Mark Latham Commodity Equity Intelligence Service

Wednesday 15th June 2016
Background Stories on www.commodityintelligence.com

News and Views:

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    Macro

    China May power consumption up 2.1pct on year


    China’s power consumption rose 2.1% on year to 473.0 TWh in May, up from the 1.9% growth registered in April, according to data from the National Development and Reform Commission on June 14.

    Over January-May, the total power consumption reached 2,282.4 TWh, climbing 2.7% year on year.

    Meanwhile, for the non-residential segment, the primary industries – mainly the agricultural sector, and the tertiary industries – mainly the service sector, power consumption both rose 9.6% in the first five months this year, while electricity use by the secondary industries – mainly the industrial sector–increased slightly by 0.4%.

    The data pints to positive changes in China's economic structure, as power use in the service sector grew faster than the industrial sector, Li Pumin, secretary general of the commission, said at a press conference.

    http://en.sxcoal.com/0/147819/DataShow.html
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    China's yuan hits five-year low


    The yuan hit a more than five-year low against the dollar on Wednesday as the greenback firmed amid growing fears that Britain may leave the European Union and caution ahead of a U.S. Federal Reserve policy decision later in the day.

    The Chinese currency hit an intraday low of 6.6047 per dollar in early trade, the lowest since January 2011, after the People's Bank of China set the midpoint rate at 6.6001 per dollar prior to the market open. The fixing was also the softest since January 2011.

    Spot yuan opened at 6.6020 per dollar, breaching critical support at 6.60. By midday, it had pared some losses and was changing hands at 6.5951, 0.02 percent firmer than the previous close.

    Concerns that Britain may vote to leave the European Union in a referendum next week continued to rattle global financial markets and policymakers.

    Chinese traders agreed that such a scenario could trigger another round of massive yuan depreciation if it causes chaos on world markets.

    "The impact of Brexit on the global markets is irreversible," said a trader at a Chinese commercial bank in Shanghai. "My estimate is that the yuan will, at the very least, further weaken 200 or 300 pips."

    Chances that the Fed will raise interest rates this week are considered to be virtually nil, but markets will be watching for comments on its rate outlook for the rest of the year.

    U.S. index provider MSCI Inc on Tuesday declined to add domestic Chinese stocks to one of its key benchmarks, concluding that Beijing had more work to do in liberalizing capital markets and delivering a blow to Chinese policymakers hoping to broaden the appeal of their currency.

    Traders said the MSCI decision did not have an immediate impact on China's forex market.

    The offshore yuan was trading 0.16 percent softer than the onshore spot at 6.6058 per dollar.

    Markets are also still awaiting the release of China's bank lending and money supply data for May.

    http://www.reuters.com/article/us-china-yuan-idUSKCN0Z1065
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    LME starts the revolution!


    The London Metal Exchange is reviewing using so-called blockchain technology, its chief executive said on Tuesday.

    A blockchain is a huge, decentralized ledger of transactions that can be used to secure and validate any exchange of data, including real assets, such as commodities or currencies

    "We've had a lot of discussions around distributed ledger technology. For warehouses, for anything where there are actual objects, and structures, and collateral and a central counterparty there's a natural extension of possibilities for distributed ledger," chief executive Garry Jones told an industry event in Hong Kong.

    "We don't think the blockchain technology is quick enough it's not broad enough (yet)," he said.

    "We're working on it ... As soon as we feel there is an application, we'll announce it. It's likely to be in the warehouse or collateral space with a central counterparty."

    http://www.reuters.com/article/lmeweek-asia-blockchain-idUSL4N1962Y8

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    Bugging in Brazil Exposes Fear of Biggest Betrayal Yet


    The tale of Brazil’s political crisis is one of betrayals -- and the most explosive one may be yet to come.

    Marcelo Odebrecht, the former head of Brazil’s largest construction conglomerate who was arrested in a massive corruption scandal, is trying to reduce a 19-year sentence through a plea bargain. Its potentially devastating impact on the political class was made clear in a chat between convalescent former president Jose Sarney, 86, and a long-time pal. “Odebrecht will show up with a 100-caliber machine gun,” Sarney said.

    Little did he know that his friend, former Petrobras executive Sergio Machado, was secretly taping their conversations as part of his own collaboration deal, going so far as to record him at a hospital. The leaked recordings were obtained during a probe, dubbed Carwash, into corruption at the state-run oil company.

    The ailing politician was just the latest target in the country’s political crisis where rampant backstabbing has become the path to survival. Machado recorded Sarney and several other members of Brazil’s political elite to gain a bargaining chip with investigators. The recordings toppled two ministers just after Acting President Michel Temer appointed them, and prompted requests for the arrest of Sarney and Senate President Renan Calheiros.

