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No need to panic about coronavirus impact on oil markets

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US Secretary of Energy, Dan Brouillette, delivers opening remarks while meeting with 17 business leaders from Confederação da Indústria Portuguesa (CIP) and the American Chamber of Commerce at the Intercontinental Hotel on February 13, 2020 in Lisbon, Portugal.

Horacio Villalobos | Corbis via Getty Images

The U.S. energy secretary does not believe the ultimate impact of China’s fast-spreading coronavirus is a cause for concern for markets.

His comments come shortly after both OPEC and the International Energy Agency (IEA) both dramatically lowered their oil demand growth forecasts this year as a result of the deadly flu-like virus.

“I think we are going to pay close attention to what is happening with the virus itself. We are still analyzing, not only the actual virus to learn more about it, but also the response to it,” Dan Brouillette told CNBC’s Hadley Gamble in an exclusive interview on the sidelines of the Munich Security Conference on Friday.

“So, we are looking to see if the Chinese government will be able to contain or at least help contain the spread of the virus. At this moment, while we are seeing some slight reductions in production as a result of the virus, we are not yet concerned about its ultimate impact.”

International benchmark Brent crude traded at $56.40 Friday morning, up around 0.1%, while U.S. West Texas Intermediate (WTI) stood at $51.49, around 0.15% higher.

Both crude benchmarks have fallen nearly 20% since climbing to a peak in early January, dragged lower by concern over demand in China during the coronavirus outbreak.

Earlier this week, OPEC slashed its demand outlook for oil demand growth this year, citing China’s coronavirus outbreak as the “major factor” behind its decision.

The Middle East-dominated producer group downwardly revised its 2020 outlook for global oil demand growth to 0.99 million barrels per day (bpd) on Wednesday. That’s down by 0.23 million bpd from the previous month’s estimate.

The IEA has also cut its 2020 oil demand forecast, predicting 0.825 million bpd this year — the lowest since 2011.

When asked why the U.S. was not more concerned given that both OPEC and the IEA had both lowered their oil demand growth expectations this year, Brouillette replied: “We have to put these things into context.”

“We have to put together very, very tough measures to contain the virus and if we do that effectively then I think you’ll see the markets bounce back and you’ll see the economies continue to grow.”

OPEC meeting

Led by Saudi Arabia, OPEC had pushed for an emergency meeting with non-OPEC partners earlier this month in order to cut oil production to offset the impact of the virus.

A committee advising the group, which consists of some of the world’s most powerful oil-producing nations, reportedly recommended a 600,000 bpd reduction in oil production to bring relief to the energy market.

However, Russia is still considering whether to sign up for the additional cuts, more than one week after the recommendation.

OPEC’s regular meeting is set for March 5. An earlier meeting than scheduled is still possible, but there has been no announcement.

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Dubai’s DP World is delisting and returning to private ownership

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A gantry crane stands in the DP World Ltd. terminal at Port Metro Vancouver in Vancouver, British Columbia, Canada, on Wednesday, Sept. 19, 2018.

Darryl Dyck | Bloomberg | Getty Images

DP World, one of the world’s largest port operators, is delisting from the Nasdaq Dubai and returning to fully private ownership, the company announced Monday.

The UAE-owned port behemoth’s parent company, Port and Free Zone World, has offered to buy the 19.55% of DP World’s shares traded on the Nasdaq Dubai for $16.75 a share, representing a 29% premium on its closing price of $13 per share on Sunday, the statement said.

Following the announcement, the firm’s stock rose 10% to $14.30 in morning trade in the Middle East.

The company said the move would enable DP World to “focus on its medium-to-long-term strategy of transforming from a global port operator to an infrastructure-led end-to-end logistics provider.” Company executives described the company’s public trading as ultimately too beholden to short-term returns.

Upon completion of the deal, it will be 100% owned by Port and Free Zone World.

The development could be bad news for the Nasdaq Dubai, for whom DP World has been a major draw for investors trading the publicly-listed shares. The Dubai-based exchange did not offer comment when contacted by CNBC. DP World had a market value of about $10 billion as of Monday morning, whereas the whole exchange is worth over $130 billion.  

“The DP World Board has concluded that the disadvantages of maintaining a public listing outweigh the benefits,” Yuvraj Narayan, group chief financial, strategy and business officer of DP World, said in the statement Monday.

“Delisting from Nasdaq Dubai is in the best interest of the company, enabling it to execute its medium to long-term strategy … In contrast, public markets typically hold a short-term view. As a result of this gap, the DP World strategy is not fully appreciated by the equity markets, and consequently is not reflected in the company’s share price performance.”

