Mark Latham Commodity Equity Intelligence Service

Thursday 9th June 2016
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files







    Macro

    Glencore sells down further agri unit stake for $625 million


    Glencore has agreed to sell a 9.99 percent stake in its agricultural business to British Columbia Investment Management Corp for $624.9 million, as it continues a push to sell up to $5 billion worth of assets this year to help cut debt.

    Glencore Agri would also take on $3.6 billion in debt currently funded by Glencore, the Swiss-based mining and trading firm said, helping to pare debt on Glencore's books. The debt would be financed without recourse to Glencore.

    The deal follows the company's sale of a 40 percent stake in Glencore Agri to Canada Pension Plan Investment Board for $2.5 billion in April, and will leave Glencore with just over a 50 percent stake in the business, with existing management to stay.

    "These transactions highlight the superior value of Glencore Agri, with its advantaged asset footprint and business model, relative to its closest peers," Glencore Chief Executive Ivan Glasenberg said in a statement on Thursday.

    The sale of the agricultural unit stakes plus an agreement to sell a gold deposit in Kazakhstan for $100 million has put Glencore on track to reach its asset sales target as it seeks to cut net debt to between $17 billion and $18 billion this year.

    http://www.reuters.com/article/us-glencore-divestiture-idUSKCN0YU2SE
    Back to Top

    Freeport says buyers eager for a stake in its assets


    U.S. miner Freeport-McMoRan Inc (FCX.N) will consider a "broad spectrum" of asset sales and has attracted interest from parties wanting to buy a stake in a grouping of its assets, Chief Financial Officer Kathleen Quirk said on Wednesday.

    "We have not ruled anything out," Quirk said at the Deutsche Industrials and Materials summit.

    "As a result of that we've gotten a lot of interest from various parties ... in all of our assets in some form or fashion," she said.

    She said Freeport, the world's biggest publicly traded copper producer, has also had interest from parties looking at buying an interest in a portfolio of its assets.

    "We will certainly consider that," she said.

    There has been media speculation that Freeport is looking at selling a minority stake in a package of its assets, possibly a grouping of its North and South American copper mines. Quirk declined to comment on the speculation.

    Phoenix, Arizona-based Freeport has been selling off assets to bring down its debt to $10 billion from nearly $20 billion.

    Most recently, it agreed in May to sell its majority stake in the Tenke Fungurume copper project in the Democratic Republic of Congo to China Molybdenum Co Ltd (603993.SS) for $2.65 billion.

    The company has also been preparing itself, by lowering costs and cutting production, for copper prices as low as $1.75 a pound although it does not predict prices will fall that low, Quirk said.

    The price of the metal, currently about $2.06 per pound, needs to get back above $3 for the industry to ramp up investment in new projects, she said.

    http://www.reuters.com/article/us-freeport-mcmoran-assetsales-idUSKCN0YU1XE

    Attached Files
    Back to Top

    S Korea to shut aging coal-fired power plants, LNG to get a boost: minister


    Stressing the urgent need to cut emissions in the country, South Korea's energy minister Wednesday said the government was set to shut aging coal-fired power plants and vigorously promote cleaner fuels by using gas-fired power plants for electricity generation.

    "The government has decided to close down aged coal-powered power plants accused of air pollution and fine dust emissions," South Korea's Minister of Trade, Industry and Energy Joo Hyung-Hwan said in his keynote speech at the Future Energy Forum in Seoul Wednesday.

    But the plan to phase out aging coal-fired plants is unlikely to affect the country's oil demand, as oil accounts for just 3% of total electricity generation and the cost of power production using oil is higher compared to using LNG.

    About 10 coal-fired power plants -- in operation for about 40 years or more -- will be the first ones to shut down, Joo said at the forum hosted by South Korea's biggest daily Chosun Ilbo.

    "As the shutdown of coal-fired plants can affect the country's power supply, natural gas-fired power plants would produce more electricity to avoid any possible electricity shortages," he said.

    While the government is keen to cut coal use in power generation, industry officials see the potential to curb coal usage for power plants as limited.

    South Korea's coal-fired capacity additions are expected to increase by nearly 44% to 36,193 MW by 2020, from 25,149 MW in 2014, Choi Jae-Young, procurement manager at Korea East-West Power Co. said during his presentation at a coal industry gathering in Bali, Indonesia, earlier this month.

    He said South Korea's coal demand is expected to increase by nearly 40 million mt in the next four or five years. The country's total thermal coal imports in 2015 stood at about 93.7 million mt, up 1% from 2014. South Korea runs 53 coal-fired power plants, supplying about 40% of South Korea's electricity, followed by nuclear at about 30%, LNG 25%, oil 3% and renewable sources, such as hydropower, solar, wind and fuel cells, 2%.

    Operating rates at natural gas-fired power plants have decreased to under 40% since the second half of 2014, from 60% in 2012-2013 because of increased capacity of coal-fired and nuclear power plants and a slowing economy.

    "The country's reliance on LNG in its fuel mix for power generation is expected to rebound on the back of the government's plans to shut down aged coal-powered power plants," Yoon Dong-Jun, CEO of Posco Energy, said on the sidelines of the forum. Posco Energy, a unit of the country's top steelmaker Posco, runs six LNG-fired power plants.

    http://www.platts.com/latest-news/coal/seoul/s-korea-to-shut-aging-coal-fired-power-plants-27603471?hootpostid=ebfcaf755dabf9fb9970962479f094e2
    Back to Top

    Oil and Gas

    Nigerian chaos leaves refiners cold and oil unsold amid outages


    Refineries from India to the United States are backing away from buying Nigerian oil amid heightened uncertainty about deliveries as the country squares up to militants in the restive Delta region.

    Their reluctance to buy is limiting the prices Nigeria can get for its oil even as there is less of it - another hit to the finances of a country battling its worst economic crisis in decades.

