Mark Latham Commodity Equity Intelligence Service

Thursday 9th March 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Norway stresses need for unique post-Brexit bilateral trade deals with UK


    Norway and the UK must enter into new bilateral trade deals post-Brexit that goes well beyond a traditional agreement given the "profound" economic integration between the two countries, including in the energy sector, the Norwegian government said in a report published late Monday.

    The UK is increasingly dependent on gas imports from Norway, with pipeline gas supplies in January hitting a new record high, and both countries have stressed that the UK's interest in Norwegian gas is set to grow as the UK looks to phase out coal-fired power generation.

    The UK is expected to trigger Article 50 -- thereby formally notifying its intent to leave the EU -- by the end of this month.

    "The UK is one of our largest trade partners both for goods, services and investments," the government said in the report called "What will Brexit mean for Norway?"

    Gas exports from Norway to the UK via pipeline in 2016 amounted to 29.9 Bcm (an average of 82 million cu m/d), up from 26.7 Bcm the previous year, according to data from Platts Analytics' Eclipse Energy.

    But since the start of 2017, flows have been averaging a much higher level at 129 million cu m/d, underlining the increasing importance of gas trade between the two countries.

    TRADE DEAL

    Norway is not an EU member state, but is part of the European Economic Area which allows it to take part in the EU internal market.

    "When the UK exits the EU, the EEA agreement will no longer be the basis for trade between Norway and the UK," it said.

    "Norway must enter into new bilateral agreements with the UK when the country leaves the internal market and the EEA," it said.

    "The scope of our trade, but also more profound economic integration with the UK, suggests that future agreements must be far more comprehensive than the provisions of the World Trade Organization or a traditional trade agreement."

    The government also said it would take time before new permanent agreements can come into force.

    "Any transitional arrangements will therefore be important to avoid any undue discrimination and protectionist measures," it said.

    Oslo also urged the UK and EU to allow it a place at the negotiating table.

    "Negotiations between the EU and UK on any future agreements and any transitional arrangements will have major consequences for...future bilateral relations between Norway and the UK," it said.

    "It is therefore important for Norway to become involved in discussions on joint solutions between EU and UK in areas that affect the internal market."

    http://www.platts.com/latest-news/natural-gas/london/norway-stresses-need-for-unique-post-brexit-bilateral-26679733
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    China Feb producer inflation fastest in nearly 9 years as commodities surge


    China's producer price inflation accelerated to its fastest pace in nearly nine years in February and by more than expected as prices of steel and other raw materials extended a torrid rally, boosting profits for industrial companies worldwide.

    Consumer inflation, however, cooled more than expected to its mildest pace since January 2015 as food prices fell, remaining well below the government's 3 percent target.

    China's iron ore and steel prices have been rallying for a year, fuelled by a construction boom, though worries are growing over rapidly rising stockpiles at Chinese ports.

    The country's insatiable demand for resources has helped spur an inflationary pulse in commodities markets and the manufacturing sector worldwide.

    The producer price index (PPI) jumped 7.8 percent in February from a year earlier, slightly more than economists had expected and compared with a 6.9 percent increase in January, the National Statistics Bureau (NSB) said on Thursday.

    But many analysts believe China's producer inflation may peak soon, and do not expect much of a flowthrough into China's consumer inflation data, which unlike some other large economies is mainly driven by prices of food and services.

    In recent months, the People's Bank of China (PBOC) has cautiously shifted to a tightening bias, inching up short-term money market rates, as authorities turn their focus to containing the risk from a rapid build-up in debt.

    Cooling inflationary pressures could reduce the risk that the central bank would have to respond more forcefully.

    "We expect any tightening of policy to be driven by concerns about credit risks rather than efforts to contain inflation," Julian Evans-Pritchard from Capital Economics in Singapore wrote in a note.

    "Given the lack of any meaningful feed through to consumer prices, policymakers aren't likely to be too concerned about the high producer price inflation," he said.

    Evans-Pritchard expects producer inflation to peak within a month or two, as year-on-year price comparisons start to moderate. Prices of many building materials such as steel reinforcing bars began to take off in spring last year.

    PRICES OF STEEL, MINERALS, ENERGY REMAIN STRONG

    Similar to previous months, producer price gains were mainly seen in mining and heavy industry, with a 36.1 percent leap in mining, the biggest jump in that category since early 2010.

    Raw materials increased 15.5 percent, while oil refiners and chemical producers also saw solid increases.

    That has been good news for some producers after years of losses which severely restricted their ability to service their debts.

    Coal and chemical products firm Yunnan Yunwei said on Tuesday it had returned to profit in 2016. Its shares have gained 25 percent in the last three months.

    However, while factory surveys show manufacturers have been able to pass on some of the higher input costs by raising prices of their goods, there has been scant evidence of it filtering down to consumers yet.

    China's consumer inflation rate slowed to 0.8 percent in February from a year earlier as food prices fell following the long Lunar New Year celebrations. The CPI for January and February combined rose 1.7 percent.

    "Although February's CPI slowdown was relatively large, CPI is still relatively steady when food and energy prices are taken out of the equation," statistician Sheng Guoqing said.

    The stats bureau attributed the slowdown in consumer inflation to the Lunar New Year and cold weather.

    Analysts polled by Reuters had predicted the consumer price index (CPI) would rise 1.7 percent, versus a 2.5 percent acceleration in January.

    The government is targeting 3 percent consumer inflation for 2017, unchanged from last year, Premier Li Keqiang said in his annual government work report on Sunday.

    China has cut its economic growth target to a more modest 6.5 percent this year to give policymakers more room to push through painful reforms to contain financial risks.

    http://www.reuters.com/article/china-economy-inflation-idUSL3N1GM1XQ
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    Oil and Gas

    Saudi to supply full crude contract volumes to Asia


    Saudi Aramco will supply full contract volumes of crude oil to multiple Asian buyers in April, three industry sources with knowledge of the matter said.

    Despite commitments to cut production in an OPEC deal, Saudi Aramco had agreed to supply at least one customer in Asia with incremental crude on top of contracted volumes next month, as it holds to a strategy of maintaining market share in the fastest-growing market, one of the sources said.

    Saudi Arabia led a pact between the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, including Russia, Mexico and Kazakhstan, to cut global crude output by about 1.8 million barrels per day (bpd) from Jan. 1, and bring supply closer to demand.

    The kingdom had cut beyond the level pledged in the agreement and brought its output below 10 million bpd, Saudi Energy Minister Khalid al-Falih said on Tuesday. Suppliers participating in the curbs have cut more than 1.5 million bpd, he said, exceeding what he called the market's low expectations.

    While supplies to Asia have been little changed, Saudi Aramco has been cutting supplies to some major oil companies in Europe and the United States, industry sources have said. Nearly half of Saudi's crude production is exported to Asia.

    http://www.reuters.com/article/us-saudi-supply-asia-idUSKBN16G097

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    Iraq can produce 5 million barrels a day in second half of 2017, oil minister says


    Iraq will be able to produce 5 million barrels of oil a day in the second half of 2017, the country's Minister of Oil Jabbar Ali Al-Luiebi said Tuesday.

    If Iraq were able to achieve that feat, it would come ahead of the market's expectations and potentially complicate Iraq's commitment to cut production under a deal with the Organization of the Petroleum Exporting Countries.

    "We achieved this great achievement of 4 million barrels per day ... middle of 2016, and now we have climbed up and we are reaching about 5 million barrels per day beginning of second half of this year," Al-Luiebi said during an interview at CERAWeek by IHS Markit.

