Mark Latham Commodity Equity Intelligence Service

Thursday 8th December 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Laffer: This will work. The FT: No it won't!

    Mr Laffer says the best part of his strategy is that there is no limit to the dynamic gains from lowering taxes. “Make sure you understand this is the beginning and the process never ends. Just when you think you’ve hit nirvana, something else goes on and you start the process all over again,” he adds.

    Although tax rates in most countries rose throughout the 20th century, which was by far the best century in economic history, Mr Laffer is unbowed. “When [taxes] went up [countries] did very poorly and when they went down, they did very well,” he says.

    Furthermore, the poor will gain, he insists, and whispers that incomes will “trickle down” from rich to poor — a conservative argument long maligned by liberals. “When you change the marginal rate of substitution between labour and leisure, do people choose different combinations of labour and leisure?” he asks rhetorically, “Duh — you can call that trickle down, but it’s not taxes that matter, it’s tax rates.”

    “We went from a the highest marginal rate of 70 per cent to one of 28 per cent [in the Reagan administration]. Do you see what happened to employment? Boom.”

    Trade is the one area in which Mr Laffer is concerned about the president-elect’s grip on economics, saying: “I don’t know if I’ve ever seen a politician who’s ever understood trade”.

    “I don’t believe Donald Trump is nearly as protectionist as his quotes,” he adds, and he urges the president-elect not to worry about the US trade deficit. “Which would you rather have? Capital lined up on our borders trying to get into our country or trying to get out of our country?”

    Since foreigners need to acquire dollars by selling goods and services to the US, he says, there are big benefits in a trade deficit. “Duh — you can’t have foreign investment without a trade deficit,” he says.

    Just as Mr Trump has been ferociously critical of Ms Yellen’s chairmanship of the Federal Reserve, Mr Laffer is sure central bankers have got their strategies of ultra-loose monetary policy wrong. He thinks low interest rates fail to give people incentives to supply capital for housing and businesses, thereby constraining growth.

    “Markets really know how to give you prices and Janet Yellen doesn’t. She’s never been forced to bear the consequences of her own actions,” he says, before warming to the theme. “[Central bankers] think they know better than God. She thinks she knows better how to change the economy better than the last four and a half billion years of evolution. How silly is that.”

    Invoking the spirit of Charlton Heston in Planet of the Apes he adds: “Keep your stinking monkey paws off my economy, you dirty ape. That goes for [liberal economist Paul] Krugman, that goes for Yellen, that goes for all of these would-be dictators of the economy.”

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    The funny thing about physics.

    One problem was how the wind often toppled the device on takeoff or landing. “It was a dumb thing about physics,” says Chris Anderson, chief executive of 3D Robotics Inc., which has made parts and software in Google’s drones.

    Google parent Alphabet Inc. and others in Silicon Valley are broadening their sights from the digital to the physical world in a bid to expand their influence, and their bottom lines. They promise to reinvent everything from cars to thermostats to contact lenses. Yet in a sign of how innovation is stalling broadly in the American economy, they are finding their new terrain far harder to control than their familiar digital turf.

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    Mobius on commodities at an investor Q&A


    Q: I’m a shipping professional and we only see grim pictures for international trade and raw material production. Can you explain how low commodity prices impact China? – Jing in China (via LinkedIn)

    A: Commodity prices have seen a sharp rebound this year after several years of weakness, and we think prices may have bottomed. Going forward, we expect commodity prices to continue to recover, and see some attractive valuations among select sector stocks in this area. However, in my view, the immense impact China has on commodity markets—being the largest consumer of commodities for so long—will likely no longer be the factor that it was in the past. So, we can’t expect the high degree of Chinese trade in this area that we experienced in the past 10 years or so. Nevertheless, other fast-growing countries such as India may come to replace China and pick up the slack in regard to commodity demand. Demand could also come from a recovering United States, particularly with talk of increased US infrastructure spending that would require natural resources. In regard to the impact of low commodity prices directly on China, it generally has been positive since China is a big importer, and low prices help their costs.

    http://mobius.blog.franklintempleton.com/2016/12/06/readers-questions-answered-6/?utm_medium=Text+link&utm_source=Twitter
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    China Nov exports, imports rise unexpectedly, commodity purchases soar


    China's imports grew at the fastest pace in more than two years in November, fueled by its strong thirst for commodities from coal to iron ore, while exports also unexpectedly rose, reflecting a pick-up in both domestic and global demand.

    Imports expanded 6.7 percent from a year earlier, easily eclipsing economists' expectations for a drop of 1.3 percent and its strongest gain since September 2014, official data showed on Thursday.

    Exports rose 0.1 percent from a year earlier, defying predictions for a 5 percent slide.

    That left the country with a trade surplus of $44.61 billion for the month, the General Administration of Customs said, versus forecasts of $46.30 billion and October's $49.06 billion.

    "The improvement reflects a strengthening in global demand, with recent business surveys suggesting that developed economies are on track to end the year on a strong note," Julian Evans-Pritchard, China economist of Singapore-based Capital Economics, said in a note.

    Analysts polled by Reuters had expected a slightly more modest drop in November exports after a 7.3 percent contraction in October, while imports had been seen falling at roughly the same pace.

    But China's imports of major commodities including iron ore, crude oil, coal, soybeans and copper all surged by volume in November, despite a sharp weakening in its yuan currency.

    China imported 91.98 million tonnes of iron ore in November, up 13.8 percent from the previous month and the third highest monthly tally on record.

    It also imported its largest volume of coal in 18 months, as utilities replenished stocks to cope with higher winter demand.

    Copper imports surged 31 percent as traders stockpiled more metal amid robust construction demand.

    "The rise in copper imports reflected in part a rise in Shanghai Futures Exchange inventories and stronger demand from the Chinese power and construction sectors," said Vivek Dhar, a commodities analyst with Commonwealth Bank in Melbourne.

    "The debate dividing the market is whether this growth can be sustained into next year, or will things flatten out. This isn't necessarily clear just yet."

    PERFORMANCE STILL WEAK FOR 2016

    Despite the upbeat November readings, the world's largest trading nation still looked set for another downbeat year.

    Exports in the first 11 months of the year fell 7.5 percent from the same period a year earlier, while imports dropped 6.2 percent.

    Weak exports have dragged on economic growth as global demand remains stubbornly sluggish, forcing policymakers to rely on higher government spending and record bank lending to boost activity, at the risk of adding to a mountain of debt.

    Recent data had suggested the world's second-largest economy was steadying as the government rushed to launch new infrastructure projects and the housing market boomed, fuelling demand for building materials from steel bars to cement.

    The official Purchasing Managers' Index (PMI) showed factory activity expanded at its strongest pace in more than two years, though a private survey pointed to more modest growth.

    But analysts have warned that a property boom which has generated a significant share of the growth may be peaking, dampening demand for raw materials

    China could also be heavily exposed to protectionist measures next year if U.S. President-elect Donald Trump follows through on campaign pledges to brand it a currency manipulator and impose heavy tariffs on imports of Chinese goods.

    However, Chinese Customs said on Thursday that pressure on exports is likely to ease at the beginning of 2017.

    http://www.reuters.com/article/us-china-economy-trade-idUSKBN13X09K

    Attached Files
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    China Nov forex reserves fall more than expected to lowest in nearly six years


    China's foreign exchange reserves fell far more than expected in November to the lowest level in nearly six years, as authorities struggled to stem capital outflows and shore up the sliding yuan in the face of a relentlessly rising dollar.

    Reserves fell by $69.06 billion last month, the fifth straight month of declines, to $3.052 trillion, levels not seen since March 2011, central bank data showed on Wednesday.

    Some traders believe the $3 trillion mark is a key psychological level for the People's Bank of China, but it risks rapidly churning through its still massive stockpile if the U.S. dollar continues to rise against other currencies.

    Last month's drop was the largest since January, when a sharp fall in the yuan and worries about China's slowing economy raised fears that Beijing would devalue its currency, roiling global financial markets.

    Economists polled by Reuters had expected reserves to drop $30 billion to $3.091 trillion in November, after a decline of $45.7 billion in October.

    The central bank is widely believed to have sold U.S. dollars to support the yuan currency CNY=CFXS as it sunk to more than 8-1/2 year lows last month.

    China's foreign exchange regulator said the decline in reserves was partly due to the dollar's 3 percent rally versus major currencies in November.

