Mark Latham Commodity Equity Intelligence Service

Thursday 11th August 2016
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    Macro

    China July PPI down 1.7pct on year


    China's Producer Price Index (PPI), which measures inflation at wholesale level, dropped 1.7% year on year but up 0.2% month on month in July, showed the latest data released by the National Bureau of Statistics (NBS) on August 9.

    It indicated that China's producer deflation eased to its slowest decline in nearly two years in July, a positive sign of improving conditions of the world's second largest economy.

    In July, prices of coal mining and washing industry fell 5.3% on year but up 0.6% on month; prices of oil and natural gas mining industry slid 15.9% on year but up 1.8% on month.

    Besides, prices of ferrous metal industry dropped 3.7% from the previous year but up 0.4% from June, data said.

    During the first seven months this year, China's PPI dropped 3.6% on average from the previous year.

    Of this, the average price of coal mining and washing industry fell 12.9% on year; while the price of oil and natural gas mining industry decreased 27.2% on year; price of ferrous metal industry dropped 10.4% from the previous year, data showed.

    The data came along with the release of the Consumer Price Index (CPI), which climbed 1.8% from the year prior and rose 0.2% on month in July.

    http://old.en.sxcoal.com/0/151120/DataShow.html
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    Oil and Gas

    OPEC Says Weak Oil Demand Is Here to Stay


    Weakness in global oil markets, which has dragged prices to a three-month low, may persist as demand slows seasonally and fuel inventories remain abundant, OPEC predicted.

    There are “lingering concerns” that U.S. and European refiners may reduce processing rates as profits fade amid a continuing “overhang” of crude and refined fuels, the Organization of Petroleum Exporting Countries said in its monthly report. Gasoline consumption will taper off in the U.S. with the end of the summer-vacation driving season, it said.

    “With the end of the driving season in the third quarter, gasoline demand could see a seasonal downward correction,” the organization’s Vienna-based research department said. High inventories of heating oil and diesel fuel around the world mean “the supply side could also continue exerting pressure,” it said.

    Oil’s recovery from the 12-year lows reached in January sputtered out in early June amid plentiful stockpiles, faltering demand growth and signs that U.S. explorers could resume drilling. OPEC, which is sticking with a strategy to maximize its market share and let prices sag, said Monday it will hold informal talks on the sidelines of a conference in Algiers next month.

    Weaker Margins

    Brent futures traded at $44.92 a barrel on the ICE Futures Europe exchange at 12:09 p.m. in London, having sunk to $41.51 on Aug. 2, the lowest intraday price since April 18.

    “Refining margins have been weakening during the last month due to high product inventories, which were caused by the lower-than-expected increase in demand,” according to the report.

    The re-balancing of world markets will resume towards the end of the year, according to OPEC. Consumption will pick up in the Northern Hemisphere as winter approaches, reversing some of the discount on oil prices for immediate delivery and whittling away the excess in inventories, OPEC forecast.

    Production from OPEC’s members increased by 46,400 barrels a day to 33.106 million a day in July, according to external sources compiled by OPEC. That’s in line with the level the group expects will be needed in the third quarter. OPEC included Gabon, which became its 14th member on July 1, in both June and July production totals.

    Production from Saudi Arabia, the group’s biggest member, was mostly stable at 10.477 million barrels a day in July, according to the external sources. The report also includes production data reported directly by member countries, which showed Saudi output rising by 123,000 barrels a day to 10.673 million a day. Iraq’s direct submission showed its output rising by 57,000 barrels a day last month to 4.606 million a day.

    OPEC kept estimates for global supply and demand this year and next mostly unchanged from last month’s report.

    http://www.bloomberg.com/news/articles/2016-08-10/opec-signals-oil-market-lull-may-persist-on-muted-fuel-demand
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    Saudi Arabia Said to Report Record Oil Output on Summer Demand


    Saudi Arabia told OPEC that it pumped a record 10.67 million barrels of oil a day in July to meet a summer surge in domestic demand, an increase that will do nothing to endear OPEC’s leading exporter to other members seeking output limits to shore up prices.

    The figures were submitted to the Organization of Petroleum Exporting Countries, according to two people with knowledge of the data, asking not to be identified because the information wasn’t made public. The output beat the previous all-time production high of 10.56 million barrels a day in June 2015, according to OPEC submissions. OPEC’s monthly report is scheduled to be released Wednesday.

    Oil extended its decline, dropping as much as 1.6 percent to $42.08 a barrel in New York trading.

    OPEC will hold informal talks ata conference in Algiers next month, as members constantly discuss ways to stabilize the market, Mohammed Al Sada, Qatar’s energy minister and holder of OPEC’s rotating presidency, said Monday. Russia, Saudi Arabia and other major oil exporters met in Doha in April in a bid to stabilize markets by putting caps on output. The effort collapsed after Saudi Arabia demanded that rival Iran be a part of the deal. At the time, Iran had ruled out any limits on its output as it ramped up production after the lifting of international sanctions.

    “It’s not surprising to see Saudi output at record,” said Anas al-Hajji, an independent analyst and former chief economist at NGP Energy Capital Management LLC in Houston. “The Saudis didn’t want to cut back on exports and they needed to produce more to meet local summer demand. Also, the Saudis are processing more crude this year at refineries as they want to grow in products market.”

    Power Demand

    Power demand in the Middle East peaks in the hottest months of July and August, when Saudis turn up their air-conditioners to cool homes and offices. Saudi Arabia was planning to boost crude production to 10.5 million barrels a day for the 2016 summer, a person with knowledge of Saudi output policy said in April.

    Gasoline shipments from Saudi Arabia, the world’s biggest crude exporter, grew to 213,000 barrels a day on average between January and May, up by 76 percent from the same period a year ago, according to data from Joint Organisations Data Initiative compiled by Bloomberg.

    Saudi Arabia’s increased crude output comes as Russia and Iran are boosting shipments to top demand markets such as India and China. Iran boosted crude output to 3.85 million barrels a day and plans to keep boosting production to 4.6 million barrels in five years, Fars news agency reported Wednesday, citing comments made by Oil Minister Bijan Namdar Zanganeh at parliament.

    Any talk about a new oil production freeze pact is very premature and a mere wishful talking up of market sentiment” while Russia, Saudi Arabia and Iran keep boosting output, said Mohamed Ramady, London-based independent analyst and former professor of economics at King Fahd University of Petroleum and Minerals.

    After years of dominating crude sales to the Chinese market, Saudi Arabia is being challenged by Russia for supplying China, the world’s biggest energy consuming nation. The Asian country’s monthly imports from the Middle Eastern kingdom have been exceeded by purchases from Russia seven times since May 2015, customs data compiled by Bloomberg show.

    http://www.bloomberg.com/news/articles/2016-08-10/saudi-arabia-said-to-pump-record-oil-output-to-meet-summer-usage
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    Saudi-Iran Oil Rivalry Heats Up as OPEC Seeks to Stabilize Price


    Saudi Arabia and Iran are showing no let up in their market share war, just days after OPEC announced an informal meting to discuss ways to stabilize falling prices.

    The Organization of Petroleum Exporting Countries announced on Monday it will hold informal talks on the sidelines of a conference in the Algerian capital next month. Saudi Arabia, the world’s largest crude exporter, told OPEC that it boosted oil output to a record 10.67 million barrels a day in July, two people with knowledge of the data said. Iran’s output is up to 3.85 million barrels a day, Fars news agency reported, citing Oil Minister Bijan Namdar Zanganeh. That’s the highest since 2008, data compiled by Bloomberg show.

