MUMBAI/NEWDELHI: The Central Information Commission (CIC) has directedIndia’s stock market regulator to disclose all details related to the insider trading case involving Reliance Petroleum Ltd (RPL) in 2007, in a move that could have a bearing on not just the functioning of the Securities and Exchange Board of India (Sebi), but also the regulator’s independence.
The case in question relates to the merger of RPL with Reliance Industries Ltd (RIL) and the short sale of shares in the former by entities related to the latter ahead of that amalgamation. A short sale involves selling borrowed shares with plans to buy them back later at a lower price.
RIL and Sebi have been trying to settle the case through a so-called consent process, in which the individual or entity being investigated pays a fine and the regulator drops the case and also all charges of wrongdoing. A consent mechanism refers to a settlement of a case dealing with alleged infractions in securities laws without the individual or company involved either admitting or denying guilt.
According to various reports on the case, the entities that short-sold RPL shares may have made profits in excess of Rs.500 crore.
Sebi doesn’t disclose whether it is investigating a company for insider trading, and while it discloses the terms of consent when it settles cases, it also does not provide details.
On 6 November, following an appeal by Bangalore-based lawyer Arun Kumar Agrawal, chief information commissioner Satyananda Mishra passed an order directing Sebi to disclose details of investigations or the consent order proceedings in the case, along with the identity of the entities involved in the short sale of RPL shares. Sebi has till 16 November to provide this information.
CIC isIndia’s apex body monitoring the enforcement of the Right to Information (RTI) Act.
A senior Sebi official, who spoke on condition of anonymity, said the regulator is examining the order and working on its plan of action. A Sebi spokesperson did not comment on the matter.
Sebi has an option to move the high court, appealing against the CIC order, and Agrawal, the petitioner, said: “I am sure Sebi will appeal against the CIC order before the high court. I am yet to decide whether to file a caveat on this or not.”
Before filing an appeal against Sebi, Agrawal sought details of the case from the regulator through RTI applications. However, Sebi had refused to disclose any information stating that quasi-judicial proceedings were in progress and that the information sought was exempt under certain sections of the RTI Act. The regulator’s appointed appellate authority endorsed Sebi’s information officer’s decision.
Subsequently, the case moved to CIC.
An RIL spokesperson declined to comment on the order.
A Mumbai-based securities lawyer, who spoke on condition of anonymity, said that incidentally, Sebi came out with consent terms first in 2007. “Again in early 2009, the market regulator had issued an internal circular on standardization of the consent process,” this person said.
In May this year, the regulator finally brought out new norms streamlining the consent procedure.
CIC said Sebi’s argument that at the end of the quasi-judicial proceedings the charged entities may be found innocent, cannot be a reason to conceal the information from the public.
A former Sebi executive, who now practises law, said, “It is a good order that promotes transparency and I support this order.” He didn’t want to be identified.
The Mumbai-based securities lawyer said: “Out of three circulars (on consent order mechanism), only two are available in public domain. After this CIC order, Sebi should make the internal circular of 2009 public.”
Indeed, the order specifically comments on this: “…information relating to the issue of the circular in 2007 regarding the guidelines for the consent order mechanism cannot fall as such under any of the exemption provisions. Since the consent order mechanism constitutes a very important decision for settling disputes between regulated entities and the Sebi, it is all the more necessary that the background for the formulation of the parameters of the mechanism as contained in the circular of 2007 is made public.”
The Mumbai-based securities lawyer said it would be more interesting to see if Sebi discloses the information on the entities involved in the short sale of the shares. “The consent terms clearly state that Sebi will keep the material received by the parties during an investigation confidential and will not use that information against the company once the matter is settled through consent procedure,” he added.
The petitioner said he is sure Sebi won’t disclose names.
“I am very sure Sebi will do everything not to reveal the names of the 13 entities involved in this case of insider trading,” said Agrawal.
Sebi may not have to disclose the details of the case as directed by CIC in 10 days if it opts to file an appeal against the order in the high court.
The regulator, in 2008, had launched investigations into the matter and later initiated quasi-judicial proceedings in 2010. Back in 2007, RIL had sold 4.1% of its stake in RPL, but to prevent a slump in the RPL stock, the shares were sold first in the futures market and later in the spot market, covering the share sales in the futures market.
Sebi’s claim is that because the company was aware of the sale of equity shares and sold futures ahead of that, its actions amount to insider trading. Through the dealings,
RIL received revenue of Rs.4,023 crore and its profit from the transaction in the futures segment was Rs.513 crore.
