Mark Latham Commodity Equity Intelligence Service

Thursday 8th October 2015
Background Stories on www.commodityintelligence.com

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    Macro

    Iraq leans toward Russia in war on Islamic State


    Iraq may request Russian air strikes against Islamic State on its soil soon and wants Moscow to have a bigger role than the United States in the war against the militant group, the head of parliament's defence and security committee said on Wednesday.

    "In the upcoming few days or weeks, I think Iraq will be forced to ask Russia to launch air strikes, and that depends on their success in Syria," Hakim al-Zamili, a leading Shi'ite politician, told Reuters in an interview.

    The comments were the clearest signal yet that Baghdad intends to lean on Russia in the war on Islamic State after U.S.-led coalition airstrikes produced limited results.

    Russian military action in Iraq would deepen U.S. fears that it is losing more strategic ground in the region as Russia weighs in behind President Bashar al-Assad with airstrikes in Syria and Iran holds deep sway in Iraq.

    Iraqi Prime Minister Haider al-Abadi has said he would welcome Russian airstrikes on Islamic State militants in Iraq and powerful Iranian-backed Shi'ite militias hope for a partnership with Russia to counter U.S. influence.

    "We are seeking to see Russia have a bigger role in Iraq. ... Yes, definitely a bigger role than the Americans," Zamili said.

    Shi'ite militias, long mistrustful of the United States, see Russia's intervention as an opportunity to turn the tables.

    Russia's drive for more clout in the Middle East includes a new security and intelligence-sharing agreement with Iran, Iraq and Syria with a command centre in Baghdad.

    "We believe that this centre will develop in the near future to be a joint operation command to lead the war against Daesh in Iraq," said Zamili, using a derogatory Arabic acronym for Islamic State, which is also known as ISIS or ISIL.

    Washington has been pressuring Abadi to rein in Shi'ite militias, angering fighters seen as a bulwark against the ultra-hardline Sunni Islamic State, the biggest security threat to oil producer Iraq since the fall of Saddam Hussein since 2003.

    "The Russian intervention came at the right time and right place and we think it will change all rules of the game not only in Syria but in Iraq also," said Muen al-Kadhimi, an aide to Hadi al-Amiri, the most powerful Shi'ite militia leader.

    "The government has been relying heavily on an untrustworthy ally, which is the United States, and this fault should be fixed."

    A new dynamic dominated by Russia would put pressure on Abadi, who depends heavily on U.S. support and is at odds with the militias and their Iranian backers.

    But with Islamic State showing no signs of weakening, the priority will be finding a formula for stability and the key players are embracing Russia.

    "There's a need to create a new coalition and force that is actually effective on the ground and performs the actual goal of fighting Daesh," said Mohammed Naji, another aide to Amiri.

    "There is a serious discussion and inquiry into requesting the Russian air forces to conduct air strikes against Daesh positions in Iraq."

    http://www.reuters.com/article/2015/10/07/mideast-crisis-iraq-russia-idUSL8N12728A20151007

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    China's graft watchdog investigates former Sinopec chairman


    Chinese authorities have placed the governor of Fujian province, who is also the former chairman of China Petroleum and Chemical Corporation, under investigation on suspicion of "serious disciplinary violations", China's anti-graft watchdog has said.

    Su Shulin had been Fujian governor since 2011 and also served as deputy Communist Party chief in Fujian, the Central Commission for Discipline Inspection said in a statement late on Wednesday.

    Su was chairman of China Petroleum and Chemical Corporation, or Sinopec Corp, before his appointment in Fujian, one of China's wealthiest provinces on the coast across from Taiwan.

    The commission did not give details about Su's suspected 'disciplinary violations'. The accusation is used regularly as a euphemism for corruption.

    President Xi Jinping has carried out a sweeping campaign against corruption, waste and extravagance in official ranks since he assumed power three years ago.

    Su, 53, was also previously the vice president of CNPC, the parent of PetroChina , and was seen as a rising star within the party leadership because of his accomplishments and relatively young age.

    Several sources told respected financial magazine Caixin that Su's case was related to discoveries made about Sinopec by inspection teams from the government's audit office.

    It was not possible to reach Su for comment and it was not immediately clear if he has any legal representation.

    Xi has targeted the energy industry in his far-reaching campaign against graft. CNPC was a power base for disgraced former domestic security chief Zhou Yongkang, who was jailed for life for corruption in June.

    http://www.reuters.com/article/2015/10/08/china-discipline-fujian-idUSL3N1280YR20151008
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    Brazil's president loses legal battle, faces impeachment threat


    Brazil's besieged President Dilma Rousseff lost a major battle on Wednesday when the federal audit court rejected her government's accounts from last year, paving the way for her opponents to try to impeach her.

    In a unanimous vote, the Federal Accounts Court, known as the TCU, ruled that Rousseff's government manipulated its accounts in 2014 to disguise a widening fiscal deficit as she campaigned for re-election.

    The ruling, the TCU's first against a Brazilian president in nearly 80 years, is not legally binding but it will be used by opposition lawmakers to argue for impeachment proceedings against the unpopular leftist leader in an increasingly hostile Congress.

    Rousseff's office said there were no legal grounds for the ruling and maintained in a statement that the audit court unduly penalized actions taken by her Workers' Party government to maintain social programs for Brazil's poor.

    Opposition leaders hugged and cheered when the ruling was announced in Congress, though it was not clear whether they have enough support to impeach the president despite a widening corruption scandal engulfing state-oil firm Petrobras and Brazil's deepest recession in 25 years.

    "This establishes that they doctored fiscal accounts, which is an administrative crime and President Rousseff should face an impeachment vote," said Carlos Sampaio, leader of the opposition PSDB party in the lower house.