    OPEC secretary general on Trump administration: So far, so good  11 Hours Ago | 02:25

    Iraq's production was nearly 4.47 million barrels a day in January, according to secondary sources cited by OPEC. Baghdad is supposed to be producing only 4.35 million barrels per day for the first six months of 2017 as part of an agreement by OPEC members to cut output in order to reduce brimming oil stockpiles.

    Asked by CNBC how an extension of the OPEC agreement would affect plans to reach 5 million barrels a day, Al-Luiebi said, "It would premature to comment" because it is too early to tell whether the deal will be extended.

    OPEC officials said they will reassess the agreement — and whether it should be extended by another six months — at their May meeting.

    It is unclear how much oil Iraq is removing from the market at this point. A compliance committee will meet later this month to assess reductions by participating producers.

    Al-Luiebi's comments on Tuesday are significant because the time frame he offered for producing 5 million barrels a day is well ahead of expectations, said John Kilduff, founding partner at energy hedge fund Again Capital. Previous forecasts were for Iraq to hit that production level by year-end at best and perhaps not until 2018.

    "Obviously, it's bearish. They're going to have to show considerable production constraint having that spare capacity. That's the kind of capacity historically only the Saudis have had," he told CNBC.

    It would also make it harder for oil prices to rally on other supply disruptions if Iraq had more spare capacity, he added. Baghdad could presumably tap that spare capacity during such disruptions.

    Iraq, OPEC's second largest producer, has presented obstacles to production cuts. In addition to missing its target in the first month of the deal, Baghdad quarreled with the producer group over how cuts would be measured.

    In November, OPEC agreed to reduce production by 1.2 million barrels a day, and 11 other exporters committed to cutting a combined 558,000 barrels a day.

    http://www.cnbc.com/2017/03/07/iraq-can-produce-5-million-barrels-a-day-in-second-half-of-2017-oil-minister-says.html
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    Nigeria's recovery could end OPEC oil output cut exemption, Libya further away


    When OPEC agreed to exempt Libya and Nigeria from its oil production cuts, market watchers said the two beleaguered countries' upside potential could complicate its attempt to accelerate the market's rebalancing.

    Both countries have ambitious aims to recover output following months of militant attacks on oil infrastructure that caused their production to plummet last year, as OPEC was negotiating the deal.

    But while Libya has seen a renewal of fighting that threatens to derail its recent fragile oil output recovery, Nigeria appears well on the way to full restoration of its output that could see it pressured by its fellow OPEC members to end its exemption from the production agreement.

    The six-month deal, which expires in June, will be up for review at OPEC's next meeting on May 25, with some ministers saying the production cuts should be extended to continue drawing down global inventories.

    "As things stand at present, potentially the new dynamic that will need to be resolved is if Nigeria's militant attacks die down, there will be a case to bring Nigeria into the quota system," said Richard Mallinson, geopolitical analyst with Energy Aspects. "That's unlikely to be something that Nigeria would welcome, but that would be a part of the negotiations."

    Nigeria oil officials could not be reached for comment, but oil minister Emmanuel Kachikwu, following the last OPEC meeting on November 30 when the production agreement was signed, acknowledged that a fully-recovered Nigeria likely would be asked to share in the cuts.

    "I don't expect that once you reach your volume you are going to have free rein, so we probably have six months to get our act together and then hopefully zoom back out production and then we will be asked to contribute," Kachikwu told reporters. "That is what I imagine."

    The OPEC deal calls for the producer group to lower output by some 1.2 million b/d from October levels and freeze production at around 32.5 million b/d, while exempting Libya and Nigeria from any cuts.

    The latest S&P Global Platts OPEC survey released Monday found the group is about 340,000 b/d above that ceiling.

    OPEC Secretary General Mohammed Barkindo has said the organization is closely monitoring news from the two exempt countries.

    "Every barrel that they can produce and export will be accommodated by OPEC, as well as non-OPEC producing countries, as well as the market," Barkindo said in February at the IP Week conference in London. "By accommodation I mean that both OPEC and non-OPEC...will continue to review developments in Nigeria, as well as Libya, and will take those into account."

    http://www.platts.com/latest-news/oil/london/analysis-nigerias-recovery-could-end-opec-oil-26681015
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    Brazilian crude threatens Oceania, Middle East suppliers' Asian market share


    China's strong appetite for Brazilian crude has set off alarm bells among various producers in Oceania and the Middle East, prompting Australian and key Persian Gulf crude suppliers to slash their selling prices in an effort to remain competitive and protect their market share in Asia, market participants said Wednesday.

    Since late 2016, China saw a dramatic increase in Brazilian crude imports and the trend remained firmly intact with two Chinese state-run oil companies purchasing 5 million barrels or more of heavy sweet crude from the South American state for loading in March, according to a source with direct knowledge of the deals.

    March shipping fixtures seen by S&P Global Platts also showed that PetroChina has fixed the San Jacinto to move 130,000 mt of crude oil for March loading from Brazil to China, while trading company Vitol also booked Suez Hans and Fraternity to move a combined 260,000 mt of crude for loading in the same month for the similar journey.

    In addition, Shell and Repsol fixed Maran Artemis and Aquarius Voyager respectively, to move a combined total of 560,000 mt of crude for March loading from Uruguay to China, according to the latest fixtures.

    Uruguay's Montevideo is a common loading destination for Brazilian offshore producers because of its proximity to several prolific oil fields like those in the nearby Santos Basin.

    The source indicated that the Brazilian crude grades that the state-run Chinese companies had purchased for loading in March consisted mainly of Roncador, Marlim and Lula.

    AUSTRALIAN CRUDE PREMIUMS UNDER PRESSURE

    Taking the biggest brunt of the continued arbitrage flows from South America to North Asia, many of the Australian heavy sweet crude grades that are heavily dependent on Chinese demand, saw their price differentials tumble to multi-month lows.

    Latest market talk indicated that Mitsui could have sold a 550,000-barrel cargo of Australian Vincent crude for loading over April 24-28 to a European trading company at a premium of around $1.50/b to Platts Dated Brent crude assessments on a FOB basis, sharply lower than the premium of around $2.80-$3.10/b heard paid for a March-loading cargo in the previous trading cycle.

    Platts assessed Vincent crude at a premium of $1.75/b to Dated Brent Tuesday, the lowest differential since October 19, 2016 when it commanded a $1.55/b premium.

    In comparison, Brazil's heavy sweet Roncador crude was last assessed at a discount of $4.95/b to Platts Latin American Brent Strip (PLABS), while the country's heavy sour Marlim was assessed at PLABS minus $5.25/b on Tuesday.

    "Far East [and Oceania crude grades] were too expensive," said the source.

    MIDDLE EASTERN PRODUCERS FEEL COMPETITION

    Middle Eastern producers were also taking a cautious stance in recent weeks as they stepped up efforts to curb Asia's appetite for arbitrage barrels and remain competitive amid Dubai's strength against other global benchmarks Brent and WTI.

    Last week, Saudi Aramco announced surprise cuts to the OSP differentials for its Asia-bound Arab Light and Arab Medium crude for loading in April, while Abu Dhabi's Upper Zakum crude also saw its OSP differential for February lowered by 7 cents/b from the previous month.

    The Brent/Dubai Exchange of Futures for Swaps spread -- a key indicator of ICE Brent's premium to benchmark cash Dubai -- has been narrowing sharply this year, making Dubai-linked Middle Eastern and Far East Russian grades less competitive against various grades linked to the European benchmark, traders said.