    But the yuan's more than 5 percent slide so far this year has sparked a flurry of bets that the currency will weaken further, leaving traders wondering how long China can maintain its yuan defence and withstand a prolonged drain on reserves if the U.S. dollar continues to rally.

    The yuan fell 1.6 percent in November alone, its worst month since August 2015 when Beijing shocked global markets by devaluing the currency by almost 2 percent overnight.

    Adding to pressure on the currency, U.S. President-elect Donald Trump has vowed to label China a currency manipulator on his first day in office on Jan. 20 and has threatened to impose huge tariffs on imports of Chinese goods.

    Though the composition of China's reserves is a state secret, analysts say the falling value of other currencies it holds against the rising U.S. dollar likely accounted for some of the fall in reserves.

    But China also has announced a string of measures in recent weeks to tighten controls on money moving out of the country, adding to market speculation that potentially destabilising capital outflows are on the rise.

    "The capital control tightening that Chinese authorities announced at end-November is a very good indicator that capital outflows continue from China and are turning threatening," analysts at Bank of Tokyo-Mitsubishi UFJ said in a note this week.

    The PBOC had sold a net $39.2 billion worth of foreign exchange in October, indicating continued official intervention to support the yuan.

    To be sure, the yuan is falling alongside other emerging market currencies in the face of the strong dollar, which is being buoyed by hopes that President-elect Donald Trump will be able to shift the U.S. economy into faster gear.

    It has been more steady lately against a basket of currencies of major trading partners.

    But China, with its huge trade surplus with the United States, is firmly in Trump's sights. He has vowed to label China a currency manipulator on his first day in office on Jan. 20 and has threatened to impose huge tariffs on imports of Chinese goods.

    A senior central bank researcher told Reuters last week that Beijing needs to break a potentially destructive feedback loop, where expectations of further yuan weakness spur outflows, and fresh capital flight in turn puts more pressure on the currency.

    The central bank is also likely to worry about a faster drawdown of its reserves, which are approaching the closely watched $3 trillion level, analysts said.

    French bank Societe Generale said earlier this year that International Monetary Fund guidelines put $2.8 trillion as the minimum prudent level for China, which is not far away if reserves keep falling at the current pace.

    Since mid-2014, China's forex reserves, which include a hefty amount of U.S. government bonds, have shrunk by more than the gross domestic product of Switzerland.

    "Our baseline is that tightened capital controls enable the authorities to stay the course during the Trump dollar rally, which on ING's forecasts will persist through the first quarter of 2017," Tim Condon, ING's chief Asia economist, wrote in a note.

    But he warned that capital outflows during the dollar rally could become "excessive".

    The State Administration of Foreign Exchange (SAFE) has begun vetting transfers abroad worth $5 million or more and is increasing scrutiny of major outbound deals, even those with prior approval, sources told Reuters last week.

    Currency analysts polled by Reuters expect the yuan to plumb its lowest level in nearly a decade next year on sustained capital outflows and further gains in the dollar.

    China's gold reserves fell to $69.785 billion at end- November from $75.348 billion at end-October.

    http://uk.reuters.com/article/uk-china-economy-forex-reserves-idUKKBN13W0SF
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    Indian Economy Crashes As Modi's "Black Money" Theory Collapses


    Amid social unrest and loss of faith in the nation's currency, India's economy has ground to a halt with its Composite PMI crashing by a record in the last month as demonetization strikes.

    However, even more problematic is that Indians have validated 82% of bank notes rendered worthless by PM Modi, dramatically undermining the government’s estimate of unaccounted wealth in the economy. As Bloomberg reports,

    About 12.6 trillion rupees ($185 billion) had been deposited into bank accounts as of Dec. 3, the people said, asking not to be identified citing rules for speaking with the media. The government had estimated that about 5 trillion rupees of the 15.3 trillion rupees sucked out by Modi’s move would stay undeclared, implying that this was cash stashed away to evade taxes, known locally as black money.

    Lack of a meaningful cancellation could be a double blow for Modi as the measure was being used as a political and economic gauge of the success of his Nov. 8 move. One of Modi’s biggest campaign pledges was to expose black money in Asia’s No. 3 economy, and economists were viewing the cash as a potential windfall for the government.

     "Some of the windfall that the government was hoping for from the cancellation of notes will be dented," said Anjali Verma, chief economist at PhillipCapital Ltd. "That means the fiscal stimulus that was being expected might also take some hit. That is not good news at a time when direct consumption, private investment is not expected to pick up."

    "Markets are not too worried at the moment," said Chakri Lokapriya, Mumbai-based managing director at TCG Advisory Services, which manages about $3 billion. "But if 12-13 trillion rupees comes back into the system it defeats the whole theory of black money."

    In such a situation where the gains of demonetization aren’t apparent, individuals will more closely analyze the pain. A slump in demand due to the cash shortages will hurt company revenues and government tax collections, widening the budget deficit and ultimately weakening the rupee, Lokapriya said.

    So was the whole effort merely, as Modi admitted, a move towards a cashless society after all? And not in any way related to corruption? Either way, it is too late now as faith in the fiat currency has collapsed.

    Finally, while most shrug and say "how does that affect us?", the tumult in India is weighing heavily on the rest of the world via the oil market. India has been the world’s fastest-growing crude market and that may weaken as the government’s cash crackdown slows the economy. As Bloomberg reports,

    Diesel and gasoline use, which account for more than half of India’s oil demand, will slow or contract this month and possibly early next year, according to Ivy Global Energy Pte., FGE and Centrum Broking Ltd.

    “As the Indian economy largely depends on various cash-intensive sectors, the demonetization saga will no doubt slow down economic growth in the near term,” said Sri Paravaikkarasu, head of East of Suez oil at FGE in Singapore. “Moving into the first quarter, an expected slowdown in the economic growth should marginally drag down oil consumption, particularly that of transport fuels.”

    Diesel consumption could fall as much as 12 percent and gasoline demand as much as 7 percent this month,according to Tushar Tarun Bansal, director at Ivy Global Energy.

    “I expect to see a much smaller growth in diesel demand of about 2 percent in the first quarter,” Bansal said.

    The possible slow down this month and into next year is a reversal of the demand spike seen in November as people rushed to fill their tanks to take advantage of a rule allowing fuel retailers to accept the banned 500 and 1,000 rupee ($15) bills until Dec. 2.

    So an Indian PM 'flaps his wings' and the rest of the world may have a hiccup.

    http://www.zerohedge.com/news/2016-12-07/indian-economy-crashes-modis-black-money-theory-collapses
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    Trump EPA pick has sued EPA, is climate sceptic


    Donald Trump has reportedly nominated an attorney general who has sued and reviled the Environmental Protection Agency (EPA) to be the body’s new chief.

    In February, Trump – then leading the Republican primaries – said of the EPA: “We’re going to have little tidbits left but we’re going to get most of it out.”

    With his choice of Oklahoma attorney general Scott Pruitt to head the agency, he appears to be making good on another campaign pledge.

    Pruitt has been a leader in a coalition of attorneys general that has sued the EPA over its Clean Power Plan, which aims to cut pollution from power plants.

    Like his new boss, Pruitt has cast doubt over the science of climate change. In an op-ed in the National Review in May he wrote: “That debate is far from settled. Scientists continue to disagree about the degree and extent of global warming and its connection to the actions of mankind.”

    In 2014, the New York Times found Pruitt had been sending letters to the EPA accusing them of overestimating air pollution figures. They had been written by fossil fuel industry donors and copied onto his own stationary.

    In June, he signed a letter with 12 other state attorneys general addressed to their other state colleagues around the nation. They complained that lawsuits being brought around the country against fossil fuel companies for misleading investors were spurious and “not a matter for the courts”.

    In the letter, they argued that by the same logic those who ‘exaggerated’ climate risk could be sued for fraud. Pruitt called those people “climate alarmists”.

    New York state Attorney General Eric Schneiderman released a statement on Wednesday saying Pruitt was a “dangerous and unqualified choice”.

    Green groups reacted with bitter hostility calling Pruitt a “fossil fuel industry puppet” (350.org), “an arsonist in charge of fighting fires (Sierra Club) and “destined for the environmental hall of shame” (NRDC).

    http://www.climatechangenews.com/2016/12/07/epa-suing-attorney-general-to-head-trump-epa/#disqus_thread

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    BHP gas deal ends brown coal fantasy, could pave way for solar thermal


    A decision by BHP Billiton to sign an electricity supply agreement with an existing gas generator in New South Wales should bring an end to plans to restart the Northern brown coal generator in Port Augusta, and could open the path for the much touted solar tower and molten salt storage project.