    A group calling itself the Niger Delta Avengers has staged a number of attacks on oil installations belonging to Shell , ENI and Chevron, pushing output in what is usually Africa's largest crude exporter down past 20-year lows last month.

    Some oil facilities have clawed back output, but the Avenger attacks have continued and the group has vowed to bring Nigerian production to "zero".

    "Not everybody wants to be caught up in that, so they will avoid it," said Olivier Jakob, managing director of PetroMatrix in Switzerland. "The refineries will walk away from it."

    India's HPCL was forced last month to cancel a vessel it chartered to carry 2 million barrels of West African crude due to the Qua Iboe force majeure.

    India's state-run Indian Oil Corp. Ltd - a major buyer of Nigerian grades over the past year - has stated in its recent tenders that it would not take grades under force majeure. Qua Iboe remained off the list in its latest tender, according to a document seen by Reuters, an extremely unusual development in its requests for sweet crude.

    Indonesia's Pertamina, another frequent buyer, also chose not to buy Nigerian grades in its recent tenders, favouring Congolese Coco, Angolan Girassol and Saharan Blend from Algeria instead.

    Traders said Pertamina had shifted its preferences since the violence and uncertainty escalated, although Daniel Purba, senior vice president of ISC Pertamina, told Reuters by text message that Pertamina is "monitoring" Nigeria, but "currently it's still not affecting crude purchasing."

    Four of Nigeria's oil grades - including the largest stream, Qua Iboe - have been under force majeure in the past month - a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.

    ExxonMobil, which declared force majeure on Qua Iboe in May due to an accident, lifted the declaration last week, but the unpredictability is too much for some buyers.

    The reduced demand means Nigeria is not benefiting as much as others from a rebound in Brent crude prices, which is partly driven by its own oil outages.

    Even refineries on the U.S. East Coast, which have been on a buying spree for Nigerian crude in recent months that averaged 240,000 barrels per day (bpd) in April and May, according to Reuters shipping data, are starting to turn away.

    "When you plan your crude run months in advance and commit buying cargo, you need to be comfortable that the cargo will be there when you go to lift," one U.S. east coast oil trader said.

    As a result, differentials to dated Brent for Qua Iboe, Bonny Light and other grades are under downward pressure. There are several unsold cargoes for June loading, even with more than half a million barrels of production missing.

    The Nigerian government set up a team this week to launch dialogue with the Avengers, but the group, via their Twitter feed, rejected the offer to talk and blew up another Chevron well.

    "The nature of the recently re-emerged militancy in the Niger Delta suggests it is here to stay for the foreseeable future," said Elizabeth Donnelley, assistant head of the Africa programme at Chatham House, a London-based think tank.

    http://www.reuters.com/article/nigeria-oil-exports-idUSL8N18Z3TS
    Back to Top

    Norway Strike Threat Increases as Parties Fail to Find Agreement


    The threat of strike action among 6,000 oil service worker employees in Norway increases as unions and energy company representatives fail to settle wage disputes.

    The threat of strike action among 6,000 oil service worker employees in Norway increased Wednesday, as unions and energy company representatives failed to settle wage disputes, multiple sources say.

    After two days of negotiations, the Norwegian Union of Energy Workers (Safe) opted to break off talks with the Norwegian Oil and Gas Association, while the Norwegian Union of Industry and Energy Workers (Industry Energy) postponed its discussions.

    “The distance between the parties was too great where Safe was concerned,” said Jan Hodneland, lead negotiator for the Norwegian Oil and Gas Association, in an official statement.

    “The economics of the settlement were crucial to the failure to find solutions…Safe’s overall demands demonstrate that it does not share our perception of reality with regard to the demanding position in which the oil and gas industry finds itself,” he added.

    “Where Industry Energy is concerned, the negotiations have been demanding but we have agree to suspend the talks for now and resume at a later date,” Hodneland concluded.

    The latest figures from the Central Bureau of Statistics show that investment on the Norwegian Continental Shelf is falling and will continue to decline due to low oil prices, high costs and the need for cost reductions. From a peak of NOK 214 billion ($26.4 billion) in 2014, capital spending in the Norwegian petroleum industry is expected to fall by almost 30 per cent to NOK 153 billion ($18.8 billion) in 2017.

    “In these circumstances, employers and employees have a shared responsibility to safeguard jobs and valuable expertise in an industry which Norway will need for a long time to come,” said Hodneland in an Oil and Gas Association statement June 6.

    Talks between the Norwegian Oil and Gas Association and Industry Energy are expected to re-commence June 30. The deadline for reaching a compromise is July 1, Reuters quoted Industri Energy leader Leif Sande as saying. If no deal is struck, shutdowns could begin as early as July 2.

    http://www.rigzone.com/news/oil_gas/a/144965/Norway_Strike_Threat_Increases_as_Parties_Fail_to_Find_Agreement?utm_source=GLOBAL_ENG&utm_medium=SM_TW&utm_campaign=ARTICLE
    Back to Top

    'Intense' competition expected in European gas market: IEA's Birol


    Weak demand growth, low coal prices and an inability to absorb the global glut of LNG will see the European gas market become a battleground for gas suppliers looking to retain -- or gain -- market share, the head of the International Energy Agency said Wednesday.

    In the IEA's latest Medium-Term Gas Market Report, executive director Fatih Birol said the context for global gas markets was changing rapidly, and that as a result "intense" competition was expected in Europe.

    "Demand and supply developments are pointing to a period of oversupply in the market and indeed the next five years will witness a reshaping of global gas trade," Birol said.

    LNG production in the US and Australia is increasing "robustly", he said, underpinned by a massive expansion in export capacity in both countries at a time when global gas demand growth slows.

    Weakening gas demand in Japan and South Korea will result in major shifts in global gas trade patterns -- ample LNG supplies will look for a home elsewhere, Birol said.

