Mark Latham Commodity Equity Intelligence Service

Friday 22nd April 2016
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    Oil and Gas

    Steel, Iron Ore and Coal


    Secret shame of the American Middle class.

    Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

    Well, I knew. I knew because I am in that 47 percent.

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    Finland's Metso profit and orders hit by mining slump

    Finnish engineering group Metso posted a lower-than-expected quarterly profit and new orders on Friday as miners delayed buying its grinding mills and crushers.

    Nordic mining equipment makers are struggling as mining groups cut spending due to low metal prices and uncertainty over growth in top metals consumer China.

    Metso shares fell after it reported adjusted earnings before interest, tax and amortization were 28 percent lower than a year ago at 56 million euros ($63 million), missing the consensus of 68.5 million in a Reuters poll.

    New orders fell 10 percent to 663 million euros, compared to analysts' average expectations of 679 million euros.

    "Orders and net sales were at a low level in the project businesses during the first quarter, as uncertainties in the markets tend to slow down both the decision-making relating to new orders and the execution of ongoing projects," chief executive Matti Kahkonen said in a statement.

    Metso, which also makes valves and pumps for the oil and gas industry, said it expects demand to remain weak for mining equipment and satisfactory for other products and services.

    It did not put a figure on its profit outlook for this year. Shares in the company had fallen by 6 percent by 0745 GMT.

    "The company should give a more exact guidance. The current outlook doesn't tell enough about developments in different business sectors, and just raises more uncertainty," said Juha Kinnunen, analyst at Inderes Equity Research.
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    China's Great Ball of Money Is Rushing Into Commodities Futures

    Chinese speculators have a new obsession: the commodities market.

    Trading in futures on everything from steel reinforcement bars and hot-rolled coils to cotton and polyvinyl chloride has soared this week, prompting exchanges in Shanghai, Dalian and Zhengzhou to boost fees or issue warnings to investors. While the underlying products may be anything but glamorous, the numbers are eye-popping: contracts on more than 223 million metric tons of rebar changed hands on Thursday, more than China’s full-year production of the material used to strengthen concrete.

    “The great ball of China money is moving away from bonds and stocks to commodities," said Zhang Guoyu, a Shanghai-based analyst at Tebon Securities Co. “We’ve seen a lot of people opening accounts for commodities futures recently."

    The frenzy echoes the activity that fueled China’s stock market last year before a rout erased $5 trillion, and follows earlier bubbles in property to garlic and even certain types of tea. China’s army of investors is honing in on raw materials amid signs of a pickup in demand and as the nation’s equities fall the most among global markets and corporate bond yields head for the steepest monthly rise in more than a year.

    Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, says the improvement in fundamentals and the availability of leverage to bet on commodities is making them irresistible to traders.

    “These guys are going nuts," Hong said. “Leverage exaggerates the move of the way up, but also on the way down - much like what margin financing did to stocks in 2015.”

    The gain in steel prices isn’t just on the futures market, with spot prices for the physical product also rallying amid a sudden shortage as construction activity accelerates. Rebar prices have risen 57 percent this year on average across China, according to Beijing Antaike Information Development Co., a state-owned consultancy. Even after output of steel increased to the highest monthly volume on record in March, rebar inventory is still falling, signaling a supply deficit.

    To cool activity, the Shanghai Futures Exchange increased transaction fees while the Dalian Commodity Exchange raised iron ore margin requirements. The bourse in Dalian also tightened rules on what it called abnormal trading, which now includes frequent submission and withdrawal of orders and self-trading. The Zhengzhou Commodity Exchange urged prudent investment on cotton futures amid "relatively large price fluctuations."

    “There’s a lot of liquidity and there are people looking for opportunity," said Ben Kwong, a director at brokerage KGI Asia Ltd. in  Hong Kong. “Investors are just boosted by recent rebound in those commodity prices and it’s speculative behavior."

    Futures slid Friday after the exchange clampdown, with contracts on rebar closing down 4.8 percent at 2,619 yuan a ton, its biggest daily decline in six weeks. A gauge of materials shares sank 2.7 percent on the mainland as the benchmark Shanghai Composite Index advanced 0.2 percent.

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    Anglo American reports lower production ahead of annual meeting

    Anglo American Plc reported lower first-quarter production across most of its mining businesses on Thursday ahead of its annual meeting, where shareholders have been urged reject CEO Mark Cutifani's pay.

    Anglo American, the world's fifth-biggest diversified mining group by value, embarked on a major overhaul in February to cope with weak prices and demand, which includes the sale or closure of its iron ore, coal and nickel businesses.

    The company said in the first quarter, iron ore production at its Kumba Iron Ore Ltd business fell 27 percent as its Sishen mine moves to a lower cost pit configuration.

    It cut diamond production at its De Beers division by 10 percent to 6.9 million carats, due to low prices, while the sale of its Norte assets in Chile last year resulted in a 15-percent fall in copper production, the company said.

    But nickel production was up 67 percent and platinum production rose 4 percent.

    "Overall, this is a weak production report, across most key commodities - production volumes for iron ore, metallurgical and thermal coal, copper, nickel and platinum were all below our estimate - typically 5-7 percent below expectation," Canaccord Genuity said in a note.

    Anglo American has been downgraded to 'junk' territory by credit rating agencies Fitch Ratings, Moody's and S&P, which cited the prolonged downturn in commodity prices, negative cash flows at many of the company's mines and uncertainty about the execution of the debt reduction.
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    Miners spending again: $50 billion capex in five months

    SNL Metals & Mining tallied the value of planned capital spending announced by mining companies in November. The industry research firm based in Charlottesville, Virginia did the same thing again April 7.

    Outlays on new mines, sustaining capital, expansions and projects like mine life extensions had surged by nearly $50 billion to $108 billion over the duration of just five months.

    Of course, some of this money may never be spent and many projects announced now may only result in actual spending years down the line or get substantially revised.

    Nevertheless, it paints a picture of a measure of confidence returning to the sector.

    And even more encouraging, initial capital spending on greenfield projects rose 216% in the first quarter compared to end-2015.

    At $12.3 billion of projected capex it was the highest three-month period  since Q4 2014, although it still pales in comparison to the heady days of 2012 when quarterly initial capex topped out at more than $50 billion.

    According to SNL data between November and April, the bulk of announced capital spending shifted to Latin America and copper.

    The region accounted for $32.4 billion in committed or actual spending while copper attracted $34.9 billion worth of new money.  Copper projects in Latin America attracted nearly two thirds of total new projects focused on the red metal.

    NGEx Resources 60%-owned Constellation copper project is by far the biggest new project announced. The late-stage project in Chile will need more than $7.4 billion with an estimated $3.1 billion to build the mine and  roughly $4.4 billion for sustaining capital over a life of 48-years.

    Other Latin American projects include $1.9 billion for Vale's Salobo copper project in Brazil and $725 million for Hot Chili.'s 49.9%-owned Productora copper project in Chile.

    During the previous period SNL data showed most money were going to Canada and the US, and towards gold projects which are still a close close second globally with $32.12 billion of announced spending, a 113% jump since November.

    Investment in gold projects was led by Harmony Gold and Newcrest teaming up on the late-stage Wafi-Golpu project in Papua New Guinea. The South African miner and Australia's top producer projected investments of $2.7 billion in initial capex, and an additional $3.7 billion for expansion work.

    SNL forecasts that Latin America and copper would continue to attract the most investment.  More than $100 billion of planned capital spending over the next six years will flow into the region

    Copper is projected to account for 30% of the estimated $258.7 billion in global capex through 2012. Initial capital costs account for $152 billion, or 59%, of the projected total for the next six years according to SNL.

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    Sinopec opens new industrial platform

     Asia's largest refiner, China Petroleum & Chemical Corp, known as Sinopec, is pushing big into a market-oriented transformation with the launch of the country's largest online industrial supply system on April 18, teaming up with e-commerce giant Alibaba Group Holding Ltd.

    It is the latest in a string of moves by state-owned enterprises to diversify their business and enhance profitability.

    Sinopec, teaming up with Alibaba Group Holding Ltd, launches the country's largest online industrial supply system on April 18. 

    The online industrial product system - - used to be Sinopec's internal procurement platform, but the company decided to open up its access to the public as part of a restructuring amid weak oil prices.

    Alibaba provides services to Sinopec in terms of internet safety, big data and technology upgrading.

    Wang Yubing, president of Sinopec's procurement division, says the company plans to build the platform into an industrial version of, the country's largest online shopping marketplace, owned by Alibaba.

    "The market value of online retail business rose to about 3 trillion yuan ($464 billion; 409 billion euros), but the market potential for online sales of industrial products is much larger than that," he says, expecting the transaction value on the platform to reach 500 billion yuan.

    Currently, 90 percent of the transactions on the platform have come from Sinopec, but Wang says more companies will join the purchasing system since it will reduce their sourcing budget and increase efficiency.

    "This platform will benefit not only large industrial enterprises but also those small and medium-sized companies through sharing our resources in suppliers and experience in supply chain management, because it will optimize their sourcing process and reduce the procurement cost," says Jiao Fangzheng, Sinopec's deputy general manager.

    The website provides a huge array of products from more than 60 industries, including coal, steel, petrochemicals and oil equipment, the company says.

    Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, says that it is a laudable attempt, but it may take quite a long time to make the platform a real success.

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    Volkswagen Reaches Deal With U.S. Authorities Over Diesel Emissions Scandal

    Relief is on the way for U.S. drivers of nearly 500,000 Volkswagen AG2-liter diesel vehicles equipped with devices meant to trick emissions tests.

    A San Francisco federal judge said Thursday that Volkswagen has reached the broad outlines of a deal with U.S. authorities that includes buybacks of cars and compensation for U.S. drivers. The company didn’t specify the cost of the deal or the specifics of the proposal.

    The approximately 80,000 3-liter vehicles equipped with the devices weren't included as part of the plan.

    U.S. District Judge Charles Breyer, who is overseeing the case, said in open court that Volkswagen plans to offer consumers the option of having their vehicles bought back or modified to meet emissions standards. Those with leased cars can cancel the lease. “Substantial compensation” on top of the buyback or fix will also be awarded to consumers, Judge Breyer said.

    The deal comes as part of litigation consolidating more than 500 federal lawsuits filed against Volkswagen in the wake of its September admission that it knew its diesel vehicles weren’t as “green” as advertised and were violating pollution laws. Some 11 million vehicles are affected world-wide.

    Judge Breyer, who is overseeing the case, has pressured Volkswagen since February to produce a fix for the cars. Judge Breyer made it clear last month that if no solution was offered by this week, he would consider a request by the plaintiffs to set a summer trial. An attorney for Volkswagen said at the time that engineers were working around the clock on a fix.

    A bevy of U.S. authorities have put pressure on the company, including the U.S. Justice Department, Environmental Protection Agency, Federal Trade Commission and California Air Resources Board.

    The mushrooming fallout from the scandal has cost Volkswagen’s chief executive and top U.S. manager their jobs and led to plunging U.S. sales. Dealers have been left with expensive inventory they are unable to unload, and some have sued, alleging that Volkswagen defrauded them.

    Volkswagen for years touted its diesel line as environmentally friendly vehicles with good fuel economy. The FTC sued the company for false advertising last month, pointing to alleged misleading taglines like “Diesel. It’s no longer a dirty word,” and “Green has never felt so right.”

    The company continues to face a criminal probe in the U.S. and litigation abroad.
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    China allowing bankruptcy's?

    China laid out measures to choke off bank credit to the heavily leveraged steel and coal industries, the latest attempt to tackle inefficiencies weighing on the economy.

    A proposal circulated by the central bank and other agencies Thursday called on lenders to stop making loans to new steel or coal projects that don’t already have government approval, and slow or stop lending to unprofitable companies that can’t repay.

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    Most hated rally?

    There is, of course, repetition, and a lot of it. One of the lines I'm hearing more and more is that this is "the most hated rally ever." I'm fairly sure I heard that line used following strong rallies in equity ETFs like the S&P 500 SPDRs SPY, -0.33% I don't know what evidence people have to make such a claim, but, wow, does it sound like a powerful statement and a reason for equities to keep pushing higher.

    It’s hard to backtest such a statement with actual buys and sells, but viewers seem to love how it sounds. It makes us feel more bullish because the contrarian in us gets excited that markets are hated on the upside. After all, that means stocks have more room to run on the upside, right?

    I find it curious that a rally is so hated after such a powerful move in broad indices. More likely, the real hatred comes from those parts of the marketplace that investors left for dead. Gold miners and material stocks more generally fit the bill there. Into this quarter, our top-quartile-ranked ATAC Beta Rotation FundBROTX, +0.31%  will be overweighted the materials sector using ETFs like the Materials Select Sector SPDR ETF XLB, +0.21%  based on our dynamic momentum weights and risk triggers. I'm excited for that on a personal basis, regardless of the fact that everything we do is quantitative. The contrarian in me believes that the commodity move is real and has legs.

    You want a hated rally? It's the one going on in the Market Vectors Gold Miners ETFGDX, +1.97%  which has had an immense rally thus far in 2016, but in the context of the last few years, looks like a blimp in positive returns (vertical axis shows price).

    Does this continue? Your guess is as good as mine, but after so much real hate and bearishness toward commodities for a prolonged period of time, the contrarian in me says the bias remains higher for anything gold and materials related. The quant in me agrees.

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    South32’s 2016 guidance on track following strong Q3

    Diversified miner South32 said on Thursday that the company was on track to achieve its 2016 production guidance for all its operations, following a strong third quarter ended March. 

    The BHP Billiton spin-off produced 1.3-million tonnes of alumina during the three months under review, which was up 2% quarter-on-quarter, as well as 240 000 t of aluminium, which was on par with the previous quarter. Energy coal production from South Africa declined by 5% to 7.9-million tonnes in the March quarter, while metallurgical coal production from Australian mines was up by 35% to 1.2-million tonnes during the same period. 

    South32 reported that the increase in metallurgical coal production was underpinned by the restart of longwall mining at the Dendrobium operation, at the Illawarra operations, as well as the ramp-up of the new Appin Area 9 longwall, following project completion, at a cost of $565-million. 

    Meanwhile, manganese production for the quarter was up by 33% on the previous quarter, to 1.2-million tonnes, while manganese alloy production declined by 27% to 48 000 t. At the Australian manganese operations, South32 benefited from an increase in ore production on the back of optimised concentrator performance and drier weather conditions. 

    However, manganese alloy production at the Australian operations reflected a temporary suspension of two of the four furnaces in response to power shortages in Tasmania. The first of the furnaces was suspended in December, and the second one followed in March. The two remaining furnaces are currently operating at a reduced electricity load. All four furnaces were expected to return to full production by the end of June. 

    At the South African manganese operations, South32 also reported an increase in manganese ore production, following the extended suspension of operations at the Wessels and Mamatwan mines, in November, in response to the challenging market conditions. Following a completion of a strategic review, mining activities at the South African manganese operations resumed in the March quarter, with South32 saying that the reconfigured operation would have greater flexibility to respond to market demand, having ramped-up production to an optimised 2.9-million tonnes a year. 

    However, manganese alloy production from the South African operations also decreased during the three months to March, following the suspension of three of the four high-carbon ferromanganese furnaces in May last year. The one remaining furnace would remain operational until market conditions improved. 

    Furthermore, South32 on Thursday also reported that nickel production for the quarter was up 10%, to 9 700 t, while silver production declined by 20% to 4.4-million ounces, lead production was down 24% to 36 900 t and zinc production fell by 17% to 18 500 t. 

    Meanwhile, CEO Graham Kerr said that the company was on track to reduce its controllable cost by $300-million during the full 2016, with the restructuring of operations at Worsley Alumina, in Australia, as well as the Australian and South African manganese units largely complete. The restructuring of the Cerro Matoso operation and the Illawarra metallurgical coal operations would be completed by the June quarter. “We are making great progress on our cost-out programme across all operations and have continued to generate cash despite volatile commodity markets,” Kerr said.
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    Incentives offered for Chinese mining companies who want to upgrade

    The Ministry of Land and Resources said on Wednesday that it will release a five-year-guidance for providing financing support and tax cut policies to mining companies that are willing to upgrade mining facilities by the end of this year.

    "Companies should further seek solutions to boost mining efficiency. The nation is speeding up efforts to protect natural resources during the 13th Five Year Plan," said Yu Haifeng, director at the department of mineral resources under the Ministry of Land and Resources.

    Yu said the mining companies that develop major mineral resources, such as cooper, iron and aluminum, are able to get around 40 percent of financial support towards upgrades. While companies that exploit other types of less-widely used mineral resources, are able to get 10 to 25 percent.

    In the meantime, the Ministry and State Administration of Taxation will make more efforts to promote resource tax reform. This is to reduce tax burden to cash-restrained companies and encourage them to make investment to improve mining efficiency.

    A sample survey conducted by the ministry earlier this year shows that natural resources' exploitation in China is gradually becoming more efficient. The recovery rate for coal mining gauges the level that can be recovered from known coal reserves increased 15 percentage points compared to the levels in 1999.

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    China’s energy guzzlers Q1 power use down 5.8pct on yr

    Power consumption of China’s four energy-intensive industries dropped 5.8% on year to 381.6 TWh in the first quarter, accounting for 28.2% of the nation’s total power consumption, the China Electricity Council (CEC) said on April 19.

    Of this, the ferrous metallurgy industry consumed 104.2 TWh of electricity in the first quarter, falling 14% year on year, compared to the drop of 6.8% from the previous year; while the non-ferrous metallurgy industry used 115.2 TWh of electricity, down 5.7% year on year, compared a 3.1% growth from the year prior.

    The chemical industries consumed 104.4 TWh of electricity during the same period, up 3.4% year on year, lower than a 3.6% growth a year ago; while power consumption of building materials industry dropped 4.7% year on year to 57.8 TWh, compared to a 4.5% decline a year ago.

    In March, the four industries consumed a total 137.4 TWh of electricity, climbing 2.9% year on year, accounting for 28.8% of China’s total power consumption.

    Of this, the ferrous metallurgy industry consumed 37.1 TWh of electricity in March, dropping 5.6% on year; while the non-ferrous metallurgy industry used 43.3 TWh of electricity, increasing 6.3% from a year ago.

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    Senate passes bill to bolster power grid, speed LNG exports

    The Senate passed the first broad energy bill in nine years on Wednesday, legislation containing modest measures popular with both Republicans and Democrats to modernize the power grid and speed the permitting process for liquefied natural gas exports.

    The bill, which passed 85-12, attempts to protect the power grid from extreme weather events such as ice storms and hurricanes, and from cyber attacks. It also aims to spur innovations in storage of power from wind and solar energy.

    The House of Representatives passed a similar bill last year.

    The Energy Policy and Modernization Act would increase U.S. exports of liquefied natural gas (LNG), eventually helping to give European consumers alternatives to relying mainly on Russia for gas.

    After disagreements held the bill up for months, senators last week dropped measures from the bill to aid Flint, Michigan overcome a drinking water crisis, in which children have been exposed to dangerous levels of lead, and on offshore drilling.

    Lawmakers from both the House and Senate will next iron out differences over the bill. The Senate bill, for instance, requires the Department of Energy to issue a decision on LNG projects within 45 days of an environmental assessment, while the House bill directs the DOE to make the decision on permits after 30 days.

    Senator Maria Cantwell, a Democrat from Washington state who co-sponsored the bill, said shortly before it passed that she hoped the chambers would move quickly "so that we can realize the opportunity to help our businesses and consumers plan for the energy future."

    The White House has signaled that President Barack Obama would sign the Senate bill.

    Energy policy analyst Kevin Book of ClearView Energy Partners said the chances the bill would be signed into law this year were about 65 percent, because the White House has had some differences with the House bill.

    Charlie Riedl, the head of industry group the Center for Liquefied Natural Gas, said the vote was a "big step forward" and that certainty about the regulatory process is "crucial" for projects that cost billions of dollars to build.

    Rob Cowin, director of government affairs at the Union of Concerned Scientists, a nonprofit group, said the bill falls "far short" of what is needed to promote wind and solar power, but is "better than doing nothing."

    The Senate on Tuesday passed several amendments to the bill, including restricting most sales from the Strategic Petroleum Reserve when oil prices are low.

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    China just unveiled new steps it will take to encourage foreign trade and boost exports

    China will take steps to boost exports, including encouraging banks to boost lending, expanding export credit insurance and raise tax rebates for some firms, the cabinet said on Wednesday, in the latest step to underpin growth.

    "Foreign trade is an important part as well as a driving force of the national economy," the State Council said in a statement after a meeting chaired by Premier Li Keqiang.

    Banks will be encouraged to lend to profitable trading companies that have received overseas orders, export credit insurance will be expanded and tax rebates for exporters of some machinery products will be increased, it said.

    China's exports in March returned to growth for the first time in nine months, adding to further signs of stabilization in the world's second-largest economy but officials have cautioned about the trade outlook.

    The government will also implement proactive import policies, supporting imports of advanced equipment and technology, the cabinet said.

    The government will step up investment in roads, railways and airports in poorer regions and encourage its less developed western and central provinces to attract investment from more developed eastern provinces.

    China's economic growth slowed to 6.7 percent in the first quarter, its weakest pace since early 2009, but stronger-than-anticipated activity indicators for March suggested the economy was picking up.

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    U.S. Bancorp Profit Drops as Provisions for Energy Loans Surge

    U.S. Bancorp, the nation’s largest regional lender, said profit dropped 3.1 percent in the first quarter as provisions for bad loans surged 25 percent, driven by a jump in downgrades on energy-related credits.

    Net income fell to $1.39 billion, or 76 cents a share, from $1.43 billion, or 76 cents, a year earlier, the Minneapolis-based bank said Wednesday in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for per-share profit of 76 cents.

    Oil prices have plunged more than 60 percent since their 2014 peak, forcing banks to set aside billions to cover bad energy loans. Standard & Poor’s said in March that U.S. regional banks could suffer losses if oil prices continue to fall. U.S. Bancorp Chief Executive Officer Richard Davis has relied on fees from credit cards and auto financing to bolster earnings.

    “Although the pressures from the energy industry negatively impacted the quarter, we took appropriate measures and remain confident that we are well positioned to continue delivering industry-leading returns throughout the year,” Davis, 58, said in the statement.

    Provisions for credit losses increased to $330 million from $264 million a year earlier, and energy-related commercial non-performing assets jumped $257 million from the fourth quarter, the company said. Reserves for the commercial energy sector rose to 9.1 percent of outstanding balances from 5.4 percent at the end of December.

    U.S. Bancorp’s loans to energy-related businesses were $3.4 billion as of March 31, about 1.3 percent of the total outstanding.

    Revenue rose 2.7 percent to $5.04 billion, while expenses climbed 3.2 percent to $2.75 billion.

    U.S. Bancorp shares fell 1.8 percent this year through Tuesday, compared with the 6.4 percent decline of the 24-company KBW Bank Index.

    PNC Financial Services Group Inc., the second-largest U.S. regional bank, last week reported profit that missed analysts’ estimates as provisions for bad loans almost tripled from a year earlier. Bank of America Corp. said April 14 that first-quarter net income fell 13 percent on a drop in trading and underwriting revenue, while Wells Fargo & Co., Wall Street’s top oil and gas banker, posted profit that missed estimates as the firm set aside more money for soured energy loans and expenses increased.

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    Iraq's Sadr calls for protests to bring about new government: statement

    Iraq's powerful Shi'ite cleric Moqtada al-Sadr on Wednesday called for renewed protests after the nation's politicians missed a deadline he gave to vote on a cabinet of technocrats proposed by Prime Minister Haider al-Abadi to tackle corruption.

    In a statement received by email, Sadr called for "continuing peaceful protests under the same intensity and even more in order to pressure the politicians and the lovers of corruption."

    "Nobody has the right to stop it otherwise the revolution will take another turn," he said in the statement.

    Sadr renewed his call for the parliament to vote on the cabinet overhaul and asked MPs that represent him not to take part in any session other than the one to be convened for that purpose.
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    Total targets gas, renewables and power expansion

    French oil and gas company Total announced the creation of a gas, renewables and power division on Tuesday, which it said will help drive its ambition to become a top renewables and electricity trading player within 20 years.

    The new business division, to be led by a president with a seat on the company's executive committee, will take effect from Sept. 1.

    "Gas, Renewables and Power will spearhead Total's ambitions in the electricity value chain by expanding in gas midstream and downstream, renewable energies and energy efficiency," Total said in a statement.

    The new organizational structure was presented by Chief Executive Officer Patrick Pouyanne to workers' representatives at a works council meeting in Paris on Tuesday.

    "The goal is to be in the top three global solar power companies, expand electricity trading and energy storage and be a leader in biofuels, especially in bio jet fuels," Pouyanne said in the statement.

    The Gas, Renewables and Power branch will be Total's fourth business division. The others are Exploration and Production; Marketing and Services, and Refinery and Chemicals.

    A spokeswoman said the plan outlined on Tuesday was not a strategic roadmap but the company's ambition of where it wanted to be in 20 years. Total will present its strategic outlook to investors in September.

    The company said last year that it plans to spend at least half a billion dollars annually in its renewable energies and aimed to increase the share of clean energies in its portfolio to between 15 to 20 percent by 2035, from 3 percent currently.

    The spokeswoman said the company was responding to the shift in global energy demand from fossil fuels' dependency to more energies from renewable sources to combat global warming.

    "The idea behind it is that we will remain an oil and gas major with competitive oil assets that we can exploit with a low break-even point," she said.

    Total also said on Tuesday that it was creating a global services division which will pool some services including purchasing, information systems and human resources in an effort to cut costs in the current price downturn.
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    Who speaks for Saudi Arabia on oil, rivals and allies wonder

    As far as Venezuelan oil minister Eulogio Del Pino is concerned, his counterpart Ali al-Naimi, the world's most influential oil official for the past two decades, is no longer the voice of authority for Saudi Arabia.

    Del Pino is still trying to find who is.

    As prospects for the first deal between OPEC and non-OPEC in 15 years faded on Sunday due to last-minute demands from Saudi Arabia, ministers gathered in Qatar appealed to Naimi to save the agreement, Del Pino said.

    "Unfortunately, the people representing the Saudis at the meeting didn't have any authority at all," Del Pino told reporters in Moscow on Monday, a day after Saudi Arabia's demand that arch-rival Iran sign on ruined a widely expected agreement to freeze output.

    "Even Naimi didn't have the authority to change anything. The Saudis said, 'we have new papers and either you approve them or we don't agree'," Del Pino said. "It was a purely political decision... Oman, Iraq, everyone was disappointed and one minister told me it was his worst-ever meeting."

    OPEC member Venezuela, one of the hardest hit by the latest oil price collapse, has had a tense relationship with the cartel's de facto leader Riyadh for decades.

    But Del Pino's frustration is being echoed inside and outside the Organization of the Petroleum Exporting Countries since Deputy Crown Prince Mohammed bin Salman became the kingdom's top oil official last year.

    Few Saudi or OPEC watchers have doubts that the 31-year-old Prince Mohammed is ultimately in charge of oil policy at the world's largest oil exporter. He is also in charge of defence and economic reform.

    But after decades of hearing mostly one technocrat reliably articulate that policy to the outside world -- Naimi -- a proliferation of voices is causing more confusion than clarity, they say.

    Besides Prince Mohammed, the second in line to the throne, those voices also include Naimi's deputy and an older half-brother of the deputy crown prince, Prince Abdulaziz, as well as state oil giant Saudi Aramco's chairman Khalid al-Falih.

    Added to those is the persistent presence of Naimi himself, despite rumours that the 81-year-old would soon be allowed to retire.

    Saudi policies have never been easy to read, but the unpredictability has risen steeply in recent months, Saudi watchers said. That is particularly unwelcome given the worsening relations between Riyadh and Tehran, which are fighting proxy wars in Syria and Yemen.

    Gulf OPEC sources said that although the Saudis' Gulf allies quickly came into line behind Naimi during the meeting on Sunday, his decision came as a complete surprise to them. The kingdom usually consults with Kuwait, the UAE and Qatar.

    A senior source familiar with discussions said he thought Naimi himself was not aware of the change in plan until late in the game.

    "I think it was a last-minute decision, otherwise Naimi would not have come," the source said. "Naimi flew to Doha with an intention to close a deal and when he arrived in Doha, he got another instruction not to do it."

    Up until Saturday, Prince Abdulaziz was assuring everyone privately that there would be a deal, sources close to the discussions said.

