Mark Latham Commodity Equity Intelligence Service

Wednesday 7th June 2017
Background Stories on www.commodityintelligence.com

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    Macro

    Saudi demands of Qatar: BREAKING!

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    MGL Comment
      As we go to press. Looks 'official'.
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    U.S. Considering Sanctions on its 3rd Largest Oil Supplier



    Venezuela is third-largest oil supplier to U.S.

    The U.S. is mulling sanctions against Venezuela’s oil industry, according to a Reuters report.

    Reuters quotes sources saying that U.S. officials are currently evaluating different types of sanctions, and have not decided on what, or whether, sanctions should be imposed. Previous sanctions, which were imposed from 2011 to 2015, prevented PDVSA from bidding on U.S. government contracts. However, potential actions could be as severe as banning oil imports from Venezuela and preventing PDVSA from having activities in the U.S.

    Venezuela accounts for 9% of 2016 U.S. oil imports

    It is not clear if any potential sanctions would affect Venezuelan shipments of oil to the U.S., but cutting off imports from Venezuela could have important ramifications for the U.S.

    Venezuela is currently the U.S.’s third-largest oil supplier, and sent the U.S. 271 MMBO in 2016. Overall, the South American nation has provided the U.S. with about 11.9 billion barrels of oil since 1986, making it the U.S.’s fourth-largest long-term oil supplier.

    Last year Venezuela accounted for about 9% of total U.S. oil imports. Its share of the U.S. market has been decreasing since 1996, when Venezuela provided 17.4% of all U.S. oil imports. Volumes from Venezuela have been falling as well. In 2004, The U.S. imported 578 MMBO from the South American nation, more than double current levels.

    Imports from Venezuela are almost exclusively heavy oil, as most of Venezuelan production is from heavy, sulfurous fields. The volume-weighted average API gravity of imports from Venezuela was 17.6 °API in 2016. This is significantly below, or heavier, than any other major U.S. oil supplier. Overall the U.S.’s imported oil averages 26 °API.

    U.S. may turn to Canada and Mexico to replace Venezuela

    U.S. refineries are set up to run a heavier crude slate than the U.S. operators are currently producing domestically, meaning refineries must import heavy grade oil to maintain full utilization. The rise of light oil production from U.S. shale has led to heavy oil dominating American oil imports. The demand for light oil is largely being supplied by U.S. shale producers.

    If the U.S. were to cut off imports from Venezuela, American refiners would have to turn to other sources for very heavy crude. Fortunately, the U.S. has two other nearby import partners that could supply heavy oil.

    Canadian oil sands production is still on the rise, and the heavy oil produced from these operations could likely easily replace Venezuelan production. In fact, this process is already ongoing. Ten years ago, Venezuela provided about 25% of all U.S. heavy oil imports. Oil with an API gravity lower than 25 is often defined as “heavy oil.” In 2016, this share had fallen to only 17%, the lowest on record.

    Canada has seen an opposite change. In 2006, imports from Canada supplied about 23% of all heavy oil the U.S. took in. This share has risen significantly in the last ten years, rising to 49% last year.

    Mexico could also supply heavy oil to replace missing Venezuelan imports. Mexico’s production is slightly lighter than Venezuela’s, typically ranging from 20 °API to 25°API instead of from 15°API to 20°API. However, Mexican production is declining, and import volumes from Mexico have dropped by even more than imports from Venezuela.

    Venezuelan crisis deepening

    The sanctions are being considered in response to the current situation in Venezuela, which has seen significant instability in recent months. Oil exports account for about 95% of all Venezuelan exports according to Reuters, and the government

    Shortages of food and basic goods are widespread in the country. The government has instituted rationing in an attempt to combat shortages, but this has not solved the underlying lack of available goods. According to CNBC, consumer prices rose by about 800% in 2016, and the Venezuelan economy shrank by 18.6%. In May the Wall Street Journal reported on the National Poll of Living Conditions, which indicated that about 75% of Venezuelans had lost weight in 2016, by an average of 19 pounds.

    Protests have been extensive, and the government has cracked down severely.

    According to Reuters, the last two months of unrest have resulted in the deaths of more than 60 people. The harsh actions by the Venezuela government are driving the U.S. to consider sanctions. However, any sanctions imposed may affect not just the nation’s oppressive government, but also the citizens themselves.

    https://www.oilandgas360.com/u-s-considering-sanctions-on-its-3rd-largest-supplier-of-oil/
    MGL Comment
    At issue now: the elections, which Maduro wants to replace with some kind of referendum on the constitution. Venezuela coming under sharp criticism from Nikki Haley, US representative at the UN. Does this lead to sanctions? That's a tough cookie. 

    http://www.reuters.com/article/us-usa-venezuela-rights-idUSKBN18X1TG
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    Rio Tinto to cut $781m debt through cash tender offers


    Mining major Rio Tinto plans to reduce its gross debt by $781-million through cash tender offers as part of its ongoing capital management plan.

    Rio Tinto Finance Plc and Rio Tinto Finance Ltd have made cash tender offers to buy up to $781-million of the outstanding securities due between 2021 and 2025.

    The offer, which commenced on May 22 and will expire on June 19, was oversubscribed by June 5.

    Rio said in an update to shareholders that the securities purchased would be retired and cancelled and no longer remain outstanding.

    Further, Rio Tinto has issued a redemption notice for June 21 for about $1.7-billion of its 2019 and 2020 dollar-denominated notes.

    The redemption, along with the offer, will bring the total principal amount of notes repurchased in June to $2.5-billion.

    The dealer managers for the offer are Mizuho Securities USA, Morgan Stanley & Co and RBS Securities.

    http://www.miningweekly.com/article/rio-tinto-to-cut-781m-debt-through-cash-tender-offers-2017-06-06
    MGL Comment
    Rio's net debt now below 2010 levels, and at that point they went on a capex surge. This time we need to see some shareholder friendliness please. 
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    Boris rides to the rescue.

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    MGL Comment
    Small note for political cognoscenti: Boris Johnson was allowed out of the box yesterday, and the response of the Tory faithful was instantaneous. Theresa May is once again outpacing Jeremy Corbyn in Google Trends. Something to do with with 'Tricephalous'.
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    Oil and Gas

    Oil shipping bears brunt of Qatar diplomatic crisis


    In the aftermath of the UAE and Bahrain's decision to cut diplomatic ties with Qatar, their respective port authorities have issued restrictions on movement of ships to and from the country, which will have implications on crude and oil product loadings in the Middle East and could push up bunker prices elsewhere, Asian shipping industry officials said Tuesday.

    One of the world's largest oil importers changed its VLCC loading plans overnight to steer clear of issues arising from the diplomatic impasse between Saudi Arabia, the UAE, Bahrain and Egypt on one side and Qatar on the other.

    Vessels flying the Qatar flag or those heading to or arriving from Qatar ports are not allowed to call at Fujairah and Fujairah Offshore Anchorage regardless of their nature of call till further notice, harbor master Tamer Masoud said in an advisory late Monday.

    Related factbox: Qatar's diplomatic isolation and its impact LNG, oil and gas

    Saudi Arabia has also imposed restrictions and the port authority has asked shipping agents not to receive any vessels with the Qatar flag or owned by Qatari companies.

    All ports of Bahrain and its territorial waters will remain suspended for marine navigation from and to Qatar, effective Tuesday, the country's Ministry of Transportation and Telecommunications said in a statement.

    This implies that while there will not be a direct point-to-point voyage between Qatari ports and Fujairah and ports of Bahrain, but movement of cargoes can still take place if the vessel calls at a third port.

    "Our VLCC was due to load partial cargoes, first in Qatar and then in the UAE and the port agent had given the nod to bring the ship in [to the UAE] but we did not want to take a chance," said a source involved in loading crude on a VLCC on the Persian Gulf-East Asia route.

    "We swapped the cargoes at the 11th hour and will instead load the full volume in Qatar itself," the source said. The parcel nominated by the UAE will instead be loaded on another VLCC.

    The charter party agreement had explicitly stated "loading in one, two or three safe ports in the Persian Gulf excluding Iran and Iraq" or else the shipowner would have asked for additional freight.

    There are no legal issues involved if the loading port is in Qatar because the country has not imposed any counter-restrictions.

    Large oil companies have dozens of cargoes loading in the Middle East and therefore have the flexibility to swap parcels but such changes at short notice can often lead to additional expenses.

    "Swapping oil cargoes is like a game of chess for the large oil companies," said a VLCC broker in Singapore.

    However, smaller companies that have only a few cargoes to trade do not have such flexibility to swap parcels and can end up paying higher freight.

    "We have parcels to load from Al Shaheen and Ras Tanura later this month in a single VLCC and are currently checking on the legal feasibility of doing so," said a chartering source in Tokyo.

    One possibility is to split the cargo and load it on smaller ships such as Suezmaxes and Aframaxes, but no decision has been taken so far, he said.

    "If this happens, Aframax volumes and freight on the PG-East route will go up," a broker said.

