Mark Latham Commodity Equity Intelligence Service

Friday 3rd June 2016
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    Oil and Gas


    Noble Just Sold Stock At A 63% Discount

    The Hong Kong-based company will offer 1 rights share for each existing share at 11 Singapore cents, a 63 percent discount from the close on Thursday, according to a statement on Friday. Of the total 6.54 billion shares to be issued, biggest holder Elman has agreed to take 625.5 million, while China Investment Corp., the third-largest, agreed to take 630.6 million. CIC will get a second seat on the board.
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    EU Diesel Sales: 6 months on.

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    Strikes reduce French power output, outages in some areas - CGT

    French nuclear power output fell by over 2,400 megawatts (MW) on Thursday, causing a few local blackouts, the CGT union said, after workers at utility EDF joined a nationwide rolling strike against a government plan to reform labour laws.

    The union said in a statement that output from at least six of France's 19 nuclear plants had been reduced by 0900 GMT after members walked out or reduced output at some sites.

    However, the reported impact was relatively modest and represented less that 4 percent of France's total nuclear power capacity, which normally supplies about three quarters of the nation's electricity.

    A spokeswoman for state-controlled EDF said less than 9 percent of its workforce was on strike on Thursday morning.

    Widespread blackouts are not expected because unions are compelled by law to maintain a minimum level of output in agreement with French grid operator RTE.

    Nevertheless, the CGT said that the action by EDF workers had caused some reported gas and electricity supply outages in the town of Tulle, and industrial zones in Brive and Urerche in the southwest of the country.

    RTE, an independent unit of EDF, reported unplanned power outages related to five nuclear reactors, with electricity production reduced by over 70 percent at the 1,300 MW St. Alban 1 reactor, and by 50 percent at the 1,300 MW Nogent 1 reactor near Paris.

    French intraday power prices jumped to as much as 73.9 euros per megawatt-hour (MWh) between 0800 and 0900 GMT, compared with 42.8 euros/MWh at the same time the day before.

    CGT said union members had also downed tools and were blockading Elengy's, Fos and Montoir liquefied natural gas (LNG) terminals.
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    The world's economic canary just cheeped again.

    South Korean exports, nicknamed the "world's economic canary in the coal mine," fell by 6.0% in May from a year earlier, according to Korea's latest export data.

    This is the 17th consecutive month that exports have dropped.

    And, although the data was an improvement from the 11.2% drop in April, it was far more than the 0.4% dip economists were expecting.

    Korean exports are often referred to as the "world's economic canary in the coal mine" by economists because 1) of their heavy exposure to the US, China, and Japan — some of the world's biggest economies, and 2) the data comes out on the first day of each month.

    As such, they generally give a good taste of what's been happening in global trade activity in the month prior.

    Notably, a Morgan Stanley team led by Deyi Tan argued that the latest reading on Korean exports actually "saw some signs of stabilization in May at low levels, suggesting similar read-across for global trade activity."

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    Brookfield Raises $4 Billion for Latest Private Equity Fund

    Brookfield Asset Management Inc.’s private equity division will have a $4 billion war chest to deploy when it’s spun out next month from the country’s largest alternative asset manager, about $500 million more than expected.

    Brookfield’s latest private equity fund, which closed Wednesday, was raised in about a year, six months quicker than the previous fund which was a fraction of the size at $1 billion, said Cyrus Madon, chief executive officer of the division, Brookfield Business Partners.

    "We’ve made an effort to broaden our investor base and we are attracting capital from different parts of the world," Madon said in a phone interview. The biggest increases in its investor base came from the U.S, the Middle East and Asia, he said.

    The closing of the private equity fund Wednesday is part of arecord $25 billion that Brookfield raised over the past 12 months for its flagship funds, a reflection of global capital seeking a home outside traditional investments such bond markets, where yields remain near record lows.

    The new fund will continue to be focused on opportunities in business services and the industrial sector with equity investments ranging from $200 million into the billions and will focus on regions where Brookfield already operates, including the U.S., Canada, Brazil, Europe and Australia, Madon said.

    About $1.5 billion of the new fund has already been invested in three companies -- facilities manager Global Integrated Solutions Ltd., a group of former Apache Energy Ltd. oil and gas assets, and graphite manufacturer GrafTech International Ltd.

    The private equity arm will expand into other segments over time, he said.

    "We generally try to invest in out of favor sectors and industries, so our strategy is not going to change," Madon said. "But we are seeing some potentially very lucrative opportunities."
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    French FNME CGT union calls for rolling strike in energy sector

    France's hardline CGT union has asked its members to vote for a rolling nationwide strike in the energy sector during general assembly meetings that will be held later on Wednesday, CGT union at France's mines and energy federation FNME said.

    The strike would start on Wednesday, the statement said, adding that the aim would be to reduce power output at French nuclear, hydro, fuel and coal-fired plants.

    The strike would also stop injection of gas into storages and block unloading of LNG cargoes, the statement said.

    The strike is part of nationwide rolling strikes called by CGT and FO unions aimed at forcing the French government to drop planned labour reform.
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    China's factories steadying but weak, hopes for quick recovery fade

    China's manufacturing activity showed signs of steadying in May but remained weak amid soft demand at home and abroad, suggesting the world's second-largest economy is still struggling to regain traction.

    A rebound in March had raised hopes that China's economy was reviving, breathing life into global financial and commodity markets, but analysts said the soggy activity readings and weak April data suggest no quick recovery is in sight.

    China's official factory activity gauge expanded for the third straight month in May, but only marginally, while a private survey showed conditions deteriorated for a 15th straight month. Both showed factories continued to cut staff.

    "The question was whether the March rebound was a one-month story, or whether weakening in April was the outlier. Our expectation is May and June will fall somewhere in-between." said Zhu Haibin, chief China economist at JPMorgan.

    "The real estate market recovery has maintained momentum, the number of new investment projects is strong, and corporate earnings have also improved. The modest recovery will continue."

    The May Purchasing Managers' Index (PMI) was unchanged from April at 50.1, barely above the neutral 50-mark.

    To be sure, higher commodity prices, a better housing market and plenty of government spending have helped the industrial sector, but questions remain as to whether the upturn will last.

    Chinese steel prices posted their sharpest monthly drop on record in May, while more cities are tightening mortgage requirements, fearing house prices are growing overheated.

    "Prices are recovering and inventories are falling. The economy is improving, but we aren't sure it is sustainable. We think the data may decline again starting in July or August," said economist Wang Jianhui at Capital Securities in Beijing.

    The official output index edged up to 52.3, indicating production remains solid despite government pledges to curb overcapacity plaguing sectors such as steel. But new orders expanded more slowly, while growth in export orders stalled.

    A private factory survey painted a darker picture. Faced with shrinking demand, smaller manufacturers continued to cut payrolls at a rate similar to February's multi-year record.

    The private Caixin/Markit Manufacturing Purchasing Managers' index (PMI) fell to 49.2 last month, below market expectations of 49.3 and April's reading of 49.4.

    With the economy not yet on firm footing, economists expect Beijing to keep up its infrastructure building spree but are dialing back expectations for further broad policy easing by the central bank, which has cut interest rates and banks' reserve requirements repeatedly since late 2014.

    Investors have been buzzing over whether China is shifting to a more cautious policy stance since a People's Daily article in May that warned about the dangers of relying on too much debt to stimulate the economy.

    A record first-quarter credit binge boosted investment and industrial output in March, but banks sharply cut April lending.

    A similar survey showed activity in China's services sector continued to expand but at a slower pace, with the official reading dipping to 53.1 from 53.5 in April. Growth was weighed down by a slowing financial services sector.
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    China finds renewed interest in Bitcoin

    Two years after the first wave of Bitcoin frenzy swept China, Chinese investors are again chasing after the virtual currency, pushing up its price 16 percent in four days.

    The price reached 525.49 U.S.dollars per bitcoin Monday, which means 1.2 billion U.S. dollars were added to the market value since Friday.

    China's government frowns on the trading of Bitcoin, but many Chinese investors are nevertheless paying close attention to the market which is believed to yield high returns.

    Decreasing supply expectations are also fueling the price spike, analysts said.

    The virtual currency is created by a complicated computing process called "mining," and a mechanism was installed in place to limit the speed at which the coin is produced.
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    Libyan security forces pushing Islamic State back from vicinity of oil terminals

    Libyan security forces captured a second town from in as many days from Islamic State, a spokesman said, pushing the militant group back towards its stronghold of Sirte and away from positions near to key oil terminals.

    The Petroleum Facilities Guard took control of Nawfiliyah, about 130 km (80 miles) from Sirte, though fighting outside the town raged on and some PFG members had been wounded, spokesman Ali al-Hassi said. The PFG captured the nearby town of Ben Jawad on Monday after clashes that killed five of its combatants.

    PFG forces say they are fighting on behalf of a U.N.-backed unity government that arrived in Tripoli in March to try to end factional chaos prevailing since Muammar Gaddafi's fall in 2011, with Islamist militants taking root in the security vacuum.

    PFG forces have advanced since separate brigades aligned with the unity government pushed Islamic State back to the outskirts of Sirte from the west.

    Western states are counting on the unity government to bring together Libya's armed factions and tackle Islamic State, which has exploited anarchy in the oil-producing North African state to establish its strongest base outside Syria and Iraq.

    Islamic State (IS) extended its presence along some 250 km (155 miles) of Mediterranean coast on either side of Sirte, and in January began attacking the PFG-secured oil terminals of Es Sider and Ras Lanuf.

    Islamic State has lost no significant population centres in its coastal zone over the last week but if government-backed brigades hold their ground, the jihadists' buffer zone around Sirte would have shrunk significantly.

    The PFG is a thousands-strong paramilitary force set up to protect Libya's oil installations.
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    UN Envoy Kobler Says Libya Is Making ’Important Progress’

    United Nations envoy to Libya Martin Kobler said Libya is making “important progress” in that its unity government has now secured control over the central bank and the national oil company.

    Rebuilding the authority of the Libyan government is key to defeating the Islamic state, though that will necessarily require military force, Kobler said at a briefing in Paris.

    French Foreign Minister Jean-Marc Ayrault said a key challenge for Libya is rebuilding its army.
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    Trump and Brexit: watching the bookies.

    Image titleImage titleThat's a bull market! From 150 to 1 to evens in 2 years. 

    Image titleBrexit meanwhile is clearly  a short, despite polls which are volatile, inconsistent, and 'close'

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    Noble Group CEO quits unexpectedly, raising doubts over strategy

    Noble Group's CEO Yusuf Alireza quit on Monday, a surprise move that comes just weeks after he secured crucial financing for Asia's biggest commodity trader and raises questions about its future strategy.

    The embattled company named its president William Randall, and Jeff Frase, global head of oil liquids, as co-CEOs and said it would begin a sale process for Noble AmericasEnergy Solutions, which it had indicated to be valued at over $1.25 billion in August 2015. The changes are with immediate effect.

    The sale move is aimed at boosting the balance sheet of Singapore-listed Noble, which has been battered since early last year by a bruising accounting dispute and weak commodity markets.

    "The first task is to stabilize the situation and convey stability and continuity," said Nirgunan Tiruchelvam, an analyst at Religare Capital Markets. "That would be the immediate task of somebody in this business which has volatility," he said.

    Noble was accused in February 2015 by Iceberg Research of overstating its assets by billions of dollars, claims which Noble rejected. Since then, Noble's market value has plunged by about 75 percent, or over S$6 billion ($4.35 billion), to S$1.8 billion and its debt costs have risen as it lost its investment grade rating and battled the worst commodity price rout in decades.

    Alireza, a former Goldman Sachs Asia co-head who joined Noble four years ago, steered it into selling assets and cutting business lines as part of a radical transformation to become a company which did not own bulky assets.

    With the transformation process now largely complete, Alireza considered that the time was right for him to move on, Noble said. Alireza did not immediately respond to a request for comment. 

    Under his watch, Noble made small investments in commodity producers to secure marketing and supply rights, in some cases for as long as 20 years, according to sources.

    The company enlisted a team of quantitative analysts to design structured trades and business models involving long term commodity contracts, sources familiar with the situation have told Reuters.

    Critics have said the company booked profits upfront on some of the contracts, which were based on overly-optimistic assumptions about commodity prices. Noble has defended its accounting policies, and board-appointed consultants PricewaterhouseCoopers found it had complied with international accounting rules.

    Earlier this month, Noble finalised $3 billion in credit facilities, a crucial move allowing it to refinance all of its debt maturing this year as it reported a 62 percent fall in quarterly profit.
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    Bitcoin Surges To 2016 Highs On Rising Chinese Demand; Decouples From Gold

    Ever since last September, when we explained that as a result of China's crackdown on capital controls, the one clear winner (in addition to Vancouver real estate) would be bitcoin, the digital currency has more than doubled in dollar terms, rising from $230 and surging as high as $500 a few months later. Overnight bitcoin, which had traded in a stable range with little of its characteristic volatility in recent months, made its latest breakout, surging nearly 5% from a $440-level, to a fresh 2016 high of $480, and has since retracted the move modestly, trading at $475 at last check.

    This pushed bitcoin's price to the highest since its sharp breakout in early November, when it breifly topped $500.

    The rally started late last night, with bitcoin trading at around $450 when a 30-minute jump saw bitcoin price trading at $461. Before long, bitcoin price was hovering near the $470 mark.

    According to Cryptcoinnews, the increase in price can be attributed to the growing demand from the Chinese market, as predicted here almost a year ago when the price was 50% lower, as a result of the recent Yuan devaluation. CCN elaborated on the BTC/CNY exchange charts in yesterday’s analysis piece, speculating that the price will eventually strike out for $500.

    The last rally in bitcoin occurred last month to this very day, with trading hitting a high of $470 in the days following the release of the Segregated Witness (SegWit) code by developers.

    A notable observation about the recent breakout in bitcoin is that the digital currency, which for a period had tracked moves in gold, now appears to have officially decoupled from the precious metal.
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    Hollande says won't let protesters choke economy as police clear fuel picket

    French riot police removed picketers and barricades blocking access to a large fuel distribution depot as President Francois Hollande warned anti-reform protesters on Friday he would not let them strangle the economy.

    The police operation to free up a fuel depot near the Donges oil refinery in western France followed similar swoops at other depots this week to ease petrol shortages caused by picketers fighting planned labor law reforms.

    Although concerns were mounting about potential disruption to the Euro 2016 soccer tournament which begins in two weeks time, evidence elsewhere in the energy sectorindicated a slightly less tight supply compared with the previous day. Some 741 of oil major Total's 2,200 filling stations were out of fuel compared with 784 a day earlier.

    In the Seine Maritime region north of Paris, local government prefect Nicole Klein said the number of petrol stations without fuel had fallen significantly and lifted rationing orders.

    Nevertheless at the Fos-Lavera oil port in southern France, the country's biggest, about 38 oil tankers were queued up waiting to unload, up from 12 the previous day, a port authority spokeswoman said.

    Separately, the hardline CGT union said its members at the CIM oil terminal at the port of Le Havre, which handles 40 percent of French crude oil imports, had voted to extend their strike until Monday.

    Speaking in Japan after a summit with other world leaders, Hollande said France's economy was starting to pick up and should not be derailed by opponents of a reform designed to make hiring and firing easier to boost employment.

    "I will stay the course because this is a good reform and we must go all the way to adoption," the Socialist leader said. "This is not the time to put the French economy in difficulty."

    Hollande's appeal was directed above all at the CGT union, which is leading street protests, public transport strikes and fuel supply pickets that also risk disrupting the European soccer tournament France is hosting next month.
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    Oil and Gas

    Saudi Arabia reinforces strategy with 10-year high Japan crude sales

    The sharp upsurge in Saudi Arabia's crude exports to Japan to 10-year highs in April clearly signals one thing -- that the Middle East supplier is intensifying efforts to grab any incremental demand opportunity that comes from its key customers.

    And it seems to be in no mood to deviate from its aggressive policy of doing all it can to boost market share, industry sources and analysts said, adding that its strategy was unlikely to change over the course of the year.

    "The Saudi response [for incremental supplies] has improved in recent months," a Japanese refiner source said. "We feel that they are actively responding to requests for incremental supplies in a prompt manner."

    Japan's crude imports from Saudi Arabia averaged 1.42 million b/d in April, the highest for the month since it imported 1.5 million b/d in April 2006, according to preliminary data released Tuesday by the Ministry of Economy, Trade and Industry.

    Saudi Arabia's crude supplies to Japan in April surged 37.2% from 1.037 million b/d a year earlier, according to S&P Global Platts calculations based on METI data.

    It includes 50% of imports from the Partitioned Neutral Zone, which lies between Saudi Arabia and Kuwait. METI lists it as a separate supply source.

    Saudi Arabia's market share rose to 41% of Japan's total crude imports of 3.47 million b/d in April, from 31% a year ago.

    Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corporation said that Saudi Arabia's increased crude sales to Japan in April was not a coincidence at this level and was based on its market share strategy.

    "Based on its market share strategy, the Saudis are trying to increase their share by selling larger volumes to secure their income," Nogami said. "They are expected to maintain this policy this year."

    Saudi Arabia's oil policy is being closely watched as the kingdom recently appointed Khalid al-Falih as energy minister to replace the long-serving Ali al-Naimi.

    Samer AlAshgar, president of Saudi Arabia's independent King Abdullah Petroleum Studies and Research Center said at an energy seminar in Tokyo on May 13 that he did not expect the kingdom to change its market share policy any time soon.

    "I do not see any change from the current strategy that they have now," AlAshgar told the energy seminar hosted by the Institute of Energy Economics, Japan. "The policy has been working and is now being effective."

    Despite this year being a leap year, Saudi Arabia's crude supplies to Japan showed a hefty increase during the first four months, when overall Japanese imports slid 2% year on year to an average 3.47 million b/d, according to Platts calculations based on METI data.

    Saudi Arabia's crude supplies to Japan averaged 1.27 million b/d in January-April, accounting for 36% of the total imports in the four-month period.

    Compared with the same period last year, that was 7.6% higher from the 1.18 million b/d levels and accounted for 33% of the 3.54 million b/d total imports.

    Saudi Arabia's crude supplies to Japan spiked in April at a time when Japanese refiners had to make up for an expected shortfall in their procurements from Iran and the UAE, coupled with competitive Saudi official selling prices for March loading programs, industry sources said. Japan's crude imports from Iran dropped 71.9% year on year to 19,161 b/d in April.
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    Exxon CEO Says Argentina Shale Investment May Exceed $10 Billion

    Exxon Mobil Corp. may invest more than $10 billion in Argentina’s Vaca Muerta shale formation in the next decades, Chairman and Chief Executive Officer Rex Tillerson said Thursday.

    The oil giant has so far invested $200 million in the world’s second largest shale gas deposit, Tillerson said after meeting with Argentine President Mauricio Macri in Buenos Aires. Exxon has received approval to invest $250 million more for a pilot project in the coming months.

    If the pilot project is successful, the company will start full development during a period of 20 to 30 years that could involve additional investment “that would be well in excess of $10 billion,” he said.