    Qatari officials were also telling participants that the Emir of Qatar, Sheikh Tamim bin Hamad al-Thani, had clinched Prince Mohammed's agreement that there would be a deal no matter whether Iran took part or not, the sources said.

    For Russia, which also meant to join the global freeze deal, the change in the Saudi position was a huge surprise because the Kremlin had thought it had cut the deal with almost everyone who matters in Saudi Arabia, Russian sources said.

    Russian oil minister Alexander Novak was so confident in the deal's success on Sunday that he was the last minister to arrive, having spent most of Saturday playing for the Russian government's soccer team against Italy.

    "At the end of the day it didn't really matter who we were speaking to, Naimi or Prince Mohammed. The Saudis just changed the policy," said a source close to Novak, who was at the Doha talks.

    "Of course, we will continue talking to the Saudis. But it is so difficult," the source said.
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    China's investment in highways, waterways up 7 pct in Q1

    China's fixed investment in highways and waterways in the first quarter (Q1) reached 254.6 billion yuan (39.35 billion U.S. dollars), up 7 percent year on year, the transport ministry said Tuesday.

    Of the investment, 228.9 billion yuan was in highways, a year-on-year increase of 8.5 percent.

    The growth rate in western regions hit 11.1 percent year on year, which was much higher than central and eastern China, Ministry of Transport (MOT) data showed.

    A total of 4.87 billion trips were made and 8.79 billion tonnes of freight were transported via railways, highways and waterways in Q1, MOT official Zhang Dawei said. The number of journeys was down 1.8 percent from the same period last year, and freight tonnage rose 2.1 percent year on year.

    In Q1, the cargo-handling capacity of major ports increased 1.7 percent year on year to 2.76 billion tonnes, and the container throughput increased 1.9 percent to 50 million standard units, Zhang said.

    Logistics business volume surged more than 50 percent in the first three months, he said, compared with the same period last year.

    Zhang expects the current momentum in freight transportation to remain throughout the first half of 2016 while passenger traffic growth will remain subdued as a result of industrial restructuring.

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    Russian PM orders state firms to spend 50 pct of profits on dividends

    Russian Prime Minister Dmitry Medvedev on Tuesday ordered state companies to spend 50 percent of their profits on dividend payouts in 2016, according to a document published on the government website.

    The measure is expected to boost federal budget revenues by 100 billion roubles ($1.52 billion), Medvedev told the lower chamber of Russia's parliament as he reported on the performance of his cabinet.

    The order concerns some of the country's largest companies, including natural gas giant Gazprom, diamond producer Alrosa, oil companies Bashneft and Zarubezhneft, as well as RusHydro, Sovkomflot, Transneft, Rosneftegaz, according to the document.
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    India's March trade deficit narrows, but exports plummet

    India's trade deficit narrowed for the third straight month in March to $5.07 billion, as imports shrank at a faster pace than exports, data showed on Monday.

    Although exports for the year ending March were the weakest since 2010/11, down 15.85 percent from a year ago, the narrowing trade gap showed that India - the world's No.3 crude importer - has been a net beneficiary of the collapse in oil prices.

    For the 2015/16 fiscal year that ended in March, the trade deficit stood at $118.5 billon, compared with $137.7 billon in the previous fiscal year.

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    Siemens may build gas-fired power plant in Germany

    Siemens cleared a regulatory hurdle on Monday in a bid to build a gas-fired power station in southern Germany, a rare event in a country where a drive for renewable energy has made many traditional sources of power unprofitable.

    It would be the first gas plant order in Germany in four years for Siemens, whose chief executive said last year he had resigned himself to never selling another gas turbine in his home country.

    Germany's cartel office has approved the plant in Leipheim, north east of Ulm in Bavaria, which would be built by Siemens and Stadtwerke Ulm, a utility in Baden Wuerttemberg. It still needs approval from European Union competition authorities.

    The gas-fired plant is designated as a reserve power plant for Bavaria where the neighbouring nuclear power station Gundremmingen will be switched off in two stages, 2017 for block B and 2021 for Gundremmingen C. Reserve power plants can earn more money, making a gas-fired option more commercially viable.

    A Siemens spokesman said the project was still awaiting approval from European cartel authorities. "We cannot yet give any further details."

    He also said that a firm order would only materialise after the consortium had been fully established.

    Bavaria currently gets a third of its power from renewable sources, including solar, hydroelectric, biomass and geothermal.

    But the state, like Germany as a whole, still needs some conventional energy capacity to guard against supply swings in a region that is home to carmakers BMW and Audi that are heavy energy users.

    Coal is usually chosen to fill this gap because it is cheaper than gas-fired power. Coal-fired power plants currently earn 7.70 euros per megawatt hour of 2017 baseload production sold ahead in the wholesale market, while those of gas-fired capacity lose 3.7 euros/MWh Thomson Reuters data shows.

    But analysts say that gas plants operating in the reserve market for power in Germany that can switch on quickly when there is a shortfall can earn extra money, making them commercially viable.

    The Welt am Sonntag newspaper had reported on Sunday that the job could be worth up to half a billion euros for Siemens ($565 million) for a 600 megawatt (MW) plant.
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    3D Printing arriving in aerospace in force now.

    That’s according to Terry Wohlers, an industry analyst and consultant who publishes an annual volume regarded by many as the most authoritative source of analysis for the additive-manufacturing industry. Last year, companies purchased 808 machines capable of building metal parts layer by layer, up from 550 in 2014 and 353 in 2013, according to Wohlers. Annual sales growth in the hundreds of units may seem small, but these machines cost hundreds of thousands to a million dollars each.

    GE has begun commercial production of this 3-D-printed fuel nozzle and eventually plans to produce 30,000 annually.

    Makers of orthopedic and dental implants were among the first to begin 3-D-printing metal products; they have been producing implants this way for a few years. But the entry of the aerospace industry has the potential to turn metal additive manufacturing into a much bigger business.

    Several 3-D-printed parts developed by GE, Airbus, and others are either ready for the market or close to it. In fact, GE is already using the technology to produce two complicated jet engine components—a fuel nozzle and an apparatus for housing temperature sensors—as well as parts for a turboprop engine. And companies are developing numerous additional parts for airplanes, satellites, and rockets behind the scenes.

    Industrial additive manufacturing generally involves an intense heat source, either a laser or an electron beam, that melts metal powders layer by layer according to computerized instructions, building up parts as the metal solidifies. The technology is especially useful for making complicated components in relatively small volume, because developing the tools to manufacture them can be very expensive.

    A container for a temperature sensor made by GE was the first 3-D-printed metal part to gain approval from the Federal Aviation Administration.

    The conventional version of GE’s 3-D-printed fuel nozzle is composed of 18 individual parts that must be welded together. The new version is just a single part, and it is 25 percent lighter, which will help increase fuel efficiency. There are 19 such nozzles in a new jet engine that GE is developing, for which the company has 10,000 orders, and the company plans to use the technology to make 30,000 of these nozzles annually.

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    Gold, Google and Good Luck!

    China’s economy expanded 1.1% in the first quarter of 2016 from the fourth quarter of last year, National Bureau of Statistics data showed, missing analysts forecasts.

    The slower-than-expected quarterly growth rate comes amid other signs the Chinese economy is stabilizing in the first quarter, including positive surprises from trade, inflation, output and credit.

    Analysts had expected quarterly growth of 1.5% for the first quarter, but the statistics bureau did not release quarterly figures when it issued annual figures on Friday.

    “The 1.1% growth rate clearly illustrates that China’s economy still faces downward pressures,” Zhou Hao, senior economist at Commerzbank, wrote in a research note on Monday.

    “If we calculate the seasonally adjusted GDP growth based on the qoq numbers, we find that there is a big gap (0.4 percent point) between headline GDP growth (non-seasonally adjusted) and the seasonally adjusted GDP growth. As economists, we always prefer the seasonally adjusted qoq numbers, which better tell the underlying growth momentum,” he added.

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    IMF Panel Calls for ‘More Forceful’ Policies to Boost Growth

    IMF Panel Calls for ‘More Forceful’ Policies to Boost Growth

    Global finance ministers and central bankers pledged to step up their efforts to support growth, as chances rise of a broader slowdown and risks including refugee crises and a potential U.K. exit from the European Union threaten the world economy.

    “Downside risks to the global economic outlook have increased since October, raising the possibility of a more generalized slowdown and a sudden pull-back of capital flows,” the International Monetary Fund’s top policy advisory committee said in a statement following a meeting on Saturday in Washington. To achieve strong global growth, “we will employ a more forceful and balanced policy mix,” the panel said.

    The statement reflects policy makers’ concern that expansion will slow, after the IMF this week downgraded its global outlook again, warning that a prolonged period of slow growth has left the world economy at risk of slipping into stagnation.

    Using all policy tools “is vital to stimulate actual and potential growth, enhance financial stability and avert deflation risks,” according to the communique from the panel, known as the International Monetary and Financial Committee. The panel advises the board of governors of the 189-member nation IMF.

    After a separate gathering at the IMF’s spring meetings in Washington, Group of 20 finance ministers and central bankerssaid on Friday that risks to the global recovery have stabilized even as threats to the outlook remain, including terrorism and the U.K.’s potential exit from the European Union.

    In nods to emerging markets, the IMFC said the fund will discuss the reporting of official reserves in Special Drawing Rights, the IMF reserve-currency unit of account that’s adding China’s yuan to its basket this year. In addition, the IMFC said the fund’s next review of voting shares should be completed by late 2017, and should increase the power of emerging market and developing countries.

    The latest governance change was approved in December by U.S. lawmakers. It gave more of a voice to emerging markets such as China and India in exchange for greater congressional oversight of the fund.

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    In crushing defeat, Brazil's Rousseff moves close to impeachment

    Brazil's leftist President Dilma Rousseff suffered a humiliating loss in a crucial impeachment vote in the lower house of Congress on Sunday and is almost certain to be forced from office months before the nation hosts the Olympics.

    Fireworks lit up the night sky in Brazil's megacities of Sao Paulo and Rio de Janeiro after the opposition comfortably surpassed the two-thirds majority needed to send Rousseff for trial in the Senate on charges of manipulating budget accounts.

    The floor of the lower house was a sea of Brazilian flags and pumping fists as dozens of lawmakers carried in their arms the deputy who cast the decisive 342nd vote, after three days of a marathon debate.

    The final tally was 367 votes cast in favor of impeachment, versus 137 against, and seven abstentions. Two lawmakers did not show up to vote.

    Brazilian financial markets were expected to open higher on Monday after the vote - a major step toward ending 13 years of the left-leaning Workers' Party rule in the world's ninth largest economy.

    If the Senate now votes by a simple majority in early May to proceed with the impeachment, as expected, Rousseff would be suspended from her post and be replaced by Vice President Michel Temer as acting president, pending her trial. Temer would serve out Rousseff's term until 2018 if she is found guilty.

    The impeachment battle, waged during Brazil's worst recession since the 1930s, has divided the country of 200 million people more deeply than at any time since the end of its military dictatorship in 1985.

    It has also sparked a bitter battle between the 68-year-old Rousseff and Temer, 75, that could destabilize any future government and plunge Brazil into months of uncertainty.

    Despite anger at rising unemployment, Rousseff's Workers Party can still rely on support among millions of working-class Brazilians, who credit its welfare programs with pulling their families out of poverty during the past decade.

    "The fight is going to continue now in the streets and in the federal Senate," said Jose Guimaraes, the leader of the Workers' Party in the lower house. "We lost because the coup-mongers were stronger."

    Opinion polls suggest more than 60 percent of Brazilians support impeaching Rousseff, Brazil's first female president, less than two years after she won reelection in 2014.

    While she has not been accused of corruption, Rousseff's government has been tainted by a vast graft scandal at state oil company Petrobras and by the economic recession.

    Hundreds of thousands of demonstrators from both sides took to the streets of towns and cities across the vast nation, in peaceful protests. Millions watched the congressional vote live on television in bars and restaurants, in their homes or on giant screens in the street, as the soccer-mad nation does for major football matches.
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    U.S. industrial output falls, signals weak first-quarter GDP growth

    U.S. industrial production fell more than expected in March as manufacturing and mining production decreased, the latest indication that economic growth braked sharply in the first quarter.

    Industrial output declined 0.6 percent last month after a downwardly revised 0.6 percent drop in February, the Federal Reserve said on Friday. Industrial production has fallen in six of the last seven months.

    Economists polled by Reuters had forecast industrialproduction slipping only 0.1 percent last month after a previously reported 0.5 percent drop in February.

    Industrial production fell at an annual rate of 2.2 percentin the first quarter after decreasing at a 3.3 percent pace in the fourth quarter. The report joined data on retail sales, business spending, trade and wholesale inventories in suggesting that economic growth slowed to crawl at the turn of the year.

    Growth estimates for the first quarter are as low as a 0.2 percent annualized rate. The economy grew at a 1.4 percent rate in the fourth quarter. But given a buoyant labor market, the ebb in growth is likely to be temporary.

    U.S. financial markets were little moved by the data.

    The industrial sector has been undermined by a slowingglobal economy and robust dollar, which have eroded demandfor U.S. manufactured goods. It is also being weighed down by lower oil prices that have undercut capital investment inthe energy sector, as well as an inventory correction.

    But there are signs the worst of the industrial sector downturn is over, with recent manufacturing surveys turning higher. In addition, the dollar's rally has fizzled and oil prices appear to be stabilizing.

    Last month, manufacturing output fell 0.3 percent, the biggest decline since February 2015, after slipping 0.1 percent in February. Manufacturing was dragged down by motor vehicle and parts production, which plunged 1.6 percent after rising 0.8 percent the prior month.

    For the first quarter, manufacturing output rose at a 0.6 percent rate. In March, there were also decreases in the output of electronic equipment, appliances and components.

    Mining production tumbled 2.9 percent as oil and gas welldrilling plummeted 8.5 percent after diving 15.8 percent in February. Last month's drop in mining output was the largest since September 2008, when output was curtailed because of hurricanes. Mining production has declined in each of the last seven months.

    A plunge in oil prices since June 2014 has hurt the profits of oil-field companies like Schlumberger (SLB.N) and Halliburton (HAL.N), leading to deep cuts in their capital spending budgets.

    Unseasonably warm weather in March hurt utilities production, which fell 1.2 percent after declining 3.6 percent in February.

    With output declining last month, industrial capacity use fell 0.5 percentage point to 74.8 percent, the lowest level since August 2010. Officials at the Fed tend to look at capacity use as a signal of how much "slack" remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.

    As The NY Fed notes:

    Business activity expanded for New York manufacturing firms for the first time in over a year, according to the April 2016 survey. After remaining in negative territory for seven months, the general business conditions index rose to a reading slightly above zero last month, and climbed nine more points to reach 9.6 in April. Thirty-one percent of respondents reported that conditions had improved over the month, while 22 percent reported that conditions had worsened. After a steep gain last month, the new orders index edged up two points to 11.1, pointing to an increase in orders. The shipments index edged lower but, at 10.2, still signaled a modest increase in shipments. The unfilled orders and delivery time indexes both came in close to zero. The inventories index was -4.8, indicating that inventory levels were slightly lower.

    The prices paid index rose sixteen points to 19.2, suggesting that input prices increased at a significantly faster pace than last month. The prices received index, up nine points to 2.9, showed a small increase in selling prices. The index for number of employees edged up to 2.0, indicating that employment levels remained fairly steady.
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    China deal may trigger knee-jerk metal sales, but little long-term impact

    China's bold deal to ditch its disputed export tax rebates on some niche aluminum and steel products could flood the saturated global market, as producers scramble to sell excess metal ahead of the changes, prolonging the industry's pain, traders said.

    While a rush to offload unwanted product may be a knee-jerk reaction and last a short time, any increase in shipments from the world's top producer would likely stir concerns about the world glut that has led to the industry's worst crisis in a generation.

    It would also hurt domestic and international prices, which are languishing at their lowest levels in years. The world's second-largest economy accounts for half of global steel and aluminum output.

    To ease trade friction with Washington, Beijing agreed on Thursday to scrap a program that has provided export subsidies of some $1 billion over three years to a range of sectors from aluminum to textiles.

    U.S. regulators gave few other details on the types of metal product or when the steps would take effect, but it was widely welcomed as a small step toward creating a more level playing field for metal producers across the globe.

    It could, for instance, do away with the country's 13-percent value-added tax rebate on semi-fabricated aluminum products that has spurred exports and complaints that China is exporting its excess capacity, hurting prices and damaging Western producers like Century Aluminum Co.

    While waiting for more details, aluminum traders in Asia said they would still sell excess material abroad, and may even pick up the pace of deals before any clampdown.

    "There's ... bound to be a flood of exports running up to the implementation. In aluminium and steel, there are enough stocks to feed an export boom," said Caroline Bain, senior commodities economist at Capital Economics in London.

    One source said the deal was more of a public relations stunt after congressional hearings this week with U.S. steel and aluminum companies including United States Steel Corp.

    That is because it does little to tackle complaints from the European and U.S. steel and aluminum makers that Beijing is propping up its domestic industries through indirect subsidies, like low-cost energy, interest-free loans and free land.

    "On the surface, it sounds like a big move. But I don't know if it's just another rule that will be ignored," said Lloyd O'Carroll, senior analyst with CRU Group in Richmond, Virginia.

    The tax reform was limited in scope too - specialty steel products, like stainless steel and super alloys used by the aerospace and automotive sectors, only account for about 2 percent of the 1.6 billion-tonne global steel market.

    While the 40 million-tonne aluminum market is smaller, the effect of the policy change is potentially greater as it could include a broader range of products from plate and sheet used by the automotive sector to foil.
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    Yen, and more importantly Yuan

    Japan’s Finance Minister Taro Aso on Friday threatened “necessary” action against a rising yen despite U.S. Treasury Secretary Jacob Lew arguing there was no justification for Tokyo to intervene in the country’s currency.

    The public clash between the two allies over currency policy underscores growing worries in the U.S. that Japan might resort to exchange-rate depreciation to revive the world’s third-largest economy.

    Mr. Aso, speaking after a meeting of finance officials from the Group of 20 largest economies, said countries can intervene in their currencies if there is “excess volatility” or “disorderly” movement in exchange rates. Those are terms agreed to by the G-20 and the smaller Group of Seven industrialized economies that can justify currency intervention.

    Japan and other global heavyweights have said they won’t intervene in markets unless strong exchange-rate movements threaten to jeopardize their economies.

    “Taking necessary measures against such exchange-rate movements would conform to the G-20 agreement,” Mr. Aso said told reporters. Earlier this week, Japanese central bank Gov. Haruhiko Kuroda said the yen’s recent rise has been “excessive,” his strongest language yet on the currency’s recent moves.

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    Oil and Gas

    China May Raise Fuel Prices for First Time in Six Months on Oil

    China may increase local fuel prices for the first time in six months following a rally in oil prices.

    The nation may raise gasoline and diesel retail rates by 175 yuan ($27) a metric ton on April 26, ICIS China, a Shanghai-based commodity researcher, said in an e-mailed report. Brent oil, the international benchmark, has surged more than 60 percent from a 12-year low in January. China last increased fuel prices in October.

    The Chinese government decided in January not to adjust fuel prices when oil falls below $40 a barrel to support oil companies and curb pollution. The policy resulted in refining margin for Chinese plants increasing 68 percent to $16 in the first quarter of this year from the previous 12 months, according to ICIS China. Exports slipped in the first two months as it became profitable to sell oil products at home.

    “If oil can stay above $40 a barrel, China will return to its normal fuel-adjustment cycles, which is every 10 working days,” Lin Jiaxin, an analyst with ICIS China, said by phone from Guangzhou. “Refiners’ processing margins will probably fall from the first quarter’s high.”

    China’s diesel exports surged to a record 1.25 million tons in March as the oil rally boosted overseas fuel prices. Once China resumes raising prices, domestic and international rates will equalize and refiners’ exports will be driven by their stockpile levels, Lin said.

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    Schlumberger CEO Sees `Full-Scale Cash Crisis' in Oil Industry

    Schlumberger Ltd. cut another 2,000 jobs in the first quarter as the world’s largest provider of oilfield services sees the industry in an unprecedented downturn.

    The global headcount dropped to 93,000 at the end of the first quarter with the reduction, Joao Felix, a spokesman for the company, said by e-mail. More than a quarter of Schlumberger’s workforce, or roughly 36,000, has now been cleaved off since the worst crude-market crash in a generation began in late 2014.

    The decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis,” Chairman and Chief Executive Officer Paal Kibsgaard said in an earnings report Thursday. "This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity."

    The oilfield service providers were the first to feel the pain when crude prices began falling in the middle of 2014. Of the more than 250,000 jobs cut globally in the energy industry during the downturn, the service providers continue to be the most heavily impacted after customers slashed more than $100 billion in spending last year, with promises of more cuts to come.

    Schlumberger’s profit fell in the first quarter as the company, which helps explorers find pockets of oil underground and drill for it, adjusts to shrinking margins in North America as customers scale back work. Customers are slashing spending by as much as 50 percent in the U.S. and Canada.

    Net income declined to $501 million, or 40 cents a share, from $975 million, or 76 cents, a year earlier, the Houston- and Paris-based company said in a statement Thursday. The profit was 1 cent more than the 39-cent average of 37 analysts’ estimates compiled by Bloomberg.

    "It’s a weak beat mainly because they guided estimates down," Rob Desai, an analyst at Edward Jones in St. Louis, who rates the shares a buy and owns none, said in a phone interview. "North America came in weaker than we expected."

    Challenges from the collapse in crude prices can be seen in the world’s largest hydraulic fracturing market, North America, where Schlumberger reported a loss of $10 million, before taxes. Elsewhere, the company announced earlier this month plans to cut back activity in Venezuela, holder of the biggest oil reserves of any country, due to unpaid bills.

    The company was expected to generate a North America operating profit margin at break-even, according to Capital One Southcoast. That’s better than smaller competitors reporting margins as low as negative 30 percent.

    "Break-even is the new up," Luke Lemoine, an analyst at Capital One in New Orleans who rates the shares the equivalent of a buy and owns none, said in a phone interview before the results were released. "In this environment, it’s hard to defend the 5 percent margins in North America they had talked about."

    The second quarter is expected to get worse for Schlumberger, with North American margins dipping as much as 4 percent into the red, Lemoine said.

    "A lot of it is carrying excess costs," he said. "Service companies have cut personnel and facilities, but they’re unwilling to cut to the bone. So, they are maintaining some slack in capacity."

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    Santos quarterly revenue steady as LNG output ramps up

    Australia's Santos Ltd reported a 1 percent rise in first quarter revenue as it stepped up coal seam gas sales to its Gladstone liquefied natural gas (LNG) plant, offsetting a collapse in oil and gas prices.

    Sales volumes in the March quarter rocketed 40 percent to 21.3 million barrels of oil equivalent (mmboe).

    Revenue inched up to A$835 million from A$825 million in the period a year earlier, roughly in line with a forecast from RBC, as its average realised price fell 28 percent.

    Train 1 at Gladstone LNG, which shipped its first cargo last October, produced at an annual rate of 3.8 million tonnes a year in the March quarter, and Santos said it expects to begin producing LNG from the second unit at Gladstone this quarter.

    Santos' chief executive, Kevin Gallagher, who took the reins in February, days after the company's shares hit a 23-year low, said he remained focused on how to position the company to withstand weak oil prices.

    "We will continue to look for opportunities to lift productivity and reduce costs to drive long-term value for shareholders," he said in a statement.

    The company reaffirmed it expects to sell between 76 and 83 mmboe this year.
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    Norway's Arctic a bright prospect in crisis-hit oil sector

    While the oil industry continues to cut jobs, projects and costs amid low crude prices, one region is making a surprise comeback after years of declining activity, company executives and officials say: the Norwegian Arctic.

    The search for oil and gas in mature offshore areas in the North Sea is being axed this year due to tighter budgets, but the number of exploration wells in the Norwegian part of the Barents Sea is increasing to 10 in 2016 from seven last year.

    Adding to this, the government will hand out new drilling permits by the end of the second quarter, in an oil licensing round set to open unexplored acreage in the Barents Sea, near Norway's offshore border with Russia.

    Oil major Statoil said it was seeking a rebound in exploration activity offshore Norway in the next few years with a focus on the Arctic..

    "We're looking to the 23rd round to trigger an uptick in activity for us," Statoil's head of exploration for Britain and Norway, Jez Averty, told Reuters on the sidelines of an industry conference, referring to the government's ongoing process.

    The head of Norway's Petroleum Directorate, Bente Nyland, said: "There have been both downturns and upturns in the Barents Sea, but now we are definitely on an upturn."

    After years of delay, Italy's Eni has finally begun production at Goliat, the first oil-producing field in the region. And this week Statoil said it would be able to cut development costs further at its Johan Castberg oilfield, a key project.

    "I am very optimistic for the Barents Sea ... When Statoil announced their work on Castberg and said they have reduced the cost of the development to such low levels, it was a huge signal to the rest of the industry," the deputy leader of trade union Industri Energi, Frode Alvheim, told Reuters.

    Swedish oil firm Lundin Petroleum and Austria's OMV reported progress in the development of two significant oil discoveries, the Alta/Gotha and Wisting.

    Challenges remain, however. Higher costs and a lack of infrastructure to transport oil and gas from the fields are a big hurdle, so oil firms are more reliant on collaboration to develop projects in tandem.

    And even though the Petroleum Directorate believes half of Norway's undiscovered resources lie beneath the Barents seabed, the geological uncertainty is higher and knowledge of the acreage lower than in mature areas.

    Shell withdrew its application from the 23rd licensing round earlier this month, while other majors such as ExxonMobil, Eni and Total did not apply, partly because they are searching for larger discoveries in other parts of the world.
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    Repsol to sell LPG business in Peru and Ecuador to Abastible for $335 million

    Repsol has entered into an agreement with the Chilean company Abastible to sell its LPG (Liquefied Petroleum Gas) businesses in Peru, for 980 million Peruvian soles, and in Ecuador, for 33 million dollars, totalling 335 million dollars at the current dollar/sol exchange rate, subject to the usual adjustments for these types of transactions. Both transactions are expected to close in upcoming months, once the necessary administrative authorizations are granted. The capital gain generated will be determined when the transactions are completed and the dollar/sol exchange rate that will be applied is fixed.

    The richness and diversity of Repsol's asset portfolio, especially following the integration of Talisman, has allowed the company to find more portfolio management opportunities, including in the sale of assets considered non?strategic. In recent months the company has made divestments worth close to the 3.1 billion euros outlined for the first two years of the 2016/2020 Strategic Plan.

    After this divestment, Repsol maintains its hydrocarbon exploration and production activities in Peru and Ecuador. The company also continues to operate a refinery and 410 service stations in Peru.
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    Global refining margins help lift crude oil prices

    Global refining margins have improved significantly in recent weeks which should support strong demand for crude and lend some strength to both spot prices and spreads in the short term.

    While diesel markets remain oversupplied and margins poor, gasoline consumption is booming and margins have improved sharply, improving economics for many refineries.

    There is no straightforward way to estimate the profitability of turning crude into products in real time since every refinery processes a different slate of crudes and produces a different slate of products.

    Even for the same refinery, crude and product slates can vary significantly over short periods as the refinery's planning department takes advantage of short-term opportunities in the market place.

    But the multitude of indicators on refinery margins all point to an improvement in the United States and globally since the lows hit in February, which is helping support crude oil prices.

    The most generic refining indicators compare the cost of acquiring a benchmark crude and processing it into major products such as gasoline and diesel.

    The 3-2-1 crack spread compares the acquisition cost of three barrels of crude with the selling price of two barrels of gasoline and one barrel of diesel.

    Other popular indicators are the 5-3-2 crack (five barrels of crude, three barrels of gasoline and two barrels of diesel) and the 2-1-1 crack (two crude, one gasoline and one diesel).

    The 3-2-1 crack has improved from a low of around $12 per barrel in early February to around $18 so far in April, based on futures prices for U.S. light sweet crude, gasoline and diesel.

    There have been broadly comparable improvements in the 5-3-2 and 2-1-1 crack spreads over the same period (

    While refining margins for making diesel and other distillates have continued to deteriorate this has been more than offset by a sharp improvement in gasoline prices and margins.

    Generic crack spreads do not capture all the complexity of turning crude into fuels, lubricants, asphalt and petrochemical feedstocks.

