Mark Latham Commodity Equity Intelligence Service

Wednesday 4th January 2017
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    Tax Reform

    Highlights of the Tax Reform Act of 2014 include:

    • New Individual and Corporate Rate Structure:  Flattens the code by reducing rates and collapsing today’s brackets into two brackets of 10 and 25 percent for virtually all taxable income, ensuring that over 99 percent of all taxpayers face maximum rates of 25 percent or less.  The plan also reduces the corporate rate to 25 percent. 
    • Larger Standard Deduction:  Makes the code simpler and fairer by providing a significantly more generous, inflation-adjusted standard deduction of $11,000 for individuals and $22,000 for married couples.  
    • Larger Child Tax Credit:  Increases the child tax credit to $1,500 per child, adjusts it for inflation going forward and expands the number of families that can claim the credit. 
    • Simpler, Improved Taxation of Investment Income:  Taxes long-term capital gains and dividends as ordinary income, but exempts 40 percent of such income from tax – resulting in a three percentage point decrease from the maximum rates individuals pay today on such income while also achieving the lowest level of double taxation on investment income in modern history.  
    • No AMT:  In addition to lowering tax rates for families and all job creators, the plan repeals the Alternative Minimum Tax (AMT) for individuals, pass-through businesses and corporations.  
    • Easier Education Benefits: Adopts recommendations stemming from the bipartisan working groups to consolidate education tax benefits so, along with the additional money from stronger economic growth, families can more easily afford the costs of a college education. 
    • Modernized International System: Modernizes the international tax code for the first time in more than 50 years while protecting jobs, wages and profits from being shipped overseas. 
    • Permanent R&D Incentive:  Invests in innovation by making permanent an improved Research & Development Tax Credit.
    • More Affordable Healthcare: While the plan generally leaves ObamaCare policies untouched and for a later debate on healthcare, there are two main exceptions given strong bipartisan support for: (1) repeal of the medical device tax and (2) repeal of the medicine cabinet tax, which prohibits use of funds from tax-free accounts to purchase over-the-counter medication without first obtaining a prescription. 
    • IRS Accountability:  Cracks down on IRS abuses and reduces massive waste, fraud and abuse.  The plan also contains provisions prohibiting implementation of recently proposed rules affecting 501(c)(4) organizations and provides victims with information regarding the status of investigations into violations of their taxpayer rights.
    • Infrastructure Investment:  Dedicates $126.5 billion to the Highway Trust Fund (HTF) to fully fund highway and infrastructure investment through the HTF for eight years. 
    • Simplification for Seniors:  Reflecting a proposal supported by AARP and ATR, the plan requires the IRS to develop a simple tax return to be known as Form 1040SR, for individuals over the age of 65 who receive common kinds of retirement income like annuity and Social Security payments, interest, dividends and capital gains.
    • Charitable Giving:  Expands opportunities to make tax-deductible contributions past the end of the tax year, makes permanent conservation easement incentives, simplifies exempt organization taxes and sets a floor instead of a cap to the amount of donations that can be deducted.  The economic growth in this plan will increase charitable giving by $2.2 billion annually.
    • Shrinks and Simplifies the Income Tax Code:  In addition to easing complexity and compliance burdens by adopting a larger standard deduction, enhanced child tax credit and lower rates, the plan repeals over 220 sections of the tax code; cutting the size of the income tax code by 25 percent. 

    In keeping with previously released drafts, the Committee seeks input and feedback on technical and policy issues raised by the draft released today.  The Committee also invites input on the accompanying technical explanation prepared by the JCT staff, a document that could serve as the basis for similar legislative history on any future tax reform legislation that may be considered by the Committee.  Additionally, as it further examines options arising from the budgetary and economic analysis, the Committee is especially interested in receiving constructive feedback on areas listed below.

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    Munger on MacroEconomics.

    https://www.farnamstreetblog.com/?s=munger+ricardo

    First, he said Berkshire beat the market in common stock investing through one sigma of luck, because nobody could beat the market except by luck. This hard-form version of efficient market theory was taught in most schools of economics at the time. People were taught that nobody could beat the market. Next the professor went to two sigmas, and three sigmas, and four sigmas, and when he finally got to six sigmas of luck, people were laughing so hard he stopped doing it.

    Then he reversed the explanation 180 degrees. He said, “No, it was still six sigmas, but is was six sigmas of skill.” Well this very sad history demonstrates the truth of Benjamin Franklin’s observation in Poor Richard’s Almanac. If you would persuade, appeal to interest and not to reason. The man changed his view when his incentives made him change it, and not before.

    I watched the same thing happen at the Jules Stein Eye Institute at UCLA. I asked at one point, why are you treating cataracts only with a totally obsolete cataract operation? And the man said to me, “Charlie, it’s such a wonderful operation to teach.” (Laughter). When he stopped using that operation, it was because almost all the patients had voted with their feet. Again, appeal to interest and not to reason if you want to change conclusions.

    Well, Berkshire’s whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form. And not one ounce of attention to the descendants of that idea, which came out of academic economics and went into corporate finance and morphed into such obscenities as the capital asset pricing model, which we also paid no attention to. I think you’d have to believe in the tooth fairy to believe that you could easily outperform the market by seven-percentage points per annum just by investing in high volatility stocks.