    BHP confirmed on Tuesday that it had signed an agreement for gas-fired electricity to help support its Olympic Dam mining operations in South Australia.

    The decision dashes hopes by bottom-feeding energy entrepreneur Trevor St Baker to reopen Northern brown coal generator, which was closed in May because it was no longer profitable.

    Its demise has often been blamed on renewable energy and the state government’s energy policy, but that fact is that it was old, highly polluting and it was unable to find an industrial user to sign an off take agreement.

    “We have had discussions with proponents potentially looking to restart the Northern Power Station,” a BHP spokesperson said in an emailed statement to RenewEconomy.

    “However after substantial consideration we found our needs were better met by entering a supply arrangement with an existing gas generator in South Australia.”

    That gas generator is thought to be Pelican Point, the gas generator that was mothballed 10 days before the closure of the Northern brown coal power station after deciding to sell its gas supply to the LNG market.

    It was brought back into operation in July for a brief period during work on the inter-connector to Victoria in an effort to loosen the stranglehold on the market and prices by the remaining gas and diesel generators, most of which are controlled by just two companies.

    The state government was keen for it to return on a more permanent basis, and appeared to calibrate its tender for a 10-year supply contract for government departments just for that purpose. The state government even increased its emission allowance to cater for that idea.

    However, advocates of the solar tower and storage proposal in Port Augusta say that the fact that BHP has signed an off-take agreement with Pelican Point means that the government can look further afield, and ensure it is using its contract to encourage new technologies.

    Repower Port Augusta has called on the South Australian Government to rule out purchasing its power from the Pelican Point gas plant and use its energy tender to make solar thermal happen in Port Augusta following news Engie (Pelican Point’s owner) has signed a contract to supply BHP with power,” the group said in a statement.

    “Premier (Jay) Weatherill should use the State Government’s power purchase to make solar thermal happen in Port Augusta.
    The State Government has currently left the door open to gas plants but news today that BHP has signed a contract with Pelican Point shows that gas companies do not need to be propped up by the State Government.”
    The federal Coalition has led a campaign to demonise renewable energy and has suggested that 40 per cent wind and solar is too much for a state such as South Australia, because it made its energy supply too unreliable.

    But those claims are ridiculed in a new report by the CSIRO and the network owners lobby group, which outlines how South Australia could be 80 per cent powered by wind and solar by 2036, and the whole country 90 per cent powered by 2050.

    However, it says such targets require co-ordinated policies, and the curation of new technologies such as battery storage and solar towers and storage.  

    http://reneweconomy.com.au/bhp-gas-deal-ends-brown-coal-fantasy-could-pave-way-for-solar-thermal-24831
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    Oil and Gas

    Armed groups take control of Libyan town near oil ports: officials


    Armed groups took control on Wednesday of the Libyan town of Ben Jawad, close to some of Libya's major oil ports, as forces loyal to the eastern government, that seized the coastal terminals in September, defended them from the air, officials said.

    Miftah Magariaf, head of the Petrol Facilities Guard in the area, said "terrorist groups" had launched rocket attacks as ground forces advanced but the oil fields had not been affected.

    But the attacks may herald an escalation of the fight for control of the oil ports and for overall power between Libya's many armed factions, which have been at war since a 2011 uprising.

    One eastern security official said the groups approaching Libya's Oil Crescent ports were linked to the Benghazi Defence Brigades, which tried this year to launch a counter-attack against forces loyal to eastern Libyan commander Khalifa Haftar.

    Some of the armed groups' vehicles had been destroyed in air strikes south of the oil port of Es Sider, security sources said. Ben Jawad lies about 30 km (19 miles) west of Es Sider.

    Rajab al-Zwai, an engineer at Es Sider, said some oil workers had been evacuated and fighter jets could be heard overhead. Es Sider is still closed as oil workers carry out repairs to damage from previous fighting.

    A resident in the nearby port of Ras Lanuf also said jets could be heard and reported a security alert, but said the area was otherwise calm.

    Haftar's forces seized control of four Oil Crescent ports from a rival faction three months ago, allowing Libya's National Oil Corporation (NOC) to end blockades at three of the ports and double oil production to about 600,000 barrels per day (bpd).

    Output remains far below the 1.6 million bpd that the OPEC member was producing before the uprising that toppled long-time leader Muammar Gaddafi five years ago.

    Ben Jawad lies 150 km southeast of Sirte, where forces led by brigades from the city of Misrata secured the final buildings held by Islamic State on Tuesday after a military campaign against the jihadist group lasting nearly seven months.

    There have been rumors in recent weeks about a possible counter-attack against the oil ports by forces including the faction that was ousted in September, Islamist-leaning brigades with support from Misrata, and a Haftar rival who was named as defence minister by a U.N.-backed government in Tripoli.

    http://www.reuters.com/article/libya-security-oil-idUSL5N1E22HM
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    Shell and Total said to sign initial oil deals with Iran


    Royal Dutch Shell Plc and Total SA will sign initial agreements on Wednesday to develop oil and gas fields in Iran, in the first European petroleum deals in the Persian Gulf country since sanctions eased earlier this year, an Oil Ministry official said.

    The companies will sign “heads of agreement,” or non-binding accords, with the ministry to develop the South Azadegan and Yadavaran oil fields and the Kish natural gas deposit, the official said, asking not to be named as he is not authorized to brief the media. He didn’t say which company would develop which of the fields.

    The deals will be the first signed by European companies to develop Iran’s oil fields since sanctions were loosened in January under a deal to curb the Islamic Republic’s disputed nuclear program. Paris-based Total signed a $4.8 billion accord last month to develop an Iranian gas project.

    https://www.energyvoice.com/oilandgas/middle-east/126262/shell-total-said-sign-initial-oil-deals-iran/

    Shell will sign three memoranda of understanding (MoUs) agreements in Tehran to develop the South Azadegan, Yadavaran oil fields and the Kish gas field, the Iranian Oil Ministry official said.

    The South Azadegan and Yadavaran fields both straddle Iran's border with Iraq.

    Total (TOTF.PA), which last month signed the first deal by a Western energy firm since sanctions were lifted, will start talks about new oil and gas projects but will not be signing any deals on Wednesday, the official said.


    "These preliminary agreements could mark a strong sign of confidence towards the sustainability of the nuclear deal," said Homayoun Falakshahi, Middle East research analyst at Wood Mackenzie.

    http://uk.reuters.com/article/uk-shell-iran-deals-idUKKBN13W13R?il=0
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    In Land of World’s Cheapest LNG, Exxon and Total Seen Teaming Up


    The Total SA-led Papua LNG project in Papua New Guinea may export gas via Exxon Mobil Corp.’s existing PNG LNG facility to avoid the expense of building a new plant, Prime Minister Peter O’Neill said. While the cost of developing the country’s natural gas resources are about half those of neighboring Australia, building a multi-billion dollar unit to export the fuel may not be viable in an era of low oil prices, he said in an interview in Sydney on Wednesday.

    “We need to continue to maintain a competitive edge in our country by maintaining cost levels that will ensure the project gets off the ground,” O’Neill said. “If there are areas where we can save costs including sharing the infrastructure there already in the current LNG project, we are quite happy to go along with that.”

    A global supply glut has pushed prices down by more than 60 percent in the past three years, raising questions over how quickly a next wave of LNG supplies will be developed. Buyers have shied away from signing long-term agreements that have historically helped fund new projects, which can take six or seven years to develop.

    The world will need an estimated 175 million metric tons of additional LNG annually by 2030 even after including all the plants that are under construction or have been approved for investment, Richard Guerrant, a vice president with the Exxon’s gas, power and marketing arm, said Tuesday. That would be more than two-thirds of all the LNG produced globally last year.

    The PNG LNG project, operated by Exxon, began production in 2014 from a two-train production unit with a capacity of 6.9 million tons of LNG per year. Exxon is also set to become a major shareholder in the Total-run group planning Papua LNG, the country’s next major gas venture, due to its impending takeover of InterOil Corp.

    LNG in PNG, including development, operational and shipping costs is the world’s cheapest and less expensive than in the U.S., Sanford C. Bernstein & Co. analysts including Neil Beveridge said in Sept. 7 note.

