SINGAPORE, May 16 (Reuters) – The volume of U.S. crude oil arriving in Asia is expected to hit a new high in July as Asian refiners sought arbitrage supplies to replace Middle Eastern crude after prices for Gulf grades rose, traders said on Wednesday.

U.S. crude arriving in Asia hit an all-time high of close to 25 million barrels in May with cargoes discharging in China, South Korea, Singapore, India and Malaysia, according to trade flows data on Eikon.

The volume dips to about 19 million barrels in June, but is set to rebound again in July after U.S. crude futures slipped to the widest discount in three years against Brent at $8.06 a barrel this week, according to traders and Eikon data.

“The only thing that narrows the spread will be exports, which I think will really pick up throughout summer,” said Michael Tran, energy strategist at RBC Capital Markets.

Weekly U.S. crude exports jumped to a record 2.6 million barrels per day (bpd) last week, according to the U.S. Energy Information Administration.

“Everyone is fixing vessels for export,” one U.S. crude trader at a refinery said.

U.S. crude shipments to Europe hit a record 14.7 million barrels in April, and about 13.9 million barrels are scheduled to arrive in May, Eikon data showed.

The drop in U.S. crude prices also coincides with rising values for Middle East oil in Asia and has opened the arbitrage window, traders said.

Close to 10 supertankers, each carrying 2 million barrels of crude, have been lined up to load oil in the U.S. Gulf Coast for Asia, two of the traders said. These are expected to arrive in July, they said.

“WTI Midland is coming across,” a third trader said, adding that refiners such as JXTG Nippon, SK Energy and Cosmo Oil have bought U.S. crude.

Last week, Indian state-refiner Indian Oil Corp (IOC) bought 3 million barrels of Louisiana Light Sweet and WTI Midland crude for loading in June.

South Korea’s second-largest refiner GS Caltex has bought 5 million barrels of U.S. crude, mainly Eagle Ford and WTI Midland, for June to August delivery, up from 4.75 million barrels in the first five months this year, a company spokesman said.

Some of the popular U.S. grades in Asia such as WTI Midland, Mars and Southern Green Canyon can now compete with Middle East grades such as Murban and Oman in Asia, traders said.

WTI Midland crude delivered to North Asia is priced at a premium of close to $5 a barrel to Dubai quotes, comparable with Abu Dhabi’s Murban, while Mars crude cargoes are being offered at $1.50 a barrel above Dubai quotes, competitive with Oman, they said.

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As Brent climbs closer to US$80, Asia’s oil expenses could reach US$1 trillion, Reuters reports, citing robust demand and a stronger greenback. This would likely have a marked negative effect on some Asian economies, with RBC Capital Markets analysts noting that Asian oil consumers are most vulnerable to oil price jumps.

The Asia Pacific accounts for more than a third of global oil consumption, which currently stands at around 100 million barrels daily. At the same time, it produces less than a tenth of global oil, which is the reason for its heightened vulnerability to oil price moves.

China and India in particular, are both the drivers of the regional demand growth and stand to lose the most if prices get to be too high. China last month imported an average of 9.6 million barrels daily, which at current prices cost US$768 million a day. This translates into US$280 billion for the full year, at current prices.

Yet China is a relatively rich country, equipped to withstand a price shock. Also, China has been filling its petroleum reserves while prices were low, so it likely has a substantial cushion against such a shock.

India, on the other hand, is poorer than China and it imports even more oil than its neighbor. Last month, India reported its trade deficit had reached the highest in three months because of higher oil prices. At US$13.7 billion, the deficit was lower than the estimate of several analysts polled by Bloomberg, but it was still the highest since the end of 2017 given that growth in non-oil imports slowed to a 16-month low.

Asia’s new powerhouse imports 80 percent of the crude oil it needs to fuel its growing economy. This year, the country’s oil ministry has calculated it would need to import 1.61 billion barrels (219.15 million tons) of crude, which at current Brent prices would mean a bill of US$127.19 billion.