    For Tillerson, Argentina’s vast Vaca Muerta shale region represents an opportunity to reverse production losses and add reserves after a $35 billion wrong-way bet on U.S. natural gas and a Russian exploration venture that was derailed by international sanctions. Exxon, the world’s largest oil explorer by market value, has designated Vaca Muerta as one of nine “key activity” areas in the Western Hemisphere and one of just four in South America, according to company data.

    Macri has been courting international corporations from Total SA to Dow Chemical Co. to Coca-Cola Co. to invest in Argentina since taking office in December. Exxon, whose annual sales dwarf the economic output of all but about 45 of the world’s nations, is building a plant to strip impurities out of natural gas as well as a pipeline network to handle the output from its Vaca Muerta wells.

    “I am very encouraged by the changes that have occurred here in Argentina, with the change in government,” Tillerson said, according to a statement from the Argentine government.

    Exxon’s worldwide oil and gas output is lower than it was when Tillerson began his tenure as CEO a decade ago.

    Last year, the company that traces its roots to the 1880s and John D. Rockefeller’s Standard Oil Trust failed to replace all the crude and gas it pumped with new discoveries for the first time in 22 years. In April, S&P Global Ratings stripped Exxon of the gold-plated credit rating it had held since the Great Depression.

    Tillerson will reach Exxon’s mandatory retirement age of 65 in March. In a May 25 meeting with reporters after the company’s annual meeting in Dallas, he declined to say whether he would seek an extension of his tenure from the board.

    Vaca Muerta, Spanish for Dead Cow, is one of the world’s top shale plays, covering an area the size of Belgium and considered key to restoring energy self-sufficiency in Argentina.
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    BP to Pay $175 Million to Settle Claims It Hid Spill Size

    BP Plc said it agreed to pay $175 million to settle claims by U.S. investors that its managers lied about the size of the 2010 Gulf of Mexico oil spill to prop up its stock price,
    removing the company’s last major overhang from the disaster.

    The investors, who blamed BP for massive losses when the true scope of the spill was revealed, had sought as much as $2.5 billion. The settlement averts a trial that was set for July in Houston federal court.

    The settlement announcement Thursday came shortly after a ruling by U.S. District Judge Keith Ellison to narrow the evidence that could have been presented to a jury. The decision, which would have benefited BP at trial, limited the management statements that investors could claim affected the stock price.

    BP shares plunged by more than 40 percent in the weeks after the April 2010 disaster, as it became clear the company couldn’t immediately contain the spill. More than 4 million barrels of oil escaped into the Gulf of Mexico during the 87 days London-based BP took to control the well.

    The investors’ lawsuit, led by the public employee pension funds of New York and Ohio, revolved around statements made shortly after the Deepwater Horizon drilling rig blew up in April 2010. Those statements also were central to BP’s agreement in 2012 to pay $525 million to resolve claims by the Securities and Exchange Commission that the London-based company underestimated the size of the spill to bolster stock prices. BP also pleaded guilty to a felony count of obstruction of Congress related to spill estimates.

    “Investors saw their stock prices plummet after the Deepwater Horizon explosion,” said Jennifer Freeman, a spokeswoman for the New York Comptroller’s Office. “This settlement helps compensate investors for their losses."
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    As diesel price soars, U.S. refiners seize the moment, sell future output

    U.S. diesel futures have soared about 40 percent in the last two months, prompting independent refiners to pounce, selling future output on the view that resurgent domestic demand and higher exports may turn out to provide only a brief boost.

    The surprise rally in U.S. diesel futures has put prices on track for their biggest quarterly percentage gain in seven years. Money managers and hedge funds have invested heavily in the fuel as stronger-than-expected demand has helped draw down record inventories.

    Diesel typically enjoys strong seasonal demand in these months from farmers fueling tractors and equipment during the spring planting season. But prices this year have gotten an extra boost from robust exports to Europe and Latin America.

    Strikes in France have slashed European supplies for almost two weeks, boosting demand for U.S. diesel. But the announcement that one French refinery would restart hit U.S. diesel margins on Thursday. The distillate crack spread had jumped 7 percent, then gave up most of the day's gains.

    Refiners such as Valero Energy Corp and Phillips 66 typically look for big price rallies to sell future output. These refiners were presented with a rare opportunity to lock in profits when diesel prices and margins popped in April and May.

    Producer short positions in NY Harbor Ultra Low Sulfur Diesel (ULSD) have soared to levels not seen since November 2010, data from the Commodity Futures Trading Commission show.

    Refining margins, represented by the U.S. diesel crack spread, have jumped by about 70 percent since early April and are on track for their biggest quarterly percentage gain since 2013. Margins widened to $14.94 on Thursday, their highest since mid-February, but then gave back most of the day's gains on the French refinery announcement.

    Locking in $13 to $14 per barrel of profit through the rest of 2016 was better than the single-digit margins earlier this year, a trader at a U.S. East Coast refiner said. But they remain a far cry from the record hit in 2012, which exceeded $45 a barrel.

    "Refiners are systematic, because they need to lock in margin," said John Saucer, vice president of research and analysis at Mobius Risk Group. "Anytime there's an uptick in a crack or a margin they're going to capitalize on it."

    The rally could fade if hedging gathers pace and speculative buying wanes.

    In a further sign of selling into next year, the average for the 12 futures contracts expiring in 2017, called the calendar strip, has not kept pace with gains in this year's prices.

    Since early April, the 2017 strip has risen 21 percent to $1.64. Over the same period, the 2016 strip has gained about 29 percent, while the front-month contract has jumped about 40 percent.

    The picture for refiners has improved dramatically since the bleak outlook this winter, after margins fell as low as $8 a barrel in late January. Soon after that, many refiners shut capacity due to weak profits because of a big glut in diesel.

    But refiners are skeptical that margins will remain strong, because U.S. crude is on track for its biggest quarterly percentage gain since 2009. Fear for tighter margins going forward has encouraged them to hedge.

    The heightened activity in diesel is surprising for this time of year, when typically the market buzz surrounds gasoline, heading into the busy summer driving season.

    Speculative investors turned bullish on diesel early in May for the first time in about two years, after inventories that had been bloated by a mild winter started to decline.
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    Summary of Weekly Petroleum Data for the Week Ending May 27, 2016

    U.S. crude oil refinery inputs averaged 16.2 million barrels per day during the week ending May 27, 2016, 73,000 barrels per day less than the previous week’s average. Refineries operated at 89.8% of their operable capacity last week. Gasoline production increased last week, averaging over 9.9 million barrels per day. Distillate fuel production increased last week, averaging about 4.8 million barrels per day.

    U.S. crude oil imports averaged over 7.8 million barrels per day last week, up by 524,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.6 million barrels per day, 8.3% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 921,000 barrels per day. Distillate fuel imports averaged 69,000 barrels per day last week.

    U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.4 million barrels from the previous week. At 535.7 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 1.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 1.3 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 1.3 million barrels last week and are near the upper limit of the average range. Total commercial petroleum inventories decreased by 2.7 million barrels last week.

    Total products supplied over the last four-week period averaged 20.4 million barrels per day, up by 2.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.7 million barrels per day, up by 4.0% from the same period last year. Distillate fuel product supplied averaged about 4.1 million barrels per day over the last four weeks, up by 0.6% from the same period last year. Jet fuel product supplied is up 1.6% compared to the same four-week period last year.

    Cushing drops 700,000 bbls

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    Another fall in US oil production

                                                   Last Week     Week before   Last Year

    Domestic Production '000......... 8,735               8,767           9,586
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    U.S. FERC approves Elba Island LNG export project

    Kinder Morgan on Thursday said its units Elba Liquefaction and Southern LNG received approval from the Federal Energy Regulatory Commission for the Elba liquefaction and export project.

    In its statement, Kinder Morgan informed its units have also received FERC certificates of public convenience and necessity for the EEC modification project and SNG Zone 3 expansion project, respectively.

    The liquefaction project has a price tag of $2 billion and will be constructed and operated at the existing Elba Island LNG terminal near Savannah, Georgia.

    The first of 10 liquefaction units is expected to be placed in service in the second quarter of 2018, with the remaining nine units coming online before the end of 2018. The project is supported by a 20-year contract with Shell, Kinder Morgan added.

    The other expansion works that include additional compression and related work for north-to-south capacity expansions on Elba Express Pipeline that will supply additional gas to industrials and utilities in Georgia and Florida and to Elba Island for liquefaction.

    Facilities for these pipeline projects are expected to be placed in service late in the fourth quarter of 2016.

    The liquefaction project is expected to have a total capacity of approximately 2.5 million tons per year of LNG for export, equivalent to approximately 350,000 Mcf per day of natural gas.

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    Israel approves development of large offshore Leviathan natgas field

    Israel's government on Thursday approved the development of the controversial Leviathan natural gas field that will give Israel a second source of gas supply while potentially turning it into a gas exporter.

    Leviathan, one of the largest offshore discoveries of the past decade, was found off Israel's Mediterranean coast in 2010. It has an estimated 622 cubic meters of natural gas (BCM) of reserves and is expected to become operational in 2019.

    Texas-based Noble Energy, which holds a 40 percent stake in Leviathan, said the field would initially start production at 1.2 billion cubic feet a day and expand to 2.1 bcf.

    "Leviathan is expected to provide a second source of supply and entry point into Israel's domestic natural gas transport system, while also delivering exports to regional countries," Noble said in a statement.

    The site, however, will cost at least $5 billion to develop and it was not yet clear how the project will be financed.

    "Strong momentum on the regulatory and marketing fronts represents major steps in advancing the Leviathan project towards final investment decision," said J. Keith Elliot, Noble's senior vice president for the Eastern Mediterranean.

    Earlier this week, Leviathan signed a deal to supply up to 473 bcf to a new private power plant, IPM Be'er Tuvia, for 18 years. Noble estimated gross revenue from the deal at $2.5 billion.

    In January Leviathan signed a $1.3 billion gas supply contract with Edeltech, Israel's largest private power producer.

    Last week Israel's government approved a revised deal aimed at fast-tracking development of Leviathan, which has been mostly earmarked for exports.

    The Leviathan project hit a major obstacle in March when Israel's Supreme Court blocked a previous agreement between the field's shareholders and the Israeli state, the terms of which would have stayed unchanged for 10 years.

    It had been opposed by opposition parties and public advocacy groups on grounds that Noble and its partner Delek Group - which also own the adjacent Tamar field - would control too much of Israel's natural gas supply.

    Tamar began production in 2013 and provides Israel with its current natural gas needs.
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    Even for BP and Shell, North Sea remains a hard sell

    When it comes to the North Sea, there is no such thing as an easy sale, even for oil giants Royal Dutch Shell and BP.

    More than any other region in the world, the North Sea has suffered greatly over the past two years as a 60 percent drop in oil prices, high operating costs, dwindling reserves and a tough tax regime has hit operators hard.

    As a result, producers ranging from Shell and France's Total to smaller regional players such as Enquest and Tullow Oil have put dozens of assets in the region on the block to boost their balance sheets.

    But deals have been few and far apart. Buyers and sellers have found it hard to agree on the value of assets and how to share the costs of dismantling and cleaning up of obsolete fields, known as decommissioning.

    With around 30 percent of fields operating at a loss in 2016 and others seeing razor thin margins, "almost all UK North Sea assets are up for sale," said Fiona Legate, senior UK upstream oil and gas analyst at consultancy WoodMackenzie.

    "There is however a limited pool of buyers," she added.

    BP has struggled to sell a stake in its Forties pipeline system, one of the region's oldest and the main source for the eponymous crude used to price the global Brent crude benchmark.

    Talks with Swiss-based chemical giant Ineos recently collapsed after the sides could not agree on how to price the asset, sources close to the negotiations said.

    The Forties pipeline has a capacity to deliver over 1 million barrels per day and serves over 50 offshore oil and gas fields in the central North Sea, according to BP's website.

    But declining output has meant the pipeline operated at less than 40 percent of its capacity last year, WoodMackenzie says.

    Ineos wanted BP and other producers using the pipeline to commit to a fixed capacity fee that would guarantee revenue even if output continued to decline, industry sources close to the talks told Reuters.

    BP however sought to pay on a per-barrel basis, they said. "Buyers want something to protect them against a drop in throughput," one source said. The pipeline system remains on the market.

    Shell is starting an ambitious three-year $30 billion global asset sale programme to pay for its $54 billion acquisition of smaller British rival BG Group in February.

    In the North Sea, the company is planning to bundle several assets in packages that will include mature fields along with more attractive assets such as the Buzzard field and pipelines, banking sources said.

    The Anglo-Dutch company held talks in recent months with Neptune, a North Sea-focused investment company headed by former Centrica boss Sam Laidlow and backed by private equity funds Caryle Group and CVC Partners.

    Shell Chief Financial Officer Simon Henry remains confident it can meet its target within around three years. Shell will focus at first on selling infrastructure, refining and retail businesses that are less exposed to oil price fluctuations over production, or upstream assets, he said.

    "If the oil price stays at $48 a barrel maybe (the sale programme) will take us a little bit longer. We are not chasing sales of upstream assets at $48."

    Operating in the North Sea remains challenging even after Shell cut costs sharply in recent years, Henry said, adding that within the region, some areas are more profitable than others.

    "We've taken our costs down hugely and improved our reliability and availability. So the performance today is much better than it was two years ago but it is still not good," Henry told reporters on May 24.

    "In general it is high cost region in which you have to keep spending to stay in business and have significant decommissioning and restoration costs."

    An extended period of low oil prices also leads to an earlier decommissioning of fields, he said.

    WoodMackenzie estimates 142 fields will cease production over the next five years. Total UK North Sea decommissioning are expected to reach 55 billion pounds.
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    OPEC Keeps Status Quo After Failing to Agree on Output Cap

    OPEC will stick to its policy of unfettered oil production after members failed to agree on a new output ceiling. Crude extended its decline in London.

    The meeting didn’t produce a supply accord but did reach consensus on appointing Nigeria’s candidate as new secretary-general, Sudirman Said, Indonesia’s energy minister, said in Vienna. The Organization of Petroleum Exporting Countries’ de facto leader, Saudi Arabia, had previously discussed restoring a production target scrapped in December, according to delegates familiar with the matter.

    Oil has rallied about 80 percent from the 12-year low reached in January as depressed prices take their toll on supplies. That suggests the Saudi-led decision in 2014 to maintain output amid a global glut is finally paying off, with higher-cost producers cutting back. While Saudi Arabia had shown willingness to mend divisions Thursday with cash-strapped members demanding a new group ceiling, Iran said it would only support individual country quotas that would be difficult to agree in a single meeting.

    Iran has rejected any cap on production as it restores output following the removal of sanctions in January. The country’s refusal to participate in a production freeze proposed earlier this year prompted Saudi Arabia to block a deal between OPEC and Russia in April.

    Although OPEC regularly ignores its own output targets and there was no suggestion anyone would cut production, even a token gesture could have showed renewed unity and boosted prices. 

    Nigeria’s Mohammed Barkindo will assume the role of secretary-general, succeeding Abdalla El-Badri, who has been in the job for nine years. Barkindo was acting head of OPEC in 2006 and previously ran Nigerian National Petroleum Corp.

    His appointment demonstrates that OPEC has at least overcome squabbles that scuppered consensus on the top job at previous summits. El-Badri, a 76-year-old Libyan, was originally due to step down in 2012 after serving the maximum two terms, but members weren’t able to agree on a replacement and his tenure was extended at successive meetings.

    Barkindo, whose rival nominees for the job included Indonesia’s Mahendra Siregar, spent more than 23 years at NNPC, where he served in various capacities including deputy managing director of Nigeria LNG and head of the international trading unit. He also served for 15 years as Nigeria’s national representative to OPEC.
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    Iran seeks 14.5% OPEC quota

    Iran oil min Zanganeh says pre-sanctions OPEC mkt share of 14.5% wld be "fair" quota. OPEC at ~32 mil b/d; that'd make 4.64 mil b/d for Iran

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    Petrobras CEO Says No More Political Interference in Oil Company

    Petroleo Brasileiro SA’s new Chief Executive Officer Pedro Parente said political interference has ended in the state-run oil producer and that fuel price decisions will now be made according to the company’s best interests.

    A solution to Petrobras’s debt, the largest in the industry, includes selling part of its assets, he told reporters after his swearing-in ceremony in Brasilia, led by Acting President Michel Temer.

    Parente is the best person to lead a recovery at the oil company that is at the center of Brazil’s biggest-ever corruption scandal, Temer said during the event.

    Temer said he supports the two-year graft probe known as Carwash that has led to the arrest of former Petrobras executives, business leaders and politicians. Under a scheme that lasted about a decade, a group of suppliers bribed former officials to win contracts with the oil producer. The acting president reiterated Petrobras’s claim that it was a victim of bad practices.

    "Everyone expects that you, in some time, will make us proud of our Petrobras again," Temer said at the ceremony, where heads of state banks were also sworn in. "No one will interfere in Carwash."

    Parente, who has extensive experience in government and business, was confirmed as CEO by the board of directors on May 30. He will officially assume the post on Thursday in Rio de Janeiro, where Petrobras is based.

    Parente was a member of Petrobras’s board for almost four years starting in 1999, and its chairman for nine months, while he was part of former president Fernando Henrique Cardoso’s cabinet. He was also the head of agribusiness giant Bunge Ltd.’s Brazil unit from 2010 to 2014. He is currently the chairman of BM&FBovespa SA, the operator of Latin America’s biggest securities exchange.
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    With $50 crude, signs of life return to West Texas oilfields

    As crude prices plummeted last summer, Steve Pruett, chief executive of a small west Texas oilfield developer, idled a drilling rig, opting to pay $21,000 a day to store it rather than dig more wells and risk bigger losses.

    Now as oil prices rise again, the third-generation oil man is offering his only rig crew bonuses to drill wells as fast as they can, but says his company, Elevation Resources, will wait until next year to deploy a second rig.

    "We're going to ease back into the activity, not stomp on the accelerator," Pruett said. "We've all sobered up."

    Last year's rollercoaster when crude prices rallied in the first half of the year only to come crashing down in the second half, burned many producers and Pruett and his peers remain cautious.

    But there are signs of guarded optimism that this time the industry has really seen the worst of the nearly two-year downturn that cost hundreds of thousands of jobs, pushed dozens of firms into bankruptcy and led to an investment slump so severe that it weighed on the whole U.S. economy.

    With crude prices now nearly double their February lows near $26 per barrel, new wells in the Permian Basin - North America's richest source of shale oil - are again becoming profitable and producers are taking baby steps to crank up output again.

    The number of rigs in the shale oil basin that spreads across more than 50 counties near the border with New Mexico rose by 17 to 146 on May 31 after bottoming in late April, according to data shared with Reuters by Drillinginfo, a consultancy.

    The number of drilling permits - a leading indicator of future activity - issued for the Permian region in April, the latest month available, was the highest since October 2015. 

    The Permian rig count remains far below its November 2014 peak of 467 rigs recorded by oil services company Baker Hughes, and many areas and new wells less productive than those in "sweet spots" will need prices to climb further to be profitable again. But the stirrings suggest some relief is on its way. Job losses in Midland and Odessa, the region's main cities, have slowed, local oil executives talk about plans to drill and some are already arranging new financing.