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    Freestyle Chess

    Technology and innovation. Here is a provocative thought: if you compete against a computer, you are highly likely to lose. If you compete with a computer to augment your performance, you are more likely to win. The question is how this plays out in the investment business.One model we can examine is chess. Machine beat man when Garry Kasparov lost to Deep Blue in1997. Since then, a new type of play called freestyle chess has become more popular. In freestyle chess, humans make the moves but can avail themselves of whatever aids they want, including chess programs and other humans. While it is close, it appears that freestyle teams are the best chess players in the world, easily surpassing humans by themselves and narrowly beating the best chess programs.44You need to sort what the computer is good at and what you can do. Then you have to let the computer do its thing while you do yours. Computers are good at applying base rates, crunching numbers, and casting a wide net. Humans can add value by understanding causality in a more nuanced way, recognizing      regime changes, and applying more granular knowledge.It is hard to be at the cutting edge of innovation, but there is a great deal to gain from simply applying available ideas or principles. For example, it is still surprising how few fundamental investors use simulation in their work. You can buy a Monte Carlo simulator off the shelf for a reasonable price, and it will generate substantial insight. Is your organization set up in the best possible way? For example, are your teams the proper size, of the ideal composition, and managed well? Finally, fundamental firms should keep an eye on academic research to see if any of the ideas apply.

    https://doc.research-and-analytics.csfb.com/docView?language=ENG&format=PDF&source_id=em&document_id=1063945621&serialid=1wRGyN6EnJdsEAzicRfCQyDmuExS84d2HcYRBRMNZJ8%3d

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    Inflation or Activity? The hairdryer count.

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    Resource Scepticism

    Legendary investor John Templeton famously proclaimed in 1994 that "[b]ull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."Image titleImage titleImage title

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    Hokkaido Climate Data: No change for decades.

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    Bitcoin surges above 1,000 dollars to kick off new year


    Bitcoin has seen its price pass 1,000 U.S. dollars for the first time in three years to kick start 2017 after the so-called cryptocurrency wrapped up last year as the best-performing currency.

    Bitcoin breached the notable round number of 1,000 dollars late Sunday, a level not seen since November 2013, and continued to rise in the following days. But the virtual currency's price is still shy of its all-time high of 1,163 dollars reached on the Bitstamp exchange in late 2013.

    Bitcoin outperformed all central-bank-issued currencies with a more than 120 percent rise in 2016, helped by a notable boost following Donald Trump's victory in the U.S. presidential election in November.

    Market analysts believe that the rise of bitcoin was driven by a number of factors including geopolitical instability and an increase in the number of professional investors chasing quick profits amid strong market sentiment.

    Although the virtual currency breached the key psychological level of 1,000 dollars, no one has the crystal ball to predict where the highly volatile currency will go next.

    Surpassing this price point could provoke a large number of sell orders, but it might also provide bitcoin prices with a new support level, said CoinDesk, a bitcoin news website.

    Bitcoin was created in 2009, which can be exchanged with traditional currencies such as the U.S. dollar or used to purchase goods or services.

    But the U.S. Securities and Exchange Commission has cautioned that bitcoin operates without central authority or banks and is not backed by any government, and its exchange rate has been very volatile.

    The financial regulator also highlighted the security concerns, as bitcoin may be stolen by hackers and bitcoin exchanges may permanently shut down due to fraud, technical glitches or hackers.

    According to Reuters, a tenfold increase in its value in two months in late 2013 took bitcoin to above 1,100 dollars, but a hacking on the Tokyo-based Mt. Gox, once the world's largest bitcoin exchange, in February 2014 caused its value plunge to some 400 dollars in the following weeks.

    Bitcoin's biggest daily moves in 2016 were around 10 percent, still very volatile compared with legal tenders, but still markedly lower than its trading in 2013 with daily price swings as much as 40 percent, Reuters noted.

    http://news.xinhuanet.com/english/2017-01/04/c_135954727.htm
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    China extends overcapacity fight to more sectors in 2017 -paper


    China will increase its targets for capacity cuts in steel and coal in 2017, while extending its campaign against overcapacity to industries such as cement, glass, electrolytic aluminum and shipping, a state-run newspaper said on Friday.

    China has vowed to restructure its vast industries to tackle inefficiency and cut capacity overhangs, promising early this year to close around 500 million tonnes of coal capacity and 100 to 150 million tonnes of steel capacity in three to five years.

    The world's top producer and consumer of coal and steel will aim to raise the 2017 closure targets in the two sectors by more than 10 percent, the Economic Information Daily said, without giving more details.

    "Measures to tackle overcapacity this year have not fundamentally changed the oversupply in the coal market," the paper quoted Nur Bekri, director of the National Energy Administration, as saying.

    "Cutting overcapacity will remain a key trend in the coal industry in the next three to five years."

    The 2016 target for slashing outdated capacity - including 250 million tonnes in the coal sector and 45 million tonnes in iron and steel sector - has been finished ahead of the schedule, the paper said.

    The government will also turn its attention to other industries, including the cement sector, which has continued to add new production lines despite demand already peaking, it said.

    It quoted industry sources as saying that the extension of the campaign would "largely improve profitability in these sectors".

    http://www.reuters.com/article/china-overcapacity-idUSL4N1EP09L

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    Oil and Gas

    Russia increases oil production by 2.5% in 2016


    Oil production in Russia grew by 2.5% in 2016 year on year reaching 547.49 mln tonnes, according to the data provided by the Central Control Administration of the Fuel and Energy Complex.

    In December, oil production was 47.4 million tonnes (3.5% growth compared to December 2015).

    Novatek was the leader in terms of oil production growth in Russia last year with the 37.6% growth year on year, its oil production grew to 12.46 mln tonnes. Gazprom Neft was the best oil company in terms of oil production dynamics. The company produced 57.79 million tonnes of oil, which is 6.7% more than in the previous year.

    A growth in oil production was also demonstrated by Bashneft - 6.3%, 20.8 mln tonnes - and Tatneft - 5.3%, 28.69 mln tonnes. Rosneft increased oil production by 0.5% to reach 209.96 mln tonnes, and Surgutneftegaz - by 0.4% to reach 61.85 mln tonnes.

    On the other hand, Lukoil reduced oil production by 2.8% to 83.57 mln tonnes, RussNeft - by 5.2% to 7 mln tonnes and the Independent Oil Company - by 1.3% to 2.3 mln tonnes.

    http://tass.com/economy/923680
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    Libya's crude oil production hits highest in two years


    Livesquawk reporting comments from a senior official at the Libyan state-owned National Oil Corp, as cited by Platts, noting that Libya's crude oil production hits 690,000 b/d, highest in two years.

    https://www.fxstreet.com/news/libyas-crude-oil-production-hits-highest-in-two-years-platts-201701030318
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    Iraqi PM says Kurds exporting more oil than allocated


    Iraq Prime Minister Haider al-Abadi said the autonomous Kurdish region was exporting more than its allocated share of oil as the country seeks to comply with an OPEC output cut.