    A VLCC, Suezmax and Aframax typically carries 2 million, 1 million and 600,000-700,000 barrels of crude respectively.

    There are dozens of cargoes that are partially loaded in Qatar, Bahrain and Saudi Arabia and shipping executives are hoping that this impasse will be resolved in a week.

    "Otherwise it will be a mess," one of the VLCC brokers said.

    In the clean tankers' segment, there are hundreds of cargoes that move between ports in the Persian Gulf itself, in what is called a cross-PG voyage.

    Fujairah's commercial stocks of refined products were 18.22 million barrels in the week that ended May 29, up 1.7% from the week before, data released last week by the Fujairah Energy Data Committee, or FEDCom, showed.

    CALLING AT THIRD PORTS

    While there are only a handful of tankers with the Qatari flag, but by not allowing direct sailing to and fro between Qatar and Fujairah of even vessels that do not carry the Qatari flag has put shipping companies and charterers in a legal quandary.

    Ships may transit the port of Khor al Fakkan. It was not immediately known whether the port has issued a similar advisory restricting direct sailing to and from Qatari ports, as it is also part of the UAE.

    Khor al Fakkan is hardly 5 miles from Fujairah. In the past, when there have been stringent regulations governing shipping in and out of Fujairah, shipowners and charterers have used the Khor al Fakkan as a conduit for storage, repairs and other miscellaneous shipping works.

    "Khor al Fakkan is akin to outside port limits of Fujairah unless an explicit directive from the UAE debars maritime navigation to Qatari ports from there as well," a senior maritime industry executive said.

    If that happens, the ships will have to call at the port of a country with which Qatar still enjoys diplomatic relations to avoid a direct voyage between Qatar and Bahrain and the UAE, he said.

    SINGAPORE TO SEE BUNKERING GAINS

    Fujairah has been the preferred bunkering port in the Middle East because with its huge storage, it is relatively cheaper compared with other ports.

    Fujairah's stocks of heavy distillates and residues totaled 10.08 million barrels as of May 29, rebounding by 11% week on week, FEDCom data showed.

    These stocks can pile up due to port restrictions on Qatar-related voyages. Fujairah has about 41.5 million barrels of commercial oil product land storage available for lease, according to Platts Analytics estimates.

    "Bunkering is a major source of revenue for the UAE and by not allowing ships embarking from Qatar or planning to go there to come to Fujariah will hurt its hub status," said another VLCC broker in Singapore.

    One view is that shipowners can now ask for higher freight if the vessel calls at Qatari ports.

    "If not allowed to dock at Fujairah, these ships will have to load bunker fuel in Singapore," said a clean oil tankers broker.

    This in turn can push up the bunker prices in Singapore. The 380 CST grade bunker fuel was assessed at $305.50/mt and $306.50/mt delivered in Singapore and Fujairah respectively on Monday, according to the S&P Global Platts data. The corresponding price in Khor Fakkan was also $306.50/mt, the data showed.

    https://www.platts.com/latest-news/shipping/singapore/tankers-analysis-oil-shipping-bears-brunt-of-27841411
    MGL Comment
    Messy. 

    Crucial point: so far the Gas pipeline to the UAE is still working. 

    Meanwhile:

    US intelligence officials believe Russian hackers planted a false news story that prompted Saudi Arabia and several allies to sever relations with Qatar, according to CNN.

    FBI experts visited Qatar in late May to analyse an alleged cyber breach that saw the hackers place the fake story with Qatar’s state news agency, the US broadcaster said.

    Saudi Arabia then cited the false report as part of its reason for instituting a diplomatic and economic blockade of Qatar, the report said. The blockade was joined by several other Gulf states and has spiralled into the worst diplomatic crisis for the region in decades.


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    Platts restricts Qatari-loading crude in pricing process



    Oil pricing agency S&P Global Platts said it will not automatically include Qatari-loading crude in its Middle East benchmark after Saudi Arabia and some other Arab states cut ties with Doha, a move that disrupted traditional shipping routes.

    Saudi Arabia, the United Arab Emirates, Egypt and Bahrain said on Monday they would sever all ties including transport links with Qatar, escalating past diplomatic disagreements.

    Within hours, the UAE barred all vessels coming to or from Qatar using its anchorage point off Fujairah, a popular location for bunkering, where vessels take on fuel of their own.

    Platts' move is unlikely to have a significant impact on the broader oil market because Qatar is one of the smaller producers in the Organization of the Petroleum Exporting Countries.

    Any disruption to Qatar's liquefied natural gas exports, an area in which it is a major world player, could hit global prices, but there is no indication so far of that happening.

    Al-Shaheen crude from Qatar usually loads onto supertankers together with other Gulf-based grades, meaning flexibility of movement is critical to transporting oil out of the region.

    "It is typical in the Gulf to co-load VLCCs (very large crude carriers) in combinations that include crude oil from Kuwait, Saudi Arabia, Qatar, UAE and Oman," S&P Global Platts said in a note to subscribers.

    "As such, restrictions on vessels calling into Qatar and associated uncertainty could impact the inherent value of crude loading from Qatar, including al-Shaheen," it said.

    Riyadh issued a similar shipping ban. Trading sources say cargoes of al-Shaheen usually load onto VLCCs in Saudi Arabia before sailing to Asia.

    Trades, bids and offers for Qatar's al-Shaheen grade, a medium sour crude, have been included in Platts' assessment of its Dubai price benchmark, which underpins the vast majority of oil trades in Asia, since January 2016.

    The Dubai benchmark is backed by Dubai and Oman crude, Abu Dhabi's Upper Zakum and Murban grades, as well as al-Shaheen.

    "Qatar-loading al-Shaheen may not be nominated in the Platts Dubai Markets on Close process without mutual agreement between buyer and seller," the company said in an emailed statement.

    "Since its introduction as a deliverable into the Dubai basket in January 2016, al-Shaheen has performed well. This review is to ensure that the Dubai benchmark is not negatively impacted by the current uncertainties surrounding Qatar’s relations with its Gulf neighbors."

    Buyers and sellers could mutually agree to alternate loadings of al-Shaheen cargoes, but sellers should not impose this, Platts said.

    "If a party wants to bid up Dubai they won’t agree to any of the sellers’ request to deliver al-Shaheen, so it will definitely affect (the benchmark),” a source from an Asian refiner said.

    Sellers in the Platts trading window were previously allowed to deliver, without buyers’ consent, any of the five crude grades that make up the Dubai benchmark.

    Platts said it would continue to assess and publish independent values for other Qatari-loading crudes during the review. It added that the process would not immediately impact existing nominations for cargoes loading in June and July against trades previously reported in the Platts pricing process, known as the market-on-close.

    The company, a unit of S&P Global Inc, produces a number of benchmark prices for the crude oil market, including dated Brent.

    http://www.reuters.com/article/us-qatar-s-p-global-idUSKBN18X12I
    MGL Comment
    This is more important than it looks, Saudi prices it's crude streams off Dubai/Oman blends that until yesterday, included some Qatari Oil. 
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    China 'teapot' oil group urges compliance on quotas, tax


    An alliance of more than 20 of China's independent oil refineries has urged its members to strictly adhere to government rules on oil quotas and taxes, according to a group statement seen by Reuters on Tuesday.

    The mostly privately run refineries, known as "teapots", have upended China's oil market after Beijing began allowing them to import crude in late 2015 in an effort to shake up a market dominated by state-owned majors.

    However, state firms like Sinopec and PetroChina have repeatedly accused the independents of undercutting their larger rivals by evading or under-paying consumption taxes for gasoline and diesel. Beijing in 2016 dispatched inspection teams to oversee the teapots' tax records.

    The independents are also facing shifting government policies on oil quotas at a time when domestic oil demand growth is slowing, undermining their ability to expand after a stellar year in 2016.

    "(We) shall strictly abide by government regulations over flows of crude oil, pay taxes according to the law," the statement from the alliance said.

    "Resale of (imported) crude oil shall be strictly prohibited ... defaults shall be banned."


    The government has stipulated that crude brought in via import quotas should only used by the independents for their own processing and not resold in the market.

    The alliance, headed by Shandong Dongming Petrochemical Group, the country's largest independent refiner, also called for joint purchasing and information sharing in a bid to stave off internal competition.

    Since late 2015, China has allowed about 28 independent companies to import crude oil for the first time in an effort to boost private investment and encourage competition.

    The plants have won crude oil import quotas totalling nearly 1.9 million barrels per day, and made imports equal to about 18 percent of China's total oil imports in the first quarter.

    http://www.reuters.com/article/us-china-oil-independents-idUSKBN18X0GY

    Attached Files
    MGL Comment
    Peace breaks out between the teapots and regulators? At one point Beijing had threatened to rescind all import quotas. 
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    Exxon to look for oil off Equatorial Guinea


    Exxon Mobil has inked a contract to look for oil in a deep-water field off the coast of Equatorial Guinea, the company said Monday.