    "Yes, it is still economical [to buy Brazilian grades]," the source said when asked about the general cost comparison between purchasing South American and Asia-Middle East crude grades including freight rates.

    The source added that the narrow Brent/Dubai spread would likely keep the Brazil-Asia arbitrage window wide open as Roncador and Marlim are priced against Brent.

    The second-month EFS averaged $1.51/b in February, the lowest since August 2015 when it averaged 79 cents/b, Platts data showed. The EFS averaged $1.65/b in January, $2.17/b last December and $2.11/b in November 2016.

    http://www.platts.com/latest-news/oil/singapore/brazilian-crude-threatens-oceania-middle-east-27785358

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    Brazil, Widening the Hunt for Corruption, Finds It Under Every Rock


    RIBEIRÃO PRETO, Brazil—This affluent city in Brazil’s southeastern highlands, famous for its agribusiness, artisanal ales and annual book fair, is usually a tranquil place. Yet in recent months Ribeirão Preto has been rocked by a $65 million alleged bribery and kickback racket at City Hall.

    It is one of hundreds of such scandals coming to light in Brazil. A three-year-old nationwide corruption probe, dubbed Car Wash, is inspiring a frenzy of similar operations by local prosecutors and police, who are uncovering a staggering degree of corruption and sparking turmoil across the country.

    Dárcy Vera, a former cotton picker and maid who swept to victory in 2008 as Ribeirão’s first female mayor, was jailed in December for allegedly masterminding the scheme. She denied wrongdoing and was later released pending a judge’s ruling on formal charges of corruption, embezzlement and criminal conspiracy.

    In the weeks that followed her arrest, tales of dawn police raids, briefcases stuffed with cash and the mysterious suicide of a local businessman in his shower engulfed this Boston-size city. The mayor’s post went unfilled for nearly two weeks—everyone in Ms. Vera’s line of succession was either also in jail, under investigation or refused to take the job.

    Duarte Nogueira, who was sworn in as Ribeirão’s new mayor in January, promised voters a return to normality. But he, too, is now facing suspicion. After construction giant Odebrecht pleaded guilty in the U.S., Brazil and Switzerland to bribing officials in 12 countries in exchange for contracts, a former executive testified the firm made a campaign contribution to Mr. Nogueira. The new mayor says all donations he received were legal and has denied any wrongdoing.

    “We’ve never seen such chaos,” says Gláucia Berenice, a 51-year-old evangelical missionary and one of the few Ribeirão city councilors from Ms. Vera’s administration who authorities say isn’t under investigation.

    For the past three years, Brazil has been gripped by the Car Wash probe, so called because it began as an investigation into money laundering at a gas station. It soon uncovered a scheme to skim an estimated $13 billion from inflated contracts at state-run oil company Petrobras. It has landed swaths of the business and political elite behind bars, implicated more than 20 foreign firms and helped topple President Dilma Rousseff last year, though she hasn’t been personally accused in the scheme.

    It has thrown Brazil’s political class into turmoil and deepened the country’s worst recession on record, which has seen the economy contract two years in a row. At the same time, there is a possible silver lining if the Car Wash investigation can strengthen the rule of law—a key step toward consolidating one of the world’s largest democracies.

    Similar scandals are now unfolding at state and local governments across Brazil, where a surge of anticorruption investigations has landed hundreds of elected officials in jail, from Rio de Janeiro to the far corners of the Amazon rain forest. In the jungle-covered state of Rondônia, on the border with Bolivia, prosecutors have been investigating an alleged scheme to defraud the city’s prison service.

    “The Car Wash Operation has laid everything in Brazil bare, making it clearer than ever that corruption here is both chronic and endemic,” says Gustavo Justino de Oliveira, lawyer and professor of administrative law at the University of São Paulo.

    Corruption isn’t just more evident in Brazil. There is also more of it, says Christopher Garman at Eurasia Group, the consultancy. “Over the past 15 years with the commodity boom, the volumes of investment that policy makers had at their disposal increased tremendously and so the opportunities for corruption grew as well,” he says.

    Brazilian judges handed out as many as 500 convictions involving hundreds of mayors across Brazil in 2016 for misconduct in office, largely related to corruption, according to an estimate from Claudio Ferraz, a professor of economics at Rio’s PUC University, using government data. That compares with 25 such convictions in 2000.

    Every day, new details of corruption probes emerge, paralyzing local governments struggling to deal with severe fiscal crises in the midst of the recession.

    In Rio de Janeiro last month, an electoral court ordered the state’s governor, Luiz Fernando Pezão, to step down, accusing him of trading government contracts for campaign financing, casting further uncertainty over the debt-ridden tourist hot spot. He has denied wrongdoing and plans to appeal.

    More than 600 miles southwest in Piên, a town of around 12,000 people, police accused former Mayor Gilberto Dranka of hiring the gunman who killed his successor, Loir Dreveck, a week before Christmas. Mr. Dranka, who police found hiding in the attic of his mansion, allegedly ordered the killing of the town’s mayor-elect after Mr. Dreveck refused to let him appoint friends and contacts to the new government. Mr. Dranka has denied wrongdoing. His lawyers say he hid because he thought the officers were burglars.

    “If they can discover, investigate and punish such a grandiose corruption scheme at the federal level, why can’t we do the same for smaller cases?” says Marcelo Magalhães, one of the police officers investigating the scandal in Piên.

    https://www.wsj.com/articles/widening-brazilian-probes-uncover-staggering-level-of-corruption-1488914293

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    Healthy LNG supplies weigh on price

    Healthy LNG supplies weigh on price

    Asian spot LNG prices dropped for the eighth consecutive week on healthy supply and subdued demand with recent tender awards confirming the downward trend.

    Spot prices for LNG for April delivery LNG-AS were pegged at approximately US$6.00 per mmBtu, down 20 cents on the previous week.

    May prices dropped to US$5.80 per mmBtu, although some traders had difficulty in assessing the month's value due to a lack of deals.

    Thailand's PTT and Gail India both purchased one April cargo at a price estimated to be slightly above or below US$6 per mmBtu.

    Despite average to warmer weather in Japan from March to May, pockets of demand persist. A Japanese end-user has a requirement for an April shipment while another seeks a May cargo, likely tempted by low prices to refill inventory ahead of the summer cooling season, one industry watcher said.

    Meanwhile, Gail India's time-swap deal with Swiss trader Gunvor to offload some of its US gas volumes will begin with Gunvor delivering 15 cargoes to Gail between April and December this year.

    The deal should significantly cut Gail's demand for spot shipments, potentially contributing to an easing market as new production gets underway in Australia and the US.

    In the Atlantic, Argentina state-run energy firm Enarsa launched a tender seeking 20 cargoes between June and August.

    LNG prices are under pressure amid rising supplies of spot cargoes as projects offer spot buyers volumes that would have otherwise been shipped to term customers.

    https://www.lngindustry.com/liquefaction/08032017/healthy-supplies-weigh-on-price/
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    Angola LNG gets more feed gas as Chevron starts production at Mafumeira Sul

    Angola LNG gets more feed gas as Chevron starts production at Mafumeira Sul

    Chevron-led 5.2 million tons per year Angola LNG plant in Soyo is set to get new supply of feed gas as the company’s unit, Cabinda Gulf Oil Company began producing oil and gas at the Mafumeira Sul project offshore Angola.

    Located 24 km offshore Cabinda province in 60 meters of water, Mafumeira Sul is the second stage of development of the Mafumeira field in block 0.

