BB may consider deadline extension
for tenure of bank directors
Sheikh Shahariar Zaman
Bangladesh Bank is examining a proposal to extend the tenure of private commercial bank directors scheduled to leave their boards by September, said the central bank governor after a meeting with bank chairmen on Thursday.
Tenures of about 130 directors are scheduled to end by September as per the amended Bank Company Act, promulgated in October 2007. The act prohibits an individual from acting as a director for more than six consecutive years. It further stipulates that those already with a tenure exceeding six years would have to be relieved of their duty as a director within a year of the promulgation of the ordinance.
The directors requested the central bank to give them a ‘breathing space’ to absorb new directors, said a senior central banker.
‘Most of the directors in some banks would have to retire from their boards, which might create a vacuum,’ he said.
The central bank might give them one or two annual general meetings to induct new directors, he added.
He, however, said, ‘We did not make any commitment but we are scrutinising their request.’
Criticising the practice of appointing family members to the boards, he said it would be more beneficial to the organisations if they appointed professional people who can run those establishments more efficiently.
The directors need not transfer their shares and the new professional directors may be allotted token shares to become eligible for directorship, he said.
The central bank would perform its job as a regulator but ‘self-regulation’ is the best means, he said.
Banks are not like other commercial establishments as they deal with depositors’ money, he said. ‘The board must enjoy full confidence of the people in general and depositors in particular.’
The central bank wants to see competent and professional persons on the boards of the banks, he said.
Induction of professionals into the boards will infuse new ideas and dynamism to the business, he added.
Out of the 30 private banks, there will be changes in the boards of 18 banks. Al-Arafah Islami Bank will lose 21 directors, Exim Bank 8, Mutual Trust Bank 8, Pubali Bank 14, Social Investment Bank Limited 12, City Bank 13, Premier Bank 10 and UCBL 19 directors.
The boards of Pubali Bank, Al Arafah Bank, UCBL, Premier Bank, City Bank and SIBL will have to be entirely reconstituted after October next year.
Arab Bangladesh Bank and First Security will lose four directors each, Brac Bank and Bank Asia to lose three directors, and Jamuna Bank, Mercantile Bank, Southeast Bank, Uttara Bank, and Commerce Bank will lose one director each.
DSE seeks more budgetary measures
for capital market growth
Staff Correspondent
The Dhaka Stock Exchange has sought more fiscal policy supports of the government for the capital market growth.
‘We hope that the government will take measures in the next national budget for enlargement of the capital market,’ Saiful Islam, newly elected senior vice-president of the DSE, said at a press briefing in DSE conference room on Thursday.
He said the DSE submitted a set of proposals to the government for accommodating in the national budget for the fiscal year 2008-2009.
On May 19, finance adviser AB Mirza Azizul Islam told the media that the budget for the fiscal year 2008-2009 was likely to be announced on June 8 to June 10.
Saiful Islam, also managing director of the Equity Partners Securities, a brokerage firm, said the bourse proposed a number of measures including widening tax differentiation between the listed and the unlisted companies and removing double taxation on income.
He said the bourse also proposed a set of macro-economic policy measures for consideration aiming at betterment of the capital market.
He said the government had taken a number of measures for development of the stock market in the fiscal budget for the year 2007-2008. ‘The government is offloading shares of the state-owned enterprises to increase the supply of securities to the stock markets.’
Mirza Azizul Islam, also former chairman of the Securities and Exchange Commission, stock market regulatory body, presented the national budget for the fiscal year 2007-2008.
Abdul Haque, newly elected president of the DSE, said, ‘We hope that the next budget will be more capital market friendly.’
He said the investment activities in the country would be vibrant, if the capital market is enlarged.
DSE chief executive officer Salahuddin Ahmed Khan said the supply of shares should be increased to meet up the growing demand in the markets.
He said shortage of securities against the high demand pushed most of the securities overpriced in recent times posing risks to the retail investors.
The government should take necessary fiscal and monetary policy measures for making the capital market a vibrant one. Capital market is growing but yet under expanded, he said adding
‘The government and private sector entrepreneurs should come forward to utilise its potential as source of industrial financing.’
