Oil prices mixed as demand shrinks, but stimulus hopes support

MELBOURNE (Reuters) – Oil prices were mixed on Thursday following three days of gains, with the prospect of rapidly dwindling demand due to coronavirus travel bans and lockdowns offsetting hopes a U.S. $2 trillion emergency stimulus will shore up economic activity.

West Texas Intermediate (WTI) crude CLc1 futures slipped 4 cents, or 0.2%, to $24.45 as of 0018 GMT, while Brent crude LCOc1 futures rose 12 cents, or 0.4%, to $27.51.

“With lockdowns in many countries, expectations of oil demand contracting by more than 10 million barrels per day (bpd) are rising. Such demand loss will increase the supply glut,” Australia and New Zealand Banking Group analysts said in a note.

The collapse of a supply-cut pact between the Organization of the Petroleum Exporting Countries (OPEC) and other producers led by Russia is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million bpd from May.

“Production increases by Saudi Arabia and Russia loom, and things still look uncertain due to the ongoing price war between these two countries,” ANZ said.

U.S. crude inventories rose by 1.6 million barrels in the most recent week, the U.S. Energy Information Administration said on Wednesday, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10% to 19.4 million bpd, EIA data showed.

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Stocks, gold surge as Congress nears $2 trillion aid package

NEW YORK/LONDON (Reuters) – Stock markets soared on Tuesday, with a gauge of global equities posting its biggest gain since the coronavirus roiled financial markets a month ago, as the U.S. Congress zoned in on a $2 trillion stimulus package to curb the pandemic’s economic toll.

Senate Majority Leader Mitch McConnell said a deal was “very close” for an aid package that investors hoped would turn around markets reeling from the biggest downturn since the global financial crisis more than a decade ago.

The market rally came a day after the U.S. Federal Reserve’s offer of unlimited bond-buying to help avert a global depression failed to persuade skittish investors, at least initially.

The mood improved on Tuesday, with U.S. gold futures climbing as much as 6.7% to $1,672.60 an ounce and the dollar halting its steady rise as the moves by the Fed and others eased the need for cash and slashed the demand for dollars.

The rally led some to suggest a rout that has trimmed U.S. and European equities by roughly 30% in the past month may be near an end.

“We’re seeing some signs that a bottoming is happening,” said Neel Shah, senior trader at Peak6 Capital Management. “The next big step is the Senate passing the stimulus bill.”

U.S. and European stocks jumped 6% or more and the dollar index, a basket of major trading currencies, slid.

MSCI’s gauge of stocks across the globe gained 8.39%, the largest single-day gain since equities tumbled from all-time highs a month ago and since the height of the global financial crisis in October 2008.

The broad pan-European STOXX 600 index rose 8.40%, its strongest session since late-2008. The index is still down about 30% from a record peak hit in February.

German stocks jumped 11% and British blue chips added 9% as both bourses also posted their best sessionssince 2008.

Europe’s so-called fear gauge fell to 52.53, itslowest in nearly two weeks, after spiking to 12-year highsearlier this month.

Emerging market stocks rose 5.73%.

The rally was wide, lifting most stocks, with only 11 S&P 500 stocks declining on the day.

On Wall Street, the Dow Jones Industrial Average rose 2,112.98 points, or 11.37%, to 20,704.91. The S&P 500 gained 209.93 points, or 9.38%, to 2,447.33 and the Nasdaq Composite added 557.18 points, or 8.12%, to 7,417.86.

(Graphic: Volatility is back on Wall Street, here)

Measures the Fed unveiled on Monday to boost liquidity across debt markets and backstop lending were seen by investors as helping market conditions.

“The Fed’s measures are unprecedented, and they have been extremely proactive in preventing this external shock from morphing into a wider funding crisis,” said Vasileios Gkionakis, head of FX strategy at Lombard Odier.

The Fed also will expand its mandate to buy corporate and municipal bonds and backstop a series of other measures that analysts estimate will deliver more than $4 trillion in loans to non-financial firms.

Other countries unveiled their own measures. South Korea’s ravaged market climbed 8.6% after the government doubled a planned economic rescue package to 100 trillion won ($80 billion).