    But many refining companies publish their own indicators for refineries in their portfolio and they all show margins improving significantly from the lows in February.

    Indicators published by the refiners capture much more of the complexity in the refining process though still not all of it.

    Valero, the largest independent refiner in the United States, reports indicative margins for its refineries across North America, which is a good proxy for the health of the U.S. and Canadian refining sector.

    Valero's indicator for refineries along the U.S. Gulf Coast has improved from just $11.50 in February to over $17 so far in April.

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    Sinopec's second LNG project at Beihai begins commercial operations

    State-owned China Petroleum and Chemical Corp., or Sinopec, received the first commercial cargo at its newly commissioned Beihai LNG terminal in Guangxi province, the company said in a statement Tuesday.

    The Methane Spirit, loaded with a 160,000 cubic meter cargo from the Australia Pacific LNG project, docked at the terminal on April 19, marking the official start of commercial operations of the first phase of the project.

    In the first phase, the plant has a nameplate capacity of 3 million mt/year of LNG that can meet the demand of 22 million households in Guangxi and the western part of the neighboring Guangdong province.

    This phase has been delayed by close to a year. The plant had been scheduled to start commercial operations in mid-2015.

    Sinopec had earlier stated that the second phase of the project would see the terminal capacity increase to 9 million mt/year.

    However, Sinopec has not stated a timeline for the second phase. There were no replies to requests for clarification on the status of phase 2 of the project.

    Most of the supply for the terminal will come from Australia, where Sinopec has already signed a 20-year sale and purchase agreement with APLNG for 7.6 million mt/year of LNG.

    As the 3 million mt/year terminal import capacity is currently well below the contracted volumes, Sinopec recently sold some of its term volumes to other buyers in the spot market.

    In the future, some contracted volumes would go to Sinopec's existing LNG terminal in Qingdao, but given the size of the contract, more volumes would most likely be sold, a source close to the company said.

    The arrival of the first commercial cargo comes two weeks after the ship delivering the commissioning cargo to the facility left.

    The BW Pavilion Vanda, which also carried a cargo from the APLNG project, arrived at the Beihai plant on March 28, and left on April 5, cFlow Platts ship-tracking software, showed.

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    Kinder Morgan cuts 2016 spending, lowers earnings guidance

    Kinder Morgan, the nation’s largest natural gas pipeline operator in the U.S., kicked off the first quarter earnings season Wednesday by scaling back its expectations for 2016.

    The Houston company said it expected its 2016 adjusted, pretax earnings to be about 3 percent less than the $7.5 billion it had previously budgeted. The forecast for distributable cash flow, an industry-standard metric that approximates how much cash the company has available to pay out or reinvest, sank by about 4 percent below previous annual forecast of $4.7 billion.

    Net income was $314 million for the quarter, down 25 percent from $419 million in the same period last year.

    In addition, the company cut its backlog of projects expected to be built in the next five years from $18.2 billion to $14.1 billion. Kinder Morgan cut out the Northeast Energy Direct Market project due to insufficient interest from customers and nixed the Palmetto Pipeline after it was blocked by regulators.

    In a statement issued Wednesday announcing the results, Kinder Morgan CEO Steve Kean said fewer projects and less spending would help the company focus on strengthening its financial footing.

    “We continue to focus on high-grading our growth project backlog to allocate capital to the highest return opportunities by reducing spend, improving returns and selectively joint venturing projects where appropriate,” Kean said.

    Kinder Morgan’s first-quarter 2016 distributable cash flow, an industry-standard metric that approximates how much cash the company has available to pay out or reinvest, rose to $1.272 billion from $1.24 billion in the same period last year. In January, executives said they expected to see about $1.2 billion in distributable cash flow.

    Net income was $314 million for the quarter, compared to $419 million in the same period last year.

    Much of that cash will stay within Kinder Morgan’s business, thanks to a 75 percent dividend cut the company the company instituted in December.

    Before the cut, Kinder Morgan had paid out almost all of the cash its businesses generated and borrowed to fund expenses such as new pipelines. But low oil prices have roiled credit and equity markets, and by late 2015 lenders and stock traders wanted a higher premium for opening their check books. The dividend cut allowed the company to bypass those markets and fund growth with its own cash. Executives said that self-funding growth was a better long-term move than using cash to pay a dividend.

    In the first quarter alone, the company said it will have $954 million in cash after paying out its 12.5 cent quarterly dividend.

    “We do not need to access the capital markets to fund growth projects in 2016,” said Richard D. Kinder, executive chairman and former CEO. “This cash flow in excess of our dividends insulates us from challenging capital markets and significantly enhances our credit profile.”
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    China March diesel exports jump 316.5 pct on year -customs

    China's diesel exports soared 316.5 percent in March from a year earlier to 1.25 million tonnes, customs data showed on Thursday.

    Gasoline exports rose 9.1 percent in March from a year earlier to 670,000 tonnes, while kerosene exports fell 7.4 percent on year to 1.03 million tonnes, the data showed.
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    Oil steadies as IEA expects biggest non-OPEC output fall in 25 years

    Crude prices steadied after earlier declines on Thursday as the International Energy Agency (IEA) said that 2016 would see the biggest fall in non-OPEC production in a generation, helping rebalance a market that has been dogged by oversupply.

    The IEA's chief Fatih Birol said on Thursday that low oil prices had cut investment by about 40 percent in the past two years, with sharp falls in the United States, Canada, Latin America and Russia.

    "This year, we are expecting the biggest decline in non-OPEC oil supply in the last 25 years, almost 700,000 barrels per day. At the same time, global demand growth is in a hectic pace, led by India, China and other emerging countries," he told reporters in Tokyo.

    Despite the IEA comments, statements by Russia and Iran on Wednesday weighed on the market. Russia's energy minister said it might push oil production to historic highs of over 12 million barrels per day (bpd) just days after a global deal to freeze output levels collapsed and Saudi Arabia threatened to flood markets with more crude.

    Meanwhile, Iran, determined to regain market share following the lifting of sanctions last January, reiterated its intention to reach output of 4 million bpd as soon as possible.

    With major producers in the Middle East and Russia seemingly racing to raise production, much will depend on U.S. drillers and demand to determine how long the global glut lasts, which sees between 1 million and 2 million barrels of crude pumped every day in excess of demand.

    "Any hope of market re-balancing from the current surplus in supply (lies) on the predicted decline in U.S. oil production," French bank BNP Paribas said.

    "The U.S. accounts for the bulk of non-OPEC's 2016 oil supply contraction of 700,000 barrels per day forecast. If the decline in the U.S. oil supply proves insufficient to tighten balances, then ... the oil price will remain low," it added.

    In refined products, China saw exports of diesel and gasoline soar, spilling surplus fuel into a market that is already well supplied, and threatening to further cut Asian benchmark refining margins that have halved since the beginning of the year.

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    China's March piped natural gas imports up 37.7 pct y/y - customs

    China's imports of piped natural gas jumped 37.7 percent year on year to 2.72 million tonnes in March, the country's General Administration of Customs said on Thursday.

    March imports of liquefied natural gas (LNG) grew 27.4 percent on year to 1.7 million tonnes.
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    Summary of Weekly Petroleum Data for the Week Ending April 15, 2016

    U.S. crude oil refinery inputs averaged 16.1 million barrels per day during the week ending April 15, 2016, 163,000 barrels per day more than the previous week’s average. Refineries operated at 89.4% of their operable capacity last week. Gasoline production increased last week, averaging over 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.

    U.S. crude oil imports averaged 8.2 million barrels per day last week, up by 247,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.8 million barrels per day, 2.1% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 791,000 barrels per day. Distillate fuel imports averaged 90,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.1 million barrels from the previous week. At 538.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 0.1 million barrels last week, but are well above the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 3.6 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.2 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 0.4 million barrels last week.

    Total products supplied over the last four-week period averaged 19.9 million barrels per day, up by 3.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 3.9% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels per day over the last four weeks, down by 0.7% from the same period last year. Jet fuel product supplied is down 2.0% compared to the same four-week period last year.

    Cushing inventories fell 300,000 bbl last week.
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    US Oil production falls 24,000 bbl day in latest week

                                                Last Week    Week Before    Last year

    Domestic Production '000...... 8,953              8,977              9,366
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    Russia Warns Of Production Increase:

    Perhaps upset at the weekend's development, Russia has decided to rattle the global crude complex cage. Amid hopes of a freeze,Russia's energy minister Alexander Novak has reversed course and stated that Russia could "in theory" increase oil output and "was never ready to cut production." It appears things are rapidly breaking down between Russia and The Kingdom - which perhaps explains Obama's rapidly arranged trip to kiss the ring in Riyadh.

    Russia’s Deputy Prime Minister Arkady:

    "The policy of certain countries regarding diversification of energy sources aimed at supporting local production is sometimes implemented inefficiently as it creates extra costs for consumers and changes the oil and gas market balance. From our viewpoint, the situation is not transparent enough as not the whole information is provided to consumers," he said.

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    Oil output down for U.S. shale company Sanchez

    U.S. inland oil player Sanchez Energy Corp. said Wednesday its average daily oil production volume was down nearly 10 percent from last year.

    Total production of oil, natural gas and other liquids during the first quarter of the year was 56,500 barrels of oil equivalent per day, which Sanchez said represented a 25 percent increase from first quarter 2015. Output is divided evenly between the three categories, and all of the gains came from gas and other liquids.

    For oil, the company said it produced a total of 1.6 million barrels during the first quarter of the year, an 8 percent decline from the previous quarter and a 9 percent decline year-on-year.

    A short-term market report from the U.S. Energy Information Administration finds production will decline in most of the Lower 48 states and Alaska because of the pressure from lower crude oil prices. Total U.S. crude oil production declined from the 9.1 million bpd expected during the first quarter of the year to an average 7.9 million bpd by third quarter 2017.

    CEO Tony Sanchez said the results showed the company was able to perform well under the pressure from lower crude oil prices, despite the drop in oil production.

    "With these results, we believe we are now drilling and completing wells at some of the lowest cost levels reported in unconventional oil and gas development," he said in a statement.

    Sanchez in January announced plans to cut spending by about $50 million. The company entered 2015 with plans to cut spending by about 60 percent compared with fourth quarter 2014.

    Strong production trends in the United States and weakened global demand pushed crude oil prices down from highs about $100 per barrel in mid-2014, leading to a sustained level at around $40 per barrel for much of the latter half of first quarter 2016. That's left companies with little spare capital to invest in exploration and production.

    Much of the focus for Sanchez is in the Catarina section of the Eagle Ford shale reserve area in Texas. The company said drilling costs at the Catarina shale "continue to trend downward," with some wells running at about 9 percent below the field's average.
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    Devon Energy Announces Sale of Non-Core Mississippian Assets

    Devon Energy Corp. announced today it has entered into a definitive agreement to sell its non-core Mississippian assets in northern Oklahoma to White Star Petroleum, LLC for $200 million. The transaction is subject to customary terms and conditions and is expected to close in the second quarter of 2016 with an effective date of Jan. 1, 2016.

    “This is another important step in executing on our plan to divest $2 billion to $3 billion of non-core assets across our portfolio during 2016”

    “This is another important step in executing on our plan to divest $2 billion to $3 billion of non-core assets across our portfolio during 2016,” said Dave Hager, president and CEO. “Proceeds will be used to further strengthen our investment-grade balance sheet. Additionally, this timely transaction accelerates Devon’s efforts to focus exclusively on its best-in-class resource plays in onshore North America.”

    Net production from the Mississippian assets averaged 12,800 oil-equivalent barrels (Boe) per day in the first quarter of 2016, of which approximately 30 percent was oil. At Dec. 31, 2015, proved reserves associated with these properties amounted to 11 million Boe. Field-level cash flow accompanying these assets, which excludes overhead costs, totaled $8 million in the first quarter.

    The divestiture process for the Company’s remaining non-core assets is ongoing. Devon is marketing its 50 percent interest in the Access Pipeline in Canada and anticipates an announcement in the first half of 2016. Efforts to monetize remaining upstream assets in the U.S. are also progressing. Data rooms for upstream assets have been open since early March and bids are expected in the second quarter. Overall, Devon remains on track to complete its $2 billion to $3 billion of non-core divestitures by year end.
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    Russian oil CEO: We won't do deals with OPEC

    A top Russian oil executive may just have killed off any lingering talk of an agreement among producing countries to freeze output.

    The world's top exporters, including Russia, failed to agree a production freeze at talks on Sunday, but said they would continue to work together to find a way to support prices.

    Whatever happens now, there's very little chance of Russia -- the world's second biggest oil producer after the U.S. -- ever agreeing to restrain output, said Lukoil CEO Vagit Alekperov.

    Asked whether Russia and OPEC could eventually reach a deal, Alekperov told CNN: "I don't think so, despite the fact that work on so called coordination of our activities is underway."

    He said Russia wouldn't "integrate" with OPEC, noting that his country had maintained its distance from the cartel even during the Soviet era.

    Lukoil is Russia's second biggest oil company after Rosneft. It claims to produce around 2% of the world's crude oil.

    Alekperov said Lukoil and other Russian oil companies have adjusted to low prices and are able to "earn money to invest and money for shareholders."

    Related: Oil crisis is hitting Russia hard

    Alekperov, who owns 23% of Lukoil, said he believed oil prices bottomed out earlier this year and will now rebound.

    "What we're seeing today ... indicates that we're coming to a period of stability of prices and a trend towards higher oil prices," he said.

    Alekperov also downplayed the Russian government's claim it could increase production in response to the failure of the Doha talks. He said most of Russia's oil reserves are in mature oil fields.

    "You need new oil fields to boost the production in new territories," he said. "They're in the Arctic of course, the Far East, the deep waters of the Caspian it's hard to talk today about getting these territories producing soon, because they require colossal spending."

    Investment in Russia's oil and gas industry has been held back by international sanctions, introduced after Russia seized Crimea from Ukraine in 2014.

    Alekperov added that he expects prices to reach $50 per barrel by the the end of this year, or early 2017.
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    Cheniere ships US LNG to Europe

    Cheniere’s Sabine Pass LNG export terminal in Louisiana has shipped its sixth commissioning cargo to Europe.

    As reported by LNG World News, the sixth cargo is being carried onboard Teekay’s first MEGI-powered LNG carrier, Creole Spirit. The 174,000 cbm capacity Creole Spirit left the Sabine Pass liquefaction and export facility on April 15.

    The vessel will deliver the chilled fuel to Portugal that imports LNG via the REN-operated terminal in the Port of Sines. Creole Spirit is expected to dock at the Sines LNG terminal on April 26, shipping data by the Port of Sines showed on Wednesday.

    Houston-based Cheniere has not responded to an email by LNG World News seeking more information on the matter, by the time this article was published.

    Cheniere started exporting LNG from Sabine Pass in February, a major milestone in global LNG trade as the U.S. is set to become a net exporter of domestically sourced shale gas.

    However, this will not be the first shipment of U.S. shale gas to Europe as the Swiss-based Ineos said in March it had delivered the first-ever cargo of shale gas-sourced ethane to Europe.

    Europe will be the third continent to receive LNG export volumes from Cheniere’s Sabine Pass plant after South America and Asia. Sabine Pass commissioning cargoes have been shipped to Brazil, Argentina and India.

    Sabine Pass is expected to load up to eight commissioning cargoes as part of its start-up process, after which it will start to operate commercially.

    After the departure of Creole Spirit, Genscape, that has infrared cameras pointed at Sabine Pass, estimates Sabine’s LNG storage level to be at “14.3 Bcf, accounting for a 10% fuel use for the compressors“.

    “The BW GDF Suez Brussels is next up to take a cargo from Sabine, expected on April 24, awaiting in the Gulf of Mexico,” the analytics firm said in a note on Monday.

    Worth mentioning, the U.S. FERC has on Monday granted Cheniere’s request to introduce feed gas to Sabine Pass LNG’s Train 2 for commissioning.

    The company plans to construct over time up to six liquefaction trains, which are in various stages of development. Each train is expected to have a nominal production capacity of about 4.5 mtpa of LNG.
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    Woodside Petroleum sales slashed by price rout

    Woodside Petroleum has started on engineering work to bring gas held by US player Hess Corporation off Western Australia into the North West Shelf venture, as one of several smaller projects it is pursuing after dropping the $US40 billion-plus Browse floating LNG project last month.

    The progress on the Equus project with Hess, envisaged under an agreement struck by the North West Shelf venture in late 2014, came as Woodside reported a 30.3 per cent drop in sales for the first quarter as the impact of lower oil and LNG prices hit home.

    Sales for the first three months of 2016 fell to $US982 million ($1.3 billion) from just over $US1.4 billion in the year-earlier period, despite an 8.7 per cent rise in production to 23.7 million barrels of oil equivalent.

    Woodside shares dropped 1.6 per cent, markedly underperforming the broader energy index, which gained 3.8 per cent on an uptick in crude oil prices overnight on Tuesday Australian time.

    But the sales figures beat analysts' expectations, with several pointing to a less severe decline in LNG prices than had been feared due to price floors in some long-term sales contracts.

    JPMorgan analyst Mark Busuttil described the quarter as a "strong" one, and said Woodside could beat its full-year output guidance. He also cited the better-than-expected LNG prices, which dropped only 10 per cent at the North West Shelf venture and 2 per cent at Pluto, compared with a 20 per cent drop in the oil benchmark.

    But he said the risk remained Woodside may have to accept lower prices when long-term contracts are renegotiated in the near future.

    Chief executive Peter Coleman, who will face shareholders at the annual general meeting in Perth on Thursday, said the company was "progressing well" with its low-cost, high-value growth strategy.

    "We are taking advantage of market conditions and applying latest technology to reduce life-cycle costs, further enhancing our position as a low-cost operator," Mr Coleman said.

    Dropping the Browse floating LNG project has left Woodside short of large growth projects, but Mr Coleman has been pointing to more-modest opportunities.

    Last week, he said Woodside was close to a final investment decision on its $US2 billion-plus Greater Enfield oil project off Western Australia, and chief operating officer Mike Utsler signalled plans for early production from recent gas discoveries off Myanmar.

    In Wednesday's quarterly report, Woodside also gave a 2017 date for a final investment decision on the Equus project, which Hess had previously indicated could cost $US6 billion for the upstream development of its fields in the Carnarvon Basin.

    Meanwhile the Lambert Deep gas project at the North West Shelf is set for a final investment decision this December half, although projects are intended to keep the venture's gas plants full rather than provide new growth.

    "Organic growth for the company remains limited," said Bernstein Research analyst Neil Beveridge, while agreeing with the decision to put Browse on hold.

    Woodside reiterated it was still committed to "the earliest commercial development" of Browse gas, with floating LNG still its preferred solution.

    Production volumes slid 4.8 per cent from the December quarter, due to maintenance work at NW Shelf oil and waning flows from older projects.

    The Balnaves oil venture, which Woodside acquired only last year as part of its $US3.75 billion deal with Apache Corporation, has had a disappointingly rapid decline and ceased production on March 20.

    However, Woodside's Pluto LNG venture in Western Australia had a good quarter, producing about 12 per cent beyond its expected capacity. The Kitimat gas venture in Canada, also acquired from Apache, produced more gas than expected into the domestic market, although the LNG export part of the project is still widely seen as a long-dated option dependent on higher prices.

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    FERC allows feed gas for Sabine Pass Train 2

    The United States federal Energy Regulatory Commission on Monday granted Cheniere’s request to introduce feed gas to Sabine Pass LNG facility’s Train 2 for commissioning.

    Cheniere Energy requested authorization to introduce feed gas and refrigerants within the areas identified as Phases 3 – 5, which was granted in March, and then added a request for authorization to introduce feed gas and refrigerants to Train 2, including the heavies removal unit (HRU).

    However, FERC did not reveal in its order the exact areas into which feed gas can be introduced to.

    To remind, Sabine Pass export facility in Louisiana started producing LNG from its Train 1 in February.

    The first cargo from the facility departed on February 24 and was later delivered to Petrobras’ Guanabara Bay LNG terminal in Brazil.

    Cheniere is building liquefaction and export facilities at its existing import terminal located along the Sabine Pass River on the border between Texas and Louisiana.

    The company plans to construct over time up to six liquefaction trains, which are in various stages of development. Each train is expected to have a nominal production capacity of about 4.5 mtpa of LNG.
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    US oil drillers seek limits on crude imports

    Oil drilling companies and royalty owners from the Texas Panhandle to New Mexico’s stretch of the Permian Basin are embarking on a grass-roots campaign to limit foreign oil imports, salvaging what they say is a major sector of the U.S. economy.

    “American oil is competing against a cartel of government operators which has a stated initiative of driving an American industry out of business,” said Tom Cambridge, one of the Panhandle producers leading the campaign.

    The grass-roots movement is pushing for the next president of the United States to issue a proclamation setting quotas for imports — something that hasn’t been done in more than four decades.

    “It’s not that this is the first time but this is a more concerted, deliberate effort and I think it’s gaining ground,” said John Yates Jr., a member of a well-known family that is a leader in the industry and has over the last century developed some of New Mexico’s largest and most significant oilfields.

    Under the plan unveiled by the Panhandle Producers and Royalty Owners Association and other supporters, import quotas could be imposed within the next administration’s first 90 days in office. Canadian and Mexican oil would be exempt.

    Quotas on heavy crude oil would be phased in and imports would eventually be limited to around 10 percent of total demand.

    Supporters say they’re drawing a line in the sand after more than a dozen oil-rich nations failed to agree during a recent meeting in Saudi Arabia to freeze production. They blame Middle East producers for flooding the market and fueling the price war as a means to stifle domestic production.

    Oil fell in the past two years from above $100 a barrel to touch 12-year lows under $30 a barrel earlier this year, and U.S. production has dropped by as much as 700,000 barrels a day and the number of rigs in the field has sunk to historic lows.

    By 2017, crude oil production is forecast to average around 8 million barrels per day, nearly 1.5 million less than in 2015, according to the U.S. Energy Information Agency.

    Oilfield equipment along one of the two-lane highways that link West Texas and southeastern New Mexico sits idle in company yards, and local governments and schools are feeling the pinch as severance taxes and royalties dwindle.

    “Service companies, restaurants, real estate, the people building motels and hotels — there are a lot of impacts,” said Yates told the Associated Press.

    Daniel Fine with the Center for Energy Policy at New Mexico Tech has been commissioned by the quota supporters to bring the idea before lawmakers and other elected leaders.

    “The idea is to support domestic energy sources against import reliance and the risks that come with that,” said Fine, who is also an energy policy adviser to Gov. Susana Martinez’s administration and a former MIT research associate.

    The effort launched this week with forums in Amarillo, Texas, and Artesia, New Mexico.
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    Kuwait oil workers call off strike, return to work

    The Kuwait Oil Workers Union on Wednesday called off a "total strike" and decided to return to work, hours after a fresh appeal by the acting oil minister.

    "In respect for the emir and in loyalty to him... we have decided to cancel the total strike," an official statement by the union said, ending action that had given support to oil prices.

    The statement said workers would go back to work at 0400 GMT.

    "We trust the emir... for the protection of the rights of oil workers," said the union statement, posted on its official Twitter account.

    The decision came only hours after the union leaders told a press conference that they would continue their strike, having rejected all appeals.

    The union leaders insisted that they would end the strike only after all their demands were met in full including the scrapping of plans to cut their wages and benefits.

    The union said in the new statement that the strike was "extremely successful" and conveyed the workers' message to authorities about their rights.

    It also warned oil authorities of taking any action toward the workers who stopped work.

    The strike, which began on Sunday, slashed OPEC members' crude and natural gas production by more than half.

    Kuwait's crude production dropped from 3.0 million barrels per day to just 1.5 million bpd and refining output dived to 520,000 bpd from 930,000 bpd.

    The workers' demands included abolishing decisions by authorities to cut some incentives in the face of falling oil prices and excluding the oil sector from a new payroll scheme for public servants.

    Acting oil minister Anas Al Saleh called on workers in a television interview Tuesday night to return to work and start negotiations with authorities.

    "We cannot sit on the negotiations table while the strike was still going. Return to work and come for negotiations," Saleh told private Al Rai satellite television.

    Saleh, who is also the finance minister, said that authorities have not yet implemented any decision regarding the oil workers' pay.

    Oil prices ended a four-day losing streak Tuesday as sharply curtailed production in Kuwait due to the strike spurred hopes for an easing of the global crude glut.
    US benchmark West Texas Intermediate for delivery in May jumped $1.30 (3.3 per cent) to $41.08 a barrel on the New York Mercantile Exchange.

    In London, European benchmark Brent North Sea crude for June delivery finished at $44.03 a barrel, a gain of $1.12 (2.6 per cent) from Monday's settlement.
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    ND Bakken Crude Oil Being Transported to Europe

    The exportation of Bakken crude oil is beginning just 4 months after Congress lifted the 40-year-old ban on transporting oil overseas.

    Congress lifting the oil export ban back in December of 2015 allows the U.S. and North Dakota to compete in the global market.

    "We have been waiting for that first shipment of Bakken crude to end up leaving our shores, we've seen that," said Sen. Heidi Heitkamp, D-N.D.

    "Hess sold 175,000 barrels of Bakken crude oil for export from the United States. The oil was loaded in St James, La., and is being transported to a European refinery," said Hess in a statement.

    "Whenever you can capture new markets, wherever those new markets are, it incentivizes you to produce more of whatever it is. So eventually it's going to lead to more domestic production," said Kari Cutting, Vice President, ND Petroleum Council.

    Cutting says exporting oil overseas will also help grow our nation's economy, support job growth and keep gasoline prices low for the consumers.

    "Once North Dakota crude oil is able to reach a major market hub like the Gulf Coast it then becomes a marketing situation where they will try to determine whether that crude will be destine for a refinery in the U.S. or globally at this point," said Justin Kringstad, ND Pipeline Authority.

    It's up to the oil companies to find markets overseas that have a need for the state's light, sweet crude.

    A representative from Hess says the ship of Bakken crude should reach Europe sometime this week.
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    Brazilian Gas Producer Parnaiba Seeks Acquisitions Amid Downturn

    Parnaiba Gas Natural SA, Brazil’s biggest independent natural gas producer, is considering acquisitions and preparing to expand output in Latin America’s biggest economy.

    The Rio de Janeiro-based producer spent 800 million reais ($223 million) last year to expand infrastructure and drill 30 wells in what was Brazil’s biggest drilling campaign on land, Chief Executive Officer Pedro Zinner said in an interview. This has put the company on track to nearly double output to 8.4 million cubic meters (297 million cubic feet) in July, and it is looking to expand further, he said.

    “We’re always looking at opportunities,” said Zinner at the company’s office in Rio. “We’ll see a lot of stranded assets.”

    State-controlled Petroleo Brasileiro SA is looking to divest assets ranging from pipelines to offshore oil fields in an effort to ease the biggest debt load in the oil industry and withstand the worst oil market in a generation. Apart from potential acquisitions, Parnaiba also plans to hunt for more gas deposits at seven concessions it won in October. It plans to start using seismic technology next year to map the geology and decide on drilling sites, he said.

    Last month energy producer Eneva SA, which owns 27.3 percent of Parnaiba, signed an agreement with the company’s other main shareholders to incorporate it as a subsidiary. Brazil’s antitrust regulator, Cade, approved the deal last week, and it still needs to be approved at a shareholders’ meeting. Parnaiba will feed its expanding gas production to Eneva’s power plants, which are some of the most efficient in Brazil, Zinner said.

    “Upstream will be the growth arm of the new entity,” Zinner said. “It’s been a good year despite all the turbulence.”
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    Pacific E&P Reaches Restructuring Deal With Canada's Catalyst

    Catalyst won out over five other bidders, Bogota-based Pacific said in a statement Tuesday. Restructuring will reduce debt, improve liquidity, and better position the oil producer after a rout in crude prices. Operations will continue without disruption throughout the restructuring.

    Under terms of the deal, Toronto-based Catalyst and the other creditors will provide $500 million in debtor-in-possession financing secured against the company’s assets, according to the statement. The $250 million provided by funding creditors will be converted into five-year convertible notes, while Catalyst’s $250 million will be converted or exchanged for 16.8 percent of the common shares in the reorganized company.

    “We are confident that the company will emerge from this process as a stronger entity, best-positioned to weather the current oil price environment and capitalize on opportunities once the market adjusts,” Pacific Chief Executive Officer Ronald Pantin said in the statement.