Sharif Ataur Rahaman, vice-president of the DSE, also present at the briefing.
Bad debts amount increases by
Tk 1,214 crore in third quarter
Staff Correspondent
The classified loans figure of the banks increased by Tk 1,214 crore in the third quarter of the current fiscal year, according to the Bangladesh Bank data.
The total amount of the bad loans stood at Tk 23,838 crore, 13.15 per cent of the total loans figure at Tk 181,234 crore, provided by the 48 scheduled banks till March.
Earlier till December, the figure of the bad debts was Tk 22,624 crore, 13.23 per cent of the total loans figure at over Tk 170,000 crore.
The banks could not make much recovery from the defaulters in the January-March period, former Bangladesh Bank governor Mohammed Farashuddin told New Age.
Many big businessmen are either in jail or on the run due to anti-corruption drive of the government, he said adding, ‘Their businesses are also not going well.’
The amount of the bad debts would have been higher had not the banks wrote off a huge amount of loans in a bid to clean their balance sheets, he pointed out.
A decade back, the amount of bad debts was about Tk 21,000 crore, which was 30 per cent of the total loans figure, he said adding, ‘Now the figure is slightly higher.’
Terming the huge write-off by the financial institutions as a ‘moral hazard,’ he said the banks are actually patronising the rich who take loans from the funds of general depositors.
Banks mobilise funds from general depositors at lower interest rate and provide money to people at higher interest rate. Write-off of the loan amount of rich people means the borrower dot have to pay back the money to banks on various pleas, he explained.
‘In addition to that the banks have to write-off loan money from their profits. The shareholders get less dividend for the write-off,’ he pointed out.
There should be asset management companies which would buy the bad assets from the banks and recover whatever amount they can from the defaulters, he 0bserved.
In the third quarter, the state-owned banks had classified loans amount of Tk 14,212 crore, private commercial banks Tk 5,746 crore, foreign commercial banks Tk 227 crore and specialised banks had Tk 3,652 crore.
World stock markets weighed down
by soaring oil prices
Agence France-Presse . London
Stock markets around the world mostly slid on Thursday, weighed down by record-high oil prices that stoke inflation and bite into earnings, analysts said.
Hong Kong shares closed down 1.64 per cent after Wall Street wilted overnight. Europe’s main stock markets mainly fell as the price of crude soared above 135 dollars for the first time on Thursday.
‘We’re seeing a flight to defensives such as utilities and pharmaceuticals amid oil price, dollar and general economic concerns,’ said a saleswoman at a European brokerage who requested anonymity.
In Asia, Chinese share prices ended 1.65 per cent in negative territory, Singapore shed 1.1 per cent and South Korea lost 0.7 per cent.
But Japanese shares recovered to close modestly higher, while Taiwan and Australia ended flat.
‘If commodity prices continue to rise and oil prices stay high, it’s difficult for Asian markets to make progress,’ Pierre Gave, the head of research at financial consultancy GaveKal told AFP.
‘The big weight on Asian markets at the moment is the problem of inflation,’ said Hong Kong-based Gave. ‘We’ve seen a big outflow of capital from Asia over the last month and a half.’
In Europe, Frankfurt’s main index shed 0.51 per cent, and Paris slid 0.33 per cent, while London gained 0.24 per cent approaching the half-way stage.
‘If it weren’t for the miners and telecoms, I don’t think we’d be seeing these slight gains’ in London, said Mic Mills from tradindex.com.
Investors fear surging fuel and food costs will bleed cash from consumers’ wallets and force some countries to hike interest rates in a bid to tame inflation by slowing economic growth.
They also worry about the wider impact of the ailing US economy, which is battling a slowdown after a house price downturn and default crisis among subprime — or riskier — mortgages.
On Wall Street the Dow Jones Industrial Average plummeted 1.77 per cent Wednesday because of the feverish rise of black gold, with the US central bank cutting its 2008 economic growth forecast to 0.3-1.2 per cent from 1.3-2.0 per cent, citing oil prices as a factor.
