Mark Latham Commodity Equity Intelligence Service

Friday 29th April 2016
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Brazil prosecutors charge Rousseff campaign strategist

Brazilian prosecutors charged political strategist Joao Santana, the architect of President Dilma Rousseff's 2010 and 2014 election victories, and 16 others with corruption on Thursday as part of a massive graft investigation.

Santana, who was arrested in February, is accused of receiving bribes from engineering conglomerate Odebrecht in a scheme to divert funds from state-run oil company Petroleo Brasileiro SA, or Petrobras, prosecutor Deltan Dallagnol told a news conference.

Santana also received bribes off contracts involving Petrobras, shipbuilder Sete Brasil and Keppel Fels, the local unit of Singapore oil rig builder Keppel Corporation Ltd , Dallagnol said.

The investigation of Santana, known as "the maker of presidents" in Latin America, has increased calls for Rousseff's ouster even though a current attempt to impeachment her is not related to the graft probe.

The senate is expected to vote to put Rousseff, Brazil's first woman president, on trial for manipulating public accounts next month, which would suspend her from office for up to six months.

Santana, 63, also advised former President Luiz Inacio Lula da Silva and late Venezuelan President Hugo Chavez. A former journalist, Santana is known for producing dramatic, big-budget campaign videos appealing to poor voters.

Santana is one of few prominent political players facing prosecution in Curitiba, where a team of police and prosecutors have aggressively cracked Brazil's largest-ever corruption case.

Some 50 sitting politicians, including the leader of the lower house of Congress, are under investigation in Brasilia as they have immunity from all but Brazil's highest court.

Prosecutors also charged Keppel's former lobbyist in Brazil Zwi Skornicki with corruption, but Dallagnol said they did not have enough evidence to prosecute any Keppel employees.

Representatives for Santana and Keppel Fels did not immediately respond to request for comment. Keppel said in October it might face investigation and no longer does business with Skornicki.

Prosecutors levied yet another charge on Marcelo Odebrecht, the former chief executive of Latin America's largest builder who was already sentenced to 19 years in jail. They emphasized the family-controlled company's institutionalized payment of bribes and sophisticated money laundering.

Odebrecht, which has construction projects all over the world, is seeking a leniency agreement to minimize penalties.

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Xinjiang Q1 outbound electricity transmission up 30.1pct on year

Xinjiang supplied 9.2 TWh electricity to end users outside the northwestern autonomous region in the first quarter this year, climbing 30.1% from a year ago, said the Xinjiang Development and Reform Commission.

The electricity transmitted via the Hami-Zhengzhou ±800 KV DC transmission line, which extends from Hami of eastern Xinjiang to Zhengzhou in Henan province, stood at 8.08 TWh or 87.83% of the total outbound transmission.

During the same period, Xinjiang’s power generators connected to grids generated 53.74 TWh of electricity, rising 13.1% year on year, withoutput in March reaching 18.61 TWh, up 13.5% on year.

Over January-March, thermal power output reached 46.62 TWh or 86.8% of the total, rising 13.3%; hydropower output was 2.6 TWh or 4.8% of the total, up 52.1% from the year prior.

Wind power output declined 2.3% on year to 3.18 TWh during the same period, accounting for 5.9% of the total output. And solar power was 7100 GWh or 1.3% of the total, dropping 15.4% compared with the year-ago level.

Meanwhile, electricity consumption in Xinjiang increased 11.79% on year to 40.79 TWh in the first three months.

During the same period, the residential segment stood at 1.81 TWh, up 10.10% on year.

For the non-residential segment, the primary (primarily agricultural sector), secondary (primarily industrial sector) and tertiary (primarily services sector) industries consumed 1.56 TWh, 34.73 TWh and 2.68 TWh of electricity, up 0.39%, 12.77% and 7.83%, separately.

Four major energy-guzzling industries — steel, non-ferrous, building materials and chemical industries — consumed 23.0 TWh, accounting for 56.39% of the region’s total power consumption and 66.23% of the electricity use in the secondary industries.
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Amazon..and packaging Inc. on Thursday delivered its most profitable quarter ever, topping last year’s record holiday period, thanks to surging sales from its lucrative cloud-computing business.

Despite a persistent reputation as a profit miser, Amazon turned in its fourth straight moneymaking quarter and expanded margins in its core retail business, as well as the Amazon Web Services division that rents computing power to other companies.

Shares in the Seattle online retailer surged more than 12% after hours as the company’s results far outpaced analyst estimates.

Superlatives abound: Its 28% sales growth was the highest since the second quarter of 2012, while its operating margin of 3.7% was its best in more than five years.

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Vedanta Reports Loss as Cairn Writedown Eclipses Metal Rebound

Vedanta Ltd., India’s biggest producer of aluminum and copper, posted a quarterly loss as a writedown by it’s oil-producing unit to account for the slump in crude offset gains from a rebound in metal prices.

Net loss totaled 111.8 billion rupees ($1.68 billion) in the three months ended March 31, compared with 192.3 billion rupees a year earlier, the unit of London-listed Vedanta Resources Plc said in a statement on Thursday. Net income before exceptional charges was 9.55 billion rupees, more than the average 5.63 billion rupees estimated by six analysts. While sales declined 10.7 percent to 158.3 billion rupees in the quarter, it topped analysts’ estimates of 154.8 billion rupees.

The worst oil crash in a generation saw Cairn India Ltd., Vedanta’s crude oil unit, post its biggest quarterly loss in the three months ended March 31. That offset gains from a rebound in metal prices, spurred by speculation that raw-materials consumption in China will turn around after years of concern over worsening economic growth.

Cairn India, which produces about a quarter of the country’s domestic crude output, reported an impairment charge of 116.7 billion rupees in the fourth quarter to write down the value of oil and gas assets and higher government tax on oil. The explorer posted a record loss of 109.5 billion rupees in the quarter, it said on April 22. The average price of Brent crude, the global benchmark, slumped to the lowest in almost 12 years in the period.

Vedanta also wrote down 14.9 billion rupees at its exploratory assets in West Africa because of falling iron ore prices and geopolitical uncertainty, while making a one-time provisioning of 4.6 billion rupees at its Copper Mines of Tasmania and Bellary iron ore assets, the company said.

Vedanta’s total costs fell 3 percent to 140.7 billion rupees in the quarter, while finance costs rose about 17 percent to 15.4 billion rupees, the company said. Net debt stood at 252.9 billion rupees at the end of March, while cash and liquid investments totaled 526.7 billion rupees, it said. The shares slid 4.8 percent to 99.80 rupees by 3:30 p.m. close in Mumbai, the biggest drop in three weeks.

Three-month zinc prices on the London Metal Exchange have jumped 17 percent this year, while copper climbed 4 percent. Aluminum has gained 9.4 percent this year, recovering from a slump of 19 percent in 2015 while an index of six metals on LME gained 6.7 percent. The rebound in metal prices helped Hindustan Zinc Ltd., in which Vedanta owns 64.9 percent stake, report a 7.7 percent increase in net income to 21.5 billion rupees in the fourth quarter, it said on April 21.
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Oil loses commodity trade crown to unlikely challenger: rebar

Crude oil futures, long the king of commodity trading, have lost their dominant position as the world's most traded and valuable derivative in the resources sector to an unlikely challenger: Chinese rebar.

Soaring volumes as well as a price jump since the beginning of the year have seen Shanghai rebar steel futures move past both major crude benchmarks, international Brent futures and U.S. Texas Intermediate (WTI), in April to make it the world's most traded commodity futures.

In an unprecedented jump, the most traded contracts of Shanghai-based steel derivative traded over 129 million lots of 10 tonnes each to date in April, up from roughly 65 million this month last year.

That put their monthly value at $487 billion, based on average April prices, according to Reuters calculations.

Trading in West Texas Intermediate's most active contract, the most liquid crude futures contract, was worth around $479 billion in April.

Although analysts said that the spike in rebar trading might be overblown, some felt the steel sector, including raw material iron ore, had the potential to challenge crude's dominance in the long-term.

"I wouldn't rule out the (steel futures) market being bigger (than crude) in terms of liquidity," said UBS commodities analyst Daniel Morgan in Sydney, adding rebar and iron ore trades were "a deep liquid way to express views on the steel sector and the Chinese economy."

And volumes aren't just rising in China's steel market, but also its core raw material, iron ore.

"Strong iron ore volume growth has... been accompanied by rising open interest and deepening liquidity across the forward curve, as more industry participants continue to adopt greater use of derivatives for price risk management," said Adrian Lunt, head of commodities research at Singapore Exchange (SGX).

In China, the steel trading surge comes as huge amounts of speculative money has poured into its commodities markets since the beginning of the year, and especially this month, triggering fears of a bubble and prompting exchanges and regulators to introduce more restrictive trading rules.

Many analysts, therefore, think that steel's dominance in the commodities world will be short-lived and that globally traded crude will retake the throne soon.

Besides, crude's importance as the fuel for global transport ensures its ongoing lead in physical trading.

"Oil is the most important commodity globally for the physical trade. There's no doubt about that. The physical (steel) trade will never be as large as the physical trade for oil," UBS's Morgan said.
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Anglo American agrees $1.5 bln sale of niobium and phosphates units

Miner Anglo American said on Thursday it had agreed to sell its niobium and phosphates businesses to China Molybdenum for $1.5 billion in cash to reduce its debt level.

The businesses, consisting of mines, plants, processing facilities, chemical complexes and deposits, are located in Brazil.

The deal is subject to certain approvals and is expected to close in the second half of the year.

"The proceeds from this transaction ... will enable us to continue to reduce our net debt towards our targeted level of less than $10 billion at the end of 2016," Anglo's Chief Executive Mark Cutifani said in a statement.
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China's Dalian Commodity Exchange again doubles coking coal, coke futures transaction fees

China's Dalian Commodity Exchange raised transaction fees on coke and coking coal futures contracts, it said on Wednesday, the fourth increase in a week.

The exchange doubled transaction fees to 0.072 percent on the futures contracts, effective from April 28, according to a statement on its website.

The exchange initially raised fees from 0.003 percent to 0.006 percent on April 20, effective from April 22.

Chinese commodities exchanges have stepped up efforts to curb surging prices that some say have been driven by speculators, raising fears of another derivatives bubble after last year's stock market collapse.
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Stronger China March industrial profits add to economic recovery hopes

Profits earned by Chinese industrial companies rose 11.1 percent in March from a year earlier, adding to signs that the country's economic slowdown may be bottoming out.

Industrial profits rose to 561.24 billion yuan ($86.50 billion) in March, the National Bureau of Statistics(NBS) said on its website on Wednesday.

That brought total first-quarter profits to 1.34 trillion yuan, up 7.4 percent from a year earlier and improving from a 4.8 percent rise in the January-February period.

The data covers large enterprises with annual revenue of more than 20 million yuan from their main operations.

The first-quarter gains were largely led by chemical companies and agricultural and foodprocessing companies, which posted 20.8 percent and 12.1 percent growth compared with the same period a year earlier.

But heavy industry and mining continued to struggle, with ferrous metal smelting and rolling firms seeing profits fall 15.8 percent in the quarter and profits for coal miners slumping 92.6 percent. Oil and gas producers posted a loss.

Debt at Chinese industrial companies increased 5.2 percent on a yearly basis to 55.22 trillion yuan as of end-March, the bureau said.

China's economy grew 6.7 percent in the first quarter this year from a year earlier, its slowest pace in seven years, but beter-than-expected consumer, investment and factory data have fueled hopes that the economy's prolonged downturn may be easing.

Still, analysts are worried that the improvement may be largely driven by companies taking on more debt, raising questions about whether the seeming pick-up in the broader economy can be sustained.

Adding to that caution, the statistics bureau warned that profits from investment and non-core activities "increased dramatically", and that the rise in profits was not seen across the industrial spectrum.

The bureau said that 30.5 percent of industrial profits in March stemmed from investments and non-core activities.

"The pickup in March industrial profits was partly due to an improving economy, but it was not a balanced and stable recovery," NBS official He Ping said in a statement accompanying the data.
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South Africa's Eskom to spend $23.5 billion on new plants

South Africa's Eskom to spend $23.5 billion on new plants

South African power utility Eskom is not under pressure to tap international markets to help fund its 340 billion rand ($23.5 billion) five-year expansion plan, its chief executive said on Tuesday.

State-owned Eskom is building new plants and transmission lines to augment a power grid that nearly collapsed in 2008 and was forced to implement controlled blackouts, or load shedding, early last year that dented economic growth.

"Our funding for last year is complete and most of the funding for this year is done," Eskom CEO Brian Molefe told reporters. "We never issue less than benchmark which is anything above $500 million, so it can be $750 million or $1 billion."

He said the timing would depend on market conditions, adding that the successful pricing of a 10-year dollar bond by the National Treasury in April was a good sign.

Eskom is building three new power plants and expects to add 5,620 megawatts (MW) to the network by 2018.

Minister Lynne Brown, whose department oversees the power utility, told parliament that power supply had stabilised, adding that "for the longest of time South Africans have had their lights on and load shedding has become a distant memory".

Brown said the rest of Africa was a key growth area, with Eskom eyeing new business opportunities this financial year in the Democratic Republic of Congo, Mozambique and Uganda.

Brown also said Eskom, which provides virtually all the electricity to Africa's most industrialised economy from coal-powered plants, has been paying above inflation prices to secure coal, despite being the main buyer of the commodity.

"Eskom coal costs have been growing above inflation levels," she said, adding that she hoped the cost could come down.

Eskom gets 51 percent of its coal from global miner and commodity trader Glencore, Exxaro, South32 and Anglo American.

To help reduce the cost of coal for Eskom, CEO Molefe said the utility was busy renegotiating its long-term coal contracts.

Eskom was also investigating whether it could lay claim to some of the mine assets of its coal suppliers, given the utility had helped to pay for the operations of their mines as part of historical contracts, he said.
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Freeport McMoran reports bigger quarterly loss

- Net loss attributable to common stock totaled $4.2 billion, $3.35 per share, for first-quarter 2016. After adjusting for net charges totaling $4.0 billion, $3.19 per share, first-quarter 2016 adjusted net loss attributable to common stock totalled $197 million, $0.16 per share.
- Consolidated sales totalled 1.1 billion pounds of copper, 201 thousand ounces of gold, 17 million pounds of molybdenum and 12.1 million barrels of oil equivalents (MMBOE) for first-quarter 2016, compared with 960 million pounds of copper, 263 thousand ounces of gold, 23 million pounds of molybdenum and 12.5 MMBOE for first-quarter 2015.
- The Cerro Verde expansion project reached full production capacity in first-quarter 2016, and Cerro Verde is on track to produce over 1 billion pounds of copper for the year 2016.
- Consolidated sales for the year 2016 (adjusted for the anticipated closing of the Morenci transaction in second-quarter 2016) are expected to approximate 5.0 billion pounds of copper, 1.85 million ounces of gold, 71 million pounds of molybdenum and 54.4 MMBOE, including 1.15 billion pounds of copper, 195 thousand ounces of gold, 19 million pounds of molybdenum and 13.5 MMBOE for second-quarter 2016.
- Average realized prices were $2.17 per pound for copper, $1,227 per ounce for gold and $29.06 per barrel for oil for first-quarter 2016.
- Consolidated unit net cash costs averaged $1.38 per pound of copper for mining operations and $15.85 per barrel of oil equivalents (BOE) for oil and gas operations for first-quarter 2016. Consolidated unit net cash costs for the year 2016 are expected to average $1.05 per pound of copper for mining operations and $15 per BOE for oil and gas operations.
- Operating cash flows totalled $740 million (including $188 million in working capital sources and changes in other tax payments) for first-quarter 2016. Based on current sales volume and cost estimates and assuming average prices of $2.25 per pound for copper, $1,250 per ounce for gold, $5 per pound for molybdenum and $45 per barrel for Brent crude oil for the remainder of 2016, operating cash flows for the year 2016 are expected to approximate $4.8 billion (including $0.8 billion in working capital sources and changes in other tax payments).
- Capital expenditures totalled $982 million for first-quarter 2016, consisting of $459 million for mining operations (including $350 million for major projects) and $523 million for oil and gas operations. Capital expenditures are expected to approximate $3.3 billion for the year 2016, consisting of $1.8 billion for mining operations (including $1.4 billion for major projects) and $1.5 billion for oil and gas operations.
- At March 31, 2016, consolidated debt totalled $20.8 billion and consolidated cash totalled $331 million. At March 31, 2016, FCX had $3.0 billion available under its $3.5 billion credit facility.
- During first-quarter 2016, FCX entered into agreements to sell an additional 13 percent ownership in Morenci and to sell an interest in the Timok exploration project in Serbia for aggregate consideration of $1.3 billion. In addition, in April 2016, FCX entered into an agreement to sell certain oil and gas royalty interests for $0.1 billion. These transactions are expected to close in second-quarter 2016.
- FCX continues to advance discussions for the sale of certain interests in its mining and oil and gas assets to accelerate its debt reduction initiatives. FCX expects to achieve additional progress during second-quarter 2016.

Freeport-McMoRan Inc said it would cut about a quarter of the workforce in its oil and gas business after failing to sell the unit.

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Teck Resources reports surprise profit helped by cost cuts

Canadian miner Teck Resources Ltd reported a surprise quarterly profit as cost-cutting measures and a weak Canadian dollar helped cushion the impact of lower coal and copper prices.

The global commodity rout has pushed coal and copper prices to multi-year lows, forcing miners to sell assets, lay off workers, and cut dividends and capital spending to preserve cash and reduce debt.

However, a strong U.S. dollar has helped Teck, which sells commodities in the U.S. currency but incurs expenses in local currencies, particularly the Canadian dollar.

Teck, the largest producer of steel-making coal in North America, said on Tuesday it expected coal sales to exceed 6.5 million tonnes in the current quarter.

The company said the construction of the Fort Hills oil sands project in northern Alberta is more than 55 percent complete and was on track for first oil production by late 2017.

The company had earmarked C$2.9 billion for the project, of which about C$1 billion remains to be spent as of April 25, the company said.

A prolonged slump in oil prices has resulted in a number of oil projects being deferred, but Fort Hills is one of the projects that is expected to be completed because of the investments already made.

Teck owns a 20 percent stake in Fort Hills, majority owned by Suncor Energy Inc.

Net profit attributable to the company rose to C$94 million ($74 million), or 16 Canadian cents per share, for the first quarter ended March 31, compared with C$68 million, or 12 Canadian cents per share, a year earlier.

Excluding gains from asset sales and other items, the company earned 3 Canadian cents per share, compared with analysts' average estimate of a loss of 3 Canadian cents.

The Vancouver-based company's revenue fell by 16 pct to C$1.70 billion.

The company's total debt was $6.97 billion, as of March 31, slightly higher than $6.96 billion at the end of last year.
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The 'Hail Mary' Throw,

Here is a question it would have seemed incredible to pose as recently as five years ago: are the liberal elites on the wrong side of history? Are they about to succumb to that favourite feature of university examination papers “a historical watershed”? Consider the accumulating evidence.

Last weekend, in the first round of the Austrian presidential election, Norbert Hofer, the candidate of the Freedom Party (FPO), led the poll with 36.4 per cent. The candidates of the governing coalition parties were in fourth and fifth place, each with a humiliating 11 per cent of the vote, and are eliminated from the second round where Hofer will face a run-off against Green candidate Alexander Van der Bellen.

The Austrian and EU establishment is now investing all its hopes in the supporters of the other candidates uniting to stop Hofer in the final round on 22 May. Since Van der Bellen’s platform is an open-doors policy for immigrants, while Hofer’s victory is attributed to the influx of 90,000 migrants into Austria in the past year, his appeal to voters may be less seductive than the establishment hopes.

This is just the latest shock for the European elites. Earlier this month the Dutch electorate, in a referendum, voted down a proposed treaty between the EU and Ukraine. That, of course, was the “wrong” result. For fear of serial embarrassment by the untutored public, the Dutch minister of the interior has already said he will “look more closely” at the referendum law. A Dutch minister with his finger in the dyke of public opinion is an accurate metaphor for the beleaguered condition of the political establishment. Geert Wilders’ PVV party is leading the polls in the Netherlands.

Marine Le Pen similarly heads the polls for next year’s presidential election in France. The insurgency is now ubiquitous. In Germany last month voters delivered a rebuff to Angela Merkel, provoked by her immigration policy, with Alternative für Deutschland (AfD) – a party that did not even exist four years ago – taking 24.4 per cent of the vote in Saxony-Anhalt and doing well everywhere else that was contested. In Poland and Hungary the victory over the discredited establishment has already been won, with the electorates voting into power, with overall majorities, governments that reject the Brussels agenda and instead reflect the national will.

In Britain, the mere fact the Leave campaign in the EU referendum seriously threatens Remain is a seismic change. The response from the threatened elites has been to unite against the perceived danger of the popular will prevailing. In the United States, the two surviving establishment (Ted Cruz now rates that label) candidates in the presidential race have formed an alliance to stop Donald Trump. How insulting is it to the voters of Oregon and New Mexico that Ted Cruz will cut campaigning for their support, while John Kasich will reciprocally snub Indiana?

Donald Trump has 845 delegates to Ted Cruz’s 559. Today is another Super Tuesday, with five states voting and 172 delegates available. Trump has poll leads ranging from 26 to 38 per cent across all five states. Even if, eventually, he rolls into the GOP convention 20 delegates short, if backroom deals were to cheat him of the nomination, even the National Guard could not contain the resulting explosion.


What is helicopter money and how does it work?

As I learned when I spoke about it in 2002, the imagery of “helicopter money” is off-putting to many people. But using unrealistic examples is often a useful way at getting at the essence of an issue. [3] The fact that no responsible government would ever literally drop money from the sky should not prevent us from exploring the logic of Friedman’s thought experiment, which was designed to show—in admittedly extreme terms—why governments should never have to give in to deflation.

In more prosaic and realistic terms, a “helicopter drop” of money is an expansionary fiscal policy—an increase in public spending or a tax cut—financed by a permanent increase in the money stock. [4] To get away from the fanciful imagery, for the rest of this post I will call such a policy a Money-Financed Fiscal Program, or MFFP.

To illustrate, imagine that the U.S. economy is operating well below potential and with below-target inflation, and monetary policy alone appears inadequate to address the problem. [5]Assume that, in response, Congress approves a $100 billion one-time fiscal program, which consists of a $50 billion increase in public works spending and a $50 billion one-time tax rebate. In the first instance, this program raises the federal budget deficit by $100 billion. However, unlike standard fiscal programs, the increase in the deficit is not paid for by issuance of new government debt to the public. Instead, the Fed credits the Treasury with $100 billion in the Treasury’s “checking account” at the central bank, and those funds are used to pay for the new spending and the tax rebate. Alternatively and equivalently, the Treasury could issue $100 billion in debt, which the Fed agrees to purchase and hold indefinitely, rebating any interest received to the Treasury. In either case, the Fed must pledge that it will not reverse the effects of the MMFP on the money supply (but see below).

From a theoretical perspective, the appealing aspect of an MFFP is that it should influence the economy through a number of channels, making it extremely likely to be effective—even if existing government debt is already high and/or interest rates are zero or negative. In our example the channels would include:

  1. the direct effects of the public works spending on GDP, jobs, and income; 
  2. the increase in household income from the rebate, which should induce greater consumer spending;
  3. a temporary increase in expected inflation, the result of the increase in the money supply. Assuming that nominal interest rates are pinned near zero, higher expected inflation implies lower real interest rates, which in turn should incentivize capital investments and other spending; and
  4. the fact that, unlike debt-financed fiscal programs, a money-financed program does not increase future tax burdens. [6]
Standard (debt-financed) fiscal programs also work through channels #1 and #2 above. However, when a spending increase or tax cut is paid for by debt issuance, as in the standard case, future debt service costs and thus future tax burdens rise. To the extent that households today anticipate that increase in taxes—or if they simply become more cautious when they hear that the national debt has increased—they will spend less today, offsetting some of the program’s expansionary effect.[7] In contrast, a fiscal expansion financed by money creation does not increase the government debt or households’ future tax payments and so should provide a greater impetus to household spending, all else equal (channel #4 above). Moreover, the increase in the money supply associated with the MFFP should lead to higher expected inflation (channel #3)—a desirable outcome, in this context—than would be the case with debt-financed fiscal policies.

Could the central bank implement an MFFP on its own? Some have suggested an alternative approach in which the central bank prints money and gives it away—so-called “people’s QE.” From a purely economic perspective, people’s QE would indeed be equivalent to a money-financed tax cut (Friedman’s original helicopter drop, although perhaps more targeted). The problem with this policy, which would certainly be illegal in most or all jurisdictions, is not its economic logic but its political legitimacy: The distribution of what are effectively tax rebates should be subject to legislative approval, not determined unilaterally by the central bank. I’ll return to the issue of MFFP governance in a moment.


"It's the economy, stupid"
~Bill Clinton

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Commodity Intelligence-Quarterly.

Possibly one of the most difficult quarterlies we've written!

We're taking appointments now for presentations please. 

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Commodity Intelligence q2 2016 (2).pdf
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Malaysia's 1MDB says in default after missed bond payment

! Malaysia Development Bhd (1MDB) said on Tuesday it did not pay a $50.3 million coupon on a $1.75 billion bond following a stand-off with Abu Dhabi sovereign fund IPIC, triggering cross defaults on some of its other bonds.

The troubled Malaysian state fund, which is at the centre of a multi-billion-dollar graft scandal, said in a statement it would meet all its other liabilities.

The missed payment increases the probability the government will have to assume 1MDB's obligations, said Christian de Guzman, a senior analyst at Moody's Investors Service.

"It brings us one step closer to crystallisation of contingent liabilities on the government's balance sheet," he told Reuters.

S&P Associate Director YeeFarn Phua said the default may trigger an "acceleration event on the other bonds of 1MDB", meaning lenders may demand an early bond or loan repayment.

The cross default, the continuing stand-off with IPIC and a widening investigation across at least six countries into possible corruption and money-laundering connected to the fund are starting to affect the markets.

The ringgit fell 1 percent to 3.94 to the dollar by mid-afternoon on Tuesday, mostly on the default news, traders said. Malaysia's Sovereign Credit Default Swap -- a type of insurance that protects against a country defaulting or restructuring its debt -- rose 4.5 basis points to 166/171 bps.

The Malaysian fund said the missed interest payment caused a cross-default on its 5 billion ringgit ($1.28 billion) sukuk (Islamic bond) due in 2039 and a 2.4 billion ringgit sukuk due between 2021 and 2024.

1MDB President Arul Kanda Kandasamy said in an interview with Reuters it was keeping its options open on another coupon payment coming up on May 11 "and will deal with the payment closer to time".