RIL has approached Sebi twice to settle the case, offering to pay Rs.2 crore in the first instance and Rs.10 crore in the second instance.
A company can approach the regulator for a consent only when the final recommendations are made by the investigation officer. In case of RIL, Pradnya Saravade, a former executive director of Sebi had investigated the matter and submitted the report to Sebi in 2009. The report had stated RIL was involved in insider trading in 2007 while selling shares in erstwhile RPL.
The case is yet to be closed by Sebi.
“… The matter has been lying for several years now pending a final decision in the matter. Several entities have been identified by Sebi who were involved in the insider trading/short sale of shares of RPL in 2007… If, as a regulator, the Sebi took cognizance of allegations of any breach of law, rules or regulations by one or more entities for unlawful private gain, the information generated in the process of its investigation needs to be disclosed in the public domain. Such disclosure would keep the general public informed and educated about the risks they may confront in making investments in the market,” read the CIC order.
The commission, however, denied Agrawal’s appeal regarding information on the assets and liabilities of Sebi’s chairman. CIC argued that it was in the nature of personal information exempt under the RTI Act.
GOVT LETTER TO OMCs: WILL PAY R30,000 CRORE IN DUES
NEW DELHI: In what may come as an empty Diwali bonus for the bleeding oil marketing companies, the government has sent an assurance letter of compensation of Rs 30,000 crore to IOC, HPCL and BPCL.
This is roughly half of the total amount needed from the government to compensate oil marketing companies for selling diesel, kerosene and cooking gas cylinders below the market price during April-September period.
The assurance letter from the finance ministry has come just a day before the OMCs are to declare their second quarter results.
This would allow firms to adjust the subsidy amount in their books to lower the loss on account of under recoveries.
According to sources, the finance ministry is unlikely to release the actual money before January till the supplementary grant is provided.
Out of total Rs 30,000 crore, the share of Indian Oil Corporation stands at R16,094 crore, HPCL R6,600 crore and BPCL, R7,400 crore. The oil ministry has sought compensation to the tune of R1 lakh crore for the entire year.
“About R60,000 crore of under-recoveries during the current year are likely to be borne by the upstream companies (ONGC, OIL and GAIL), efforts will be made to persuade the ministry of finance to compensate the balance under-recoveries,” Moily said earlier.
D6 AUDIT: OIL MINISTRY HOPES RELIANCE, CAG WILL BURY THE HATCHET
NEW DELHI: The Ministry for Petroleum & Natural Gas finds itself caught between the devil and the deep sea on the issue of ‘performance audit’ for Reliance Industries Ltd-operated D6 block.
The tussle between the Comptroller & Auditor General of India (CAG) and the contractor (RIL) has left the Ministry hoping that the two will find a middle path so that the audit can be done without any hassle.
Simply put, performance audit in case of an exploration and production company will include all the technical aspects, reservoir management, as well as procurement.
For example, whether costs incurred for procurement of goods and services are determined through a transparent and competitive process, so as to protect Government’s revenue interests, especially as such costs are recovered from profit petroleum, is subject to scrutiny. Profit petroleum is Government’s share of profit from revenues of the field.
A comparison is also made with adjacent basins and their cost effectiveness, say those from auditing fraternity.
An argument could be that CAG has conducted audit for public sector entities like ONGC, and also commented on their performance, so a private contractor could not be treated any differently.
Any audit cannot be restricted only to the accounting records, but extends to verification whether the costs depicted are correctly determined, CAG had said in its October 26 letter to the Ministry.
The CAG in its statement of November 1 while stating that it does not conduct performance audit of private operators, also said that, “It is the consistent stand of CAG that performance audit of the production sharing contracts is covered under Section 16 of the CAG’s (DPC) Act, as profit petroleum is non-tax revenue credited to the Consolidated Fund of India and such audit would involve examination of all records including those of the operator, which are relevant to our audit.”
“This provision of CAG’s (DPC) Act gives CAG the unfettered right of access to all records required for such audit and would override any conditions sought to be imposed on our audit process,” the statement said.
Meanwhile, concerns raised by RIL are based on its past experience with CAG, where it felt that issues of procurement and other technical points raised by the Government auditor were not appropriate.
The Petroleum Ministry in November 2007 had requested the CAG to carry special audits in respect of certain blocks/fields operated under NELP and Pre-NELP regime. The Government move is justified by the fact that the production sharing contracts provides for two audits, one by the management committee of the block and the other by the Government.