    “It only gives one signal to the markets that the Saudis are not here to scale back, especially in the face of Iranians bringing more oil to the market,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg television interview. “I doubt there’s going to be any concrete agreement despite there being talks.”

    Saudi Arabia typically pumps more oil in the summer to meet higher domestic energy demand from air conditioning. The kingdom is also engaged in a battle for market share with rival Iran and has cut prices to its customers in Asia, the biggest market for both exporters. Kuwait on Wednesday also cut its pricing to Asia, widening the discount to $2.65 a barrel for September from $1.70 a barrel in August.

    OPEC’s smaller producers, which have driven calls to cap the group’s output, can only look on as prices tumbled more than 50 percent since mid 2014. The last effort to freeze output in April, which also included non-OPEC producer Russia, collapsed after Saudi Arabia demanded that Iran be part of the deal. Iran still opposes any limits on its production, with the country seeking to reclaim its pre-sanctions share of OPEC’s total output before contributing to any production freeze, according to an OPEC delegate who asked not to be identified.

    OPEC nations aren’t pushing to revive the aborted April proposal, two delegates from the group said last week, and analysts don’texpect any deal to be reached.

    “These planned OPEC discussions may be viewed by some as a cheap possibility to try and stabilize the market,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “It’s more likely to be a way of further destroying the market’s confidence in OPEC, as the organization cries wolf once again.”

    http://www.bloomberg.com/news/articles/2016-08-10/saudi-iran-oil-rivalry-heats-up-as-opec-seeks-to-stabilize-price
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    Iran Expects $25 Billion Oil Contracts Signed Within Two Years


    Iran expects foreign oil companies to sign deals valued at $25 billion over the next one to two years under the terms of a new contract model approved last week, the managing director of the National Iranian Oil Co. said.

    The state energy producer plans to tender contracts over a period of six months to a year to develop several oil and gas fields, the oil ministry’s news service Shana reported Tuesday, citing Ali Kardor. NIOC has identified 34 foreign companies as suitable bidders, he said. NIOC is also seeking investments under existing models, he said.

    Iran approved the new contract model on Aug. 3 in a push to bring foreign investment and technology to rebuild its energy industry, the largest sector of the economy. The government hopes foreign companies will invest as much as $50 billion a year in Iran’s oil industry. Major European oil companies such as Italy’s Eni SpA and France’s Total SA have expressed an interest in developing Iran’s oil and gas fields.

    NIOC has identified 12 to 13 fields as a priority for the first round of investment, Kardor said, without naming the fields. Oil Minister Bijan Namdar Zanganeh last week said Iran’s priorities would be jointly owned oil and gas fields, and producing assets where recovery rates could be improved.

    International oil companies must form a joint venture with an Iranian partner under the new contract model. The government has approved eight Iranian exploration and production firms as eligible partners, and Kardor said this number was likely to increase.

    Iran has already succeeded in meeting its pledge to regain market share it lost due to the sanctions over its nuclear program. Iran boosted crude output to 3.85 million barrels a day, Fars news agency reported Wednesday, citing comments made by Zanganeh at parliament. That would be the highest since December 2008, according to data compiled by Bloomberg.

    http://www.bloomberg.com/news/articles/2016-08-10/iran-expects-25-billion-oil-contracts-signed-within-two-years
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    Thailand's PTT Global Q2 profit down 45 pct, hit by shutdowns

    Thailand's PTT Global Q2 profit down 45 pct, hit by shutdowns

    PTT Global Chemical Pcl , Thailand's largest petrochemical maker, posted a 45 percent drop in quarterly net profit on Wednesday due to a 2-month scheduled shutdown of its refinery and an unplanned stoppage of an olefins cracker.

    Net profit was 4.92 billion baht ($141.46 million) for the April-June period, slightly lower than the average 5.13 billion baht forecast of eight analysts surveyed by Reuters.

    But profit rose 5 percent from the previous quarter mainly because of an inventory gain of 2.2 billion baht after a rise in benchmark Dubai crude prices, PTTGC said in a statement.

    Its refinery run rate dropped to 35 percent from 100 percent a year earlier, while gross refining margin fell 25 percent on year to $4.05 a barrel, the company said.

    PTTGC is the flagship petrochemical business of PTT Pcl , Thailand's largest energy firm. Its operations are expected to improve in the second half because no maintenance shutdown will weigh down earnings, analysts said.

    On Monday, Thai Oil Pcl, the refinery flagship of PTT, reported a better-than-expected 24 percent rise in quarterly net profit due to strong performance of the refinery unit and an inventory gain after an increase in global crude oil prices.

    Thai Oil's 275,000-barrel-per-day (bpd) refinery ran at 109 percent in the second quarter, up 2 percent from a year earlier.

    Another oil refiner, Bangchak Petroleum, posted second-quarter net profit of 2.4 billion baht, down 13 percent on year but up 51 percent from the previous quarter thanks to a higher crude run and gross refining margin.

    http://www.reuters.com/article/ptt-global-chem-results-idUSL3N1AR2BN
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    Japan's Tepco steps up LPG procurement to meet summer power demand


    Japan's Tepco Fuel & Power is stepping up LPG procurement for thermal power generation to meet peak summer power demand over July-August, sources familiar with the matter said this week.

    Tepco Fuel & Power, a unit of Tokyo Electric Power Company Holdings, bought a few LPG cargoes in July, marking the first procurement of the fuel in fiscal 2016-2017 (April-March), sources said.

    Traders said the utility was likely to have bought two to three cargoes of LPG for delivery in July, with a propane/butane mix of either 60:40 or 50:50.

    For August, Tepco Fuel & Power had bought a half cargo of 21,000 mt of propane so far, a trader said.

    This could not be confirmed with the company, however, and price details were not available.

    It was unclear if the utility will buy any more cargoes for August.

    The company also hiked its consumption of crude oil and fuel oil for thermal power generation in July as a result of higher summer temperatures, sources said.

    "Tepco buys LPG during the summer because LPG prices [are] traditionally low during this time," a market source said.

    The price of physical propane on a CFR Singapore-Japan basis fell to a record low of $271.50/mt on July 29, S&P Global Platts data showed.

    This was the lowest level since October 2006, when Platts first started assessing propane prices.

    The price has since rebounded slightly to be assessed at $282.50/mt Monday on the back of an uptick in the crude complex.

    Despite demand from Japan for power generation, the LPG market is still largely bearish amid ample supply from the US and the Middle East, including an increase in exports from Iran.

    Demand from petrochemical producers has been largely lackluster amid high inventories in North Asia and some steam cracker scheduled to carry out maintenance.

    Tepco Fuel & Power typically uses fuel oil and LPG for thermal power generation to meet power demand during peak hours.

    It typically makes prompt purchases of LPG from domestic suppliers when demand for power generation rises.

    Its increased LPG buying follows a spike in fuel oil demand for thermal power generation, which surged by 22% from a year ago to 670,000 kiloliters (135,941 b/d) in July mainly due to the hot weather and glitches at coal- and gas-fired power plants, as estimated by Japan's largest refiner JX Nippon Oil & Energy.

    A trader said earlier that Japan's fuel oil demand in July was three times more than what was expected for the month.

    http://www.platts.com/latest-news/oil/singapore/japans-tepco-steps-up-lpg-procurement-to-meet-27644427?hootpostid=3d51399c788346928deacbadc9f38534
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    Western nations urge calm at Libyan oil port


    Western countries including the United States, France and Britain said in a joint statement on Wednesday they were concerned by mounting tension around the Zueitina oil terminal in Libya.