1MDB is locked in a dispute over its obligations to International Petroleum Investment Co (IPIC) under a debt restructuring agreement reached last June.

Under that deal, IPIC agreed to loan $1 billion to 1MDB and assume payments on $3.5 billion of 1MDB debt. It also forgave an undisclosed amount of debt that 1MDB owed to IPIC, in exchange for assets which have not been named.

IPIC said 1MDB was in default of that agreement, after the Malaysian fund failed to repay the loan, now at $1.1 billion with interest.

IPIC said on Monday it would make the interest payment on a $1.75 billion bond that was due on Monday but only after 1MDB defaulted. IPIC guaranteed the bond.

Leong Lin Jing, an investment manager at Aberdeen Asset Management Asia Ltd, said he believes the Malaysian government will "try to contain the situation as much as they can to avoid any doubts to Malaysian government bonds".

He said "investors are quite sanguine because everyone has priced in how negative these headlines are".
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Key Elements of Saudi Arabia's Blueprint for Life Post Oil

Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman unveiled his “Saudi Vision 2030” to reduce the kingdom’s reliance on oil.

The blueprint, approved by King Salman, includes plans to sell less than 5 percent of Saudi Arabian Oil Co., or Aramco, the creation of the world’s largest sovereign wealth fund and raising non-oil revenue.

Here is a guide to the main elements of the plan, announced on Monday in Riyadh and during Prince Mohammed’s interview with Saudi-owned Arabiya television. The prince had disclosed some of the proposals in two interviews with Bloomberg News.

Aramco IPO:

* While Aramco’s valuation hasn’t been completed, the company is expected to be worth more than $2 trillion, the prince said, making the planned initial public offering the world’s biggest.

* “Aramco’s IPO would have several benefits, the most important of which is transparency,” he said. “Aramco would have to announce its earnings every quarter. It will be observed by all Saudi banks, all analysts and Saudi thinkers as well as all international banks and think tanks. You’ll have great supervision overnight.”

Public Investment Fund:

* Saudi Arabia will create the world’s largest sovereign wealth fund to hold state assets, including Aramco and real-estate, said the prince. Land will be developed and companies owning these projects listed. The fund will be headquartered in King Abdullah Financial District.

The $2 Trillion Project to Get Saudi Arabia’s Economy Off Oil
Saudi $10 Billion Financial District Is Missing One Thing: Banks
Biggest Ever Saudi Overhaul Targets $100 Billion of Revenue

Military Industry:

* Saudi Arabia plans to set up a holding company by the end of next year for defense industries as it seeks to meet more of its military needs domestically. The kingdom will also restructure several contracts and tackle wasteful spending in the defense industry.

* “Our aim is to localize over 50 percent of military equipment spending. We have already begun developing less complex industries such as those providing spare parts, armored vehicles and basic ammunition,” according to the vision’s document. “We will expand this initiative to higher value and more complex equipment such as military aircraft.”

* “We have a problem with military spending,” the prince told Al Arabiya. “When I enter a Saudi military base, the floor is tiled with marble, the walls are decorated and the finishing is five stars. I enter a base in the U.S., you can see the pipes in the ceiling, the floor is bare, no marble and no carpets. It’s made of cement. Practical.”

Non-oil Economy

* The kingdom aims to generate 35 percent of the economy from small and medium enterprises, up from 20 percent, according to the plan. It’s also plans to raise non-oil revenue to 1 trillion riyals ($266.6 billion) from 163 billion riyals.

* The kingdom also wants to reduce unemployment among Saudis to 7 percent from 11.6 percent, according to the vision document.

* Plan includes allowing expatriates to own property in selected areas, and simplifying visa processes, according to the official Saudi Press Agency.

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China state-owned nonferrous metals firm misses payment on another bond

Guangxi Nonferrous Metals Group Co Ltd, the unlisted metals producer which defaulted on a bond in February, has missed a payment on a 500 million yuan ($77 million) private placement note which matured over the weekend.

The firm, which is owned by the Guangxi provincial government, posted a notice informing investors of the missed payment to one of China's main bond clearinghouses on Monday.

The note was a three-year issue with a 5.56 percent coupon rated BB, maturing on April 23.

The metals producer cited in the notice "consecutive losses and the fact that it has already entered bankruptcy reorganisation procedures" as reasons for the missed payment.

Steel and nonferrous metals smelters have been among the hardest hit of China's industrial firms following an extended real estate downturn, which bottomed out in the second half of 2015 bolstered by government support measures.

Several smelters have encountered repayment difficulties over the past 18 months, and analysts expect more defaults ahead as economic growth cools and amid continuing industry consolidation.

Chinese bond yields, particularly low-rated issues, have risen sharply over the past month as investors priced in weakening corporate creditworthiness and a more cautious central bank.
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Is China Stimulus now lifting Asia too?

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Three Gorges Dam discharges more water, braces for flood

Inflow from the upper streams of the Yangtze River has hit an eight-year high, forcing the Three Gorges Dam to discharge more water and brace for floods.

Inflow from the upper streams has been growing since April 16 and shows no sign of relenting, according to a statement from the Three Gorges Corporation.

The dam started to increase discharging water downstream late on Friday, it said.

The water level currently stands at 163.5 meters. The Three Gorges Corporation aims to bring it to 145 meters, a safe level to cope with floods.

Flood season has arrived early around the Yangtze this year, due to ample rainfall in the tributaries of the river.

The Three Gorges project in Hubei Province is a multi-functional water control system consisting of a dam stretching 2,308 meters long and 185 meters high, a five-tier ship lock and 26 hydropower turbo-generators.
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Bitcoin Snaps: Surges To Fresh 2016 Highs On Sudden Burst Of Buying

Just three days ago, on April 21, when looking at the technical picture behind the recent bitcoin price action (having covered theextremely favorable fundamentals last September when it was trading at half its current price), we asked if "Bitcoin is about to soar." We were focusing on the bullish pennant formation which suggested a breakout to the upside was imminent.

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Moments ago, we got the answer when "soar" is precisely what bitcoin did when following a burst of high volume buying, the digital currency spiked higher by over 4%, to a price of $470...

... hitting fresh 2016 highs.

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After the Chinese started buying gold and silver last weekfollowing the launch of the Shanghai gold fix (as reported here), is the "wholesale bid" finally moving into the best way of avoiding capital controls available to several million Chinese?

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Freeport Said Offering Packages of Assets to Cut $20 Billion Debt

Freeport-McMoRan Inc. is trying to sell stakes in packages of mining and energy assets as the biggest publicly traded copper miner steps up efforts to reduce debt, three people with knowledge of the matter said.

The Phoenix-based company has held talks with potential buyers of a minority interest in a grouping of mining assets in Africa and the Americas, two of the people said, asking not to be identified because talks are private and at an early stage. Those mines were acquired when Freeport bought Phelps Dodge Corp. in 2007.

Oil and gas assets purchased through a $9 billion debt-fueled deal three years ago have also been included in other packages being floated by the company, the people said. Freeport also is looking at selling 10 percent to 20 percent of its North and South American operations, which includes the Morenci mine in Arizona, as well as Cerro Verde in Peru, one of the people said. In February, Freeport sold a $1 billion stake in Morenci to Sumitomo Metal Mining Co.

The value of the assets being offered is about $2 billion to $3 billion, the people said.

Morenci is one of five Freeport mining assets considered core to operations, as is Cerro Verde. The others are Tenke Fungurume in the Democratic Republic of Congo, El Abra in Chile and Grasberg in Indonesia.

In response to questions on its asset-sale plans, Freeport said it has “nothing to discuss at this time in advance of our earnings call on Tuesday.”

By selling minority stakes in packages of assets, Freeport would be able to share costs and raise cash to pay down debt while still retaining control of prized low-cost copper mines. In January, Chief Executive Officer Richard Adkerson made it clear that any operation, in full or in part, could be sold as the company continues to struggle under a $20 billion debt load after commodity prices collapsed.

Freeport spent more than a year looking at options for its stand-alone oil and gas business before opting to fold it back into the company and downsize management to save costs.

“Frankly, there’s way too many non-core assets for sale across the energy and mining space to expect companies in general to get good values,” Sussman said.
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Britain says can't rule out sending troops to Libya: newspaper

British Foreign Secretary Philip Hammond said on Sunday that he could not rule out sending troops to Libya if requested to do so by the Libyan government, but that any deployment would need to be approved by parliament.

Western powers are backing a new Libyan unity government, hoping it will seek foreign support to confront Islamic State militants, deal with migrant flows from Libya to Europe and restore oil production to shore up Libya's economy.

"It wouldn't make sense to rule anything out because you never know how things are going to evolve," Hammond told the Sunday Telegraph newspaper.

"But if there were ever any question of a British combat role in any form - ground, sea or air - that would go to the House of Commons," he said referring to Britain's elected parliament.

Last week Hammond told parliament there were no plans to send combat troops to Libya, responding to media reports that British special forces were already operating in the country.

Libya has been in chaos since Western-backed rebels overthrew President Muammar Gaddafi in 2011.

Hammond said he did not think it was likely that Libya would invite foreign military intervention, but highlighted the risk that an Islamic State stronghold in the country could pose to mainland Europe.

"If Daesh (Islamic State) became established in Libya and sought to use that established base to infiltrate terrorists into Europe, that would be a threat to all of us," he said.
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GM to temporarily idle four North American auto plants

General Motors said on Friday it will close four North American plants, which primarily make cars rather than SUVs or trucks, for two weeks because of a parts shortage following the earthquake this month in Japan.

GM looked at parts availability and its North American plant operations and decided that these four plants would close to ensure adequate parts supply, a company spokeswoman said.

GM said the steps are being taken proactively, as it "continues to assess the potential impact on its supply chain" of the earthquake, which has curtailed some auto supplier plants in Japan.

Operations at Lordstown, Ohio; Fairfax, Kansas; Spring Hill, Tennessee; and the Flex Oshawa plant in Ontario will be shut for two weeks beginning on April 25, GM said in a statement.

GM will make up the production lost during the shutdowns by the end of this year, the company said.

It said the "temporary adjustment" was not expected to affect the company's full-year production plan, or its second-quarter or full-year financial results for North America.

In the past few years and especially as gasoline prices have remained low, GM and other automakers have experienced greater consumer demand for pickup trucks and SUVs than sedans and hatchbacks.

The Lordstown plant makes the Chevrolet Cruze compact car; Spring Hill makes the Cadillac XT5 midsize crossover SUV; Fairfax makes the midsize Chevrolet Malibu and the fullsize Buick LaCrosse sedans; and Oshawa Flex makes the fullsize Chevrolet Impala and the midsize Buick Regal sedans as well as the fullsize Cadillac XTS sedan.
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Venezuela runs up $1 bln debt for late shipping containers

V enezuelan state agencies have run up close to $1 billion in debts with shipping firms due to delays in returning containers, potentially boosting the cost of importing staple goods as the country struggles with product shortages and an economic crisis.

The agencies have held containers for months or simply never returned them, at times leaving the truck-sized steel boxes for years in oil industry facilities or on provincial farms even though this costs $100 per day per container, according to industry sources.

The debts have piled up over the last six years, coinciding with a steady rise in the role of state agencies in importing goods to Venezuela, particularly food. The country is served by industry giants such as Maersk of Denmark and Hamburg Sud of Germany.

The container debts put shipping lines on a long list of industries ranging from international airlines to telecommunications giants that have complained of being unable to collect on billions of dollars in unpaid Venezuelan bills.

Like these groups, it is unclear if shipping firms will ever be able to recover the debt. But it adds to the risks for shipping companies serving the Venezuelan market. Freight rates to Venezuela have risen to become among the highest in region, and in some cases are three times higher than other South American destinations, according to documents seen by Reuters.

That higher cost creates an additional difficulty for President Nicolas Maduro's government, which is struggling with triple-digit inflation and chronic product shortages reminiscent of the former Soviet Union.

Government agencies including the Food Ministry and state oil company PDVSA, which is involved in food imports, did not respond to requests for comment.

Venezuela's shipping industry association last year estimated the debt at $817 million for containers that were not returned or returned late. The figure has now topped $1 billion, according to an industry source with first-hand knowledge of situation who asked not to be identified.

In the country's main port city of Puerto Cabello, containers worth $20,000 to $40,000 each are piled up in empty lots and along unpaved roads.

"Puerto Cabello is turning into one big warehouse," said opposition deputy Deyalitza Aray, who has investigated what she calls the growing disorder in public imports.
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Rio moves to repurchase notes

Mining major Rio Tinto on Friday launched cash tender offers for some $1.5-billion of its 2017 and 2018 notes. 

The miner told shareholders that it was using its strong liquidity position to reduce gross debt through the early repayment of some near-marturing debt. 

Subject to a number of conditions, Rio would spend capital to repurchase some $1.75-billion of notes due in 2017, and with any cash remaining, would move to purchase some of the $3-billion in notes due in 2018. The tender period was expected to close in May.
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Reliance Industries posts biggest profit in eight years

India's Reliance Industries Ltd reported a 15.9 percent rise in fourth-quarter profits on Friday due to strong margins in its oil refining and petrochemicals businesses which account for up to 95 percent of revenues and profits.

Reliance, controlled by India's richest man, Mukesh Ambani, posted a consolidated net profit of 73.98 billion rupees ($1.11 billion) for the Jan-March period - it's highest quarterly profit since December 2007.

That compares with the 63.81 billion rupees the company reported it earned in the same period last year and the average of analysts' forecasts of about 69.48 billion rupees, according to Thomson Reuters data.

The gross refining margin on each barrel of crude processed was $10.80 a barrel, up from $10.1 per barrel a year ago, Reliance said.

The company's flagship refining operations, with a refinery in the western state of Gujarat that processes 1.2 million barrels of crude oil a day, reported a 30.4 percent jump in operating profit for the quarter to 63.94 billion rupees.

The petrochemicals business saw a 35.4 percent jump in operating profit to 27.13 billion rupees.
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Are we in a recession?

Are we in a recession right now (April 2016)?

Marco Annunziata Marco Annunziata, Chief Economist, GE; PhD Economics from Princeton 6.4k Views • Upvoted by Jake Meyer, Econ PhD. Candidate: International Money and Finance/Global Political Economy

Are you in Brazil, Argentina, Russia or Greece? If so, then yes, you are in a recession. If you live in pretty much any other country, you are not. The US is growing at about 2 ½ %, Europe at about 1 ½ %.  These are not stellar rates, but they are very far from a recession.

The fact that many of you are asking though, confirms one of my biggest worries: there is an incurable pessimism out there, and many of my colleagues in the economics profession have their share of responsibility. Consider this: over the last five years we have heard over and over that we are still in a recession, or on the brink of a new crisis. And yet, over this period, global growth has averaged 3.8% per year. The average over 1980-2006 was…3.5%. That’s right. We have been doing better than the historical average, all the while telling ourselves we were in stagnation, or a “new mediocre” as the IMF likes to call it.

I see a few explanations for this. Advanced economies are a bit weaker than they used to be, and most of the economic punditry reflects their point of view. And we still think of the 2003-07 record-growth period as “normal” – instead of admitting that it was a bubble.

We are not in a recession. Not in the world, not in the US. In the US, there are now about 4.5 million more people employed than at the peak before the crisis.

All this pessimism troubles me for two reasons. The first is that it holds back consumption and investment – so it holds back growth. The second is that by thinking that the bubble years were normal, we are not focusing on the right things. All the debate is on quantitative easing and negative interest rates as ways to create growth. But you can’t quantitatively ease your way to sustainable growth. You have to invest in infrastructure and education, create a strong business environment, innovate. It’s hard work. But it’s the only way. That is what we should be debating.

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Two narratives on Brazil

There are vast parts of our country that are poor and without security or education. The state needs to reach these people. Brazil’s history has shown that the free market simply won’t do it,” said Luiz Torelly, a bureaucrat at the state-run Institute for National and Artistic Patrimony in Brasília who defends the size of Brazil’s state.

At the same time, there are few voices in Brazilian public life to challenge the ideas of people like Mr. Torelly. There is no major political party advocating limited government. Politicians who do are likely to be derided by nationalists as sellouts to the free-market U.S.

Unlike other nations in the New World, Brazil never had a revolution that set it in opposition to an intrusive state. The Portuguese monarchy brought an entire ship filled with royal files and documents when it relocated to Rio. Successive governments have added new layers of regulation to a state that began as a royal court. In 1979, military rulers tried to pare back the bureaucracy by creating a cabinet post, the Minister of De-bureaucratization.

The result today is a bureaucracy that spends 41% of the country’s gross domestic product—about double the rate of the U.S. The return for all that tax money is questionable: poorly built roads, ports and bridges, and second-rate education and health services. As one travelers’ cliché goes, Brazil taxes like Scandinavia but has Africa-level infrastructure. In 2013, huge and sometimes violent protests erupted across the country, with protesters upset that the country was spending billions on World Cup stadiums while patients died waiting on the floors of hospital hallways.


Indeed, most of today’s largest media outlets – that appear respectable to outsiders – supported the 1964 military coup that ushered in two decades of rightwing dictatorship and further enriched the nation’s oligarchs. This key historical event still casts a shadow over the country’s identity and politics. Those corporations – led by the multiple media arms of the Globo organisation –heralded that coup as a noble blow against a corrupt, democratically elected liberal government. Sound familiar?

Mute Current Time0:00 / Duration Time1:46 Loaded: 0% Progress: 0%
Brazilian president Dilma Rousseff faces impeachment – video explainer

For more than a year, those same media outlets have peddled a self-serving narrative: an angry citizenry, driven by fury over government corruption, rising against and demanding the overthrow of Brazil’s first female president, Dilma Rousseff, and her Workers’ party (PT). The world saw endless images of huge crowds of protesters in the streets, always an inspiring sight.

But what most outside Brazil did not see was that the country’s plutocratic media had spent months inciting those protests (while pretending merely to “cover” them). The protesters were not remotely representative of Brazil’s population. They were, instead, disproportionately white and wealthy: the very same people who have opposed the PT and its anti-poverty programmes for two decades.

Slowly, the outside world has begun to see past the pleasing, two-dimensional caricature manufactured by its domestic press, and to recognise who will be empowered once Rousseff is removed. It has now become clear that corruption is not the cause of the effort to oust Brazil’s twice-elected president; rather, corruption is merely the pretext.

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Algos vs Humans

Lexicon packages the news in a way that its robo-clients can understand. It scans every Dow Jones story in real time, looking for textual clues that might indicate how investors should feel about a stock. It then sends that information in machine-readable form to its algorithmic subscribers, which can parse it further, using the resulting data to inform their own investing decisions. Lexicon has helped automate the process of reading the news, drawing insight from it, and using that information to buy or sell a stock. The machines aren’t there just to crunch numbers anymore; they’re now making the decisions.

Henri Waelbroeck seems to fit the popular image of the scientist transplanted into the world of high finance and hedge fund trading, the sort of stereotype found in books like "The Fear Index" by Robert Harris.

Waelbroeck, director of research at machine learning-enhanced trade execution system Portware, was previously a professor at the Institute of Nuclear Sciences at the National University of Mexico (UNAM). His areas of expertise include: complex systems science, quantum gravity theories, genetic algorithms, artificial neural networks, chaos theory.

The impression Waelbroeck conveys is one of precision. He explains that algorithms have grown in complexity since being introduced to the world of trading around 2000. This has made it increasingly difficult for traders to understand each vendor's full algorithm platform and how to optimally select an algorithm for each particular trade that comes in from a portfolio manager. Portware leverages artificial intelligence to help traders use execution algorithms and in some cases provides automated execution solutions that select the optimal control parameters on algorithms.

"Our work really has focused on two objectives: the first is to find an optimal execution schedule for each trade, and the second is to interact with the order flow more efficiently to avoid the harmful effects of high frequency trading (HFT)," Waelbroeck told IBTimes.

A practical implementation approach involves modeling, building, and testing commodities trading strategies using data gathered from datafeeds and databases. An effective workflow enables you to:

  • Set up and calibrate custom commodities derivatives pricing applications
  • Build, test, and optimize custom trading strategies
  • Apply machine learning techniques to enhance strategies
  • CVaR Portfolio Optimization 5:33
  • Manage an automated commodities trading order workflow

For more information, see MATLAB® and toolboxes for financestatisticsoptimization, and trading.

Examples and How To

Software Reference

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Gov'ts vs People

The number of people accessing Facebook via the “dark web” now stands at 1 million per month, the tech giant announced today (April 22). Facebook has maintained an “Onion” site that resides on the Tor network, which forms part of the so-called dark web, for about a year and a half. This is the first time the company has revealed details about its presence in this shadowy corner of the internet.

Tor preserves users’ privacy by disguising their identity and location by bouncing web traffic randomly through a far-flung network of servers. (Tor is short for The Onion Router, since it adds layers of anonymity to traffic that are tricky to peel away.) The Tor code is open-source and its servers are operated by volunteers.

The number of people connecting to Facebook over Tor is growing at a steady clip. Facebook said that in June last year some 525,000 people accessed its dark-web site. Traffic has grown in a “roughly linear” pattern sine then, according to Facebook, meaning about 50,000 new users are have been accessing the social network via Tor each month.

“People who choose to communicate over Tor do so for a variety of reasons related to privacy, security and safety,” wrote Alec Muffett, a Facebook engineer in London who leads the company’s work on its dark-web presence. “It’s important to us to provide methods for people to use our services securely—particularly if they lack reliable methods to do so.”

Indeed, Facebook has added more ways to access the site on the dark web over time. In January, itmade its Onion site accessible to smartphones running the Android operating system.

Traffic to the Tor network often spikes in places when governments try to restrict access to social networks. This was the case in Bangladesh at the end of 2015, when the government cut off access to Facebook for around three weeks, citing security concerns following controversial death sentences handed down by the courts. Traffic to the Tor network originating in Bangladesh surged during that period, although Facebook hasn’t clarified whether it saw a similar uptick in traffic to its own dark-web site.

“To be clear, temporary increases have more to do with current events than access restrictions,” said Melanie Ensign, a Facebook spokesperson.Image title

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Oil and Gas

Eni Posts Larger-Than-Expected Loss Amid Oil Price Slump

Eni SpA posted a first-quarter loss that was worse than analysts’ estimates amid a collapse in crude prices.

The Italian oil company’s adjusted net loss was 479 million euros ($546 million), compared with a profit of 454 million euros a year earlier. Analysts had expected a 12.3 million-euro loss, according to the median of nine estimates compiled by Bloomberg. Production growth fell short of expectations and Eni’s net cash from operating activities fell 56 percent to 1.3 billion euros.

“Our biggest concern as ever is the cash flow,” which was “very weak,” Exane BNP Paribas said in a note on Friday.

The plunge in crude prices since the middle of 2014 has weighed on oil company profits, forcing them to cut capital spending, slash dividends and postpone or cancel expensive exploration projects. Eni’s results contrast with the better-than-forecast profit reported this week by BP Plc, Statoil ASA and Total SA.

Eni shares fell 1.1 percent to 14.24 euros as of 9:17 a.m. in Milan trading, paring this year’s gain to 3.1 percent. That compares with the 8.5 percent advance in the 20-member Stoxx Europe 600 Oil and Gas Index.

Exiting Businesses

Eni was in the process of exiting two major lines of business in the first quarter -- chemicals and engineering and construction -- meaning the units’ performance was not reflected in adjusted net income from continuing operations, the company said. On a standalone basis -- reinstating gains and losses from transactions with these divisions -- Eni reported an adjusted net loss of 77 million euros, compared with a profit of 701 million euros a year earlier.

“The fundamentals of the oil market remain weak,” Eni said in a statement. “Management is planning to increase efforts to optimize capex and reduce operating costs by exploiting the deflationary pressure induced by the fall in crude oil prices.”

Eni’s oil and gas production rose 3.4 percent from a year earlier to the equivalent of 1.75 million barrels of oil a day, compared with an average forecast of 1.78 million barrels a day by five analysts surveyed by Bloomberg. The start of output in fields in countries including Norway contributed to the gain. Eni reiterated that it would cut investment this year by 20 percent.

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China's net LPG imports hit record high, may take a breather

China's net LPG imports in March more than doubled from a year ago to hit a record high, as low prices ignited buying interest from import terminals and propane dehydrogenation plants.

Traders expect LPG imports to remain high in April, but purchases could slow in the following months due to higher inventories.

Net LPG imports in March surged 119% year on year to around 1.5 million mt, the highest on record, Platts calculations using data released Friday by the General Administration of Customs showed. The March volume was up 57% month on month, which was also the highest month-on-month increase in the past eight months.

Traders attributed the rush for March imports to higher profit margins at both LPG import terminals and PDH plants.

"Lower LPG prices in the international market have encouraged both import terminals and PDH plants to buy more last month [for March and April delivery]," a trader in eastern China said.

The pre-tax import cost of LPG averaged $351/mt in March, down 9% from $387/mt in February and 35% lower from $543/mt a year ago, according to Platts calculations. This equates to around Yuan 2,609/mt ($400.64/mt), after adding customs duty and value added tax.

"We increased our LPG imports in the past two months as we saw good trading margins and we were bullish about the LPG price in the future," a trader with Oriental Energy said.

As China's largest LPG importer in 2015, Oriental Energy in eastern China runs three major import terminals and a PDH plant capable of consuming around 720,000 mt/year of propane.

The company imported a total of 335,700 mt LPG in March, up 169% from 124,800 mt in the previous month, according to a report from Beijing-based energy information provider JYD Commodities Hub.

In addition, Wanhua Chemical Group, formerly Yantai Wanhua Chemical, which runs a PDH plant capable of consuming around 900,000 mt/year of propane and 600,000 mt/year of butane, also boosted its LPG imports to 133,059 mt in March, compared with no imports in February, the customs data showed. It is based in eastern China's Shandong province.

As China's biggest PDH plant, the company has a FOB contract with Qatar International Petroleum Marketing Company Limited, or Tasweeq, this year, but the term volume is unknown. Wanhua also has a CFR term contract with Turkish trader Bayegan for a 44,000-mt evenly split cargo per month or bi-monthly from Ruwais in the UAE, since last year, sources said.

"We mainly bought the LPG cargoes from the spot market last month as spot LPG prices were attractive," a source with Wanhua said, adding that the plant is running at around 70%-80% of capacity.

Chinese PDH plants' processing margin was estimated to be above Yuan 1,000/mt last month, and it remains healthy this month, according to market sources.

"But with the rebound in LPG prices and the restart of some PDH plants, the margin could be narrowed next month," a source in eastern China said.

PDH plant operators have been enjoying strong margins for propylene, their key output, which has prompted them to process more propane.