    A Total spokeswoman in Paris didn’t immediately respond to a phone call seeking comment. An Exxon spokeswoman for PNG didn’t immediately respond to a phone call.

    Paris-based Total, which operates the Papua LNG venture, hasn’t ruled out a separate greenfield LNG development and needs to explore the economics of supplying gas to an expansion of Exxon’s PNG LNG plant, the company’s PNG Managing Director Philippe Blanchard said Monday.

    Realistic Outlook

    O’Neill said it was vital the Papua LNG project gets off the ground but the government needs to be realistic about the best method of commercializing its gas resources. It hopes to take discussions forward with companies including Exxon and Total in early 2017.

    “I understand there is good demand for our gas because it is much cleaner than many of the others on the market,” he said. “I do not see a problem in which we will be shut out of the market. In Japan cleaner gas is much preferred to what is being sold by some of our competitors.”

    The PNG government confirmed it will hold talks with resource owners including PNG LNG about diverting some gas supplies to the domestic market, while also tweaking the fiscal terms covering future expansions.

    A sovereign wealth fund is also likely to be introduced in 2017 from energy and mining revenues although O’Neill declined to specify any targets.

    https://www.bloomberg.com/news/articles/2016-12-07/in-land-of-world-s-cheapest-lng-exxon-and-total-seen-teaming-up
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    Santos flags asset sales in turnaround strategy


    Australian oil and gas producer Santos Ltd will cut costs and put some assets up for sale as it looks to cut debt over the next three years, in a turnaround strategy announced on Thursday.

    The company, which counts China's ENN Group as its largest shareholder, has been under pressure to cut debt that peaked last year as it completed its flagship Gladstone liquefied natural gas project, just as oil and gas prices slumped.

    "Santos will target a US$1.5 billion reduction in net debt to less than US$3 billion by the end of 2019 through increased operating cash flow and releasing capital through non-core asset and infrastructure sales," the company said in a statement.

    Investors had been looking for a debt-reduction strategy after the company booked a $1 billion writedown on the Gladstone LNG project in August.

    Santos said the planned assets sales would allow to "simplify the business" and focus on five core natural gas projects in Australia and Papua New Guinea.

    It said 2016 sales volumes were expected to be at the top end of its guidance range of 81 to 83 million barrels of oil equivalent.

    http://www.reuters.com/article/santos-strategy-idUSL4N1E25AG
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    Kremlin says Glencore, Qatari fund to buy 19.5 pct stake in Rosneft


    The deal, to acquire a 19.5 percent stake in Rosneft from the Russian state, suggests the lure of taking a share in one of the world's biggest oil companies outweighs the risks that come with Western sanctions imposed on Russia over the conflict in Ukraine.

    It pointed to a possible reassessment by foreign investors of the risks of dealing with Russia, at a time when the election of Donald Trump as U.S. president has heightened expectations of a thaw between Moscow and Washington.

    The deal was announced days after Russia and OPEC agreed to coordinated output cuts to support oil prices, the first time they have cut in tandem in 15 years.

    State-owned Rosneft had kept the deal a tightly-guarded secret, with the first word emerging when Russian President Vladimir Putin met Rosneft Chief Executive Igor Sechin on Wednesday evening in Moscow.

    "It is the largest privatisation deal, the largest sale and acquisition in the global oil and gas sector in 2016," Putin said in televised remarks from the meeting.

    Under the deal, according to Sechin, Glencore and Qatar's sovereign fund will take equal shares of the 19.5 percent stake in Rosneft, which is being sold by the government as part of a privatisation drive.

    Rosneft has a market value of $59.17 billion, according to Reuters data, which suggests that the deal was done with a 2 percent discount to the market price.

    Glencore said in a statement it would finance part of the deal by putting up 300 million euros of its own equity, with the rest financed by banks and by the Qatari sovereign fund, the Qatar Investment Authority.

    The Qatari fund, which could not immediately be reached for comment, is one of the biggest investors in Glencore.

    Russian officials were jubilant that Rosneft had pulled off a deal which will deliver a large chunk of the cash they need to fill gaps in the state budget caused by an economic slowdown and sanctions.

    "Money has no smell," a government source told Reuters when asked about the outcome of the deal.

    PUTIN'S CONTRIBUTION

    Putin congratulated Sechin, one of his closest lieutenants, on the deal and said he hoped that the consortium of new investors would improve Rosneft's governance and transparency and would raise its market value.

    "Given the very difficult economic circumstances and the extremely tight deadlines for this kind of project, I can report to you that we were able to land this deal thanks to your personal contribution, your support," Sechin told Putin.

    Glencore stands to benefit from the deal by gaining access to Rosneft's crude volumes. It said that under the deal, it would conclude a new five-year offtake agreement with Rosneft giving it an extra 220,000 barrels a day to trade.

    To date, Glencore's rival Trafigura has been the biggest long-term buyer of Urals crude oil, the grade of oil produced in Russia.

    Qatar, meanwhile, will further establish itself as a major investor in some of the world's biggest businesses. It already owns stakes in such bluechip firms as Volkswagen (VOWG_p.DE) and Credit Suisse.

    Rosneft is subject to U.S. sanctions imposed after Russia annexed Ukraine's Crimea region in 2014. But since the money from the sale of the stake will go to the Russian state, rather than to Rosneft, the sanctions do not directly apply.

    By landing the investors, Sechin will further burnish his standing within Russia's ruling elite. He was already riding high after securing a deal in October to acquire Indian refiner Essar, giving Rosneft a foothold in the world's fastest growing fuel market.

    "He said the money would come," said a second source within the government, referring to revenue from the Rosneft stake sale that was promised to the government. "He killed all the birds with one stone. He showed everyone," said the source, speaking on condition of anonymity.

    When Rosneft this week placed $9.4 billion in domestic rouble bonds, market players assumed that was to fund the buyback of its shares, absent an outside investor.

    But it now appears that, in parallel, Sechin and his aides were trying to hash out an eleventh hour deal to land a foreign investor. Ivan Glasenberg, Glencore's chief executive, was in Moscow on Tuesday, where he was spotted at a mining conference.

    The second government source said the bond issue was a safety net in case the negotiations with the outside investors fell through.

    The deal with Qatar and Glencore was so last minute that it appeared it would not close in time to meet the government's deadline for booking money in the budget from the sale.

    Asked by Putin when the state budget was going to get the money earned from the sale, Sechin said that it was going to come from Rosneft cashflow and from credit finance, organised by one of Europe's largest banks.

    After the deal was announced, the Kremlin said steps would be taken to ensure that the influx of a large volume of foreign currency from the deal would not cause volatility on the Russian forex market.

    http://www.reuters.com/article/us-russia-rosneft-privatisation-idUSKBN13W2QG

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    Chevron sets 2017 capital budget, in 4th year of spending cuts


    Oil and gas major Chevron Corp  on Wednesday announced a $19.8 billion capital and exploratory investment program for 2017, down 42 percent from its outlays in 2015.

    The 2017 budget is expected to be at least 15 percent lower than projected 2016 capital investments, Chevron said.

    "This is the fourth consecutive year of spending reductions," Chief Executive John Watson said in a statement. "This combination of lower spending and growth in production revenues supports our overall objective of becoming cash balanced in 2017."

    The 2017 capital budget will target high-return investments and completion of major projects under construction, Watson said.

    Chevron said in March it would slash its capital budget by as much as 36 percent in 2017 and 2018.

    Construction is nearing completion on several major capital projects, which are now online or will come online in the next few quarters.

    San Ramon, California-based Chevron reported a drop in third-quarter profit in October, but the results beat expectations as cost cuts in the company's U.S. oil production division helped mitigate some of the impact of low crude prices.

    http://www.reuters.com/article/us-chevron-outlook-idUSKBN13X01S
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    Iraq Can’t Count on Kurds or Oil Companies for Help on OPEC Cuts


    Iraq can’t count on the self-governed Kurds in the north or international oil companies to help it cut crude production as promised at an OPEC meeting last week. That may leave the country with no option but to slash state-controlled supplies to comply with its quota.

    Under the deal the Organization of Petroleum Exporting Countries reached last Wednesday, Iraq must reduce crude output by 210,000 barrels a day from October levels. But to achieve that, OPEC’s second-biggest producer may have to rely on the crude it fully controls. International companies including BP Plc and Royal Dutch Shell Plc pump most of Iraq’s oil, and the semi-autonomous Kurds contribute more than half a million barrels a day on top.

