Mark Latham Commodity Equity Intelligence Service

Friday 23rd June 2017
Background Stories on www.commodityintelligence.com

News and Views:

Attached Files
    Macro
    Oil and Gas
    Alternative Energy
    Uranium
    Base Metals
    Steel, Iron Ore and Coal

    Macro

    Arab states send Qatar 13 demands to end crisis, official says



    Four Arab states boycotting Qatar over alleged support for terrorism have sent Doha a list of 13 demands including closing Al Jazeera television and reducing ties to their regional adversary Iran, an official of one of the four countries said.

    The list, compiled by Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain as the price for ending the worst Gulf Arab crisis in years, also demands the closing of a Turkish military base in Qatar, the official told Reuters.

    Qatar must also announce it is severing ties with terrorist, ideological and sectarian organizations including the Muslim Brotherhood, Islamic State, al Qaeda, Hezbollah, and Jabhat Fateh al Sham, formerly al Qaeda's branch in Syria, he said, and surrender all designated terrorists on its territory,

    The countries give Doha 10 days to comply, failing which the list becomes 'void', the official said without elaborating. The demands were handed to Qatar by Kuwait, which is mediating in the dispute, said the official, who spoke on condition of anonymity.

    The four Arab countries accuse Qatar of funding terrorism, fomenting regional instability and cozying up to revolutionary theocracy Iran. Qatar has denied the accusations.

    U.S. President Donald Trump has taken a tough stance on Qatar, accusing it of being a "high level" sponsor of terrorism, but he has also offered help to the parties in the dispute to resolve their differences.

    Turkey has backed Qatar during the three-week-old crisis. It sent its first ship carrying food aid to Qatar and dispatched a small contingent of soldiers and armored vehicles there on Thursday, while President Tayyip Erdogan spoke with Saudi Arabia's leaders on calming tension in the region.

    http://www.reuters.com/article/us-gulf-qatar-demands-idUSKBN19E0BB
    Back to Top

    China needs patience to fight costly war against soil pollution: government



    China must show patience in its "long war" against widespread soil pollution, the environment ministry said this week, with the country facing a clean-up bill that could reach as high as 1 trillion yuan ($146.39 billion).

    Beijing has promised to draw up new policies and set up a dedicated fund to deal with large stretches of polluted soil caused by overmining, industrial wastewater runoffs or excessive pesticide and fertiliser use.

    But it said in an action plan published last year that it would aim to "stabilize" worsening soil pollution by the end of this decade and only start to make improvements by 2030.

    Speaking at a press briefing on Wednesday, Qiu Qiwen, head of the soil environment department of the Ministry of Environmental Protection (MEP), said the cost of cleaning up one mu (0.066 hectares) of polluted farmland in China could reach as much as 20,000 yuan ($2,928.86).

    According to the last nationwide survey published in 2013, about 50 million mu (3.33 million hectares) of China's farmland - an area the size of Belgium - was too polluted to grow crops. That would put total clean-up costs at 1 trillion yuan.

    "Soil pollution does not form overnight and the problem cannot be solved overnight," said Qiu, adding that China "must have patience to fight the long war ahead".

    Analysts say China's soil clean-up will provide lucrative business opportunities for a growing number of specialist environmental firms, but it is still unclear who will foot the bill, especially in the countryside.

    Qiu said Beijing has already allocated a budget of 14.6 billion yuan to cover nationwide soil remediation projects from last year until the end of the first half of 2017.

    One firm already benefiting from that fund is Beijing Geoenviron Engineering & Technology, which said last month that a 121.9 million yuan project in southwest China to remediate soil contaminated by heavy metals would be financed by the government.

    "Treating and recovering polluted soil is very difficult and costly, and requires a long cycle," Qiu said.

    He said China would publish the results of its latest survey on soil pollution after 2020. It will also identify polluted farmland and assess its impact on the quality of agricultural products by the end of next year.

    Some of the measures being considered to clean up China's soil include rotating crops and turning farmland into forest, Qiu said.

    http://www.reuters.com/article/china-environment-soil-idUSL3N1JI36E
    Attached Files
    Back to Top

    China to cut thermal power surcharges, signals higher on-grid prices – document



    China’s state planner will reduce surcharges paid by coal-fired power producers, paving the way for the first increases in wholesale power prices since 2011, according to a document sent to regional officials and power producers and seen by Reuters.

    The change will take effect from July 1, said the document sent by the National Development and Reform Commission (NDRC), and will help utilities manage rising coal prices.

    “Power generators have been complaining about losses since last year as coal prices increase, so a tariff decrease is much expected,” said Li Rong, power analyst with consultancy SIA Energy.

    Thermal power companies pay surcharges to provincial governments to cover environmental protection and other programs. According to the document, local authorites, which onsell the power to the national grid, will be able to raise power prices, offsetting the lower surcharge revenues.

    China last raised on-grid thermal power prices in 2011. Tariffs have since fallen due to years of weakening coal prices, which began to turn around in April last year.

    In Ningxia, a region suffering from surging coal prices and a glut of overcapacity, the government plans to raise prices by about 0.25 Chinese cents per kilowatt hour (kWh) from the current regional benchmark rate of 25.95 cents per kWh, equivalent to 1 percent hike, an official with the regional government said.

    Top power groups have been lobbying the Ningxia government to curb soaring coal prices.

    The NDRC did not immediately respond to a faxed request for comment.

    The reduction of one surcharge by 25 percent and the elimination of another comes as power companies report losses as coal prices hit record highs.

    Thermal coal futures prices rose more than 40 percent this year to a record high around 580 yuan ($84.90) per tonne on June 20.

    http://www.hellenicshippingnews.com/china-to-cut-thermal-power-surcharges-signals-higher-on-grid-prices-document/
    Attached Files
    Back to Top

    Oil and Gas

    Oil market flashes warning about stock levels in 2018


    Oil traders have become increasingly doubtful that OPEC will manage to cut crude stocks down to the five-year average in 2018 and keep them there.