In China, mainland stocks posted their biggest gain in three weeks of almost 3%, while Japan’s Nikkei soared 7%, its biggest daily gain in four years. [.SS][.T]

Still, investors remained wary, as the number of coronavirus infections globally neared 400,000 and new infections brought in from abroad rose in China.

Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the outbreak hammered the world economy, and Japan said it was postponing the Olympics.

IHS Markit’s flash composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of economic health, plummeted to a record low of 31.4 in March, the biggest one-month fall since the survey began in 1998.

The government and central bank financial support helped calm nerves in bond markets, where yields on two-year U.S. Treasuries hit their lowest since 2013.

The benchmark 10-year U.S. Treasury note fell 31/32 in price to yield 0.8642%.

Germany’s 10-year yield was up 2 basis points on the day at -0.36%, compared with a 4 bps rise before the purchasing managers index (PMI) releases, all small moves when compared to record lows hit at -0.90% earlier in March.

(Graphic: Global financial markets since coronavirus escalated, here)

ALL ABOUT THE ECONOMY

The impact of the virus on the global economy is evident in a series of growth forecast downgrades and advance readings of PMIs across the world’s biggest economies.

German activity plunged to the lowest since the 2009 crisis, driven by a record services contraction, while French activity hit all-time lows. Japan posted its biggest-ever services fall.

However, the prospect of massive Fed funding pushed the greenback 0.26% lower against rivals, off three-year peaks, falling against the yen and sliding 1% versus the euro.

Brent futures rose 12 cents to settle at $27.15 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 65 cents to settle at $24.01.

(Graphic: China’s coronavirus cases, here)

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Markets tumble as scale of stimulus programs numbs investors

NEW YORK (Reuters) – Global equities tumbled anew on Wednesday, with bond and gold prices also falling in an unusual tandem, as markets grappled with the sheer scale of government programs and handouts aimed at softening the economic shockwave from the coronavirus.

The Trump administration asked Congress to approve $500 billion in cash payments to taxpayers in two rounds starting April 6 and $50 billion in secured loans to U.S. airlines to address the outbreak’s impact, according to a document seen by Reuters.

Traders are struggling to sort out the various moves by global central banks and governments to shore up economies bracing for what looms as a short but deep global recession from a pandemic still on the rise.

Investors dumped precious metals and other safe-havens in favor of cash after the additional U.S. stimulus measures announced Tuesday failed to calm markets hit by mounting fears over the economic downside from the coronavirus.

Estimates for the duration of the damage extend out into the summer. Japan already is in a recession, a downturn is imminent in Europe and a U.S. recession will start in the second quarter, a report from IHS Markit said.

The coronavirus has raised the prospect of the steepest ever annual fall in oil demand, Goldman Sachs said. U.S. crude futures plummeted to an 18-year low and Brent hit more than 16-year low as travel and social lockdowns slammed demand.

Certain correlations are breaking down in the markets as typical safe-haven assets sell off, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“During a dramatic risk-off situation you would expect to see at least a little bit of a bid in bonds or maybe in gold, but we’re seeing the opposite,” Abbasi said.

“Despite the continued pain in equities, the safe-haven asset correlation seems to be now trading with risk assets, rather than the inverse to them,” he said.

Bond prices tumbled, instead of rising, as investors sold to raise cash. Yields on the benchmark 10-year U.S. Treasury yield rose to 1.257%, after earlier hitting 1.226%.

In Europe, the gap between German and other euro zone bond yields widened, with investors demanding higher premiums to hold anything but German debt.

Ten-year French government bonds yielded 69 basis points more than their German counterparts, the most since April 2017.The gap between 10-year German and Dutch debt grew as wide as 37basis points, the most since July 2015.

Gold dropped 2%, falling below $1,500 an ounce.

“Gold continues to suffer from risk-off panics in the market, trading back below $1,500 level,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“Liquidity here, as in most markets, is deeply compromised and we expect to see continuing volatility, mood-driven swings,” Wong said.

MSCI’s gauge of stocks across the globe shed 6.26% and emerging market stocks lost 5.34%. The pan-European STOXX 600 index lost 3.99%.

