Mark Latham Commodity Equity Intelligence Service

Tuesday 10th November 2015
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    World flirts with global recession as trade growth slows, warns OECD

    Organisation for Economic Co-operation and Development trims global growth forecasts amid a "deeply concerning" slowdown in global trade and slower growth in emerging markets "The growth rates of global trade observed so far in 2015 have, in the past, been associated with global recession." Catherine Mann

    It came as the Paris-based think-tank trimmed its forecast for global growth to 2.9pc this year.

    This represents the slowest pace of expansion since 2009 and is down from its previous projection of 3pc.

    Growth in 2016 is expected to rise to 3.3pc, although this is weaker than the 3.6pc growth the OECD predicted just two months ago. Trade growth was expected to reach just 2pc this year, with China's slowdown "at the heart" of subdued forecasts.

    Catherine Mann, the OECD's chief economist, said the weakening in global trade was "deeply concerning".

    Ms Mann highlighted that there had been just five years in the past 50 in which global trade grew by 2pc or less.

    "These rates, have, in the past, been associated with global recession," she said.

    Angel Gurria, the OECD's secretary general, said its global growth projection of 3.6pc in 2017 was disappointing by historical standards.

    "By 2017 - ten years after the onset of the crisis - we still would not have achieved the global rate of growth enjoyed before the crisis," he said.

    "Even this improvement hinges on supportive macroeconomic policies, investment, continued low commodity prices for advanced economies and a steady improvement in the labour market."

    The think-tank also warned that high levels of underemployment in the eurozone and even the US, which is expected to raise interest rates next month, would dampen wage growth "for some time to come".

    China's performance key to global growth

    China was one of the few countries to receive a growth upgrade from the OECD.

    The think-tank raised its 2015 forecast to 6.8pc, from 6.7pc. Growth is expected to remain unchanged at 6.5pc in 2016 and slow to 6.2pc in the following year.

    However, the OECD warned that a sharper slowdown in China could knock up to a percentage point off world output, with the biggest impact on countries such as Russia and Japan.

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    What An Industrial Depression Looks Like

    Two weeks ago, when looking at the latest Caterpillar retail sales data...

    Image title... we said that "If Caterpillar's Data Is Right, This Is A Global Industrial Depression."

    Today we get visual evidence of this, courtesy of an Australian heavy industrial equipment auction where machines such as a Caterpillar 992C wheel loader, which normally costs $2.9 million, can now be bought for just $15,000, a 99% discount!

    As Australia's ABC reports, now that the commodity bubble has burst for good, auctioneers are hard at work selling tens of millions of dollars of suddenly useless coal mining machinery for just a fraction of its original market value.

    The reason is known: the severe downturn in the Australian resources sector (courtesy of China's whose commodity imports are declining with every passing month) has led to a massive oversupply of equipment, and much of it is unsuitable for use in any other industry. This means unwanted excavators, trucks and sundry heavy machinery will end up as scrap, if not sold at auction.

    ABC's reporter visited just one such auction in New South Wales, which was owned by Big Rim, a mining services contractor which also collapsed after the miners it serviced also closed. What he saw was stunning:

    "We had 20 trucks in the Hunter Valley recently that 18 months ago were probably worth $600,000 each. We've just cut 'em up, returned about $40,000." And this is what an industrial depression looks like in numbers:

    Was: $2.9m | Now: $15,000: Caterpillar 992C wheel loader

    Was: $1.4m | Now: $50,000: Hitachi EX1200 hydraulic excavator

    Was: $2.7m | Now: $46,000: Caterpillar D11N crawler tractor

    Was: $900,000 | Now: $47,500: Caterpillar 775D rear dump truck

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    China Oct PPI down 5.9pct on year

    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 5.9% year on year and down 0.4% month on month in October, the National Bureau of Statistics (NBS) said on November 10.

    It was the 44rd straight year-on-year decline, due to subduing demand from downstream sectors.

    Factory prices of production materials declined 7.6% year on year and down 0.5% from September, the NBS said.

    The price of coal mining and washing industry fell 15.8% on year and down 0.9% on month, while the price of oil and natural gas mining industry decreased 39.9% on year and down 2.7% on month, it said.

    Besides, prices of ferrous metal industry dropped 18.5% from the previous year and down 0.7% from September, data showed.
    Over January-October, PPI dropped 5.1% on average from the previous year, and factory prices of production materials decreased 6.6% on year.

    Of this, the average price of coal mining and washing industry fell 14.3% on year; while the price of oil and natural gas mining industry decreased 37.4% on year; price of ferrous metal industry dropped 20.8% from the previous year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which rose 1.3% from the year prior but down 0.3% from the month before in October.
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    Volkswagen moves to appease angry US customers, workers

    Volkswagen AG took new steps on Monday to appease U.S. customers and German union leaders unhappy with the company's response to a sweeping emissions cheating scandal that claimed another high-profile executive.

    Volkswagen is offering a $1,000 credit, of which half is to be spent at VW and Audi dealerships, to U.S. owners of certain diesel models that do not comply with government emissions standards, VW's U.S. subsidiary said.

    The automaker said eligible U.S. owners of nearly 500,000 VW and Audi models equipped with 2.0 liter TDI diesel engines can apply to receive a $500 prepaid Visa card and a $500 dealership card, and three years of free roadside assistance services.