    “It looks complex for Iraq to deliver all the cuts it signed up to,” Richard Mallinson, an analyst at consultant Energy Aspects Ltd, said by phone from London. “In most cases the international oil companies will probably not be ready to do it on their fields.”

    OPEC’s first production cuts in eight years will be a shock for Iraq. The group’s second-largest producer has had no output target since the 1990s as it recovered from conflicts. Iraq resisted having a target now, arguing it needed every dollar to fight Islamic State militants, but relented under pressure from other OPEC members.

    Iraq is unique among OPEC members in sharing production with a self-governing region that accounts for about 12 percent of its total output. Iraq pumped 4.58 million barrels a day in November, according to data compiled by Bloomberg.

    Oil Minister Jabbar Al-Luaibi earlier disputed OPEC’s data on Iraqi production and insisted he wouldn’t agree to a cut. He eventually conceded on both points after coming under pressure in last month’s meeting and placing a phone call to Prime Minister Haider Al-Abadi, who supported the deal, according to two OPEC delegates.

    The Kurdistan Regional Government in northern Iraq controls about 550,000 barrels a day of oil production -- as much as OPEC member Ecuador. The KRG is so far indicating it doesn’t plan to scale back its production.

    KRG officials haven’t spoken yet to the Oil Ministry in Baghdad about the OPEC deal, Natural Resources Minister Ashti Hawrami said Monday at a conference in London. OPEC’s agreement probably won’t have much effect on the KRG, he said. Iraq’s Oil Ministry spokesman Asim Jihad declined to comment.

    The two operating companies pumping the most oil in the KRG have no plans to reduce output. KAR Group, a local company producing about three-fifths of the Kurdish region’s oil, hopes to increase its output next year by 40,000 barrels a day, President Baz Karim said at the London conference. Norway-based DNO ASA, the Kurdish region’s second-largest producer, hasn’t received any indication that it’s expected to pump less oil, Executive Chairman Bijan Mossavar-Rahmani said last week.

    Outside Iraq’s Kurdish enclave, almost 90 percent of the country’s oil production comes from fields operated by international companies, Oil Ministry data from September show. These companies could charge the ministry a curtailment fee under their contracts if they are ordered to decrease production, Deputy Oil Minister Fayyad Al-Nima said in October at a news conference in Baghdad.

    Iraqi state-run oil companies pump 440,000 barrels a day but export only 280,000 of this through the southern port of Basra. They export the remainder, from northern fields around the city of Kirkuk, to Turkey through a Kurdish-owned pipeline. The Oil Ministry shares the revenue from these sales with the KRG under a deal the two sides reached in August.

    “Cutting that off would clearly raise tensions with the KRG,” Mallinson said.

    https://www.bloomberg.com/news/articles/2016-12-07/iraq-can-t-count-on-kurds-or-oil-companies-for-help-on-opec-cuts
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    BP boss Bob Dudley says firm will double North Sea production, hails “crown jewel”


    BP’s top boss said the oil major would double its North Sea production as he hailed the region as one of the company’s “crown jewels”.

    Bob Dudley sat down exclusively with Energy Voice in his first trip to Aberdeen since 2011.

    The chief executive said: “The North Sea is not only our backyard, it is one of four crown jewels.”

    The oil major will drill five exploration wells next year and 50 new development wells over the next three. Its production is also set to double by 2020 to 200,000 barrels of oil a day. The increase is in comparison to 2015’s output figures.

    The oil boss said: “There’s some hope on the exploration programme, because any one of those wells or prospects could lead to yet another hub of development.

    “You will see portfolio changes for us in the North Sea, but you may see us invest in other projects as people approach us about joining them. So I think there’s a mix, but we should double our production by 2020 from where it was in 2015.

    “We should be over 200,000 barrels a day in 2020 and by then I’m hopeful our exploration programme will lead to more things to do.”

    The operator is expecting first oil form two of its major developments, Quad 204 early next year and Clair Ridge in 2018. It currently has two billion barrels of resource potential in the UKCS, split evenly between its planned production, discovered, and future prospects.

    BP’s production figures have steadily declined since its peak in 2000. However, 2015 marked the start of its five-year turnaround. Production will climb to 209,000 in 2020.

    The global leader also dispelled the “myth” that North Sea industry was over, insisting BP would be pumping oil until 2050.

    “The myth that the North Sea is finished is absolutely that. It’s a wrong myth,” he said.

    “There’s a demonstration of new activity and new big fields coming on stream. It’s not just BP fields. There are others as well, so there’s real economic activity that will support thousands of jobs. And there is an active exploration programme that could create something really new and exciting. I think it will be ‘good’ exciting – not necessarily the silver bullet.

    “The reality is that the North Sea is a mature basin so some of the structural changes will stay.

    https://www.energyvoice.com/oilandgas/north-sea/126209/exclusive-bp-boss-bob-dudley-says-firm-will-double-north-sea-production-hails-crown-jewel/
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    Summary of Weekly Petroleum Data for the Week Ending December 2, 2016


    U.S. crude oil refinery inputs averaged over 16.4 million barrels per day during the week ending December 2, 2016, 134,000 barrels per day more than the previous week’s average. Refineries operated at 90.4% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.9 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day.

    U.S. crude oil imports averaged 8.3 million barrels per day last week, up by 755,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 8.0 million barrels per day, 5.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 652,000 barrels per day. Distillate fuel imports averaged 106,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.4 million barrels from the previous week. At 485.8 million barrels, U.S. crude oil inventories are at upper limit of the average range for this time of year. Total motor gasoline inventories increased by 3.4 million barrels last week, and are well above the upper limit of the average range. Both Finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.5 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 1.5 million barrels last week but are near the upper limit of the average range. Total commercial petroleum inventories increased by 1.4 million barrels last week.

    Total products supplied over the last four-week period averaged about 19.6 million barrels per day, down by 1.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.1 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels per day over the last four weeks, up by 5.7% from the same period last year. Jet fuel product supplied is up 3.6% compared to the same four-week period last year.

    Cushing up 3.8 mln bbl's

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    Tiny drop in US oil production


                                                  Last Week   Week Before  Last Year

    Domestic Production '000 .....8,697           8,699           9,164
    Alaska .......................................... 522              522             525
    Lower 48 .................................. 8,175           8,177           8,639

    http://ir.eia.gov/wpsr/overview.pdf
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    The OPEC Production Agreement: Genscape’s Outlook for an Uptick in U.S. Production


    With the Organization of Petroleum Exporting Countries reaching an agreement to cut production, Genscape expects resulting higher crude prices to spur U.S. producers to add 125 more rigs by mid-2017. A large number of these rigs will go back to work in the West Texas Permian Basin.      

    West Texas Intermediate prices above the 50 dollar per barrel support level should increase levels of drilling and investment, specifically in the Permian Basin, but also across other shale plays including the North Dakota Bakken, SCOOP/STACK in the Midcontinent, Niobrara mostly in Colorado, and South Texas Eagle Ford.  

    The cuts by OPEC members have stirred bullish sentiment towards U.S. producers by offering an opportunity to regain market share. At the same time, a new wave of U.S. production could cap oil prices as production rises. U.S. production is anticipated to grow again in mid-2017, and additional takeaway infrastructure will be required, particularly in the Permian Basin.

    According to RigData, since bottoming in May, oil rig counts increased from 323 to 523 rigs during the week ending December 2, 2016. In the Permian alone, oil rigs have increased by 110 rigs during this time period. This accounts for 55 percent of overall Lower 48 rig count growth and shows that the Permian Basin is presently one of the most economic oil plays.  Other areas have also seen an uptick in rigs since May, but to a lesser extent: the Eagle Ford (+17 rigs), SCOOP/STACK (+15 rigs), Bakken (+8 rigs), and the Niobrara (+6 rigs).

    Each basin, and each new well drilled within these basins, have different economics based on multiple variables, primarily drilling costs, drilling times, initial production rates, and estimated ultimate recovery.  As a result, each play has a different capacity for rigs at various prices. Also, there is a period of time, on average about six months, between a price signal and a rig movement to account for rig contracts and getting crews back to work, hedges that are in place, and cash flow concerns that pose short-term constraints to a producer.