Oil continued its astonishing rise Thursday, reaching a record-high 135.14 dollars a barrel in London after unexpected drops in US crude and petrol stocks.
‘The mood is so negative,’ said Prayoga Triyono, a fund manager at Henan Putirai in Jakarta. ‘The oil price does scare away investors although at some point it may boost interest in energy stocks.’
Biman stops catering services to GMG Airlines for default in payment
United News of Bangladesh . Dhaka
As GMG Airlines is planning to go for nearly one billion US dollar purchase of six wide body Boeing aircraft, the Biman Bangladesh Airlines Limited stopped catering services to the airlines on Wednesday for default in payment of Tk 4.3 million.
Biman also owes around Tk 6.3 million from GMG Airlines for cargo handling.
Sources in Biman said GMG Airlines also defaulted in payment to the International Air Transport Association Clearing House. For this reason, Biman has not received $259,747.88 for ground handling charges provided to GMG Airlines.
On cargo handling account, GMG Airlines gave a bank guarantee of Tk 1 million whereas the dues stand at Tk 6.3 million, while its bank guarantee is Tk 4 million against supply of food items from Biman Flight Catering Service.
A Biman high official said the cheques they received from the GMG Airlines on account of food services were dishonoured by the respective bank. The amount of such dishonoured cheques is Tk 3.2 million.
For ground handling
of GMG Airlines flights,
Biman is waiting to get $ 259,747.88 from the IATA Clearing House.
As per the IATA rules, all ground handling payments would be provided through the IATA Clearing House.
Recently, IATA Clearing House informed all its members in writing that GMG Airlines, Air Botswana and Mahan Air have defaulted to pay their dues.
The Biman high official said this letter is a warning to all IATA members. ‘IATA by this letter to all its members gave the signal to be more cautious before making any deal with the three airliners.’
‘Japan’s economy showing resilience’
Agence France-Presse . Tokyo
The Japanese economy is holding up well in the face of the US economic slowdown but interest rates still need to be kept low until uncertainty over the outlook clears, the IMF said Thursday.
The International Monetary Fund urged Asia’s largest economy to make efforts to reduce its huge public debts and take measures to address the demands from its ageing population.
‘We see the economy as showing a welcome resilience to the slowdown in the US and global markets so far,’ Daniel Citrin, deputy director of the IMF’s Asia and Pacific Department, told reporters.
He noted that the world’s second-biggest economy posted annualised growth of 3.3 per cent in the first quarter of 2008, based on a preliminary estimate.
‘That said, recent indicators do suggest that we are heading for a slowdown. The momentum is set to slow with lower global growth, a fairly stagnant US economy in particular, and also deteriorating terms of trade reflecting the sharp increase in global energy and commodity prices.’
‘This is putting a squeeze on both profits in the business sector and household income,’ Citrin said after annual consultations between the IMF and Japanese government and other officials.
He said the IMF expects Japan’s economy to grow by about 1.4 per cent this year and 1.5 per cent in 2009, in line with its earlier forecasts.
‘The outlook is subject to considerable uncertainty at this time, related to the depth of the US slowdown and also future developments in commodity prices and financial market conditions,’ he said.
Surging oil could deal blow
to world economy
Agence France-Presse . Washington
The feared super-spike in crude oil prices that appears to be underway could deal a crippling blow to a global economy already reeling from the US housing slump and tight credit, analysts say.
Yet some argue that the surge may be a speculative bubble, and could end up self-correcting as demand softens from weaker economic growth and energy efficiency measures.
Crude futures this week soared past the level of 130 dollars a barrel for the first time, having more than doubled in the past year.
The jump appeared to fulfill predictions from some analysts of a super-spike that could take oil to 150 to 200 dollars a barrel.
Goldman Sachs analyst Arjun Murti added to the speculative fever earlier this month with a dire prediction of higher prices, citing ‘a lack of adequate supply growth’ and still-strong demand.
‘The possibility of 150-200 dollars per barrel seems increasingly likely over the next six to 24 months,’ he said in a research note.