According to Platts calculations, the premium of CFR China propylene prices to the breakeven cost of converting propane into propylene has risen steadily so far this year, to average $107.45/mt in March, from an average of $11.04/mt in January.

Over January-March, net LPG imports were also up 72% year on year to 3.25 million mt, according to Platts calculations.

The UAE remained the top supplier in March at 688,001 mt, up 86% month on month and 64% higher year on year.

The US was the second-largest supplier in both March and in Q1, with 361,954 mt and 998,779 mt respectively. LPG imports from the US in March were only up 2% month on month, but jumped 101% year on year, Platts calculations showed.

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Suncor Prepares for Production Boost on Majority Syncrude Stake

Suncor Energy Inc. is doubling down on a bet that the oil sands will be a competitive source of crude as it increases its ownership of the Syncrude Canada mine and presses ahead with its Fort Hills bitumen project.

The company’s production will grow 40 percent from 2015 levels to more than 800,000 barrels a day by 2019, President and Chief Executive Officer Steve Williams said during a conference call Thursday with analysts to discuss first-quarter results.

“That’s a growth trajectory that very few companies of our scale can hope to equal,” Williams said. “More importantly, it’s growth that gives us even more leverage to rising oil prices.”

The company paid C$937 million ($747 million) for Murphy Oil Corp.’s 5-percent of Syncrude, boosting its ownership to 53.74 percent, it said Wednesday.

Suncor, Canada’s largest oil company by market value, is also pressing ahead with its C$15.1 billion Fort Hills project, with plans to spend C$4.5 billion with its partners this year to begin production at the end of 2017.

Cost Competitive

Suncor aims to make bitumen extraction an important -- and cost competitive -- source of crude for global markets. The company reduced cash operating costs at the oil sands division in the first quarter by 15 percent to C$24.25 a barrel, and Williams said the company can sustain a dividend and free cash flow at crude prices of $40 a barrel.

Williams said he expects a period of oil prices being “lower for longer.” The price of West Texas Intermediate crude, the U.S. benchmark, has gained 25 percent this year and traded Thursday above $46 a barrel, a five-month high. Prices averaged $33.63 during the first quarter.

“Oil sands operating costs not surprisingly continue to trend lower across all segments due to a combination of higher volumes, cost savings and lower natural gas prices,” said Menno Hulshof, an analyst at TD Securities, in a note. “In fact, we would have to go all the way back to 2007 to see costs this low.”

Expansion Plans

The 5 percent stake in Syncrude acquired from Murphy Oil will provide Suncor with an additional 17,500 barrels a day of production. The sale will allow Murphy Oil to focus on its drilling operations in North America, the U.S. producer said in a separate statement. The process of improving Syncrude’s operations will be a “multi-year” process and Suncor will continue to work with Syncrude’s operator Imperial Oil Ltd. to improve operations.

The company last year began its efforts to boost control over Syncrude, which produces light synthetic crude oil. It succeeded in winning over resistant Canadian Oil Sands management and shareholders after sweetening its offer earlier this year. Suncor made two offers before a hostile bid in October and finally secured Canadian Oil Sands management’s green light for the takeover in January.

Suncor has taken advantage of the oil industry downturn to expand through deals including the C$4.2 billion takeover of Canadian Oil Sands and the purchase of a bigger stake in a venture with France’s Total SA. The company will “take a breath” on large projects and focus on increasing efficiency and lowering costs, Williams said on the call.

Suncor has also targeted as much as C$1.5 billion in asset sales, Alister Cowan, Suncor Chief Financial Officer, said on the call. The company isn’t currently selling its chain of gas stations. It has already sold C$4.5 billion worth of assets since its merger with Petro-Canada in 2009.

At the same time, Suncor has cut spending by 10 percent this year after posting a surprise fourth-quarter loss. The 2016 spending reductions come after the company eliminated about 1,700 jobs and slashed its budget last year.

First-quarter net earnings were C$257 million, or 17 cents a share, compared with a loss of C$341 million, or 24 cents a share, in the year-earlier period, the company said in a separate statement. The oil sands division lost C$524 million in the quarter, compared with a loss of C$146 million a year earlier, the company said.
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Origin hikes LNG earnings forecast on strong output at new plant

Origin Energy Ltd on Friday more than doubled its outlook for earnings from liquefied natural gas this year, saying the first unit at its Australia Pacific LNG plant was producing at above its rated capacity of 4.5 million tonnes a year.

APLNG, operated by ConocoPhillips, shipped 11 cargoes in the March quarter, mostly going to China's Sinopec, and is set to start exporting from its second production unit between July and December, Origin said.

The extra volume adds to an already oversupplied global LNG market, with spot prices in Asia LNG-AS down 36 percent so far this year.

"Given the strong operational performance of Train 1 since shipment of the first LNG cargo on Jan. 9, Origin expects to recognise Train 1 revenue from March 1 2016," it said in its quarterly report.

It now expects underlying LNG earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to June 2016 of between A$100 million and A$150 million, well above an earlier forecast between A$30 million and A$80 million.

Origin reported a 45-percent rise in March quarter revenue to A$316.4 million ($241.8 million) from a year earlier on the back of first sales from the APLNG project.

Production rose 65 percent to 60.9 petajoules.
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Libya outlines ambitious plans to restore oil output

Libya's National Oil Corporation has ambitious plans to restore output to pre-2011 levels after years of violence and disruption, officials said.

Oil output is now less than a quarter of the 1.6 million barrels per day Libya pumped before Muammar Gaddafi fell in 2011, and the National Oil Corporation (NOC) in Tripoli hopes to ramp it up swiftly with the backing of a new unity government.

Full recovery could take years because of shutdowns by disgruntled workers, political rivalry and attacks by Islamic State militants.

Militants hit the al-Ghani, Mabrouk, and Dahra fields in the Sirte basin over a year ago, forcing the NOC to declare force-majeure on 11 fields, and there have been further attacks since then.

An NOC official in Tripoli told Reuters that at least 200,000 bpd of capacity had been damaged in attacks on oil fields in the western Sirte basin, Libya's most prolific.

It may take the NOC until late 2017 or 2018 to bring those fields back to full capacity, the official said, if it can afford the repairs.

The first phase of a three-stage recovery plan can be implemented within three months, a second NOC official in Tripoli said, allowing fields like El Sharara and Elephant, with a combined capacity of around 430,000 bpd, to come back on stream.

But other fields, including those that have been directly attacked and others that feed via pipeline to Libya's largest export terminals at Ras Lanuf and Es Sider, may take longer to bring back online, he added.

Phase two covers six to eight months down the line while the final phase covers fields that will take between eight months and several years to reopen.

Infrastructure damage at the ports could take years to repair and will delay the restart of the fields feeding to them. Another big factor is the cost of the repairs.

"All those plans depend on security. If proper and robust security at the oil facilities is not in place, then our plans will be in jeopardy," the second official said.

Earlier this year militants attacked Ras Lanuf and Es Sider, which can handle 600,000 bpd of crude exports. The two terminals had been closed since December 2014, after an attack on Es Sider.

The latest assault left just 12 out of 32 storage tanks at the terminals operational, NOC chairman Mustafa Sanalla told Reuters in February. It may take NOC "many years" to rebuild damaged "long lead items" at the ports, he added.

A U.N.-backed unity government's move to Tripoli last month raised hopes that Libya could restart idled fields and reopen export terminals, and the NOC in Tripoli says it could quickly double production to over 700,000 bpd, if political and security conditions stabilise.

The government is still struggling to gain clear support, especially in the east. A parallel NOC in the east exported a shipment of oil independently for the first time this week, further complicating the prospects for recovery.

"We are focused now on how to resume oil production. In some places, we'll just have to open the valves," Sanalla told Reuters last week. "But first of all, we need to have stability."

Industry sources do not expect production to increase beyond 600,000 bpd within the next few months.

"If the new unity government is successful in asserting some control, then output should recover, but only slowly and with setbacks," Energy Aspects analyst Richard Mallinson told the Reuters Global Oil Forum earlier this month.


The NOC hopes the unity government can create a unified security force to protect oil infrastructure.

For now, security will depend on an array of armed factions including the Petroleum Facilities Guard (PFG), a semi-official corps that has blockaded ports and whose attempt in 2014 to export crude independently was thwarted by U.S. special forces.

PFG leader Ibrahim Jathran says he supports the unity government and is ready to reopen the ports of Zueitina, Es Sider, and Ras Lanuf, and Sanalla has said the NOC would accept the PFG as part of a future, national security force.

But the blockade and the PFG's refusal to allow storage tanks to be emptied at threatened terminals have infuriated the NOC. Meanwhile a rival PFG faction, Battalion 152, has said it is loyal to eastern military commander Khalifa Haftar, whose political allies have blocked the eastern parliament from approving the unity government.

The unity government said on Sunday it feared further attacks on coastal infrastructure and oil fields, and that it had received reports that these were threatened not only by Islamic State but also by Gaddafi loyalists and Sudanese rebels.

Financing could be a challenge in the short term as Libya has been hard hit by falling oil prices and has had to bear the double burden of a price crash and constrained output simultaneously.

Sanalla has estimated the cost of lost production at more than $68 billion for the past three years, and says Libya loses $30 million every day because of shutdowns. Security worries in some areas mean the NOC has yet to assess the full cost to repair damaged facilities.

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Gazprom 2015 Profit Jumps as Kremlin Demands Higher Dividend

Gazprom PJSC, the world’s biggest natural gas producer, said full-year profit jumped almost five-fold, signaling the possibility of a higher dividend payout just as the Russian government needs more funds to plug its budget gap.

Net income rose to 787 billion rubles ($12.2 billion) in 2015 from 159 billion rubles a year earlier, the state-controlled company said Thursday in a statement. That was more than an average estimate of 758 billion rubles by 10 analysts in a Bloomberg News survey. Gazprom’s 2014 profit was hurt by foreign currency losses after exceeding 1 trillion rubles in the previous three years.

The Russian government last week issued an order that state companies must pay out at least half their income under Russian or international accounting standards, whichever produces the higher figure. The move stoked appetite for the gas producer’s shares, which is trading at its highest level in more than a year in Moscow.

“Gazprom dividends is the main intrigue now,” said Elchin Mammadov, a London-based analyst at Bloomberg Intelligence. “Still, there’s no clarity how much the payments may increase.”

Gazprom’s management had recommended to increase the dividend payment by 2.8 percent to 7.4 rubles per share, or 175 billion rubles in total, before the state order was published. That would equal 50 percent of the company’s profit under Russian accounting standards after adjustments.

The Moscow-based producer, which meets about 30 percent of Europe’s gas demand, will probably pay less than expected given falling export earnings after the plunge in oil meant a lower price for gas, according to eight of 11 analysts in a Bloomberg survey. The average forecast is 30 to 35 percent of the international profit.

Gazprom’s domestic rival, state-run Rosneft OJSC, plans to pay out 35 percent of its profit after its board approved the recommendation on Friday, a decision seen as a compromise by analysts including Raiffeisen Bank and Aton LLC. The Economy Ministry sought half the profit, while the Energy Ministry demanded to keep 25 percent, citing risks to the company’s investment plans and production, Interfax reported last week.

Sergei Kupriyanov, a Gazprom spokesman in Moscow, declined to comment on the dividend outlook before executives hold a regular call with investors and analysts later on Thursday. Gazprom’s board typically discusses a payout recommendation in the second half of May before the annual shareholder meeting, scheduled for June 30.
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National Oilwell Varco Reports First Quarter 2016 Results

National Oilwell Varco, Inc. today reported a first quarter 2016 net loss of $21 million, or $0.06 per share, excluding other items. Other items included $147 million in pre-tax charges primarily associated with severance and facility closure costs. GAAP net loss for the quarter was $119 million, or $0.32 per share.

“Oil prices and oilfield activity continued to plummet during the first quarter of 2016, causing our customers to cut spending to bare minimum levels”

Revenues for the first quarter of 2016 were $2.19 billion, a decrease of 20 percent compared to the fourth quarter of 2015 and a decrease of 55 percent from the first quarter of 2015. Adjusted EBITDA (as defined below) for the first quarter was $127 million, or 5.8 percent of sales. Decremental Adjusted EBITDA margin (the change in Adjusted EBITDA as a percent of the change in revenue) from the fourth quarter of 2015 to the first quarter of 2016 was 37 percent. Operating loss, excluding other items, was $48 million.

“Oil prices and oilfield activity continued to plummet during the first quarter of 2016, causing our customers to cut spending to bare minimum levels,” stated Clay C. Williams, Chairman, President and CEO of National Oilwell Varco. “The fifth quarter of this extraordinary downcycle saw our revenues decline sharply once again, leading us to intensify our cost reduction efforts. While this market has been very tough on our business, I am grateful for the leadership and perseverance demonstrated by National Oilwell Varco’s tremendous employees. Better days lie ahead. Our strong financial resources enable us to continue to invest in new technologies, products and acquisitions that better position us for the inevitable upturn.”

Lots more detail:

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Sinopec Profit Triples as Refining Outweighs Oil's Plunge

China Petroleum & Chemical Corp., Asia’s biggest refiner, posted a threefold increase in profit as the drop in oil prices was outweighed by the benefit of improved refining margins.

Net income at the Beijing-based company known as Sinopec rose to 6.66 billion yuan ($1.03 billion), compared with 2.17 billion yuan a year ago, according to a statement to the Hong Kong stock exchange Thursday.

China announced in January that fuel prices wouldn’t be adjusted when oil falls below $40 a barrel in an attempt to support the domestic energy industry and curb pollution. The policy boosted domestic refining margins during the first quarter to $16 a barrel, a 45 percent increase from the same period a year earlier, according to researcher ICIS China. The country’s product exports slipped in the first two months as it became more profitable to sell fuels at home.

“Sinopec benefited a lot in the first quarter from very low crude prices and the fuel price floor set by the government,” Li Li, an analyst with ICIS China, said by phone from Guangzhou. “The company will probably be unable to enjoy such good refining margins in the second quarter with higher crude cost.”

Sales dropped 13 percent to 413.8 billion yuan in the period, while oil and gas output fell 2.7 percent to 114.7 million barrels of oil equivalent. Total refining output fell 2.4 to 57.2 million tons. Operating profit from refining swung to a 13.4 billion yuan gain from a loss the year earlier.

Sinopec last year outperformed its state-owned rivals PetroChina Co. and Cnooc Ltd. as profit from oil refining helped offset the impact from oil’s plunge.

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Samsung Heavy Loses $4.6 Billion Royal Dutch Shell Order on Oil

Samsung Heavy Industries Co., the world’s third-largest shipbuilder, said an order to build three floating liquefied natural gas production facilities was canceled after the energy development project was scrapped amid a plunge in oil prices.

The contract, valued at 5.27 trillion won ($4.6 billion), from Royal Dutch Shell Plc was voided because of the current difficult market conditions, the Sungnam, South Korea-based company said in a regulatory filing Thursday. The shipbuilder won the deal in June on the condition that the project will start only after the client is ready to proceed.

Oil prices that have more than halved in the last two years have forced energy companies and rig owners to cancel offshore projects and delay deliveries. As a result, shipyards in Asia such as Samsung Heavy and Singapore’s Sembcorp Marine Ltd. reported losses or smaller profits last year.

Woodside Petroleum Ltd. scrapped plans in March to develop the Browse LNG project in Australia with partners, including Shell and BP Plc, saying it won’t go ahead with the floating LNG development after completing detailed engineering and design work. The Browse partners will prepare a new plan and budget for developing the gas resources, it said.

Samsung Heavy is currently building two other floating LNG facilities for Shell and Petroliam Nasional Bhd. of Malaysia. The first project is expected to complete work at the shipyard in the second half of this year, the company said.

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MEG Energy reports quarterly profit helped by cost cuts

MEG Energy Corp., which operates in Canada’s oil sands, reported a first-quarter profit, compared with a loss a year earlier, as it managed to keep production costs at record lows to help cushion the impact of a slump in oil prices.

MEG said cash flow used in operations, or negative cash flow, rose to $131-million from $30-million as realized bitumen prices more than halved.

The prolonged oil slump has forced oil producers, including MEG, to try and preserve cash and reduce debt by selling assets, laying off workers and cutting their dividend as well as capital spending.

MEG, whose key operations are in the Athabasca oil sands region of Alberta, said it was implementing a hedging program to increase the predictability of future cash flows.

The company said it continues to target average production of 80,000-83,000 barrels per day (bpd) this year.

Bitumen production fell about 7 per cent to 76,640 bpd in the quarter due to a turnaround a quarter ahead of schedule at MEG’s Christina Lake facilities in northern Alberta.

However, its net operating costs decreased 19 per cent to $8.53 per barrel, in line with the record-low cost in the previous quarter.

That helped the company reported a net profit of $131-million, or 58 cents per share, for the three months ended March 31. It had lost $508-million, or $2.27 per share, a year earlier.

Revenue fell 37.9 per cent to $290-million.
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Weir sees 70 pct of North American fracking fleet idle

Oil equipment maker Weir Group reported a 47 percent fall in first-quarter oil and gas orders on Thursday and estimated some 70 percent of North America's fracking fleet is currently idle as low crude prices slow investment in the sector.

The Scottish company, which specializes in pumps and valves used in drilling rigs, said a 20 percent reduction in U.S. land rig count in the past two months had lowered demand for its products.

"The U.S. rig count decline over the course of Q1 was over and beyond everyone's expectations," Chief Executive Keith Cochrane told analysts.

His comments echoed ones from U.S. oilfield services firm Baker Hughes on Wednesday about a slowdown in U.S. drilling activity that hit its first-quarter revenue.

Cochraine said, however, that cost savings had bolstered first-quarter profits, without giving financial details.

"As a result, we expect first half profits to be slightly ahead of market expectations," Cochrane said.

The fall in drilling activity and recent uptick in oil prices will encourage customers to place new orders, Cochrane added.

"If they want to keep producing they need to start spending money again," he said.

Jon Stanton, Weir's chief financial officer, said this meant the company expected its oil and gas division to return to profit in the second half of the year from a "moderately loss-making" position currently.

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PetroChina posts first quarterly loss as oil prices weigh

PetroChina Co Ltd, the country's largest oil and gas producer, on Thursday reported its first ever quarterly loss as oil prices touched near 13-year lows, and forecast continued volatility in the market.

Faced with the worst downturn in the oil sector in at least three decades, state-run PetroChina posted a net loss in the first three months of 13.79 billion yuan ($2.13 billion), compared with a profit of 6.15 billion yuan a year earlier.

In the first quarter of 2016, the average realized price for crude oil of the group was $27.27 per barrel, of which the domestic realized price was $26.55 per barrel, representing a drop of 44.2 percent from the same period a year earlier.

The company expects that for the rest of the year the supply and demand fundamentals will remain loose. "International oil prices will widely fluctuate at a low level," the company said in a statement to the Hong Kong stock exchange.

A prolonged fall in oil prices has weighed on the industry, with U.S. giant Exxon Mobil this week losing its top credit rating from Standard & Poor's for the first time in almost 70 years and British oil company BP reporting an 80 percent drop in first-quarter profits.

PetroChina expects total crude output this year of 924.7 million barrels.

Last month, PetroChina reported a net profit of 35.52 billion yuan for 2015, down 70 percent from the previous year, and said it would trim capital expenditure by 5 percent to 192 billion yuan this year ($30 billion).

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Marathon Petroleum barely ekes out a profit due to weak crack spreads

Refiner Marathon Petroleum Corp (MPC.N) barely eked out a profit in the first quarter, hurt by weak crack spreads – the difference between the prices of crude oil and refined products.

Net income attributable to the company slumped to $1 million, or less than 1 cent per share, in the three months ended March 31, from $891 million, or $1.62 per share, a year earlier.

The drastic decline in profit was also a result of higher turnaround activity, or scheduled events where an entire unit is taken offstream for an extended period for a revamp or renewal.

Marathon also took an impairment charge of $129 million in the latest quarter.

Refiners have seen their margins shrink due to the narrowing price difference between U.S. Crude CLc1 and globally traded Brent futures LCOc1, to which the price of refined products are tied.

"Despite weakness in refining margins in the first two months of the year, we saw crack spreads strengthen late in the quarter as gasoline inventories declined and refiners responded to market conditions," Chief Executive Gary Heminger said in a statement on Thursday.

Marathon's revenue and other income fell 25.6 percent to $12.75 billion.

As part of its turnaround work, Marathon commissioned a light crude upgrade project at its Robinson, Illinois refinery to increase its overall processing capacity by 20,000 barrels per stream day (bpsd)

The upgrade is also to boost by 30,000 (bpsd) its light crude capacity, the quantity of oil product produced by a single refining unit during continuous operation for 24 hours.

Up to Wednesday's close of $41.37, the company's shares have slumped more than 19 percent in the last 12 months.

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ConocoPhillips posts quarterly loss, cuts 2016 budget again

ConocoPhillips, the largest U.S. independent oil company, posted a first-quarter loss, compared with a year-earlier profit, and cut its spending budget for the second time this year as the slump in crude prices sapped profitability.

The company cut its 2016 capital expenditure forecast to $5.7 billion from $6.4 billion, driven by reduced deepwater exploration activity. It had cut its capital budget forecast in February.

Crude prices continued to fall in the quarter, eating into the income of E&P companies. Oil prices touched a low of $27.10 per barrel, before recovering to close at $39.60 at end of March.

ConocoPhillips, which cut its quarterly dividend by 25 percent in February to save cash, reduced its first-quarter operating costs by 21 percent to $1.69 billion.

Production fell to 1,578 thousand barrels of oil equivalent per day (mboe/d) from 1,610 mboe/d.

First-quarter net loss was $1.5 billion, or $1.18 per share, compared with a profit of $272 million, or 22 cents per share, a year earlier.

Excluding special items, the company's loss was 95 cents per share, compared with analysts' estimates of a loss of $1.05.

Total revenue and other income fell 37 percent to $5.02 billion.

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Cnooc 1st Quarter Revenue Drops 31% After Crude Hits 12-Year Low

Cnooc Ltd., China’s biggest offshore oil and gas explorer, reported a 31 percent decline in first-quarter revenue amid a crash in crude prices to the lowest in 12 years.

Oil and gas sales dropped to 24.6 billion yuan ($3.8 billion) in the three months ended March 31, the Beijing-based company said in a statement to the Hong Kong stock exchange Thursday. Cnooc, which gets almost all of its income from oil and gas production, doesn’t report quarterly profit.

Cnooc’s average realized oil price fell 39 percent to $32.54 a barrel in the first quarter. Brent oil, the global benchmark, averaged about $35 a barrel in the first quarter, from about $55 a year ago. Prices hit a 12-year low in January.

Output rose 5.1 percent to 124.3 million barrels of oil equivalent from a year earlier, according to the statement.

Cnooc’s annual production overtook China Petroleum & Chemical Corp. in 2015 to become the country’s second-biggest oil and gas producer as the offshore explorer pumped about 496 million barrels of oil equivalent, compared with its state-owned peer’s 472 million barrels. Cnooc’s output may slip to 470 million to 485 million barrels this year as the company takes measures to control operational costs.
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Suncor Energy to acquire additional 5 percent stake in Syncrude

Canadian oil and gas producer Suncor Energy Inc said on Wednesday it has agreed to pay about C$937 million to acquire an additional 5 percent stake in its Syncrude oil sands joint venture from Murphy Oil Corp's Canadian unit.

The deal would increase the company's share in Syncrude to 53.74 percent, Suncor said in a statement.

Together with Suncor's acquisition of Canadian Oil Sands in March, the company's production capacity would increase by 17,500 barrels per day of high-quality light sweet synthetic crude, Suncor Chief Executive Steve Williams said.

Murphy Oil said in a statement it expected the deal to close at mid-year.
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Noble Corp profit plunges as low oil prices hit rig demand

Noble Corp Plc's quarterly profit plunged 41 percent, coming slightly below analysts' expectations, hurt by lower demand for rigs as oil prices hover around decade lows.

The prolonged slump in oil prices has led to a steep decline in drilling activity, mainly in the offshore market, as oil and gas producers cut costs.

Noble's average rig utilization fell to 79 percent in the first quarter ended March 31 from 86 percent, a year earlier.

Average day rate, the amount an oil and gas company pays per day for a rig, fell 15.5 percent to $287,169.

The net profit attributable to Noble fell to $105.5 million, or 42 cents per share, while operating revenue declined nearly 24 percent to about $612 million.

Excluding items, the company earned 31 cents per share, missing the average analyst estimate of 33 cents, according to Thomson Reuters I/B/E/S.
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Exxon ups dividend 3 percent day after ratings downgrade

Exxon Mobil Corp raised its quarterly dividend by 3 percent on Wednesday, a day after Standard & Poor's downgraded the U.S. oil and gas company citing its generous payouts to shareholders.

It was the smallest increase since at least the first quarter of 2006, when the dividend rose 10 percent, according to Thomson Reuters data.

The downgrade of the oil giant was the first by S&P in more than 70 years. It was flagged by the ratings agency last week and did not come as a surprise Wednesday morning as Exxon's board met to approve the dividend increase and review quarterly results, which are set to be released on Friday.

The board had halted a massive share repurchase program on Feb. 2, the same day S&P warned publicly a downgrade was possible. The repurchase program had dwarfed the dividend payout for years, and its cancellation was the first sign by Exxon's board of less-generous remuneration to shareholders.

Exxon has raised its dividend each of the past 34 years. The increase this year came as the company and its peers are fighting the perception they spend too much on shareholders and not enough strengthening its balancing sheet and building oil reserves.

Filings with U.S. regulators show that at a combined $325 billion in dividends and repurchases, Exxon's spending on shareholders in the last 11 years has exceeded by nearly 20 percent its outlays of $271.7 billion for new property, plant and equipment over the same period.

S&P on Tuesday cut Exxon's top-tier credit rating by one notch to "AA+" from "AAA," saying it was concerned the world's largest publicly traded oil company would rather enrich shareholders than cull debt.

Exxon raised its payout to 75 cents from 73 cents. The dividend will be payable on June 10 to shareholders of record as of May 13.

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Summary of Weekly Petroleum Data for the Week Ending April 22, 2016

U.S. crude oil refinery inputs averaged over 15.8 million barrels per day during the week ending April 22, 2016, 257,000 barrels per day less than the previous week’s average. Refineries operated at 88.1% of their operable capacity last week. Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production decreased last week, averaging over 4.6 million barrels per day.

U.S. crude oil imports averaged about 7.6 million barrels per day last week, down by 637,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.7 million barrels per day, 1.2% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 898,000 barrels per day. Distillate fuel imports averaged 207,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.0 million barrels from the previous week. At 540.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 1.6 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 1.7 million barrels last week but are well above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.3 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 5.2 million barrels last week.