DP World Group Chairman and CEO Sultan Ahmed bin Sulayem described the ports and logistics industry as in the midst of a major transition, with its customer base undergoing consolidation and the “vertical integration of several competitors.”

“Returning to private ownership will free DP World from the demands of the public market for short term returns which are incompatible with this industry, and enable the company to focus on implementing our mid-to-long-term strategy,” he said.

DP World operates 48 marine terminals and 13 port developments in more than 30 countries.

Shares of DP World peaked in late January 2018 at $26.99 per share and have fallen about 52% since then as of Sunday’s market close in the United Arab Emirates. The company’s revenue in 2018 was $5.6 billion, a nearly 20% increase on the previous year, according to its latest available financial report.

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Malaysia bars entry of MS Westerdam cruise passengers

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Malaysia has barred the entry of remaining passengers from a cruise ship docked in Cambodia — after an American passenger tested positive for the new coronavirus upon her arrival in Kuala Lumpur.

Confirming local media reports, Malaysia’s deputy minister for international trade and industry, Ong Kian Ming, told CNBC on Monday that his country will stop “other people who want to come to Malaysia from the cruise ship … for now.”

The 83-year-old American woman, who arrived in Malaysia from Cambodia last week, was the first person from the MS Westerdam cruise ship to test positive for the virus, now called COVID-19.

She and her husband were found to have flu-like symptoms while going through the thermal scanner at the Kuala Lumpur International Airport last week, local media reported. Her husband tested negative for the virus, the reports said.

The cruise — which carried 1,455 guests and 802 crew — departed Hong Kong on Feb. 1. The ship arrived in Cambodia last Thursday after being turned away by several countries including Japan, the Philippines, and Thailand, which were afraid passengers onboard might be infected.

Malaysia is also closing its ports to cruise ships originating from or had transited in China, according to local media reports. The country has confirmed 22 cases of COVID-19, according to data from the Johns Hopkins University.

Speaking to CNBC’s “Squawk Box Asia,” Ong said the spread of the coronavirus would drag down Malaysia’s growth.

“Definitely, we’re anticipating that there will be short-term disruptions in the supply chains that could affect some of the multinational companies working and operating in Malaysia,” he said.

He added that the country’s growth could be lower than the government’s target of 4.8% for 2020. But both the government and the central bank, Bank Negara, have the ability to support the Malaysian economy, said Ong.

Still, various banks and research houses have downgraded their growth forecasts for Malaysia after the economy expanded by 3.6% year-on-year in the fourth quarter of 2019 — the slowest rate in a decade.

One of the most drastic downgrades came from Dutch bank ING, which cut its forecast for Malaysia’s 2020 growth from 4.5% to 3.5%.

“It’s not going to be too long before demand takes a hit from the rapid spread of Covid-19, the virus currently causing havoc worldwide,” Prakash Sakpal, Asia economist at ING, wrote in a note last week.

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General Motors (GM) retreats from Australia, New Zealand and Thailand

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Mary Barra, Chairman and CEO of General Motors.

Bill Pugliano | Getty Images

General Motors is continuing a years-long global restructuring to concentrate on high-profit markets such as North America and China.

The Detroit automaker said Sunday that it will “wind down” its sales, design and engineering operations in Australia and New Zealand and discontinue its Holden brand in the region by 2021.

GM also announced plans to exit Thailand, including withdrawing Chevrolet by the end of this year and selling a plant to Chinese automaker Great Wall Motors.

GM said it expects to take $1.1 billion in charges mostly in the first quarter as a result of the actions, including $300 million in cash.

Chairman and CEO Mary Barra said the actions are part of the automaker’s global restructuring, which was initially announced in 2015, to concentrate on profitable markets and prioritize investment on driving “growth in the future of mobility,” especially in all-electric and autonomous vehicles.

“I’ve often said that we will do the right thing, even when it’s hard, and this is one of those times,” Barra said in a release.

The announcement comes more than two years after GM ended vehicle manufacturing in Australia, a place the automaker used as a proving ground for up-and-coming executives, including GM President Mark Reuss.

Reuss, in the release, said the company explored a range of options to continue Holden operations, but “none could overcome the challenges of the investments needed for the highly fragmented right-hand-drive market, the economics to support growing the brand, and delivering an appropriate return on investment.”

“At the highest levels of our company we have the deepest respect for Holden’s heritage and contribution to our company and to the countries of Australia and New Zealand,” Reuss said.

The market exits add to unprecedented actions by GM to retreat from underperforming markets in recent years, most notably selling its European operations to French automaker PSA Group in 2017. It also restructured its operations in South Korea and ended or limited operations in Russia, Australia, India and Thailand.

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