    It has a design capacity of 150,000 barrels of liquids and 350 million cubic feet of natural gas per day. Early production from the project commenced in October 2016 through a temporary production system. Ramp-up to full production is expected to continue through 2018.

    Early production from the project commenced in October 2016 through a temporary production system, while the ramp-up to full production is expected to continue through 2018.

    Chevron said in an earlier statement that the associated natural gas will be commercialized through the Angola LNG plant in Soyo.

    Cabinda Gulf Oil Company is the operator and holds a 39.2 percent interest in Mafumeira Sul. Chevron’s partners are Sonangol E.P. (41 percent), Total (10 percent) and ENI (9.8 percent).

    http://www.lngworldnews.com/angola-lng-gets-more-feed-gas-as-chevron-starts-production-at-mafumeira-sul/
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    Summary of Weekly Petroleum Data for the Week Ending March 3, 2017


    U.S. crude oil refinery inputs averaged 15.5 million barrels per day during the week ending March 3, 2017, 172,000 barrels per day less than the previous week’s average. Refineries operated at 85.9% of their operable capacity last week. Gasoline production increased last week, averaging over 9.8 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day.

    U.S. crude oil imports averaged just about 8.2 million barrels per day last week, up by 561,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.9 million barrels per day, 1.7% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 242,000 barrels per day. Distillate fuel imports averaged 266,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 8.2 million barrels from the previous week. At 528.4 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 6.6 million barrels last week, but are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.7 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories fell 4.1 million barrels last week but are in the middle of the average range. Total commercial petroleum inventories decreased by 2.4 million barrels last week.

    Total products supplied over the last four-week period averaged 19.6 million barrels per day, down by 1.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 8.8 million barrels per day, down by 6.1% from the same period last year. Distillate fuel product supplied averaged over 4.0 million barrels per day over the last four weeks, up by 12.6% from the same period last year. Jet fuel product supplied is down 7.7% compared to the same four-week period last year.

    Cushing up 900,000 bbls

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US oil production up year on year


                                                 Last Week    Week Before     Last Year

    Domestic Production '000.......... 9,088              9,032             9,078
    Alaska ............................................... 527                   517               . 507
    Lower 48 ....................................... 8,561    .          8,515               8,571

    http://ir.eia.gov/wpsr/overview.pdf
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    Royal Dutch Shell to sell Canadian oil sands interests for $7.25bn


    Oil giant Royal Dutch Shell is to sell its oil sands interests in Canada and reduce its share in the Athabasca oil sands project to 10% from 60% for a total of $7.25bn.

    Shell will remain the operator of Athabasca’s Scotford upgrader and the Quest carbon capture and storage project so it can focus on its Canadian downstream business and leverage proprietary technology.

    As part of the deal the FTSE 100 explorer will sell its 60% stake in Athabasca and its Peace River Complex asset, which includes undeveloped oil sands leases in Alberta, to a subsidiary of Canadian Natural Resources, which will be the operator of the Athabasca’s upstream mining assets, for about $8.5bn, comprised of $5.4bn in cash and around 98m Canadian Natural shares worth $3.1bn.

    Shell, along with Canadian Natural will also jointly buy Marathon Oil Canada, which holds a 20% stake in Athabasca, from an affiliate of Marathon Oil Corporation for $1.25bn each.

    The sale, which is expected to close mid-2017 and is subject to regulatory approval also includes intellectual property agreements valued at up to $285m and a long-term supply agreement for the Scotford refinery, which could potentially allow for additional cost reductions for Shell.

    Shell chief executive Ben van Beurden said: “This announcement is a significant step in re-shaping Shell’s portfolio in line with our long-term strategy. We are strengthening Shell’s world-class investment case by focusing on free cash flow and higher returns on capital, and prioritising businesses where we have global scale and a competitive advantage such as Integrated Gas and deep water.

    "The proceeds will accelerate free cash flow and reduce gearing and make a meaningful contribution to Shell’s $30bn divestment programme.”

    http://www.digitallook.com/news/news-and-announcements/royal-dutch-shell--2565820.html
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    Shale Billionaire Hamm Says Industry Binge Can `Kill' Oil Market

    Shale Billionaire Hamm Says Industry Binge Can `Kill' Oil Market

    Harold Hamm, the billionaire shale oilman, said the U.S. industry could "kill" the oil market if it embarks into another spending binge, a rare warning in a business focused on fast growth to compete with OPEC.

    The statement, at an energy conference in Houston on Wednesday, comes as top shale companies announce large increases in spending for this year, and the U.S. government says domestic oil output next year will surpass the record high set in 1970. OPEC ministers have said they are keeping a close watch on shale production to decide in late May whether to extend their oil-supply cuts into the second half of the year.

    Oil prices plunged 5 percent on Wednesday to their lowest level this year, falling just above $50 a barrel, on investor concerns about unbridled growth in America’s shale basins swelling U.S. inventories.

    U.S. production "could go pretty high," Hamm said at the CERAWeek by IHS Markit conference in Houston, one of the largest gatherings of oil executives in the world. "But it’s going to have to be done in a measured way, or else we kill the market."

    Hamm runs Continental Resources Inc., one of the biggest shale producers in the country with drilling operations that run from the Bakken in North Dakota to Oklahoma. He also was an early supporter of Donald Trump’s candidacy, and remains an informal adviser to the president on energy.

    Spending Announcements

    After oil prices doubled over the past year, U.S. shale drillers have announced big increases in spending for 2017. Anadarko Petroleum Corp. this week said it planned to invest 70 percent more this year than in 2016. Last month, EOG Resources Inc., another big shale producer, said it will spend 44 percent more this year than last. Exxon Mobil Corp. plans to spend a third of its drilling budget this year on shale.

    Shale producers are staging the biggest surge in drilling since 2012, with the number of oil rigs rising to more than 600 this month, nearly double the level of June. They are rushing to spend again after the Organization of Petroleum Exporting Countries and Russia agreed last year to cut its supplies, boosting oil above $50 a barrel after a two-year price rout.

    The drilling boom has been led by the Permian Basin, which extends from western Texas and south-east New Mexico, and the Scoop and Stack plays in Oklahoma.

    The Energy Information Administration this week said U.S. production will rise to 10 million barrels a day by the end of next year, more than 10 percent higher than now. If so, shale drillers will capture market share from OPEC, largely filling the increase in global oil demand.

    "We are witnessing the start of a second wave of U.S. supply growth," Fatih Birol, the head of the International Energy Agency, told Bloomberg in an interview on the sidelines of the Houston conference.

    Saudi Arabia Energy Minister Khalid Al-Falih earlier this week warned CERAWeek attendees that what he called the green shoots emerging in the U.S. oil industry were perhaps growing "too fast." ConocoPhillips CEO Ryan Lance quipped afterward that the green shoots looked more like "trees" to him.

    Al-Falih, in a clear message to the U.S. industry, said it would be "wishful thinking" to expect that Saudi Arabia and OPEC "will underwrite the investments of others at our own expense" through production cuts.

    https://www.bloomberg.com/news/articles/2017-03-09/shale-billionaire-hamm-says-industry-binge-can-kill-oil-market
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    Water poses problems for the energy industry in the Permian

    Water poses problems for the energy industry in the Permian

    Wastewater injection faces an uncertain future in West Texas’ prolific Permian basin, and companies working there will have to consider how else to dispose of water produced by fracking, said Alex Archila, the asset president of shale at BHP Billiton, a mining and exploration company.