    Washington, Paris, London and the governments of Germany, Spain and Italy urged a return to government control of all oil and gas installations and called on all parties "to abstain from any act of hostility and avoid all actions that could damage or disrupt energy infrastructure".

    Zueitina is one of three eastern oil ports blockaded by Libya's Petroleum Facilities Guard (PFG). The PFG has signed a deal to reopen the ports with the U.N.-backed Government of National Accord (GNA) in Tripoli, but forces loyal to a separate government based in eastern Libya have threatened to block a resumption of exports.

    Libya's National Oil Corporation (NOC) said on Sunday that it was concerned by reports of "imminent conflict" in the vicinity of Zueitina between the PFG and the Libyan National Army (LNA), which is loyal to the eastern government.

    In a statement released by the French foreign ministry, the six Western powers expressed their support for efforts by the GNA to "find a peaceful solution to the disruptions affecting energy exports in Libya".

    "The Government of National Accord must work with the National Oil Corporation to relaunch oil production in order to rebuild Libya's economy."

    Fighting, political disputes and militant attacks have reduced Libya's oil production to a fraction of the 1.6 million barrels per day the OPEC member was producing before the 2011 uprising against Muammar Gaddafi.

    "Restarting oil exports is crucial for generating revenues needed to provide for the essential needs of the Libyan people, notably electricity, healthcare and infrastructure," the statement by Western countries said.

    http://www.reuters.com/article/libya-security-oil-west-idUSL8N1AR2GA
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    Diesel oil leaks from grounded rig’s fuel tanks


    Two fuel tanks on the grounded semi-submersible rig Transocean Winner have been breached and it remains unclear how much oil has leaked into the environment.

    To remind, the Transocean Winner drilling rig ran aground near a beach in the Isle of Lewis in the UK after having been struck by severe storms early this week. Following the incident, the coast guardwarned people not to attempt to visit the area.

    A damage assessment team from Smit Salvage and Transocean has been on board the oil rig to carry out a series of initial inspections.

    According to a statement by the Maritime and Coastguard Agency (MCA) on Wednesday, the damage assessment team spent three and a half hours checking the condition of the Transocean Winner looking at its structural integrity.

    The rig remains in the original position and was reported to be carrying 280 metric tons of diesel oil on board in total split between a number of separate tanks. During the inspection, the MCA said that the salvors discovered that two of the fuel tanks appear to have been breached. However, it is unclear at this time how much oil from those tanks has been released to the environment.

    “Weather conditions have made it impossible for the team to continue the assessment today,” the Maritime and Coastguard Agency (MCA) said on Wednesday.

    Additional salvors and technical experts from Transocean and also equipment continues to arrive to the incident area to support the operation the MCA said and added that a temporary exclusion zone of 300metres to keep boats away remains in force.

    The tug Union Bear remains in the vicinity along with the ETV Herakles to support the operation.

    The MCA concluded that Hugh Shaw, the Secretary of State’s representative for maritime and salvage continues to monitor the operations and is maintaining touch with all the key stakeholders, including Transocean, Smit Salvage, the Scottish Environment Group and Western Isles Council.

    http://www.offshoreenergytoday.com/diesel-oil-leaks-from-grounded-rigs-fuel-tanks/
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    Shell’s Nigerian unit declares force majeure on gas supplies to NLNG


    According to Reuters, Shell Petroleum Development Company of Nigeria Ltd (SPDC) has declared force majeure on the supply of gas to the Nigeria LNG (NLNG) export plant. The company is the Nigerian unit of Royal Dutch Shell, and is a joint venture (JV) with the state oil company, Nigerian National Petroleum Corp. (NNPC).

    Reportedly, a spokesman for the company said that force majeure was declared was due to a leak on the Eastern Gas Gathering System (EGGS-1) pipeline. The company uses this pipeline to deliver the majority of its gas to the NLNG facility, which is located on Bonny Island.

    The facility is able to produce 22 million tpy of LNG, and was developed 16 years ago. It is owned by NNPC, Shell, Eni and Total, with long-term supply contracts with a number of companies, including Enel, Shell, Engie SA and Galp. In addition to this, it sells cargoes on the spot market. Nonetheless, Reuters claims that this latest development may impact exports, with the SPDC spokesman stating that the pipeline has been shut down for a joint investigation into the cause of the leak.

    http://www.lngindustry.com/liquid-natural-gas/10082016/Shells-Nigerian-unit-declares-force-majeure-on-gas-supplies-to-NLNG-2890/
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    Gazprom First-Quarter Net Falls 5.2% Amid Gas-Price Decline


    Gazprom PJSC, the world’s biggest natural gas producer, said first-quarter profit decreased 5.2 percent as expenses climbed amid lower prices for the fuel.

    Net income fell to 362 billion rubles ($5.6 billion) from 382 billion rubles in the first quarter of last year, the Moscow-based company said in a statement. That compares with an estimated 363 billion rubles, according to a Bloomberg survey of analysts. Revenue rose 5.4 percent to 1.74 trillion rubles.

    Gazprom is struggling as oil’s slump weighs on export prices for its gas, which are linked to crude under some contracts. The company’s average June export price was the lowest since 2007, according to Bloomberg calculations based on Russian customs data. Gazprom may lower its production to a record this year as demand slows in Russia and Ukraine, according to Russian government estimates in July.

    “The drop in export prices will continue,” Kirill Tachennikov, an oil and gas analyst at BCS Financial Group, said by e-mail. “Given that the contract price was close to spot, Gazprom’s market share remained almost the same and is unlikely to change significantly going forward.”

    Average prices to Europe and Turkey fell 34 percent compared with the same period the previous year to $187.50 per thousand cubic meters, Gazprom said. The state-controlled company has responded by boosting exports to its most lucrative market. Volumes jumped 49 percent to 58.1 billion cubic meters, pushing gross sales to 815 billion rubles, according to the company.

    ‘Challenging’ Times

    Even with the first-quarter increase in exports, dollar-denominated revenue from the region may drop this year to the lowest since 2005 as most contracts are linked to oil with a time lag of as much as nine months.

    The Russian producer, which supplies about 30 percent of Europe’s gas, faces “challenging” times until at least 2018 amid weak export prices, slated spending on pipelines to China and the European Union and increased domestic competition, S&P Global Ratings said last month.

    Operating expenses jumped 24 percent in the first quarter, driven by a change in gas-purchase costs relating to the completion of an asset swap with BASF SE’s Wintershall unit that gave the Russian gas producer control over European trading and storage units, the company said.

    Earnings before interest, taxes, depreciation and amortization dropped to 444 billion rubles as prices declined, Kirill Tachennikov, an oil and gas analyst at BCS Financial Group, said by e-mail. That compares with 583 billion rubles a year earlier.

    Cash Flow

    Free cash flow in the first quarter amounted to 237 billion rubles compared to 252 billion rubles in January to March last year, according to calculations based on Gazprom’s financial reports. The positive free cash flow was mainly the result of an almost 240 billion-ruble reduction in working capital, according to Tachennikov.

