Saudi heavy crude price to Asia may hit three-year high
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World No. 1 oil exporter Saudi Arabia could raise prices for the heavy crude it sells to Asia in August to the highest in more than three years, trade sources said.
The move would come after refiner profits on churning out fuel oil from heavy crude hit record highs, with state oil giant Saudi Aramco cutting heavy crude production as part of a drive led by the Organization of the Petroleum Exporting Countries, or Opec, to rein in global output.
Saudi Aramco may lift the official selling price for Arab heavy crude to Asia by 20 cents a barrel to $1.65 below the average of Oman and Dubai quotes in August, its narrowest discount since December 2013, according to four Asian crude buyers.
A hike in prices for Saudi heavy crude could buoy demand for such oil from other Middle Eastern producers, as well as supplies from Russia, Angola and the Americas.Reuters
A puzzling cycle in emerging markets
History suggests that when the US Federal Reserve tightens monetary policy, dollars tend to fly out of emerging markets mainly because these markets begin to lose sheen and a tighter US monetary policy could dampen growth elsewhere.
However, the recent episode of policy tightening in the US has done nothing to slow down the flow of dollars into emerging markets. Ironically, the flows are into debt of emerging market economies.
The Reserve Bank of India (RBI) has indeed pointed out this puzzling flow of dollars into emerging market debt. “In the meanwhile, portfolio flows to emerging markets in 2017 show a tilt towards the debt component which is a little puzzling in the context of the US interest rate cycle,” states RBI’s financial stability report.
One reason could be that despite interest rate hikes, the differential between dollar bonds and some emerging market bonds like India and Indonesia is still high.
Further, unlike past swathes of time when US policy tightening and slowing emerging market economies coincided to make it easy for foreign investors to redirect their money to dollar assets, this time fundamentals of emerging market economies are improving, with growth inching up and inflation being under control.
Allocation to India by Asia funds dips to 13.3% in May
Allocation to India by Asia ex-Japan funds has come down to 13.3% in May from 13.6% in April, according to Kotak Institutional Equities’ latest foreign fund-flow tracker.
Fund allocation to India by GEM (global emerging market) funds remained around 11%.
“Allocation by Asia ex-Japan non-ETF (exchange-traded funds) funds to India came down to 13.9% from 14.2% in the previous month,” said Kotak, adding that allocation to India by GEM ETF funds declined to 9.9% from 10% in April.
Allocations to India and China constitute more than one-third of the average Asia ex-Japan fund portfolio.