    Keith Moore, president and CEO of West Texas National Bank, a local energy lender, says loan applications are starting to arrive again after a year-long pause. "People were sitting on their projects. It looks like we are on the edge of recovery."

    Pruett says with oil near $50, wells on three of Elevation Resources' seven fields are already profitable and he expects prices to climb $60 next year, which would call for a second rig.

    Attached Files
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    Exxon's knife at Shell's throat.

    Indian firm Petronet, New Delhi, is reportedly in talks with ExxonMobil Corp. to renegotiate the price of LNG it signed for from the Gorgon-Jansz project on Barrow Island offshore Western Australia.

    The original 20-year contract was signed in 2009 between the two companies for 1.4 million tonnes/year of LNG.

    The talks follow Petronet’s successful renegotiation of the price of an LNG contract with Qatar’s RasGas in December 2015 on the back of low global LNG prices.

    The revised Qatar contract uses a 3-month average figure for Brent crude instead of the original 5-year average of a basket of crude imported by Japan. Petronet sweetened the new deal with an undertaking to buy an additional 1 million tpy of Qatari LNG.

    Petronet’s 2009 Gorgon-Jansz contract with ExxonMobil was also based on a Japanese crude basket.

    Petronet is an Indian government-initiated joint venture of GAIL (India) Ltd., Oil & Natural Gas Corp., Indian Oil Corp. Ltd., and Bharat Petroleum Corp. established to import LNG and build receiving and gasification terminals in the country.

    The first terminal was set up at Dahej, Gujarat; the second at Kochi, Kerala. A third is under construction at Gangawaram, Andhra Pradesh.

    Attached Files
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    Anadarko says “strongly committed” to Mozambique LNG project

    Woodlands-based Anadarko said Wednesday the company is “strongly committed” to its multi-billion Mozambique LNG project despite the debt crisis in the African country and the oil price downturn.

    The Mozambican government has admitted in April to the existence of USD1.4bn in undisclosed loans by the Interior Ministry and state-owned security companies Proindicus and Mozambique Asset Management.

    Mozambique is estimated to hold about 100 trillion cubic feet of proved natural gas reserves.

    However, Anadarko and Eni, that are developing LNG export projects in the country have still not made a final investment decision.

    “We continue to be strongly committed to the Mozambique LNG project – to taking it to FID and to building and commissioning a world-class facility,” Anadarko spokesman John Christiansen told LNG World News in an emailed statement on Wednesday.

    “We are aware of Mozambique’s debt issues and as the Government works to address those, we are working hard to put in place a set of agreements with the Government that will provide the foundation for definitive sales agreements with LNG customers. Once those agreements and the financing arrangements are in place, we expect to be in a position to take FID at that time,” said Christiansen.

    Anadarko and partners have discovered more than 75 Tcf of recoverable natural gas resources in Mozambique’s Offshore Area 1, which will be used to feed an onshore LNG terminal on the Afungi peninsula in Cabo Delgado province.

    The reserves are sufficient to support two initial LNG trains, each with capacity of 6 million tonnes per annum, as well as to accommodate expansions, including additional trains capable of producing about 50 million tonnes of LNG per year, according to Anadarko. The Mozambique LNG project has more than 8 MMTPA of non-binding LNG offtake agreements already in place.

    Anadarko also announced in December it had signed a unitization and unit operating agreement to develop natural gas resources straddling the Offshore Area 1 and Offshore Area 4 blocks in Mozambique.

    The deal, which frames the cooperation between the government of Mozambique, Anadarko and Eni, the operator of the Offshore Area 4, enables the advancement of the Prosperidade and Mamba straddling reservoirs.

    According to Anadarko, the Prosperidade and Mamba straddling natural gas reservoirs, which comprise the unit, will be developed in a separate but coordinated manner by the two operators until 24 trillion cubic feet of natural gas reserves (12 Tcf from each area) have been developed.

    Anadarko’s partners in the Offshore Area 1 are National Oil Company Empresa Nacional de Hidrocarbonetos (ENH), Mitsui E&P, Beas Rovuma Energy, BPRL Ventures Mozambique, ONGC Videsh and PTTEP Mozambique.

    Eni owns an indirect stake in the Offshore Area 4 through Eni East Africa. Other partners are Galp Rovuma, Kogas, ENH and CNOOC that also owns an indirect interest through Eni East Africa.
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    Halliburton Fracked Eclipse’s 3.5 Mile ‘Purple Hayes’ Utica Well

    There’s an old saying that goes like this: “Success has many fathers, but failure is an orphan.” Not long ago MDN reported that Eclipse Resources had drilled what is believed to be the longest horizontal well (on land) in the world–the 3.5 mile “Purple Hayes” Utica Shale well.

    It wasn’t but a day or two and one of the companies that worked on the well to help drill it, Nine Energy, popped up to say they had a hand in that recording-breaking well.

    Last week MDN told you that “snubbing” company Deep Well Services, from Pennsylvania, also helped with drilling the well.

    Drilling any well is truly a team effort with many companies involved. Yesterday yet another company stepped up to claim they played a major role in drilling the Purple Hayes–Halliburton…
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    626 Mmcf/d of Northeast Shale Gas Begins Flowing to Gulf Today

    Fantastic news! More Marcellus and Utica Shale gas will begin flowing to the Gulf Coast, beginning today.

    Some of that gas will go to the Sabine Pass LNG (liquefied natural gas) export facility owned by Cheniere Energy–the first such facility to (recently) begin exporting natural gas to other countries.

    In October 2014 Boardwalk Pipeline Partners filed a request with the Federal Energy Regulatory Commission (FERC) to reverse the flow on a 690-mile segment of their Texas Gas Transmission pipeline to begin carrying Marcellus and Utica Shale gas from the northeast to the south.

    In September 2015 FERC approved the project, called the Ohio-Louisiana Access Project. Today the pipeline reverses and Sabine Pass is the foundation shipper–beginning to accept 300 million cubic feet per day (Mmcf/d) of yummy and wholesome Marcellus and Utica Shale gas…

    Attached Files
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    Niger Delta Avengers 'Blow Up' Chevron Wells in Nigeria

    Chevron’s RMP 23 and RMP 24 wells in Nigeria have been blown up, according to a Twitter statement from the Niger Delta Avengers.

    Niger Delta Avengers ‎@NDAvengers

    With the heavy presence of 100 Gunboats, 4 Warships and Jet Bombers NDA blew up Chevron Oil Well RMP 23 and RMP 24 3:44am this Morning.

    7:12 AM - 1 Jun 2016

     Follow Niger Delta Avengers ‎@NDAvengers

    RMP 24 and RMP 23 are Chevron Swamp Highest producing Wells. 

    7:23 AM - 1 Jun 2016

    Chevron was not immediately available to confirm the attack.

    The Niger Delta Avengers claimed responsibility for an assault on Chevron’s Escravos terminal in Nigeria May 26.

    NDA used explosives to damage the Escravos tank farm main electricity feed pipeline, which resulted in Chevron’s onshore activities in the Niger Delta being shut down.

    The attack followed NDA’s warning to Chevron that no repair works should be carried out to facilities previously targeted by the group, until NDA’s demands are fully met. NDA claimed on its official website May 11 that it suspected Chevron was preparing to carry out repair works at the Okan Valve platform, which was blown up by the group at the start of the month.

    In an emailed response to Rigzone last week, a Chevron spokesperson said that the company will not comment on the safety and security of its personnel and operations as a matter of long-standing policy.

    - See more at:
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    Dana Gas CEO Expects ‘Bumpy Road’ for Oil as Shale Sets Floor

    The oil market is heading for a “bumpy road” with prices close to levels that are profitable for U.S. shale producers, according to Patrick Allman-Ward, chief executive officer of Dana Gas PJSC, which produces natural gas in Egypt and Iraq.

    U.S. shale producers can pump crude profitably at prices of about $40 to $45 a barrel, Allman-Ward said in an interview in Dubai Wednesday. Those levels will act as a floor as prices “firm up” in the second half, he said.

    Brent crude has rallied 31 percent this year on signs of a dwindling glut, partly due to high-cost producers cutting back. Demand is rising and production is being disrupted because of outages in Nigeria and Canada, according to Allman-Ward.

    “It will be a bit of a bumpy road going forward,” Allman-Ward said, with prices tending to “firm up” in the second half.

    The drop in prices since then may mean Dana Gas has to wait longer than planned for overdue payments owed by the Egyptian government for past gas sales, Allman-Ward said. The company, which agreed to sell Egypt’s share of condensate to recover the back debt, may be able to collect all the overdue amounts only in 2019, he said. Dana Gas could still meet its target to get paid back by the end of 2018 if prices rise, Allman-Ward said.

    Dana Gas has boosted production since the end of March to about 70,000 barrels of oil equivalent a day after completing a natural gas pipeline in Egypt, he said. The 17-kilometer (11-mile) link from the Balsam field in the Nile River delta to a processing plant in Egypt allowed the company to add about 10,000 barrels of oil equivalent a day of new production capacity since the end of March, Allman-Ward said.

    The company finished the pipeline ahead of schedule, allowing it to beat its own end-of-year target of reaching 70,000 barrels. Additional improvements planned at the Egyptian processing plants will help add daily capacity of 10,000 to 15,000 barrels of oil equivalent by the end of the year or in early 2017, Allman-Ward said.

    Dana Gas, which received part of a nearly $2 billion arbitration award related to its Iraq business last year, will use some of that cash to pay down debt Allman-Ward said. Reducing borrowings will help cut interest costs, he said.

    “The prudent thing to do is delever,” he said. “It makes sense to take out a cost element from our balance sheet.”
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    Canada's Husky Energy says oil price rally to generate free cash

    Husky Energy Inc, Canada's No. 3 integrated oil company, said it expected to generate free cash flow and may reinstate a cash dividend as crude oil prices have rallied in recent weeks.

    The company said it could generate about C$800 million ($611.48 million) in free cash flow if oil rises to $50 from $40 per barrel on an annualized basis.

    The oil producer said it was on track to complete eight projects by the end of this year, which would contribute 90,000 barrels per day of new production once fully ramped up.

    Husky, controlled by Hong Kong billionaire Li Ka-shing, produces oil and natural gas in Canada and Southeast Asia, and holds numerous exploration licenses offshore of Atlantic Canada.

    The company had cut its budget and production outlook and suspended quarterly dividend in January, a few months after surprising investors by switching to a stock dividend from cash payments.

    Husky Energy, which has reached agreements for asset sales worth about C$2.8 billion this year, said it expected to achieve its target of about two-times net debt-to-cash flow from operations.
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    China issues draft rules for strategic oil reserves

    China issues draft rules for strategic oil reserves

    China is planning changes to the way it handles oil reserves by allowing private companies to build and operate some of its strategic stockpiles, while also requiring companies to maintain compulsory inventories, potentially boosting its future imports.

    Beyond allowing private companies to build and operate some strategic petroleum reserves (SPR), draft rules issued by the National Energy Administration (NEA) on Tuesday will also oblige companies to keep compulsory oil reserves.

    These stocks must be kept separately from commercial reserves, and the draft states that such compulsory reserves could only be used at the direction of the state council or cabinet.

    The government determines the size of such mandatory reserves based on oil consumption, the rules published on the NEA website said (

    Although no specific volumes were published and no implementation timetable given, traders said that such requirements would boost China's oil imports further, if implemented.

    "Potentially it is supportive of the oil market as it may increase imports and reduce exports of products. However, the devil is in the detail so we need a clearer picture," said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.

    China is the world's second-biggest crude importer, importing 32.58 million tonnes (or around 8 million barrels per day) and challenging the United States' for top spot.

    China is expected to add 70-90 million barrels to its strategic crude oil purchases in 2016 as it takes advantage of low prices, a Reuters survey has shown.

    By mid-2015, China had stockpiled about 190.5 million barrels under its SPR programme, or roughly one month of net crude imports.

    Beijing's goal is to stockpile reserves amounting to 90 days of net imports, which is the standard for SPRs in most western countries.

    In the draft rules, the government defines the country's SPRs as including government stockpiling and companies' compulsory stockpiling reserves.

    China's stockpiling programme has so far been led largely by state-owned energy giants Sinopec and CNPC, with ChemChina recently striking a deal with privately-run CEFC China Energy to lease out tanks in the southern island province of Hainan.

    Approval to use strategic oil reserves must come from the state council, the draft rules stipulated.

    Circumstances under which the reserves may be used include during an unexpected emergency when oil supplies are either blocked or significantly reduced, or when macro-economic adjustments are needed.

    The strategic oil reserves include crude oil and oil products like gasoline, diesel and jet fuel.

    The NEA is seeking public feedback on the draft rules until June 18.
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    Golar posts $80 million loss in Q1, says LNG shipping market remains weak

    Bermuda-based Golar LNG, the owner and operator of liquefied natural gas carriers on Tuesday posted a loss of $80.1 million in the first quarter of this year.

    The shipping company’s adjusted operating loss was at $41.2 million in the first quarter as compared to $31.6 million in the fourth quarter of 2015.

    “Although headline shipping rates remained relatively unchanged, utilisation fell from 42% in 4Q 2015 to 24% in 1Q and revenue dropped accordingly from $20.1 million in 4Q of 2015 to $16.6 million in 1Q,”  Golar LNG said on Tuesday.

    Weak LNG freight market

    Golar noted that the weak LNG freight market continued in the early part of 2016, with the majority of fixtures coming from the Pacific basin.

    However, the Pacific basin fixtures were mostly for short periods, and the largest number of idle vessels is located in the basin.  The economics turned in favour of the charterers that took advantage of the overcapacity.

    There were fewer vessels and fewer fixtures in the Atlantic basin, due to subdued reload activity in Europe.

    “Middle Eastern activity was light during 1Q but has picked up as we approach mid-year when the Middle East and South American importers increase gas demand,” Golar said.

    Slower than expected start-ups at Sabine Pass in the U.S., Gorgon in Australia and Angola LNG in Africa have had a negative effect on the shipping market, however, vessels for the projects have been taken off the spot market.

    Enarsa of Argentina recently issued a tender for 35 cargoes which stimulated chartering activity in the early part of the second quarter, although whether this results in an improvement on the first quarter remains to be seen, according to Golar.

    “A gradual recovery, hand in hand with the ramp up and start-up of projects should result in improving utilisation and charter terms, initially for newbuild TFDE tonnage, and then for modern steam vessels,” Golar said.

    For its part, Golar LNG decided to lay up its spot traded Golar Viking and Golar Grand, as round-trip economics result in a lower effective rate, even though rates for newbuild TFDE vessels stay at US$25,000 to $30,000 per day.

    All of Golar’s ten newbuilds are currently operating inside the Cool Pool.

    Attached Files
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    Valvoline Files for IPO as Parent Shifts Focus to Chemicals

    Valvoline Inc., the second-largest U.S. operator of oil-change stores, filed to sell stock in an initial public offering as parent Ashland Inc. sharpens its focus on specialty chemicals.

    The sale of as much as 20 percent of Valvoline shares is being targeted for the fourth quarter with the rest of the stock to be distributed later to Ashland shareholders, the Covington, Kentucky-based chemical maker said in a statement Tuesday. Subject to investor approval, Ashland will reincorporate in Delaware as Ashland Global Holdings Inc. to minimize separation-related taxes.

    The Valvoline IPO, which was first announced in September, is the latest phase of a decade-long transformation in which Ashland has sold a stake in an oil refiner and disposed of a road-paving business and a chemical-distribution operation. The company, led since last year by Chief Executive Officer William Wulfsohn, has also bought makers of specialty chemicals such as those used in pharmaceuticals, hair gels and anti-wrinkle products.

    Valvoline, which had net income last year of $196.1 million on sales of $1.97 billion, traces its history to the discovery in 1866 that crude oil makes a good lubricant, according to a filing. Valvoline was trademarked six years later and was subsequently recommended for use in the Ford Model T.

    The company sells lubricants through 1,050 Valvoline branded quick-lube franchises and company-owned stores, more than 30,000 retailers and 12,000 car dealers, repair shops and competing quick lube outlets. Division President Sam Mitchell was named as Valvoline CEO in September when plans for the IPO were first announced.

    The new company will be based in Lexington, Kentucky, and will trade under the ticker symbol VVV.

    The IPO managers are Bank of America Corp., Citigroup Inc. and Morgan Stanley.
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    Oil tankers in limbo as Venezuela's PDVSA fails to pay BP: sources

    Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela's PDVSA has not yet paid supplier BP Plc, according to two sources and Thomson Reuters vessel tracking data.

    The cargoes are part of a tender Petroleos de Venezuela [PDVSA.UL], known as PDVSA, awarded in March to BP and China Oil. The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries.

    While three cargoes for this tender were delivered in April, seven other vessels, including BP's four hired ones, are waiting to discharge, leaving up to 3.85 million barrels of WTI in limbo.

    The company's cash crunch, which also affected its oil imports late last year, have added to a backlog of tankers since March due to malfunctioning loading arms at Jose, Venezuela's main crude port.

    PDVSA initially offered to pay for the imports with Venezuelan oil, but negotiations for those swaps failed as the proposed loading windows and crude grades did not work for BP, a source close to the talks said.

    Amid low crude prices, declining exports and a brutal recession at home, PDVSA has since 2015 delayed payments to suppliers. As a result, service firms including Schlumberger, Halliburton and Petrex have curtailed operations in the OPEC country.

    The payment delays are also raising questions about who will pay for demurrage, or the daily costs for delays. Three of the BP tankers have been anchored for over 30 days.

    As China already lifts Venezuelan crude as part of broader oil-for-loans deals, its companies have agreed on swaps for this tender, the sources said.

    Issues with loading arms to receive tankers at Jose port have doubled wait times for shippers since March.

    PDVSA said in a statement that installation of replacement equipment in the port's southern dock were successfully concluded on Tuesday.

    Some 30 dirty tankers are currently waiting around PDVSA's ports in Venezuela and Curacao.

    PDVSA has become one of the largest buyers of U.S. crude since last month even with a narrow arbitrage that makes most exports unattractive, analysts have said, but payment delays could stymie its bid to continue imports.
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    U.S. March oil demand rises 2 percent year-on-year -EIA

    U.S. total oil demand rose for the second consecutive month in March, fueled in part by the continued strength in demand for gasoline, federal data released on Tuesday showed.

    U.S. oil demand rose by 2 percent, or 378,000 barrels per day, from a year ago to 19.61 million bpd, data from the U.S. Energy Information Administration showed.

    The March figures mark the fourth year-over-year increase in total oil demand in the last nine months, including February's growth of 1.5 percent, EIA data shows.

    The demand growth was led by gasoline, which jumped 3.8 percent, or 344,000 bpd, from a year ago to 9.4 million bpd, according to the EIA's petroleum supply monthly report.

    The gasoline demand numbers were strong enough to overcome weaker demand for distillates, which fell to 2.8 percent, or 113,000 bpd, versus last year.

    The U.S. Department of Transportation released figures last week that showed motorists logged 5 percent more miles on U.S. roads in March than they did a year earlier, fueling a record pace in vehicle miles traveled for the first three months of the year.