Further, it can get an audit done by its representatives or through Chartered Accountants. Based on the audit by the Government, the cost petroleum is determined and it is crucial for finalising Government share of profit petroleum.
RIL, while not contesting the Government’s decision for an as provided in Section 1.9 of the accounting procedure of the production sharing contract, had expressed reservations on the Government auditor looking into the technical aspects. The contractor has maintained that it will welcome comments on operational matters if such comments come from experts having the knowledge of the complexities of deep water operations.
Those following the sector point out that another concern of RIL could be that this will be an independent standalone audit, and if this is made public it will lead to more media scrutiny.
Critics say that the concern could be that a question can be raised on why the contractor has not been able to meet the commitment of hitting an output of 80 mmscmd.
POWER PLAY: GAS SUPPLY IS A MATTER OF PUBLIC INTEREST THAT MUST BE RESPECTED
The proposal to supply gas to power projects on a rotational basis defies logic, and is as specious as the argument that there is a shortage of gas in the Krishna Godavari basin. It means that gas would be supplied, though not in full as contracted for meeting power generation needs. Such an eventuality would mean that power producers would be unable to meet their contracted power supplies to the Andhra Pradesh grid. Also, distribution companies would have to purchase electricity from the spot markets at astronomical prices to meet demand, leading to huge losses and would not be in a position to service debt.
As a net result of all this, either the exchequer or the taxpayer would have to foot the rising cost. Or else, AP’s hapless consumers will have to live with power outages. The rotational supply proposal is being pushed on claim that the supplier, Reliance Industries, is facing a shortfall in its gas wells, with output dropping to 25.35 million standard cubic metres (MSCM) a day from a peak of 64 MSCM. RIL submitted its bid to mine KG gas on the basis of studies that the resource was available in abundance in the region.
It is strange that the company has since turned around to claim that enough gas is no longer available. That lack of availability has held Andhra Pradesh hostage to pricing games that monopoly control of natural resources engenders. AP contributes almost Rs 8 lakh crore to the country’s gross domestic product. So a power shut down there means that the state would face shortfalls in overall output across all sectors, including agriculture, industry and services. It is strange that regulators have not yet effectively intervened in the matter. After all, enforcement of contractual obligations is a regulatory issue first, and then an issue of law.
When power producers enter into a fixed supply agreement with fuel suppliers, such agreements have clauses that require suppliers to compensate for shortfalls in supplies from alternative sources or compensate for consequential liabilities. It is strange that none of these clauses have been invoked so far. Is this a repeat of the Kavas and Gandhar gas supply agreements, where the company quoting the lowest bid of $2.34 (per thousand million British thermal unit) subsequently reneged on its obligations, paying a pittance as compensation? Gas is a natural resource. If supply of that resource is held back and an entire population dependent on that resource are put to hardship, then it amounts to nothing short of extortion.
Clearly, there is a case for the state and the regulators to get involved instead of remaining idle ringside spectators. Gas supply to AP or, for that matter, any other state is a matter involving public interest. Unless the regulators intervene fast to enforce the primacy of public interest or monopoly interests,Indiafaces the prospect of regulatory capture. The best instance here is theUSanti-trust cases in 2003 against El Paso Natural Gas Company in 2003. If that precedent is applied, then gas suppliers have a lot of explaining to do for the hardships and economic losses in AP and elsewhere.
ONGC NOTIFIES 14 OIL AND GAS DISCOVERIES IN FIRST HALF OF FY13
NEW DELHI: State-owned explorer Oil and Natural Gas Corp (ONGC) has reported 14 discoveries in the first half of the current fiscal with four of these having been notified by its board, even as the company’s crude and gas outputs are likely to rise in FY14.
According to a statement issued by ONGC, out of the four wells notified by its board, two are exploratory wells situated in Western Offshore basin and KG Onland basin, while the other two are development wells located in Motera and Cambay Onland basins.
Chairman and Managing Director of ONGC, Sudhir Vasudeva said that the company’s crude oil production is likely to rise to 29.1 million tonnes in the next fiscal from the current year target of 27.002 million tonnes. Similarly, gas output could rise to 26.45 million tonnes in 2013-14 from 25.73 million tonnes of the current fiscal.
ONGC NET DOWN 32% ON SUBSIDY
NEW DELHI: A 115 per cent jump in the subsidy burden has pulled down ONGC’s net profit 31.8 per cent in the September quarter. Net profit was Rs 5,897 crore against Rs 8,642 crore in the same quarter last year. Revenue dipped 12.5 per cent to Rs 19,853 crore.
