Mark Latham Commodity Equity Intelligence Service

Monday 15th February 2016
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    Macro

    Turkey, Saudis threaten ground troops in Syria


    Hopes of securing a temporary truce in the Syria crisis within a week dimmed over the weekend as Syrian government forces tightened the noose around rebel-held parts of Aleppo, Turkey continued shelling Kurds and Syrian troops inside Syria, and Russia's foreign minister put the chances of a quick deal at less than 50 percent. His comments and strong words from U.S. Secretary of State John Kerry underscored deep U.S.-Russian disagreements over Syria.

    Further complicating the picture, Turkey's foreign minister said his country and Saudi Arabia may launch ground operations against the Islamic State of Iraq and Syria (ISIS) in Syria, Turkish media reported Saturday.

    Diplomats from countries with interests in Syria's five-year civil war - including the United States, Russia, Turkey, Iran and Saudi Arabia - agreed Friday to work toward a temporary "cessation of hostilities" within a week. They also agreed to "accelerate and expand" deliveries of humanitarian aid to besieged Syrian communities beginning this week.

    However, the ongoing posturing by all sides involved and the ever-persistent bloody fighting in the country itself threaten to make the diplomatic effort for naught.

    Officials involved in truce talks have acknowledged from the start that the test would be turning commitments on paper into reality on the ground - and it wasn't clear whether deep differences regarding the truce and which groups would be eligible for it could be overcome.

    The truce deal in Munich came as Syrian government forces, aided by a Russian bombing campaign, are trying to encircle rebels in Aleppo, the country's largest city, and cut off their supply route to Turkey.

    Turkey's foreign minister, Mevlut Cavusoglu, was quoted in the Yeni Safak newspaper Saturday as saying that "Turkey and Saudi Arabia may launch an operation from the land" against ISIS, which holds a swathe of Syrian territory.

    Saudi Arabia is "ready to send both jets and troops" to Turkey's Incirlik air base, Cavusoglu was quoted as saying, and a ground operation is possible if there is "an extensive results-oriented strategy" in the fight against the Islamic extremists. Incirlik is now being used by the U.S.-led coalition in the campaign against IS.

    Turkish television channels NTV and CNN Turk also carried remarks by Cavusoglu suggesting that Turkey and Saudi Arabia see eye-to-eye on the need for ground operations in Syria.

    A senior commander warned the Saudis Sunday against getting more directly involved, reports Agence France Presse.

    "We definitely won't let the situation in Syria to go forward the way rebel countries want... We will take necessary actions in due time," deputy chief of staff Brigadier General Masoud Jazayeri told Iran's Arabic-language Al-Aalam television.

    Riyadh said on Saturday it had deployed warplanes to Turkey's Incirlik airbase in order to "intensify" its operations against the Islamic State group in Syria.

    Iran is a close ally of Syrian President Bashar Assad and has sent weapons, money and military advisers to Syria to help bolster his forces. Tehran denies it has sent combat troops, but several Iranian soldiers, including senior officers, have been killed on Syrian battlefields.

    Shiite Iran and Sunni Saudi Arabia have been engaged in a growing hostile struggle for regional influence in recent years, with their interests coming into conflict in Yemen, Syria, and elsewhere.

    There was a dangerous rise in tensions between Iran and Saudi Arabia in recent weeks following the kingdom's execution of a Shiite cleric and attacks on Saudi diplomatic posts in the Islamic Republic.

    The exection of the cleric, Nimr al-Nimr, inflamed a 1,400-year-old conflict between Sunni and Shiite Muslims.

    Analysts have feared the dispute could boil over into the proxy wars between the two Mideast rivals.

    Meanwhile, opposition activists say Turkey has shelled positions held by the main Kurdish militia in northern Syria for a second day Sunday.

    The Syrian Observatory for Human Rights activist group says two fighters from the Syrian Democratic Forces - a coalition of Kurdish and Arab fighters - have been killed and seven others wounded in the shelling.

    There was no immediate confirmation by the group, which is dominated by Kurdish fighters from the People's Protection Units known as the YPG.

    The group has been on the march in the northern province of Aleppo near the Turkish border in recent days. That has alarmed Turkey, which considers the group to be an affiliate of the Kurdish PKK movement which it considers to be a terrorist organization.

    http://www.cbsnews.com/news/turkey-saudi-arabia-threaten-ground-troops-syria/

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    21 countries in Thunder of the North drill in Saudi Arabia


    International war games to raise combat readiness, boost coordination

    Saudi media said that the war manoeuvres, code namedcode named Northern Thunder, would be held in the northern region of the kingdom and that several countries would join.

    Brigadier Ahmad Asiri, the spokesperson for the Arab Coalition fighting to restore the rule of the internationally recognised government in Yemen, said that 21 countries would be participating in the Northern Thunder drill.

    “There will be 21 Arab and Muslim countries taking part in huge drills,” Assiri told London-based newspaper Al Sharq Al Awsat. “It will serve to boost fighting capabilities, exchange information, benefit from experiences and expertise and enhance coordination between the participating countries. There will be joint military command centres,” he said.

    Assiri added that “when participating countries feel that there are coordinated and interdependent efforts, the results of the exercise will be positive. We have models based on real experience of being in the Arab coalition in Yemen where operations are running excellently and positively,” he was quoted by the daily as saying.