    The move was latest attempt to pacify owners who have been frustrated by how the German automaker plans to fix affected models. The company has warned it could rack up multi-billion-euro costs to remedy the issue and repair the damage to its reputation.

    "I guess it's a very small step in the right direction. But far from what I'd like to see in terms of being compensated," said Jeff Slagle, a diesel Golf owner in Wilton, Connecticut.

    The scandal erupted in September when VW admitted it had rigged U.S. tests for nitrogen oxide emissions. The crisis deepened last week when it said it had understated the carbon dioxide emissions and fuel consumption of vehicles in Europe.

    VW said on Monday it continues to discuss potential remedies with U.S. and California emissions regulators, including the possibility that some of the affected cars could be bought back from customers.

    In Washington, Democratic Senators Richard Blumenthal and Edward Markey on Monday decried VW's consumer program as "insultingly inadequate" and "a fig leaf attempting to hide the true depths of Volkswagen's deception."

    The senators said VW "should offer every owner a buy-back option" and "should state clearly and unequivocally that every owner has the right to sue."

    Late Monday, attorneys general from 47 states and the District of Columbia issued a statement saying the automaker's offer to consumers "in no way diminishes the seriousness of the deceptive practices and environmental harms" being investigated by the states.

    In Germany, the financial impact of the scandal has exacerbated tensions between Volkswagen management and labor leaders over plans to cut spending by about 1 billion euros ($1.08 billion) per year through 2019 at its core Volkswagen brand operations.

    Read more at Reuters

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    Oil and Gas

    Tanker ship futures market booms as rates rally

    The market for hedging oil tanker freight has revived sharply this year to a value of $4.5 billion after years of torpor, with ship owners looking to profit from a freight rally and more energy companies scramble to cover risk, industry sources say.

    Cheap oil bargain hunters after the price drop and refineries, which have been operating at unusually high levels to meet rising demand, have helped tanker markets experience their best earnings in years after a long period of losses.

    Rates for crude supertankers have soared in recent weeks to over $100,000 a day - their highest since 2008.

    In tandem, tanker freight forward agreements (FFAs), which allow a buyer to take a position on where freight rates will stand at a point in the future, have seen a surge in activity.

    "A lot of oil majors are under a lot of pressure," said Jay Lovell, chair of the FFA tanker brokers' association.

    "They have to be seen hedging any kind of assets that they have ... that is why you are seeing a lot more driven volumes coming through from oil majors these days," said Lovell, head of tanker FFA trading with leading broker Braemar ACM.

    In the year to date, the value of the FFA tanker market - which includes both crude and oil products segments - reached over $4.5 billion, versus $3.2 billion for 2014 and $3.2 billion in 2013, according to market estimates.

    Oil majors including BP, Phillips 66 and Statoil plus trade houses Glencore, Trafigura, Vitol and Gunvor are active in tanker FFAs.

    Traded volumes for crude tanker FFAs have doubled to 106,660 lots in the year to date from 51,257 lots in 2014 and 35,990 lots in 2013. Products tanker FFAs reached 132,761 lots so far this year versus 129,899 last year and 143,094 lots in 2013, Baltic Exchange data showed. The Baltic acts as a benchmark for the FFA tanker market.

    Lovell said in the past six months, 20 new participants had joined the FFA tanker market - some returning after being absent for years due to slower activity at that time.

    Lower oil prices have meant marine bunker fuel costs, that make up a large part of a ship's expenses, have dropped. That helps bottom lines and also adds to more speculative activity, brokers said.

    Glenn Huniche, FFA trader with Maersk Tankers and chair of the advisory FFA tanker users' group, said investments in shipping by private equity houses and hedge funds in recent years were adding to the flows, while tanker owners were also taking more punts.

    "That is something that is going to be game changing in the years to come," Huniche said, ahead of the annual FFA tanker forum in London this week.

    "With the upturn, conventional (tanker) owners are coming back with money in their pockets - and that can be used in instruments like this."

    Read more at Reuters

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    Oil tankers queueing in U.S. Gulf seen as new symbol of glut

    A traffic jam of oil tankers has emerged along the U.S. Texas coast this month, a snarl that some traders see as the latest sign of an unyielding global supply glut.

    More than 50 commercial vessels were anchored outside ports in the Houston area at the end of last week, of which 41 were tankers, according to the Houston Pilots, an organization that assists in the navigation of larger vessels in and around port areas. Normally there are between 30 to 40 vessels anchored offshore, of which two-thirds are tankers, according to the pilots.

    Although the channel has been shut intermittently due to fog or flooding in recent weeks, pilots said those issues were not significant enough to create the backlog.

    "It's not because of a lack of pilots or tug boats," according to JJ Plunkett, a Port Agent with the Houston Pilots.

    As of Nov. 6, more than 20 million barrels of crude were sitting in vessels anchored outside the U.S. Gulf Coast waiting to discharge, double the volume that typically discharges each week, according to Matt Smith, Director of Commodity Research at ClipperData.

    "We're seeing ships idling off the coast of China, Singapore, (the) Arab Gulf, and now the U.S. Gulf. It appears that the glut of supply in the global market is only getting worse," Smith said.

    Oil traders in the U.S. cash market pointed to everything from capacity constraints at Gulf Coast storage tanks to a lack of buyers for the imported barrels.

    While U.S. data show Gulf Coast inventories hit a record 251.7 million barrels just over a week ago, major facilities at Corpus Christi, Houston, the Beaumont-Nederland area, and St. James, Louisiana, were still barely two-thirds full at the end of October, according Genscape data.