    Calendar spreads for Brent futures throughout the rest of 2017 and 2018 have weakened significantly since OPEC agreed to roll over its production allocations at the end of May.

    Calendar spreads (price differences between futures contracts for delivery in different months) are closely linked to the expected level of oil inventories.

    Physical traders and refiners use spreads to hedge oil stored at tank farms and refineries as well as onboard ships in transit or acting as floating storage.

    But spreads can also be used by traders and specialist hedge funds to speculate on the level of global oil stocks in future.

    High and/or rising inventories are normally associated with a contango structure, where the price for oil delivered in future is higher than for immediate delivery.

    Low and/or declining global inventories are normally associated with a backwardation, where the price for future deliveries is below the spot price.

    The theoretical relationship between stocks and spreads was formulated by economist Holbrook Working in the 1930s in relation to U.S. grain futures.

    But the same relationship has been visible in oil, where the shift in Brent spreads between contango and backwardation has mirrored the build up and draw down in inventories since the 1990s.

    Brent spreads have therefore become one of the favourite ways for speculative traders to express a view on the outlook for oil production, consumption and stocks.

    By June 21, December 2017 futures were trading at a discount of $2.69, a shift in the spread of more than $3.50 per barrel in less than a month .

    PLENTIFUL STOCKS

    Calendar spreads are not an infallible guide to future stock levels especially beyond the next few months. Spread traders are often proved wrong.

    But the emergence of a large contango implies many hedgers and speculators now expect stocks to remain higher than before.

    OPEC, led by Saudi Arabia, and its non-OPEC allies, led by Russia, have pledged to do "whatever it takes" to bring OECD inventories down to the five-year average.

    But many analysts and traders are sceptical the current level of cuts will be enough to bring stocks down to the target this year or prevent them rising again next year.

    The U.S. Energy Information Administration (EIA) forecasts global inventories will fall by an average of 0.2 million barrels per day in 2017 before increasing by an average of 0.1 million bpd in 2018.

    EIA forecasts OECD commercial stocks will still stand at 2,989 million barrels at the end of 2017, almost 230 million barrels higher than the year-end average for 2012-2016.

    The agency also predicts OECD stocks will rise to 3,020 million barrels at the end of 2018, which would be almost 260 million barrels over the 2012-2016 average.

    The forecasts assume OPEC's output agreement is extended beyond March 2018 but compliance deteriorates ("Short-Term Energy Outlook", EIA, June 2017).

    If these forecasts prove correct, OPEC will only have made limited progress towards its goal of rebalancing the market even by the end of 2018.

    STORAGE AND SHALE

    The recent drop in oil prices has been concentrated in near-term futures contracts.

    Brent for delivery in October 2017 has fallen by $9.50 since May 23, while Brent for delivery in December 2018 is down by only $5.50 per barrel.

    Sharp falls in the cost of crude for delivery in the near future provide an enhanced incentive to buy and store excess oil, helping the market carry a higher level of inventories than anticipated before.

    Near-term price declines also send a strong, urgent signal to U.S. shale producers to curb their drilling to avert an even bigger build up of inventories in future.

    https://mail.google.com/mail/u/1/#inbox/15cd0b6611ca45e5?compose=15cd36a4e02acecd
    Back to Top

    This is the real reason we’re ‘drowning in oil,’ says Ed Yardeni



    Oil experts tend to blame growing crude production from countries that aren’t bound by the OPEC-led production cut agreement for the ongoing glut in global supplies, but that isn’t the whole story.

    Oil producers in the Organization of the Petroleum Exporting Countries continue to “put a lid on their output in an effort to prop up prices,” but the price for a barrel of Brent crude LCOQ7, +0.69%  was just below $45 in Wednesday dealings— “comfortably in the $40-$50 price range that I have been expecting for this year,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in blog post Wednesday.

    Brent crude, as well as West Texas Intermediate crude CLQ7, +0.52% has fallen by more than 21% year to date.

    Yardeni titled his blog post, “Drowning in Oil” — suggesting that advances in technology have contributed to higher production rates in the U.S. as demand world-wide may increasingly suffer from the use of alternative energy sources like solar.

    A report from International Energy Agency released in mid-June showed that global oil supply rose by 585,000 barrels per day in May to 96.69 million barrels a day. That was 1.25 million barrels a day above a year earlier — the highest annual increase since February 2016, the IEA said.

    Non-OPEC output, particularly in the U.S., dominated the rise, it said.

    In his blog, Yardeni pointed out that despite a plunge in prices, U.S. crude production fell “just” 12% from the week of June 5, 2015, through the week of July 1, 2016, with weekly output better in Texas and North Dakota than the rest of the country.

    Since then, it has climbed 10% to 9.3 million barrels a day with oil production, instead, led by the rest of the country, excluding Texas and North Dakota.

    “Could it be that frackers figured out how to lower their costs in two states where they’ve been most active, and taken their innovations to other states?” Yardeni asked. “Maybe.”

    “The frackers are using every frick in their book to reduce the cost of pumping more crude oil,” he said. “Rather than propping up the price, maybe OPEC should sell as much of their oil as they can at lowest prices to slow down the pace of technological innovation that may eventually put them out of business.”

    Meanwhile, major oil producers with large crude reserves such as Saudi Arabia, Russia and Iran, should be “awfully worried that they are sitting on a commodity” that may be much less needed in the figure, said Yardeni.

    “As long as the sun will come out tomorrow (as little orphan Annie predicted), solar energy is likely to get increasingly cheaper and fuel a growing fleet of electric passenger cars,” he said.

    http://www.marketwatch.com/story/this-is-the-real-reason-were-drowning-in-oil-says-ed-yardeni-2017-06-21
    Back to Top

    Russia's Rosneft plans to pay half of net profit in dividends from 2017



    Russia's largest oil producer Rosneft, which is state-controlled, plans to pay 50 percent of its net profit in dividends starting from 2017, and the plan will be presented to the government soon, Rosneft CEO Igor Sechin said on Thursday.

    Addressing a shareholders' meeting, Sechin said the dividend policy was consistent with the company's new strategy, to be worked out by the end of this year and called "Rosneft-2022".