    As part of its pact with the West African country's government, the Texas oil company will operate and get an 80 percent working interest in a deep-water block that spans 307,000 acres about 36 miles west of Malabo, the country's capital.

    It's not far from the Zafiro field that has been operated by Exxon subsidiary Mobil Equatorial Guinea for two decades.

    Related: Exxon Mobil confirms Texas site for $10 billion  petrochemical complex

    Exxon said it has agreed to reprocess existing 3-D seismic data and acquire new data that could lead to oil discoveries.

    The deal comes a few weeks after Equatorial Guinea became OPEC's newest member nation. It produced 244,000 barrels of oil a day in 2014, according to the Energy Department.

    http://www.chron.com/business/energy/article/Exxon-to-look-for-oil-off-Equatorial-Guinea-11196754.php
    MGL Comment
    80% working interest on 307000 acres adjacent to an existing Oil field.  These deals just don't get better than that!

    Over the last year we have seen a gradual improvement in Oil deals from sovereigns. We had the improvement in UK N Sea terms, we had the Mexican privatisation on terms that attracted capital, and now Equatorial Guinea gives 80% net. We're starting on the next phase of our great decade long journey at the $50 mark. Phase one was the shales doing their funky stuff. Phase two will be the offshore redesigning itself from the ground up. It's going to be all FPSO's, subsea completions, and only in countries that give spanking great deals.

    We're watching Venezuela now. A Maduro collapse would inevitably alter the game, 'new' Venezuela would be looking for Oil deals. The trouble is, Venezuela has stung the Americans, Europeans, Russians and Chinese in the last two decades, and nobody has emerged with either Oil or cash. So the deal would have to be really good.  
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    Russian Urals crude CIF Augusta at highest since December 2015



    The Mediterranean Urals market has hit a 1.5-year high, supported by a shorter June Urals loading program and healthy demand in the second half of June.

    Aframax Urals cargoes, basis CIF Augusta, were assessed at a $0.865/b discount to the Mediterranean Dated Strip Monday, its highest since December 3, 2015 when it was at a discount of 84.5 cents/b, according to S&P Global Platts data.

    Demand for the crude has been strong over recent days, with Litasco buying four cargoes of Urals CIF-Augusta, two each on Thursday and Friday, while bidding again for a cargo in Monday's Platts Market on Close process but remaining unsold at Dated Brent minus $0.80/b for a June 26-30 cargo.

    Vitol were on the other side Monday, offering a June 24-28 cargo at Dated Brent minus 75 cents/b, which also remained outstanding in the MOC.

    High Urals CIF-Augusta has also led to the spread between Urals CIF-Augusta and Urals CIF-Rotterdam widening again after the Baltic loading crude -- which typically trades at a discount to its Mediterranean counterpart due to the much larger volume being exported from the Baltics -- briefly flipped to a premium over Urals CIF-Augusta just over a month ago at the beginning of May.

    The spread has since returned to a discount for CIF Rotterdam, which hit 55 cents/b on Monday, its widest since April 28.

    https://www.platts.com/latest-news/oil/london/russian-urals-crude-cif-augusta-at-highest-since-21945161
    MGL Comment
    Notable that the Saudi crude discount has sharply narrowed in the past two weeks. Saudi-Russian rapprochement has meaning. 
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    Repsol says makes 2 Tcf gas find offshore Trinidad



    Repsol had made its largest natural gas discovery of the last five years offshore Trinidad and Tobago, with an estimated 2 Tcf of gas in place, the Spanish company said Monday.

    The discovery was the most significant in a decade for the country, Repsol said in a statement.

    "The discoveries were made in two wells, Savannah and Macadamia, located in the East Block within the Columbus Basin east of the island of Trinidad at a depth of 150 meters," Repsol said.

    Repsol holds a 30% stake in the exploration consortium bpTT, while the rest is held by BP, it said.

    Trinidad and Tobago is the second-largest country for Repsol production, after the US, it said. Repsol produced 101,887 barrels of oil equivalent per day in Trinidad and Tobago in 2016, it added.

    Repsol added that Trinidad and Tobago has also authorized the development of the Angelin project, in which it also holds a 30% stake. This field is located in the West Block, 60 km from the island of Trinidad, where production is estimated at 600 MMcf/d (109,000 boe/d). Drilling is expected to begin in the second half of 2018, with production beginning in 2019.

    Repsol has operated in Trinidad and Tobago since 1995. The company holds mineral rights to three offshore production and development blocks and rights in two other exploration blocks.

    Repsol's 2016 net production in Trinidad and Tobago was 3.9 million barrels of liquids and 187.5 Bcf of gas, equivalent to 101,887 boe/d. The company's net proved reserves of oil and gas amounted to 291.4 million boe at the end of 2016.

    The Trinidad and Tobago discovery announced Monday follows Repsol's find in Alaska announced in March -- described as the largest conventional discovery of hydrocarbons of the last 30 years on US soil, with a total of about 1.2 billion recoverable barrels of light crude oil.

    https://www.platts.com/latest-news/natural-gas/barcelona/repsol-says-makes-2-tcf-gas-find-offshore-trinidad-21937357
    MGL Comment
    It is always interesting when the minority partner in a consortium discloses the dirt. In this case BP probably is unmoved by 2 tcf of gas in low return Trinidad and Tobago. 
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    Gazprom advances on southern natural gas corridor to Europe via TurkStream, Poseidon


    Russian gas giant Gazprom, Italy's Edison and Greece's Depa have agreed to establish a southern route for Russian gas supplies to Europe, which will run across Turkey to Greece and on to Italy.

    The signing highlights interest from countries in the south of the region to proceed with a new gas transportation route from Russia despite continuing opposition from Brussels to the expansion of Russian gas infrastructure in the area.

    Under the deal, the three companies agreed "to coordinate the implementation of the TurkStream project and the Poseidon project in the area from the Turkish-Greek border to Italy in full compliance with applicable legislation," Gazprom said Friday.

    "The construction of [TurkStream's] second string would make it possible to annually deliver 15.75 Bcm of gas to the border with Europe," Gazprom said after the meeting with Edison CEO Marc Banayoun.

    Italy's economy minister Carlo Calenda described this as a "very important agreement" signed on the sidelines of the St Petersburg International Economic Forum.

    "The launch and commissioning of the gas pipeline Poseidon from Greece to Puglia...is important for us. Why? Because Nord Stream cannot be the only one, it should be balanced with South Stream," he told the forum.

    "We feel it is important to have South Stream which you know was somehow halted, but which should be re-launched soon," he said.

    Russian deputy prime minister Arkady Dvorkovich, in turn, offered the full support to the project of the country's authorities but cautioned that the EU's position will be "important here."

    "I want to confirm that we support our joint approach in developing both Northern and Southern gas corridors in Europe in parallel. Both projects are commercially beneficial, including when implemented simultaneously," Dvorkovich said. "Of course, the European Union's position is important here, but Italy has a very pragmatic position in this regard, we will try to implement it together."

    South Stream, a project designed to carry up to 63 Bcm/year of Russian gas across the Black Sea to Bulgaria and further on across southern Europe to Italy and Austria, was blocked by the EU amid concerns of Europe increasing its dependency on Russian gas and calls for the region to diversify its energy sources.

    Alternative routes being developed in the region, however, offer much lower volumes of new gas.

    Following the EU's ban on South Stream, Gazprom opted to double the capacity of the existing Nord Stream pipeline across the Baltic Sea to 110 Bcm/year.

    Gazprom also started building the first part of the offshore section of the TurkStream route, which is expected to be completed by 2019, to bring 15.75 Bcm/year of gas to the domestic Turkish market.

    Friday's document followed the signing of a Memorandum of Understanding between the three countries in February 2016 to ensure natural gas deliveries from Russia across the Black Sea and third countries to Greece and onward to Italy "in order to set up a southern route for Russian gas supplies to Europe."


    GAS EXPORTS ON THE RISE


    The signing followed meetings by Gazprom CEO Alexei Miller with heads of a number of European gas companies, including some from southern and eastern Europe.

    Gazprom's gas deliveries to Europe were at record high levels last year and continued to grow through the first five months of this year.

    Gazprom even said in May that it would need to reconsider its production plans on the robust demand as stocks across Europe fell to historically low levels last winter.

    In particular, Miller met with Bulgarian energy minister Temenuzhka Petkova to discuss "the prospects for deeper collaboration in the gas sector, noting that Russian gas exports to Bulgaria had been growing every year since 2013."

    Bulgaria increased purchases of gas from Gazprom by 2.1% to 3.18 Bcm in 2016, with the deliveries building up further by 15% on the year in January-May, Gazprom said.

    Hungarian volumes in January-May rose by 37% on the year, the Russian company said, providing no absolute figures. Deliveries to Hungary amounted to 5.7 Bcm in 2016.

    Gas supplies to Greece rose 35% year on year to 2.7 Bcm in 2016, and continued rising through the first five months of 2017, gaining 49% in May, Gazprom said.