    "It's the end for the Rousseff government," said Rubens Bueno, a congressman from the PPS party. He said the opposition has the votes to start proceedings in the lower house though perhaps not the two-thirds majority needed for an impeachment trial in the Senate.

    In a last-ditch bid to win time, the government had asked the Supreme Court to delay Wednesday's ruling, but it refused.

    Attorney General Luis Inacio Adams said the government would appeal again to the top court to overthrow the audit decision.

    Earlier on Wednesday, Rousseff's government failed to get enough support in Congress to back her efforts to rebalance Brazil's public accounts. Rousseff is also reeling from a ruling on Tuesday that cleared the way for a separate probe on alleged irregularities in her re-election campaign last year.

    Congress put off for a fourth time a session on whether to back or overturn her vetoes of two spending bills after her government was unable to obtain a quorum despite a cabinet reshuffle last week meant to bolster her support.

    "It's as if the government has ceased to exist," said congressman Pauderney Avelino of the opposition Democrats party.

    The congressional setback calls into question her ability to raise taxes to plug a widening budget gap that led the Standard & Poor's rating agency to strip Brazil of its investment-grade rating last month.

    http://www.reuters.com/article/2015/10/08/brazil-rousseff-idUSL1N1271HA20151008

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    As A Shocking $100 Billion In Glencore Debt Emerges...


    One week ago, in a valiant attempt to defend the stock price of struggling commodity trading titan Glencore, one of the company's biggest cheerleaders, Sanford Bernstein's analyst Paul Gait (who has a GLEN price target of 450p) appeared on CNBC in what promptly devolved into a great example of just how confused equity analysts are when it comes to analyzing highly complex debt-laden balance sheets.

    CNBC's Brian Sullivan gets into a heat spat with Paul Gait over precisely how much debt Glencore really has, with one saying $45 billion the other claiming it is a whopping $100 billion.

    The reason for Gait's confusion is that he simplistically looked at the net debt reported on Glencore's books... just as Ivan Glasenberg intended.

    However, since Glencore - like Lehman - is first and foremost a trading operation, one also has to add in all the stated derivative exposure (something we did ten days ago), in addition to all the unfunded liabilities, off balance sheet debt, bank commitments and so forth, to get a true representation of just how big, or rather massive, Glencore's true risk is to its countless counterparties.

    Conveniently for the likes of equity analysts such as Gait and countless others who still have GLEN stock at a "buy" rating, Bank of America has done an extensive analysis breaking down Glencore's true gross exposure. Here is the punchline:

    We consider different approaches to Glencore’s debt. Credit agencies, such as S&P, start with “normal” net debt, i.e. gross debt less cash and then deduct some share (80% in the case of S&P of “RMIs” – Readily Marketable Inventories. These are considered to be “cash like” inventories (working capital) in the marketing business. At the last results, RMIs were about US$17.7 bn. Giving full credit for RMIs plus a pro-forma for the equity raise and interim dividend we derive a “Glencore Adjusted Net Debt” of c. US$28 bn.

    On the other hand, from discussions with our banks team, we believe the banks industry (and ultimately regulators) may look at the number i.e. gross lines available (even if undrawn) + letters of credit with no credit for inventories held. On this basis, we estimate gross exposure (bonds, revolver, secured lending, letters of credit) at c. $100 bn.With bonds at around $36 bn, this would still leave $64 bn to the banks’ account (assuming they don’t own bonds).

    Yet more: http://www.zerohedge.com/news/2015-10-07/shocking-100-billion-glencore-debt-emerges-next-lehman-has-arrived
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    Teck Announces Silver Streaming Agreement with Franco-Nevada


    Teck Resources Limited announced today that it and a subsidiary have entered into a long-term streaming agreement with a subsidiary of Franco-Nevada Corporation  linked to production at the Antamina mine. Teck holds a 22.5% interest in Compañía Minera Antamina S.A. ("CMA") which owns and operates Antamina.

    Franco-Nevada will make an upfront payment of US$610 million to Teck and will pay 5% of the spot price at the time of delivery for each ounce of silver delivered under the agreement. Teck will deliver silver to Franco-Nevada equivalent to 22.5% of payable silver sold by CMA, using a silver payability factor of 90%. After 86 million ounces of silver have been delivered under the agreement, the stream will be reduced by one third. Closing of the transaction is subject to completion of certain corporate matters and customary conditions and is expected to take place in the first half of October.

    http://finance.yahoo.com/news/teck-announces-silver-streaming-agreement-100000362.html
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    Cargill 1st-qtr profit jumps 20 pct despite commodities slump


    Global commodities trader Cargill Inc effectively navigated tumbling commodities markets and volatile currencies to turn in a 20-percent gain in first-quarter profit, the privately held company said on Wednesday.

    The Minnesota-based company's grain and oilseed supply chain and energy businesses were standouts in the quarter ended Aug. 31, in stark contrast with several rival agribusinesses that have struggled in the commodities market downturn.

    Cargill reported net earnings of $512 million for the fiscal first quarter, compared with a profit of $425 million a year earlier. Revenue declined 17 percent to $27.5 billion from $33.3 billion.

    "Our team ably navigated the quarter's weather-driven agricultural commodity markets, as well as the effects of more volatile emerging markets, currency fluctuations and other macroeconomic uncertainty," CEO David MacLennan said in a release.

    Cargill's origination and processing unit, which buys, sells, stores and processes crops such as corn and soybeans, was its largest contributor in a quarter marked by falling prices and tepid global demand.

    Soybean processing profit strengthened amid bumper crops in North and South America, Cargill said.