That’s a hefty bill, although much smaller than China’s. A lot of analysts leaning towards the bullish side argue that oil needs to breach US$100 a barrel to start denting demand. Both India and China have ambitious infrastructure projects that require fuel, and China is making good money from oil product exports, which have been a major driver of higher imports.

Whether or not these analysts are right will likely become evident soon enough. Let’s just recall that China’s Sinopec cut its orders from Saudi Arabia by 40 percent last month after the Kingdom announced a surprising increase in prices for Asian clients.

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• Blockchain, AR, and the end of Comcast will remain the province of early adopters for a good long while.
• Bloomberg Businessweek’s Sooner Than You Think issue looks at a lot of AI technology that’s coming soon, but here are a few things in the broader tech world that are likely further off than the hype often suggests.

Useful Blockchain

Digital ledgers may yet end up being the solution for everything, but so far they’ve solved almost nothing. On its busiest day, the nine-year-old Bitcoin economy registered about 400,000 transactions. On an average day, Visa Inc. racks up 150 million. Most other blockchain applications are in even earlier stages—for now, many are just white papers. And it’s unclear whether the principle behind blockchain, which holds that distributed computing systems are inherently more trustworthy than those controlled by a central entity, even makes sense for most applications. The decentralized ledger is going to be far less helpful than Visa’s consumer support line when someone runs up a bunch of fraudulent charges on your account.

Mainstream Augmented Reality

Two years after the release of the first Oculus, HTC Vive, and Playstation VR headsets, virtual reality has struggled to attract the talented developers it needs to garner a mass audience, and vice versa. Now, true believers insist they always thought the bigger deal would be augmented reality, which overlays digital images on your real-world field of vision. Google and Apple are building developer tools for AR smartphone apps, and 2018 is supposed to see the unveiling of a long-awaited headset from Magic Leap Inc., as well as a new version of Microsoft’s industry-leading HoloLens. But these are more like save-the-dates than a coming-out party.

The End of Big Cable

Cable providers regularly top lists of America’s most-hated companies, and since 2010 more than 13 million people who would have been cable subscribers in happier times have either cut the cord or avoided ever signing up, according to analyst firm MoffettNathanson LLC. The fourth quarter of 2017, during which 3.4 million subscribers quit, was the pay-TV business’s worst ever. Still, because of local monopolies, there’s been no corresponding collapse in broadband subscriptions to the same companies. Big Cable’s role in your life may change, but it’s not going away.

100 Percent Renewable Energy

Although solar and wind power are coming on strong, don’t expect the grid to transition fully to clean energy anytime soon. In April, Apple Inc. said it now powers all its data centers, offices, and stores in 43 countries with renewables, an impressive feat. The bigger battle: cleaning up Apple’s supply chain, which puts out three-quarters of the company’s emissions. More broadly, four-fifths of the global power supply still depends on fossil fuels. At this rate, the renewable revolution won’t be finished for decades. There are no signs that the planet will stop warming in the meantime.

Data Portability

Starting May 25, new rules in Europe require companies such as Facebook Inc. to provide a way for users to download all the photos, posts, and other data they’ve uploaded in a “structured, commonly used, and machine-readable format.” The idea is to make your data as portable from site to site as your phone number is between wireless carriers. Personal data, however, isn’t as straightforward an asset as a phone number. Beyond your lists of friends, Facebook collects all kinds of other information about the connections between you and others, and what you experience on Facebook rests largely on access to other people’s data, as well. It’s tough to see how all that stuff can be both cleanly packaged and adequately protected.

Robot-Only Factories

Automation is displacing workers, but panic about the coming laborpocalypse is overheated. Take a recent McKinsey & Co. report claiming that as many as 800 million jobs could vanish by 2030. Most headlines neglected to include the accompanying prediction that resulting supply-chain needs could create even more jobs over the same period. So far, some of the smartest robots remain focused on picking up random items from a bin. In an actual workplace, when robots have to pick up heavier objects and contend with human co-workers, even the more impressive models have struggled to function.