    "While Europe has traditionally been the outlet of last resort for unwanted LNG supplies, this time around, weak demand growth and very low coal prices will limit how much gas the region can absorb. As a result, intense competition will develop among producers to retain or gain access to European customers," he said.

    In Europe, the changing market points to a "stark change" in the operating environment for key supplier Gazprom, Birol said.

    "The past 12 months have brought signs that Gazprom might be opting for a more flexible marketing approach," he said.

    "For the company to achieve its stated strategy of maintaining market share in Europe, it will need to adopt a more competitive pricing mechanism than in the past."

    The IEA said that LNG had up to now not been a real threat to Gazprom's position in the European market -- in fact Gazprom's market share has risen given weak European production and losses of North African volumes in recent years.

    "Oversupply in global markets will lead to fierce competition in Europe, with flexible US and Qatari volumes fighting hard to gain access to European customers," it said.

    The IEA said that Gazprom had the advantage of having large volumes of European demand locked in via minimum take-or-pay levels in long-term contracts.

    But, for volumes above this threshold, it needs to compete, it said. "Gazprom needs to win an additional 15-20 Bcm of demand above minimum take-or-pay obligations to maintain exports at the 2015 level," the IEA estimated.

    It added that the period 2016-18 will be very different for Gazprom in light of weak demand in Europe, greater regional interconnection and large volumes of cheap LNG flooding the market.

    "Additional supplies to Europe can conceivably displace Russian gas, but if there is a change in Gazprom's pricing policy aiming at defending market share, prices could be bid down to levels that trigger either coal-to-gas switching in the power sector or a significant supply-side response," it said.

    http://www.platts.com/latest-news/natural-gas/london/intense-competition-expected-in-european-gas-26462412
    Back to Top

    EU antitrust regulators carry out raids on trio of oil companies


    EU antitrust regulators have raided the offices of a number of oil companies over suspected blocking of gas exports to other EU countries.

    The move was made by the European Commission who said the raids took place on Monday but did not name the companies.

    It’s understood the companies included Romgaz, Transgaz and OMV Petrom.

    Last year, the EU competition enforcer charged Gazprom with a similar offence, a case which the Russian gas company is trying to settle with concessions to avoid a possible billion-euro fine.

    In a statement, an EU executive said: “The Commission is investigating potential anticompetitive practices in the transmission and supply of natural gas in Romania, in particular relating to suspected anticompetitive behaviour aimed at hindering natural gas exports from Romania to other member states.”

    Romania is one of the EU’s least energy-dependent states.

    It produces the bulk of its gas locally and imports up to 8% of its needs from Russia.

    https://www.energyvoice.com/other-news/111764/eu-antitrust-regulators-carry-raids-trio-oil-companies/
    Back to Top

    Shell resumes Iranian oil purchases


    Royal Dutch Shell has resumed purchases of Iranian crude, becoming the second major oil firm after Total to restart trade with Tehran after the lifting of sanctions, trading sources said and ship tracking data showed.

    Iran has been trying to claw back its market share since international sanctions were lifted in January and regaining a major buyer such as Shell will further aid its cause.

    Shell declined to comment.

    According to shipping data, Shell fixed Suezmax tanker Delta Hellas to bring 130,000 tonnes of Iranian crude from Kharg Island on July 8 to continental Europe.

    Trading sources said the cargo would unload in Rotterdam.

    Shell repaid its outstanding debt to Iran from pre-sanction times earlier this year.

    Besides Total, European purchases of Iranian crude have gone to refineries in Spain, Greece and Italy since the sanctions were lifted in January this year.

    Tehran's re-entry to the oil market has heightened tensions with arch-rival Saudi Arabia and attempts by OPEC to concoct a strategy to boost oil prices have been scuppered as a result.

    Iran has resisted Saudi Arabia's calls for output caps as Riyadh is itself aggressively expanding its buyer list ahead of an IPO for its state firm.

    A production freeze deal collapsed in April when Tehran skipped a key meeting in Qatar that included non-OPEC members. OPEC delegates also failed to agree on a plan during their June meeting.

    Major oil producers including Venezuela and Nigeria have been hit hard by a steep fall and protracted weakness in global oil prices.

    Iran's crude exports are now close to pre-sanctions levels of around 2.5 million barrels per day.

    http://www.reuters.com/article/us-iran-shell-idUSKCN0YU1LL
    Back to Top

    Petrobras puts two LNG terminals on sale


    Petrobras of Brazil on Tuesday said it began a bidding process to sell its liquefied natural gas terminals in Rio de Janeiro and Ceará, along with the thermoelectric power plants associated with these terminals.

    The company noted in its statement that no deals have been signed securing the conclusion of the transaction, and no deliberation by the executive board or the board of directors of Petrobras took place to date.

    The Pecém LNG import terminal has a daily sendout capacity of up to 7 million cubic meters of natural gas to the Guamaré-Pecém gas pipeline that mainly supplies the Ceará and Fortaleza thermal power plants.

    The second facility, the Guanabara Bay LNG import terminal in the state of Rio de Janeiro, has a sendout capability of 22.5 million cubic meters per day.

    In 2014, Excelerate Energy provided an FSRU, the 173,400 cubic meters Experience, upgrading the facility’s capacity. It provides natural gas to the Southeast gas pipeline network and primarily serves the thermal power plants in the region.

    http://www.lngworldnews.com/petrobras-puts-two-lng-terminals-on-sale/
    Back to Top

    LNG Ltd soars on takeover rumour



    Aspiring US gas exporter Liquefied Natural Gas Ltd has profited from another buoyant trading session with its shares now up 66 per cent this week with speculation of a possible takeover tilt rumoured in the market.

    The former market darling has suffered a disastrous 12 months with its market capitalisation slashed from nearly $2 billion a year ago to less than $300 million last week.

    The share price fall was attributed to the worsening global energy price outlook and delays in signing up customers for its $US2.2 billion ($3 billion) Magnolia LNG project in Louisiana.