On Wall Street, the Dow Jones Industrial Average fell 1,660.63 points, or 7.82%, to 19,576.75. The S&P 500 lost 177.29 points, or 7.01%, to 2,351.9 and the Nasdaq Composite dropped 462.37 points, or 6.3%, to 6,872.41.

Boeing Co fell another -22.1% as the planemaker called for a $60 billion bailout for U.S. aerospace manufacturers facing the fallout of an extended collapse in global travel.

European bourses tumbled, with indexes in London, Frankfurt and Paris plunged from 4% to 5%.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.

The economic slowdown will be tough on travel-related industries, gaming and brick and mortar retail, said Scott Crowe, chief investment strategist at real estate-focused CenterSquare Investment Management in Philadelphia.

U.S. clothing retailer Gap Inc and luxury department store operator Neiman Marcus will close their stores for two weeks, joining other retailers in a vast effort to stem the spread of the coronavirus.

“It’s a little less obvious whether the government will start bailing out retailers. The problem is that a lot of these retailers were already teetering on a knife edge coming into this,” Crowe said. “There are very few industries right now that can sustain to a four- to eight-week shutdown.”

U.S. crude hit its lowest since March 2002, falling even after weekly government data was less bearish than expected. The draw on gasoline stockpiles and smaller-than-expected build in crude inventories showed that people were preparing ahead of business and school closings, analysts said.

U.S. crude fell 18.18% to $22.05 per barrel.

(Graphic: Market selloff speed, severity eclipses previous dislocations, here)

“We are in the midst of the mayhem really, and I think there is still a risk that the increasing number of infections will keep markets on their toes,” said Hans Peterson, global head of asset allocation at SEB investment management.

“It is hard to know how deep the recession will be, and as long as we have that situation it is hard to lift sentiment.”

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Oil giants set health checks for critical staff, work-from-home rules

HOUSTON (Reuters) – Major energy companies in the United States imposed work-from-home rules for office staff and began health checks for remote or critical workers as coronavirus spread and threatened an industry reeling from falling demand and profits.

BP, Exxon Mobil, Kinder Morgan, Motiva Enterprises and Royal Dutch Shell told most office staff to work from home starting Monday. Federal regulators on Friday were pressed by companies to ease work rules for pipeline operators and to limit visits to some sites. Shell and Chevron began health checks of workers and visitors at some key U.S. facilities, spokesmen said.

Offshore rigs, refineries and pipelines require on-site teams and group workers in close quarters, making them vulnerable in a Covid-19 outbreak. They cannot be run remotely and health checks could prevent forced shutdowns that could lead to big losses or local fuel shortages.

The pandemic has infected more than 156,000 people worldwide including some 2,900 people in the United States, killed more than 5,800 globally and slashed fuel demand amid shuttered schools, churches, offices and some retail stores.

There is only one known case of Covid-19 to hit a U.S. refinery. Marathon Petroleum Corp, the nation’s largest refiner by capacity, removed some staff at a California plant after an employee became ill. Norwegian oil firm Equinor halted a North Sea development project and removed staff after an offshore worker fell ill.

STORM-LIKE PREPARATIONS

Falling oil demand and a price-war that slashed crude prices by about 50% this year has put the industry in a tailspin. Many oil firms have abruptly cut spending and staff to cope with the downturn.

Work-at-home rules, fewer car and plane trips are expected to reduce U.S. petroleum demand by up to 2.5 million barrels per day (bpd). For the full year, it could cut motor fuel use by roughly 300,000 to 400,000 bpd.

There have been no refining or chemical plant shut-ins caused by coronavirus. Still, companies are drafting plans similar to hurricane measures that keep plants running with minimal staff, said people familiar with operations.

Shell asked salaried staff at its Louisiana refineries to begin shadowing hourly plant operators to prepare managers to run units if necessary, the people said.

Exxon (XOM.N) will allow only trained operators into control rooms at its Baytown plant, and they must remain at least six feet apart from one another, they added.

Pipeline regulators were asked on Friday to consider easing work-rules for control room operators and to limit visits by U.S. and state inspectors, said Suzanne Lemieux, an emergency expert at trade group American Petroleum Association.