    Asiri said that Saudi Arabia worked within military coalitions and that it was ready for a land war whenever the international coalition wants to launch ground operations.

    Saudi Arabia has a strong desire to defeat terror groups, he said, adding that no country in the region was targeted by the Daesh terror group like the Saudi kingdom where it attacked mosques, security men and the northern border.

    Several Arab ambassadors said that the participation of their countries in the “Northern Thunder” will focus on the ground troops and will boost combat readiness and coordination.

    “The initiative of the Custodian of the Two Holy Mosques to launch the Northern Thunder drills is one of his numerous initiatives to preserve security and stability in the region,” Jamal Al Shamayla, the Jordan ambassador to Saudi Arabia, said. “Jordan, led by His Majesty King Abdallah, will always and forever be with Saudi Arabia, led by King Salman Bin Abdul Aziz, through consultations and coordination towards all issues of common interest. Jordan is absolutely keen on Arab security, particularly during these times dominated by chaos resulting from terrorism,” he said.

    http://gulfnews.com/news/gulf/saudi-arabia/21-countries-in-thunder-of-the-north-drill-in-saudi-arabia-1.1670564

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    Iran will defend Syria’s airspace if Damascus requests


    A senior Iranian air force commander says Iran is prepared to defend Syria’s airspace if Damascus calls for it.

    Brigadier General Farzad Esmaili, the commander of Iran’s Khatam al-Anbiya Air Defense Base, made the remarks during an interview with the Tasnim news agency on Sunday.

    After praising the government and people of the Arab country for their five-year battle against foreign-backed Takfiri terrorism, he stressed that any military presence in Syria without the approval of Damascus would end in nothing but "defeat.”  

    The remarks were made in the wake of reports that Turkey and Saudi Arabia were preparing to launch joint military operations on Syrian soil.

    Instead of contemplating a ground presence in Syria, Esmaili noted, Riyadh should consider stopping atrocities in Yemen where over 8,200 people have been killed and some 16,000 more injured since March 26, 2015.

    Meanwhile, Saudi Arabia has confirmed deployment of warplanes to the Incirlik Air Base in southern Turkey, claiming that the move was in line with the so-called fight against Daesh.

    http://www.presstv.ir/Detail/2016/02/14/450357/Iran-air-force-defend-Syria

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    Saudi Stocks Slammed As War Worries Trump Dead-Crude-Bounce


    Oil's late week surge provided much buying excitement as Mid-East equity markets opened with flashing green numbers across every screen. However, by the close, it was a sea of red with Kuwait, Egypt, Amman, and Iraq all lower and Saudi's Tadawul All Share Index tumbling almost 4% from the opening highs as war worries dragged The Kingdom's stock market back near 5-year lows.

    http://www.zerohedge.com/news/2016-02-14/saudi-stocks-slammed-war-worries-trump-dead-crude-bounce

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    China Exports Crash Most In 6 Months Despite "Devalued" Yuan


    Despite the weakening of the Yuan, China exports collapses 6.6% YoY in January (massively missing the 3.6% increase expected). Imports continued their 15 month series of collapses with a 14.4% plunge (again drastically worse than the 1.8% increase expected). This pushed the trade balance to a record surplus CNY406bn.

    In Yuan terms it's ugly... Both imports and exporets were worse than the lowest forecast of all professional economists...

    The last time Chinese trade data was this bad was in August. China devalued three days later

    http://www.zerohedge.com/news/2016-02-14/china-exports-crash-most-6-months-despite-devalued-yuan
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    Peter Pan Is Dead - Japanese Economy Stalls For 6th Time In 6 Years


    We just cannot wait for the next time either Abe or Kuroda utter the following string of words "[stimulus - insert any combination of equity buying, bond buying, money printing, and NIRP] is having the desired effect." For the sixth time in the last 6 years, GDP growth has once again turned negative and while the BoJ balance sheet continues to balloon, so the nation's economy (as measure by GDP) is now shrinking as Peter Pan policy is officially dead.

    With 3 of the top 4 forecasters already suggesting Japanese GDP growth would be worse than the median estimate of -0.2% growth, fairy-tales were all they had left... Nearly a year ago, Bank of Japan governor Haruhiko Kuroda described the unlikely inspiration behind Japan’s unprecedented monetary stimulus: Peter Pan.

    I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’.

    Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions.

    And now, Pan is dead... this is the 6th negative GDP growth period since 2010... printing a 0.4% QoQ drop against the -0.2% growth expectation...

    http://www.zerohedge.com/news/2016-02-14/peter-pan-dead-japanese-economy-stalls-6th-time-6-years

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    Indonesia export, import slump deepens; central bank may cut rates


    Indonesia posted a small trade surplus in January, confounding expectations for a third monthly deficit, due largely to a slump in imports from persistently weak domestic consumption.

    Sliding prices for oil, gas and other commodities have led to a sharp drop in export earnings for Southeast Asia's largest economy, and deteriorating global demand could push the central bank to cut rates again this week, some economists said.

    Exports plunged 20.72 percent in January to $10.50 billion, the weakest shipment by value since September 2009 and the 16th straight month of decline. Economists surveyed had expected a 15.40 percent drop.