Total products supplied over the last four-week period averaged 20.0 million barrels per day, up by 4.0% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, up by 5.6% from the same period last year. Distillate fuel product supplied averaged about 4.0 million barrels per day over the last four weeks, down by 0.1% from the same period last year. Jet fuel product supplied is down 0.5% compared to the same four-week period last year.

Cushing inventory up 1.7 mln bbl's
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US oil production slips again

                                             Last Week     Week Before   Last Year

Domestic Production '000........ 8,938               8,953            9,373
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Rig-builder Sembcorp Marine's profit halves as clients defer projects

Singapore rig-builder Sembcorp Marine's quarterly profit halved as customers deferred projects, and it faces prolonged uncertainty on contracts from its biggest client, Sete Brasil, whose shareholders have approved its bankruptcy.

Sembcorp Marine posted a profit of S$55 million ($41 million) for the three months ended March 31, compared with a profit of S$106 million a year ago.

Sembcorp Marine and its cross-town rival Keppel Corp have been hit by slumping orders as oil prices dropped nearly 60 percent since mid-2014.

Exacerbating the situation are troubles at Sete Brasil, a company set up by corruption-battered Petroleo Brasileiro SA (Petrobras). The graft scandal and recession have crushed popularity for President Dilma Rousseff, who is facing ouster.

Sete Brasil's shareholders last week voted to allow it to seek bankruptcy protection. It has paid neither Sembcorp Marine nor Keppel since late 2014.

Both companies have said provisions taken last year for those contracts are currently sufficient, while Sembcorp Marine started arbitration proceedings against subsidiaries of Sete Brasil, from which it has won orders worth $5.6 billion.

"For Sete Brasil, there is going to be a lot of unknowns such as the ongoing political scandal there, I doubt anything will be done this year. So the arbitration can just drag on for a while," Joel Ng, an analyst at KGI Fraser Securities, said before the results were announced.


A collapse of Sete Brasil would be devastating not only for the investors that backed the project but for dozens of local suppliers. More than 800,000 local shipbuilding jobs could be lost, triggering $10 billion in losses, industry estimates show.

"In Brazil, the political upheavals remain unabated, with the ongoing process to impeach the Brazilian President," said Sembcorp Marine's chief executive, Wong Weng Sun.

"Such development and the deteriorating economy have contributed to the ongoing volatility and uncertainty of the situation in Brazil."

SembCorp Marine, a subsidiary of industrial conglomerate Sembcorp Industries, posted quarterly revenue of S$918 million - a drop of about 30 percent from a year earlier. Its order book stood at S$9.7 billion at the end of the quarter.

The company's cashflows have come under pressure as customers delay taking deliveries of their projects, hurting its gearing levels, analysts said.

Earlier this year, Reuters, citing people familiar with the matter, reported the parent may inject funds into SembCorp Marine or buy full control to replenish finances.
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Baker Hughes reports bigger quarterly loss

Oilfield services provider Baker Hughes Inc (BHI.N) said on Wednesday it expects U.S. rig count will begin to stabilize in the second half of this year, while the rig count globally will drop steadily through the end of the year.

However, the company, which also reported a bigger first-quarter loss, said it does not expect drilling activity in the United States to increase meaningfully this year, even if the rig count held steady.

Baker Hughes said it expects the current-quarter rig count in North American to fall 30 percent from the previous quarter, while the count globally would be limited by fewer new projects.

"During the quarter, the industry faced another precipitous decline in activity, exceeding even the most pessimistic predictions, as E&P companies further cut spending in an effort to protect cash flows," Chief Executive Martin Craighead said in a statement.

Baker Hughes, whose shares were down nearly 4 percent in premarket trading, also said revenue in North America declined 59 percent the latest quarter, steeper than the 41.9 percent drop in total revenue.

Baker Hughes, which is to be bought by bigger rival Halliburton Co (HAL.N), also reiterated that their merger agreement would not terminate automatically if regulatory reviews extended beyond the deadline of April 30.

Baker Hughes said it was retaining costs in its operating profit margins as required by the merger agreement. Halliburton had said it reduced the infrastructure it had been maintaining in anticipation of the merger as it saw "no scenario in the current market where we need this additional infrastructure".

Halliburton had postponed reporting its full results to May 3 from April 25 to accommodate the deadline. The deal has run into regulatory snags, with the U.S. Department of Justice suing to block the deal earlier this month.

Baker Hughes, which will get $3.5 billion from Halliburton if the deal is not cleared by regulators, said the two companies may continue to defend against the lawsuit and seek relevant approvals, or terminate the agreement.

Net loss attributable to Baker Hughes widened to $981 million, or $2.22 per share, in the first quarter ended March 31, from $589 million, or $1.35 per share, a year earlier.

Revenue fell 41.9 percent to $2.67 billion, missing analysts' average estimate of $2.85 billion, according to Thomson Reuters I/B/E/S.

North America revenue accounted for about 30 percent of total revenue.

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China's Biggest Oil Company Posts 52% Decline in 2015 Profit

China National Petroleum Corp., the country’s biggest oil and gas producer and the parent of PetroChina Co., said profit fell 52 percent as lower oil prices punished global explorers.

Profit last year fell to 82.5 billion yuan ($12.7 billion), the Beijing-based company said in a statement on its website Wednesday. The unlisted, state-owned company didn’t specify whether the profit is pretax, gross or net. Revenue fell 26 percent to 2 trillion yuan, while oil and gas output rose 1.8 percent to 259.5 million metric tons, it said.

“We properly dealt with all the risks and challenges and steered the company from the model of chasing speedy expansion to a model focusing more on quality growth,” Chairman Wang Yilin said in the statement.

CNPC owns oil and gas assets in politically unstable areas, including Sudan, and controls 86 percent of the listed company. PetroChina’s net profit tumbled 67 percent to 35.5 billion yuan in 2015, the lowest since 1999, the company said last month. Brent crude averaged $54 a barrel last year, from $99 the year before.

CNPC’s proved oil reserves reached 730 million tons and natural gas reserves were 570 billion cubic meters at the end of last year. Total pipeline length reached 80,000 kilometers (49,720 miles). The company employs 1.52 million people.

Wang said last month the company won’t cut frontline oil and gas workers as it seeks to reduce costs to cope with low energy prices. CNPC was also said to be among the few state-owned companies selected for reform to become a strategic holding company.

Domestic crude production reached 111.4 million tons (about 2.24 million barrels a day), accounting for 52 percent of the country’s total, according to the company. Domestic natural gas output reached 96.5 billion cubic meters, about 73 percent of the nation’s total.

CNPC sold 116.3 million tons of oil products last year, 40 percent of the country’s market share. Domestic natural gas sales rose 2.6 percent to 122.6 billion cubic meters.
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Turkish oil group in talks to invest in Genel's Kurdistan gas project

A Turkish state-backed energy firm is in talks to invest in Genel Energy's two big gas field developments in Iraqi Kurdistan, which would also include a pipeline to connect them to Turkey, company and industry sources said.

London-listed Genel is one of the main oil producers in Iraqi Kurdistan and last year cut its production forecasts because of low oil prices. In March, it reported its biggest ever annual loss after downgrading its oil reserves.

Genel is hoping that connecting the gas field developments - Bina Bawi and Miran - to Turkey will provide it with a major growth opportunity.

Genel is currently in talks with TEC, a joint venture that includes the international arm of state-owned Turkish Petroleum, to invest in the development of the fields, a pipeline into Turkey as well as storage facilities, according to several sources involved in the talks.

"They want to invest in the entire value chain of the project," one source said.

Genel has made no secret of plans to bring in a partner for the project. The company hopes to complete the negotiations with the partner by the end of the year, Chief Executive Officer Murat Ozgul told reporters at the company's annual general meeting in London on Wednesday. He did not name the partner.
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Hess reports smaller-than-expected loss

U.S. oil producer Hess Corp (HES.N) reported a smaller-than-expected quarterly loss as cost cuts helped offset the impact of lower oil prices.

Hess, like other oil producers, has slashed its capital budget and curtailed production plans after a more-than 60 percent drop in oil prices CLc1 eroded profits.

The company's oil and gas production inched slightly lower to 350,000 barrels of oil equivalent per day (boepd) in the first quarter, from 355,000 boepd a year earlier.

Hess, which produces oil in North Dakota's Bakken Shale and the U.S. Gulf of Mexico, said average realized price for crude fell 36.8 percent to $28.50 per barrel in the quarter.

Net loss attributable to Hess widened to $509 million, or $1.72 per share, in the quarter ended March 31, from $389 million, or $1.37 per share, a year earlier.

Analysts on average had expected a loss of $1.83 per share, according to Thomson Reuters I/B/E/S.

Revenue fell about 40 percent to $993 million.
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Gas sales and China deal boost profit at Russia's Novatek

Russia's second-largest natural gas producer Novatek overcame Western sanctions to deliver stronger net profit in the first quarter by selling a stake in an LNG project to a Chinese fund and improving domestic gas sales.

Novatek, which is under a Western sanctions over Moscow's role in the Ukraine crisis, has been struggling to raise funds for its $27 billion Yamal LNG project and turned to China for investment partnerships and loans.

The company said on Wednesday it had completed the sale of a 9.9 percent in Yamal LNG, which is due to start production of liquefied natural gas next year, to China's Silk Road Fund in March.

Novatek said that including the deal, first-quarter net profit reached 115.9 billion roubles ($1.8 billion). Excluding the Yamal LNG stake sale, first-quarter normalised net income jumped by 87.4 percent to 58.2 billion roubles ($893 million).

Revenue was up 22.5 percent to 139.4 billion roubles, largely due to an increase in sales of liquids, mainly crude oil and gas condensate.

The company has increased its share of the Russian gas market as, unlike its competitor state-owned gas giant Gazprom , it is able to cut its prices.

Novatek, in which France's Total has an 18.2 percent stake, said its earnings before interest, tax, depreciation and amortization (EBITDA), including its share in joint ventures, increased by 13 percent to 62.1 billion roubles.

The company's other key shareholders are Gennady Timchenko and Chief Executive Officer Leonid Mikhelson.

Novatek's shares were 0.3 percent higher at 1200 GMT, outperforming the Moscow broader stock market.
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Consol swings to Q1 loss owing to lower prices, revenues

US fossil fuels producer Consol Energy has swung to a first-quarter loss as lower realised prices for its natural gas and coal products drove down revenues. For the first quarter ended March 31, NYSE-listed Consol reported a net lost $97.6-million, or $0.43 a share, compared with a profit of $79-million, or $0.34 a share, in the same period a year earlier. 

The results included a $29.3-million loss on commodity derivative instruments, $12.6-million loss from the sale of a gathering pipeline, and $2.9-million in severance. The adjusted earnings before interest, tax, depreciation and amortisation was $176-million, down from $242-million a year ago. Revenue fell 30% year-over-year to $558.5-million in the first quarter, down from $792.6-million a year earlier. 

Natural gas revenue dropped 19% to $181.2-million, while coal revenue fell 39.5% to $251.9-million. 

Consol had sold its cornerstone Buchanan mine, in Virginia, during the quarter, pushing the company’s cash balance in the bank up to $1.3-billion. "The Buchanan sale is significant for a number of reasons. Not only does this divestiture support our corporate strategy, it also brought forward substantial value, at a premium multiple valuation. “That said, this transaction was a win-win for both us and the buyer, who will benefit from this premier mine becoming their flagship operation. 

For Consol, the sale of Buchanan marks another large step toward executing our strategy of becoming a pure-play E&P company,” Consol president and CEO Nicholas DeIuliis said in a statement.
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Forget the Saudis, Texas will win the oil price war

Forget the Saudis, Texas will win the oil price war

Crude oil prices continued to surprise on Tuesday, with the US benchmark adding another 4% to $44.60 a barrel. West Texas Intermediate is now up 65% since hitting 13-year lows below $27 a barrel February 11. It's a performance only bettered by the globe's second most traded bulk commodity – iron ore.

But like analysts of the steelmaking raw material, many in the industry have been surprised by the extent of the rally, consistently calling the oil price lower. The blame for the cloudy outlook for crude is mostly being laid at the door of Saudi-Arabia.

Image titleUS spare capacity may be close to rivaling OPEC’s current spare capacity

After the collapse of the Doha talks to freeze production and amid a spat with the US over terrorism, the world's top producer has threatened a scorched earth policy when it comes to maintaining and growing its market share.

But there is an alternative view out there that argues that the US, more than the Saudis, will control the direction of the market and in the event of an all-out price war holds the commanding position.

That's thanks to astonishing technological improvements in the US. The shale revolution that drove natural gas production between 2010 and 2015, found its way into the oil field, resulting in a 57% jump in US crude production in just three short years to peak at 9.7 million barrels per day in April 2015.

And it's not just a crude story: In the last decade, the US has introduced 8.3 MMBoe/d (million barrels of energy equivalent per day) into the global market when one considers production of crude, natural gas and natural gas liquids according to research by Platts Analytics.

Suzanne Minter, Manager of Oil and Gas Consulting for Platts Analytics on Tuesday testified before the US Senate Energy and Natural Resources Committee about where the global oil market is heading.

Minter said "the time and the rate in which this energy entered the market appears to have stressed the system in ways unimagined" making the US producer "the marginal supplier and price setter into the global market":

Texas alone could introduce 1.25m barrels into the global market – on average within just 30 days

After 14 months of persistently low prices, U.S. producers have entered 2016 with estimated capital expenditures cuts of 40%, more than 6,500 drilled but uncompleted wells in inventory, and find themselves operating at or near cash costs.

"Drilled but uncompleted wells hold reserves that can be brought on line in a short period of time, thereby defining the concept of spare capacity. It is plausible to believe that U.S. spare capacity may be close to rivaling OPEC’s current spare capacity. However, we believe that the prices needed to incentivize the U.S. producer to complete their drilled but uncompleted wells may be much lower than global competitors believe or would like it to be.

"The near term oil recovery will be more than likely be tenuous and ebb and flow, rather than occur in a linear fashion, as all parties involved figure out how to balance supply growth. However, due to spare capacity and the unique economic environment which drives producer activity, it may very well be that the US producer is best positioned to lead the recovery and bolster economic growth.”

Platts Analytics research shows that Texas alone could introduce 1.25 MMB/d of oil into the global market and can do so in a short space of time – on average just 30 days. That's more oil than the Saudis have threatened to flood the market with and all very close to the world's top refining hub.

Over and above resources and technology, the US has another powerful advantage: dynamic markets. The country has roughly 9,000 different entities producing energy. Saudi Arabia's oil wealth – indeed its whole economy – is now in the hands of a 30-year old prince.

Minter said that "while each producer will behave differently than the next, it seems realistic pricing in the mid-$40 – $50 per barrel range they will bring incremental volumes back into the market place. Well, that's where we got to today.

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Total first quarter beats forecasts on high output, strong margins

French oil and gas major Total reported a better that expected net profit in the first quarter of the 2016 as high output and a strong performance in refining and chemicals helped limit the impact of a prolonged fall in oil prices.

Net adjusted profit of $1.6 billion fell 37 percent compared with the same quarter in 2015. A Reuters poll of analysts had estimated the company's net adjusted result of $1.2 billion.

Weak oil prices have hit the whole industry, and led a day ago to U.S. giant Exxon Mobil losing its Standard & Poor's top credit rating for the first time in almost 70 years.

Total said its hydrocarbons production for the first quarter of the year rose by 4 percent to 2.479 million barrels of oil equivalent per day compared with the same quarter last year, a level in the quarter last seen ten years ago.

It added that in its downstream segment, although refining margins were down compared with 2015, the business had held up well and remained strong at the beginning of the second quarter.

"Refining & Chemicals improved its results compared to 2015 despite the decrease in refining margins to $35 per ton, thanks to a record high utilization rate of 94 percent and favorable petrochemicals margins," Total's Chief Executive Officer Patrick Pouyanne said in a statement.

The company proposed to maintain its dividend unchanged at 0.61 euros per share, payable through cash and scrip scheme.
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Argentina's YPF Said Set to Resume Crude Exports After Two Years

YPF SA is set to export crude oil from Argentina for the first time in two years next month, taking advantage of a new government subsidy.

It was the state-controlled oil company’s first use of an incentive announced last month to spur drilling amid low oil prices. YPF sold 200,000 barrels of Escalante crude to PetroChina Co. as part of a combined 1 million-barrel joint cargo with Pan American Energy LLC, which provided the other 800,000 barrels, according to three people with knowledge of the matter who asked not to be identified because they weren’t authorized to discuss the matter.

The shipment is scheduled to load May 10-20 from Caleta Cordova, Argentina.
YPF, which is based in Buenos Aires, plans to export another cargo in June, and more shipments are likely to follow this year, one of the people said. Argentine refiners are also buying imported crude at prices cheaper than the one the government sets for domestic oil.

“In light of sluggish demand for feedstock from Argentine refineries, the subsidy offers a way for producers to compete internationally while supporting their domestic industry,” Mara Roberts, an analyst with BMI Research in New York, said in an e-mail.

Argentina’s government last month announced it would provide a $7.50-a-barrel subsidy on exported oil as long as the price of Brent crude, the international benchmark, was below $47.50. Brent futures for June delivery settled at $45.74 a barrel Tuesday on ICE Futures Europe.

YPF, the country’s largest refiner, also has extra crude available because a coker unit was damaged at its La Plata refinery in 2013, limiting its demand for domestic oil. Construction of a new unit is under way and expected to be done at the end of this year. Exports of Escalante are likely to continue until tests on the new unit are concluded in 2017, according to a person familiar with the work.

That could be stymied by a recovery in international crude prices, however, as producers cut global output. Front-month Brent futures have climbed 64 percent from a low of $27.88 in January.

“Given that the subsidy requires benchmark prices to remain under $47.50, it’s unlikely that Argentine producers will be exporting significant quantities for much longer,” Roberts said.

This year, Argentina imported 2 million barrels of oil from Nigeria, and may seek to import another cargo before June, according to data compiled by Bloomberg.
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Statoil Unexpectedly Posts Profit in First Quarter Amid Oil Drop

Statoil Unexpectedly Posts Profit in First Quarter Amid Oil Drop

Statoil ASA, Norway’s biggest oil company, said profits slumped by 86 percent as crude prices fell to their lowest level in almost 12 years in the first quarter.

Statoil reported adjusted earnings after tax of $122 million, down from a $902 million a year earlier, it said in a statement Wednesday. Still, that beat the average forecast for a $125 million loss in a Bloomberg survey of 12 analysts. Adjusted earnings after tax is a measure that excludes financial and other items to better reflect underlying operations.

“Our financial results were affected by low oil and gas prices in the quarter,” Chief Executive Officer Eldar Saetre said in the statement. “We delivered strong operational performance across all business areas, high production efficiency and results in line with expectations from liquids trading and refining.”

Statoil and rivals such as Royal Dutch Shell Plc and BP Plc have seen earnings weighed down by a collapse in crude prices since the middle of 2014. Most of the majors have responded by cutting spending, delaying projects, streamlining operations and eliminating jobs in order to protect their cash flow and pay dividends.

Statoil, which is 67 percent owned by the Norwegian government, in February deepened cuts to capital expenditure to about $13 billion in 2016, a target it reiterated Wednesday. The company will pay a dividend of 22 cents for the first quarter, in line with the board’s intention to keep payouts flat for the first three quarters. Statoil introduced a scrip dividend program in February, letting shareholders opt for new shares at a discount instead of cash.

The company produced 2.05 million barrels of oil equivalent in the first quarter, little changed from 2.06 million barrels a year earlier and beating a 2.03 million barrel estimate in a survey of 26 analysts conducted by Statoil.
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API report small crude drawdown

the American Petroleum Institute reported a drawdown of nearly 1.1 million barrels in U.S. crude inventories last week versus a 2.4 million-barrel build expected by analysts in a Reuters poll.

The API report is a precursor to official inventory data due on Wednesday from the U.S. Energy Information Administration.

"There's a possibility we could see newer highs from here, notwithstanding the EIA data, as the market is really fired up on the idea of tightening supplies," said John Kilduff, partner at New York energy hedge fund Again Capital.
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Rex Energy Converts IOUs into Common Stock, Avoids Bankruptcy?

In what appears to be an ongoing strategy/trend among exploration and production companies (i.e. drillers), Rex Energy is the latest driller to convert outstanding debt in the form of notes (IOUs) into equity, or stock ownership.

Earlier this year Rex, a small Marcellus/Utica driller headquartered in State College, PA, offered to refinance its IOUs so the notes expire later, meaning Rex wouldn’t have to cough up cash sooner to pay off the debt.

With few takers for a second lien, Rex then offered to sweeten the deal. Rex finally closed out the offer at the end of March.

But what’s this? Rex announced yesterday they have exchanged a bunch of the notes, along with some preferred stock and second liens, for common stock.

We’ve seen this before with companies either heading for or in bankruptcy–they exchange debt for equity. The strategy turns outstanding debt into ownership in the company, which tends to devalue the stock held by existing investors.
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For The First Time Since The Great Depression, Exxon Mobil Loses 'AAA' Rating

Exxon Mobil has been rate AAA by S&P since 1930 according to Bloomberg. Today that ended as the global crude explorer with sales that dwarf the economies of most nations was cut to AA+ (Outlook stable). Having been put on notice in February (negative watch), citing concern that credit measures would remain weak through 2018.

Credit measures will be weak for a AAA rating due, in part, to low commodity prices, high reinvestment requirements and large dividend payments, S&P says.

Maintaining production and replacing reserves will eventually require higher spending, S&P says.

Greatest business challenge is replacing co.’s ongoing production, S&P says.
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E.ON's Uniper woos investors with cost cuts, asset sales

Uniper, the power plant and energy trading business being spun off by Germany's biggest utility E.ON, on Thursday promised cost cuts, asset sales and a dividend in its battle to keep investors onboard despite faltering markets.

E.ON, like local rivals RWE and EnBW, has been hammered by the rise of renewable energy, plunging wholesale electricity prices and Germany's plans to abandon nuclear power by 2022.

It has responded by seeking to spin off most of its nuclear, gas and coal-fired plants as well as energy trading activities into Uniper, to focus on growing renewables, networks and services instead.

In its first public remarks to investors, Uniper said it would pay 200 million euros ($226 million) in dividends for 2016, sell at least 2 billion euros of assets by 2018 and cut costs to reduce debt. It did not put a figure on savings.

Asset sales are likely to include a 12.25 percent stake in Brazilian power producer Eneva, worth 257 million reais ($72 million) based on its current market capitalisation.

"Now it's about getting the house in order," Uniper Chief Executive Klaus Schaefer, E.ON's former finance chief, said in joint presentations with E.ON. "No unit will be spared, we will look at everything."

Chief Financial Officer Christopher Delbrueck added there would be no "sacred cows" within the company.

Some analysts and traders are sceptical about prospect for Uniper, whose struggling assets have been widely blamed for driving down E.ON's market value.

"It's a poor business model," one trader said, pointing to proforma results showing Uniper's business had been loss-making every year since 2013.

Shares in E.ON, which are down nearly 40 percent over the past twelve months, were up 2 percent at 1226 GMT.

As part of the spin-off, under which E.ON will list 53.35 percent of Uniper later this year, existing shareholders will receive one Uniper share for every ten E.ON shares they own.

E.ON confirmed it was aiming to divest the remaining stake over the medium term, but added further stake sales would not take place before 2018 to avoid a large tax payment.
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Here’s why Cheniere Energy, Inc (LNG) is a Potential Acquisition Target

Why Cheniere Energy is an attractive buy?

International demand for LNG is expected to rise 6% at a compounded annual growth rate (CAGR), or at an average rate of 23 metric tons per annum (mtpa) of new gas liquefaction capacity needed each year. The consultancy group, Wood Mackenzie projects LNG demand to increase by 193 mtpa till 2025.

Considering LNG’s growth outlook, the company continues to strive to leverage its core infrastructure, in order to tap the growing LNG market. Cheniere Energy plans to develop up to seven trains, with a 4.5 mtpa expected nominal production capacity, near Corpus Christi, Texas.

The proceeds generated from LNG export will be used to finance the company’s capital expenditure. The planned LNG export units are expected to generate $4.3 billion in the form of fixed contract fees through a long-term contract of 20 years.

Discount on gas spot prices at the Henry Hub in Louisiana dipped by $2 per million British thermal unit in April. The Northeast Asia spot LNG price dropped more than $15 in December 2013. The squeeze in discount, however, will not dent Cheniere Energy due to its long-term contract that covers 87% of the company’s total capacity. Nonetheless, the spread poses a serious threat to the LNG industry.

The company boasts a strong balance sheet with no bond maturities before 2020, which means that it could heavily invest in the LNG market to tap end-market opportunities. Chenier Energy utilized its $2.8 billion senior credit facility to meet near-term debt obligations and improve its liquidity position.

Bottom Line

Its low cost of production paired with untapped opportunities, justifies the company’s expectation for a significant premium in case of an acquisition. The company has shown some resilience in the prolonged downturn, as the stock price has increased in the past couple of months. This positive trend is likely to continue due to significant growth prospects for the commodity.
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Qatar to Scrap Fuel Subsidies in May as Decade of Surplus Ends

Qatar will scrap gasoline and diesel subsidies next month as the world’s richest nation per capita is set to plunge into deficit this year after more than a decade of budget surpluses.

The world’s biggest exporter of liquefied natural gas is in the second year of a $200 billion infrastructure upgrade to help it host soccer’s 2022 World Cup. The decision to link transportation fuel to international prices follows a Jan. 30 percent increase in local gasoline prices for the lowest available grade.

Ending subsidies aims to reduce wasteful consumption, the official Qatar News Agency reported Tuesday, citing comments by Sheikh Mishaal bin Jabor Al Thani, who heads a committee studying domestic gasoline and diesel prices.

Unlike some of its oil-rich neighbors that have cut spending, Qatar will increase outlays to 35.1 percent of GDP this year compared with 33.1 percent in 2015, according to the International Monetary Fund. As part of belt-tightening plans, the United Arab Emirates eliminated fuel subsidies last year, while Saudi Arabia, Oman and Bahrain reduced support.

Reducing and scrapping subsidies, curbing spending and seeking non-oil revenue sources has become a priority for crude exportersfrom Saudi Arabia to Algeria that are grappling with low prices.

Qatar is expected to post a budget deficit of 2.7 percent of gross domestic product this year, after recording a surplus of 10.3 percent in 2015, according to IMF estimates. It had an average budget surplus of 9.3 percent of GDP between 2000 and 2012.
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Eastern Libya ships first oil cargo in defiance of Tripoli

A government based in eastern Libya shipped its first cargo of crude on Monday in defiance of authorities in the capital Tripoli, a bold move that could deepen the divisions that have brought chaos since the fall of Muammar Gaddafi.