    Upon completion of the transaction, Catalyst is expected to hold 29.3 percent of the reorganized company, while the funding creditors will hold 12.5 percent.

    Pacific’s $4.1 billion in unsecured debt, $1.2 billion in obligations on its credit facility and other unsecured claims by creditors will be wiped out and exchanged for a 58.2 percent stake in the reorganized company.

    The agreement, which is contingent on customary approvals, is also subject to a no-shop clause for as many as 12 weeks, and is expected to be completed by the end of the third quarter.

    "We understand the importance of Pacific to the countries in which it operates, including Colombia and Peru, and we are eager to work with Pacific’s local and international stakeholders to complete this restructuring with a view to establishing a stronger, long-term focused and soundly recapitalized Company," said Gabriel de Alba, managing director and partner of Catalyst.

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    Seventy Seven Energy to file for bankruptcy amid oil slump

    Oilfield services company Seventy Seven Energy Inc said it intended to file for a prepackaged Chapter 11 bankruptcy on or before May 26, the latest energy company to seek bankruptcy protection amid a prolonged oil price slump.

    The company, which was spun off from Chesapeake Energy Corp in 2014, said it had entered into a restructuring agreement with certain lenders that would allow it to convert about $1.1 billion of its debt into equity.

    A more than 60 percent fall in global oil prices since mid-2014 has forced about 50 North American oil and gas producers to seek bankruptcy protection.

    Weak oil prices have also prompted oil producers to severely curtail spending, weighing on demand for the oilfield services provided by companies such as Seventy Seven Energy.

    Chesapeake Energy Corp, the company's former parent, surprised investors last Monday, when it said lenders had allowed it to keep its $4 billion borrowing base, despite concerns about its liquidity position.

    Baker Botts LLP is Seventy Seven Energy's legal counsel and Lazard Freres & Co LLC is the financial adviser. Alvarez & Marsal is the company's restructuring adviser.
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    Brent signals traders to release oil stocks

    Crude oil storage helped commodity traders and refiners make strong profits last year and in the first quarter of 2016 but now the price structure which made it possible is evaporating.

    In a typical storage strategy, known as "cash and carry", traders buy physical crude and put it into storage in a tank farm, or more rarely on a tanker at sea.

    Traders simultaneously sell crude futures for a nearby contract, hedging their exposure in case prices fall while the oil is stored.

    As the futures contracts near expiry, traders buy them back and sell more contracts for a date further in the future. The strategy continues until the trader is ready to release the stocks back to the market.

    But the strategy only works if the futures market trades in contango, with contracts near expiry cheaper than those further forward.

    In a contango market, traders are constantly buying lower-priced contracts and selling higher-priced ones, making a profit on the difference.

    The profit from the futures half of the transaction pays for all the costs of borrowing money to buy the physical oil and arranging storage.

    Provided the physical and financial transactions are exactly matched there is an opportunity to make a riskless profit.

    In practice, the transactions rarely match perfectly and there is often some residual risk, but cash and carry is still one of the lowest risk and most popular trades in the physical oil business.

    In late 2014 and again in late 2015, traders and refiners raced to buy as much crude as possible and put it into storage to profit from a big contango structure in the futures market.

    But the strategy depends on the contango remaining wide enough to cover all the costs of financing and storing the physical crude.

    As the contango in Brent narrows sharply, strategies which depend on selling Brent futures are becoming unprofitable (Hedge funds bet on tightening oil market despite Doha debacle, Reuters, April 19 ).

    To the extent traders and refiners are financing and storing extra stock with Brent futures, the barrels are likely to be sold if the market remains in a narrow contango or moves deeper into backwardation.

    In contrast, WTI futures continue to trade in a much larger contango, which continues to make financing physical oil stocks profitable (

    Brent is used in cash and carry strategies outside North America while WTI is employed mostly for storage trades in the United States.

    The sharp narrowing of Brent spreads suggests speculative physical stocks in Europe, Asia and on tankers at sea will be the first sold, while stockholding in the United States remains profitable for now.

    The prospect of a market near to balance has helped narrow the contango (Brent contango is hard to square with missing barrels, Reuters, March 9 ) (

    OECD crude stocks rose by a relatively modest 375,000 barrels per day during the first two months of the year, according to the International Energy Agency.

    Preliminary data show OECD crude stocks rose only 400,000 bpd in March, compared with an average build of almost 1 million bpd in the same month over the last five years (Oil Market Report, IEA, April 14).

    The IEA's predictions for a very small crude surplus in the second half of the year imply OECD stocks are likely to decline between July and December.

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    Sinopec Shifts Global Oil Assets to State Buyers Amid Downturn

    One of China’s biggest oil and gas explorers found a buyer for its oil assets from Canada to Kurdistan amid a collapse in energy prices and a drive to reform state-run firms: another government-owned company.

    China Petrochemical Corp., Asia’s biggest refiner known as Sinopec Group, sold to two state investment vehicles more than half of a unit that holds its overseas assets. Shifting ownership of properties across the energy supply chain into other government-run companies is becoming more common in China in anticipation of broader industry reforms, according to Tian Miao, an analyst at North Square Blue Oak Ltd., a China policy research company.

    “Only the state-owned asset companies have the capacity and money to merge and reorganize them,” Tian said. “Those overseas projects bought at high oil prices years ago may have lost massive value in this low oil price environment.”

    The unit, Sinopec International Petroleum Exploration & Production Corp., acquired many of the properties when oil was above $100 a barrel and is now challenged to find buyers, according to James Hubbard, a Hong Kong-based analyst at Macquarie Capital Securities Ltd.

    “No company would buy those assets at anything but a small fraction of what Sinopec Group paid for them,” Hubbard said. The assets “have book values that are far in excess of anything Sinopec’s listed company would pay without destroying vast amounts of shareholder value.”

    China’s biggest oil and gas companies, which include Sinopec Group as well as China National Petroleum Corp., spent nearly $119 billion on energy deals from 2009 through 2013, accounting for 13 percent of global transactions in the industry, data compiled by Bloomberg show.

    The overseas assets SIPC held for Sinopec Group include the $3.1 billion stake it bought in Apache Corp.’s Egyptian operations in 2013 and its $4.65 billion share in Syncrude Canada Ltd. in 2010. It also took over Canadian explorer Daylight Energy Ltd. for $2.1 billion in 2011. Oil prices averaged more than $100 during those years.

    SIPC also holds assets Sinopec Group picked up from Addax Petroleum Corp., for which it agreed to pay C$8.3 billion in June 2009, and a $7.1 billion chunk of Repsol YPF SA’s Brazilian unitbought in 2010. It also owns projects in Russia, the Middle East and Africa, according to its website. SIPC will retain operational control of the assets after the deal, it said in a statement Friday.

    SIPC sold the stakes to China Chengtong Holdings Group Ltd. and China Reform Holdings Corp., without providing a value for the transactions. The statement Friday announcing the deal said ownership will be split into two 30 percent stakes and one 40 percent share, without providing details. A Sinopec Group spokesman was unable to clarify. Neither China Chengtong Holdings nor China Reform Holdings responded to requests for comment.

    China Reform Holdings was involved in a separate shift of assets in November, when it bought a 50 percent stake in PetroChina Co.’s Trans-Asia Gas Pipeline Co. for $2.4 billion as the the state-owned explorer tried to raise money to meet year-end profit targets.

    Sinopec Group’s international units produced 49.86 million barrels of crude in 2014, or about 14 percent of its total 360.7 million barrels output, according to its 2014 annual report.

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    At least 5 dead, hundreds rescued from high water in Houston flooding

    At least five people have been killed in flooding that has covered the Houston region, officials said Monday, forcing the evacuation of hundreds of people and knocking out power to thousands of homes and businesses.

    "This is a life-threatening emergency," the city said on an emergency website. "Houston residents should avoid travel at all costs today."
    Four of the deaths happened in hard-hit Harris County, officials said.
    The driver of an 18-wheeler was found dead inside the cab after he drove into high waters, a Harris County constable reported, and another man was found dead in a submerged car, the Houston Fire Department said.
    Two others were found dead after driving around a barricade on Houston's west side, Harris County Judge Ed Emmett said.

    In neighboring Waller County, a 56-year-old man was found dead in a submerged vehicle, County Judge Trey Duhon said.
    "It is believed the car rode off the road and into a ditch," Duhon said.

    A flash flood watch is in effect for the Houston area through Tuesday morning, with "life-threatening" flash flooding possible Monday night, the weather service said. As little as an inch of rain could aggravate the flooding, it said.

    Emmett called it the most significant flood event since Tropical Storm Allison in 2001, which left 41 people dead. It caused more than $5 billion in property damage in Harris County alone, according to the county's Flood Control District.

    Around 45,000 customers in the region were without power as of Monday afternoon, emergency management officials said, down from a peak of 123,000 earlier in the day.

    Some areas had received as much as 16 inches of rain by Monday morning, according to the flood control district.

    The heavy rains forced seven of the city's many bayous out of their banks and created flooding in parts of the city that had not flooded for many years, Turner said.

    The situation is the result of a nearly stationary area of low pressure that has stalled over the western United States, allowing moisture from the Gulf of Mexico to flow into Texas over the last few days, according to CNN meteorologist Sean Morris.

    Very heavy rainfall is expected to continue through Tuesday before the system begins to move off to the northeast and weaken, he said.
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    Iran Is Ready To Flood The World With Oil... It Just Has No Ships To Deliver It

    Late last week, just ahead of the Doha meeting, we showed that Iran's existing oil tanker armada which until recently had been on anchor next to the Iranian coast and which according to Windward data was storing as much as 50 million barrels offshore...

    ...  had finally started to move.

    The reason, as Bloomberg reported, was that tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, and offsetting the entire production decline by US producers with just half a month's incremental production.

    However, now that the shipping armada has sailed to its various (most Asian) destinations, it may be difficult to repeat this in the near term.

    According to Reuters, Iran is struggling to increase oil exports because many of its tankers are tied up storing crude, some are not seaworthy, and foreign shipowners are clearly reluctant to carry its cargoes.

    The math: Iran has 55-60 oil tankers in its fleet, a senior Iranian government official told Reuters. He declined to say how many were being used to store unsold cargoes, but industry sources said 25-27 tankers were parked in sea lanes close to terminals including Assaluyeh and Kharg Island for this purpose.

    Asked how many tankers were not seaworthy and needed to go to dry docks for refits to meet international shipping standards, the senior official said: "Around 20 large tankers ... need to be modernised." A further 11 Iranian tankers from the fleet were carrying oil to Asian buyers on Tuesday, according to Reuters shipping data and a source who tracks tanker movements. That was broadly in line with the number consistently committed to Asian runs since sanctions were lifted in January, putting more strain on the remaining available fleet.

    So as increasingly more of Iran's tanker fleet is currently utilized or is otherwise out of commission, Iran desperately needs foreign ships to execute its plans for a big export push to Europe and elsewhere and meet its target of reaching pre-sanctions sales levels this year.

    There is just one problem: nobody wants to give their spare tanker capacity to Iran.

    According to Reuters ship owners, who are not short of business in a booming tanker market, are unwilling to take Iranian cargoes.

    One stumbling block is residual U.S. restrictions on Tehran which are still in place and prohibit any trade in dollars or the involvement of U.S. firms including banks - a major hurdle for the oil and tanker trades, which are priced in dollars.

    As a result only eight foreign tankers, carrying a total of around 8 million barrels of oil, have shipped Iranian crude to European destinations since sanctions were lifted in January, according to data from the tanker-tracking source and ship brokers.

    That equates to only around 10 days' worth of sales at the levels of pre-2012, when European buyers were purchasing as much as 800,000 barrels per day (bpd) from the OPEC producer. So far no Iranian tankers have made deliveries to Europe, according to data from the tanker-tracking source.

    Whether it is due to politics or simple business precaautions, Paddy Rodgers, chief executive of leading international oil tanker company Euronav, said at present there was "no great urgency to do business in Iran".

    "There is not a premium to do business in Iran and there is plenty of other business - the markets are busy, rates are good. So there is no stress on wanting to do it," he told Reuters. "I don't really want to set up a euro bank account in Dubai in order to trade with Iran - that would crazy."

    Michele White, general counsel with Intertanko , an association which represents the majority of the world's tanker fleet, said: "We have witnessed a reluctance by our members generally to return to Iranian trade given the prohibition on use of the U.S. financial system - essentially no U.S. dollars."

    One can almost smell Saudi intervention here, which we firstdescribed two weeks ago when we reported that not only has Saudi Arabia banned Iranfrom sailing in its territorial waters, but has taken proactive steps to slow Iran’s efforts at increasing oil exports, interfering with third parties and making Iran's procurement of vessels virtually impossible. As the abovementioned oil tanker association Intertanko and other industry participants said then, while no formal notice has been given by Saudi Arabia, uncertainty is making some charterers less willing to lift Iranian crude.

    "It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis."

    Iran admits as much.

    A senior Iranian government official, who declined to be named due to the sensitivity of the matter, acknowledged his country was finding it difficult to hire foreign tankers.

    "We are working on the problems. There are various issues involved, financial, banking and even insurance. It has improved a little bit since the lifting of sanctions but we still face serious problems."

    Asked if this and the need to modernise some of the domestic fleet was holding back exports, he said: "Of course it does."

    Iran's problems may not be resolved any time soon. Reuters adds that two other sources with other leading oil tanker operators echoed the above concerns and said they were not doing Iran deals at the moment.
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    Iran's crude output to reach pre-sanctions level by June, official says

    Iran's crude oil production will reach pre-sanctions levels within two months, a deputy oil minister was quoted as saying on Tuesday, reaffirming Tehran's commitment to boosting production.

    State news agency IRNA quoted Rokneddin Javadi as saying that the pre-sanctions level would be attained by the end of the Iranian month of Khordad, which falls on June 20.

    Iran's oil production was slightly below 4 million barrels a day before sanctions were imposed on the oil industry in 2011 and 2012. Last week Javadi said output had already surpassed 3.5 million barrels a day.

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    Denbury Resources' borrowing base cut by 30 pct to $1.05 bln

    Oil and gas producer Denbury Resources Inc said its lenders reduced its borrowing base by 30 percent to $1.05 billion and that it had to pledge more assets.

    U.S. oil and gas companies are seeing the largest cuts yet to their bank loans as oil prices continue to remain weak.

    Every six months, oil and gas producers negotiate with banks how much credit they should be given, based on the value of their reserves in the ground.

    Denbury said the amendment to its credit facility increased the mortgaged property collateral requirement to 90 percent from 85 percent of its proved reserves.

    The amendment also allows the company to take on $1 billion of junior lien debt that may be issued in exchange for the company's senior subordinated notes or other unsecured debt.

    Denbury also said it added to its hedging positions and now has hedges in place through the second quarter of 2017.
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    Statoil develops subsea technology to reduce costs by 30%

    Norwegian operator Statoil has developed a new concept for subsea developments aimed at reducing costs by 30%.

    The company has created Cap-X, which according to reports in Norwegian media, will bring them one step further towards a “plug and play solution” to the seabed.

    A spokesman for Statoil said the technology had been inspired by the company’s previous experience drilling in the Barents Sea.

    He said the technology had given “confidence” in creating profitability for the company in the region.

    Statoil believes Cap-X, which had first been developed for solving challenge of shallow reservoirs, will also have further potential elsewhere on the Norwegian shelf.

    The subsea concept is based on suction anchor technology for mounting installation on the seabed such as Statoil, Shell and the Norwegian Geotechnical institute has been pioneering.

    The company has also patented the technology but the company’s spokesman said the move was “not about” other companies being unable to adopt the technology.
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    Oregon LNG Project ceases operations

    Oregon LNG has announced that it has ceased operations on the Oregon LNG Project.

    Oregon LNG confirmed that the owner of the LNG project, Leucadia National Corp., has decided to cease funding the project.

    In a short statement released on its website, Oregon LNG said: “Oregon LNG thanks all those in the project area who supported its 12-year effort to bring good jobs and tax revenues to Warrenton and Clatsop County by building a LNG terminal and associated pipeline. Oregon LNG will have no further comment.”

    The proposed US$6 billion project would have included an LNG export terminal located in Warrenton, Oregon, US, at the mouth of the Columbia River, and a natural gas connector pipeline to bring largely Canadian natural gas from an existing pipeline in Washington State to the terminal site. Oregon LNG hoped that the LNG project would have produced up to 9 million tpy of LNG.
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    Energy Transfer-Williams Deal Had a Different Kind of Tax Day

    Monday turned out to be a different sort of Tax Day for Energy Transfer Equity LP and Williams Cos., two U.S. energy pipeline giants seeking a multibillion-dollar merger.

    While Americans were filing their annual tax returns, Energy Transfer revealed in its own filing that it has yet to obtain a tax opinion needed to close its takeover of Williams. Latham & Watkins LLP told the company that, if the deal had closed Monday, the law firm wouldn’t have been able to deliver a so-called “721 opinion” -- deeming the transaction an exchange that frees shareholders from tax liabilities.

    Williams disagrees with that position and the two companies are discussing how it may affect the deal’s closing, according to the filing. It’s the latest in a series of twists for the troubled pipeline merger. Since Energy Transfer offered in September $43.50 for each Williams share, the collapse in oil prices has cut the market value of both companies by roughly half, casting doubt on whether the takeover will happen.

    “We view the current uncertainty over the opinion as yet another impediment to the ETE-WMB merger,” said Selman Akyol, an equity analyst at Stifel Nicolaus & Co. “The latest transaction update from ETE muddies the waters.”

    The deal’s arbitrage spread, traded by those betting on whether it’ll close, widened Monday to the biggest since January, reflecting growing doubt about its prospects.

    The spread is “blowing out,” Timm Schneider, an analyst at Evercore ISI, said in a note to clients. “The stocks are certainly reacting to the speculation around a potential completion (or not) of this transaction.”

    Energy Transfer shares jumped as much as 22 percent Monday before settling at $9.85. Williams slid as much as 13 percent and closed at $16.68.

    Both companies are required to cooperate and make “commercially reasonable efforts” to obtain the tax opinions necessary for the deal, based on their merger agreement. Lance Latham, a spokesman for Williams, declined to comment on Monday’s filing. Vicki Granado, a spokeswoman for Energy Transfer, declined to comment beyond the statement.

    Energy Transfer also indicated in Monday’s filing that future dividend payouts from its Energy Transfer Corp. unit, a limited partnership created for the Williams merger, may be in jeopardy.

    Owing in part to “more challenging business conditions,” Energy Transfer’s management is forecasting that Energy Transfer Corp., shares of which would be exchanged for existing ones in Williams, will issue payouts of 57 cents a share in 2016 and 46 cents in 2018 -- but nothing in 2017.

    The proposed deal has already spurred disagreements between the two companies. In March, Energy Transfer completed a private unit offering that it may use to help pay down debt associated with the purchase of Williams. Williams had earlier blocked its proposal to hold a public offering and wasn’t involved in the private one.

    Williams filed suit against Energy Transfer and its chief executive officer, Kelcy Warren, over the exchange earlier this month. In its challenge against Warren, Williams said its would-be leader “maliciously” orchestrated the offering to guarantee himself more than $200 million a year in payments at the expense of other investors.
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    Papua New Guinea LNG projects see opportunity in tough market

     As liquefied natural gas (LNG) producers despair over a supply glut, two projects in Papua New Guinea are pressing on in a bid to sign off on new developments by 2018 to take advantage of a drop in construction costs and high quality gas.

    France's Total SA said this week it could build the country's second LNG plant for $10 billion, well below industry estimates, while Australia's Oil Search Ltd, which aims to expand in the region, said it expected new projects would have no trouble attacting lenders.

    The push is in stark contrast to moves by rivals to shelve or delay LNG projects from Australia to Canada following an 80 percent slump in prices amid a flood of new supply just as demand has slowed.

    Papua New Guinea has an advantage over Australian and U.S. gas as it is liquids rich, which creates extra revenue, it is closer to the world's biggest LNG markets in Japan, South Korea and China, and the gas has a higher heating value.

    ExxonMobil Corp is already weighing an expansion of its PNG LNG plant, which has been exporting for two years and is now producing at an annual rate of 8 million tonnes.

    In its first public comments on cost, rival Total said a second plant, dubbed Papua LNG, could be built for $10 billion, at least 25 percent below analysts' estimates.

    "We intend to build our own facilities. It will be a big project - about $10 billion and 10,000 people will have jobs," Chief Executive Patrick Pouyanné was quoted saying in two PNG newspapers on Monday following talks with PNG Prime Minister Peter O'Neill.

    Oil Search, a partner in both Papua LNG and ExxonMobil's PNG LNG, said on Tuesday it expects to be able to fund its share of any new PNG developments.

    "Based on soundings with financial institutions ... significant debt funding appears to be available for good quality projects such as these potential developments, despite the weaker oil price," it said in its quarterly report.

    For a 7-million-tonnes-a-year project using gas from the Elk and Antelope fields, $10 billion would imply a cost of around $1,425 a tonne, compared with previous estimates from Papua LNG partner InterOil Corp of a cost of around $2,000 to $2,100 a tonne.

    "That is low," Neil Beveridge, a senior analyst at Bernstein Research, said in an email, adding: "We certainly believe that project could be one of the lowest cost in the region."

    Oil Search declined to comment, deferring to Total as operator of the project. A Total spokesman told Reuters the cost estimate referred to the entire project, not just Total's share.

    Pouyanné said last week now is the time to invest in new LNG plants, as projects will be able to negotiate cheaper construction costs with contractors as a raft of ongoing projects are completed over the next two years.

    "Frankly for a major company like Total, the best strategy is to invest when prices are low because then the costs are low," he told reporters at a conference last week.

    Oil Search wants the Papua LNG and PNG LNG projects to work together, to prevent wasting money the way LNG producers have on the east coast of Australia building three competing projects side by side.

    UBS analyst Nik Burns estimates a stand-alone Papua LNG project would cost $15 billion and an expansion of PNG LNG would cost $9 billion, while tying them together could cut the combined costs by at least 10 percent.

    "The size of the prize is potentially quite large," Burns said.

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    Italy's gas imports from Russia hit new low, Algerian flows at steady high

    Italian gas imports from Russia and northwest Europe hit new lows on Sunday, as flows from Algeria continued to defy expectations, remaining at a steady high since the start of April, according to data from Eclipse Energy, an analytics unit of Platts, Monday.

    The rise in Algerian gas exports to Italy since the start of the second quarter has seen a slump in supplies from Italy's other core gas suppliers.

    Italy is Europe's third biggest gas market with consumption of some 66 Bcm in 2015, and it is reliant on imports for as much as 90% of its demand.

    Russia was Italy's largest single gas supplier last year, delivering 49% of all Italian imports, or 30 Bcm.

    On Sunday, gas supplies from Russia to Italy fell to just 48 million cu m, the lowest level since the end of January, according to the Eclipse data.

    And supplies via Switzerland from northwest Europe on Sunday hit their lowest point since October last year at just 6 million cu m.

    By contrast, Algerian gas exports to Italy on Sunday totaled 63 million cu m, in line with the average since the start of the month, the Eclipse data showed.

    That is significantly higher than the 16 million cu m/d average in March.

    Russian exports to Italy in the first quarter averaged 77 million cu m/d, so the drop to less than 50 million cu m/d at the weekend is significant.

    A theoretical continued rate of 50 million cu m/d for the rest of the year would see Russia supply just 21 Bcm to Italy in 2016.

    The slowdown in Russian supplies to Italy is surprising in some ways after Eni agreed with Russia's Gazprom in January this year to "maximize" the sale of Russian gas under the partners' long-term contract supply agreements.

    However, Eni CEO Claudio Descalzi also said in March that Eni had re-negotiated in 2015 its long-term gas import contract with Algeria's Sonatrach to include increased gas volumes.

    The sudden hike in Algeria exports could be attributed to a number of factors, including lower LNG production and customers nominating higher volumes because of favorable prices under long-term, oil-indexed contracts.

    Algerian pipeline exports to Spain are also well up so far in April, supplies averaging 41 million cu m/d compared with a March average of just 29 million cu m/d, the Eclipse data showed.

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    Saudi's Other Warning Makes Oil Traders Sweat After Doha Failure

    After his comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share.

    It was Mohammed Bin Salman’s repeated assertions that the kingdom wouldn’t join an output freeze without Iran that derailed talks between 16 producing countries on April 17. In interviews with Bloomberg News, the prince cautioned that if other producers increased output, Saudi Arabia could respond in kind. Iran is restoring exports after international sanctions over its nuclear program were lifted in January.

    “It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis will go ahead and increase their production as they were planning.”

    Oil prices dropped on Monday after Saudi Arabia resolved that an oil-supply freeze was possible only with the support of all OPEC members, including Iran, causing talks in the Qatari capital to unravel. Tensions between the two regional antagonists have flared as they take opposite sides in bloody conflicts in Yemen and Syria.

    In an interview published on April 1, Prince Mohammed said that while Saudi Arabia was ready to cap production in concert with other countries, "if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

    The world’s largest oil exporter could increase output by more than 1 million barrels a day, or about 10 percent, to 11.5 million if there was demand for it, the prince, chairman of the Supreme Council of Saudi Arabian Oil Co., said on April 14. It could increase further to 12.5 million in six to nine months, he added. The country pumped 10.2 million a day last month, according to data compiled by Bloomberg.

    “This just shows how central the tensions and the rivalry in the region between Iran and Saudi Arabia are,” Dan Yergin, vice chairman at IHS Inc. said in a Bloomberg Television interview. “There’s zero trust between these two countries right now.”

    Iran plans to boost output to 4 million barrels a day in the Iranian year through March 2017, Oil Minister Bijan Namdar Zanganeh said April 6. That would be an increase of about 800,000 barrels a day from March production. Its crude shipments have risen by more than 600,000 barrels a day this month, according to shipping data compiled by Bloomberg.
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    Kuwait Oil-Workers Strike Over Pay Dispute Enters Third Day

    Oil workers at Kuwait’s oil production facilities extended their strike for a third day over an unresolved pay dispute, slashing the OPEC member’s output by about 1.7 million barrels a day, an amount exceeding the current global surplus.

    The “strike is on,” Kuwait National Petroleum Co. spokesman Khaled Al-Asousi said in a text message Tuesday. Attempts to reach a settlement failed after talks with the union broke up at 3 a.m., said a government official who asked not to be identified because the negotiations are private.

    Oil production plunged 60 percent to 1.1 million barrels a day when the strike began on Sunday, while the state refining company slowed operations at its three oil-processing plants to less than 60 percent of their combined capacity. Kuwait Petroleum Corp.’s oil-production and refining units are working to restart units and raise fuel-processing rates to full capacity, officials said Monday.

    Oil pared declines, with Brent crude dropping 0.4 percent to $42.74 a barrel by 8:45 a.m. in Dubai, after falling as much as 0.7 percent. Kuwait pumped 2.81 million barrels a day last month, making it OPEC’s fourth-largest producer, while worldwide supply surpassed demand by 1.6 million barrels in the first quarter, according to the International Energy Agency.

    “If the Kuwaiti strike persists, it re-balances the market,” Robin Mills, chief executive officer at consultant Qamar Energy in Dubai, said by phone on Monday. “So far it looks like Kuwait is meeting demand and supplying their commitments out of storage.”

    Oil workers in Kuwait are striking to protest cuts in pay and benefits as Middle Eastern crude exporters, reeling from lower oil income, cut subsidies and government handouts. The walkout is the first by oil workers in Kuwait since at least 1996, according to Middle East Economic Digest.

    “The substantial impact of the Kuwait strike has added significantly to the various short-term shut-ins around the world,” consultants FGE said in a note on April 18. The Kuwaiti cuts are “pretty well trebling the shortfalls” from unplanned disruptions in countries including OPEC members Nigeria, Iraq and Venezuela, it said.

    The strike may last 10 to 15 days, because the government set up a joint committee to negotiate with the union over 10 days, said Virendra Chauhan, a London-based oil analyst at Energy Aspects Ltd. “Assume a bit of time to return to work and ramp up,” he said. “Basically we are not expecting months of delay.”

    KPC, the main national oil company, is able to meet its supply commitments to clients in spite of the walkout, the official Kuwait News Agency reported Monday, citing the oil industry’s spokesman, Sheikh Talal Al-Khaled Al-Sabah. Refiner Kuwait National Petroleum Co. was processing about 520,000 barrels of oil a day, the same amount as Sunday, and all three of its plants were operating, Al-Asousi said Monday. Union officials haven’t been responding to requests for comment since the strike began.

