Categories IPO, Markets, Research Summary

China situation spurs more cuts as oil prices fall further

On Jan. 28, Monday, oil prices slipped following indications that crude production might rise further after US energy companies added rigs for the first time since 2019 began.

World’s second largest oil user China posted more signs of economic slowdown furthered the price fall.

International Brent crude oil futures slipped 0.2% to $61.50 a barrel on Monday morning, while US crude oil futures fell 0.5% to $53.43 per barrel.

In Baker Hughes energy services firm’s weekly report last Friday, US energy firms raised the number of oil exploration rigs by ten more to 862. This was a further indication of an output spike.

Till the year began, a boom in China drove oil consumption. The start of year saw it at over 100 million bpd.

It was only a few months ago that the Saudi Arabia-led Organization of the Petroleum Exporting Countries (OPEC) introduced supply cuts to tighten markets and regulate prices.

GRAVE SITUATION FOR CHINA AFTER HYUNDAI CUTS JOBS

Last week, Hyundai Motor announced that its Chinese JV will accept voluntary retirements following a sudden slump in car sales.

The world’s biggest car market recently saw the phasing out of tax cuts on small cars, along with tightening tariffs due to the trade stand-off with the United States.

Earlier in January, a Reuters poll suggested that China’s economy might slow to 6.3% in 2019 due to weakening domestic demand. The US tariffs added to the Asian countries woes. This expected growth of the Chinese economy would be the lowest in 2018. The economy was touted to grow 6.6% in 2018, while it grew 6.9% in 2017.

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The bleak Chinese economy outlook has lead to automakers like Nissan to cut production, and other such as Suzuki Motor to exit from the country.

Along with this, the diplomatic row between Seoul and Beijing further added to Hyundai’s problems.

China growth slump pulls down oil prices

Hyundai, which worked with Kia Motors, was the third largest automaker in the country till 2016. In the recent fourth quarter, Hyundai’s China sales slumped 23%.

An official company statement read, “Hyundai Motor is reviewing various optimization plans to enhance facility efficiency around the Chinese New Year holidays.”

Chinese fintech publication Caixin also reported that Hyundai’s local JV expects 1,500 spare working roles in the first quarter. According to reports, the company had told the staff to choose to stay or leave.

However, there has been no official statement from Hyundai regarding any possible layoffs or voluntary retirements.

 

 

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