Chairman Sudhir Vasudeva said: “The sharp increase in subsidy is the single reason behind the drop in profits”.
Under the government’s subsidy burden sharing mechanism, the company contributed Rs 12,330 crore to compensating partly the revenue loss of oil marketing companies on diesel, kerosene and domestic LPG. In the last year’s corresponding quarter, the company had contributed Rs 5,713 crore. The subsidy outgo has pulled down the net profit Rs 7,103 crore.
The government-owned firm realised $46.8 on a barrel of crude after giving discount of $63. Last year same quarter, it had realised $82.6 a barrel after a discount of $33. The company’s crude output dipped 8.2 per cent to five million tonnes while gas output rose 1.2 per cent to 5,898 million standard cubic metres. ONGC notified 14 new oil and gas discoveries in the first half of the year.
Vasudeva said the low net realisation is a matter of concern for the company since operating cost is going up by 7 per cent every year. “We are barely hand to mouth and not generating surplus for the company”.
NEVER-ENDING WOES OF LPG CONSUMERS
It is not possible to anticipate all the unintended consequences of new LPG quota system. While it may reduce subsidy burden to some extent, consumers will continue to face enormous problems in securing their LPG supplies in the future
Even under the best of times, it has never been an easy task for LPG (liquefied petroleum gas) consumers to secure supplies from public sector oil company dealers. When consumers can get petrol anywhere anytime why should it be difficult to get an equally if not more important commodity like cooking fuel without much hassle?
The state-run oil companies have been subsidizing residential LPG ever since it was introduced as a cooking fuel. Since people were not familiar with LPG, it was found necessary to subsidize it. In the beginning the subsidy burden was manageable. Diversion of residential LPG was minimal or non-existent. However, as the difference between subsidized residential LPG and commercial LPG widened, diversion increased. At present it is more than 30% based on several studies.
Currently the LPG burden to the central government has been more than Rs34,000 crore. On each LPG cylinder, the government has to dole out at least Rs468. To reduce the burden government has decided to limit the subsidized LPG to six cylinders per family per year as part of their recent big bang reforms.
However, when a consumer takes delivery of LPG, he has to pay the full price and subsidy will be deposited into the bank account by the oil company. To ensure that the subsidy amount is not directed to wrong persons, the Aadhaar platform will be used. On paper this looks fine and easy.
Mysorein Karnataka is one of the two districts to experiment with Aadhaar-based LPG delivery implementation on a pilot basis. According to the LPG dealers and oil company managers inMysore, implementing quota system of six cylinders will be easy without any hassle. At this stage it is just a wild conjecture.
Already some consumers who do not buy LPG for more than six months have to go through an elaborate process of registering with the dealer again. Only when the oil companies give their approval from the centralized Bengaluru head offices, their account will be unblocked to receive supply. The rationale of such a process which is an unnecessary harassment to the honest consumers is not easy to defend.
If a house has a joint family or more than one family or multiple kitchens then they are eligible for a larger quota. How and who will decide this quota is not clear. Such discretion will certainly lead to bribing. Institutions like orphanages, schools with the mid-day meals, anganwadis are also eligible for additional quotas.
How about those who do not have the Aadhaar number? Will they be able to get the subsidy? Assuming some are not interested in the subsidy, can they get LPG supplies? Here again it is not clear at what price they will be able to get an LPG cylinder.
To put a stop to households having multiple connections from different public sector companies, an elaborate system using RR (number given by power companies) and also through the “Know Your Customer” formality was implemented. Many had to surrender the additional connections. Out of the blue, on 25th October the petroleum ministry decided to allow multiple connections and introduced one more price category called non-subsidized non-domestic exempt (NDEC ) which is about three times the subsidized residential price.
The petroleum ministry should be congratulated for having allowed the multiple connections and to allow the consumers to buy from any company of their choice. This will certainly introduce competition among the oil companies for that segment where high price is not a deterrent. This has been one of the suggestions made by LPG dealers.
Before the new policy of six cylinders, there were three prices for selling the same commodity LPG—highly subsidized residential, non-subsidized commercial and automotive. Now there are already three more new price categories announced for different consumer categories—subsidized residential consumers who will receive subsidy into their bank accounts for the first six cylinders, non-subsidized non-domestic exempt category and the third group consisting of schools, anganwadis, orphanages, etc. As different groups of consumers demand subsidized LPG, competitive politics may lead to some more price categories.