    The company sees its free cash flow positive this year, deputy head Andrey Kruglov said in June, declining to elaborate on the outlook.

    http://www.bloomberg.com/news/articles/2016-08-10/gazprom-quarterly-profit-falls-5-2-amid-gas-price-decline
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    Japan's Jera plans 42 percent cut in long-term LNG contracts by 2030


    Japan's Jera Co, the world's biggest importer of liquefied natural gas (LNG), is planning to cut the amount of gas it buys under long-term contracts by 42 percent by 2030 from current levels, the company's president told Reuters.

    The company now buys 34.5 million tonnes per annum (mtpa) of LNG under contracts for 10 years or longer. By 2030, that will drop to about 20 million mtpa, President Yuji Kakimi said.

    Jera will take this step to prepare for the liberalization of the Japanese electric market that has clouded the outlook for LNG purchases by the country's utilities, said Kakimi. Future LNG consumption may also be limited by nuclear power plant restarts and the installation of renewable generation such as solar power.

    The company's cuts in long-term purchase puts question marks over planned large-scale, multi-billion dollar LNG production projects, which rely on long-term contracts to gain financing. Asian LNG markets are also suffering through a 72 percent slump in prices since February 2014.

    Jera, a joint venture between Tokyo Electric Power and Chubu Electric Power, takes in 40 mtpa of LNG.

    The company's long-term contracts start expiring in 2018 and more than 10 mtpa will conclude by the early 2020s. Kakimi said the company has no plan to sign new pacts for the foreseeable future.

    To offset the decline as the long-term contracts expire, Jera will sign long-term agreements for about 5 mtpa of LNG to stay at the 20 mtpa level, he said.

    Japan's retail electricity reform that started in April, which ended regional monopolies, has thrown future power sales into doubt and forces utilities to reduce long-term contracts to cover the minimum essential requirements, he said.

    "The power generators cannot have fuel for 20 years without having long-term power sales contracts," he said. "The long-term portion will decline rapidly with the progress of liberalization like in Europe."

    Japan, the world's biggest LNG buyer, will see imports decline to 62 million tonnes in 2030, from a record 88.5 million tonnes in 2014 because of a shift to nuclear power as plants restart and more renewable energy is added to the grid, the country's government has forecast.

    Jera, which buys about half of Japan's LNG imports, sees its annual LNG trading volume, or the amount it consumes plus resale cargoes, in 2030 to be closer to the low end of its projected 30 to 40 mtpa range, Kakimi said.

    He said that Jera would be burning about 28 mtpa of LNG a year by 2030, based on the government projections of 62 million tonnes of imports.

    Jera's trading volumes would rise toward 40 mtpa if its joint venture companies' nuclear plants did not resume operations as projected, he said.

    At 40 mtpa of trading volumes, long-term contracts would remain unchanged at about 20 mtpa, with medium- and short-term contracts at 10 mtpa, and the remaining 10 mtpa as spot volumes, he said.

    "There is an absolute amount of electricity that we would like to produce using LNG and 20 million tonnes is the essential volumes that we are sure of," he said.

    http://www.reuters.com/article/us-lng-jera-idUSKCN10L117
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    Summary of Weekly Petroleum Data for the Week Ending August 5, 2016


    U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending August 5, 2016, 255,000 barrels per day less than the previous week’s average. Refineries operated at 92.2% of their operable capacity last week. Gasoline production increased last week, averaging 10.1 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.

    U.S. crude oil imports averaged 8.4 million barrels per day last week, down by 334,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 8.4 million barrels per day, 11.5% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 930,000 barrels per day. Distillate fuel imports averaged 184,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the previous week. At 523.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 2.8 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 2.0 million barrels last week but are near the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.0 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories increased by 2.5 million barrels last week.

    Total products supplied over the last four-week period averaged about 20.8 million barrels per day, up by 1.9% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.8 million barrels per day, up by 1.7% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, up by 2.4% from the same period last year. Jet fuel product supplied is up 4.8% compared to the same four-week period last year.

    Cushing inventories up 1.2 mln bbl

    http://ir.eia.gov/wpsr/wpsrsummary.pdf
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    US oil production in small fall


                                                   Last Week   Week Before  Last Year

    Domestic Production '000.......... 8,445             8,460           9,395    
    Alaska .........................................  425                427              471

    http://ir.eia.gov/wpsr/overview.pdf
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    Art Berman: Permian breakeven is $61.

    http://www.artberman.com/permian-basin-break-even-price-is-61-the-best-of-a-bad-lot/

    Permian Basin Break-Even Price is $61: The Best of a Bad Lot

    Posted in The Petroleum Truth Report on June 19, 2016

    The break-even price for Permian basin tight oil plays is about $61 per barrel (Table 1). That puts Permian plays among the lowest cost significant supply sources in the world. Although that is good news for U.S. tight oil plays, there is a dark side to the story.

    Just because tight oil is low-cost compared to other expensive sources of oil doesn’t mean that it is cheap. Nor is it commercial at current oil prices.

    The disturbing truth is that the real cost of oil production has doubled since the 1990s. That is very bad news for the global economy. Those who believe that technology is always the answer need to think about that.

    Through that lens, Permian basin tight oil plays are the best of a bad, expensive lot.




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    Attached Files
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    The #1 Efficiency Gains in Energy Come From…Sand?


    It’s clear from comments on Q2 conference calls in the last week that North American producers ARE getting more efficient—lowering costs—in producing tight oil, or shale oil.  And they don’t think they’ve hit their limits yet.

    The high tech reason for these improvements? Simple sand.  It is stunning to me how much more sand is getting used in tight oil and gas wells.

    Here’s a chart from US Silica (SLCA-NYSE) on what it takes to frack a single well now:



    Image titleAnd here is another visual from energy boutique brokerage firm Tudor Pickering & Holt on where they think frac sand use is going next year in the Permian basin of SW Texas:




    Image titleThey have a near identical chart for the western Delaware basin of the Permian.


    Cimarex (XEC-NYSE) said on their Q2 call on Thursday Aug. 4 that they increased their sand or “proppant” use by 92% to 2400 pounds every linear foot of a 10,000 foot horizontal in a Lower Wolfcamp formation well in Culberson County and increased production 36%.  Here’s a slide that shows how much more sand they use now just over the last 18 months:





    Image titleHere’s what Devon Energy (DVN-NYSE) said in their Q2 call last week:

    “John P. Herrlin – SG Americas Securities LLC
    …with the STACK and also the Woodford, you’re putting in a lot more sand. Do you have any sense of what you think the economic limit is for how much profit you can put in?

    Tony D. Vaughn – Chief Operating Officer

    I can give you a little bit of a feel. I’ll remind us of the experience that we had in, I believe it was mid-2014 when we started increasing the sand loads in our Delaware completions and we really ran up to – from about 600 pounds per lateral foot in early 2014 up to about 3,000 pounds per lateral foot through 2015…We think we can get the most commercial returns in the current business environment done at about 1,500 to 2,000

    “..And then if you move over into the Anadarko Basin, we’re using a slick water job in our Woodford type work, and we continue to increase our proppant loads there. So we’re up to about 2,000 pounds per lateral foot. And after drilling and completing over 800 wells, this last large pad that we brought on had the best results that we’ve ever had in the Cana-Woodford play.

    “As we think about the STACK play right now… we are increasing our sand loads there up to about 2,600 to 2,750 pounds per lateral foot and enjoying increasing success there.” (Courtesy of SeekingAlpha.com)

    Chesapeake (CHK-NYSE)—never a company to do things in a small way—has the biggest frack I’ve heard of so far.  They put more than 30 million pounds into a Haynesville shale—and the CEO Robert Lawlor said on the Friday Aug. 5 conference call that more sand is so good, he calls drilling now “proppant-geddon’:

    The results have been very impressive, with the restricted initial rate of 38 MMcf/d and a flowing pressure of approximately 7,500 psi,” Lawler said. “We call this new era in completion technology, ‘proppant-geddon.’