    Several traders said some ships may have arrived without a buyer, which can be hard to find as ample supply and end-of-year taxes push refiners to draw down inventories.

    Read more at Reuters

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    Iran Plans Natural Gas Exports With First Working FLNG

    Crippling E.U. and U.S. export sanctions on Iran may be lifted next year in exchange for compliance with July's nuclear accord, and Iran is already making plans for exports of oil – and natural gas.

    “A memorandum of understanding has been signed with a respectable German company which possesses the technology to build LNG tankers. Preliminary accords have also reached with several South Korean and Chinese firms,” said Esmaeil Sadeqi, an Iranian project manager, speaking to a media source.

    Iran has existing shipyard facilities capable of handling large vessels, including two drydocks sized appropriately for VLCCs and VLNGs. Under the MOU, the technology transfer for sophisticated VLNG construction would come from foreign partner firms.

    Separately, Iranian media reported November 9 that Minister of Petroleum Bijan Zangeneh is in discussions with Belgian Secretary of State for Foreign Trade Pieter De Crem regarding a partnership with Belgium’s Exmar. Under the agreement, Exmar would supply Iran with what would be the world’s first functioning Floating Liquified Natural Gas (FLNG) barge.

    “If the two sides show flexibility and technical and economic negotiations bear results, [the Belgian side] will bring FLNG facilities to the Kharg region in not a distant time and Iran will begin producing LNG for the first time,” he said.

    Iranian oil output is already in the range of 2.8 million bpd, analysts say, with the possibility of more than a million more bpd by the end of 2016. Once the nation puts this output on the saturated global market, prices could fall still further below the current $50 Brent crude range. And now it appears set to do the same in the well-supplied LNG market as well.

    While rival gas exporter Qatar has already secured a lucrative market in Asia, Iran's LNG sales strategy is focused on Europe. The E.U. would benefit for both economic and strategic reasons; Europe gets the majority of its natural gas from Russia via pipeline, and Russia has been known to restrict supply as a way of exerting diplomatic pressure.

    Media reports indicate that Iran has preliminary agreements with Spain as its primary gateway to the European market. The peninsula has the largest LNG receiving terminal capacity in Europe, and is planning an expansion of its pipeline connections to the E.U. gas grid.

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    UAE pressing ahead with oil expansion, betting on price recovery

    United Arab Emirates, one of the wealthiest Gulf states, is pushing ahead with large new energy projects, betting an oil price recovery will start as early as next year as demand begins to absorb the global glut.

    "These are times of some hesitancy, times of pain for some ... But pain is not new ... We will pass it stronger," energy minister Suhail Al Mazrouei told the UAE's biggest annual oil show in Abu Dhabi.

    "That (oil price drop) didn't change the vision of the UAE ... We are not cancelling projects," he added.

    Oil prices crashed after Saudi Arabia and Gulf allies the UAE, Kuwait and Qatar enforced a decision by the Organisation of Petroleum Exporting Countries (OPEC) to fight for market share with rival producers, abandoning a decade-old policy of cutting output to prop up prices.

    Prices have more than halved over the past 18 months, and OPEC itself sees the current oil glut persisting well into next year, prompting even the wealthiest OPEC members, like Saudi Arabia, to revise some field development plans.

    Low prices have also slowed some non-oil projects in the UAE, including the opening of a huge new Louvre museum, while others such as the Abu Dhabi film festival have been canceled.

    But officials insist that projects in key sectors such as energy, defence and infrastructure continue as planned.

    On the energy side, the country is pushing ahead with a plan to raise its oil production capacity to 3.5 million barrels per day from the current 3 million within the next two to three years, the head of the national company ADNOC Abdullah Nasser al-Suwaidi said. The UAE is currently producing 2.9 million bpd.

    Some $35 billion worth of investments will flow into offshore exploration after decades of investments into onshore, he said.

    The UAE is hoping the lion's share of its energy needs will be covered with rising gas production by 2021, while around a third of energy needs will be met with nuclear and solar projects, said Al Mazrouei.

    He added the UAE, as part of OPEC, could not afford losing market share by cutting back on supply, suggesting continued support for the OPEC strategy to fight for market share through higher output and lower prices.

    "I'm not regretting this decision. We like that decision," he said while declining to predict the outcome of the OPEC meeting in December.

    As the markets have began to rebalance, global oil prices will start an upward correction in 2016, Al Mazrouei said. "I wouldn't call it a crisis. I would call it a cycle ... I'm optimistic. Next year will be a year of correction".

    Read more at Reuters

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    Brazil's Petrobras, union strike talks fail, risk of fuel shortage rises

    Brazil's Petrobras and unions failed to reach an agreement on Monday over worker demands that the state-run oil company reverse budget cuts and cancel assets sales aimed at trimming its massive debt, union and company officials said.

    The week-old strike, already the biggest in 20 years, now risks an impasse that could hurt domestic fuel supplies and further hobble a company already under financial pressure and the fallout from a corruption scandal.

    "Our demands are not for salaries, but in defense of national sovereignty and that the company goes back to being the impulse for development of the country," FUP, the country's main oil-union federation said late Monday.

    Combined with a growing truckers strike, the Petrobras walkout could further harm a Brazilian economy already struggling with its worst recession in decades.