    Considering these factors (that are baked into the lag between a price signal and rigs spudding wells and the week-over-week WTI gain of $5.09 per barrel, week ending December 2, 2016),  Genscape expects 2017 production to decline 91 Mb/d year-over-year, much less than previously thought. This decline is nearly half of the decline of 178 Mb/d expected for 2017 year-over-year that Genscape forecasted in early November (when 2016 WTI pricing fell to $44.07 per barrel in the week ending November 4, 2016). Production is now expected to grow to 8.9 MMb/d by the end of 2017 from current levels of 8.6 MMb/d. After declining since mid-2015, production is expected to grow again in Q3 2017,  the period for which Genscape's forecast has been most impacted by the recent price uptick. The Permian Basin is expected to lead the way, growing 335 Mb/d year-over-year in 2017. Other areas such as the Midcontinent, Bakken, Niobrara, and Eagle Ford will also contribute to the rise in production.

    With the growth projected in the Permian, primary outbound infrastructure could be challenged as early as mid-2017. The only new pipeline project proposed is Enbridge’s Midland, TX,-to-Houston 300 Mb/d line slated to be online in mid-2018. As Enbridge said in their third quarter earnings call, “The pipe is purchased. The right-of-way is all but done, 90 percent of the right-of-way. I think we're looking at April/May of 2018, and we’re going to build the pipe. And we think it’ll be full. Its initial capacity is 300,000 barrels and day, and we’ve got three contracts. So it’s going to be a success.”

    The OPEC agreement to cut 1.2 MMb/d of production is a welcome relief to U.S. oil producers battered since late 2014 by sharp price declines. Uncertainty remains in how quickly U.S. activity will ramp up, though U.S. upstream producers will emerge from this downturn with much leaner cost structures and more efficient operations. As production grows again in late 2017, infrastructure requirements will need to be closely assessed, particularly in the Permian, which is likely to become constrained later next year. The downside risk in the next two years is that U.S. production could ramp too quickly, sending the market toward a relapse in oversupply. But with OPEC taking approximately 1.2 MMb/d off the market, and U.S. production only falling by 800 Mb/d since December 2014, U.S. producers are poised to regain some production losses. To keep up to date on new activity, request a trial of Genscape’s U.S. Crude Oil Production Report.

    - See more at: http://www.genscape.com/blog/opec-production-agreement-genscape%E2%80%99s-outlook-uptick-us-production#sthash.SDzNhl8M.dpuf

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    Devon Energy Announces Resource Expansion in the Delaware Basin with Successful Leonard Shale Spacing Test


    Devon Energy Corp. announced today an increase to its risked drilling inventory in the Delaware Basin following a successful Leonard Shale stacked spacing test in southeast New Mexico.

    The Thistle spacing pilot tested 400-foot vertical spacing between the Leonard Shale “B” and “C” intervals in the southwest corner of Lea County, New Mexico. Initial 30-day production rates from this two-well pilot averaged 1,800 oil-equivalent barrels (Boe) per day per well, of which 75 percent was light oil. The Thistle wells were drilled with 7,000-foot laterals at a cost of about $6 million per well.

    Early results from the Leonard Thistle pilot also indicate minimal interference between wells, suggesting potential for joint development of multiple intervals in this portion of the Leonard play. With the success of this stacked spacing test, Devon is now raising its risked inventory in the Leonard Shale to 950 gross locations. This increase in risked inventory represents growth of nearly 20 percent from previous estimates and conservatively assumes only six wells per surface section. The company expects its risked inventory in the Leonard to continue to expand with further delineation work.

    Overall, the company has 60,000 net surface acres in the Leonard Shale play, with gross pay ranging up to 1,100 feet and as many as three different landing intervals. Adding up the Leonard leasehold by target landing interval, Devon has exposure to 160,000 net effective acres. This early-stage development play has potential for greater than 1 billion Boe of recoverable resource.

    “The strong flow rates from the Thistle spacing pilot is another example of the positive rate of change we are achieving in the Delaware Basin and is another critical step in further delineating the massive resource upside associated with our North American onshore portfolio,” said Tony Vaughn, chief operating officer. “In the upcoming year, we plan to continue to accelerate drilling in our world-class Delaware Basin and STACK assets. We expect this increased activity to deliver strong growth in high-margin production and further expand our recoverable resource in the U.S.”

    Devon has one of the best Delaware Basin positions in the industry with stacked-pay potential providing exposure to the Delaware Sands, Leonard Shale, Bone Spring, and Wolfcamp formations. The company’s position is extremely well positioned on the North American cost curve. In aggregate, the company has exposure to 670,000 net acres by formation, with nearly 6,000 risked undrilled locations and greater than 20,000 unrisked locations in this basin.

    Converting the massive and growing opportunity in the Delaware Basin into production and free cash flow is a top priority for the company. Devon remains on track to accelerate drilling activity to three operated rigs by year end 2016. Depending upon cash flow availability, the company has the potential to further ramp-up activity to as many as 10 rigs by the end of 2017. This increase in drilling activity will focus on the Bone Spring, Leonard Shale and Wolfcamp targets.

    https://www.oilvoice.com/Press/458/Devon-Energy-Announces-Resource-Expansion-in-the-Delaware-Basin-with-Successful-Leonard-Shale-Spacing-Test
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    Crescent Point boosts 2017 capital budget to C$1.45 billion


    Dec 7 Canadian light oil and gas producer Crescent Point Energy Corp said on Wednesday it will increase its 2017 capital budget 31 percent from this year to C$1.45 billion ($1.10 billion) and boost production by 10 percent.

    The Calgary-based company, which has core operations in southwest Saskatchewan, the Williston Basin and the Uinta Basin in the United States, expects to finish 2017 producing 183,000 barrels of oil equivalent per day.

    Crescent Point previously set a preliminary 2017 budget of C$1.4 billion.

    The updated guidance is the latest sign of cautious optimism among Canadian oil and gas producers after more than 2-1/2 years of weak prices and aggressive cost cutting.

    "We've had a very successful 2016 operationally and are ahead of our budgeted December exit production of approximately 167,000 boepd," Scott Saxberg, Crescent Point's president and chief executive officer, said in a statement.

    The company plans to drill 670 wells next year and has allocated 51 percent of its budget to the Williston Basin, which spans the U.S.-Canada border and is Crescent Point's largest producing area.

    Twenty-five percent of capital expenditures are earmarked for southwest Saskatchewan, while 18 percent of the budget will be spent on the Uinta Basin in Utah.

    The remainder of the budget will cover infrastructure and seismic investments in its three core areas, Crescent Point said.

    http://www.reuters.com/article/crescent-point-capex-idUSL1N1E226G

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    Agriculture

    Ukraine PM says Odessa fertilizer plant sale has failed


    Ukraine's Prime Minister blamed the State Property Fund for the failure of a second attempt to sell a state-owned fertilizer plant in Odessa, seen as a test of a Western-backed push for privatization and reform.

    "The auction for the privatization of OPZ has shown that the institution (the State Property Fund) is not capable of carrying out effective privatization," Prime Minister Volodymyr Groysman said in a government meeting.

    The Odessa Portside Plant was meant to be the centerpiece of the privatization drive, but an initial attempt in July did not attract a single buyer partly due to a starting price above $500 million.

    http://www.reuters.com/article/ukraine-crisis-privatisation-idUSS8N1AL024
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    Precious Metals

    Agnico Eagle buys shares in gold explorer


    Canadian gold miner Agnico Eagle has entered into a share purchase agreement with G4G Capital to earn 19.93% of its total issued and outstanding common shares at $1.20 apiece.

    On closing of the transaction, which is expected on or around December 13, Agnico Eagle and G4G, which will be renamed White Gold Corp, will enter into an investor rights agreement.

    This will give Agnico Eagle the right to participate in certain equity financings to maintain its 19.93% interest, as well as the right to nominate one person to the board of directors.

    The agreement will also give G4G the right to designate a buyer in the event that Agnico Eagle wishes to sell more than 5% of its common shares.

    Further, Agnico Eagle will be subject to a two-year standstill, which will prohibit it from taking certain actions, including acquiring more than 19.99% of the issued and outstanding common shares, subject to certain exceptions.