    Gazprom's natural gas deliveries to Austria rose by 38% to 6.1 Bcm in 2016, and jumped by 80% year on year in January-May, according to Gazprom.

    Supplies to Serbia increased by 42% year on year in January-May, after a 4.3% increase to 1.75 Bcm in 2016, Gazprom said.

    https://www.platts.com/latest-news/natural-gas/moscow/gazprom-advances-on-southern-natural-gas-corridor-26747791
    MGL Comment
    Gazprom clearly cannot stand the idea that Israeli (or Egyptian gas) should reach Italy, and is repitching south stream here. Clearly the opaque Turks, who have sat on the fence on this one for nearly a decade, don't like the fact that the Israeli-Italy pipeline does not pass through Turkey. 

    The Dam is breaking in the Eastern Med. 

    Which brings us to Qatar and the Saudis. Now we've all noticed that the Saudi's made nice with the Russians, and vice versa. One of the big issues on the table was Syria, where Qatar has spent a small fortune supporting anyone willing to help it's gas pipeline ambitions to the EU. In recent months Iran has been navel gazing, and discovered it has much Gas, and is thinking a S Pars field development, which would mesh nicely with the Qatari's on the N Pars field. Then out of the blue, the Iranian's blew the dust off  this pipeline suggestion: Image title

    So to summarise:

    ~Israel wants to build a pipe to Italy from Leviathan. Eni wants 'in' because of all the Egyptian gas they have found.
    ~Gazprom is suddenly talking southstream, with the Turks, which is basically a 'blocking' move to prevent any other pipeline moving towards the EU.
    ~Iran is talking S Pars, and offering development contracts left, right, and centre.
    ~The Saudi's and Russians have smoked the peace pipe on Syria.

    and poor little Qatar, with 30% of the world's LNG market, and a history  of being a nuisance suddenly finds itself bouncing around like a cork in a bucket. This by the way, some weeks after they announce a low cost expansion in LNG capacity. 

    Meanwhile the EU/UK/US are becoming seriously annoyed about all the bombs being thrown around by immigrants from this part of the world. 

    The funniest bit of all: I haven't said 'Oil' once. 
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    Colombia oil industry threatened by local opposition: group


    Colombia's oil industry is threatened by a growing number of public referendums that seek to ban crude production, the country's oil association said on Monday, as the mining sector faced similar votes.

    The warning from the Colombian Petroleum Association (ACP), which represents private producers in the Andean country, came one day after residents of Cumaral municipality in Meta province voted by a large majority to ban crude exploration, drilling and production.

    Cumaral's vote was the first public referendum on banning oil exploration, but another 20 are scheduled, which could increase legal uncertainty and lead to the delay or cancellation of millions of dollars in investments key to averting a fall in reserves, ACP head Franciso Jose Lloreda said.

    "Legal uncertainty will lead to a nosedive for exploration and production activity in Colombia. There won't be investment or exploration if a wave of public votes continues," Lloreda said.

    Mansarovar Energy, a joint venture between India's ONGC-Videsh and China's Sinopec, has a project in Cumaral.

    "Mansarovar Energy hopes that with the help of the national government we can rapidly define clear rules for companies and investors, to solve the legal and regulatory uncertainty that the energy sector find itself in," the company said in a statement, adding it would hold meetings with the government to decide its next steps.

    The mining industry has already been hit by similar referendums. South Africa's AngloGold Ashanti announced in April it would halt all exploration work at its $2 billion La Colosa project in Tolima province, after locals backed a proposal to ban mining over water quality fears.

    The government says it will seek congressional approval to harmonize national and local mining laws in an attempt to head off investor worries about the mining votes.

    Oil companies operating in Colombia announced in March that they would double their investment to as much as $5 billion to maintain production levels amid stable prices. Lloreda said uncertainty over the votes could lead some to reevaluate their investments.

    Colombian output has decreased due to the global fall in crude prices, as companies delayed exploration and lowered production. Average output was down 12 percent year-on-year in 2016 to 885,000 barrels per day.

    http://www.reuters.com/article/us-colombia-oil-idUSKBN18W2NN

    Attached Files
    MGL Comment
    Mind your eye here, Colombia seems to have having one its periodic convulsions, and its spread to Oil. At issue: distribution of royalty income between centre and municipalities.
    Back to Top

    API data reportedly show fall in U.S. crude supply, rise in product stocks



    The American Petroleum Institute reported Tuesday a fall of 4.6 million barrels in U.S. crude supplies for the week ended June 2, according to sources. The API data, however, also showed a climb of 4.1 million barrels in gasoline supplies, while inventories of distillates were up 1.8 million barrels, sources said.

    http://www.marketwatch.com/story/api-data-reportedly-show-fall-in-us-crude-supply-rise-in-product-stocks-2017-06-06
    MGL Comment
    Big shrug. 
    Back to Top

    EIA: US oil output nears new record


    US crude oil production will, for the first time in nearly 50 years, climb to 10 million b/d by March 2018, the US Energy Information Administration said Tuesday.

    Such a level would mark the highest daily US production rate since November 1970, when production climbed to nearly 10.05 million b/d and averaged about 9.64 million b/d for that year, according to government data. The November 1970 figure remains the all-time high.

    "Increased drilling activity in US tight oil basins, especially those located in Texas, is the main contributor to oil production growth, as the total number of active rigs drilling for oil in the United States has more than doubled over the past 12 months," Howard Gruenspecht, the EIA's acting administrator, said in a statement.

    In its latest Short-Term Energy Outlook, EIA said it sees US crude output averaging 9.33 million b/d this year and 10.01 million b/d in 2018.

    "Growth in US production has been the largest contributor to the 800,000 b/d of non-OPEC liquids supply growth from January through May 2017," the EIA said in its report.

    "Continued increases in drilling activity in US shale basins, particularly a recent resumption in production growth from the Eagle Ford region in Texas, support production growth throughout the forecast," it said.

    The number of US oil-directed active rigs fell as low as 316 in May 2016, but has since more than doubled to 733 rigs this month.

    PRICES

    EIA expects the increase in domestic production will lower WTI crude prices in Cushing, Oklahoma, compared with Brent, creating a wider Brent-WTI price spread, which could open additional opportunities for US producers to export light sweet crude, EIA said.
    The Brent premium to WTI was as high as $2.94/b on May 19, a 17-month high. That differential is expected to average $1.91/b this year and $2/b next year, EIA said.
    WTI and Brent spot prices are expected to average $50.78/b and $52.69/b, respectively, in 2017, up from $43.33/b and $43.74/b, respectively, in 2016. In April, EIA forecast WTI and Brent would each average about 10 cents/b less in 2017.
    The EIA forecasts WTI and Brent will average $53.61/b and $55.61/b in 2018, both down $1.49/b from last month's estimate.
    The decline in the 2018 forecast was due to the "possibility of a return to modest oversupply in global oil markets," EIA said. "However, some upward price pressures could emerge in the second half of 2018 if EIA's forecast that global inventories will decline during that period materializes and if the market expects global oil inventory withdrawals into 2019."

    SUPPLY

    Production in the Lower 48 states, which fell as low as 6.61 million b/d in September 2016, climbed to 7.01 million b/d in May and is now forecast to reach 7.8 million b/d by December 2018, according to EIA.
    Production in US Gulf of Mexico waters, which dipped to 1.51 million b/d in September 2016, climbed to 1.74 million b/d in May and is forecast to hit 1.98 million b/d by the end of 2018.
    Alaskan production, which averaged 460,000 b/d in May, is expected to hold relatively steady through 2018, falling as low as 430,000 b/d and climbing as high as 510,000 b/d, EIA said.
    OPEC production is forecast to average 32.30 million b/d in 2017 and 32.77 million b/d in 2018, compared with a 32.53 million b/d 2016 average, and down 160,000 b/d and 640,000 b/d, respectively, from EIA's forecast last month due to the extension of OPEC's supply cut agreement through March.
    Total OPEC crude production climbed as high as 33.28 million b/d in November 2016 and averaged 32.12 million b/d in May, compared with 31.73 million b/d in April.
    An S&P Global Platts survey released Tuesday also found that OPEC crude output in May averaged 32.12 million b/d.
    EIA forecasts OPEC supply will climb, albeit unsteadily, through 2018, climbing as high as 32.95 million b/d in July 2018 from 32.45 million b/d this month.
    Crude production in Saudi Arabia, which hit 10.63 million b/d in July 2016, averaged 10.03 million b/d in May, up from 9.98 million b/d in April, according to the EIA. Saudi output averaged 10.42 million b/d in 2016, up from 9.65 million b/d in 2013.
    Libyan crude production, which fell to 290,000 b/d in May 2016, climbed to 780,000 b/d last month, compared with 540,000 b/d in April.

