank of Canada on Wednesday.

Investors also flocked to the dollar, often seen as a safe haven asset. The dollar index hit a 20-year high on Wednesday, which makes oil purchases more expensive for non-US buyers.

In Europe, signals were also bearish for demand with the European Commission cutting its economic growth forecast and raising the expected inflation rate to 7.6%. 

Worries of COVID-19 curbs in multiple Chinese cities to rein in new cases of a highly infectious subvariant have also kept a lid on oil prices.

China’s daily crude oil imports in June sank to their lowest since July 2018, as refiners anticipated lockdown measures to curb demand, customs data showed on Wednesday.

Data from the US Energy Information Administration also point to slackening demand, with the product supplied slumping to 18.7 million barrels per day, the lowest since June 2021. Crude inventories rose, bolstered by another big release from strategic reserves. 

US President Joe Biden will on Friday fly to Saudi Arabia, where he will attend a summit of Gulf allies and call for them to pump more oil.

However, spare capacity at the Organization of the Petroleum Exporting Countries is running low, with most of the producers pumping at maximum capacity, and it is unclear how much extra Saudi Arabia can bring into the market quickly. 

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IMF board to meet on Jan 11 for Pakistan’s first review approval

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  • Pakistan’s case not included in board meeting agenda for Dec 1-15. 
  • Ongoing SBA programme is going to expire on April 14, 2024.
  • Pakistan, IMF reached agreement on first review last month.

The International Monetary Fund’s Executive Board will take up Pakistan’s first review on January 11 next year for approval that will unlock $700 million under the standby arrangement (SBA), Bloomberg quoted the lender’s spokesperson as saying on Friday.

Last month, Pakistan reached a staff-level agreement with the IMF under the $3 billion SBA and is awaiting the board’s approval to receive a second tranche.

Earlier this week, The News had reported that Pakistan’s first review for approval was not included in the IMF’s Executive Board meeting agenda for the 1-15 December schedule

The publication reported that the IMF did not firm up its exact schedule because the Fund’s team was busy securing re-confirmation from all multilateral and bilateral creditors to meet the financing requirements of $24.9 billion for the current fiscal year.

This delay surfaced in discussions among the policymakers that the IMF might kick-start parleys on the second review probably after the general elections and takeover by the elected government.

The IMF programme was initially scheduled to kick-start parleys for a second review from Feb 3, 2024, but if the elections were scheduled to be held on February 8, 2024, then the possibility of holding talks might be done in the last week of Feb or early March 2024.

The ongoing SBA programme is going to expire on April 14, 2024.

A day earlier, IMF Executive Director Bahador Bijani noted an overall improvement in the economic situation, saying, the “Pakistani authorities have delivered”.

He made these remarks at an event hosted by Pakistan’s ambassador to the US in honour of friends of Pakistan from International Financial Institutions including IMF, International Finance Corporation (IFC), World Bank (WB), and Multilateral Investment Guarantee Agency (MIGA), at Pakistan House in Washington.

“I think the future for Pakistan is very bright. Pakistan is not just any country. It’s one of the most important countries in the region and in the world. Pakistanis deserve much more,” the IMF executive director was quoted as saying in an official statement.

Nathan Porter, IMF Mission Chief to Pakistan, also expressed satisfaction over the recently concluded staff-level agreement. He said that the actions and policies of the current government reflected its commitment to steer the country towards stabilisation.

Pakistan is reeling from Asia’s fastest inflation, has about $1 billion in dollar-denominated debt due next year and is scheduled to hold elections scheduled in February.

Interim Finance Minister Shamshad Akhtar said after the staff-level deal in November that the country may seek an additional loan from the IMF, describing the economy as “still fragile.”

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PSX hits new milestone as KSE-100 surges past 66,000 mark

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KARACHI: Bulls maintained their grip on the Pakistan Stock Exchange (PSX) as the benchmark index shot past the 66,000 mark on Friday by gaining over 1,000 points. 