As discussed above, the same commodity—LPG—is sold for six different prices. One cannot design a more perfect system to generate black money. The lowest priced LPG of around Rs29,000 per tonne is for residential consumers and highest price of Rs89,000 per tonne is for the automotive sector. Only in a society where there are honest saints, diversion of such highly subsidized commodity like cooking fuel which is in high demand can be avoided.
To prevent the dealers from diverting subsidized LPG, oil companies have developed a complex system of receiving bookings only through their portals or through mobile phones. Since in the future a dealer is forced to sell LPG only at non-subsidized prices and subsidy is paid directly to the consumers, it is claimed that the dealers will not be in a position to misuse the subsidy system as in the past. We all know that even a complex computer system can be hacked. Unless the government implements a foolproof monitoring system dishonest dealers will succeed in gaming the LPG portal system.
The only way out of this mind-boggling edifice of supplying LPG is to start the process of liberalizing the LPG market as recommended by several high-level committees. Instead, an even more complex system is being developed. There is another layer of complexity as a result of the Congress party chief Sonia Gandhi asking the Congress ministries to give two more cylinders at the subsidized price. As in the power sector, each political party will compete with one another to promise higher subsidy to residential LPG consumers. This will end up creating huge financial burden to states and they will not be able to pay the oil marketing companies.
It is not possible to anticipate all the unintended consequences of new LPG quota system. While it may reduce subsidy burden to some extent, consumers will continue to face enormous problems in securing their LPG supplies in the future.
FUELLING AN LNG BOOM
Investor interest in the liquified natural gas (LNG) supply business is on a high. Besides traders such as Petronet LNG Ltd and BP Plc, infrastructure companies such as Shapoorji Pallonji and Co. are keen on setting up new LNG-receiving terminals. These investments are significant and reflect a latent demand and a burgeoning market that is willing to pay for expensive primary energy.
Partially, this market is born of the shortcomings of existing natural gas projects. But there is also the larger issue of oil and gas exploration prospects inIndia. An aggressive exploration regime would improve the chances of gas discoveries which, in turn, will raise the probability of cheaper gas supplies in the country. Such a development will improve the competitiveness of industries in the global map, especially those that are power intensive.
But it will not be sufficient to merely overhaul the exploration policy in the forthcoming auctions of oil and gas blocks wherein more generous fiscal terms are offered.
There is a compelling need to develop the national gas grid so that consumers are able to access this gas. This is all the more essential in the present situation where expensive LNG needs to find a market and access is critical to it.
Currently, this job is undertaken by GAIL, a government-owned company that also happens to be a gas trader. The government needs to separate ownership of gas transmission assets from trading in gas. This will enable the gas market to develop without distortions.
On the consumer side, given that power and fertilizer consumers are anchor customers of LNG, the government should move towards premium pricing of gas-based power, recognizing its intrinsic merit in meeting sudden surges in power demand. The same holds for hydropower, which has also suffered because of poor pricing principles in the government-dominated market of distribution utilities.
This initiative will play an important role in hastening the pace of reforms in the power sector that is reeling under losses. This is because in both cases—either as gas supply to captive machines or as grid-based power supplies—it will provide more choice for industries that are seeking alternate sources of supply to that provided by the utility. The incentive lies in the quality and more importantly, the pricing of power.
ABAN OFFSHORE SEEKS A WAY OUT OF ITS DEBT MESS
CHENNAI: Aban Offshore, a homegrown offshore drilling company, recently announced it was recalibrating its debt from rupees to dollars in order to reduce its mammoth debt burden of Rs 14,000 crore, which is over four times its shareholders’ equity. Will this be enough to save the company from being swallowed into a financial black hole?
Aban was once the darling of investors. Its shares had touched apeakofRs5,017 in 2008, when its business was expanding rapidly. But, its fortunes began to change drastically soon after. The company piled up huge debt on its balance sheet and its stock was in tatters. The company’s shares closed at Rs 409.65 on BSE on Thursday. It has thus shed over 90 per cent value in four years.
What caused this rapid decline was perhaps its outsized ambitions more than anything else. Soon after its incorporation in 1986, the company had gone on a buying spree. In the 1990s, when many private companies inIndiawere moving out of the drilling business, Aban added more rigs through acquisitions and mergers. It purchased a 300-foot jack-up rig from Mahindra & Mahindra. This was followed by the acquisition of Hitech Drilling Services (India), which was part of the Tata group. This increased its fleet to four rigs by 2000.