    DEMAND

    EIA forecasts that in 2017 the world will produce 98.3 million b/d of global liquid fuels, 160,000 b/d less than it is expected to consume. This would be a reversal of a recent trend of supply outstripping demand amid a global crude glut.
    In 2016, production was 250,000 b/d higher than consumption and 1.34 million b/d above demand in 2015.
    The reversal in the supply/demand balance may be short-lived. In 2018, EIA projects the world will produce 110.16 million b/d of liquid fuels, 80,000 more than it is expected to consume.
    US motor gasoline consumption is forecast to climb from 9.34 million b/d in 2017 to 9.37 million b/d in 2018. US motor gasoline consumption averaged 9.33 million b/d in 2016.

    https://www.platts.com/latest-news/oil/washington/eia-steo-highlights-us-oil-output-nears-new-record-21952529

    Attached Files
    MGL Comment
    It is worth emphasising that on these EIA numbers global production is still cracking on at 1.6mbpd pa, and above demand. 
    Back to Top

    U.S. crude stocks at Cushing hub likely fell 750,000 barrels last week



    U.S. crude stocks at Cushing hub likely fell 750,000 barrels last week @Genscape

    @BloombergBriefs  
    MGL Comment
    The market has moved on to the production number. EOG said last night fracking/completion shortages could curtail US shale growth to 700kbpd this year. That's 30% lower than current adds.
    Back to Top

    USD Partners expands to carry oil sands by rail


    With pipeline capacity still relatively limited from the Canadian oil sands into the United States. Houston's USD Partners is expanding its terminal capacity in Oklahoma to offer more rail transportation access.

    Rail transportation still is considered more dangerous than pipelines, but rail car access offers oil companies more affordable transportation options from Canada when plans for new pipelines or expansions remain in the regulatory queue.

    USD Partners, which went public in 2014, plans to take oil sands via rail from its Hardisty terminal in Alberta, Canada to its new terminal in Stroud, Okla., which is being acquired for just $25 million from a partnership owned by its parent and J. Aron & Co. From there, the oil would travel via pipelines to the Gulf Coast from the Cushing, Okla. storage hub.

    "This transaction reinforces the strategic positioning of our Hardisty asset and confirms our long-held view that rail will continue as an important component of midstream transportation infrastructure in Western Canada," said Jim Albertson, USD vice president of commercial development in Canada.

    Several pipeline projects, although supported by President Donald Trump, from Canada to the U.S., such as TransCanada's Keystone XL project, remain mired amid financial, regulatory and legal hurdles.

    The Stroud terminal is located on 76 acres and includes 104 railcar spots, two 70,000 barrel storage tanks and one truck bay. Also, the terminal includes a 17-mile pipeline directly connected to the Cushing hub.

    http://www.chron.com/business/energy/article/Houston-s-USD-Partners-expands-to-carry-Canadian-11196699.php
    MGL Comment
    After the fact surely? 
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    Cowboy Country Turns Oil-Drilling Bargain as Permian Gets Pricey



    A year ago, it cost the family-owned Kirkwood Oil & Gas LLC a relative pittance to secure drilling rights in the Powder River Basin, the lonely, scrubby corner of northeast Wyoming known mostly as a home to cattle ranches and coal mines. Today, it’s a different story.

    Drilling permits on federal land that went for less than $1,000 an acre now fetch as much as $17,000, and the region has become one of the hottest prospects for new U.S. supply. Kirkwood has a lot more competition amid the sagebrush and rolling hills, including private-equity firms from Houston and big explorers like Chesapeake Energy Corp. and EOG Resources Inc.

    After a two-year slump in oil prices that led to a collapse in drilling, the Powder River Basin’s oil industry is showing signs of revival. While mostly passed over during the U.S. shale revolution, the region will get a combined $600 million in new wells this year from Chesapeake, EOG and Devon Energy Corp., and pipeline companies are drawing up plans for expansions. They hope to cash in on a geology that looks a lot like the red-hot Permian shale basin in Texas, but with land prices still a third of the cost.

    “You’re starting to see some of the optimism return,” said Steve Degenfelder, a land manager for Casper, Wyoming-based Kirkwood, which owns about 30,000 acres in the Powder River Basin and 50,000 in the Rocky Mountains area. “You don’t spend that kind of money without planning to do a lot of drilling.”

    A rebound in oil and gas could help ease the pain caused by the collapse in coal mining. The Powder River Basin is the largest source of coal in the U.S., and the business has been the region’s dominant employer for decades. But local production slipped by 21 percent last year, eliminating hundreds of jobs, as the industry lost ground to cheaper natural gas and renewable energy.

    While the the region has been supplying oil and gas for decades, the plunge in prices that began in 2014 halted almost all drilling along a 300-mile energy corridor in the Power River Basin that runs north into Montana. As crude dropped as low as $26 a barrel last year, there was just one shale-drilling rig operating in Wyoming’s Campbell and Converse counties, the heart of the basin, according to data compiled by Bloomberg.

    Last week, with oil back up around $50, there were 11. That’s still down from 32 back in 2015, but analysts expect activity will keep accelerating like it has in the Permian Basin, where companies like Pioneer Natural Resources Co. say they can break even with oil at less than $30.

    “If there’s an area where people haven’t scoured over it yet but there’s a lot of potential upside, it’s the Powder River Basin,” Peter Pulikkan, a Bloomberg Intelligence analyst in New York, said in an interview. “These are prolific wells, there’s a lot of oil, and you’re starting to see signs that it’s repeatable.”

    It’s still early days, with the optimism based on results from a handful of wells. Companies are just starting to apply new drilling techniques honed in other shale plays in recent years, and a lack of pipelines and other infrastructure means that, for now at least, local oil and gas sells at a discount to other basins, Pulikkan said.

    MORE SPENDING

    Still, explorers are gearing up to expand. Houston-based EOG doubled its Powder River leases to 400,000 acres in a $2.5 billion acquisition last year. The company plans to sink 30 new wells this year, a 50 percent increase over 2016.

    Chesapeake, based in Oklahoma City, completed several new wells in the region this year and may add an additional drilling rig, Chief Executive Officer Doug Lawler told analysts on a May 4 conference call. The company says some of its Powder River wells can now break even at below $40 a barrel.

    In another sign of rising interest, Denver-based Meritage Midstream Services II LLC said on May 3 that it had bought Devon’s pipelines and other infrastructure in the region for an undisclosed sum, with plans to double capacity of a natural-gas processing plant and add 425 more miles of pipe. Devon, based in Oklahoma City, has half a million acres of drilling rights in the region and is moving a second rig into the basin to speed up development, Chief Operating Officer Tony Vaughn said on a conference call the same day.

    “We expanded our position in the Powder at at time when the industry really didn’t understand the potential value there,” Vaughn said. “Now the industry has recognized that.”

    Wells in Converse and Campbell are producing an average of almost 1,000 barrels a day in their first month, according to data compiled by Pulikkan and BI’s Will Foiles. That rivals the output of new wells in the Permian’s Midland section, although the Texas play tends to have better infrastructure and lower costs.

    CHEAPER LAND

    Like the Permian, the Powder River Basin holds multiple, stacked layers of petroleum-soaked rock, allowing drillers to attack several targets from the same site. The region isn’t thought to hold as much oil and gas as the Permian, which is roughly twice as large. But it remains far cheaper than west Texas, where drilling rights have surged in the past year to as much as $60,000 an acre.

    “Companies that can’t play ball at that price are looking at other areas that have some of the same characteristics,” Kirkwood’s Degenfelder said.

    With Powder River coal slumping, oil and gas could be “if not the Second Coming, maybe at least a softening of the blow,” said Charles Mason, a petroleum economist at the University of Wyoming in Laramie. “Coal seems like it’s yesterday’s fuel, and we have gobs of natural gas, so maybe that’s where you should be banking if you’re the state of Wyoming.”

    http://boereport.com/2017/06/05/cowboy-country-turns-oil-drilling-bargain-as-permian-gets-pricey/

    Attached Files
    MGL Comment
    The Niobrara.

    Let's start from the top:

    Image title
    Here's the map of North America during the Cretaceous. There's an enormous shallow sea running from the Yucatan to Alaska. From south to north we have Mexico's fecund Oil rocks, the Permian, the Niobrara, the Bakken, the Duvernay, the Oil Sands and Alaska's north slope. Every single one of these locations is intimately connected with Oil. Image title
    We know the Wattenburg in Colorado is extremely profitable, and Oily. Image title
    Of the top 12 shale wells in the Niobrara only 4 are in the D.J Basin. So the present dominance of the DJ Basin (Anadarko/Noble etc) is simply an economic reaction to the Oil crash.Image title
    In May Chesapeake drilled a 'monster' well with 'enhanced completions' and claimed 2.7bn boee of resource in the immediate area.  This is the Powder River basin in Wyoming. 

    Notable: in recent weeks Baker Hughes is reporting some 6-12 rigs have moved into the Niobrara. 
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    Cheniere cleared to introduce gas to Sabine Pass LNG Train 4


    Houston-based LNG player Cheniere received permission to introduce gas and refrigerants to the fourth liquefaction train at its Sabine Pass LNG export facility in Louisiana.