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(Reuters) – The Malaysian ringgit fell to a four-month low on its first day of trade following Mahathir Mohamad’s stunning win in the country’s general election last week.

The ringgit MYR= weakened as much as 0.9 percent to 3.985 versus the dollar on Monday, as traders came to grips with the election defeat of the coalition that had ruled the country for six decades.

The Malaysian stock exchange last week extended trading holidays to Thursday and Friday after the government declared them public holidays following the election results.

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HONG KONG (Reuters) – HSBC Holdings Plc (HSBA.L) said on Monday it had performed the world’s first trade finance transaction using blockchain technology, a major step in boosting efficiency and reducing errors in the multi-trillion-dollar funding of international trade.

HSBC and Dutch bank ING successfully completed the transaction for food and agricultural group Cargill, the British lender said in a statement.

The use of blockchain technology in the banking industry is expected to reduce the risk of fraud in letters of credit and other transactions as well as cut down on the number of steps used.

Letters of credit are one of the most widely used ways of reducing risk between importers and exporters, helping guarantee more than $2 trillion worth of transactions, but the process creates a long paper trail and takes between five and 10 days to exchange documentation.

“At the moment, buyers and suppliers use a letter of credit, typically concluded by physically transferring paper documents, to underpin transactions,” said Vivek Ramachandran, global head of innovation and growth at HSBC’s commercial banking unit.

“What this means for businesses is that trade finance transactions have been made simpler, faster, more transparent and more secure.”

Putting all of Asia Pacific’s trade-related paperwork into electronic form could slash the time it takes to export goods by up to 44 percent and cut costs by up to 31 percent, the HSBC statement said, citing a study by the United Nations.

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SINGAPORE (Reuters) – Oil prices edged lower on Monday as a relentless rise in U.S. drilling activity points to increased output, while resistance emerged in Europe and Asia to U.S. sanctions against major crude exporter Iran.

Still, crude prices were near more than three-year-highs reached last week as markets expect Iran’s oil exports to fall significantly once U.S. sanctions bite later this year.

Brent crude futures LCOc1, the international benchmark for oil prices, were at $77.07 per barrel at 0010 GMT, down 5 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $70.66 a barrel, down 4 cents from their last settlement.

Brent and WTI last week reached their highest since November 2014 at $78 and $71.89 per barrel respectively.

“Around a million barrels of oil a day is likely to disappear from global oil markets if the U.S. sanctions on Iran bite,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

“But it is still far from certain that they will bite in the way intended… Germany has said it will protect its companies from U.S. sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the U.S.,” he said.

Markets were also held in check by a rise in U.S. drilling for new oil production.

U.S. drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015, energy services firm Baker Hughes said on Friday.

Hedge funds and money mangers slashed their bullish wagers on U.S. crude in the latest week to the lowest level in nearly five months, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday, in an indicator that many financial oil traders are doubtful of significant further price rises.

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• Macquarie’s Nizam makes comparison to mid-1990s Tequila crisis
• Asia has higher growth forecast, lower inflation outlook

The turbulence seen across emerging markets is following a similar pattern to a crisis that rocked global trading more than two decades ago — it involved tequila.

In the mid-1990s, U.S. interest-rate increases helped spark a Mexican peso devaluation that fueled capital flight and caused the so-called Tequila crisis. Within a few years, the sell-off had spread to Asia, which became the center stage of the emerging-market crisis, during which currencies were devalued as the region was sent into an economic tailspin. Fast forward to 2018, and history is repeating itself, with a crisis brewing in Latin America as Argentina seeks emergency funding just as the dollar and U.S. bond yields spike.

But this time around, Asia is less vulnerable to contagion, says Macquarie Bank Ltd.’s Nizam Idris.