    The two sides plan to meet again on Tuesday. A Petrobras official with direct knowledge of the talks told Reuters on Monday the company expects an agreement by the end of the week.

    "There is still no deal, but the unions better understand the company's economic situation," said the official, who asked not to be identified because the talks are private.

    While FUP is asking for an 18 percent salary increase, more than double the country's inflation rate, union officials say their demands to reverse nearly $100 billion in budget cuts and stop plans to sell oil fields and a stake in its distribution unit are more important.

    Without the sales and budget cuts Petrobras will have trouble paying its more than $130 billion of debt, the largest in the oil industry, the company says.

    Since the strike began, Petrobras said on Monday, it has held output cuts to about 115,000 barrels a day in Brazil, or about 5.5 percent of pre-strike production, thanks to management and contingency plans.

    FUP, though, says Petrobras' estimate is low and that as much as 400,000 barrels a day are affected. Companies, particularly on-shore independents, say Petrobras, one of the main buyers of non-Petrobras output in Brazil, has been unable to honor purchase contracts due to strike activity at terminals.

    FUP members and members of the rival FNP oil workers confederation are on strike at 12 of Petrobras' 13 Brazilian refineries. In the past Petrobras officials have said they can maintain refinery output for about 10 days without major output drops and the need to use up fuel stocks.

    Read more at Reuters

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    Qatar sells BG/Shell stake

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    Rout-Proof Oil Dividends Under Scrutiny as Small Companies Crack

    Europe’s biggest energy companies are doing everything they can to keep paying dividends. If their smaller peers are anything to go by, they’re fighting a losing battle.

    Companies such as Royal Dutch Shell Plc, Total SA and BP Plc have reduced spending, sold assets and even issued scrip dividends in lieu of cash to keep shareholders happy in the midst of the worst oil rout in over a decade. While the larger operators have largely succeeded in keeping payouts intact, smaller players are starting to show the strain.

    Amec Foster Wheeler Plc and Prosafe SE were the latest of at least five energy companies to reduce or cut their dividends in the past month, spurring declines of at least 14 percent in their shares. Some investors worry bigger operators will be unable to avoid that fate unless oil prices recover.

    “Probably not every company will succeed,” said Dirk Thiels, head of investment management at KBC Asset Management in Brussels. “It has to be proven that they can keep their dividends so that’s still a concern to us.”

    Amec slumped by the most on record on Thursday after the oil-and-gas engineering company said it would halve its dividend as low oil prices erode earnings. The same day, Norwegian rig provider Prosafe suspended its payouts. Marathon Oil Corp. recently reduced its payout by 76 percent, while Noble Corp., an oil-drilling services provider, said it will cut as it seeks to free up cash. Husky Energy Inc.’s shares fell to the lowest in a decade Oct. 30, after the Canadian oil producer said it would start paying its dividend in stock.

    The biggest seven integrated oil companies in the Stoxx Europe 600 Index have reduced their total dividend payments by 12 percent this year to $33.4 billion, even as oil tumbled 18 percent, and are forecast to keep payouts unchanged in 2016, data compiled by Bloomberg show. Although they are now also conserving cash by giving shareholders the option of taking payment in stock, Shell and BP are still among the most generous to investors, paying out $12 billion and $7.3 billion, respectively.

    Generosity comes at a price. Energy companies including Total and BP have announced cutbacks of $180 billion this year, the most since the oil crash of 1986, according to Oslo-based energy consultant Rystad Energy AS. BP lowered its 2015 capital-spending forecast to about $19 billion from $23 billion in 2014, and plans to sell $10 billion of assets by year-end, all the while keeping dividends unchanged. Repsol SA, Spain’s largest oil company,plans to sell 6.2 billion euros ($6.7 billion) of assets and cut investments.

    “It’s ridiculous to protect dividends when oil is under siege and the bottom is not in sight,” said David Tawil, a co-founder of New York-based Maglan Capital LP. “In a time of industry flux, as an equity holder, I’d prefer to see my company preserving capital and finding great bargains in the forced sale of assets by distressed peers. That is likely to be a much better return-on-capital expenditure than an equity dividend.”

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    Maersk Oil says new African licences relatively resilient to low oil price

    Maersk Oil, a unit of shipping conglomerate A.P. Moller-Maersk, said its planned new investments in exploration in Africa are low cost and should make them relatively resilient to weak oil prices.

    The cash-rich Danish company said earlier on Monday it will pay $365 million upfront to buy 25 percent stakes in three licences owned by Africa Oil Corporation in Kenya as well as a 25 percent stake in an exploration licence in Ethiopia and a 15 percent stake in another Ethiopian licence.

    "(These licences) have potential for oil production with relatively low technical costs and (will be) resilient to low oil prices," Maersk Oil's Chief Executive Jakob Thomasen told Reuters.

    Shares in Toronto- and Stockholm-listed Africa Oil Corporation soared 33 percent on the news on Monday while shares in Tullow Oil, which operates and controls 50 percent of four of the licences, jumped 15 percent, indicating investors believe Maersk Oil has paid a high price.

    Maersk Oil has agreed to pay future contingent payments of up to $480 million to Africa Oil for the Lokichar Project in northern Kenya and southern Ethiopia, depending on the size of the resource after final appraisal and the agreed timetable for the first oil production.

    Thomasen said oil has been found in eight areas covered by the licences and production is expected to begin at the start of the next decade.

    Maersk Oil was also still looking for opportunities to buy more North Sea interests, he said.