SWEEPING PRECAUTIONS

BP and Shell on Friday gave workers work-at-home assignments following similar social-distancing measures at Apple, Facebook, and Microsoft’s Silicon Valley offices. The rules affect about 15,000 U.S. Shell workers.

Shell has begun screening staff who travel to its U.S. Gulf of Mexico production rigs “to ensure that we minimize the risks of COVID-19 transmission” to offshore workers, said spokesman Curtis Smith.

The sweeping precautions affect refinery, oil and gas export terminal and gas pipeline operations. Kinder Morgan Inc, one of the largest North American pipeline firms, asked most of its 11,000 employees to work from home beginning Monday. It will reevaluate the situation weekly, said spokeswoman Melissa Ruiz.

Non-essential workers at BP’s U.S. refineries, Exxon’s Baytown, Texas, refinery and Shell’s Convent and Norco, Louisiana, plants also will work from home beginning Monday, according to people familiar with the matter. BP may keep the measures through mid-April, one of the people said.

Exxon would not comment on specific actions. It is focused “on ensuring the safety and health of our entire workforce and to do our part to limit the spread,” said spokesman Todd Spitler.

Marathon Petroleum launched “business-continuity plans to accommodate staffing needs in the event of illness-related absenteeism,” spokesman Jamal Kheiry said.

Among measures being weighed at refineries are assigning small crews to keep plants during an outbreak, the people said. Crews would not leave until the crisis passed.

Most refineries can operate with about half their normal staff, the people said, but may have to scale back production.

Refiners LyondellBasell Industries and Chevron are considering health checks for employees as they begin their workday, said people familiar with the deliberations.

“We are taking precautionary measures to reduce the risk of exposure, including screening workers and visitors,” Chevron spokesman Braden Reddall said. Local offices will set their own rules with health officials, he added.

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Spain imposes Italy-style lockdown in bid to contain coronavirus

All Spaniards will have to stay at home under the quarantine, which comes into force on Monday morning.

Barcelona, Spain – With the number of coronavirus cases spiralling to more than 6,000 and the death toll reaching 190, Spain on Saturday followed Italy and prepared to impose an unprecedented lockdown.

The country’s left-wing government declared a two-week state of emergency which will start from Monday at 07:00 GMT.

Some 47 million Spaniards must stay at home in an attempt to contain an outbreak which has seen 1,500 new cases in the past 24 hours. Spain has the fifth-highest number of cases in the world, behind China, Italy, Iran and South Korea.

More:

  • Timeline: How the new coronavirus spread

  • Coronavirus: Which countries have confirmed cases?

  • What happens if you catch the new coronavirus?

In practical terms, the emergency order means Spaniards will only be allowed to leave their homes to buy food, get medicines, see a doctor, leave the house for an emergency or go to work.

Already Spain has the feel of a country that has closed for business, and the atmosphere is tense.

The crackdown started last week when schools closed, confining not just 15 million pupils to home but their parents, too.

Juggling work with child care has proved a difficult balance for some.

Begona Lopez, 37, a marketing executive from Barcelona, has a four-year-old son who is too young to understand why he is confined to his mother’s cramped flat.

“My son has a habit of touching everything, so I can hardly take him out. It is not safe. He is careering around the flat on his bike in his pyjamas. I am not sure how much I can take of this,” she told Al Jazeera.

Cities deserted

The streets in many cities were empty on Saturday, with bars, restaurants, clubs and other businesses deserted. On many roads, there were few cars. 

The government has ordered the population to work from home, or “teletrabajo” as it is called in Spanish. Public transport will continue to operate to ensure those in essential sectors such as health or transport can get to their place of work, but services will be reduced by 50 percent.

The skies above Spain are also emptying as many airlines have stopped flights there.

Jet2, a British airline, ordered flights bound for Spain on Saturday to turn round in midair and return to UK airports. Other airlines have offered changes of booked flights without the usual costs. Tourists stuck in Spain may be able to change their flights and return later, and other countries have advised their citizens not to go there.