    However, the combination of an 80 per cent surge in the price of oil in the last few months, better confidence around offtake agreements and increasing speculation it may be a takeover target has boosted sentiment.

    LNG Ltd shares rose by up to 45 per cent in intraday trade on Wednesday, its biggest gain in nearly three years, before retreating to close up 25 per cent to $1.02, handing the company a market value of $516 million.

    That followed a 13 per cent share price jump on Tuesday and 16 per cent bounce on Monday as investors surged back into the stock.

    "I think it's a clear takeover target on the basis it is construction ready and proven to have the lowest capital cost for development of a greenfield LNG site," said Martin Corolan, an executive director with Foster Stockbroking which acted as a lead manager in a $174 million equity raising for LNG Ltd last year.

    "The stock was heavily sold off on energy sentiment and our view is the risk/reward begins to look appealing again as it moves towards signing its final long-term supply contracts and achieving a final investment decision which we think could occur this calendar year."

    The company on Tuesday said it was unaware why its shares had run up sharply since last week.

    One source close to LNG Ltd said Woodside's call to put a cap on any future deals at about $US1 billion meant it could be an obvious suitor for the junior LNG hopeful as it gets close to securing supply deals and making a final investment decision on Magnolia.

    LNG Ltd is thought to be making good progress in its pitch to sign up customers and has opened talks with buyers in Asia, Latin America and Europe, according to the source.



    Read more: http://www.smh.com.au/business/lng-ltd-soars-on-takeover-rumour-20160608-gpefvh.html#ixzz4B0EtDE2s
    Follow us: @smh on Twitter | sydneymorningherald on Facebook

    Attached Files
    Back to Top

    US oil production in small rise on Alaska


                                                  Last Week   Week Before   Last Year

    Domestic Production '000........ 8,745             8,735             9,610

    Alaska up 18,000

    http://ir.eia.gov/wpsr/overview.pdf

    Attached Files
    Back to Top

    Summary of Weekly Petroleum Data for the Week Ending June 3, 2016


    U.S. crude oil refinery inputs averaged over 16.4 million barrels per day during the week ending June 3, 2016, 211,000 barrels per day more than the previous week’s average. Refineries operated at 90.9% of their operable capacity last week. Gasoline production increased last week, averaging over 10.1 million barrels per day. Distillate fuel production increased last week, averaging over 4.8 million barrels per day.

    U.S. crude oil imports averaged 7.7 million barrels per day last week, down by 134,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 9.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 815,000 barrels per day. Distillate fuel imports averaged 167,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.2 million barrels from the previous week. At 532.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 1.0 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.8 million barrels last week and are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.9 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 3.2 million barrels last week.

    Total products supplied over the last four-week period averaged over 20.3 million barrels per day, up by 3.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.6 million barrels per day, up by 2.6% from the same period last year. Distillate fuel product supplied averaged about 4.0 million barrels per day over the last four weeks, up by 0.4% from the same period last year. Jet fuel product supplied is up 0.3% compared to the same four-week period last year.

    Cushing down 1.3 mln bbls

    http://ir.eia.gov/wpsr/wpsrsummary.pdf

    Attached Files
    Back to Top

    Suncor Energy Slides After Announcing $2 Billion Equity Raise


     Suncor Energy Inc. slid the most in a week a day after the oil-sands producer announced it would sell about C$2.5 billion ($2 billion) in additional equity.

    Suncor said that it would sell 71.5 million shares at a price of C$35 apiece. The money will lower debt and help pay for the C$937 million acquisition it announced in April to increase its stake in the Syncrude oil-sands joint venture. The proceeds may also fund “opportunistic growth transactions," the company said in a statement.

    Given that Suncor is still planning to sell assets, the timing of the share sale may strike investors as “a bit odd," Tyler Reardon, an analyst at Peters & Co. in Calgary, wrote in a research note Wednesday. “The fact that the company is raising equity is not totally unexpected, but the timing and its commentary on the use of proceeds does come as a surprise."

    http://www.bloomberg.com/news/articles/2016-06-08/suncor-energy-slides-after-announcing-2-billion-equity-raise

    Attached Files
    Back to Top

    Cheap Canadian gas imports may prolong U.S. energy industry's rout


    U.S. utilities and merchants are embarking on their biggest buying spree for Canadian natural gas since the start of the U.S. shale boom, taking advantage of record low prices and raising concerns about the U.S. industry's deepening crisis.

    Traders have been scooping up more gas from Canada, the world's fifth largest producer, in recent months after prices at the AECO hub in Alberta sank to a big discount to the U.S. benchmark.

    With some analysts expecting the arbitrage to remain in place through the summer and traders having booked long-term pipeline deals, the shipments could last longer than previously expected, experts warn.

    The deals will feed growing consumption from power generators after a record number of coal plants retired last year. In addition, gas demand is rising as the United States exports more gas to Mexico via pipeline and ramps up exports of liquefied natural gas to the world, traders said.

    The scramble has also offered loss-making Canadian drillers a chance to continue pumping out product as domestic tanks continue to fill up and prices languish near record lows.

    But market experts worry the surprisingly strong imports could prolong the U.S. market's biggest rout in a generation, adding to the ballooning glut after a warm winter left Canadian and U.S. storage facilities at record highs.

    "We're still pulling too much supply out of the field," said Martin King, an analyst at Alberta energy advisory FirstEnergy Capital.

    Now analysts expect Canadian imports to the United States to rise this year for the first time since 2007 when growing output from U.S. shale fields like the Marcellus in Pennsylvania started to displace Canadian fuel.

    Some traders and producers have booked deals for as long as one year to ship product to the U.S. Midwest on TransCanada Corp's Mainline pipeline, said Keith Barnett, head of fundamental analysis at ARM Energy in Houston, a big U.S. gas marketer.

    The Mainline runs from Alberta to Quebec and connects with several pipelines capable of moving Canadian gas to the U.S. Midwest.