    Even greater fallout is expected if Odebrecht and executives from his family’s construction conglomerate open up to authorities. Based on the names cited in spread sheets seized by the police during raids, the deal could ultimately implicate dozens of politicians from across Brazil’s political spectrum.

    “The political players are trying to survive, and in order to survive, they have to betray someone,” said Carlos Pereira, a professor of political economy at Fundacao Getulio Vargas in Rio de Janeiro. “With the Odebrecht agreement, we are at a critical junction, a real opportunity for big changes. There is growing intolerance for corruption among Brazilians.”

    Marcelo Odebrecht is expected to show links between undeclared funds and donations related to the re-election campaign of suspended President Dilma Rousseff, Veja magazine reported this month, without saying how it obtained the information. IstoE magazine said Rousseff directly asked Odebrecht for 12 million reais ($3.4 million) in illegal donations for her 2014 campaign. Rousseff said the reports of both Veja and IstoE are “lies.”

    The start of talks between Odebrecht and prosecutors doesn’t guarantee that an agreement will be made. According to Brazilian law, investigators can only use the information obtained through a plea bargain if a deal is signed at the end of the process with reduced sentences for the witnesses.

    The plea bargains have been key to expanding the investigation beyond Petroleo Brasileiro SA. They helped prosecutors turn an inquiry into a 26-million-real bribery scheme at the oil company into a probe that has stretched across the entire economy to uncover 6 billion reais in bribes siphoned from public contracts, prosecutors say.

    Odebrecht would be the latest of many witnesses who betrayed confidants in deals with prosecutors in the case. Former Petrobras head Paulo Roberto Costa was the first to hand over information about politicians and money launderers who had been his partners in crime for almost a decade. He collaborated in August of 2014 after his daughters, who owned illegal Swiss accounts, were caught trying to cover up evidence.

    http://www.bloomberg.com/news/articles/2016-06-15/bedside-bugging-in-brazil-exposes-fear-of-biggest-betrayal-yet
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    Oil and Gas

    Iran oil exports on track for 4-1/2-yr high as European buying recovers -source


    Iran's oil exports are on track to hit the highest in almost 4 1/2 years in June, as shipments to Europe recover to near pre-sanctions level, according to a source with knowledge of the country's crude lifting plans.

    Tehran's oil sales have nearly doubled since December, the last month before sanctions targeting its disputed nuclear programme were lifted, and the increase in sales should help offset some of the current global supply outages.

    Iran is regaining market share at a faster pace than analysts had projected since sanctions were lifted in January, helped by securing more tankers through a temporary shipping insurance fix.

    June loadings of crude and condensate are up by about 100,000 barrels per day (bpd) from last month to 2.31 million bpd in June, the source said.

    The overall figure is more than a double the same month a year ago, and the highest since January 2012, before Western sanctions were introduced, based on U.S. Energy Information Administration data.

    Exports to Europe in June recovered to about 580,000 bpd, up from 530,000 bpd in May and nearly six times greater than prior to sanctions being lifted, the source said.

    Before sanctions were enforced in mid-2012, Iran was exporting about 2.2 million bpd of crude, with Europe taking about 600,000 bpd, according to the International Energy Agency.

    Tehran's re-entry into the oil market has heightened tensions with arch-rival Saudi Arabia and helped thwart efforts by OPEC to limit output to boost oil prices.

    Iran has resisted Saudi Arabia's calls to cap output, while Riyadh aggressively expands sales ahead of an IPO for its state firm.

    Iran's loadings to Asia were 1.62 million bpd in June, up slightly from May but down from this year's high of 1.71 million bpd in April, according to the source.

    Loadings for China, Iran's biggest customer, were nearly 610,000 bpd in June, a three-month low. India's loadings were about 406,000 bpd, while South Korea is at a multiple-year high of 323,000 bpd. Japan is loading about 290,000 bpd, the highest since April.

    Greece, Italy, Spain and Turkey are all loading Iranian oil, according to the source. Poland is also lifting about 67,000 bpd this month, the first purchase since last August.

    Greece and Spain will take 67,000 bpd each this month, while Italy is lifting half that.

    Royal Dutch Shell resumed loading Iranian oil at the end of May, lifting about 1.1 million barrels and becoming the second major oil firm after Total to buy from Tehran.

    http://www.reuters.com/article/iran-oil-exports-idUSL4N1962LE
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    Gazprom expects China's gas consumption to double


    Russia's top gas producer Gazprom expects China's gas consumption to more than double, deputy CEO Alexander Medvedev said on Tuesday, suggesting the company is still counting on robust growth in demand in China even as the economy slows.

    As part of Russia's strategic shift eastwards prompted by rows with the West, Gazprom will supply China with gas via the Power of Siberia pipeline to be built in eastern Russia, raising volumes gradually to make China one of the biggest customers for Russian gas.