    Within this strategy, Rosneft plans organic oil production growth by 20-30 million tonnes in the next five years thanks to new technologies, he said.

    Rosneft sees an average world oil price of $40 per barrel in 2018, Sechin said. Rosneft also plans to create a petrochemical division of its own and to unbundle its retail business.

    http://www.reuters.com/article/us-russia-rosneft-strategy-idUSKBN19D18M
    Back to Top

    China May methanol imports down 29.6pct on year



    China imported 653,000 tonnes of methanol in May, falling 29.6% year on year but up 17.9% month on month, showed official data.

    Total methanol imports slid 4.8% from the year prior to 3.2 million tonnes in the first five months this year.

    That was equivalent to 36% of last year's total methanol imports, showed the data.

    http://www.sxcoal.com/news/4557654/info/en
    Back to Top

    Fuel Oil Margins Rise To 5-Year High, Potential Boon For Simple Refiners



    Fuel oil profit margins have surged to their highest in more than five years on lower supplies and rising demand from electric power generators, which may push some refiners to increase their runs.

    Fuel oil, the residue left over after initial crude refining, has become scarce in Asia as refiners make their plants more complex by upgrading their plants to change the fuel into gasoline and diesel. However, analysts caution that new supply should begin flowing to the region from Europe and South America, eventually driving margins back towards their typical levels.

    The spread between the 180-centistoke fuel oil swap and Dubai crude for July was at a premium of 27 cents a barrel on Wednesday, the first time the residual fuel has been at a premium to Dubai since January 2012. The margin has averaged a discount of $3.09 in 2017 and averaged minus $5.37 last year.

    The higher margins are bolstering the values for regional crude oil grades that yield a large volume of fuel oil when refined, particularly at less complex plants, said three traders in that market.

    "The elevated fuel oil cracks could prompt some simple refiners to increase run rates over the near term but the extent of this could be limited in light of relatively lower gains in light and middle distillate cracks," said Sri Paravaikkarasu, the Head of East of Suez Oil at energy consultancy FGE.

    While fuel oil margins will remain elevated, they should ease in the coming months.

    FGE's Paravaikkarasu pointed to rising exports from Latin America and the former Soviet Union in the fourth quarter as refiners there increase run rates and utilities switch away from burning fuel oil to natural gas.

    Fuel oil is primarily used to power large ships and for electric power generation. Utilities' consumption of the fuel tends to peak in the summer to meet increased cooling demand.

    "We could potentially see some correction in fuel oil crack values once peak summer demand eases," said Nevyn Nah, oil products analyst at Energy Aspects.

    Fuel oil supplies this year have declined after the members of the Organization of the Petroleum Exporting Countries focused their crude cuts on grades that yield the most fuel oil. Investments into refinery upgrades in places like India and Russia also cut supply.

    Over the first week of June, onshore fuel oil stocks <STKRS-SIN> in Singapore, the world's biggest fuel oil trading hub, sank to their lowest in more than 2-1/2 years while inventories in northwest Europe <STK-FO-ARA> fell their lowest since October.

    Refinery outages in Venezuela, a key fuel oil producer have also helped constrain supplies.

    Demand for the fuel has also been supportive. Fuel oil sales to power ships in Singapore, the world's biggest ship fuel port, rose to an all-time high in January, while sales from February to March set monthly records.

    http://www.rigzone.com/news/oil_gas/a/150693/Fuel_Oil_Margins_Rise_To_5Year_High_Potential_Boon_For_Simple_Refiners?utm_source=GLOBAL_ENG&utm_medium=SM_TW&utm_campaign=FANS
    Back to Top

    China improves urban gas pricing.

    China will improve the pricing mechanisms for urban gas distribution, effectively lowering the price that companies charge for delivering gas to users in some cities, the country's top economic planner said Thursday.

    China will link the price of independent gas distribution to the costs born by companies, while allowing them enough room to turn a profit, according to a guideline by the National Development and Reform Commission (NDRC).

    The permitted total return on investments after tax for gas distribution firms should not exceed seven percent, a standard defined after taking into account both the required return of gas companies and the need for lower gas prices for city residents and small firms, NDRC said.

    Seven percent has been set as the limit nationwide, however, local authorities should also take into consideration the different degrees of development of the local natural gas market when setting their own maximum return requirement.

    The new pricing mechanism should encourage gas companies to lower costs and improve efficiency, NDRC said.
    Back to Top

    Petrobras revives plan for IPO of fuel distribution unit



    Petróleo Brasileiro SA is reviving an initial public offering of fuel distribution unit BR Distribuidora to cut the Brazilian state-controlled oil company's debt and investment in low-return activities, Chief Executive Officer Pedro Parente said on Thursday.

    Pedro Parente said at an event in São Paulo that a proposal would be delivered for board approval as soon as next month. While terms of the deal remain under analysis, he said an initial public offering would create "more value" for Petrobras, as the oil firm is known.

    In a statement, Petrobras said the unit IPO will consist of existing shares, in a mechanism known as a secondary offer. Parente did not specify terms or a timetable for the IPO, but if the board approves the plan in July, it could be priced as early as October, based on standard IPO calendars in Brazil.

    "We see market conditions that are extremely favorable, with investors willing to pay high valuations to encourage good companies to list their shares," Parente said.

    Petrobras is increasingly relying on cost reductions, asset sales, spinoffs and capital-spending cuts to trim debt of about $100 billion and turn the page on a massive corruption scandal.

    Rio de Janeiro-based Petrobras has gone back and forth on plans to spin off or list BR Distribuidora over the past two years, backing off in part due to legal and operational challenges and investor skepticism.

    BR Distribuidora, which controls Brazil's largest gasoline, ethanol and diesel-station network, was valued at around $10 billion by UBS Securities analysts two years ago.

    Earlier this year, Petrobras unveiled a two-year, $21 billion asset sale and partnership program.

