Mark Latham Commodity Equity Intelligence Service

Friday 9th June 2017
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West underestimates China's new Silk Road, German envoy says

Western countries are underestimating China's new Silk Road project, which is an important scheme, despite concerns it is too China-centric and so far lacking in opportunities for foreign firms, Germany's ambassador to China said on Thursday.

China has touted what it formally calls the Belt and Road initiative as a new way to boost global development since President Xi Jinping unveiled the plan in 2013, aiming to expand links between Asia, Africa, Europe and beyond.

At a summit last month, Xi pledged $124 billion for the plan, but it has faced suspicion in Western capitals that it is intended more to assert Chinese influence than Beijing's professed selfless desire to spread prosperity.

Ambassador Michael Clauss told the Foreign Correspondents' Club that Germany saw a lot of merit in the scheme, but he felt many were largely ignoring it, especially in Europe and the United States, which surprised him.

"It's being underestimated a little bit. People should wake up," Clauss said, adding that one concern was that China was still promoting it as a very China-centric scheme.

"What we would like to see is it be done at a more equal footing. So far it's not yet been possible to have equal footing discussion between the European Union and China on that aspect," he said.

"It's very much centered on Beijing, on China."

European firms want to take part, but are being made to feel unwelcome or face undesirable conditions, added Clauss, who has been ambassador in Beijing since 2013.

"We know that in some cases companies have been asked to transfer their technology in return for being able to participate in some of the projects, which didn't meet with a lot of enthusiasm."

The new Silk Road is being promoted as part of China's efforts to bolster its global leadership ambitions as U.S. President Donald Trump promotes "America First" and questions existing global free trade deals, including pulling out of the Trans-Pacific Partnership, or TPP.

Clauss said the new U.S. administration was still formulating its China policy, and in Beijing, where the new U.S. ambassador is yet to arrive and the acting top diplomat has just resigned, there was little cooperation at present between Germany and the United States on China.

Even with its problems, the new Silk Road should be supported, Clauss added, however.

"Despite these shortcomings, we feel that especially since TPP and others have been given up, there's no better game in town."
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Brazil electoral court case against Temer loses force

After its chief judge urged his peers to consider Brazil's political stability, the country's top electoral court on Thursday excluded testimony of engineering company executives in an illegal campaign funding case against President Michel Temer

The decision by the Supreme Electoral Court suggested it may throw out the case that has threatened to unseat the scandal-hit president. That would clearly be a temporary win for Temer, but analysts say it would still leave him weakened and by no means bring an end to the political crisis roiling Brazil.

A guilty ruling would annul the 2014 election victory of former President Dilma Rousseff and her then running mate Temer and unseat Temer, though he could appeal and likely remain in office until a final decision, which would take months. That would deepen uncertainty over his austerity agenda aimed at plugging a gaping budget deficit and pulling Brazil out of its worst ever recession.

So far, only one judge has ruled in the trial. Herman Benjamin voted to annul the 2014 Rousseff-Temer ticket for accepting bribes and illegal donations.

But four of the seven justices are expected to vote the other way on Friday morning, including the head of the court, Gilmar Mendes, who said any ruling had to consider the stability of the country and Temer should not be compelled to step down for a minor reason.

Exclusion of the plea-bargain testimony from Odebrecht SA [ODBES.UL] executives strengthened Temer's line of argument that his campaign received no illegal funds.

The executives told prosecutors they funneled millions of dollars into the 2014 Rousseff-Temer campaign in return for government contracts and other kickbacks.

The Temer and Rousseff defense teams requested the Odebrecht testimony be scrapped, holding that it went beyond the scope of the original complaint filed to the court by the Brazilian Social Democracy Party (PSDB) after it lost the 2014 election.

"Temer has the votes to stay in office," said Welber Barral, a Brasilia insider and political consultant who is following the case closely, as is much of the country and its investors.

Barral said the court, known as the TSE, would most probably vote 4-3 to throw out the case. Any of the judges, however, could ask for more time to study the case, which could delay a final ruling for weeks.

Brazil's currency BRBY strengthened as investors sensed the court would likely favor Temer, raising the survival chances of his measures to close the budget deficit. Interest rate futures, a gauge of concern over Brazil's future, fell off morning highs on the decision to exclude Odebrecht testimony.


Temer opponents had been counting on a TSE ruling to force him from office. The country is stuck in a political crisis triggered by Brazil's biggest ever graft scandal and last year's impeachment of Rousseff, whose supporters called it a soft coup arranged by Temer and allies to thwart the scandal probe.

Temer himself is under investigation for allegedly receiving millions in bribes and obstruction of justice, and Brazil's top federal prosecutor is widely expected to formally charge him soon.

Temer, whose government's approval ratings are in the single digits, canceled meetings to follow the court session on television in his presidential office, an aide said. "The president is confident his defense with prevail," spokesman Marcio de Freitas told Reuters.

If Temer is forced from office, lower house Speaker Rodrigo Maia would take over, and Congress would have 30 days to pick a caretaker to lead the country until elections in late 2018.

Temer has refused to resign despite separate bribery allegations made in plea-bargain testimony by executives of the world's largest meatpacker JBS SA (JBSS3.SA).

Even if Temer survives the electoral court case and is charged by prosecutors for corruption, he is unlikely to fall.

For the top court to put him on trial, the charges would have to be authorized by two thirds of the lower chamber of Congress, where his allies are still a majority.

The PSDB party, Temer's main coalition ally, delayed until Monday a meeting on whether to pull its three ministers from his cabinet, which would erode his support in Congress, but not to the point that charges against him would pass the chamber.
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Italy's 5-Star says no deal possible on electoral reform, wants snap vote

Italy's anti-establishment 5-Star Movement called on Thursday for immediate national elections after a deal on electoral reform among the major parties unraveled.

"There is no chance of starting all over again. The legislature should end here and we should hold immediate elections," said Luigi Di Maio, who is widely expected to be the 5-Star's candidate for prime minister.

He spoke shortly after the lower house voted to send the electoral reform bill back to a cross-party commission for further discussion.

Upping the pressure for an early election, the parliamentary party leader of the ruling Democratic Party, Ettore Rosato, told reporters he did not know how the coalition government could hold together following the rupture over the voting law.

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Peru relaxes air quality standards to help mining industry

Peru adopted new and more flexible air quality standards on Wednesday after the old standards were criticised by mining companies and President Pedro Pablo Kuczynski.

A decree published by the environment ministry raised the maximum amount of sulphur dioxide, a byproduct of smelting copper and other base metals, that can be emitted to 250 micrograms per cubic metre per 24 hours, from the 20 micrograms per cubic metre previously.

Peru is the world's No 2 copper producer and miningaccounts for 60% of its exports. Mining companies had criticised Peru for having overly strict air quality standards, complaining the technology to meet them does not exist.

A third auction of a smelter in La Oroya, one of the world's most contaminated cities, failed to find a new operator in March. The lack of interest was in part because potential bidders were waiting for new environmental standards to be released.

Kuczynski said in July of last year that air quality standards were "unrealistic" and more stringent than in Finland. The situation had slowed investment in Peru, he said.

He said air quality standards used in other mining countries were more reasonable.
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Trump says infrastructure plan will speed approvals, cut regulations

US President Donald Trump said Wednesday that he was focused on reducing "burdensome" federal regulations and streamlining the approval and permitting process for oil and natural gas pipelines and other infrastructure projects.

"They're getting approved so fast," Trump said during a televised speech in Cincinnati, Ohio.

Trump credited his administration with approving the Keystone XL and Dakota Access pipelines.

"Nobody thought any politician would have the guts to approve that final leg," said Trump, claiming that he has received no "heat" for approving the Dakota Access pipeline.

Joined by US coal, steel and petroleum industry executives, Trump gave his speech along the banks of the Ohio River with barges carrying "West Virginia coal" in the background.

The speech was intended to detail his administration $1 trillion infrastructure plan, but Trump offered few details.

"America wants to build," he said.

According to a White House fact sheet, the plan will reduce permitting time for projects from 10 years to two years. Trump's proposed budget includes $200 billion to rebuild infrastructure and projects will be funded through a combination of loans and grants, the White House said.

"Government will get out of the way to allow State and local governments to succeed at meeting their unique challenges," the White House said.

Interior Secretary Ryan Zinke, who appeared at the event, said the plan was part of Trump's focus on "energy dominance" rather than energy independence.
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Kurd Referendum on Independance

Iraqi Kurds set date for independence referendum

President Masoud Barzani announces September 25 date, but path to independence remains unclear if 'Yes' vote wins.

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China May exports, imports beat forecasts

China reported stronger-than-anticipated exports and imports for May despite falling commodity prices, suggesting the economy is holding up better than expected despite rising lending rates and a cooling property market.

Concerns over China landed squarely back on global investors' radar after Moody's Investors Service downgraded its credit rating last month, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

Imports have been strong in recent months, driven largely by iron ore and other commodities used to feed a year-long construction boom, while exports have rebounded thanks to stronger global demand after several years of contraction.

Still, analysts had expected trade growth to cool in May, forecasting the economy will gradually lose momentum over the rest of the year as measures to cool heated home prices dampen property investment and a crackdown on riskier types of lending pushes up financing costs.

But growth in both exports and imports defied those expectations and accelerated from April.

China's May exports rose 8.7 percent from a year earlier, while imports expanded 14.8 percent, official data showed on Thursday.

That left the country with a trade surplus of $40.81 billion for the month, the General Administration of Customs said.

Analysts polled by Reuters had expected May shipments from the world's largest exporter to have risen 7.0 percent. Exports rose 8.0 percent on-year in April.

Imports were expected to have climbed 8.5 percent, after rising 11.9 percent in April.

Analysts were expecting China's trade surplus to have widened to $46.32 billion in May from April's $38.05 billion.


China May iron ore imports recover from six-month low

China's trade surplus with the U.S. was $22.0 billion in May, up from $21.34 billion in April, according to data from China's customs bureau.

The world's two biggest economies have started their 100 days of trade talks, which was agreed by United States President Donald Trump and Chinese President Xi Jinping when they met in Florida in April in an effort to reduce the massive U.S trade deficit with Beijing.

In a sign of progress, the two countries agreed in May to take action by mid-July to increase access for U.S. financial firms and expanding trade in beef and chicken among other steps.

China does not deliberately pursue a trade surplus with the United States, vice commerce minister Yu Jianhua told a news conference on May 12.

China's commerce minister Zhong Shan recently told new United States Trade Representative Robert Lighthizer the two sides should strengthen cooperation and manage disputes in trade, according to a statement on the website of China's Ministry of Commerce.
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BHP Robot ghost ships to extend miner's technology drive to seas

BHP Billiton, the world’s biggest mining company, is studying the introduction of giant, automated cargo ships to carry everything from iron-ore to coal as part of a strategic shift that may disrupt the $334-billion global shipping industry.

“Safe and efficient autonomous vessels carrying BHP cargo, powered by BHP gas, is our vision for the future of dry bulk shipping,” Vice President, Freight Rashpal Bhatti, wrote in a posting on its website. The company, also one of the world’s largest dry bulk charterers, is seeking partners to work on technological changes in the sector, he said.

BHP, which charters about 1 500 voyages a year for around a quarter of a billion metric tons of iron-ore, copper and coal, wants to deploy the technology within a decade, according to Bhatti. For the biggest miners, a move to crewless ships could deliver new savings in the $86-billion a year seaborne iron-ore market, mirroring the shift to autonomous trucks to trains that allow fewer staff to remotely operate or monitor multiple vehicles.

Deploying unmanned ships on the 10-day sea journey from Australia’s northern coast to China would be a logical extension of technology that currently runs from mines to ports and allows producers to respond quickly to specific customer demands, Emilie Ditton, Sydney-based research director at IDC Energy Insights, said by phone.

There has been in the last six months a really big change in the desire of mining companies to seek out opportunities for innovation,” Ditton said. “There’s a much bigger recognition that there are opportunities to innovate across the board.”

Work is under way at the International Maritime Organisation, the United Nations agency in London that oversees global shipping, to consider regulation of autonomous surface ships, James Fanshawe, a former senior Royal Navy officer and chairman of the UK’s Maritime Autonomous Systems Regulatory Working Group, said by phone. A meeting beginning Wednesday of IMO’s maritime safety committee will consider proposals for a regulatory study on the “safe, secure and environmentally sound operation” of autonomous vessels, according to the organisation’s website.

BHP takes the view that the dry bulk freight market is on the verge of pricing and liquidity reforms similar to those seen in bulk commodities markets over the last decade, Bhatti said in the May 30 posting. The company cut freight and transportation costs by 16% to $2.3-billion in fiscal 2016, according to filings.

The Baltic Dry Index, a measure of commodity shipping costs, fell 0.4% Tuesday to 818 points, according to the Baltic Exchange in London. BHP declined 0.6% to A$23.19 in Sydney trading Wednesday.

A three-year, €3.8-million project backed by the European Union developed a proposal for an intercontinental bulk carrier and concluded in 2015 that autonomous technology is both feasible and likely to be adopted. China’s Maritime Safety Administration is also working on development of uncrewed ships, according to its website.

Rio Tinto Group, which uses a fleet of about 76 driverless trucks and will fully deploy autonomous trains in Western Australia by the end of next year, sees shipping as among the next set of processes to target with innovation, its top iron oreexecutive Chris Salisbury told a Perth conference last month.

Rio’s marine unit shipped 281-million tonnes of cargo in 2016 and is the largest dry bulk shipping business in the world, operating 17 vessels of its own and contracting a fleet of about 200 at any one time, according to filings.

An unmanned ocean-going vessel could be in international waters by 2035 under proposals by Rolls-Royce Holdings, which has developed a virtual prototype and aims to have remotely controlled coastal vessels in testing as soon as 2020, according to its marine division. Fertilizer producer Yara International ASA said  last month it will deploy an autonomous-capable container ship on Norway’s coast from next year and aims to move to remote operation in 2019 and full autonomy a year later.

“Autonomous ships will change the way transport systemsare designed and operated,” Ornulf Jan Rodseth, a Trondheim, Norway-based senior scientist at Sintef, Scandinavia’s biggest science and technology researcher, said in an e-mail. If freight users, including BHP, are able to adopt the technology, “you might see that they build a new fleet of special purpose ships that puts the traditional ships and ship operators out of business,” he said.

Attached Files
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Vladimir Putin Is Getting Interested in Bitcoin's Biggest Rival

Ethereum, the world’s largest cryptocurrency after bitcoin, has caught the attention of Vladimir Putin as a potential tool to help Russia diversify its economy beyond oil and gas.

Putin met Ethereum founder Vitalik Buterin on the sidelines of the St. Petersburg Economic Forum last week and supported his plans to build contacts with local partners to implement blockchain technology in Russia, according to a statement on Kremlin’s website.

“The digital economy isn’t a separate industry, it’s essentially the foundation for creating brand new business models,” Putin said at the event, discussing means to boost growth long-term after Russia ended its worst recession in two decades.

Virtual currencies could help the economy by making transactions happen more quickly and safely online. Besides being a method of exchange, Ethereum can also serve as a ledger for everything from currency contracts to property rights, speeding up business by cutting out intermediaries such as public notaries.

Russia’s central bank has already deployed an Ethereum-based blockchain as a pilot project to process online payments and verify customer data with lenders including Sberbank PJSC, Deputy Governor Olga Skorobogatova said at the St. Petersburg event. She didn’t rule out using Ethereum technologies for the development of a national virtual currency for Russia down the road.

Last week, Russia’s state development bank VEB agreed to start using Ethereum for some administrative functions. Steelmaker Severstal PJSCtested Ethereum’s blockchain for secure transfer of international credit letters.

“Blockchain may have the same effect on businesses that the emergence on the internet once had -- it would change business models, and eliminate intermediaries such as escrow agents and clerks,” said Vlad Martynov, an adviser for The Ethereum Foundation, a non-profit organization that backs the cryptocurrency. “If Russia implements it first, it will gain similar advantages to those the Western countries did at the start of the internet age.”
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AMD GPU's Sold Out on Cryptocurrency Mining.

AMD Radeon RX 570 And RX 580 GPUs Sold Out Due Cryptocurrency Mining 

by  on: 06/06/2017 02:53 PM | Source | 45 comment(s)
AMD Radeon RX 570 And RX 580 GPUs Sold Out Due Cryptocurrency Mining

Last week at Computex I have been speaking with a number of board partners, all of them pretty much said the same, AMD RX 570 and 580 cards are mainly sold out in Polaris SKUS (RX 570/580) due to a large demand in Cryptocurrency GPU based Mining. 

An example here would be Ethereum and Bitcoin, the value has gone through the roof and if that value is high. Bitcoin has risen to a 160%+ value this year. Right now it is touching 3000 USD. That made it interesting to mine bitcoins on capable affordable GPUs. Currently most if not all AMD Radeon RX 570 as well as RX 580 GPUs are sold out at the big etailers. I just check the USA and EU, it's pretty much the same everywhere - sold out.

Miners make use of GPUs from AMD and Nvidia in order to mine new coins and AMD GPUs especially are interesting. Once you mine a coin they can be used for selling purposes or kept for further appreciation (or depreciation - hey it's gotta happen at one point). 

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Saudi demands of Qatar: BREAKING!

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U.S. Considering Sanctions on its 3rd Largest Oil Supplier

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Venezuelan crisis deepening

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

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

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

According to Reuters, the last two months of unrest have resulted in the deaths of more than 60 people. The harsh actions by the Venezuela government are driving the U.S. to consider sanctions. However, any sanctions imposed may affect not just the nation’s oppressive government, but also the citizens themselves.
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Rio Tinto to cut $781m debt through cash tender offers

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

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

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

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

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

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

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

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Bitcoin Spikes Above $2800 For First Time As "Japanese Buying Frenzy" Continues

It appears the Japanese bought the f**king dip in Bitcoin last week, as tonight's session has seen s sudden surge in the price of the virtual currency, taking out prior record highs and topping $2800.

Additionally, Bloomberg reports, the speculative frenzy in bitcoin is spilling over into several small cryto-currency-related stocks on the Tokyo Stock Exchange.

But it's not just Bitcoin that is soaring, Bloomberg reports that Remixpoint Co., Infoteria Corp. and Fisco Ltd., have all seen volatile swings in their share prices after announcing businesses related to digital currencies.

Remixpoint, which has more than doubled since tying up with Peach Aviation Ltd. to let customers pay for tickets with bitcoin, fell as much as 9 percent in Tokyo on Tuesday.

Infoteria, up more than 50 percent in the past month, is testing ways to let shareholders vote by proxy using blockchain, bitcoin’s underlying technology.

Fisco, a financial information services provider, began operating a bitcoin exchange last year and is up about 25 percent since early May.

All of these gains coincide with bitcoin’s rally, with the value of the virtual currency doubling against the U.S. dollar since early May. That has made the stocks of the these small-cap companies an attractive way for speculators to invest in cryptocurrency markets without buying them directly. That’s because investors can make bets via their brokerage accounts instead of taking risks with bitcoin exchanges, according to Naoki Murakami, a well-known day trader in Japan.

“From about a month ago when all these virtual currencies started spiking like crazy, we began seeing the so-called ‘stocks of the virtual currency bubble,”’ said Murakami, a frequent speaker at investor conferences.

“Not everyone is sure they can trust bitcoin exchanges. And some don’t have accounts there. That’s why they’re using the stock market to speculate.”

Another reason why these stocks can become proxies for bitcoin is due to Japan’s relatively loose listing laws, some of which require no income and a market value of as little as $10 million before a company can go public. That’s made the Tokyo Stock Exchange home to hundreds of small companies.

“It’s pure frenzy,” Murakami said.

In April, Prime Minister Shinzo Abe’s government legalized digital currencies as a form of payment and placed rules around audits and security. That lent credibility to digital currencies, leading to some Japanese companies seeking partnerships with bitcoin startups.
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Margins of one of world's most polluting fuels soar after OPEC cuts

OPEC's efforts to shore up oil prices has made one of the world's most polluting fuels a top performer for European oil refineries, as members of the producer group cut output of sulfur-filled crude grades that yield the most fuel oil.

Margins for fuel oil, a product heavy in sulfur that is increasingly restricted worldwide due to the pollutants it contains, have outperformed cleaner fuels such as diesel and gasoline for most of the past month.

Fuel oil margins in Europe have approached five-year highs, as shippers and other users have been snapping up the product while it is being produced in lower quantities.

"Unlike the rest of the barrel, fuel oil cracks posted solid gains over May," analysts JBC Energy wrote in a note, adding that cracks for high sulfur fuel oil "have been assessed above the five-year range since March."

High sulfur fuel oil cracks, a measure of profitability, nearly always run at a loss, and remain so now.

But the loss has narrowed this year, despite growing efforts to reduce the amount of sulfur that can legally be burned in everything from ship engines to power plants, part of a global drive to reduce carbon emissions and pollution.

This has been an unexpected side effect of production cuts by the Organization of the Petroleum Exporting Countries and some non-OPEC producers. OPEC-led cuts of about 1.8 million barrels per day (bpd) have aimed to reduce a global crude glut.

But most of the nations involved in cutting output primarily produce sulfur-rich, or heavy, crude grades. So production cuts made this type of oil more expensive relative to lighter oil grades that tend to have a lower sulfur content.

Refineries from Texas to South Korea have taken advantage of comparably cheaper light oil from the United States, as well as from OPEC states Nigeria and Libya that are exempt from the production cut regime. Running these lighter crude grades through refineries means less fuel oil is produced.

"It's a really big factor," JBC analyst Michael Dei-Michei said of the shift. "Everyone is trying to run light crudes."

If a third of the 1 million bpd increase in U.S. refinery runs came from light shale oil, rather than a heavy crude such as Iraq's Basra, fuel oil output would fall by about 85,000 bpd, JBC said.


Demand for fuel oil, which is widely used by ships, is likely to fall in future.

The International Maritime Organization (IMO) is slashing the amount of sulfur allowed in shipping fuel, effectively banning high sulfur fuel oil unless vessels install sulfur-catching scrubbers.

The United States and most of Europe have already banned high sulfur fuel use on their coasts. 

But the IMO rules do not kick in until 2020. For now, a rise in global trade has spurred demand from shippers for fuel oil.

World merchandise trade volumes in 2015 grew by about 1.4 percent, with the 2016 figure expected to show a similar rise, according to U.N. figures. This compares to a 13.6 percent drop in 2009, when OPEC last cut production.

One trader said the only time he expected to see a drop in fuel oil demand was once new IMO rules were implemented.

Some refineries are adapting before then. The newest units produce virtually no fuel oil at all. Others, particularly in Russia, have upgrades that substantially reduce output.

In the first four months of 2017, Russian fuel oil output fell by almost 100,000 bpd, JBC said.

U.S. residual fuel oil production in the past four weeks fell by 55,000 bpd, according to the U.S. Energy Information Administration, which JBC said could be due to refineries using light shale oil or condensates.

Longer term, fuel oil faces a tough future.

"The outlook for fuel oil is more uncertain," Energy Aspects said of the impending rules restricting its use.

"New fuel blends, with plenty of middle distillates brought into the bunker pool, are the likely winners in the post-2020 shipping fuel shift," the consultancy said.
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Parents of China Shenhua Energy, GD Power in asset merger talks: sources

The parents of Chinese energy giants China Shenhua Energy Co Ltd and GD Power Development Co Ltd are in talks to merge some of their assets, sources told Reuters, as part of a broader shake-up of debt-ridden state-owned sector.

The listed units of China's largest coal miner, Shenhua Group Corp Ltd [SHGRP.UL], and top-five state power producer, China Guodian Corp [CNGUO.UL], suspended trading of their shares on Monday citing an unresolved "important" matter.

A person with direct knowledge of the matter said GD Power would be taken over by the Shenhua Group. No other assets would be involved in the take over deal, the person said, who was not authorized to speak with media on the matter and so declined to be identified.

"After merging Guodian's GD Power into Shenhua, Shenhua will consider acquiring coal-fired power assets from the remaining top power firms," the person also said.

Shenhua Group, China Shenhua Energy, China Guodian and GD Power could not be immediately reached for comment.

China Guodian is one of five state power producers formed in 2002 after the restructuring of the country's monopoly. The other four - China Huadian Corp [CNHUA.UL], State Power Investment Corp [CPWRI.UL], China Huaneng Group [HUANP.UL] and China Datang Corp [SASADT.UL] - have also been the subject of restructuring speculation.

Three other listed units of China Guodian - Guodian Changyuan Electric Power Co Ltd, Yantai LongYuan Power Technology Co Ltd and Ningxia Younglight Chemicals Co Ltd - also suspended share trading on Monday.

The listed firms said in statements that they had been informed by their parent companies about an important matter that involved major uncertainties and required regulatory approvals.

Guodian Technology & Environment Group Corp Ltd also mentioned a "significant event" in a filing, though it did not suspend trading of its shares. The shares' price hit a seven-month high on Monday morning.

Statements from each of the listed firms did not mention the potential of a merger or refer to asset restructuring.

A second person with knowledge of the matter told Reuters that merger talks were at a preliminary stage, and that the option of complete merger of the two parents was likely to be tabled at a later stage.

The government is in the middle of a program of rejuvenating state-owned enterprises, including those in the energy sector, with the aim of building larger, globally competitive firms through mega-mergers and the creation of huge state-owned conglomerates.