    Gazprom's officials said on Tuesday they still aimed to start those supplies in 2019.

    China has pledged to reduce its coal dependence, a major source of air pollution and greenhouse gas emissions, and aims to raise gas consumption to 360 billion cubic metres by 2020 from 193.2 bcm in 2015.

    Sources close to Gazprom told Reuters in January that Russia is likely to scale back the volume of gas it plans to ship to China later this decade, due to the dive in globalenergy prices and uncertainty hanging over the Chinese economy.

    Medvedev, however, sounded more optimistic.

    "Gas consumption (in China) will double and rise further," Medvedev told reporters, without giving a timeframe.

    China expects its domestic output of gas to reach only 190 bcm by 2020, meaning it will need to boost imports or find alternative sources.

    "Russian gas sees no rivals," Medvedev said, when asked about competition in all its markets from an expected influx of seaborne liquefied natural gas from the United States and other countries.

    Gazprom has signed a deal to supply 38 billion cubic metres a year of gas to China over 30 years via the Power of Siberia pipeline, although initially the volumes would be less than that. So far, Gazprom has supplied gas via pipelines only to Europe.

    The company believes that its gas will be highly competitive on global markets due to the weakening of the rouble which makes gas production cheaper.

    Companies worldwide have invested billions of dollars in plants to produce LNG in countries such as Australia and the United States. However, growth in demand for gas is slowing, prices are falling and the LNG volumes that those companies are set to produce will exceed what major buyers such as China and Japan can absorb.

    Gazprom also plans to sell 3 million tonnes of LNG from its portfolio in 2016 on the global market, unchanged from 2015.

    http://www.reuters.com/article/russia-gazprom-china-idUSL8N1961IM

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    Shell ‘eyes Gazprom Baltic LNG deal’: report


    Anglo-Dutch supermajor Shell is expected to sign a deal with Gazprom this week concerning the Russian gas giant’s planned Baltic liquefied natural gas project at the Baltic Sea port of Ust-Luga, according to a report.

    http://www.upstreamonline.com/live/1435473/shell-eyes-gazprom-baltic-lng-deal-report?utm_source=twitterfeed&utm_medium=twitter
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    Russia's Sechin predicts dogfight for oil markets


    Igor Sechin, head of Russia's largest oil producer Rosneft and the country's most influential energy executive, said in an interview that he expects the fight for global energy market share to intensify.

    In the interview with Il Sole 24 published on Wednesday, Sechin questioned the rationale of Russia's plans to sell almost 20 percent of Rosneft as part of a wider privatization scheme, saying the company's share price did not match its fundamentals.

    "The main challenge for Russia's energy sector is a sharp increase in competition on global energy markets. In future, a tenacious competition is expected for keeping a share of traditional markets and to increase the share of new energy markets," Sechin was quoted as saying.

    Russia has been muscling in on Asian markets, where Saudi Arabia was once the unchallenged dominant supplier. For its part, Riyadh has retaliated with aggressive discounting in Moscow's backyard of Europe.

    Last year, Sechin said Saudi Arabia had started supplying ex-communist Poland at "dumping" prices, while Russian Energy Minister Alexander Novak said Saudi's entry into eastern European markets was the "toughest competition".

    Sechin, a staunch critic of the Organization of the Petroleum Exporting Countries, said the global market may face an oil shortage in three to five years and producers might need a deal to share output increases and release strategic reserves.

    "The market is reaching its balance quicker than analysts had predicted," he said.

    In comments about the state's plans to sell almost 20 percent of Rosneft, Sechin said that as weaker oil prices and international sanctions over Ukrainian crisis had hit the company's share price, wider options should be considered.

    "We believe that it would be prudent to consider different options, including inviting a strategic investor, in the current difficult conditions," he said.

    Sechin also did not rule out the possibility that Italy's Eni might participate in upstream projects in Russia.

    http://www.reuters.com/article/us-russia-rosneft-competition-idUSKCN0Z02U5

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    Rosneft Mimics Saudi Strategy to Get Foothold in Indian Market


    Rosneft OJSC is mimicking the strategy of its biggest global competitor to expand in India as the world’s top oil exporters vie for business in the fastest-growing crude-consuming nation.

    The Russian energy giant’s plan to buy a stake in Essar Oil Ltd.’s Vadinar refinery echoes proposals by Saudi Arabian Oil Co. to invest in India’s refining industry and secure new outlets for its crude.

    “We do believe in the upside potential of the Indian market,” Rosneft First Vice President Pavel Fedorov said last week. "There’s some chance you’ll see our progress with respect to tapping opportunities in the Indian market mid- and short-term.”