    Rival agribusiness Louis Dreyfus Commodities BV last week said first-half profit fell by half due to falling commodity prices and faltering growth in major markets such as China and Brazil.

    Archer Daniels Midland Co and Bunge Ltd, which along with Cargill and Dreyfus are known as the "ABCD companies" that dominate global grain trading, report results in the coming weeks.

    Results were down in Cargill's animal nutrition and protein segment as high cattle and beef prices steered consumers to cheaper pork and poultry. The company sold its pork business to meat packer JBS SA this summer.

    Cargill's food ingredients segment also posted lower quarterly results, pressured by weak profits in sweeteners and starches, which slumped amid historically low sugar prices, the company said.

    Lower operating earnings after the closure of its hedge fund arm Black River Asset Management LLC this summer weighed on results in Cargill's industrial and financialservices segment, only partly offsetting stronger returns in energy trading.

    http://www.reuters.com/article/2015/10/07/cargill-results-idUSL1N1270TE20151007

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    Freeport: Icahn executives added to board


    U.S. mining and energy company Freeport-McMoRan Inc, bowing to pressure from its largest shareholder, said on Wednesday it added two new directors to its board under an agreement with activist investor Carl Icahn.

    Freeport shares jumped more than 12 percent after announcing that it has added Andrew Langham and Courtney Mather to its board. That increases the board to 11 members, with nine independent directors and two executive directors.

    Icahn, who owned 8.8 percent of Freeport as of Sept. 22, revealed his stake in the company in August and took aim at its spending, capital structure and executive compensation.

    In a statement on Wednesday, Icahn said he believes Freeport shareholders will benefit from the agreement, which restricts the company's ability to implement a poison pill plan.

    Under pressure from slumping commodity prices and Icahn, Phoenix-based Freeport said on Tuesday that it was looking at separating its oil and gas business from its mining operations and had cut its board from sixteen to nine members.

    The company said it could spin off the oil and gas business to shareholders, and was also considering joint ventures or an initial public offering for the business.

    http://www.reuters.com/article/2015/10/07/fcx-board-idUSL3N1273GV20151007
     
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    Oil and Gas

    S Korea secures 23.5 mil mt in 2027 LNG term deals, 62% of expected demand


    South Korea has secured 2027 term contracts for 23.5 million mt or 62.3% of the 37.7 million mt it expects to need that year, state-run Korea Gas Corp. said Thursday.

    The country has secured 34 million mt for 2015, above the 33.9 million it needs for the year, according to a Kogas report submitted to the National Assembly.

    Kogas, which has a monopoly on domestic natural gas sales, expects South Korea's 2015 LNG consumption to be 34 million mt, down from an earlier outlook of 39.8 million due to weak power demand on relatively higher prices of LNG and rising nuclear power output.

    Kogas said its revised forecast was made on the basis on sluggish January-July domestic sales, which fell 8.8% year on year.

    Kogas planned to import 33.84 million mt in 2015, down 7.4% from 36.33 million mt imported in 2014, given weaker demand.

    "Short-term LNG shortage will be made up by short-term contracts to cover winter demand and spot purchasing if necessary, while long-term shortage would be partly filled by volumes from overseas projects in which Kogas is involved," the report said.

    Kogas imported 18.35 million mt of LNG over January-July, including 13.08 million mt or 71.3% from the Middle East and South Asia.

    It bought 7.32 million mt or 39.9% of its January-July imports from Qatar and 2.45 million mt or 13.4% from Oman, the report said.

    It imported 1.87 million mt from Malaysia, 1.44 million mt from Indonesia, 1.15 million mt from Russia and 790,000 mt from Australia in January-July. The other 3.33 million mt came from 10 minor suppliers, including Nigeria, Equatorial Guinea and Brunei.

    Of Kogas' total January-July imports, 15.11 million mt or 82.3% came under long- and mid-term contracts, 2.16 million mt or 11.8% was imported under short-term contracts, and 1.08 million mt or 5.9% came from spot buying.

    "Under its plans for long- and mid-term contracts, Kogas is seeking more volumes from Australia and North America so as to ease the dependence on Middle East and South Asian nations," the report said.

    "In particular, Kogas is pushing to bring in more volumes from projects in which Kogas holds stakes, such as LNG Canada."

    Kogas and its partners launched LNG Canada, a project to produce 12 million mt/year of LNG from two trains at Kitimat in the western province of British Columbia in May 2013.

    Kogas currently holds a 15% interest in Shell-led LNG Canada after selling a 5% stake to Shell in May last year as part of efforts to reduce its debt.

    "Kogas is still pushing to sell additional 5%, which will reduce its stake to 10%," a company official said.

    Kogas pushed for sell the 5% stake by the end of 2014 but failed amid the slump in energy prices in the second half of last year.

    Kogas, which imported 0.93 million mt from projects in which it holds stakes in 2014, aims to increase the volume to 2.42 million mt in 2017.

    The company currently has 15 contracts covering 24.12 million-31.44 million mt/year in imports for 2015-2019.

    The deals include 4.92 million mt/year from Qatari RasGas, 2.1 million mt/year from RasGas II and 1.5 million-2 million mt/year from RasGas III, 4.06 million mt/year from Oman's OLNG, and 2 million mt/year from Yemen's YLNG, among others.

    Kogas plans to import 2.8 million mt/year from the Sabine Pass terminal in Louisiana from 2017. It originally planned to buy 3.5 million mt/year from Sabine Pass, but Kogas signed a deal with Total in January 2014 to resell 700,000 mt/year in a bid to reduce import volumes to South Korea.