    The 5 percent increase resulted in 273.4 billion miles being driven in the month, an historic high for March.
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    OPEC oil output falls from near-record in May on Nigeria outages

    OPEC's oil output fell in May from near a record high, a Reuters survey found on Tuesday, as attacks on Nigeria's oil industry and other outages outweighed increases in Iran and Gulf members.

    A rise in supply from Saudi Arabia plus Iran suggests the group's top producers remain focused on market share, following the failure of an initiative in April between OPEC and non-OPEC producers to support prices by freezing output.

    With OPEC meeting in Vienna on Thursday, outages are effectively achieving the supply restraint on which producers could not agree. Those disruptions are supporting oil prices, which are close to 2016 highs, and the rally has reduced the urgency of any new attempt at deliberate supply curtailment.

    "There is a tiny chance of a bullish surprise but as things stand right now, the odds are the continuation of OPEC's market-share policy," said David Hufton, of oil brokers PVM.

    Supply from the Organization of the Petroleum Exporting Countries fell to 32.52 million barrels per day (bpd) this month, from 32.64 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

    OPEC output has surged since the group abandoned in 2014 its historic role of cutting supply to prop up prices, in a shift led by Saudi Arabia. There are more indications, however, that some producers are struggling to maintain supply.

    May's biggest decline occurred in Nigeria due to militant attacks on the country's oil industry. The disruption has pushed output to its lowest in more than 20 years.

    Libyan output declined further due to a blockage of shipments from the port of Hariga. Loading difficulties and other problems made a further dent in Venezuela's supply, sources in the survey said.

    Iraq, the fastest source of OPEC production growth in 2015, also pumped less as power outages limited southern exports, which in April were at a near-record.

    Of the countries boosting output, Iran managed a further increase after the lifting of Western sanctions in January.

    At 3.55 million bpd, Iranian output has more than matched the 3.50 million bpd it pumped at the end of 2011 before sanctions were tightened, according to Reuters surveys. However, any further rises will be smaller, sources said.

    "Getting back to pre-sanctions output was not a problem," said a source familiar with Iranian thinking. "Getting beyond that will be harder."

    Saudi Arabian output edged up to 10.25 million bpd, compared with 10.15 million bpd in April, the survey found.

    "Exports are higher," said an industry source who monitors Saudi output. "But production is not really changing very much."

    Other increases came from the United Arab Emirates, following the end of maintenance on oilfields, and Kuwait as supply rebounded after a three-day workers' strike in April cut output.
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    Saudi Aramco Plans to Boost Capacity on Oil Pipeline to Red Sea

    Saudi Arabian Oil Co., the world’s largest crude producer, plans to increase the capacity of its main cross-country pipeline by 40 percent as the company expands oil fields in the eastern part of the nation and builds refineries on the western coast.

    Capacity of the 1,200-kilometer (746-mile) East-West pipeline will increase to 7 million barrels a day by late 2018, from 5 million barrels a day now, the company said on its Twitter account on Tuesday. The pipeline starts near Saudi Aramco’s headquarters in Dhahran to Yanbu on the west coast near the Red Sea where it’s expanding refining and petrochemical plants.

    “There’s no let up in Aramco’s plans for downstream expansion, so this would help in making sure they eliminate any bottlenecks in shipping crude,” Edward Bell, a commodities analyst at lender Emirates NBD PJSC, said by phone from Dubai. “There’s room for considerable demand growth both domestically and for export.”

    Saudi Arabia’s main oil deposits, including Ghawar, the world’s largest, are in the eastern part of the country. Saudi Aramco is expanding capacity at the Shaybah oil field in the Rub Al-Khali desert in southeastern Saudi Arabia by 33 percent to 1 million barrels a day. It reached full production for its 900,000 barrel-a-day Manifa field offshore in Gulf waters in 2014.

    The Manifa field produces the heavy crude grade that’s processed in Aramco’s joint venture refinery with China Petrochemical Corp. at Yanbu on the Red Sea. The company is building a refinery at Jazan along the southwest coast and is considering adding units to a separate crude-processing facility at Yanbu, according to its annual review released last week.

    The country’s main crude export terminal is at Ras Tanura in the Persian Gulf. The East-West pipeline gives Saudi Arabia a potential alternative outlet for crude shipments in the event of an interruption in the Strait of Hormuz. The Strait at the mouth of the Persian Gulf is the world’s most important choke point for crude exports, with about 17 million barrels of oil passing through it daily, according to the U.S. Energy Information Administration.
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    North Dakota rig count up more than 10 percent

    North Dakota saw the number of rigs actively exploring for or producing oil and gas increase by more than 10 percent from last week, state data show.

    Data from the state government show 28 rigs in service early Tuesday, up 16 percentfrom last week. The increase follows a slow march toward $50 per barrel for West Texas Intermediate, the U.S. benchmark for the price of crude oil. WTI is up about 4 percent from last week.

    Crude oil prices are still about 50 percent lower than they were two years ago, leaving energy companies with less capital to invest in exploration and production. Oil services company Baker Hughes reported no change last week in the total U.S. rig count. Year-on-year, however, the total U.S. rig count is 53 percent lower than it was for the same week in 2015. For North Dakota, the rig count for Tuesday is off by 65 percent from this date last year.

    North Dakota, home to the Bakken shale oil reserve, last week broke a record low for rig counts set in July 2005 with 25 in service. The all-time low point for rigs in North Dakota is zero.

    Rig counts serve as a loose barometer for the health of the oil and gas industry, which has been bruised by weak economics. Hess Corp., one of the more active players in North Dakota, said its first quarter spending on exploration and production was $544 million, down nevertheless 56 percent year-on-year.

    Lynn Helms, the director of the state's oil and gas division, said energy companies working in the state are committed to running only a small number of rigs.

    State data show oil production in March, the last full month for which figures are available, at 1.11 million barrels per day, a decline of about 1 percent from February. Natural gas production, however, reached an all-time high for the state last month at 1.7 million cubic feet per day.
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    Gazprom sees no need for Europe price war, no U.S. LNG threat

    Russia's Gazprom sees no need to wage gas price wars in Europe to squeeze out rivals, including expected liquefied natural gas (LNG) from the United States, Deputy Chief Executive Alexander Medvedev said on Tuesday.

    Gazprom provides a third of the gas used in the European Union but relations have soured over Ukraine, prompting the EU to look for alternatives to Russian energy imports.

    One potential alternative for gas is LNG from the United States where exports are expected to rise sharply between now and 2019.

    "There has been a lot of talk that LNG from the United States is a panacea (for those looking to switch away) from Russian gas... But at the moment there are more preferable destinations for U.S. LNG than Europe," Medvedev said.

    "Price will determine the competitiveness of U.S. LNG. I don't see U.S. LNG flowing to Poland or Portugal."

    Medvedev reiterated that Gazprom's exports to the EU and Turkey may exceed a record-high 165 billion cubic metres (bcm) per year, topping deliveries of 159 bcm in 2015.

    Gazprom generates more than half of its revenue in Europe where Medvedev said sales would reach $28 billion this year.

    Some analysts have said that in order to preserve its market share in Europe, Gazprom would have to cut prices.

    "We don't see any need to wage a pricing war," Medvedev told reporters.

    He said gas prices in the second quarter would be the lowest this year but would rise from the third quarter.

    Last week, he said the company sees Russian gas prices in Europe this year averaging $167 to $171 per 1,000 cubic metres. That is down from about $240 in 2015, reflecting lower crude prices hitting indexed gas pricing.

    "We don't need astronomically high gas prices, we need prices which allow us to do our job," Medvedev said.

    He said that Gazprom's production costs are one of the industry's lowest at around $20 per 1,000 cubic metres.
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    LNG Glut Seen by FGE Pushing Prices to $3 as Soon as Next Year

    Liquefied natural gas spot prices will fall to $3 per million British thermal units by mid-2017 or 2018 as new projects worsen a global glut, according to energy consultant FGE.

    A bevy of new export projects scheduled to start over the next few years will create more LNG than users around the world can burn, FGE Chairman Fereidun Fesharaki said in an interview Tuesday in Singapore. Most of the direct buyers of the supply are middlemen, not end users, and they will have to offer lower and lower prices to find customers.

    LNG on the spot market near Singapore has fallen 68 percent since October 2014 to $4.43 per million Btu this week, according to Singapore Exchange Ltd. Prices will have to keep declining until they drop low enough to force some producers, probably in the U.S. or Australia, to reduce output, Fesharaki said.

    “Some people are going to have to lose billions,” Fesharaki said.

    LNG hasn’t been as cheap as $3 since July 1999, according to import data from LNG Japan Corp., which tracks both term and spot prices for imports by world’s largest buyer of the fuel. Global LNG production capacity is expected to rise to 420 million tons a year by 2020, up from 333 million this year, Goldman Sachs Group Inc. said in February. Demand by 2020 is only expected to be about 323 million tons a year, the bank forecast.

    Attached Files
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    Technip signs $500 mln deal to refurbish Libya's Bahr Essalam oil platform

    French oil services company Technip has signed a deal worth $500 million with a consortium that includes Libya's National Oil Company and Italy's oil and gas major ENI to refurbish an offshore oil platform.

    A statement from the French foreign ministry where a Libyan delegation was visiting on Tuesday, said the platform is for the Libya's Bahr Essalam oil field off Tripoli.

    The deal was signed by NOC's chief executive Mustafa Sanalla and Technip's CEO Thierry Pilenko.
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    Gazprom explores cooperation possibilities with CNOOC and CNPC

    Gazprom has announced that a working meeting has taken place in Sochi, Russia, between the Chairman of the Gazprom Management Committee, Alexey Miller, and the Chairman of the Board of Directors of China National Petroleum Corp. (CNPC), Wang Yilin.

    The meeting focused on planned gas supplies to China through both eastern and western routes. It also looked at possibilities regarding cooperation in underground gas storage and gas-fired power generation, as well natural gas vehicles (NGVs).

    An additional meeting was held between Miller and the President of China National Offshore Oil Corp. (CNOOC), Liu Jian. This meeting looked at the possibility for cooperation in hydrocarbon exploration and production, as well as in the LNG industry.
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    Japan's LNG imports slip 3.3% on year in April; Qatar, Nigeria imports lower

    Japan's LNG imports reached 6.4 million mt in April, down 3.3% from a year ago, led by lower supply from Qatar and Nigeria, data released Friday by the Ministry of Finance showed.

    On a month-on-month basis, LNG imports also dropped 21.7% from March as the country entered shoulder months.

    Shipments from Australia reached 1.8 million mt in April, up 23.2% from a year ago.

    It was the largest LNG supplier with its volume representing 28% of Japan's overall imports.

    Malaysia came in second, supplying 1.18 million mt in April, rising 7% from a year earlier.

    Imports from Qatar plunged 30.6% year on year to 841,520 mt in April, making Qatar the third-largest LNG supplier for the month.

    Shipments from Nigeria also fell 22.3% from a year earlier to 143,347 mt in April.

    Japan received no reloads from Europe and the number of exporting countries to Japan shrank to 10 in April, from 14 a year ago, with Yemen LNG shut since April 2015 amid increasing security concerns around the facility.

    The Japan Customs Cleared crude oil price was $36.957/b in April, down 34.1% from a year earlier but rose 15.5% from March.

    Some of Japan's long-term LNG contracts are linked to the JCC crude price but with a lag of a few months, so fluctuations in oil prices typically take time to be reflected in LNG prices.

    Attached Files
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    Weekly U.S. Oil Rig Count: Some Rig Repositioning

    The decline in domestic oil rigs resumed, with two rigs out of the count compared to last week. Total U.S. rig count remained flat with an increase of two natural gas rigs. The most interesting development was the appearance of new rigs in some of the lesser oil plays, which probably signals that producers are getting comfortable with $50/bbl oil as the baseline going forward.

    But there are some new rigs in lesser plays, which probably signals that producers are getting comfortable with oil staying at the $50 level.

    One new rig in Arkoma, Woodford, which went from zero rigs, to one rig.
    Two new rigs in Granite Wash.


    The oil rig count resumed its decline, with the domestic oil rig count down by two. There's some newfound confidence by producers, consistent with $50/bbl oil, as displayed by the appearance of new rigs in some of the lesser plays, which goes against the long term trend of moving rigs to the most productive regions. Overall, however, not that much new information in this report.
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    Pemex Turmoil Batters Bond Traders Again as Supplier Defaults

    Pipeline builder Arendal S de RL has become the latest casualty of Mexico’s state-owned oil producer.

    The company defaulted on a $100 million bond that was due last week after Petroleos Mexicanos deferred plans to build two pipelines and delayed payments to suppliers. Arendal depends on Pemex, as the oil giant is known, for about 80 percent of its income. In February, Fitch Rating said that Pemex owed Arendal 1.8 billion pesos ($97.4 million).

    Battered by low oil prices and sinking output, Pemex owed suppliers $7.2 billion at the end of the first quarter, more than any other company in Latin America. It has extended the amount of time it takes to pay suppliers to 180 days from 20 as it cuts costs in the wake of 14 straight quarterly losses. Pemex, which has $95 billion of debt, has also slashed the day rates it pays to rent rigs, a move that triggered a default by supplier Oro Negro last year. The notes of fellow rig operator Offshore Drilling Holding SA fell to a record 29.5 cents on the dollar May 23, signaling investors are concerned it will struggle to repay the debt.

    “The delays in accounts receivable pressured their working capital,” Francisco Gutierrez, an analyst at S&P Global Ratings, said, referring to Arendal. “About 90 percent of Arendal’s projects are with Pemex, which shows how vulnerable they are.”

    Pemex didn’t reply to a request for comment on Arendal’s default and its treatment of its suppliers. Arendal declined to comment.

    On May 16, Pemex said it had cut its debt to suppliers by 92 billion pesos. The oil producer said it prioritized payments to companies it owed less than 85 million pesos each, which covered 90 percent of the companies it was indebted to.
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    Suncor resumes oil-sands operations after wildfire shutdown

    Suncor Energy Inc. restarted oil-sands operations in the Regional Municipality of Wood Buffalo, an area in Canada that includes wildfire-ravaged Fort McMurray. It’s a move that enables thousands to return to work.

    Suncor and other oil-sands operators took offline this month more than 1 million barrels a day of output, as wildfires spread in the region and forced evacuations and the shutdown of pipelines and power supplies. “Cooler weather and several days of precipitation” have improved conditions, Canada’s largest energy company said in a statement on Sunday.

    Alberta lifted mandatory evacuation orders for the last of the accommodation and production sites on Monday, which started the process of inspections by forestry and health officials to make sure they’re safe. Officials say industry facilities are no longer at immediate risk as firefighters take advantage of better weather to keep the flames at bay.

    Suncor said 4,000 employees and contractors are back in the region, including Fort Hills workers, with an additional 3,500 people likely to return in the coming week.

    The company also reported operations are under way at the base plant mine and MacKay River, with initial production expected by the end of this week, according to the statement. No timeline was given for the joint venture with Syncrude Canada Ltd.

    Attached Files
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    Iraq joins Mideast rivals raising oil exports ahead of OPEC meeting

    Iraq will supply 5 million barrels of extra crude to its partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share ahead of an OPEC meeting this week.

    Iraq, which is the second-largest producer in the Organization of Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day.

    Saudi Arabia, Kuwait, Iran and the United Arab Emirates, also plan to raise supplies in the third quarter.

    A recovery in global oil prices from 12-year lows to above $50 a barrel and rivalry between Saudi Arabia and Iran have dampened expectations that OPEC will rein in supplies at Thursday's meeting.

    While additional exports could make up for shrinking output and supply disruptions elsewhere, the new supplies also risk delaying a re-balancing of a global market still awash with oil.

    "OPEC is indeed increasing supplies, practicing their market share first strategy," said Victor Shum, managing director of downstream energy consulting at IHS, referring to a Saudi-led drive to boost OPEC's production to take back market share.

    He said that additional oil from Saudi and Iraq may slow down a re-balancing of the global market, although this could be countered by supply disruptions from other places and strong seasonal demand.
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    Oil States Expected To Stick With Saudis: OPEC Reality Check

    Oil States Expected To Stick With Saudis: OPEC Reality Check

    OPEC members gathering in Vienna June 2 are expected to go along with a Saudi Arabia-led policy focused on squeezing out rivals amid signs the strategy is working. That means the meeting may be less fraught than the previous summit in December, which ended with public criticism of the Saudi position from Venezuela and Iran.

    By allowing prices to fall, high-cost producers are being forced out, easing the supply glut and spurring a rally of 80 percent since January to about $50 a barrel. All but one of 27 analysts surveyed by Bloomberg said the Organization of Petroleum Exporting Countries will stick with the strategy. An alternative proposal -- to freeze output -- was finally rejected in Doha last month.

    The group may also choose a secretary-general to replace Abdalla El-Badri, whose term has been extended after members failed to agree on a successor. In recent months, three new hopefuls have emerged to try and break the impasse: Nigeria’s Mohammed Barkindo, Indonesia’s Mahendra Siregar and Venezuela’s Ali Rodriguez.

    - See more at:
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    Two More Militant Attacks on Nigerian Crude Pipeline

    In two simultaneous attacks late on Thursday, the Niger Delta Avengers (NDV) have targeted a state-run crude pipeline near the Batan oilfield.

    The oil and gas pipeline is near the Batan oilfield in Warri, and is operated by the state-run Nigerian National Petroleum Corporation (NNPC).

    African media suggest that the attack differed strategically from the series of attacks that preceded it because this pipeline was heavily guarded by state security forces and militants were demonstrating their reach and capabilities.

    The NDA claimed responsibility for the attack via its Twitter feed, its established method.

    "At 11:45pm on [email protected] blew up other #NNPC Gas and Crude trunkline close to Warri. Pipeline that was heavily guarded by Military," the group tweeted.

    The group rejected a meeting recently convened in Abuja by the federal government, warning of its readiness to carry out an attack that will "shock the whole world".

    "The Niger Delta stakeholder's meeting is an insult to the people of Niger Delta. What we need is a Sovereign State not pipeline Contracts,” NDA said.

    "To the IOC's, Indigenous Oil Companies and Nigeria Military. Watch out something big is about to happen and it will shock the whole world."

    Related: Why Canada’s Oil Sand Producers Will Recover Quickly From The Wildfires

    On Wednesday, the militant group blew up the main electricity feed pipeline at Chevron’s Escravos terminal, taking the terminal offline.

    Nigeria’s oil production has plunged by 40 percent, falling to just 1.4 million barrels per day, the lowest level in decades

    Last week, Italian oil giant Eni declared force majeure after another attack on its AGIP pipeline took oil offline. Earlier this month, Shell also declared force majeure on its exports of Bonny Light crude, evacuating staff from its Eja OML 79 production facility.

    The first week of May saw militants attack one of Chevron’s offshore platforms, the Okan facility, disrupting 90,000 barrels per day of oil production. The Okan facility, which it operates in conjunction with the Nigerian National Petroleum Corp., is also a gathering point for production from several fields, so the attack knocked off output from all of them at once.
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    Will Russia’s crude output levels surprise on the upside again?

    Russia’s oil sector has shown a surprising resilience to low oil prices and western sanctions over the past two years. The country’s output repeatedly hit new record highs despite various negative outlooks.