    In November, OPEC agreed to cut output by 1.2 million barrels per day from January 2017 to support prices. Iraq, OPEC's second largest producer, agreed to reduce output by 200,000 bpd to 4.351 million bpd.

    "The region is exporting more than its share, more than the 17 percent stated in the budget,” Abadi said.

    Oil exports from the Kurdish region have long been a point of contention with Baghdad, which claims sole authority over sales of all the country's crude.

    Kurdish regional authorities have yet to publish oil export figures for December, but the Ministry of Natural resources said it had pumped an average of 587,646 bpd to Turkey's Ceyhan port in November.

    Under the terms of the 2017 budget, which passed despite a boycott from a key Kurdish party, the autonomous region is allocated 250,000 bpd exports from oilfields under its control. That does not include the disputed Kirkuk fields, which Kurdish forces control but are run by Iraq's North Oil Company (NOC).

    The Kurds built their own oil pipeline to Turkey and began exporting oil via Turkey without Baghdad's approval in 2013.

    http://www.reuters.com/article/us-iraq-oil-kurds-idUSKBN14O03E?feedType=RSS&feedName=GCA-Commodities&utm_source=dlvr.it&utm_medium=twitter
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    EC mulls Gazprom's proposals to end EU gas market antitrust case


    Russian gas group Gazprom has committed to change its business practices to settle an EU antitrust case focused on central and eastern European natural gas markets, a European Commission spokeswoman said Tuesday.

    "The commission will now carefully assess if they address, in a forward looking manner, the commission's competition concerns in line with EU antitrust rules," the spokeswoman said, without giving details of the commitments.

    "To be effective, the commitments would have to ensure the free flow of gas in central and eastern Europe at competitive prices," she said.

    The EC formally charged Gazprom in April 2015 with alleged market abuse in central and eastern Europe.

    The charges focused on Gazprom restricting gas resales across borders and allegedly charging unfair prices.

    Gazprom has since been negotiating with the EC on commitments to address these concerns in order to settle the case informally and avoid fines.

    The EC said it received Gazprom's formal commitments on December 27.

    There is no legal deadline for concluding antitrust cases.

    If the EC decides Gazprom's commitments address the antitrust concerns, then it will publish them in the EU's Official Journal and seek market players' views.

    If the results of this market test are positive, then the EC will make the commitments binding.

    If Gazprom then breaks its commitments, the EC can fine it up to 10% of its total worldwide turnover without having to prove the original antitrust concern.

    This is the standard procedure for EU antitrust cases settled with commitments.

    Other major gas companies which have settled EU antitrust cases with commitments in the past 10 years include Belgium's Distrigas (now rebranded and part of Italy's Eni), France's GDF Suez (now rebranded as Engie), Germany's E.ON (now split into E.ON and Uniper) and RWE, as well as Eni itself directly.

    RESTRICTED RESALES

    The EC's charges included that Gazprom was restricting gas resales by customers in Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland and Slovakia to companies in other countries.

    This means that wholesalers with access to cheaper Russian gas in the region were unable to resell it to those paying higher prices for Russian gas, the EC said in April 2015.

    This may have enabled Gazprom to charge unfairly high prices in Bulgaria, Estonia, Latvia, Lithuania and Poland, the EC said.

    Gazprom is the dominant supplier in the region, with national market shares ranging from well above 50% to 100%.

    The EC also challenged Gazprom's formulae for indexing gas prices to oil prices, saying at the time that they "unduly favored Gazprom" and contributed to unfair prices.

    http://www.platts.com/latest-news/natural-gas/brussels/ec-mulls-gazproms-proposals-to-end-eu-gas-market-26630235
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    Petrobras sells $587 mln in assets, misses two-year target


    Brazil's state-run oil company, Petroleo Brasileiro SA, announced the sale of ethanol and petrochemicals assets for $587 million, but said it would still fall $1.5 billion short of its divestment target for the 2015-2016 period.

    Among the assets sold were its 46 percent stake in ethanol producer Guarani SA, which was acquired for $202 million by its French partner Tereos SA, which will now own all of the company.

    Petrobras, as the company is known, said it will also sell its two petrochemical units in the northeastern state of Pernambuco - Petroquimica Suape and Citepe - to Mexican group Alpek SAB de CV subsidiaries Grupo Petrotemex SA de CV and Dak Americas Exterior SL for $385 million.

    Even after a flurry of asset sales this month, Petrobras failed to meet its two-year divestment target of $15.1 billion.

    The state oil company said in an emailed statement that a court injunction this month blocking its negotiations to sell the Tartaruga Verde and Bauna oilfields was to blame for missing the goal. The company announced in October Karoon Gas Australia Ltd was interested in these fields.

    Petrobras said its 2017-2018 asset sale target would be automatically raised to $21 billion to compensate for the shortfall.

    Petrobras is selling off noncore assets in a bid to reduce its $125 billion debt, the largest in the global oil industry.

    Last week, the company said it would sell $2.2 billion worth of assets to France's Total SA, including stakes in oilfields and two thermal power stations.

    That announcement came a week after Petrobras sold its 49 percent stake in sugar and ethanol joint venture Nova Fronteira Bioenergia SA to partner Sao Martinho SA for $133 million in shares.

    Petrobras said the recent deals were exempted from the ruling by Brazil's audit court on Dec. 7 that temporarily suspended its asset sale program. These sales were allowed to proceed because they were in advanced stages, the company said.

    http://www.reuters.com/article/petrobras-divestiture-idUSL1N1EN13T
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    Mexican protesters' blockades cause 'critical situation' - Pemex


    Blockades of fuel storage terminals by protesters angered by a double-digit increase in gasoline prices has led to a "critical situation" in at least three Mexican states, state oil company Pemex said on Tuesday.