    The need to find homes for surplus Canadian gas became more urgent last month after wildfires knocked out half of the nation's oil sands production capacity, curbing demand for the fuel. Oil sands producers use large amounts of gas to produce power and steam to cook the oil sands to produce crude.

    Prices in Alberta, where two-thirds of Canada's gas is produced, fell to around 50 Canadian cents per thousand cubic feet, the lowest on record, in mid May.

    http://www.reuters.com/article/us-usa-natgas-canada-idUSKCN0YV09Q
    Back to Top

    Wildfire prompts more Canada oil sands production cuts


    Oil sands producers Canadian Natural Resources Limited and Cenovus Energy shut projects and evacuated workers at Pelican Lake facilities in northern Alberta as wildfires threatened western Canadian output for the second time in a five weeks.

    Cenovus shut operations and evacuated all 118 workers from its 23,000-barrel-per-day Pelican Lake project on Tuesday but said on Wednesday afternoon the fire had weakened and was not an imminent threat to facilities.

    The company said 44 essential staff would be back on site during the evening and that it eyed a potential production restart for Thursday if conditions remained safe.

    Canadian Natural said on Wednesday it shut in 800 barrels per day.

    "The wildfire is a safe distance from our major facilities at Pelican Lake," Canadian Natural spokeswoman Julie Woo said on Wednesday. "Canadian Natural has moved non-essential personnel from our northern camp to other camps within our Pelican Lake operations."

    Average production at Pelican Lake was 47,600 bpd, Woo said, citing first-quarter filings. Woo did not have an update late on Wednesday afternoon.

    The fire, roughly 75 hectares (185 acres) in size, and blowing away from the facility, is some 30 km (19 miles) from the community of Wabasca, fire official Travis Fairweather said.

    More than 30 personnel were fighting the blaze, backed by bulldozers and helicopters dropping flame retardant, Fairweather said. Forecasts called for a chance of rain for Wednesday, a provincial website said.

    "The fire is no longer considered out of control, and it probably won't grow anymore," Fairweather said on Wednesday afternoon.

    The Pelican Lake fire is about 160 km (100 miles) southwest of the massive wildfire still burning east of Fort McMurray, Alberta. Last month, that blaze forced 90,000 residents to flee the city and shut down more than 1 million barrels per day of oil sands output.

    Cenovus said there had been no damage reported to facilities or infrastructure. It said air quality was at acceptable levels.

    All Cenovus staffers were evacuated on Tuesday evening to a temporary center in Wabasca, while non-essential workers were sent home.

    Cenovus said essential workers remained on standby at Wabasca, and six workers returned on Wednesday morning to inspect the facilities from a safe location.

    Husky Energy said its operations in the area were unaffected.

    http://www.reuters.com/article/us-canada-wildfire-cenovus-energy-idUSKCN0YU2BN
    Back to Top

    Mancos Shale Now Estimated to Hold 66 Tcf -- Substantially Above 2003 Assessment


    The Mancos Shale in Colorado contains an estimated 66 Tcf of natural gas, sharply higher than a 2003 estimate of 1.6 Tcf, becoming the second-largest assessment of potential continuous gas resources ever conducted by the U.S. Geological Survey (USGS), officials said Wednesday.

    The shale play also contains an estimated 74 million bbl of oil and 45 million bbl of liquids, USGS officials said in the updated analysis of undiscovered, technically recoverable resources. USGS provides publicly available estimates of undiscovered technically recoverable oil and gas resources of onshore lands and offshore state waters. The Mancos assessment was undertaken as part of a nationwide project using standardized methodology and protocol.

    "We reassessed the Mancos Shale in the Piceance Basin as part of a broader effort to reassess priority onshore U.S. continuous oil and gas accumulations," said USGS scientist Sarah Hawkins, lead author. "In the last decade, new drilling in the Mancos Shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas."

    Since the previous USGS assessment 13 years ago, more than 2,000 wells have been drilled and completed in one or more intervals within the Mancos. In addition, the USGS Energy Resources Program drilled a research well in the southern Piceance Basin that provided "significant new geologic and geochemical data" that had been used to refine the 2003 assessment.

    The Mancos is more than 4,000-feet thick in the Piceance and contains intervals that act as the source rock for shale gas and oil, which means that the petroleum was generated in the formation. Some of the oil and gas migrated out of the source rock and into tight reservoirs within the Mancos and into conventional reservoirs above and below the formation. Oil and gas also remained in continuous shale gas and shale oil reservoirs within the Mancos.

    "Tight gas in the younger, shallower parts of the Mancos Shale is produced primarily from vertical and directional wells in which the reservoirs have been hydraulically fractured," USGS noted. Shale oil and gas in the older and deeper intervals of the Mancos are produced mostly from horizontal wells that are fractured.

    http://www.naturalgasintel.com/articles/106694-mancos-shale-now-estimated-to-hold-66-tcf----substantially-above-2003-assessment?utm_source=dlvr.it&utm_medium=twitter
    Back to Top

    Alternative Energy

    Solar Is the Fastest-Growing Energy, Says BP


    The world’s growing fleet of solar panels generated a third more electricity in 2015 than a year earlier, making power captured from the sun the world’s fastest growing source of energy, according to BP Plc.

    Solar generation grew 33 percent, with China overtaking the U.S. and Germany as world leader in 2015, BP said in its 65th annual statistical review into world energy published on Wednesday. The London-based oil company exited from solar in 2011 after 40 yearsin the business.

    “Sharp cost reductions have gone hand-in-hand with rapid growth in renewable energy. Solar power production has increased more than 60-fold in 10 years, doubling capacity every 20 months,” said Spencer Dale, BP chief economist, in a speech that also predicted continued falls in the costs of solar.

    The growth in renewables means the industry now accounts for 2.8 percent of global energy use, up from 0.8 percent a decade ago, said BP. In total, renewables added 213 terawatt-hours of wind, solar and biofuel capacity last year, which was about the same as the total increase in global power generation, said BP.