The reality of sky-high energy costs could mean a darker outlook for the US and global economy, by raising the price of a variety of goods and services.
The notion of a quick recovery in the struggling US economy would likely be put in doubt, and the rest of the world would suffer as well.
‘A super-super spike would most likely put a stake in the heart of global economic growth,’ says Ed Yardeni, economist at Yardeni Research.
‘A global economic downturn would be the most likely outcome, led by a longer and deeper recession in the US.’
The airline industry, already reeling from the surge in the past year, is feeling even more pain. Several small US carriers have filed for bankruptcy and American Airlines, the nation’s largest, announced a capacity reduction of 11 to 12 per cent and other steps to deal with soaring energy costs.
‘The airline industry as it is constituted today was not built to withstand oil prices at 125 dollars a barrel, and certainly not when record fuel expenses are coupled with a weak US economy,’ said AMR Corporation chairman and chief executive Gerard Arpey. AMR is American’s parent.
John Kilduff, analyst at MF Global, said the world is consuming 87 million barrels per day of oil while producing only 82.6 million barrels.
‘This is a compelling fundamental factor,’ Kilduff said.
But some say oil is a bubble waiting to burst and that prices could fall sharply as supply and demand come into balance.
‘We see many of the essential ingredients for a classic asset bubble,’ said Edward Morse at Lehman Brothers.
Myles Zyblock of RBC Capital Markets argues that oil could be ready for a classic boom-and-bust cycle.
‘I am concerned about the possibility that a euphoric investment mentality is beginning to overtake the oil market,’ Zyblock said.
Even so, Zyblock said the spike could do considerable damage.‘An oil price mania is a particularly dangerous type of excess since it has the potential to generate severe economic, inflationary and/or political dislocation,’ he said.
Oil prices will eventually retreat, analysts say, as the United States and other big consumers curb demand — either by voluntary means or because of an economic slump.
‘What should matter and what will matter eventually is the fact that US oil imports are on a downward slope,’ said Phil Flynn at Alaron Trading, who notes that more fuel-efficient cars, and alternative energy is finally denting demand from the world’s biggest oil consuming country.
‘The strain on global energy supply appears to be moderating, albeit ever so slightly,’ adds Zyblock.
Zyblock said that other commodities such as gold have come off their peaks as the dollar has bounced back, but that oil’s inexorable rise is more difficult to explain.
‘Based on our analysis, it seems reasonable to conclude that a speculative psychology is beginning to overtake fundamentals in dictating oil price dynamics,’ he said.
‘While all manias are incredibly profitable, they are just as dangerous because their inevitable demise — characterized by a price crash — is always a surprise.’
American Airlines to cut flights,
jobs as oil prices spike
Agence France-Presse . Washington
American Airlines announced Wednesday it would cut domestic flights significantly, shed workers and raise some fees charged to passengers as it battles to offset rocketing crude oil prices.
The largest US carrier said it planned to slash its domestic flight capacity by up to 12 per cent during the fourth quarter of the year and to retire at least 75 aircraft in the face of spiking jet fuel costs.
The airline’s parent firm AMR Corp. said its moves would result in an unspecified number of job losses at American Airlines and American Eagle Airlines. Some facilities could also be closed as part of the business overhaul.
‘The airline industry as it is constituted today was not built to withstand oil prices at 125 dollars a barrel, and certainly not when record fuel expenses are coupled with a weak US economy,’ AMR chairman and chief executive Gerard Arpey said in a statement.
American announced its reforms as world oil prices jumped to new all-time peaks Wednesday, smashing the 132-dollar barrier for the first time.
Arpey said the company’s management could not afford to sit by hoping that oil prices would fall anytime soon as he participated in an annual shareholders’ meeting in Fort Worth, Texas.
American Airlines pilots and flight attendants mounted a protest outside the meeting to demonstrate against what they said is the ‘uncaring attitude’ of the carrier’s top management.
The Association of Professional Flight Attendants is calling for Arpey and other senior executives to resign. It says the executives have reaped millions of dollars in bonuses while the airline has been struggling.