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    Petrobras, Brazil oil sector could get lift from impeachment

    Brazil's corruption-battered state oil company Petrobras could be a big beneficiary if the country's opposition parties impeach President Dilma Rousseff, investors and analysts said on Monday.

    Vice President Michel Temer, who would take power if Rousseff were impeached, is considered open to industry calls for changes to oil rules brought in by her Workers' Party over the past decade.

    Rousseff's critics have said the policies, aimed at boosting state control of huge offshore discoveries, drove up costs, limited output and built up Petrobras' crippling $126 billion debt, the largest of any oil company.

    "First off, Petrobras will no longer be used as a tool for monetary policy," said Edwin Gutierrez, head of emerging market sovereign debt at Aberdeen Asset Management in London, pointing to a longtime policy of keeping gasoline prices artificially low to keep a lid on inflation.

    Many have said Rousseff's policies left Brazil's oil industry and Petroleo Brasileiro SA, as Petrobras is formally known, with few options but layoffs, cutbacks and asset sales when oil prices plunged and a giant corruption scandal was uncovered over the last year and a half.

    With Brazil's offshore oil among some of the world's most expensive to extract, any new government would have to make changes to attract a shrinking pool of investment capital away from other oil producers, he added.

    Brazilian oil unions, some of the biggest opponents of Rousseff's impeachment, are also convinced changes are afoot if Temer takes over, said Deyvid Bacelar, an oilworkers' union leader and employee representative on Petrobras' board of directors.

    Likely changes would include an end to strict local purchasing laws for ships and oil platforms, new layoffs to add to the tens of thousands already imposed nationwide, an end to minimum Petrobras involvement in key offshore oil developments and a wholesale selloff of Brazilian oil assets to foreigners.

    Temer's PMDB party and the opposition PSDB, that would likely partner with him if he became president, agree that Petrobras' role in new offshore development should be reduced and foreign investment encouraged, said Adriano Pires, a long-time PSDB advisor.

    Still, Petrobras is likely to remain a symbol of nationalist pride, limiting the potential for real change, said John Baur, global income portfolio manager who handles some of the $306 billion of assets held by Eaton Vance Investment Managers in Boston.

    "One of the reasons Rousseff was so unpopular was because she was slowly starting to make some of the changes that needed to be made," he said. "With many of the same people still around, big change in Brazil seems far-fetched."

    Even a hands-off policy, avoiding the political interference that led to corruption, massive writedowns and a plunging share price, could be a big improvement, some experts said.

    "I imagine that whomever takes over the government will look at Petrobras in a more careful way than they did only a short time ago" said Nelson Narciso, a former director of Brazil oil agency ANP.
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    Chevron signs up Australia's Alinta to buy gas from Wheatstone

    Chevron has agreed to sell 20 petajoules a year of gas from its Wheatstone project to Alinta Energy in Western Australia starting in 2020, securing a customer for more than a quarter of the domestic gas output from Wheatstone.

    The contract, lined up at a tough time for producers looking to seal long-term deals amid a gas supply glut, is for seven years, Chevron said on Tuesday.

    "This agreement is an important step in Chevron's rapidly expanding domestic gas business in Western Australia," Chevron Australia managing director Roy Krzywosinksi said in a statement.

    The $29 billion Wheatstone project is due to start producing liquefied natural gas (LNG) for export in 2017 and start supplying the Western Australian domestic market from 2018.

    At full tilt, the project will have a capacity of 8.9 million tonnes a year of LNG and 200 terajoules a day of domestic gas, with the gas being marketed separately by each of the project partners.

    Chevron has a 64 percent stake, with the remainder owned by Kuwait Foreign Petroleum Exploration Co (KUFPEC), Woodside Petroleum and Japan's Kyushu Electric Power Co and Tokyo Electric Power Co (TEPCO).

    Chevron already supplies about 10 percent of the Western Australian market with gas from its share of the competing North West Shelf project.
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    Cox Oil Offshore acquires Gulf of Mexico assets from Chevron

    Cox Oil Offshore, L.L.C., an established, privately owned, independent oil and gas company today announced they have successfully completed a transaction in which Cox Oil acquired a number of assets in the Gulf of Mexico from Chevron. The acquisition includes 19 fields and associated assets located primarily on the GOM Outer Continental Shelf and in Louisiana state waters.

    'Today's closing further demonstrates Cox Oil's dedication to the Gulf of Mexico and the Outer Continental Shelf. We look forward to welcoming the more than 100 Chevron employees that will be joining our team,' said Brad E. Cox, Chairman and Founder of Cox Oil.

    'This transaction contributes to our long term, strategic focus in the oil and gas industry. We are grateful to Chevron and their professional staff for their dedication and efforts in this process,' said Craig Sanders, CEO of Cox Oil.

    The asset acquisition package includes 170 active wells, 70 platforms, 70 caissons and other offshore structures. The financial aspects of the deal will not be disclosed. The closing date for the transaction is April 15, 2016.

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    UKOG’s Horse Hill to create up to 5,600 jobs and be worth up to £52.6bn

    A new report has said UK onshore discovery, Horse Hill, could create up to 5,500 jobs and be worth up to £52.6billion.

    UK Oil & Gas Investments (UKOG) commissioned EY to produce a report on the Gatwick site’s potential.

    The EY report read: “The development of Kimmeridge Limestone Oil in the Weald Basin, assuming it can be extracted from a development site at the volumes projected by UKOG, has the potential to generate significant economic value to the UK economy, partially off-set the decline in oil production from UK fields, support employment, and generate significant tax benefits to the exchequer.

    “These benefits will be maximised via the development of a UK-based supply chain, and through a series of targeted policies and initiatives to appropriately mitigate potential barriers to development.

    “Conceptual studies and oil in place estimates previously conducted suggest a significant opportunity for the UK to secure a proportion of its energy from the Weald Basin.”

    Future peak oil production could provide approximately 4% to 27% of 2014 UK daily oil demand over the life of the project, according to the report.

    The Gross Value Added to the UK economy could range from £7.1billion to £52.6billion, the project will generate between 1,000 to 5,600 jobs in the UK and lifetime tax revenues of between £2.1billion to £18.1billion, according to key findings.

    Stephen Sanderson, UKOG’s chairman, said: “This report confirms UKOG’s view that the development of Kimmeridge Limestone oil in the Weald Basin can make a very significant contribution to the economy, employment and energy security of the UK.

    “The report’s conclusions are given credence by the recent results of the highly successful Kimmeridge Limestone flow tests at the Horse Hill-1 oil discovery. The tests demonstrate that significant volumes of high-quality light oil exists within the Kimmeridge Limestones and can flow naturally to surface at commercial rates.

    “The unexpectedly high aggregate flow rate of over 1365 barrels per day (“bopd”) from Horse Hill’s two Kimmeridge Limestones far exceeds the study’s modelled peak flow rate of 400 bopd per horizontal well. It is, therefore, possible that the overall economic impact of Kimmeridge Limestone oil could be significantly higher than this initial report describes.”

    It comes after UKOG bought Angus Energy’s remaining 7.8% interest in the Horse Hill-1 oil discovery.

    The £1.8million transaction increases UKOG’s stake in the onshore Weald Basin from 19.9% to 27.3%.
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    Keppel Profit Drops as Oil Price Slump Delays Offshore Projects

    Keppel Corp., the world’s largest builder of oil rigs, reported a 41 percent decline in first-quarter profit as weak oil prices led to delivery delays of offshore projects.

    Net income dropped to S$211 million ($156 million) from S$360 million a year earlier, Keppel said in a statement Monday. Sales slumped 38 percent to S$1.7 billion from S$2.8 billion. The higher contribution from its property business at 47% helped to partially offset lower profits from offshore and marine sectors, the company said in the statement.

    Oil companies and rig operators face rising debt and spending cuts, and have abandoned orders or asked shipyards to delay deliveries of offshore drilling rigs and production facilities. That’s caused shipyards to post losses or smaller profits after writing off costs from projects under construction, and demand has fallen with crude prices still less than half of what they were three years ago.

    "The sustained low oil price environment continues to take a toll on the global oil and gas industry, which is in the midst of one of the most severe downturns in recent years," Chief Executive Officer Loh Chin Hua said in the statement.

    Keppel fell 2 percent to close at S$6 Monday before the earnings announcement. The stock has fallen 7.8 percent this year.

    Keppel and its smaller rival Sembcorp Marine Ltd. also face risks from Brazil, where debt-ridden Sete Brasil Participacoes SA accounts for a combined $10.5 billion in orders for semi-submersibles and drill ships at the two companies. Sete Brasil fell into financial distress after it was unable to secure long-term financing and its only client state-run oil producer Petroleo Brasileiro SA, or Petrobras, faced allegations of kickbacks.

    Keppel wrote off S$230 million in the fourth quarter over delinquent projects.

    Brazil, which has traditionally been one of the company’s key markets, "continues to be mired in economic and political challenges," Loh said.

    Keppel stopped construction work for Sete Brasil and won’t resume until payment commences, Loh said.

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    Iran urges oil producers to keep discussing freeze, says it can't sign up

    Iran urged other oil producers on Monday to continue talks on an output freeze to prop up crude prices, but insisted it was justified in not freezing its own output.

    Iranian OPEC Governor Hossein  Kazempour Ardebilli was speaking to his oil ministry's Shana news agency after talks on Sunday between producers in Doha collapsed when Saudi Arabia demanded that Iran join a freeze. Iranian representatives were not present at the talks.

    "We support cooperation between OPEC and non-OPEC member countries and efforts to bring stability to the oil market, and we urge all producers to continue their negotiations," Ardebilli said.

    But he also said Iran had made it clear that it wanted to regain its share of the oil market lost when it was hit by economic sanctions, and that "its position is supported by most OPEC and non-OPEC members around the world".

    The sanctions were lifted in January after Iran and the group of world powers known as the P5+1 agreed on curbs to Tehran's nuclear programme.

    Ardebilli said that if Iran participated in the proposed output freeze, it would in effect be maintaining sanctions on itself.

    "Those who opposed the nuclear deal between Iran and the P5+1 and the lifting of cruel sanctions on the Islamic Republic... proposed the oil output freeze in January 2016, having the illusion that Iran has no other choice but to accept," he said, in an apparent reference to Saudi Arabia.
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    DOE authorizes Flint Hills to export LNG

    The United States Department of Energy recently issued an order granting Flint Hills Resources to export liquefied natural gas from the Stabilis Energy’s Eagle Ford LNG facility in George West, Texas.

    The permission to export produced LNG has a term of 20 years and the authorized amount of 3.62 billion cubic feet of natural gas per year, DOE’s order reveals.

    The permit restricts Flint Hills only to export to countries with which the United Stated has or will have a free trade agreement.

    Flint Hills, a Delaware limited liability company with its principal place of business in Wichita, Kansas, and a unit of Koch Industries, said it is negotiating with  Stabilis Energy to buy LNG for export from its George West LNG facility.

    According to Flint Hills, the facility has been producing LNG as a replacement fuel for domestic diesel used in transportation and exploration and production, adding that no additional infrastructure would be required.

    The facility has a storage capacity of 270,000 gallons of LNG, and according to Flint Hills, LNG from the facility will be loaded onto ocean-going vessels for transport to destination countries using tanker trucks, or ISO containers.
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    Woodside keen to follow Qld LNG producers’ maintenance coordination lead

    Australian oil and gas producer Woodside would look at greater cooperation between liquefied natural gas (LNG) operators in Western Australia and the Northern Territory, after the Australian Competition and Consumer Commission (ACCC) this week authorised LNG operators on the east coast to coordinate maintenance schedules. 

    The ACCC has allowed the Australia Pacific LNG,  Gladstone LNG and Queensland Curtis LNG operators to discuss their maintenance schedules, maintenance providers and maintenance techniques to increase efficiency in the sector. “Coordinating the maintenance undertaken at these facilities will increase the efficiency of these events and reduce the likelihood of major disruptions to domestic gas markets, which could occur if multiple maintenance events at the applicants’ facilities overlap,” ACCC chairperson Rod Sims said. 

    Sims noted that the LNG producers’ facilities convert natural gas into LNG for export, adding that each LNG facility was connected to gas wells in the Surat and Bowen basins of Queensland. However, gas is also purchased in nearby wholesale markets. When the applicants’ LNG facilities were offline, the operators could redirect their gas to these wholesale markets for sale. As the LNG facilities use large quantities of gas, this could have significant effects upon the market price when their facilities were offline. 

    Sims said that wholesale gas traders raised concerns that coordination between the LNG facilities would allow them to trade advantageously in gas markets, because each LNG producer would know when maintenance was going to occur. To address this, the ACCC had imposed a condition of authorisation requiring the LNG producers to publicly disclose maintenance schedule information that they share with each other. 

    The condition had been formulated in consultation with the LNG producers and market participants. “These LNG producers can create significant volatility in domestic gas markets when they go offline for maintenance. This condition allows all market participants to know when maintenance is going to occur and to make sure that they aren’t exposed to unnecessary risk,” Sims said. 

    The ACCC authorisation would last for a period of five years. Woodside COO Mike Utsler said on the sidelines of the eighteenth LNG conference, in Perth, that the company had been working with the east coast LNG producers behind the scenes with the intent of following their lead if a successful outcome was achieved with the ACCC. “We would look to propose to the ACCC to do the same in the Northern Territory and Western Australia because it's an issue for all of Australia,” Utsler said.
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    Oversupply crashes Asian gasoline cracks, lengthens contango

    High refinery runs across Asia and a huge amount of arbitrage cargoes for March and April arrival have created severe gasoline oversupplies that have defied the product's seasonal price patterns.

    "We may not see a gasoline summer peak this year," a trader in the city state said. The benchmark FOB Singapore 92 RON gasoline crack against front-month Brent futures stood at $7.52/b at the Asian close Friday, 55.82% lower from the year-to-date high of $17.02/b saw on January 12. The sharp downward trend in cracks is highly unusual for the fuel's seasonal price movement, which usually starts picking up towards summer as demand goes up and supplies tighten due to turnarounds.

    The refinery turnaround schedule is light so far this year with most producers incentivised to run their units at high or full levels to cash in on higher light-ends margins, despite the sluggish middle distillates market.

    Higher refinery run rates have led to larger export volumes from North Asian countries, with first-quarter shipments up more than 50% year on year from China, about 20% each from Japan and Taiwan, and more than 10% from South Korea, customs data showed.

    These cargoes were more than enough to meet all the importing countries' increased demand, with some parcels having to head outside of Asia to look for outlets.

    Adding to the crowded supply scene was arbitrage cargoes brought in from Europe and the US.

    Switching from winter to summer specifications rendered some western gasoline unusable in their markets. This coupled with already high inventories there had encouraged traders to move these surpluses over to Asia to look for opportunities.

    Loaded on Long Range-sized vessels, these gasoline cargoes are of lower RON and specifications barely suitable for most importing countries here except Indonesia.

    The cargoes now floating on Singapore seas could amount to between 3 million and 4 million barrels, some market participants estimated.

    This is on top of the 14 million-15 million barrels of light distillates in Singapore's onshore storage. 

    The temporarily unwanted inflows coincided with lower-than-usual demand from Asia's top importer, Indonesia, which is expected to import less than 7 million barrels of its most widely used 88 RON gasoline in both April and May.

    Ever since the country's state-owned Pertamina started operations at two new domestic gasoline units last year, the country's import volume has fallen sharply.

    Despite peak demand coming in early June with Ramadan, market participants were not expecting Pertamina to significantly stock up in May as the country's limited storage spaces are already relatively full.

    Import increases could come later in June as Pertamina replenishes stocks.

    Only by then can the cargoes now floating at sea be absorbed, market participants said.

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    The oil rig count downward trend continues in Texas, U.S.

    Texas again led the way in another drop in the number of rigs actively drilling for crude as just 351 oil rigs are left nationwide.

    Both Texas and the U.S. saw a net loss of three rigs in the past week, according to weekly data compiled by Baker Hughes. That leaves a U.S. total of 440 rigs, including 89 gas-seeking rigs, which represents the lowest total count since the oil field services company first began compiling the data in 1944.

    Texas’ Permian Basin and Eagle Ford remain the two most active shale plays in the county, based on drilling activity, but each lost one rig this week. Texas is still home to 45 percent of the nation’s operating rigs.

    Analysts have projected the rig count would dip through most of the first half of 2016. The oil rig count is now down more than 78 percent from its peak of 1,609 in October 2014 before oil prices began plummeting.

    The benchmark price for U.S. oil was down nearly $1 on Friday and hovering near $40.60 per barrel.

    While many companies have stopped actively drilling new wells, it hasn’t stopped them from producing oil from existing wells. So oil production is taking much longer to fall than the rig count.
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    Kuwait lowers crude production 1.9m bpd on strike.

    Kuwait reduced its crude oil output and refining production on Sunday as part of an emergency plan to help the OPEC member deal with the largest petroleum workers' strike in years.

    Thousands of Kuwaiti oil and gas workers are striking to protest against a government plan for public sector pay reforms, although non-Kuwaiti workers in the industry are not on strike. Unions have not said how long the walkout will last.

    Kuwait Oil Company (KOC) spokesman Saad Al-Azmi said in a posting on KOC's Twitter account that the company had cut crude output to 1.1 million barrels per day (bpd) from its normal production level of about 3 million bpd.

    State refiner Kuwait National Petroleum Company (KNPC) has also reduced production, to some 520,000 bpd from 930,000 before the stoppage started on Sunday, Kuwait's state-owned news agency KUNA reported.

    It quoted KNPC chief executive Mohammed Ghazi Al Mutairi affirming its "success ... in implementing the emergency plan and operating the company's three refineries".

    Khaled al-Asousi, a spokesman for KNPC, said without elaborating that there was an increase in fuel supply to the local market and to the ministry of electricity. Export ports were operational and tankers were loading, he said.

    Oil sector spokesman Sheikh Talal al-Khaled al-Sabah said in remarks carried by KUNA that oil exports had not been affected by the strike and that Kuwait was capable of fulfilling the demands of its customers.

    In a later statement on Twitter, al-Khaled said production rates were gradually improving and that normal levels were "not far off".

    Kuwait's cabinet said in a statement carried by KUNA that the strike would hamper work in the vital sector and that it had authorised state oil companies to take all necessary steps to find labour and ensure production was not affected.

    The cabinet also said it would take legal measures against any unacceptable practices.

    Sheikh Mohammad al-Mubarak al-Sabah, minister for cabinet affairs, told Reuters the strike was illegal as union members had refused to negotiate ahead of the stoppage.

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    Oil producers get worst possible outcome, destroy remaining credibility.

    It was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests.

    Expectations for the meeting had been modest at best,
    with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia's insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn't countenance.

    From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome.

    The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports.

    What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports.

    The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised.

    What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the Organization of the Petroleum Exporting Countries (OPEC) or erstwhile ally Russia.

    Brent crude fell nearly 7 percent in early trade in Asia on Monday, before partly recovering to be down around 4 percent.

    The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal.

    It's likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in.

    This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance for the grouping to reach some sort of agreement.

    For the time being, OPEC's credibility is shot, and won't be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market.

    However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely.

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    EIA: Winter Ends with Record High NatGas Storage on Hand

    In the natural gas world there are two seasons: winter (when you use natural gas) and summer (when you “inject” or store natural gas). The “winter strip” goes from November to March, and the “summer strip” runs from April through October.

    Storage levels are a key factor in the pricing of natural gas. Economics 101: the price for commodities like natgas is purely a function of supply and demand. If you have more supply than demand, the price goes down. In the northeast part of the country we just came through the mildest (temperature-wise) winter in a generation.

    We used a lot less natgas than we normally would. That means the gas sitting in storage didn’t get drawn down nearly as much as it usually does. That’s what you would expect, and the U.S. Energy Information Administration (EIA) has confirmed it.

    We ended the winter heating season at the end of March with “record high levels” of natgas sitting in storage. And now we begin the process of storing more. If all other factors remain equal–meaning there’s no new or sudden increase in demand this summer–it doesn’t take a genius to figure out how record high storage levels will affect the price.
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    Santos eyes GLNG Train 2 first cargo

     Australian independent Santos is on track to deliver the first cargo from Train 2 at its Gladstone LNG project off Australia by the end of June.
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    Platts Analysis of U.S. Energy Information Administration (EIA) Data: Refinery, Pipeline Outages hit U.S. Refinery Runs

    U.S. Gulf Coast and Midwest refiners were forced to sharply cut their crude runs owing to refinery and pipeline issues during the week ended April 8, an analysis of U.S. Energy Information Administration (EIA) data showed Wednesday.

    Total U.S. crude oil inventories rose by 6.634 million barrels to 536.531 million barrels, a significantly larger build than the 1 million barrels expected by analysts surveyed by Platts earlier in the week.

    In the Midwest, where refinery utilization fell by 5.3% to 82.4%, refineries reduced their crude runs after TransCanada shut its 550,000 barrels per day (b/d) Keystone pipeline -- which carries heavy Canadian crude from Hardisty, Alberta, to Patoka, Illinois -- after discovering an oil leak on April 2.

    While TransCanada restarted the pipeline over the weekend, the pipeline outage still appeared to be weighing on refinery throughput in the region. The 336,000 b/d Wood River refinery in Roxana, Illinois -- a joint venture between Phillips 66 and Cenovus -- experienced an upset on Tuesday after attempting to restart a unit following the Keystone restart.

    While the pipeline outage led refiners to cut throughput, crude stocks in the region drew by 1.988 million barrels as crude was taken out of storage to account for the reduction in imports.

    Stocks at Cushing, Oklahoma -- delivery point for the New York Mercantile Exchange (NYMEX) crude futures contract -- fell 1.767 million barrels to 64.55 million barrels.

    While Cushing stocks are still relatively oversupplied, this too has fallen. With last week's drop, Cushing inventories fell to just 5% above the five-year average of EIA data, down from over 10% the week prior and from over 30% in late-February.

    The prompt NYMEX crude contango -- trading around $1.28/b during midday New York trading Wednesday -- has narrowed sharply over this period, having widened as far as $2.62/b on February 11.

    This is reflected even more starkly in longer-dated time spreads such as the prompt-month/12th-month contango, which was trading around $4.40/b Wednesday, in from nearly $12/b in mid-February.Meanwhile, Midwest imports fell 686,000 b/d to 1.881 million b/d, while total U.S. imports from Canada fell 586,000 b/d to 2.581 million b/d -- roughly equal to the capacity of the Keystone pipeline.


    On the U.S. Gulf Coast, refinery utilization fell 1.9 % to 93.2% after a coker at LyondellBasell's 268,000 b/d Houston refinery caught fire Friday. The refinery was forced to cut runs by roughly 30%, amounting to 2% of regional coking capacity.

    Earlier in the week, Citgo shut a 44,900 b/d delayed coker at the West Plant of its 157,500 b/d Corpus Christi, Texas, refinery. A Citgo spokesman gave no timeline for repairs Wednesday.

    Gulf Coast crude stocks added 6.992 million barrels on the sharp reduction in run rates.

    A sharp rebound in U.S. crude oil imports from Iraq made up for the reduction in imports from Canada, as U.S. imports rose 692,000 b/d to 7.94 million b/d. Total imports were just 86,000 b/d above the year-to-date average.

    Imports from Iraq jumped to 634,000 b/d after dwindling to 59,000 b/d the week prior. Imports from Iraq averaged 213,800 b/d in 2015 and have averaged 277,600 b/d thus far in 2016, and were last higher in the week ended August 29, 2014.

    The rise in total imports would have been significantly higher if not for the Keystone outage, as a tight West Texas Intermediate (WTI)-Brent spread has encouraged imports of Brent-linked crude into the United States.

    Front-month WTI futures averaged a discount of 66 cents/b in March and have averaged a discount of 84 cents thus far in April, according to Intercontinental Exchange. In February, the discount was wider, averaging 1.47/b.

    Additionally, some analysts previously cited reduced imports on weather delays in the Houston Ship Channel, which may have landed on the U.S. Gulf Coast during this reporting week.
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    Default Cycle Now In Full Swing As Goodrich Petroleum Is Latest To File Chapter 11

    The energy bankruptcy wave has been officially unleashed.

    After just yesterday Energy XXI became the latest oil company to seek bankruptcy protection, this morning another troubled energy producer, Goodrich Petroleum announced a prepackaged Chapter filing meant to implement a financial reorganization after struggling to restructure its debt amid declining energy prices.

    In its press release, the company announced, that "through the Chapter 11 restructuring, the Company will eliminate approximately $400 million in debt from its balance sheet, substantially deleverage its capital structure and strategically position the Company for long-term performance in an anticipated improving commodity price environment. The RSA eliminates all of the Company's prepetition funded indebtedness other than its first lien reserve based loan facility, which currently has approximately $40 million outstanding, resulting in a significantly deleveraged balance sheet upon the Company's emergence from the Chapter 11 bankruptcy process. "

    The filing, just like EXXI's is not a surprise: Goodrich earlier this month reached an agreement with creditors to use its “best efforts” to file for Chapter 11 with a prepackaged plan to reorganize and emerge from court as an operating business. That agreement came after the company’s debt-for-equity exchange offer failed to gain enough traction among debt holders.

    As Bloomberg reminds us, on March 16, Goodrich delayed releasing its annual report, citing a large loss that auditors have determined may affect the company’s ability to operate as a going concern. The loss comes "mainly as a result of substantial impaired asset writedowns," Goodrich said in the filing.

    But what is most notable, and goes back to what we have said for the past year, is that even in bankruptcy energy companies will continue operating, and perhaps pump even more than prepetition: as Goodrich adds, the prepack agreement "provides for the Company's executive management team to remain with the Company, which will allow for the Company's operations to continue as normal throughout the court-supervised financial restructuring process, including the payment of royalty and operating expenses."

    In other words, the pumping will go on.
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    China shale gas output soars as govt aims to improve energy structure

    Shale gas production in China soared in 2015, giving a powerful boost to the commercial exploitation of the fuel, the latest data showed.

    The output of shale gas soared 258.5% to 4.47 billion cubic meters (bcm) in 2015, Yu Haifeng, director of the department of mineral resources reserves under the Ministry of Land and Resources, told a press conference.

    However, China's shale gas output in 2015 missed the target of 6.5 bcm, a goal set in 2012.

    "China's total shale gas output has reached 5.72 billion cubic meters since 2014, when the commercial exploitation of shale gas began," he said.

    There was also a great breakthrough in China's shale gas exploration during the 12th Five-Year Plan period (2011-15), with cumulative new proven reserves of 544.13 bcm, said Yu.

    Commercial production of shale gas is on a fast track in the nation. Oil giants such as China Petroleum and Chemical Corp and PetroChina have begun exploration for the fuel in the southwestern regions of China and they made major strides.

    The exploration, development and production of shale gas can improve China's overall energy structure, media reports said, citing experts.

    Shale gas production was included as a national strategic emerging industry in 2013, according to an announcement on the website of the National Energy Administration.

    China's shale gas exploration companies can get State subsidies of 0.3 yuan ($0.05) per cubic meter from 2016 to 2018, and 0.2 yuan per cubic meter from 2019 to 2020, according to the Ministry of Finance.
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    Goldman Sachs, Denmark Said to Target Dong IPO This Quarter

    The owners of Dong Energy, who include the Danish government and Goldman Sachs, may hold an initial public offering almost one year before a previously announced deadline, according to three people close to the talks.

    The people, who asked not to be identified by name because the talks are private, said Dong’s owners still reserved the right to delay a public listing should markets suddenly turn. Denmark’s Finance Ministry in September laid out an 18-month time horizon for bringing Dong to market. Morten Kidal, a spokesman at Dong Energy, declined to comment.

    Finance Minister Claus Hjort Frederiksen said last month the timing of the IPO would depend more on the state of the stock market than on the price of oil. Those comments followed a 16 billion kroner ($2.4 billion) writedown in January of Dong’s oil and gas unit, which the company had sought to divest.

    Denmark’s benchmark stock index, the OMX Copenhagen 20 CAP, has gained about 15 percent since a 2016 low on Feb. 9. Brent prices have also recovered and are up about 50 percent over the last 3 months after plunging 35 percent in 2015.

    A potential stumbling block for an early listing could be the pricing of Dong’s oil and gas distribution network, which under the IPO agreement is to be sold to government-owned, one of the persons said.