    Under the deal, Kogas will take 2.8 million mt/year while Total will get the remaining 700,000 mt/year. Kogas also has three mid-term contracts in which Kogas imports 2.73 million-3.88 million mt/year for 2015-2016, the report said.

    Besides Kogas, two more South Korean firms are importing LNG directly from overseas sources. Posco, the country's top steelmaker, has been importing 550,000 mt/year from the BP-led Tangguh LNG consortium in Indonesia since July 2005 under a 20-year contract. SK E&S, the country's top city gas provider and an affiliate of the country's top oil refiner SK Innovation, also has been importing 600,000 mt/year of LNG directly from Tangguh since 2005 under a 20-year contract.

    http://www.platts.com/latest-news/natural-gas/seoul/s-korea-secures-235-mil-mt-in-2027-lng-term-deals-27868046

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    China triples proven reserves at top shale gas project


    China has nearly tripled the size of proven reserves at its Fuling project, by far the country's largest shale gas find, according to an official from investor Sinopec Corp and an industry report.

    The Jiaoshiba block of the project, in the municipality of Chongqing in southwest China, has 273.8 billion cubic metres (bcm) of newly proven reserves, said the report carried onnews.cnpc.com.cn, an industry portal run by top energy group CNPC.

    That would take total proven preserve certified by the Ministry of Land and Resources (MLR) at Fuling to 380.6 bcm, giving it the potential to have an annual production capacity of 10 bcm by the end of 2017, it said.

    China hopes to replicate the shale gas boom that has turned the United States into a net exporter, but more complex geology and small scale of development by only a handful state energy firms have resulted in only a few commercial discoveries.

    The latest reserve appraisal was conducted on the Jiaoye-4 and Jiaoye-5 wells, southwest of the previously evaluated Jiaoye-1 and Jiaoye-3 wells.

    By the end of August, a total of 142 wells at the Jiaoshiba block had tested high-yield industrial gas flows, the report said.

    A media official with Sinopec Corp, the investor in Fuling, confirmed the contents of the report.

    Sinopec told Reuters last month that the company was sticking by its investment pledge on shale gas despite it being more costly and technically more challenging than its conventional fields such as Puguang.

    http://www.reuters.com/article/2015/10/08/china-shale-fuling-idUSL3N1281VB20151008
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    Eurasia Drilling Gets Buyout Offer From Management, Holders


    Eurasia Drilling Co., the Russian oil driller whose planned acquisition by Schlumberger Ltd. collapsed last month, said it received a buyout offer from management and shareholders.

    The investors, whom Eurasia didn’t identify, offered $10 a share and proposed to delist the stock from London, according to a regulatory filing on Thursday. The company’s board has formed a panel of non-executive independent directors to negotiate a deal.

    Schlumberger decided two weeks ago not to pursue its $1.7 billion proposal to buy a minority stake in Eurasia after Russian authorities delayed approval of the deal for almost eight months.

    “Following the failure of the proposed transaction with Schlumberger, certain management and core shareholders seek to undertake significant rationalization of the business that would best be achieved by taking the company private, so it can sustain itself through the expected prolonged and difficult market conditions,” Eurasia said in the statement.

    A buyout at $10 a share “would be a pretty good deal for the management and core shareholders,” Artem Konchin, an oil analyst at Otkritie Financial Corp., said by e-mail. Otkritie has a target price of $17 a share for Eurasia, compared with an average estimate of $15.85 from eight analysts surveyed by Bloomberg.

    Eurasia has formed a committee comprising independent directors Alexander Shokhin, Igor Belikov and the Earl of Clanwilliam to negotiate terms on behalf of the board with the assistance of adviser Renaissance Capital, according to the statement. RenCap’s research unit has a $17 target price on the company, Bloomberg data show. Xenon Capital Partners will advise the buyout group.

    The investors want to take Eurasia private because the company requires “maximum flexibility” as lower crude prices and “continued geopolitical risks” put pressure on its operations, according to the filing. Nicosia, Cyprus-based Eurasia has idled 20 percent of its drilling fleet, most of which was deployed at West Siberian fields, and reduced its workforce by 9.4 percent amid a slowdown in exploration.

    http://www.bloomberg.com/news/articles/2015-10-08/eurasia-drilling-gets-merger-proposal-to-take-company-private-ifhvxovz
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    Total CEO Says Oil Chiefs to Meet Next Week on Climate, Carbon Pricing


    The chief executive of French oil major Total, Patrick Pouyanne, said executives of eight global oil companies would meet in Paris next week to discuss involvement in the climate change debate and proposals about carbon pricing.

    He did not name the companies.

    Earlier this year BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total wrote to U.N. climate chief Christiana Figueres, urging governments around the world to introduce a pricing system for carbon emissions.

    Setting a price for each tonne of carbon that emitters produce is meant to encourage companies to adopt cleaner technologies and shift away from using fossil fuels, primarily coal.

    In a joint statement, the companies acknowledged the current trend in greenhouse gas emissions was too high to meet the United Nation's target of limiting global warming by no more than 2 degrees.

    The Oct. 16 meeting will be followed by a press conference, where the company heads are also expected to renew their call for a global carbon pricing mechanism, the chief executive of French oil major Total, Patrick Pouyanne, said on Wednesday at a conference in London.

    Pouyanne said the company leaders would present proposals to combat global warming ahead of the December Paris climate talks, where governments will set new goals for combating climate change.

    "We need to be on the offensive ... We need to be serious to bring answers and solutions to the table and not leave policy makers raising their fingers that they (oil companies) are the devils," Pouyanne said at the Oil and Money conference.