    “We’ve not yet reached the point of diminishing returns in the Haynesville, and we plan additional tests up to 50 million pounds in the back half of the year.”

    No wonder the stock of US Silica has gone from $16-$40 this year—and stayed there.

    There’s a couple points here for investors.  Data on how much oil and gas producers are getting per 1000 feet is not easy to come by.  But several presentations are now showing over 3bcf/1000 feet for natural gas—that’s very impressive.

    And I am reading regularly that stretching laterals from 1.5 – 2.0 miles only costs an extra 20%, to get 50% more production.

    The point is—economies of scale are absolutely creating lower costs per barrel.  And producers would not be increasing sand use 40% if that wasn’t happening.

    Second, not only is an incredible amount of sand being used now, the mix in sand is changing.  The Market at first used mostly coarse sand, but is now using a finer mesh.  And because margins are being squeezed everywhere, producers are finding this method cheaper.

    “All the operators are using the slick water completion method,” says Rasool Mohammad, CEO of Select Sands (SNS-TSXv), which is developing a sand deposit in Oklahoma.  “This is cheaper than the cross gel which uses expensive frack fluids. And the slick water primarily uses finer grade sands, 40-70 and 100 mesh.”

    Mohammad—who is actually selling sand to industrial users outside of energy—says the coarse sand actually does do a better job in the long run, but right now cheaper costs are the most important factor for producers.

    That cost cutting is causing the industry—and that means producers, specialty frac sand suppliers like US Silica and the big service companies like Halliburton & Schlumberger etc.—to start looking at regional sand deposits in the southern US.  Traditionally, very high quality white sand, mostly from Wisconsin, has been used.

    But transport costs can be high, and companies like US Silica are now buying brown sand deposits closer to Texas, where it looks like the Permian will be the most active light oil basin in North America.

    Mohammad’s sand has all the technical and logistical wants by the majors, and he is hopeful to land his first energy sales contract this fall.

    The Market is convinced there will be no more price concessions by sand suppliers, and Mohammad believes there may even be a shortage of the finer sand like the one in his deposit by Q1 2017.  The industry has built and relied on the white coarser sand for the last 7 years of the Shale Revolution; this finer part of the market has been ignored and now is suddenly in high demand.

    http://oilandgas-investments.com/2016/latest-reports/the-1-efficiency-gains-in-energy-come-fromsand/

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    Chesapeake to sell Barnett land, renegotiate Williams contract


    Chesapeake Energy Corp said on Wednesday that it would sell its Barnett shale acreage in Texas to private equity-backed Saddle Barnett Resources LLC and had renegotiated an expensive pipeline contract with Williams Partners LP , steps that should save more than $1.9 billion in future liabilities.

    Wall Street cheered the news, and shares of Chesapeake rose 5.6 percent to $5.07 in after-hours trading.

    As part of the deals, Chesapeake said it would convey to Saddle, owned by private equity firm First Reserve, its roughly 215,000 acres in the Barnett, which also includes about 2,800 operated wells.

    Chesapeake also exited transportation contracts with Williams, saving $1.9 billion over the life of the contracts. Chesapeake is paying Williams more than $334 million to cancel the contract, with First Reserve set to pay an additional, undisclosed amount.

    The new contract with Saddle eliminates the expensive methodology that the Chesapeake contract was based upon, and instead will use spot natural gas prices to determine transportation costs.

    Because of the expensive contract, Chesapeake had found it expensive to drill in the Barnett in recent years.

    Both transactions should save Chesapeake at least $250 million in gathering, processing and transportation costs this year and $465 million next year, the company said.

    Chesapeake also renegotiated gas transportation contracts for other mid-continental shale plays with rates 36 percent lower starting July 2016.

    The company also cut its average daily production rate to 611,000-638,000 barrels from 625,000- 650,000 barrels.

    http://www.reuters.com/article/us-chesapeake-enrgy-divestiture-idUSKCN10L2NR
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    Refiners on track to spend record on U.S. clean fuel standards


    Major refiners like Valero Energy Corp are on track to pay record amounts this year for credits to comply with U.S. renewable fuel rules, corporate filings show, a trend that hurts profits and has some looking to export more to avoid the cost.

    Refiners and fuel importers are required to meet a U.S. biofuel quota of roughly 10 percent through blending products like ethanol into gasoline and diesel. If they fall short, they can buy credits generated by companies in compliance. But the cost of the credits, known as Renewable Identification Numbers (RINs), has jumped.

    The rising costs have hurt a sector already struggling with huge global fuel stockpiles. The S&P 1500 index of refining and marketing companies has fallen 18 percent so far in 2016, compared with a 6.5 percent gain for the broader market.

    In the first half of 2016, a collection of 10 refinery owners including Marathon Petroleum Corp, spent at least $1.1 billion buying RINs, a Reuters review of their filings showed. This puts them on track to surpass the annual record of $1.3 billion the same group spent in 2013.

    Refinery executives sharply criticized the regulations during recent earnings calls, saying the burden helped bring about the weakest profits in five years.

    "RINs continue to be an egregious tax on our business and have become our single largest operating expense, exceeding labor, maintenance and energy costs," CVR Refining Chief Executive Jack Lipinski said last month.

    Marathon Chief Executive Gary Heminger said on a call last month that demand for RINs are going to outpace supply and the company wanted to see renewable fuel standards eased.

    Refiners without blending or retail outlets, such as Delta Air Lines and CVR, have to buy a greater percentage of RINs because they don't create their own. Delta is part of a refiner group challenging fuel standards through the courts.

    Supporters of the existing policy, including the influential corn lobby, said the regulations have produced the desired effect: more renewable fuels in the nation's gasoline and diesel. They noted refiners can avoid the cost of RINs by investing in blending operations.

    "Companies that refuse to blend more renewable fuel will end up paying a premium to other market participants, including speculators, but this is a choice," said Emily Skor, CEO of Growth Energy, which represents ethanol producers.

    Renewable fuel credits averaged about 78 cents apiece in the second quarter, about 25 percent above the same period a year ago, according to Oil Price Information Service data analyzed by Reuters.

    Prices for the credits have rallied on more ambitious targets from U.S. regulators on the volumes of ethanol required to be blended with gasoline, traders and industry sources said.

    The price of credits has fuel makers like PBF Energy Inc and Valero looking to increase exports, which are not subject to the regulations, as a way to escape the costs.

    PBF Chief Executive Thomas Nimbley said on an earnings call last month that it was "very important" that they expand their refined product export operations, citing RINs as a driver.

    Refiners are also lobbying to shift the responsibility of compliance from their industry to blenders and distributors who mix gasoline with ethanol for delivery to filling stations.

    http://www.reuters.com/article/us-usa-refinery-ethanol-idUSKCN10L2F6
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    Alternative Energy

    Interserve to exit energy-from-waste business after 70 mln stg charge


    Interserve Plc, a British support services and construction company, said it would exit its energy-from-waste business, after it took a 70 million pound ($91 million) charge in the first half from cost overruns and delays in a contract in Glasgow.

    Shares in the company were up 16 percent at 375.93 pence at 0913 GMT on the London Stock Exchange.

    Interserve also said its outlook for the full year remained unchanged despite the increased political and macro-economic uncertainty following Britain's vote to leave the EU.