    During the event, Parente said improving operational profitability in the face of low oil prices highlights how recent cost-cutting efforts have bolstered the finances of the state behemoth.

    http://www.reuters.com/article/us-petrobras-divestiture-ipo-idUSKBN19D2SS
    Attached Files
    Back to Top

    Gulfport Energy Corporation Provides Update on Recent SCOOP Well Results



    Gulfport Energy Corporation today provided an update on its recent SCOOP well results. Key highlights include:

    The Vinson 2-22X27H produced at an average 30-day peak production rate of 15.7 MMcfe per day.
    The Vinson 3R-22X27H produced at an average 30-day peak production rate of 18.7 MMcfe per day.

    As previously announced, during the second quarter of 2017 Gulfport turned-to-sales two gross (1.2 net) wells, the Vinson 2-22X27H and Vinson 3R-22X27H, located in the wet gas window in southern Grady County. Following 30 days of production, the Vinson 2-22X27H has cumulatively produced 418.4 MMcf of natural gas and 1,382 barrels of oil and the Vinson 3R-22X27H has cumulatively produced 498.8 MMcf of natural gas and 1,552 barrels of oil. Based upon the composition analysis, the gas being produced from the Vinson pad is 1,118 BTU gas and yielding 35.7 barrels of NGLs per MMcf of natural gas and results in a natural gas shrink of 11%. On a three-stream basis, the Vinson 2-22X27H produced at an average 30-day peak rate of 15.7 MMcfe per day, which is comprised of approximately 79% natural gas, 19% natural gas liquids and 2% oil. The Vinson 3R-22X27H produced at an average 30-day peak rate of 18.7 MMcfe per day, which is comprised of approximately 79% natural gas, 19% natural gas liquids and 2% oil.

    https://globenewswire.com/news-release/2017/06/21/1027156/0/en/Gulfport-Energy-Corporation-Provides-Update-on-Recent-SCOOP-Well-Results.html
    Back to Top

    Sailing stone: E&P's in the US lack capital discipline

    http://sailingstonecapital.com/pdf/Life_in_the_Echo_Chamber.pdf

    It is also evident when analyzing drilling rates of returns at the company level. In fact, using 2016 reserve reports and the SEC standard measure price deck of $2.50 gas and $45 oil, we could identify only a few U.S. E&P companies that generated an unhedged economic return on their 2016 drilling program,and we have no reason to believe that the returns in the private market were meaningfully better.Second, the willingness of companies to drill irrespective of returns, combined with the willingness of the public and private capital markets to continue to fund these uneconomic activities, is putting pressure on commodity prices and commodity price expectations. Despite a nine-month extension of OPEC’s production curtailments, and a high level of compliance to-date, spot oil prices have fallen more than 15% so far this year and are back down to levels seen just prior to the November 2016 OPEC meeting, when the first rounds of cuts were announced. 

    For the last few years, we have been confounded by the market’s willingness to ignore the value destructive nature of the E&P industry (defined as spending money to earn sub-economic returns).More recently, we have become concerned that in the pursuit of growth, companies are eating through precious inventory at a time when the market is looking for supply restraint. Instead, most U.S. shale producers have promised to “stay the course” until oil prices are sustainably below $40, even thought hey failed to generate a return when oil prices were higher and service costs lower. Now, with activity levels rising, oil prices falling, and share prices falling even more, it appears that the message in the feedback loop has changed. “Drill, baby, drill” is no longer echoing off the walls. Instead, it sounds like Mr. Market is saying “Stop”. Stop drilling, stop allocating capital based on fictitious well-level economics,stop growing production.The question is whether or not anyone is listening.
    Back to Top

    Drilling Costs Rise in Marcellus/Utica; Workforce Becomes Issue



    The petrochemical conference in Pittsburgh earlier this week wasn’t the only event in town. The DUG (Developing Unconventional Gas) East conference and exposition took place at the David L. Lawrence Convention Center, several blocks from the petchem event.

    The reporting from one session in particular caught our attention. A panel of drillers and service companies (upstream focus) talked about the prices that service companies (that is, oilfield service companies, like Halliburton and Baker Hughes) charge has gone up 10-15% over rates from last year, when service companies had to slash prices.

    While that’s good for service companies, but not so good for drillers and may, yet again, lead to a decline in active rig counts. The panel also discussed the increasingly critical shortage of workers in the Marcellus/Utica industry.

    http://marcellusdrilling.com/2017/06/drilling-costs-rise-in-marcellusutica-workforce-becomes-issue/
    Back to Top

    Oil to keep flowing in Dakota line while legal battle continues



    Oil will continue to flow through the Dakota Access Pipeline through the summer while authorities conduct additional review of the environmental impact, after a judge on Wednesday ordered more hearings in coming months.

    Last week, U.S. District Court Judge James Boasberg in Washington ruled in favor of Standing Rock Sioux and Cheyenne River Sioux tribes, who said more environmental analysis of the Dakota Access line should have been carried out. The tribes had said the 1,170-mile (1,880 km) line violates their hunting, fishing and environmental rights.

    On Wednesday, Boasberg set out a schedule of hearings that will decide what will happen to the line while additional review is completed.

    A lawyer for the U.S. Army Corps of Engineers, which is responsible for environmental review, would not estimate when asked by Boasberg how long additional review would take. The judge could still order the line to be shut at a later date following a series of hearings scheduled through the summer.

    "Our view has been that the pipeline should be shut down," said Jan Hasselmann, attorney for the tribes.

    Energy Transfer Partners LP (ETP.N) built the $3.8 billion pipeline to move crude from the Northern Plains to the Midwest and then on to the Gulf of Mexico. The line runs from western North Dakota into Patoka, Illinois, where it hooks up with another line to refiners in the Gulf of Mexico.

    ETP said on Wednesday it was "pleased with the judge's decision" for pipeline operations to continue while the process "unfolds."

    The Native American tribes have been protesting the line's construction for more than a year. The line finally went into service in June.

    http://www.reuters.com/article/us-north-dakota-pipeline-idUSKBN19C2ZO
    Back to Top

    Golar, Delfin to jointly develop first US FLNG project



    Bermuda-based Golar LNG signed a deal with Delfin Midstream to jointly develop the Delfin LNG project off the coast of Cameron Parish, Louisiana, deploying Golar’s FLNG technology.