Anyone spotted disobeying the state of emergency could face large fines, and the police and army will be deployed on the streets.

Supermarkets have reported panic buying and shortages on essential items of pasta, rice and toilet roll.

Health authorities in Madrid, where almost half of all cases have been diagnosed, said their resources are stretched. Private health companies are offering help and doctors were offering advice on social media.

For a country like Spain where life is lived outside in bars, restaurants or on the beaches, the lockdown will come as a shock.

Antonio Valverde, owner of the El Pasa Doble restaurant in Madrid, said last week he made only 800 euros in one day whereas he usually he takes home 5,000 euros. 

“If this carries on for much longer, I am ruined. I cannot sustain loses like this and neither can anyone else,” he told Al Jazeera.

Lifting spirits

The closure of restaurants, bars and hotels will put a strain on Spain’s tourism industry which accounts for 12 percent of GDP and 13 percent of employment.

Economists predict the Spanish economy, which had been expected to grow by 1.7 percent this year, will plunge into recession.

Spaniards were trying to lift their spirits by standing on the balconies of flats in Madrid and singing along to the wordless national anthem, mirroring similar events in Italy.

There are also plans to applaud the health workers tackling the virus on the front lines at 21:00 GMT each night. 

Spanish Prime Minister Pedro Sanchez announced the lockdown after a marathon cabinet session, telling Spaniards: “We must all be united in fighting the coronavirus.” 

Shortly afterwards, it was revealed that his wife, Begona Gomez, had been diagnosed with COVID-19.

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The bodyhunter searching for women’s remains in El Salvador’s killing fields

By Stuart Ramsay, chief correspondent, in El Salvador

We are in the killing fields of the MS13 crime gang.

“There are bodies here for certain,” Israel Ticas tells me as he surveys the terrain.

He is the self-taught bodyhunter of San Salvador.

He leads me to a place where he found the remains of a woman.

She was brought here alive and cut to pieces by 15 assassins.

Ticas uses his hands to show me how the killers cut off her arms, legs and head. They don’t bother to shoot people.

He says the gangs want to inflict pain and routinely rape the female victims before they are killed.

“She had a cut to the head, a cut to the arm… her whole body was cut,” he said, gesticulating slicing motions on his limbs and neck.

Her body was not the only one they found in the same location.

Often other victims are present and have to watch knowing that they will get the same treatment a few minutes later. It’s horrendous and Ticas has to confront this every day.

Ticas says they would never see older adults, elderly people, or children – only young people from as young as 13 years old to 25.

“These boys, for them a woman as nothing more than a sexual object, which was worth less than an animal.”

“We are told there are 31 bodies, we have found 21,” he said.

He shouted instructions to the driver of a small digger who arrived. He needed a huge chunk of earth two meters deep to be cleared away so he could begin the painstaking task of digging and searching with shovels and pick axes.

It was going to be a big job, he said.

The signs of previous successful and unsuccessful searches dotted the landscape.

Ticas points to the spot where a woman's body was found

Small flags in holes indicated spots where Ticas thought bodies may have been buried.

One area was a patchwork of dozens of holes all exactly 15cm apart.

“We didn’t find the body the witness told us was killed here. If the body was here we would have found it, so we move further on,” he said.

“The witness has probably forgotten exactly where the person was killed.”

I ask if it was because they did the killing at night.

“Oh no, they kill in the day and in the night. Nobody can hear the screams out here and nobody but the gangs would come,” he said.

The murders in this barren wasteland are always brutal.

Earlier, I was handed a hard hat and pointed towards a hole in the ground. A sloping muddy path disappeared into the darkness beneath the University of El Salvador.

I could hear the sound of a shovel as I scrambled down into the catacombs deep beneath the university building.

Ticas was working at the end of a narrow tunnel hacked out of ancient bricks and rock, digging.

It was stiflingly hot, and sweat poured off the face of Ticas as he dug and scraped away at the mud and rock, pushing occasionally to sift through the piles of rubble looking for clues.

He was excavating the tunnels by hand, inch by inch, searching for evidence and clues that would reveal the final resting place of people murdered and buried here during the country’s civil war in the 1980s.