‘They grabbed millions of dollars in bonuses while pushing passengers to the side and disrespecting employees who’ve sacrificed so much to help the airline survive,’ said APFA president Laura Glading.
AMR reported a net loss of 328 million dollars during the first quarter compared with a profit of 81 million a year earlier. The loss was largely blamed on record jet fuel prices.
American paid 665 million dollars more for fuel during the first quarter of this year compared with last year. Its January-March fuel bill surged 45 per cent on an annual basis.
The double-digit cut to its domestic schedules marks a more aggressive drive from a prior stance in April when the company had said it was expecting to reduce capacity by 4.6 per cent.
Arpey said the flight reductions would help the airline cut its costs.
The airline anticipates retiring 40-45 aircraft, which will mostly be MD-80s, but will also include the mothballing of some Airbus A300 jets. It also plans to retire 35-40 regional jets and some turboprop aircraft.
In a bid to boost its pinched revenues, Arpey said American was introducing a new 15-dollar fee for each passenger’s first checked bag, although business and international flyers and customers who buy full-fare tickets will be exempt from the fee.
Fees, covering reservations, pet transportation and oversized bags, will meanwhile be increased from five to 50 dollars. The carrier said the fee hikes would generate increased revenues.
Other companies are also suffering from high oil prices. Delivery giant FedEx has blamed oil costs for a profit slide and big auto manufacturers such as General Motors are reeling from falling truck sales.
Oil companies, however, are banking handsome profits.
Top energy company executives from ConocoPhillips, Chevron, BP America and ExxonMobil were called to testify before Congress Wednesday about skyrocketing energy costs.
J Stephen Simon, a top ExxonMobil executive, told lawmakers that the oil giant was also having to pay more to purchase oil supplies and that high refining costs and government taxes had also inflated prices.
Indonesia braces for more protests
over fuel price hike
Agence France-Presse . Jakarta
Indonesians woke Thursday to the prospect of sharply higher fuel bills after the government said it would hike subsidised fuel prices by nearly 30 per cent to rein in the budget deficit.
The government set the figure on the upper limit of expectations late Wednesday despite widespread protests against the move ahead of elections next year.
The hike is designed to limit the impact of record world oil prices, which are blowing out the government’s multi-billion dollars fuel subsidy scheme and sucking state money out of social programmes.
‘The figure is relatively final, it will be 28.7 per cent,’ finance minister Sri Mulyani was quoted as saying on the state-run Antara news agency.
It was the first time a senior minister has put a figure on the price hikes, which have sparked almost daily protests since the government announced its intention to slash fuel subsidies earlier this month.
She did not say when the new price regime would be implemented, only that it would not be introduced until the government had finalised a package of measures designed to offset the impact on the poor.
A 28.7-per cent rise would see the cost of premium gasoline in Southeast Asia’s biggest economy climb to 5,790 rupiah (63 cents) a litre from the current price 4,500 rupiah.
President Susilo Bambang Yudhoyono says the move is essential to rein in the budget deficit and free up funds for spending on social programmes and the country’s crumbling infrastructure.
The administration has already outlined plans for direct cash transfers to millions of poor families and for expanded rice distribution and healthcare subsidies in a bid to limit the political fallout.
But it is facing mounting opposition from the street as well as parliament, where most parties have turned against the plan in a bid to win favour with voters ahead of the elections.
Indonesia last raised its fuel price by 126 per cent in 2005, sparking widespread protests.
Thousands of demonstrators took to the streets around the country Wednesday — the 10th anniversary of the fall of dictator Suharto — to condemn the latest proposed hike and demand protection from surging commodity prices.
‘The rise of fuel prices will strangle us. It’s hard for a housewife like me as the price of everything has risen even before the announcement’ of the price hike, said one protester outside the presidential palace.
Economy minister Budiono warned, however, that any delay in raising fuel prices would only worsen Indonesia’s predicament.
‘There are things that we should do if fuel prices aren’t raised, and after consideration it will be much heavier for us all to bear,’ he was quoted by Detikcom online news as saying.