    The joint development agreement will facilitate the financing, marketing, construction, development and operation of Delfin LNG, Golar LNG said in its statement.

    Delfin LNG, the first and only permitted floating LNG export project in the United States, is a brownfield deepwater port consisting of up to four FLNG vessels producing up to 13 million tons of LNG per year.

    Delfin purchased the Utos pipeline in 2014 and submitted its deepwater port license application in 2015. Earlier this month the project received approval from the Department of Energy for long-term exports of LNG to countries that do not have a free trade agreement with the United States.

    Golar LNG is currently developing the Mark II solution, based on its previous designs, the FLNG Hilli Episeyo and FLNG Gandria which will be deployed in Cameroon and Equatorial Guinea.

    The Mark II floating liquefaction solution to be deployed at the Delfin LNG project will have a liquefaction capacity over 3 mtpa.

    It is expected that FID on the Delfin project will take place in 2018 with first LNG to be delivered in 2021/22, as Golar’s chief executive, Oscar Spieler noted the construction time is less than three years.

    http://www.lngworldnews.com/golar-delfin-to-jointly-develop-first-us-flng-project/
    Back to Top

    USGC propane slips 37.5 pts as stocks build 1.75 mil barrels



    US Gulf Coast propane shed 37.5 points prices Wednesday following a reported 1.75 million-barrel stock build last week and a 70-cent/b drop in crude futures.

    June non-LST propane, reflecting prices at the Enterprise storage and fractionation terminal in Mont Belvieu, Texas, fell to 57.5 cents/gal, but gained on crude futures by 1 percentage point to price at 57% of NYMEX August WTI. Nearby Lone Star barrels maintained a 25-point premium over non-LST.

    Earlier in the day, following the 9:30 am CDT release of the Energy Information Administration's weekly inventory report, propane prices had climbed about 1 cent to 58.75 cents/gal, as crude futures were trading about 40 cents/b higher than Tuesday's settle.

    US stocks of propane and propylene grew to 54.5 million barrels in the week ended June 16, EIA data showed Wednesday. The build was the smallest since May 19 and put inventory levels 25 million barrels below levels at the same time last year.

    The largest build was in the Midwest, where stocks spiked 879,000 barrels to 17.63 million barrels, followed by the Gulf Coast where inventories grew 450,000 barrels to 30.49 million barrels.

    One trader had expected a smaller build compared to previous weeks due to some companies pushing their cargo loading dates to end of the month rather than cancel early in the hopes of seeing improved arbitrages. The trader expected more of the 10 or more cargo cancellations reported in June to be reflected later in the month.

    Market sources have reported one July cargo cancellation so far -- a mid-month Mabanaft cargo. Sources expect more companies to cancel cargoes in the second half of July.

    A Mabanaft trader did not immediately respond to a request for comment.

    One source said the smaller build was likely due to strong exports. The data showed exports fell 109,000 b/d to 707,000 b/d, but remained higher than the week of May 26 and June 2, when the EIA reported inventory builds of more than 3 million barrels.

    Propane and propylene production dipped 8,000 b/d to 1.85 million b/d while product supplied, or implied demand, rose 200,000 b/d to 986,000 b/d, EIA data showed.

    https://www.platts.com/latest-news/petrochemicals/houston/us-data-usgc-propane-slips-375-pts-as-stocks-21112576
    Back to Top

    Alternative Energy

    Starace says storage advances will make gas power ‘bridging’ role brief



    The chief executive of Italian utility Enel, Francesco Starace, says he believes the accelerated development of storage technology will hasten a renewables-dominated energy future, while lessening the requirement for gas power as a bridging technology.

    Mr Starace, newly-elected as president of Eurelectric, the representative group for the European power industry, told the Financial Times that renewable power is becoming the “cheapest and most convenient way of producing electricity” and battery technology will gradually reduce the importance of natural gas to energy security.

    Starace said it was “obvious” that renewables were winning the battle for competitiveness against fossil fuels and nuclear power. “It is a matter of fact. There is no discussion any more.”

    Renewables currently account for just 4 per cent of the global power mix compared with about 85 per cent for oil, gas and coal combined. However, renewables were responsible for a third of global growth in primary energy consumption in 2016, according to data published by BP last week.

    Starace believes that renewable share is going to grow faster than expected as battery storage technology is making strides facilitating more and more green energy.

    “In the next two to three years battery storage prices will go down and battery performance will go up so these will come more and more into the picture,” he said. “We will see batteries much more frequently than people think today.”

    “Gas will become less important than it is today but it will take time. It will evolve over 10 years but it is definitely going to happen.”

    The transitionary role of gas, which has seen much investment by Shell and BP, could be shorter than originally thought, if the Enel chief’s vision proves true.

    He also added the proviso that, despite subsidies being reduced or dispensed with for renewables, long term pricing signals needed to be implemented, as the current volatile wholesale electricity market was causing negative power prices , with generators then paying to offload electricity on the transmission system.

     “Long-term pricing signals are needed in Europe that will take the anxiety out of negative pricing,” said Mr Starace. “[That] can only happen with long-term [supply] contracts.”

    Starace says the traditional utility will still have a part to play in a newly transformed system, which has a more prosumer-oriented focus.

    “Consumers, large, medium and small, are going to be the major players in transforming the value chain of our industry,” he said. “It is extremely important that we get close to them and do not fear them. They have big power but they need us to allow them to express that power.”

    http://www.powerengineeringint.com/articles/2017/06/starace-says-storage-advances-will-make-gas-power-bridging-role-brief.html?utm_campaign=5875e05adc97a561260426e4&utm_content=59490dd7a2a6d31e61005e86&utm_medium=smarpshare&utm_source=twitter
    Back to Top

    Vestas expands turbine range, targets low and high wind markets



    Denmark's Vestas has upgraded its 3.45 MW wind turbines to 4 MW and launched three new models as it takes aim at markets where wind speeds are very low or very high, the world's biggest maker said on Thursday.