According to the PSX website, the KSE-100 index gained 1,302.45 points or 2.01% to reach 66,020.52 points at 11:39am during the intraday trading.

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Raza Jafri, who is the head of equities at Karachi-based Intermarket Securities, said that the banks and energy sector lead the rally at the bourse as cheap valuations and a reasonably settled environment help flows remain strong as foreign and local buys continue to invest.

“The MPC (Monetary Policy Meeting) next week should set the tone for near-term trading. While unchanged interest rates are widely expected, investors will look for clues in the text of the monetary policy statement to gauge how much interest rates can come down by next year,” he added. 

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Pakistani authorities have ‘delivered’ on economic front, says top IMF official

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  • IMF official says Pakistan ‘important’ country in the world.
  • “Our country is destined to succeed,” says Masood Khan.
  • Nathan Porter hails actions and policies of Pakistani govt. 

WASHINGTON: Bahador Bijani, an Executive Director of the International Monetary Fund (IMF), has noted an overall improvement in the economic situation, saying, the “Pakistani authorities have delivered”.

He made these remarks at an event hosted by Pakistan’s ambassador to the US in honour of friends of Pakistan from International Financial Institutions including IMF, International Finance Corporation (IFC), World Bank (WB), and Multilateral Investment Guarantee Agency (MIGA), at Pakistan House in Washington.

“I think the future for Pakistan is very bright. Pakistan is not just any country. It’s one of the most important countries in the region and in the world. Pakistanis deserve much more,” the IMF executive director was quoted as saying in an official statement.

The meeting took place as Islamabad awaits the IMF board’s meeting to approve a staff-level agreement on the first review of a $3 billion bailout, which will unlock $700 million in funding for the country.

Addressing the event, Ambassador Masood Khan observed that the past year was difficult for Pakistan. “We have passed through a wrenching transition and we are moving toward a new phase of stability,” he added.

“Have faith in Pakistan. Our country is destined to succeed,” he said.

“Our confidence stems from the people of Pakistan. We have a growing middle class and our human capital is increasing at a very fast pace,” he added.

Addressing a gathering of over 40 guests from the IFIs, the ambassador said that we were grateful to IFIs for their steadfast support in navigating through a difficult economic period.

Nathan Porter, IMF Mission Chief to Pakistan, speaking on the occasion, expressed satisfaction over the recently concluded staff-level agreement. He said that the actions and policies of the current government reflected its commitment to steer the country towards stabilisation.

“With that base, hopefully, we can build on and be able to move forward to reforms to build a stronger, prosperous and inclusive Pakistan,” he said.

He also appreciated the cooperation and the policies pursued by the State Bank of Pakistan for ensuring fiscal stability in the country.

Athanasios Arvanitis, Deputy Director Middle East and Central Asia Department IMF, also spoke on the occasion and expressed the hope that the elections in Pakistan would usher into a new beginning of undertaking a reform process that the country needed to make progress and address some of its structural issues.

Thanking them for their strong support, Ambassador Khan observed that the digitisation of Pakistan’s economy was creating new opportunities in the country for its youth and professionals taking the lead role in steering the country towards a bright future.

Lauding the professional achievements of Pakistanis working in the IFIs, the ambassador observed that Pakistani professionals have proved their mettle and have made the entire nation proud of their accomplishments.

“We are a nation of talented people. If you can make it, Pakistan will also make it,” observed the ambassador.

Syed Ali Abbas, Advisor Mission Chief UK, European Department IMF, in his remarks, expressed the hope that with the successful completion of the electoral process in Pakistan, the country would move towards a long-term and more durable approach which would change the trajectory of Pakistan.

Aftab Qureshi from the World Bank and Sidra Rehman from the IMF also spoke on the occasion and assured their continued cooperation.

The ambassador thanked the members of the IFIs and said that the country looked forward to working with its development partners.

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