The government’s fuel subsidies bill of 126.8 trillion rupiah ($13.8b) is based on assumed oil prices of around 95 dollars a barrel, but the cost of crude surged past 130 dollars a barrel for the first time on Wednesday.
The proposal to cut the subsidies is deeply unpopular even though most of the money goes directly into the pockets of relatively wealthy car owners.
The subsidies, which help keep fuel prices in the archipelago to the lowest in Southeast Asia, also outstrip Indonesia’s total social spending and capital investment, according to the World Bank.
Japan’s trade surplus plunges
but exports pick up
Agence France-Presse . Tokyo
Japan’s trade surplus tumbled by a worse than expected 46.3 per cent in April due to the rising cost of energy imports and falling exports to the US economy, the government said Thursday.
The data showed that Asia’s largest economy continues to be pressured by a global economic slowdown, although brisk shipments to fast-growing emerging markets are helping to cushion the blow, analysts said.
Exports to the European Union grew at the slowest pace in more than two years.
But overall export growth picked up slightly from the weakest pace in three years in March, raising hopes that Japan’s economy can continue its recovery from a slump stretching back more than a decade.
Japan had a trade surplus of 485.0 billion yen ($4.71b) in April, the finance ministry reported.
Market forecasts had been for a less severe decline of 21.7 per cent to 707.2 billion yen, according to a survey by the Nikkei business daily.
Japan’s trade surplus fell for a second straight month after a 30.5 per cent decline in March, according to revised figures.
Exports rose 4.0 per cent to 6.90 trillion yen, after an increase of just 2.3 per cent in March. Imports rose 11.9 per cent in April to 6.41 trillion yen.
The total value of oil imports jumped 55.0 per cent year-on-year, while that of liquid natural gas soared 65.8 per cent, the ministry said.
‘In addition to the weakness of exports to the United States, exports to the European Union are slowing down,’ a ministry official said.
‘We need to assess closely if the recent slowdown of shipments to the European Union signals changes to the business cycle there,’ he added.
The trade surplus with the European Union fell 3.2 per cent as exports rose just 1.3 per cent, the weakest pace since October 2005.
Air France warns of profits
fall on fuel cost
Agence France-Presse . Paris
Air France-KLM, the world’s biggest airline, warned on Thursday that operating profit would fall by about a third this year because of fuel costs, and its shares slumped for a three-day loss of about 16 per cent.
As the oil price hovers near a record of 135 dollars a barrel after a surge on Wednesday, the airline reported a sharp rise in operating profit for the last full year.
But it also warned that fuel costs would set it back sharply this year, even though it asserted it was among the world’s airlines best placed to cope.
And it said that if fuel prices continued on current trends, they would trigger a restructuring of the airline industry.
The price of shares in the group slumped by 9.65 per cent to 16.85 euros, having already fallen by nearly 8.0 per cent in the last two days.
Deutsche Bank brokers commented: ‘The group forecast seems to be a significant reduction from the consensus expectations.’ Analysts had expected a forecast of 1.2 billion euros of operating profit in the current year.
Operating profits in the year to March 31 were 1.405 billion euros, up 13.3 per cent on 2006-2007, on sales of 24.1 billion euros, despite a fourth-quarter operating loss of 46 million euros.
‘The current year is set to be challenging, with the oil price and global economy creating significant uncertainty,’ chairman Jean-Cyril Spinetta told the Paris-based air carrier’s board of directors, a company statement said.
But thanks to ‘strategic advantages’, efficient fuel hedging, rigourous cost control and ongoing post-merger synergies, Air France-KLM will remain ‘comfortably in profit,’ he said.
‘Under these conditions, and based on an oil price of 120 dollars per barrel, our objective is of an operating income in the region of one billion euros.’
HK inflation increases as food
prices continue to rocket
Agence France-Presse . Hong Kong
Hong Kong’s underlying inflation rate increased to 5.4 per cent in April as food prices continued to surge in face of global pressure, official figures showed Thursday.
The underlying rate increased from 5.3 per cent in March, according to figures released by the Census and Statistics Department.