With China trying to transition toward cleaner fuels, there has been widespread speculation in the industry that Shenhua Group would aim to ease dependence on coal mining by merging with major state power providers, including nuclear power firms.

China Shenhua Energy's Hong Kong-listed shares, which continued to trade, touched a two-year high on Monday after the firm suspended trading of its Shenzhen shares.
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Saudi Arabia, others cut ties to Qatar, cites "terrorism"

Saudi Arabia, others cut ties to Qatar, cites "terrorism"

Saudi Arabia broke diplomatic relations and all land sea and air contacts with fellow Gulf Arab state Qatar on Monday, saying the move was necessary to protect the kingdom from what it described as terrorism and extremism.

The official state news agency, citing an official source, said Saudi Arabia had decided to sever diplomatic and consular relations with Qatar "proceeding from the exercise of its sovereign right guaranteed by international law and the protection of national security from the dangers of terrorism and extremism".

Saudi Arabia cut all land air and sea contacts with Qatar "and urges all brotherly countries and companies to do the same."

Etihad Airways to suspend flights to and from Qatar from Tuesday

Abu Dhabi's state-owned Etihad Airways said it will suspend all flights to and from Doha from Tuesday morning until further notice.

The last flight from Abu Dhabi to Doha will depart at 02:45 local time on Tuesday, the airline's spokesman said in an email.

The move came after Saudi Arabia, Egypt, UAE severed ties to Qatar, accusing the wealthy Gulf Arab state of supporting terrorism.

Etihad said their flights on Monday will operate as normal.

Egyptian closes its airspace and seaports for all Qatari transportation - statement

Egypt announced the closure of its airspace and seaports for all Qatari transportation to protect its national security, the foreign ministry said in a statement on Monday.

Egypt cut ties with Qatar, accusing the Gulf Arab state of supporting "terrorist" organisations including the Muslim Brotherhood, Egypt's state news agency reported.
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South Africa's ANC gravely concerned by claims of graft

South Africa's ruling African National Congress said on Friday it is gravely concerned by media reports of leaked documents showing influence-peddling in government and wants the allegations investigated.

Some South African media reported on Thursday they had access to over 100,000 leaked documents and emails that showed improper dealings in lucrative government contracts by business friends of President Jacob Zuma.

The latest allegations of influence-peddling may deepen divisions in the ANC as factions battle for control ahead of a party conference in December where a successor to the beleaguered, scandal-plagued Zuma will be chosen.

Zuma and the Gupta family, wealthy Indian-born businessmen whose companies have contracts with state-owned firms, have not commented but have denied similar allegations in the past. Reuters could not independently verify the new allegations.

"These reports contain very worrying claims about the nature of the relationship between government and private interests," the ANC said in a statement, calling on government to urgently establish the veracity of the leaks.

"The ANC views these allegations in a very serious light as, if left unattended, they call into question the integrity and credibility of the government."

The statement appeared to contradict Zuma, who said at a parliamentary session on Thursday that he was not interested in "hearsay" published in newspapers, although he did not address the latest leaks directly.

Zuma has survived calls to resign from within the ANC in recent weeks due to disputes over political appointments and his friendship with the Gupta family.
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U.S. environmental agency to offer buyouts to cut staff: memo

The U.S. Environmental Protection Agency plans to offer some employees a buyout program to reduce staff, according to an internal memo seen by Reuters, as President Donald Trump proposes slashing the agency's budget and workforce to reduce regulation.

The memo sent by acting Deputy Administrator Mike Flynn on Thursday said the agency wants to complete the buyout program by September. It did not give a dollar figure for the buyouts or say how many employees it hoped would take the offer.

The memo was sent to all employees at the same time EPA Administrator Scott Pruitt joined Trump at the White House to announce that the United States would withdraw from the Paris climate agreement.

"Early outs and buy outs ... can help us realign our workforce to meet changing mission requirements and move toward new models of work," the memo said. "The authority encourages voluntary separations and helps the Agency complete workforce restructuring with minimal disruption to the workforce."

The EPA would see the biggest cuts of any federal agency in Trump's 2018 budget proposal, with a 31 percent reduction in budget and the elimination of over 3,200 employees. The EPA employs about 15,000 people.

In the memo, Flynn said the White House Office of Management and Budget must still approve the buyout plan. The EPA and other federal agencies have offered buyouts to employees from time to time in the past.

Details on the selection criteria for employees in the pool were still being worked out, the memo said.

Career staff at the EPA have been on edge since Trump took office, as the president vowed to undo major EPA air and water regulations in his first 100 days.

Pruitt, who was an instrumental voice in convincing Trump to withdraw the United States from the Paris climate accord, doubts that human beings drive climate change and believes the agency should pare back regulations on the energy industry.

The agency has also removed references to climate change and links to key EPA climate change reports from its website.
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Blockchain primer.

“Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative. But I am not familiar with the specific product to assert whether it is the best potential setup. And we need a long time to establish confidence.”
Nassim Taleb, author, thought leader and former trader.

 “Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. The consequences of this breakthrough are hard to overstate.”
Marc Andreesen, inventor of the first browser, thought leader and top VC.

Blockchain (1).pdf

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Blockchain (1).pdf
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Diesel Sales Plummet.

New figures from the Society of Motor Manufacturers show that sales of new diesel cars plummeted by 27.3% in April. The drop is likely to be in response to a proposed crackdown on the use of diesel cars, which is expected to take place after the UK’s general election.
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Oil and Gas

The Niger Delta Avengers Declare War Once More

The militants who wagered a war against Nigerian oil output in 2016 are banding together once again to threaten the African nation’s energy sector.

Corporal Oleum Belum, spokesman for the New Delta Avengers (NDA), sounded a battle-cry against the Delta Oil Producing Areas Development Commission (DESOPADEC) and other oil agencies on Monday.

“We hereby declare ‘Operation Cripple Oil and Gas Production’ by any means available to us,” he said. “The Federal Government and oil companies – local and multinationals – operating in Delta State are hereby put on notice that effective from midnight, June 30, this year of upheavals 2017, there should be no more oil and gas operations in Delta State.”

Attacks against the oil facilities held by the Nigerian National Petroleum Corporation (NNPC) and foreign oil majors have for the most part stopped since the beginning of the year. President Muhammadu Buhari’s administration has made diplomatic efforts to ease the grievances of the residents of the Niger Delta and their Niger Delta Avengers. One proposed solution is to legalize the makeshift refineries in the area, which process stolen oil for local consumption. Abuja would offer a limited volume of crude to the residents at a discounted price to refine at the small refineries in exchange for peace.

But the diplomacy and proposed solutions are not enough for the New Delta Avengers.

“Those who try our resolve shall be made a canon folder and used to show our determination. All members of the Joint Action Committee are hereby authorized to return to the trenches,” the group says.

On May 23rd, militants attacked a pipeline operated by the Nigerian Gas Company Ltd., a subsidiary of the NNPC, Nigeria Gas Company spokesman Violin Antaih told AFP at the time.

“It has been confirmed, even by the community people, that it was a third-party sabotage,” Antaih said. Analysts say the attack served as a warning, that the destruction could return, should talks fail.
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Egypt Reduces Arrears Owed To Foreign Oil Companies To $2.3 Billion

Egypt Reduces Arrears Owed To Foreign Oil Companies To $2.3 Billion

Egypt has reduced arrears owed to foreign oil companies to $2.3 billion, the Egyptian oil ministry said in a statement on Thursday.

The country repaid $2.2 billion in three weeks, the statement said.

Once an energy exporter, Egypt has turned into a net importer in recent years, squeezed by declining production and increasing consumption.

Cairo has pledged to eliminate the arrears by the end of June 2019 and not accumulate more, part of its drive to draw new foreign investment to an energy sector that is attracting interest following several major gas discoveries.
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Engie selling its stake in Petronet LNG

France’s LNG player Engie, through its unit, GDF International, has reportedly set the wheels in motion to sell its 10 percent stake in India’s largest LNG importer, Petronet LNG.

Citing a term sheet, Bloomberg reports the company is offering 75 million shares in total looking to rake in about $513 million through a block sale.

LNG World News invited Engie to comment on the sale report.

Earlier in March, Petronet LNG said Engie invited the state-owned companies that own a total of 50 percent in Petronet LNG, offering them first right of purchase of the 10 percent share.

The four state-owned companies are Bharat Petroleum Corporation, GAIL, Indian Oil Corporation and Oil and Natural Gas Corporation.

According to the term sheet, JP Morgan Chase and Citigroup have been hired to arrange the offering.
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Shell diverts U.S. LNG cargo to Dubai after Qatar diplomatic row

Royal Dutch Shell has sent a replacement cargo of liquefied natural gas (LNG) from the United States to Dubai, shipping data shows, after a diplomatic row disrupted typical trade routes from Qatar.

Shell has a deal to supply the Dubai Supply Authority (DUSUP) with LNG which it typically sources from Qatar because of its proximity.

But bans on Qatari vessels entering ports in the United Arab Emirates, imposed after top Arab powers severed diplomatic and transport links with Qatar on Monday, meant it had to source the LNG from elsewhere.

The Maran Gas Amphipolis tanker, carrying around 163,500 cubic metres of LNG produced in the United States, was initially headed toward Kuwait's port of Mina Al-Ahmadi but made a U-turn on Wednesday to head for Dubai's port of Jebel Ali.

The tanker is currently unloading at DUSUP's floating import terminal at Jebel Ali, data showed.
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Moody's changes outlook on Royal Dutch Shell's AA2 ratings to stable from negative

* Moody's changes outlook on Royal Dutch shell's AA2 ratings to stable from negative; affirms ratings

* Moody's-Stabilized outlook on shell's AA2 rating on expectations that financial profile will improve into 2019 on ongoing earnings and cash flow recovery

* Moody's- change in outlook to stable anticipates shell's leverage position will steadily improve in 2017-19 Source text
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Gunvor Singapore executive charged by Chinese prosecutors in oil probe -document

Chinese prosecutors have charged an employee of Swiss commodity trader Gunvor Group who has been held for a year for allegedly smuggling fuel and evading taxes on sales from the Philippines, according to a legal document viewed by Reuters.

In May last year, Chinese authorities seized a tanker and detained several people as part of a probe into suspected tax evasion on imported oil. A Gunvor senior executive based out of Singapore was one of the people detained, a source briefed on the matter told Reuters.

Yin Dikun, managing director of Gunvor Singapore, was charged with smuggling 1.3 million tonnes of fuel and evading nearly 378 million yuan ($55.7 million) of taxes, prosecutors in Guangzhou, the capital city of Guangdong province, said in the document dated June 2 and seen by Reuters.

Gunvor confirmed in an email an employee had been charged by Chinese authorities in a customs dispute between China and the Philippines. It did not identify the person, but said it continues to do business in China.

"Gunvor itself has not been charged," it said. "The company views this situation as a purely political matter."

It said it was not liable to pay duties because it was not the importer of record into China.

"Given that Gunvor is not the importer, legally the charges don't make sense," the company said.

The prosecutors did not respond to a request for comment.

Yin Dikun has been held by Guangzhou police since May 2016. An official warrant of arrest was issued in June of last year.

Charging an employee of a foreign company is the latest sign that Beijing is broadening its efforts to crack down on tax evasion in the world's top oil importer. Recently the central government has also tightened scrutiny over tax matters of independent refiners, known as teapots.

The charges against Yin centre on Gunvor's sales of light cycle oil (LCO) from the Philippines to Chinese buyers over a two-year period.

Gunvor had supplied (LCO) on a delivered basis to Chinese importers and provided certificates indicating the LCO fuel was produced in the Philippines, according to the legal document.

The prosecutors said in the document the LCO, a refinery by-product for diesel blending, had not originated from the Philippines. They did not say from where they thought the LCO had originated instead.

Under a free-trade agreement between China and the Association of Southeast Asian Nations (ASEAN), goods that are manufactured in ASEAN countries are exempt from import tariffs. The Philippines is an ASEAN member.

"Knowing that the LCO fuel it supplies are not manufactured in the Philippines, Gunvor Singapore nonetheless provided its Chinese customers ASEAN certificates for them to clear the customs," the document said.

Investigations by Chinese police found Gunvor Singapore was suspected of supplying 36 shipments of LCO under these arrangements between 2014 and 2016, it said.

Gunvor said in its email to Reuters that Philippines customs have confirmed the documentation was issued in full compliance with rules and regulations.

Gunvor said it maintains rigorous corporate compliance protocols and has taken a "conservative approach to the Chinese market in general, given the known business risks it poses".

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China's crude imports hit second highest on record in May

China's crude oil imports rebounded to the second highest on record in May, making China the world's top buyer for the month amid concerns over tightening crude supply to Asia and an extension of producer cuts to March next year.

China imported 37.2 million tonnes or 8.76 million barrels per day of crude oil last month, up 15 percent from a year earlier and nearly 8 percent from April, data from the General Administration of Customs showed.

Imports compared with average shipments to the United States in May of 8.12 million bpd, according to Reuters calculations based on EIA weekly data.

The robust May shipments reflected steady demand from private refiners, Li Yan, a crude oil analyst with Zibo Longzhong Information Group said.

"China's May crude imports were mainly driven by purchases from some Shandong-based independent refineries that had sent China's crude imports to record high in March. In the first five months, we are seeing a steady pace of buying from these 'teapot' refineries which reported good profit margins," Li said.

For the year to end-May, crude imports rose more than 13 percent from a year earlier to 176.3 million tonnes or 8.52 million bpd, the customs data showed.

However, private refiners are expected to tighten their intake for at least the next two months, analysts and traders said, ambushed by a rising local fuel glut.

Imports by the world's second-biggest oil consumer had slipped from a peak of 9.2 million bpd in March to 8.4 million bpd in April.

China's exports of refined products rose 6 percent in May to 4.03 million tonnes as state refiners sold more abroad in a bid to counter a domestic oversupply
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UAE re-imposes port ban on Qatari-linked oil tankers

Abu Dhabi Petroleum Ports Authority has re-imposed a ban on oil tankers linked to Qatar calling at ports in the United Arab Emirates, reversing an earlier decision to ease restrictions, and potentially creating a logjam of crude cargoes.

The Port Authority circular was issued late on Wednesday and seen by Reuters on Thursday. It states: "Denial of entry into any of the Petroleum Ports, for all vessels arriving from, or destined to Qatar, regardless of its flag." That was followed by a notice from the UAE's state-owned Abu Dhabi National Oil Company (ADNOC) on Thursday with the same language also seen by Reuters.

The ban on all vessels carrying the Qatari flag and vessels owned or operated by Qatar remains in place and those ships will not be allowed into its petroleum ports, the port authority circulars said.

The Abu Dhabi port authorities had eased the restrictions just a day earlier.

The ban would potentially disrupt the common industry practice of co-loading oil cargoes from different countries onto a tanker to lower the costs of shipping. Preventing the co-loading of Qatari and other Middle East grades could add to refiners' transport costs and create logistical jams.

"ADNOC has officially confirmed that we cannot co-load to and from (Qatar). So we need to find new vessels, then find co-loadings around the region," said a source from an Asian refiner.

Qatar is among the smallest of the Middle Eastern oil producers and refiners will load crude from there alongside bigger suppliers such as Saudi Arabia, the world's biggest crude exporter, and the UAE.

Re-tightening the restrictions on ships to and from Qatar will exacerbate the logistical issues that started on June 5 when Arab countries including Saudi Arabia, Egypt, the UAE and Yemen severed ties with Qatar for allegedly funding terrorism.

"This is the only thing that really matters - Qatar doesn't have that many vessels and most of their exports are co-loaded with other crudes," the second shipbroker said.

Despite the official ban, industry sources in both the Middle East and Asia indicated that the co-loading of Abu Dhabi crude along with Qatari oil may continue on a case-by-case basis.

Customers under long-term contracts with ADNOC for crude may be given exemptions to the ban at ports including Das Island and Fujairah as long as the co-loaded cargo is not only from Qatar since ADNOC does want to upset those customers, said a Middle East-based industry source.

Traders and refiners may explore alternatives like chartering smaller tankers or consider ship-to-ship (STS) transfers in the region to deal with the ban.

"It's gotten to the point where we just want this to be over... we are scrambling again," said a second Singapore-based shipbroker, adding that STS transfers could occur at designated areas offshore Oman.
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Iran declares priority oil projects for the current year .. it plans to renew its fleet of oil

Told Iranian Oil Minister Bijan Zangana, executive director of the National Oil Company Ali Carder, executive priority projects for the oil sector in the current Iranian (ends March 20 / March 2018).

This came in an official letter the minister Zangana face executive director of the National Oil Company, which was identified through which oil projects in the priority this year, came as follows :

- Focus on joint production fields and the emphasis on optimal extraction and production of 4 million barrels of oil per day to March 20 / March 2018 with a view to achieving the vision of 2021 aimed to raise the production ceiling to 7.4 million barrels per day.

- work towards raising the level of production of gas condensate to one million barrels per day within the vision of 2021, focusing on common fields and raise itsproduction to 683 thousand barrels per day to March 20 / March 2018 .

- upgrade the status of an internationally National Iranian Oil Company in the upstream oil and gas operations in the world .

- Work on the conclusion and enforcement of contracts for 10 oil and gas contracts At the framework of model Aljdid- and to emphasize the possibility of supply and technical upgrading of national technology in order to increase the recovery factor .

- Implementation of the project to increase production capacity to 350 thousand barrels per day until March 20 / March 2018 fields west Karun common crude oil (North and South Azadegan and Aadaoran and Iaran North and South).

- Completion of the enforcement capacity of the project and launch phases 13, 14, 22, 23 and 24 Pars field and the production of 620 million cubic meters of rich gas until March / March 2018 .

- Implementation of support for public benefit projects initiative B5r 3 trillion riyals (USD = 32440 SR) in oil and gas and deprived areas in the country .

In another context, the oil minister denied freezing the assets of the National Iranian Oil Company in the Emirate of Dubai and Oman . The minister pointed out Zangana, in an interview with Fars News Agency, the national oil company does not have any frozen assets even in the Emirate of Dubai and Oman .

On the other hand , and on the subject of the freezing of foreign exchange for the petrochemical companies Iranian assets in China, between Zangana that the topic under follow - up and discussed during the visit of the Minister of Economy and Finance Ali Tayyip Nya to China, pointing out that the problem lies bank transfers and it 's not about Iran, but financial transparency and the working group international financial ( the FATF) .

Furthermore, put the National Iranian Oil Tanker Company (NITC) the finishing touches on its plan to buy a number of giant oil tankers for the first time since the lifting of sanctions on Iran last year, as part of Tehran 's bid to modernize its existing fleet .

He explained the Managing Director of the company owned by the government, Cyrus heirs of an entity, any new contracts that will sign the government will be on carriers to replace the existing carriers, and not in order to add another new . He added entity heirs: n the price of building new oil tankers are currently settling at its lowest level, so is the current Aellouktaat is the best time to renew the Iranian fleet .

The Company (NITC) and one of the largest oil tanker companies in the world, with a fleet of 65 tankers approaching its capacity of 5.15 million dw
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EIA cuts 2017 Henry Hub price estimate

The U.S. Energy Information Administration has slightly reduced its forecast for Henry Hub natural gas spot prices this year.

In its latest Short-Term Energy Outlook released on Tuesday, the agency said Henry Hub gas prices would average $3.16 per million British thermal units in 2017 and $3.41/MMBtu in 2018.

The 2017 estimate is down 1 cent while the forecast for 2018 is down 2 cents as compared to forecasts in EIA’s April short-term outlook.

In May, the average Henry Hub natural gas spot price was $3.15/MMBtu), 5 cents higher than in April.

U.S. dry natural gas production is forecast to average 73.3 billion cubic feet per day (Bcf/d) in 2017, a 1 Bcf/d increase from the 2016 level, EIA said.

This forecast increase would reverse a 2016 production decline, which was the first annual decline since 2005. Natural gas production in 2018 is forecast to be 3.3 Bcf/d above the 2017 level.

EIA expects natural gas production in 2018 to be 3.3 Bcf/d above the 2017 level.
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Norway Oil Services Firms Reach Wage Deal With Two Unions, other problems

Norwegian oil services firms have reached a wage deal with two trade unions, the companies and the unions said on Wednesday, in a year when these unions are not allowed to go on strike.

The deal was made with the two largest unions, Industri Energi and Safe, which agreed a pay rise of 7,166 crowns ($846.78) and of 1 crown per hour on night shifts, with effect from June 1.

A number of oil services firms operate off Norway, including Solstad, Farstad and Havila, serving oil companies such as Statoil, Eni and Lundin Petroleum.

In separate talks, the Lederne union representing 150 workers in the oil sector did not reach a deal with oil companies and talks will now go to a state-appointed mediator.

Lederne has the right to strike this year and if they don't agree it could potentially hit Norwegian oil production from midnight on Friday.

About 150 oil platform workers would go on strike, potentially disrupting output from several Norwegian fields, if they fail to get a pay deal by midnight on Friday, their union said on Tuesday.

Lederne, the smallest of the three Norwegian unions representing oil industry workers, said the strike would target platforms at Eni's ENI.MM Goliat, Shell's (RDSa.L) Draugen and Statoil's (STL.OL) Kvitebjoern, Oseberg East and Gudrun fields.

"We believe it would mean shutting down production on those platforms," a spokesman for the union said.

The five fields together produced 326,000 barrels of saleable oil equivalent per day in March, according to Reuters calculations based on the latest figures available for individual fields from the Norwegian Petroleum Directorate.
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Kazakhstan to export up to 5 Bcm/year of natural gas to China as of 2017

Kazakhstan is to debut gas exports to China under a memorandum of understanding signed Wednesday between KazMunaiGaz and CNPC, with up to 5 Bcm/year set to be moved to China from Kazakhstan in 2017-2018, national gas transportation operator KazTransGaz said in a statement.

The MoU follows up on a previous plan to start supplies this year, with a 45% expansion of the Kazakhstan-China pipeline to 55 Bcm/year earmarked for completion in 2017.

"The sides discussed the possibility of natural gas supplies from Kazakhstan to China in 2017-2018, and agreed to sign the sales and purchase agreement on Kazakh gas exports in the volume of up to 5 Bcm [per year]," KazTransGaz said.

Kazakhstan currently exports no gas of its own to China, the country's energy ministry said.

China will receive gas at Khorgos on the border between the two countries, according to the MoU, which also defines the volumes, price and quality of the product, the company said, without providing further details.

"The diversification of transit and export routes of Kazakh gas, as well as increasing export volumes of blue fuel are important strategic tasks that were set by the head of state," Kairat Shripbayev, chairman of KazTransGaz's board of directors, said in the statement.

Gas exports are expected to further firm cooperation between the neighbors, which already cooperate in the upstream oil and gas sector, along with services and oil and gas transportation in Kazakhstan, according to the statement.

"Supplies of Kazakh gas to China will help bilateral mutually beneficial relations, as well as joint promotion of cooperation relations as part of the 'One belt, one road' initiative, aimed at creating infrastructure and firming trade and transport ties between Eurasian countries," the company said.

The construction of compressor stations on the third line of the pipeline intended for gas transportation to China foresees 20 Bcm/year transit volumes of Turkmen and Uzbek gas, in addition to Kazakh volumes, according to KazMunaiGaz, which controls KazTransGaz and 95% of the country's gas transportation.

Volumes from Turkmenistan and Uzbekistan are transported through the Central Asia-China gas pipeline network that links with CNPC's Second West-East Pipeline in western Xinjiang province at the border with Kazakhstan.

Kazakhstan's gas production is expected to rise by 3.2% on the year to 48.1 Bcm this year, mainly from the Kashagan, Karachaganak and Tengiz fields, the country's energy minister Kanat Bozumbayev estimated earlier this year.

Kazakhstan's joint project with China to expand the capacity of the Beney-Bozoy-Shymket pipeline, running from the west to southeast Kazakhstan, to 10 Bcm this year "will allow to start exports of [Kazakh] gas to China," he said, adding, however, that Kazakh gas will face strong competition from Turkmen, Uzbek and Russian future gas supplies under long-term contracts with China.

Besides, Kazakhstan prioritizes domestic supplies as it expects further natural depletion at its key fields by 2025, according to the energy ministry.
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U.S. Begins Importing Iraqi Oil After Saudis Cut Exports

The United States has begun importing Iraqi oil at a rate of 1.1 million barrels per day to replace export cuts announced by Saudi Arabia late last month, new figures compiled by Bloomberg show.

New data from the Department of Energy suggests that during the first week of June, Iraqi oil entered the U.S. at the quickest rate in the past five years – marking the first time the nation’s exports exceeded those from Saudi Arabia over the same time period.

In late May, Riyadh announced its plans to purposely reduce exports to the United States to force a reduction in the latter’s sizeable inventories, which are preventing a greater rise in global oil prices, according to Saudi Oil Minister Khalid Al-Falih.

Earlier that same month, Saudi Aramco said it would cut crude supplies to China, South Korea, and South East Asia by 1 million barrels each. The nations exports to Indian buyers in June were set to decline by just over 3 million barrels, and supplies to Japan will drop by just under 1 million barrels this month, according to a Reuters’ source.

The Organization of Petroleum Exporting Countries’ (OPEC) deal to reduce production does not set limits on the amount any member country can export to its customers. This is why Saudi cargoes to the U.S. in recent months have totaled 1.21 million barrels a day – the highest rates since 2014, the year of the oil price crash.