    Imports fell 17.15 percent, sharper than economists' estimates of 8.14 percent, data from the statistics bureau showed. Imports of raw material and capital goods were all down, the bureau said, but imports of consumer goods rose.


    Weaker than forecast exports and imports led to a $50.6 million surplus in January. A Reuters poll of analysts had expected a $360 million deficit for the month, following a revised $161 million deficit in December.

    "It's a disappointing import number," said Gundy Cahyadi, DBS' economist in Singapore.

    "For GDP growth to return to 5 percent this year, the economy needs stronger domestic demand, particularly investment. And the monthly import numbers are a good proxy for the strength in domestic demand," he added.

    Indonesia's trade balance moved back into surplus in 2015, after three years of deficits, largely due to a fall in imports as consumption and investment stayed weak.

    The government is targeting 5.3 percent GDP growth this year after the economy grew at its slowest since the 2009 financial crisis last year.

    http://www.reuters.com/article/us-indonesia-economy-exports-idUSKCN0VO0G4

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    Argentina scraps mining export taxes as part of free market push


    Argentina's new president has revoked the 5 percent tax that the previous administration collected on mining exports, state news agency Telam reported on Friday, as part of the country's two-month old push toward open markets.

    "Today end the taxes on mining exports," Mauricio Macri, inaugurated in December after winning office on a free-markets platform, said in a ceremony announcing the measure.

    "We are going to work with the governors to develop new mining projects, always putting environmental protection first," Macri said.

    His predecessor, Cristina Fernandez, expanded the state's role in Latin America's No. 3 economy. Her trade and currency controls were thrown out by Macri during his first month in office as he tries to spur production and exports while confronting double-digit inflation.

    Macri said the decision to ditch mining export taxes "is in line with generating the stability, confidence and predictability that will attract investors."

    Argentina produces aluminum, lead, copper, zinc, silver and gold.

    http://www.reuters.com/article/argentina-mining-idUSL2N15R1AA
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    3D Printed buildings??


    Image title

     A company called Zhuoda Group has developed a very unique form of 3D printing buildings, so unique that not only have they applied for over 22 patents for the technology, but they also are reluctant to divulge the exact process. Unlike other forms of 3D printing of large structures, which use a cement base for construction, Zhuoda does not. In fact, the material that they use is being called a “secret”, although they have many parties interested in purchasing it.

    The buildings that they are fabricating are strong enough to withstand 9.0 magnitude earthquakes, stand up to harsh weather, and provide for superior insulation. Better yet, the material that these houses are constructed with also generates negative ions on a permanent basis, a feature that many Chinese will be quite happy with. On top this, the buildings are also fireproof, waterproof, and virtually corrosion-proof.

    The city-state of Singapore has invested S$150 million (roughly $100 million) into the Singapore Centre for 3D Printing at Nanyang Technological University to test out 3D printing concrete blocks on a large scale. According to 3DPrint, the school is looking into building new printers to create the blocks. “In the area of housing there are quite big challenges,” Chua Chee Kai, the center’s director, told 3DPrint. “There is no assistance of 3D printers and no availability of printable concrete. We have to develop all this from scratch.”



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    Oil and Gas

    China crude oil imports fall in January from record high


    China's crude oil imports fell 20 percent in January from record high volumes the previous month to their lowest level since October, official customs data showed on Monday.

    January crude oil imports were also down 4.6 percent on a year earlier at 26.69 million tonnes, or 6.29 million barrels per day.

    China's imports reached a record 7.81 million bpd in December to close out 2015 with an average 6.71 million bpd - a figure well above China's still growing demand for oil.

    China took advantage of low global oil prices last year to add up to 185 million barrels to its reserves, Reuters calculations show, while oil demand - refinery throughput plus net imports of oil products - grew 3.1 percent.

    In January, fuel exports rose 45.2 percent to 3.01 million tonnes, or 679,700 bpd, after hitting a record 975,500 bpd in December, as China continued to export more diesel amid weakening demand for the industrial fuel.

    Diesel exports in the first quarter of 2016 may high a record high for that period, flooding Asia with supply at a time when profit margins are close to six-year lows, industry sources have said.

    Net fuel exports were 350,000 tonnes in January.

    http://www.reuters.com/article/china-economy-trade-crude-idUSL3N15U11A
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    Sembcorp Marine Posts First Loss Since 2003 on Brazil Impact


    Sembcorp Marine Ltd., the world’s second-largest builder of oil rigs, posted its first quarterly loss in at least 12 years after it took a one-time charge and the plunging oil prices pushed customers to delay or cancel orders for offshore drilling projects.

    The net loss in the fourth quarter totaled S$537 million ($384 million), the Singapore-based company said in a statement Monday. The company took impairment and provisions of S$609 million for projects of its client Sete Brasil Participacoes SA and others, according to the statement.

    It’s the first quarterly loss since the company started reporting data in 2003, according to Sembcorp Marine’s website.

    http://www.bloomberg.com/news/articles/2016-02-15/sembcorp-marine-posts-first-loss-since-2003-on-brazil-impact

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    Cenovus Energy to sell up to $5 billion in securities amid oil slump


    Canadian oil producer Cenovus Energy Inc said it may sell up to $5 billion of stock, debt or other securities, a day after it announced a dividend cut, as the company shores up its balance sheet amid a slump in oil prices.