The overall figures increased sharply to 5.4 per cent, from 4.2 per cent in March. But the increase was skewed by the government relief measure of rates concession for March 2008, the department said.
The increase in the underlying rate from March to April was due mainly to the enlarged increases in prices of vegetables and the fuel cost variation charge for towngas, the department said.
Food remained the major source of inflation pressure, without food excluding meals bought away from home increasing 19.4 per cent in price year-on-year. Pork showed the largest price increase, at 59.3 per cent. Beef was up 51.4 per cent, canned meat was up 44.5 per cent, oil was up 29 per cent and rice was up 24.5 per cent.
For the 12 months ending April 2008, the inflation figure was on average 3.1 per cent higher than in the preceding 12-month period.
A government spokesman said: ‘The pick up in inflationary pressure in recent months was largely due to the upsurge in food prices, which was driven by global food inflation.’
The sustained strong economic growth also added pressure on prices and costs, he said.
The spokesman added that the inflation outlook was rather uncertain and would hinge heavily on volatile food prices in the international markets, elevated oil prices, exchange rate movements, and strength of local economy.
However, he said the various relief measures in 2008-09 budget and the sustained labour productivity growth should help provide some cushioning effect to inflation.
Oil prices spike to historic highs
beyond $135 a barrel
Agence France-Presse . London
World oil prices broke yet more records on Thursday, catapulting above 135 dollars a barrel for the first time on runaway fears about rampant demand exceeding supply, analysts said.
Brent North Sea oil struck a historic height of 135.14 dollars a barrel and benchmark New York light sweet crude hit an all-time peak of 135.09 dollars.
‘It seems there is no stopping to soaring oil prices,’ said Andrey Kryuchenkov at the Sucden brokerage in London.
‘Investors doubt that the market will be able to meet ever growing demand in the long run, with booming emerging market economies underpinning robust demand for energy,’ he added.
After posting fresh highs, New York’s main oil futures contract, light sweet crude for July delivery, pulled back to 134.28 dollars a barrel, which was still a rise of 1.58 dollars on Wednesday’s close.
In London, Brent North Sea crude for July delivery was up 1.16 dollars at 134.33 dollars a barrel.
Crude futures have risen by more than a third since the beginning of 2008 when they struck 100 dollars for the first time, lifted by a unrest in oil-producing countries, falling energy inventories, OPEC’s unwillingness to hike output, high Asian demand for fuel and a weak dollar.
Prices breached 130 dollars for the first time on Wednesday and continued higher on news that US energy inventories had unexpectedly fallen last week.
‘Currently, market psychology is trumping fundamentals’ of supply and demand, said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.
‘The psychology is that the oil market is tight. Even though there is no shortage, global oil demand continues to grow and supply growth is restrained,’ he added.
‘Oil has performed better than equities and bonds. There is money looking for better returns and oil has offered better returns and continues to offer better returns.’
Global oil supplies could meanwhile fall far short of need and expectations in the next 20 years, the International Energy Agency is concluding with a vast effort of detective work on production prospects, a newspaper report said on Thursday.
The Wall Street Journal reported that a sweeping review of existing oil fields and investment in oil extraction was leading the IEA to conclude that the ageing of existing oil fields and inadequate investment meant that ‘future crude-oil supplies could be far tighter than previously thought.’
An already rallying oil market was spurred further on Wednesday by the US Department of Energy’s weekly snapshot of energy inventories, which surprisingly showed declines.
The DoE report showed that US crude oil stocks fell in the week ended May 16, by 5.4 million barrels to 320.4 million barrels. Most analysts’ had expected a build of 300,000.
Dollar higher against euro
Agence France-Presse . London
The dollar recovered against the euro and yen on Thursday after the Federal Reserve signalled an end to its rate-cutting policy, analysts said.
In European trading, the euro fell to 1.5755 dollars from 1.5789 in New York late on Wednesday.
Against the Japanese currency, the dollar rose to 103.30 yen from 103.02.
The dollar had tracked equity markets lower in recent days amid record-breaking crude oil, which struck an all-time high of 135.14 dollars a barrel on Thursday.