    The company has said it hopes to acquire as much as 49 percent of the 405,000-barrel-a-day Vadinar refinery in the western state of Gujarat by the end of June. That deal would come with a 10-year contract to supply 100 million metric tons of crude to the Indian market, marking a significant expansion in a country where Russia is currently barely present.

    Officials from the two countries are due to attend the St. Petersburg International Economic Forum later this week.

    Competition for market share around the world has increased as supply continues to swamp demand. While Russia in recent months has overtaken Saudi Arabia in oil exports to China, Riyadh last year took the rare step of selling crude into Moscow’s backyard of eastern Europe, prompting Rosneft Chief Executive Officer Igor Sechin to accuse the Saudis of “actively dumping” their oil.

    The fight for customers only intensified with Iran’s return to the market following the end of sanctions, while West African exporters have sent more barrels to Europe and Asia after the U.S. shale boom trimmed their sales across the Atlantic.

    Saudi Aramco has squared up to rivals, outlining plans for an expansion of refining capacity in countries including Indonesia, Malaysia, Vietnam and India. The Dhahran-based company, which already ships about 70 percent of its crude to Asia, has forged refinery partnerships in Japan, South Korea and China.

    Saudi Aramco’s joint ventures “allow it to secure demand for oil in the region that has a huge potential," said Sushant Gupta, director for Asia Pacific refining at industry consultants Wood Mackenzie Ltd. "Russia’s interest in such projects is also based on these fundamental drivers."

    http://www.bloomberg.com/news/articles/2016-06-14/rosneft-mimics-saudi-strategy-to-get-foothold-in-indian-market
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    NDA Threatens to Sink Oil Tankers, Review Its Stance of Not Taking Lives


    The Niger Delta Avengers militant group has threatened to sink oil tankers and "review" its stance of not taking lives in its latest warning to oil and gas companies operating in the Niger Delta.

    The Niger Delta Avengers (NDA) militant group has threatened to sink oil tankers and “review” its stance of not taking lives in its latest warning to oil and gas companies operating in the Niger Delta.

    Niger Delta Avengers @NDAvengers

    PRESS STATEMENT http://www.nigerdeltaavengers.org/2016/06/press-statement.html

    In a press statement released on the group’s official website, the NDA also restated its intention to attack the interests of oil corporations if they repaired any facilities damaged by the group.

    “They should not undertake any repair of pipeline, oil and gas facilities that is damaged or attacked by our forces,” said General Mudoch Agbinibo in an NDA statement.

    The NDA has carried out several attacks on oil and gas firms in the region since the start of the year, blowing up Chevron’s Escravos terminal and the company’s RMP 24 and RMP 23 wells in the process.

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

    http://www.rigzone.com/news/oil_gas/a/145071/NDA_Threatens_to_Sink_Oil_Tankers_Review_Its_Stance_of_Not_Taking_Lives?utm_source=GLOBAL_ENG&utm_medium=SM_TW&utm_campaign=ARTICLE
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    Kurds ready for new oil deal with Baghdad if they get $1 billion a month


    Iraq's Kurds are ready to strike an agreement with the central government in Baghdad on a deal to increase oil exports, if it guarantees them a monthly revenue of $1 billion, a spokesman for the Kurdistan Regional Government (KRG) said.

    Iraq's central government in March stopped oil exports through a Kurdish pipeline to pressure the local authorities to resume talks about an oil revenue sharing agreement.

    Iraq's state-run North Oil Company normally exported 150,000 barrels a day through the pipeline that comes out at the Mediterranean port of Ceyhan, in Turkey. The pipeline also carries oil produced in the Kurdish region in northern Iraq and sold independently from the central government.

    KRG spokesman Safeen Dizayee said in an interview in the Iraqi Kurdish capital Erbil on Tuesday that the Kurdish authorities would be willing to sell the oil through Baghdad if they get a share from the federal budget amounting to a $1 billion a month.

    "If Baghdad comes and says ok, give me all the oil that you have and I'll give you the 17 percent as per the budget, which equals to one billion, I think, logically it should be the thing to accept," he told Reuters, specifying later that the amount referred to a monthly payment in dollars.

    "Whether this oil goes to the international market or first to Baghdad and then to the market, it doesn't make any difference," he said. "We are ready to enter dialogue with Baghdad."

    The KRG stopped delivering crude oil to the central government a year ago, a decision taken when Baghdad's payment fell under $400 million a month, according to Dizayee.

    The Kurdish region exported an average of 513,041 barrels in May through the pipeline to Turkey, generating about $391 million, of which about $75 million was paid to oil companies that produce the crude, according to KRG official estimates.

    "The companies have been assured that certain amounts will be made on a monthly basis," said Dizayee, referring to the three foreign oil producers in the KRG region - DNO, Gulf Keystone and Genel.