    "We are looking at areas of cooperation, for example in research and development, in CCS (carbon capture and storage) ... We all have some experience individually but it's one area where we could join efforts," Pouyanne added.

    The meeting will be part of the Oil and Gas Climate Initiative, a U.N.-backed scheme involving a number of major oil and gas companies.


    - See more at: http://www.rigzone.com/news/oil_gas/a/140980/Total_CEO_Says_Oil_Chiefs_to_Meet_Next_Week_on_Climate_Carbon_Pricing?rss=true#sthash.l1tLUOLG.dpuf
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    Petrobras: A Fat Lady 'no show' at her own aria.


    Petroleo Brasileiro SA sat out an oil licensing round in Brazil for the first time ever as the beleaguered state-run oil giant struggles to reduce the industry’s biggest debt load.

    The country’s National Petroleum Agency sold only 37 of the 266 onshore and offshore blocks it offered Wednesday in the worst turnout in more than a decade. International majors operating in Brazil, including Statoil ASA, Royal Dutch Shell Plc and Total SA, didn’t submit any bids.

    The 17 companies that won licenses were mostly Brazilian oil startups and mid-sized explorers that bid for onshore tracts, including QGEP Participacoes SA and Parnaiba Gas Natural, both based in Rio de Janeiro. The six foreign winners include Santiago-based Geopark Ltd. and French utility Engie, formerly known asGDF Suez, which partnered with Parnaiba Gas Natural. QGEP was the only bidder for offshore areas, winning two blocks in the Sergipe-Alagoas basin.

    The auction took place amid a slump in crude prices and a national political crisis as Petrobras, the country’s dominant producer, grapples with cash constraints. While producers have traditionally preferred to join Petrobras as minority partners to limit risk, the company is balking at new financial commitments, according to Jotavio Gomes, an oil consultant and former  geophysicist at the state-run firm.

    http://www.bloomberg.com/news/articles/2015-10-07/brazil-starts-first-oil-exploration-auction-in-two-years

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    Summary of Weekly Petroleum Data for the Week Ending October 2, 2015


    U.S. crude oil refinery inputs averaged about 15.6 million barrels per day during the week ending October 2, 2015, 403,000 barrels per day less than the previous week’s average. Refineries operated at 87.5% of their operable capacity last week. Gasoline production decreased last week, averaging 9.3 million barrels per day. Distillate fuel production increased last week, averaging about 5.1 million barrels per day. 

    U.S. crude oil imports averaged about 7.1 million barrels per day last week, down by 486,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.2 million barrels per day, 3.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 543,000 barrels per day. Distillate fuel imports averaged 111,000 barrels per day last week. 

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.1 million barrels from the previous week. At 461.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories increased by 1.9 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 2.5 million barrels last week but are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.6 million barrels last week and are well above the upper limit of the average range. 

    Total commercial petroleum inventories increased by 2.3 million barrels last week. Total products supplied over the last four-week period averaged 19.3 million barrels per day, down by 0.3% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.0 million barrels per day, up by 4.0% from the same period last year. Distillate fuel product supplied averaged over 3.9 million barrels per day over the last four weeks, up by 3.7% from the same period last year.  Jet fuel product supplied is up 6.9% compared to the same four-week period last year.

     Jet fuel product supplied is up 6.9% compared to the same four-week period last year.
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    Cheniere Energy prepares Sabine Pass plant for LNG production


    Cheniere Energy has started the months long process of preparing its $18 billion Sabine Pass liquefied natural gas export terminal to crank out its first batch of super chilled gas for shipment overseas.

    The Houston-based company received permission from federal regulators to pipe natural gas into the sprawling plant on a remote stretch of coastline along the border between Texas and Louisiana as it starts priming the first production facilities for start-up.

    Last week, Sabine Pass LNG began bringing in small amounts of natural gas and burning some off, a process called flaring, providing early signs that the first phase of the project is nearing the finish line, according to energy research firm Genscape, which has been monitoring plant activity using a network of infrared monitors.

    Three years after construction began, the flurry of commissioning activity at the Sabine Pass plant has attracted much attention, placing Cheniere on track to complete the nation’s first large-scale terminal to ship LNG from the continental U.S.

    Thousands of welders, machinists and pipe fitters have been working for years to piece together the massive export terminal where natural gas will be piped in, chilled to minus 260 degrees to a liquid state, then shipped on specialized tankers to provide electricity to customers in India, England, Spain and Italy.

    http://fuelfix.com/blog/2015/10/07/cheniere-energy-prepares-sabine-pass-plant-for-lng-production/#27079101=0
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    RSP Permian, Inc. Prices Upsized Public Offering of Common Stock


    RSP Permian, Inc.  today announced that it has priced an underwritten public offering of 7,600,000 shares of its common stock at $25.50 per share.  The offering was upsized to 7,600,000 shares of common stock from the original offering size of 6,000,000 shares of common stock.  The Company has granted the underwriter a 30-day option to purchase up to 1,140,000 additional shares of the Company's common stock. Total gross proceeds (before the underwriter's discounts and commissions and estimated offering expenses) will be approximately $193.8 million to the Company.

    As separately announced, the Company has recently signed a letter of intent to potentially acquire undeveloped acreage and oil and gas producing properties located in the Midland Basin for an aggregate purchase price of approximately $137 million, subject to certain customary purchase price adjustments. The Company intends to use the net proceeds from this offering first to fund a portion of the purchase price of this possible acquisition, if consummated, and the balance for general corporate purposes, which may include funding our drilling and development program.