The eastern government has set up its own National Oil Company (NOC) to act in parallel to the Tripoli-based NOC that is recognised internationally as the only legitimate seller of Libyan oil.

A tanker carrying the eastern NOC's first export shipment was en route to Malta carrying 650,000 barrels of crude, a spokesman for the company said on Tuesday.

Libya's economy depends almost exclusively on oil export revenue, and the fight over who controls those funds has been at the heart of the chronic instability and civil war since Gaddafi was toppled and killed by rebels in 2011.

Parallel parliaments and governments have operated in Tripoli and the east since 2014. Much of the country is in the hands of dozens of armed groups that proclaimed loyalty to one or the other of the two rival governments, while small areas are controlled by Islamic State fighters.

The India-flagged tanker Distya Ameya left the eastern Libyan port of Hariga on Monday evening, eastern NOC spokesman Mohamed al-Manfi said, adding that the tanker has entered international waters.

A Reuters tracking system showed the Distya Ameya about 250 km (155 miles) north-east of Hariga early on Tuesday.

The eastern NOC has long been trying to sell its own oil, but until now those efforts have been blocked by the NOC in Tripoli, with the support of Western countries.

The NOC in Tripoli says any sale by its eastern rival would breach U.N. Security Council resolutions and put the future of Libya's economy at risk.

The NOC in Tripoli has continued to run oil production throughout the crisis that followed Gaddafi's fall, with the funds paying state salaries across Libya, including many of the rival armed groups, which have generally been granted official status.

The Tripoli NOC has retained strong international backing, and says it is working to plan future oil sales with a new U.N.-backed unity government that arrived in the capital late last month. The unity government includes figures from across Libya's divides, but has not yet been fully accepted by either of the two loose alliances fighting for power since 2014.

News of the eastern NOC's effort to export its first shipment of oil emerged late last week, when the NOC in Tripoli said it had prevented port workers from loading oil onto the Distya Ameya.

It said the shipment had been ordered for a company called DSA Consultancy FZC, registered in the United Arab Emirates. Reuters was unable to locate contact information for the firm.

A U.N. Security Council resolution last month said the unity government had the "primary responsibility" for preventing illicit oil sales, urging it to communicate any such attempts to the U.N. committee overseeing Libya-related sanctions.
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New estimate puts Israel's Leviathan gas resources far lower at 16.6 Tcf: sources

An updated assessment of the Leviathan offshore gas field puts the Israeli offshore field's estimated resources at 16.6 trillion cubic feet (about 453 billion cubic meters), 24% lower than a previous assessment, according to energy industry sources.

The latest estimate, by Netherlands-based SGS, was prepared at the request of Israel's Energy and Water Resources Ministry.

The previous estimate, prepared for Noble Energy Inc and its Israeli partners Delek Group and Ratio Oil Exploration in July 2014 by Netherland, Sewell & Associates, put Leviathan's resources at 21.9 Tcf.

The ministry would only confirm that it had received an estimate and that it was conducting another assessment by a second international consulting company.

The ministry said in a statement that once all of the tests are concluded it would publish the figures and determine its policy regarding development of the offshore field.

The energy industry sources said that the lower estimate, if correct, could reduce the volume of gas that could be exported from Leviathan, the largest discovery offshore Israel.

"Exports would still be feasible to Egypt, Turkey and even Europe though at reduced volumes and a delayed timetable," said one source.

However, the Leviathan partners said in a statement that there has been no change in their estimate of gas resources in the field.

The partners have said they hope to begin commercial production at the end of 2019, though independent experts have said production is not likely before 2020 at the very earliest.

This is expected to depend on a final resolution of the legal issues connected to the government's gas framework.

In 2012 the Israeli government decided that it would retain 450 billion cubic meters of gas for domestic use through 2040 and 500 Bcm for exports.
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Ocean Rig snaps up drillship at auction for $65M

Ocean Rig UDW Inc., a global provider of offshore deepwater drilling services, has acquired the drillship Cerrado for $65 million.

Ocean Rig’s subsidiary bought the 6th generation ultra-deepwater drillship Cerrado through an auction for a purchase price of $65 million. Ocean Rig said on Monday the purchase would be funded with available cash on hand.

The drillship was previously owned by Schahin Oil and Gas that filed for bankruptcy protection in April last year as it was unable to pay its debts.

The drillship Cerrado was under a contract with Brazilian state-owned oil company Petrobras, and the Brazilian company drilled the first exploration well in the Libra area, offshore Brazil, with this drillship. However, Petrobras cancelled its leases for five offshore oil drilling and production vessels, including Cerrado, with Schahin in May 2015.

The drillship was built at Samsung Heavy Industries in 2011 to similar design specifications as Ocean Rig’s existing 6th generation drillships built at Samsung, and will be renamed the Ocean Rig Paros upon its delivery to Ocean Rig.

Another subsidiary of the company has been acting as the manager of the drillship for its previous owners. The transaction is expected to close upon completion of the judicial auction procedure.

I had to read the news twice to make sure I was not mistaken? Recently, I commented on another UDW Drillship sold through an auction, as well, for $210 million.
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BP Profit Falls 80% as Oil Prices Drop; Result Beats Estimates

BP Plc reported a 80 percent decline in first-quarter earnings as crude oil prices continued to slide and a mild winter weighed on refining margins.

Profit adjusted for one-time items and inventory changes fell to $532 million from $2.6 billion a year earlier, the London-based company said in a statement Tuesday. Analysts had expected a loss of $244.9 million, according to the average of 12 estimates compiled by Bloomberg.

The average price of Brent crude, the global benchmark, slumped to the lowest in almost 12 years in the quarter. That hampered efforts by Chief Executive Officer Bob Dudley to boost earnings even after he trimmed billions of dollars of spending, cut thousands of jobs and deferred projects to weather the market rout. BP’s quarterly results, the first among the world’s oil majors, are likely to be an indication of how the others will perform.

Brent’s decline below $28 a barrel in January made crude cheaper for BP’s refineries, yet weak fuel demand during a mild winter in Europe and the U.S. drove down refining margins. Global processing margins dropped to $10.50 a barrel in the first quarter, 31 percent lower than a year earlier and 20 percent lower than the preceding quarter, according to data on BP’s website.

Oil has rallied since then, rising above $45 as U.S. crude production slows and major producers including Saudi Arabia study a possible cap on output. The increase in prices has pushed up BP’s shares 1.8 percent this year after a 14 percent decline in 2015.

The company started cutting costs and selling assets following the 2010 oil spill in the Gulf of Mexico. In October, it lowered its 2015 capital-spending forecast to about $19 billion after investing about $23 billion in 2014. BP said then it expects to spend $17 billion to $19 billion a year through 2017.

Total SA is scheduled to publish first-quarter earnings on Wednesday. Exxon Mobil Corp. and Chevron Corp. will announce results on April 29 and Royal Dutch Shell Plc on May 4.

BP (BP.L) said on Tuesday it could cut capital spending further after reporting an 80 percent drop in profits in the first quarter of the year, when oil prices touched a near 13-year low.

Chief Executive Officer Bob Dudley nevertheless said he expected crude prices to recover towards the end of the year as producers halt work on fields and fuel demand remains robust.

"Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year," Dudley said in the results statement.

Faced with the worst downturn in the oil sector in at least three decades, BP reduced its capital spending three times in 2015 to $19 billion, slashed nearly 10 percent of its around 80,000 workforce and sharply lowered costs.

BP slipped to its biggest annual loss last year as a result of lower oil prices, costs related to the settlement of a deadly 2010 Gulf of Mexico oil spill and huge writedowns.

The company said it expected its 2016 capital expenditure to reach $17 billion, at the lower end of its previous guidance, and that "in the event of continued low oil prices" it saw further flexibility to lower spending to $15-$17 billion.

It also expected 2017 cash costs to be $7 billion lower than for 2014.

BP's first quarter underlying replacement cost profit, its definition of net income, was $532 million, down from more than $2.6 billion a year earlier but beating forecasts for a loss of $140 million, according to consensus figures provided by BP.

Its refining and trading segment, known as downstream, once again came to the rescue with a quarterly profit of $1.8 billion, offsetting a $747 million loss in oil and gas production.

BP maintained its dividend at 10 cents per ordinary share.
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Pioneer Natural Boosts Full-Year Output Target on Shale Gushers

Pioneer Natural Resources Co. lifted its 2016 production growth target without increasing spending because wells drilled in a West Texas shale field are pumping more crude than expected.

The company said output will grow more than 12 percent this year, up from an earlier estimate of 10 percent. Pioneer will hold its full-year capital budget at $2 billion -- a 9.1 percent reduction from 2015 -- and pay for it with cash flow from oil and gas sales, money it already has in the bank and money received from an earlier property auction, according to a Pioneer release on Monday. Output from shale zones known collectively as the Spraberry/Wolfcamp probably will expand by 33 percent this year, more than offseting declines in other fields, Pioneer said.

The company’s first-quarter net loss widened to $267 million, or $1.65 a share, from a loss of $78 million, or 52 cents, a year earlier, according to the statement. Excluding one-time items, the per-share loss was 64 cents, compared with the average estimate of a 76-cent loss among 40 analysts in a Bloomberg survey.

During the quarter, Pioneer increased its hedging for 2017 to about 50 percent of its oil production from 20 percent, and boosted its natural gas hedges to about 25 percent of 2017 output from zero.

Pioneer released the statement after the close of regular U.S. equity markets. The shares rose 2.9 percent to $158 at 4:48 p.m. in New York., extending Pioneer’s year-to-date gain to 26 percent. That’s more than double the average advance for energy companies in the Standard & Poor’s 500 Index.

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Saudi Spot Crude Deal in China Seen by Citi as `Dramatic' Shift

Saudi Arabia made its first sale of oil to a small, independent Chinese refiner. What’s more significant to markets is that the world’s biggest crude exporter broke from its usual practice of selling via long-term contracts, according to Citigroup Inc.

The world’s biggest crude exporter sold a spot cargo to teapot refiner Shandong Chambroad, said people with knowledge of the deal who asked not to be identified as the information is confidential. The 730,000-barrel shipment is expected to load in June from state-owned Saudi Arabian Oil Co.’s leased storage tank in Japan.

“News that Saudi Arabia is selling a cargo on the spot market to Asia may mark the turning of a dramatic new chapter in the Saudi playbook,” the bank’s analysts including New York-based Ed Morse said in a April 25 report. “What is unusual is that the sale is spot rather than the initiation of a new term contract. Spot sales are about the only way the Kingdom can gain new market share in a world in which chunky buyers are interested in securing incremental purchases via spot rather than term arrangements.”

Aramco will complete the expansion of its Shaybah oilfield by the end of May to maintain the level of its total production capacity, two people with knowledge of the plan said this week. The potential for agreement between major oil producers to cap output helped prices rally from a 12-year low in January this year.

Saudi Arabia is hamstrung by its restrictive long-term oil contracts at a time when competitors including Iran are extending larger amounts of open credit to buyers for longer periods, according to Citigroup.

Saudi Aramco has long shunned spot sales of its oil, a strategy that worked well in maintaining the bulk of its 7 million barrels a day of sales, said the bank’s analysts. With the Shandong Chambroad deal, it should “lay any doubts to rest” about the company’s ability to use its logistical system and spot sales to boost market share, they said.

“It remains to be seen whether in the new oil environment, in an effort to gain greater control over market share and market pricing, the Kingdom will move more aggressively to allow resale of its crude and truly re-establish Saudi Light crude oil as the global benchmark,” said Citigroup.
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Canadian regulator approves Enbridge Line 3 with conditions

Canadian regulators on Monday recommended the federal government approve Enbridge Inc's plan to replace one of its major crude oil export pipelines, but also imposed 89 conditions on the project to enhance safety and environmental protection.

Calgary-based Enbridge plans to replace all segments of pipe on the 1,031 mile (1,659km) Line 3 between Hardisty, Alberta, and Superior, Wisconsin, by 2019, in what will be the company's largest-ever project. The cross-border endeavor will cost more than C$7.5 billion ($5.91 billion).

Monday's recommendation only applies to the Canadian section of the line. U.S. regulators are in the process of dealing with the southern leg.

In a statement Enbridge said it was pleased with the regulator's announcement and was in the process of reviewing the 89 conditions.

Despite being a cross-border project, Line 3 will not require a U.S. presidential permit, which ultimately scuppered TransCanada Corp's Keystone XL, because Enbridge is restoring the pipeline to its original capacity.

President Barack Obama rejected Keystone XL last November after a seven-year delay, and other proposed export pipelines from Alberta's oil sands to the Canadian east and west coasts are also facing additional regulatory scrutiny.

The Line 3 project will allow Enbridge to run the pipeline at maximum capacity of 760,000 barrels per day. Currently capacity is 390,000 bpd because of voluntary pressure restrictions.

Dr Robert Steedman, chief environmental officer at the National Energy Board, said a regulatory panel had concluded the project was in the public interest and unlikely to cause significant adverse environmental affects.

"The new pipeline will be built to modern standards and will operate with improved safety and reliability," he said.

The NEB's conditions also required Enbridge to continue consultation with landowners and aboriginal groups who live along the pipeline's route. Steedman said the NEB always imposed conditions when recommending projects and the 89 required of Line 3 were not unusually high.

Federal Natural Resources Minister Jim Carr said in a statement he would study the report and seek additional public input before making a decision "in fall 2016."

Enbridge ships more than 2 million bpd of crude exports to the United States, the bulk of Canada's total exports.

Chief Executive Al Monaco has previously said the project, which involves replacing existing 34-inch diameter pipe which 36-inch diameter high-strength steel pipe, would not boost total exports as the Enbridge system is in balance, meaning efforts to lift crude flow could cause bottlenecks.
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Contract driller Nabors posts quarterly loss as oil tumbles

Contract driller Nabors Industries Ltd posted a quarterly loss, compared with a year-earlier profit, as oil producers used fewer rigs amid persistently low crude prices.

The company's shares fell 9 percent to $9.86 in after-market trading on Monday.

A more than 60 percent slide in oil prices since their 2014 peak has forced exploration and production companies to cut rig usage, hurting drillers like Nabors.

U.S. energy firms cut oil rigs for a fifth week in a row to the lowest level since November 2009, oil services company Baker Hughes Inc said on Friday.

Net loss attributable to Nabors was $398.3 million, or $1.41 per share, in the first quarter ended March 31, compared with a profit of $123.6 million, or 42 cents per share, a year earlier.

The company said net loss from continuing operations included impairments from its stake in C&J Energy Services Ltd and its share in that company's losses.

Nabors owns 53 percent of C&J Energy after selling its completion and production services business to the pressure pump operator in 2014.

Nabors said its average U.S. rig count fell to 54, matching its forecast of mid-50s.

Excluding items, Nabors reported a loss of 29 cents per share, smaller than analysts' average estimate of 34 cents, according to Thomson Reuters I/B/E/S.

Total revenue fell nearly 70 percent to $430.8 million.

Adjusted revenue of $597.9 million missed analysts' average estimate of $630.8 million, according to Thomson Reuters I/B/E/S.

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Moody's downgrades Canadian province of Alberta on rising debt

Moody's Investors Service stripped the Canadian province of Alberta of its Aaa credit rating on Monday, citing its worsening fiscal position and resulting rapid rise in debt.

The ratings agency downgraded the province's long-term rating to Aa1 from Aaa and maintained a negative outlook. Earlier this month, Dominion Bond Rating Service also downgraded the province after the provincial government forecast a budget deficit of C$10.4 billion ($8.20 billion) this fiscal year.
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China Stockpiling Oil At Highest Rate In Over A Decade

China might be in the midst of another round of stockpiling, stepping up crude oil imports to fill its strategic petroleum reserve (SPR).

The slowdown in oil demand in China is one of the chief concerns regarding the state of oversupply in global oil markets. Excess production has driven down prices, but soft demand in China over the past year or so has led to a protracted recovery.

After a period of softness, oil imports could be rising once again. Bloomberg reports that the number of oil supertankers docking at Chinese ports is at a 16-month high. And there are 83 supertankers currently on their way to China, with a capacity of 166 million barrels of crude, the highest number in four months.

In the first quarter of this year China diverted about 787,000 barrels per day into its strategic stockpile, the highest rate since Bloomberg has been tracking the data in 2004. Overall, as of March, China was importing around 7.7 million barrels per day.

The activity makes sense – China needs to fill up its strategic reserve and has had several facilities come online last year, with more storage sites under construction. The timing is fortuitous since China can fill its storage reserves with oil at incredibly low prices.

Another source of additional demand comes from a policy change in the downstream sector. The central government recently loosened the rules on oil imports, allowing smaller refineries to import more crude oil. These so-called “teapot refineries,” with capacities of around 20,000 to 100,000 barrels of production per day, struggled under the old restrictions, producing at only 30 to 40 percent of capacity because of an inability to import oil. That has changed, and domestic refining production is set to rise, and with it, so are imports.

This could provide a bit of a lift to crude oil markets, as China’s additional SPR demand and higher refinery utilization could take a bite out of excess supply.

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Kuwait Emerging From Strike With Plans to Have Record Oil Output

Kuwait plans to boost oil production to more than 3 million barrels a day within months, doubling output from where it stood during last week’s oil-worker strike.

Output will climb to 3.15 million barrels a day by June, Haitham Al-Ghais, market research manager at government-owned Kuwait Petroleum Corp., said Monday in an interview in Abu Dhabi. That would be the OPEC member’s highest level of production ever, according to data compiled by Bloomberg.

A three-day strike by Kuwaiti oil workers sent crude production tumbling to 1.5 million barrels a day last week. The Oil & Petrochemical Industries Workers Confederation agreed to end the walkout after the government refused to negotiate while labor was off the job. Kuwait produced 3 million barrels a day before the strike, data compiled by Bloomberg show, making it the fourth-largest member of the Organization of Petroleum Exporting Countries.

“The strike is now done and production is back to normal,” Al-Ghais said. “We should reach our target of 3.15 million barrels in June,” he said, referring to both output and production capacity.

Kuwait is targeting capacity of 4 million barrels a day by 2020, including 350,000 barrels a day from oil fields it shares with Saudi Arabia, he said.
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Iraq's southern oil exports hit record high so far in April

Oil exports from southern Iraq have reached a record monthly rate so far in April as OPEC's second-largest producer resumes the supply growth that has added downward pressure on prices.

Baghdad had given verbal support to an initiative by OPEC and outside producers to freeze output. But they failed to reach a deal at an April 17 meeting, and rising exports from Iraq as well as other nations including Russia underline the challenges to any further attempt at curbing supply.

Iraq's southern exports in the first 24 days of April averaged 3.43 million barrels per day (bpd), according to an industry source and loading data tracked by Reuters.

If sustained, that would exceed the record of 3.37 million bpd reached in November.

The increase is in line with figures given earlier in April by an Iraqi official. According to oil trading sources, it partly reflects an easing of delays in the loading of Basra Heavy crude cargoes.

"They finally managed to catch up on the delays," the industry source said. "I don't believe anyone is really doing anything about that," the source added of the effort to freeze output.

The south pumps most of Iraq's oil. Iraq also exports smaller amounts of crude from the north by pipeline to Turkey.

Northern shipments of crude from fields in the semi-autonomous Kurdistan region have risen to 420,000 bpd so far in April, according to loading data, from 327,000 bpd in March.

The shipments have fallen from January's level of about 600,000 bpd due to pipeline sabotage and a decision by the central government in Baghdad to suspend pumping Kirkuk crude into the line.

Given the drop in northern exports from January's level, total Iraqi exports this month of 3.85 million bpd are short of a record high.

Iraq was the fastest source of supply growth in the Organization of the Petroleum Exporting Countries last year and boosted production by more than 500,000 bpd, despite spending cuts by companies working at the southern fields and conflict with Islamic State militants.

Iraqi officials and oil analysts expect further growth in the country's exports this year, but at a slower rate than 2015.

I expect "a clear slowdown from strong growth last year", Commerzbank analyst Carsten Fritsch said. "But no voluntary freeze or even cut."
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Genscape Report Of Big Cushing Build

Genscape reported a 1.5 million barrel inventory build at Cushing (considerably more than the 1.2mm build expected).

That would be the biggest inventory build since mid-December and follows 4 of the last 5 weeks with draws...
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Saudi Arabia's Break-Even Oil Price Plunges as Spending Drops

Saudi Arabia will see the biggest drop this year in the oil price needed to balance its budget as Riyadh curbs spending amid the crude-market rout.

The kingdom’s fiscal break-even will fall to $66.70 a barrel from $94.80 in 2015, the International Monetary Fund said on Monday. The 30 percent drop is the steepest among a group of Middle East and North African OPEC members reviewed by the IMF.

While that break-even remains above current market prices, the trend shows Saudi Arabia is adjusting to the slump in crude triggered by its November 2014 decision to push the Organization of Petroleum Exporting Countries to change strategy and fight for market share. The IMF figures suggest the world’s biggest oil exporter can hold firm, after its insistence that Iran join an output freeze derailed talks between 16 producer nations in Doha on April 17.

Saudi Arabia unveiled a plan on Monday for the post-oil era as it adjusts to the slump in crude. That blueprint, dubbed the “Vision for the Kingdom of Saudi Arabia,” seeks to cut reliance on oil exports and will encompass economic, social and other programs, its architect Deputy Crown Prince Mohammed bin Salman told Bloomberg News this month.

Saudi Arabia’s net foreign assets fell by $115 billion last year to plug a budget deficit that reached about 15 percent of economic output. After decades of talk of diversification, more than 70 percent of Saudi government revenue came from oil in 2015. In response, the government has already announced cuts in utility and gasoline subsidies in December.

Five out of eight OPEC countries assessed by the IMF will see theirfiscal break-even oil price fall this year.

Iran -- Saudi Arabia’s arch rival in the Middle East -- will see the second-biggest drop, by 27 percent to $61.50 a barrel. Kuwait is the best-positioned to balance its budget, needing $52.10 a barrel.

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ONGC to drill 17 shale wells

ONGC to drill 17 shale wells

ONGC Limited is planning to explore as many as 17 shale gas and oil wells in both east and west coasts with an investment of around Rs7bn. - 

See more at:
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Enbridge's Gateway Rises From Dead as Trudeau Wavers on Tankers

Enbridge Inc.’s Northern Gateway pipeline may get a new lease on life as the Canadian government wavers on a planned tanker moratorium that was previously thought to spell the end for the project.

Officials are weighing what types of petroleum products may be exempt from any moratorium, and whether certain tankers could be allowed, according to people familiar with the matter, who spoke on condition of anonymity because the talks are private.

Prime Minister Justin Trudeau pledged in November to “formalize a moratorium on crude oil tanker traffic” on British Columbia’s northern coast. But cabinet ministers are noncommittal on its precise implications, while the officials declined to comment on Northern Gateway’s prospects.

“It’s a formalized moratorium and, when we have worked out exactly what that means, we’ll let you know,” Transport Minister Marc Garneau, who is responsible for implementing the measure, said in an interview this month. Asked in a separate interview whether the moratorium pledge means Gateway is dead, he said: “It’s premature to say anything.”

The country’s oil industry, constrained by its reliance on the U.S. as the main destination for crude exports, is seeking new markets. Delays and opposition to pipeline projects are hampering that effort, leading to bottlenecks and discounts in Canadian heavy oil, which trades about $14 a barrel lower than North American benchmark West Texas Intermediate.

The 1,177 kilometer (731 mile) Northern Gateway would carry diluted bitumen from Alberta’s oil sands through British Columbia for shipment to Asia. The pipeline, now expected to cost more than the initial C$6.5 billion ($5.1 billion) price tag, was first proposed about a decade ago.

Several federal government officials declined this month to say Northern Gateway is dead, or whether the moratorium will amount to a ban on tanker traffic altogether. Trudeau spokesman Cameron Ahmad acknowledged the prime minister’s earlier comments against the pipeline while declining to comment on whether his position remains the same.

“The government is currently conducting consultations and examining science and facts to ensure we protect Canadian coastlines,” Ahmad said.

Alberta Premier Rachel Notley has changed her skeptical stand on Northern Gateway after seeing progress on some of the project’s hurdles and speaking to people involved who are “optimistic” about the pipeline’s chances, said the premier’s spokeswoman Cheryl Oates.

The debate hinges on “what petroleum products will be captured by the moratorium,” said Kai Nagata of the Dogwood Initiative, an environmental group that opposes the pipeline. He added they were told to expect legislation on the moratorium this year. “It would be quite a stunning reversal for people in British Columbia were the government to walk back its promises of a formal tanker ban.”

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Swift Energy emerges from bankruptcy

Oil producer Swift Energy Co said on Monday it emerged from Chapter 11 bankruptcy, less than four months after filing for creditor protection.

Swift filed for bankruptcy on Dec. 31, joining about 40 other energy companies that entered bankruptcy in 2015 as oil prices plunged.

The company entered bankruptcy with an agreement with more than 60 percent of the holders of its unsecured bonds.

Swift had said it planned to exchange those bonds for 96 percent of its stock when it exited bankruptcy. Its shareholders were to get 4 percent of its stock.

The company said it has completed its financial reorganization, which was confirmed by the U.S. Bankruptcy Court for the District of Delaware on March 31.

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DUC's and Refrac's: 8000 wells at 400% IRR's?

Speaking on April 21 during Hart Energy’s Refracturing: Cracking the Code breakfast seminar, experts from Baker Hughes, Weatherford, Fracknowledge and Eventure Global Technology agreed that refracturing has benefits. Potential also exists to learn more about which methods work best for certain reservoir conditions by testing concepts on some of the 8,000 or so drilled but uncompleted wells (DUCs) across North America.

However, low commodity prices have put refracturing programs in the Haynesville and Barnett on hold.

RELATED: Operators Postpone Dry Gas Basin Refracks

“We’re in a pricing environment where there is yet one more round of layoffs. Who’s going to go take risks like that?” asked Tim Leshchyshyn, president of Fracknowledge. “But if you actually look at the statistics, it’s amazing.”

Refracs account for less than 25% of the original drilling and completion costs, according to Leshchyshyn. Given oil is about half of what the industry wants it to be to thrive, there is inherently a 100% return on investment—with a quarter of the cost at one half of the return, he added. But, “The return on investment is sometimes 400%. This is above the incremental reserves. This is above net present values.”

The talk about refracturing opportunities and challenges came as companies continued to seek cost-efficiencies during a downturn brought on by a supply-demand imbalance. Refracturing instead of drilling could be among the options, considering costs associated with refracturing a well are about $1 million compared to between $6 million or $7 million to drill a new well.