    The company filed with the U.S. Securities and Exchange Commission for a mixed shelf offering after the company also said on Thursday it would cut its 2016 budget and lay off more employees. (1.usa.gov/1WhvZXF)

    In a mixed shelf offering a company may sell securities in one or more separate offerings without filing a prospectus for each one. The filing does not necessarily mean that the securities will be sold immediately, if at all.

    U.S. oil producers including Oasis Petroleum Inc (OAS.N) and Pioneer Natural Resources Co (PXD.N) have also launched stock offerings, indicating that some oil producers can tap the capital markets even as highly indebted ones struggle to survive.

    Cenovus cut its dividend by 69 percent on Thursday and said it would further reduce its workforce, on top of last year's 24 percent reduction.

    These measures come months after the company sold its oil and gas royalty properties to Ontario Teachers' Pension Plan for about C$3.3 billion, to strengthen its balance sheet.

    Cenovus had total debt of C$6.53 billion ($4.70 billion) as of Dec. 31. The company has a market value of C$11.62 billion.

    http://www.reuters.com/article/us-cenovus-energy-offering-idUSKCN0VL12G
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    As U.S. refinery cuts quicken, crude market faces next threat


    For the past six years, U.S. refiners from Texas to Philadelphia have bought every barrel of crude they can lay their hands on to cash in on a golden era of healthy margins.

    Now, at least five refiners - including two of the country's largest - have voluntarily cut output of gasoline and distillate in the most widespread cuts since the global financial crisis, moves that may deepen crude's prolonged rout as storage tanks at Cushing, Oklahoma, the main U.S. oil hub, near capacity.

    Independent refiners including Valero Energy Corp, PBF Energy INC, Philadelphia Energy Solutions and Monroe Energy, a unit of Delta Air Lines Inc, are curbing output, capitulating to record stockpiles and sluggish winter demand that have hurt profits. Even large oil companies like Exxon Mobil Corp have slashed runs.

    While seasonal run cuts for work are common, reductions for purely economic reasons are rare.

    If the closures gather pace and refineries curb their purchases of crude further, it will heap further pressure on prices, removing one of the last remaining pillars of support for drillers and integrated producers.

    "This is going to put back pressure on crude, but you had an ongoing imbalance between supply and demand," said Gary Ross, executive chairman of industry consultancy PIRA.

    While gasoline profit margins may rebound by summer as the U.S. vacation driving season arrives, the run cuts will put pressure on crude stockpiles. Ross expects refineries to run at lower rates through March and April as refiners try to unload winter-grade gasoline.

    The cuts also suggest the outlook for demand for gasoline and diesel may deteriorate before it gets better.

    "No one really knows what demand will do this year," said Dennis Cassidy, managing director and co-head of the oil, gas and chemicals practice at AlixPartners, a global consulting firm. "That's what consensus sentiment is right now, that demand will surprise to the downside."

    Over the past year, U.S. refining margins, the estimated profit from turning oil into gasoline and diesel, have halved and are near their lowest level in five years. Refineries in the Midwest are losing cash at current prices as prices at the pump slide below $1 and oversupply continues to punish prices.

    The latest round of cuts may be distinct in the pressure it places on the storage hub at Cushing, where tanks are close to full, leaving little wiggle room for surplus crude to find a home.

    Based on recent weekly inventory data, Cushing could run out of space as early as next month. Data shows planned maintenance this spring by refineries will be slower than expected, but economic run-cuts will likely offset the effects.

    It is a marked shift in fortunes for refiners, who process crude into products like gasoline, diesel and jet fuel and were the early beneficiaries of the oil price rout.

    Because refiners need to sell off stockpiles of so-called winter-grade gasoline before they begin producing large volumes of gasoline with a chemical make-up that is more resistant to evaporation in the summer, the price of gasoline typically tumbles in March.

    Tom Nimbley, chief executive of PBF, said the oversupply situation could be alleviated as refiners shift their production from gasoline to distillate fuels like diesel and jet fuel.

    Still, traders say they are concerned about the outlook for refined products, and are hesitant to maintain their long positions for the summer months on the "crack spread," an approximation of refiner's profit.

    http://www.reuters.com/article/usa-refineries-cut-idUSL2N15R03B

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    Here Is The ETF Liquidation That Sent Shockwaves Through The Crude Oil Market


    A week ago we exposed the real reason for the "crazy volatility" in crude oil markets, and specifically the driver of the immense rally (despite weak data) in crude - a massive liquidation of the triple-inverse ETF DWTI. Today we have another mysterious, even larger spike in crude oil prices (for no good reason other than 'old' misunderstood rumors about OPEC production cuts). The driver, it would appear, is another liquidation as the ETF trades at a huge discount to NAV. The last time this happened, it didn't last.

    We saw the same actin last week (and the delayed data exposed the liquidtaion)... it's happening again...