    Wind still remains the largest source of renewable power generation and grew by 17 percent in 2015, according to BP. Biofuel production grew 0.9 percent, below the 14 percent 10-year average, the oil major said. Coal saw its biggest drop in demand on record in 2015.

    Coupled with sluggish global demand for power, the growth rate of renewable power meant carbon emissions from the energy sector stalled last year, increasing just 0.1 percent.

    http://www.bloomberg.com/news/articles/2016-06-08/solar-is-the-fastest-growing-energy-says-top-fossil-fuel-major
    Back to Top

    Dong Energy market cap at $15B. Set for Copenhagen debut


    Danish energy company Dong Energy has completed its Initial Public Offering.

    Admission to trading in and official listing on Nasdaq Copenhagen of the shares of DONG Energy is expected to take place on June 9 2016.

    The company said that the final offer price was DKK 235 per offer share, valuing the company at DKK 98.2 billion. Converted to U.S. dollars, the final offer price was $36.01, and the market capitalization is $15.05 billion.

    Claus Hjort Frederiksen, Danish Minister of Finance, said that as a representative of the majority shareholder he was pleased to see that there has been a lot of interest in becoming part of the ownership of DONG Energy – both among retail and professional investors.

    He said: “It gives DONG Energy a solid foundation to retain and develop its position as one of the leading green energy companies in the world. Recognition goes to the management and employees, for all of their hard work in connection with the IPO.”

    Worth noting, while DONG Energy is looking to turn its business mostly towards renewables, the company also has producing oil and assets in Denmark, Norway and the UK. The oil and gas business is being managed for cash, which will be reinvested in renewable energy

    http://www.offshoreenergytoday.com/dong-energy-market-cap-at-15b-set-for-copenhagen-debut/
    Back to Top

    Agriculture

    Monsanto develops plan for GMO U.S. soy lacking EU import approval


    Monsanto Co is developing plans to prevent a new variety of biotech U.S. soybeans from entering European markets where they are not approved, leaders of two agricultural trade groups said, in a sign of the growing impact of regulatory delays on the world's largest seed maker.

    The company is working with representatives of the U.S. farm sector on a strategy to keep Xtend soybeans separate from varieties approved in all major export markets, said Jim Sutter, chief executive officer for the U.S. Soybean Export Council. The plan could be used if Europe does not clear imports before harvesting starts in August.

    Monsanto had no immediate comment on Tuesday.

    The company launched Xtend soybean seeds, engineered to resist the herbicides glyphosate and dicamba, before obtaining clearance for crop shipments to Europe because executives were expecting approval early this year.

    The product is designed to replace hugely popular Roundup Ready soybeans planted nationwide and its release could represent Monsanto's biggest technology launch ever, according to the company.

    But European import approval still has not come, prompting the world's top grain handlers to declare they will reject Xtend soybean deliveries to avoid trade disruptions.

    "They'll obviously have to channel it so it doesn't go to the European market," Sutter said of Monsanto. He declined to offer more details.

    Richard Wilkins, president of the American Soybean Association, also said Monsanto was working on a plan for Xtend soybeans if Europe's approval comes too late. The association, which represents farmers, has asked Monsanto to present the plan next month, he said.

    "We are particularly interested in preventing anything from disrupting international trade," Wilkins said.

    Last month, Monsanto told agricultural organizations in a letter that it hoped for European approval before summer and was not "yet in a place where harvest contingency plans are needed."

    Rivals, including Syngenta AG and Dow AgroSciences , in recent years have launched programs that specify where farmers must deliver biotech crops lacking approval in key markets or how they can use the harvests domestically.

    The United States is the biggest producer of GMO crops and has long been at the forefront of technology aiming to protect crops against insects or allow them to resist herbicides.

    That innovation is now seen as a risk to trade because it is hard to segregate crops containing traits lacking import approvals from the billions of identical-looking bushels exported every year.

    China roiled global grain trading two years ago after it rejected boatloads of U.S. corn containing a biotech Syngenta trait that had not been approved for import.

    Since then, the Swiss-based seed company has partnered with grain handler Gavilon, owned by Marubeni Corp, to oversee U.S. harvests of Duracade corn, another biotech variety that lacks China's approval.

    Associations representing grain handlers and processors, in a letter to Monsanto on May 7, asked the company's plans for Xtend soybeans if Europe does not approve imports before harvests.

    Delays in the review come as soybean and soymeal prices have surged amid crop woes in Argentina, which are expected to increase demand for U.S. soy shipped to Europe.

    One grain group, the National Grain and Feed Association, has told members of reports linking the timing of Europe's decision on Xtend soybean imports to the relicensing of glyphosate, sold by Monsanto and other companies.

    On Monday, European nations refused to back a limited extension for the use of glyphosate.

    http://www.reuters.com/article/monsanto-gmo-soybeans-idUSL1N18Z2HW

    Attached Files
    Back to Top

    Precious Metals

    After five lean years, gold miners gear up for growth


    For the first time in five years, Barrick Gold and other bullion miners are getting ready to expand, breaking from their monologue on cutting costs and debt because of tumbling gold prices.

    Backed by healthier balance sheets, a 17 percent rise in the price of gold since January to $1,244 an ounce and new investors, miners from Canada to Australia and South Africa are studying ways to raise production.

    At the world's biggest gold miner, growth was not a priority in recent years, said Rob Krcmarov, Barrick's vice president of exploration and growth, as the company sold assets to reduce its $14 billion debt by 40 percent.

    "Now some of our investors are starting to ask us: what is next?," Krcmarov said. Barrick created a "growth committee" in March to evaluate in-house projects, exploration opportunities and acquisitions.

    Early signs of activity include Kinross Gold's March decision to expand its Mauritanian gold mine. In May, Goldcorp paid C$520 million ($406.44 million) for a gold project in Canada's Arctic.