What’s New? What Works?

Harsh Chowdhary, engineering manager for Eventure Global Technology, referred to a 2009 refrac job involving three wells from the same pad. Two wells used a chemical diverter and one used expandable lining. “When the refrac was done, the mechanical isolation well showed 40% higher production rates than the chemical diverter,” he said. “It is more costly than the other options, but I think experimentation and R&D is going to drive the technology.”

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FERC clears Magnolia LNG construction

Australia’s Liquefied Natural Gas Limited on Monday informed it’s unit, Magnolia LNG, received the permit from the U.S. FERC to site, construct, and operate its LNG terminal in the Lake Charles District, Louisiana.

Additionally, Louisiana Department of Environmental Quality approved the air permit for Magnolia LNG, according to the statement.

FERC also authorized the Kinder Morgan Louisiana Pipeline to install compression and other related facilities on the KMLP Pipeline, facilitating the transportation of full feed gas volumes to the Magnolia LNG project.

Following permits from FERC and LDEQ, LNG Limited’s managing director and CEO, Greg Vessey said that the company now expects the decision of the US Department of Energy regarding the Magnolia LNG’s non-FTA export permit.

The proposed Magnolia LNG facility would have up to four trains each with a liquefaction capacity of 2 mtpa or more, two 160,000 cbm storage tanks, ship, barge and truck loading facilities and supporting infrastructure. The construction will be carried out by the KBR‐SKE&C joint venture.

Vessey added that the focus now remains on completing the marketing of Magnolia LNG’s offtake capacity, finalizing financing arrangements and progressing to the construction phase.
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Aramco Said to Expand Oilfield in May to Maintain Saudi Capacity

Saudi Arabian Oil Co. will complete the expansion of its Shaybah oilfield by the end of May, allowing the biggest crude exporter in the world to maintain the level of its total production capacity, according to two people with knowledge of the plan.

Shaybah’s production capacity will rise to 1 million barrels a day from 750,000 barrels, said the people, who asked not to be identified because the information isn’t public. The field, in the Empty Quarter desert near the border with the United Arab Emirates, produces extra light grade crude with API gravity of 42 degrees, they said.

Shaybah’s expansion will help Saudi Aramco, as the state producer is known, to keep the company’s output capacity at 12 million barrels a day, they said.

Saudi Arabia is maintaining investments in oil production as the kingdom pursues a strategy to defend market share amid a global glut. Saudi Aramco will keep investing in its crude oil production capacity, Chief Executive Officer Amin Nasser said last month. The company also plans to complete the expansion of the Khurais oil field to 1.5 million barrels a day in 2018, he said.

Saudi Arabia set a crude production record of 10.564 million barrels a day in June, exceeding a previous high in 1980, according to data the kingdom submitted to the Organization of Petroleum Exporting Countries. The country increased output after it led the group to change strategy in November 2014, fighting for market share instead of supporting prices by cutting production.

Saudi Arabia could raise crude output by more than a million barrels a day immediately if there was demand for it, Saudi Deputy Crown Prince Mohammed bin Salman said in an interview earlier this month. Aramco could increase output to 11.5 million barrels a day immediately and go to 12.5 million in six to nine months “if we wanted to,” said the prince, who is also chairman of Aramco’s Supreme Council.

The country pumped 10.2 million barrels a day last month, according to data compiled by Bloomberg. If the kingdom chose to increase investment in its oil industry, total production capacity could be increased to 20 million barrels a day but not beyond that level, the prince said.
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Texas oil rig count keeps falling

Texas lost another seven rigs actively drilling for oil in the past week, leaving just 351 oil rigs left nationwide as the energy sector continues to shed jobs by the thousands.

The U.S. saw a net loss of eight oil rigs and one natural gas rig in the past week, according to weekly data compiled by Baker Hughes. That leaves a U.S. total of 431 rigs, including 88 gas-seeking rigs, which represents the lowest total count since the oil field services company first began compiling the data in 1944.

The oil rig count alone is now down more than 78 percent from its peak of 1,609 in October 2014 before oil prices began plummeting and at the lowest since November 2009.

Texas’ Permian Basin took the hardest hit with a loss of five rigs, although it still remains the nation’s most active shale play. Southern Texas’ Eagle Ford lost two rigs. Texas is still home to 43 percent of the nation’s operating rigs.

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

The benchmark price for U.S. oil was up nearly 40 cents on Friday up to more than $43.50 a barrel.

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

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Halliburton says it cut 6,000 jobs in first quarter, delays earnings call, "landing point" for rig count

Halliburton says it cut 6,000 jobs in first quarter, delays earnings call, "landing point" for rig count

Halliburton Co said it cut more than 6,000 jobs in the first quarter, during which revenue slumped 40.4 percent and it took a $2.1 billion restructuring charge mainly for severance costs and asset write-offs amid the prolonged slump in oil prices.

Halliburton also postponed its earnings conference call to May 3 from April 25 to accommodate the April 30 deadline to close its acquisition of Baker Hughes Inc, the company said in a statement after the U.S. market closed on Friday.

The No.2 oilfield services provider is scheduled to report first-quarter results on Monday, April 25. Baker Hughes is due to report on April 27, but has not held conference calls since the merger was announced in 2014.

While the deal will help Halliburton narrow the gap with market leader Schlumberger Ltd, it faces stiff regulatory hurdles.

The U.S. Justice Department filed a lawsuit this month to block the deal. European Union antitrust regulators could make its objections to the deal known to Halliburton next week, Reuters reported on Wednesday.

The merger was in part to help weather the oil price downturn that started in mid-2014, and its aftermath. Since 2014, Halliburton has reduced its headcount by about a third and slashed costs as its clients sharply reduce activity.

"Life has changed in the energy industry," CEO Dave Lesar said. President Jeff Miller said, "My definition of an unsustainable market is one where all service companies are losing money in North America, which is where we are now."

The company's first-quarter revenue dropped to $4.2 billion from $7.05 billion. Miller said Halliburton's margins have been resilient, with "decremental margins of only 22 percent for the quarter."

Schlumberger on Thursday reported negative margins for North America for the first time since the oil slump started. Margins become negative when costs exceed revenue earned.

Halliburton said it expects spending on drilling and completion services to fall 50 percent in North America this year, following a 40 percent decline last year. It expects global spending to drop 30 percent for the second straight year.

U.S. energy firms cut oil rigs this week to the lowest level since November 2009, Baker Hughes said.

Halliburton said it expects that the second quarter will mark the "landing point" for rig count. The company said it typically sees margins improving at least a one quarter after rig count flattens.
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India's Reliance looking at long-term oil supplies from Iran

Reliance Industries Ltd, India's biggest oil refiner, said it is looking to buy more crude from Iran as the company seeks to rebuild ties to benefit from shorter shipping distances.

The company had made small purchases from Iran in the current quarter and was currently engaged in talks for bigger supplies, indicating that it could also get into a long-term supply contract, said V Srikanth, Reliance's joint chief financial officer.

"We have had engagements with Iran before the sanctions and they have grades of crude that are attractive to us from where we are," Srikanth said at a news conference on Friday.

India is set to import at least 400,000 barrels per day (bpd) of Iranian oil in the year from April 1, with refiners looking to ramp up purchases after the sanctions targeting Tehran ended in January, sources had told Reuters.

Iran was India's second biggest oil supplier before economic sanctions aimed at Iran's nuclear program hampered its trade relations. Now, Indian buyers are being drawn back to Iran in part by freight discounts that increase as more barrels are purchased.

The comments came as Reliance posted its biggest quarterly profit in over eight years on better margins in the company's core refining and petrochemical business.

Reliance, controlled by India's richest man, Mukesh Ambani, reported an estimate-topping net profit of 73.98 billion rupees ($1.11 billion) for the Jan-March period -- its highest quarterly profit since December 2007.

The gross refining margin on each barrel of crude processed was $10.80 a barrel, up from $10.1 per barrel a year ago, Reliance said.

Srikanth said the company will be able to sustain margins at above $10 -- one of the highest among global refiners -- in the current financial year.
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Alternative Energy

First Solar stock slips after first revenue miss in four quarters

Solar panel maker First Solar Inc reported its first revenue miss in four quarters, sending its shares down as much as 9 percent in after-market trading.

The company also said on Wednesday it named Chief Financial Officer Mark Widmar as CEO, succeeding James Hughes, who plans to step down effective June 30.

Revenue rose about 81 percent to $848.5 million in the first quarter, largely due to higher revenue from the sale of a large California solar power plant to Southern Co.

But that fell short of analysts' average estimate of $973.4 million, according to Thomson Reuters I/B/E/S.

The company reported a net profit of $170.6 million, or $1.66 per share, for the three months ended March 31, compared with a loss of $60.9 million, or 61 cents per share, a year earlier.

First Solar raised the lower end of its full-year 2016 earnings per share forecast by 10 cents to $4.10. The company retained the higher end at $4.50.

Analysts on average were expecting $4.30, according to Thomson Reuters I/B/E/S.

First Solar also boosted its full-year gross margin forecast to a range of 18 percent to 19 percent, from 17 percent to 18 percent.

The company named Alexander Bradley, vice president, treasury and project finance, its interim chief financial officer.
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DONG Energy has wind in its sails as profits increase in 2016

Wind power helped Denmark’s Dong Energy to increase profits in the first quarter of 2016.

The company reported that its EBITDA had increased by 35% to DKK8.1billion compared with DKK6billion in 2015.

The improvement was driven by a 53% increase in wind whose stellar performance was partly offset by lower gas, oil and power prices.

Net profit jumped to DKK5.2 billion in the first quarter, up by nearly 49% on the year. DONG said this was primarily due to the higher EBITDA and lower depreciation and net financial expenses.

Dong said depreciation and impairment costs were down, helping achieve the growth in net profit.

The company confirmed its initial public offering (IPO) is proceeding as planned, with the listing expected before the end of March 2017.

Chief executive Henrik Poulsen, said: “Our strategic shift towards renewables and green customer solutions is well under way and continues to support our strong financial performance – both short and longer-term.”

“Wind power continues to grow on the back of new offshore wind farms being constructed.

“We are currently working on six major offshore wind farms in the UK and Germany and they are all well on track.”

DONG is proceeding to build its pipeline of wind farm projects beyond 2020.

It acquired 1 GW offshore project rights in the US taking total US project rights to 2.5GW. The company is establishing a presence in Taiwan in order to explore offshore wind opportunities in the Asia-Pacific region.
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Siemens claims EU's largest wind turbine contract with Iberdrola

Germany's Siemens has won a five-year deal worth up to 833 million pounds ($1.2 billion) to build and service wind turbines for Scottish Power's East Anglia ONE project off the eastern coast of England, Scottish Power said on Wednesday.

The contract, for 102 turbines each capable of generating 7 megawatts of electricity, was Europe's largest single contract for the supply of offshore wind turbines, said Scottish Power, which is owned by Spain's Iberdrola.

The turbine blades will be manufactured at Siemens' Hull factory in northern England, a 160-million pound compound to be opened in 2017 to meet Britain's huge demand for offshore wind equipment.

Britain, the world's largest market for offshore wind projects, plans to have over 10 gigawatts of offshore wind capacity in production by 2020.

Scottish Power plans to start building the 715-megawatt East Anglia ONE wind farm off the coast of Norfolk in 2017, with the turbines set for installation by 2019 and the wind farm operational by 2020 the utility said.

When completed the East Anglia ONe project is expected to generate enough electricity to power around 500,000 homes.

Scottish Power has secured a guaranteed price for the electricity produced at the wind farm of 119 pounds/megawatt hour (MWh) under the government's contracts-for-difference scheme to incentives low-carbon power production.

Electricity prices in Britain currently trade around 37 pounds/MWh..

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China's newly installed wind power capacity grows 13 pct in Q1

Newly installed wind power capacity in the first quarter reached 5.33 gigawatts, up 13 percent over the same period last year, according to the National Energy Administration (NEA) on Tuesday.

By the end of March, China had 134 gigawatts installed wind power capacity, up 33 percent compared to the figure by March last year, the NEA said.

However, wind-power use was falling due to wastage.

The average usage of wind power in the first three months was 422 hours, 61 less than the same period last year, the NEA said.

Wind power wasting reached 19.2 billion kilowatt hours, an increase of 8.5 billion kilowatt hours compared with the same period last year, the NEA added.
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Statoil enters German offshore wind market with E.ON in EUR1.2bn deal

Statoil will partner with E.ON as it enters the German offshore wind market with the EUR1.2billion Arkona project.

When operational the Arkona wind farm will provide renewable energy for up to 400,000 households in Germany, making it one of the largest ongoing offshore wind developments in Europe.

Eldar Sætre, Statoil’s chief executive said: “We are pleased to announce our decision to develop this significant offshore wind project together with E.ON.

“This investment is in line with our strategy to gradually complement our oil and gas portfolio with profitable renewable energy and other low-carbon solutions.”

Statoil is the second-largest supplier of natural gas in Germany and has been delivering gas from Norway through three direct pipelines for over 35 years.

The new windfarm adds a new dimension to the Norwegian-German energy partnership said Sætre.

Located in the Baltic Sea, the Arkona wind farm will be located 35 kilometres northeast of the Rügen Island and consist of 60 six-megawatt turbines.

E.ON’s Climate & Renewables chief executive Michael Lewis said: “This project offers ideal conditions for further reducing the costs of offshore wind and will take us a big step toward realizing our goal of making renewables truly competitive.”

Start of electricity production is expected in 2019. Once in service, the wind farm will create up to 50 permanent jobs for highly skilled staff in operations, administration, and maintenance as well as, indirectly, another 100 jobs for external service providers.

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French combined wind, solar power output up 32% in March

An increase in installed renewables capacity saw output from wind and solar farms increase in March this year by 32% compared with the same period last year, according to the latest figures from French grid operator RTE.

Solar output was up 23% on year at 661 GWh, after installed capacity increased by 16% since March 2015 to 6.31 GW.

Meanwhile, wind output was up by 35% at 2.42 GWh, with wind capacity having also increased on year by 11.5% to 10.405 GW.

Together, wind and solar made up circa 6% of the total power generation mix, while fossil-fuel generation accounted for just over 8% of the mix.

A 300 MW solar power generation park, Cestas, in the Bordeaux region in France, the largest in Europe, entered full service in November last year.

The Cestas plant holds a 20-year power offtake agreement with EDF at a price of Eur105/MWh ($130/MWh) under France's regulated feed-in tariff mechanism.

The cost of solar production has fallen sharply in recent years on cheaper component costs, and this price is lower than the 35-year contract price of GBP92.50/MWh (Eur117.0/MWh) agreed on by the UK government for EDF's planned 3.2 GW Hinkley Point C nuclear power plant.

RTE's report showed that more wind capacity is currently under construction or "in the pipeline" than solar capacity.

Three onshore wind projects totaling 128 MW are being constructed and 3.26 GW worth of offshore wind projects are "pending". Meanwhile, only 105 MW worth of solar projects are waiting to move into construction phase, with 19 MW in the process of being brought online.
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China's newly added solar power capacity rise 52%

China's installed 7.1 GW of new photovoltaic power capacity in the first quarter this year, showed data released by the National Energy Administration (NEA) on April 22.

This brings the country's total installed photovoltaic power capacity to 50.3 GW, up 52% from the same period last year, the NEA said in a statement.

The country's photovoltaic power generation jumped 48% year on year to 11.8 billion kWh during the first quarter, according to the statement.
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China’s Q1 nuclear power output at 47.1TWh

China’s nuclear power output stood at 47.1 TWh in the first quarter of the year, up 34.22% year on year, accounting for 3.47% of China’s total 1,355.1 TWh during the same period, said the China’s Nuclear Energy Association (CNEA) in a quarterly report released on April 26.

The nuclear output is equivalent to a reduction of 14.82 million tonnes of standard coal, 38.84 million tonnes of carbon dioxide, 0.13 million tonnes of sulfur dioxide and 0.11 million tonnes of nitric oxide.

The on-grid power output amounted to 43.86 TWh during the same period, climbing 33.75% from the previous year, it said.

In the first quarter, two nuclear power generating units-- #3 unit at Yangjiang nuclear power plant and #1 unit at Fangchenggang nuclear power plant—were newly put into commercial operation. At present, there are a total of 30 nuclear power generating units that have started commercial operation in China, with combined installed capacity reaching 28.6 GW, according to the report.
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German power firms may pay less than feared for nuclear storage

German power firms may have to pay less for the storage of radioactive waste than investors had feared, driving up their shares in what is seen as a breakthrough in sorting out the financing of a nuclear phaseout.

Utilities will be asked to pay 23.3 billion euros ($26.4 billion) into a state fund to cover the costs of nuclear waste storage, members of a commission tasked with securing funds needed for Germany's nuclear exit told Reuters on Wednesday.

In exchange, Germany's "big four" energy firms - E.ON , RWE, EnBW and Vattenfall - will be able to shake off long-term liability for radioactive waste storage, the most complex, costly and timely aspect of nuclear decommissioning.

The recommendation translates into a surcharge of 6.1 billion euros on top of 17.2 billion euros in storage provisions the companies have set aside so far. This is at the lower end of a 6 billion-18 billion euro range previously discussed.

Shares in E.ON and RWE rose on the news and were up 2.1 percent and 4.8 percent, with traders saying the proposal could cap months of wrangling and remove the single biggest concern investors have regarding German utility stocks.

Investors have been dumping utility stocks over concerns the power firms, already burdened by tens of billions of euros in debt, could remain liable for waste storage forever.

The sources added the amount was agreed unanimously by the 19 members of the commission, which is expected to publish its proposals later on Wednesday on how to allot the costs of Germany's nuclear phase-out.

The recommendations will serve as the basis for talks between the German government and utilities. It is generally expected that the government will adopt the commission's proposals.
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Potash Corp cuts 2016 profit forecast on weak demand, prices

Potash Corp of Saskatchewan, the world's biggest fertilizer company by capacity, cut its full-year profit forecast due to weak demand and lower prices.

The U.S.-listed shares of the company, which also reported a 79.7 percent fall in first-quarter profit on Thursday, were down more than 6 percent at $17.13 in light trading before the bell.

Potash prices have fallen sharply over the past year due to overcapacity, declining farm income and weak currencies in major consumers such as India and Brazil.

The company cut its 2016 earnings forecast to 60 cents-80 cents per share from 90 cents-$1.20 per share. Analysts on average were expecting 90 cents per share, according to Thomson Reuters I/B/E/S.

The company said it expected second quarter profit of 15 cents-25 cents per share, also below the average estimate of 27 cents per share.

"Lower prices for all nutrients weighed on our performance for the quarter and contributed to a more subdued outlook for the year," Chief Executive Jochen Tilk said in a statement.

Potash cut the upper end of its 2016 potash sales volume forecast to 8.8 million tonnes from 9.1 million tonnes. It retained the lower end of the forecast at 8.3 million tonnes.

Weak demand and increasing competition pushed down potash prices in North America while a lack of new contracts in China and low demand from India impacted global potash deliveries in the quarter, the company said.

Potash Corp had said in January that it did not expect weak market conditions to improve soon, and suspended operations at its newest mine, Picadilly in the Canadian province of New Brunswick.

The company's net earnings fell to $75 million, or 9 cents per share, in the three months ended March 31, from $370 million, or 44 cents per share, a year earlier.

Revenue fell 27.4 percent to $1.21 billion.

Up to Wednesday's close, the company's U.S.-listed shares had fallen nearly 45 percent in the past year.
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DuPont raises full-year outlook, first-quarter results beat forecast

DuPont's first-quarter results beat Wall Street estimates and the chemicals and seed producer raised its full-year guidance as it sees lower currency impact than expected.

The company said its global cost savings and restructuring plan is on track and that it still expects savings of $730 million this year.

"Solid execution, local price and product mix gains, and higher corn area led to a strong start to the year for our Ag business," Chief Executive Ed Breen said.

The company, which plans to merge with Dow Chemical Co (DOW.N), now expects operating earnings of $3.05-$3.20 per share, up from $2.95-$3.10 per share it estimated earlier.

DuPont now expects the negative currency impact for the year to be about $0.20 per share, 10 cents lower than estimated earlier.

Net income attributable to the company rose nearly 19 percent to $1.23 billion, or $1.39 per share, in the first quarter.

On an operating basis, the company earned $1.26 per share.

Net sales fell 5.5 percent to $7.41 billion, but was above average analysts estimate of $7.19 billion, according to Thomson Reuters I/B/E/S.

DuPont and Dow Chemical agreed in December last year for a $130 billion all-stock merger, in a first step towards breaking up into three separate businesses.

Analysts have speculated that the deal will face intense regulatory scrutiny, especially over combining the two companies' agricultural businesses, though both Dow and DuPont executives have said that any asset sales required would likely be minor.

DuPont said last month that U.S. regulators needed more time to review materials related to its merger with Dow Chemical Co (DOW.N).

The company said it will hold a conference call at 0800 ET Tuesday to discuss the results, which were released earlier than expected.
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Hedge Funds Double Bets on Crops Rally as Weather Gets Nastier

With drought in Brazil and flooding in Argentina threatening crops, the weather is getting nasty enough for hedge funds to take notice.

Money managers more than doubled their wagers on a rally for agriculture prices, pushing their holdings to the biggest since July, after betting on declines just last month. The investors are now the most bullish on soybeans since May 2014 and trimmed the bets on declines for corn for the fifth time in six weeks. The Bloomberg Agriculture Subindex of eight farm products is heading for its best April rally since 2010.

Dryness is such a problem for the corn harvest in Brazil, the third-largest exporter, that the government suspended import tariffs for six months, signaling it may have to import the grain. Excessive rains in Argentina, the third-largest soybean grower, prompted the nation’s two biggest exchanges and the agriculture ministry to cut outlooks for the crop. Adding to the positive outlook for prices is China’s stabilizing economy and a weaker U.S. dollar that boosts the appeal of supplies from American farmers.

“Now that we’ve started planting, we’re thinking about how the growing season will pan out, and we’re putting some more risk premium into the market, it’s been beaten down so much,” said Chris Narayanan, the head of agricultural research at Societe Generale SA in New York. “If the weather gets worse in Brazil and you have hot, dry weather in the U.S., you could see another massive rally.”

Combined positions across 11 agricultural products rose to 368,088 futures and options in the week ended April 19, according to U.S. Commodity Futures Trading Commission data published three days later. That compares with 177,770 a week earlier.

The Bloomberg Agriculture Subindex climbed 1.5 percent last week, after reaching the highest since July. The recent price gains have stoked speculation that futures may be bottoming after reaching multi-year lows this month. Market participation expanded amid the rebound, with surging trading volumes and rising open interest.

As conditions deteriorate for South American crops, threats are increasing to U.S. growing areas. The shift from El Nino to La Nina weather patterns may come as early as July, Wong said. That would mean higher summer temperatures and drier U.S.conditions, potentially lowering yields for corn and soybeans. Rains in American cotton areas have already disrupted plantings of that crop, and investors more than doubled their net-long position in the fiber to the highest since February.

Ample global inventories can help cushion crop losses from inclement weather and limit price rallies. While the Bloomberg Agriculture Subindex rose last week, the measure tumbled 3 percent on Friday, the biggest drop since August. The ratio of corn stockpiles to demand will be elevated for the season that starts this year, Goldman Sachs Group Inc. said in a report last week. The bank said it was bearish on corn and soybeans and cut its outlook for wheat prices.

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Precious Metals

Alexco: Silver

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Big boost for world's top diamond miner

Alrosa, the world's top diamond producer by output, received a shot in the arm on Wednesday after ratings agency Moody's upgraded the miner's credit rating by two notches.

Moody's upgrade brings the debt rating of Alrosa which is 77%-owned by Russia and the Republic of Sakha (Yakutia), to just below investment grade.

Moody's said its decision reflects the fact that Alrosa's financial metrics "have remained strong versus global peers" and will remain robust, "owing to the company's status as a major producer and exporter of diamonds and weak rouble, the company's 29% share in the global diamond output, its low-cost reserve base, technical mining expertise, solid liquidity and conservative financial policy."

At the same time, Alrosa's rating factors in "the volatile demand and prices for diamonds and the company's exposure to the Russian macroeconomic environment, despite the high exports, given that its operating facilities are located in Russia."

Alrosa is being prepped for privatization and worth $8.4 billion in Moscow after rising by a third in value this year

Moody's says the reason the outlook the rating remains negative is based on state-ownership of the company and the potential downgrade of Russia's sovereign rating. At the same time the ratings agency also takes into account the "moderate probability of government support in the event of financial distress."

Alrosa earlier in April presented a rosy outlook for the diamond market with continued albeit modest growth in demand of 2%–4% through 2025 at the time of the release of its 2015 results.

The company said output climbed to 38.3 million carats, a 6% increase when compared to the previous year, thanks mainly to improvements at its Mir and Udachny underground mines, as well as the commissioning of Karpinskaya-1 and Botuobinskaya pipes and other high-potential deposits.

Alrosa, which together with Botswana-based De Beers produces more than half of the world's diamonds, also saw its reserves grow last year to 43.6 million carats. Despite poor global diamond market conditions, the company sold 3.8% more rough diamonds and increased sales 8% to $3.4 billion.

Alrosa, which along with fellow Russian resources firms Rosneft and Bashneft are among the most likely candidates for privatization this year, is worth $8.4 billion in Moscow (RUB 546 billion) after rising by a third in value this year.
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Gold miner Goldcorp beats market forecasts, swings back to profit

Canadian gold producer Goldcorp Inc on Wednesday reported better-than-expected earnings, returning to a profit in the first-quarter on the back of higher production and lower costs.

Goldcorp, the world's third-biggest gold producer by market value, left unchanged its 2016 production and cost forecast.

Goldcorp's two newest mines, Eleonore in Canada and Cerro Negro in Argentina, continued to ramp up in the quarter and underground mine development is "advancing well," Chief Executive David Garofalo said in a statement.

Goldcorp said it will decide around mid-year whether to go ahead with two proposed projects, the Penasquito pyrite leach plant in Mexico and the Musselwhite materials handling venture in Ontario, Canada.

Earlier on Wednesday, Goldcorp reported net earnings of $80 million, or 10 cents a share, for the three months to end-March. That compared with a net loss of $87 million, or 11 cents per share, a year earlier. In the fourth quarter, Goldcorp reported a net loss of $4.27 billion, or $5.14 per share.

Excluding non-cash and one-time items such as a foreign exchange loss and restructuring costs, earnings in the first quarter were $50 million, or 6 cents a share, beating the 4 cents consensus estimate of analysts polled by Thomson Reuters I/B/E/S.