    There were distribution problems in northern Chihuahua and Durango states, as well as Morelos state just south of the Mexican capital, due to the blockades affecting key terminals, Pemex said in a statement.

    The company added that if the blockades continue, the operations of nearby airports could also be affected.

    One association of gas stations with a large presence in Mexico City, Grupo Gasolinero G500, said in a statement late on Tuesday that it would shut some of its stations on Wednesday where it has identified insufficient security.

    The finance ministry's decision last week to raise fuel prices by between 14 and 20 percent effective Jan. 1 has been widely criticized across the oil-rich country, prompting numerous street protests and criticism of the government.

    The gasoline and diesel price spikes, derided by locals as "gasolinazos" in Spanish, follow plans the government announced last month detailing a gradual, year-long region-by-region price liberalization for 2017.

    http://www.reuters.com/article/us-mexico-pemex-idUSKBN14O0A1
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    Gulf Energy Companies Reduce Borrowing 26% as Oil Prices Surge


    Energy companies in the Middle East reduced their borrowing by 26 percent in 2016 as an increase in oil prices late in the year provided revenue needed for exploration and production.

    Bonds and loans issued by energy producers in the six-nation Gulf Cooperation Council declined 26 percent to $17.5 billion from a record $23.7 billion in 2015, data compiled by Bloomberg show. Oil trader BB Energy Gulf DMCC in Dubai was the only borrower in the final six months last year, taking out $200 million to refinance debt.

    Crude oil rallied 16 percent in the final three months of 2016 as oil producers from OPEC and 11 non-OPEC nations agreed to cut output this year. Before the rally, lending had surged as energy companies turned to banks and investors for cash as borrowing costs fell and oil prices declined. The drop in lending later in the year was a boon to those who did borrow, with BB Energy increasing its refinancing from $175 million as the deal was oversubscribed.

    “If oil prices go up a few notches, it will help them rely less on international borrowing,” John Sfakianakis, director of economics research at Jeddah-based Gulf Research Center, said by phone Monday from Athens. “There’s more money available for oil companies to keep within rather than go out and borrow.”

    Borrowers also held back as costs increased. The J.P. Morgan Middle East Composite Index of the region’s debt yield, an indication of borrowing rates, averaged 4.7 percent last year compared with 4.43 percent in 2015. The gauge had dropped to a 16-month low in late August. In December, the U.S. Federal Reserve raised interest rates and forecast a steeper path for 2017 increases.

    For more about first-half borrowings in 2016 led by Saudi Aramco, click here.

    In contrast to industry, governments in the Gulf region increased borrowing following a halving of oil prices since 2014, forcing some of them to use foreign cash reserves. Saudi Arabia led sovereign issues, raising $17.5 billion in the biggest emerging-market bond sale in October. Qatar sold $9 billion in May and Abu Dhabi raised $5 billion in April.

    "If oil prices continue to improve, producers will rely less on international borrowing, especially as costs increase as the Fed hikes rates," Sfakianakis said. "This year could be a repeat of 2016. More government borrowing, and not as much by oil companies."

    https://www.bloomberg.com/news/articles/2017-01-02/gulf-energy-companies-reduce-borrowing-26-as-oil-prices-surge
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    Friends of the Earth Fracking Lies

    The Advertising Standards Authority has been conducting an investigation into Friends of the Earth's wild stories about unconventional oil and gas in recent weeks. Today it was announced that our green friends have decided that a hasty retreat is in order. Rather than fighting the allegations against them they have decided to promise to stop telling said porkie pies rather than wait for an official ruling that they are, in fact, wholesale purveyors of baked meat products.
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    Iran Qualifies CNPC to Total for Bidding on Energy Projects


    China National Petroleum Corp., Royal Dutch Shell Plc and Total SA are among the companies that will be invited to bid in tenders, according to a list published Monday on the website of state producer National Iranian Oil Co. Total, along with Lukoil PJSC and the oil unit of Gazprom PJSC, are some of the companies on the list that have already signed preliminary agreements with Iran to study oil fields for potential future development.

    Iran aims to attract more than $100 billion in foreign investment to speed growth in its energy industry after sanctions cut international companies’ involvement in developing the world’s fourth-largest oil reserves. Since sanctions eased in January, the Persian Gulf producer has doubled exports as crude prices rallied. Brent crude gained 52 percent last year and traded at $57.08 a barrel at 11:48 a.m. in Dubai.

    The country boosted oil production last year by 870,000 barrels a day to 3.67 million by November, according to data compiled by Bloomberg. While the country has reached several preliminary agreements with international companies, it has yet to sign any concrete deals to boost crude production since Oil Minister Bijan Namdar Zanganeh outlined more than 50 potential projects at a Tehran conference in November 2015. Zanganeh said at the time the country was targeting about 5.7 million barrels a day of crude and condensate production early in the next decade.

    Companies from Italy, Spain, Japan and India also made the list. U.S. oil services provider Schlumberger Ltd. was among those identified, according to the NIOC website. U.S. sanctions legislation prevents companies based in that country from investing in Iran’s energy industry, while foreign subsidiaries of American entities are allowed to operate in the Persian Gulf country.

    https://www.bloomberg.com/news/articles/2017-01-02/iran-qualifies-cnpc-to-total-for-bidding-on-oil-and-gas-projects
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    Genscape Cushing inventory


    Genscape Cushing inventory: +1.038MM bbl in week ended Dec. 30

    @zerohedge
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    U.S. oil rig count recovers to end 2016 near year-ago levels -Baker Hughes


    The U.S. oil rig count ended 2016 just below year-ago levels as drillers added rigs this week as part of the biggest recovery since a global oil glut crushed the market over two years.

    Drillers added two oil rigs in the week to Dec. 30, bringing the total count up to 525, the most since December 2015 and 11 shy of the 536 rigs seen at the end of 2015, energy services firm Baker Hughes Inc said on Friday. RIG-OL-USA-BHI

    Since crude prices recovered from 13-year lows in February to around $50 a barrel in May, drillers have added a total of 209 oil rigs in 28 of the past 31 weeks, fueled by prices climbing to near 17-month highs.