    The company, whose activities range from providing care services for people in their own homes to building repairs at Britain's Sandhurst military academy, said the energy-from-waste business has six contracts signed between 2012 and 2015, with total whole-life revenue of 430 million pounds ($561 million).

    "Every pound of revenue is valuable of course, but we are interested in the revenue that we generate profit from, not the revenue that we generate losses from," Chief Executive Adrian Ringrose told Reuters.

    "I think exiting that part of our business will be a very beneficial thing to do," he added.

    Interserve said it expects to complete these contracts during 2017 and the impact of these contracts on its income statement would be contained within the previously announced charge.

    Ringrose said there was "limited" forward market opportunity in industrial projects in the next few years, adding that the company would not have earned a "great deal of work" from the sector in any event.

    The outsourcing company also reported a 2.1 percent rise in headline operating profit to 62.9 million pounds in the six months ended June 30.

    "It is a little too soon to tell how Brexit is going to play through, but certainly we can see why it might generate opportunities much as it might generate risk," Ringrose said.

    Ringrose said the formation of a new department of state in the UK to negotiate and implement Brexit offered Interserve opportunities.

    "We are in the business of servicing the government and its properties, the civil servants that work in it," he added.

    The weakness in the sterling would also help Interserve, which earns a third of its revenue from outside the UK, Ringrose said.

    Ringrose also said Interserve would benefit from the fact that it offers services that customers need, rather than those that are "entirely discretionary".

    "We keep the lights on, we keep people safe, we keep people warm. Clients need to keep spending money on the sort of services we deliver," he said.

    http://www.reuters.com/article/interserve-divestiture-idUSL3N1AR2A2
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    Europe Aims to Close Loophole on Wood Energy


    European officials are moving to close a loophole that promotes the burning of wood for electricity by an industry that’s felling American trees, and a new report they commissioned has laid bare the urgent need for reform.

    European Union climate rules treat woody biomass energy as if it’s as clean as solar or wind energy, despite it releasing more heat-trapping carbon dioxide for every megawatt of electricity produced than coal. Producing wood pellets for fuel can also foster climate-changing deforestation.

    The European Commission, which advises European Union lawmakers, last week identified myriad environmental hazards from the transatlantic wood energy trade in a 361-page report.

    The loophole in Europe’s climate policies is a veritable accounting error that has led to national energy subsidies that are financing a burgeoning industry. The subsidies are paying for wood pellet fuel to be produced at newly built mills in the American South, where trees are plentiful and forest protections are minimal.

    Without reducing climate pollution, the industry is helping European countries meet European Union rules on carbon emissions, if only on paper.

    Dozens of Southern mills produced an estimated 5 million tons of wood pellets that were exported to Europe last year, with production growing by a third on average each year since 2012. Producing each ton of dried wood pellets requires roughly twice that amount of freshly cut wood.

    “The U.S. is the main exporter of wood pellets to the EU,” said Daniel Calleja Crespo, who directs the European Commission’s environmental department, which commissioned consultants to produce the report. “The growth of the industrial pellet industry has raised concerns about possible negative environmental impacts — direct and indirect.”

    The report was commissioned to help guide a European Union effort to update climate and energy policies after 2020, when a new global treaty on climate is expected to take effect.

    Under the Paris Agreement, which is a climate pact that was finalized during U.N. negotiations in France in December, the European Union pledged to reduce its climate pollution by 40 percent in 2030, compared with 1990 levels.

    While the findings were characterized as “exploratory” in the new report, due in part “to the short time period over which the wood pellet industry has emerged in the U.S,” the researchers identified a number of “policy risks” from the transatlantic wood energy trade. Those included “biodiversity loss, deforestation and forest degradation” in the U.S., and “not meeting” reductions in greenhouse gas pollution at power plants in Europe.

    Environmental groups who have been rallying to protect America’s forests and the climate from industrial wood energy use in Europe lauded the report as an important step forward.

    Adam Macon, a campaigner with the North Carolina-based nonprofit Dogwood Alliance, which works to protect Southern forests, called the report the “clearest acknowledgement” yet from European officials about the environmental impacts of their growing reliance on wood energy.

    “The report broadly confirms the growing understanding that industrial scale bioenergy and subsequent wood pellet production is bad for the forests, climate, and communities,” Macon said. “Any increase in wood pellet production is going to have much more negative consequences than any sort of potential benefits.”

    http://www.climatecentral.org/news/europe-aims-to-close-loophole-on-wood-energy-20591?utm_content=buffer00a54&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
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    Agriculture

    Tata Chemicals sells urea business to focus on other fertilisers


    Aug 10 India's Tata Chemicals, the Tata group's flagship chemical and fertilisers company, is selling its urea business to Norway's Yara International to focus on other fertilisers and consumer products like pulses and spices.

    Tata said it had agreed the sale of its urea business, which is in the northern state of Uttar Pradesh, to Yara, one of the world's largest fertiliser producers, for 26.7 billion rupees ($400 million).

    The Uttar Pradesh business contributed 13 percent of Tata Chemicals' total sales revenue last fiscal year. The company will now focus on fertilisers such as soda ash and expand its consumer-related business that includes salt, spices and pulses.

    "In many of these businesses if you don't have scale, it becomes unsustainable in the long run. We are trying to scale the consumer business and that is the company's broad strategy," Tata Chemicals' Managing Director Ramakrishnan Mukundan told a press conference on Wednesday.

    About eight companies produce urea in India but analysts say the sector is hampered by regulated returns and delayed subsidy disbursements from the government, which has led to consolidation in the sector.

    The operations being acquired by Yara produce 0.7 million tonnes of ammonia and 1.2 million tonnes of urea annually and had revenues of $350 million and operating profit of $35 million for the fiscal year through March 2016, Yara said in a statement earlier in the day.

    The deal also includes Tata Chemicals' distribution network in Uttar Pradesh.

    Indian merchant bankers Kotak Investment Banking and JM Financial advised Tata Chemicals on the deal.

    http://www.reuters.com/article/tata-chemicals-fertilizers-yara-intl-idUSL3N1AR3QB
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    Israeli chemicals maker ICL beats Q2 profit forecasts thanks to specialty products


    Israel Chemicals, one of the three major suppliers of potash to China, India and Europe, reported a better than expected second-quarter profit on Wednesday and predicted further gains from its specialty products units.

    Growth in its essential minerals division, which includes its main businesses like potash, a crop nutrient, and phosphates, was marginal however and that would probably continue due to strong competition, Chief Executive Stefan Borgas said.

    Israel's biggest chemicals producer earned 10 cents per diluted share, excluding one-off items, down from 13 cents per diluted share in the same quarter a year ago, but higher than the 6 cents per share forecast by Thomson Reuters I/B/E/S.

    Revenue jumped 15 percent to $1.4 billion, in part due to a stoppage a year earlier when workers went out strike, and beat a $1.26 billion forecast.

    ICL, which has exclusive permits in Israel to extract minerals from the Dead Sea, said quarterly results benefited from a diversification away from core businesses into specialty products, like advanced additives and specialty fertilizers.

    Sales at the specialty solutions business grew 15 percent in the quarter.

    "This is a sustainable growth rate for the upcoming quarters as well," Borgas said on a conference call with analysts.

    ICL, a subsidiary of Israel Corp, said it would pay a quarterly dividend of $60 million, or 5 cents per share.