    RSP is an independent oil and natural gas company focused on the acquisition, exploration, development and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin of West Texas. The vast majority of RSP's acreage is located on large, contiguous acreage blocks in the core of the Midland Basin, a sub-basin of the Permian Basin, primarily in the adjacent counties of Midland, Martin, Andrews, Dawson, Ector and Glasscock. The Company's common stock is traded on the NYSE under the ticker symbol "RSPP."

    http://finance.yahoo.com/news/rsp-permian-inc-prices-upsized-134400654.html

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    TransCanada launches binding Open Season for Cushing Marketlink


    TransCanada Corp. has launched an Open Season to obtain binding commitments from interested parties for transportation of crude oil on Cushing Marketlink from Cushing, Oklahoma to markets on the US Gulf Coast.

    Interested parties may submit binding bids for transportation capacity during the Open Season that will close on 6 November 2015 at Noon MST. The anticipated commencement date for crude oil transportation service is early 1Q16.

    http://www.energyglobal.com/downstream/refining/07102015/TransCanada-launches-binding-Open-Season-for-Cushing-Marketlink-1555/
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    Canadian Oil Sands rejects Suncor bid; adopts poison pill


    Canadian Oil Sands calls Suncor's bid "opportunistic"and has adopted a poison pill defence.

    On Monday Suncor commenced an unsolicited offer for struggling Canadian Oil Sands (TSE:COS) for $4.3 billion. Canadian Oil Sands has been labouring under low oil prices while Suncor has weathered the downturn through its higher margin retail and downstream refining operations.

    Canadian Oil Sands adopted what it is calling ashareholder rights plan. Following the acquisition of 20 per cent or more of the outstanding shares by any person, each right held by a person other than the acquiring person would entitle the holder to purchase shares at a substantial discount.

    The move by Canadian Oil Sands is buying the company time.

    "The board will consider Suncor's unsolicited offer in both the current context and in light of the strong long-term potential of Canadian Oil Sands," says Donald Lowry, Chairman of the Board, in a news release.

    "Shareholders do not need to take any action or make any decision about the Suncor offer until the Board has had an opportunity to fully review the offer and to provide a recommendation based on careful analysis."

    http://www.mining.com/canadian-oil-sands-rejects-suncor-bid-adopts-poison-pill/
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    Alternative Energy

    Oil-Producing Solar Farm Nears Construction Start by Glasspoint


    GlassPoint Solar Inc will begin work on one of the world’s largest solar park this month, with completion planned for late 2017.

    The 1-gigawatt solar-thermal project will turn water into steam for injection into an oilfield in Oman. The process is known as enhanced oil recovery or EOR and involves heating the ground to improve the flow of heavy crude to the surface.

    The Fremont, California-based company is working with Petroleum Development Oman, a joint venture with Royal Dutch Shell Plc, Total SA and the government of Oman. The project is a landmark deal in terms of size but also because it also the first time that solar energy is used to produce oil at a commercial scale. Glasspoint previously did smaller pilot projects involving solar and oil.

    “The global oil industry uses about 9 million barrels of the fossil fuel per day to power the production process, the equivalent of Western Europe’s daily consumption,” Rod MacGregor, chief executive officer of GlassPoint, said in an interview in London.

    Many countries have already pumped their lightest, easiest to access oil and now are using EOR to reach the heavier varieties. Companies can spend as much as 60 percent of their operating costs on fuel for EOR, using five barrels to steam to make one barrel of oil, according to MacGregor.

    GlassPoint’s steam-making facility will largely be run on the sun’s energy by day and natural gas at night. Solar-powered steam is 10 percent cheaper than natural gas in California. In Oman, it’s about 28 percent cheaper compared to the export price for liquefied natural gas.

    “But you also have to factor in the opportunity cost, Oman could be selling that gas,” MacGregor said.

    A standard medium-sized oilfield would require 1 gigawatt to 3 gigawatts of solar thermal power to make the right amount of steam. Some of the larger ones would need up to 30 gigawatts, he said.

    http://www.bloomberg.com/news/articles/2015-10-07/oil-producing-solar-farm-nears-construction-start-by-glasspoint

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    SunEdison expects to be cash positive through 2016


    Solar company SunEdison Inc said on Wednesday it was on track to be cash positive throughout next year, assuaging investor concerns about its liquidity and "yieldco" model.

    The company, which said two days ago that it would cut 15 percent of its workforce, has reported negative cash flow from operating activities for the past four years, according to Thomson Reuters data.

    SunEdison also said on Wednesday that it had terminated an agreement to buy renewable energy company Latin American Power.

    The Wall Street Journal first reported late on Tuesday that the company would end a $700 million agreement to buy Latin American Power, an owner of wind and hydropower projects in Chile and Peru.

    "SunEdison has got to a point where I don't expect to see an acquisition from them over the next several quarters," said S&P Capital IQ analyst Angelo Zino.

    Maryland Heights, Missouri-based SunEdison, which has spent more than $6 billion on acquisitions in less than a year, has been under pressure since mid-July after buying Vivint Solar Inc in a deal valued at $2.2 billion.

    Also, the company's "yieldco" model has been hit by falling oil prices as well as a flood of IPOs.

    SunEdison last July became the first solar company to spin off some of its power plants into yieldco, which earns money through long-term contracts with utilities.

    Terraform Global Inc, one of the company's yieldcos, had a weaker-than-expected market debut on July 31, triggering a fall in SunEdison's shares. Up to Tuesday's close, the stock had fallen nearly 63 percent since then.

    On Wednesday, SunEdison also cut its 2016 production forecast to 3.3-3.7 gigawatts from 4.2-4.5 GW.

    SunEdison said it was doing more third-party sales, compared with its base plan of 5-10 percent. This will help SunEdison enhance near-term cash flow generation, said Zino.