    The Danish parliament’s finance committee on Thursday officially gave the government backing to list Dong Energy. Denmark has been planning to list the company since 2004 but has postponed an IPO several times.
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    Alternative Energy

    Copper mine glut puts brakes on Latin America’s clean-power boom

    The global copper slump is helping to tap the brakes on Latin America’s fastest-growing renewable-energy market.

    Chile, the world’s biggest copper producer, has been adding solar panels and wind turbines for two years to supply power-thirsty smelters that process ore from remote mines in the sun-baked northern desert. But with metal prices half what they were five years ago,  output fell and energy demand slowed. That’s compounding an electricity glut in a self-contained power grid thousands of miles from population centers in the stick-shaped South American country.

    “The first boom of clean energy is over,” said Carlos Barria, a former chief of the government’s renewable-energy division who is now a professor at the Pontificia Universidad Catolica de Chile University in Santiago. “We are going to see fewer new projects.”

    While solar installations will triple this year, reflecting projects financed before the electricity-price slump, banks have pulled back on financing, which means the number of new panels in 2017 will plunge by 66 percent, according to Bloomberg New Energy Finance. For wind turbines, the slump will happen sooner, with installations dropping 62 percent in 2016, after developers added 900 megawatts in the previous two years, BNEF estimates.

    Most of the new capacity has been built in the northern region of a country that stretches more than 4,200 kilometers (2,600 miles) along the Pacific Ocean from Peru to the Southern Ocean of Antarctica. There are no transmission lines to connect electricity generated for the mining industry — which uses a third off Chile’s energy — to the power grid serving the more-populated areas in the central part of the country, or further south.

    Spot electricity in Chile tumbled last year to $104 per megawatt hour, down 34 percent from 2013, Energy Ministry data show. Prices in the regulated market also are falling, fulfilling a pledge by the government to reduce power costs. As recently as October, as more wind and solar plants came online, electricity was being auctioned at $79.30.

    “There is overcapacity in the north of Chile, and the prices are going down,” said Rafael Mateo, chief executive officer of the energy unit at Acciona SA, which already has a wind farm in Chile and is building solar projects in the country. Alcobendas, Spain-based Acciona wants to have 1 gigawatt of renewable energy capacity by 2020.

    Compounding the glut is the mining slump. Too much copper and slowing global demand sent the metal to a seven-year low in January, and several big producers including BHP Billiton Ltd. and Anglo American Plc have reduced operations in Chile. The country’s total production in the first two months of the year were 6.7 percent lower than the same period in 2015, according to the National Statistics Institute.

    More than 70 percent of planned spending on new production is either frozen or under review, and investments over the next decade may reach $40 billion at most, less than the $110 billion expected in 2012, according to the National Society of Mining, known as Sonami. The organization now estimates the industry’s electricity needs will rise by 54 percent in the next decade, down from a forecast of 80 percent in 2014.

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    SunEdison Files For Bankruptcy

    It's over. After months of arguing that everything will be ok as investors flee the troubled company, it is now officially over:

    Terraform Power and Global are not part of the filing.

    The company reported between $10-50 billion in assets and $10-50 billion in debt.

    As part of its filing, SunEdison reports its has obtained a $350MM DIP loan:

    WHEREAS, the Company, as borrower, has requested that one or more potential financing sources (which may include certain lenders or noteholders under certain of the Company’s existing secured indebtedness) (collectively with any agent, arranger and letter of credit issuer under any DIP Facility (as defined below), the “DIP Lenders”) arrange, backstop and/or provide one or more debtor-in-possession superpriority credit facilities, including (i) a new money term loan facility (the “DIP NM TL Facility”), which may include a roll-up of up to $350 million aggregate principal amount of the Company’s existing second lien loans and second lien convertible notes, to the extent required by the applicable DIP Lenders and authorized by the Bankruptcy Court (the “DIP TL Roll-Up Facility”), and (ii) a roll-up or refinancing of the Company’s existing first lien letter of credit facility (up to an amount equal to the full principal amount outstanding thereunder, any unused commitments thereunder and the face amount of issued and undrawn letters of credit thereunder) to provide for the extension and renewal of existing letters of credit (and, to the extent agreed by the applicable DIP Lenders, the issuance of new letters of credit thereunder) and/or additional letter of credit facilities to provide for the issuance of new letters of credit and/or backstop or replacement of existing letters of credit (collectively, the “DIP LC Facility” and collectively with the DIP NM TL Facility and DIP TL Roll-Up Facility, the “DIP Facilities”) subject to exceptions and limitations to be set forth in any orders of the Bankruptcy Court concerning any of the DIP Facilities (the “DIP Financing Orders”);
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    Britain's National Grid to pay firms to use power this summer

    A dozen British companies will be paid to use electricity under a scheme National Grid will launch next month aimed at balancing the system in summer, when output is high from renewable energy sources such as wind and solar.

    National Grid said 12 companies have won contracts for the Demand Turn Up scheme which will run from May until September.

    "For the 2016 service period we have procured 309 megawatts of Demand Turn Up," National Grid's Nick Blair, senior account manager of the scheme, said in an email.

    Under the scheme, companies will conduct some operations at night or at midday when there is a lot of electricity generation from wind farms and solar power plants.

    As a part of the tender, companies were required to prove they need to carry out such operations and that the electricity would not be wasted.

    National Grid declined to name the winning companies but said an example could be a water firm shifting their pumping processes to a time when supply is high but demand is low.

    The scheme was also open to small scale power generators that can also reduce their output at short notice, such as combined heat and power units, which generate electricity as a by-product of heating.

    The companies will be paid 1.5 pounds per megawatt hour (MWh) for participating in the scheme. They will be paid a further 60-75 pounds/MWh if called upon to act.

    British spot electricity prices currently trade around 37 pounds/MWh.

    In 2014 National Grid paid 10 million pounds ($14.43 million) to wind power generators to stop production when electricity demand was low to ensure the system was not oversupplied.

    National Grid forecasts electricity demand will hit a record low this summer.

    Meanwhile renewable electricity output in Britain is rising. It accounted for a record 25 percent of the country's generation in 2015.
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    WTO terms India's ruling on solar power 'inconsistent'; Centre calls it 'unfortunate'

    India on Wednesday termed as "unfortunate" the recent WTO ruling which held the Centre's power purchase agreements with solar firms as "inconsistent" with international norms and said it will raise the issue during a high-level UN event this week.

    "It is unfortunate that when India has launched such a big renewable programme, very small portion of it is in a way reserved for India's small entrepreneurs.

    "We will definitely flag this issue because this shows that the way we are going green. The developed world should not have objections on such a small thing," Environment Minister Prakash Javadekar said.

    During a recent meeting of BASIC countries - Brazil, South Africa, India and China - held in New Delhi, China had come out in support of India's decision to file an appeal against the WTO ruling.

    Javadekar will sign the Paris Agreement on behalf of India on April 22 at a high-level signature ceremony convened by United Nations Secretary-General Ban Ki-moon. He will also attend the Major Economic Forum meeting on April 23-24.

    Ruling against India, the World Trade Organization (WTO) had recently said the government's power purchase agreements with solar firms were "inconsistent" with international norms -- a matter in which the US had filed a complaint before the global trade body alleging discrimination against American firms.

    The US had dragged India to WTO on this issue in 2014, alleging the clause relating to Domestic Content Requirement (DCR) in the country's solar power mission were discriminatory in nature and "nullified" the benefits accruing to American solar power developers.

    After looking into the matter, the WTO's Dispute Settlement Panel had ruled that "the DCR measures are inconsistent" with relevant provisions of TRIMs (Trade Related Investment Measures) Agreement and with the articles of the erstwhile GATT (General Agreement of Trade and Tariffs).

    The ruling was a blow to India which has announced a target of 175 GW of renewable energy by 2022, of which 100 GW will be realised through the National Solar Mission.

    Supporting India's decision to challenge the WTO ruling, Greenpeace also had earlier said the ruling "violates" the spirit of the Paris Climate Change Agreement.
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    Drax offers to end coal burning in return for green subsidies

    The head of Drax Group, Dorothy Thompson, says they are willing to accelerate the closure of itscoal-fired power units in return for green energy subsidies to help develop its biomass power facilities.

    Ms Thompson told the Financial Times, the company would be unable to transform the rest of the plant from coal to biomass without the subsidies, but could if offered the incentives, be in a position to close its coal capability inside three years.

    “We have project plans that we could execute within three years, so you could take our coal units off the system by 2020 if not before,” Ms Thompson said in an interview ahead of Drax’s annual shareholder meeting on Wednesday.

    The company has already turned its 42-year-old Selbypower station into one of the world’s biggest renewable generators over the past four years, by upgrading nearly half its six coal-fired boilers to burn wood pellets, mostly imported from the US.

    But it has only done this after receiving subsidies and other support worth £451.8m in 2015, or 17 per cent of revenues at the power plant, which supplies about 8 per cent of the UK’s electricity.

    The company has suffered from government policy as it bids to move away from coal. When a climate change tax was applied to renewable generators, Ms Thompson likened it to “putting an alcohol tax on apple juice”.

    Ms Thompson says switching Drax’s remaining three coal boilers to wood would be impossible unless the company receives more of a newer type of subsidy structured as a contract for difference, or CFD, that guarantees long-term power prices for renewable power companies.

    Drax was awarded one CFD contract for its third boiler conversion two years ago but is still awaiting state aid approval for it, a delay Ms Thompson says is “shocking”.

    Approval is widely expected because Brussels waved through support in December for a coal-to-wood pellet conversion at the smaller Lynemouth power station.
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    Burying Pollution Tested With $1.5 Billion Project in Australia

    The idea that significant amounts of greenhouse gases can be buried underground will be tested soon at a remote island off northwest Australia, where oil companies led by Chevron Corp.are poised to inject pollutants 2 kilometers (1.25 miles) into the Earth’s crust.

    The A$2 billion ($1.5 billion) carbon capture and storage project at Barrow Island about 37 miles off the coast will be the biggest of its kind when it starts by next year. It’s part of the gigantic Gorgon liquefied natural gas development, which began production last month after $54 billion of investment and will run for four decades.

    So-called CCS plants are crucial to holding back climate change, accounting for a seventh of the emissions reductions theInternational Energy Agency says are needed to keep the planet from overheating. While the Barrow CCS project will be a milestone for the effort to sequester greenhouse gases, it also highlights the difficulties of the technology. It wouldn’t have happened without the government pushing it, stepping in with A$60 million in funds and vowing to assume long-term liability should any of the gas escape.

    “It doesn’t happen without the government doing something,” said Tony Wood, director of the energy program at the Grattan Institute research group in Melbourne and an adviser to governments in the region on clean-energy technologies at the Clinton Foundation until 2014. “You can either put in place a carbon price, throw money at it as a government or you can regulate it. In this case, they effectively chose the third.”

    The Western Australian government insisted on Barrow CCS as a condition of approving Gorgon, whose developers also include oil majors Exxon Mobil Corp. and Royal Dutch Shell Plc. At the time the investment decision was made in 2009, the government was planning to introduce a carbon trading system that would have underpinned the economics of the project. The development will inject as much as 4 million tons of carbon dioxide per year at Barrow Island, reducing Gorgon’s emissions by 40 percent.

    “It is still early days for these types of projects, and they are costly,” John Watson, Chevron’s chief executive officer, told reporters in Perth on April 12. “So the ultimate application of these technologies will be their competitiveness.”

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    China's CGN Q1 power output up 54.4pct on year

    China General Nuclear Power Group (CGN), a large clean energy enterprise in China, produced 24.46 TWh of electricity or 22% of the targeted volume for 2016 in the first quarter of the year, soaring 54.42% on year, said the company in its latest statement.

    It was mainly due to the marked year-on-year rises in power output of its subsidiaries Yangjiang Nuclear Power Co., Ltd and Liaoning Hong Yanhe Nuclear Power Co., Ltd, as well as less maintenances over January-March than the same period last year, said the statement.

    Social power use declined during the period when China was celebrating Lunar New Year, and some power generating units of the company slowed or even suspended operation. These units all recovered operation currently. The company has 9 nuclear power generating units under construction by end-March this year.

    In the first quarter, CGN saw operating revenue increasing 67% on year to 6.87 billion yuan ($1.06 billion), with net profit up 36% on year to 1.94 billion yuan or 26% of the targeted volume for 2016.
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    Orocobre: Olaros ramp-up reaches cash breakthrough

    Argentina miner Orocobre has achieved operating cash-cost breakthrough at its Olaroz lithium project as production ramped up to 2,332t lithium carbonate in the March qtr (Q1), within 97% of its 2,400t target and up from 1,108t in the Dec qtr. Orocobre expects 3,000t in Q2.

    After first deliveries of battery-grade product in Q1, more are scheduled in Q2 at forecast lithium carbonate prices over $US7,500/t FOB. Orocobre expects more increases further into the year.
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    Cameco suspends production at its Rabbit Lake operations, cuts 500 jobs

    Canadian uranium producer Cameco Corp said it is suspending production at its Rabbit Lake operation in northern Saskatchewan, while also reducing production across Cameco Resources' U.S. operations.

    The company said the changes are expected to reduce about 500 positions at Rabbit Lake, and around 85 at the U.S. operations.

    The uranium producer cited continued depressed market conditions that cannot support the operating and capital costs needed to sustain production at Rabbit Lake and the U.S. operations.

    The reduction in headcount will affect long-term contractors, as well as employees, Cameco reported on Thursday.

    "These measures will allow us to continue delivering value to Cameco's many stakeholders and support the long-term health of our company. We will provide assistance to those affected by these decisions", said Cameco President and CEO Tim Gitzel.
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    German commission eyes 24 bln eur payment for nuclear waste storage-sources

    The commission charged with how to apportion the costs of Germany's nuclear exit wants operators to pay about 24 billion euros ($27.22 billion) into a state-run fund for the end and intermediate storage of radioactive waste, sources familiar with the plans told Reuters.

    The sources said only a minority of the 19 members of the government-appointed commission are in favour of the operators paying more than 26 billion euros.

    The Commission aims to complete its recommendations on Wednesday and make them public, said the sources.
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    Uranium market is getting crushed

    Uranium is having the worst start to a year in a decade. U3O8 is down more than 25% in 2016 with the UxC broker average price sliding to $25.69 a pound on Friday. That's the cheapest uranium has been since May 2, 2005.

    At no point since Fukushima, did the average weekly spot price dip below $28 a pound

    Haywood Securities in a  research note points out that the spot U3O8 price "saw three years of back-to-back double-digit percentage losses from 2011-13, but none worse than what we’ve seen thus far in 2016, and at no point since Fukushima, did the average weekly spot price dip below $28 a pound." The long term price, where most uranium business is conducted, is languishing at around $44 a pound.

    Uranium was actually the best performing commodity in 2015 by virtue of having declined in value only slightly over the course of the year. So what's happening?

    Vancouver-based Haywood attributes the decline to "a dearth of non-discretionary buying from utilities combined with an over-supplied market which continues to inflate global inventories, partially attributable to the continued shutdown of Japanese reactors and the ramp-up of production at selected uranium mines including Cigar Lake."

    Five years after the Japanese disaster only two of the country's 50 nuclear reactors are back on line.  In other developed markets nuclear power is also in retreat.

    Top user France which relies on its 58 plants for more than three-quarters of its electricity needs, has begun a program to reduce that figure to 50%.   Problems with next-generation plants developed by French state utility EDF and top supplier Areva are well-documented. Germany is phasing out the technology.

    Prospects for new reactor build are very different in China (22 under construction), India (6 being built), Russia (8 inside the country and another 2 in neighbouring Belarus) and the Middle East (4 under construction in the UAE with many more planned in the region). But growth in emerging uranium markets may also be less rosy than the build-out numbers suggest.

    Special arrangements like top producer Kazakhstan's uranium-sovereign debt deal with China leave little room for non-state players. India's focus and expertise is with reactors using locally-sourced thorium and longer-term low oil prices may rein in any nuclear energy ambitions in middle-Eastern countries and Russia.

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    Germany asks Belgium to switch off nuclear reactors

    Germany has asked Belgium to take two nuclear reactors temporarily off the grid while questions about their safety are cleared up, an unusual diplomatic move that underscores German concerns about the plants.

    Production at Belgium's Tihange 1 nuclear reactor was halted for about 10 days in December because of a fire. Staffing has also been reduced to minimize the risk of unauthorized personnel gaining access to the plants after the November attacks on Paris and the March attacks on Brussels.

    Environment Minister Barbara Hendricks said on Wednesday that the decision to request another shut down of the Tihange 2 and Doel 3 reactors came after Germany's independent Reactor Safety Commission advised that it could not confirm the reactors would be safe in the event of a fault.

    Deputy Environment Minister Jochen Flasbarth telephoned the Belgian Interior Minister on Hendrick's behalf on Tuesday to request a shutdown pending further safety investigations. Officials did not specify a timeframe.

    The core tanks at the 33-year-old Doel 3 and Tihange 2 reactors were built by Dutch company Rotterdamsche Droogdok Maatschappij, which has also built reactors in other countries.

    The two reactors, both with about a gigawatt of capacity, were closed in 2012 and again in 2014 after a brief restart, after inspections unveiled tiny cracks in their core tanks.

    But the Belgian regulator authorized a restart in November 2015 after finding that the cracks were hydrogen flakes trapped in the walls of the reactor tank and had no unacceptable impact on the plant's safety.

    "I consider it right that the plants are temporarily taken offline at least until further investigations have been completed. I have asked the Belgian government to take this step," Hendricks said in a statement.

    She added the move would send a strong signal to reassure Germany and show that Belgium is taking the concerns of its neighbors seriously.

    Belgian nuclear regulator FANC expressed surprise at the German minister's remarks, saying in a statement that it had explained the issue with the reactors at a meeting of international experts.

    "The nuclear reactors at Doel 3 and Tihange 2 fulfill the highest security standards," the agency added.

    Spurred by the disaster at Japan's Fukushima plant in 2011, Germany pledged to abandon nuclear power generation completely by 2022 in favor of other power sources.

    Hendricks' comments are the highest profile criticism of the Belgian nuclear reactors so far in Germany, with the region around Aachen and the state of North Rhine-Westphalia having previously voiced concern.

    Last week, the state of North Rhine-Westphalia said it would join a lawsuit brought by the Aachen city region against the Tihange 2 reactor, which is roughly 65 kilometers (about 40 miles) away from the west German city.

    Germany has long been nervous about the safety of the reactors and a working group of officials met earlier this month to discuss the issue. Flasbarth told reporters talks with Belgian authorities had been constructive.

    He added the decision to make the request had not been taken lightly and that Germany would give the Belgian government time to respond.
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    French nuclear watchdog says investigating falsified engineering reports

    French nuclear security watchdog ASN said on Monday that it had been informed of the falsification of control reports by a French engineering company which produces parts used by industries that supply the nuclear sector among others.

    ASN did not namee companies involved, but said in a statement that equipment destined for a research reactor under construction may have been affected.

    The watchdog said an investigation has been launched to determine the scope of the falsification. It also requested that the nuclear industry sector carry out checks.
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    Fertiliser group Yara sees benefits of lower energy costs

    Fertiliser maker Yara International on Thursday reported stronger than expected first-quarter earnings and said lower energy costs in the next two quarters would help its performance, sending its shares up.

    The company has been cutting costs and increasing investments to become more competitive in the face of difficult market conditions.

    Chief executive Svein Tore Holsether said the company had produced strong results in a challenging market environment, where weaker fertilizer prices and lower deliveries impacted earnings.

    "Lower natural gas cost in Europe continued to improve Yara's competitive position during the quarter," he said.

    Yara's energy costs in the second quarter would be 1.15 billion crowns lower than a year ago, and would be 1.0 billion crowns lower in the third quarter, the company said, due to lower oil and gas prices. Its fertilizer business is a big energy consumer.

    It reported earnings before interest, taxes, depreciation and amortisation, excluding one-offs, of 5.1 billion crowns ($628.47 million) in the quarter, down from 5.7 billion a year earlier, but above analysts' forecasts for 4.9 billion in a Reuters poll.

    "Given the fall in share price the last months, the market's expectations for the quarter had clearly come down ahead of the report," said Thomas Nielsen, a fund manager at Norwegian fund Odin, which holds shares in the company.

    "As such adjusted EBITDA down 12 percent compared to same quarter last year, was probably not so bad after all. We believe lower energy prices may have a positive impact going forward."
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    Neonicotinoids and Bees: the heat is on.

    Despite the fact that bee-endangering pesticides are banned in the EU, the UK government just gave the go-ahead to farmers to sow these toxic-coated seeds anyway. Any day now, Bayer and Syngenta's toxic bee-hurting seeds could be sown -- wreaking even more havoc on our bees.

    Instead of listening to us, the Government listened to the intensive farming industry - ignoring the growing evidence of how dangerous these chemicals are to bees and other pollinators.

    Hundreds of thousands of people have already signed petitions to the UK Government to stop harming our bees, and they're feeling the sting. A massive public outcry could force the government to back down and protect bees.

    Sign the petition now to the UK Government: stop allowing our bees to die -- uphold the pesticide ban!

    Neonicotinoids or "neonics", the world's most widely used insecticide, were restricted in the EU in 2013 because they were found to be of 'high acute risk' to bees. They can still be used on some crops but not those that attract bees when they flower.

    Serious scientific evidence shows that the nerve agents cause serious harm to bees - whose pollination is vital for many crops, and thus threaten our whole food supply.

    This plan to sow UK fields with treated bee-harming seeds flies in the face of science and facts.

    The Government gagged its own pesticide advisers to try and stop campaigners from piling pressure on the government -- showing that they are terrified of a massive public outcry. They haven't even seen the half.

    Companies like Bayer and their associates have been trying to overturn the neonics ban in the EU for years - using lawsuits and intimidation tactics to try and get their way. But we've been there at every step, fighting hard to make sure our precious pollinators aren't stamped out by corporate greed.

    Let's swarm the UK Government with signatures now and make sure they protect bees once and for all.


    More information:
    UK government gags advisers in bees and pesticides row, The Guardian, July 17, 2015
    Not Just Bees: Controversial Pesticides Linked to Bird Declines, Wired, 7 Sept 2014

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    Precious Metals

    Alrosa first-quarter diamond sales rise 34 pct

    Russian diamond mining company Alrosa's first-quarter sales rose 34 percent year-on-year to 12.1 million carats, the world's largest producer of rough diamonds in carats said in a statement on Thursday.

    But Alrosa's revenue from rough diamond sales climbed a more moderate 18 percent from a year earlier to $1.3 billion after prices for gem-quality diamonds fell 9 percent to $146 per carat. Its output fell 2 percent to 8.2 million carats.

    Alrosa and De Beers, a unit of Anglo American and the world's leading diamond miner in terms of value, produce more than a half of the world's rough diamonds.

    Alrosa has suffered in recent years due to weaker global demand. It posted a loss in 2014 and in 2015 sales dropped 24 percent in carat terms, though a slide in the rouble helped it report a profit.

    In 2015, Alrosa raised its inventories by 8 million carats to 22 million carats to ease pressure on the market and said then that there would be no further increase in 2016.

    To keep inventories unchanged, Alrosa is likely to prioritise volumes of sales over prices this year, VTB Capital said in a recent report.

    The company plans to produce up to 39 million carats of diamonds in 2016, compared with 38 million carats produced and 30 million carats sold in 2015. Its 2016 sales are expected at more than $3.5 billion.

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    Newmont's earnings beat market estimates

    Gold and copper miner Newmont Mining Corp (NEM.N) reported lower quarterly earnings on Wednesday but they blew past analyst estimates due to higher copper sales from its Indonesian operation and a strong performance from its Australasian mines.

    Newmont, the world's second-biggest gold miner by market value, said its adjusted net income fell to $182 million, or 34 cents a share in the first quarter.

    Although down from $229 million or 46 cents a share in the year-ago period, it was well ahead of the 20 cents a share that analysts were expecting, according to Thomson Reuters I/B/E/S estimates.

    "A combination of lower capex, better operating performance out of Australasia and more copper sales during the quarter is really how that beat materialized," BMO Capital Markets analyst Andrew Kaip said.

    Greenwood Village, Colorado-based Newmont, left unchanged the forecasts it made in February for gold and copper production in 2016 and 2017.

    The company said its net income from continuing operations was $78 million, or 15 cents a share, in the quarter ended March 31. That compares with $175 million, or 35 cents a share, in the same period a year ago when gold and copper prices were higher.

    In the first quarter, attributable gold production from Newmont mines in the Americas, Australia, Asia and Africa rose to 1.23 million ounces of gold and 38,000 tonnes of copper. That compares with 1.19 million ounces of gold and 37,000 tonnes of copper in the same quarter a year ago.

    All-in sustaining costs to produce one ounce of gold improved to $828 an ounce in the first quarter from $849 in the same quarter a year ago.

    Prices received for its gold averaged $1,194 an ounce in the first quarter, down from $1,203 per ounce in the first three months of 2015. Average copper prices received fell to $2.02 a pound from $2.34 per pound.

    Earlier on Wednesday Newmont said vice-chair Noreen Doyle has been appointed to succeed Vincent Calarco as board chair. Calarco will remain as a director.
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    Silver is going nuts.

    Silver is going nuts

    The price of silver has exploded on Tuesday and is trading at its highest level since May 2015

    Just after 2:20 p.m. BST (9:20 a.m. ET) the metal synonymous with finishing second is the biggest gainer of all major commodities, up by more than 4.9% on the day. It is trading at roughly $17.02 an ounce. Silver gained 3% in early trading but has continued to jump.

    Here's how silver looked a few minutes ago:Image title

    The cause of silver's rally looks to be a correction in the trading ratio between gold and silver. Traditionally, silver prices track gold carefully, meaning that when gold rises, so does silver. However, this year, silver prices have lagged a little behind.

    At the start of April, gold had gained more than 13% on the year, while silver was up just 8%. However in the past couple of weeks, silver has started to gain momentum, as investors look to close the appreciation gap between the metals.

    As UBS analyst Joni Teves puts it, as quoted by the Financial Times: "It's a combination of silver getting a bit of attention over the past week with the big move in the gold/silver ratio and quite a few market participants looking at silver in and its relative performance to gold and thinking it might be time for a bit of catch up."

    Gold has been garnering most of the attention in markets in recent months, enjoying its most successful quarter in 30 years in Q1 of 2016.

    The safe-haven metal appreciated hugely in the first quarter, driven by high market volatility and a weakening dollar; however, on Tuesday, it is silver that is in focus, with gold pulled higher by silver's surge. It is up by roughly 1.75% on the day. Platinum, one of few metals to cost anywhere near as much as gold, has gained just less than 3.55%. Palladium, another rare metal, closely related to platinum, is up 2.7%.

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    Community opposition forces Newmont to abandon Conga project in Peru

    Output from Conga was supposed to replace production from the nearby Yanacocha mine (pictured), which is running out of gold. (Image from archives)

    Newmont Mining Corp's (NYSE:NEM), the world's 2nd largest gold miner, is walking way from its $5 billion Conga copper and gold project in Peru after year of relentless community opposition.

    In its annual filing with the U.S. Securities and Exchange Commission (SEC), the Colorado-based miner said that due to current social and political conditions, the company “did not anticipate being able to develop Conga for the foreseeable future.”

    Locals welcomed the news, which granted Peruvian farmer Máxima Acuña de Chaupe the Goldman Environmental Prize.

    Acuña, who has been at the forefront of the opposition against the Conga project since it was first proposed in 2010,said in a statement she only has one more wish. “I want to return to the peaceful life I had on my land with my family for almost 20 years.”

    Newmont decided to halt construction work at the project in November 2011, after violent protests led by governor Gregorio Santos forced the country's government to declare a state of emergency.

    Peruvian farmer Máxima Acuña de Chaupe has won the Goldman Environmental Prize after Newmont removed its proposed Conga gold mine in northern Peru from its list of reserves in its annual filing with the SEC. (Image provided)

    Minera Yanacocha, one of the two local companies working with Newmont in the now mothballed project, tried hard to win local support, but was unable to secure it.

    Social pressure continued in the following years, to the point that Peru’s government had to hire international consultants to determine the viability of revised water strategy proposed Newmont. Eventually, authorities decided to order a suspension of all work at the site, except for the construction of water reservoirs.