    The upgrade to 4 MW, or 4.2 MW in an optimized mode, is the fourth upgrade to the turbine range since it was introduced at 3 MW in 2010, it said in a statement.

    The upgraded V150 turbine is designed to harness energy in low wind areas with blades now almost 74 meters long and a tower height of 166 meters. The swept area will increase by 22 percent to 17,671 square meters, Vestas said.

    The new V136 turbine is designed to operate at medium wind speeds and to produce less sound while the new V117 model is for use in areas with very strong wind or typhoon type weather.

    The wider range of turbine types could help Vestas grow its onshore business, helping spur developments in more remote areas, away from communities where projects often face local opposition.

    All three new turbines feature strengthened nacelles and hubs and extra cooling capacity.

    The gearbox has been strengthen on the V136 and V150 models.

    http://www.reuters.com/article/us-vestas-wind-windpower-launch-idUSKBN19D12Q
    Back to Top

    China's mining of combustible ice beats expectations



    China has extracted about 235,000 cubic meters of the combustible ice from the South China Sea, beating previous expectations for the mining operation.

    Wednesday afternoon marked six weeks of an ongoing mining operation in waters near the Pearl River estuary, without being disrupted by this year's second typhoon Merbok, according to operators of the trial mining site in the Shenhu area of the South China Sea.

    "China has beaten expectations in completing the trial explorations of combustible ice using local innovations in technology and engineering. It marks a historic breakthrough," according to a statement released by the mining site.

    Combustible ice usually exists in seabed or tundra areas which have the strong pressure and low temperature necessary for its stability. It can be ignited like solid ethanol, which is why it is called combustible or flammable ice.

    One cubic meter of combustible ice, a kind of natural gas hydrate, is equal to 164 cubic meters of regular natural gas.

    China declared its first success in collecting samples of combustible ice in the South China Sea on May 18 after discovering the substance in the South China Sea in 2007.

    http://en.people.cn/n3/2017/0622/c90000-9231545.html
    Back to Top

    Swedish Developer Plans to Build OWFs Without Subsidies



    Svea Vind Offshore, a recently established Swedish company, plans to build six new wind farms off the coasts of Gävle and Oxelösund in Sweden.

    Permit application for the first of the six planned projects is expected to be submitted in the autumn. The first offshore wind farm is planned to be built off Gävle, according to NyTeknik, and involves installing some 20 turbines with a combined total capacity of 200MW. If everything goes as planned, the construction could start as soon as 2021.

    The developer aims to build the projects without government’s subsidies. Svea Vind Offshore aims to achieve this by using new technologies and by developing projects far enough to enable utilisation of good wind conditions, but still close enough to the shore to allow for easy maintenance.

    The company says that under current circumstances it will be able to build a project that would have a power production cost of less than EUR 50/MWh.

    Right now Svea Vind is in dialogue with parties who may have conflicting interests in the six sites such as the Armed Forces. Also, the company is in talks with potential partners on energy storage systems.

    http://www.offshorewind.biz/2017/06/22/swedish-developer-plans-to-build-owfs-without-subsidies/
    Back to Top

    Trump’s ‘Solar Border Wall’ Claim Sends Stocks Soaring



    Donald Trump has told supporters at a rally in Iowa that his proposed wall on the U.S.-Mexico border would ideally be laden with solar panels, according to a new report by the BBC.

    During the rally, he suggested that the idea to install solar panels on the hypothetical wall was originally his, though the green amenity had been included in several companies’ bids to plan and construct the wall.

    “We’re thinking of something that’s unique, we’re talking about the southern border. Lots of sun, lots of heat,” Trump said. “We’re thinking about building the wall as a solar wall, so it creates energy, and pays for itself. And this way Mexico will have to pay much less money…Pretty good imagination, right? Good? My idea.”

    The Mexican border wall had been a cornerstone of Trump’s campaign for president last year. The Department of Homeland Security invited construction companies to submit proposals for the wall’s design after the January inauguration. Two hundred companies have responded so far and 20 have been short-listed.

    Bloomberg reported that stocks of solar panel companies jumped on Thursday, after Trump’s rally. SunPower Corp. stocks rose by 12 percent, while Canadian Solar and Jinkostar both experienced single digit climbs.

    “Just the fact that he used the word solar in a sentence and that perhaps he is not entirely anti-renewables helps,” Jeff Osborne of Cowen & Co. in New York told Bloomberg in an interview.

    The idea of adding solar panels to the wall, which is intended to curb illegal immigration from Mexico, has been discussed by researchers and activists alike.

    http://oilprice.com/Latest-Energy-News/World-News/Trumps-Solar-Border-Wall-Claim-Sends-Stocks-Soaring.html
    Back to Top

    Uranium

    UK Hinkley plant could cost $38 bln in electricity payment top-ups: watchdog



    Britain's deal with EDF to build the Hinkley Point C nuclear plant is risky and could lead to requests for more cash and electricity payment top-ups worth 30 billion pounds ($38 billion), a parliamentary watchdog said on Friday.

    "Delays have pushed back the nuclear power plant's construction, and the expected cost of top-up payments ... has increased from 6 billion pounds 30 billion pounds," the report from the National Audit Office (NAO) said.

    The NAO is publishing its report just as the government has committed to help to curb energy costs as part of its new policy objectives.

    Hinkley Point C is Britain's first new nuclear plant to be built in decades. It has been plagued by delays and criticized for its guaranteed price for electricity, which is higher than current market prices.

    EDF's UK arm EDF Energy is building the 18 billion pound plant in southwest England with China General Nuclear Power Corporation (CGN), which has a 33.5 percent stake.

    Britain awarded the project a minimum price guarantee of 92.5 pounds per megawatt hour (MWh), inflation linked, for 35 years.

    Under the contract, the government will pay the difference between the wholesale electricity price and the minimum it has promised - so-called top-up payments.