    SunEdison said it expected about 45 percent of its total volume to be sold to third parties in 2016.

    http://www.reuters.com/article/2015/10/07/sunesunedison-inc-outlook-idUSL3N1273EK20151007
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    Agriculture

    Monsanto reports quarterly loss, sets new share buyback


    Monsanto Co, one of the world's largest seed and agrichemical companies, said on Wednesday that it was slashing 2,600 jobs and restructuring operations to cut
    costs in a slumping commodity market that it expects to squeeze results well into 2016.

    Monsanto, which also reported a much wider quarterly loss, said that along with the layoffs, its global restructuring would include "streamlining and reprioritizing" some commercial and research and development work, including an exit from the sugar cane business.

    In its fiscal 2014 annual report, Monsanto said it had 22,400 regular employees and 4,600 temporary workers.

    The company said it expected to reap annual savings of $275 million to $300 million from the restructuring by the end of fiscal 2017, at a total cost of $850 million to $900 million. It is developing further plans to reduce operating spending by an additional $100 million, bringing total annual savings to as much as $400 million.

    Monsanto said it was pegging its earnings-per-share outlook for its new fiscal year, which began on Sept. 1, at $5.10 to $5.60. That is well below many analysts' expectations for more than $6.00.

    To try to shore up investor confidence, the company announced a $3 billion accelerated share repurchase program.

    Monsanto said its losses widened to $1.06 a share in the fourth quarter ended on Aug. 31 from 31 cents a year earlier.

    Sales of corn seeds and traits, Monsanto's key products, fell to $598 million from $630 million in the quarter. And sales at the company's agricultural productivity unit, which includes Roundup herbicide, dropped to $1.1 billion from $1.25 billion.

    For the year, net sales were down about 5 percent for the seeds and traits products and fell 7 percent for herbicides and other agricultural productivity products.

    Despite the bleak results, Monsanto Chairman Hugh Grant said in a statement that the company's fundamentals were strong. Monsanto will remain focused on execution of growth targets for its core seeds and traits business and be "disciplined" with its herbicide business, he said.

    The company said it would still meet its target of more than doubling fiscal 2014 earnings per share, excluding special items, by 2019.

    Shares of Monsanto were down 1.5 percent at $86.22 in early trading. The stock had fallen roughly 30 percent from a high set last February, and its growth strategy has under intense investor scrutiny after its attempted takeover of Swiss rival Syngenta AG failed.

    http://www.reuters.com/article/2015/10/07/monsanto-results-idUSL1N1270O220151007

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    Canadian farmers follow miners, stream crops for cash


    Canadian canola farmers are tapping an alternative form of financing more often used by cash-hungry miners, turning a small Saskatchewan company into one of the country's biggest suppliers of the oilseed.

    Regina-based Input Capital Corp, which does not own a tractor or grain bin, now controls 75,000 tonnes of canola production through contracts with 78 farmers, up from just five in 2013.

    Input, which has a market capitalization of about C$200 million ($153.43 million), says it is the first company in the world to buy "streams" of farmers' future production. 

    While farmers have long used forward sales contracts to hedge the price they get for their crops, Input's model offers the advantage of upfront payment. Input aims to profit by paying a discounted price for the oilseed, used to make cooking oil and margarine.

    Streaming currently accounts for less than 1 percent of this year's harvest in the world's biggest canola producer. But as Input grows, it may claim a larger share of the farm credit business of Canada's major banks and other lenders.

    "There is a dearth of working capital available to farmers," said Input Chief Executive Doug Emsley. "Farmers need cash when they have crop in the bin, because they can't necessarily monetize it when they want to."

    Input's niche model has helped it attract investors including Sprott Asset Management.

    "They're first to market and they're making it more and more difficult for other financialinstitutions to provide an equal service," said Sprott portfolio manager Jason Stevens.

    But like crop prices themselves, Input's stock is volatile.

    Its shares on the TSX Venture Exchange hit an all-time high in April before crumpling to an eight-month low in August. The stock is up about 18 percent year to date.

    Another company is already hoping to follow Input's path - in Australia. Startup CommStream Capital Ltd is looking to sign farmers to multi-year contracts to supply half a dozen crops, including wheat, barley and canola.

    Australian farmers' debts currently hold them back from investing to improve productivity, said CommStream Chief Operating Officer Simon Skerrett.

    Churchbridge, Saskatchewan farmer Graham Sorgard signed a six-year contract to supply Input with 100,000 bushels of canola annually, about one-quarter of his production. The deal gave him C$3 million up front - 70 percent of the contract's value - enabling him to buy an egg farm and stock up on fertilizer.

    "I can see (crop-streaming) getting bigger," Sorgard said. "I think the sky's the limit."

    Even so, crop-streaming comes with all the risks associated with weather-dependent agriculture. Last year, a large farm that was flooded could not meet its supply obligation, so Input restructured its contract, noted National Bank analyst Greg Colman.

    http://www.reuters.com/article/2015/10/07/canada-canola-financing-idUSL1N1121IK20151007
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    Base Metals

    ICSG revises down copper supply forecast, expects 2016 deficit


    Global copper supply will be in deficit next year, down from a previously anticipated surplus following a string of production cuts and mine disruptions, the International Copper Study Group (ICSG) said in its latest forecast.

    In a report published Tuesday, ICSG said there would be a 130,000 mt deficit in 2016 compared with a surplus of 230,000 mt it forecast in April.

    It also reduced its estimate for this year to a surplus of just 41,000 mt against one of 360,000 mt in its April outlook.

    "The revisions reflect substantial changes in market conditions since April 2015," ICSG said.