    As the oil price has halved since the middle of last year, oil firms have shelved $200 billion worth of spending on new projects since mid-2014, according to oil consultancy Wood Mackenzie.

    Read more at Reuters
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    Pakistan says finalises 15-year, $16 bln LNG deal with Qatar

    Pakistan has finalised a 15-year, $16 billion liquefied natural gas (LNG) deal with supplier Qatar and shipments are expected to begin next month, Pakistani energy minister Shahid Khaqan Abbasi said on Monday.

    The amount is 1.5 million tonnes per year, the minister told Reuters on the sidelines of an Asian ministerial energy roundtable in the Qatari capital Doha.

    The two sides have agreed a price, he said without elaborating.

    "We have finalised the deal. The first shipment is expected in December," he said.

    "We are hopeful for similar deals in the future."

    Read more at Reuters
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    Ineos signs ethane deal for Fife plant with Exxon Mobil and Shell

    Ineos has signed a deal with Exxon Mobil and Shell to secure ethane from US shale gas for the Fife Ethylene Plant (FEP) at Mossmorran.

    Under the agreement, the plant will receive ethane from Ineos' new import terminal in Grangemouth from mid-2017.

    Ineos said the new source of feedstock would complement supplies from North Sea natural gas fields and help secure skilled jobs "in the long run".

    FEP is owned and run by Exxon Mobil, while Shell has 50% capacity rights.

    The plant is one of Europe's largest ethylene facilities, with an annual capacity of 830,000 tonnes.

    'Landmark agreement'

    Ethane gas is vital in the production of ethylene, which is used to manufacture a broad range of products.

    Geir Tuft, business director at Ineos O&P UK, said: "This is a landmark agreement for everyone involved.

    "We know that ethane from US shale gas has transformed US manufacturing and we are now seeing this advantage being shared across Scotland."

    Elise Nowee, from Shell Chemicals, added: "This agreement gives FEP access to the new infrastructure developed by Ineos and in so doing brings US-advantaged ethane to FEP.

    "The agreement will help us to meet the long-term needs of our ethylene customers."
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    EIA: Permian Basin output still growing, but other top shale plays to fall

    New federal data shows that the Energy Department expects drillers in the Permian Basin to push oil production in the shale play above 2 million barrels per day for the first time ever this November.

    The U.S. Energy Information Administration’s monthly Drilling Productivity Report released Monday, which covers seven of the biggest shale plays in the country, projects production in the Permian to jump by 17,000 bpd this month. That increase would bring the play above the 2 million bpd mark. In December, the EIA expects the play to grow again by 11,000 bpd.

    But the Permian is one of the outliers — the only other play expected to grow over the next two months is the Utica in the Appalachian region. Combined with the other five plays — the Eagle Ford, Bakken, Haynesville, Marcellus and Niobrara plays — oil output overall is projected to fall to 4.95 million bpd the end of the year. That would be a fall of nearly 560,000 bpd from an April 2015 peak of 5.51 million bpd.

    The Eagle Ford in South Texas has had the biggest impact on overall U.S. production growth. The EIA projects output in the Eagle Ford to fall 436,000 bpd by December from a peak of 1.71 million bpd in March.

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    Marathon Oil Signs Agreement for Divestiture of Gulf of Mexico Assets

    Marathon Oil Corporation announced today that the Company has signed an agreement for the sale of its operated producing properties in the greater Ewing Bank area and non-operated producing interests in the Petronius and Neptune fields in the Gulf of Mexico for $205 million.

    The buyer will assume all future abandonment obligations for the acquired assets. These assets represent a majority of the Company’s operated and non-operated producing properties in the Gulf of Mexico. The effective date of the transaction is Jan. 1, 2015. Closing is expected before year end.

    Marathon Oil will retain its interests in certain other producing assets and acreage in the Gulf of Mexico, as well as its interests in the Gunflint development and Shenandoah discovery.
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    Sanchez Energy reports 3Q loss

    Sanchez Energy Corp. on Monday reported a third-quarter loss of $416.9 million, after reporting a profit in the same period a year earlier.

    On a per-share basis, the Houston-based company said it had a loss of $7.33. Losses, adjusted for one-time gains and costs, came to 49 cents per share.

    The results exceeded Wall Street expectations. The average estimate of seven analysts surveyed by Zacks Investment Research was for a loss of 61 cents per share.

    The independent oil and gas company posted revenue of $114.5 million in the period, missing Street forecasts. Four analysts surveyed by Zacks expected $135.3 million.

    Pro forma liquidity of approximately $842 million as of September 30, 2015, consisting of $197 million in cash and cash equivalents, approximately $345 million of cash proceeds from the Western Catarina Midstream Divestiture and an elected borrowing base commitment of $300 million
    Average drilling and completion costs (including facilities) at Catarina of $4.1 million per well during the third quarter 2015
    South-Central Catarina wells exceed expectations, with average 30-day rates of greater than 1,300 BOE/D and estimated ultimate recoveries tracking to nearly double the 600-700 MBOE Western Catarina type curve
    A total of 41 wells drilled toward the Company's 50 well annual drilling commitment at Catarina for the period July 2015 to June 2016, with the Company expecting to fulfill this commitment by year-end 2015
    Fourth quarter 2015 production guidance of 48,000 to 52,000 BOE/D, an increase of 2,000 BOE/D over the third quarter 2015 production guidance
    In 2016, Sanchez Energy will have 18,000 BBL/D of crude and 39 MMCF/D of natural gas hedged
    A borrowing base of $500 million recommended by the lead agent on the Company's bank credit facility, with final approval of that borrowing base anticipated in the next few weeks with no change expected to the elected commitment amount
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    Gulfport Energy 3Q15: Shuts-in 100 Mmcf/d of Production

    Gulfport Energy, a major Utica Shale driller, released their third quarter 2015 update last Thursday and held an analyst conference call on Friday. Among the things we learn from their public statements: in all categories (natural gas, oil, NGLs), Gulfport’s production was up dramatically from the same quarter a year ago.