    G4G has an option to acquire 12 301 claims across 21 properties, covering about 249 000 ha and representing about 30% of the White Gold district in the Yukon Territory from Wildwood Exploration and G4G’s chief technical adviser Shawn Ryan.

    http://www.miningweekly.com/article/agnico-eagle-buys-shares-in-gold-explorer-2016-12-07
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    Base Metals

    Nevsun off to the races after eye-popping Serbia assays


    Nevsun Resources Timok copper project continues to boost the stock of the Vancouver-based company with a 5% jump on Wednesday following the latest set of drilling results from the Serbian property.

    By the close in New York, Nevsun shares changed hands at $3.30, up 4.8% on the day, and in after hours trade investors continued to chase the counter higher affording it a market capitalization of $987 million. Nevsun is up 21.8% in value this year.

    Nevsun highlighted new assay results from on-going drilling of the super high-grade Upper Zone at Timok, part of 50,000 metres $40 million program through 2017:

    Drilling continues to confirm continuity and the high-grade nature of the Upper Zone
    New massive and semi-massive sulphide intersections include:

    TC160121:  182.3m @ 4.17% Cu, 4.80g/t Au, including 40.5m @ 11.61% Cu, 12.9g/t Au
    TC160119:  86.2m @ 9.47% Cu, 8.83g/t Au, including 46.5m @ 15.61% Cu, 11.29g/t Au
    TC160117:  98.8m @ 9.82% Cu, 8.86g/t Au, including 33.0m @ 20.04% Cu, 14.35g/t Au
    TC160114:  171.0m @ 4.94% Cu, 5.21g/t Au, including 10.5m @ 11.09% Cu, 17.82g/t Au and 24.0m @ 10.27% Cu, 6.71g/t Au, and 7.5m @ 7.88% Cu, 3.78g/t Au

    Additional 18,500m of drilling in progress to further improve confidence in the resource

    Nevsun CEO, Cliff Davis said the assays represent about 25% of the planned in-fill drilling designed to confirm and upgrade the resource of the Upper Zone mineralization and that the pre-feasibility study scheduled for September 2017 is "progressing well":

    "Recent meetings with both the Prime Minister of Serbia and the Minister of Mines and Energy have demonstrated the State’s very strong support for international investment and in particular, the development of the Timok Project.”

    The Upper Zone at Timok, located in the eastern part of the Eastern European country near the Bor mining and smelting complex, boasts copper and gold content consisting of 1.7 million tonnes of indicated resource grading 13.5% copper and 10.4 g/t gold and 35.0 million tonnes of inferred resource grading 2.9% copper and 1.7 g/t gold.

    Nevsun completed a takeover of Reservoir Minerals in June in a $440 million cash and shares deal which provided the companies 100% ownership in the upper zone of Timok, which had previously been owned by Reservoir and Freeport McMoRan. Nevsun shareholders own two-thirds of the combined company.

    Nevsun and joint venture partner Freeport is also undertaking a $20 million drill program at the Lower Zone at Timok which is characterized by porphyry-style mineralization.

    Nevsun's sole operating mine is the Bisha complex in Eritrea. Nevsun owns 60% (the Eritrean government owns the rest) of the $250 million Bisha mine which started operations as a gold-silver producer in 2010. Three years later Bisha underwent a $110 million expansion to switch to copper concentrate production from supergene ore.

    This year the company pivoted again to expand flotation capacity to produce zinc concentrate with shipments starting in September. Zinc is the best performing metal this year with a 70% jump in price in 2016 to $2,760 a tonne, near levels last seen in 2008.

    http://www.mining.com/nevsun-off-races-eye-popping-serbia-assays/

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    Copper Mountain expects to exceed production guidance


    Continued mining activities at CopperMountain Mining’s eponymous mine, in southern British Columbia, during October and November, have seen the company achieve an above-average mining rate of 193 550 t/d, against its 174 000 t/d budget.

    The TSX-listed miner said in a statement on Tuesday that its yearly production was on track, with year-to-date copper production totalling 76-million pounds of copper, which is slightly ahead of guidance for the year. The company also produced 14.4-million pounds of copper during the months of October and November.

    A total of 12.4-million tonnes of material was mined, including 4.4-million tonnes of ore and 8-million tonnes of waste, resulting in a strip ratio of 1.8:1 from its Pit 2 area, the Saddle area, and the newly developed Oriole deposit just south of the mine’s Pit 3. High equipment mechanical availability was also maintained during the quarter, which helped contribute to the above-average mining ratesachieved.

    Meanwhile, the miner noted that its mill continued to operate above design capacity rates, averaging 42 079 t/d for the months of October and November. Total tonnes milled during the period was 2.6-million, with an operating time of 93.6%.

    Copper recovery for the two months averaged 80% as initial oxidised ore from Oriole was starting to be processed through the concentrator. The average grade for the two months was as planned at 0.32% copper.

    Further, Copper Mountain noted that gold and silver production from the mine continued to provide a favourable contribution to the operation, accounting for over 20% of the mine revenue.

    "The new production records being achieved at the mine have greatly strengthened our operating base and our balance sheet,” said CEO Jim O'Rourke, adding that the recent rise in the copper price was a welcome change and that gold production continued to provide a strong by-product credit.

    http://www.miningweekly.com/article/copper-mountain-expects-to-exceed-production-guidance-2016-12-07
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    Steel, Iron Ore and Coal

    China railway bureaus to sign long-term coal transport contracts


    China's state-owned railway departments will sign long-term transport contracts with coal suppliers and buyers to help implement annual coal supply deals, in the latest bid to meet winter demand and tame a months-long price surge, the China Securities Journal reported on December 7.

    For annual supply contracts of more than 200,000 tonnes, railway bureaus will sign transport deals with key miners, the paper cited a senior railway official as saying, following a coal trade fair at the largest coal port city Qinhuangdao last week.

    For larger contracts, with annual supply of over half a million tonnes that have fixed departure and arrival points, railway departments will look at signing deals with both the coal miners and buyers.

    Miners and buyers this month started executing term supply agreements, with one of the first contracts priced at 580 yuan/t ($84.19/t) for 5,500 Kcal/kg NAR thermal coal, Shanghai Securities Journal reported on the same day, a level still significantly below spot rates.

    China, the world's top coal producer and consumer, has in recent months been putting in place measures to prevent a winter shortage of coal, a concern following earlier government-enforced mine closures.

    The government has told key miners to restart production and encouraged miners and utilities to sign contracts below prevailing spot rates.

    http://www.sxcoal.com/news/4550012/info/en
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    Peabody wants to repay term loan early thanks to improving coal prices


    US coal producer Peabody Energy Corp said it would seek court approval to repay a $500 million term loan ahead of schedule because it has enough cash to operate in bankruptcy thanks to a rise in coal prices, Reuters reported.

    Peabody obtained an $800 million debtor-in-possession or DIP financing from both secured and unsecured creditors when it joined other large US coal producers in bankruptcy in April, hit by a drop in coal prices.

    The financing included a $500 million term loan, which the company is planning to repay, along with a $200 million bonding accommodation facility for cleanup costs and a letter of credit worth $100 million.

    Since April there has been a significant increase in the price of both the seaborne thermal and metallurgical coal sold by Peabody, one of the world's leading coal producers.

    If Peabody repays the term loan before mid-January, its bankruptcy estate will save more than $12 million in interest payments per quarter, the company said in a filing with the US Bankruptcy Court in Saint Louis. The court must approve the request.

    "Early repayment of the term loan would result in increased savings and flexibility as we move through the later stages of the bankruptcy," Peabody spokesman Vic Svec was cited by Reuters as said.

    Peabody has said it hopes to exit bankruptcy within a year of its 2016 filing, and the recent improvement in coal prices has made a consensual bankruptcy reorganization more likely.

    Peabody's shares, which fell to a record low of $0.55 after its Chapter 11 filing in April, closed at $8.60 in over-the-counter trading on December 2.

    http://www.sxcoal.com/news/4550033/info/en
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    China's coal imports from Newcastle terminals gain 48pct in Nov


    Australian coal exports from the Port Waratah Coal Services (PWCS) terminals (Carrington and Kooragang) at Newcastle to China rose 48% from October and surged 123% from a year ago to 1.56 million tonnes in November, PWCS said in the latest performance report.

    Chinese buyers imported more coal to meet demand and offset shortfall in domestic market, as miners produced less amid the government's de-capacity drive. Data showed China's coal output dropped 12.3% and 12% in September and October, respectively.