    British spot wholesale electricity prices have fallen since the deal was struck in 2013, and currently trade around 40 pounds per MWh.

    A spokeswoman for the Department for Business, Energy and Industrial Strategy (BEIS) said the project would ensure nuclear is part of a diverse energy mix in Britain.

    "Consumers won't pay a penny until Hinkley is built; it will provide clean, reliable electricity powering six million homes and creating more than 26,000 jobs and apprenticeships," she said.

    The plant, which EDF initially promised would be powering ovens to cook Britons’ Christmas dinner in 2017, is expected to start generating electricity in 2025.

    BEIS said the project would add 10-15 pounds annually to household electricity bills up to 2030.

    But the watchdog's report criticized the government for failing to fully consider the impact on bills beyond 2030.

    The NAO also said there was a risk the project would need further financial support.

    "The UK government could come under pressure to provide more support or take on additional risk, particularly given (Hinkley's) potential importance for ensuring energy security," it said.

    When built Hinkley Point C is expected to generate around 7 percent of Britain's electricity, and will help to replace the country's aging nuclear fleet, and closing coal plants.

    EDF Energy said the NAO report showed the project was good value compared with other low-carbon energy alternatives, and that EDF Energy and CGN bear the construction risk of the project.

    "Relaunching the UK nuclear new build industry at Hinkley Point C will enable costs for future projects, in particular Sizewell C, to be lower," an EDF Energy spokesman said.

    EDF and CGN also plan to build two more reactors at Sizewell in eastern England.

    http://www.reuters.com/article/us-britain-nuclear-costs-idUSKBN19D2WP
    Back to Top

    Base Metals

    China pushes back as U.S. aluminium industry urges crackdown on imports



    China pushed back on Thursday at charges by U.S. manufacturers and labour unions that it has flooded the market with cheap aluminium and put U.S. producers out of business, saying unilateral punitive trade measures should not be used to try to remedy a global glut of the metal.

    In a rare appearance at a U.S. government hearing by a Chinese official, Li Xie, director of China's export division at China's commerce ministry, called on the Trump administration to refrain from imposing curbs on Chinese aluminium imports.

    He spoke at a hearing by the U.S. Commerce Department on the Trump administration's Section 232 investigation into whether foreign aluminium imports pose a threat to U.S. national security. The administration is also conducting a separate investigation into steel.

    The administration is widely expected to impose tariffs or quotas on foreign aluminum and steel imports.

    "Aluminum products imported from China are general products with civilian uses such as packing, roofing, road signs and consumer durables. None of these products implicate national security," said Li.

    He noted that Chinese firms had not been invited to the hearing and said unilateral sanctions by the United States were not an answer to a global issue.

    "Global overcapacity is the result of manufacturers, including weakness in global economic growth and sluggish demand. The solution to these challenges entail global joint efforts."

    China had undertaken measures to eliminate excess domestic aluminum capacity, said Li. When asked by the panel what those measures were, he said he would submit a written report.

    Testimony to the committee by American manufacturers and labor unions said the domestic aluminum industry had been brought to its knees by market-distorting policies in China.

    Robert Scott, an economist with the Economic Policy Institute, said foreign aluminum imports threatened the entire U.S. industry which was hanging on "only by a thread" after a prolonged and steady decline in aluminum prices.

    The threat was driven by growth of excess capacity and overproduction in China, which had increased by nearly 1,500 percent between 2000 and 2017, he said.

    Official data shows that just 6 percent of America's aluminium exports come directly from China, but producers here argue the capacity expansion there has prompted a global price crash.

    Michael Bless, president and chief executive for Century Aluminum Company, a large U.S. producer of primary aluminium, said the U.S. aluminium industry was "in danger of completely disappearing" because of global overcapacity.

    "The domestic industry is in danger of completely disappearing," he said, adding that out of five aluminum smelters only two were operating at full capacity. In the last four years, employment and production have fallen nearly 60 percent, he added.

    "China has no natural comparative advantage. Its smelters are among the highest cost producers in the world, they lose money, yet continue to expand," he added.

    Gerd Gotz, director general of the 80-member European aluminium industry, said European manufacturers should be spared from any crack down as a result of the investigation.

    "The vast majority of European imports have little to no link to U.S. national security but are largely used in commercial applications," he said.

    http://www.reuters.com/article/us-usa-trade-aluminium-idUSKBN19D2EU
    Back to Top

    Steel, Iron Ore and Coal

    India's coal companies spending meets 52% of targeted expenditure



    Three state-run coal companies, Coal India Ltd (CIL), Singareni Collieries Company Ltd (SCCL) and NLC Ltd (formerly Neyveli Lignite Corporation), have spent only 52% of their targeted expenditure till May this financial year, Business Standard reported on June 22.

    For April to May, the combined target for spending was Rs 1,757.91 crore ($272.34), of which only Rs 917.69 crore has been spent by the three coal companies.

    Data from the Ministry of Coal shows the total plan outlay for CIL, SCCL and NLC for this fiscal is pegged at Rs 19,048.12 crore. NLC has the biggest outlay of Rs 8,948.12 crore followed by CIL and SCCL, respectively spent Rs 8,500 crore and Rs 1,600 crore.

    On coal production, both CIL and SCCL fell short of their assigned targets in the first two-month period. CIL produced 79.2 million tonnes of coal by May end against its target of 91.7 million tonnes. SCCL fared better though its production at 9.5 million tonnes in the same period was less than the targeted 10.5 million tonnes.

    Overall coal dispatches by both CIL and SCCL increased over the previous fiscal. CIL's coal dispatch in April-May stood at 91.7 million tonnes, growing 4% year on year. SCCL's coal dispatch rose 11.1% in the period under review from 9.5 million tonnes to 10.6 million tonnes. Coal supplies by SCCL to the power sector moved up 10.8% on the year whereas CIL witnessed a plummet of 1.7%.