    However, the price the company gets for those commodities is down rather dramatically. The company experienced a major paper loss for 3Q15 due to write-downs on the value of its assets (because of low prices).

    Gulfport announced it will “voluntarily curtail” 100 million cubic feet equivalent per day (MMcfe/d) of production beginning November 1, 2015 through early 2016, due to low prices. Better to wait and sell it later at a higher price. They’re also going to forgo a fifth drilling rig in the Utica, planned to start up in 2016.

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    Alternative Energy

    CO2 levels hit record high for 30th year in a row -WMO

    Greenhouse gas levels in the atmosphere reached a record high in 2014 as the relentless fuelling of climate change makes the planet more dangerous for future generations, the World Meteorological Organization said on Monday.

    "Every year we say that time is running out. We have to act NOW to slash greenhouse gas emissions if we are to have a chance to keep the increase in temperatures to manageable levels," WMO Secretary-General Michel Jarraud said in a statement.

    Graphs issued by the United Nations agency showed levels of carbon dioxide, the main greenhouse gas, climbing steadily towards the 400 parts per million (ppm) level, having hit a new record every year since reliable records began in 1984.

    Carbon dioxide levels averaged 397.7 ppm in 2014 but briefly breached the 400 ppm barrier in the northern hemisphere in early 2014, and again globally in early 2015.

    Soon 400 ppm will be a permanent reality, Jarraud said.

    "It means hotter global temperatures, more extreme weather events like heatwaves and floods, melting ice, rising sea levels and increased acidity of the oceans. This is happening now and we are moving into uncharted territory at a frightening speed."

    The rise in carbon dioxide levels was being amplified by higher levels of water vapour, which were in turn rising because of carbon dioxide emissions, the WMO said.

    Levels of the other two major man-made greenhouse gases, methane and nitrous oxide, also continued their relentless annual rise in 2014, reaching 1,833 parts per billion (ppb) and 327.1 ppb, respectively. Both increased at the fastest rate for a decade.

    The U.N. panel of climate scientists estimates that concentrations of carbon dioxide, methane and nitrous oxide are at their highest in at least 800,000 years.

    Jarraud's annual plea for the world to do whatever it can to cut greenhouse gas emissions comes weeks before negotiators from more than 190 countries are due to meet in Paris to try to agree a new U.N. climate deal.

    More than 150 countries, led by top greenhouse gas emitters China and the United States, have issued plans to limit greenhouse gas emissions beyond 2020. But the plans revealed so far will not curb emissions enough to meet a target agreed in 2010, to limit global warming to within 2° Celsius (3.6 Fahrenheit) of pre-industrial levels.

    Read more at Reuters
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    Base Metals

    First Quantum Minerals Reports Third Quarter 2015 Results

    First Quantum Minerals Ltd. today announced comparative earnings of $70 million and cash flows from operations, before changes in working capital and tax paid, of $263 million for the three months ended September 30, 2015. On a per share basis, these equate to $0.10 and $0.382, respectively using the weighted average shares outstanding of 684.5 million for the quarter. The weighted average shares outstanding for the prior year quarter was 591.2 million.


    The first full quarter of commercial operations for the Kansanshi smelter:

    Concentrate processed of 254,709 tonnes, average copper recovery above design at 97.8%, production totaled 57,085 tonnes of copper anode and 229,000 tonnes of sulphuric acid

    Copper production, sales and C12 cash cost better than both comparative 2014 quarter and Q2 2015:

    Results reflect mainly the ramp-up of Sentinel, benefits of the Kansanshi smelter, the company-wide cost improvement program and lower fuel cost
    Production - 107,485 tonnes, sales - 104,613 tonnes, C12 cash cost - $1.18 per pound

    Best quarterly nickel production since Q3 2014 on higher output at Kevitsa and the steady improvement at Ravensthorpe:

    Production - 9,955 tonnes, sales - 10,733 tonnes, C12 cash cost - $4.56 per pound

    Realized per pound prices for copper $2.28 and nickel $4.81 below comparative 2014 quarter and Q2 2015:

    Q3 2014 = copper $3.11, nickel $8.47; Q2 2015 = copper $2.65, nickel $5.98

    Changes to the Zambian taxation regime effective July 1, 2015 whereby mineral royalties were lowered from 20% to 9% for open pit mines and corporate tax of 30% and variable profits tax of up to 15% were reinstated.

    Net loss attributable to shareholders of the Company of $427 million includes a $471 million deferred income tax charge triggered by the reinstatement of corporate tax in Zambia effective July 1, 2015 and an unrealized foreign exchange loss of $94 million on the revaluation of the Zambian Value Added Tax receivable due to the depreciation of the kwacha against the US dollar in the quarter.