    “Water, as I said of the Permian, will be a huge issue past a certain amount that you can inject,” said Archila. “And then it will be other solutions that the industry will need to figure out.”

    BHP Billiton is a Melbourne-based company with a presence in Houston and land in the Permian.

    Archila, who spoke on a panel at the CERAweek energy conference, said companies working in the Permian face two challenges when it comes to water: getting enough water for fracking and getting rid of underground water released by fracking.

    Typically, companies dispose of so-called wastewater by injecting it back underground, a process that has been linked to earthquakes in some areas of the U.S. In response to concerns about earthquakes, Oklahoma has limited wastewater injection. On Wednesday, Archila said that there might be a limit to how much wastewater can be injected into an area.

    The Permian is the hub of U.S. oil and gas production  in the U.S.. At CERAweek, there is even a word for the energy industry’s enthusiasm for the basin: Permania.

    http://fuelfix.com/blog/2017/03/08/water-poses-problems-for-the-energy-industry-in-the-permian/
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    Alternative Energy

    Dutch, Danish grid operators to form offshore power hub in North Sea


    Dutch power grid operator TenneT said on Wednesday it had found the first partner for its plan to create an offshore energy hub in the North Sea, Danish power transmission company Energinet.dk.

    TenneT's plan, first announced in June, involves the construction of one or more artificial islands around Dogger Bank, roughly at the centre of the North Sea between Denmark, Germany, Britain, Norway and Belgium, with connections to each.

    As the capacity of North Sea offshore wind farms grows, having a central hub will make it easier to apportion the low-carbon power to European nations as needed, and ultimately help the EU meet targets for cuts in emissions, the company says.

    TenneT will formally sign a deal with Energinet on March 23.

    "Discussions with other potential partners are ongoing, which not only include other North Sea transmission system operators, but also other infrastructure companies," TenneT said in a statement.

    Energinet.dk CEO Peder Østermark Andreasen said the project has the potential to lead to a "further reduction in prices of grid connections and interconnections."

    Separately on Wednesday, TenneT said it would invest 25 billion euros in new transmission capacity over the coming decade to support a number of offshore wind and onshore renewable projects currently in the pipeline, as well as to improve interconnections between the Netherlands and Germany.

    The amount is an increase from the 22 billion euros in a March 2016 forecast, after the Dutch government announced plans last autumn for a major acceleration in funding for renewable energy projects, including permitting 5 gigawatts of new offshore turbine farms..

    TenneT will provide infrastructure for the new farms.

    "If we want to exploit all this green electricity in our Northwest European region to the full, we cannot do so without new power transmission links, both onshore and offshore," CEO Mel Kroon said in a statement.

    "The ongoing coupling of the European energy markets will lead to more convergence of electricity prices in the various European countries, and will make electricity more affordable for end users," he said.

    TenneT reported 2016 underlying operating profit of 701 million euros on revenue of 3.23 billion euros ($3.41 billion), both down slightly from 2015, due to lower reimbursements for its services.

    http://www.reuters.com/article/tennet-hldg-energy-hub-idUSL5N1GL2CI
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    Agriculture

    Australia's 2017-18 wheat production forecast to fall 32% from last season


    Australia is expected to produce 23.98 million mt of wheat in the 2017-2018 (October-September) season, down 31.75% from the previous season's record harvest of 35.13 million mt, a normal yield with average seasonal conditions, the Australian Bureau of Agricultural and Resource Economics and Sciences said in its quarterly report Monday.

    A drier and hotter season in the first half of 2017, with exceptional heat in southeastern Australia in January-February could possibly reduce the yield, traders said. Last week, the likelihood of encountering El Nino in Australia was estimated at 50% by the Bureau of Meteorology.

    Also, the planted area for 2017-2018 is forecast to drop 1% to 12.8 million hectares, as farmers are expected to favor the more lucrative options such as pulses and sheep.

    However, final wheat acreage will depend on weather conditions ahead of and during the planting season, which typically takes place between March and June, the report added.

    Meanwhile, 2017-2018 wheat exports are estimated at 21 million mt, down 8% from the previous season on lower production.

    S&P Global Platts assessed Australian Premium White wheat Monday at $207/mt FOB Western Australia, unchanged from last Friday's buy-sell discussions that were range-bound.

    http://www.platts.com/latest-news/agriculture/singapore/australias-2017-18-wheat-production-forecast-27784507
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    Precious Metals

    Indian gold imports said to almost triple on wedding demand


    Gold imports by India, which competes with China for the role of world’s biggest consumer, are said to have risen almost three-fold in February from a year earlier as jewelers increased stockpiles before the festival and wedding period that starts next month.

    Shipments jumped 175% to 96.4 metric tons in February from a year earlier, according to a person familiar with provisional data from the finance ministry, who asked not to be identified as the data aren’t public. Overseas purchases slid 32% to 595.5 t in the 11 months to February. Ministry spokesperson DS Malik declined to comment on the data.

    After a lull in demand exacerbated by Prime Minister Narendra Modi’s move to withdraw high denomination currency notes, jewelers are building up inventories. They expect to see some recovery in purchases ahead of India’s wedding season and on the auspicious Hindu gold-buying day of Akshaya Tritiya that falls toward the end of April this year.

    “We expect some heavy buying in April as a large number of weddings are expected to take place,” Mehul Choksi, chairperson of jewelry store chain Gitanjali Gems, said by phone from Mumbai. “The wedding season runs from April to July, so we are expecting some recovery in demand.”

    While annual Indian demand should recover, year-on-year growth rates will be modest, relative to historical levels, Citigroup said in research report Wednesday. Demand is estimated around 725 t in 2017, similar to levels seen the prior year, it said. Indians buy gold during festivals and for marriages as part of the bridal trousseau or as gifts, and the nation imports almost all the gold it consumes.

    http://www.miningweekly.com/article/indian-gold-imports-said-to-almost-triple-on-wedding-demand-2017-03-08
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    Base Metals

    BHP eyes temporary workers to break strike at Chile's Escondida mine


    BHP Billiton may try to restart production at the world's No.1 copper mine Escondida in Chile using temporary workers once the strike surpasses 30 days, the company told a local radio station on Wednesday.

    If their safety could be assured "there is the option of using contractors' help to try to get production going" and it will be evaluated day by day, Escondida's corporate affairs director Patricio Vilaplana told Teletrece in an interview.

    Local media reported that the company is considering a two-pronged approach as the strike approaches the 30-day mark on Friday - submitting a new contract offer that deals with some of the union's concerns, and restarting output.

    BHP declined to comment.

    The strike is already the longest in Escondida's history, boosting global copper prices on tighter supply expectations and leading smelters to cut fees. The mine produced over 1 million tonnes of copper last year, around 5 percent of the world's total.

    The union is confident the bulk of its 2,500 members will not break ranks and accept an offer from the company, said union spokesman Carlos Allendes. After 30 days, under Chilean law, unionized workers have the right to break from the union position and accept the company offer.

    The two sides still seem far apart after government-mediated negotiations last month failed after a few hours.

    No fresh talks are scheduled, Chile's Mining Minister Aurora Williams told Reuters on the sidelines of a mining conference in Toronto this week.

    "(The government) is available at all times. However, there needs to be the willingness from both parties to sit down and have a discussion," she said.

    The stoppage began on Feb. 9 after contract talks between the company and union collapsed, with the main disagreements centered on the status of new workers and planned changes to shifts and benefits.