Production at Goldcorp, which operates only in the Americas, including the United States and Mexico, increased to 783,700 ounces in the first quarter from 724,800 ounces in the year-ago period.

All-in sustaining costs to produce an ounce of gold fell to $836 from $885 a year ago.

Free cashflow was a negative $101 million in the first quarter, down from a negative $321 million a year ago, because of an increase in working capital, Goldcorp said. The company said it expected to be "substantially free cash flow positive" for the full year.

Goldcorp will increasingly look for large gold deposits outside the Americas as they have become scarcer in the region, Garofalo said in January. He tagged Europe and Africa as possible locations for acquisitions.
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Barrick Gold reports a quarterly loss

Barrick Gold Corp, the world's largest gold producer, reported a quarterly loss, compared with a year-earlier profit, as asset sales weighed on production and realized prices fell.

Barrick, which has been selling non-core assets and using cashflow to pay down debt, said it is on track to cut debt by $2 billion this year. The company's total debt fell to $9.1 billion from $10 billion at the end of December.

The company, which has mines in the Americas, Australia and Africa, said gold production fell 7.9 percent to 1.3 million ounces in the first quarter, while all-in sustaining costs - the industry cost benchmark - fell 23.8 percent to $706 per ounce.

Barrick also reaffirmed its gold production guidance of 5-5.5 million ounces for 2016 but cut its all-in sustaining cost forecast to $760-$810 per ounce from $775-$825.

The Toronto, Ontario-based miner's stock has doubled in value this year on the back of stronger gold prices. Investors have also warmed to the company as it has cut operating costs and expenses and whittled down its mountain of debt.

The company reported a net loss of $83 million, or 7 cents per share, in the quarter ended March 31, compared with a profit of $57 million, or 5 cents per share, a year earlier. On an adjusted basis, it earned 11 cents per share.

Revenue fell about 14 percent to $1.93 billion.
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Sibanye guides soaring earnings after quarterly operating profit rockets

Sibanye guides soaring earnings after quarterly operating profit rockets 

‘Proudly South African’ precious metals mining company Sibanye on Monday reported a 240% higher operating profit to R2.5-billion in the March quarter on a doubled-plus 38% margin. The flourishing JSE- and NYSE-listed company, headed by CEO Neal Froneman, said earnings a share for the six months to June 30 would be at least 150% – or 30c a share – higher than the 20c a share reported for the corresponding period in 2015. 

All-in sustaining costs (AISC) were 3% lower in rands at R454 282/kg and 28% lower in dollars at $895/oz, with the AISC margin increasing from a negative 2% to a positive 24% in the three months to March 31. Pronounced March-quarter safety regression, however, reflected the deaths of Moreruoa Mahao, Tanki Sebolai, Elliot Kenosi and Luis Massango. 

Net debt, excluding the Burnstone gold mining development on the South Rand, fell from R1 362-million to R591-million after a dividend payout of R916-million. Headline earnings a share for the six months were expected to be at least 158% – or 30c a share – higher than the 19c previously. Both increases were on rises in the 301%-higher March-quarter rand gold price, 

Sibanye said in a release to Creamer Media’s Mining Weekly Online. It added that normalised earnings a share were expected to increase by at least 500% from the 27c a share normalised earnings reported for the prior six months. March-quarter revenue increased by 50% to R6 736-million ($427-million) on higher gold output and a gold price that rose from R459 564/kg to R600 267/kg and from $1 182/oz to $1 222/oz. 

The Kloof gold mine near Westonaria produced a 31%-higher 114 400 oz (3 557 kg) mostly on improved underground yields. The Beatrix mine in the Free State produced a 26%-higher 73 000 oz (2 269 kg) and Cooke near Randfontein a 12%-higher 1 536 kg (49 300 oz), both on better underground yields and volumes. Driefontein's production was similar year-on-year at 124 100 oz (3 859 kg), with improved underground mining values offsetting lower mining volumes caused by a seismic event at the Hlanganani Five shaft and issues at Masakhane One shaft. 

Despite a March-quarter cost push, total cash cost remained similar to that of the March 2015 quarter at R385 117/kg and significantly lower at $759/oz owing to the weakening of the rand:dollar exchange rate. March-quarter capital expenditure (capex) increased by 3% to R739-million, mainly on upped underground development at the Burnstone project. 

The acquisition of Aquarius Platinum, which delisted, has been concluded while the acquisition of the Rustenburg platinum assets from Anglo American Platinum are still awaiting the Section 11 transfer of mineral rights by the Department of Mineral Resources, which has been with the department since February. Detailed financial and operating results are provided on a six monthly basis at the end of June and December each year.
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Base Metals

French PM commits 200 mln euros to support New Caledonia nickel producer

France will lend up to 200 million euros ($228 million) to support struggling New Caledonia nickel producer Societe Le Nickel (SLN), Prime Minister Manuel Valls said on Friday.

Valls, who is visiting the French territory, said the financing will be in place until 2018 with final terms still under discussion.

The aid package comes at a time when nickel prices are hovering near 13-year lows. The mineral is crucial to New Caledonia as it accounts for about a fifth of its economy.

Earlier this year, the territory lost a key Australian customer which fell into insolvency.

"The situation is serious," said Valls. "SLN is facing an unprecedented crisis."

SLN, a unit of French government-owned Eramet, has seen the average cash cost of nickel production drop 10 percent compared with the 2015 average.

Valls also committed to support the replacement of an ageing electricity plant for SLN's smelter.

The French territory has two other smelters, owned by Glencore, Vale.

New Caledonia holds around a quarter of the world's reserves of nickel, used in everything from stainless steel to batteries.

New Caledonia had until recently resisted selling ore directly to large consuming countries such as China, hoping to protect its local smelting industry.

But in a change in policy, the government earlier this month said SLN and another company were free to sell a combined amount of up to 700,000 tonnes of low-grade nickel ore, known as laterites, to Chinese buyers over a period of 12 to 18 months.

Eramet has already unveiled plans to sharply reduce production costs at SLN over the next two years to cope with a severe downturn in the global market as appetite for metals falters in top consumer China, with many producers operating at a loss.
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First Quantum swings to Q1 profit as production rises

Canadian base metals producer First Quantum Minerals has swung to a first-quarter profit as strong production at all its continuing operations underpinned rising revenues. 

Net earnings from continuing operations attributable to TSX- and LSE-listed First Quantum shareholders was $49-million in the first quarter ended March 31, compared with a loss of $78-million a year earlier. 

Excluding special items, First Quantum reported comparative earnings of $63-million, or $0.09 a share, compared with an adjusted loss od $12-million, or $0.02 in the comparable period of 2015. 

Revenue had risen 20% year-over-year to $720-million, on the back of strong copper production, boosted by output from its Sentinel mine, in Zambia. Copper output increased by about 30% over the comparable period a year earlier to 119 287 t.

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Freeport's Q1 Cerro Verde copper output nearly triples on expansion

Freeport McMoRan said its Peruvian unit nearly tripled first-quarter copper production after bringing online a $4.6 billion expansion.

Copper production jumped to 272 million lb in Q1 from 107.2 million lb a year earlier, while copper sales jumped to 262.6 million lb from 109.9 million lb, the Sociedad Minera Cerro Verde unit said Thursday in a filing to securities regulator SMV.

Asia accounted for 80% of sales last year, followed by North America (8%), South America (7%) and Europe (5%), it said.

Capital expenditures totaled $163 million in the quarter due to spending on the expansion, which has been completed and ramped up to full capacity in the quarter, the company said.

The project boosted concentrator capacity at Cerro Verde to 360,000 mt/d of ore from 120,000 mt/d and will provide additional annual production of about 600 million lb of copper and 15 million lb of molybdenum. The mine is on track to produce 600,000 mt copper in 2016, partner Buenaventura said last year.

Quarterly profit doubled to $96.9 million from $40.7 million a year earlier as sales also doubled to $532 million from $257 million a year ago. The company sold copper at $2.23/lb compared with $2.49/lb a year earlier.

Cerro Verde is Peru's third-largest copper miner after Southern Copper and Antamina.
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Rusal Q1 aluminium output climbs amid signs of price recovery

Rusal Q1 aluminium output climbs amid signs of price recovery

Russia's Rusal Plc reported a 1.7-percent rise in first quarter aluminium production from a year earlier and said there were signs metal prices were improving thanks to global output cuts.

Rusal, which slipped last year to world No.2 aluminium producer behind China's Hongqiao, has been hit by a slump in metal prices, but said production cuts outside China and limited restarts of smelters in that country were helping turn around the market.

"Aluminum world (ex-China) production data for March 2016 from CRU evidenced that capacity closures that took place in 4Q15-1Q16 have started to influence the market," Rusal said in its quarterly report on Friday. CRU Group is a metals consultancy.

London Metal Exchange aluminium prices have jumped 10 percent since the start of the year.

Rusal's aluminium production rose to 916,000 tonnes in the three months to March from 900,000 tonnes a year earlier. Output fell slightly from the December quarter.

It said it had started testing its new Boguchansky smelter, selling 39,000 tonnes from the Russian plant in the first quarter.

Average sales prices slumped 28 percent from the same period a year ago and were down 3.6 percent from the December quarter.

Rusal confirmed it would pay off $700 million in debt due in 2016 after lining up a refinancing earlier this week. The debt payment included $109 million of its own funds, it said.

"The Company continues to actively explore further opportunities for the optimization of its debt structure," Oleg Mukhamedshin, Rusal's strategy director, said in a statement.

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Southern Copper's net profit dropped 34.5 pct in first quarter

Southern Copper Corp's net profit dropped 34.5 percent to $185.1 million, or $0.24 per share, in the first quarter on slumping metal prices, the company said Thursday.

The result was better than the mean market estimate of $139.76 million, according to Thomson Reuters I/B/E/S.

The Phoenix, Arizona-based company said it produced 24.8 percent more copper in the first quarter compared with the same quarter in 2015 thanks to its expansion at its Buenavista mine in Mexico, setting a new record for the global miner with 221,661 tonnes.

Southern also reported record sales volumes of copper and silver that were offset by sharp price decreases for the metals.

The company owns mines in Peru and Mexico and is part of Grupo Mexico.
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Global lead seen in surplus in 2016, zinc in deficit -ILZSG

The global lead market is forecast to have a surplus of 76,000 tonnes this year, the International Lead and Zinc Study Group (ILZSG) said on Thursday.

The global zinc market is forecast to have a deficit of 352,000 tonnes in 2016, it said.

The ILZSG expects a 2 percent rise in global demand for refined lead to 10.83 million tonnes in 2016 and a 3.5 percent rise in usage for zinc to 14.33 million tonnes.
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Grupo Mexico: Q1 16 profit up 21%

Mexican mining, rail and infrastructure company Grupo Mexico’s Mar 2016 qtr (Q1 2016) net profit has jumped 21% on Q1 2015 to $US406.9M due to higher metals production and a big jump in investment gains.

The improved bottom line came despite revenue dipping 7.8% to $1.9B because of lower key commodity prices, including copper and silver.

However, copper production was up 20% to a record 1Mt, fuelled by new projects, and a $288.6M gain in investments from Q1 2015’s $35.8M.

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Indonesia estimates value of Freeport unit two-thirds below offer

Indonesia has proposed a value for a 10.64% stake in Freeport-McMoran's local unit that is about two-thirds below the figure the company proposed in January. Copper miner Freeport's unit is valued at about $630-million and the US-based parent has been asked to revise its offer, an Indonesian mining ministry spokesperson said on Tuesday. 

Freeport had offered to sell the stake in its Indonesian operations, including the Grasberg copper and gold mining complex, at $1.7-billion in January. Under an agreement reached with Indonesia in mid-2014, Freeport must sell the government a greater share of its Grasberg mine and invest in domestic processing to win an extension of its operating contract when it expires in 2021. 

Freeport wants to invest $18-billion to expand its operations, including underground mining, but is seeking government assurances first that it will get a contract extension. "Based on the replacement value, the government calculates [the stake] to be worth around $630-million," ministry spokesperson Sudjatmiko told Reuters, referring to a 2013 regulation that sets out how the government calculates mining stakes.

In all of Freeport's agreements with the Indonesian government, the company has indicted that a sale would be at fair market value, Freeport CEO Richard Adkerson said. "That's consistent with our contract and that remains our position," Adkerson said on a conference call with analysts to discuss Freeport's first-quarter results. 

The Indonesian government wants to increase its ownership of Freeport Indonesia to 20% from 9.36% currently. A further 10% must be divested to the government by the end of 2019. "We have asked Freeport to revise their offer. Once we reach an agreement on price we can make a timeline," he added. 

The US mining giant valued its Indonesian asset, one of the world's biggest copper mines, at $16.2-billion. But the amount was immediately criticised by Indonesia's state-owned enterprise minister Rini Soemarno, who hoped one of two government-owned companies, miner Aneka Tambang (Antam) or aluminium producer PT Inalum, would buy the stake. "We will review and respond to every statement we receive from the government," Riza Pratama, a spokesperson for Freeport Indonesia, said without elaborating. 

Freeport's valuation of its Indonesian unit was based on an analysis of "fair market value for the Grasberg mining operations," Pratama said.
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Oz Minerals hedges gold bets at Prominent Hill

Copper-gold miner Oz Minerals has hedged a portion of the gold contained within stockpiles at its Prominent Hill mine, in South Australia, to take advantage of Australian gold prices, which were at a near 15-year high. 

The miner told shareholders on Wednesday that the Prominent Hill stockpiles was estimated to contain some 370 000 oz of gold, and represented significant value for the company, as it had already been mined and contained known grades. 

Oz has hedged some 60% of the recoverable gold from the stockpile, amounting to 171 200 oz, to generate revenue of A$293-million between 2018 and 2021. “The gold contained in the stockpiles at Prominent Hill is a tremendously valuable, de-risked asset and we have decided to lock-in approximately 60% of the value by taking advantage of the current historically high gold prices,” said CEO and MD Andrew Cole. 

The hedge contracts were entered into with a banking syndicate, which included NAB, HSBC and Westpac. Cole said on Wednesday that the gold stockpiles at Prominent Hill would continue to grow over the remaining life of the openpit mine, adding that the company’s hedge position would be reviewed on a quarterly basis, and the ability to maintain a hedge position equivalent to around 60% of the recoverable gold contained in the stockpile would be retained. 

The current stockpile was expected to be drawn down through to 2022.
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Nevsun, Reservoir merge to create new midtier base metals company

Dual-listed base metals miner Nevsun Resources has agreed to acquire TSX-listed Reservoir Minerals for about $365-million to create a new, diversified midtier base metals mining company. 

The new company would have a cash-producing operating asset in Bisha, Eritrea – a high-grade openpit copper-zinc mine, and 100% ownership of the upper zone of the Timok copper project in Serbia – a high-grade copper and gold development project.    The transaction would enable Nevsun and Reservoir shareholders to participate in the Bisha mine’s ongoing cash flow generation and to take advantage of the Timok copper project’s growth potential, as well as the significant exploration potential at Bisha and Timok.   

On completion of the arrangement, Nevsun’s current shareholders would own about 67% of the combined company while Reservoir shareholders would own the remaining 33%. Under the terms of the definitive agreement, announced Sunday, Nevsun agreed to acquire all of Reservoir’s outstanding common shares, as well as its restricted share units, on the basis of two common shares and $0.001 in cash for each Reservoir common share. 

“This transaction diversifies Nevsun’s asset base, putting our cash balance to work in a strategic and high-return investment that will deliver significant value to our shareholders,” said Nevsun president and CEO Cliff Davis. “The upper zone, with its high-grade copper-gold resource and nearby infrastructure in a mining friendly jurisdiction, adds significant growth to Nevsun and, with ongoing cash flow generation from our Bisha mine, we have the financial strength and proven technical ability to move the Timok project forward in a timely manner. 

We look forward to working with all stakeholders and Timok’s highly capable partner in bringing the project into production.” Reservoir president and CEO Dr Simon Ingram also highlighted the agreement as a positive move for Reservoir and its shareholders, as it would, among other things, expedite the development of the Timok copper-gold project, to the benefit of all stakeholders. 

Meanwhile, Nevsun and Reservoir have also entered into a funding transaction comprising a private placement for 19.99% of Reservoir’s outstanding common shares, as well as a loan transaction. Nevsun subscribed for about 12-million of Reservoir’s common shares at C$9.40 a share, for a total subscription price of about $90-million, increasing Reservoir’s total outstanding shares to about 60-million. 

The transaction also provided an unsecured cash loan of about $44-million to Reservoir.  The combined funding transaction provided Reservoir with about $135-million in financing to enable Global Reservoir Minerals, a wholly owned subsidiary of Reservoir, to exercise its right of first offer in the Timok copper project, in respect of its joint venture (JV) with Freeport International Holdings. 

Once Global Reservoir closed the exercise of the right of first offer, it would have a 100% interest in the upper zone of Timok and a 60.4% interest in the lower zone – under two JV agreements with Freeport. It would also become the operator of the project. Freeport could increase its ownership in the lower zone to 54% under the terms of the original Timok JV agreement, with Global Reservoir holding the remaining 46%. 

On completion of the combination, Global Reservoir would be a wholly owned subsidiary of the combined company. “Reservoir’s board of directors have determined that this transaction is the best funding alternative for our shareholders to fund the Timok right of first offer,” said Ingram, adding that Nevsun was a proven mine developer with the technical experience and strong balance sheet to enable Timok development. 

“Reservoir shareholders retain exposure to the development potential of Timok and also gain exposure to the operating Bisha mine’s cash flow and additional exploration potential.  The combined company will be in a strong position to efficiently advance the Timok project to production,” he concluded.
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French miner Eramet expects first half loss, pursues nickel savings

French mining and metals group Eramet said on Friday it expects to post another operating loss in the first half due to weak metal prices and would pursue efforts to save cash at its troubled nickel unit.

The company reported first-quarter sales of 666 million euros, down 14 percent from the same period last year, including a 39 percent fall for its nickel division and a 10 percent decline for its manganese unit.

It forecast, in a statement after the market close, that first-half current operating profit would be below the level in the first half of 2015, when it recorded a 70 million euro loss.

The group had said in February it planned to sharply reduce production costs at New Caledonian nickel business SLN over the next two years to cope with a downturn in the global market that has left most producers of the stainless steel ingredient operating at a loss.

Eramet said in Friday's statement that the average cash cost at SLN had fallen 10 percent compared with the 2015 average, in what it called swift and significant results.

Eramet has called on the provincial authorities in New Caledonia, which have a minority shareholding in SLN, to help finance a recovery plan, and the issue is expected to be discussed next week when French Prime Minister Manuel Valls visits the Pacific territory.

At the same time, Eramet forecast a rise in its second-quarter sales of manganese after a fall in ore inventories and a sharp rebound in market prices in March.

Eramet also announced that Japan's Mitsubishi Corporation had exercised an option to sell a stake in the Weda Bay nickel mine project in Indonesia, following a review of its mining portfolio.

The French group said the move would lead to an increase by nearly 100 million euros in its net debt, and leave it with a 90 percent stake in Weda Bay, a project it previously put on hold due to the downturn in the nickel market.

Eramet also announced management changes, with Georges Duval, part of the family that is Eramet's largest shareholder, stepping down as deputy CEO in charge of the alloys division.
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OZ, EMR Capital said among final bidders for Glencore cobar mine

OZ Minerals and EMR Capital Advisors are among suitors picked to make final offers for Glencore’s Cobar copper mine in Australia, people with knowledge of the matter said.

The Swiss commodity trader and producer is in negotiations with bidders for the New South Wales mine, which may fetch about $300 million, said the people, asking not to be identified as the details are private. The talks may still fall apart, and Glencore could end up keeping the asset, the people said.

Glencore chief executive officer Ivan Glasenberg is selling assets to mitigate concern about the company’s capacity to pay down $30 billion of debt as commodity prices tumble. Earlier this month, Glencore agreed to sell 40% of its agriculture unit to Canada Pension Plan Investment Board for $2.5 billion, and the company said in March it’s confident of getting more than A$1 billion ($776 million) for its Australian coal train assets.

The Cobar mine produces about 50 000 metric tons of copper concentrate a year, Baar, Switzerland-based Glencore said in October. The company is also selling the Lomas Bayas open-pit mine in Chile, which produces about 75 000 tons of refined copper a year.

OZ Minerals, Australia’s third-largest copper producer, said in July it’s conducting a global search to add new base metals assets. EMR, a private equity firm led by former Rio Tinto Group executive Owen Hegarty, specialises in natural resources investments and manages the EMR Capital Resources Fund, according to its website.
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Steel, Iron Ore and Coal

Australian coal prices plummet as Colombian cargoes head to Asia

Australian thermal coal prices for delivery in June have dropped to 10-year lows as Colombian miners start sending large volumes into Asia for the first time, adding cargoes to an already oversupplied market.

Prices for coal cargoes delivered from Australia's Newcastle port by May 31 last closed at $46.60 per tonne, their lowest since 2006.

The slump comes just as other commodities such as steel and oil enjoy rallies on the back of new investor appetite.

In thermal coal markets, by contrast, an unusual new trade route has opened as low dry-bulk rates allow Colombian miners, who usually supply North America and Europe, to target Asia.

South Korea's East-West Power utility (EWP) this month bought 260,000 tonnes of Colombian coal on free-on-board (FOB) terms for loading between June and August, adding to another 410,000 tonnes already on order.

"We have currently got ordered 670,000 tonnes of coal from Colombia," said a utility source familiar with the matter.

"Currently Colombian coal is about $7-8 (per tonne) cheaper than the Australian coal and if this price trend continues, we are definitely willing to import more from Colombia," said the source, who declined to be identified.

Colombian coal appearing in larger volumes in the Pacific has helped push down Australian prices, analysts said.

"Coal supply in the Pacific has been rising for more than a month. Shipments from Colombia contributed to this," said Georgi Slavov, head of energy, ferrous metals and shipping research at brokerage Marex Spectron.

Although he added that these shipments were part of a bigger increase in supplies, including from Australia itself.

Pricing agency Platts reported that the 410,000 tonnes were ordered on a cost and freight (CFR) basis, while the 260,000 tonnes came on a free on board (FOB) basis.

Platts said EWP paid $41 a tonne for the FOB cargoes and $52 per tonne for the CFR supplies, making them competitive against the Newcastle price of $46.60 a tonne, which are quoted on a FOB basis.

That's still far less than its monthly imports of around 5 million tonnes from Australia and 2-3 million tonnes from Indonesia.

But it's a huge jump from Colombia's typical monthly supplies to South Korea of just 1,000 to 3,000 tonnes, and would bring its share of supplies there towards 7 percent.

Colombian miners are having to look to new markets as consumption in Europe and North America is stalling due to the rise of renewables, improving energy efficiency, and because of the U.S. shale boom which has made natural gas highly competitive there.

The extension of the Panama Canal, almost completed, will further boost Colombian coal exports to Asia.

"It will lower the freight costs and make the Colombian coal more attractive to us and other countries in Asia," the Korean utility source said.
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Cliffs rallies as strong Q1 performance sees it back in the black

The largest US iron-ore producer Cliffs Natural Resources has a first-quarter profit amid sustained market improvement. For the three months ended March 31, Cliffs recorded net income attributable to Cliffs' common shareholders of $108-million, or $0.62 a diluted share, compared with a net loss attributable to Cliffs' common shareholders of $773-million, or $4.26 a diluted share, recorded in the first quarter of 2015. 

The latest period included a debt-restructuring and extinguishment gain of $179-million. Revenue dropped 32% to $305.5-million. Analysts had expected a loss of $0.10 a share on revenue of $272-million. The company benefitted from an iron-ore price that had improved by about 44% so far this year. "The steel market in the US has started to show consistent signs of a real recovery, with a direct positive impact on our steel clients' order books and, consequently, a totally expected improvement in our clients' appetite for the pellets we supply them,” Cliffs chairperson, president and CEO Lourenco Goncalves stated. 

The company had raised its 2016 capital spending guidance to $75-million, an increase of $25-million, to produce a specialized super-flux pellet at United Taconite. Goncalves noted that a newly adopted supply discipline going forward by the two Australian majors BHP Billiton and Rio Tinto, followed by a similar statement coming from their Brazilian peer Vale, had generated a more reasonable pricing environment for sinter feed fines in the international market for iron-ore, which continued to be short in lump ore and pellets. 

Cliffs reduced its cost to produce iron-ore in the US by 26% to $48/t, the company said. Administrative costs were $28-million, down 3%from the first quarter last year. Cliffs maintained its outlook to produce about 17.5-million tons of iron-ore in the US this year and 11.5-million tons in the Asia/Pacific region.
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Vale Ends Losses as Oil Rout Helps Get Iron to China Cheaper

Vale SA had its first profit in three quarters as the best-performing major iron-ore miner this year cut costs and prices rebounded. Shares gained.

Net income in the first three months of the year was $1.78 billion compared with a $3.12 billion loss a year ago, the Rio de Janeiro-based company said Thursday in a statement. Adjusted earnings before interest, taxes, depreciation and amortization rose to $2 billion from $1.6 billion, beating the $1.5 billion average of 12 dollar-based estimates compiled by Bloomberg.

Vale, which makes most of its money from iron ore, is beating more diversified rivals BHP Billiton Ltd. and Rio Tinto Group in equity and debt markets this year as the raw material surges 49 percent to $61.09 a metric ton. The Brazilian miner is also getting a boost from lower freight costs thanks to oil’s collapse, which reduces its disadvantage to Australian producers that are closer to China. From a year ago, Vale reported a 32 percent cost reduction in delivering iron to its Chinese customers.

While cheaper inputs and a recovery in prices is helping Vale’s efforts to preserve margins, net debt rose to $27.7 billion from $24.8 billion a year ago.

“The quarter has ended in a good mood in March with prices recovering,” Chief Financial Officer Luciano Siani Pires said in a video posted on the company’s website. “But that doesn’t mean we are going to be caught off guard or that we are going to relax in our relentless quest towards building a more competitive company.”

2Q Prospects

Vale expects demand for iron ore to remain strong this quarter amid stimulus from the Chinese government, helping offset a higher seasonal rebound in shipments.

“We acknowledge the recent improvement in iron ore prices but are cognizant of market volatility, thus remaining fully committed to strengthening our balance sheet through the reduction of our net debt as previously informed,” Vale said in today’s statement.

Vale is also favoring higher-grade production to reduce costs and plans to start mining at S11D, the industry’s biggest development project, in the second half of this year.

The combination of more lower-cost output and surging prices has prompted analysts to increase their annual earnings estimates by an average of 103 percent in the past three months for Vale, while profit expectations for Rio and BHP have dimmed slightly in that period, according to data compiled by Bloomberg.