While the current fears emerging out of Latin America remind him of the so-called Tequila Crisis, today “Asian economies are a lot stronger,” said Nizam, the bank’s head of strategy for fixed income and currencies in Singapore. “Current-account deficits are actually smaller, foreign reserves are much larger than before, and currencies are unpegged. The situation today is not entirely the same as compared to 1995.”

He’s not alone. Commonwealth Bank of Australia also sees Asian currencies faring better than their peers elsewhere in the developing world if the crisis emanating out of Latin America intensifies. While there are exceptions — the Indonesian rupiah is more vulnerable than others since it’s one of the few Asian emerging markets that run current-account deficits — the crises that’s exacerbated the sell-off this time around in Argentina and Turkey are signaling that they are more idiosyncratic in nature with less contagion risks.

After erasing almost all of their gains for the year because of a pick-up in U.S. inflation and global trade tensions, emerging market assets made a comeback last week. Asian currencies have been the winners, with seven out of the 10 best performers in emerging markets this quarter coming out of the region.

Here are the reasons why Asia may fare better after all:

Current Account

Six out of nine major economies in Asia outside of Japan enjoy surpluses in their current accounts, led by Singapore, Taiwan and Thailand with excesses of more than 10 percent of gross domestic products. Indonesia, India and the Philippines have shortfalls.

Better current-account balances mean that Asia is better equipped to meet their dollar-denominated payment obligations to their bond holders, according to Andy Ji, a currency strategist at Commonwealth Bank of Australia.

Economic Drivers

A two-year rally that drove emerging-market stocks and currencies to the highest level since at least 2007 was supported by economic fundamentals. And Asia still stands out.

Asia’s developing economies are poised to expand an average of 6.5 percent in 2018 compared with 4.9 percent for all emerging markets, according to forecasts from the International Monetary Fund. Inflation in Asia, excluding Japan, will accelerate to 2.3 percent in 2018 compared with a world average of 3.3 percent, according to surveys of economists by Bloomberg.

And that’s despite the headwinds of tighter monetary policy by the Federal Reserve and rising U.S. yields.

While the Philippines became the latest emerging market to raise interest rates to rein in price gains in a booming economy, both Bank of Korea and the Reserve Bank of India lowered their own inflation projections last month. China has already cut its reserve requirement ratio twice this year.

“The fundamentals in Asia are better than other regions, while political and geopolitical risks are smaller, too,” Koji Fukaya, chief executive officer in Tokyo at FPG Securities Co. “Gains in U.S. yields are a reflection of strong economic condition there, and Asia benefits from the strong U.S. economy more than other regions.”

Politics

To be sure, like other emerging markets, Asia also faces political risks with a slew of elections in the next two years, including in Indonesia and India.

A case in point is Malaysia, where voters last week elected Mahathir Mohamad, the nation’s longest-serving premier, as leader in a stunning upset to end the six-decade rule of Najib Razak’s party.

“At a time of growing pressure on emerging-market currencies and bonds, the situation in Malaysia bears careful watching for potential knock-on effects, particularly as rising rates and geopolitical uncertainties remain live in the backdrop,” Eli Lee, head of investment strategy at Bank of Singapore Ltd., wrote in a note.

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• Regulator hopes transparency will lower P2P interest rates
• Aims to restrict fundraising to registered fintech firms

Indonesia is planning to tighten regulation of its vibrant financial technology sector, imposing new rules on companies which it hopes will stand at the forefront of efforts to extend services to more of the country’s 260 million people.

The Financial Services Authority, known as OJK, plans to issue new rules by June that will compel fintech firms to be registered with authorities. Unregistered companies won’t be allowed to tap financial markets or raise money from banks, said Nurhaida, vice chairman of the regulator, which also supervises Indonesian banks and the stock market.