    Conga, which had the potential to generate up to 350,000 ounces of gold and 120 million pounds of copper a year, during its 19-year life, was going to be built by Newmont’s existing Yanacocha mine, Latin America’s largest gold operation.

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    Net long gold COMEX positions extend to 4.5-year high: CFTC

    Managed-money investors increased net long gold positions on US commodity exchange COMEX to 170,634 contracts for the week to April 12, the highest level since September 2011, data from the US Commodity Futures Trading Commission showed Monday.

    The figure is up 12% from 152,758 contracts the previous week and is the largest weekly addition for five weeks.

    With each contract worth 100 oz, the total represents around 550 mt of gold.

    Institutional investors have built up bullish positions only since January, coinciding with the surge in this year's gold price, after eight weeks of net short positions in November and December.

    Gold has gained over 15% since the start of 2016, up to six-week highs around $1,260/oz last week on extended dollar weakness uncertainty around global monetary policy.

    "Markets [have] become generally more nervous in the aftermath of the global financial crisis and this is one of the key factors that has amplified the change in sentiment towards gold this year," UBS precious metal analyst Joni Teves said Friday.

    "Heightened risk aversion encourages holding gold as an insurance. Although an improvement in risk appetite would divert some attention away from gold, support would come from accommodative policy and lower rates," she added.

    Gold was trading around $1,230/oz Monday morning.

    Meanwhile, SPDR Gold Trust, the world's largest gold-backed exchange-traded product, showed weekly outflows of 5.35 mt for the week ending Friday.

    After significant gains this year, up 176 mt from January to March, the fund is down nearly 7 mt in April.

    Total assets in the fund now stand at 817.81 mt, down from a 3.5-year high of 823.7 mt in the last week of March.

    Net long positions in silver were up 29.5% to a three-year high of 56,018 contracts, according to CFTC data.

    Platinum was up 12.1% to 16,425 contracts and palladium was down 25.6% lower at 4,788 contracts.
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    Base Metals

    S Korea aluminium premiums slip $3/mt on weak demand, narrow LME spreads

    Spot premiums for South Korean primary aluminium fell $3/mt in the last week with Platts assessing them at $108-$112/mt plus LME cash, CIF Busan.

    Trading volumes were thin, market participants said, with low factory orders impacting consumer demand and traders not restocking due to a narrow spread in LME aluminium prices.

    Producer, consumer and trader sources had widely differing ideas on market clearing levels.

    A producer put the market clearing premium at $108-$110/mt CIF Busan, but said he did not conclude any sales.

    A consumer said $108-$110/mt CIF Busan may apply to Indian and Russian material, but aluminium from other origins might fetch closer to $115/mt. He too, however, did not report any deals.

    A trader reported a sale last week of Q2 strip shipments at $105/mt and $114/mt plus LME cash, CIF Incheon, for monthly shipments of 1,000 mt.

    The source attributed the difference in premiums to the metal's origin and chemical content.

    A second producer source reported wide range of offers in the domestic market at $106-$116/mt, FCA basis.

    He attributed the difference in premiums to the seller's corporate profile.

    The larger South Korean conglomerate trading houses were generally offering at higher premiums, while global traders were more competitive, he said.
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    Rio Tinto’s Oyu Tolgoi lifts gold guidance after strong start to 2016

    Rio Tinto subsidiary Turquoise Hill Resources, which owned a 66% interest in the significant Oyu Tolgoi copper/gold mine, in Mongolia, on Tuesday said the mine’s first quarter performance was so strong, that it hiked its full-year production guidance. 

    For the three months ended March 31, Vancouver-headquartered Turquoise Hill advised that the Oyu Tolgoi operation’s concentrator throughput reached a quarterly high, as well as better-than-expected gold production. 

    As a result, the company was increasing its 2016 gold production guidance to reflect the mine accessing more of the final, high-gold benches in Phase 2 of the openpit. Also during the quarter, Oyu Tolgoi exceeded two-million tonnes of concentrate shipped. During the period, concentrator throughput increased 3.1% quarter-over-quarter, resulting in average throughput of about 106 000 t/d for the quarter. 

    Concentrate production in the first quarter remained high, resulting from increased throughput and strong copper grades. Copper output in the period reached a quarterly high, increasing 0.5% over the previous period. Turquoise advised that as expected, gold output in the period declined about 30% over the previous quarter, owing to lower grades and the near-completion of mining in phase 2 of the openpit. 

    Given the stronger-than-expected first-quarter gold output, the Turquoise Hill had increased its 2016 gold in concentrates guidance to a range of 255 000 oz to 285 000 oz, up from 210 000 oz to 260 000 oz forecast previously. Oyu Tolgoi was also expected to produce 175 000 t to 195 000 t of copper in concentrates for 2016. 

    Turquoise Hill expected a notice-to-proceed decision for the $6.8-billion underground expansion of its massive Oyu Tolgoi mine – one of the largest in the mining industry.
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    Nickel (and Cobalt)

    Image titleImage title

    Eurasian Resources Group S.a.r.l. plans to use a $2.2 billion project in the Democratic Republic of Congo to become the world’s top cobalt producer and tap growing demand for batteries from companies including Tesla Motors Inc.

    ERG, which earlier this month agreed on $700 million of Chinese funding for the project, has started construction and aims to complete it within 20 months, according to Chief Executive Officer Benedikt Sobotka. He sees the company becoming the largest cobalt producer when full capacity is reached. Chinese producers currently vie with each other for the top spot.

    Cobalt prices should advance “significantly” in the next two years as demand for the metal used in rechargeable batteries increases, Sobotka said. The battery market is expanding as more consumers turn to electric and hybrid cars and look to store renewable energy to power appliances when there’s little wind or sunshine. Daimler AG and Tesla said they plan to sell batteries storing energy to homeowners and businesses.

    “Given that companies such as Tesla are expanding and increasing the use of batteries, our project has very good prospects," Sobotka said in an interview last week.

    ERG Assets

    Luxembourg-registered ERG owns Eurasian Natural Resources Corp., which delisted shares in London in 2013 amid a fraud probe. It controls assets in Kazakhstan, Europe, Africa and Brazil and is 40 percent owned by the Kazakh government with the remaining held by private investors.

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    World's largest underground copper mine remains shut on heavy rains, mudslides

    Codelco's El Teniente mine, the world's largest underground copper operation and the sixth biggest copper mine by reserve size. (Image from archives)

    Chile’s Codelco, the world’s No.1 copper producer, said Monday that its El Teniente mine will remain closed until at least Thursday, following torrential rains that hit the central part of the country over the weekend, causing major damages and leaving an estimated 4 million people without drinking water.

    Codelco warned that for each day the mine remains inactive, it loses about 1,500 tonnes of copper output, as El Teniente is the world's largest underground copper mine and the sixth biggest by reserve size.

    Codelco loses about 1,500 tonnes of copper output for each day El Teniente mine remains inactive.

    In total, Codelco estimates it will lose around 5,000 tonnes of the red metal due to the suspension of mining activities,local newspaper El Mercurio reports (in Spanish).

    The situation could get even worse, as the state emergency agency, Onemi, issued Monday an early alert for the Atacama region, the heart of Chile’s copper industry, which is expected to also get heavy rain and winds of at least 100k/h.
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    Heavy rains in central Chile affect millions, hit copper output

    Heavy rains battering central Chile have left an estimated 4 million people without drinking water as landslides wreaked havoc and rivers breached their banks, leaving at least one person dead and closing the world's largest underground copper mine.

    A woman was killed by a landslide in the San Jose de Maipo valley, a mountainous region just southeast of capital city Santiago, while a special police force is searching for another four people in the same area, said Ricardo Toro, the head of Chile's Onemi emergency office.

    Television images showed streets in Providencia, an upscale neighborhood of Santiago, overrun by flood waters after the Mapocho River breached its banks.

    Codelco, the world's top copper producer, said the rains forced the Chilean state-owned miner to suspend production at its century-old underground El Teniente mine, likely leading to the loss of 5,000 tonnes of copper.

    Global miner Anglo American Plc suspended mining activities at its flagship Los Bronces copper mine and the smaller El Soldado deposit for security reasons.
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    Steel, Iron Ore and Coal

    150,000 steel workers to be resettled in Hebei Province

    Thursday. The province, China's largest steel production base, will close 60 percent of its steel plants by 2020 to cut overcapacity and reduce pollution. Photo: AFP

    Up to 150,000 steel workers will be laid off in China's largest steel producing province, Hebei, as part of the country's determination to reduce over-capacity and upgrade industries, provincial authorities said.

    But they added that all the affected workers will be properly resettled, and no one has been left jobless.

    Song Limin, Deputy Chief of Hebei's Development and Reform Commission, told a press conference in Handan, North China's Hebei on Thursday that 100,000 would need to be resettled in the next five years.

    "In the process of industry transformation and upgrading, all affected workers have been properly taken care of, through reassignments or transfers to other companies," Song said.

    Amid the international economic slowdown, China is going through a painful period of economy restructuring, including reducing excess lower-end industrial capacity. As a result, more than a million workers may need to be laid off nationwide, Premier Li Keqiang's said in March.

     According to a report released by the Hebei government on Thursday, during the 12th Five-Year Plan (2011-15), the province cut the capacity of the iron industry by 34 million tons, 41 million tons in the steel industry, 138 million tons in the cement industry, while reducing the use of coal by 27 million tons.

     "In the Handan Iron & Steel Group, employment and production are relatively stable, and the employees have mainly been reshuffled, such as being transferred from major positions to minor ones like logistics or services, or on rotation in different positions," Cao Ziyu, a member of the Standing Committee of the CPC Handan Committee, and Executive Vice Mayor of Handan, said Thursday.

    Meanwhile, the Handan government announced that the city will reduce the capacity of the iron industry by 16.14 million tons and the steel industry by 12.04 million tons.

    The Beijing Youth Daily reported in March that according to Hebei Governor Zhang Qingwei, 60 percent of steel companies would be closed or merged by 2020.

    "In Handan, the number of steel companies has been reduced from 35 in 2012 to 22 by the end of 2015," Cao said.

    Cutting overcapacity in sectors like coal and steel is part of the country's supply-side structural reform and high on the government agenda, the Xinhua News Agency reported.

    According to the Ministry of Human Resources and Social Security, in the process of cutting excess capacity in the steel and coal industries, 1.8 million workers will be reassigned and resettled, reported in March.

    In February, the State Council issued a guideline that no new coal mines will be approved before 2019 and that the country will shut down 500 million tons of capacity and consolidate another 500 million tons in fewer but more efficient mine operators in the next three to five years.

    Song said some of the steel workers would be transferred to non-skilled support positions, and some will be trained and transferred to a tertiary industry. He added instead of liquidating the companies, the government will absorb the employees through mergers and restructuring.

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    Rally takes iron ore close to $70 a tonne

    Iron ore has risen again with the key steel-making ingredient now trading close to $70 a tonne – a level last seen at the end of 2014.

    Benchmark Australian ore for immediate delivery into China was quoted by the Steel Index at $68.7 a tonne on Thursday, up $4.40 or 6.8 per cent on the previous session.

    It has now risen 60 per cent since the start of the year and is the best performing major commodity outpacing silver, gold and oil, much to the surprise of analysts and traders,writes Neil Hume in London.

    Thursday’s advance came as Chinese steel prices enjoyed another big day of gains, rising nearly 9 per cent to their highest level since September 2014.

    China is not only the world’s biggest producer of steel but also the largest consumer of iron ore, which is mixed with coking coal and limestone in a furnace to make pig iron. This is later turned into steel.

    Steel reinforcement bars, widely used in construction and seen as a good proxy for Chinese demand, hit $430 a tonne on Thursday. Restocking, seasonal demand and tighter supplies following a string of closures last year are said to be behind the increase in steel prices.

    But rise in Chinese steel prices and the demand for iron ore has still left many industry participants scratching their heads.

    The head of BHP Billiton in Australia — home to its major iron ore mines — said he did not expect the rise in prices to hold for more than a few months because more supply is set to hit the market.

    “As you see more low cost volume come to market, here in Australia as well as elsewhere, you would expect that prices would not be sustained as these high levels,” said BHP’s Mike Henry.

    Overnight, Murilo Ferreira, the chief executive of Vale, said the company was aiming to become the biggest supplier of iron ore to China, with plans to increase shipments to 250m tonne a year from 180m with new supply coming from its new mega project S11D.

    Iron ore is a major source of profits for BHP and Vale and rivals such Fortescue Metals Group and Rio Tinto. Analysts at UBS estimate a $10 move in the price of iron ore impacts net earnings at Rio by $1.7bn.
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    South Korea Mar met coal imports soar 67pct on mth

    South Korea imported 3.05 million tonnes of metallurgical coal in March, including coking coal and PCI coal, surging 66.8% from February and up 2.07% on year, according to the latest customs data.

    Of this, coking coal imports stood at 2.29 million tonnes, 3.1% higher than the year-ago level.

    The highest volume of imported coking coal in March was 1.17 million tonnes from Australia, rising 69.57% on month, but dropped 16.41% from the year before.

    Coking coal imports from Canada stood at 437,300 tonnes in the month, slumping 15.64% on year.

    South Korea imported 50,600 tonnes of coking coal from China in March, rising 31.39% year on year, and almost doubling the volume of February.

    Shipments from Russia to South Korea stood at 254,700 tonnes, up 41.27% from the same month of 2015; while the US exported 251,600 tonnes in March, more than tripling the February tonnage.

    The Asian country imported 754,100 tonnes of PCI coal in March, up 28.96% month on month, but down 0.93% on the year.

    Australia was the largest PCI coal supplier to South Korea in March at 421,900 tonnes, down 24.53% on year, followed by Russia at 207,700 tonnes, up 127.5% year on year, and China with 65,700 tonnes, surging 83.06% from a year earlier.

    Meanwhile, data showed that in March, South Korea imported 39,600 tonnes of coke and semi-coke, up 63.24% from February and rising 71.58% on the year— mainly from China (36,300 tonnes, up 57.37% YoY), Russia (3,298 tonnes, compared with zero in the same month last year); and Germany (20 tonnes, flat on year).

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    China to strictly control credit for new coal, steel projects

    China will strictly control credit available for new capacity additions in the steel and coal sectors, both of which are suffering from price sapping supply gluts, the government said on Thursday.

    Beijing will also boost state support for the export of steel and coal by encouraging firms to shift capacity abroad as part of its efforts to ease domestic overcapacity, according to a joint statement issued by the central bank and several other government bodies.

    It was unclear whether the government planned to encourage greater exports of the two commodities directly from China.

    The statement said China would "strengthen financing support for enterprises 'going out'", and use loans, export credits and project financing to encourage coal and steel enterprises to build capacity abroad.

    "The details are in line with the government's overall guidelines," said Jiang Feitao, a steel researcher with the China Academy of Social Sciences.

    "China's measures to boost the economy will definitely lift demand and this will be unfavourable for the overcapacity cut."

    "I am also cautious about China's move to shift overcapacity overseas as this doesn't help, and just replaces exports," he added.

    China has been blamed for flooding world markets with cheap steel, putting overseas producers at risk of closure, though analysts say cost disadvantages make a large surge in coal exports highly unlikely this year.

    China is planning to shed 100-150 million tonnes of crude steel capacity in the next five years, and a further 500 million tonnes of surplus coal production, in a bid to tackle huge capacity overhangs that have saddled domestic firms with persistent losses.

    Local governments have been reluctant to force through bankruptcies at so-called zombie coal and steel enterprises amid fears of rising unemployment and a surge in non-performing loans.

    The government has earmarked 100 billion yuan ($15.45 billion) to handle layoffs, and it is also promising to establish mechanisms to deal with mounting debt.

    The government said in Thursday's statement that it would speed up the handling of non-performing loans in the debt-ridden sectors, and extend direct financing to support their restructuring. It would also would work to deal with possible default risks in the two sectors as soon as possible.

    It said banks would use a wide range of methods, including debt restructuring and bankruptcy settlements, to handle the problem, and it would also develop pilot projects aimed at securitising non-performing loans.

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    POSCO says China steel prices to steady; cautious on oversupply

    South Korea's POSCO, the world's No.5 steelmaker, said China's steel prices were unlikely to extend their gains after a recent sharp rally, and cautioned that rising output in a world market flush with supplies could dampen any recovery.

    Steel prices in China have soared 60 percent so far in 2016, given a pick-up in seasonal demand after the Lunar New Year break and the shutdown of some plants in 2015 when prices plunged for a sixth year. But the rally is now prompting more output to come online in the top producing nation, leading to worries over the sustainability of the price trend.

    At a conference call after POSCO reported a smaller-than-expected drop in its first-quarter operating profit, executive vice president, Son Chang-hwan, said: "Prices are unlikely to extend gains, but are expected to remain at the current levels should demand hold up and supply is well-controlled."

    Currently there is a massive supply glut in the global steel market due to soaring cheap shipments from China as well from other countries, such as Japan and South Korea.

    Recently, India's Tata Steel put its British operations up for sale, blaming the move that leaves thousands of jobs at risk on the flood of cheap Chinese supplies.

    The United States and European Union have called for urgent action to address this crippling overcapacity, after China and other major steel producers failed to agree on measures to tackle the industry crisis earlier in the week.

    "Although China steel prices are rising, the market is in substantial oversupply. If output continues to rise, the market would deteriorate eventually," POSCO's Son said on Thursday.

    As of now, however, POSCO is reaping the benefits of a "faster-than-expected" recovery in steel prices.

    POSCO's first-quarter operating profit fell 10 percent to 659.8 billion won ($581.89 million) from a year ago, beating a consensus forecast for a drop to 611 billion won from 14 analysts compiled by Thomson Reuters I/B/E/S.

    While revenue fell 18 percent to 12.46 trillion won in the quarter, net profit grew 5 percent to 352.5 billion won.

    POSCO may cut its dividend this year to invest in future growth, senior executive vice president Choi Jeong-woo said.

    POSCO, which has been selling some of its affiliates under chairman Kwon Oh-joon amid the global steel sector crisis, said it expects to improve its finances by about 4 trillion won this year by restructuring some of its units and assets.

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    Severstal first-quarter core earnings fall 53 pct

    Severstal, one of Russia's biggest steel producers, said on Thursday its first-quarter core earnings fell 53.2 percent year-on-year, showing the impact of a steep drop in world steel prices.

    Steel prices reached their lowest level in the last ten years at the end of 2015 and the beginning of 2016, Severstal, controlled by billionaire Alexei Mordashov, said in a statement.

    The decline in prices was only partially offset by a positive effect from a depreciation in the rouble, which decreases producer's costs in dollar terms.

    Severstal's earnings before interest, taxation, depreciation and amortisation (EBITDA) fell to $273 million. Analysts, polled by Reuters, expected earnings of $279 million.

    Its net profit fell 19.6 percent to $270 million, which took into account a foreign exchange gain of $175 million. Adjusting for non-cash items, Severstal's underlying net profit totalled $99 million.

    Two-thirds of Severstal's revenue, which fell 28.3 percent to $1.1 billion, came from Russia, hit by low oil prices and Western sanctions.

    Russian steel demand could fall almost 10 percent this year due to lower construction activity, Severstal said, citing the World Steel Association's forecast. It also said increasing protectionist trends globally would continue to put pressure on export deliveries and margins.
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    As prices surge, Vale joins iron ore production guidance cuts

    Top iron ore producer Vale followed rivals Rio Tinto and BHP Billiton  on Wednesday by announcing that it expects full-year iron ore production to come in at the lower end of guidance.

    Vale  said it produced 77.5 million tonnes of iron ore in the first quarter, marking a record for output during the first three months of the year for the Rio de Janeiro-based company.

    Its Carajás operations also achieved a production record for a first quarter of 32.4 million tonnes, representing an increase of nearly 18%, offsetting the halt in production at its Samarco 50-50 joint venture with BHP and the decrease in output at its Mariana mining hub. Operations at Samarco remains suspended following the failure of a tailings dam in November.

    The company total output was down 12% from the December quarter however.

    "Production in the first quarter and the plan for the rest of the year suggests an annual production towards the lower end of our original guidance of 340-350 million tonnes," Vale said in a statement. The company produced 345.9 million tonnes in 2015.

    While Rio could just pip Vale as the top iron ore miner this year on current predictions, the Melbourne-based company won't top the rankings for long. Vale’s flagship S11D project in the Carajas complex with annual capacity of more than 90 million tonnes is 80% complete and is expected to start shipping by the end of 2016.
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    Rio Tinto Q1 HCC output falls slightly on year

    Rio Tinto’s 1Q16 hard coking coal production fell slightly from last year’s 2 million tonnes but climbed 4.2% from the previous quarter to 1.98 million tonnes, according to the company’s latest quarterly production report.

    The company’s produces hard coking coal from two mines in the Bowen Basin, Queensland: the Hail Creek opencast mine and Kestral underground mine. Rio Tinto owns 82% of Hail Creek with joint venture partners Nippon Steel Australia, Marubeni Coal and Sumisho Coal Development. It owns Kestral mine with Mitsui Ketral Coal Investment, a subsidiary of Japanese trading house, Mitsui.

    Hail Creek produced 1.22 million tonnes of hard coking coal in 1Q16 – up from 1.13 million tonnes in the previous quarter and 1.18 million tonnes in 1Q15. Overall, the mine produced 5.01 million tonnes of hard coking last year for Rio Tinto.

    Kestral mine production of hard coking coal fell slightly to 758,000 tonnes in 1Q16 – down from 766,000 tonnes in 4Q15 and 813,000 tonnes in 1Q15.

    Production of semi-soft coking, however, jumped by 31% year on year and up 47% from 4Q15, as a result of mine production sequencing at Hunter Valley Operations and Mount Thorley Warkworth. Rio Tinto produces semi-soft coking coal from operations in New South Wales.

    The company also completed the restructuring of its ownership of its New South Wales assets, taking full ownership of Coal & Allied from its joint-venture partner, Mitsubishi. The Japanese company took a 32.4% direct stake in Hunter Valley operations as part of the restructuring, leaving Rio Tinto’s stake in Hunter Valley Operations, Mount Thorley and Warkworth at 67.6%, 80% and 55.57% respectively.

    Looking ahead, the company’s share of production is unchanged and is expected to be 7–8 million tonnes of hard coking coal and 3.3–3.9 million tonnes of semi-soft coking coal.
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    China steel mills resume production

    A survey by Chinese consultancy Custeel showed 68 blast furnaces with an estimated 50 million tonnes of capacity have resumed production. The capacity utilization rate among small Chinese mills has increased to 58 percent from 51 percent in January. At large mills, it has risen to 87 percent from 84 percent, according to a separate survey by consultancy Mysteel.

    The rise in prices has thrown a lifeline to 'zombie' mills, like Shanxi Wenshui Haiwei Steel, which produces 3 million tonnes a year but which halted nearly all production in August. It now plans to resume production soon, a company official said, declining to be named as he's not authorized to speak publicly.

    Another similar-sized company, Jiangsu Shente Steel, stopped production in December but then resumed in March as prices surged, a company official said.

    More than 40 million tonnes of capacity out of the 50-60 million tonnes that were shut last year are now back on, said Macquarie analyst Ian Roper. "Capacity cuts are off the cards given the price and margin rebound," he said.

    Profit margins have risen to 500-600 yuan a tonne ($77-$93) on average, the highest in at least two years, said Hu Yanping, senior analyst at

    "The government wants to bolster the economy and boost demand for industrial sectors, but it is also resolute to push forward the supply-side reform, putting it in a dilemma," said Hu.

    To show the world it is serious in slicing its bloated steel sector, China has said it cut 90 million tonnes of capacity and plans to cut another 100-150 million tonnes through 2020.

    Yet China's crude steel output hit a record high of 70.65 million tonnes in March.

    A surge in steel output should be driven by an increase in contracted purchases, otherwise mills are just betting on an improvement in demand that may not happen, Liu Zhenjiang, vice secretary general of the China Iron and Steel Association (CISA), told an industry conference in Beijing this month.

    "Cutting steel capacity is important, but controlling steel output is more important," he said.

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    Indian utilities FY 2015-16 thermal coal imports down 11.8pct on year

    Indian power utilities imported 80.47 million tonnes of thermal coal in fiscal year 2015-2016 ended on March 31, down 11.8% on year, according to latest data from India's Central Electricity Authority.

    Of this total, 36.98 million tonnes was imported by 37 utilities in the 12-month period as against a target of 42 million tonnes for blending purpose, the data showed.

    Six utilities did not import any coal during fiscal 2015-2016.

    However, eight utilities, which use only imported coal for their power plants exceeded the target of 42 million tonnes by importing 43.49 million tonnes during the last fiscal year.

    Private power producer Adani Power imported the highest quantity at 16.8 million tonnes for its Mundra thermal power plant during fiscal 2015-2016.

    State-run power generator NTPC Limited followed with 9.5 million tonnes, and Tata Power for its Mundra ultra mega power plant at 9.3 million tonnes.

    On a monthly basis, March 2016 imports were at 5.8 million tonnes, down 22.6% from the year-ago period.
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    Shenhua Wuhai raises met coke prices

    Shenhua Wuhai Energy Co., Ltd, one subsidiary of China’s top miner Shenhua Group in Inner Mongolia, has raised prices of its Grade II met coke delivered to end users in Tangshan, Hebei province, in response to positive changes recently observed in the coke and steel markets.

    Shenhua Wuhai increased the price of Grade II met coke by 30 yuan/t to 780 yuan/t with VAT, DDP Tangshan, effective 18:00 of April 14, sources confirmed with China Coal Resource.

    It also raised the price of high-sulphur material by 30 yuan/t to 700 yuan/t with VAT, DDP Tangshan.

    This is the second time Shenhua Wuhai raised prices of met coke this month, after a rise of 30 yuan/t on April 7.

    China’s coke market has improved in recent weeks, thanks to low stockpiles at coke plants and buoyant demand from steel mills amid rises in steel prices.
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    U.S., other countries call for urgent action on steel overcapacity

    The United States, Canada, the European Union, Japan, Mexico, South Korea, Switzerland and Turkey issued a statement on Tuesday calling for urgent action to deal with global steel overcapacity, U.S. officials said.

    The statement came a day after major steel-producing countries meeting in Brussels failed to agree to measures to tackle the problem, with Washington pointing a finger at China for failing to take action to cut overcapacity.
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    BHP joins Rio in iron ore output cut, eases oversupplied market

    Mining giant BHP Billiton followed rival Rio Tinto in trimming its iron ore output guidance on Wednesday, helping to ease pressure on an oversupplied market.

    The world's no. 3 producer cut its Western Australia iron ore production for the year to June 30, 2016 by 10 million tonnes to 260 million tonnes, blaming a cyclone that ripped through the Pilbara iron ore region in January coupled with accelerated railway maintenance work.

    Analysts said the output cut, along with Rio Tinto's lowered production guidance for 2017 on Tuesday, would help support iron ore prices, which have staged a recovery this year on restocking by Chinese steel mills.

    "In our view this potentially highlights a value over volume strategy from BHP, which is likely to be supportive of a tighter iron ore balance next year," J.P. Morgan said in a client note.

    Together with Brazil's Vale, the big three miners have trimmed about 55 million tonnes of expected iron ore output in recent months, equivalent to the output from the new Roy Hill mine built by Australian billionaire Gina Rinehart.

    "Talk to any iron ore bear in the market and they will tell you Vale and Roy Hill are flooding the market. Just remove those tonnes by cuts to BHP and Rio and that thesis is broken," said Macquarie Bank analyst Hayden Bairstow.

    BHP's latest production cut means the company is set to produce less iron ore year-on-year for the first time since a merger with Billiton in 2001.

    BHP also lowered its iron ore target by 10 million tonnes in January following the deadly Samarco dam disaster in Brazil.

    Rio Tinto on Tuesday cut its 2017 production guidance by 10 million to 20 million tonnes due to delays in its shift to driverless trains.

    Vale said in December said it would produce 340 million to 350 million tonnes in 2016, down from a target of 376 million tonnes, although still in line with 345.9 million tonnes in 2015. Some analysts expect the miner will cut its guidance further when it releases an operations update later on Wednesday.

    Iron ore prices have jumped 45 percent this year, but the industry has been virtually unanimous in predicting a return to lower prices given the scale of oversupply in the industry.

    "Demand has been overtaking supply as the determining factor for iron ore prices, that's a reason why the price is stronger," said a commodities trader specialising in bulk commodities such as iron ore and coal. "What BHP has done is make that even more evident."