    And DWTI is trading at a dramatic discount to NAV - which suggests - given the day lag (There is a day's lag between when redemptions and creations are ordered and when they show up in share figures) that buying pressure hits today...

    http://www.zerohedge.com/news/2016-02-12/here-liquidation-just-sent-shockwaves-through-crude-oil-market
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    Saipem counting the cost of going solo in low oil price world


    A plunge in oil prices and little sign of recovery anytime soon have left Italian oil contractor Saipem ill-prepared to cope with life independent from former parent Eni, even after a 3.5 billion euro ($4 billion) fundraising.

    The much-needed money is essentially in the bank, as the share sale to existing investors is underwritten by a financial consortium and core investors Eni and state fund FSI.

    Saipem said on Thursday shareholders had signed up to 87.8 percent of the offering, worth 3.073 billion euros, leaving the underwriters including the consortium of Goldman Sachs, JP Morgan taking potentially unwanted stock.

    However, some analysts had feared worse. "We think a 12.2 percent unsubscribed ratio can be considered a success," said Guglielmo Opipari of broker ICBPI.

    Saipem shares on Friday opened higher, but then fell back to hit a new near 20-year low.

    Some analysts say the plunge in the stock is a sign that, even with new funds, investors are sceptical it can thrive on its own in a struggling oil industry.

    "Saipem was separated from Eni before its time... it's unprepared for independence," said Bernstein oil analyst Nicholas Green, who has an underperform rating on Saipem shares.

    The future looked brighter when state-controlled Eni set in motion plans to cut loose Saipem in July 2014, with oil prices trading at around $110 per barrel.

    Now they are close to 12-year lows under $30 a barrel, hit last month when Eni finally sold part of its 43 percent stake in Saipem to get 6.7 billion euros of gross debt off its own balance sheet and sever its ties.

    As well as leaving Saipem to raise funds from its investors, that deal left it to negotiatebank loans to handle its new debt pile, using its own Baa3/BBB- credit rating and not Eni's A rating.

    With crude prices showing little sign of recovery amid a glut of supply and weakening demand, analysts are concerned oil producers will cut back further on investments, hitting firms such as Saipem that run drilling rigs and lay pipelines.

    On Wednesday, credit ratings agency Moody's followed rival S&P in saying it could downgrade Saipem's debt to "junk," citing the risk of project cancellations and delays in an ailing sector.

    A Milan banker said any downgrade could make it tougher for Saipem, which has already announced several profit warnings and hefty cost cuts, to win new business.

    In its share sale prospectus, Saipem said it might have to review forecasts set last October - which included a market recovery in 2017 - if oil prices remained under pressure.

    "Saipem is saving costs. It may have to save more," said Barclays analysts, with an underweight rating on Saipem shares.

    There is also concern over a set of pending legal claims proceedings, stemming in part from a corruption probe in Algeria.

    Barclays estimates net outstanding claims against Saipem are around 700 million euros.

    Saipem, meanwhile, has said it has had made 62 million euros of provisions against potential future litigation payments of 126.4 million euros. Under accounting rules, companies do not have to provision for claims they cannot reliably quantify.

    http://www.reuters.com/article/saipem-financing-idUSL8N15R1FK
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    Noble Group's LNG traders leaving to join Glencore – sources


    Three liquefied natural gas (LNG) traders at Asia's biggest commodity trade house, Noble Group Ltd, including two co-heads of the team, are leaving to join rival trader Glencore, sources familiar with the matter told Reuters.

    Noble and Glencore declined to comment. The sources said that Noble will continue to trade LNG, having restarted its London-based trading desk in 2014. Noble will still have about five people involved in the LNG business.

    The departures come after a tough period at Noble. The company's shares have shed more than two-thirds of their value in the past year, after Iceberg Research alleged the company inflated its assets by billions of dollars by inaccurately representing the value of its contracts.

    A slump in commodity markets also hit the firm. Noble has rejected the accusations of accounting irregularities.

    Last month, Noble's executives said the company was taking measures to bolster its balance sheet. It has slashed capital expenditure on areas such as its non-ferrous metals business and sold its stake in its agribusiness unit.

    LNG, however, has been an attractive area for commodity traders, as a wave of export projects planned over the past decade come to fruition, boosting supply and creating trading opportunities.

    One of Noble's biggest LNG ventures has been its two-year supply deal into the burgeoning Egyptian market after the country launched two import terminals last year, enabling it to quickly become a significant buyer of the fuel.

    Switzerland-headquartered Glencore noted last year that LNG offered growth opportunities for the trade house.

    Two trade sources separately told Reuters that two LNG traders from Glencore had recently departed from the company. Glencore declined to comment on the departures.

    http://www.reuters.com/article/us-noble-group-lng-idUSKCN0VN0S5
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    S.Korea's Jan Iran crude oil imports triple from year before


    South Korea's imports of Iranian crude oil tripled in January from a year earlier with the United States lifting sanctions on Tehran, but shipments remain far below pre-sanction levels, customs data showed on Monday.

    The world's fifth-largest crude importer brought 859,223 tonnes of Iranian crude oil last month, or 203,165 barrels per day (bpd), three times higher than 273,626 tonnes imported a year earlier, the data showed.

    That marks the highest imports for January since 2012 when South Korea shipped in 975,967 tonnes, the data showed. The country, along with other major Iranian crude buyers, had to slash Iranian crude imports from mid-2012.

    The Islamic Republic on Jan. 17 emerged from years of economic isolation as world powers lifted sanctions after confirming that Tehran had curbed its nuclear programme.