According to evidence presented to the El Salvador truth commission, between 300 and 500 people a month disappeared or were murdered as the military government fought left-wings guerillas at the height of the war in 1981.

Ticas pushed his way through a narrow gap he had made, linking two tunnels. He tapped the ancient brick and mud walls trying to find the cavity where the bodies have been buried and covered up.

He paused, spotting a long but bent nail. It could have been from a box or a coffin.

A witness to the murders had admitted they killed people down here but the foundations and catacombs beneath the building had long since changed as the university campus was extended over the intervening decades.

It was an historical crime, but modern day murders are his real work and life’s calling.

In El Salvador there are many bodies to find, killed by the crime gangs that terrorise society here.

So far he has found the bodies of over 750 people who had been “disappeared” by the gangs, 70% of them, in recent years, women.

San Salvador has continued to be dangerous in the years after the war. In 2018, the capital had 50.32 homicides per 100,000 residents, with 3,382 people reported missing across the whole country.

The number missing is believed to be much higher because many do not report family members who have disappeared for fear of reprisal by the gangs.

Above ground I joined him and an ever present guard of police and soldiers, rifles permanently on the ready, as they scoured the barren hills outside the country’s capital, San Salvador.

Ticas has turned himself into a forensic investigator, inventing his own techniques for body hunting. He is a maverick who often clashes with his superiors in the Justice Department, but he gets results.

He is something of an earth whisperer who can read where evil was done.

The gangs want Ticas dead. He knows this because they have tried many times. His techniques mean that apart from just recovering the bodies he can find evidence that sometimes links the crime to specific individuals.

He is driven by the need to find justice and restore dignity to the memory of the victims. He does it for the families and he does it for himself.

“I say (to the families of the victims) I honour the victims and I feel your pain. I feel it in my heart because I am human.”

Such is the scale of the violence here the Body Hunter of San Salvador will never finish his work. But he won’t ever give up on the victims.

Beneath the scorching sun in the barren wilderness he whispers, “I am the lawyer for the dead.”

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Trump’s peace deal with Taliban under threat as leader boasts of ‘defeating superpower’

Earlier this month US and Taliban leaders signed a peace deal in Doha that will seem all 12,000 American soldiers pull out within 14 months. In return the Taliban have agreed to reduce the level of violence, keep Al-Qaeda and ISIS out of areas they control and enter into negotiations with the Afghan Government. However according to Michael Semple, an academic from Queen’s University in Belfast, the agreement is effectively a Taliban victory.

Speaking to The Times he commented: “The US conceded to pretty much every single Taliban demand – that’s the definition of victory.”

America first invaded Afghanistan, ending the Taliban’s brutal rule, in response to the 9/11 terrorist attacks.

Al-Qaeda, which carried out the atrocities in New York and Washington D.C., used Afghanistan as a base for its operations.

More than 2,400 American soldiers have been killed in the conflict, the longest war in US history.

In addition 456 British soldiers were killed fighting the Taliban, primarily around Helmand province in southern Afghanistan.

Speaking to The Times a Taliban leader insisted Trump’s deal was a victory for the group.

He said: “We have just defeated a superpower.

“Once the Americans have gone it will be easy to sort out the Afghan government.

“We haven’t been shedding blood all these years with the intent of sharing power with the Kabul government.

“We fight for Sharia, for the Islamic Emirate, not to make deals with democrats in the time of our victory.”

Under the terms of the Doha agreement thousands of Taliban prisoners will be released by the Afghan government, though it is currently refusing to do so.

The Taliban won’t negotiate directly with the elected Afghan government which they believe lacks legitimacy as ‘apostates’.

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However Afghan authorities are refusing to release prisoners and in response the Taliban have continued their attacks.

Despite the continued violence US troop withdrawals from the country have already began.

There are fears that, despite the Taliban’s promise, this will lead to Al-Qaeda and other international terrorist groups becoming reestablished in the country.

In an interview with The Times Khalid Agha, a Taliban commander, said: “The aim of al-Qaeda and the Taliban is one and the same: to establish a regional emirate.

“Al-Qaeda have been our brothers in jihad.