    The company in recent weeks has signed potash supply contracts with Chinese and Indian customers and said it was continuing to negotiate with additional customers in India.

    "ICL's potash business in the second half of the year will experience higher sales quantities but lower average prices," it said.

    Given falling potash and commodities prices it will accelerate the transition from extracting and producing potash to producing polysulphate at its mine in Britain. The steps, ICL said, are expected to reduce the mine's annual potash production, freeing up production capacity for manufacturing polysulphate.

    ICL had planned to end potash production in Britain in 2018 but Borgas said the plan would now come into effect as much as 12 months ahead of schedule.

    http://www.reuters.com/article/icl-results-idUSL8N1AR3X0?feedType=RSS&feedName=basicMaterialsSector&utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+MasterMetalsNews+%28MasterMetals+News+Feed%29&utm_term=MasterMetals
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    Precious Metals

    Cullinan mine yields 138.57 ct diamond


    LSE-listed Petra Diamonds has recovered a 138.57 ct Type IIa, D-colour diamond at itsCullinan mine, in South Africa.
     
    The high-clarity diamond will be offered for sale as part of the company’s next sales process later this month.

    The company had earlier this year sold a 121.26 ct white diamond recovered from the same mine to a joint venture between Dubai-based diamond trading company Nemesis International and Golden Yellow Diamonds for $6-million.

    http://www.miningweekly.com/article/cullinan-mine-yields-13857-ct-diamond-2016-08-10
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    Asia gold demand to fall 15-20 pct in 2016 on price rise-Scotiabank


    Gold consumption in China and India, the world's top two buyers, is set to drop 15 to 20 percent in 2016 after lower investment demand and jewellery sales, an official at a leading importing bank said.

    Lower demand from the two countries, which account for more than half of the global market, could limit a rally in global prices which are trading near a two-year high.

    "Indian demand would be 15 to 20 percent lower in 2016 than the previous year. Higher prices, weak investment demand contributed in reducing consumption," Sunil Kashyap, managing director, Global Banking and Markets at Scotiabank, told Reuters on Wednesday.

    "India is not unusual. This is a general trend across Asia, even in China."

    Gold prices have jumped nearly 28 percent so far in 2016 to $1,352 per ounce, deterring traditional jewellery buyers.

    "Unless the price comes below $1,300 per ounce we do not expect demand to pick up," Kashyap said.

    Chinese demand for gold totalled 981.5 tonnes last year, followed by India on 864.3 tonnes, according to data compiled by the World Gold Council.

    In India, local gold prices jumped to 32,455 rupees ($487.21) per 10 grams in July, the highest in nearly three years, prompting consumers to sell their old jewellery.

    As a result, total scrap supplies in India could jump to 120 tonnes to 180 tonnes in 2016, Kashyap said, with 10 to 15 tonnes coming onto the market each month.

    In 2015 scrap supplies totalled 80.2 tonnes, according to the WGC data.

    Weak demand and scrap supplies are helping India in reducing imports, which in July fell by 79.3 percent from a year ago to 20 tonnes, the lowest level since March, GFMS data showed.

    http://www.reuters.com/article/asia-gold-demand-idUSL3
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    Silver Wheaton lifts FY gold outlook 15% following record Q2 output


    The world’s largest precious metals streaming firm Silver Wheaton said Wednesday it expected to produce 15% more gold this year than previously expected, as production is being boosted by strong performance from its key asset,Vale’s Salobo mine, on which it had just picked up a further gold stream.

    For 2016, Silver Wheaton’s estimated attributable goldproduction would be 305 000 oz, up from 265 000 oz previously forecast. The estimated average yearly attributablegold output over the next five years (including 2016), was likely to be about 330 000 oz/y of gold, up from 260 000 oz, the Vancouver-based company advised.

    The company also expected slightly lower silver output this year at 32-million ounces, down from 32.8-million ounces previously, weighed down by lower-than-expected output from Primero Mining’s San Dimas mine and Goldcorp’s Peñasquito mine. This would be partially offset by Glencore’s Antamina mine, which was expected to be above previous guidance. Over the next five years (including 2016), the silver outlook remained unchanged at 31-million ounces a year.

    Silver Wheaton reported record attributable silver sales volumes for the six months ended June 30 of 14.7-million ounces, an increase of 31% when compared with the first half of 2015. Gold sales also hit record volumes at 136 000 oz for the first half, up 52% year-on-year.

    On a silver equivalent basis, the attributable sales volume for the six months ended June 30 was 25-million ounces, representing an increase of 40% year-on-year, representing yet another company record.

    Revenue for the three and six months came in at $212-million and $400-million, respectively, up 29% and 36% each.

    Net earnings rose 12% during the second quarter to $60-million, or $0.14 a share, while it fell 2% during the first half to $101-million, or $0.24 a share.

    Operating cash flows for the three and six months were $134-million, or $0.31 a share, and $248-million, or $0.59 a share, respectively, representing an increase of 23% and 25% over the respective periods of 2015.

    The board had declared a dividend in the amount of $0.05 a common share according to the company’s stated dividend policy being equal to 20% of the average of the previous four quarters' operating cash flow.

    http://www.miningweekly.com/article/silver-wheaton-lifts-fy-gold-outlook-15-following-record-q2-output-2016-08-11

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    Steel, Iron Ore and Coal

    Daqin July coal transport down 26.7pct on year


    Daqin line, China's leading coal-dedicated rail line, transported 25.21 million tonnes of coal in July this year, up 5.04% on month but down 26.65% on year – the 23th consecutive year-on-year drop, said a statement released by Daqin Railway Co., Ltd on August 10.

    In July, Daqin's daily coal transport averaged 0.81 million tonnes, edging up 1.25% on month.

    Daqin rail line realized coal transport of 182.95 million tonnes in the first seven months, falling 23.83% year on year.

    The operation of Zhunchi (Zhunger-Shenchi) railway boosted coal transport of Shuohuang (Shuozhou, Shanxi-Huanghua port, Hebei) railway, which squeezed the transport by Daqin line.

    During the first half of the year, the volume of coal transported by Daqin line was only 10-20 million tonnes higher than that of Shuohuang line, said industry insiders, without giving specific figures.

    http://old.en.sxcoal.com/0/151113/DataShow.html
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    Bankrupt coal miner Peabody's lenders approve business plan


    Peabody Energy Corp said on Wednesday its five-year business plan had been approved by its debtor-in-possession lenders, the first step towards emerging from Chapter 11 bankruptcy.

    Peabody, the biggest U.S. coal miner, filed for bankruptcy protection in April after a sharp drop in coal prices left it unable to service its $10.1 billion debt, much of it incurred for to expand in Australia.

    The bankruptcy ranks among the largest in the commodities sector since energy and metal prices began to fall in 2014.

    The St. Louis-based company said it was aiming for total annual sales of 194 million to 197 million tons between 2018 and 2021, up from an expected 168 million tons in 2016. Revenue over the period is expected to be $4.4 billion to 4.6 billion.

    Peabody said it would review its assets in Australia to run a "smaller but more profitable" basis.

    The company said in May it would sell its interest in undeveloped assets in Queensland for A$104 million (now $80.6 million) to Sydney-based Pembroke Resources, backed by private equity firm Denham Capital.

    http://www.reuters.com/article/us-peabody-energy-bankruptcy-idUSKCN10L1C8
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    Coal exports via Vostochny Port rise 2.6pct over Jan-Jul


    JSC Vostochny Port, a Russia-based terminal operator, reported 13.5 million tonnes of coal export handling over January-July this year, an increase of 2.6% than the first half of 2015, Port News reported on August 10, citing the company.