    BHP has previously said it would not use replacement labor for the first 30 days, as it has sought to keep a lid on simmering tensions and avoid violent clashes.

    Few striking workers are expected to cross picket lines and work alongside temporary contractors, given that over 99 percent of the unionized workers initially voted to strike, an unusually high level of support.

    The union has built a camp for striking workers complete with cinema and sports arena high in the Atacama Desert on the mine's outskirts, and union leaders have said they have the funds to continue for some time.

    "What's keeping the workers going at the moment? The perception that they're going to lose and job security will be in doubt ... that makes you think twice if you want to go back," said Allendes.

    http://www.reuters.com/article/chile-copper-escondida-idUSL2N1GL1D9
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    Copper smelter fees in Asia cool to four-year lows after mine shutdowns


    Spot processing fees in Asia for copper concentrate have slid to their cheapest in four years as shutdowns at the world's top two mines in Chile and Indonesia grind on longer than anticipated, and it is likely they will drop further in the coming month.

    Treatment and refining charges (TC/RCs) for trader-to-smelter deals for shipments to China in March and April have fallen to around $70 a tonne and 7 cents a pound, according to a smelter and a trading source.

    That is the weakest since around April 2013, according to metals and mining consultancy CRU, and a steep drop from 2017 term rates of $92.50 a tonne. Smelters typically cut fees to compete for concentrate stocks when supplies are short.

    Smelters with low stocks, including in top refined metal maker China as well as India and Japan, are facing narrowing margins as fees slide. Some in China have moved up maintenance to wait out the shortfall, analysts and smelter sources say.

    This is set to eat into 2017 refined copper output, pushing the market into deficit as global manufacturing demand revives, and is likely to drive a rally in prices.

    "We're a bit stumped about why copper prices haven't shot up and we haven't seen (TC/RCs) much sharper in the past week," said a trader at a global company in Asia.

    "My take is they're shuffling the shipments around, diverting some and bringing others forward, and so far there is sufficient concentrate supply," the trader said.

    Even at the four-year low for TC/RCs, smelters have some room to move, consultancy CRU said, with the break even point for Chinese smelters at $55 per tonne and for Japan at $45 a tonne. It did not provide figures for other Asian regions.

    Citi sees nearly 3.5 million tonnes of annual smelter capacity potentially going into maintenance in March given the tight concentrate market. That will "accelerate a tightening metal market trend via falling copper inventory heading into 2Q-17," analyst David Wilson said in a report.

    Citi expects the supply shock to help push refined copper into a deficit in 2017 for the first time in six years, and propel copper prices to nearly $7,000 a tonne before year-end, up 20 percent from $5,800 on Wednesday. [MET/L]

    INDIA AND JAPAN

    Smelters in India and Japan are expected to be among the first hit by the tighter supplies since they carry relatively low inventories across their financial year-end on March 31 and typically take shipments from the disrupted mines.

    "The Indians are starting to feel a little uncomfortable," said one concentrate trader at a Swiss trading house in Asia.

    A strike at the world's biggest copper mine - BHP Billiton's Escondida in Chile - is entering its fourth week and has shut concentrate output. Workers at Cerro Verde, one of Peru's largest mines, are also set to start a strike on Friday.

    In Indonesia, concentrate exports have been cut off since January from Freeport-McMoRan's Grasberg site, the world's second biggest copper mine.

    Indian smelter Vedanta Resources said it did not expect any "operational challenges ... (and had) taken all the necessary steps to ensure no impact from this disruption," although provided no details.

    India's other main smelter, Hindalco Industries, did not respond to a request for comment.

    Pan Pacific Copper, Japan's biggest copper smelter, is making some adjustments such as on shipping to secure supplies, a spokesman said.

    Sumitomo Metal Mining said it had not yet been affected by the disruptions from Escondida or Grasberg because it also gets concentrate from other mines. It also did not include the Indonesian mine in its procurement plans for this year because of the potential for disruption.

    "But if the strike continues at Escondida for a long time, we may need to think of other measures," a spokeswoman said, without giving further details.

    http://www.reuters.com/article/us-copper-supply-india-idUSKBN16F101
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    World's newest copper mine is a loner until prices rebound


    The end of the commodities super-cycle has left just one new major copper mine on the verge of production. Its owner says prices need to recover further before others are built.

    Cobre Panama, a sprawling openpit mine being developed by First Quantum Minerals in the central American nation, is set to begin production as early as next year and reach full output by the end of 2019. Its timing couldn’t be more fortuitous: the market for the industrial metal is set to swing into its first deficit in six years and remain in shortage to 2020.

    The price of copper – often used as a barometer of global economic health – has gained about 25% in the past six months on mine disruptions, Chinese demand and expectations of a US infrastructure build up, making it the top gainer in the Bloomberg Commodity Index. That’s still not high enough to prod a new cycle of investment, says First Quantum President Clive Newall.

    "Good copper projects are scarce at these prices," Newall said in a phone interview Monday from London. "There is an incentive price to build new greenfield sites, which is significantly above the current price."

    Copper prices need to rise another 15% to about $6 700 a ton before mining companies commit to new greenfield projects, meaning the industry is unlikely to boost capital spending until 2019 at the earliest, Citigroup forecast in a February report. Wood Mackenzie estimates a price of around $3.30 a pound ($7 275 a ton) would be sufficient to prompt investment, assuming miners will require a 15% rate of return, mining and metals analyst Chang Khoo said in an email.

    CAPEX CRUNCH

    Three-month copper fell 1% Tuesday to $5 858 a ton on the London Metal Exchange. Even with the recent gains, coppertrades at almost half the price reached in 2011. Prices may climb above $8 000 a ton before the end of the decade, Citigroup forecasts. Estimates compiled by Bloomberg predict a median price of $6 414 a ton by 2020.

    “The dramatic capex crunch in the copper mining sector since 2012 has eviscerated the copper project pipeline for much of the remainder of the current decade," analysts led by David Wilson said in the Citigroup report. The market is headed for a shortfall of 327 000 metric tons in 2017, rising to 600 000 tons in 2020, according to David Lilley, co-founder of RK Capital Management and one of the world’s top copperinvestors.

    There’s a reluctance to invest after years of low prices, BHP Billiton CEO Andrew Mackenzie said at a miningconference in Florida last week. Swedish-Canadian commodities entrepreneur Lukas Lundin called the industry “gun shy.” Oscar Landerretche, chairperson of Codelco, the world’s biggest copper producer, said: “It’s going to be very difficult for the industry to respond even if it wanted to."

    Demand for copper – one of the most commonly used metals found in electrical wiring to air conditioners to kitchen utensils – is set to surge, driven by Asia’s growing economies and the spread of electric vehicles, Citigroup said. Yet new discoveries haven’t kept pace with the growth in demand and it can take 25 years from early exploration to bring a new copper deposit into production, according to a study by the World Bank last year.
    Hedging Copper

    Labor disputes have also disrupted exports from the world’s two biggest mines in Chile and Indonesia, helping to drive up prices.

    First Quantum won’t benefit immediately from copper’s recent surge. After narrowly averting breaching loan terms last year, the Vancouver-based company has hedged almost 90% of its 2017 copper sales at an average price of $2.25 a pound, according to Sanford C. Bernstein That’s below the current price of about $2.65 a pound.

    "The 2017 realized price doesn’t matter," Sanford analysts led by Paul Gait wrote in a February 21 report. Miningcompanies tend to hedge near the bottom of the commodity cycle, locking in highly depressed prices and forgoing the upside when the cycle turns, it said. "This is exactly what happened to First Quantum."