“We will not help them plot further attacks like 9/11, but we will not expel them either.

“Anyone who asks us to do so will face huge opposition within our movements.”

Earlier in the week President Trump admitted the US withdrawal could result in the Taliban seizing power.

He said its “not supposed to happen that way, but it possible will”.

The US President added: “Countries have to take care of themselves.

“You can only hold someone’s hand for so long.”

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Oil slumps as stock markets sink, while Saudi, UAE plan to boost capacity

NEW YORK (Reuters) – Oil prices fell 4% on Wednesday, sinking into the close of trading with renewed weakness in the stock market after the World Health Organization said the global coronavirus outbreak is now a pandemic, and as major oil producers announced plans to escalate the burgeoning price war.

Brent crude settled down $1.43, or 3.8%, at $35.79 per barrel, while U.S. West Texas Intermediate (WTI) crude ended down $1.38 or 4% to $32.98.

Risk assets tumbled throughout the day, but accelerated losses late as the number of coronavirus cases increased and numerous countries restricted travel.

“What caused the dump in oil prices in the last minutes before the oil market close was when the stock market made new lows,” said Phil Flynn, analyst at Price Futures Group in Chicago. “News on the coronavirus does not seem to be inspiring demand hopes right now.”

Both the Organization of the Petroleum Exporting Countries and the U.S. Energy Information Administration (EIA) slashed oil demand forecasts because of the coronavirus outbreak, as they now see demand contracting in this quarter.

Saudi Arabia and the United Arab Emirates announced plans to boost production capacity following the collapse of coordinated output cuts by Saudi Arabia, Russia and others. The Saudi energy ministry has directed producer Saudi Aramco to raise its output capacity to 13 million from 12 million barrels per day (bpd).

UAE national oil company ADNOC also said it would raise crude supply to more than 4 million bpd in April and accelerate plans to boost its output capacity to 5 million bpd, a target it previously planned to achieve by 2030.

“Saudi’s shock-and-awe strategy suggests to us that to bring Russia back to the negotiating table, it is serious in causing severe price and revenue pain for all oil producers,” UBS analysts said in a note.

Trading in long-dated Brent futures contracts points to expectations that supply will continue to rise. The current Brent front month contract recently traded at more than $5 below the six-month contract, the biggest discount since January 2016.

(GRAPHIC: Oil price forecasts dim after price war begins – here)

Russian Energy Minister Alexander Novak said Saudi Arabia’s plans to increase production capacity were “probably not the best option”, adding Moscow had several phone calls with OPEC and non-OPEC members, but that no partners had agreed to its proposal.

OPEC said in a monthly report that it expected global demand to rise by just 60,000 bpd in 2020, a reduction of 920,000 bpd from its previous forecast.

The U.S. Energy Information Administration (EIA) also said global oil demand is expected to dive by 910,000 bpd in the first quarter due to coronavirus outbreak.

Numerous North American producers have announced spending cuts including Occidental Petroleum Corp, Marathon Oil Corp and Diamondback Energy Inc.

“Any reduction in spending and drilling will take time to show up in actual production figures and is unlikely to mitigate the bearish impact of a massive Saudi output increase, in case the latter does happen,” oil brokerage PVM’s Tamas Varga said.

Weekly data on U.S. inventories showed little effect from the coronavirus outbreak. Crude stocks rose by 7.7 million barrels, but inventories of gasoline and diesel fell sharply, as refining runs remain at seasonally low levels. [EIA/S]

Policymakers and central banks have been taking measures to bolster their economies against disruption caused by the coronavirus outbreak, the latest being the Bank of England which unexpectedly cut interest rates by half a percentage point on Wednesday.

(GRAPHIC: Oil price dive turns up the heat on OPEC finances – here)

A worker at Equinor’s Martin Linge offshore oil and gas development has been diagnosed with the coronavirus and is being held in isolation, the Norwegian energy firm said. It said activity on the field will be reduced on Wednesday.

However, China’s independent oil refiners are cranking up production as local governments begin to relax strict measures to contain the coronavirus and fuel demand begins to recover.