    Updated full year Guidance:

    Production: 2015 guidance for copper and gold lowered while nickel remains within previous guidance range.
    C12 cash cost: 2015 guidance lowered to between $1.20 and $1.35 per pound copper and between $4.40 and $4.70 per pound for nickel.
    Capital expenditures: 2015 estimate unchanged at $1.4 billion inclusive of approximately $600 million for Cobre Panama (First Quantum's share $360 million), $230 million for capitalized stripping and $200 million for each of Sentinel and sustaining capital.
    2016 estimated at $1.2 billion inclusive of $880 million for Cobre Panama (First Quantum's share $528 million), $200 million for capitalized stripping and $100 million for sustaining capital.
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    World’s biggest zinc producer exploring total exit from mining

    The company has already suspended operations at its Mexico’s Campo Morado and Canada’s Myra Falls mines.

    Debt-laden European zinc producer Nyrstar said Monday it plans to raise up to $296 million (€275m) through a share offering to pay down debt and has appointed bankers to explore a total exit from mining.

    The Belgian company, which is the world's No.1 zinc producer, laid out a package of measures it is putting in place to try repaying a $447 million bond that matures in 2016 and also address ongoing problems with it mining division.

    Nyrstar also announced a number of commercial supply agreements with Trafigura, the world’s second-largest metals trader and its main shareholder.

    Nyrstar also announced a number of commercial supply agreements with Trafigura, the world’s second-largest metals trader and its main shareholder.

    The commodity trader has agreed to buy as much as $135 million (€125m) of shares in a first-quarter rights offer totalling $270m to $296m. As part of the deal, Trafigura won’t raise its stake to more than 49% from over 20%, according to Nyrstar. Should the rights offer boost Trafigura’s holding above 30%, it won’t be obliged to make an offer for the rest of the stock, the company added.

    Nyrstar shares jumped up as much as 9.4% in Brussels on the news and were trading 5.5% higher at €1.62 mid-afternoon.

    They took a huge dip on Oct. 22, falling 27% in a matter of hours, after new chief executive Bill Scotting said the company was considering selling stock to meet its debt obligations.

    On Monday, Scotting noted Trafigura’s involvement in the refinancing was not a “takeover by stealth”.

    Nyrstar has been hit quite hard by the rout in commodities, with zinc down 24% this year on declining demand from top consumer China. The company said it’s mulling reducing zinc production from its mines by as much as 400,000 metric tons if prices stay depressed. That would almost match the 500,000 tonnes that Glencore, another leading zinc producer, recently cut.

    The company has already suspended operations at its Mexico’s Campo Morado and Canada’s Myra Falls mines.
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    Steel, Iron Ore and Coal

    India coal imports falling in boost to self-sufficiency goal

    India's coal imports fell 5 percent in October in their fourth straight monthly slide as local output rose fast under the government's push to open a mine every month, keeping the country on course to become self-sufficient in thermal coal in three years.

    Asia's third largest economy is targeting to more than double coal output to 1.5 billion tonnes this decade, and state-run Coal India has already turned around its
    poor performance with record growth from old and new pits.
    Coal imports into India, the world's third-largest buyer, fell to 14.52 million tonnes last month from a year earlier, according to trade ministry data provided by Coal Secretary Anil Swarup. April-October purchases fell 4.6 percent to 108.4 million.

    "The trend (of falling imports) will continue because of sustained increase in coal production by Coal India," Swarup told Reuters on Monday.

    Apart from Coal India, Swarup expects about 500 million tonnes of coal coming from the private sector by the end of this decade. The government is working out details to open up the nationalized sector and allow private companies to mine and sell coal.

    India has enough reserves of thermal, or power-generating, coal but will have to continue buying foreign coking coal used by the steel industry.

    Read more at Reuters

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    Arch Coal posts $2 BIL Q3 loss, says it may have to file for Chapter 11

    Arch Coal on Monday reported a $2 billion loss in the third quarter of 2015 and for the first time admitted it may be necessary to file for Chapter 11 bankruptcy even if it is able to restructure debt.

    In an earnings filing with the US Securities and Exchange Commission, the St. Louis, Missouri-based producer said it continues to be in "active dialogue" with creditors in an effort to restructure its balance sheet, but it may be necessary to file for relief under Chapter 11 protection in the "near term" even if an agreement is concluded.

    "The coal industry remains in a period of distress due to strict governmental regulations, oversupply in the global coal market, increased competition from natural gas, and low coal demand and prices, among other factors," Arch said. "Many coal companies, including Arch, have been consistently reporting cash burn and losses, and, due to current market conditions, expect to continue to use cash and report losses for the foreseeable future."

    Arch on Monday canceled its Q3 earnings conference call with the media and investors, citing "ongoing discussions with various creditors."

    The company reported a $2.1 billion asset impairment charge for Q3 "due to deteriorating market conditions" and $149 million in losses related to the bankruptcy of Patriot Coal. Arch's operations in Appalachia accounted for $1.7 billion of the asset impairment charges.

    At the end of Q3, Arch had almost $6.5 billion in total liabilities, including $5.1 billion in long-term debt.

    Despite the Q3 loss, Arch said it still had liquidity of $704.4 million at the end of September, with $694.5 million in cash and liquid securities. That high liquidity could keep the company operating for some time, said Chiza Vitta, associate director of natural resources at Standard & Poor's.

    "The weird thing about Arch is they have so much cash on hand, so much liquidity, they can stretch this out for a while," Vitta said. "When things are tough, you usually don't see that."