    Iran is exporting 1.3 million bpd of crude oil, and will be pumping 1.5 million bpd by the start of the next Iranian year on March 20, a vice-president Eshaq Jahangiri was quoted as saying on Saturday.

    Under sanctions, South Korea and other major Iranian crude buyers were required to ship in no more crude than levels imported in 2014.

    Seoul bought 5.7 million tonnes, or 114,595 bpd, of crude from Tehran last year, down 8 percent year-on-year, according to the customs data and Reuters calculations last month.

    Overall, South Korea imported 10.84 million tonnes of crude in January, or 2.56 million bpd. That was 4.6-percent lower than the 11.37 million tonnes imported a year earlier, according to the customs data.

    Final data for last month's crude oil imports will be released by state-run Korea National Oil Corp later this month.

    http://www.reuters.com/article/southkorea-crude-iran-idUSL3N14Z21U

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    US rig count tumbles again


    The number of rigs drilling for oil plummeted again this week, falling by 28, the second-straight week of deep losses in the oil patch, according to Baker Hughes.

    The release on Friday marks the eighth week in a row that producers pulled rigs back from the oil field. The rig count has now fallen in 22 out of the last 24 weeks, often by double digits.

    The total rig count, which when including natural gas rig fell by 30, now stands at 541.

    In the first month-and-a-half of 2016 alone, drillers have shut down 97 oil rigs. Nearly 60 of those rigs have fallen in just the last two weeks.

    Faltering oil field activity has followed the recent plunge in oil prices. The high for West Texas Intermediate, the U.S. benchmark crude, was $36.76 on Jan. 4, already decade low. Since then, crude has fallen as low as $26.21 on Feb. 11. Following the rig count announcement, WTI jumped back up by more than $3 to $29.34 at 12:18 p.m. on Friday.

    With the most still left to lose, Texas has seen the biggest drop in rigs over the last three weeks. On Friday, data showed the state saw an additional 13 rigs taken out of production, eight in the Permian Basin, bringing the total draw back in Texas rigs this year to 73. The state now has 245 rigs left, the lowest mark for Texas this century.

    Oklahoma and New Mexico lost four rigs each. North Dakota saw three shut down.

    http://fuelfix.com/blog/2016/02/12/rig-count-tumbles-again/
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    Paragon Offshore Files for Chapter 11 Bankruptcy


    Offshore drilling rig operator Paragon Offshore PLC filed for chapter 11 bankruptcy Sunday, with an agreed turnaround plan that will reduce its debts by about $1.1 billion.

    A casualty of plummeting oil prices, Paragon announced on Fridaythat it intended to file for bankruptcy protection, to implement a restructuring strategy supported by unsecured bondholders and senior lenders.

    Sinking oil prices have slowed drilling and production activities, taking a toll on companies like Paragon, which are competing for increasingly scarce business. Mexico’s Petróleos Mexicanos and Brazilian state oil company Petróleo Brasileiro SA, or Petrobras, which have been big customers for Paragon, have moved to cut back their contracts.

    Sunday’s bankruptcy filing in the U.S. Bankruptcy Court in Wilmington, Del., was part of an agreement reached with leading creditors on a debt-slashing plan that Paragon hopes will see it through the industry slump.

    Under Paragon’s chapter 11 plan, bondholders are being offered cash and a share of equity in the reorganized company. Paragon’s also proposing to pay cash to cut down its revolving loan and stretch out the timeline to pay it off. Equity holders will keep a 65% stake in the reorganized Paragon, under the plan.

    Paragon’s chapter 11 restructuring grew out of months of talks with lenders about how to deal with a $2.6 billion debt load as business dropped off amid the decline in the oil industry.

    http://www.wsj.com/articles/paragon-offshore-files-for-chapter-11-bankruptcy-1455500476
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    Oklahoma hit by its third-strongest earthquake ever: USGS


    Oklahoma was struck by a magnitude 5.1 earthquake on Saturday morning, the third-strongest quake ever recorded in the state, which has experienced a surge in seismic activity in recent years, the U.S. Geological Survey reported.

    The quake at 11:07 a.m. local time (1707 GMT) was followed by several aftershocks in the next 90 minutes, including one with a magnitude of 3.9, the USGS said. The first quake was felt from Kansas City, Missouri, to Dallas, Texas, but no damages or injuries were reported.

    Oil fields have boomed in Oklahoma over the past decade thanks to advances in hydraulic fracturing and horizontal drilling, and seismologists have said the state's frequent earthquakes may be linked to disposal wells that inject saltwater, a natural byproduct of oil and gas work, into deep underground caverns.

    Earthquakes in Oklahoma in January led to calls for the governor to make changes to oil and gas drilling regulations.

    Saturday's quake was centered about 95 miles (153 km) northwest of Oklahoma City, and at an estimated depth of 4 miles (7 km), the USGS said.

    The epicenter is near the East Campbell Gas Field and about 75 miles (121 km) west of Cushing, Oklahoma, which is one of the largest oil storage hubs in the world and is known as the Pipeline Crossroads of the World.

    Only two previous earthquakes in Oklahoma were stronger than Saturday's: a magnitude 5.6 quake in 2011 and a 5.5 magnitude quake in 1952, said Robert Williams, a geophysicist with USGS.