    In July, coal throughput at Vostochny Port jumped by 15% to 2.23 million tonnes. The average daily unloading rate at the Vostochny Port's dedicated coal terminal reached 761 rail cars, hitting the record high.

    JSC Vostochny Port, together with JSC Rosterminalugol at the Port of Ust-Luga, will be concentrated in a single management structure, Moscow headquartered Port Management Company Ltd. (UPK), the company said in a press release.

    The total throughput of the two terminals by the year 2015 results exceeded of 40 million tonnes, more than a third of the Russian coal exports.

    JSC Vostochny Port is the major stevedoring company of Russia specializing in handling of export coal. The company's assets include the Specialized Coal Terminal, the only in the Primorsky Terrioty dedicated terminal utilizing conveyer equipment as well as the railcar unloading station. Automation at the facility reaches 98.9%. The coal terminal's annual capacity reaches 14.2 million tonnes.

    The second facility is the Universal Handling Terminal of annual capacity of 3 million tonnes, which specializes in clamshell coal handling. The Company receives largely coal mined in Kuzbass region. The commodity exports account for 98.5% of total cargo volumes of the terminal operator. Less than 1.5% is coal shipped by coasting dry bulk carriers, and just 0.01% accounts for other cargoes.

    In 2015 cargo throughput at Vostochny port totaled 22.8 million tonnes, a fifth of the total coal exports from Russia's seaports and about 32% of the coal handled at the ports in the country's Far East basin.

    Vostochny Port presently is implementing a large-scale investment project (since 2012) on the construction of Coal Handling Complex Phase 3, including the construction of a federal railway infrastructure. The facility P3 completion and launching is scheduled for 2017, with annual coal throughput capacity of 39 million tonnes.

    http://old.en.sxcoal.com/0/151119/DataShow.html
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    Vale denies iron ore streaming financing deal in the works


    Vale SA, the world's largest producer of iron ore, denied it plans to raise cash from the sale of future iron ore output through a so-called streaming financing transaction.

    Rio de Janeiro-based Vale told the securities industry watchdog in a filing that the information regarding the streaming financing deal was "not true." Reuters reported on Aug. 3 that Vale expected to raise up to $10 billion from the sale of about 3 percent of future iron ore output to undisclosed Chinese companies.

    http://www.reuters.com/article/vale-sa-iron-streaming-idUSE6N17V056
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    China makes headway in steel capacity cut, NDRC


    Efforts to reduce China's steel production overcapacity are forging ahead according to plan, the Xinhua News Agency reported, citing the National Development and Reform Commission (NDRC).

    In a medium-term roundup of the drive on August 10, the top economic planner said that the central government has rolled out general guidelines and the NDRC has also strengthened guidance of local governments and major steel producers in drawing their own capacity cut plans.

    The State Council guidelines, issued on February 4, dictated that steel production capacity must be reduced by 100 million tonnes to 150 million tonnes over the next five years, with some 45 million tonnes cut in 2016.

    The People's Daily cited Xia Nong, head of the NDRC industry department, as saying that the resolute measures have proven effective, and the drive will pick up speed in the second half of this year to achieve the goal.

    Inspection teams will be dispatched to local governments to oversee their work starting from mid-August, the report said.

    Crude steel output posted a year-on-year decline of 1.1% in the first six months of 2016, and operational conditions of the steel sector reported improvement.

    In fact, China's crude steel production capacity utilization rate, 71.2% in 2015, was higher than the global average of 69.7%, showed data from the World Steel Association.

    In the first half of 2016, China reduced steel capacity by 13 million tonnes, about 30% of the planned cuts for the whole year, a figure in line with expectations, according to Feng Fei, vice minister of industry and information technology.

    The campaign apparently gathered momentum in July, when another 17% of the target was finished.

    In the first half this year, work focused on breaking down tasks, so that they could be allocated to provincial-level regions, and the formulation of supportive measures for steel capacity cuts, Feng said.

    In the second half, capacity cuts and supportive measures will gain speed, he said.

    Still, warming steel prices had watchdogs on alert for resurgence in production capacity as crude steel output soared to 69.47 million tonnes in June, setting a record of average daily yield of some 2.32 million tonnes.

    A price rebound means balky local officials, some of whom decided to defer capacity cut tasks, while the generation of job opportunities for hundreds of thousands of laid-off employees and the massive debts of steel enterprises suggests a tough battle ahead for overcapacity cut.

    Although four provinces have already met their annual goals, eight reported lukewarm progresses while 10 have not taken any substantive measures, according to an inter-ministerial meeting held on August 4.

    http://old.en.sxcoal.com/0/151160/DataShow.html
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    U.S. Steel Canada rejects latest offer from Essar consortium


    U.S. Steel Canada on Wednesday rejected a buyout offer from Ontario Steel Investment Ltd, a group that includes shareholders of Essar Global, saying it was not considering further proposals by Essar, which had been eliminated from the sale process.

    The offer, made on Tuesday, included the assumption of C$954 million ($734 million) in liabilities under U.S. Steel Canada's pension plan and a commitment to provide C$25 million toward post-employment benefits for U.S. Steel Canada's staff.

    U.S. Steel Canada, which has been in creditor protection since 2014, said Essar was rejected as a potential buyer of the business earlier this year following discussions with stakeholders including the Ontario government.

    It cited a failure by Essar, the Indian energy and resources conglomerate, to provide evidence of its financial ability to own and operate the company and an inability to gain the support of all stakeholders including the provincial government.

    The United Steelworkers (USW) union has criticized U.S. Steel Canada's decision and Essar later re-entered the bidding process through the Ontario Steel investment vehicle.

    U.S. Steel Canada, which employs nearly 2,000 workers in Ontario and has the capability to produce 2.6 million tons of steel annually, is a former unit of United States Steel Corp

    http://www.reuters.com/article/ussteelcanada-ma-ontariosteel-idUSL1N1AR0ER
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    Activists demand Formosa Plastics Group shut steel unit in Vietnam


    About 100 activists protested in front of Formosa Plastics Group's headquarters in Taipei on Wednesday demanding it shut its steel project in Vietnam and urged Hanoi to prosecute the Taiwanese firm for environmental damage.

    "Formosa: out of Vietnam", "We want the truth", chatted the protesters, most of whom were Vietnamese.

    The Vietnamese government said in June that the $10.6 billion steel project allowed toxic waste to enter the sea in one of Vietnam's biggest environmental disasters.

    Formosa, one of the communist country's biggest investors, has pledged $500 million in damages and admitted its steel plant caused massive fish deaths along a 200 km (124 mile) stretch of coastline in April..

    "The secretive 'settlement' announced by the Hanoi government and Formosa on June 30 underscores the lack of transparency in the handling of the environmental disaster," said activist Duy Hoang.

    "Formosa is not the only party in this incident. The Vietnamese authorities need to demonstrate greater transparency and release its investigative report," he said.

    The disaster unleashed months of public anger on social media and on the streets of big Vietnamese cities.

    Vietnamese environmental authorities said in July that they were working with local officials in the Ha Tinh province to investigate dry waste, belonging to the steel unit, that was found dumped on a residential farm.

    Formosa is one of Taiwan's biggest conglomerates. Its listed units included Formosa Plastics Corp and Formosa Chemicals & Fiber Corp.

    http://www.reuters.com/article/formosa-protest-idUSL3N1AR24C
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