    "Ultimately, it is up to them on how long they can keep going," he said. "They have to balance how much they are bleeding [financially] against when and to what extend a turnaround will happen."
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    Rush to speed Brazil mine permit may be behind dam disaster

    Mining companies often complain endless red tape makes it hard to do business in Brazil but prosecutors and environmentalists say burst dams at an iron ore mine that triggered massive flooding last week point to gaping lapses in regulation.

    The floodwaters and mudflow killed at least two people and another 25 are still listed as missing in a disaster that came two years after a study requested by a prosecutor warned the dams in the mineral-rich state of Minas Gerais could collapse.

    "It was evident this dam was risky," Carlos Eduardo Pinto, a state prosecutor who probes the mining industry, told Reuters, referring to the first dam that gave way, leading to the rupture of another.

    Pinto is investigating whether a tailings pond, a reservoir for water with mine waste held by the dam, was too full.

    The dams burst on Thursday at a mine operated by Samarco, a joint venture between BHP Billiton Ltd , the world's largest mining company, and Vale SA, the biggest iron ore miner.

    In 2013, when Samarco was seeking renewal of its operating license, Pinto commissioned a study that found a design flaw in the tailings pond. It warned that an embankment could give way if it became saturated by water.

    The Instituto Pristino, an environmental group staffed by researchers from the Federal University of Minas Gerais, recommended the company conduct a dam-break study and draw up a contingency plan in case it burst.

    But the state licensing agency ignored the recommendations and renewed the mine's license a week after it was published, in October 2013.

    The state environment office in charge of the licensing agency said in an email the report recommended only industry standards. It did not say whether it asked the company to enforce those standards before renewing the license, though it did say an independent audit of the dam in July this year concluded the structure was stable.

    Prosecutors are investigating whether increased production at the mine might have affected the volume in the reservoir. Vale has said the Samarco mine increased output last year by 37 percent with the addition of a new iron ore pellet plant.

    Pinto said the company opted to accommodate the growth by raising the dam wall instead of building a new one, which would have been more costly, and was still working on it when the dam burst.

    Read more at Reuters

    Attached Files
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    EU fails to take action to stop cheap Chinese steel imports

    that European Union ministers failed to agree on Monday on urgent measures that steelmakers are demanding to stem a flood of cheap imports from China after the loss of some 5,000 jobs in the sector in Europe in the past three months.

    Luxembourg economy minister Etienne Schneider, whose country holds the six-month rotating presidency of the bloc, told a news conference that they agreed on the gravity of the situation and the need to take concrete actions. Luxembourg has called for a conference later this year to consider a response.

    British steelworkers union Community said the ministers had failed to grasp the urgency of the situation, with the promise of another conference only delaying action.

    Economy and industry ministers had gathered in Brussels at the request of Mr Sajid Javid, business minister for Britain, where the majority of jobs have been lost.

    Attached Files
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    Vallourec has no current plans to raise cash after loss

    French steel pipe maker Vallourec on Monday reported a loss in the third quarter against a backdrop of falling demand from its oil and gas customers and said it did not expect market conditions to improve in the short-term.

    But Vallourec stuck to its target for positive free cash flow generation over the full year. Finance chief Olivier Mallet told a conference call that the group had no plans at the current stage for a capital increase, when asked about speculation the company might raise cash.

    The company made a loss of 66 million euros ($70.92 million) compared with 175 million euros core profit in the same period in 2014.

    Vallourec makes two-thirds of sales from the oil and gas sector, and has been trying to cut production capacity and jobs to cope with the downturn affecting its oil company customers following the fall in global crude oil prices.

    Vallourec had warned in July that it expected full-year 2015 earnings before interest, taxes, depreciation and amortisation to be negative.

    The company said that it expected further deterioration in the fourth quarter, as it would be affected by the unfavourable phasing of oil and gas deliveries in Brazil.

    It has already said it would cut capital expenditure to 300 million euros in 2015 from the 350 million initially planned. On Monday it said it would further reduce capex to below 300 million euros.

    Global staff reduction in the first nine months of 2015 has reached 2,500 or about 11 percent of total headcount, it said.

    Read more at Reuters
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    China Oct steel products exports down 20pct on mth

    China’s steel products exports rose 5.5% on year but dropped 19.8% on month to 9.02 million tonnes in October, after hitting the record high of 11.25 million tonnes in September, showed the customs data on November 9.

    The monthly decline was mainly due to steel producers’ customs clearance in advance before the National Day holidays. Besides, foreign countries’ intensified anti-dumping acts also brought some negative effects on China’s steel products exports.

    The value of October steel exports stood at $4.67 billion, dropping 24% on year and down 17.7% on month. That translated to an average export price of $517.96/t in October, rising $13.3/t from September but down $201.1/t year on year.

    Over January-October, the exports of China’s steel products stood at 92.13 million tonnes, a year-on-year rise of 24.7%.

    Total exports value during the same period stood at $53.33 billion, down 6.9% from a year ago.

    Meanwhile, China imported 950,000 tonnes of steel products in October, dropping 12.8% on year and down 5.9% on month. The value of imports stood at $978 million, dropping 9.2% from September and down 27.4% from a year ago.

    Over January-October, the imported steel products amounted to 10.68 million tonnes, down 11.7% on year. The value totaled $12.13 billion, a decline of 19.5% year on year.

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