    "What the sector will see is smaller, bolt-on type projects, brownfield expansions of existing mines. That's going to account for the bulk of growth in new investment in the space," said BB&T Capital Markets analyst Garrett Nelson.

    Over the past half-decade, many mining companies have pared debt and overhead to build cash flow, that can be used to boost output, along with rising prices.

    Such balance sheet improvements have attracted investors who once again see promise in gold stocks, including billionaire George Soros.

    Shares in gold miners have soared this year with the Philadelphia Gold and Silver Index up 98 percent versus a paltry 3.5 percent increase in the S&P 500 Index.

    Still, with lingering memories of the last bull run's overpriced mine builds and acquisitions that stretched balance sheets, producers are keeping watch on volatile gold prices which peaked at $1,920 an ounce in September 2011.

    "At this stage, it's largely talk and discussion and trying to get people to recognize that they do have these options in the portfolio," said Stephen Land, who manages Franklin Templeton's Franklin Gold and Precious Metals Fund.

    Barrick and others such as Australia's Evolution Mining say growth means more than just adding production - ounces must be profitable at a range of prices.

    "We want to be a company that prospers through the cycle and not just when the gold price is going up," said Evolution Executive Chairman Jake Klein.

    Gold prices began dropping sharply from late 2012 as concerns about global inflation fell, reducing bullion's value as a hedge against rising prices.

    Newcrest has its hands full with expansion plans at existing assets, and while the company is "not blind" to larger scale M&A opportunities, it is "not a major focus" right now, said CEO Sandeep Biswas.

    By focusing on early-stage projects, Canada's Agnico Eagle Mines, which doubled 2015 exploration spending from the previous year, can reap more profit from its investments, CEO Sean Boyd said.

    Still, securing new supplies is critical: after seven years of gains, gold production will fall for the next three years, Thomson Reuters GFMS data shows.

    Some miners will be tempted to make acquisitions.

    Advanced projects and newly-built mines that can supply "instant ounces" are likely to be popular targets, said Cassels Brock & Blackwell mining lawyer Paul Stein.

    Evolution and South Africa's Sibanye Gold have said they might be looking to buy.

    http://www.reuters.com/article/us-gold-mining-growth-idUSKCN0YU1C5

    Attached Files
    Back to Top

    Base Metals

    Electric vehicles to power cobalt revival


    Cobalt prices may be on the threshold of a major revival due to flourishing demand for the mineral, a key component of lithium-ion batteries used in electric cars.

    Prices for cobalt metal are expected to rise 45 percent to above $16 a lb by 2020 from $11 now as stricter emissions controls boost demand for electric vehicles and push the market into deficit from this year, analysts said.

    Consultants CRU Group say electric car and plug-in hybrid vehicle sales could top 17 million in 2030, assuming an average growth rate of 25 percent a year from 2016 to 2030.

    That compares with sales of 540,000 electric cars last year and 750,000 this year based on year-to-date sales.

    "Demand for cobalt in non-metallurgical (chemical) uses such as in batteries will grow at more than 7.5 percent a year to 2020," said CRU senior consultant Edward Spencer.

    "Chemical demand growth will be buoyed by the electric vehicle sector growing out of its infancy and the lithium-ion sector for other applications also growing robustly."

    Lithium-ion batteries are also used in mobile phones, laptops, digital cameras, cordless drills and hedge trimmers.

    Amounts of cobalt used in these batteries vary, but larger quantities typically mean enhanced performance.

    Lithium nickel manganese cobalt oxide and lithium nickel cobalt aluminum oxide are two compounds used in batteries for electric vehicles.

    China's electric car market is expected to grow at a faster pace than in the rest of the world. It is already the world's largest consumer of cobalt, accounting for nearly 40 percent of global demand estimated at around 90,000 tonnes this year.

    Roughly 60 percent of the world's cobalt comes from the Democratic Republic of Congo (DRC).

    China has few cobalt resources and that is why the State Reserves Bureau (SRB) bought 2,200 tonnes of the metal late last year and is in the process of acquiring another 2,800 tonnes, traders say. The SRB declined to comment.

    China's scramble for cobalt resources over coming years can be seen in a deal announced last month where Freeport-McMoRan Inc agreed to sell its majority stake in a unit controlling the Tenke copper project in the DRC to China Molybdenum for $2.65 billion.

    "Tenke is one of biggest cobalt ore bodies on the planet, we think the real reason behind the purchase was security of supply for China," said Investec analyst Jeremy Wrathall.

    Also highlighting cobalt's potential over coming years is the U.S. Defense Logistics Agency starting to stockpile cobalt compounds, seen as "strategic and critical".

    CRU's Spencer sees global cobalt demand at approximately 120,000 tonnes in 2020, whereas Macquarie analysts see it at 107,000 tonnes. Both, however, forecast similar deficits in excess of 7,000 tonnes at the end of 2020.

    "Cobalt's demand growth profile remains one of the best among industrial metals peers. Its exposure to rechargeable batteries continues to play a crucial role," Macquarie analysts said in a note.

    Rising supplies from ramp ups at mines such as Ambatovy and a return to full production at Katanga are expected to limit the deficit between now and 2020, but much depends on nickel prices.

    http://www.reuters.com/article/metals-cobalt-demand-idUSL8N1902I9

    Attached Files
    Back to Top

    Steel, Iron Ore and Coal

    Hebei large miners adjust up washed coking coal prices


    Large miners in southern and northern Hebei province have recently increased prices of coking coal by 20-50 yuan/t from June 1, which have been accepted by most customers, sources said.

    Kailuan Group adjusted up prices by 20 yuan/t for local end users and 50 yuan/t for key customers, with a discount of 10-20 yuan/t for major customers; Jizhong Energy raised price of primary coal and fat coal by 50 yuan/t, and that of lean coal by 30 yuan/t.