As the de facto leader and largest producer of OPEC, Saudi Arabia has cut its production the most of any member of the bloc. But stubbornly high fossil fuel inventories - which have been maintained worldwide, but are most readily measured in the U.S. due to open customs data – have prevented the measures from buttressing oil prices in a lasting way. Importer nations have opted to take advantage of low oil prices to stock up for the future.
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Australia provincial government approves start of $600 million gas pipeline

The government of Australia's Northern Territory on Thursday gave the go-ahead to start building an A$800 million ($600 million) gas pipeline that could help ease a shortage of the commodity in the country's east.

Jemena owned by State Grid Corp of China and Singapore Power, was given permission to build the westernmost portion of the 622 km (386 mile) line designed to join gasfields in northern Australia with the eastern state of Queensland.

Australia is the world's second-largest liquefied natural gas (LNG) exporter, but has faced a growing crisis over local gas supply with prices rocketing over the past two years as the commodity is shipped abroad.

"Jemena has indicated that it will start construction ... as soon as practicable to take advantage of the dry season," Northern Territory Minister for Resources Ken Vowles said in a statement, referring to the drier months between May and October. The initial portion will be over 340 km long.

Further sections still require approval from landholders and the Queensland state government.

Jemena was not immediately available for comment. The company had previously said it planned to begin construction of a compressor station, for which it has already won approval, in May, and that it may eventually extend the pipeline.
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Australia's New South Wales to open up new areas for natural gas exploration

The state government of New South Wales, Australia, is taking steps to release new areas for gas exploration, it announced on Tuesday.

NSW and other Australian states tied to the East Coast gas market, including Queensland, Victoria, South Australia, and Tasmania, have been facing high gas prices and concerns of potential shortages, which have led to pressure on the region's LNG exporters.

The potential shortages have been blamed in part on the LNG exporters based in Queensland and certain states, including New South Wales, gas exploration restrictions, and the collapse in oil prices.

"When we released the NSW Gas Plan last year, we said we would pause, reset, and then recommence gas exploration on our terms," NSW minister for resources Don Harwin said.

The NSW government said geologists have identified the Bancannia Trough, north of Broken Hill, and the Pondie Range Trough, north of Wilcannia, for initial assessment by an advisory body for strategic release.

Australia's gas industry lobby group, the Australian Petroleum Production and Exploration Association, welcomed the news, saying it hopes it signals recognition that developing local gas supply is essential for the region.

"For three years, gas development has been suspended in NSW. During that time, customers have faced rising gas prices and tightening supply. We now have the unsustainable situation where NSW produces just 3% of its gas needs, leaving local customers to pay a premium to obtain interstate gas," APPEA chief executive Malcolm Roberts said.

The NSW Government also said that Santos' Narrabri Gas proposal is under consideration as a "stategic project" with the Department of Planning and Environment.

The threat of gas shortages on the east coast of Australia led the country's federal government to announce earlier this year a plan to restrict LNG exports if domestic gas needs were not met.


Victoria's government, which has the strictest onshore gas exploration restrictions in the country, on Wednesday, called for tougher export controls.

Platts Analytics expects Australia's LNG exports to total 55.66 million mt in 2017 and rise to 70.92 million mt in 2018, it said.

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Netherlands, Poland set for first US LNG shipments

The Netherlands and Poland are both expected to receive a cargo within the next 24 hours from Cheniere’s Sabine Pass LNG export terminal in Louisiana, the first ever US LNG cargoes produced from shale gas to reach the two countries.

According to shipping data, the 140,000-cbm Arctic Discoverer has anchored offshore the port of Rotterdam where the Dutch Gate terminal is located, while the 162,000-cbm Clean Ocean is located offshore Swinoujscie where Poland’s first LNG import terminal is situated.

The LNG tankers left the Sabine Pass liquefaction facility on May 21 and May 22, respectively, the data shows.

The LNG shipment to Dutch Gate terminal is Northwest Europe’s first ever cargo of US LNG. Gate terminal did not provide any additional info on the US LNG shipment.

In its efforts to diversify the supply sources of natural gas, Poland secured the spot cargo delivery of U.S. LNG in May this year. The agreement was signed during the Polish secretary of state and chief of the cabinet of the president, Krzysztof Szczerski‘s visit to Washington.

So far, US LNG cargoes landed only in the southern part of Europe. Italy, Malta, Spain, Portugal and Turkey received Sabine Pass cargoes since February last year when the plant started shipping the fuel.

Currently, there are only three liquefaction trains in operation at the Sabine Pass facility and in the lower 48 states.

Europe is expected to boost its LNG imports from the US as more liquefaction projects located along the US Gulf Coast come online.

The U.S. is expected to become the world’s third-largest LNG supplier by 2020 behind Qatar and Australia.
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International offshore rig count 27 units short year-on-year

The international offshore rig count for May 2017 was down by 27 units year-on-year, but up by one unit compared to the last month’s count, according to a Wednesday report by Baker Hughes.

The international offshore rig count for May 2017 was 202, up 1 from the 201 counted in April 2017, and down 27 from the 229 counted in May 2016.

The international rig count for May 2017,which includes land and offshore units, was 957, up 1 from the 956 counted in April 2017, and up 2 from the 955 counted in May 2016.

The average U.S. rig count for May 2017 was 893, up 40 from the 853 counted in April 2017, and up 485 from the 408 counted in May 2016.

The average Canadian rig count for May 2017 was 85, down 23 from the 108 counted in April 2017, and up 43 from the 42 counted in May 2016.

The worldwide rig count for May 2017 was 1,935, up 18 from the 1,917 counted in April 2017, and up 530 from the 1,405 counted in May 2016.

The worldwide offshore rig count for May 2017 was 226, up 5 from 221 counted in April 2017 and down 29 from 255 counted in May 2016.
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Shock, Summary of Weekly Petroleum Data for the Week Ending June 2, 2017

U.S. crude oil refinery inputs averaged over 17.2 million barrels per day during the week ending June 2, 2017, 283,000 barrels per day less than the previous week’s average. Refineries operated at 94.1% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.9 million barrels per day. Distillate fuel production increased last week, averaging about 5.3 million barrels per day.

U.S. crude oil imports averaged over 8.3 million barrels per day last week, up by 356,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.3 million barrels per day, 8.8% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 787,000 barrels per day. Distillate fuel imports averaged 152,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.3 million barrels from the previous week. At 513.2 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories increased by 3.3 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 4.4 million barrels last week and are near the upper limit of the average range for this time of year. Propane/propylene inventories increased by 3.3 million barrels last week but are in the lower half of the average range. Total commercial petroleum inventories increased by 15.5 million barrels last week.

Total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.6 million barrels per day, down by 0.7% from the same period last year. Distillate fuel product supplied averaged over 4.0 million barrels per day over the last four weeks, up by 1.8% from the same period last year. Jet fuel product supplied is up 5.2% compared to the same four-week period last year.

Cushing down 1,400,000 bbls

It is not often that we record more exports then EIA. We have all the records of those exports. We're not happy with their number.

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US Lower 48 production falls 20,000 bbls day

                                                         Last Week    Week Before  Last Year

Domestic Product[email protected]  9,318           9,342            8,745
Alaska ................................................ 503               507                528
Lower 48 ......................................... 8,815           8,835             8,217
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Trafigura sees earnings rise but margins fall on low oil volatility

Swiss commodity trader Trafigura reported on Wednesday a 12 percent increase in core earnings on the back of higher turnover but also a fall in profit margins due to a lack of volatility in oil markets since the end of 2016.

Trafigura, which rivals Glencore (GLEN.L) as the world's second largest oil trader, said its first half core earnings or EBITDA rose 12 percent to $921.4 million, while gross profit increased 6 percent to $1.238 billion, helped by better revenues in the metals unit. Revenues grew 53 percent to $67.317 billion.

Trafigura reports results on an October-October basis, so the first half results reflect its performance from October to March, when oil markets saw record low volatility.

The firm said its gross profit margin stood at 1.8 percent versus 2.7 percent in the first six months of 2016 due to "low levels of realized volatility, with prices largely range-bound from December".

"This reduced profitable opportunities for trading," it said, adding that gross profit from oil trading fell by 17 percent from the first half of 2016 to $652 million.

Gross profit and margins in oil fell despite total volumes in oil trading rising by 25 percent from the period a year earlier to an average of 4.995 million barrels per day, broadly on a par with Glencore and only behind the world's top oil trader Vitol.

"We expect our daily average volume traded for the full 2017 financial year to exceed 5 million barrels per day, compared to 2016 daily average volume of 4.3 million barrels," Trafigura said, citing its rising role in exporting U.S. shale crude and increasing sales to China and India.

Trafigura also said it saw a 37 percent rise in metals and minerals volumes in the first half. As a result, gross profit in the metals division rose by more than 50 percent to $586 million.

Trafigura says no impact on gas trading so far from Gulf crisis

It said the market showed signs of supply tightness in zinc and copper concentrates while refined metals saw a sharp expansion in demand, with aluminum a particularly strong performer.

In coal, Chinese supply curbs stimulated new import flows, for example from Indonesia, Australia and South Africa, while the iron ore market also showed new signs of life, Trafigura added in its report.

"We were able to expand overall trading volumes and gross profit, with refined non-ferrous metals, coal and iron ore all showing strong tonnage growth and non-ferrous concentrates maintaining leading market positions without sacrificing margins," it said.
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Tankers load Qatari crude along with UAE oil as shipping ban eases

Exports of Qatari crude oil have not been hindered by a port ban imposed by other Gulf states as tankers are loading Qatari grades along with cargoes from the United Arab Emirate, shipping data in Thomson Reuters Eikon showed on Wednesday.

Two Very Large Crude Carriers (VLCC), which can each carry up to 2 million barrels of oil, successfully loaded Abu Dhabi grades on Wednesday, despite having taken on Qatari crude in an earlier leg of the voyage, shipping data in Thomson Reuters Eikon showed on Wednesday.

The loadings come amid Abu Dhabi's easing of restrictions on oil cargoes going to or coming from Qatar, according to a shipping circular seen by Reuters.

Tensions in the Middle East erupted on June 5, when Saudi Arabia, Egypt, the UAE and Bahrain severed their ties with Qatar, accusing it of supporting terrorism. The Arab allies, which halted air, land and sea movements to and from Qatar also implemented shipping restrictions.

The restrictions left oil shippers, unsure of the restrictions' impact, scrambling to take precautionary measures such as seeking smaller tankers to load and ship only Qatari cargoes.

Supertanker Apollo Dream loaded Abu Dhabi's Upper Zakum crude after already taking a cargo of Qatar Marine onboard. The Panamanian-flagged vessel, which is managed and chartered by Japanese oil refiner Idemitsu Kosan (5019.T), loaded the Qatari grade at Halul Island on June 5-6, before heading to Zirku Island in Abu Dhabi to take on the Upper Zakum crude.

A second supertanker New Friendship also loaded Abu Dhabi Das Blend crude on Wednesday. The VLCC had earlier taken on Qatari Deodorized Field Condensate (DFC) from Ras Laffan over June 4-5.

Both tankers sailed directly from Qatari to UAE berths, and as of 1041 GMT (6:41 a.m. ET) were signaling Saudi Arabia's Ras Tanura as their next port of call.


The two supertanker voyages point toward the status quo of shipping activities in the region.

"Until we hear an example of a 'ban', business as usual for now," a Singapore-based trader who specializes in Middle East markets said.

Two Asian refiners, who declined to be identified because of the commercial sensitivity of the matter, said they did not experience any problems with the shipment of Qatari cargoes.

"I think we are fine, we can handle it," one of the sources said.
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Victoria calls for tougher LNG export controls

Australian state wants temporary cap placed on exports amid tightening domestic supply

The Victorian government will lobby other state and territory governments for tougher liquefied natural gas export controls as it struggles with tightening supply and rising prices amid its own moratorium on exploration.

The Daniel Andrews-led Labor government is proposing new gas market reforms which it will present at this week’s Council of Australian Governments meeting in Hobart.

The federal government has already proposed an LNG export control mechanism that will be triggered when a shortfall occurs
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Shell sets Forcados loadings for June

But restart of major Nigerian export terminal doing little to lift suezmax rates.

Shell is reportedly looking to send out seven cargoes this month from its Forcados terminal. The ramp-up in exports come after the first test cargo from the facility in six months was sent out in May.

The loading programme for June is expected to reach 5.9 million barrels in total, according to trade sources. The Forcados terminal can handle between seven and eight suezmax tankers per month at peak output, market sources say.
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Russian Urals crude CIF Augusta at highest since December 2015

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

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

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

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

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

The spread has since returned to a discount for CIF Rotterdam, which hit 55 cents/b on Monday, its widest since April 28.
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EIA: US oil output nears new record

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

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

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

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

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

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

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


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


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


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

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

The American Petroleum Institute reported Tuesday a fall of 4.6 million barrels in U.S. crude supplies for the week ended June 2, according to sources. The API data, however, also showed a climb of 4.1 million barrels in gasoline supplies, while inventories of distillates were up 1.8 million barrels, sources said.
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U.S. crude stocks at Cushing hub likely fell 750,000 barrels last week

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

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Cheniere cleared to introduce gas to Sabine Pass LNG Train 4

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

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

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

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

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

According to a previous filing, Cheniere expects the fourth train to reach substantial completion in the second half of 2017.
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Platts restricts Qatari-loading crude in pricing process

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The company, a unit of S&P Global Inc, produces a number of benchmark prices for the crude oil market, including dated Brent.
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China 'teapot' oil group urges compliance on quotas, tax

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

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

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

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

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

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

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

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

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

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

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Oil shipping bears brunt of Qatar diplomatic crisis

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Cowboy Country Turns Oil-Drilling Bargain as Permian Gets Pricey

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

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

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

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

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

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

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

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

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


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

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

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

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

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


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

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

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

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Gazprom advances on southern natural gas corridor to Europe via TurkStream, Poseidon

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

Supplies to Serbia increased by 42% year on year in January-May, after a 4.3% increase to 1.75 Bcm in 2016, Gazprom said.
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Repsol says makes 2 Tcf gas find offshore Trinidad

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

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

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

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

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

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

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

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

The Trinidad and Tobago discovery announced Monday follows Repsol's find in Alaska announced in March -- described as the largest conventional discovery of hydrocarbons of the last 30 years on US soil, with a total of about 1.2 billion recoverable barrels of light crude oil.
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Canada: Woodfibre LNG secures 40-year export license

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

The announcement was made by Natural Resources Minister Jim Carr.

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

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

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

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

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

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

The project involves construction and operation of an LNG export facility on the previous Woodfibre pulp mill site, which would have a storage capacity of 250,000-cbm.
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USD Partners expands to carry oil sands by rail

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

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

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

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

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

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

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

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

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

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

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

The deal comes a few weeks after Equatorial Guinea became OPEC's newest member nation. It produced 244,000 barrels of oil a day in 2014, according to the Energy Department.
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Oil Supply is Re-balancing Now: SG, RBC

The oil market re-balancing is in progress, even if it is slower than expected, according to releases by Societe Generale and RBC Capital Markets.

When OPEC first agreed to cut production in November, it was hoped that six months of reduced production would be enough to rebalance the oil market and draw down inventories.

However, according to Societe Generale OECD crude and product stocks at the end of April were 56 MM barrels higher than at the end of December. OPEC was essentially forced to continue cuts, which were agreed to in late May.

Societe Generale reports that if cut compliance is maintained, oil stocks will begin to decrease in the rest of the year. Global oil demand is projected to grow by 1.3 MMBOPD this year and in 2018. This increased demand, combined with decreased output from OPEC, means that the implied drawdown is 0.6 MMBOPD in 2017 and 0.5 MMBOPD in 2018.

Both years will see most drawdowns in the second half of the year.

According to RBC, inventories are already decreasing, though it may not be obvious. Total OECD oil stocks are about 280 MMBO higher than the five-year average currently. However, this is primarily due to the U.S. American stocks account for nearly 70% of the excess in storage currently. This situation has led RBC to predict that the U.S. will be the last major region to rebalance. However, RBC does anticipate that stocks will eventually balance out, probably in mid-2018.

Both firms have decreased their predicted oil prices as a result of the slow drawdown on global inventories. Societe Generale expects WTI to average $53.80 in 2017 and $57.50 in 2018. RBC sees similar WTI prices, predicting $53/bbl in 2017 and $59/bbl in 2018.

After this prices will rise over the next few years to $75/bbl, as the need for investment in major projects requires increased pricing, according to Societe Generale’s analysis.
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Oil prices slide over worries Middle East rift will undermine output cuts

Oil prices fell for a third day on Tuesday, hit by concerns that a political rift between Qatar and several Arab states would undermine an OPEC-led push to tighten the market.

Persistent gains in U.S. production also dragged on benchmark crude prices, traders said.

Brent crude LCOc1 was trading at $49.27 per barrel at 0424 GMT, down 20 cents, or 0.4 percent from its last close. That is down 9 percent from the open of futures trading on May 25, when an OPEC-led policy to cut oil output was extended into the first quarter of 2018.

U.S. West Texas Intermediate (WTI) crude CLc1 had dropped 18 cents, or 0.2 percent, to $47.21 per barrel. That is down about 8 percent from the May 25 open.

Leading Arab powers including Saudi Arabia, Egypt, and the United Arab Emirates cut ties with Qatar on Monday, accusing it of support for Islamist militants and Iran.

Steps taken include preventing ships coming from or going to the small peninsular nation to dock at Fujairah, in the UAE, used by Qatari oil and liquefied natural gas (LNG) tankers to take on new shipping fuel.

Analysts said that the current dispute goes much deeper than a similar rift in 2014.

"The measures by the anti-Qatar alliance signal commitment to forcing a complete change in Qatari policy or creating an environment for leadership change in Doha ... Saudi Arabia and its allies will not accept any solution short of (Qatari) capitulation," political risk consultancy Eurasia Group said in a note.

With oil production of about 620,000 barrels per day (bpd), Qatar's crude output ranks as one of the smallest among the Organization of the Petroleum Exporting Countries (OPEC), but tension within the cartel could weaken an agreement to hold back production in order to prop up prices.

Greg McKenna, chief market strategist at futures brokerage AxiTrader, said that the boycott of Qatar meant there was "a real chance" that OPEC solidarity surrounding its production cuts may fracture.

Although Qatar is a small oil producer, other OPEC states could see such an action as a reason to stop restraining their own output, traders said.

Worries over the outlook for OPEC's drive to rein in production come amid bulging supplies from elsewhere, especially the United States.

U.S. crude production has jumped over 10 percent since mid-2016 to 9.34 million bpd C-OUT-T-EIA, levels close to top producers Russia and Saudi Arabia.

"The relentless increase in U.S. oil production appears to have the market worried that the OPEC cuts will be completely nullified by the increased U.S. production," William O'Loughlin, analyst at Australia's Rivkin Securities, wrote in a note to clients on Tuesday.
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North Dakota oil industry shows signs of a rebound

For much of last year, Jeep Punteney was a casualty of the global oil price crash that halted North Dakota’s petroleum boom.

His career was on hold for seven months, while he picked up sporadic work in construction.

“I put my résumé out and got into the same line as everyone else,” said Punteney, 42, who went to college for chemical engineering and has spent most of the past two decades working the oil patch.

Now he’s back in the fields.

North Dakota’s oil country boomed to unprecedented heights earlier this decade, transforming the state, beckoning legions of workers from Minnesota and rippling in other ways across the economy of the upper Midwest. Then, as swiftly as it erupted, it crashed, victim of steps by Saudi Arabia and other countries to boost their production.

Prices dropped from around $100 a barrel in 2014 to $30 early last year, bringing big financial losses for companies that had invested heavily in North Dakota production and bankrupting some of them outright. Jobs vanished.

Now there are strong signs of a rebound. Drillers are bringing rigs back. Some companies are scrounging to find enough workers, an about-face for an industry that shed almost half its jobs during the bust.

“The industry is coming back,” said Monte Besler of FRACN8R Consulting in Williston, N.D. “I don’t think it’s as robust as we’d like it to be. But it is definitely improving.”

The optimism remains tentative, as price and production levels would need to rise a lot more to rival the days of the boom. Newer fields in Texas and New Mexico are the hot spots in U.S. shale oil right now, drawing investment that might otherwise flow to North Dakota, the nation’s No. 2 oil producing state.

Nonetheless, North Dakota players that survived the crash started getting more active last fall, when major oil-producing nations agreed to output cuts that pushed prices back over $50 a barrel. Companies have worked to boost productivity, getting leaner to cope with current price levels.

Punteney is back at work supervising new well drilling sites for WPX Energy. What the past few years made clear is that the industry is at the mercy of oil prices.

“When you work in the oil field, you work in a boom-and-bust world,” he said.

Price dynamics

Global oil producers extended their output cuts on May 25, but the price of oil indicates continuing uncertainty. The benchmark U.S. oil price closed Friday at $47.66, below the important $50-per-barrel mark.

Oil inventories are still historically high, partly because U.S. oil production has risen sharply since last fall. And while OPEC and Russia — key oil playmakers — have indicated they’ll cap production for the next nine months, they could capitulate and produce full-out, driving down prices.

What made the big difference in U.S. production, particularly in North Dakota, was the advent of the technique known as hydraulic fracking. Last year, the state’s oil production was more than six times what it was in 2008 — despite the bust.

The adoption of fracking prompted companies to pour $30 billion into the region before the downturn. An oil rig is the epitome of a big-time investment: The 13-story, 275-ton movable, mechanical beasts cost about $50,000 to $70,000 per day to operate.

There are now 51 drilling rigs in North Dakota — well below the high of 218 in December 2012 — but up from a low of 27 in May 2016.

They run 24 hours a day, with workers usually putting in 12-hour shifts. As supervisor, Punteney must be constantly at the drilling sites nestled in western North Dakota’s rolling hills. His “living shack” is adjacent to a makeshift office, and he works two weeks on, two weeks off.

On a recent spring day, the rig was drilling three new wells at a site that already hosts three of WPX’s 248 wells in North Dakota. Each of the six wells will reach down 2 miles, then veer horizontally for another 2 miles, the signature pattern of shale oil fracking.

“With six wells, you have a spider web beneath you,” Punteney said.

A native of Wyoming, Punteney started out in the oil business as a pumper — a grunt worker at a well site. Last fall, he was hired by WPX, a company that focuses on U.S. shale oil and gas production. WPX had five rigs operating in North Dakota before the bust, but then cut back to one. It added a second late last year after raising its capital spending budget. Other producers have been doing the same.

With investment rising, oil field employment seems to have turned a corner this spring. In April, the North Dakota job sector that mostly includes oil and gas workers stood at 16,400, up 10 percent over the same month in 2016. April marked the second consecutive month of year-over-year increases in oil jobs.

Meanwhile, online job openings were at a 12-month peak in April — and up 94 percent over a year ago — in “construction and extraction," which includes oil field employment in North Dakota’s four largest oil-producing counties, according to Job Service North Dakota. Active résumés for those jobs were down 52 percent over a year ago, indicating an imbalance between oil jobs and job seekers.

“Companies are not keeping up in hiring,” said Ron Ness, president of the North Dakota Petroleum Council, a trade group. “We are probably looking for 1,000 employees in Williston, Dickinson, Minot and Stanley to fill the needs.”

Ness said the improving U.S. economy and lower unemployment rates generally aren’t helping. “This will be a long-term problem because the entire labor market is pretty tight,” he said.

The oil fields tend to attract nomads — men and women who travel for work but might keep their roots in another state. With an uptick in the overall economy, there are fewer of those willing to travel for higher wages when they can find well-paying jobs at home.

For those at work in the oil fields, prospects are more encouraging these days.

“I sure hope it keeps picking up — that’s what we are all here for,” said Edward Keith, a 35-year-old WPX worker from Ohio.

“I see myself in this industry until I retire,” he said while manning the controls of a fracking operation in McKenzie County.

Keith and four other workers sat staring at computer screens in the “data van,” a sort of command-post trailer at a “completion site.” Here, a drilling rig has come and gone, leaving six wells ready for hydraulic fracking. The place hums 24 hours a day with diesel engines mounted on 16 frack pump trucks — the power supply for the action below.

Torrents of water and sand are pushed under high pressure through the wells — along with a dash of chemicals — creating cracks in shale rock formations. The grains of sand keep the cracks open, allowing oil and gas to flow.

Shale oil operators have been pumping significantly more sand and water in recent years, extracting more oil per well. They’re operating more wells per “pad,” too — another productivity move. With more wells at a single site, oil field services can be centralized. For instance, fewer roads need to be built to individual sites, and a single water line can serve multiple wells.

A decade ago, two wells per pad was a big deal. The six on the WPX site is common nowadays; one North Dakota operator has 18 oil wells on one pad. “This is the biggest single driver helping the efficiency and profitability in North Dakota,” said Besler, the fracking consultant.

Operators are drilling with better cost efficiency, too. A decade ago, it took about 43 days to drill a well, compared with 13 to 18 days now.

Break-even costs for wells in North Dakota’s four biggest oil producing counties fell significantly from mid-2014 through 2016 — over 40 percent in two of them, state data show. Meanwhile, productivity has soared.

New production per oil rig has risen 38 percent in North Dakota’s Bakken oil field over the past year, according to data from Ernst & Young, which does oil industry consulting. However, total oil production on the Bakken had fallen 1.5 percent during the same time, the data show.