    The coal terminals exported a total 9.28 million tonnes of coal in November, rising 6.73% from October and up 16.2% from the same month last year. Of the total shipments in November, 86% were thermal coal and the remainder was coking coal, PWCS said.

    Of this, 4.67 million tonnes were shipped to Japan, an increase of 6.73% from October, mainly due to strong replenishing demand after the end of term contract talks with Australian miners.

    South Korea received 1.15 million tonnes of coal in November, up 24.53% from the month before, driven by a strengthened demand for winter heating. Yet the volume was also 22.77% lower than November last year, as the country began to take other sources like Indonesia and Colombia amid high cost of Australian coal.

    Exports to Taiwan slumped 24.62% month on month to 0.94 million tonnes in November, data showed.

    Over January-November, PWCS exported a total 99.03 million tonnes of coal, the operator said.

    By the end of November, the PWCS terminals had 21 vessels waiting to load coal, flat from a month ago.

    Coal stockpiles at these two terminals stood at 1.57 million tonnes at the end of November, down 27.6% from end-October, of which 0.25 million tonnes were at Carrington and 1.32 million tonnes were at Kooragang.

    Coal exports at Newcastle are likely to rise in the short run, as the Asian-Pacific region needs more coal to burn for winter heating, and Australian coal prices are expected to fall back to a reasonable level, following the signing of mid- and long-term contracts between Chinese miners and end users in early December.

    http://www.sxcoal.com/news/4550042/info/en

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    China Nov coke exports up 10.7pct on year


    China exported 0.93 million tonnes of coke in November, rising 10.7% year on year and up 6.9% month on month, showed data from the General Administration of Customs (GAC) on December 8.

    Total export value of the steelmaking material in the month increased 56.3% from a year ago and up 35.5% from October to $185.07 million, equivalent to an average export price of $199/t, up $41.95/t month on month.

    Over January-November, China's coke exports were 9.22 million tonnes, rising 12.4% year on year, with value dropping 5.5% from the year prior to $1.25 billion.

    http://www.sxcoal.com/news/4550073/info/en
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    The ‘weird’ commodity that’s hurting bears as prices double


    Iron-ore’s probably heading for a retreat in 2017 as new mine supply comes online and a surplus builds, according to UBS Group, which acknowledged that the commodity’s recent surge was unexpected and had torpedoed an earlier forecast for a slump this quarter.

    “It’s just surprised me,” Wayne Gordon, executive director for commodities and foreign exchange at the bank’s wealth-management unit, said in an interview in Singapore on Wednesday.

    In early October, Gordon told Bloomberg Television the final two months of the year may mark a “death knell” for the raw material as stockpiles climb. “Iron ore is weird because the inventories are very high in China and it’s got to be pure spec flows,” he said.

    The raw material has doubled since bottoming 12 months ago on growing optimism that demand would remain steady in China and rising speculative interest. The advance, which has persisted even as China’s exchanges sought to curb investors’ enthusiasm, has wrong-footed analysts as well as miners. This week, Barry Fitzgerald, chief executive officer of Australia’s Roy Hill Holdings, said every time he makes a price forecast, he gets it wrong.

    “We’ve had a tough year in 2016,” said Gordon, who now sees the price back down at about $60 a metric ton in six months. “The market’s been balanced, if not in a slight deficit for iron ore, which is remarkable because we had that massive surplus the previous year. But next year, you’ll start to see that building up with a surplus again.”

    BENCHMARK RALLIES

    Ore with 62% content delivered to Qingdao advanced to $79.73 a dry ton on Tuesday, near the level of $80.83 hit on November 28, which was the highest price since October 2014, according to Metal Bulletin. It’s up 83% in 2016 and heading for the first annual increase in four years. Prices bottomed out at $38.30 in December 2015.

    Iron-ore futures in Dalian climbed 6.6% on Wednesday to close at the highest level since August 2014, presaging further gains in the benchmark price. Steel reinforcement bar in Shanghai also advanced to the best mark in more than two years after authorities in the biggest steel-making province launched a crackdown on illegal production.

    UBS’s views on iron-ore are in sync with Barclays and Citigroup, both of which said this week that prices are expected to fall again as supply expands and demand in China fails to grow. Citigroup sees prices dropping every quarter next year, from $60 in the first three months to $53 in the final period. Barclays put iron ore at $48 in the second half of 2017.

    The inability of the bears to call iron ore prices right this year has been highlighted by Cliffs Natural Resources CEO Lourenco Goncalves. “Do you know what they’re going to say next? They’ll say it’ll be next year,” Goncalves said in September. “That’s the reason I don’t believe them. They don’t know anything.”

    Australia and Brazil are the world’s largest iron-ore shippers, and new projects are being ramped up in both countries, with Vale SA poised to start exports from its S11D venture and Fitzgerald’s mine in the Pilbara building up toward capacity. Australian Trade Minister Steven Ciobo told Bloomberg on Wednesday he doesn’t try to predict where prices are headed.

    “Well, I’m not in the business of crystal-ball gazing on commodity prices,” Ciobo said in an interview in Jakarta. “They are what they are, and as the government, of course, we deal with that. Obviously if the price is better, that’s good for Australia.”

    http://www.miningweekly.com/article/the-weird-commodity-thats-hurting-bears-as-prices-double-2016-12-07

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    China Nov iron ore imports jump to 3rd highest month on record


    China imported 91.98 million tonnes of iron ore in November, up 13.8 percent from the previous month and reaching one of the highest volumes on record, official data from the country's customs authority showed on Thursday.

    The total was an increase of 12 percent from 80.8 million tonnes in November last year and was the third highest month on record, behind September's total of 93 million tonnes and the all-time high of 96.26 million tonnes set in December 2015.

    The jump was unexpected as steel mills have slowed output ahead of the winter months, when demand for rebar for use in construction typically slows.

    Steel mills in the world's top steelmaking country have also curbed output as surging costs of raw materials like coking coal and iron ore have eroded profits.

    "I think (the rise) just reflects some adjustments in terms of arrivals after the holidays in October when some shipments may have been postponed," said Helen Lau, analyst at Argonaut Securities in Hong Kong.

    "Otherwise there's no reason for a big rebound in iron ore imports," she said.

    Imports of iron ore hit 935 million tonnes in January-November, setting it up to top 1 billion tonnes this year and surpass the 2015 record of 952.84 million tonnes.

    Imports of steel products rose 2.8 percent from the month before to 1.11 million tonnes, while exports climbed 5.5 percent to 8.12 million tonnes.

    http://www.reuters.com/article/china-economy-trade-ironore-idUSL4N1E31VA
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    Tata Steel sweetens offer to UK workers, moves closer to merger


    Tata Steel UK on Wednesday offered British unions a deal guaranteeing jobs and investment in return for cutbacks to pensions, moving the company a step closer to merging its European assets with Germany's Thyssenkrupp (TKAG.DE).

    Britain's largest steelmaker offered to keep production at the country's largest steel plant in Port Talbot, Wales, going for at least five years, with a commitment to try to avoid any compulsory redundancies for five years, steel unions said.

    It also offered to invest 1 billion pounds in its UK business over the next 10 years.

    In return however, Tata, which employs some 4,000 people at the Welsh plant and 11,000 in the UK as a whole, wants to close employees' costly final salary pension scheme to future accruals and replace it with a defined contribution scheme.

    Unions will ballot on the plan in January next year.

    They are concerned that should they agree to let Tata close the current pension scheme, the company will look to spin it off into a standalone entity that could eventually fall into the Pension Protection Fund (PPF) if necessary.

    The PPF is a life-boat for failing schemes that would cut benefits by 10 percent for employees below retirement age.

    "These significant commitments on production, jobs and investment are welcome, however the move to close the British Steel Pension Scheme will clearly be of serious concern to all members," said the Community union in a statement.

    The union noted, however, that Tata was now offering to contribute up to 10 percent to a new pension scheme for workers, versus a previous offer of 3 percent.

    Still worries over the company's pensions and merger plan remain.

    Industrial group Thyssenkrupp, which has long been seeking a solution for its ailing steel business, has insisted it is not prepared to take on Tata's pension liabilities in the event of a merger.

    Moreover, the company has made clear that its primary aim in merging with Tata is to combat overcapacity in the steel sector.

    http://www.reuters.com/article/us-tata-thyssenkrupp-porttalbot-idUSKBN13W24G
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