    As of June 7, the ex-washplant price of Tangshan fat coking coal and Handan primary coking coal stood at 720 yuan/t and 690 yuan/t with VAT, respectively, both up 30 yuan/t on week.

    One Tangshan-based steel producer said the price hike of fat coal was notified by Kailuan Group orally so far, adding that current price of this material was 800 yuan/t with VAT, on delivered basis.

    http://en.sxcoal.com/0/147487/DataShow.html
    Back to Top

    China on track to import 1 billion tonnes of iron ore this year


    On Wednesday the Northern China benchmark iron ore price held onto recent gains to trade at $52.10 per dry metric tonne according to data supplied by The Steel Index after Chinese imports of the steelmaking raw material continued to gather pace.

    The price of iron ore is down sharply since trading within shouting distance of the $70 mark in mid-April but is back in bull territory for 2016 with a 22% rise since the beginning of the year and a 40% rebound since hitting near-decade lows in December.

    Customs data released today showed China imported 86.75 million tonnes of iron ore in May, the fourth highest monthly figure on record and the biggest volume this year. May cargoes constituted a 22.4% rise from a year earlier.

    Australia and Brazil are predicted to increase their share of the seaborne market to 90% within five years from 77% at the moment

    Shipments climbed 9.1% to 412.15 million tonnes in the first five months of the year and at the current rate could reach the 1 billion tonnes per year mark in 2016 for the first time. Year to date iron ore is averaging $51.60 a tonne.

    The country's iron ore imports has coincided with stockpiling, however. Inventories at the country's ports now stand at just over 100 million tonnes, up from 75 million tonnes during the summer months last year.

    A recent report by Australia's Dept of Industry showed the country and to a lesser degree Brazil, are wiping the floor with producers in other countries. The two nations are predicted to increase their share of the seaborne market to 90% within five years from 77% at the moment. South Africa, Ukraine and Iran make up the top fiver iron ore suppliers to China.

    Australian government analysts estimates global trade in iron ore to inch up by only 4 million tonnes from 2015 levels to reach 1.48 billion tonnes in 2016, the lowest rate of growth in more than a decade. By 2021 world trade in iron ore is forecast to jump to just under 1.6 billion tonnes.

    Iron ore dependence on China won't diminish even as imports begin to fall from record levels next year according to the report. China last year consumed two-thirds of the seaborne iron ore supply with imports reaching a record 968 million tonnes according to dept calculations.

    http://www.mining.com/china-track-import-1-billion-tonnes-iron-ore-year/
    Back to Top

    BHP sets sights on a new iron-mine to replace ageing one


    The new mine will be designed to replace almost a third of BHP's current production from the Yandi mine. 

    BHP Billiton is studying an option to develop a massive new iron-ore deposit in Australia to replace lost tonnes as operations age and reserves decline, according to the company and documents filed with environmental regulators. 

    The deposit is called South Flank and lies 10 km south of BHP's existing Mining Area C operation and would create an expanse 26-km long and 2-km wide. 

    "We are currently studying a number of options to sustain our supply chain capacity for the future, and the South Flank deposit is one option under consideration," a BHP spokeswoman said. She said it was too early to place a cost on any new iron-ore mine, which would be designed to help replace almost a third of BHP's current production, coming from its Yandi mine. 

    "At the current rate of production, the resource supporting Yandi's 80-million-tonnes-a-year operation will need to be sustained from other ore sources at some stage over the next five to ten years," she said. 

    BHP is the second-biggest iron-ore producer in Australia behind Rio Tinto, with each company using its own rail lines and port facilities to ship hundreds of millions of tonnes of ore a year, mostly to China. Rio Tinto is expected to decide this year to whether to develop its own Silvergrass iron-ore deposit in Australia, which analysts estimate could cost $1-billion. 

    Iron-ore was largely absent from a growth strategy outlined by BHP CEO Andrew Mackenzie last month that focused on ways to increase the company's footprint in copper and petroleum, despite iron-ore being its greatest source of revenue. BHP has invested heavily in iron-ore, more than doubling its output since 2010. 

    The company has submitted an environmental document to Western Australia state's Environmental Protection Authority to determine the level of assessment required. The document is designed to help the authority decide on how much scrutiny to apply to the project, with BHP recommending a full public environmental review be conducted. 

    Any plans remained preliminary and don't change BHP's production guidance of 260 million tonnes this year and 290 million tonnes over time, according to the spokeswoman.

    http://www.miningweekly.com/article/bhp-sets-sights-on-a-new-iron-mine-to-replace-ageing-one-2016-06-09
    Back to Top

    Japan may seek WTO help to resolve India steel tariff dispute


    Japan said it may ask the World Trade Organization (WTO) to help resolve a dispute related to India's "safeguard" tariffs on the import of hot-rolled steel.

    India has extended its safeguard import taxes on some steel products until March 2018, in a bid to stop cheap overseas purchases from flooding its market and bolster the domestic steel sector.

    Japan will make repeated requests to the Indian competent authority to ensure the consistency of their measures with the WTO agreements, the Japanese Ministry of Economy, Trade and Industry said in a report.

    http://www.reuters.com/article/india-steel-japan-idUSL4N1903QA
    Back to Top

    China key steel mills profit jumps to 7.2 bln yuan in Aprir, CISA


    China’s 93 large and medium-sized steel firms reached profit of 7.214($1.098) billion yuan in April, thanks to the rapid increase in prices of steel products, said the China Iron and Steel Association (CISA).

    http://en.sxcoal.com/0/147483/DataShow.html
    Back to Top
    Commodity Intelligence LLP is Authorised and Regulated by the Financial Conduct Authority

    The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only.

    Officers and employees, including persons involved in the preparation or issuance of this material may from time to time have "long" or "short" positions in the securities of companies mentioned herein. No part of this material may be redistributed without the prior written consent of Commodity Intelligence LLP.