    This surprising pattern could well be repeated both this year and next should certain projects overcome delays and greenfields ramp up output.

    Independent research group Vygon Consulting, in its May study, said oil production in Russia is likely to continue growing not only this year — as was forecast by many market observers — but also next year.

    On top of this, the consultancy sees Russian crude production hitting the 11.3 million b/d level next year. If so, it will get close to Russia’s all-time high, recorded in 1987. This is well above other most optimistic estimates.

    A general consensus sees Russia’s crude production continuing to grow this year by around 100,000 b/d or even slightly above this figure. The growth is supported by investments made in previous years.

    Next year, however, output is expected to remain flat or even drop by around the same 100,000 b/d, as greenfields no longer compensate for growing natural decline at mature fields in West Siberia. This view is shared by many market experts both in Russia and abroad, although forecasted figures do differ somewhat.

    Russian and international estimates are not directly comparable due to use of different conversion factors for Russian crude and condensate volumes reported in mt.

    The International Energy Agency, for example, has warned that while Russia’s oil resource base is weakening, the commissioning of new fields is likely to be delayed in the coming years due to capex constraints and rising fiscal pressures, making it increasingly challenging for oil producers to maintain crude output.

    Vygon Consulting, however, believes that several new projects that are scheduled for commission both this and next year are unlikely to be delayed as they are ready to launch and key capital investments have already been committed to them.

    These projects include the Filanovskogo field in the Caspian Sea and the Messoyakha field in northern Siberia, set to come online by the end of this year and a number of new fields expected to start in 2017.

    In addition, already commissioned greenfields, including in the Arctic, could increase output to become drivers of crude production growth next year.
    As a result, the consultancy estimates, crude production from greenfields is likely to jump to nearly 1.5 million b/d, or 85%, in 2017, from its 2015 level, which would fully compensate for the natural decline elsewhere.

    Indeed, this outlook is much higher than the level of natural decline at old fields in Russia, with different estimates putting output at between 100,000 b/d and 400,000 b/d in 2015.

    The problem is that crude production in West Siberia is falling by around 3.5-4% a year, despite the sharp increase in drilling and wider use of enhanced oil recovery technologies seen last year. If those operations are reduced due to companies’ financial constraints, the natural decline could accelerate drastically.

    So far, however, production drilling — including the drilling of horizontal wells — is still on the rise as oil companies’ operations are supported by flexible taxation and the forex rate of ruble to dollar, mitigating cuts in oil prices.

    But there is the risk that Russia’s authorities could opt to increase the tax burden on oil companies to resolve budget problems.

    And while at present governmental officials have said there are no plans to raise these taxes, a different approach might prevail when the government considers how to meet the 2017 budget in the autumn.

    If the tax burden is increased, the outlook for Russia’s crude production could be quite different from that of current forecasts.
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    Hercules Offshore to file for bankruptcy a second time

    Hercules Offshore Inc said it planned to file for prepackaged Chapter 11 bankruptcy, just six months after the rig contractor emerged from bankruptcy protection.

    The company said it had entered into a restructuring support agreement with some lenders, which will eventually allow it to place all its unsold assets into a wind-down vehicle until they can be sold.

    Hercules Offshore said its international units would not be included in the bankruptcy filing, but would be a part of the sale process.

    The company said in February that it was considering strategic options, including selling itself.

    Hercules filed for Chapter 11 bankruptcy protection in August 2015 and emerged from bankruptcy in November.

    "Since this time, the ongoing decline in oil prices, the consolidation of its U.S. customer base and the addition of new capacity have negatively impacted dayrates and demand for Hercules's services," the company said in a statement.
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    Alternative Energy

    Rio Tinto expects lithium to be in high demand

    Diversified mining major Rio Tinto signals that it is eager to join the lithium rush, with its lithium-borate deposit in Serbia being seen as a “strategically important” project for the group. 

    In a Rio Tinto publication released on Thursday, Rio Tinto CEO for diamonds and minerals, Alan Davies, described the lithium-borate project in the Jadar basin as “exciting”. He said that lithium was a resource that was expected to be in high demand in future, owing to growth in the electric vehicle (EV) market.

    Rio Tinto has earmarked $20-million for the Serbian project until the end of 2017, to complete the studies required for the prefeasibility stage and to obtain a resource reserve certificate from the Serbian government. To date, Rio Tinto has invested $70-million in the Jadar project. 

    The company’s geologists discovered a new lithium sodium borosilicate mineral in the Jadar basin in 2004 and two years later, jadarite was officially confirmed as a new mineral. Jadarite contains lithium and borates and Serbia is the only known source of the mineral. 

    Rio Tinto believed that the Jadar lithium-borate deposit was among the largest lithium deposits in the world. If developed, the Jadar project could supply over 10% of the world’s lithium demand. The fastest-growing application for the mineral was lithium batteries, with particularly strong demand from EVs. The Rio Tinto M2M publication stated that the world market for EVs was expected to increase to more than ten-million vehicles by 2022 – about ten time the market size in 2014.

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    Temperature spiral animation

    Temperature spiral animation created by University of Reading climate scientist Ed Hawkins that went viral on the internet has been updated and pushed into the future by the US Geological Survey.

    The new temperature spiral animation takes the scariest of the emission scenarios used by the Intergovernmental Panel on Climate Change (IPCC) and adds it to the original Hawkins spiral. Hawkins described his animated spiral as presenting “global temperature change in a visually appealing and straightforward way” and it was retweeted thousands of times on Twitter.

    The original animation showed how global temperatures have risen since 1850 and put them in the context of the global target limit of a 2oC rise in global temperatures above those of the pre-industrial era. The data for the Hawkins spiral came from global monthly average temperatures from January 1850 to March 2016 is taken from the UK Meteorological Office’s HadCRUT4.4 temperature analysis. It is displayed as a variance, or anomaly, relative to the mean global temperature between 1850 and 1900.


    Temperature Spiral

    The updated version of the climate temperature spiral animation. Courtesy: US Geological Survey
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    Pollen in batteries

    Energy storage is an extremely hot area of the energy and utility markets right now, with new innovations and investment opportunities appearing all the time. Add to that the breakneck growth of the energy storage market and you have a recipe for a burgeoning industry with massive potential. One of the most innovative technologies recently though is under development at Purdue University. Researchers in the Chemical Engineering Department there are working on a battery that uses plant pollen as a component.

    The pollen would act as an anode in the Purdue battery in place of the current standard which uses tiny graphite particles. The innovation is using high temperature argon environments to char the pollen, leaving residual pure carbon in its place. The residual carbon components retain the same small geometric structure as pollen, which means that they are very complex surfaces covered with spikes, crevices, and pits. In nature, that surface allows pollen to effectively stick to bees and other insects helping plants to propagate effectively.

    In batteries, the complex structure of the residual carbon particles creates a greater surface area, which in turn allows for better ion storage in the batteries. That makes the batteries more efficient and gives them a greater energy capacity. The technology has significant promise since energy storage capacity in batteries is one of the key issue that constrains the industry.

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    Germany ends row with states over green energy roll-out

    Chancellor Angela Merkel hammered out the framework for a deal with state premiers on Wednesday on reforms to Germany's renewable energy law aimed at curbing the costs and controlling the speed of the future roll-out of green power sources.

    After a meeting with the leaders of Germany's 16 states that stretched into the early hours of Wednesday, the government agreed to limit the expansion of onshore wind at 2.8 gigawatts in capacity per year, equivalent to about 1,000 wind turbines.

    In addition, only a certain amount of new capacity will be permitted in north Germany to avoid overburdening the electricity grid.

    "We have come a long way," Merkel told reporters following the meeting.

    Saxony-Anhalt Premier Reiner Haseloff spoke of a "breakthrough," while his counterpart in Bremen, Carsten Sieling, said they had covered 90 percent of the ground.

    Generous green subsidies have led to a boom in renewable energy, such as wind and solar power. But the rapid expansion has pushed up electricity costs in Europe's biggest economy and placed a strain on its grid.

    The latest reforms are aimed at slowing the growth in renewables, which accounted for around a third of Germany's electricity last year.

    With the government sticking to its target for an increase in the share of renewable sources to 40 to 45 percent of total electricity production by 2025, it will have to put the brakes on growth to avoid overshooting.

    One of the biggest sticking points in the talks were plans to limit the amount of onshore wind, with critics saying that would endanger Germany's long-term energy goals and put jobs in the sector at risk.

    The government also wants to move away from guaranteed set payments to a competitive auction system where green energy producers only receive payments for their power if they win a tender.

    According to the proposals, an upper limit of 600 megawatts will be placed on solar power expansion. Installations that are smaller than 750 kilowatts of capacity will continue to receive support so as not to discourage rooftop solar panels.

    The government and states failed to agree on upper limits for biomass, which is important in the southern state of Bavaria, while questions remain over the future expansion of offshore wind plants.

    The government now hopes to approve the proposals in the Cabinet in coming weeks. The draft law is due to come into force at the start of 2017.
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    DECC proposes anaerobic digestion subsidy cuts

    The government has proposed to reduce support for anaerobic digestion (AD) projects in the UK.

    It has launched a consultation – open until 7th July – on revised support levels for AD and micro combined heat and power (mCHP) technologies currently eligible for the Feed-in Tariff (FiT) scheme.

    The initiative was launched in 2010 to encourage deployment of small scale low carbon power generation in the country.

    Anaerobic digestion is the process by which organic matter such as animal or food waste is broken down to produce biogas and biofertiliser.

    For projects under 250KW, DECC is proposing to reduce support from 8.21p/kWh to 5.98p/kWh.

    Tariffs for installations between 250KW-500KW would also be cut from 7.58p/kWh to 5.52p/kWh while those larger than 5,000KW would receive no subsidies.

    DECC states: “Our tariff-setting methodology considers AD installations claiming RHI [Renewable Heat Incentive] payments, relying on 100% food waste as their feedstock and receiving a gate fee of £20 per tonne. Analysis shows that such installations are able to make sufficient revenues to make the deployment of the plant viable and achieve a 9.1% rate of return without support from the generation tariff.”

    It adds it had projected 100 installations equating to 160MW of capacity by 2020/21 when the FiT scheme was launched.

    However by the end of March this year, the number of installations accredited under the FiT scheme was 250, with an installed capacity of 177MW.

    In contrast, mCHP plants “have not seen a sustained level of deployment”.

    Therefore DECC is proposing to maintain the current tariff for projects under 2KW at 13.61p/kWh.

    The technology was originally included in the FiT scheme as a pilot. The government claims support has been available for up to 30,000 installations, with an capacity of 2KW or less.

    However despite an increase in generation tariffs following the 2011/12 FiT review, deployment of mCHP has remained low with only 501 installations supported under the scheme by the end of 2015, with a further 158 commissioned and awaiting accreditation.

    Annual deployment rates have continued to fall since 2011 with only 18 installations deployed in 2015, DECC adds.

    A deployment cap of 3.6MW to March 2019 has been proposed.
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    Offshore wind opportunities for the oil and gas supply chain

    The global oil and gas downturn continues to significantly impact the North Sea oil and gas industry. To help companies consider the opportunities in offshore wind, BVG Associates (BVGA) has produced an 'Oil and Gas Seize the Opportunity: Offshore Wind' guide for Scottish Enterprise. The guide highlights the opportunities for the oil and gas supply chain in the £210 billion global offshore wind CAPEX and OPEX expected by 2025.

    The guide shows how the oil and gas sector can transfer its skills and experience, built up over the last 50 years of working in some of the world's most challenging environments. Packed with case studies, it demonstrates how companies have successfully diversified into offshore wind from the oil and gas sector.

    For example, FoundOcean, the world's largest dedicated offshore grouting specialist, with a European Offshore Service Base in Livingston, first entered the offshore wind industry in 2010 following a 50-year history in oil and gas. The offshore wind sector now accounts for around half of the firm's revenues.

    Andrew Venn, FoundOcean Sales Director said: 'We realised that offshore wind was a market that offered us a diversification opportunity right on our doorstep. We identified that there was a gap in the market for companies, like ourselves, able to offer competitive and innovative solutions. Entering the offshore wind sector is challenging but get it right, and it can be a long-term part of a company's strategic vision with excellent global prospects.'

    Alan Duncan, Senior Associate at BVGA, said 'Scotland is leading the world in floating wind development and has helped the UK become a world leader for deployed offshore wind. Scotland's capable and dynamic oil and gas suppliers can play a key role in the offshore wind drive to increase innovation and reduce costs'.

    'This guide provides an opportunity map based on real examples from our industry engagement work. The offshore wind supply chain is broken down into 35 sub-elements. This allows oil and gas companies to identify where their specific opportunities lie and what they can learn from companies that have already achieved success,' added Duncan.

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    Bids in for Moroccan solar project: consigning fossil fuels to their death bed.

    Saudi Arabia’s Acwa Power has submitted the lowest tariff price for the Noor solar photovoltaic project in Morocco.

    That bid amounts to 4.797 cents a kilowatt hour but more bids are to come as just three of the 20 prequalified groups submitted so far.

    The project, when built, will be Morocco’s large-scale photovoltaic solar scheme, with a capacity of 135-170 MW.

    Acwa Power, in consortium with the US’ First Solar, submitted a tariff of 4.797 cents a kilowatt hour ($c/kWh) for the project. This was slightly lower than the 4.81$c/kWh tariff submitted by the second-lowest bidder, the Saudi/Spanish FRV/Abdul Latif Jamil team.

    The Noor PV 1 project will be located over three sites: Ouarzazate, Laayoune and Boujdour. The Moroccan Agency for Solar Energy (Masen) has already awarded contracts for more than 500 MW of concentrated solar power (CSP) schemes, for the Noor 1, 2 and 3 projects, at the Ouarzazate site.

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    Chile's SQM to boost potassium nitrate production capacity

    Chilean chemicals firm SQM said on Thursday it will increase its potassium nitrate production capacity 50 percent to approximately 1.5 million tonnes per year by building a new plant and improving operating efficiencies.

    SQM said it plans to build a new plant with initial capacity of 300,000 tonnes annually, but added that it still has not determined how much it will cost to develop the new plant.

    Production at the new plant is expected to begin in mid-2018.

    Additionally, SQM said it has been introducing measures to increase operating efficiency at existing plants, which will allow it to boost production capacity by some 100,000 tonnes annually in 2016 and another 100,000 tonnes in 2017.

    "We will maintain high levels of installed capacity for the production of water soluble potassium nitrate for applications in the specialty plant nutrition market, and at the same time we will consolidate our position as the leading providers of nitrates -potassium nitrate and sodium nitrate- that are used for thermal storage in concentrated solar power plants," said Patricio de Solminihac, SQM's chief executive.
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    Widely used U.S. farm chemical atrazine may threaten animals: EPA

    One of the most popular herbicides in U.S. agriculture can be dangerous to animals and fish and leaves behind worrisome residue levels, the Environmental Protection Agency said on Thursday in a draft report that sparked outrage among farmers.

    The agency's assessment of atrazine could lead to tighter regulatory limits on the product, manufactured by Swiss-based Syngenta AG. That could ultimately prevent farmers from being able to use it to control weeds, according to agricultural groups that blasted the report as flawed.

    Atrazine is primarily used on corn, sorghum and sugarcane to fight weeds and increase yields in the Midwest.

    The EPA's review adds to a debate about the safety of leading crop chemicals after a branch of the World Health Organization said last year that the herbicide glyphosate was "probably" able to cause cancer in humans.

    The EPA said atrazine's effects exceeded its "levels of concern" for chronic risk by 198 times for mammals and 62 times for fish. The agency will accept comments on the preliminary findings and consider whether to require label changes after it publishes a final risk assessment.

    The EPA republished the findings after it said it inadvertently posted the same report, along with other related documents, online this spring in an error that has sparked criticism from U.S. lawmakers.

    Syngenta, which is set to be acquired by Chinese state-owned ChemChina, said atrazine is safe and that the EPA report "contains numerous data and methodological errors and needs to be corrected."

    If the EPA's report is finalized as written, it could cause label restrictions so severe that they would "effectively ban the product from most uses," the Iowa Corn Growers Association said.

    "EPA's flawed atrazine report is stomping science into the dirt and setting farmers up for significant economic hardship," said Gary Marshall, executive director of the Missouri Corn Growers Association.

    The U.S. House of Representatives' agriculture committee is looking into EPA actions related to its multi-year review of potential risks tied atrazine and glyphosate.

    The agency said it plans to release its draft cancer risk assessment for glyphosate by year's end.
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    India sticks with above normal monsoon forecast

    India's weather office on Thursday stuck to its initial forecast for above average monsoon rains in 2016, boosting hopes for a revival in farm output which could translate into lower food prices and also lower interest rates.

    The June-September monsoon rains would be 106 percent of a long-term average, the chief of the Indian weather office said, in the second forecast for the four-month long season.

    Monsoon showers, which typically start from June 1 and cover the entire country by the middle of July, would arrive slightly late this year but crop sowing would not be delayed, the weather office said last month.

    "Conditions are congenial for the arrival of monsoon in the next 4-5 days," Laxman Singh Rathore, the chief of India's meteorological department, said at a news conference.

    The annual June-September monsoon rains hit the coast in India's southern Kerala state first before progressing to other parts of the country.

    Although agriculture accounts for about 15 percent of the country's $2 trillion economy, about two-thirds of its 1.3 billion people depend on agriculture for their livelihood.

    Reserve Bank of India governor Raghuram Rajan in April said he was closely watching inflation developments as well as monsoon rain forecasts in terms of the impact on monetary policy.
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    Row between Peru and UK-listed cacao company turns bitter amid calls for trading halt

    A row between the Peru government and a UK-listed cacao producer accused of illegally destroying Amazon rainforest has prompted land rights campaigners to call for the removal of the company from trading on the London stock exchange.

    United Cacao Ltd is seeking to become the world's largest single producer of cacao through its plantations in northern Peru, billing itself as a leading ethical producer both in labour and environmental terms.

    However Peru's forestry ministry, SERFOR, says the Cayman Islands registered company company does not have approved certification for its plantations that span several thousand hectares in the Iquitos region by the Amazon.

    But the company says its Peruvian subsidiary, Cacao del Peru Norte, is in compliance with all Peruvian laws, operating on freehold land zoned for full agricultural purposes by the relevant national authorities.

    The competing claims have promoted an investigation by the London Stock Exchange's Alternative Investment Market, that allows smaller companies to raise capital for expansion, amid calls for trading in United Cacao to be suspended.

    "This case is important for Peru but it's time for stock exchange authorities to start taking interest in the impact of these companies around the world," said Julia Urrunaga, from the Environmental Investigation Agency, a campaign group which has been following the case.

    "Companies doing illegal operations should not be raising money in Europe," she told the Thomson Reuters Foundation by phone from Lima, Peru's capital.

    The row dates back to 2013 when the company submitted details for environmental reporting documentation requested by authorities querying its agricultural activities.

    Employing more than 500 workers in Peru and running programs to support small-scale farmers, the company says on its website it is seeking to become the world's largest and lowest cost corporate grower of cacao when it completes the planting of its existing 3,250 hectare estate in 2017.