    "We have started to pay some of it, at least it has rebuilt that confidence between the government and the IPCs (oil companies," he said, referring to arrears owed to the companies.

    The KRG in February said it will be paying international oil companies in 2016 according to the terms of their contracts, after making ad-hoc payments last year.

    The foreign operators have been reluctant to invest and further develop assets in the region without the promise of regular payment, while the cash-strapped KRG needs production to increase as it struggles to avert an economic collapse.

    http://www.reuters.com/article/us-iraq-oil-kurdistan-idUSKCN0Z10CY
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    Unaoil says to sue Fairfax Media over corruption allegations


    Monaco-based oil services company Unaoil said on Tuesday it was launching legal action against Australia's Fairfax Media group, publisher of the Sydney Morning Herald, over reports linking it to corrupt practices involving big oil companies.

    Fairfax Media and the Huffington Post said in a joint report in April that the U.S. Department of Justice and anti-corruption police in Britain and Australia had launched a joint investigation into the activities of Unaoil.

    Unaoil denied the allegations and said that it had been the victim of an extortion attempt by unidentified criminals.

    It did not say what information the extortionists had threatened to pass to the media but said it had been their victim for four months.

    "Unaoil has instructed its lawyers to commence legal action against Fairfax Media and its partners in relation to the malicious and damaging allegations negligently published by these media organisations and repeated by other media organisations globally," Unaoil said in a statement.

    "Unaoil estimates its damages to be over $100 million and intends to hold Fairfax Media and its partners to account for their irresponsible and injurious reporting."

    Unaoil did not say when it would sue and it has not said what its legal claim is, other than to refer to theft of company data and harm to reputation.

    A spokesman for Fairfax Media could not immediately be reached for comment by Reuters by telephone or email.

    Unaoil provides services to oil companies in the Middle East, Central Asia and Africa.

    Fairfax and the Huffington Post, citing leaked documents, reported that unidentified government contracts worth billions of dollars were awarded on the basis of bribes, many of which were organised by Unaoil.

    Authorities in Monaco subsequently raided Unaoil's offices and the homes of its directors.

    A spokeswoman for The Huffington Post could not immediately be reached for comment by telephone or email. The outlet has previously said it stood by its reporting.

    The reports led Iraqi Prime Minister Haider al-Abadi to direct the country's highest corruption watchdog to investigate suspicion of graft in the awarding of oil contracts and urged the courts to prosecute.

    It also prompted a number of companies, including Italy's Eni, to disavow publicly any contact with Unaoil.

    http://www.reuters.com/article/oil-corruption-idUSL4N1962YJ
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    Total acquires Lampris


    Total and Lampiris, the third-largest supplier of natural gas and renewable power to the Belgium residential sector, have signed an agreement under which Total will acquire all of the shares in Lampiris. The agreement is subject to customary regulatory approvals.

    The transaction will have no impact on the companies' relationships with their customers or their suppliers, whose contracts will not be affected, and no jobs will be lost.

    http://www.oilvoice.com/n/Total-acquires-Lampris/9c5fbe5b5f88.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29
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    Venezuela's oil production drops as economic crisis bites


    Output in the country, which has the world's largest oil reserves, dropped to 2.37 million barrels per day in May, according to OPEC data published on Monday.

    That's down some 5 percent from April and off nearly 11 percent from 2015, adding to the woes of oil-dependent Venezuela as it wrestles with a brutal economic crisis. The drop could also help erode a supply glut that has weighed on prices.

    Amid a cash crunch, Venezuela's oil fields are suffering from shortages of spare parts, the retreat of oil services companies due to unpaid bills, maintenance issues, and crime, according to workers, union leaders, foreign executives, and industry experts.

    Oil workers earn only a few dozen dollars a month at the black market rate due to the bolivar currency's rapid tumble on the parallel market, sparking malaise and a brain drain.

    "Workers' moods are in the dumps," said Francisco Luna, a union leader and technician who works in the oil-producing area of Lake Maracaibo. "Every day it's worse. Maintenance is lacking, equipment is lacking."

    Officials at state-run oil company PDVSA, the sole operator of the country's oil fields, did not respond to a request for comment.

    The Caracas-based company has blamed problems on saboteurs and international smear campaigns.

    As Venezuela's recession appears set to worsen, many wonder how much further output could tumble and whether social issues could eventually encroach on output.

    Energy consulting firm IPD Latin America caused waves earlier this year when it predicted production could slip to 2.35 million bpd this year, a figure on par with last month's output.

    Beyond production, Venezuela's refineries and ports have also suffered problems due to equipment failures and power cuts.

    Supermarket lines and worsening scarcities mean many Venezuelans' lives now revolve around the quest for food, and there has been an increase in worker absenteeism, according to union leaders and foreign executives.

    Still, Venezuela's economic crisis may provide a silver lining for global oil consumption.