    The Baker Hughes oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May as U.S. crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.    

    U.S. crude futures were trading at $53.60 a barrel on Friday, on its way to over 40 percent growth for the year, the largest annual percentage growth since 2009.

    Futures for both calendar 2017 and 2018 were trading around $56 a barrel.

    Analysts said they expect U.S. energy firms to boost spending on drilling and pump more oil and natural gas from shale fields in coming years now that energy prices are projected to keep climbing.

    The total oil and natural gas rig count ended 2016 at 658, down 6 percent from the 698 at the finish of 2015.

    http://www.reuters.com/article/usa-rigs-baker-hughes-idUSL1N1EI0VB
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    Inside FERC Henry Hub January index rises 71 cents to $3.94/MMBtu


    Bidweek prices across the US rose in January, pushing the national natural gas average price up $1.12/MMBtu to $4.29/MMBtu, with the largest increases occurring in the Northeast, where the regional average jumped $4.18/MMBtu, or 105%, month on month.

    Algonquin city-gates jumped $7.34/MMBtu to reach $12.07/MMBtu, almost double the previous January price, while deeper into the Appalachian production basin, Dominion South increased 93 cents to $3.33/MMBtu, an increase of nearly 39%.

    Similarly, Chicago city-gates increased 92 cents to $4.17/MMBtu as the Upper Midwest market moves into January after experiencing the highest December demand levels in the last five years, driven by temperatures in Chicago averaging 2.7 degrees below seasonal norms, National Weather Service data showed.

    The weather service projected a high probability of below-average temperatures over much of the Upper Midwest into mid-January, providing support to the region's bidweek prices.

    Along the Gulf Coast, Houston Ship Channel rose 67 cents and Henry Hub climbed 71 cents to settle around $3.65/MMBtu and $3.94/MMBtu, respectively. Despite trading closely through much of 2016, January bidweek increased the spread to 29 cents -- the largest spread in the last 12 months -- from the 25-cent spread established in December.

    In the Southwest, the Southern California city-gate rose 29 cents to $3.92/MMBtu, while AECO jumped 50 cents to $3.49/MMBtu, the highest price in over two years as Platts Analytics data showed net exports to the US were up 150 MMcf/d in fourth-quarter 2016, reaching 5.3 Bcf/d.

    http://www.platts.com/latest-news/natural-gas/houston/inside-ferc-henry-hub-january-index-rises-71-21489941
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    Range Issues Statement in Response to the Press Release Issued by Chapter IV Investors,


    RANGE RESOURCES CORPORATION  issued the following statement in response to the press release issued by Chapter IV Investors, LLC dated January 3, 2017:  While Range does not typically comment on market speculation, in this instance the company wanted to make clear that it has not been contacted by EQT Corporation regarding a potential merger of the two companies nor does Range plan to initiate any such discussions.  If EQT or any other entity were to contact Range regarding a potential transaction, Range’s Board will evaluate any such potential transaction considering the best interests of its stockholders given the circumstances at the time.

    Range does not expect to comment further regarding this matter.

    http://boereport.com/2017/01/03/range-issues-statement-in-response-to-the-press-release-issued-by-chapter-iv-investors-llc-dated-january-3-2017/
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    Will Alpine High pan out? Analysts weigh in


    Houston-based Apache Corporation recently announced the discovery of an estimated 15 billion barrels of oil and gas in the area of Balmorhea and plans to drill and use hydraulic fracturing on the 350,000 acres surrounding the town.

    The investment community is torn on Apache Corp.’s new find in West Texas.

    Plenty are unconvinced that Alpine High, as the Houston company is calling it, will produce as advertised.

    Apache has announced finds before that petered out, said Andy McConn, a senior analyst at the energy research firm Wood Mackenzie. It pushed fields in the Texas panhandle and in South Texas’ Eagle Ford. “Both those plays really fell out of favor,” McConn said. “I’m a bit skeptical, just because of that history.”

    More wells need to be drilled to prove the field, agreed Hassan Eltorie, an analyst at energy research firm IHS Markit. Pipelines need to be built. “We’ll get a lot better vision six months to a year from now,” Eltorie said.

    But some insist Apache has found something other exploration and production companies couldn’t.

    “I think Apache has done some of the best homework of any E&P I’ve followed in some time,” John Herrlin, head of oil and gas research for the investment bank Societe Generale, told me recently.

    “Next year, once the pipeline is in place,” Herrlin said, “Wall Street will have a different appreciation.”

    http://fuelfix.com/blog/2017/01/03/will-alpine-high-pan-out-analysts-weigh-in/
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    Frac Sand Truck Drivers Wanted

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    Halliburton to hire 200 workers in Permian Basin


    Oil services company Halliburton has announced plans to bring about 200 jobs to the Permian Basin, an area which covers southeast New Mexico and parts of western Texas.

    The Current-Argus reports that Halliburton spokeswoman Emily Mir says in a Wednesday statement there will be job opportunities in various parts of the basin, including in Artesia.

    The announcement comes as local officials say there’s been growth in the energy market in recent weeks, with more companies looking to expand in the region.

    Shannon Carr with the Department of Development says an increase in oil and gas production will be good for the local economy.

    Industry experts say oil prices need to be around $45 to $50 per barrel to be profitable.

    http://fuelfix.com/blog/2016/12/30/halliburton-to-hire-200-workers-in-permian-basin/
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    Oil companies hiring fracking crews in Bakken


    Oil companies are hiring in the Bakken, and more jobs are expected to open up next year.

    Job Service North Dakota announced six oil companies are looking for workers to man fracking crews in the new year, said Cindy Sanford, customer service office manager of Job Service’s Williston branch. She said she couldn’t reveal the names of the companies due to confidentiality clauses, but she said the companies are looking to hire 45 to 65 workers per crew. On the low end, that could bring 300 hires to the Bakken, she said.