    In the ongoing row, Peru's Supreme Court said in February this year that United Cacao had the correct zoning and environmental permissions for its plantations.

    But in May the Forestry Ministry released a statement accusing the firm of violating land use regulations.

    A spokesman for United Cacao said this came out of the blue as the company is in regular correspondence with Peru's Agriculture Ministry and received no advanced warning about the critique of the environmental impact of its plantations.

    Regulators with the Alternative Investment Market said they were looking into whether United Cacao broke any trading rules in Britain, but could not comment on specifics of the case. United Cacao floated on London's junior AIM in 2014.

    The company is also listed in Peru on the Lima Stock Exchange (BVL).

    Officials from the BVL did not respond to phone calls or emails from the Thomson Reuters Foundation requesting comment.

    As Peru prepares for a second round of presidential elections on June 5, more than 200 land and resource related conflicts are ongoing in the country, according to government figures. (Reporting by Chris Arsenault, Editing by Paola Totaro; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking and climate change.
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    Potash output cuts seen hindering industry's long-term recovery

    North America's big potash miners have doubled down on a production cut strategy they hope will lift the fertilizer's price from a near decade low, even as some investors warn this threatens their long-term profitability and props up weaker rivals.

    Shares of Potash Corp of Saskatchewan and Mosaic Co, major players who have trimmed output when prices weakened, are down nearly 50 percent from a year earlier following their most recent production cuts.

    Some suggest they should take a page from Saudi Arabia's oil strategy, boosting production to drive out higher-cost competitors, with the goal of maximizing profit over time.

    "Lower prices would keep the new capacity out. That's more sustainable than trying to artificially maintain the price by closing (low-cost) facilities," said Bryan Agbabian, head of agricultural equities at Allianz Global Investors, which has avoided potash company shares for three years.

    While this new approach would hurt share values in the near term, it would also begin a healthy industry transition, he added.

    Potash Corp, which confirmed it is sticking with its tighter supply strategy, surprised many in January by closing its eastern Canadian mine about a year after opening it.

    "The reason it works well is the resources in potash are more concentrated than any other commodity," Chief Executive Jochen Tilk said in an interview, noting that a few players in the industry have access to the majority of resources.

    Mosaic CEO Joc O'Rourke told analysts last month that the company will continue to cut production when markets soften. Mosaic spokesman Ben Pratt said there has been no change in strategy since then and executives were unavailable for further comment.

    Canpotex Ltd, the export potash sales agency for Potash, Mosaic and Agrium Inc, earlier this year reduced first-half export plans by 1.5 million tonnes, representing nearly 8 percent of its estimated 2015 sales.

    But industry watchers noted this controlled-supply strategy helps European mines operated by K&S AG and ICL Israel Chemicals continue to produce potash at some of the highest costs in the business.

    ICL is cutting operating costs in Spain, and plans to convert its United Kingdom facility to a specialty form of potash within two years. Those mines serve Europe's niche markets that sometimes yield premiums, said ICL Chief Executive Stefan Borgas.

    "We don't lose any money anywhere," Borgas said.

    Attached Files
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    India starts talks on new potash import contracts -industry officials

     Indian buyers have started talking with potash suppliers on new import contracts, trying to settle them at a steep discount to last year's price, two industry officials told Reuters, as plentiful supplies gave purchasers new bargaining power.

    Contracts signed by India and China are considered benchmarks in Asia, and are closely watched by other potash buyers such as in Malaysia and Indonesia.

    India typically opens negotiations for imports of the key fertiliser ingredient in February, aiming to sign new contracts before the start of the next fiscal year on April 1.

    However, India halted potash imports in February this year and delayed negotiations after successive droughts dented demand in one of the world's biggest fertiliser consumers.

    "We are negotiating with suppliers. Hopefully negotiations will be over this week," a senior official with an Indian fertiliser company told Reuters over the phone from Moscow, where he was attending a conference.

    "If negotiations fail this week, then suppliers could visit New Delhi in June to settle the new contract," he said.

    Under the previous contract, India was buying potash at $332 a tonne on a cost and freight basis (CFR).

    Indian buyers are seeking a steep reduction as global potash prices have fallen to their lowest in a decade, weakened by declining U.S. farmer incomes, falling currencies in consuming markets such as Brazil and bloated mining capacity.

    "Miners have to accept the fact that it is an oversupplied market. They have to reduce prices to boost the consumption," said an official with a co-operative fertiliser company.

    India's imports of potash could rise if the suppliers reduce prices as the monsoon is forecast to deliver surplus rainfall, the official said.

    Monsoon rains in June-September deliver about 70 percent of the country's annual rainfall and sustain the half of India's farmlands which lack irrigation.

    State-run Indian Potash Ltd, the country's biggest importer, cut retail prices of muriate of potash for farmers by 1,000 rupees ($15) per tonne to boost the consumption, said P.S. Gahlaut, managing director of the company.

    India imported around 3 million tonnes of potash in the 2015/16 fiscal year that ended on March 31.

    Major potash suppliers to India include Uralkali, Potash Corp of Saskatchewan , Agrium Inc, Mosaic, K+S, Arab PotashCo and Israel Chemicals.

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    EU to propose shorter glyphosate licence renewal -sources

    EU to propose shorter glyphosate licence renewal -sources

    European Union states will meet next week in an effort to agree a far shorter licence renewal for herbicide glyphosate before the current one expires, which would require the phasing out of products such as Monsanto's Roundup.

    The EU executive will put a new proposal for a licence renewal of between one and two years to experts from the EU's 28 nations on June 6, according to EU sources.

    The Commission initially proposed a 15-year authorisation, which it later cut to nine years, amid a transatlantic row over whether glyphosate may cause cancer.

    It twice delayed a vote to extend the licence because it lacked sufficient support, following opposition from France and Germany.

    Glyphosate is widely used by farmers and gardeners, but approval for its use in the EU expires at the end of June.

    It is still unclear whether the Commission will have the qualified majority needed for a binding decision, as Germany has said it would abstain from voting because ministries run by different parties in the ruling coalition are at odds.

    If no decision is reached, manufacturers will have six months to phase out glyphosate products from the market.

    Contradictory findings on its carcinogenic risks by various scientific bodies and public campaigning by citizens groups and non-governmental organisations have thrust glyphosate into the centre of a dispute among EU and U.S. politicians, regulators and researchers.
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    Precious Metals

    Barrick Gold reaches $140 million accord in U.S. investor lawsuit

    Barrick Gold Corp has agreed to pay $140 million to resolve a U.S. lawsuit accusing the gold producer of concealing problems at a South American mine and of fraudulently inflating the company's market value, according to court papers.

    The settlement, disclosed in papers filed on Tuesday in Manhattan federal court, would resolve a class action accusing Barrick of deceiving investors about environmental problems afflicting its Pascua-Lama project on the border of Argentina and Chile.

    "I am pleased we were able to reach this resolution for investors," James Hughes, a lawyer for the plaintiffs at the law firm Motley Rice, said in a statement.

    Barrick in a statement confirmed the $140 million accord and said the value of the settlement is insured.

    "Barrick continues to believe that the claims alleged by the lead plaintiffs in the litigation are unfounded, and under the terms of the settlement agreement, the company has not accepted any charges of wrongdoing or liability," the company said.

    The settlement, which requires court approval, comes two months after a federal judge cleared the way for shareholders who bought or acquired Barrick stock between May 7, 2009 and Nov. 1, 2013 to pursue the case as a class action.

    Barrick bought the Pascua-Lama project in 1994, and had been counting on it to generate a large percentage of its overall gold production.

    But cost overruns, environmental issues, labor unrest, political opposition and falling bullion prices contributed to Barrick's decision on Oct. 31, 2013 to indefinitely halt the project, after it had already spent more than $5 billion.

    Investors in the lawsuit contended Barrick touted Pascua-Lama during this period as a "world-class project that will contribute low-cost ounces at double-digit returns," even as it became clear the project would fall short of expectations.
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    Alrosa doubles net profit on strong diamond sales

    Russian diamond miner Alrosa , the world's largest producer of rough diamonds in carat terms, more than doubled its quarterly net profit on the back of strong sales, it said on Tuesday. 

    Alrosa, with its key production assets located in the Yakutia region in Russia's Far East, posted a first-quarter net of 49.9-billion roubles ($757-million), up from 22.2-billion in the same period a year ago, on revenue up 37% at 102.3-billion. 

    The company, which along with Anglo American unit De Beers produces about half the world's rough diamonds, said earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 38% to 59.3-billion roubles. Alrosa had said last month its first-quarter sales rose 34% year-on-year to 12.1-million carats. 

    The group is among state assets set for privatisation later this year, with the government aiming to earn more than 60-billion roubles from selling a 10.9% stake in the company. 

    Alrosa plans to hold meetings with investors in the United States and Britain in June ahead of the stake sale. Proceeds from the sell-off will assist the government's efforts to keep the budget deficit within its target of 3% of gross domestic product. 

    Alrosa plans to produce up to 39-million carats of diamonds in 2016, compared with 38-million produced and 30-million sold in 2015. Its 2016 sales are expected at more than $3.5-billion. Diamond sales stagnated in 2015, hit by a weaker Chinese economy. However, producers are seeing scope for recovery, especially in the US, which accounts for some 45% of demand.
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    Base Metals

    Iran says in talks with Rio, Glencore about copper projects

    Iran is stepping up talks with potential foreign investors with an eye to developing its mining and metals industries according to Mehdi Karbasian, president of Imidro a state-owned group pushing for mine development in the country, Platts News reported on Wednesday.

    The annual value of Iran's mining and metals imports and exports only amount to $11.5 billion at the moment, but following the lifting of sanctions last year the country has ambitious plans saying potential revenues from the sector could be worth more than crude oil.

    Speaking following the opening of a new Europe-Iran trade center in Berlin, Karbasian said Imidro recently held talks with Australia's Rio Tinto about new investments in the Middle Eastern nation's aluminum, steel, copper and gold industries.

    Karbasian has also met with top brass from  European  commodities trading giants Glencore and Trafigura, and Germany's Aurubis, the regions top copper producer and the world's number one recycler of the metal:

    "Glencore and China's NFC already have business agreements to help develop Iran's copper industry, Karbasian said earlier this year. Iran hopes to raise its copper concentrates output to as much as 2 million mt/year by 2025 in conjunction with partners, from some 200,000 mt/year at present, as part of a national development plan, he said."

    According to Imidro, Iran’s copper reserves accounts for 4% of the world’s total or roughly 2.6 billion tonnes and the country's production represent 75% of the total for the Middle-East. National Iranian Copper Industries Company is listed on the Tehran Stock Exchange and is the country's top non-oil exporter.

    The country is also a leading lead and zinc producer and ranks number four in Asia behind China, Kazakhstan and India in terms of production. Iran's zinc reserves are the world's largest. There are only 15 operating gold mines in Iran, but expanding  precious metal mining received a boost in November 2014 with the commissioning of the Middle-East's largest gold processing plant at the Zareh Shuran mine in the West Azerbaijan province to boost production from less than 30,000oz to over 200,000oz per year.

    Iran in March inked deals South Korea and with China's Sinosteel to build a massive aluminum smelter and plans to put out an international tender for a bauxite pipeline in Guinea, West Africa.

    The discovery of two large coal and iron ore deposits in the Lut desert in central Iran was announced by the mines ministry last year.  The country is the number four supplier of iron ore to China, shipping some 15–20 million tonnes annually of domestic production of 45 million tonnes.

    Imidro last month announced 17 development projects inside the country worth $1.2 billion. Mining represents 0.7% of the country's GDP and the goal of the national development plan is to lift that to 4%.

    There are approximately 5,500 mines in operation in Iran, with 90% owned by the state. Iran's mining industry is uncompetitive despite very low labour costs because of a crippling lack of equipment and machinery due the the sanctions regime  Karbasian said in November: "Old and second-hand machineries are being used in many of the mines some of which have been used in other countries for over 50 years."

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    China's spot copper concs TC/RCs for clean ore rise further on ample supply

    Chinese spot copper concentrate treatment and refining charges or TC/RCs for clean ore continued to rise with indications heard exceeding $100/mt and 10 cents/lb on ample market supply, industry sources said Wednesday.

    Spot TC/RCs for mixed ore were generally about $20/mt and 2 cents/lb above the clean ones.

    TC/RCs are fees charged to miners by smelters to treat and refine copper concentrate to produce copper metal. They typically rise when concentrate supply is ample and fall when supply is tight.

    "The spot TC/RCs for clean ore are at in excess of $100/mt (and 10 cents/lb) now, compared with around $95/mt (and 9.5 cents/lb) in May and in excess of $80/mt (and 8 cents/lb) in April," said a north China-based analyst.

    An east China-based industry source and a north China-based industry source heard the spot TC/RCs at $95-$100/mt and 9.5-10 cents/lb this week, while a Japanese trader heard at in excess of $100/mt and 10 cents/lb.

    "There is a lot of supply in the market and the spot TC/RCs have gone up from $93-$99/mt and 9.3-9.9 cents/lb last week," this eastern Chinese industry source added.

    The northern Chinese industry source said: "China's copper concentrate imports from Peru saw a hike in April."

    China imported 299,618 mt of copper concentrate from Peru in April, up 13% on the month and up 24.4% on the year, according to latest monthly data from the General Administration of Customs.

    Over January-April, China's imports from Peru were 1.3 million mt, up 77.7% on the year.

    The Japanese trader said: "I heard negotiations around $95/mt (and 9.5 cents/lb) but done at in excess of $100/mt (and 10 cents/lb) and even at $110/mt (and 11 cents/lb). The market is oversupplied. The demand was down in March-April as the dirty ore grade was not that bad and the demand for clean ore to blend with it went down. In addition, several Chinese smelters were conducting maintenance in the second quarter, thereby reducing the consumption."
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    Two years after Qingdao scandal, LME bets on electronic tracking of metal

    The London Metal Exchange is expanding its new electronic method of tracking metal in warehouses, as the system launched in April gains early traction among some western and Chinese banks, as well as warehousing and metals firms looking to cut risks.

    Global metals markets were rocked two years ago by a $3 billion fraud in the Chinese port of Qingdao. A firm allegedly duplicated warehouse certificates to pledge metal as collateral for multiple bank loans, hitting companies ranging from Citic to Standard Chartered.

    LMEshield, which provides electronic receipts as proof of ownership for metal stored outside the LME's own network of registered warehouses, is adding five jurisdictions where it will operate - Brazil, Chile, India, Japan, South Africa - to a 14-country list and is also extending to coal, iron ore and ferroalloys.

    "We are delighted with the support we have seen for this initiative so far, and we plan to add more than 20 facilities to the network in a range of jurisdictions in the next few days," the LME's head of business development Matt Chamberlain said.

    Members of the working committee behind LMEshield include Goldman Sachs, Louis Dreyfus and fund behemoth Red Kite Capital.

    Warehouses run by Henry Bath and Independent Commodity Logistics are already live, while at least another two warehouse companies are in train, industry sources said.

    Signs of take up will be welcome news for the LME. It has been suffering from falling trade volumes, struggling new products and large withdrawals from its warehousing network, since it was bought by Hong Kong's exchange for $2.2 billion four years ago.

    And with slowing factory growth in China, still by far the world's biggest consumer of metals, counterparty risk remains one of the biggest headaches for business.

    "It gives more transparency, control, it's helping reduce the risk around the financing," said Jeremy East of Standard Chartered in Hong Kong, who heads Asia metals trade.

    The LME saw a 9 percent on-quarter decline in the trading of metals contracts in the first quarter, and rival CME is snapping at its heels with a string of new metals product launches and its own storage expansion plans.


    As well as eventually raising revenue via daily and transaction fees, data gathered by LMEshield could offer the LME and Hong Kong exchange intelligence for new product launches.

    The LME is currently not permitted to register warehouses in China, but if more Chinese firms adopt it for offshore stocks the LME increases its chances of becoming an industry standard.

    "It's the way to get in (to China) without really getting in," said a trader at a Chinese merchant in Singapore.

    A majority stake in Henry Bath, an LME warehousing firm, with a 221 year history and an early adopter of LMEshield, was bought in January by state-owned China National Materials Storage and Transportation Corporation (CMST) to expand its global business.

    For banks, an unwieldy paper trail can be shifted into electronic form, with documentation standardised, soothing concerns of compliance departments.

    But LMEshield could face cost obstacles after years of low commodity prices and since the LME operates under British law there may be jurisdicational issues with extending it into China.

    Traders who count on proprietary knowledge of trade flows are also wary about their private stocks being revealed.

    "What it is, is a better, ordered way for keeping records, and for getting slightly more security," said a London-based banker.
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    Australian micro miner says finds big zinc lode

    Australian penny stock Rox Resources, backed by mining major Teck Resources of Canada, said it has discovered one of the world's largest zinc deposits in northern Australia, although any decision to mine is years away.

    The discovery comes seven months after Chinese conglomerate MMG Ltd shut the nearby exhausted Century zinc mine, once the world's third-biggest, leaving a hole in global supplies of the metal chiefly used to galvanise steel.

    The lode, named Teena, holds 14.2 billion pounds of zinc, as well as 2.1 billion pounds of lead, making it around the same size as the Century deposit. Teena is located eight kms (5 miles) from the Glencore -owned McArthur River zinc mine.

    Rox's stock more than doubled on Wednesday on news of the find to just under three Australian cents a share, giving it a market value of A$34.2 million ($24.8 million), although it would likely be a decade before a mine is built, if at all.

    "We've established that a significant resource is there and now we need to conduct more drilling and metallurgical work, which will not happen overnight," Rox managing director Ian Mulholland said.

    "Realistically, we are still anywhere between five and 10 years away from production," Mulholland said.

    Shares in Metalicity Ltd, another Australian penny stock sitting on a potentially big zinc mine, known as Admiral Bay, have more than tripled so far this year to 7.5 Australian cents.

    "Investors in small miners are hungry to allocate cash even in companies like Rox that have a long way to go," said Keith Goode, an analyst for Eagle Mining Research. "Teena is not a mine yet and will require huge amounts of capital and development work without any guarantees."

    The latest find is 49 percent owned by Rox and 51 percent by Teck, which also runs the world's second-biggest operating zinc mine, Red Dog in Canada.

    Teck holds an option to increase its stake to 70 percent by spending a further A$1.15 million on exploration having already spent A$13.85 million.
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    Workers to strike at Colombia's Cerro Matoso nickel mine

    Union workers at Colombia's Cerro Matoso mine, one of the world's largest producers of ferronickel, will begin an indefinite strike on June 14 in protest of work and pay conditions, the union president said. 

    A strike at Cerro Matoso, owned by Australia's South32, could impact global nickel prices as production stalls. Miners last year went on strike at the mine for two weeks before reaching agreement on a dispute that had forced previous owner BHP Billiton to declare force majeure. 

    "The union has voted to strike on June 14 because of the negative attitude of the company to resolve workers' demands," Domingo Hernandez, president of the Sintracerromatoso union, told Reuters. "Despite the decision to strike, we maintain an open door to dialogue. A solution to avoid the strike lies with the company." 