    "My sense is domestic demand is also lower, so the impact on net exports may be less than the production decline," said Ben Ramsey, an analyst at J.P. Morgan.

    http://www.reuters.com/article/venezuela-oil-idUSL1N195196
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    API data shows inventory build


    Data from the American Petroleum Institute showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, compared with analyst expectations for a decrease of 2.3 million barrels.

    http://www.reuters.com/article/us-global-oil-idUSKCN0Z1027
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    EIA June DPR: The Worm Turns for Utica NatGas Production


    Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR).

    The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month.

    One observation from the June report: The worm has turned for natural gas production in the Utica Shale. Until this report, the Utica has stood alone among nation’s seven major plays in a trend of producing more natgas month over month. The EIA now predicts next month that trend will reverse and the Utica will begin to produce less natgas month over month. Not a lot less! Just 4 million cubic feet per day (Mmcf/d). But still, it’s worth noting.

    Another observation:When you combine all of the plays for both oil and natgas production, the rate of decrease for both is picking up. That is, month over month we’re now producing less and less of both oil and natgas from our shale plays. Which will likely be good for prices.

    http://marcellusdrilling.com/2016/06/eia-june-dpr-the-worm-turns-for-utica-natgas-production/
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    Suncor sees wildfire costing nearly C$1 billion: sources


    Suncor Energy Inc has told employees the massive wildfire that struck northern Alberta in May will cost the company nearly C$1 billion ($777.91 million), two sources at Canada's largest crude producer said on Tuesday.

    The wildfire, which forced the evacuation of the oil sands hub of Fort McMurray, also shuttered operations at facilities owned by Suncor and other producers in the region for weeks, at one point cutting Canada's crude output by more than a million barrels a day.

    The Suncor number is the first concrete figure to emerge from oil sands companies on the scale of their wildfire costs. With some companies still ramping up production, the overall cost of the natural disaster has not been determined.

    Analysts pegged oil companies' pre-tax profit loss at $45-$50 million a day during the wildfire shutdowns.

    Husky Energy and Cenovus Energy Inc said on Tuesday wildfire costs would not be substantial, though the companies declined to provide an estimate.

    Barclays analyst Paul Cheng said Suncor's pre-tax losses were probably close to C$1 billion, although the long-term impact would be limited.

    "It's going to be a really messy and very difficult second quarter in the case of Suncor," Cheng said. "But everyone is quite confident by the end of the month they should be up to normal operations, and if that's the case this is a one-quarter event and investors will not put too much weight on that."

    At Suncor, one worker, who declined to be named because he was not authorized to speak to reporters, said an executive told employees on Monday that the company expects fire-related losses "just shy" of C$1 billion.

    A second employee, also speaking on condition of anonymity, said workers were told that direct costs related to the fire and the loss of production would cost nearly C$1 billion.

    A Suncor spokeswoman declined to comment on wildfire-related losses.

    Suncor has several oil sands facilities, including the main mining site which has the capacity to produce up to 350,000 barrels per day.

    Last week Suncor said it expected to have its base plant operations back to pre-fire production rates within a week and all operations in the region producing at normal, pre-turnaround rates by the end of June.

    The sources said they were told that the company's thermal operations were not coming back online as quickly as hoped because of blockages, likely stemming from the shutdown of steam injections that melt the tarry bitumen in reservoirs.

    But they were also told Suncor had as much as six months' worth of available inventory at its main mining site, more than the typical amount of roughly two months.

    A third Suncor employee, who also declined to be named, said by email that he was told the company saw "significant losses" that could stretch beyond the nearly C$1 billion disclosed at Monday's meeting, a large portion of which was due to flying workers to and from facilities, and employee lodging.

    "We have lost major production but we do have four to five months of ore and we are slowly ramping back up operations," the employee said.

    Suncor spokeswoman Sneh Seetal declined to comment on specifics of operations but said the broader effort to bring production online was on track.

    "Our return to operations is going as planned," she said. "We are bringing these operations back."

    http://www.reuters.com/article/us-suncor-energy-wildfire-idUSKCN0Z026Y
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    Alternative Energy

    Johnson Matthey obtains high energy battery materials licence from CAMX Power LLC


    Johnson Matthey and CAMX Power LLC  announce that Johnson Matthey has been granted a licence under the intellectual property of CAMX relating to the CAM-7 platform of nickel based cathode materials for use in lithium-ion batteries.  

    The CAM-7 platform covers a range of patented, nickel rich cathode materials which offer excellent performance across a range of features including energy density, cycle life, gassing and power handling. This makes products based on this technology particularly suited to demanding applications, such as battery electric vehicles and plug-in hybrid electric vehicles, delivering high energy density with high power capability. With its experience in the scale-up and manufacture of battery materials, in-depth knowledge of nickel chemistry allied to its customer focused technical organization, Johnson Matthey is well placed to bring CAMX Power's innovative technology to market to meet the rising demand for high energy cathode materials.