    “It’s getting busier in our offices, as far as not only with job seekers but also the companies,” said Phil Davis, the agency’s western area director. “We are seeing more of the service rigs — not so much the drilling rigs — but our service rigs and workover rigs, jobs are coming back there, which is a great thing.”

    Oil companies announced in October they would post positions for workers in the Bakken as oil prices climbed to an 18-month high in December. Oil on the New York Mercantile rang out Thursday at $53.83, almost a 50 percent increase over last year. That’s down from an all-time high of $136.29, which was set July 3, 2008, but almost double the 10-year low — barrels of oil went for less than $27 in early 2016.

    After peaking in June 2014, oil prices started to fall off, causing oil companies to lay off workers and take rigs offline. As of Thursday, North Dakota’s rig count was 39. That’s down from its all-time high of 218 in May 2012, but the count has been on a slight increase over the past several months.

    The recent job postings in western North Dakota mostly are for service or workover rigs, which are used to complete a well and install the pump after drilling is done.

    As of Thursday, almost 500 jobs posted on Job Service North Dakota mentioned oil.

    November’s increase from October for all job openings for Stark County, where oil jobs once were abundant before the bust, was 140, while Williams County, the heart of fracking, saw a 50-job increase.

    The December numbers are expected to come out Wednesday, Davis said. He added companies are looking for workers who have more skills than the crews hired when the oil boom began in the early 2010s, which saw a lot of “greenhorns” come to North Dakota, he said.

    Davis couldn’t say whether the job openings meant the oil industry could turn around since it went bust in recent years, but he did say it was exciting to see the jobs come back.

    “I’m kind of excited to see what the December numbers bring us,” he said. “I’m expecting a little bit of an increase.”

    http://www.prairiebusinessmagazine.com/energy/4189523-oil-companies-hiring-fracking-crews-bakken#.WGu1zaQGtog.twitter
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    Marathon Petroleum explores spin-off for retail business Speedway


    Marathon Petroleum Corp (MPC.N), under pressure from activist investor Elliott Management, said a special committee of its directors would review its retail business, including considering a tax-free separation.

    Elliott unveiled a 4 percent stake in Marathon Petroleum in November and urged the company to consider spinning off just Speedway, a chain of gasoline stations and convenience stores, or all three of its retail, refining and pipeline businesses.

    Marathon Petroleum said it expects to provide an update on the review by mid-2017.

    http://www.reuters.com/article/us-marathon-pete-elliott-speedway-idUSKBN14N128
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    Alternative Energy

    Vestas' strong 2016 finish offsets worry over Trump energy policy


    A spate of last-minute orders from the United States has put Danish wind turbine maker Vestas on track for its highest contract intake in six years and eased some investors' concerns over U.S. energy policy under the incoming Trump administration.

    Vestas Wind Systems (VWS.CO) and its rivals are benefiting from a new focus on renewables, encouraged by the Paris Agreement on climate change last December and a five-year extension of a key U.S. Production Tax Credit.

    But Vestas' share price, which had more than doubled since the beginning of 2016, came under pressure after it early in November warned of a slowdown in the U.S. market next year, coupled with the election win by Donald Trump, who had expressed support for conventional fossil fuels.

    The company, however, has announced eight U.S. orders from Wednesday through Friday totaling more than 700 megawatts of new wind power capacity.

    Sydbank analyst Jacob Pedersen is "very positively surprised" about the prospect for a new order record, he said in a note, adding that it signaled 2018 could bring progress after an expected slight decline next year.

    He said he saw increased uncertainty after Trump's election win but any worsening of the conditions for wind farms would not be of significance until 2020 at the earliest.

    "Wind and renewable energy have broad bipartisan support in the United States," Vestas told Reuters by email on Friday. It said wind energy's natural competitiveness against other power generation sources would "help ensure its solid future".

    Trump's presidency would "in theory" be negative for the renewables sector, Chief Financial Officer Marika Fredriksson told Reuters just before the U.S. presidential election, but said it was too early to assess as the industry creates a lot of jobs, a main political target for Trump.

    Vestas has announced wind turbine orders for a total of 8.92 gigawatts this year, up from 8.10 gigawatts at the same time last year, according to the company's website.

    Taking into account still-unannounced orders, the order intake for 2016 is projected to rise above last year's 8.94 gigawatts.

    Vestas has announced orders from the United States for over 3.1 gigawatts this year, more than a third of its total orders, up from 2.87 gigawatts in 2015.

    The total for 2016, including still-unannounced orders, will be announced on Feb. 8 when Vestas publishes full-year results.

    http://www.reuters.com/article/us-vestas-wind-orders-idUSKBN14J0VF
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    Agriculture

    EU regulators delay ChemChina/Syngenta merger decision to April 12


    European Union antitrust regulators have extended the deadline for a decision on ChemChina's proposed buy of Swiss pesticides and seeds group Syngenta by 10 working days to April 12.

    Syngenta said in a statement the two companies had asked for the extension to allow "sufficient time for the discussion of remedy proposals".

    The European Commission opened an in-depth investigation into state-owned ChemChina's $43 billion bid in October, saying the companies had not allayed concerns over the deal.

    The Commission's website showed the deadline had been extended by 10 days on Tuesday.

    "ChemChina and Syngenta remain fully committed to the transaction and are confident of its closure," the Swiss company said.

    http://www.reuters.com/article/us-syngenta-ag-m-a-chemchina-idUSKBN14N1GK
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    Steel, Iron Ore and Coal

    China's CCB signs $4.3 bln of debt/equity swaps with coal, steel firms


    China Construction Bank Corp (CCB) has signed around 30 billion yuan ($4.31 billion) worth of debt-for-equity swaps with eastern Anhui province's state-owned coal and steel firms, the official Xinhua news agency said late on Wednesday.

    Since China's policymakers re-launched the debt-for-equity scheme in October to ease the borrowing overhang of its struggling firms, the country's banks have rushed to sign deals with state-owned enterprises to ease their burden.