    USGS initially said that Saturday's quake was probably the second-biggest in the state's history but then revised it after reviewing records.

    The USGS said it was not known if Saturday's quake was related to oil and gas production activities.

    The state has been recording about two-and-a-half earthquakes a day of a magnitude 3 or greater, a rate 600 times greater than observed before 2008, the Oklahoma Geological Survey said in a report last year.

    http://www.reuters.com/article/us-oklahoma-quake-idUSKCN0VM0ST
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    Agriculture

    Mosaic expects potash prices to fall more than a fifth in Q1 2016


    The US-based fertiliser major gave a sombre outlook for prices of both potash and phosphate this year, but said that the current tough market could present it with opportunities to make acquisitions, which would strengthen its business model in the future.

    US fertiliser producer,  The Mosaic Co., has said that phosphate prices could fall by as much as 14.6% to $350/tonne by the end of March while potash prices are liable to slump by up to 21% to $200-230/tonne.

    http://www.indmin.com/Article/3529165/Mosaic-expects-potash-prices-to-fall-more-than-a-fifth-in-Q1-2016.html

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    Base Metals

    Freeport agrees $1bn mine stake sale with Sumitomo


    Freeport-McMoRan, the US copper producer that’s seeking to cut debt after the rout in commodities hammered prices, agreed to sell an additional 13% stake in its Morenci mine in Arizona to Sumitomo Metal Mining Company for $1 billion.

    The transaction will cut Freeport’s stake in the open-pit mine to 72% from 85%, while 28% will be owned by Sumitomo Metal, as well as the unit that’s jointly owned with Sumitomo Corporation, according to a statement on Monday. Freeport expects to record a gain of about $550 million on the deal, it said.

    Commodities producers including miners are cutting debt, trimming production and slashing spending as copper prices trade near a six-year low. Freeport, which is seeking to cut its debt by $5 billion to $10 billion, last month flagged it would consider deals involving core operations, which include Morenci. The rout in raw materials is putting pressure even on major operators, potentially spurring sales of top-tier mines, Rio Tinto Group’s chief executive officer Sam Walsh told Bloomberg Television last week.

    “This transaction represents an important initial step toward our objective to accelerate debt reduction and restore our balance sheet while retaining a portfolio of high-quality assets and resources,” Freeport chief executive officer Richard C Adkerson said in a statement on Monday.

    http://www.mineweb.com/news-fast-news/freeport-agrees-1bn-mine-stake-sale-with-sumitomo/

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    Steel, Iron Ore and Coal

    India prods steelmakers to use local coal to cut $4 bln import bill


    India is asking the country's big steelmakers to consider converting local medium-quality coal into premium coking coal to slash an annual import bill of more than $4 billion for buying that grade from countries such as Australia and South Africa.

    Resurgent local output of power-generating thermal coal has been one of Prime Minister Narendra Modi's successes, and the latest project could help India to partly make up for a shortage of coking reserves that forces companies like JSW Steel and Jindal Steel to import heavily.

    Coal Secretary Anil Swarup - who has held talks with companies including Tata Steel and SAIL - said the government could ask state-run Coal India to sign long-term contracts with steel companies to supply medium-grade coking coal that currently goes into power plants.

    The plan would require investment of a few hundred million dollars for specialised washeries and other equipment to improve the coal quality, but that could lead to savingsof billions of dollars in imports, according to Swarup.

    "We have raised the quantity of coal produced, the aim is now to improve the quality," Swarup told Reuters. "We are trying to formulate a policy."

    This could aid in meeting Modi's goal of making the country self-sufficient in as many raw materials as possible, while at the same time exporting more value-added products like steel to boost local manufacturing and create jobs. (reut.rs/1XnpxQe)

    India, the world's third-largest steel producer and once an exporter to neighbouring countries, turned a net importer of the alloy in the past two years after China started to aggressively sell its excess steel across the world.

    India is also the world's third-biggest importer of coal, and the surge in local output, mainly of thermal coal, is hurting suppliers of that grade in Indonesia. If India starts to boost coking coal output as well, there could also be a few losers in Australia and South Africa.

    But India will be able to substitute only 5-10 percent of the total coking coal imports to begin with, according to Dipesh Dipu, a natural resources expert at Jenissi Management Consultants that advises companies like Jindal Steel.

    That could mean annual savings of around $500 million based on India's imports of about 44 million tonnes of coking coal last fiscal year. The country's total annual coking coal need is about 90 million tonnes.

    India is in talks with companies in Poland and Australia for technical help in upgrading its coking coal quality.

    It is also trying to douse underground mine fires that have burned for a century in Jharia, in the eastern state of Jharkhand, to better tap the only source of top quality coking coal in the country.

    India's total coal imports have fallen for the last seven months, a big change for a country that has struggled to feed its expanding power plants despite having the world's fifth-biggest reserves of more than 300 billion tonnes of the fuel, almost 90 percent of that in thermal grades.

    Faster environmental clearances and acquisition of land to expand mines have led to the turnaround, although Swarup acknowledged that India will not be able to produce all of its own coking coal.