Minutes released by the US Federal Reserve on Wednesday signalled that further interest rate cuts are doubtful in the United States without a ‘significant weakening’ of the economic outlook.
‘The minutes implicitly suggest that US rates have bottomed out and would only be cut in an emergency, in the case of capital markets falling or the economy showing much slower growth rates than currently projected,’ said Hans Redeker at BNP Paribas.
In its minutes from the April 29-30 policy meeting, the Federal Reserve also slashed its 2008 growth forecast for the US economy to a range of 0.3 to 1.2 percent.
The US central bank made a sharp downward revision to its prior forecast of 1.3 to 2.0 percent growth for 2008 in an economic update accompanying the minutes from its April 29-30 policy meeting.
The Fed cut its key interest rate by 25 basis points at the meeting, the smallest reduction this year.
‘We are seeing less possibility of rate hikes in the US, while the possibility of rate hikes than rate cuts in Europe is rising,’ said David Mann, currency strategist at Standard Chartered Bank.
Meanwhile, the British pound was given a boost by official economic data which showed consumer spending in Britain is not falling as rapidly as feared and that industry’s producer prices continue to hit new records, traders said.
The combination of Thursday’s data releases further diminished the chances of a rate cut in June to give a lift to economic growth, they added.
In London on Thursday, the euro changed hands at 1.5755 dollars against 1.5789 late on Wednesday, at 162.76 yen, 0.7972 pounds and 1.6188 Swiss francs. The dollar stood at 103.30 yen and 1.0274 Swiss francs.
The pound was at 1.9761 dollars. On the London Bullion Market, the price of gold jumped to 929.30 dollars per ounce from 923 dollars late on Wednesday.
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Al Arafah Bank opens online banking
Private and government-owned banks are not providing proper service to their clients, said finance adviser Mirza Azizul Islam at the launching ceremony of the online banking service of Al Arafah Bank Ltd at a city hotel on Thursday Online banking will improve the service level as clients complain that they are not getting quick service from the banks, he said. Bangladesh is lagging behind in the technology though it is extremely important to be competitive in this globalised world, he said. The banks should use information technology extensively, the adviser said. The financial institutions do business with the depositors’ money, so they should announce their financial statements to the people, he observed. Al Arafah Bank has introduced online banking to give better service to its clients, said Mohammad Anwar Hossain, chairman of the bank. The bank saved foreign currency as it is using local online software, he said. Most of the banks have procured banking software from firms abroad. The programme was presided over by the managing director of the bank, MA Samad Sheikh.
— New Age
IPDC declares 15pc dividend
The shareholders of the Industrial Promotion and Development Company of Bangladesh on Thursday approved five per cent cash and 10 per cent stock dividend on the paid up capital at the company’s 26th annual general meeting. The chairman of IPDC and also Industries secretary Nurul Amin presided over the meeting at the Darbar hall of the Bangladesh Rifles in the Dhaka city. IPDC director Altaf Hussain, managing director and chief executive officer Mominul Islam and company secretary Mousumi Yasmin, spoke on the occasion. Nurul Amin said IPDC played a pivotal role in developing country’s industrial sector since its inception in 1981 as the first private sector financial institution in the country. It had been partner to many of the very renowned corporate houses in Bangladesh in their incubation stage, he said. High official of the IPDC and a good number of IPDC shareholders were present at the AGM.
— BSS
UK co to invest Tk 4cr in UEPZ
A British company, Oasis Transformation Ltd, will set up an agro processing industry in the Uttara Export Processing Zone investing Tk 4 crore. An agreement to this effect was signed between the Bangladesh Export Processing Zones Authority and the British company at the BEPZA complex in Dhaka on Thursday, said a press release. The 100 per cent foreign owned company will produce, among other things, interior screens, tableware, tables and chairs from local bamboo. It will create employment for 46 Bangladeshis. Member (investment promotion) of the BEPZA and managing director of the Oasis Transformation inked the agreement on behalf of their respective sides. BEPZA executive chairman Brig Gen Jamil Ahmed Khan and officials of both sides were present on the occasion.
— BSS
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