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Dolphin pipeline running as normal despite political tension

The Dolphin subsea pipeline shipping Qatari gas to the UAE is functioning without interruptions, despite the UAE and some other Arab nations severing their diplomatic ties with Qatar.

Saudi Arabia, Egypt, Bahrain, and the United Arab Emirates have cut their diplomatic ties with Qatar, citing the latter’s support terrorist organizations.

In a statement on Monday, the Saudis accused Qatar of supporting „various terrorist and sectarian groups aimed at destabilizing the region including the Muslim Brotherhood Group, Daesh (ISIS) and Al-Qaeda.”

However, according to Reuters, which cited unnamed sources, the offshore pipeline running from Qatar’s Ras Laffan to Taweelah in the UAE is functioning uninterrupted, despite the political tensions in the region.

According to the operator Dolphin Energy, the 364-kilometer pipeline is the largest and longest gas pipeline in the Middle East. Its maximum depth underwater is 50-meters. The Export Pipeline transports 2 billion standard cubic feet a per day (scf/day) of refined methane gas from Qatar. Its design capacity is 3.2 billion scf/day.
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Genel loses second co-founder as Rothschild steps down

Genel Energy co-founder Nathaniel Rothschild has resigned from the Iraqi Kurdistan oil producer, the latest in a series of high-profile departures from the loss-making company.

Rothschild's departure follows the resignations of chairman and co-founder Tony Hayward, the former BP chief executive, and of chief financial officer Ben Monaghan, a former J.P. Morgan banker.

Although only a non-executive director Rothschild was influential as he still owns a stake of around 7.9 percent in the company.

Genel on Monday also announced the departure of fellow board member Simon Lockett, head of the audit and nominations and the health and safety committees.

"Today's news suggests that more substantial changes are afoot, as the ties with the past are broken," said analysts at RBC Capital Markets.

New Chairman Stephen Whyte will take the helm on Tuesday from Hayward when the company holds its annual meeting.

"The composition of the board will be a focus for the new chairman," a Genel spokesman said on Monday.

The oil producer has been grappling with a steep reserves downgrade at its flagship Kurdish oilfield and the effect of weak oil prices on its revenues.

Shares in Genel traded down 6.6 percent at 0912 GMT, underperforming the sector index which was down 0.3 percent.
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Unusual export offers add to naphtha oversupply in Asia

The unusual cocktail of rare export offers by some Southeast Asian countries, robust outflows from India, and market conditions favoring flow of cargoes from the West have left naphtha buyers in Asia spoilt for choice, a trend that is likely to continue in the coming months.

With refineries steadily returning from maintenance at a time when China's appetite for imports remains feeble, Asia's naphtha market may feel the pinch as it braces for a situation of oversupply in the coming months, according to market participants who spoke to S&P Global Platts.

"Over the next few months, Asia may face a scenario in which demand could lag behind supplies," said Nevyn Nah, refined oil products analyst at Energy Aspects. "Even Middle East supplies are also expected to rebound with the return of condensate splitters in Qatar and the UAE."

According to Facts Global Energy, lower naphtha demand stems from a variety of reasons, such as high cracker maintenance in China and easing ethylene-naphtha cracks leading to lower cracker runs, particularly in Europe, resulting in more arbitrage cargo arrivals in Asia.

In addition, the market is witnessing some switchover to LPG as feedstock, as the propane-naphtha spreads are to some extent favorable.

"Naphtha cracks remain under pressure as higher supplies are met with lower demand," said Sri Paravaikkarasu, head of oil, East of Suez at FGE.

"The coming months will remain a mixed bag. The weakness could persist for a couple of months as we have a new splitter coming online in Dalian in June, and Japanese crackers should commence maintenance turnarounds. However, we are bullish beyond that timeframe," she added.


The CFR Japan naphtha crack against front-month ICE Brent crude oil hit the lowest level in seven months at $53/mt on May 25, before rebounding to $56.80/mt on May 31, data from Platts showed. The crack in May averaged at $58.34/mt, down 20% from the April average of $73.38/mt.

Adding to the supply stream, India, as of now, is expected to export around 635,000 mt of naphtha for June loading -- higher than the typical monthly export volume of 500,000-600,000 mt, based on Platts calculations.

Apart from Indian exports, rare volumes of naphtha have emerged from Southeast Asia.

In a rare move, Indonesia's state-owned Pertamina issued a sell tender last week, offering 170,000 barrels of naphtha for June 1-30 loading from Tuban, which was most likely offered because of a scheduled refinery turnaround, market sources said.

Since December 2015, Pertamina has been a net importer of naphtha, after it lost its net exporter crown in March 2015.

Pertamina takes naphtha from Indonesian TPPI's Tuban facility every month for blending at its refinery to produce 92 RON gasoline. When the company has a refinery turnaround, the oil and gas firm is left with surplus naphtha, which is then offered for exports.

Pertamina plans to shut its 120,000 b/d Dumai and 50,000 b/d Sei Pakning refineries in central Sumatra for 40 days of maintenance in July, taking a total 170,000 b/d of capacity offline.

And in Malaysia, Hengyuan Refining Company issued a sell tender offering 24,000-48,000 mt of naphtha with 70%-78% paraffin content for loading from Port Dickson between August 1 and December 31, 2017. Hengyuan will have four-eight parcels to offer over the five-month period. Each cargo will be 5,000-6,000 mt. The tender closed on May 31 and has validity until June 7.

This will be the company's first naphtha export tender after Shell sold its 51% stake at the 125,000 b/d Port Dickson refinery to Malaysian Hengyuan International Ltd., a subsidiary of Chinese independent refiner Hengyuan Petrochemical.


On the demand side, buying interest from Japan, South Korea, and Taiwan remained largely stable.

Petrochemical margins have narrowed, thanks to a sharp fall in ethylene prices this month. The spread between CFR Northeast Asia ethylene against CFR Japan naphtha fell from $763.88/mt on May 2 to $587.63/mt on May 31, Platts data showed.

At the current spread, it remains profitable to produce olefins using naphtha. If the spread falls under $350/mt, it may not be economical to produce olefins, which could result in run cuts at steam crackers and lower naphtha demand.

While import demand from most Northeast Asian countries has been fairly stable, demand for imported naphtha cargoes from China has been falling because of higher domestic production.

China's naphtha imports in April fell 50.5% year on year to 122,000 b/d, according to latest data released by the National Bureau of Statistics.

Naphtha imports over the January-April period averaged at 158,000 b/d, down 24.4% over the same period last year.

Chinese refiners, particularly the independent refineries in the northeastern Shandong province, have raised crude refining throughput and increased naphtha yield to 6.24% over the January-April period, from 6.11% over the same period in 2016. Naphtha output over January-April was at 11.392 million mt, up 5.4% from January-April 2016.

"After a couple of months, naphtha demand should receive boost both in Asia and the Middle East as the ramp-up of Sadara cracker and the commissioning of PetroRabigh's aromatics expansion project should tighten Middle East balances. Reliance intends to commission its Phase II aromatic expansion project some time later this year," Paravaikkarasu added.
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U.S. Gulf Coast unduly responsible for falling gasoline demand in 2017

Even with Americans on track to drive a record number of miles this year, government data shows U.S. gasoline demand has been lackluster, and the South is to blame.

If the Energy Department data is correct, the U.S. Gulf Coast is having an unusual influence on the overall decline in gasoline usage so far this year. But analysts and traders said the region's status as a global refining hub may be skewing both the national and regional numbers.

U.S. gasoline demand in the first quarter was down 2.7 percent from a year earlier, according to the latest monthly data from the U.S. Energy Information Administration. The Gulf Coast accounted for 71 percent of the decline.

Gulf Coast gasoline demand, which ranks behind the East Coast and the Midwest, was down 11 percent in the first quarter, EIA data showed.

EIA uses "product supplied" as a proxy to measure U.S. gasoline demand. Product supplied measures the changes in volume of gasoline and other products at primary sources, such as refineries and storage terminals.

The Gulf Coast is the U.S. refining hub, sending products all over the U.S. and the globe. This makes it the most difficult region in which to track the flow of products, analysts and traders said. This means, for example, if the EIA overestimates exports, it would underestimate U.S. demand.

"The Gulf Coast has a lot of statistical noise," said Robert Campbell, head of oil products markets at consultancy Energy Aspects.

Campbell said he was not certain the EIA figures will be revised upward down the road, but he said the Gulf Coast market is showing no evidence that demand is down. The federal agency puts out final numbers in about a year.

"The cash gasoline market continues to be strong, refineries are running at high rates, and there's only been modest inventory builds," Campbell said. "There's no signs of distress, so that's telling."

Gulf coast cash conventional gasoline traded on Friday at about 6.25 cents below benchmark futures largely in line with year ago levels. Meanwhile, the more liquid CBOB strengthened last week to a near three-week high.

U.S. Gulf Coast refineries processed a record 9.45 million barrels of crude oil last week, according to the EIA, marking the third consecutive week above 9 million barrels. Meanwhile, gasoline inventories have remained near five-year highs, despite robust exports, EIA data showed.

U.S. driving volumes in the Gulf Coast also suggest gasoline demand remained strong during the first quarter.

Texas motorists log the second-most miles in the United States, trailing only California. Texas drivers traveled 1.9 percent more miles on the state's roads and highways through March than they did last year, according to the latest figures from the U.S. Department of Transportation.

Overall, motorists logged 272 billion miles (438 billion km) on U.S. roads and highways in March, up 0.8 percent from a year earlier, the Transportation Department said.

U.S. vehicle miles travelled were up 1.5 percent year-over-year through the first three months of 2017.

Attached Files
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Good well prompts Halcon to take Delaware option

US independent plans to sell Bakken non-op acreage to fund $11,000-per-acre deal in Texas

A solid well result in the eastern part of the Delaware sub-basin of the Permian has prompted Texas-based independent Halcon Resources to exercise an option to acquire additional acreage in the play.

The option, which Halcon signed as part of its $750 million entry into the Delaware earlier this year, allows Halcon to acquire an additional 6720 acres in Ward County, Texas, for $11,000 per acre, or about $74 million.
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DOE grants non-FTA export permit to Delfin LNG

The United States Department of Energy has authorized Delfin LNG to export up to 1.8 billion cubic feet of natural gas per day from the proposed floating LNG terminal offshore Louisiana in the Gulf of Mexico.

Delfin LNG, a wholly-owned subsidiary of Fairwood Peninsula Energy, plans to build a deepwater port in the Gulf of Mexico to liquefy domestically sourced natural gas for export.

Due to its offshore location, the environmental review of Delfin was led by the Maritime Administration (MARAD) and the U.S. Coast Guard, DoE said in its statement.

Delfin LNG has been authorized to export the LNG volumes for a period of 20 years to any country with which the United States does not have a free trade agreement (non-FTA).

Earlier this year, MARAD approved the project would consist of four semi-permanently moored floating LNG vessels, each capable of storing 210,000 cubic meters of LNG and a production capacity of 3.3 mtpa of the chilled fuel each.

Combined, the four floating LNG vessels will have a production capacity of 13.3 million tons of liquefied natural gas per year.

MARADpreviously informed that the port operations are expected to commence no earlier than July 2019 with the commissioning of the first FLNGV. The port is expected to be fully operational by July 2022.

Attached Files
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Apache Sells Canadian Conventional Assets for C$330 Million

Cardinal acquires 5,000 BOEPD of production

Apache Corp. (ticker: APA) announced the sale of Canadian light oil assets today in a C$330 million ($244 million) cash deal with Cardinal Energy (ticker: CJ). Unlike many recent Canadian oil and gas property sales, these properties are not unconventional Montney or oil sands, but instead are conventional light oil.

~300 drilling locations available, 6% decline rate

The assets sold are in two locations, one in central Alberta in the House Mountain area, and the second in the Weyburn/Midale area of southeast Saskatchewan.

According to Cardinal, the properties will add about 5,000 BOEPD of production, with oil and NGL making up all production. In total, the assets account for 21.9 MMBOE proved developed producing reserves.

The Alberta assets are about 30 miles from existing Cardinal properties, and are currently producing 2,150 BOEPD from the Beaverhill Lake formation. Anticipated future development involves fracturing existing wells and developing the 50 identified drilling locations.

The Saskatchewan assets are under CO2 and water floods to enhance recovery, and currently have a very low 6% decline rate. Cardinal plans to expand EOR operations and conduct infill drilling on the 250 potential well locations identified.

Funding from credit facility, share sale

Cardinal will fund the acquisition with its credit facility and a financing agreement. This agreement involves selling C$170 million in shares to a syndicate of banks, which will then be sold to the public. The credit facility will cover the remaining $160 million.

To reduce the cost of the transaction, Cardinal anticipates selling off royalty interests and fee title lands associated with the properties by the end of the year. The proceeds from this sale will be used to pay down the debt portion of the acquisition cost.

Apache refocusing on Permian

Apache is selling these assets to focus on its Permian assets, as the overall Permian basin will receive nearly two-thirds of the company’s budget this year. Apache is targeting significant growth from the Permian, where the company owns about 1,570,000 acres. Current production from the area is about 150 MBOPD, but Apache plans to nearly double this by Q4 2018.

Cardinal focuses on low-decline oil fields

Cardinal Energy is a Canadian E&P that focuses on developing oil-producing properties. Cardinal owns several properties in Alberta, the result of previous acquisitions. The company’s holdings are all conventional oil fields with very low decline rates, so this current transaction will be very similar.
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Saudi Arabia raises July crude prices to Asia after OPEC extends cuts

Saudi Arabia has raised its official selling prices (OSPs) for all its crude oil grades sold to Asia in July, in line with market expectations, after OPEC and non-OPEC producers agreed to extend supply cuts last month.

State oil giant Saudi Aramco said on Sunday it raised the July price for its Arab Light grade for Asian customers by $0.60 a barrel versus June to a discount of $0.25 a barrel to the Oman/Dubai average.

The hike was bigger than anticipated by Asian refiners and traders surveyed by Reuters. Saudi Aramco was expected to increase the price of its flagship Arab Light crude by 20-50 cents a barrel in July, as the contango in Middle East crude benchmarks narrowed last month.

A contango market refers to prompt prices that are lower than those in future months, while narrowing contango signals increased demand or tightening supply.

Aramco also raised its Arab Light OSP to Northwest Europe by 35 cents a barrel for July from the previous month to a discount of $3.10 a barrel to the ICE Brent Settlement.

The Arab Light OSP to the United States was set at a premium of $1.10 a barrel to the Argus Sour Crude Index (ASCI) for July, up $0.50 a barrel from the previous month.

OPEC, Russia and other oil producers agreed on May 25 to extend cuts in oil output by nine months to March 2018 as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years.

Saudi crude OSPs set the trend for Iranian, Kuwaiti and Iraqi prices, affecting more than 12 million barrels per day (bpd) of crude bound for Asia.
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Big oil, small U.S. towns see new reward in old production technique

Amid the frenetic activity of American shale oilfields recovering from a two-year recession sit a handful of oil towns that seemed impervious as many producers went into bankruptcy and the economy around them sank.

Occidental Petroleum Corp and a few other oil producers with wells near this town on New Mexico's border with Texas steadily pumped low-cost oil through the downturn, using a technique that has been heralded worldwide as a way to reduce carbon emissions and boost oil output.

"When everyone else in the oil industry was going down, Oxy kept working," said Joshua Grassham, vice president of Lea County State Bank and a Hobbs Chamber of Commerce board member. The city of 35,000 rests on the Permian oilfield, the largest oilfield in the United States.

This way of drilling brings with it a sweetener for the oil industry to keep crude flowing: a tax credit that helps insulate these wells in a downturn, and could triple in size if Congress approves a new measure this summer.

Such a move could extend by decades the producing life of hundreds more wells, increasing oil supply which would be a drag on prices. To date, the technique has been employed only at conventional oilfields, rather than on shale deposits. Some firms are studying how to put the technique to work in shale drilling, too.

The drilling method harnesses the carbon dioxide produced during the extraction of oil or from power plants, and forces it back into the fields. That boosts the pressure underground and drives more oil to the surface.

Their success could be replicated in oilfields across the United States if Congress approves the measure, which already enjoys broad bipartisan support. While the Trump administration has yet to say whether it supports the tax credit increase, the measure could also be a boon to the coal industry, which Trump wants to revitalize.

The technique, one of several so-called enhanced oil recovery (EOR) strategies used to prolong the productive lifespan of oilfields and increase output, underpins around five percent of U.S. oil output, or about 450,000 barrels per day, according to energy consultancy Advanced Resources International.

EOR can help firms to produce between 30 percent and 60 percent of all the oil held in a reservoir. That's far more than the 10 percent usually recovered from initial traditional drilling, according to the Department of Energy.

The existing credit has provided a financial lift for Occidental, Denbury Resources Inc and oil producers with ready access to the gas. Exxon Mobil Corp and Chevron Corp also use the technique on some of their oil fields. None detail their tax savings from the credit, but since the it was first offered in 2008, companies have collected at least $350 million in the credits, according to Internal Revenue Service figures.

In Hobbs, Occidental not only kept a 200-person workforce intact during the oil-price downturn - when tens of thousands of workers were laid off in the shale patch - it also invested $250 million to expand operations during that period, according to its public filings.

That meant Hobbs and nearby Seminole, Texas, where Hess Corp has its own carbon dioxide injection facility, didn't suffer the extreme financial pain felt by shale towns, such as Williston, North Dakota, and other shale producing communities in 2015 and 2016.

"Oxy's investment in the carbon project was a huge economic boost to our area," Grassham said.

Some of the carbon dioxide, a greenhouse gas, comes from naturally occurring reservoirs that are a low-cost source for Occidental. Others get the gas piped from power plants that burn coal. Power companies hope the technique can help them avoid higher carbon emissions.

The company spends about $18 to $25 per barrel to collect oil from its enhanced oil recovery operations. In contrast, its shale-focused well costs are lower - $16 to $19 per barrel. But because EOR wells pump consistently for decades, their value to the company over time exceeds shale wells, whose production quickly tapers off.

Across Texas and New Mexico, Occidental runs one of the world's largest fleet of enhanced oil recovery projects, injecting 2 billion cubic feet of carbon dioxide each day into wells that first produced oil nearly a century ago.

"We had a very large, stable carbon dioxide EOR business in our portfolio during the downturn," said Jody Elliott, president of Occidental's American operations. "That helped."

Partly because of its carbon facilities, Occidental was able to raise its dividend during the downturn. Today, executives are using the profits from the carbon business to grow its shale business across the Permian, the largest acreage holding in the region.

"These two businesses play very well off of each other," Elliott said.


Congress is expected this summer to debate extending an existing tax credit that could pave way for wider use. The proposed Carbon Capture Utilization and Storage Act would boost the credit to $35 per metric ton of carbon dioxide, up from $10 per ton today.

The legislation failed to move forward during last year's heated presidential campaign, but supporters say it will be reintroduced soon. "We want to make sure that we show a strong commitment so we continue to develop these technologies," said North Dakota Senator Heidi Heitkamp, a Democrat and the bill's lead sponsor.

Electricity generator NRG Energy Inc earlier this year opened a $1.04 billion carbon capture facility at a Texas coal-fired power plant, using its carbon dioxide emissions to extract crude from a 1930s-era oilfield.

Expanding the credit could, supporters hope, encourage more coal-fired power plants to follow NRG's lead by capturing and selling carbon to oil producers. Most oilfields are not located near carbon dioxide supplies, so the tax credit also could spur the build-out of carbon pipelines.

Environmentalists, including the Sierra Club, like the process because it traps carbon underground, preventing it from contributing to greenhouse gas emissions.

"You'll put more carbon in the ground than oil that is produced," said Vello Kuuskraa, president of consultancy Advanced Resources International, which studies enhanced oil recovery and carbon storage.

Oxy is considering investing another $550 million in its Hobbs operation in the next several years to further expand its carbon facilities.

"During all these oil industry downturns, those carbon wells keep people working," said Grassham.
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Rosneft gets access to vast oil transportation system in Iraqi Kurdistan

Rosneft will get access to a major regional transportation system with the capacity of 700,000 barrels per day (bpd), the company said. It is planned to expand capacity to more than 1 million bpd by the end of 2017.

The documents were signed ahead of a meeting between Russian President Vladimir Putin and the Prime Minister of Iraqi Kurdistan Nechirvan Barzani. Rosneft CEO Igor Sechin and Minister of Natural Resources for the Kurdistan Regional Government Dr. Ashti Hawrami signed the contracts within the framework of the Forum.

The Russian company will get access to “one of the most promising regions of the developing global energy market with expected recoverable reserves in the order of 45 billion barrels of oil and 5.66 trillion cubic meters of gas (according to the estimate of the Ministry of Natural Resources of Kurdistan Region),” said Rosneft.

“The agreement includes five Production Sharing Agreements (PSA). It includes production; it is a contribution to infrastructure… It is a fairly large supply contract on favorable terms for Rosneft. As a result, we get access to a large pipeline that goes from Kurdistan to Turkey. It’s a contract for 20 years,” Rosneft spokesman Mikhail Leontyev told RT.

“It’s a strategic investment in one of the most strategically developing regions. American and other players want to get access to the region. Kurdistan is highly promising in terms of oil production, and it wants to diversify its output,” said Leontyev.
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U.S. crude oil exports reached 1,001,000 bpd in April

U.S. crude oil exports reached 1,001,000 bpd in April compared with 834,000 bpd in March-foreign trade data from U.S. Census Bureau

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LNG traders evaluate impact of Saudi-led diplomatic blockade of Qatar

LNG traders evaluate impact of Saudi-led diplomatic blockade of Qatar

LNG traders are bracing for potential trade disruptions following moves from Saudi Arabia, Bahrain, Egypt and the UAE to cut diplomatic ties with Qatar, the world's largest LNG supplier.

Saudi Arabia's decision Monday to break diplomatic ties, consular relations as well as land, air and sea contacts with Qatar over terrorism and extremism funding claims were followed by similar moves from Bahrain, the UAE and Egypt, according to media reports.

Qatar is the world's largest LNG supplier, having exported 78.8 million mt of LNG in 2016, more than 30% of global supply of 257.8 million mt, according to S&P Global Platts Analytics, and an increasing share of its production has been delivered to emerging Middle Eastern buyers including Egypt, Jordan and the UAE.

Any disruptions in Qatari LNG supply could have a significant impact on pricing, trade flows and energy security in Egypt, which imports most of its LNG from Qatar, a Singapore-based trader said.

More than 60% of Egypt's LNG imports in 2016 -- 4.61 million mt of a total 7.26 million mt -- were sourced from Qatar and delivered as part of supply contracts between Egyptian Natural Gas Holding, or Egas, and traders or portfolio sellers.

"There would be some impact," the trader added. "Cargoes would have to come from somewhere, including the Atlantic or Australia."

"We might see some increase in prices for Egypt deliveries, whereas Qatar might have some additional volumes that can be shown into other Middle East countries and the Far East, but that would upset some shipping arrangements in the near future."
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Petronas’ profit soars in Q1

Malaysian energy giant Petronas reported a RM10.3 billion ($2.4 billion) profit for the first quarter 2017, boasting over 100 percent rise over the corresponding period in 2016.

This was primarily driven by higher oil prices and improved margins from upstream and downstream businesses, as well as ongoing cost reductions, Petronas said.

Profit after tax jumped from RM4.6 billion ($1 billion) in the first quarter of 2016, as a result of higher revenue and higher average realized prices and lower net impairment on assets. Revenue was up 25 percent from RM49.1 billion in Q1, 2016, to RM61.6 billion during the quarter under review.

Total LNG sales volume for the quarter was higher by 0.15 million tons compared to the corresponding quarter in 2016, mainly attributable to higher volumes from Gladstone LNG in Australia and the start-up of Train 9 in the company’s Bintulu LNG complex.

Volumes reached 7.5 million tons of LNG for the period, as compared to 7.35 million tons of liquefied natural gas in the first three months of 2016.

Gas sale volumes in Malaysia grew by 23 mmscfd on the back of higher demand in East Malaysia.

Despite positive results in the first quarter, the company said it continues to maintain a conservative outlook for the remainder of 2017, “as supply and demand balances are still slow to return to a sustained equilibrium.”
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U.S. drillers add oil rigs for record 20th week in a row -Baker Hughes

U.S. energy firms added oil rigs for a record 20th week in a row in a year-long return to the well pad although some analysts expect the pace of additions could level off as crude prices remain below $50 per barrel. Drillers added 11 oil rigs in the week to June 2, bringing the total count up to 733, the most since April 2015, energy services firm Baker Hughes Inc said on Friday. That is more than double the same week a year ago when there were only 325 active oil rigs. Monthly additions in May were at the lowest levels since October due to soft oil prices.

The recovery in oil prices has stalled since February and prices are now no higher than they were a year ago. Experience indicates the rig count will stop rising within a few months, said John Kemp, a Reuters market analyst. ( “The active rig count is likely to peak in June or July unless the price of benchmark West Texas Intermediate (WTI) crude starts rising again above $50 per barrel,” he added.

U.S. crude futures were trading under $48 a barrel, putting the front-month on track for a second weekly decline in a row, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the United States, worsening a global glut. U.S. production was projected to increase output to 9.3 million barrels per day in 2017 and a record high 10.0 million bpd in 2018 from 8.9 million bpd in 2016, according to federal data. Futures for the balance of 2017 were trading around $48 a barrel, while calendar 2018 was fetching nearly $49 a barrel.

Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and gas rig count would average 874 in 2017, 1,086 in 2018 and 1,197 in 2019. Most wells produce both oil and gas. That compares with an average of 798 so far in 2017, 509 in 2016 and 978 in 2015. If correct, Simmons’ 2019 forecast would be the most since 2014 when there were 1,862 active rigs. The rig count peaked in 2012 at 1,919, according to Baker Hughes.
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Norway trade unions agree pay deal with oil drillers, avert strike

Norwegian drilling rig operators have reached a wage deal with all three trade unions representing workers, averting the risk of a strike that could have hit exploration, the companies and the unions said on Friday.

One of the three unions announced on Thursday afternoon it reached an agreement, while the two others followed later.

A number of drilling firms operate off Norway - including Maersk Drilling, Transocean, Fred. Olsen Energy, Odfjell Drilling, Rowan Companies and Songa Offshore - renting out rigs to oil companies.

Oil companies, including Statoil, Eni and Lundin Petroleum, which rent rigs to search for hydrocarbon reserves, plan to drill a record 15 wells in the Arctic Barents Sea this year.

The wage deal was signed by the Safe, Industri Energi and DSO unions, as well as the Norwegian Shipowners' Association, which negotiated on behalf of the companies.
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Oil price outlook grows more gloomy despite OPEC cut extension: Reuters poll

Oil analysts have grown more downbeat about the outlook for crude and expect prices to average around $55 a barrel this year even after OPEC and its partners agreed to restrain production into 2018, a Reuters poll of analysts showed on Friday.

"Greater OPEC restraint will help to shore up prices, but we do not expect it to be enough to push prices above $55 per barrel on average in 2017-18," said Cailin Birch, an analyst at the Economist Intelligence Unit.

Birch cited continuing oversupply and only modest consumption growth.

The survey of 34 economists and analysts predicted Brent crude would average $55.57 per barrel in 2017, lower than last month's forecast of $57.04.

U.S. light crude was expected to average $53.52 a barrel this year, dipping from last month's forecast of $54.73.

The figures are the weakest projections this year, with forecasts falling slightly each month since the start of 2017.

The Organization of the Petroleum Exporting Countries and some non-OPEC producers on May 25 agreed to extend output cuts of about 1.8 million barrels per day (bpd) until March 2018. The initial six-month deal had been due to end on June 30.

But rising production from the United States has so far undermined its efforts to reduce bloated global inventories to the five-year average. U.S. crude production hit 9.34 million bpd last week, its highest level since August 2015.

"U.S. oil inventories will decline seasonally in the summer months, but will remain well above the five-year average," Commerzbank analyst Carsten Fritsch said.

OPEC's decision to extend the same level of cuts for nine months rather than reducing production further could prove insufficient to draw out the surplus despite OPEC's strict compliance with the curbs. [OPEC/O]

Analysts said the group is at risk of losing further market share to U.S. shale oil producers, which could cause compliance with the deal to slip in the second half of the year.

Rising prices, which had tumbled from above $100 a barrel in 2014, have encouraged U.S. shale producers to increase drilling.

"The failure of members participating in the deal to deepen cuts leaves the pace of rebalancing being dictated by the oil-output profile in the United States," said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics.

"Growth in oil production from U.S. shale acreages will remain a real threat that could scupper much of the benefits from output cuts by OPEC and some non-OPEC members," he said.

Apart from booming shale output, supply recovery in Nigeria and Libya, the two OPEC members exempt from the deal to cut output, pose additional risks for crude markets, analysts said.

Still, higher seasonal demand in the second half of 2017 could result in a significant drawdown in inventories that would move the market closer to balance, analysts said.

"Growing demand will be the main factor draining the global oil surplus, but generally at a slower pace than perceived," said Norbert Ruecker, head of macro and commodity research at Julius Baer.
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Saudi's Falih: Aramco to invest globally in gas and LNG after IPO

Saudi Energy Minister Khalid al-Falih attends a session of the St. Petersburg International Economic Forum (SPIEF), Russia, June 2, 2017. REUTERS/Sergei Karpukhin

Saudi Arabia's national oil company Saudi Aramco aims to invest globally in production of gas and liquefied natural gas after holding its initial public offering, Saudi Energy Minister Khalid al-Falih said on Friday
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China's Hengyi to start up $3.4 bln Brunei oil refinery in 2019 -sources

Privately-run Chinese company Hengyi Group expects to start operating a $3.4 billion refinery in resource-rich Brunei in 2019 after completing building work in October next year, two industry executives briefed on the matter told Reuters.

Hengyi had previously delayed the start up of the 160,000 barrels-per-day facility in Southeast Asia from an initial 2015 target, partly blaming delays in local infrastructure.

East China-based Hengyi, a leading manufacturer of synthetic fibre, declined to comment this week, while the Brunei government did not respond to an email seeking comment.

The company in March signed off on the final investment for the $3.445 billion refinery at Pulau Muara Besar island in Brunei, the largest of its kind run outside China by a private Chinese firm.

The facility will primarily provide feedstock for Hengyi's massive Chinese production of pure terephthalic acid, or PTA, an intermediate for making polyester. But it will also churn out fuel, competing with supply from the region's oil hub, Singapore.

That comes as new refineries are also due to come online in Vietnam and Malaysia.

"There's already an oversupply so any delay is good. Nghi Son (in Vietnam) is coming up in 2018 and the Refinery and Petrochemical Integrated Development (RAPID) project (by Malaysia's Petronas) is in 2019," said Nevyn Nah of Energy Aspects.

Hengyi agreed in 2012 with Royal Dutch Shell, long active in exploring for oil and gas in the kingdom, to supply the refinery with crude oil over a 15-year term.

It was unclear if that deal remained valid. Shell said it would not comment on commercial matters.

One of the two industry sources said Hengyi may explore a swap deal with Shell, with the major supplying some crude in return for refined products.

China's Lanzhou LS Heavy Equipment Co Ltd has been contracted to build key production units at the refinery including a 1.5 million tonne per year aromatics facility and a 2.2 million tpy hydrocracking unit.

Kunlun Construction and Engineering Corp, a unit of state energy group China National Petroleum Corp, has previously said it won a deal in late 2016 to build a 15-million-barrel tank farm at the development.

Started as a small sock-weaving factory in 1994
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Old school LNG gas sellers try new tricks to lure pickier buyers

One of the stodgier corners of the energy industry is getting more relaxed.

Liquefied natural gas sellers, which once did business almost entirely on long-term, oil-linked contracts, are offering shorter deals, more pricing options, unrestricted shipping terms and in some cases are even willing to invest in the infrastructure their buyers need to import the super-chilled fuel.

“In the past we could just produce LNG and sell it to power generators,” Jean-Pierre Mateille, vice president of trading for Total Gas & Power said Thursday at the Platts LNG & Natural Gas Markets Asia conference in Singapore. “Today this is not enough. You have to invest in downstream projects in order to secure demand.”

Prompting this shift in philosophy is a glut of production capacity coming online from Australia to the U.S. that has driven down spot prices by about 70 percent since February 2014. With LNG in abundant supply, buyers have a stronger hand in contract negotiations and are balking at signing the kinds of deals that have traditionally underpinned projects. No company has sanctioned a major new green-field LNG development since late 2013.

Energy giants are hoping more amenable terms will entice customers to sign up for supplies, guaranteeing future cash flow to finance multi-billion liquefaction plants. Failure to do so could mean that demand growth eats through the supply glut and creates scarcity and higher prices in the next decade, according to Bloomberg New Energy Finance.

In the future, banks may be able to finance projects based on a combination of shorter contracts and an understanding that producers will be able to sell cargoes through spot deals as LNG markets becomes more liquid, said Luca Tonello, deputy general manager and head of project finance for Asia investment banking at Sumitomo Mitsui Banking Corp. At the moment, banks still require traditional long-term deals, he said.

“It’s very challenging for a green-field project,” said Gonzalo Cabrera, general manager for LNG economics and markets analysis at Anadarko Petroleum Corp., which is developing a new LNG plant in Mozambique. “Some of us at the office are taking boxing classes during lunch time, and we joke on the way back that now we’re ready to negotiate with our customers. That’s how tough it is.”

Gas Hedging

Anadarko is listening to potential customers when they push for prices that aren’t linked to oil, Cabrera said. Several price indices are vying to become an Asian LNG benchmark, such as Platts’ Japan-Korea Marker and Singapore Exchange Ltd.’s Sling Index.

In 2000, 98 percent of LNG was sold at prices tied to oil. By 2025, that will fall to 61 percent, according to Cheniere Energy Inc. New volumes from the U.S. are tied to Henry Hub gas prices, with other contracts linked to European gas.

Tellurian Inc., which is developing a proposed LNG plant in Louisiana, has floated the possibility of selling LNG at a flat price of $8 per million British thermal units for five years.

A U.S. plant that’s already operating could use natural gas futures to hedge sales five to six years out and offer flat prices, Scott Chrisman, vice president for LNG and midstream commercial and development at Sempra Energy. Liquidity in the futures market dries up after that, and bilateral hedging with a bank or a trading house would become prohibitively expensive.

The emergence of the U.S. as an LNG exporting power is not only connecting Henry Hub to global prices, it’s also adding destination flexibility. Unlike contracts that require LNG to be delivered to a specific port, U.S. LNG can be sent anywhere once it’s loaded on tankers, to the delight of buyers like Japan’s Jera Inc., which said destination restrictions impinge on its ability to re-sell cargoes it doesn’t need.

Sharing Pizza

“It’s like if you go to the pizzeria and buy a pizza, and the shop owner orders that you have to eat the pizza at home by yourself,” Kazuhiro Yokoi, the company’s vice president for fuel transactions, said at the conference. “Sometimes we want to share with our families, sometimes we’re full so we want to give a slice to someone else. This is the feeling LNG buyers have.”

Total and Royal Dutch Shell Plc are among companies investing in a floating LNG import terminal in the Ivory Coast in order to secure a new market that could buy 2 million tons of LNG a year. Cheniere is also investing in a LNG import project in Chile.

Cheniere, which is operating or building seven liquefaction trains in Louisiana and Texas, is trying to find buyers to finance the construction of two more that are already permitted. Douglas Wharton, Cheniere’s director of origination, said the company is offering more flexibility in terms of contract length after signing 20-year deals on the first seven.

“The traditional 20-year contract is not set in stone by any means,” Wharton said in an interview at the conference. “The challenge is finding a balance between what length of contracts buyers are willing to sign into what terms banks are willing to accept.”
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S.Arabia to consider investing in Russia's Eurasia Drilling -TASS

Saudi Arabia will consider investing in Russian company Eurasia Drilling, the TASS news agency cited Saudi Energy Minister Khalid al-Falih as saying on Friday.

Eurasia Drilling is Russia's largest oilfield services company by metres drilled.

The minister was speaking at an economic forum in St Petersburg.
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Murphy sees US Gulf as competitive with shale

Company says improved cost structures help economics of deep-water drilling and development

Murphy Oil's cost-cutting measures in the downturn have made their deep-water US Gulf of Mexico projects able to compete with onshore North American shale plays, a company official said.

"These projects can compete right now with onshore, we just have to get out and execute," Murphy Oil vice president of exploration and new ventures Gregory Hebertson said at the Louisiana Energy Conference in New Orleans on Thursday.
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Japanese companies eyeing Baltic LNG participation

Two Japanese companies, Mitsui and Itochu Corporation have shown interest in the Baltic LNG project Gazprom intends to develop near the seaport of Ust-Luga.

Gazprom’s head, Alexey Miller, held meetings with representatives of the two companies, in St. Petersburg on Thursday.

During the meeting with Tatsuo Yasunaga, CEO of Mitsui, the focus was placed on the construction of the third train of the Sakhalin II LNG plant.

In addition to showing interest in the Baltic LNG project, the two companies discussed partnership prospects in the field of LNG bunkering.

At the meeting with Masahiro Imai, senior managing executive officer of Itochu Corporation, Miller discussed the prospects of cooperating in the energy sector, in addition to Itochu’s interest in the Baltic LNG project.

Gazprom’s Baltic LNG project would have a production capacity of 10 million tons of LNG per year and is primarily targeted at the European and Latin American markets.
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Alternative Energy

German wind, solar power output peaks above 50 GW for first time

Power output from wind and solar in Germany rose above 50 GW for the first time on Wednesday with many neighbouring states also registering strong wind and solar supply and the resulting oversupply pushing down spot power prices across the region, data from grid operators shows.

Actual wind and solar power output in Germany averaged 50.287 GW during hour 12 with onshore wind pegged at 28.6 GW, offshore wind producing 4.2 GW and solar adding a further 17.4 GW, according to EEX Transparency which collects the data.

According to TSO estimates, wind and solar production for hour 13 was forecast even higher at 51.2 GW, the data shows.

This oversupply from wind and solar saw some hourly prices turn negative on the intraday market after afternoon hours in the day-ahead spot auction already settled below Eur10/MWh on the Epex Spot exchange.

Massive swings in wind and at times solar, with total installed capacity already above 92 GW put Germany's power grid under pressure with grid expansion lagging behind the boom in wind especially in Northern Germany with many neighboring states also registering very high levels of wind and solar production amid unseasonally high wind levels Tuesday and Wednesday.

In France, combined wind and solar production peaked at 12.5 GW around midday on Tuesday with the French wind and solar portfolio approaching 20 GW this summer, according to grid operator RTE.
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Chinese vice premier calls for joint efforts in clean energy push

Chinese Vice Premier Zhang Gaoli on June 7 called for joint efforts to improve global energy governance to push green and low-carbon development.

China is willing to work with the international community on the UN 2030 Agenda for Sustainable Development and the Paris Agreement on climate change, Zhang said in a speech delivered at the opening of the Eighth Clean Energy Ministerial and the Second Mission Innovation Ministerial in Beijing.

The vice premier called for deepening innovative cooperation in clean energy, improving the energy use system and promoting greener and more efficient energy consumption, to build a low-carbon and clean energy supply system.

Zhang said that China would carry out joint action plans to mobilize businesses in the clean energy push and ensure the benefits were shared by the public.
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U.S. solar market to fall 16 percent in 2017, report says

U.S. solar installations will fall 16 percent this year, according to a forecast released on Thursday, as utilities slow procurement of projects to meet state mandates and residential systems become harder to sell.

Following a banner 2016 driven by expectations that a key federal tax credit would expire at the end of that year, the utility-scale market is expected to drop to 8 gigawatts this year from more than 10 GW last year, according to a report by GTM Research and the Solar Energy Industries Association.

The utility market, which accounts for about half of all solar systems, is expected to resume growth in 2019 as utilities seek to procure projects before the 30 percent federal tax credit for solar projects begins to step down in 2020.

Prices on solar systems dropped further during the first quarter, falling below $1 per watt for the first time, the report said.

Residential solar is expected to rise 2 percent for the year, well below the 19 percent growth it logged last year. California is experiencing a major decline in adoption of home installations that contributed to a 17 percent first-quarter drop in the nationwide market. The state accounted for 35 percent of the total U.S. market during the quarter, its lowest share since GTM began tracking the market in 2010.

Large national installers that make up close to half the market, like Tesla Inc's SolarCity and Vivint Solar Inc , have slowed growth to focus on profitability.

Residential markets in New York, Massachusetts and Maryland also fell during the quarter as installers found it was taking longer to win over customers beyond the early adopters.

The market for non-residential solar, which includes commercial and community solar installations, rose 30 percent in the first quarter thanks in part to a robust community solar market in Minnesota and growth in New York.

GTM would revise its forecasts downward, it warned, if a petition by bankrupt solar manufacturer Suniva to implement a 78-cents-per-watt floor on solar module pricing is approved by the U.S. International Trade Commission. U.S. module prices were around 40 cents a watt in the first quarter.

Suniva filed a rare Section 201 petition with the ITC last month, seeking new duties on imported solar products to combat a global oversupply of panels that has depressed prices. If successful, the petition would put solar system costs at 2015 levels, according to GTM.
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Here comes the sun: investors increasingly hot on solar projects in S.E. Asia

Investors are increasingly excited about the prospects for much faster growth in the solar power industry in Southeast Asia, which has until now been a backwater for renewable energy.

They say that the region is in a perfect position to benefit from rapidly declining prices in solar panels. It has strong economic growth, relatively high costs of electricity and a shortage from traditional sources, undeveloped infrastructure in more remote areas, plenty of sunshine, and backing for more renewable energy from many of Southeast Asia’s governments.

“Dramatically falling costs for solar energy technologies means businesses and governments are choosing renewable energy not for environmental reasons but for economic ones,” said Roberto De Vido, spokesman for Singapore-based Equis, one of Asia’s biggest green energy-focused investment firms with $2.7 billion in committed capital. “It simply makes good business sense. And that's a trend that's not going to change,"

By the end of last year, Southeast Asia had installed solar capacity of only just over 3 gigawatts (GW), a mere 1 percent of global capacity, according to data from the International Renewable Energy Agency (Irena).

Steve O’Neil, the chief executive of Singapore-based solar panel maker REC, said he expects that to grow by 5 GW of new installations every year between 2017-2020. That’s the equivalent of building five standard fossil-fuel power stations annually.

"People don't realize what is about to happen, when you're in the middle of exponential growth," said REC's O'Neil. "It's transformational.

Some European funds are among those looking at the region.

"The projects on offer in Europe are stagnating, so European investors are looking in that direction with great interest," said Armin Sandhoevel, chief investment officer for Infrastructure Equity at Allianz Global Investors, whose team manages 1.6 billion euros ($1.76 billion) worth of renewable investments.

"In Asia, you'd expect double-digit returns. That's hard to achieve in Europe," he said.

Southeast Asia has a population of more than 600 million and annual power demand growth of 6 percent, which most countries struggle to meet.

Solar power potential is measured by Global Horizontal Irradiation (GHI), a measurement of the intensity of the sun. Thailand has a GHI that can produce 1,600 to 2,000 kilowatt-hours of solar power per square meter (kWh/m2), well above the 1,000 to 1,200 kWh/m2 in Europe’s solar leader Germany, according to solar weather and data provider Solargis.

The region is ripe for a boom because solar panel prices have crashed to under 50 cents per watt of electricity today from $70 per watt in 1980 as technology and manufacturing efficiency have improved consistently.

At the same time, Southeast Asian countries have all set ambitious renewable energy targets, ranging from 18 percent of overall energy generation mix in Thailand and Malaysia to 35 percent in the Philippines, up from negligible levels today.

There are, of course, still risks for investors - including currency volatility, the difficulties of making land acquisitions, and usually the lack of any government guarantees, said Sharad Somani, head of Asia/Pacific Power & Utilities at KPMG.

Storing solar power through the night remains a hurdle too, though battery technology is improving rapidly.


Bringing together international investors, panel makers, and potential users is a small but growing group of venture capital firms, mostly based in Singapore.

GA Power is one such firm. Led by German solar business veterans, it focuses entirely on financing and developing solar projects across Southeast Asia.

"There is more money than there are projects. If you can offer professional developed projects, you'll have no issue organizing funding," said Roland Quast, GA Power's managing director, adding that “a solar boom in Southeast Asia is unavoidable” given it is now a competitive power source.

He said an investor can expect around a 12 percent economic internal rate of return on average in the region. The measurement reflects returns after costs for the construction, installation, and operation of a project.

Mid-sized solar projects that can be turned on without having to tap into a larger grid are in favor in the region as governments seek to bring power to an area without having to add expensive infrastructure, Quast said.

KPMG’s Somani, who is an adviser in the renewables sector, said that Equis and other funds are raising capital with U.S. and European institutional investors, including pension funds. Equis declined to provide detail on the sources of its money.

"Today we have unique confluence of all three factors necessary for success of such projects – demand for projects from government/utility side supported by conducive regulatory framework, strong developer and supplier interest and abundance of domestic and international financing availability," Somani said.


At the REC solar panel factory in Singapore, one of Singapore's biggest manufacturing sites, a thousand workers and more than a hundred robots work around the clock, churning out 20 containers full of panels every day, which are immediately sent to overseas customers, increasingly to Southeast Asia.

"We produce 14,000 panels per day, which go into 20 containers, 24/7. We never stop," REC's O'Neil told Reuters during a recent visit to the factory.

Founded in Norway, headquartered in Singapore, and owned by Chinese industrial giant ChemChina, O'Neil says that REC sells globally, but that he expects "Southeast Asia to become a game-changer."

In 2016, REC grew by just 3 percent in Southeast Asia - excluding the huge solar markets of India, China and Australia. This year, it expects 5 percent growth in the region, and then 9 to 10 percent growth annually between 2018 and 2020.

The business is cut-throat. Cheap Chinese production of solar panels has left a trail of collapsed companies in its wake - the bankruptcies of Germany's SolarWorld, once Europe's biggest panel maker, and major U.S. panel maker Suniva are among them.

To survive, REC says it needs to be in a relentless drive to improve productivity, including employing low-wage Malaysian workers and automating as much as possible.

"Our panels are now cheaper than a same-sized window," said O'Neil.
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U.S. carbon emissions from energy sources seen at 25-year low in 2017

U.S. carbon dioxide emissions from energy sources are expected to hit a 25-year low in 2017 as the power sector burns less carbon-intensive coal and more low-cost natural gas, according to government data released Tuesday.

In 2018, however, carbon dioxide emissions from transportation, power plants, homes and businesses should climb about 2.2 percent, the U.S. Energy Information Administration said. That increase would be due to forecasts for a colder winter, higher economic growth and rising gas prices, the EIA said.

The projected 2018 increase in carbon dioxide emissions has nothing to do with U.S. President Donald Trump's decision to pull out of the Paris climate agreement, the agency said. That exit will not take place until Nov. 4, 2020, the day after the next presidential election.

U.S. emissions have been falling for several years, largely because coal consumption is declining as power plants increasingly use gas to generate electricity. Coal lost its title as the primary fuel for power plants to gas in 2016 after holding that crown for a century.

EIA said coal's share of generation would rise to 30.9 percent in 2017 and 31 percent in 2018 from 30.4 percent in 2016. Natural gas will take a 31.4 percent share of power generation in 2017 compared with 33.8 percent in 2016, before rising to 31.9 percent in 2018.

Energy-related carbon dioxide emissions were expected to fall to 5,134 million metric tons in 2017, which would be the lowest since 1992, before rising to 5,248 MMT in 2018, according to EIA's latest Short-Term Energy Outlook (STEO).

The all-time peak of 6,021 MMT was in 2007.

EIA projected U.S. coal consumption would rise to 731 million short tons in 2017 and 743 million tons in 2018. That compares with 730 million tons in 2016, the least since 1982, and an all-time high of 1,128 million tons in 2007.

Gas prices are expected to rise to an average of $3.16 per million British thermal units in 2017 and $3.41 in 2018 from $2.51 in 2016.

EIA said dry gas production in 2017 would rise to 73.30 billion cubic feet per day from 72.29 bcfd in 2016. They said U.S. gas consumption would fall to 73.41 bcfd in 2017 from a record 75.12 bcfd in 2016.

EIA projected both production and consumption would rebound in 2018 to record highs with output hitting 76.57 bcfd and usage reaching 76.24 bcfd.

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Offshore Wind Powerhouses Call For 4GW-a-Year Tempo Post 2020

The governments of Germany, Belgium and Denmark came together with offshore wind industry captains in signing a Joint Statement to further the deployment of offshore wind energy in Europe.

The industry has been on a steep cost reduction curve and has met its self-imposed target of EUR 100/MWh by 2020 ahead of time. Winning bids of auctions in the Netherlands, Germany and Denmark delivered up to 48% cost reduction compared to projects just two years ago.

Delivering further cost reductions will require the deployment of significant volumes of new offshore wind. But most governments in Europe have still to define clear plans for how much new offshore they intend to deploy, notably beyond 2023.

The industry therefore calls on European governments to collectively ensure there is 60GW, or at least 4GW per year of new deployment in the decade after 2020. Going beyond 4GW per year would enable the industry to become fully competitive with new conventional generation ahead of 2030.

Samuel Leupold, CEO, DONG Energy Wind Power, said: “More than ever, we need countries to coordinate and lay out a clear vision. A visible and steady pipeline of projects between 2020 and 2030 will allow for continued cost reductions, a thriving supply chain and continued European leadership in an increasingly international market for offshore wind. We welcome the joint statement and call on other governments to commit to robust volumes.”

To deliver on these volumes, government and industry signatories committed to build on public-private cooperation to facilitate investments in projects and associated infrastructure. Crucially, they pledged to work towards the necessary European framework supporting Europe’s common renewable energy trajectories in part by calling on the European Commission to mobilise dedicated funding for strategic joint projects for offshore wind energy.

Michael Hannibal, CEO Offshore, Siemens Gamesa Renewable Energy, said: “We will continue with technological innovation, testing and industrialisation to reduce costs going forward. But it’s absolutely necessary to have sufficiently large volumes for offshore wind deployment. We need to build on the Joint Statement and create a strong market for offshore wind in Europe. This will deliver sustainable offshore wind energy to society and allow manufacturers to maintain global technology leadership.”

60 GW, which the industry intends to deploy between 2020 and 2030, represents only a fraction of the potential of offshore wind energy in Europe.