“People who have no access to conventional financial institutions can be reached by fintech players,” Nurhaida, the only female member on the board of OJK, said in an interview in Jakarta last month. “However, we will regulate fintech and establish transparency. With transparency, the lender will better understand and calculate risk, and we hope that they can lower interest rates.”

Greater internet penetration and the use of smartphones has helped Indonesia make the most progress across East Asia and the Pacific in reaching its unbanked over the past three years, rendering fintech crucial to a population scattered across hundreds of islands. However, loans by fintech companies have surged, pushing the OJK to review peer-to-peer lending rules.

OJK recognizes about 44 fintech companies and the Fintech Association of Indonesia has more than 130 members. While these service fishermen and farmers who lack the paperwork or collateral to get loans from traditional banks, interest rates are often much higher. Draft guidelines had proposed capping borrowing costs at seven times the central bank’s policy rate, though the OJK’s final regulations in January 2017 didn’t include this suggestion.

Minimum requirements already proposed for banks and their fintech partners include core capital of at least 1 trillion rupiah ($70 million) and satisfactory risk ratings. Peer-to-peer lending jumped 38 percent in the first two months of 2018 from a year earlier, hitting 3.5 trillion rupiah, and OJK director Eko Ariantoro said in March that regulators “don’t want these developing fintechs to become loan shark-like businesses.”

Indonesia allows foreign ownership of 85 percent in fintech and caps lending to individual borrowers at 2 billion rupiah for peer-to-peer lenders. These rules won’t be relaxed anytime soon though the regulator won’t set an interest rate band for these companies, Nurhaida said.

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SINGAPORE – Corporate service providers (CSPs) will soon have to take a new mandatory training and proficiency test aimed at boosting professional standards in the industry and Singapore’s reputation as an international financial and business hub.

From Nov 15 this year, CSPs seeking to be registered as filing agents (RFAs) with the Accounting and Corporate Regulatory Authority (Acra) will need to undergo the test before being allowed to register or renew their registrations, it announced on Friday (May 11).

CSPs provide services such as companies’ set-up, corporate secretarial services and statutory filing of documents with Acra. In 2015, regulations, including anti-money laundering (AML) and counter financing of terrorism (CFT), were introduced to require CSPs to register with Acra.

It said the new training programme is part of ongoing efforts to strengthen the CSP sector’s resilience to illicit activities such as money laundering and terrorism financing.

The initiative was announced by Acra chief executive Ong Khiaw Hong at the annual CSP Conference on Friday morning.

In his keynote address, Mr Ong noted the key role that CSPs play in helping to combat illicit corporate activities.

He said that CSPs should “remain mindful of the growing complexity and cross-border nature of such illicit activities” and urged them to “stay up to date with AML and CFT measures and implement them correctly”.

Acra worked with the Chartered Secretaries Institute of Singapore (CSIS) and Institute of Singapore Chartered Accountants (ISCA) to develop the training programme.

New applicants seeking to be a RFA, as well as existing RFAs, have to complete the mandatory training and take the online proficiency test.

The majority of existing RFAs registered with Acra will have until April 2019 to complete the training and take the test as they will only need to renew their registration in April 2019.

At the conference, Acra also shared findings from its latest round of compliance reviews of RFAs.

It said there was a marked improvement with close to 75 per cent of RFAs achieving a “compliant” rating for AML/CFT requirements compared to 50 per cent two years ago.

A small segment of the CSP sector however was still found to be non-compliant with significant breaches detected.

To deter such breaches and enhance market transparency, Mr Ong announced in his speech that from June 1 this year,  Acra will be publishing the names of RFAs that have been suspended or had their registration cancelled due to severe breaches of AML/CFT regulations.

The information will be made publicly available on the Acra website and BizFile+ portal.

Commenting on the new regulatory measures, Ms Grace Tan, chief executive of CSIS which organises the annual CSP Conference, said: “With the crucial role they play servicing corporate clients, the CSP sector must ensure appropriate internal policies, procedures and controls are in place to mitigate the risks of money laundering and terrorism financing.