    In its approval of Cheniere’s request filed on May 26, the Federal Energy Regulatory Commission added that the approval does not grant Cheniere the authority to commence the construction or commissioning of other project facilities at the LNG terminal.

    FERC said in its filing that the project has to comply with all applicable remaining terms and conditions.

    Cheniere’s Sabine Pass LNG export facility is ramping up its export volumes with 18 cargoes, totaling about 61 billion cubic feet, exported from its first three liquefaction trains in May, a record monthly volume since February last year.

    The company is developing up to six trains at its Sabine Pass terminal with each train expected to have a nominal production capacity of approximately 4.5 million tons per annum.

    According to a previous filing, Cheniere expects the fourth train to reach substantial completion in the second half of 2017.

    http://www.lngworldnews.com/cheniere-cleared-to-introduce-gas-to-sabine-pass-lng-train-4/
    MGL Comment
    Image title

    US LNG export completions accelerate from here. 
    Image title
    By the end of 2020 the US will be closing in on Australia as #2 worldwide. 
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    Canada: Woodfibre LNG secures 40-year export license


    Canada has approved a 40-year export license for the proposed Woodfibre LNG export project in Squamish, British Columbia.

    The announcement was made by Natural Resources Minister Jim Carr.

    “We know there is tremendous demand for natural gas, especially in the fast-growing countries of Asia. The approval of Woodfibre LNG’s 40-year export licence provides certainty for investors while creating jobs for Canadians as the world moves toward a low-carbon future,” Carr said.

    The National Energy Board (NEB) announced in April that it had granted the 40-year export license to the Woodfibre LNG project, subject to a Governor in Council approval.

    The LNG export project received a 25 license to export about 2.1 million tonnes of LNG per year in December 2013. However, amendments to the National Energy Board Act Part VI Regulations in 2015 increased the maximum term to 40 years, Woodfibre LNG Limited

    However, amendments to the National Energy Board Act Part VI Regulations in 2015 increased the maximum term to 40 years, Woodfibre LNG Limited, the project developer said in a statement.

    The Woodfibre LNG project is located approximately 7 km west-southwest of Squamish-

    Pacific Oil & Gas Limited, part of the Singapore-based RGE group of companies, the parent company of Woodfibre LNG reached the final investment decision for the project in November last year.

    The project involves construction and operation of an LNG export facility on the previous Woodfibre pulp mill site, which would have a storage capacity of 250,000-cbm.

    http://www.lngworldnews.com/canada-woodfibre-lng-secures-40-year-export-license/
    MGL Comment
    Now construction is not due to start until year end here at Woodfibre, so unfortunately the green/liberal coalition will be in power. This is a small project in an isolated location, so it might squeeze past the greens as a test of concept. It all depends how religious everyone is feeling. 
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    Uranium

    Germany's top court to announce fuel tax ruling on June 7


    Germany's highest court will on Wednesday announce a long-awaited decision that will ultimately determine whether the country's utilities will get back nearly 6 billion euros ($6.8 billion) in taxes they paid for their use of nuclear fuel rods.

    The ruling will be published via a press release at 0730 GMT (0930 CET, the German Constitutional Court said in a statement on Tuesday.

    E.ON, RWE and EnBW are pinning their hopes on the verdict as it marks the last chance to challenge the tax after the European Court of Justice in 2015 ruled that it did not breach European Union laws.

    Shares in E.ON and RWE were both up about 1 percent following the announcement, with traders pointing to the billions of euros they can claim back should the court rule in their favor.

    "There is a good chance of a positive outcome for the utilities," Bernstein senior analyst Deepa Venkateswaran wrote in a note. "We believe that the bulk of the upside is not priced in the stocks."

    A fuel element tax, introduced in 2011 and expired in 2016, required firms to pay 145 euros per gram of nuclear fuel each time they exchange a fuel rod, usually about twice a year. E.ON has paid about 2.8 billion euros, while RWE and EnBW have paid 1.7 billion and 1.44 billion, respectively.

    http://www.reuters.com/article/us-germany-nuclear-court-idUSKBN18X0PP

    German utility companies scored a major victory on Wednesday in a long-running dispute with the government after the country’s highest court ruled a law imposing a tax on nuclear fuel was unconstitutional.

    Attached Files
    MGL Comment

    FRANKFURT, June 7 (Reuters) - German utilities scored a major victory on Wednesday when the country's top court declared a nuclear fuel tax as illegal, enabling E.ON, RWE and EnBW to claim back about 6 billion euros ($6.76 billion).

    In a long-awaited verdict closely watched by investors and analysts, Germany's Constitutional Court said the tax, which was imposed between 2011 and 2016, was "formally illegal and void".


    Verdict in. 
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    Agriculture

    U.S. and Mexico sugar talks go into overtime after day of drama


    U.S. Commerce Secretary Wilbur Ross on Monday extended the deadline for U.S.-Mexico sugar trade negotiations by 24 hours, and sources on either side of the spat said U.S. industry added new demands after the governments struck a provisional deal.

    Ross said extra time was needed to complete "final technical consultations" for a deal. At stake is the possibility of stiff U.S. duties and Mexican retaliation on imports of American high-fructose corn syrup ahead of wider trade talks expected in August.

    An agreement in Washington would end a year of wrangling over Mexican sugar exports. The latest talks began in March, two months after President Donald Trump took power vowing a tougher line on trade to protect U.S. industry and jobs.

    They are seen as a precursor to the more complex discussions on the North American Free Trade Agreement between the United States, Mexico and Canada.

    "The two sides have come together in quite meaningful ways, but there remain a few technical details to work out," Ross said in a statement as time was running out on a Monday deadline.

    "We are quite optimistic that our two nations are on the precipice of an agreement we can all support, and so have decided that a short extension of the deadline is in everyone's best interest."

    Ross did not provide details of the issues yet to be resolved in his statement.

    ICE U.S. domestic raw sugar futures for July delivery finished down 2.9 percent at 27.66 cents per lb, in the largest one-day loss in over a year.

    While one Mexican official familiar with the talks described what was still being discussed as details of "implementation" of the main points already agreed, another expressed frustration with the disruptions in the talks.

    The officials and two other sources with direct knowledge of the talks in the morning said an agreement had been struck between the governments. However, as the day progressed, one of the officials began to worry about growing resistance from U.S. industry, saying he thought lobbyists were trying to postpone an agreement.

    The Mexican official and a U.S. industry source said the U.S. sugar industry then came back with additional demands outside of the terms agreed on earlier.

    The demands included changes to a "first refusal right" that would allow Mexico to sell U.S. refiners any additional sugar they needed beyond agreed quotas, the official said, complaining that the demands were like "a moving target."

    That source said the cane refiner ASR Group, a partnership that includes the politically connected Fanjul family, was active in raising the new requirements. The Fanjuls own Domino Sugar, C&H, and Florida Crystals.

    ASR Group declined to comment on its involvement in the talks.

    In an earlier attempt to break the impasse, U.S. Commerce Secretary Ross came close to hammering out a compromise deal before a deadline in May, but that also fell through when the U.S. sugar lobby upped pressure on U.S. lawmakers, said two sources familiar with the talks.

    The powerful lobby also includes Imperial Sugar Co, owned by Louis Dreyfus Co, and U.S. cane and beet growers.

    A Washington-based source familiar with the negotiations said that the two sides had "come together" on the four largest issues separating the U.S. and Mexican sugar industries, but some technical details still needed to be worked out. The person declined to elaborate.

    The agreed terms would lower the proportion of refined sugar Mexico can export to the United States to 30 percent of total exports, from 53 percent, one of the Mexican government sources said.

    The agreement would also cut the quality of Mexico's crude sugar exports to 99.2 percent, from 99.5 percent, the source said, tackling a key complaint of U.S. refiners, who have said Mexican crude sugar was close to refined and going straight to consumers.

    It also contemplated an increase on the price paid for Mexican sugar, to 23 cents per lb for raw sugar and 28 cents for refined, the source said.

    Corn refiners including Archer Daniels Midland Co, Cargill Inc, Corn Products International Inc and Tate & Lyle Plc would be affected if a final deal is not reached and Mexico resorted to retaliatory tariffs against fructose syrup.

    http://www.reuters.com/article/us-usa-trade-mexico-delay-idUSKBN18W2K4
    MGL Comment
    Sugar. 

    World price: $0.14c
    US price: $0.27c 

    US producers and consumers: largely private sector. 
    Mexico: Gov't sector, about 1m employees!

    Background: the US has maintained Sugar import controls since 1789, (there maybe a clause in the constitution on this one!) NAFTA agreement went pear shaped about ten years ago when the gradual ratchet on NAFTA provisions allowed unlimited volumes of Mexican sugar into the USA. 
    Complicating factors: US exports of high corn fructose syrup to Mexico are large, and sugar buyers have leverage in congress too. 

    Fact: there has never been free trade in Sugar. 