According to a new resource assessment by BVG Associates released today, offshore wind could in theory generate between 2,600 TWh and 6,000 TWh per year at a competitive cost – EUR 65/MWh or below, including grid connection and using the technologies that will have developed by 2030. This economically attractive resource potential would represent between 80% and 180% of the EU’s total electricity demand.

Jens Tommerup, CEO, MHI Vestas Offshore Wind, said: “Quite simply, the future vitality of offshore wind depends on clear and consistent volumes in the market. Visible and reliable deployment targets will unleash investments and competition in the market. And they will drive technological breakthroughs and the continued globalisation of the industry.”
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Tesla In Hot Water After New Insurance Report

AAA is raising premiums on Tesla vehicles by 30% after data showed that owners of Model S and Model X cars filed claims at abnormally high rates, and that those claims cost more compared with other cars in the same class, Automotive News reported.

Tesla, of course, is disputing the insurer's analysis.

"This analysis is severely flawed and is not reflective of reality," the electric-vehicle maker said in a statement emailed to Automotive News. "Among other things, it compares Model S and X to cars that are not remotely peers, including even a Volvo station wagon."

AAA’ chief actuary said the insurer noticed the anomaly in its own data before confirming it with data provided by a second source, the Highway Loss Data Institute.

"Looking at a much broader set of countrywide data, we saw the same patterns observed in our own data, and that gave us the confidence to change rates," he said.

Other large insurance companies, including State Farm and Geico, said that claims data is a major factor in calculating premiums. But they would not disclose if their Tesla-owning customers would also see rates rise.

The Highway Loss Data Institute report covered the 2014-2016 model years. Vehicles are divided into classes based on size, weight and competing models. The frequency and severity of claims are compared with overall average claims. The report found that the frequency, and cost, of claims related to Tesla vehicles was much higher.

"Teslas get into a lot of crashes and are costly to repair afterward," said Russ Rader, spokesman for the Insurance Institute for Highway Safety, which is the Highway Loss Data Institute's parent organization. "Consumers will pay for that when they go to insure one."

Tesla said the Highway Loss Data Institute's system placed it with the wrong competitors. If it were compared with similar rivals, the company argued, its crash data would not stand out negatively.

Tesla said the high rate of acceleration in both the Model S and Model X make it "false and misleading" to compare against vehicles such as the XC70, adding that the Model S also holds the lowest likelihood of injury, according to an evaluation by the National Highway Traffic Safety Administration.

"We expect Model X to receive the best score for any SUV ever tested," a Tesla spokesperson said.

An extraordinary metal that is vital to the electric car boom is facing a critical shortage. One small company has positioned itself to profit hugely from the coming price shock.

Collision damage claims for large luxury vehicles are reported 13 percent more frequently than average, and those claims cost about 50 percent higher than average, the Highway Loss Data Institute said. The rear-wheel-drive Tesla Model S is involved in 46 percent more claims than average, and those claims cost more than twice the average, it said.

In the large luxury SUV class, where collision coverage claim frequency is the same as the average for all vehicles and the cost of claims is 43 percent above average, the owners of the Model X file for claims 41 percent more often than average, and those claims cost 89 percent more than average, according to the institute.
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California, China defy U.S. climate retreat with new cleantech tie-up

California said it will cooperate with China on clean technology, emissions trading and other "climate-positive" opportunities as it bids to fill the gap left after President Donald Trump pulled the United States out of the Paris climate accord last week.

The government of California and China's Ministry of Science and Technology would work together on developing and commercializing know-how on carbon capture and storage, clean energy, as well as advanced information technology that could help cut greenhouse gas emissions, according to a Tuesday statement.

President Trump announced last week that he would pull the United States out of the 2015 Paris agreement on climate change, a move branded as "insane" by California governor Jerry Brown, who is visiting China this week.

The decision to withdraw was seen to have handed the political and diplomatic initiative to China, which has continued to pledge its unqualified support for the Paris accord.

Brown told reporters on the sidelines of a clean energy forum in Beijing on Tuesday that the failure of leadership from the United States was "only temporary" and said science and the market would be required to get past it.

In an earlier speech, Brown criticized those still "resisting reality".

"The world is not doing enough," he said. "We are on the road to a very negative and disastrous future unless we increase the tempo of change."

Joint pledges by China and the United States ahead of the Paris talks helped create the momentum required to secure a global agreement, and included a promise by China to establish a nationwide emissions trading exchange by this year.

Brown told Reuters last week that he would discuss linking China's carbon trading platforms with California's, the biggest in the United States.
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CGN Jan-Apr profit jumps 34pct on year

China General Nuclear Power Corporation (CGN) earned a total 6.84 billion yuan ($1.01 billion) of profit over January-April this year, up 34% from a year earlier, said the company.

It realized 26.19 billion yuan of operating revenue in the first four months, a year-on-year rise of 43.9%.

The achievement was mainly attributed to the company's efforts in controlling cost, enhancing efficiency and guaranteeing safe operation.

Meanwhile, it was also committed to optimising asset structure in the first four months this year to promote further development.
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Germany's top court to announce fuel tax ruling on June 7

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

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

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

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

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

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

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

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Is the corn market ready to rally on U.S. weather worries?

Corn futures prices have remained stubbornly low for the past three months despite heavy rain and cold weather complicating planting and early crop development for many U.S. Midwestern farmers.

But the tide may be shifting as the summer is beginning under a warmer and drier regime.

Driven partially by mounting U.S. weather concerns, July corn on Wednesday broke above the $3.60-to-$3.80 per bushel range it had been trading in for three months and new-crop December corn topped $4.00 a bushel for the first time since March 6.

So far this year, the corn market seems particularly unwilling to latch on to weather-related U.S. crop worries. Planting weather was cold and wet in many parts of the Corn Belt and the current crop conditions are not as good as they have been in previous years.

But corn futures stuck within the range anyway as traders are often unstirred over planting hardships so long as the weekly progress numbers align with averages, which they did this spring.

Long-range weather stories are going to be an even tougher sell, and the hesitation is understandable considering the botched forecasts from many weather vendors last summer calling for potential drought.

Instead, plentiful rains arrived in the key months of July and August and U.S. corn ended up breaking the previous yield record by more than 3 bushels per acre in 2016.

Yet some weather analysts have been pounding the drum for some time now about July and August 2017 possibly being hot and dry, just as corn will enter its grain filling stage.

There are various meteorological and statistical reasons offered for the outlook, but the market seems to have tuned that all out for now.

It might take a while longer for traders to buy into any hazardous grain-fill forecasts and for forecasters to regain the traders’ trust, but it seems as if the market is perking up at over weather at least in the near-term.

The summer’s first expansive atmospheric ridge – sometimes known as a “ridge of death” when it persists – will grip the Corn Belt this weekend, ushering in unseasonably hot and dry weather to places that do not need it (

However, weather models as of mid-day Wednesday were calling for much more rain across the Midwest into mid-month than the previous day’s models. But if that forecast does not hold, corn futures could be heading even higher in the coming days.


Ignoring the summer weather and putting the meteorology aside, the statistics point to a greater chance of below-trend yields when spring planting is much wetter than usual.

In the top 20 wettest April-to-May periods over the last 50 years, some 13 of those years ended with corn yields more than 1 percent below the long-term trend. Yields were within 1 percent of average in three of the years, and the remaining four years recorded above-trend yields (

April and May of 2017 ranked as the fifth wettest in the last 50 years across the U.S. Corn Belt. Only one of the top 10 wettest springs – the tenth in line – gave way to above-trend corn yields later in the summer.

To be fair, yield performance in two of the 20 wet spring years – 2004 and 1982 – was some of the best to date, though rainfall was notably greater during the 2017 spring.

And some of the worst-yielding years are also mixed in, including 1995, 1991, and 1983, all of which fell inside the top 10 wettest April-to-May periods.

Whether the yields that faltered in those 20 years did so over a hot and dry late summer or something else is an entirely different discussion. But the statistics make it clear that corn has a steeper hill to climb when the springtime is as rainy as it was in 2017, meaning there may be less room than previous years for weather woes later in the summer.


Areas of concern already exist in various corners of the Corn Belt, and conditions may worsen over the next week given the drier, warmer forecast.

Crop ratings in the Eastern Corn Belt are considerably below both average levels and last year. As of June 4, the amount of corn rated in good or excellent condition in Illinois, Indiana, and Ohio was 59 percent, 46 percent, and 49 percent, respectively.

The overly wet spring in parts of these states has led to a fair amount of replanting, disease and weaker plants. Historically, low ratings at this point in the season do not guarantee below-trend yields to the Eastern belt, but they apply more pressure to have near-perfect weather going forward.

Despite the rainy spring, many areas in the Eastern Corn Belt are now in need of rain again, but the forecast is fairly devoid for the next week. Together, Illinois, Indiana, and Ohio produce one-quarter of the nation’s corn.

In the Northern Plains, drought has been creeping into the picture. According to USDA’s weekly progress report, the amount of topsoil classified as short or very short of moisture grew by 50 percent in the Dakotas during the week ended June 4. Some 54 percent of topsoil in both states now carries this rating.

North Dakota is best known as the top spring wheat-producing state, but corn production has become more prevalent both there and in South Dakota in recent years. The two states together produce about 9 percent of the U.S. corn crop.

If weather models continue to trend wetter into the middle of the month, the market’s concern will likely be sidelined for the time being until the next unfavorable pattern starts to surface in the forecasts.

Latest GFS and EC weather model runs for U.S. Midwest on Thomson Reuters Agriculture Weather Dashboard:
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Russian spring wheat sowing at 12.8 mil mt, 94.6% of total: ministry

Russian spring wheat planting increased to 12.8 million hectares, or 94.6% of the total planned area, as of June 5, down 4.66 percentage points year-on-year, data from the Ministry of Agriculture showed Tuesday.

The slower progress of spring grain planting in comparison to last year was due to an April frost and persistent rains in May, according to traders. However, market participants are confident the delays from rain will translate into higher wheat yields, especially as many regions have finished sowing such as the south of Russia.

Offers for Russian 12.5% protein wheat for H2 July loading on June 5 were heard at $179/mt, down $1 week-on-week versus bids at $177/mt, up $1 week-on-week. On May 2, offers were heard at $176/mt.

The May/June premium comes as a result of uncertainty over the new crop arrival date and the quality of wheat available, traders said. Many still recognize that any continuation of heavy rain into June and early July could affect wheat quality.

Ministry data also showed that barley was planted on 7.6 million hectares, or 94.5% of the total forecast area, down 4.22 percentage points year-on-year.

Corn was planted on 2.9 million hectares or 94.1% of the total planned area, down 2.33 percentage points year-on-year.

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Norway's Yara says Qatar fertiliser export unaffected by diplomatic row

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But the company is looking long-term and has repeatedly stated it believes rising demand for fertilizer in growing nations, particularly China and India, will lead to a long-term price increase for the commodity.
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U.S. and Mexico sugar talks go into overtime after day of drama

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The potash market may be sputtering along with prices over half they were five years ago, but that isn't stopping a large volume of the fertilizer ingredient to be shipped through Thunder Bay, Ontario.

While the majority of Canadian potash marketed and sold through Canpotex – the world's largest potash exporter – is moved through Neptune Bulk Terminals in Vancouver (and also Portland, OR) a smaller amount is shipped via bulk carriers through Thunder Bay, a port on the St. Lawrence Seaway.

A report this week notes that Thunder Bay saw its largest monthly shipment of potash in May since April 2007.

Grain shipments were also up in May by 100,000 tonnes, driven mainly by record levels of canola. Overall cargo shipments at the port are up 20% compared to the same time last year, to 1,169,998 metric tonnes.

Those numbers are only likely to improve with one major potash mine in Saskatchewan recently opened and another possibly on its way.

On May 2 K+S Potash Canada, a subsidiary of German giant K+S Group, officially opened its Legacy project, the first potash mine built in the province in more than 40 years.

The operation, henceforth known as Bethune, is expected to produce 2 million tonnes per year once at full capacity; first potash is anticipated at the end of this month.
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Argentine corn exports set to compete hard with Brazil, U.S.

Harvesting of Argentina's biggest corn crop ever has been slowed by rains across the Pampas grains belt, pushing export schedules past August and increasing the competition against massive expected output from Brazil and the United States.

What is shaping up to be an August export battle among the world's top three corn suppliers would put downward pressure on international prices already hammered by a global grains glut.

The United States is the world's top corn supplier, followed by Argentina and Brazil. Argentina usually offers freshly harvested corn between March and July, a schedule that may extend past August this year due to transport routes being flooded out and farmers planting later in the year.

In anticipation of huge global supply, traders have built short positions, selling corn now and hoping to fulfill those sales later through purchases at cheaper prices.

"Traders have already gone for their maximum short positions. They've had to be restrained by their internal company risk officers," said August Remijsen, former Southern Cone CEO of trading group Toepfer.

U.S. Commodity Futures Trading Commission data on Friday showed funds held twice as many short positions as long positions in the CBOT corn futures market as of May 30 for a net short position of 224,571 contracts, the second most bearish fund position in that market since March 2016.

Swooning grains prices have already dragged down profits for big trading companies including Archer Daniels Midland Co, Bunge Ltd and Cargill Inc., while making it easier for poorer countries to feed themselves.

Argentina usually has the advantage of offering corn to the international market ahead of its two main rivals, but less than 40 percent of its 2016/17 crop has been harvested so far, compared with 60 percent a year earlier.

"For sure we will compete more," said a trader with a major grains export company. "Before Argentina was almost done by August. Now we are going to have a lot of corn just being harvested in August."

Argentina is expecting a record overall 2016/17 corn crop of at least 39 million tonnes, with about 60 percent, a bigger proportion than ever, planted late in the season.

Harvesting is progressing 8.6 percent points slower than the average pace over the last five years, according to the Buenos Aires Grains Exchange. Harvesting has also been slower than expected in the southern U.S. corn belt, where early planting had raised expectations of an early crop.

August is a traditionally a big month for Brazilian corn exports while freshly harvested U.S. corn usually gets to port in September.

"When late-planted Argentine corn starts coming in, there will be a new sales push from growers and exporters. Even Brazil is slated to import Argentine corn this year," Argentine farmer and crop analyst Pablo Adreani said.

"An estimated volume of 8 million tonnes of Argentine corn will compete with Brazil and the U.S. in the July-October period," he added.

In the current market year, which started in March, Argentina's main corn customers have been Algeria, Vietnam and Malaysia. So far 17 million tonnes have been harvested from Argentina and about 13 million tonnes have already been spoken for by exporters, Adreani said.

"That's a very high sales versus harvested volume ratio, showing farmers have decided to sell more corn and less soy," he said.

The grains exchange forecasts a corn harvest of 39 million tonnes this season, vaulting above Argentina's previous record high 30 million tonnes set in the previous crop year.

The jump in Argentine corn supply follows sweeping trade policy reforms implemented in December 2015.

President Mauricio Macri took office that month, having been elected on a free-markets platform. He eliminated the 20 percent tax that had been slapped on corn exports and ditched the strict trade and currency controls favored by the previous government.

Attached Files
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Precious Metals

Mexico owes Canada miners over $360 million, led by Goldcorp - documents

Mexico's tax agency is holding over $360 million in tax rebates owed to six Canadian miners, including $230 million to Goldcorp Inc, according to sources and official documents seen by Reuters, escalating the situation into a showdown between the Mexican government and Canadian mining firms operating there.

In a string of meetings, Canadian officials have pressed Mexico to fix the problem, which hamstrings mining companies' ability to invest in operations and is particularly difficult for smaller, cash-strapped miners and explorers, people familiar with the matter said.

Vancouver-based Goldcorp declined to comment on its outstanding refund, which represents 142 percent of its 2016 net profit and 6 percent of its full-year revenue.

Goldcorp, the world's No. 3 gold miner by market value, is owed the largest amount, according to documents seen by Reuters, followed by Torex Gold Resources, a small, Toronto-based miner which began commercial production at its Mexico mine last year and is waiting on a refund of some $66.5 million.

"It's damaging the ability to reinvest the dollars in assets that actually pay real tax," said Torex chief executive Fred Stanford, who is working with Mexican authorities to resolve Torex's 2015 submissions, but declined to comment on the refund amount.

While several companies said that refund delays began to grow longer two or three years ago, exact amounts of withheld refunds have not been previously reported.

Osvaldo Santin, head of Mexico's Tax Administration Service, acknowledged the problem in an interview last month with Reuters, saying the agency had seen a spike in value-added tax, or VAT, refund requests.

"Given this atypical phenomenon, we are carrying out more in-depth assessments," he said. Working with the miners, the agency is aiming for a quick resolution to prevent it becoming an operations problem, Santin added.


Mining companies' appetite for investing in Mexico has soured in the face of the withheld rebates as well as ongoing security threats and high royalties, said Rob McEwen, CEO of McEwen Mining.

"You take a number of these factors and when a miner doesn't have control over them, it increases the risk," he said. Toronto-based McEwen, which saw its Mexican mine robbed at gunpoint of 7,000 ounces of gold in 2015, said it had a $6.2 million refund outstanding as of March 31.

Nearly 70 percent of foreign-owned mining companies operating in Mexico are based in Canada, according to Global Affairs Canada, the country's combined foreign and trade ministry. The value of Canadian mining assets in Mexico totaled C$19.4 billion ($14.4 billion) in 2015, second only to U.S. assets worth an estimated C$24.8 billion.

The tax row comes as foreign direct investment (FDI) in Latin America's second-largest economy has cooled while U.S. President Donald Trump pressures American business to grow at home. FDI in Mexico slumped 26 percent in the first quarter from the same period a year ago to $7.9 billion.


Unlike sales tax, which only applies to a final purchase, Mexico's 16-percent VAT is levied every time value is added during the production of goods or when they are sold.

Mining companies, which export much of their production and spend heavily on machinery and equipment, typically generate large VAT returns.

Mexico's VAT refunds officially take 40 days to be processed, and by law, can take months if there is an audit. In practice, however, the process can take much longer, particularly if litigation is involved.

Endeavour Silver Corp is owed $15.6 million - including $6 million to $7 million from purchases with seven suppliers under audit - money that Chief Financial Officer Dan Dickson said is being withheld to coax Endeavour to pressure the suppliers into paying more income tax.

"It's not my job to make sure they are paying their income tax," he said. "We can't add a 16-percent cost to our company. That makes our mines unprofitable."

Sources and documents also show Alamos Gold is owed about $26 million and Agnico Eagle Mines nearly $18 million. The Toronto-based companies were not immediately available for comment.

Frustrated miners complained to Canada's Minister of Natural Resources, Jim Carr, during a trade mission earlier this year. Carr raised the matter with Mexico's Secretary of the Economy, who committed to look into the matter, two sources said.

The extended wait times for VAT refunds are forcing the hand of some small miners, said one executive, who asked not to be named.

"I've heard, more recently, of an increase in intermediary third parties actually buying VAT receivables (at a discount), so companies can get the cash up front," he said. "Miners are just increasingly desperate to get their refunds."
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Gold climbs to its highest finish in 7 months

Gold prices climbed Tuesday to settle at their highest level since early November. Uncertainty surrounding a rift between Qatar and other Middle East nations, the upcoming U.K. election and European Central bank meeting lifted investment demand for the precious metal.
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China's Gold Imports Seen Jumping 50% as Haven Demand Booms

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

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

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

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

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

Investment Demand

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

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

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

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

“I suspect that jewelry demand will be down more in tonnage terms than investment will be up,” Klapwijk said on the sidelines of the conference organized by the Singapore Bullion Market Association. “So demand in China this year could be down a tad. Financial use of gold in China could also see some reductions.”
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Russia's Polyus tests markets with London and Moscow share sales

Russia's top gold producer Polyus will offer new and existing shares in a secondary share offering in both London and Moscow, it said on Monday, in a deal that will test investor appetite for Russian assets.

Polyus delisted from the London Stock Exchange in late 2015 after Western sanctions over Moscow's role in the Ukraine crisis began to bite for Russian companies. However it returns to London, buoyed by an 11 percent rise in global gold prices this year and by a separate $887 million deal to sell 10 percent of the company to a Chinese consortium led by Fosun International.

As part of its secondary share offering for 7 percent of the company's equity, Polyus expects to raise $400 million from the sale of new shares. Further proceeds from existing equity will go the company's controlling shareholder, the family of Russian tycoon Suleiman Kerimov.

The company, listed on the Moscow Exchange with a market capitalisation of $9.9 billion and a free float of 6.76 percent, plans to use the proceeds from the planned share sale to repay some of its debt and finance projects.

The Chinese deal had valued Polyus at $9 billion, or $70.6 per share, compared with 4,423 roubles ($78) per share at the market close on Friday. The shares were up 0.4 percent at 4,440 roubles on Monday.

Other large Russian companies will be watching the Polyus offering with interest, hoping to gauge the likelihood of a robust return of investors that took flight after Moscow annexed Crimea from Ukraine in 2014.

The first $500 million-plus offering on the Moscow market this year could be followed by an initial public offering (IPO) from En+ Group, which manages Russian tycoon Oleg Deripaska's aluminium and hydropower businesses, sources have told Reuters.

State shipping company Sovcomflot is also expected to launch an IPO before long.

Polyus, meanwhile, is looking for a successful share sale to boost funds after winning a licence in January for one of the world's biggest untapped gold deposits and as it prepares to start production at its large Natalka deposit in late 2017.

In a separate statement on Monday, Polyus raised its production forecast to 2.35-2.4 million troy ounces in 2018 and 2.8 million ounces in 2019, having previously forecast 2.7 million ounces by 2020. Total cash costs will remain below $400 an ounce, it added.
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Osisko Gold to buy metals portfolio from Orion Mine for C$1.13 billion

Canada's Osisko Gold Royalties Ltd said on Monday it had agreed to buy a precious metals portfolio from U.S. private equity firm Orion Mine Finance Group for C$1.13 billion ($839.40 million) to expand its diamond, gold and silver asset base.

Osisko will pay Orion C$675 million in cash and the remaining C$450 million in Osisko shares.

The portfolio consists of 74 royalties, streams and precious metals offtakes and will result in Osisko holding a total of 131 royalties and streams, the company said.

As a part of the deal, Osisko will be entitled to some production from the Renard diamond mine in Quebec, Brucejack gold and silver mine in British Columbia and the Mantos Blancos mine in Chile.

Reuters had reported in January that Orion Mine was in talks to either sell or publicly list the portfolio.

Maxit Capital LP, BMO Capital Markets, National Bank Financial and PricewaterhouseCoopers were Osisko's financial advisers.
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China's Shandong Gold Mining to seek loans to buy Barrick mine stake

Shandong Gold Miningplans to apply for loans worth up to $1.26-billion via its unit to fund the acquisition of a stake in Barrick Gold's mine in Argentina, the Chinese precious metal producer said.

The Chinese producer's unit Shandong Gold Mining (Hong Kong) would apply for the loans from offshore units of two Chinese state-owned banks, it said in a statement.

Out of the total borrowing, $960-million would be used to fund the acquisition of a 50% stake in Canadian firm Barrick's Veladero gold mine, in Argentina, while the remaining $300-million would be allocated as working capital.

In April, Shandong Gold Mining said it would acquire the stake in the Veladero mine owned by Barrick, the world's largest gold producer. Chinese firms have been seeking resources overseas to expand their global footprint.
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U.S. diamond market slows versus 2016, India brighter: De Beers

Indian diamond jewelry sales are rebounding after a fall of nearly 9 percent last year, while demand in the biggest market, the United States, has slowed in 2017 in line with muted economic growth, De Beers said on Friday.

Broadly steady global diamond jewelry demand worth $80 billion in 2016 masked 4.4 percent growth in the United States and an 8.8 percent fall in India, where sales were disrupted by a jeweler's' strike and a government decision to withdraw high-value bank notes.

Major miner Anglo American counts on its business with De Beers, the world's biggest diamond producer by value, to shelter its portfolio from volatile commodity markets as diamonds tend to hold value when basic raw materials fall in price.

While De Beers' traditional focus is rough diamonds, the group is developing its presence in the high-margin diamond retail market through De Beers Diamond Jewellers' retail network and the Forevermark high-end diamond brand, which had retail sales of around $750 million in 2016.

Forevermark Chief Executive Stephen Lussier said the signs so far were that last year's trends were reversing.

In the third biggest market India, Forevermark diamond sales have rebounded so far this year by around 70 percent versus a year ago, when a 19-day jeweler's' strike and the withdrawal of high-value notes limited sales.

Even considering the recovery was from an unusually low base, Lussier said in a telephone interview that Forevermark was outperforming a broadly steady diamond maket.

The United States' diamond market has slowed slightly this year as expected economic growth has yet to materialize, he said without giving figures. Disappointing U.S. jobs growth numbers on Friday pushed the U.S. dollar lower.

The 2016 diamond data released on Friday, which De Beers publishes for the entire industry, found U.S. consumers last year accounted for around half of world diamond jewelry buyers - a level not seen since before the financial crisis - after five years of consecutive demand growth.

Engagement rings are central, but there is a growing trend for U.S. women to buy diamonds for themselves, which Lussier said was "a sign of economic empowerment".