“CSIS is confident that the mandatory training will help raise the professional standing of the CSP sector.”

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The path to higher oil prices seems pretty clear, but it isn’t inevitable.

There are plenty of reasons why the oil market is suddenly on edge, and why oil prices are at their highest level since 2014. Venezuela’s oil production is falling off of a cliff, and could fall faster now that creditors are swarming over the country. The upcoming presidential election risks a financial crackdown from the U.S. Treasury, threatening to add to the country’s woes.

The more obvious catalyst over the past week was the U.S. withdrawal from the Iran nuclear deal, putting a sizable chunk of Iranian supply at risk, although exactly how much remains to be seen.

Most importantly, the underlying fundamentals are bullish: the supply/demand balance is tighter than at any moment in recent memory, with demand expected to outpace supply for the rest of the year. Global inventories are back down to the five-year average, and falling. Because data is published on a lag, the market could overtighten before OPEC realizes it.

U.S. shale is the one factor keeping prices in check, having added more than 1 million barrels per day (mb/d) since last September. The EIA sees output growing to 11.9 mb/d in 2019 (ending the year at over 12 mb/d), up from 10.5 mb/d a month ago. In other words, the agency is baking in an additional 1.5 mb/d of extra supply over the next year and a half.

That should keep a lid on prices.

But what if all that fresh supply doesn’t actually make it online? U.S. shale production is exploding, but is also running up against serious pipeline constraints that are pushing down prices in West Texas and threaten to severely slow development. While WTI in Cushing is above $70 per barrel, oil in Midland is selling in the high-$50s per barrel.

Texas pipelines are full, and new conduits connecting the Permian to the Gulf Coast will take another year and a half to come online. According to PLG Consulting, an estimated 200 million barrels of oil from the Permian won’t be able to make to market over the next 16 months. “They’re not going to be able to get it all out,” said Taylor Robinson, president of PLG, told the Wall Street Journal. PLG estimates the pipeline deficit will mushroom to 750,000 bpd by September 2019. Shale drillers will call upon railways and trucks to help move product to the coast, but neither will be sufficient to resolve the bottlenecks.

So, if the one major variable holding prices in check fails to materialize, it seems likely that prices are heading north. Bank of America Merrill Lynch said in a May 9 report that it could see oil prices shooting up to $100 per barrel in 2019.

“The up-trend remains strong and intact,” Robin Bieber, technical chart analyst at London brokerage PVM Oil Associates, told Reuters.

Still, the path higher for oil prices is not entirely cleared of hurdles. Even though the paper market for oil has gone wild over the past week, the physical market still looks well-supplied. There are currently unsold cargoes in northwest Europe, the Mediterranean, China and West Africa, according to Bloomberg. That helps explain the deterioration in the near-term timespreads in the oil futures market. That is, the July-August differential has shrunk from 63 cents per barrel from mid-April to just 24 cents per barrel. The weakening of the backwardation is consistent with a well-supplied or oversupplied market.

Moreover, hedge funds and other money managers have amassed a record position on bullish bets in oil futures, a sign of widespread expectations of rising prices. However, that exposes oil prices to a potentially sharp correction if sentiment shifts. Another way of saying the same thing is that investors have helped magnify the price gains recently because of their positioning, but if fears of supply disruptions from Iran, for example, fail to translate into physical barrels removed from the market, the risk premium could ebb and prices could fall as investors liquidate their bullish bets. In short, the financially-driven price rally could reverse course.

One candidate to shift sentiment could be demand undershooting expectations. There is nothing like $3 per gallon gasoline to begin to curb consumption. The recent strengthening of the dollar will compound the pain for the rest of the world, threatening to curtail demand.

Nevertheless, the oil market is tighter than it has been in years and physical supplies could fail to keep up with demand, especially if a few disruptions occur. While it isn’t a certainty (it never is), the odds are good that prices continue to rise.

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