In 2005, the company added two jack-up rigs and a drill ship and, in the same year, went international by launching Aban Singapore Pvt Ltd as its vehicle for international operations. The killer blow: A 33.7 per cent stake in Sinvest ASA, a Norwegian company with eight new premium jack-ups on order, through an open offer of $1.3 billion in 2007.
While these acquisitions made headlines, debt began to take its toll on the company. Also, analysts say that not listing theSingaporesubsidiary at the right price and going for short-term contracts at a time when crude oil prices were rising steadily added to its problems.
Now, the company is trying to set its books in order. The management recently said it wanted to restructure its loans and raise fresh funds (around $400 million, or Rs 2,174.6 crore, according to Thursday’s currency rates) through global depository receipts, foreign currency convertible bonds and other modes, and around Rs 2,500 crore through placement to qualified institutional placements) to reduce debt.
Speaking on the sidelines of its annual general meeting in Chennai, Reji Abraham, managing director of Aban Offshore, said that the company had around Rs 2,000 crore of debt in Indian currency, which attracted an interest of 13-14 per cent. This means an annual interest outgo of Rs 260-280 crore. The company posted a profit of Rs 370.9 crore on a revenue of Rs 3,228.7 crore in 2011-12. A major share of this, around Rs 1,800 crore, is expected to be converted into dollar loans in the next three to four months. Analysts reckon the refinancing of loans with external commercial borrowings would cut interest costs by five-six percentage points.
Rupee loans account for around 15 per cent of the total debt of the company. The larger chunk is in foreign currency. The company has reduced its total debt burden from $2.8 billion last year to $2.6 billion this year and expects to reduce it by around $200 million (around Rs 1,100 crore) every year for the next five years.
In addition to restructuring, the company is also looking at selling some assets to finance its debt. Abraham said he was considering the option of selling some of the existing rigs to buy new ones and use part of the proceeds for debt repayment. The 18 assets of the company could be worth around $3 billion.
Abraham is also looking to boost revenue by getting into long-term contracts and by leasing Aban’s rigs at higher prices. The company is expecting around 20 per cent increase in the rental of the rigs that are due for renewal. Analysts say the rates at which the company’s rigs are redeployed will be crucial to its future. The operating cash flow of the firm for both the financial years (2012-13 and 2013-14) is strained. This makes contract renewals critical to the company, they add.
But, effecting a complete turnaround won’t be easy. Earlier this month, Aban leased one of its rigs to Petronas Carigali Sdn Bhd for three years for $ 152.75 million (around Rs 800 crore). It was not a huge premium, considering the company had deployed the same rig for $241 million (at that time, equivalent to around Rs 1,133 crore) for four years.
However, one bright spot for the company is that its operating cash flows appear stable. Four of its six rigs whose contracts are due for renewal during the current financial year might get renewed at higher day rates. Besides improving cash flows, it will enhance operating margins. June quarter margins improved by seven percentage points to 59.5 per cent, compared with the preceding quarter, although they’re lower than the year-ago period.
CRUDE UP IN ASIA
Brent North Sea crude for December delivery was up 15 cents to $107.40
SINGAPORE: Crude made gains in Asia today as an unexpected narrowing of theUStrade deficit and slowing Chinese inflation rate buoyed markets, analysts said.
New York’s main contract, light sweet crude for delivery in December gained 10 cents to $85.19 a barrel while Brent North Sea crude for December delivery was up 15 cents to $107.40.
Hopes that the economy of theUS– the world’s largest oil consumer — was on the mend were boosted after trade data released late yesterday exceeded analysts’ expectations, Capital Economics said in a report.
“The unexpected narrowing in the trade deficit in September opens the door to a modest upward revision to third-quarter real GDP growth,” the report stated.
TheUStrade deficit narrowed in September to $41.5 billion, down from $43.8 billion in August, on a rebound in exports to a record level, Commerce Department data showed.
The improvement surprised most analysts, who had forecast that the deficit would widen to $45.4 billion.
Meanwhile inChina, National Bureau of Statistics data released earlier Friday showed the inflation rate of the world’s largest energy consumer slowing to a gain of 1.7 percent year-on-year in October.
The slowing inflation rate was welcome news to crude traders, said Jason Hughes, head of premium client management for IG Markets Singapore.
“The easing inflationary pressure… Gives Chinese officials more scope to implement measures should the global situation deteriorate further,” he told AFP.