    The country's second biggest lender CCB has signed a 30 billion yuan debt-for-equity framework agreement with Huainan Mining Industry (Group) Co, Huaibei Mining Group and Magang (Group) Holding, the parent company of Maanshan Iron & Steel Co , to reduce leverage and increase profits, said Xinhua.

    CCB also agreed to provide Huainan Mining, Huaibei Mining and Wanbei Coal-Electricity Group with more than 30 billion yuan worth of credit within the next 5 years, together with comprehensive financial services that include investment banking and settlement services among other things, said Xinhua.

    CCB, Huainan Mining, Huaibei Mining, Wanbei Coal-Electricity Group and Magang (Group) Holding were not immediately available for comment when contacted by Reuters.

    The deal follows a CCB $739 million debt-for-equity swap with Xiamen CCRE in November.

    Heavy industries such as coal and steel are suffering from over-capcity as China has switched its economic growth strategy to depend more on higher-end technology and consumption.

    On Monday, the country's largest lender Industrial and Commercial Bank of China (ICBC) signed three debt-for-equity swaps with Shanxi province's highly indebted state-owned coal and steel firms.

    http://www.reuters.com/article/china-ccb-debt-idUSL4N1EO224
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    Beijing's coal use down by 57pct since 2013


    China's capital Beijing saw its coal consumption fall by as much as 57% in the past three years, as the city works to curb smog, according to the municipal environmental watchdog.

    Beijing burned less than 10 million tonnes of coal in 2016, down from 23 million tonnes in 2013, showed statistics released by the municipal environmental protection bureau on January 3.

    Emissions from coal are cited as a cause of the high concentration of breathable toxic particulate matter, known as PM 2.5, which causes smog.

    Beijing's 21 million inhabitants used to rely heavily on coal for electricity and winter heating. Across China, coal remains the primary source of energy.

    The city's urban districts have completely removed coal-burning furnaces used for heating, Xinhua reported, quoting Li Kunsheng, a municipal environment official.

    In 2016, the city ordered 424,000 old vehicles off the road and closed 335 polluting factories, and more than 4,000 companies were ordered to reshuffle their production operations to meet environmental standards, said Li.

    Beijing has suffered from frequent winter smog in recent years, triggering widespread public concern. Government statistics show steady drops in sulfur dioxide, nitrogen dioxide, PM 10, and even PM 2.5, but not enough to end smog for good.

    http://www.sxcoal.com/news/4550954/info/en
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    US coal mining firm Ramaco files for IPO


    Ramaco Resources Inc., a Kentucky-based mining firm with four currently non-operating mines in West Virginia, Virginia, and Pennsylvania, field with the U.S. Securities and Exchange Commission on December 29 for an initial public offering (IPO), media reported.

    The company said it expects to begin commercial operations in the first quarter of 2017 with annual production of 1.1 million tonnes of metallurgical coal aimed at a target customer base of U.S. steel mills and coking plants.

    Ramaco noted in its filing that U.S. coal miners produced 66 million tonnes of metallurgical coal in 2015 to meet North American demand of 21 to 22 million tonnes and export demand of 46.3 million tonnes. The company believes that a recent decision in China to curtail domestic product has created an anticipated shortfall in supply and is the cause of recent price increases for metallurgical coal.

    The company currently counts 27 employees, including its named executives, and another 19 operational employees at its preparation plant at one location. Ramaco does not indicate how many employees it expects to hire, but it does report that it expects to produce 4.06 tonnes per employee hour in its first 10 years of operation, more than twice the current U.S. industry average of 1.81 tonnes per employee hour.

    http://www.sxcoal.com/news/4550889/info/en

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    Final phase of Minas Rio mine expansion a priority for Anglo — report


    Iron ore is Brazil's largest foreign exchange earner and Minas-Rio has been one of the most significant private investments in the country’s economy in recent years.

    Almost a year after market rumours indicated that Anglo American was planning a complete exit from Brazil, the company is now about to begin the last phase of a key expansion of its Minas Rio iron ore mine, in Minas Gerais state.

    The final developments, Anglo Brazil’s CEO Ruben Fernandes told a local mining news site, will need a $308 million (R$1 billion) investment and will allow the massive mine to reach full capacity, delivering about 26.5 million tonnes of iron ore this year and 29 million before 2020.

    Anglo will invest about $308 million this year in a expansion that will boost Minas Rio's output to about 26.5 million tonnes of iron ore this year and 29 million before 2020.

    Anglo paid about $5.5 billion to former Brazilian billionaire Eike Batista for Minas Rio in two stages in 2007-2008. It then had to spend about $8.4bn more to bring it to full production, which began in 2014, more than twice what was originally projected.

    The deal soon soured as rising global iron ore output overwhelmed demand, causing prices to tumble 80% from their 2011 peak.

    But after an unexpected but quite welcome rally in 2016 (the commodity climbed 81% last year), Anglo’s costly bet for iron ore may finally pay off. Better demand and a more restrained approach by top producers Vale and Rio Tinto are likely to carry into 2017, limiting the steel-making material potential price drops, according to some analysts.

    This year “will bring more supply than current pricing can handle, so pricing should see downward pressure from the current $80 a ton levels,” Jeremy Sussman, an analyst at Clarksons, told Bloomberg.

    Ore with 62 percent content in Qingdao ended the year at $78.87 a tonne, just below a two-year high of $83.58 hit on Dec. 12, according to Metal Bulletin Index.

    http://www.mining.com/final-phase-of-minas-rio-iron-ore-mine-expansion-a-priority-for-anglo-report/
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    US stainless sheet prices jump on mill hikes, surcharge gains


    US cold-rolled stainless sheet transaction prices moved up to start 2017 as both smaller mill discounts and higher raw material levies pushed up pricing for January deliveries, sources said Tuesday.

    US stainless producers in early December announced increases on cold-rolled stainless sheet prices for January deliveries, with ATI Allegheny Ludlum, AK Steel, North American Stainless and Outokumpu each stating they would achieve the rise by reducing the functional discount applied to stainless sheet base prices by 2 percentage points.