    Shaw and Partners analyst Peter O'Connor said the production cuts were driving iron ore prices "30-40 percent ahead of consensus expectations."

    Despite the latest curtailments, Royal Bank of Canada analysts still see a mounting supply imbalance - growing globally to 161 million tonnes this year from an estimated 88 million in 2015.
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    BHP Billiton weighs getting out of Indonesian coal

    BHP Billiton is considering quitting its coal assets in Indonesia, where it recently started shipping steel-making coal from a small mine, amid uncertainty over Indonesian regulations and a weak outlook for coal.

    BHP owns a 75 percent stake in the IndoMet Coal project, having sold the rest to Indonesia's Adaro Energy in 2010 for $335 million. Coal asset prices have collapsed since then, and analysts said BHP would be lucky to fetch $200 million now for the stake in a largely undeveloped resource.

    "Does it move the dial for BHP? No. But it's a really high quality met-coal property and potentially a fantastic opportunity for an Indonesian company with the right connections," said Shaw & Partners analyst Peter O'Connor.

    BHP, the world's largest exporter of metallurgical coal, is considering a range of options for IndoMet, a spokeswoman said. She declined to comment on whether the company has entered into talks with any potential buyers for its stake.

    "BHP Billiton is conducting a strategic review of the long-term future options for its Indonesian coal interests, IndoMet Coal, which comprises seven coal contracts of work within the provinces of Central and East Kalimantan," the global miner said in its quarterly review.

    IndoMet started producing last year from the 1 million tonnes a year Haju mine, where BHP has come under fire from environmental groups. The mine made up less than 2 percent of BHP's metallurgical coal output in the first nine months of this fiscal year.

    BHP has held off approving larger developments in Indonesia, awaiting more certainty on government regulations.

    Adaro says the IndoMet assets holds at least 1.27 billion tonnes of coal resources. ItsCEO and a spokesman did not immediately respond to emailed requests for comment.

    Indonesia's director of coal mining at the Energy and Mineral Resources Ministry, Agung Pribadi, said he was unaware of BHP's review of IndoMet.
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    China steel rally unsustainable as production rises - CISA

    The recent rally in steel prices in China will be unsustainable, given rising output from steel mills in the world's biggest producer and consumer of the alloy, the China Iron & Steel Association (CISA) said on Tuesday.

    While government measures to boost the economy will underpin local steel demand, exports will come under pressure due to rising protectionism from Southeast Asia and European countries against cheap supplies from China, leading to a product build up at home and lower prices, CISA cautioned in its monthly report.

    Chinese steel prices have jumped almost 42 percent so far in 2016, following six straight annual falls, fuelled by tighter supply due to shutdowns in the past year and a pickup in construction activity after Lunar New Year in February.

    "The big rise in steel prices has led to a rapid reopening of capacity that had been shut or suspended ... a large rise in steel output will not be good for the gap between market demand and supply," CISA said.

    Already a huge surplus has forced China to aggressively ship out steel, with exports hitting a record high of 112 million tonnes last year. India's Tata Steel recently put its British operations up for sale, blaming the move on a flood of cheap Chinese supplies.

    But overseas sales will be difficult this year, given complaints of dumping and rising protectionism from Europe, the United States and Southeast Asian countries, CISA said.

    The United States has blamed China for not effectively dealing with overcapacity, while the latter has said blaming it for global steel woes was a lazy excuse for protectionism and that such finger-pointing would be counter-productive.

    A meeting of ministers and trade officials from over 30 countries this week failed to agree measures to tackle the global steel overcapacity.

    And this comes at a time when China's output is picking up.

    China's steel production hit a record high of 70.65 million tonnes in March, amounting to 834 million tonnes on an annualised basis. Traders and analysts expect output to rise further in April and May.

    China accounts for about half of global steel production with a total official capacity of 1.13 billion tonnes. The country aims to cut between 100 million and 150 million tonnes of crude steel capacity over the next five years.

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    Glencore, Tohoku set coal contract, but benchmark fades

    Glencore and Tohoku Electric Power set a Australian thermal coal import price 9 percent below last year, although the traditional benchmark for industry pricing appears to be breaking down, sources said on Tuesday.

    The contract price for the financial year beginning April 1 was set at $61.60 per tonne, down from $67.80 a year ago, four sources said, reflecting a global supply glut for thermal coal but still well above current spot prices.

    The Tohoku/Glencore price has often set the benchmark for other Japanese utilities, but industry sources said the pricing mechanism was coming under pressure amid a shakeup of Japan's electricity market that has increased competition.

    "What is happening this year is the traditional Japanese benchmark system is collapsing," said a source familiar with the negotiations. "We are hearing there will be different prices depending on where the coal comes from and also volumes."

    Another source with direct knowledge of the matter said there were other contracts with lower prices, including ones below $60 per tonne, depending on where coal is mined.

    "Given higher competition in the face of the liberalisation of Japan's retail electricity power market, buyers' evaluations and negotiations have become more strict," the source said.

    "The utilities are not buying coal just by calories any more, but are trying to set different prices to reflect their evaluation of each mine," he added.

    Competition among Japanese power and city gas utilities intensified this month when the companies lost their monopoly control over the retail power market.

    A Tohoku spokesman said the company had reached an agreement with Glencore, but declined to comment further. Glencore was not immediately available for comment.

    Australia accounts for about three-quarters of Japan's thermal coal imports. Shipments reached 86.8 million tonnes in 2015, with about 50 million tonnes covered by annual contracts.

    Other potential buyers said they were slightly disappointed with the Glencore-Tohoku price, as spot coal has been traded at below $55 a tonne due to slow demand in Asia.

    Asian benchmark thermal coal from Australia's Newcastle terminal fell about 14 percent in the financial year to March 31, settling at $54.19 a tonne. The price has lost more than 60 percent since early 2011.

    "The agreed price came a bit high, but Japanese utilities need to accept higher prices so that producers can stay in business and supply high-quality coal for a long-term," one buyer said.

    Coal producer Peabody Energy Corp filed for U.S. bankruptcy protection last week after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for expansion in Australia.

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    Rio Tinto Q1 iron ore output up 13% as prices soar

    Rio Tinto Group reported first-quarter iron ore production rose 13% as the world’s second-largest supplier continues to expand output amid the steelmaking ingredient’s 2016 price surge.

    Output rose to 84 million metric tons in three months to March 31, London-based Rio said Tuesday in a statement. That compares to 74.7 million tons in the same period a year earlier, and was in line with the 83.9 million ton median estimate among six analysts surveyed by Bloomberg. Production dropped 4% from the previous quarter on seasonal factors.

    Iron ore surged 23% in the first quarter as improving margins at China’s steel mills — which account for about half of global production — spurred demand, while policymakers including Premier Li Keqiang have indicated they’re prepared to bolster growth in the top commodity-consuming nation. Raw material prices have probably bottomed amid brighter prospects for Chinese demand, according to Citigroup Inc.

    Output was higher “due to the completion of some brownfield developments and expanded infrastructure capacity in the Pilbara in 2015,” the company said in the statement.

    China’s economy stabilised last quarter as a surge in new credit spurred a property sector rebound. The world’s biggest steel producer pushed output to a record in March as mills in China fired up plants to take advantage of a price surge since the start of the year that’s rescued profit margins.

    “We continue to experience volatility in commodity prices across all markets,” Chief Executive Officer Sam Walsh, who will step down on July 1, said in the statement. “In the face of a testing external environment, our focus remains on delivering further cost and productivity improvements, disciplined capital management and maximising free cash flow, to ensure that Rio Tinto remains strong.”
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    China says financial crisis caused weakening global steel demand

    China believes that the weakening global demand for steel since the 2008-09 financial crisis is the "fundamental cause" of excess capacity in the steel and related industries, which is a common challenge for the world.

    But China's domestic efforts in reducing overcapacity in the related sectors and its Belt and Road Initiative, which is actually helping boost steel consumption, need global cooperation and coordination.

    China laid out its position on Monday at the High-Level Symposium on Excess Capacity and Structural Adjustment in the Steel Sector in Brussels.

    Zhang Ji, China's assistant minister of Ministry of Commerce, heads a delegation to the talks, organized by Belgian government and OECD.

    "The Chinese side believes that since the international financial crisis, economies have suffered a notable slowdown, sluggish recovery, and a decline in infrastructure construction, industrial development and household consumption, leading to weak global demand for steel," according to the position paper.

    "This is the fundamental cause of excess capacity in the steel and some other industries,
    " the document said.

    Before the international financial crisis in 2008, strong growth of the world economy was conducive to the increase in the production capacity of the global steel industry.

    "Any other analysis and judgment on the steel excess capacity will make us lose direction and fail to find a correct solution," the paper was cited as saying.

    The Chinese side took the view that the OECD Steel Committee is a forum for global dialogue and communication on steel, and the nature of the session should be a symposium rather than a formal official meeting.

    China also said that the excess capacity problem currently facing the steel sector is a universal one for all steel-producing countries in the world.

    "It is a common challenge that needs to be confronted by all countries together. The shared problem needs to be tackled with shared efforts. Pointing fingers at one another doesn't help solving it," the paper said. "Therefore, we believe that all parties should take part in the Symposium in the spirit of cooperation and discuss excess capacity issue in the steel sector constructively."

    China is now making tremendous efforts and considerable sacrifices to cut its overcapacity. During the 12th Five-Year Plan period from 2011-2015, China shut down outdated facilities with total production capacity of over 90 million tons; in the coming five years, China will further reduce crude steel capacity by 100 million to 150 million tons, involving the reemployment of 500,000 people.

    "The measures we have taken and the effects they produce have been fully recognized and appreciated by many countries," Chinese government said in the paper.

    China hopes more countries would take proactive measures in line with their respective national conditions and stage of development, jointly contributing to resolving excess capacity in the steel industry, according to the position paper.

    China believes that countries need to work on both the supply side and the demand side, and vigorously expand the demand to tackle excess capacity.

    "China's Belt and Road Initiative set out a vision to strengthen the connectivity and infrastructure development of countries along the route. This has fuelled their demand for steel, and delivered win-win outcomes through social and economic development," the paper was cited as saying.

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    China Mar rail coal transport down 9.7pct on year

    China’s rail coal transport dropped 9.7% on year but up 14.4% from February to 159 million tonnes in March, showed the latest data from the China Coal Transport and Distribution Association.

    Of this, 111 million tonnes or 69.8% of the total were railed to power plants, a yearly decline of 5.4% but a monthly increase of 11%, data showed.

    In the first quarter of the year, China’s railways transported a total 476 million tonne of coal, falling 11.3% year on year, with thermal coal transport contributing 339 million tonnes or 71.2% of the total, down 4.6%.

    Coal-dedicated Daqin line transported 83.28 million tonnes of coal during the same period, down 21.4% on year, with March volume down 19.3% on year at 28.89 million tonnes.
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    Rio Tinto cuts 2017 iron ore guidance as first-quarter shipments rise

    Rio Tinto on Tuesday cut its 2017 production guidance from its Australian iron ore mines due to a delay in the rollout of its autonomous transport technology, based on driverless trains.

    The global mining giant said output from its Pilbara mines, which make up the vast majority of its iron ore production, would fall to 330 million to 340 million tonnes from a previous forecast of 350 million tonnes, as testing of its AutoHaul technology continues.

    Rio Tinto's $518 million autonomous train plan has been under development since 2012, and follows the deployment of 71 autonomous trucks at its Australian iron ore mines.

    Still, the world's No. 2 iron ore producer posted an 11 percent rise in first quarter iron ore shipments and confirmed it was on track for a record 350 million tonnes in 2016 as it runs its mines at full tilt despite a global supply glut amid slower Chinese industrial growth.

    The production increases underscore the determination of outgoing Chief Executive Sam Walsh to defy calls for supply restraints until markets are in better balance.

    Rio Tinto's first quarter shipments climbed to 80.8 million tonnes from 72.5 million in the year-ago quarter, but were down from 91.3 million tonnes in the preceding quarter due to a cyclone that interrupted shipments in late January.

    "We continue to experience volatility in commodity prices across all markets," Walsh, who last week tipped a second-half contraction in iron ore prices, said in a statement.

    Iron ore stood at $59.40 a tonne, having advanced nearly 40 percent since January due to restocking of depleted inventories in China.

    "In the short term Rio's guidance is being maintained and that comes as the iron ore price is high," said Shaw & Partners analyst Peter O'Connor. "Next year, their guidance is down, and we don't know where the price is going to be, that's not good."

    Citigroup analysts forecast a decline in iron ore prices in the second half of 2016 due to continued oversupply. The bank sees iron ore averaging $45 a tonne in 2016, $39 in 2017 and $38 in 2018.

    Walsh, who retires in July, has repeatedly defended running the company's mines at maximum speed even as demand growth from China's steel mills waned, saying any curtailment would simply open the door for competitors to fill the void and do little to lower supply and elevate prices.

    BHP Billiton, the world no. 3 producer, will report quarterly production on Wednesday. It is likely to report a strong quarter, although also affected by weather, as it too focuses on reducing costs rather than shedding production. However, its overall shipments will be crimped by the suspension of production from its Samarco joint venture in Brazil following a deadly damburst.

    Rio Tinto said its thermal coal output fell 3 percent in first quarter versus a year ago to 5.5 million tonnes, pointing to a yearly total of 16 million to 17 million tonnes.

    In copper, where Rio Tinto is looking for greater exposure to offset a high-weighting toward iron ore, first quarter mined production slipped 2 percent to 141,200 tonnes against the same period a year ago.

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    Major steel producers fail to reach deal on overcapacity, U.S. chides China

    China and other major steel-producing countries failed to agree measures to tackle a global steel crisis as the sides argued over the causes of overcapacity, prompting U.S. criticism of Beijing's approach and an angry response from Chinese officials.

    A meeting of ministers and trade officials from over 30 countries, hosted by Belgium and the OECD on Monday, sought to tackle excess capacity, but concluded only that it had to be dealt with in a swift and structural way.

    Washington pointed the finger at China over the failure of the talks, saying Beijing needed to act on overcapacity or face possible trade action from other countries.

    "Unless China starts to take timely and concrete actions to reduce its excess production and capacity in industries including steel ... the fundamental structural problems in the industry will remain and affected governments – including the United States – will have no alternatives other than trade action to avoid harm to their domestic industries and workers," U.S. Secretary of Commerce Penny Pritzker and U.S. Trade Representative Michael Froman said in a statement.

    Asked what steps the Chinese government would take following the unsuccessful talks, China Commerce Ministry spokesman Shen Danyang told reporters on Tuesday: "China has already done more than enough. What more do you want us to do?"

    "Steel is the food of industry, the food of economic development. At present, the major problem is that countries that need food have a poor appetite so it looks like there's too much food."

    The OECD said global steelmaking capacity was 2.37 billion tonnes in 2015, but declining production meant that only 67.5 percent of that was being used, down from 70.9 percent in 2014.

    Britain in particular has felt the squeeze as its largest producer Tata Steel has announced plans to pull out of the country, threatening 15,000 jobs. Last week, more than 40,000 German steel workers took to the streets to protest against dumping from China.

    China, the world's top steel producer, has been ramping up exports of steel in recent years, as it battles to steer its economy into services-led growth and away from traditional manufacturing, while keeping employment levels high.

    China's steel exports jumped 30 percent from a year ago to 9.98 million tonnes in March despite a slew of anti-dumping measures globally.

    But blaming China for woes in the global steel industry is simply a lazy excuse for protectionism, and such finger-pointing will be counter-productive, China's official Xinhua news agency said in a commentary on Monday.

    "It's more been their competitive advantage into Asian countries which has really driven that rise in exports," said Daniel Hynes, a commodity strategist at ANZ Bank. "I think that will continue and will keep those export levels relatively high despite the pressures we're seeing now."

    At a news conference following Monday's meeting, deep divisions between China and other producers were clear.

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    Mechel signs debt restructuring deal with Sberbank

    Russian coal and steel producer Mechel said on Monday it had agreed a debt restructuring deal with the country's biggest bank Sberbank totalling 30 billion roubles ($446 million) and $427 million.

    The mining company, controlled by businessman Igor Zyuzin, borrowed heavily before Russia's economic crisis and has struggled to keep up repayments as demand for its products weakened alongside tumbling coal and steel prices.

    It is now in talks to restructure $5.1 billion, about 80 percent of its total debt, with four large creditors: Sberbank, Gazprombank, VTB and a syndicate of foreign banks.

    Mechel said on Monday its subsidiaries had reached an agreement with Sberbank to restructure the $427 million and 13 billion roubles of the 30 billion total.

    A separate agreement regarding the remaining 17 billion roubles owed by Mechel's Chelyabinsk Metallurgical Plant is due to be completed shortly, it said.

    The miner said it must now repay 2.8 billion roubles to Sberbank and its Sberbank Leasing subsidiary to complete the restructuring deal.

    The grace period for Mechel's main debt could be extended until January 2020, with loans maturing in April 2022, Mechel said, but only if VTB agrees to similar conditions.

    In February, Mechel reached debt restructuring agreements with major creditors after two years of negotiations. But last month, the company failed to get a quorum of 50 percent of its minority shareholders' votes to approve the deal.
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    China cuts working hours for coal miners in bid to tackle supply glut

    China will reduce the number of statutory working days for its coal miners to 276 a year from 330 as it bids to tackle a chronic supply glut that has sapped prices, the country's work safety watchdog said on Monday.

    With demand on the wane and mining firms facing widespread losses, China plans to shut down 500 million tonnes of coal production capacity over the next three to five years as part of its efforts to cut a surplus estimated at more than 2 billion tonnes a year.

    China's State Administration of Work Safety ( said in a notice on its website on Monday that the official production capacity of the country's coal mines would be adjusted to fit the new 276 working day limit, meaning that mines will be held to even stricter production caps.

    China's mines traditionally produced more than their designed capacity as miners worked throughout the year to churn out as much coal as possible.

    But the practice has led to safety problems as well as oversupply, and China is now cracking down on mines that produce more than they are allowed.

    The country has also promised to ban all new coal mine projects for at least three years, and will close more than 1,000 mines this year.

    Coal production in China fell 3.5 percent to 3.68 billion tonnes last year, dropping for the second year in succession amid slowing industrial demand and a state campaign to cut the country's dependence on polluting fossil fuels.

    In a break with tradition, Chinese coal miners this year allowed their workers to leave their posts during the Chinese new year holidays, another move aimed at curbing oversupply and shoring up prices.
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    China steel, iron ore futures pull back further after rally

    Iron ore and steel futures in China pulled back further on Friday from an early-week rally that lifted prices to multi-month highs amid signs of a pickup in demand in the world's top consumer.

    Spot iron ore has similarly retreated, but was still up 10 percent so far on the week as firmer steel prices spurred buying interest in the raw material.

    The most-traded September iron ore on the Dalian Commodity Exchange was down 2 percent at 414 yuan ($64) a tonne by midday. It touched a 17-month high of 432 yuan on Thursday.

    On the Shanghai Futures Exchange, steel rebar for October delivery slipped 1.5 percent to 2,316 yuan a tonne. It spiked to an 11-month peak of 2,435 yuan on Wednesday.

    "Steel demand was also expected to slow on views that steel end-users had accumulated enough steel inventories for some time and were waiting for steel prices to fall before repurchasing," Commonwealth Bank of Australia said in a note.

    A pickup in seasonal demand lifted China's crude steel output to a record high of 70.65 million tonnes in March, government data showed.

    "This is really surprising. Steel output will likely rise further in the second quarter due to improving demand, but we still expect full-year output to drop slightly from 2015 due to supply-side reforms and tight credit," said Yu Yang, an analyst at Shenyin & Wanguo Futures in Shanghai.

    Iron ore for immediate delivery to China's Tianjin port dropped 2.2 percent to $58.60 a tonne on Thursday, after touching a five-week high of $59.90 the day before, according to The Steel Index.

    The spot benchmark is still up 10 percent for the week, its strongest such gain since April last year.

    Iron ore could find firm support at $50 a tonne, analysts at Sucden Financial say.

    "As policymakers in China remain committed in their supportive efforts we could see traction built around these levels with spikes higher as sentiment once again overrides the fundamentals, they said in a report.

    "However, aside from some potential for tentative spikes towards $70 ... we anticipate spot iron ore prices will be capped on the upside by ample supply and lower per capita consumption, which could eventually drag prices lower towards the tail-end of 2016."

    China's economy grew at its slowest pace in seven years in the first quarter. Indicators from the country's consumer, investment and factory sectors, however, point to nascent signs that the slowdown in the world's second largest economy may be bottoming out.

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    China Coal Energy Mar coal sales up 26pct on month

    China Coal Energy Co., Ltd, the country’s second largest coal producer, sold 11.57 million tonnes of commercial coal in March, gaining 25.76% on month and up 26.4% on year, the third consecutive year-on-year rise, the company announced on April 15.

    In the first quarter this year, the company sold 30.42 million tonnes of commercial coal, up 25.6% from a year ago, it said in a statement.

    Of this, self-produced commercial coal accounted for 6.76 million tonnes or 58.4% of the total in March, rising 16.2% on month and up 19.4% on year, also the third straight year-on-year increase. The volume over January-March increased 20.7% on year to 20.1 million tonnes.

    China Coal Energy, which sold large volumes of coal through railways, has benefited directly from a 0.001 yuan/ cut in rail freight of Daqin line to 0.09 yuan/ in early February.

    Coal mines of the company are mostly located in Pingshuo mining area in Shanxi province, which contributed nearly 70 million tonnes of coal output last year.

    China Coal produced 7.1 million tonnes of commercial coal in March, up 17% on month but down 1.3% on year, with that in the first quarter up 3.96% on year to 20.49 million tonnes.

    On March 24, China Coal Energy and another three leading producers including China Shenhua, Datong Coal and Yitai Group decided to maintain the prices of thermal coal shipped via China’s northern ports stable in April from March, after a meeting with the China National Coal Association, a move that would help them to maintain market shares.

    Prices of thermal coal, used mainly for power generation, have been relatively stable since entering April, after rebounding 20-30 yuan/t since December last year, supported by low stocks at northern ports and constrained output amid the government’s efforts to tackle overcapacity.

    On April 15, the Fenwei CCI thermal index assessed domestic 5,500 Kcal/kg NAR coal at 384 yuan/t, up 5.06% from the start of the year, while 5,000 Kcal/kg NAR coal rose 5.03% from the start of the year to 344.5 yuan/t.

    With flat demand expected for the short run, thermal coal prices will be mainly impacted by the pace of production recovery at main production areas and competition of imported coal from the abroad.
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    Atlas Iron says it could go under without a debt-to-equity deal with its lenders

    Atlas Iron says it could go under without a debt-to-equity deal with its lenders

    Miner Atlas Iron, an early victim of falling iron ore prices, says there’s a high risk of going into voluntary administration if a debt restructure isn’t approved by shareholders.

    The debt-to-equity proposal would cut what Atlas owes to lenders to $US135 million ($176 million) from $US267 million ($348 million) and extend the maturity date to April 2021 from December 2017.

    The cash interest Atlas pays on the debt would be cut by about 65%, a saving of $20 million a year.

    The Pilbara miner will issue new shares and options, giving the lenders a combined stake of about 70% in the company.

    The companies shares fell further today, dropping 13% to $0.02.

    “This deal is necessary if we are to secure a strong future for Atlas, giving our company added resilience to withstand iron ore price volatility and maximising its potential to once again generate strong returns for shareholders,” chairman Cheryl Edwardes wrote in a letter to shareholders.

    “I appreciate that some aspects of the debt restructuring proposal may seem complicated. But the key objective is very simple: to deliver the best possible outcome for Atlas and its shareholders given the difficult position in which the company finds itself as a result of falls in the iron ore price.”

    Edwardes says many shareholders will be extremely disappointed at the prospect of their investment being further diluted by the issue of shares. However, the alternative would bring “potentially dire consequences” for shareholders.

    The Pilbara miner started mothballing its mines in April last year because the cost of digging the ore was greater than the price on the global market.

    It then restarted after doing deals with contractors and cutting costs hard. It also raised $87 million from shareholders to give the company a cushion against price fluctuations.

    For the six months to December, production was steady at 6.9 million tonnes but revenue fell 17.4% to $372 million.

    Atlas recorded a statutory loss of $114.3 million after non-cash asset impairments and inventory write-downs of $43.9 million and restructuring costs of $7.1 million. The company posted a loss of $1.08 billion in the same six months last year.

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    China unveils guidelines to help laid-off coal, steel workers

    China's ministries unveiled general plans to help 1.8 million redundant workers from the steel and coal industries, Xinhua News reported on April 16.

    The guidelines, dated April 7 but made public late on April 15, was jointly released by seven ministries including the Ministry of Human Resources and Social Security, and six other government bodies including the National Development and Reform Commission.

    Billed as "opinions", the guidelines outline a range of measures to keep unemployment low.

    In addition to the help given to redundant staff, support will be offered to firms who create new jobs by adopting the "Internet Plus" strategy, developing new industries or products, and expanding domestic and overseas market, according to the document.

    Workers should receive free job training, and for those who want to start their own businesses, channels that will give them access to government support, it said.

    Local authorities should also enhance trans-regional cooperation to relocate redundant workers to regions with employment opportunities.

    To cushion the effect of job losses on families and the society, the central government decided to allocate 100 billion yuan ($15.43 billion) to help the laid-off workers find new jobs. The fund can be increased if necessary and local governments should handle their responsibilities accordingly, Premier Li Keqiang said in March.

    As China's economy slows, the government has pledged to slash overcapacity in labour-intensive industries, including coal and steel, to switch from an investment-led model to one that relies on domestic consumption, services and innovation. But this has prompted fears the country might face its fiercest unemployment pressures since the late 1990s.

    China aims to lay off 5-6 million state workers in the next two to three years as part of efforts to curb industrial overcapacity and pollution, its boldest retrenchment programme for 20 years, Reuters cited sources as saying in March.

    The leadership would spend nearly 150 billion yuan covering the cost of the layoffs in the coal and steel sectors alone over the next two to three years.

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    BHP Billiton, Rio Tinto, private equity eye for Anglo American's coal assets

    BHP Billiton, Rio Tinto, Glencore and US private equity firm Apollo are circling Anglo American's metallurgical coal assets in Australia, which could be valued at about $US1.5 billion ($2 billion) in a sale.

    These four companies have all signed non-disclosure agreements as part of the sale process.

    Anglo American said in February that discussions were underway about divesting its Moranbah and Grosvenor assets, as part of its plans to sell $US3 billion - $US4 billion of assets this year in order to cut debt. The process is being run by Bank of America Merrill Lynch, Australian media The Age cited sources as saying.

    Some industry players have expressed caution at the future of coking coal assets given their increasing unpopularity from an environmental standpoint and their exposure to the troubled steelmaking industry.

    Several mining bankers said BHP a likely frontrunner for the assets through its BHP Billiton Mitsubishi Alliance (BMA), which operates seven mines in Australia's Bowen Basin, close to Moranbah and Grosvenor, a $US1.95 billion mine development project.

    Earlier this month Anglo said it had sold its stake in Australia's Foxleigh metallurgical coal mine to a consortium led by Taurus fund management.
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    Tokyo Steel hikes product prices on international pick-up

    Tokyo Steel hikes product prices on international pick-up

    Tokyo Steel Manufacturing , Japan's top electric arc furnace steelmaker, will raise the price of its products for May delivery by up to 16 percent in its first across-the-board price hike in more than two years, reflecting a recovery in international markets.

    Tokyo Steel's pricing strategy is closely watched by Asian rivals such as Posco, Hyundai Steel Co and Baosteel, which all export to Japan.

    "We need to raise prices to reflect a stronger overseas steel market as well as higher steel scrap prices after China cut its steel exports," Tokyo Steel's Managing Director Kiyoshi Imamura told a news conference.

    "We also see increased activities in construction projects in Japan," said Imamura.

    Prices will rise by 5 percent to 16 percent in the first across-the-board hike since late 2013.

    Shanghai rebar prices have risen about 50 percent since bottoming out in early December, encouraging Chinese mills to sell to domestic customers instead of exporting.

    The price of Tokyo Steel's main product, H-shaped beams used construction, will rise by 5,000 yen to 72,000 yen a tonne, while prices for steel bars, including rebar, will rise by 7,000 yen to 51,000 yen ($472) a tonne, the company said.

    Prices for most of its sheet products, including hot-rolled coils, will rise by 3,000 yen.

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