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Oil rises more than 1% on smaller-than-expected rise in crude stocks

SINGAPORE (Reuters) – Oil prices rose more than 1% on Thursday, recouping losses from the previous day on a smaller-than-expected rise in crude oil inventories in the United States, although the gains were capped by uncertainties over cuts by major oil producers.

Brent crude rose by 78 cents, or 1.5%, to $51.91 per barrel by 0202 GMT, while U.S. West Texas Intermediate (WTI) was up by 69 cents, or 1.5%, at $47.47 per barrel.

Volumes were low, however, reflecting that “there is not a lot of confidence in the moves,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC), meanwhile, struggled on Wednesday to win support from Russia to join them in additional oil output cuts to prop up prices that have tumbled by a fifth this year because of the coronavirus outbreak.

Saudi Arabia wants extra cuts of 1 million to 1.5 million barrels per day (bpd) for the second quarter, and to keep existing cuts of 2.1 million bpd in place until the end of 2020.

“If OPEC+ settles with something in the middle of the Russian request of no change in cuts and the 1.5 million Saudi goal, that might not be enough to keep prices supported here,” said Edward Moya, senior market analyst at broker OANDA.

“OPEC+ needs to send a strong message and anything below 1 million barrels in deeper production cuts will send oil prices sharply lower.” 

Supporting oil prices, U.S. crude stocks rose modestly in the latest week, while U.S. oil exports surged to more than 4 million barrels a day for the first time since December, suggesting a rise in overseas demand. [EIA/S]

Geopolitical tensions in the Middle East also boosted prices. The Saudi-led coalition fighting in Yemen said it had foiled an attack on an oil tanker off Yemen’s coast on the Arabian Sea, the Saudi state news agency SPA reported on Wednesday.

Still, the global spread of the coronavirus has crushed hopes for stronger growth this year and will hold 2020 global output gains to their slowest pace since the 2008-2009 financial crisis, International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday.

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EU crisis: Germany to ‘increase controls’ at the border following influx of refugees

Greek police have struggled to cope with the large number of refugees descending on the country after Turkey said EU borders would now be open. Greece has said it has more than 25,000 people trying to enter the country and has arrested a further 220 so far.

With the crisis worsening, an MP for Angela Merkel’s Christian Democratic Union party, Mathias Middelberg has now claimed extra controls will be necessary.

He said: “Nationally, we have to prepare for increased controls and also for rejections at our own borders.”

He also accused Turkish President, Recep Tayyip Erdogan of a “breach of contract”.

Mr Erdogan announced on Saturday that Turkey has opened its border to the EU, leading to many refugees from the Syrian Civil War attempting to enter the bloc.

Echoing Mr Middelberg, Lower Saxony’s Interior Minister, Boris Pistorius called for immediate support for Greece.

He also said the EU could not allow large groups of people to cross the external border.

He added: “We cannot allow hundreds of thousands of people to come to us again across Europe’s external borders.”

Mr Erdogan made the decision to release the refugees after claiming his country could no longer cope with the amount of people escaping the conflict in Syria.

JUST IN: Syria war: Turkey can’t handle ‘refugee wave’ warns Erdogan

Specifically, Turkey has claimed it cannot hold the waves of people entering to escape from Syrian and Russian airstrikes.

The Turkish President said: “We will not close these doors in the coming period and this will continue.

“Why? The European Union needs to keep its promises.

“We are not obliged to look after and feed so many refugees.

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“If you’re honest, if you’re sincere, then you need to share.”

Turkey has an estimated 3.7 million refugees from the conflict in Syria.

Following the migrant crisis in 2015, Turkey did sign a deal with the EU to stop more migrants heading into Greece.

The EU had offered Turkey more aid to deal with the crisis but that did not deter Mr Erdogan from opening the border.

Mr Erdogan also claimed the decision to open the border to Greece was “fully” in line with international law.

Turkey’s President also attacked Greece over its “inhumane scenes” after video emerged of the treatment refugees had received.

In retaliation, Greece has accused Turkey of housing the refugees as political pawns.

The Prime Minister, Kyriakos Mitsotakis said Greece would not be blackmailed over the matter.

Additional reporting by Monika Pallenberg.

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