    Wilbur Ross comments are quite illuminating:

    Mr. Ross said “the Mexican side has agreed to nearly every request made by the U.S. industry,” but he added that the U.S. sugar industry overall isn’t ready to support the pact. Washington protects U.S. sugar growers and refiners from some foreign competition, but policy makers also have to take into account confectioners who want easy access to sugar at the lowest possible price.

    “We now need to make a definitive agreement, and we’re hoping in that process the industry will come on board,” Mr. Ross said.

    Everyone unhappy, aside from the Mexican's who just seem relieved. 


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    BHP to grow potash business to size of iron ore — report


    BHP, the world's largest mining company by market capitalisation, is considering to grow its potash business to the size of its iron ore division, but only under “certain circumstances.”

    Speaking to Japanese newspaper The Nikkei,chief executive Andrew Mackenzie said that as part of the company’s recently announced restructuring, BHP expects to reinvest what it gets for its US shale gas assets into potash.

    BHP is currently developing its Jansen potash mine in Canada, which would be the company's biggest single investment ever.

    The results of this strategy, however, won’t be immediate, he warned: "It's taken us 50 years to create today's iron ore business. It will be another 50 years to create a potash equivalent. So you have to start somewhere," Mackenzie said.

    And that starting place seems to be Canada’s Saskatchewan province, where the world’s third largest iron miner is currently building its massive Jansen potash mine.

    To date, BHP has committed a total investment of $3.8 billion to move Jansen into production. From that total, $2.6 billion have been set aside for surface construction and the sinking of shafts, though analysts predict the total cost will be close to $14 billion.

    Mackenzie said last month it was looking at a phased expansion of Jansen, which is projected to produce 8 million tonnes of potash a year or nearly 15% of the world's total.

    He added the company could seek approval from the board for such expansion as early as June 2018, with production beginning in 2023.

    Prices for the crop fertilizer ingredient, however, are not favourable — they are still hovering around $230 a tonne, less than half what they were only five years ago.

    Besides, BHP’s iron ore business brings in about $9 billion a year, which doesn’t look like an easy target to match by any other division, particularly by potash, given current prices.

    But the company is looking long-term and has repeatedly stated it believes rising demand for fertilizer in growing nations, particularly China and India, will lead to a long-term price increase for the commodity.

    http://www.mining.com/bhp-grow-potash-business-size-iron-ore-report/
    MGL Comment
    The assumption of rising demand for Potash in China and India has to be questioned. We know nitrate intensity in theses two countries is way too high, we know both have water pollution issues in scale. We know that OECD farm practises have markedly reduced potash intensity per acre. We might be able to infer that China/India farm practises follow the same route. 
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    Norway's Yara says Qatar fertiliser export unaffected by diplomatic row



    The export of fertilisers from Qatari producer Qafco is unaffected by a regional diplomatic row that has cut off other commodity shipments, Norway's Yara said on Tuesday.

    Yara has a 25-percent stake in Qafco while state-controlled Industries Qatar owns the rest.

    "We have no logistics problems. Production from that facility is shipped from a dedicated port (in Qatar)," said a Yara spokesman.

    Yara's share of Qafco's production amounted to 1 million tonnes of ammonia and 1.5 million tonnes urea fertiliser, he added.

    http://www.reuters.com/article/gulf-qatar-yara-intl-idUSL8N1J31WQ

    Attached Files
    MGL Comment
    No disruption here. 
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    Precious Metals

    Gold climbs to its highest finish in 7 months


    Gold prices climbed Tuesday to settle at their highest level since early November. Uncertainty surrounding a rift between Qatar and other Middle East nations, the upcoming U.K. election and European Central bank meeting lifted investment demand for the precious metal.

    http://www.marketwatch.com/story/gold-climbs-to-its-highest-finish-in-7-months-2017-06-06
    MGL Comment
    Gold has now been between $1100 and $1400 for 4 years. 
    Back to Top

    China's Gold Imports Seen Jumping 50% as Haven Demand Booms


    China, the world’s biggest gold market, may boost imports through Hong Kong by about half this year as local investors seek to protect their wealth from currency risks, a slowing property market and volatile stocks, according to the Chinese Gold & Silver Exchange Society.

    Mainland China is set to import about 1,000 metric tons from the territory in 2017, said Haywood Cheung, president of the century-old exchange in Hong Kong which trades physical gold and silver. That compares with net purchases of 647 tons last year and would be the biggest since 2013, data from the Hong Kong Census and Statistics Department compiled by Bloomberg show.

    Demand is rising on concerns over property, share and bond markets and the outlook for the yuan, amid a government drive to reduce leverage in the financial system. Local consumption was up 15 percent in the first quarter, with sales of bars for investment climbing more than 60 percent and dwarfing a 1.4 percent rise in jewelry buying, according to data from the China Gold Association. China also imports gold from Switzerland.

    “People are looking at other means to invest, a safe haven to protect their renminbi because of the depreciation, so everybody starts to look for safe haven products,” Cheung said in an interview at a precious metals conference in Singapore on Monday. “So I think we’re going to have a good year.”

    Imports from Switzerland topped 100 tons in the first four months of the year, according to calculations on data reported by the Swiss Federal Customs Administration. In December, China imported 158 tons from the country, taking the total for the year to 442 tons, up from 288 tons in 2015, the data show.

    Investment Demand

    Global investors have also increased holdings. Assets in the SPDR Gold Trust, the world’s largest exchange-traded fund backed by bullion, have climbed by more than 6 percent since the end of January to 851 tons as of June 5. Bullion rose as much as 0.8 percent to $1,289.95 an ounce on Tuesday, the highest level in about seven weeks, and traded at $1,288.50 by 10 a.m. in London.

    The Chinese Gold & Silver Exchange Society is planning to build a bonded warehouse in Qianhai, with a storage capacity of 1,500 tons of gold, and completion is expected in two to three years, said Cheung, who has 33 years of experience in the industry. A temporary warehouse which holds about 50 to 100 tons of gold will be operational by the end of this year, he said.

    The society has an offshore gold product, denominated and settled in renminbi, with current transactions of about 20 billion to 30 billion yuan daily, Cheung said. This isn’t good enough and one way to improve it is to build the warehouse to get in touch with the China market, he said. The Shenzhen region supports about 3,000 jewelry manufacturing companies which supply 70 percent of the Chinese retail market, he said.

    While the case for investment demand in China is reasonably “solid,” jewelry demand will probably decline again this year in volume terms as the consumer spends money on other things such as property or travel, or prefers 18 karat instead of 24 karat products, said Philip Klapwijk, managing director of Precious Metals Insights Ltd.

    “I suspect that jewelry demand will be down more in tonnage terms than investment will be up,” Klapwijk said on the sidelines of the conference organized by the Singapore Bullion Market Association. “So demand in China this year could be down a tad. Financial use of gold in China could also see some reductions.”

    https://www.bloomberg.com/news/articles/2017-06-06/china-s-gold-imports-seen-surging-50-as-investors-seek-haven?cmpid=socialflow-twitter-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social
    MGL Comment
    China turns back to Gold.

    Last year the Chinese preferred bitcoin:
    Image titleBut volumes have crashed in China as regulators stepped in to tap shoulders. 

    It now looks like they are coming back to Gold. 
    Back to Top

    Base Metals

    Qatar's aluminium exports blocked, Norsk Hydro seeking other routes



    Qatar's isolation by top Arab nations has already hit aluminium exports from a plant part-owned by Norway's Norsk Hydro which warned on Tuesday it would take time to restart them.

    Saudi Arabia, Egypt, the United Arab Emirates and Bahrain on Monday cut ties with Qatar which denounced the move as predicated on lies about it supporting militants. Qatar has often been accused of being a funding source for Islamists, as has Saudi Arabia.

    "Most Qatalum shipments normally go through the large Jebel Ali port in (the) UAE, but this port looks to be closed for all Qatar shipments from Tuesday morning," Norsk Hydro said.

    Norsk Hydro and State-owned Qatar Petroleum [QATPE.UL] each own 50 percent of the Qatalum joint venture, which produces more than 600,000 tonnes of primary aluminium per year.

    The aluminium is exported by ships from Qatar to the Jebel Ali port, where the metal is then transferred onto larger vessels and shipped to customers in Asia, Europe and the United States.

    "Our people are looking at whether we could ship directly from Qatar or use an alternative regional hub," a Norsk Hydro spokesman told Reuters.

    Any solution would take time, he added. "There are several alternatives we are looking at and we will look at all possibilities," he said.

    "But this is complex and will take some time."

    Shares in Norsk Hydro were down 1.8 percent at 0818 GMT, lagging an Oslo benchmark index which was 0.6 percent lower.