    "The increase is sticking, and I don't think we're going to see the mills pull back and allow for steeper discounts," a service center source said.

    The increase, which covers 200, 300 and 400 series-cold rolled stainless sheet, marks the first for series 300 sheet base prices since April, and domestic mills are holding firm. Service center sources said they saw a strong uptick in demand during December as customers looked to get orders in before higher base prices took effect.

    "We probably had the busiest December we've ever seen with everyone looking to buy ahead of the increase," a second service center source said.

    Inventory levels are low among both mills and service centers and current lead times from US producers are in the range of five to six weeks, buy-side sources said. Additionally, the import market for commodity-grade stainless continued to be scarce throughout December, with offers for imported material dropping off toward the end of 2016, sources said. "I think everyone is waiting to see what happens with [President-elect Donald] Trump and the incoming administration when it comes to trade," the second service center source said. "Right now people seem a bit leery."

    In addition to less competition from imports, rising raw material surcharges are driving up US domestic pricing, sources said. US mills published cold-rolled sheet surcharges for January with Types 304 and 316 stainless at 62.82-62.84 cents/lb and 75.66-75.7 cents/lb, respectively. Type 304 stainless is up 47% from 46.95-46.98 cents/lb in December, while Type 316 is up 25% from 60.55-60.59 cents/lb, as the chrome portion of the benchmark jumped month on month.

    Given the sharp increase in surcharges, another base price hike is not expected in the near term, sources said. The mill-announced increase, combined with higher surcharges, marks the largest month-on-month increase that one service center source said they have seen in 30 years of working in the industry.

    "I think the market will ride the wave of surcharges and wait to see how January plays out," another buy-side source said.

    Demand throughout January is expected to be less robust than December, as many customers bought early to avoid higher pricing, sources said.

    "You end up borrowing business from the next month when a sharp increase like this happens," the second service center source said.

    On Tuesday, S&P Global Platts raised its monthly transaction price assessments for Types 304 and 316 CR stainless sheets to 119-121 cents/lb and 151-153 cents/lb, respectively. This compares with December transaction prices of 100-102 cents/lb and 132-133 cents/lb, respectively. Type 430 stainless sheet transaction prices rose to 88-89 cents/lb, up from 73-74 cents/lb.

    http://www.platts.com/latest-news/metals/pittsburgh/us-stainless-sheet-prices-jump-on-mill-hikes-21489944

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    China's 99 major steel makers' profit at 4.42 bln yuan in Nov, CISA


    China's 99 major steel makers realized sales revenue of 264.89 billion yuan ($38.06 billion) in November, with total profit of 4.42 billion yuan, showed data from China Iron and Steel Association (CISA).

    In November, 22 or 22.2% of the major steel makers suffered a loss of 2.31 billion yuan in total, data showed.

    During January-November, total sales revenue dropped 4.36% year on year to 2.51 trillion yuan, with profit amounting to 33.15 billion yuan, compared with a loss of 52.91 billion yuan during the same period of 2015.

    There were 26 or 26.3% of major steel enterprises in the red in the first eleven months of 2016, with losses decreasing 67.7% from the year-ago level to 21.88 billion yuan, CISA data showed.

    China produced 738.94 million tonnes of crude steel between January and November last year, up 1.14% year on year, with November output up 4.98% from the preceding year to 66.29 million tonnes.

    Of this, 575.79 million tonnes or 77.92% of the total were produced by the 99 major steel makers in the first eleven months, edging up 0.07% on the year. Their output in November increased 5.03% from the year prior to 52.54 million tonnes or 79.25% of the nation's total.

    http://www.sxcoal.com/news/4550950/info/en
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    China Dec steel sector PMI drop to 47.6


    The Purchasing Managers Index (PMI) for China's steel industry dropped to 47.6 in December 2016, showed data from the Steel Logistics Professional Committee (CSLPC) on January 1.

    That was lower than November's 51.0 and also below the 50-point boom-bust line after two straight months' rise, indicating a downturn in the steel industry, mainly affected by weak demand, increased stockpiles at steel mills, and less support from raw material prices.

    In December, the steel industry output sub-index was 44.9, dropping 3.9 from 48.8 in November, the lowest monthly reading since July, which reflected further decline of domestic steel output in the near future.

    Meanwhile, the new orders and new export orders sub-indices were both below the 50-point mark that separates growth from contraction, standing at 47.8 and 44.0, respectively, down 8.1 and 6.2 from November.

    During December 2016, the inventory sub-index for the country's steel industry bottomed out to 49.6, from November's seven-month low of 45.1.

    Besides, the purchase price sub-index plunged 16.5 to 60.9 in December, while it was still above the 50-point boom-bust line for the tenth consecutive month.

    However, steel producers were still actively stocking up steelmaking materials, given considerable profits for now.

    Experts anticipated steel prices to slide under pressure, as demand from downstream sectors may weaken approaching the Spring Festival, while daily output of crude steel is likely to maintain for the sake of profits.

    http://www.sxcoal.com/news/4550911/info/en
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    China lifts electricity price for outdated steel plants


    China has toughened its tiered electricity pricing to deter outdated steel producers and advance capacity cuts, the top economic planner said on January 3.

    The measure, effective since January 1 this year, will raise the extra price paid by "outdated" steelmakers by 66.7% to 0.5 yuan/ kWh (about 7 US cents), according to the website of the National Development and Reform Commission (NDRC). Outdated steelmakers are those scheduled to be phased out.

    Producers that have not met capacity-cut goals on time face the same penalty as those to be phased out, while those in the "restricted" category will continue to face an additional 0.1 yuan/kWh of electricity.

    Local authorities are allowed to expand the price gap even further, the NDRC said.

    Since 2004, the NDRC has implemented a three-tier pricing system for eight major energy-intensive industries, including steel-making, categorizing the players as "encouraged," "restricted" or "outdated."

    The incentive is considered conducive to the country's capacity cuts and supply-side reform.

    http://www.sxcoal.com/news/4550946/info/en
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