    Workers have demanded a pay increase of 9.77%, Hernandez said. Cerro Matoso said in a statement that the union has ignored the crisis sparked by the global drop in mineral prices and reduced output caused by a depletion of reserves. 

    "We insist that Cerro Matoso cannot take work commitments that exceed economic capacity or jeopardize the sustainability of the company," said mine president Ricardo Gaviria, adding that the company would be negatively impacted by a strike. 

    The union's demands would incur additional costs of $12-million, the statement said. Cerro Matoso reported losses of $75-million between July 2015 and March this year. The mine, located in the northern province of Cordoba, produced 36 670 t of ferronickel last year, down 11% from 2014. Cerro Matoso has more than 1 200 employees, 520 of whom belong to the union.
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    Alcoa's spin-off plan sparks dispute with Australian partner Alumina

    Australia's Alumina has "serious concerns" about the impact of a demerger plan of US partner Alcoa on the pair's bauxite and alumina production joint venture, the Australian company said on Monday. Alumina said in a statement that it was concerned the plan would "result in a material adverse change in the nature, size, scope and financial wherewithal of Alumina's partner in AWAC (Alcoa Worldwide Alumina and Chemicals)." 

    Alcoa's plan, disclosed in September, would separate the company's plane and car parts business under the name Arconic, while the traditional aluminium smelting operations, including the 60 percent stake in AWAC, would retain the Alcoa name. 

    On Friday, Alcoa filed a lawsuit at the Court of Chancery in Delaware, seeking a declaration that Alumina has no right to block the plan and has no consent rights or rights of first refusal in relation to the plan. "Alcoa's separation does not require Alumina Limited's consent," Alcoa spokeswoman Monica Orbe said in an email on Monday. "We look forward to putting this matter behind us and launching new Alcoa and Arconic in the second half of 2016." 

    Alcoa also asked the court to declare its plan does not entitle Alumina to take over marketing rights in AWAC. "Alumina considers that Alcoa's demerger proposal triggers consent and 'first offer' rights in favour of Alumina under the AWAC arrangements," Alumina said in a statement to the Australian Securities Exchange. 

    "Alumina will vigorously defend the proceedings brought by Alcoa." In its court filing, Alcoa said that following its September announcement, it had received letters from Alumina. 

    Alcoa said in the filing that Alumina threatened to make "public statements about the separation and Defendants' objections to it that would harm Alcoa by casting a cloud over the separation, and disrupting AWAC's operations by purporting to 'assume' marketing rights that Alumina does not have." Alcoa said its demerger plan was similar to when Alumina split from Western Mining more than a decade ago. It said that at that time, Alcoa had no rights of first refusal or right to block the split under AWAC agreements. 

    Alumina has proposed amending AWAC agreements to protect the interests of Alumina shareholders, and said the two sides have been in talks since early this year. At present, Alumina does not have access to AWAC's cash flows and instead receives a dividend. Alumina's biggest shareholder is China's CITIC Resources Holdings Ltd, with a 17.9% stake. 

    Alcoa has yet to disclose how it would allocate debt and liabilities, such as pension and closure liabilities, when it splits. The case is Alcoa Inc v Alumina Limited, Alumina (USA) Inc, and Alumina International Holdings Pty Limited, Case No. 12385-, in the Court of Chancery, Delaware
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    Aluminium producer seeks Q3 premium of $110/T from Japan buyers -sources

    A major aluminium producer has offered Japanese buyers a premium of $110 per tonne for July-September primary metal shipments, down 4-6 percent from the previous quarter, three sources directly involved in pricing talks said on Monday.

    Japan is Asia's biggest importer of the metal and the premiums for primary metal shipments it agrees to pay each quarter over the London Metal Exchange (LME) cash price set the benchmark for the region.

    For the April-June quarter, Japanese buyers agreed to pay producers a premium of $115-$117 per tonne PREM-ALUM-JP, up about 5-6 percent from the prior quarter, due to lower local inventories.

    The latest quarterly pricing negotiations began late last week between Japanese buyers and miners including Rio Tinto Ltd , Alcoa Inc and South32 Ltd, and are expected to continue in June.

    A source at a smelter said the decline mirrored falling inventories in Japan and weaker overseas premiums.

    Aluminium stocks at three major Japanese ports - Yokohama, Nagoya and Osaka - fell 6 percent from a month earlier to 324,800 tonnes at the end of April, according to tradinghouse Marubeni Corp.

    That inventory has been dropping since hitting a peak in May last year as buyers reduced imports, with the April figure down more than 30 percent from a year earlier.

    "The U.S. and European premiums had weakened earlier this year though they have somewhat recovered since hitting bottoms," the smelter source said.

    U.S. aluminium premiums on the CME are siting at 7.9 cents per pound, down from around 9 cents in late February, while take up of the contract is at record highs, according to open interest which is standing at around 28,000 lots.

    Comex European premiums are standing about $78.30 a tonne, down from $113.80 in late December, but slightly firmer than six-month lows of around $70 a month ago.

    One end-user source said Japanese buyers were not willing to accept the offer, blaming recent spot premiums standing at around $90 per tonne.

    "We have been unhappy about the recent quarterly premiums as they had not reflected real market condition and had stayed above spot premiums," the source said.

    "Some buyers may even want to change the way we negotiate premiums every quarter if producers continue to seek much higher levels than spot market."
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    Chile's copper output drops in April due to heavy rains

    Copper output in world No. 1 producer Chile fell in April as some mines in the central part of the country were hit by heavy rains and ore grades continued to decline, the government said on Monday.

    Chile, which produces one-third of the world's copper, is struggling with dwindling ore grades in many of its aging deposits at a time when mining companies are implementing cost-cutting measures to address a steep drop in metals prices.

    Copper mines in Chile produced 432,277 tonnes of copper in April, an 8.2 percent decrease from the previous year, the INE statistics agency said.

    At the height of the El Nino mid-April rains, Anglo American Plc and state-owned producer Codelco temporarily suspended operations at two major copper mines with combined annual capacity of 880,000 tonnes.

    From January through April, Chilean mines produced 1.83 million tonnes of copper, a 4.7 percent decrease from a year earlier.

    Production of molybdenum, a metal used to harden steel, jumped 21 percent in April to 4,103 tonnes. Output of molybdenum totaled 19,121 tonnes in the January through April period, a 37.9 percent increase from a year earlier.

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    Steel, Iron Ore and Coal

    Peabody Australia losses blow out to $2.7bn,

    Aurizon's coal haulage business could be hurt if Peabody Australia is forced to renegotiate contracts.

    Peabody Australia's accountants have warned there is "significant uncertainty" over the coal miner's ability to remain a going concern, raising questions over the long term viability of its haulage contracts with rail group Aurizon.

    Peabody's Australian coal mining business has continued to operate following the Chapter 11 bankruptcy filing of its US parent, Peabody Energy, in April.

    But in Peabody Australia's annual accounts, filed with the Australian Securities and Exchange Commission on May 31, the company revealed consolidated net losses had deepened to $2.7 billion, including $1.8 billion of impairments, for the year ending in December compared with a $1.27 billion loss a year earlier. Its liabilities now exceed its assets by $4 billion.

    The coal group also warned that "weak market conditions" had continued since December and that its liquidity would be affected by the Chapter 11 reorganisation because it was unable to draw on some borrowing facilities.

    Alternative funding arrangements are being put in place, including a $US250 million revolving intercompany loan facility, but may not be enough to accommodate all cash outflows, including repayment of operating leases and bank guarantees, Peabody Australia said.

    The group is trying to put in place "stays, waivers and other negotiated outcomes" with counter-parties so it has enough cash to meet its needs. "Some interim arrangements have been agreed and other commercial negotiations are ongoing," Peabody Australia said.

    Peabody Australia's directors said in the report that they believed the company would be able to pay its debts on time. None of Peabody Australia's operations are included in the US bankruptcy filings.

    But the group's auditors, EY, said the changes to Peabody Australia's funding arrangements meant that there was now "significant uncertainty whether the company and/or the consolidated entity will continue as a going concern".

    Peabody Australia is also facing legal action from minority partners in its central Queensland Monto Coal joint venture, who are claiming up to $1.7 billion after alleging the management agreement in the joint venture was breached.

    Analysts are closely watching Peabody Australia's financial performance amid concerns that it may be forced to renegotiate some of its coal haulage contracts with Aurizon.

    Peabody accounts for about 10 per cent of Aurizon's coal haulage volumes, or about 20 million tonnes.

    Credit Suisse analysts this week warned that if Peabody's Australian business became "distressed", an administrator or receiver may try to renegotiate the contracts (which include both thermal and metallurgical coal in NSW and Queensland) at a lower price.

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    Bucking the trend: Australian prospector plans new iron-ore mine

    As most of the world's small iron-ore miners fight for survival, an Australian prospector is preparing to dig a new mine – counting on its high-grade ore and specialist mill buyers to compete in market dominated by mega producers. 

    Quentin Hill, MD of Carpentaria Exploration, says his company's "super grade" concentrate represents some of the world's richest iron-ore pellet feeds, which can yield margins competitive with Vale, Rio Tinto, BHP Billiton and Fortescue Metals Group, which together control 70% of the sea-borne market. 

    Bahrain Steel has signed a nonbinding letter of intent with Carpentaria for three-million tonnes a year, while Mitsubishi and commodities trader Gunvor Group have agreed to buy a further one-million tonnes each. That leaves about 4.5-million tonnes of annual production still to be marketed, according to Hill. 

    While Carpentaria corrals new customers, blueprints for new mines from Australia to Guinea are being abandoned, as iron-ore topples from highs near $200/t four years ago to less than $50/t today. 

    Buyers ultimately determine which independent projects get developed, Hill said, based on the quality of the ore and an ability to operate at a low cost to ride out price cycles. "For us, this is being demonstrated by the recent nonbinding letters of intent that show the strength of international interest for our project," he said. 

    Carpentaria's "soft rock" is different from other harder magnetite ores, which allows a very different approach to the typical iron-ore mining and processing challenges. "The soft rock enables simple liberation of a super grade magnetite product without complex and expensive processing methods," Hill said, referring to the grade of ore. 

    Carpentaria has set a goal of first production by 2020, supplying its high-grade product with an iron content of 70% mostly to electric arc furnace steel mills, known as mini-mills. Mini mills manufacture steel from scrap mixed with pellets – concentrated balls of iron – alleviating the need for the large tonnages of iron-ore supplied to traditional blast oven furnaces. Hill is canvassing steel mills and trading houses, with an eye on the Middle East and Asia.
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    Iron ore price rout accelerates

    On Thursday  the Northern China benchmark iron ore price dropped 2.8% to $47.90 per dry metric tonne, the lowest since mid-February according to data supplied by The Steel Index. The steelmaking raw material is down 26% over the past month and is now just holding onto double digit gains for the year.

    Coking coal also had a torrid month after coming close to triple digits in April, only to fall back to the early $80s by the end of May and wiping out all of 2016's gains. Steel prices underperformed iron ore in May, cutting further into margins at Chinese blast furnaces which had brought 50m tonnes of capacity back online.

    Due to a lack of clearer policy direction from Beijing, market uncertainty and price volatility may remain relatively high in the near-term

    The outlook for Chinese iron ore and steel demand was also crimped by a disappointing reading of Chinese manufacturing activity indicating Beijing's economic stimulus program is already running out of steam.

    The Singapore Exchange in a research report says China's steel demand from the real estate and infrastructure sectors has improved in recent months, driven by stimulus measures and state-backed investment. However, due to a lack of clearer policy direction from Beijing, "market uncertainty and price volatility may remain relatively high in the near-term."

    The forward curve on the Singapore Exchange, the first to launch iron ore price derivatives in 2009, looks pretty ugly and even before the recent drop, the consensus forecast of analysts polled by FocusEconomics was a sub-$50 average during the second quarter.
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    Japan Apr coking coal imports down 10.79pct on yr

    Japan imported 5.17 million tonnes of coking coal in April, falling 28.38% month on month and 10.79% on year, the latest customs data showed.

    Of this, cargoes from Australia marked the highest volume at 2.64 million tonnes, edging down 1.88% from the year-ago level and dropping 14.55% from March.

    In April, coking coal imports from Indonesia dipped 4.18% on year and 42.60% on month to 1.40 million tonnes, and that from Canada dropped 44.41% on year and 30.10% on month to 558,862 tonnes, ranking the second and the third of the total, respectively.

    In the same period, Japan’s coking coal imported from Russia slumped 39.03% on year and 48.93% on month to 246,288 tonnes; while imports from the US edged up 2.83% on year to 242,878 tonnes, almost doubling the 123,946 tonnes in March.
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    Joy Global posts surprise profit on cost reductions

    Mining equipment maker Joy Global Inc reported a surprise quarterly adjusted profit and a sequential rise in bookings for the first time in four quarters, sending its shares up as much as 14 percent on Thursday.

    Joy Global, like larger rival Caterpillar Inc, has been cutting costs as plunging commodity prices and slowing growth in markets such as China, the world's top copper consumer, reduced demand for its giant shovels and draglines.

    However, the company acknowledged that mixed economic signals, primarily from China, suggest that there could be a possible near-term improvement in economic output.

    Caterpillar in April had indicated that demand for construction equipment from China was improving.

    Joy Global has noted some signs of life in China, which is a positive for the copper market, J.P. Morgan Securities analysts wrote in a note.

    Citigroup analysts said bookings for the quarter exceeded their expectations.

    Bookings for the Milwaukee, Wisconsin-based company rose 24 percent sequentially in the latest quarter. Bookings last rose in the second quarter of 2015, when it increased 6.4 percent on a sequential basis.

    The company reported a loss from continuing operations of $15.3 million, or 16 cents per share, for the latest quarter, compared with a profit of $56 million, or 57 cents per share, a year earlier.

    However, it earned 9 cents per share on an adjusted basis. Analysts on average were expecting the company to break even on a per-share basis for the quarter, according to Thomson Reuters I/B/E/S.

    Revenue fell to $602 million from $810.5 million. Joy Global has cut jobs and lowered production among other measures to try to adapt to slowing demand.

    The company said it now expected 2016 sales at the lower end of its previous outlook of $2.4 billion-$2.6 billion. Adjusted earnings were also pegged at the bottom end of its previously expected range of 10-50 cents per share.
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    EU approves subsidies aimed at closing down coal

    The European Commission has cleared the way for billions of euros in subsidies to be provided to Germany and Spain with the aim of ending coal power in these countries.

    The EU approved nearly €4bn in subsidies to close down Spain’s unprofitable coal mines and Germany’s lignite-fired power stations.

     €2.1bn is to be spent by Madrid in closing 26 coal mines that are no longer profitable. This state aid will be permitted on the condition that the closure of the mines is completed by 2019.

    “The Spanish authorities have given a commitment to recover any aid from mines that have not been closed by that date,” the Commission said in a statement.
    Meanwhile in Germany, Brussels has authorised the government to subsidise the closure of power stations fuelled by lignite.

    Merkel’s cabinet negotiated the closure of eight lignite-burning installations owned by Mibrag, Vattenfall and RWE between 2016 and 2019. Together, these eight power stations represent 13 per cent of Germany’s lignite-burning capacity.

    By 2020, the closure of these power stations will cut the annual carbon emissions of Germany’s electricity sector by 11 to 12 million tonnes. In return, the federal government in Berlin will compensate the electricity companies to the tune of €1.6bn for loss of revenue.

    In a statement the Commission concluded that “the effects of the measure on the electricity market are expected to be limited and that potential distortions of competition created by the aid are largely offset by the environmental benefits”.
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    Russian steelmakers complain of bullying by EU officials

    Two of Russia's largest steelmakers NLMK and Severstal have made formal complaints against two EU officials, alleging bullying during an EU investigation into whether China and Russia exported steel at unfairly low prices.

    Tensions between Russia and Brussels have been high since Moscow's seizure of Ukraine's Crimea region in March 2014 that led to economic sanctions.

    Ties have been further soured by an anti-dumping investigation into cold-rolled flat steel products following complaints from European producers that they face unfair competition from Russian and also Chinese rivals.

    The Commission has imposed provisional anti-dumping duties on a number of Russian and Chinese companies - including for NLMK at the highest rate of 26.2 percent and Severstal at 25.4 percent. These were enforced even though the investigation is only set to close by August.

    A letter from the Brussels office of international law firm Dentons Europe to the European Commission, seen by Reuters and dated May 31, alleges that two Commission officials carried out verification visits to NLMK "in such a way as to amount, cumulatively, to bullying, psychological harassment and perceived intimidation".

    The visits were aimed at gathering information for the investigation, the letter said. Such visits are normal practice during EC trade investigations.

    The two EU officials at the trade directorate, case handler William De Ruyck and assistant case handler Jean-Michel Bindner, declined to comment when spoken to by Reuters.

    A European Commission source said it was aware of the concerns raised by NLMK and held its staff to the highest ethical standards but had no further comment.

    Complaints over EU trade investigations are normally about methodology or tariffs imposed rather than allegations such as those made by NLMK and Severstal.

    In an emailed statement sent to Reuters, NLMK said the Commission's investigation into imports of cold-rolled flat steel products was conducted with "flagrant violations of all possible norms and standards, as filed in a separate complaint to the European Commission".

    NLMK said the decision to impose the duties was absurd and it denied allegations it was dumping steel, or selling it at below cost price, on the EU market.

    NLMK said it employs over 2,000 people in the European Union and continues to invest in developing its EU operations.

    Severstal confirmed it had sent a letter of complaint about the behaviour of two EU officials, adding that it had cooperated fully with the investigation and had not engaged in dumping.
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    Wescoal achieves ‘best ever’ financial results

    South African coal mining and trading company Wescoal has posted its “best financial results ever” as it reins in costs, ramps up operations and sets a stable foundation for sustainable growth. 

    The JSE-listed firm on Thursday posted a 76.1% surge in headline earnings a share to 27.1c apiece for the year ended March 31. Earnings a share rose 66.6% to 26.2c for the year under review. “Late last year, R52-million in capital was raised and these funds were used to derisk and expedite key elements of the Elandspruit project, which realised its steady-state production of two-million tons a year and, with continuous coal supply contracts to State-owned power utility Eskom, formed the foundation for Wescoal’s performance,” said CEO Waheed Sulaiman on Thursday. 

    During the year under review, the group increased production at its flagship Elandspruit colliery from zero to 165 000 t/m within three months, using internal funding mechanisms. Further, optimisation and quality management projects were completed at the processing plant, unlocking Wescoal’s capacity to treat more than 200 000 t/m run-of-mine. 

    Profit after tax for the 12 months to March 31, jumped 78.8% to R51.8-million, owing to a better-quality debtor book, increased productivity and cost savings across the group. Wescoal’s cost-saving strategies and cash flow management enabled the reduction of overall debt and freed up working capital during the year under review. 

    “We reduced operating expenses by R22-million to R168-million, down from R191-million last year,” said CFO Izak van der Walt. Operational earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 42.1% to R152.1-million, with the mining division’s Ebitda 31.2% higher at R124.7-million and the trading division maintaining Ebitda at R31.9-million. 

    “Wescoal trading met expectations in a difficult and volatile environment. Multiple business interruptions and financial stresses experienced by non-Eskom domestic coal consumers impacted negatively on the division resulting in reduced overall revenues,” Sulaiman said. 