    "The most important (thing) is that they get the aluminium out of Qatar, but this could lead to delays and some financial effects. But I don't think it is anything dramatic," Danske Bank analyst Eirik Melle said.

    http://www.reuters.com/article/us-gulf-qatar-norsk-hydro-aluminium-idUSKBN18X0HF
    MGL Comment
    600/- mt of Aluminium capacity disrupted. 
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    Steel, Iron Ore and Coal

    Fall in iron ore price prompts rethink on grade differentials



    As the iron ore market gathers in the Czech capital of Prague this week, a reevalution of iron ore products may be underway, based on lower pricing and changes in supplies. This may be increasing an urgency to stay competitive and secure attractive outlets.

    An overriding issue will be the recent 40% or so decline in reference spot fines prices delivered to China in the past three months. In a twist of fate, prices are trending close to where they were a year ago, falling back after a peak late 2016 and strengthening further into Q1.

    However, more than the latest price decline, regional pricing premiums in segments such as pellets, concentrates and lump may be increasingly fought out. These premiums are taking on a larger share of overall pricing, given the sharp decline for fines.

    A focus on defeating effects from higher silica content from southern Brazil ores and care around phosphorous levels remain key areas in procurement executives’ plans.

    At the same time, the huge relative discounts now on offer for lower grade, and higher alumina fines, may make new combinations and Australian ores in new markets more attractive.

    The buyers coming together with traders, miners and service providers at banks and shipping groups are predominantly securing materials for mills in Europe, the Middle East and the US.

    Their focus is on efficiency and high utilization rates at the mills, and for iron ores to eventually meet qualities of steel for the more demanding applications in the market, and to customers with tighter tolerances.

    A combination of greater Atlantic demand to secure expanding supplies of Vale’s Carajas fines from northeast Brazil, along with widening interest in blast furnace grade pellets into new US and Middle East plants may be seen.

    The right value-in-use to justify pricing relativities among grades, and material availability, will determine changing allocations and portfolio make up.

    Usage of BF pellets growing at DRI and HBI plants, in addition to furnaces, is adding a twist, with suppliers of lower silica and alumina pellets finding a wider pool of bidders.

    PRICES DOWN

    The elephant in the room, though, is price.

    While spot iron ore has a history of price volatility and sub $60/dry mt CFR China prices may prompt new suppliers to reevaluate operating, the recent decline is partly dictated by long-running fundamentals.

    An increase in supplies from Australia first, and since last year from Brazil, with more concern on China’s steel output longevity are factored in.

    Chinese government policies around propping up its economy in a transition to greater consumerism and environmental awareness of air quality and mining emissions are a key driver for imports.

    As for Beijing, providing sufficient stimulus for the country’s steel production and demand this is mainly via infrastructure projects — the One Belt One Road a convenient soundbite for part of the largesse — and managing property demand growth.

    This too is injecting further swings in iron ore demand and pricing.

    It all comes as futures markets in steel, iron ore and coking coal in China and Singapore further influence physical purchasing sentiment.

    China’s steel output was still growing this year, with hot metal rates up 4.4% year-on-year through April, despite widespread industry belief a peak in production has already been reached, or is near.

    As for supply additions, Vale believes the market may be balanced this year, on higher demand, and more focus on low silica and alumina grades. A ramp up at Carajas is the biggest new supply factor, which it will ultimately control.

    Global iron ore supply may increase by 70 million mt globally this year, Vale said in April, accounting for supplies to cover just over 5% of China’s crude steel output.

    Carajas shipped for blending in Asia may lead European and Persian Gulf buyers to remain concerned around the availability of high grade supplies.

    Prague may be the occasion to ensure visibility in supplies and the right pricing relativity.

    http://www.hellenicshippingnews.com/fall-in-iron-ore-price-prompts-rethink-on-grade-differentials/
    MGL Comment
    It is worth mentioning that the new stream of Carajas fines is extremely high grade, at least according to Vale. China's anti-pollution drive is definitely making buyers more circumspect on price vs quality. 
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    China's Tangshan starts new campaign to implement steel cuts



    The major Chinese steel city of Tangshan has launched a fresh crackdown on mills that illegally restart production or violate industry overcapacity rules, according to a notice published by the China Iron and Steel Association on June 5.

    Tangshan, in Hebei province, produced 88.3 million tonnes of steel last year, up 6.8% year on year and more than the entire United States, putting it on the front line of the central government's efforts to curb overcapacity in the sector. It aims to close around 8.6 million tonnes of annual production capacity this year.

    But the city was the subject of a central government investigation earlier this year amid concerns that firms continued to raise steel output despite mandatory capacity cuts.

    New guidelines drawn up by the Tangshan planning commission promise to put grassroots government departments under greater pressure to comply with anti-pollution and overcapacity guidelines, and identified the names of officials tasked with ensuring that shuttered plants do not reopen, power and water supplies are cut off and equipment dismantled.

    The guidelines also cover illegal new capacity expansions in the steel, cement and coking coal sectors, as well as the closure of coal mines in the province.

    Hebei aims to cut major emissions by more than 15% by 2020 and will step up efforts to force local industries to meet their pollution targets for 2017, said a recent local government plan.

    The province, which surrounds China's capital Beijing, is already under heavy political pressure to bring concentrations of small, breathable particles known as PM2.5 down by 25% over the 2013-2017 period, and it admitted last month that it was still not properly enforcing state pollution standards and policies.

    Average PM2.5 in Beijing-Tianjin-Hebei rose nearly 20% year on year in the first four months of 2017, and the region is expected to introduce tough new restrictions on industry in the second half of the year to ensure its 2017 targets are met.

    Hebei also said it would establish a fully integrated environmental information platform by the end of this year enabling it to keep track of and punish offenders.

    http://www.sxcoal.com/news/4556932/info/en

    Attached Files
    MGL Comment
    Image title
    So Beijing has killed the privates sector, and sent out armies of inspectors, yet the AQI's of even the Beijing-Tianjin corridor which has been inspected so many times now, remain stubbornly high. The SOE's are going to have to comply too. President Xi's ambition to have tea on the lawn in Tiananmen square under a blue sky is just not happening, and thats embarrassing. 
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    Shanghai steel falls for 9th day on weak demand outlook, pressures iron ore



    Chinese steel futures fell for a ninth straight day on Tuesday, pressured by expectations of slow demand that have also dragged spot iron ore prices to their weakest level in nearly eight months.

    Construction activity typically eases in China during summer, curbing steel consumption in the world’s top user and producer of the material.

    The most-active rebar on the Shanghai Futures Exchange was down 1.1 percent at 2,955 yuan ($435) a tonne by 0207 GMT. The construction steel product touched 2,906 yuan earlier, its lowest since May 5, and has lost more than 11 percent over the nine sessions to Tuesday.

    Expectations of slower seasonal steel demand in China and moderating growth in property development have pulled down steel prices, said Ric Spooner, chief market analyst at CMC Markets.

    “We’re also seeing a bit of wind-back in speculative interest given that authorities have moved to tighten up on liquidity to some extent,” said Spooner.

    Weaker steel prices have curbed Chinese steel mills’ appetite for raw material iron ore.

    Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB dropped 3.3 percent to $55.90 a tonne on Monday, the lowest since Oct. 10, according to Metal Bulletin.

    It was the steepest single-day decline since May 26 for the spot benchmark which touched $94.86 in February.

    “Steel mills were also reportedly more concerned with paying off quarterly debts than procuring additional iron ore,” Commonwealth Bank of Australia said in a note.

    Unlike spot prices, iron ore futures in China were largely steady on Tuesday after a two-day spike.

    “Spot iron ore prices remained under pressure as steel futures continue to drift towards the support level of around 2,800 yuan. I think any upside in the Dalian price may be fairly limited,” said Spooner.

    The most-traded iron ore on the Dalian Commodity Exchange was last up 0.1 percent at 436 yuan per tonne.

    http://www.hellenicshippingnews.com/shanghai-steel-falls-for-9th-day-on-weak-demand-outlook-pressures-iron-ore/
    MGL Comment
    Where now at the point where new capacity ideas likely die, which is good, and low quality Chinese domestic capacity cannot make a dime, that's good too. Unfortunately, I am still looking at silver linings. 

    ALL the markets attention is one what the miners do NEXT. They are making the right sort of noise, but we need ACTION. Capex bad. Dividends and share buybacks good. 
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    Egypt imposes tariffs on Chinese, Turkish, and Ukrainian steel - ministry



    Egypt has imposed temporary import tariffs on rebar steel from China, Turkey and Ukraine to protect local manufacturers suffering from losses, the trade ministry said in a statement on Tuesday.

    The tariff will be set at 17 percent for Chinese steel, 10-19 percent for Turkish steel, and 15-27 percent for Ukrainian steel, it said.

    The decision followed an investigation that has gathered complaints from local manufacturers failing to compete with imported alternatives, the statement said.

    “It (the decision) is intended to protect local manufacturing from harmful practices by imported alternatives," Trade Minister Tarek Kabil said in the statement.

    The decision will remain valid for fourth months but it was not immediately clear when it would come into effect.

    http://www.reuters.com/article/egypt-trade-steel-idUSL8N1J347B
    MGL Comment
    Whats the betting this ends up being permanent?
    Back to Top
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