After the United States, the next biggest market is China, where demand growth rose by 0.6 percent in local currency last year and it continued to rise into the first quarter of 2017.
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Deutsche Bank Trader Admits To Rigging Precious Metals Markets

After months of "smoking guns" and conspiracy theory dismissals, a Singapore-based Deutsche Bank trader (at the center of fraud allegations) finally confirmed (by admitting guilt) what many have suspected - the biggest banks in the world have conspired to rig precious metals markets.

The Deutsche Bank trader, David Liew, pleaded guilty in federal court in Chicago to conspiring to spoof gold, silver, platinum and palladium futures, according to court papers. Bloomberg notes that spoofing involves traders placing orders that they never intend to fill, in an attempt to manipulate the price.

Following an introductory period that included orientation and training, LIEW was eventually assigned to the metals trading desk (which included base metals and precious metals trading) in approximately December 2009. During the Relevant Period, LIEW was employed by Bank A as a metals trader in the Asia-Pacific region, and his primary duties included precious metals market making and futures trading.

Between in or around December 2009 and in or around February 2012 (the "Relevant Period"), in the Northern District of Illinois, Eastem Division, and elsewhere, defendant DAVID LIEW did knowingly and intentionally conspire and agree with other precious metals (gold, silver, platinum, and palladium) traders to: (a) knowingly execute, and attempt to execute, a scheme and artifice to defraud, and for obtaining money and property by means of materially false and fraudulent pretenses, representations, and promises, and in furtherance of the scheme and artifice to defraud, knowingly transmit, and cause to be transmitted, in interstate and foreign commerce, by means of wire communications, certain signs, signals and sounds, in violation of Title 18, United States Code, Section 1343,which scheme affected a financial institution; and (b) knowingly engage in trading, practice, and conduct, on and subject to the rules of the Chicago Mercantile Exchange ("CME"), that was, was of the character of, and was commonly known to the trade as, spoofing, that is, bidding or offering with the intent to cancel the bid or offer before execution, by causing to be transmitted to the CME precious metals futures contract orders that LIEW and his coconspirators intended to cancel before execution and not as part of any legitimate, good-faith attempt to execute any part of the orders, in violation of Title 7, United States Code, Sections 6c(a)(5)(C) and 13(a)(2); all in violation of Title 18, United States Code, Section 371.

Defendant LIEW's employer, Bank A, was one of the largest global banking and financial services companies in the world. Bank A's primary precious metals trading desks were located in the United States, the United Kingdom, and the Asia-Pacific region.

Defendant LIEW and other precious metals traders, including traders at Bank A, engaged in a conspiracy to commit wire fraud affecting a financial institution and spoofing, in the trading of precious metals futures contracts traded on the CME.

Defendant LIEW placed, and conspired to place, hundreds of orders to buy or to sell precious metals futures contracts that he intended to cancel and not to execute at the time he placed the orders (the "Spoof Orders").

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Base Metals

Copper price jumps on Chinese imports surprise

In February copper hit a 21-month high on the back of optimism that Donald Trump's $500 billion-plus infrastructure plan would add fuel to the fire of Chinese economic stimulus already working its way through commodity markets.

While US stimulus now appears further in the distance, Chinese support for the sector has stayed surprisingly strong with imports of the metal, widely used in the construction, manufacturing transportation and power industries, surging in May.

Markets had overestimated the slowdown in China's economic growth and sluggish domestic demand

Official customs data from China, responsible for some 45% of global copper consumption, show the country's refined copper imports in May increasing by 30% to 390,000 tonnes compared to the previous month. Year-on-year import volumes were down 9% however. For the whole of 2016 imports were at record levels of 4.95 million tonnes.

The copper imports rebound in May is more than market expectations, especially in the off season for copper, (suggesting) markets had overestimated the slowdown in China's economic growth and sluggish domestic demand," Helen Lau, an analyst at Argonaut Securities in Hong Kong told Reuters.

In a sign that disruptions at some of the world's biggest mines including BHP's Escondida minein Chile and Freeport's Grasberg operations in Indonesia is having an impact on mine supply concentrate imports declined by more than 15% in May compared to April. Cargoes were down 20% compared to a year ago reaching the lowest levels since October 2015. 2016 was a banner year with volumes gaining 28% over 2015 hitting an all-time high of 16.96 million tonnes for the full year.

Chinese imports compare to global mined production of an estimated 20.5 million tonnes per year.

Copper futures trading on the Comex market in New York reacted positively to the import data adding more than 2% from Wednesday's close trading near its day high of $2.6105 per pound ($5,755 a tonne) in afternoon dealings. Copper is up 3.5% year to date.
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China's Q1 aluminium demand surges 15% on year to 8.24 mil mt: industry guild

China's aluminium demand in first-quarter 2017 surged 15% year on year to 8.24 million mt, on the back of consumption by the real estate, car and power sectors -- the key aluminium consumers, the Henan Provincial Nonferrous Metals Guild said in a report on its website on Thursday.

The guild, which is a metals industry association, has over 100 producer-members and advises the government on non-ferrous metal industry policies and laws, and is also into metals research.

Other factors supporting the rise in aluminium demand in Q1 include the mainland China macro-policy and better aluminum prices, the guild said.

China's aluminium sector earned a profit of Yuan 7.1 billion ($1.065 billion) in Q1 2017, compared with a loss of Yuan 5 billion in Q1 2016, the data showed. The sector's sales revenue in Q1 2017 was Yuan 141.6 billion, up 37% year on year, according to the guild.

Chinese domestic alumina spot prices averaged at Yuan 2,438/mt ($366/mt) in April 2017, down 11% month on month, with prices having fallen to Yuan 2,300/mt by end-April, the guild data showed.

In April, China's average daily national alumina and refined aluminium outputs were 213,000 mt and 92,000 mt, respectively, which were the highest thus far, the guild data showed. As of end-April, the country's total aluminium stock was more than 1.2 million mt, also hitting a historically high level. March's volume was undisclosed though.

As of June 2, the Shanghai Futures Exchange has refined aluminium stocks of 435,001 mt, up 21,375 mt from the week of May 31, SHFE data showed.

China's national aluminium demand has been forecast to grow from an estimated 34.02 million mt in 2016 to 46.68 million-50.93 million mt by 2023, with the coming of the lightweight industry age in the mainland, as well as demand support by the domestic template, car, decoration, construction, and electronics sectors, according to the China Non-ferrous Metals Industry Association.

China produced 24.46 million mt of alumina and 10.97 million mt of refined aluminium in Q1 2017, up 21% and 10% year on year, respectively, the guild data showed.
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Mongolia presidential hopeful urges more state control in mining

A leading candidate for Mongolia's presidency has called for greater state control of projects like the giant Oyu Tolgoi copper-gold mine run by Rio Tinto, making mining and foreign investment central issues in the election campaign.

The landlocked North Asian country of three million people goes to the polls on June 26, just a month after securing a $5.5 billion International Monetary Fund-led bailout to lift the economy out of a balance of payments crisis.

Campaigning began on Tuesday, and painful austerity measures agreed by the Mongolian People's Party (MPP), which runs the government but doesn't hold the presidency, have made an easy target for rivals, as have controversies over deals done with foreign mining companies.

The presidential election in the former Soviet satellite, wedged between China and Russia, comes amid growing frustration among voters over suspected corruption and the perceived ineffectiveness of their governments.

Under Mongolia's parliamentary democracy, the MPP government's term should run for another three years, but its policies could be challenged by a president with veto powers.

The outgoing president Tsakhia Elbegdorj belongs to the Democratic Party, but has to step down having served a maximum two terms.

The Democratic Party's new candidate Khaltmaa Battulga, a martial arts star turned business tycoon, opened his campaign with a call for greater government control over the economy and the country's mineral resources.

"Our political environment is very unstable, so our big development policy won't go forward. Because of that, we can't solve unemployment or poverty," Battulga told CI Television in an interview posted on the network's official Facebook account late on Tuesday.

"The government should hire experts and take control of everything, including Oyu Tolgoi and Tavan Tolgoi," he said.

His comments could send shudders through Rio Tinto, which owns 66 percent of Oyu Tolgoi, and scare off private companies that might be interested in forming strategic partnerships at the giant, fully state-owned Tavan Tolgoi coal mine.

Oyu Tolgoi LLC, the Mongolia-based company that runs the project, declined to comment. Rio Tinto did not immediately respond to requests for comment.

Dale Choi, analyst and head of the Altan Bumba Financial Group, said the Mongolian government did not have a good record when it came to managing its assets.

"Most of the SOEs are loss making businesses, and even those that pay some of the highest taxes to Mongolia are not efficient businesses," he said.


The ruling MPP candidate Mieygombo Enkhbold, has called for continued "stability", while the government struggles to introduce economic reforms having already raised some taxes and cut spending as part of the IMF bailout deal.

Asked for Enkhbold's position on the mining sector, an MPP spokesman forwarded a statement setting out the party's support for the further development of big mining projects "based on the fundamental interests of our people."

Nationalist politicians have repeatedly called for greater Mongolian control over Oyu Tolgoi, which is forecast to become the world's third-largest copper producer when output peaks at 550,000 tonnes in 2025, up fourfold from this year.

A third party candidate Sainkhuu Ganbaatar, who is expected to win enough votes to force Mongolia's first-ever second round presidential election run-off, has continued his hardline stance when it comes to Mongolia's ownership of its resources.

"The Mongolian people in Mongolia are the real master. This means that Mongolians are the deciders of their natural resources," he said in his manifesto.

Attempts to renegotiate ownership and a long dispute over taxes and cost overruns led to the suspension of construction on the underground tunnels at Oyu Tolgoi in 2013, and also scared off investment for other projects.

Construction on the project was relaunched after the signing of a new agreement that ended the dispute in 2015.

During its first phase, the open pit mine had already contributed more than $1 billion in taxes and other payments to the government by 2015, while local businesses and suppliers had earned some $4 billion from the project, according to the International Finance Corporation.

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Chilean copper mines halt operations as storms hit desert

Operations at some of the world's largest copper mines have been halted after northern Chile was hit by snowstorms, companies said Wednesday.

State-owned mining company Codelco said mining had halted at its Chuquicamata, Ministro Hales and Radomiro Tomic mines for safety reasons, although processing plants were operating normally.

Safety protocols have been implemented at its nearby Gabriela Mistral mine, the company said.

Antofagasta Minerals said it had partially halted operations at its copper mines i n the region.

Snow forced mining at Antofagasta's Zaldivar mine, which is 50% owned by Barrick Gold, while rain is causing difficulties at the Antucoya and Centinela mines, the company said.

"The situation is being evaluated minute by minute by the emergency committees at each of the mines," it said.

Workers at the BHP Billiton-controlled Escondida copper mine, the world's biggest, posted photos online of thick snow drifts at the open pit operation.

The mine only recently resumed normal operations in the wake of a 44-day strike by unionized employees in February and March.

Chilean emergency office ONEMI raised the alert level to red from yellow, noting that the precipitation, which began Tuesday, is set to continue into Wednesday afternoon.

The mayor of Antofagasta, the region's largest city, said the weather had been harsher than expected, with many roads closed as a result of flooding.

Chile's Antofagasta region is the heart of the country's mining industry and its mines produced more than 2 million mt of copper last year.

Northern Chile is home to the Atacama, the world's driest desert, which normally receives just a few millimeters of rain a year.

But freak rainstorms can cause significant damage when they strike.

Before the storm, Mines Minister Aurora Williams called on the industry to take preventative measures against the weather front and suggested workers at small-scale operations should stay home to minimize the risk.
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Qatar's aluminium exports blocked, Norsk Hydro seeking other routes

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

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

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

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

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

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

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

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

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

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

Nickel touched a near one-year low of $8,700 per tonne on the London Metal Exchange (LME) last week.

It has recovered a little to $8,900 this morning but that still makes it by some margin the worst performer among the major LME-traded industrial metals with a year-to-date decline of over 10 percent.

And, if you believe Goldman Sachs, the stainless steel ingredient is going to stay at these bombed-out levels for a good while.

This marks the collapse of nickel's previous bull narrative of mass mine closures in the Philippines. As that scenario rapidly recedes, nickel is once again facing a long war of producer attrition to rebalance supply with demand.


As recently as March, LME three-month nickel was on a bull roll, trading above the $11,000 level.

The market's exuberance was down to one woman, Regina Lopez, eco-warrior turned environmental minister in the Philippines.

And then at the start of last month she was gone, having failed to win endorsement from the government's Commission on Appointments.

Some smaller mines remain suspended. But most look set to continue operating with Lopez' replacement, former military chief Roy Cimatu, immediately adopting a more conciliatory stance.

Philippines nickel production fell hard, by 36 percent in the first quarter of this year, according to the International Nickel Study Group (INSG).

But that was as much down to a particularly heavy monsoon season as to environmental closures.


Not that China's NPI producers won't be feeling the pinch at these low prices. So will just about every other nickel producer.

Cost-curve economics will replace Philippine environmental policy as the driver of supply rationalisation.

The only thing is that nickel has been here before, most recently during the extended price trough that ran from late 2015 to the middle of 2016, when Lopez first grabbed the headlines.

And it turned out to be much more price inelastic than expected.

Some higher-cost operations did indeed exit the market, particularly in Australia and Brazil.

Some, such as the Falcondo ferronickel plant in the Dominican Republic, exited but have since returned under new ownership. And others have all the while been ramping up production.

Vale's Goro plant in New Caledonia saw its best operational performance in the first quarter of this year since the facility, a by-word for technical problems, was first fired up in 2011.

Glencore's Koniambo ferronickel plant, another much-troubled mega-project also in New Caledonia, did the same.

Both are still running significantly below nameplate capacity, meaning that Vale and Glencore have every incentive to continue raising production.

It's instructive to compare the trends in mined and refined output over the last three years.

The INSG estimates that global mined production fell by almost 23 percent over the 2014-2016 period, largely reflecting a slump in Indonesian output after its export ban.

However, production of refined metal, including ferronickel, actually rose by 1.4 percent over the same period.


None of which bodes particularly well for a return of bullish exuberance to this market any time soon.

The underlying issue remains the same now as it was back in 2015-2016, the last time the London price traded consistently below the $10,000-per tonne level.

This is a supply chain that is still living with the consequences of nickel's extraordinary bull run to over $50,000 in 2006 and 2007.

It didn't stay there long but that price explosion caused the creation of a whole new supply stream. China's nickel pig iron production was a direct reaction to super-high refined metal prices.
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Owner of $1bn cobalt project says rally is far from over

Tight cobalt supplies will keep boosting the price of one of this year’s hottest commodities, according to  Eurasian Resources Group, which is developing an almost $1-billion project in the Democratic Republic of Congo (DRC).

Cobalt jumped 71% this year on surging demand for the metalused in batteries for electric cars made by firms such as Tesla. It may rise another 60% to as much as $90 000 a metric ton in the next 18 months or so, said ERG CEO BenediktSobotka. He said clients are already asking to pay fixed prices for supplies from the mine, which isn’t due to start until late 2018.

Demand surged after usage expanded from mobile phones to larger batteries in cars and homes, prompting concern supply won’t keep up. Sobotka’s view echoes that of Glencore’s billionaire chief Ivan Glasenberg, who last month said the electric vehicle boom is coming faster than expected. ERG plans to initially produce 14 000 t/y from its Metalkol Roan Tailings Reclamation project in the DRC and eventually leapfrog Glencore as the top producer.

“Demand is remarkably strong,” Sobotka said in an interview in Moscow. “People are inquiring about lifetime offtake contracts” from ERG’s project for 2018-2019, he said.

Cobalt, which rallied 37% in 2016, traded at $56 500 on Friday, according to Metal Bulletin. This year’s advance has far exceeded gains for most major commodities.

While analysts such as those at CRU Group expect further price gains, Morgan Stanley last month said more supply from the DRC, where the bulk of production comes from, will start putting pressure on prices next year.

ERG’s Sobotka isn’t worried, and sees any excess supply being “quickly eaten.”

“Over the last 12 months the market participants have realised that there was a lot of dirty cobalt product that is produced using child labour in the DRC” and outdated technology, he said. “Big automotive corporations can’t just ignore this alarming problem anymore,” and that may support a tight market, he said.

Speculative demand is also significant, partly because it’s hard to invest in battery producers, many of which are part of other firms such as carmakers, he said.

To limit the impact of any electricity shortages at the cobaltproject, ERG is developing a large power project in Mozambique that will be able to supply the company’s DRCassets via neighbouring countries. The firm is conducting a feasibility study and aims to start construction in the next two years.

ERG has at least $4.5-billion worth of projects under development and also owns assets in Kazakhstan and Brazil. While it’s involved in production of copper, aluminium and iron ore, Sobotka says he’s more excited about cobalt and chrome, which he calls the “next generation of commodities.”

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First Q3 Japan aluminium premium settlement reported at $119/mt plus LME CIF

A producer and a Japanese buyer agreed to set the third-quarter premium for aluminium imports into Japan at $119/mt plus LME cash CIF Japan, down from $128/mt for Q2, several parties involved in the talks said Monday.

The agreement was for P1020/P1020A aluminium ingot for shipping to Japan over July to September, for over 500 mt/month.

Around 15 Japanese buyers and five producers are continuing the negotiations, sources said.

Rusal offered at $128/mt plus LME cash CIF Japan, Rio Tinto Japan at $123/mt, a third producer at $125/mt, and a fourth producer at $120/mt.

One Japanese buyer said $119/mt plus LME cash CIF Japan was too high.

Producers said output cuts in China are affecting the market but it was too early to say, he said.

The buyers put their Q3 premium ideas in the range of $110-$120/mt CIF Japan.
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Russia's Rusal aims to agree on Taishet project financing in 2017

Russian aluminium giant Rusal plans a number of debt refinancing deals this year and also plans to agree on financing terms for its Taishet aluminium smelter project in Siberia in 2017, Deputy Chief Executive Oleg Mukhamedshin said.

Rusal, the world's second-largest aluminium producer, started building the smelter in 2007 but then delayed it when aluminium prices fell. The company said last month it was preparing to resume the project.

Mukhamedshin said that Rusal, controlled by Russian tycoon Oleg Deripaska, needed between $700 million and $800 million to have Taishet's first aluminium production line running at its full capacity of 430,000 tonnes per year by 2020.

"We plan to raise all this amount in debt - we have proposals, mainly from Russian state banks," he said in an interview on the sidelines of the annual international economic forum in St Petersburg.

Rusal is currently in talks with state-controlled power generating company Rushydro about potential partnership for the project, Mukhamedshin added.
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CEO of Finnish miner Talvivaara gets suspended sentence for misleading investors

The founder and chief executive of troubled Finnish miner Talvivaara was handed a suspended eight month sentence on Friday after a court ruled the company gave investors unrealistic forecasts for nickel production.

The Helsinki district court said the company and CEO Pekka Pera gave investors nickel production forecasts in 2012 and 2013, which had an impact on Talvivaara's share price, but which the court said were unlikely to be met at the time they were given.

Former executives Harri Natunen and Saila Miettinen-Lahde were given fines, while a third former executive Lassi Lammassaari received a suspended sentence of six months for misuse of insider information in connection with trades in company shares.

All four have denied any wrongdoing and said during the investigation and in court that information given to investors at all times had been based on the most accurate information available.

Talvivaara said in a statement on Friday that the company and the defendants were assessing the rulings, and were likely to appeal.

Talvivaara also said there was no reason to reassess Pera's position as CEO in light of the court's decision.

Talvivaara's shares have been suspended from trading since 2014 due to a debtrestructuring. The company aimed to become  Europe's biggest nickel miner by pioneering a process of using bacteria to extract nickel at its mine in northern Finland.

But production problems were compounded when the mine leaked waste water, raising the level of uranium and other metals in nearby lakes and rivers, and the company was pushed into a debt restructuring in 2013.

Last year, a local court fined Pera and Natunen for environmental damage.

State-owned Terrafame took control of the mine in 2015 in a bid to protect local jobs and the environment, and commodities trader Trafigura took a stake in the mine in February. The mine turned an operating profit in the fourth quarter of 2016, for the first time since 2011.

Talvivaara shareholders comprise about 80,000 Finnish retail investors.
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Chile eyes construction of new copper smelter

Chilean President Michelle Bachelet said Thursday that she had asked state mining organisations including top producer Codelco to look at the possibility of building a new copper smelter to add value to copper exports.

"I have asked (the organisations) to begin a study together to establish a new smelter in the region of Atacama that will be at the vanguard of clean technology," said Bachelet, as she gave her annual state-of-the-nation address to Congress.
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Steel, Iron Ore and Coal

Dalian iron ore falls for third day as steel struggles

Iron ore futures in China dropped 2 percent on Thursday, falling for a third session in a row, reflecting weak appetite for the raw material as steel prices struggled to sustain their upward momentum.

Losses in Chinese futures could drag spot iron ore prices further, having declined to their lowest level in nearly a year on Wednesday.

The most-active iron ore contract for September delivery on the Dalian Commodity Exchange closed down 2 percent at 423 yuan ($62) a tonne.

“Iron ore consumption has come under pressure as Chinese steel mills look to spend funds on loan repayments due at the end of the quarter,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB slid 1.1 percent to $55.43 a tonne on Wednesday, the lowest level since July last year, according to Metal Bulletin.

The spot benchmark, which touched $94.86 in February, has lost almost 30 percent this year, underperforming other commodities such as nickel and oil.

Adding to plentiful supplies at home, China’s iron ore imports rose in May from a six-month low in April, reaching 91.52 million tonnes.

Stockpiles of the raw material at China’s ports stood at 136.55 million tonnes last week, near the highest level since 2004. SH-TOT-IRONINV

After an early-year surge driven by Beijing’s infrastructure spending, Chinese steel prices have fallen 15 percent from this year’s peak as construction demand tapers off during summer.

The most-traded rebar on the Shanghai Futures Exchange ended nearly flat at 2,968 yuan per tonne after rising as much as 2 percent intraday. The construction steel product touched a one-month low on Tuesday, but rebounded on Wednesday to snap a nine-day slide.

Globally, BMI Research said it was keeping its average steel price forecast of $530 a tonne for this year and $500 in 2018. That compares to $484 last year.

“This reflects our belief that prices will trend lower in the second half of 2017 from current spot prices as a result of resilient Chinese production growth on the back of low iron ore and coking coal prices,” BMI said in a report.

Chinese mills produced a record 72.78 million tonnes of crude steel in April, breaking the previous all-time high set in March.
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Wilbur Ross sees 'genuine' national security concern on steel

U.S. Commerce Secretary Wilbur Ross said on Thursday that a national security review of the U.S. steel industry will be completed "very shortly" and will seek to protect the interests of both domestic steel producers and consumers.

Ross told a Senate Appropriations subcommittee hearing that he believes there is "a genuine national security issue that must be considered in this case," the second major signal in two days that the Trump administration is preparing new steel import restrictions.

In a speech in Cincinnati on Wednesday, Trump said: "Wait until you see what I'm going to do for steel and for your steel companies. We're going to stop the dumping, and stop all of these wonderful other countries from coming in and killing our companies and our workers. You'll be seeing that very soon."

The steel review under a Cold War-era trade law would result in a "thoughtful" set of recommendations for Trump to consider for action, Ross said. He has previously said he expected to complete the study by the end of June.

Ross identified three kinds of actions that could be recommended: imposing tariffs above the current, country-specific anti-dumping and anti-subsidy duties on steel products; imposing quotas limiting the volume of steel imports; and a hybrid "tariff-rate quota" option that would include quotas on specific products with new tariffs for imports above those levels.

Choosing the latter option would help mitigate concerns over steel price inflation from tariffs, Ross said. Some steel users have voiced concerns that import limits would cause price increases that would make them more vulnerable to foreign competitors.

"The overall impact on inflation, were that to be the route, should be relatively modest," Ross said. "So we're very mindful of the need both to protect the domestic steel producers from inappropriate behavior on the part of foreign dumpers, but also to protect the steel consumers, the steel fabricators, the auto companies and everybody else who uses steel."
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China May steel products exports down 25.93% on year

China May steel products exports down 25.93% on year
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Wesfarmers says coal price contracts set for shake-up

Wesfarmers says quarterly contract prices that underpin the coking coal industry will cease to exist, telling investors Japanese steel mills are likely to decide on a new mechanism within weeks.

Incoming Wesfarmers chief executive Rob Scott, who is now managing director of the conglomerate’s industrial and resources division, told investors it expected some clarity on pricing structure within weeks.

‘It looks like that quarterly price system is falling over now so we will find out more in the next week or two,” Mr Scott said.

“This is uncharted territory in many ways.”

BHP Billiton chief commercial officer Arnoud Balhuizen also believes there will be a change away from the quarterly contract prices, telling a Melbourne function last week that recent volatility in coking coal price could break the traditional system.

Instead of setting prices agreed every three months the industry could move closer to a daily market price.

Japanese steelmakers, who have traditionally preferred quarterly contract prices, paid much more for coal on contracts between November and March than they could have bought at market or “spot” prices, undermining their confidence in the contract system.

Cyclone Debbie disrupted coal supply in early April, delaying negotiations over the contract price for the three months to June 30. The contract price for that period has still not been settled.

Wesfarmers moved to capitalise on higher coal prices last year by launching a formal sales process for its coal operations, which include Curragh in Queensland and a 40 per cent stake in NSW’s Bengalla mine.

Mr Scott said Wesfarmers was continuing to explore the potential divestment and investors should not fret that the process was taking some time.