Record Output

Vale churned out 77.5 million metric tons of iron ore in the first quarter, putting it on course to meet its annual target range, albeit at the lower end, it said last week. The company also set first-quarter records in nickel and copper production.

Shares in the Brazilian miner rebounded 49 percent this year compared with BHP’s 10 percent gain and Rio Tinto’s 13 percent advance. Vale’s $2.25 billion of notes due in 2022 are trading at a yield gap of 3.3 percentage points compared with similar Rio Tinto bonds, down from a spread of 5.3 percentage points at the end of last year.
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Iron ore price plummets amid Chinese speculative mania

On Wednesday the Northern China benchmark iron ore price fell 5.6% to $60.50 per dry metric tonne (62% Fe CFR Tianjin port). Iron ore is now down more than 12% from 16-month highs hit last week according to data supplied by The Steel Index, but the steelmaking raw material still boasts a 41% rise in 2016 and a 60%-plus recovery from nine-year lows reached mid-December.

Given that it forges half the world’s steel and consumes more than 70% of the 1.3 billion tonne seaborne trade, the iron ore market is reliant, more than any other commodity, on the Chinese economy.

After authorities introduced trading curbs on stocks in 2015, many Chinese investors shifted their attention from the country’s equity markets to commodity derivatives

The surge in iron ore over the past four months has come mainly on the back rapidly rising steel prices in China and commodity investment fever that's gripping the mainland.

Copper fell victim to Chinese speculators a year ago when a hedge fund calledShanghai Chaos conducted a bear raid on copper futures. Attention has now shifted to iron ore and other metals including aluminum.

The first signs that the fundamentals of the physical iron ore trade was no longer much of a factor driving prices came on March 7. The price surged 19.5% in a single day – in absolute terms the day-on-day rise was roughly half of the price of contracted iron ore during the early 2000’s under the old ‘annual benchmark’ system, which ended in April 2010.

Since then volatility has only increased – nearly 240 million tonnes worth of Shanghai rebar futures contracted changed hands on a single day last week. Reuters points to the fact that it "was equivalent to around a third of China's steel production last year, not just of construction-destined rebar but of every imaginable type of steel product."

Circuit breakers on the Dalian Commodities Exchange to curb excessive price movement have been repeatedly triggered the past few weeks. After a very subdued launch in October 2013, volumes have sky-rocketed and last month daily trade in iron ore contracts surpassed one billion tonnes for the first time. That figure compares to the annual global seaborne trade of around 1.3 billion tonnes.
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China’s 2016 apparent steel consumption may reach 683 mln T

China’s apparent steel consumption is expected to reach 683 million tonnes in 2016, roughly stable or a slight rise from last year, which indicated a relatively sound demand for steel products, said the China Iron & Steel Association (CISA) in a market analysis.

Meanwhile, China’ output of crude steel, steel products and iron ore may amount to 788 million, 770 million and 1.3 billion tonnes in 2016, falling 2%, 2% and 6% on year, respectively.

The imports and exports of steel products are expected to drop 6.1% and 11.01% from a year ago to 12 million and 100 million tonnes respectively in the year; imports of iron ore may decline 5% or so from the year prior to 900 million tonnes, it said.

CISA, pointing out the current tough situation of oversupplied steel market amid slowing domestic economic growth, also stressed that China will still be the largest steel consumer across the globe for a long term.

The national regular demand for steel products remains stable and substantial, such as road construction, city maintenance and disaster rescue; the steel consumption of road construction, auto-manufacturing and ship-manufacturing sectors was on the increase in 2016, despite the slowing growth of steel demand in housing, machine, household appliances and other major steel-consuming sectors, which signaled a prospect of steel industry worth to expect.

Besides, the state’s "Belt and Road" initiatives strategic policy and other development policies will also lend support to long-term and stable demand for steel products.
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CIL slashes coal prices

Faced with mounting stocks currently estimated at 58-million tonnes, producer Coal India Limited (CIL) has slashed the prices of high-grade coal by around 40%. A senior CIL official said that the reduction in prices had been put into effect from April on an experimental basis, but could be continued through the current 2016-17 fiscal year if lower prices proved successful in reducing  existing stockpile and ensured higher off-take, particularly from the thermal power generation sector. 

CIL has also scrapped the premium charged based on volumes delivered to incentivise large volume buyers to commit to higher offtake. For example, CIL used to charge a premium of 10% of the price for all deliveries above 90% of the contract with the buyer and the premium would increase to 20% of the price if deliveries ranged between 95% and 100% of the contract. 

The reduction in base price and the waiver of premium deliveries, a remnant from days of supply shortage, were largely CIL’s reaction to rising production, high stocks at power plants and fall in off-take from the latter. On April 1, coal stocks at power plants was reported at 38-million tonnes During 2015/16, CIL notched a production growth of 8.5% at 536-million tonne and this enabled a reduction in imports by 34.26-million tonnes. 

The production target for the current year had been fixed at 540-million tonnes but was implementing a phased lowering of production levels across some of mines in response to slowdown in off-take from the power sector.

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China’s key steel makers’ Q1 losses rise over sixfold, CISA

China’ key steel makers suffered a loss of 8.75 billion yuan ($1.35 billion) in their total net profits in the first quarter this year, increasing over sixfold or 659.51% from the same period last year, showed data from the China Iron & Steel Association (CISA).

Meanwhile, the number of steel enterprises in the red shrank to 36.36% in the first quarter from 51.52% the same period last year, and many steel makers managed to turn losses into profitability in March amid the recent rising steel prices, registering the first profitability in recent nine months.

CISA data showed that 96 large and medium steel producers realized sales revenue of 210.63 billion yuan in March, and their profits stood at 2.56 billion yuan; there were 28 steel producers in deficit in March, accounting for 29.2% of the total.

It, though signaling the short-term favorable turn of steel industry impacted by de-capacity policy, also demonstrates the expanding gap inside the internal steel industry, and it will exert negative influences on the market if the steel prices fail to further rise in later period, said the analyst.

The robust uptick in recent steel prices was only a short burst, mainly driven by Chinese government’s accelerated investment on infrastructure and the following plenty of credit activities, instead of actual improvement of domestic demand, said Goldman Sachs.

The rising prices put supply side into the risk of ahead-of-timing production recovery, especially those steel makers tasting the sweetness of better profit, yet the capacity utilization rate of China’s crude steels still remained less than 70%, which means that the de-capacity work has not actually start, and it has a long way to go, it added.
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Australia's Atlas shareholders back restructure as iron ore price rises

Australia's Atlas Iron Ltd averted collapse on Wednesday after shareholders approved a debt-for-equity swap that will hand 70 percent of the company to creditors amid a recovery in iron ore prices.

Chairman Cheryl Edwardes had warned ahead of an extraordinary shareholders' meeting of a "high risk" that Atlas would be placed in administration, a form of bankruptcy, unless the deal went ahead.

Atlas mines about 14 million tonnes of iron ore a year in the Pilbara region of Western Australia, where it is dwarfed by rivals Fortescue Metals, BHP Billiton and Rio Tinto , who control the majority of Australia's 700-million-tonnes-a-year export market.

Tumbling iron ore prices in recent years forced Atlas to lay off two-thirds of its employees, suspend mining, and seek the support of its suppliers to get back in production, underscoring the difficulties faced by smaller miners carrying high debt.

Iron ore prices have galloped almost 50 percent this year, while Atlas has cut its cash cost of production to A$49 ($37) a tonne from A$66 18 months ago, Edwardes said.

"This significantly lower cost base, which stands to be reduced further by the interest savings stemming from the debt restructure, enables Atlas to better withstand any future iron ore price volatility," she said.

Iron ore .IO62-CNI=SI stood at $64.10 a tonne on Wednesday, although many in the industry believe the price recovery is only temporary owing to a supply glut.

Citi analysts expect iron ore to average $38 a tonne in the fourth quarter, while an Australian government forecast pegs iron ore at $45 a tonne by the end of December.

Atlas' debt-for-equity swap will put 70 percent of the company's stock in the hands of 71 lenders in exchange for a 48 percent reduction in its loan debt to $135 million.
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Fortescue buys out more debt

Iron-ore miner Fortescue Metals would repay $577-million in debt through after issuing voluntary redemption notices to holders of 2019 notes.

“This debt repayment delivers on our sustained commitment to reduce all-in costs, further generating strong cash flows and continuing to reduce our debt,” said CEO Nev Power on Wednesday.

The notes would be redeemed in full from accumulated cash on hand, and was expected to generate additional interest savings of at least $48-million a year. Over the last 12 months, Fortescue has repurchased some $1.7-billion in debt, with the company’s total debt repayments in the last two-and-a-half years now exceeding $4.8-billion.
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Guangdong March coal imports rebound 66pct on month

Southern China’s economic hub Guangdong province imported 4.27 million tonnes of coal in March, down 0.5% year on year but surging 65.5% from February, according to the latest Chinese customs data.

The total value of the March imports was $201.1 million, which translates to an average price of $47.1/t, up $4.04/t on month but down $11.89/t on year.

Imports of thermal coal, mainly used for power generation, stood at 3.39 million tonnes in March, up 44.9% month on month but down 14.2% year on year.

Of this, lignite imports accounted for 55.2% or 1.87 million tonnes, climbing 30.8% from February but down 22.4% year on year. Around 96.3% lignite imports were from Indonesia.

Besides, coking coal imports surged 440% from February and up 145.5% on year to 0.81 million tonnes, data showed.

In the first quarter, Guangdong imported a total 10.1 million tonnes of coal, down 2.9% year on year.

Of this, thermal coal imports stood at 8.6 million tonnes, down 8.5% on year; lignite imports stood at 5.07 million tonnes, up 1.2%; coking coal imports 1.3 million tonnes, up 26.2%.

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China’ key steel mills daily output hit new high in early April

The daily crude steel output of China’s key steel mills rose 3.39% from ten days ago to 1.69 million tonnes in early April, hitting a new high since this year, according to data released by the China Iron and Steel Association (CISA).

China’s daily crude steel output may total 2.26 million tonnes in early April, up 3.62% from ten days ago, CISA forecasted.

Domestic steel prices were on the sharp rise during the past week, with rebar price climbing 20% or so on week. The gross profit of some steel mills has exceeded 1,000 yuan/t, which was caused by supply shortage amid rebounded downstream demand and traditional peak season.

By April 10, stocks of steel products in key steel mills rose 7.1% from ten days ago to 12.91 million tonnes, yet it was still 5.8% lower than the same period last month. It won’t bring any great negative influences on supply-demand situation of spot market before hitting 15 million tonnes of steel stocks, said the analyst.

Meanwhile, social stocks of steel products stood at 9.38 million tonnes last week. If the de-stock pace continues, it will be a sound support for steel prices. But the current price hike is the temporary sentiment-triggered situation, and it may face a downturn in later period.

Analysts were still bullish toward the profitability of steel mills amid relatively proper supply in the second quarter.
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In bold move, U.S. Steel launches campaign to stop China imports

U.S. Steel Corp has launched a campaign to prevent imports from China's largest steel producers, it said on Tuesday, the boldest step yet by a U.S. company as a trade brawl with the world's largest steel producer escalates.

In a complaint to the U.S. International Trade Commission (ITC), the U.S. steelmaker called on regulators to investigate dozens of Chinese producers and their distributors for allegedly conspiring to fix prices, stealing trade secrets and circumventing trade duties by false labeling.

Analysts said it could be the most significantly development in U.S. steel trade in a quarter of a century, and will likely ratchet up tension between China and major steel producing nations, as the global industry grapples with chronic oversupply and sluggish demand.

The petition, known as Section 337 and used to protect against intellectual property theft, listed some of China's top producers, including Hebei Iron & Steel Group and Anshan Iron and Steel Group and Shandong Iron & Steel Group Co .

"We have said that we will use every tool available to fight for fair trade," said U.S. Steel Corp President and Chief Executive Officer Mario Longhi in a statement.

"With today's filing, we continue the work we have pursued through countervailing and antidumping cases and pushing for increased enforcement of existing laws."

It comes after U.S. officials last week warned that China should take steps to cut excess output or face possible trade action and Australia said on Saturday it will impose import duties on certain types of Chinese steel to protect domestic steelmakers.

Even before the ITC makes its ruling, Chinese exporters may curb shipments fearing retroactive measures, Michelle Applebaum, analyst at Steel Market Intelligence, said.

The ITC has 30 days to decide whether to initiate the case. It is also investigating allegations of unfair trade practices in the stricken aluminum industry.

Beijing has defended itself against the allegations, saying it has done enough to reduce steel capacity and blaming global excess and weak demand for the industry's woes.

The Pittsburgh, Pennsylvania-headquartered company has filed the complaint on its own and is relying on a clause in U.S. tariff law 337 not used by the steel industry for almost four decades.

"It's a bold step," by U.S. Steel, said Patrick Macrory, director of the International Trade Center at the International Law Institute in Washington.

In 1978, eight U.S. firms that used the clause went after 35 Japanese competitors over welded stainless steel pipe imports. Back then, rather than barring the product from U.S. shores, ITC issued a "cease and desist" order against 11 companies for engaging in unfair competitive practices.

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Shenhua Mar coal sales double on rebounding downstream demand

China Shenhua Energy Co., Ltd, the listed arm of coal giant Shenhua Group, sold 48.4 million tonnes of coal in March, rising 106.8% on month and up 90.6% on year, the second straight monthly increase, data showed from the company’s announcement on April 25.

Coal sales in the first quarter stood at 92.5 million tonens, rising 27.1% on year.

The company said the sharp rise was mainly due to the increased sales of outsourced coal amid rebounding coal demand at downstream sector in March, as well as the visibly lower base in the same month last year.

Coal sales via northern Chinese ports stood at 27 million tonnes in March, rising 132.8% on year and up 64.6% on month, while those in the first quarter up 63% on year to 55.1 million tonnes.

Coal shipped from Shenhua’s exclusive-use Huanghua port stood at 19.3 million tonnes or 71.5% of its total shipment via northern ports in the month, increasing 221.7% on year and up 73.9% on month.

That over January-March soared 122.9% on year to 37.9 million tonnes.

The company produced 24.7 million tonnes of coal in March, rising 12.8% on month and up 6.9% on year, the second straight yearly rise. The output in the first quarter increased 2.9% from a year ago to 71.3 million tonnes.

Shenhua exported 300,000 tonnes of coal in March, soaring 200% on month and up 200% from previous year, while the number soaring 133.3% on year to 700,000 tonnes in the first quarter.

The company produced 20.1 TWh of electricity in the month, climbing 12.4% on year and up 41.7% on month, while power output over January-March rose 4.2% on year to 54.9 TWh.

Electricity sales rose 12.8% on year and up 42.2% on month to 18.86 TWh in March, and the number was up 4.8% on year to 49.15 TWh over the same period.

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Iron ore, steel slide as curbs tame China commodities

Iron ore and steel futures in China fell sharply on Tuesday after authorities raised transaction costs to cool last week's rapid gains in Chinese commodities, which had raised fears of an unstable speculative bubble forming.

Base metals futures also fell, while other commodities, including coking coal and cotton, surrendered most of their early gains to end nearly flat.

China's top commodity exchanges in Dalian, Shanghai and Zhengzhou have increased trading margins and fees in response to surges in prices and volumes last week that were not matched by an improvement in the fundamentals for most of the underlying commodities.

The most traded September iron ore contract on the Dalian exchange closed down 6 percent at its exchange-set floor of 450.50 yuan ($69.35) a tonne. It hit 502 yuan on Monday, its strongest since August 2014.

Analysts say the spike was largely due to speculators betting that a rise in infrastructure spending in China would lift raw material prices, which have been battered for years by a broad-based glut.

But analysts warned that the rise could flip into an equally precipitous fall.

"The speculation-driven futures rallies are not sustainable, and consolidation may have some spillover effects on the spot market," Argonaut Securities Helen Lau said in a note.

News that China's top steel making province will ban the reopening of steel mills that had been previously ordered to shut down also weighed on sentiment for commodities used in steelmaking, which include iron ore, coking coal and coke.

On the Shanghai Futures Exchange, rebar - reinforced steel used in construction - fell 3.8 percent to close at 2,554 yuan a tonne.

Rebar reached a 19-month high of 2,787 yuan on April 21, when its turnover was worth nearly 50 percent more than the total value of trade on the Shanghai stock exchange.

Open interest in iron and rebar has fallen sharply, suggesting some of the trades are being executed by investors holding short positions that are getting squeezed.

Coking coal on Dalian closed nearly flat at 797.50 yuan a tonne after hitting a contract-high of 837.50 yuan earlier. Coke trimmed gains to 0.4 percent after rising as much as 4 percent. The two had soared by their 6 percent limit on Monday.

Cotton on Zhengzhou Commodity Exchange also closed little changed after spiking as much as 3.6 percent.

Jin Tao, analyst with Guotai Jun'an Futures in Shanghai, said there is a "severe shortage" of coking coal and coke following shutdowns of mines and plants in China last year as steel mills step up production.

That has fueled a big spike in spot prices of the two raw materials, particularly this month, said Jin.

"Whether the rally can be sustained will depend on whether the government will keep reining in the sector. But falling forward contracts suggest investors remain cautious on the outlook," he said.
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China's top steel making province bans reopening of mills ordered closed - Xinhua

China's top steel making province will ban the reopening of steel mills that had been previously ordered to shut down, the official Xinhua News Agency reported on Tuesday, as soaring steel prices lure back producers.

Provincial authorities in Hebei also pledged to step up monitoring of steel mills, punish closed mills that reopen and investigate and sack local officials who allow the reopening of mills and approve illegal projects, Xinhua said.

Hebei accounts for just under a quarter of steel production in China, by far the world's top steel producer and consumer.

A jump in steel prices this year has encouraged many producers in China to rekindle their furnaces and ramp up production, potentially exacerbating a global steel glut that has sparked trade friction with other producers including the United States, Britain and Australia.

Some mills in China have been ordered to close as part of the government's efforts to trim overcapacity. Xinhua quoted a notice from the Hebei government as saying officials were not allowed to permit these facilities to restart production "under any circumstances."

Other mills, facing losses, cooling demand and tighter credit conditions, have trimmed output or suspended production for economic reasons. It was not clear if these mills were included in the ban on resuming production.

Australia said on Saturday it would impose duties on certain types of Chinese steel to protect domestic steelmakers, while the United States and seven other countries called earlier this month for urgent action to address global overcapacity.

Chinese steel futures have jumped more than 50 percent so far in 2016 after six straight years of losses. Dalian iron ore futures have risen about 55 percent since the beginning of this year, as investors bet the government will take more measures to stimulate the economy.

Despite Beijing's efforts to cut surplus Chinese steel capacity and pressure from other countries to cut exports, China's steel output rose to a record in March while its steel shipments rose 30 percent from a year ago.

China has a total crude steel capacity of 1.13 billion tonnes, but produced about 800 million tonnes of crude steel last year, suggesting more than 300 million tonnes of surplus capacity.

The country plans to shed 100-150 million tonnes of domestic crude steel capacity in the next five years, and another 500 million tonnes of surplus coal production, in a bid to tackle huge capacity overhangs that have saddled domestic firms with losses and debts.
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Shaanxi Coal posts reduced Q1 loss on cost control

Shaanxi coal industry Co., Ltd, one major listed coal miner in China, reported a loss of 38.85 million yuan ($5.98 million) during the first quarter this year, narrowing down significantly from 291 million yuan of loss it suffered a year earlier, showed the latest company statement.

That compared to loss of 1.18 billion yuan in the fourth quarter last year, mainly attributed to better cost control, Shaanxi Coal said in a statement to the Shanghai Stock Exchange on April 22.

This was the fifth quarterly loss the company has suffered since the first quarter of 2015, hit by the plunge in coal prices amid slackening demand from end users.

During the first quarter, Shaanxi Coal realized 5.84 billion yuan of operating revenue, down 31.98% year on year. Total operating cost drop 33.44% year on year to 5.71 billion yuan, thanks to the drop in sales cost of its coal business.

Revenue from coal sales reached 5.524 billion yuan, with sales cost at 3.505 billion yuan, the company said, without giving relevant data comparisons for the same period last year.

Last year, Shaanxi Coal suffered a loss of 3 billion yuan from 0.95 billion yuan of profit in 2014, while operating revenue tumbled 132.26% on year to 32.51 billion yuan.
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China's coal imports surge

China’s thermal coal imports jumped 46.6% from March’s multi-year low to 7.42 million tonnes in March, which was also 27% higher than the year-ago level, showed data from the General Administration of Customs.

China’s coking coal imports in March surged 71.5% on month to 5.09 million tonnes, hitting the highest since August 2015, showed the latest data from the General Administration of Customs (GAC).

That was also a rise of 73.6% year on year, the first yearly increase in the past seven month.

The monthly increase was mainly impacted by rebounded steel and coke markets, short domestic supply and the appreciation of the RMB.
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China confirms to strictly control coal-fired power capacity

China's government said on Monday that it would strictly control the total capacity of its coal-fired power sector, confirming a move that had previously been flagged by the country's energy watchdog.

Beijing will halt the construction of new coal-fired power plants until 2018 in 15 regions even for projects that have already been approved, the country's top economic planner said in a joint statement with China's energy regulator. It will also stop approving new projects in as many as 13 provinces until 2018.

The National Energy Administration had said in late March that the step was on the way after details were reported by local media.

China has promised to bring greenhouse gas emissions to a peak by "around 2030" as part of its commitments to a global pact to combat global warming, signed in Paris last year. The country is by far the world's largest emitter of carbon dioxide.

That has hit international coal markets hard, with miners in key suppliers such as Australia scrambling for business.

"In the regions with a power surplus or under air pollution control, we will not arrange construction planning for new coal-fired power plants," the government said in the statement, sent to major power companies and local regulatory bodies on Monday.

Environmental group Greenpeace said the rules, if fully implemented, could involve up to 250 power projects with a total of 170 GW in capacity, according to initial estimates in March.

The government also said in the statement that it would prioritize building power plants that use non-fossil fuels in regions short of energy supplies.

It added that it would also retire old coal-fired generators that fall short of meeting efficiency and environmental standards, targeting units smaller than 300 MW that have been serving over 20-25 years.

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Samarco continues polluting after dam burst: Brazil prosecutor

Samarco Mineração SA has not adopted measures to stop the leaking of mine tailings as required by a court after a deadly dam burst, a prosecutor said on Friday, an allegation that could delay the miner's return to operations.

Prosecutor Carlos Eduardo Ferreira Pinto said in an interview with Reuters he would submit the opinion to court by Tuesday. If a judge agrees, Samarco will have to pay a daily fine of 1 million reais ($277,000) until the leaks stop.

Environmental protection officials have said Samarco would have to stop all leakage before they would grant permission to resume operations that halted after a disaster in November that killed 19 people.

Samarco, which is jointly owned by mining companies Vale SA and BHP Billiton Plc, said on Friday that a 2 million cubic meter capacity dam it built is preventing leaks.

Based on a report prosecutors commissioned from a local technological center, the structure does not stop water from leaking into provisional dikes, picking up tailings sediment from the dam burst, and flowing into the Rio Doce river, Pinto said.

Samarco hopes to resume operations to be able to pay for a 20 billion reais damages settlement.
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SSAB announces $615 mln rights issue amid slumping steel prices

Swedish steel maker SSAB is planning a 5 billion crown ($615 million) rights issue and other measures to shore up its balance sheet amid slumping prices and industry over capacity, it said on Friday.

European steel companies are struggling to cope with steep price falls and growing overcapacity, with China and Russia accused of exporting massive quantities at artificially low prices, a practice referred to as dumping.

"This comprehensive financing package will enable us to fully focus on the activities that will restore us to industry leading profitability," SSAB Chief Executive Officer Martin Lindqvist said in a statement. "At the same time, we are well prepared to sustain periods of low demand."

SSAB's biggest owners Industrivarden and Solidium will subscribe to their share of the issue and remainder is fully underwritten by a group of banks.

There had been speculation the heavily indebted firm would make a rights issue after ArcelorMittal, the world's largest steel maker, announced in February that it planned to raise $3 billion in capital to reduce debt.

SSAB also said it would sell non-core assets, extend its debt maturities, and take measures to improve cash flow, which is expected to reduce net debt by about 10 billion crowns by the end of 2017

SSAB shares dropped to a 20-year low in January, though they have recovered sharply since.

On Friday, the company reported a smaller than expected first-quarter adjusted operating loss than expected at 190 million crowns ($23.4 million).

That compared with a profit of 564 million a year earlier and an average loss of 266 million seen in a Reuters poll of analysts.
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Rizhao Steel and Shenhua Wuhai raise coke prices

Two major Chinese steelmakers Rizhao Steel Holding Group and Shenhua Wuhai Energy Co., Ltd, one subsidiary of China’s top miner Shenhua Group in Inner Mongolia, have increased their purchase prices for coke used for steel making, in response to positive changes recently observed in the coke and steel markets.

Rizhao Steel Holding Group, a major Shandong-based steel maker, lifted the purchase price of coke by 30 yuan/t, effective 00:00 of April 20, offering 780 yuan/t with VAT for suppliers inside the province and 790 yuan/t for those from other provinces, sources confirmed with China Coal Resource.

Shenhua Wuhai increased the price of Grade II met coke by 40 yuan/t to 820 yuan/t with VAT, DDP Tangshan excluding empty-return fee, effective 18:00 of April 20, sources confirmed.

This is the third time Rizhao Steel and Shenhua Wuhai raised prices of coke this month, after a rise of 30 yuan/t on April 13 and April 14, respectively.

China’s coke market continued to face low stockpiles and tight supply this week. Meanwhile, some coke plants have started to make money, thanks to the sharp rise of coke price and small uptick of coking coal.
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Japan to build 43 coal-burning power stations

Japan is expected to build as many as 43 coal-fired power stations over the next 12 years, after the Environment Ministry gave the green light to projects in February this year.

The Asian country currently has a total of 90 coal-fired units with a total capacity of 40.5 GW. Another 50 added by 2028 could represent a total capacity of 61 GW.

Coal is a cheaper alternative to generate electricity, and new sources of power are essential following the closing of nuclear power stations in 2011, after the tsunami.

Before these power stations closed, nuclear energy supplied a third of the market.

According to Global Construction Review, Japan is planning for a scenario where demand for energy rises by 22% to 1.1 trillion kWh by 2030, despite its declining economy.

The country’s ten regional utilities lost their monopoly over electricity supply on 1 April this year, and 266 companies are now licensed to supply the domestic market. Among those competing for consumers are telecoms firms, trading conglomerates and even a travel agency.
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