    First Quantum will stop hedging, "when we believe that Cobre Panama is sufficiently de-risked," Newall said, declining to elaborate. With the bulk of heavy constructionout of the way, the project is "largely de-risked," Newall said during a February 27 investor call.
    Panama Canal

    The company still needs to arrange $2.5-billion in projectfinancing, which it expects to finalize this year, Newall said. First Quantum is in talks with a group of export credit agencies, which would offer insurance cover to lenders, allowing for loans with longer tenures and lower interest rates.

    The $5.48-billion project sits only 20 kilometers (12 miles) from the Atlantic coast, where it has already built a deepwater dock. Thanks to the Panama Canal, it will be able to ship its concentrate to just about any major smelter in the world.

    “Not many companies have embedded growth,” though First Quantum is one of them, said Chris Beer, a commodity fund manager at RBC Global Asset Management in Toronto.

    At full production, Cobre Panama is expected to yield 320 000 tons a year. That means First Quantum would be producing about 910 000 tons of copper annually by 2020, surpassing producers like Rio Tinto Group and KGHM Polska Miedz SA, according to a February investor presentation.

    "We’d be heading toward becoming a top-five copperproducer," Newall said.

    Even at current prices, Cobre Panama will still be profitable, Newall said.

    "It’s certainly a price where we’d make money," he said. "They’re going to get better, and that’s the ideal time to be bringing something like Cobre Panama into the market."

    http://www.miningweekly.com/article/worlds-newest-copper-mine-is-a-loner-until-prices-rebound-2017-03-08
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    Congo risks 50 percent drop in power output due to low rainfall


    Power production in Democratic Republic of Congo could fall by nearly half in the next dry season as scarce rainfall has left the Congo River at its lowest level in more than a century, the state generating company said on Wednesday.

    In a country dependent on hydropower for nearly all its electricity, the shortfall would affect the dominant copper industry and other businesses.

    Water levels in the Congo - Africa's second longest river, normally its deepest and a vital artery across the center of the continent - have fallen 50 percent compared to last year, said Medard Kitakani, spokesman for national utility SNEL.

    That meant levels for the November-February period were at their lowest in more than 100 years, he told Reuters.

    SNEL currently produces about 850 MW of power, and "if there is not an improvement in the levels of rainfall, there is a risk that we will lose 350-400 MW" during the dry season, Kitakani said.

    The dry season runs from May to September. Kitakani was unable to say how much power production typically falls during that period but said the potential drop was unusually severe.

    The country's environment minister has blamed the fall in the river's level on climate change, Kitakani said.

    Congo is Africa's biggest copper producer, and the region of Katanga where the metal is mined receives only about half the power it needs from the national grid, forcing operators to rely on expensive generators or power imports from neighboring Zambia.

    Charles Kyona, president of the industry-led chamber of mines, told Reuters that miners were concerned about persistent power shortfalls. The chamber has repeatedly called for further liberalization of the energy sector to address the problem.

    "Without electricity, we don't have the means to effectively work," he said.

    Less than 15 percent of the population has electricity, and the existing supply suffers from repeated breakdowns of the generators at the country's main hydroelectric dams and an unreliable distribution network.

    Plans to build a new 4,800 MW, $14 billion dam on the Congo River in coming years as part of an envisioned 44,000 MW Grand Inga project have stalled, with the government yet to select a developer.

    http://www.reuters.com/article/congo-energy-idUSL5N1GL2E4
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    Rusal revises CIF Japan Q2 offer higher at $135/mt plus LME


    Russian aluminum producer Rusal has revised up its offer to Japanese buyers to $135/mt plus London Metal Exchange cash, CIF Japan, for second quarter contracts, after offering at a premium of $125/mt on February 20.

    Two Japanese buyers said a Rusal official informed them of the change in meetings Tuesday.

    The Japanese buyers said they had not reached agreements with Rusal or other producers for the Q2 premiums, as they wanted to study the market before making a decision on the $125/mt premium offer.

    One Japanese buyer said he had counter-bid below $125/mt plus LME cash CIF Japan.

    Rusal Japan could not be reached for comment.

    Rusal supplies to Japanese trading houses, rolling mills and extruders 99.7% P1020 aluminum ingots as well as value added products on long term contracts.

    Rio Tinto Japan and South32 has offered at $135/mt plus LME cash, CIF Japan, for Q2 contracts.

    http://www.platts.com/latest-news/metals/tokyo/russian-rusal-revises-cif-japan-q2-offer-higher-27785359
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    Nickel price is plummeting


    Nickel fell to a 13-year low of $7,725 a tonne ($3.50 a pound) in February last year; then rallied to more than $11,700 by mid-November only to end the year barely above $10,000.

    This year the rollercoaster continued as news from top suppliers Indonesia and Philippines pull the metal in different directions. After a 10% rally in February, the price of nickel has been hammered down this week losing 7% since Monday to end Wednesday's session at $10,200.

    Nickel, mainly used as an anti-corrosive in steel alloys, rallied in 2016 on the back of a clampdown on mines in the Philippines which took over as the main supplier to China following an ore export ban in Indonesia in place since 2014.

    The market was rocked by reports that Indonesia's partial lifting of the export ban may result in higher volumes of ore hitting the market sooner than previously thought

    The weakness this weak is being blamed on news that the Philippines government may have another look at its mining sector environmental review that led to the closure of over half the country's production capacity.

    The market was also rocked by reports that Indonesia's partial lifting of the export ban announced in January may result in higher volumes of ore hitting the market; and sooner than previously thought.

    Indonesian miner PT Aneka Tambang said in February it has 5 million tonnes stockpiled for immediate shipping and Bloomberg reported Wednesday the state controlled company is ready to load the first cargoes destined for China.

    Metalbulletin quotes from a broker note saying that Indonesian miners "with smelters or those that co-operate with smelter owners will be allowed to ship as much nickel ore and bauxite as the input capacity of the smelters".

    In another sign that the Indonesian nickel industry is gearing up again comes from Hong Kong-listed China Hanking Holdings which told shareholders on Wednesday it will restart a low-grade nickel mine it closed in 2014 to supply domestic smelters.

    http://www.mining.com/nickel-price-plummeting/
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    Glencore Is on to a Winner With This Obscure Metal


    Cobalt is having a moment in the spotlight. Historically a minor byproduct of copper and nickel mining, the metal is a key ingredient for lithium-ion batteries and now a growing money maker for Glencore Plc.

    In the past eight months, prices more than doubled on speculation that supply won’t keep up with demand for batteries in electric cars. Glencore, the largest cobalt producer, plans to about double output by 2018, and only coal, copper and zinc offer more of an earnings boost when prices rise.

    Cobalt, which has been in oversupply for years, was often treated as an afterthought at the copper and nickel mines where it’s found. Now, demand for the once obscure metal that’s mined largely in the Democratic Republic of Congo is soaring as it graduates from mobiles to larger batteries in electric vehicles and homes.

    At Glencore, cobalt is “starting to make a significant difference to earnings,” and is helping reduce costs in its larger copper mining business, Tyler Broda, an analyst at RBC Capital Markets in London, said by phone. “Glencore’s copper business is now one of the best-placed in the world in terms of cost right now, and byproducts like cobalt have played a big part in that.”

    Every 10 percent change in the cobalt price affects Glencore’s earnings before interest, taxes, depreciation and amortization by about $150 million, according to Barclays Plc analysts including Ian Rossouw. If prices rise another 50 percent and Glencore achieves its output targets by 2019, that would add about $2.2 billion to annual earnings, they said in a March 1 note.