    "Although a downward revision has been made to global usage in view of lower than anticipated growth in China, larger downward adjustments have been made to production as a result of recent announcements of production cuts," it added.

    Several major copper producers have reduced mining output after a bearish year for the metal in which London Metal Exchange prices have fallen 16% year-to-date.

    Prices have been hit by a slowdown in China, which accounts for 40% of global demand, and production overcapacity.

    The ICSG said expected 2015 copper production would increase just 1% year-on-year, down from 7% growth in 2014.

    "[Refined production] growth of around 7% in China will be partially offset by a decline in production in Chile, Japan and the United States," it said.

    ICSG's revision follows similar moves across the industry, with Macquarie revising down 2016 supply of copper to a 272,000 mt deficit in its October 2015 Commodity Outlook.

    But there is still debate about what copper's aggregate supply balance will look like in the next year. "Low oil prices and declining commodity currencies are helping to lower production costs, enabling some producers to delay making cuts," said Sucden's Quarterly Metals report this month, forecasting a 230,000 mt surplus in 2016.

    http://www.platts.com/latest-news/metals/london/icsg-revises-down-copper-supply-forecast-expects-26232251

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    Alcoa wins $1.1 bln contract for Lockheed's F-35 fighter jets


    Alcoa Inc said it had got a contract to supply titanium to Lockheed Martin Corp's F-35 Lightning II aircraft.

    The contract has an estimated value of about $1.1 billion, the company said on Wednesday.

    Alcoa said it would supply titanium for airframe structures for all three variants of the F-35 fighter jets over nine years, from 2016 to 2024.

    http://www.reuters.com/article/2015/10/07/alcoa-contract-lockheed-idUSL3N1273GM20151007

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    Steel, Iron Ore and Coal

    France urged to end coal projects in Turkey


    Environmental lobby groups on Wednesday urged French President Francois Hollande to force state-owned utility Engie to stop investing in coal projects in Turkey.

    Engie, in partnership with the Turkish company Mimag-Sanko, plans to build the Ada Yumurtalik 1,320-megawatt coal plant in the south of Turkey.

    Around 35 environmental groups, including WWF France, Greenpeace Turkey and Climate Action Network Europe, said the project threatens citrus fruit production in the area and new coal plants put the livelihoods of 500,000 people at risk.

    "We strongly urge you to act to cancel Engie's investment plans in the Ada coal power plant project in Iskenderun Bay, and to push Engie commit to end all its coal investments and activities," they said in a letter to the French president.

    Coal remains the world's top fuel for power generation but over the past year pressure on governments and companies worldwide has increased to pull out of coal on environmental grounds. U.S. bank Citi on Tuesday joined the retreat by tightening its policy on credit exposure to coal miners.

    Turkey plans to double its coal power capacity over the next four years to help it meet rising energy demand as its economy expands.

    The French state owns 84 percent of Engie and around 33 percent of utility EDF. Both companies are among the sponsors of United Nations climate talks which will be held in Paris from Nov. 30 to Dec. 11 with the aim of agreeing a global deal to curb emissions.

    The letter said it was the French government's responsibility as the host of the U.N. climate talks to ask those companies to redirect coal investments towards energy efficiency and renewable energy.

    France has pledged to eliminate coal export credits and scrapped credits used for coal technology made by Alstom last month.

    Utility companies have said it will take time to move completely away from the use of fossil fuels and some have urged governments to put a global price on carbon emissions so there is less incentive to burn highly polluting coal.

    http://www.reuters.com/article/2015/10/07/france-coal-idUSL8N1272ZM20151007
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    Roy Hill mine will ship its first iron ore cargo on 21 October - Report


    Australia’s Roy Hill iron ore mine, majority owned by Ms Gina Rinehart’s Hancock Prospecting, looks set to deliver its maiden iron ore shipment before the end of the month according to one of the project’s key investors. Mr Matthew Hope, a research analyst at Credit Suisse, in a note to clients said “Roy Hill will ship its first iron ore cargo on 21 October, according to POSCO, a shareholder in the mine and recipient of the cargo at its south Korean mill.”

    He added “JV partners, POSCO, Marubeni and China Steel Corp will take 50% of the 55 million tonnes per annum output, the remainder is intended to be sold in China.”

    The project, commenced in mid-2011, has an initial mine life of 17 years according to the Roy Hill website.

    Contractor Samsung CT sent hundreds of workers to the Pilbara site earlier this year to help meet a deadline for making a first shipment in October.

    http://steelguru.com/mining/roy-hill-mine-will-ship-its-first-iron-ore-cargo-on-21-october-report/436303#tag
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    Vedanta to export 5.5 million tonnes of iron ore from Goa in 2015-16


    Live Mint reported that Vedanta Resources Plc said that it would export 5.5 million tonnes of iron ore from its mines in Goa by March as the company restarts operations with the permission of the country’s apex court.

    Mr R Kishore Kumar, chief executive officer of Vedanta’s iron ore business “Mines in Goa will export about 20 million tonnes of iron ore in the fiscal year ending March 2016. Out of this, Vedanta will export about 5.5 million tonnes.”

    He added “If we are given a larger production capacity, we are in a position to become competitive.”

    Mr Kishore said that Vedanta is targeting a production cost of USD 20 a tonne.

    The Supreme Court has allowed Vedanta to mine only 5.5 million tonnes of iron ore, but the company is seeking a relaxation on the limit to become competitive in a global market that has witnessed a meltdown in price of the commodity used to make steel.

    http://steelguru.com/mining/vedanta-to-export-5-5-million-tonnes-of-iron-ore-from-goa-in-2015-16/436305#tag
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