“I don’t really have more to update on the sale process other than we are working through the process,” Mr Scott said.

He said there were no coal sale processes that were happening quickly, with bidders wanting to undertake rigorous due diligence.

Mr Scott said resolving a dispute with Queensland government-owned power generator Stanwell Corporation last year was beneficial to the sales process.

“We are very pleased to have reached a settlement, which provides us with greater certainty.”

Wesfarmers is also making a push into Western Australia’s domestic gas retail market. AGL and Origin recently secured gas retail licences and want to ‘disrupt’ the market.

Wesfarmers said it now has about 20 per cent of the market, with 60,000 new natural gas residential customers in the past 12 months, taking total residential customers to 150,000.
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Mechel to pay first full preferred share dividends since 2011

The board of Russian metals and mining giant Mechel has recommended paying full dividends to preferred shareholders for the first time since 2011 now the company has fought back from the brink of bankruptcy.

Mechel borrowed heavily before Russia's economic crisis hit in 2014 and was facing what would have been the country's biggest corporate collapse after struggling with debt repayments as demand for its products weakened and coal and steel prices fell.

But the company, controlled by businessman Igor Zyuzin, struck a debt-restructuring deal with creditors last year and posted a net profit of 13.9 billion roubles ($244 million) for the first quarter of 2017, helped by higher coking coal prices.

Mechel said in a statement on Thursday its board had recommended dividend payments of 10.28 roubles per preferred share for 2016, when it made a net profit of 7.1 billion roubles.

The company has paid preferred shareholders a minimum payment of 5 kopeks per a share since 2011 and has yet to resume full dividend payments to ordinary shareholders.

Mechel's preferred shares on the Moscow Exchange jumped 7 percent after the announcement.

Chief Executive Oleg Korzhov said last month that management had asked creditors for permission to make the dividend payments, currently set at 20 percent of net profit.

Lenders Sberbank and VTB said last week they both supported the proposal.
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High floor price deters buyers at OMC iron ore auctions

The latest round of iron ore e-auctions by Odisha Mining Corporation (OMC) saw subdued buying interest. OMC offered 508,000 tonne of iron ore of which barely 200,000 tonne was booked, meaning an unsold inventory of 308,000 tonne.

Both iron ore lumps and fines were on offer from OMC’s key operating mines of Gandhmardhan, Daitari and Koira.

The response to the auctions was weak as OMC continued its stand to hike base prices of lumps and fines. The floor price of lumpy ore was in the range of Rs 2200-2600 per tonne. Similarly, fines’ reserve price was fixed in the band of Rs 900-1300 a tonne. The raise in floor prices by OMC was despite plunge in sponge iron prices of the order of Rs 2500-Rs 3000 per tonne since the last auctions.

“OMC’s floor price at iron ore e-auctions is based on the pricing mechanism adopted by the Indian Bureau of Mines (IBM) which is faulty. Pricing mechanism has to be made more realistic and transparent,” said a senior official with a steel company.

OMC has refused to budge from its pricing stand, ignoring concerns flagged off by steel makers. R Vineel Krishna, managing director, OMC could not be immediately contacted for his comments.

Though OMC has drawn a roadmap for higher iron ore output targets and agreed to augment production at its mines, the results have not yet shown up at the ground level. OMC had set a target to achieve a production figure of 20 million tonne (mt) by 2017-18 but it looks challenging given OMC’s current actual annual production hovering around six million tonne.
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China May coal imports drop as Beijing cracks down on foreign shipments

China, the world's largest coal buyer, imported 22.19 million tonnes of coal in May, down 10.5 percent from a month earlier, preliminary customs data showed on Thursday, as sluggish domestic prices and tightening import policies hurt demand.

But imports of the fuel were up 16.6 percent from a year earlier, figures from the General Administration of Customs of China showed.

The numbers include lignite, a type of coal with lower heating value that is largely supplied by Indonesia.

For the first five months, coal shipments rose 30 percent from the year before to 111.7 million tonnes.

The month-on-month drop in imports came as the Securities Daily newspaper reported in May that Beijing had asked utilities to reduce their purchases of overseas coal by 5 to 10 percent this year in an effort to restrict low-quality imports.

Falling domestic prices have also made imports from Australia and Indonesia less competitive. The most-active-traded thermal coal futures prices touched a two-month-low of 503 yuan ($74.02) per tonne on May 11, down more than 10 percent from a record 566 yuan per tonne on April 5.

Inventories at China's major coal port Qinhuangdao SH-QHA-COALINV climbed to 5.94 million tonnes in late May, the highest in three months.

Forecasts for an early heat wave could help boost demand before the peak summer season in July, analysts and traders said, with electricity usage jumping as people crank up their air conditioning. But they added that large coal stocks at ports may drag on prices in coming weeks.
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China May iron ore imports recover from six-month low

China's iron ore imports rose 5.5 percent in May from a year earlier, recovering from a six-month low in April, as mills in the top steelmaking nation scooped up more raw material as they posted strong profits.

Imports of iron ore last month reached 91.52 million tonnes, according to data from the General Administration of Customs on Thursday, up from 86.75 million tonnes a year ago and April's 82.23 million tonnes, the lowest since October 2016.

Analysts said the total was still near historical highs as mills continue to produce large volumes of steel to take advantage of decent margins.

"Profitability at steel mills was good in May especially for rebar producers," said Wang Di, analyst at CRU consultancy in Beijing.

"I don't think there will be a slump in iron ore imports going forward because while inventory at ports is very high, inventory at mills is relatively low."

Last month, Chinese iron ore futures plunged 15 percent for their worst monthly performance in more than a year, with investors liquidating long positions amid worries about slowing construction and infrastructure demand.

"While steel prices have come off their recent rally, and we think are set for further declines, iron ore prices could see a short-term stabilization before easing in the second half of the year," Barclays Capital analysts in a recent research note.

Stockpiles of imported iron ore at China's major ports remain close to 13-year highs. SH-TOT-IRONINV

Steel consumption typically eases during the summer months in the north of the country along with construction activity.

Imports of steel products rose 2.8 percent to 1.11 million tonnes in May from April. Exports rose 7.6 percent to 6.98 million tonnes.

Reining in excessive local government debt and the shadow banking sector in China has been high on the central government's agenda, leading to concerns that tighter liquidity will affect completion of some large infrastructure projects.
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China to incentivise coal mines with better safety.

China to incentivise coal mines with better safety.
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US utilities' coal consumption climbs in May: EIA

Warmer weather and higher natural gas prices helped to increase utility coal burn in May, the US Energy Information Administration said Tuesday.

In its latest monthly Short-Term Energy Outlook, the EIA estimated coal consumption increased by 24.4% or 9.6 million st month on month to 48.9 million st.

EIA said coal accounted for 27.6% of May generation, compared with 32% from gas-fired facilities. In April, coal accounted for 25% of generation and gas 31.5%.

In May, the average spot Henry Hub natural gas price was $3.15/MMBtu, up 5 cents compared with April. Prices are expected to stay near $3.20/MMBtu through October before climbing at the end of the year to $3.43/MMBtu.

Despite the additional coal burn, the EIA estimates utility stockpiles grew slightly in May, with inventories up less than 1% to 164.1 million st.

The agency predicts warmer weather should increase June coal burn to 59.5 million st and diminish stockpiles to 158.5 million st at month's end.

Coal consumption should increase to 71.4 million st in July and peak at 72.5 million st in August when summer cooling demand is in full force.

Coal inventories are expected to reach a 2017 low of 141.9 million st at the end of September and begin 2018 at 145.2 million st, down 25.7% or 50.3 million st year on year.

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Guizhou to eliminate 67.08 Mtpa coal capacity in 3 yrs

Guizhou to eliminate 67.08 Mtpa coal capacity in 3 yrs
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Shanghai steel falls for 9th day on weak demand outlook, pressures iron ore

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

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

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

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

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

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

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

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

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

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

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

The most-traded iron ore on the Dalian Commodity Exchange was last up 0.1 percent at 436 yuan per tonne.
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Egypt imposes tariffs on Chinese, Turkish, and Ukrainian steel - ministry

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

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

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

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

The decision will remain valid for fourth months but it was not immediately clear when it would come into effect.
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Fall in iron ore price prompts rethink on grade differentials

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

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

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

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

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

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

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

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

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

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


The elephant in the room, though, is price.

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

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

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

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

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

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

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

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

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

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

Prague may be the occasion to ensure visibility in supplies and the right pricing relativity.
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China's Tangshan starts new campaign to implement steel cuts

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

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

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

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

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

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

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

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

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

Attached Files
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China iron ore rises for second day on restocking demand

Iron ore futures in China climbed for a second consecutive session on Monday, rising 2 percent, as recent rapid losses spurred restocking demand among steel producers.

But a sustained drop in Chinese steel prices pulled the steelmaking raw material off session highs, suggesting any further gains may be limited. Shanghai rebar futures fell for an eighth day in a row.

The most-traded iron ore on the Dalian Commodity Exchange closed up 2 percent at 435 yuan ($64) a tonne, but off the session’s peak of 443 yuan. The contract slid more than 5 percent last week after hitting a six-month low.

“The divergence between steel and iron ore has been pronounced in recent weeks; driven in part by steel mills easing back on restocking earlier this year,” ANZ analysts said in a note.

“However, with prices back below $60/tonne it may have been low enough to entice traders back.”

Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 3.3 percent to $57.79 a tonne on Friday, after touching a seven-month low in the prior day, according to Metal Bulletin.

But traders say plentiful supply of iron ore could cap any upward momentum in prices.

Imported iron ore at China’s ports stood at 136.55 million tonnes as of June 2, only down slightly from the previous week’s 136.6 million tonnes which was the most for the stockpiles since 2004, based on data compiled by SteelHome consultancy. SH-TOT-IRONINV

Weaker steel prices may also limit Chinese steel mills’ appetite to replenish their iron ore inventory.

The most-active rebar on the Shanghai Futures Exchange ended 3.9 percent lower at 2,939 yuan a tonne, just off the session’s trough of 2,938 yuan, its weakest since May 15.
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India's Adani backs go-ahead for $4 billion Australia coal mine

India's Adani Enterprises gave final investment approval on Tuesday for its $4 billion Carmichael coal mine and railway in Australia's north, shifting the focus to fund raising for the controversial project.

Adani, which hopes to secure a A$900 million ($670 million) government loan, said in a statement it had given "final investment decision approval" to build what would be Australia's biggest coal mine.

"We are committed to this project," Adani Chairman Gautam Adani said.

The Carmichael mine has faced years of delays amid opposition from environment groups who argue it will contribute to global warming and damage the Great Barrier Reef, leading some banks to rule out any role in funding.

"Announcing an intention to invest is a far cry from having the finance to do so," said Julien Vincent, executive director of environmental finance organization Market Forces. Greenpeace Australia Pacific said the announcement was a "PR stunt".

The project is located in the remote Galilee Basin, a 247,000 square-kilometer (95,000 square mile) expanse in the central outback that some believe has the potential to become Australia's largest coal-producing region.

Adani said the project would create 10,000 direct and indirect jobs, with pre-construction works starting in the next few months. Coal from the mine will be exported to India.

Queensland premier Annastacia Palaszczuk said Australia's third biggest state had been hit by a global resources downturn and Adani's decision would help mining firms.

Adani's decision "is a vote of confidence not just in the Queensland economy, but in Queensland people", she said.

However, one energy analyst said the huge project would drive down thermal coal prices if it was built, putting pressure on local rivals.

"The Queensland government probably doesn't appreciate that they could lose thermal mines in Queensland for the sake of bringing in this one," said the analyst, who asked not to be named as he was not authorized to comment on Adani.

The Northern Australia Infrastructure Facility, the federal agency that will decide whether to grant the government loan to Adani, was not immediately available for comment.
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North American steel groups want stronger NAFTA rules of origin

Steel trade groups representing Canada, the United States and Mexico said that any upgrade to the North American Free Trade Agreement (NAFTA) should require that manufacturers use more steel produced in the region in their products.

The rules of origin, which stipulate that products must meet minimum NAFTA-wide content requirements to be tariff-free, are seen as a sensitive area of discussion once negotiations to revamp the trilateral treaty kick off in August.

"The three countries should agree to updated rules of origin and regional value content requirements that incentivize investment and job growth in the region," lobby groups representing the North American steel industry said in a joint letter.

"In particular, rules of origin and regional value content provisions for steel-containing goods should ensure that North American manufactured goods are built with North American steel," said the letter.

Under rules of origin, manufacturers must obtain a minimum percentage of components for their products from the three NAFTA members.

Mexican officials have said that stricter rules of origin in some industries could be one way for companies in North America to use more regional content, supporting President Donald Trump's plan to create more U.S. manufacturing jobs.

Mexico sends the vast majority of its exports north to the United States, and local officials view the trade agreement as a lynchpin of their economy.
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Italy backs ArcelorMittal bid for polluted Ilva steel plant

The Italian government supports a joint bid by ArcelorMittal and Marcegaglia group for the polluted Ilva steel plant in southern Italy, the Industry Ministry said on Monday.

Industry Minister Carlo Calenda has signed a decree backing the 1.8 billion euro ($2 billion) offer from the world's largest steelmaker and Marcegaglia for Europe's biggest steel plant by output capacity, the ministry said in a statement.

Italy has been trying to sell Ilva, which is near the port city of Taranto, since 2015 when the state took full control of the plant in a bid to clean up the polluted site and save thousands of jobs in an economically depressed area.

The commissioners running Ilva said last month the ArcelorMittal consortium had won the bidding but unions opposed the thousands of layoffs involved in its plan. A rival consortium led by India's JSW Steel raised its offer.

Under the plan presented by the ArcelorMittal consortium, called Am Investco Italy, Ilva's total workforce, which includes two smaller bases in northern Italy, will be cut from more than 14,000 to eventually reach 8,480 by 2024, the ministry said.

Up to 4,100 of those to be laid off will be eligible for state unemployment support. Am Investco has said it was open to trying to reduce the number of job losses in the near term, the ministry said.

The next step in the sale process involves the environment ministry examining Am Investco's plans for cleaning up the site. Once the ministry issues its decree, expected during autumn this year, the deal must be approved by the European Union.

Steel production will remain at 6 million tonnes a year during the clean-up of the site, which magistrates sequestered in 2012 amid allegations its emissions were causing abnormally high cancer rates.

ArcelorMittal chief executive Lakshmi Mittal said in a statement that the company "will work with all interested parties to guarantee Ilva, its workers and the regions where it operates a better, more stable and sustainable future."

By 2024, Am Investco aims to have boosted output to the full 8 million tonnes Ilva is authorised to produce, the statement said, using three of Ilva's original five furnaces. The plan also includes a pledge to invest about 2.4 billion euros in technology and environmental improvements.
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The hard-to-believe steel shortage that's unfolding in China

The world’s top steelmaker may have a shortage of steel. China has a lack of rebar, according to iron-ore miner Fortescue Metals Group, which says a shortfall of the key product helps to explain a divergence between the price of the commodity it digs up with the alloy it’s made into.

There’s a shortage of rebar, Fortescue’s CEO Nev Powersaid in a Bloomberg Television interview in Beijing on Monday, citing closures in China of some steel producers, especially operators of induction furnaces. Rebar, or reinforcement bar, is a basic item used to reinforce concrete.

China makes half of the world’s steel, and in recent years it’s been more associated with excess production, soaring steelexports, and sinking prices. That pain has spurred the government – egged on by Group of Seven policy makers – to press on with shutdowns of outdated plants, promote consolidation and clean the air that’s polluted by smokestacks. Over the past year, the closure of i nduction furnaces, which use electricity, has been a focus.

“Induction furnaces typically make rebar and as those furnaces are closed down, it’s created a shortage of rebar and the prices have gone up,” Power told Bloomberg Television. “The margins that are being made in rebar at the moment we don’t believe are long-term and as new production comes in, we’ll see those margins comes back to normal.”

While iron has tumbled this year amid concerns about supply, as well as projections demand may slow in China, rebar by contrast has soared. That’s a divergence from the pattern in recent years when they’ve moved in tandem, with Shaw and Partners and Liberum Capital flagging the shift. Spot ore with 62% content was at $57.79 a dry ton on Friday, down 27% this year, according to Metal Bulletin.

There are signs of a possible shortfall with nationwide stockpiles or rebar in retreat, although analysts say that the trend may now be easing as other producers boost supply. Inventories of rebar in China have shrunk every week since mid-February and are now at the lowest since December.


“The elimination of some induction furnaces has indeed led to a shortage of rebar in China,” said Xu Huimin, an analyst at Huatai Futures in Shanghai. “However, we may be reaching an inflection point as demand has started to weaken and supply is expected to increase.”

Shifts in China’s policy on coking coal have also been behind the split between iron and steel, according to Power, who said he’s seen a “significant change” in the relationship between the two. When coal surges, as happened last year, mills can respond by using more higher-grade iron ore to boost efficiency.

Iron-ore’s slump this year has come as supplies increased, including from top producers Australia and Brazil, with Vale SA beginning a four-year ramp-up of its biggest project S11D. In April, Australia’s government said it expects output from the biggest miners to top demand, hurting prices.

Power cited stockpiles of ore held at China’s ports among factors that had hurt iron ore. “As the port stocks come down that will keep a lid on prices,” he said. “But once things return to normal, we should see it trade somewhere around where the global supply curve is.”
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Indonesia sets June HBA thermal coal price at $75.46/mt, up 46% on year

Indonesia's Ministry of Energy and Mineral Resources set its June thermal coal reference price, also known as Harga Batubara Acuan or HBA, at $75.46/mt, down 9.9% month on month but up 45.64% from a year ago.

The ministry had set the price for May at $83.81/mt, and for June 2016 at $51.81/mt.

The HBA is a monthly average price based 25% on the Platts Kalimantan 5,900 kcal/kg GAR assessment; 25% on the Argus-Indonesia Coal Index 1 (6,500 kcal/kg GAR); 25% on the Newcastle Export Index -- formerly the Barlow-Jonker index (6,322 kcal/kg GAR) of Energy Publishing -- and 25% on the globalCOAL Newcastle (6,000 kcal/kg NAR) index.

In May, the daily Platts FOB Kalimantan 5,900 kcal/kg GAR coal assessment averaged $69.60/mt, down from $74.92/mt in April, while the daily 90-day Platts Newcastle FOB price for coal with a calorific value of 6,300 kcal/kg GAR averaged $74.52/mt, down from $84.64/mt in April.

The HBA price for thermal coal is the basis for determining the prices of 75 Indonesian coal products and calculating the royalty producers have to pay for each metric ton of coal they sell.

It is based on 6,322 kcal/kg GAR coal, with 8% total moisture content, 15% ash as received and 0.8% sulfur as received.
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China's key steel mills daily output up 1.1pct in mid-May

China's key steel mills daily output up 1.1pct in mid-May
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China's quality watchdog says 57.84 mln T imported coal unqualified in 2016

A total of 57.84 million tonnes of imported coal were found unqualified after tests in 2016, up 4.04% year on year, China's quality watchdog said in a white paper released in mid-May.

The inspected coal totaled 195.73 million tonnes, down 7.79% from the year-ago level; while the value stood at $9.66 billion, decreasing 24.81% year on year, said the General Administration of Quality Supervision, Inspection and Quarantine in the paper.

The value of the unqualified imports declined 15.46% from the year-ago level to $3.06 billion, or 1/3 or more of the total inspected.

The watchdog conducts tests on eight environmental-related items -- ash, sulfur, calorific value, arsenic, mercury, phosphorus, chlorine and fluorine.

The unqualified imports that mainly failed to meet moisture, ash and calorific value among eight indexes that disagreed with contract terms, had not been returned or rejected after consultations between sellers and buyers, showed the white paper.

Of the total 195.73 million tonnes of import coal tested, 0.97 million tonnes were incompliant with environmental rules and thus be returned back to the supplying country. All such coal was anthracite from North Korea.

The paper said these batches of unqualified coal mainly come from Australia, Indonesia, North Korea, Mongolia, Russia, the Philippines and Canada.

With unstable coal quality, 65.3% of imported coal from Canada was unqualified, followed by 61% for North Korea and 46.2% for the Philippines; below 30% for quality-stable Australia, Indonesia, Mongolia and Russia coal.

The reasons behind unqualified imported coal included: unstandardized method of sampling, narrow range of quality specifications in contracts, restrictions on high-quality coal exports by some countries, unfavorable ways of trade settlement, change in moisture content impacted by weather as well as fake test reports.

Attached Files
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Odisha approves JSW Steel’s $7.8 billion steel plant

Odisha said on Friday it had approved a plan by JSW Steel to set up a 10 million tonnes a year steel plant costing about 500 billion rupees ($7.8 billion).

JSW, which is India’s biggest steelmaker by capacity and produces 18 million tonnes a year, has sought 4,500 acres of land which were earlier allotted to South Korea’s Posco, Odisha state-chief secretary Aditya Prasad Padhi told Reuters.

“We will evaluate the exact amount of land required for the project and give them the land,” Padhi said, adding the project is likely to be built in four years.

The government of the state in the east of India has also approved JSW’s plan to lay a slurry pipeline linked to the plant.

JSW would submit expressions of interest for two iron ore mines in Odisha, its Joint Managing Director Seshagiri Rao had said in April.
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India's JSW steel raises bid for Italy's troubled Ilva steel plant

A consortium led by India's JSW Steel raised its bid for Italy's troubled Ilva steel plant, a statement said on Saturday, in a challenge to a group that was declared the winner of the tender process last month, but whose offer faces labour union opposition.

JSW, leading a consortium called AcciaItalia, said it would put up 1.85 billion euros ($2.09 billion), which is broadly in line with the winning bid, and added it would "immediately" hire 9,800 employees. It had originally offered about 1.2 billion euros.

"The decision (to make a counter offer) is in the interest of Ilva, of its employees, of the supply chain, the territory of the factory and the national machine industry," the statement said.

The Industry Ministry said on Friday that it could not accept a counter offer, according to procedure, if the only thing changed was the purchase price. The government has been vetting the winning bid and is supposed to decide by Monday whether to officially endorse it.

Metal workers' unions said on Saturday that they would send a letter to Prime Minister Paolo Gentiloni and Industry Minister Carlo Calenda asking for an urgent meeting.

In a statement, Rocco Palombella of the Uilm metal workers' union said it was "necessary to reflect... on the counter offer by AcciaItalia".

The bid that last month won the tender offer was made by a consortium called Ama Investco Italy that is led by ArcelorMittal, the world's biggest steelmaker. It foresees some 4,800 job cuts, though the workers would receive state unemployment support until 2023.

A spokeswoman at the Industry Minister was not immediately available to comment.

AcciaItalia said that its newest bid excluded two of the previous members of its consortium, Arvedi and Cassa Depositi e Prestiti, and was made exclusively by JSW and Delfin.

Ilva was placed under court administration in 2013 after magistrates seized 8.1 billion euros of assets belonging to its former owners, the Riva family, amid allegations that toxic emissions were causing abnormally high rates of cancer.

The government took over administration of the business in 2015 to try to save jobs and clean up its polluting furnaces
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Brazil iron ore miners see freight formula benefit for third month

Iron ore miners in the Atlantic region have benefited from freight formulas in contracts for material sold FOB, rather than using spot freight rates, for the third straight month.

Spot Brazil to China Capesize rates in May continued to offer lower FOB Brazil netback iron ore prices compared with an industry formula for a third straight month, according to analysis by S&P Global Platts Thursday.

There was a $2.49/wet mt difference in the two rates in May, compared with $2.69/wmt more paid under the formula in April, and $3.78/wmt more seen in March.

That may aid miners after a sharp drop last month in reference delivered prices in China, with Platts IODEX falling to $61.55/dry mt CFR China in May, from $70.67/dmt in April.

A formula adopted by Vale and the wider industry using a fixed freight rate and bunker oil adjustment factor average at around $11.60/mt for May, based on Platts calculations. The spot Tubarao to Qingdao Capesize rate averaged in May at $14.09/mt, as assessed by Platts.

The freight rate is used to netback to a Brazil FOB basis iron ore reference 62% fines prices in China, which forms the base value in contracts for different iron ore grades, including fines, concentrates, pellets and lump.

Different moisture adjustment rates govern how the final netback is used for sales of the products.

Other Atlantic region iron ore suppliers use the industry reference in their own sales, while spot freight may also be used.

The current benefit of using spot freight rates to derive an iron ore price for buyers with contracts tied to freight netback formulas is seen, while industry sources may remain less concerned for now.

Mill buyers in Europe are exposed to the Brazilian iron ore market and terms offered in securing material under contract.

Ores may increasingly move to Asia-Pacific markets such as China, as Europe's share of sales fall, according to Vale's shipment data.

Other producers have stated the need to track similar terms, as offered by Vale, in case different pricing frameworks create complications during volatility in spot markets.

Even with the past three-month period showing spot Capesize rates derived lower FOB iron ore prices than under the formula, there may need to be a longer sustained price gap to encourage a move to freight spot index-based pricing formulas.

One shipping market source said recently he expected the Brazil-China route may see spot rates fall in future, and be closer to prices as derived by the contract formula.

The outlook factored in no major net dry bulk vessel growth, and stable bunker fuel prices.

Iron ore buyers this year were said to have been given a new iteration of the netback formula, lowering the fixed freight value, while adapting the bunker adjustment factor closer in line with lower oil prices.
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