    The producer is also doubling down on its exposure to the metal, with a deal last month to buy full control of the world’s biggest cobalt mine. It will acquire 31 percent in Mutanda Mining in the DRC from billionaire Dan Gertler.

    Glencore shares added 0.7 percent to 322.20 pence as of 11:53 a.m. in London.

    Wider Deficits

    The cobalt market was in a deficit last year for the first time since 2009, according to Darton Commodities Ltd., a cobalt trading house based in Guildford, U.K. The group predicts deficits will widen as annual battery-powered vehicle sales rise from 750,000 currently to an estimated 13 million in 2020.

    LME cobalt has gained more than 50 percent this year, to $50,750 a metric ton on Tuesday.

    Some analysts have cautioned that the cobalt market is in danger of overheating. While deficits will “undoubtedly” support higher prices over the year, there’s a risk that slowing demand and profit-taking by hedge funds could push prices lower in the second quarter, according to Edward Spencer, a senior consultant at CRU.

    That’s not deterring Bob Mitchell, a Tualatin, Oregon-based managing member at Portal Capital, who began buying physical metal for his Green Energy Metals Fund when prices were below $11 per pound ($24,250 per ton). Mitchell still views the market as cheap relative to historical averages and expects prices will be higher this time next year, he said.

    Cobalt is “definitely a commodity that’s enjoying its day in the sun,” Glencore Chief Financial Officer Steve Kalmin told analysts on a call last month.

    https://www.bloomberg.com/news/articles/2017-03-08/cobalt-steps-out-of-the-shadows-as-glencore-s-new-star-player?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social
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    Steel, Iron Ore and Coal

    China's four major polluted provinces to set up


    China's major coal producer Shanxi province will make concerted efforts with capital Beijing, Tianjin and Hebei this year to set up "non-coal" areas, in order to combat rampant smog and improve air quality, according to Shanxi delegates of the Fifth Session of the Twelfth National People's Congress on March 7.

    Shanxi will ban use of "San Mei" – a coal variety typically used to heat families, hotels or restaurants or to be burned by industrial boilers – in Taiyuan, Yangquan, Changzhi and Jincheng cities in winter.

    By end of 2016, Linfen, Jinzhong, Luliang, Taiyuan and Changzhi cities each reported over 100,000 households to have replaced natural gas or electricity for burns of "San Mei", while the other six cities each reported 50,000-100,000 households, said Vice Governor Wang Bin.

    The province will complete transformation of 43 large coal-fired power units each with capacity of 18.07 GW to realize ultra-low emissions this year, and finish desulphurization, denitration and dust removal at 82 steel makers and 146 coking plants.

    http://www.sxcoal.com/news/4553156/info/en

    Attached Files
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    Shanxi reduces 143 mln T coal output in 2016


    Shanxi, a leading coal producing province in northern China, reduced coal production by 143 million tonnes, accounting for some 40% of the country's total decrease in coal output last year,data showed.

    The achievements in its de-capacity campaign, with 25 coal mines closed in 2016, contributed to improved performance and increased profitability for coal producers.

    By December 31 last year, a total of 31,586 workers had been resettled, accounting for 99.76% of the province's total layoffs in coal industry.

    Shanxi planned to cut 20 million tonnes per annum of coal capacity this year, as part of continued efforts to optimize the industry.

    http://www.sxcoal.com/news/4553150/info/en
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    Optimism pervades US coal industry amid fewer regulations: forum


    Optimism pervaded the coal industry Wednesday as it gathered at the American Coal Council's Spring Coal Forum in Clearwater, Florida, as the early days of the Trump administration have brought regulatory relief for an industry struggling to regain its edge.

    Early signs of the Trump administration's focus on energy-related regulations have been positive for the industry, including a bill signed last month that eliminated the Stream Protection Rule, as well as executive orders on other energy-related issues, said Michael Nasi, a partner with Jackson Walker, a Dallas-based environmental law firm.

    Doing nothing in terms of federal intervention would be a major change for the industry compared with the Obama administration, which issued 57 federal implement plans over eight years. The FIPs are typically reserved for extraordinary circumstances under the Clean Air Act, which attempted to give more control to the states.

    "If all the president does is to stop doing [regulations] like this, he's going to do an amazing job," Nasi said.

    Related Capitol Crude podcast:Sizing up Trump's oil and energy policy initiatives from the Bone zone

    More effort will be needed to "derig the system" and deliver a "regulatory reset," said Nasi, who spoke with others on the broad theme of regulations and their impact on the coal industry in the post-Obama world.

    The first of several steps is expected this week to begin the process of eliminating and potentially replacing the Clean Power Plan, Nasi said. The plan was expected to effectively eliminate construction of new coal-fired power plants.

    http://www.platts.com/latest-news/coal/clearwater-florida/optimism-pervades-us-coal-industry-amid-fewer-21101393
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    India works on formula to regulate iron ore prices - steel secretary on TV


    India is working on a formula that might act like a cap on iron ore prices, the country's steel secretary Aruna Sharma told CNBC TV18 on Wednesday.

    "There needs to be some sharing of the profits. We are working on the end-formula, and maybe we will come up with the logic very soon," Sharma said.

    The price of iron ore "should not move like the sensex" as such price fluctuations make it very difficult for an industry to work, she added.

    Iron ore prices rose to their highest since August 2014 last month in China, the world's top producer and consumer of steel.

    With Beijing expected to boost infrastructure spending, iron ore .IO62-CNO=MB, which is used to make steel, could rally further.

    http://www.reuters.com/article/india-iron-ore-idUSL3N1GL2DI
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    China's Feb steel exports slump to three-year low, iron ore down


    Chinese steel exports tumbled to a three-year low in February, customs data showed on Wednesday, lower than expectations, as steelmakers in the world's top producer shifted to meeting rising demand at home.

    Shipments for the month were 5.75 million tonnes, the lowest since February 2014, data from the General Administration of Customs showed. It was down 29.1 percent from a year ago and down 22.5 percent from January.

    "We understand that strong prices in the domestic market has lured mills to reduce shipment overseas but we didn't expect they would cut exports so much. If the big decline continues, upside room for domestic prices might be capped," said Zhao Chaoyue, an analyst with Merchant Futures in Shenzhen.

    The sharp drop in exports could blunt criticism by steelmakers in the United States and other global producers that China is dumping excess material abroad.

    A rally in steel prices has prompted Chinese steelmakers to raise production. Rebar futures on the Shanghai Futures Exchange have risen 18.5 percent this year.

    A senior trader in Hangzhou expected Chinese steel exports to stay at similar levels to February during March given overseas buyers are reluctant to accept rising offers from Chinese exporters.

    Total exports for the first two months, which smoothes out the impact of the Lunar New Year holiday falling at different times, fell 25.7 percent to 13.17 million tonnes, data showed.

    Imports of steel rose from a year ago to 1.09 million tonnes in February, up 17 percent. Total imports for the first two months of 2017 jumped 17.6 percent from a year ago to 2.18 million tonnes.

    China's iron ore imports rose to 83.49 million tonnes in February, up 13 percent from a year ago, as steelmakers increased production and restocked the raw material.

    Total arrivals for the first two months of the year rose 12.6 percent to 175.3 million tonnes from a year ago.

    http://www.reuters.com/article/china-economy-trade-steel-idUSL3N1GL17N
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