    "This licence is another important step in our Battery Technologies strategy where we are building a broad portfolio of battery materials aimed at satisfying the most demanding performance requirements," said Martin Green, Director of Johnson Matthey's Battery Technologies business.  "With CAM-7, CAMX Power has built a strong global IP position. Access to this will enable Johnson Matthey to accelerate its entry into the nickel rich cathode material sector of the automotive market. The CAM-7 platform is highly complementary to our existing R&D programmes and we are excited by the prospects that it offers."

    http://www.prnewswire.com/news-releases/johnson-matthey-obtains-high-energy-battery-materials-licence-from-camx-power-llc-300283811.html
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    Saudi Arabia to install first wind turbine in 2016


    Saudi Arabia’s first wind turbine will be installed and operational later this year.

    The turbine will be installed by GE and Saudi Aramco at Turaif bulk plant and will replace diesel as the primary source of power generation for the site.

    It has been designed to cope with the harsh climate and analyses its own data several times a second to maximise output and efficiency through its 120-metre blades.

    The initiative is in line with Saudi Vision 2030 that has set an initial target of generating 9.5GW of renewable energy. Up to 750,000 homes can be powered by 1GW – this is equivalent to the output of two traditional coal power plants.

    The initiative aims to promote renewable energy, economic diversity, local manufacturing as well as increasing productivity and efficiency across the energy and digital sectors.

    http://www.energylivenews.com/2016/06/14/saudi-arabia-to-install-first-wind-turbine-in-2016/
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    Nissan to develop ethanol-based fuel cell technology by 2020


    Nissan Motor Co said on Tuesday it was developing fuel cell vehicle (FCV) technology using ethanol as a hydrogen source in what would be an industry first, and planned to commercialize its system in 2020 as part of efforts to develop cleaner cars.

    The Japanese company said using ethanol, produced from crops including sugar cane and corn, to generate hydrogen-based electricity inside vehicles would be cheaper than fuel celltechnology developed separately by rivals Toyota Motor Corp Honda Motor Co, and Hyundai Motor Co.

    "The cost and energy required to produce hydrogen can be very high, and it also requires significant investment in (fuelling and storing) infrastructure," Nissan Executive Vice President Hideyuki Sakamoto told a media briefing.

    "Compared with that, ethanol is very easy to procure, it is safer to store and lower cost. These are its merits."

    Nissan said its technology would be ready for use in vehicles in 2020, adding it could be used to extend the range of larger, electric vehicles such as delivery vans.

    It would target a cruising range of around 800 kilometers per fuelling, more than the range for gasoline-powered vehicles of just over 600 kilometers.

    The automaker said running costs for the FCVs would be roughly similar to those of electric vehicles, while declining to give details on vehicle pricing.

    Ethanol is used as a fuel source for vehicles in countries including Brazil, but Nissan is planning to use it to generate electricity in fuel cell stacks to charge batteries which would power vehicle motors.

    In developing its FCV technology, Nissan joins Toyota and Honda in a national, government-backed drive to develop a "hydrogen society", in which the zero-emission fuel would be used to power homes and vehicles, and reducing Japan's reliance on imported fuel sources and nuclear power.

    Toyota began marketing the Mirai, its hydrogen FCV, in late 2014, while Honda earlier this year began sales of its Clarity Fuel Cell vehicle. Initial production for both models has been limited due to their relatively high cost and limited fuelling infrastructure.

    Unlike its rivals' offerings, Nissan's technology does not require hydrogen to be stored in vehicles, reducing the need for expensive bulky hydrogen tanks, and would not require fuelling stations, which have been slow to spread globally.

    http://www.reuters.com/article/us-autos-nissan-fuelcells-idUSKCN0Z01BG

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    Precious Metals

    Standard Chartered finds diamonds no longer a bank's best friend


    Standard Chartered said it will stop providing financing to parts of the diamond and jewellery industries as part of a review of its exposure to risky sectors.

    The business, which comprises around $2 billion in loans to so called midstream diamond and jewellery companies which trade and polish the precious commodities, would be shut down, the bank confirmed on Tuesday.

    "Continuing to provide financing to the midstream diamond and jewellery segment falls outside of the bank's tightened risk tolerances. We are working with clients to ensure a smooth exit," said a spokesman for the bank.

    Banks in some of the biggest diamond and jewellery markets such as India have reined in lending in the last two years, fearing defaults amid greater regulatory scrutiny of the sector, which has led to a broad credit crunch.