    In May, NLC managed to see a lignite production of 8.81 million tonnes only compared to its target of 11.55 million tonnes. Power generation at 1689.36 million units was also 17.65 per cent short of the mandated 2051.50 million units in May.

    http://www.sxcoal.com/news/4557707/info/en
    Back to Top

    Shaanxi May raw coal output gains 21.6pct on year



    Shaanxi May raw coal output gains 21.6pct on year

    http://en.sxcoal.com/
    Back to Top

    EU Steel Prices Decline due to High Inventories and Import Pressure



    Flat product price weakness persists in both the north and south of Europe, according to MEPS. Spot business is slow amidst a reluctance to commit to forward transactions for third quarter business. Inventories at distributors and OEMs remain relatively high. Large volume orders were placed at the turn of the year, in anticipation of price rises. The material has now been delivered or, in some instances, is still arriving, inflating already bloated stocks. Import offers are competitively priced. Quotations by overseas suppliers are made more attractive by the strength of the euro against the US dollar.

    The supply situation has eased, for most strip mill products, in Germany. Underlying steel consumption is robust, despite the approach of the summer holiday season. Nevertheless, due to high inventories, particularly at the service centres, buyers are very careful when placing forward orders. Standard grades and sizes are on offer from suppliers in India, Taiwan, Vietnam, South Korea and Russia. Quotations are at more competitive prices than in May because of the weak US dollar exchange rate. The domestic price trend is negative.

    After a good first quarter, French distributors report slightly softer conditions in the second trimester. Prices continue to be under negative pressure. Supply chain participants are hopeful that business will start to pick up in the short term. End-users are beginning to refill their order books, as a number of projects receive approval. Large buyers have started to purchase material, anticipating mill closures in August.

    Growth in Italian manufacturing output slowed slightly, in May. Steel demand is stagnant and the market remains fragile. The only sectors performing well are automotive and mechanical engineering. MEPS notes that third country imports from India, Turkey, Vietnam and China are widely available at attractive prices. At the moment, stocks are plentiful at distributors and end-users, causing customers to purchase only to fill any gaps in inventories. Re-ordering for the autumn is unlikely to take place until just before the August holidays commence. Customers are demanding discounts, leading to depressed resale values and poor profit margins for the service centres. Ex-works strip mill product figures continue to contract.

    In the UK, the weakness of the pound sterling is helping exporters of manufactured goods, although new investment is hindered by the upcoming Brexit negotiations. A number of negative price corrections were noted for strip mill product sales, in June. As resale values at the service centres weaken, buyers are, once again, considering the purchase of overseas material, particularly from suppliers in India and Vietnam. Currently, this is much cheaper than the European equivalent, partly because of exchange rate movements. Demand on distributors remains reasonable, although the market has become quiet over the last few weeks. Inventories are at a higher level than normal. Resale values are under downward pressure as a number of distributors liquidate stocks, accumulated when prices were much lower than today.

    Despite reluctance on the part of European sellers, negative price movement continues in the Belgian market for third quarter deliveries. Demand on the service centres improved, recently, but remains modest. Stocks are plentiful, enabling buyers to postpone major purchasing decisions, for now. They only order the small quantities that they need before the approaching holiday month of July.

    Import offer prices into Spain decreased when the US dollar weakened. So far, few deals have been concluded as buyers anticipate more concessions, in the future. Moreover, the market is overstocked. Service centres will need new material for September/October, after the holidays. European suppliers are slashing their quotations accordingly, as order intake slows. Despite satisfactory levels of real consumption from a growing manufacturing sector, end-users continue to ask distributors for discounts. Service centres complain that resale values are falling more quickly than mill prices.

    http://www.hellenicshippingnews.com/eu-steel-prices-decline-due-to-high-inventories-and-import-pressure/
    Back to Top

    China's Shagang raises ferrous scrap buying price second time in a week



    Jiangsu Shagang Group, China's biggest scrap user, raised its buying prices for ferrous scrap effective Thursday, its second increase in a week, a company source said.

    After its Yuan 40/mt ($5.85/mt) increase, the mill will pay Yuan 1,590/mt ($233/mt), including 17% value added tax, delivered to Zhangjiagang, for heavy melting scrap with a minimum width of 6 mm, the source said.

    Shagang's last adjustment was made Sunday in the form of a Yuan 80-100/mt increase to various scrap grades.

    The company source said the increase was likely due to scrap supply being tighter.

    https://www.platts.com/latest-news/metals/singapore/chinas-shagang-raises-ferrous-scrap-buying-price-27848760
    Back to Top

    Canada prime minister says steel exports not U.S. security threat



    Prime Minister Justin Trudeau on Thursday dismissed the idea that Canadian steel exports posed a national security threat to the United States and expressed confidence Canada would escape any punitive measures.

    The U.S. administration of President Donald Trump is probing whether foreign-made steel imports pose a risk. The investigation is almost complete, officials say.

    Trudeau told a public event in Toronto it was "just silly" to imagine Canadian exports were a threat to the United States, given how closely the two nations' militaries and security forces cooperated.

    "I made this point directly to the President, that Canada has no business being on a list of possible national security concerns and I am confident we're moving in the right direction on that," he said. The two leaders spoke last Friday.

    Foreign steel companies are concerned the probe may be aimed at shoring up American producers and cutting out foreign competition.

    Reuters reported in March that Canadian officials fear any U.S. action against the highly integrated steel industry could result in major job losses

    http://www.reuters.com/article/us-canada-politics-trudeau-steel-idUSKBN19D2CL
    Back to Top

    Q3 ferrochrome price settles at 110c/lb – Merafe



    JSE-listed Merafe Resources on Friday announced a decrease in the third quarter ferrochrome price.

    The European benchmark ferrochrome price decreased 28.6% from 154c/lb for the second quarter to 110c/lb for the third quarter.

    http://www.miningweekly.com/article/q3-ferrochrome-price-settles-at-110clb-merafe-2017-06-23
    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.

    Company Incorporated in England and Wales, Partnership number OC344951 Registered address: Commodity Intelligence LLP The Wellsprings Wellsprings Brightwell-Cum-Sotwell Oxford OX10 0RN.

    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 guarantee 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.

    © 2024 - Commodity Intelligence LLP