    Group revenue remained flat at R1.6-billion, as sales volumes from the trading division muted that of the strong sales reported by the mining unit. Overall sales for the 2016 financial year reached 2.8-million tons, with sales from the trading division down 9% to one-million tons owing to increased focus on managing business risk and shareholder returns, while the mining division reported stable sales of 1.7-million tons for the year under review.
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    Voestalpine shares jump after company sees profit steady this year

    Voestalpine said it expects to reach an operating profit in its current year close to last year's level, marking a relatively reassuring outlook in the hard-pressed sector and sending its shares up nearly 8 percent.

    Responding to the sector's worst recession in a decade, Voestalpine has been working to increase the share of higher-value products in its output and on internationalising its business.

    The Linz-based company on Thursday reported a higher than expected full-year net profit of 602 million euros ($675 million), with strong demand from the car industry for its special steel and auto parts products offsetting weakness in its metal engineering business which suffered from the deterioration in the oil and gas sector.

    Analysts polled by Reuters had on average forecast a net profit of 572 million euros in the year through March 31.

    Earnings before interest and tax (EBIT) reached 888.8 million euros on sales of 11.1 billion.

    Chief Executive Wolfgang Eder said there were signs of a slight upward trend in its key market Europe, and that the weak Chinese economy had not affected Voestalpine's business so far.

    "The industrial sectors we are working in continue to do well, and this should not change in the course of the year," Eder said on a conference call.

    In a presentation to investors the company said its outlook was for adjusted EBIT and core earnings or EBITDA for the current year to be at least equal to last year's underlying level, even if the economic environment remains challenging.
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    Iron ore at risk of losing all of 2016’s gains as rout deepens

    Iron ore is at risk of losing all of this year’s gains.

    Ore with 62 percent content has sunk to $48.40 a ton after posting the biggest monthly loss in about five years in May, according to Metal Bulletin Ltd. The collapse has left prices that topped $70 in April less than $5 above 2015’s close.

    The raw material has been on a tumultuous ride this year as signs of a demand revival in China spurred a speculative rally that lifted prices in the three months to April. The boom turned to bust after a regulatory crackdown and as supply increased, raising volumes at ports in China. With output set to expand, there’s a possibility that 2016 will prove to be another losing year, according to Shenhua Futures Co.

    “It seemed clear at the start of 2016 that iron ore was set to face another challenging year but the outlook has since been muddied by the surprise rally,” said Wu Zhili, a Shenhua analyst. “Demand remains weak and supply is still increasing. There’s a good chance prices will end the year lower.”

    Should that forecast prove prescient, 2016 would become a fourth year of lower prices. Iron ore was routed in the three years to 2015 as surging low-cost mine supply in Australia and Brazil combined with a slowdown in China to pummel prices. They bottomed at $38.30 in December.
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    China’s May coal imports from PWCS terminals surge to 16-month high

    China imported 1.6 million tonnes of coal in May from eastern Australia's Port Waratah Coal Services (PWCS) terminals, up 21.2% month on month, said the Newcastle coal terminals operator in a performance report on Jun 1.

    The offtake was a 16-month high since January 2015 when 2.16 million tonnes of coal was shipped, according to PWCS data.

    Traders said that Chinese buyers were attracted to Newcastle thermal coal over the past month as its price was lower than comparative calorific value domestic thermal coal in China.

    Prices for Newcastle 5,500 kcal/kg NAR thermal coal, the preferred product for Chinese buyers, averaged $43.80/t FOB in May and a similar level in April.

    In comparison, domestic coal prices in China were currently at around $50/t FOB North China ports basis 5,500 kcal/kg NAR, said traders.

    Over January to May, China shipped 5.2 million tonnes of coal through the PWCS terminals, compared with 6.8 million tonnes in the corresponding 2015 year-to-date period, according to port data.
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    Glencore to close Australian coal mine due to low price

    Glencore will close its Tahmoor coal mine in Australia by early 2019, the latest example of low coal prices decimating the sector.

    Glencore is one of Australia's largest coal producers running 18 mines and employing some 7,650 workers.

    Glencore said it begun consultation with the 350 employees at the Tahmoor mine, which has been operating since 1979 and last year produced 2.1 million tonnes of metallurgical coal used in steel making.

    "The decision has been made as a result of continued low prices in global coal markets, which has meant the economic return from reserves still available at Tahmoor are not sufficient to warrant the investment required to mine them," Glencore said in a statement.

    Like other miners, Glencore has been hit hard by the collapse in commodity prices linked to slowing demand from China. It has also slashed production of copper and oil as well as cutting investment and costs.

    Global metallurgical coal prices have dropped from more than $300 a tonne in 2011 to around $94 in step with weakening steel prices.

    Leading global coal producer Peabody Energy Corp filed for U.S. bankruptcy protection in April after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for an expansion into Australia.

    Last year, Chinese-controlled coal miner Yancoal Australia cut close to half the jobs at two of its collieries after losses over two years climbed to more than A$1 billion($724.50 million).

    In one of the most glaring examples of exiting coal at any cost, Brazil's Vale, sold a mothballed coal mine in Australia to a local operator for A$1. At peak coal prices, the mine was worth around A$500 million.
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    Hebei Iron & Steel says U.S. probe damaging world steel trade

    China's Hebei Iron & Steel Group, its biggest steelmaker by output, accused the United States of breaching WTO rules and said U.S. protectionism is damaging the world steel trade, in a statement posted on its website on Thursday.

    The U.S. International Trade Commission (ITC) a week ago launched a probe into Chinese steel mills accused by United States Steel Corp of stealing its secrets and conspiring to fix prices.

    "The protectionist behavior taken by the U.S. based on purely groundless accusations by U.S. Steel has seriously broken the WTO rules, distorted the normal world steel trade and damaged the essential interests of Chinese steel mills and U.S. steel users," the statement said.

    The Chinese steelmaker said it strongly opposed the probe and urged the United States to understand the motivation of the complaint, assess the consequences brought by trade protectionism, respect objective facts and be careful when taking measures to cut trade.

    Hebei Iron & Steel said it would appeal the probe, without saying to whom, and called on the Chinese government to take measures in line with WTO rules to maintain the legal interests of Chinese steel mills.

    U.S. Steel filed its original complaint a month ago, alleging it was a victim of a 2011 computer hacking incident that also prompted U.S. federal cyber-espionage indictments against five Chinese military officials in 2014.

    The ITC identified 40 Chinese steelmakers and distribution subsidiaries as respondents in its probe, including Baosteel Group, Hebei Iron and Steel, Wuhan Iron and Steel Co Ltd, Maanshan Iron and Steel Group, Anshan Iron and Steel Group and Jiangsu Shagang Group.

    Baosteel, China's second-largest steelmaker and the world's fourth-largest, said in a statement the United States was acting in breach of World Trade Organization (WTO) rules. It urged the Chinese government to take all necessary measures to ensure the sector receives fair treatment.

    The China Iron & Steel Association (CISA) also said the government should take counter-measures against the United States to support the steel industry.

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    Vale Tampers With Crucial Data From Deadly Dam Disaster, Say Federal Police

    New evidence reveals Vale, the company responsible for the tragic mining disaster in Mariana, in the state of Minas Gerais, tampered with important data regarding their activity in the area.

    In November 2015 the Fundão dam burst, and a river of slurry swept through the neighbouring village of Bento Rodrigues, killing 19 inhabitants. The mining company responsible for the dam, was Samarco, joint owned by Vale and BHP Billiton. According to the Federal Police's report, Vale tampered with figures in order to deliberately obstruct the investigations.

    The mining company generated two types of waste products in the region of the disaster: slurry, which was stored in Samarco's tailings dam, and other residues that were deposited in a reservoir in Campo Grande.

    One month after the dam burst, causing fatalities and the irreversible pollution of the Rio Doce, Vale modified official documents detailing the chemical composite of the residue and the concentration of mineral waste produced.

    In the modified version of accounts, the volume of slurry deposited in the Fundão was considerably less than the original amounts stated by the company.

    Higher levels of water present in the dumped refuse was considered by police to be one of the causes of the dam's rupture.

    In a statement released by the company, Vale admitted to altering the reports. However, the firm insists these were actually "corrections", and that all its calculations have been executed with perfect transparency.

    Vale's use of the dam was revealed by Folha in November. The data was altered in December.

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    Japan Jan-Apr coal imports drop 3pct on year

    Japan Jan-Apr coal imports drop 3pct on year

    Japan imported 62.96 million tonnes of coal over January-April this year, falling 2.64% year on year, showed data from Japan Customs.

    The coal imports of the country totaled 193.74 million tonnes in 2015, rising 1.01% from the year prior, data showed.

    Of this, thermal coal imports rose 4.8% on year to a record 114.15 million tonnes last year.
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    SABIC eyes coal-based China petchem complex joint venture

    SABIC has signed an agreement with Shenhua Ningxia Coal Industry Group (SNCG), a unit of China's biggest coal producer– Shenhua Group, to build a joint venture petrochemical complex in Ningxia, the Saudi Arabia-based chemicals major said in a statement issued late on May 30.

    The proposed joint venture complex in north-central China will utilise locally available coal feedstocks to be supplied by SNCG, SABIC said.

    "The parties would proceed with further actions to implement the project in the event of a positive final investment decision and subject to obtaining all necessary governmental approvals," it said.

    Financial details of the agreement and project timeline were not disclosed.

    The two firms will soon conduct a joint feasibility study on the project and seek the required regulatory approvals within three years, it said.

    The Ningxia petrochemical project with SNCG will help protect SABIC against the fluctuations and cyclical movements in feedstock prices in the international markets, SABIC vice chairman and CEO Yousef Al-Benyan said in the statement.

    In the first quarter of the year, SABIC posted a 13.2% year-on-year fall in net profit to around $909 million amid lower product prices, which tracked the global energy prices.
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    Nippon Steel looks to break up Usiminas after CEO appointment: source

    A change of chief executive at Brazilian steelmaker Usiminas has accelerated plans for controlling shareholders Nippon Steel & Sumitomo Metal Corp and Ternium SA to break up the company, a source close to the Japanese firm said on Tuesday.

    Nippon Steel, however, issued a statement later denying that it was planning to break up Usiminas, and a spokesman said the focus was on financial restructuring and completing an equity financing.

    The Usiminas board last week appointed veteran executive Sergio Leite to the top job in a contested vote. He replaced Rômel Erwin de Souza, who had been backed by Nippon Steel.

    In a split, Nippon Steel could take Usiminas' mill in Ipatinga, while Ternium could get the Cubatao mill in the neighboring state of Sao Paulo. The source said no official negotiations had begun.

    The companies have been at loggerheads for nearly two years over control of the Brazilian steelmaker and a break-up has been considered by both sides.

    Usiminas has already stopped steel production at its Cubatao mill, slowed work at its mines and laid off thousands of employees as it suffers through Brazil's worst recession in decades.

    "(Nippon) does not see another solution other than a division of the company," the source said.

    Japan's Nikkei newspaper also reported on Wednesday that Nippon Steel intended to hold talks on dividing production assets of Usiminas with Ternium.

    "The priority issues on Usiminas now are to complete a planned equity finance and financial restructuring," a spokesman for the company said.

    Japan's largest steelmaker is looking to annul the appointment of Leite, arguing it was made without the required consent of its members on the Usiminas board. Nippon Steel has taken the case to a court in the state of Minas Gerais, where Usiminas is based.
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    China steel, iron ore, worst month ever as demand wanes

    Chinese iron ore futures edged higher on May 31 and steel steadied but both were set to end May with their deepest monthly losses on record as seasonal demand in the top global steel consumer fizzles, Reuters reported.

    May's decline follows a spectacular rally over December to April that was fueled by optimism about China's economy. But the bullish sentiment turned into doubts as indicators from retail sales to trade suggested a solid recovery was not yet in place.

    The five-month price surge pushed many shuttered Chinese steel mills to resume operations, increasing supply that could keep steel markets under pressure as seasonal demand slows down with hot weather curbing construction activity from June.

    These mills "just don't start and stop with the flows of seasonal demand," said Daniel Hynes, senior commodity strategist at ANZ Bank.

    "We'd expect those to remain open for the time being and that probably should result in steel production holding up relatively well despite that normal seasonal slowdown."

    The most-traded rebar on the Shanghai Futures Exchange was little changed at 1,995 yuan/t ($303/t) by the midday break.

    Rebar, or reinforcing bar used in construction, has fallen 28% from its April peak. For the month, it has lost 22% so far, the most since the Shanghai exchange launched rebar futures in 2009.

    On the Dalian Commodity Exchange, the most-active iron ore gained 1% to 346.50 yuan/t. The contract is now down 31% from April's high and 24% over May, its biggest monthly decline since launch in 2013.

    Stocks of imported iron ore at China's major ports have continued to rise, standing at 100.65 million tonnes on May 27, the highest since December 2014, according to data tracked by industry consultancy SteelHome.

    With Chinese steel production holding up, ANZ's Hynes said he doesn't expect the iron ore port inventory to rise sharply from current levels.

    Spot iron ore could find strong support at around $50/t, he said.

    Iron ore for immediate delivery to China's Tianjin port slipped 1.2% to $50.30/t on May 30, data compiled by The Steel Index showed.

    The spot benchmark has lost almost 23% so far in May, its biggest monthly drop since August 2012.

    Other steelmaking raw materials coking coal and coke on May 31 recovered from recent lows, rising 1.3% and 1.9%, respectively.

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    China’s key steel mills daily output at 1.75 mln T in mid-May

    The daily crude steel output of China’s key steel mills climbed 2.23% from ten days ago to 1.75 million tonnes in mid-May, hitting a new high since late-June last year, according to data released by the China Iron and Steel Association (CISA).

    China’s daily crude steel output is expected to be 2.35 million tonnes in mid-May, up 2.05% from ten days ago, CISA forecasted.

    Price of Tangshan steel billets dropped 23.5% to 1,820 yuan/t by May 30, compared with 2,380 yuan/t at the start of the month. Price of rebar in Shanghai stood at 2,300 yuan/t on the same day, falling 500 yuan/t from ten days ago and down 830 yuan/t from early May.

    By May 20, stocks of steel products in key steel mills rose 0.33% from ten days ago to 13.98 million tonnes; social stocks of steel products stood at 9.5 million tonnes by May 27, dropping 26.53% on year and down 0.78% on week.

    Analysts said the rainy season in eastern China may reduce purchase of steel products, and the volume of social stocks will mainly depend on the demand from downstream sectors in the future.

    Many steel makers turned profitability into losses again amid the steep monthly drop of steel prices in May. Domestic steel market is expected to stabilize in the short run.

    Attached Files
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    Glencore bids for Anglo American’s coal mines in Australia

    Glencore and Apollo Minerals are said to have made a joint bid for Anglo American's metallurgical coal mines in Australia, valued at up to $1.5 billion.

    According to The Australian, the companies are offering $1 billion for both Grosvenor and Moranbah mines, only days ahead of the June 6 deadline set by Anglo for final bids.

    The Queensland-based operations have been up for sale since February, when chief executive officer Mark Cutifani singled out the assets the firm had decided to offload after a prolonged commodities rout left it with high levels of debt.

    He said at the time that Anglo American expected to generate between $3bn and $4bn from asset sales this year.

    Other firms have also circled the coal mines at various stages of the process, including BHP Billion, South32 and X2, with varying reports as to which remain in contention.

    From those, Glencore is the one that has been more vocal about its intentions to take advantage of the merger and acquisitions opportunities in the market at the moment. In March, CEO Ivan Glasenberg said he was “looking at everything,” as long as the asset purchases wouldn’t undermine the company’s balance sheet.

    Last month, Anglo sold its 70% stake in Foxleigh coal mine, also located in Queensland, to a consortium led by Taurus Fund Management, an Australian fund manager that invests in the commodities industry. The total amount was not disclosed.
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    China’s coal price climbs to eight-month high amid supply cut

    China’s benchmark coal prices climbed to the highest since September as government steps to curb supply amid a glut and it started to take effect.

    Spot 5,500 Kcal/kg coal at the port of Qinhuangdao, China’s benchmark grade, rose 10 yuan/t to an average 395 yuan/t ($60) as of May 29, according to data from the china Coal Transport and Distribution Association in Beijing.

    The world’s largest coal producer is seeking to ease a glut of industrial capacity as it shifts toward consumer-led growth and tries to curb pollution. The nation’s coal production fell 11% to 268 million tons in April. That’s the biggest slump in data going back to April 2015, when the bureau resumed releasing coal production figures.

    "We believe the supply-side reform impacts are kicking in and should sustain," said Michelle Leung, a Hong Kong-based analyst at Bloomberg Intelligence. "Demand is still weak."

    Qinhuangdao coal prices may rise 20%t to 450 yuan/t by December, Citigroup Inc. analysts Jack Shang and Claire Jie Yuan wrote in a research note last week. The government has asked domestic miners to cut output by 16% and reduce their operating days to 276 from 330 annually, according to the report.
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    China’s coal industry Jan-Apr profits down 92.2pct on year

    China's coal mining and washing industry profits plunged 92.2% from last year to 960 million yuan ($146.6 million) over January-April, according to data released by the National Bureau of Statistics (NBS) on May 27.

    During the same period, the coal mining and washing industry realized revenue of 653.3 billion yuan, dropping 14.8% from a year ago, data showed.

    Total profit of the country’s entire mining industry also declined 104.8% on year to the loss of 4.03 billion yuan during the same period.

    Meanwhile, profit in ferrous and non-ferrous metal mining industry fell 9.4% and 8.1% on year to 10.17 billion and 11.63 billion yuan, respectively.

    The profit of the power and heat generation industry dipped 0.5 % from the year prior to 149.23 billion yuan.
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    ChemChina interested in Germany's SGL Carbon: Manager Magazin

    ChemChina is interested in buying SGL Carbon (SGCG.DE), Manager Magazin reported on Friday, one of a growing number of Chinese companies seeking to acquire key German industrial technology.

    Shares in SGL Carbon, which makes graphite electrodes for scrap metal recycling, jumped to a four-month high, trading 11.2 higher at 11.75 euros by 1045 GMT, valuing the company at just over 1 billion euros ($1.12 billion).

    SGL has been seeking a buyer for its graphite-electrode business, which has struggled since Chinese semi-finished steel became cheap enough to compete with scrap, sending demand for recycling equipment plunging.

    China is the world's biggest steel producer and consumer.

    SGL has warned that its operating income will fall markedly this year as prices at its graphite electrode business fall.

    A spokesman for SGL declined to say whether ChemChina was a possible buyer for the graphite electrode business but said that SGL was not seeking to sell the group as a whole.

    A person familiar with the matter said only the sale of that business was under consideration.

    Manager Magazin said that ChemChina would rather buy the whole company.

    Graphite electrodes are SGL's biggest business. SGL also makes other graphite products for the chemical, semiconductor, energy and automotive industries.

    Manager Magazin said ChemChina Chairman Ren Jianxin had held talks with SGL Chief Executive Juergen Koehler and with Quandt family heiress Susanne Klatten, who owns 27 percent of SGL.
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