    Industry sources told Reuters in January that banks including Standard Chartered, State Bank of India, IDBI Bank Ltd and ABN Amro had become cautious over their exposure to the jewellery sector.

    http://www.reuters.com/article/stanchart-diamonds-idUSL4N1963LD
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    Base Metals

    China firms to fund Congo hydro power plant to lift mining output


    GOMA, Democratic Republic of Congo, June 14 (Reuters) - C hina's Sinohydro and China Railway Group will finance a $660 million hydroelectric plant in southeastern Democratic Republic of Congo which is being built to reduce the copper-mining region's power deficit.

    Congo is Africa's largest miner of copper and the 240 megawatt dam in the town of Busanga will power Sicomines, a nearby copper and cobalt mining joint venture between the Chinese companies and Congolese state miner Gecamines.

    Sicomines is the mining side of a $6 billion minerals-for-infrastructure deal signed in 2007, under which Sinohydro and China Railway Group pledged to build $3 billion worth of infrastructure in return for a 68 percent stake in the mine.

    Moïse Ekanga, executive secretary of the Congolese government office charged with overseeing the deal, said on Tuesday that Sicomines would require 170 MW from the Busanga dam to run at full capacity, while the remaining 70 MW would feed the national grid.

    Congo's southeastern mining region has an electricity deficit of about 900 MW, the statement said.

    "This agreement will help jumpstart energy development in the DRC after the recent slowdown due to falling commodity prices," Ekanga said, adding Mauritian firm Mag Energy International will also be a partner in the project.

    The statement did not say how long construction would last. Sicomines officials have previously estimated that it would take four to five years.

    It also did not say whether the Chinese firms' funding would be counted toward their infrastructure or mining obligations under the original contract.

    Campaign groups have expressed concerns that the money will be considered as infrastructure investments, reducing the amount available for roads, schools and hospitals.

    Sicomines, which began operations last November, is already Congo's third largest producer of copper, according to the country's chamber of mines.

    http://www.reuters.com/article/congodemocratic-mining-china-idUSL8N1962ES
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    Chuquicamata underground copper mine to begin production in 2019: Codelco exec


    Work to develop a large underground operation at the Chuquicamata copper mine in northern Chile is on track for production to begin in 2019, a manager at state-owned copper company Codelco said Tuesday.

    Speaking at the MinSub underground mining conference in Santiago, Francisco Carrasco, strategic planning manager for the Chuquicamata underground project, said that despite some initially difficulties in building the necessary tunnels and shafts, progress was on track.

    Tunnel builders are now just 15 meters from completing the 900 meter deep extraction shaft. Transport, air injection and access tunnels are now either complete or near completion, meaning that mass construction of the network of tunnels can continue without interrupting operations at the Chuquicamata open pit, one of the world's largest copper mines.

    The mine will eventually consists of 143 km of tunnels and 19 km of conveyor belts with the capacity to haul 150,000 mt/day of crushed rock 900 meters up to the surface.

    "By the time it is finished it will be the world's largest electromechanical system," Carrasco said.

    Codelco is converting Chuquicamata into an underground mine at a cost of $4 billion as the century-old pit is too deep and ore grades too low to continue operating.

    However, once the underground mine is in production it will take several years to ramp up to its capacity production of 367,000 mt/year of copper.

    http://www.platts.com/latest-news/metals/santiago/chuquicamata-underground-copper-mine-to-begin-21708675
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    Steel, Iron Ore and Coal

    China steel, iron ore slide 3 per cent as demand worries drag


    Steel and iron ore futures in China dropped around 3 percent on Tuesday, pressured by slow seasonal demand in the world¡¯s top consumer of the two commodities.

    Profit margins among Chinese steelmakers have fallen in recent weeks following a sharp rise through March and April when a seasonal pickup in consumption combined with low steel inventories.

    The margin of finished steel prices over raw materials has plunged more than 30 percent since the beginning of May, as steel production ramped up in response to the higher profit margins, said a Singapore-based trader.

    "In absence of improved demand sentiment or a reversion to pro-growth policy measures in China, steel margins on average may continue to be pressured over the coming weeks," he said.

    Construction activity typically weakens from June and through the hot summer weather in China, curbing steel demand.

    The most-traded rebar on the Shanghai Futures Exchange was down 2.8 percent at 2,093 yuan ($318) a tonne by the midday break.

    The drop came after a 4-percent surge on Monday that traders attributed to expectations of tighter supply in China¡¯s top steelmaking city of Tangshan. Chinese markets were shut on June 9-10 for public holidays.

    The Tangshan local government has ordered mills in and near the area to cut production from June 14-21 to ease air pollution, similar to an order it made in May.

    The stricter regulations could lower steel production by 500,000 to 1 million tonnes, according to Commonwealth Bank of Australia.

    http://en.chinamining.com.cn/News/2016-06-14/1465885964d76559.html
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