    "Indian coals can be beneficiated to substitute some amount of imported coals," Tata Steel head spokesman Chanakya Chaudhary said.

    http://www.reuters.com/article/india-coal-idUSL3N15Q1IW

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    China Jan iron ore imports rise on year ago, steel exports fall


    China's iron ore imports rose 4.6 percent in January from the same time last year to 82.19 million tonnes, as domestic steel mills replenished inventories with cheap overseas supplies, customs data showed on Monday.

    The January figure was still down 14.6 percent on a record 96.27 million tonnes imported the previous month, however, amid a seasonal decline in steel production ahead of the Lunar New Year holiday.

    Demand for restocking held relatively strong in January, but levels were not enough to stimulate iron ore prices, the China Iron and Steel Association (CISA) said in its monthly market report.

    "Low smelter utilisation rates cannot support any increase in iron ore prices, and though factors like the Spring Festival holiday slowed the price decline, the overall downward trend has not been reversed," the association said in the report, published earlier this month.

    Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI fell more than 3 percent in January, after prices tumbled 40 percent in 2015.

    China's giant steel sector, which imported a record 952.72 million tonnes of iron ore last year, is struggling with crippling rates of overcapacity, declining domestic demand and a collapse in prices, and it has relied on overseas sales to keep it afloat.

    Chinese exported 9.74 million tonnes of steel products in January, down 5.3 percent on a year ago and down 8.6 percent from December, in line with recent CISA warnings that sustained increases were unlikely, given a rise in foreign anti-dumping measures against Chinese producers.

    The official customs data also showed that crude oil imports in January fell 4.6 percent on a year earlier to 26.69 million tonnes, while coal imports fell to 15.32 million tonnes, down 9.2 percent from the same time last year.

    The domestic coal sector is suffering a severe capacity glut, cutting prices and eroding the cost advantages usually enjoyed by foreign suppliers. Chinese coal imports plunged 30 percent over the whole of 2015.

    China's copper imports rose 5.3 percent compared with last January, to reach 437,000 tonnes, while soy imports fell 17.7 percent in January to 5.66 million tonnes.

    http://www.reuters.com/article/china-economy-trade-commodities-idUSL3N15U0RY
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    EU to investigate alleged Chinese steel dumping


    European Union regulators opened three new anti-dumping investigations into Chinese steel products on Friday, responding to calls from European industry for protection from cheap imports that they blame for thousands of job losses in Europe.

    The EU executive also announced provisional anti-dumping duties on cold-rolled flat steel from China and Russia. The duties range from 13.8 percent to 16 percent for the Chinese companies and from 19.8 percent to 26.2 percent for the Russian ones.

    The new steel investigations concern whether seamless pipes, heavy plates and hot-rolled flat steel are being sold into Europe at unfairly low prices.

    "We cannot allow unfair competition from artificially cheap imports to threaten our industry," EU Trade Commissioner Cecilia Malmstrom said in a statement. "I am determined to use all means possible to ensure that our trading partners play by the rules."

    The EU has the power to impose duties on imported products if it finds they are sold at below fair market prices and damage European producers.

    Seven countries including Britain, France and Germany wrote to the Commission last week urging it to step up action to relieve Europe's ailing steel industry, which is suffering from tumbling prices and cheap imports from China and Russia.

    Europe has lost 85,000 steel jobs since 2008, more than 20 percent of the workforce, according to the industry body Eurofer.

    China's Ministry of Commerce said last week that claims it was dumping steel in Europe should be put to the World Trade Organization.

    China makes nearly half the world's 1.6 billion tonnes of steel, and exported over 100 million tonnes of it last year.

    Britain's largest steelmaker Tata Steel Ltd said last month it would cut 1,050 British jobs, adding to 4,000 job losses in the British steel industry last October.

    As well as targeting steel dumping, the Commission on Friday announced the extension of duties to prevent imports of dumped and subsidised Chinese solar panel components via Taiwan and Malaysia.

    An investigation concluded Chinese-made solar modules and cells were being trans-shipped via Taiwan and Malaysia and to prevent the practice continuing, existing anti-dumping and anti-subsidy duties were being extended to those two countries.

    It said the new duties would not, however, apply to genuine producers in Taiwan and Malaysia.

    Since the investigation began, solar components from Taiwan and Malaysia had to be registered, meaning national customs authorities in the European Union can now retroactively collect the duties for the months since May last year.

    http://www.reuters.com/article/eu-steel-antidumping-idUSL8N15R289
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    China's Steel industry needs market exit mechanism to cut overcapacity


    A market exit mechanism must be put in place as the steel industry strives to cut excess capacity, China Iron and Steel Association said on February 12.

    "Though some enterprises have either cut or stopped production, the absence of an exit mechanism has prevented them from withdrawing from the market completely," the association said.

    "Some have become 'zombie enterprises' due to a lack of funding, but are still there."

    Some local governments still request those enterprises to maintain production to ensure social stability and local economic growth, the association said.

    China's iron and steel industry has hit a soft patch as the general economy and decades of building boom are slowing. The country's production of crude steel fell 2.3% to 804 million tonnes in 2015, the first time the industry reported negative growth in 34 years.

    China will cut crude steel production capacity by 100 to 150 million tonnes in five years, the State Council said last week.

    http://en.sxcoal.com/0/140820/DataShow.html
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