Mark Latham Commodity Equity Intelligence Service

Friday 1st May 2015
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Oil and Gas


Houthi rebels in Saudi attack

Three Saudis were reportedly killed after an incursion by Yemeni Houthi rebels into southern Saudi Arabia on Thursday.

The assault occurred at a border post in Najran province, but was repulsed by Saudi forces after air strikes were called for.

The attack on Saudi soil will no doubt raise tensions further in the region as Saudi-led air strikes continue against Houthi rebels in Yemen.

A report from Saudi state media said that dozens of rebels had been killed following the assault in Najran, with other reports pointing to the trio of Saudi deaths.

Saudi Arabia had halted its month-long campaign of air strikes against Houthi rebels in Yemen – called Operation Decisive Storm - as it said it favoured a political solution – termed Operation Restoring Hope - to end a conflict following the threat to the rule of President Abd-Rabbu Mansour Haddi.
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China goes organic

Image titleTsinghua University is the #1 rated university in China.Image titleHere are all the chops from co-authors.

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China power consumption to grow 3-5 pct in 2015, CEC

China’s power consumption is forecast to reach 5,690-5,800 TWh in 2015, up 3-5% from the previous year, with consumption in the first half of the year estimated at 2,680 TWh, up about 2% from a year ago, China Electricity Council (CEC) said in a report on April 29.

The A month ago, the CEC forecast China’s power consumption in 2015 would be 5,740-5,800 TWh, up 4-5% year on year.

The forecast, revised down from CEC’s previous forecast of 4-5% growth to 5,740-5,800 TWh in early March, was based on multiple factors, including the downturn in industrial production, economic restructuring, warmer weather, on-grid power tariff cut and decrease in Q1 power consumption.

Total newly installed power generating capacity is expected to reach 100 GW this year, consisting over 53 GW of capacity from non-fossil fuels. And overall installed power generating capacity will amount to 1,460 GW by end of the year, rising 7.5% or so year on year, 35% or 510 GW of capacity would be based on non-fossil fuels.

Utilization rate of power generating units is forecast to be 4,130 hours on average in 2015, but the utilization of thermal units may fall below 4,600 hours to hit a new low, mainly due to weak demand and rising share of cleaner energy sources.

The CEC said power supply would be surplus in northeastern and northwestern provinces, and remain generally balanced in other parts of the nation. But some parts of northern China may see sporadic tightness, while south China-based Hainan province may see supply far short of demand, it noted.
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China Lesso

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This is China Lesso Group. They make plastic pipe.

8x eps, 5.5x ev/ebitda. 2.5% yield.

Beijing is planning to spend $5.7tn on water remediation. This sounds to us like much plastic pipe.Image title

Here are plastic pipe prices, which are modestly rising, but input costs will be nicely flat to down because of Oil!Image title
The company is not very informative, but has consistently made money. We do know that the plastic pipe industry in China has been horrible, with massive excess capacity.

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New Saudi Crown Prince Mohammed bin Nayef marks generational shift

Saudi Arabia's new heir to the throne Crown Prince Mohammed bin Nayef, a close friend of the United States and a scourge of Islamist militants, will be the country's first king from the third generation of its ruling dynasty.

King Salman bin Abdulaziz, in a decree on Wednesday, appointed his nephew and Interior Minister Prince Mohammed as heir apparent, replacing the monarch's half-brother Crown Prince Muqrin in a shake-up at the top of the world's biggest oil exporter.

The move, three months after he took the throne following the death of King Abdullah and coming as Saudi Arabia leads a military campaign against Iranian-allied Houthi militias in Yemen, appeared to settle for many years to come tough decisions over the kingdom's succession.

By sending an assassin to try to kill Prince Mohammed when he was Saudi security chief in 2009, al Qaeda paid him the compliment of treating him as one of its most dangerous enemies.

The prince narrowly survived that attack, in which a militant approached him claiming he wanted to defect before detonating a bomb concealed under his clothes, and was named Interior Minister in November 2012.

The 55-year-old is now firmly established as the most powerful member of his generation in the ruling al-Saud family, and even before he becomes king will be one of the most important figures in the kingdom.

He is the first grandson of Saudi Arabia's founding monarch, King Abdulaziz, or Ibn Saud, to join the line of succession. Abdulaziz established the kingdom in 1932 and ruled until his death in 1953, a period in which Saudi Arabia assumed growing geopolitical importance because of its huge oil resources, developed with U.S. partners.

Mohammed, who was named as first deputy prime minister, remained in his position as Interior Minister, Wednesday's decree said.
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A breakout in commodities would be the last thing anyone expects

Andrew Thrasher, who studies price rather than macroeconomics, had the below remarks and chart in his weekly roundup Monday:

One way we can chart inflation is through the relationship between commodities and Treasury’s.

If commodity prices are rising at a faster pace than bonds, then it’s believed that inflation is also on the rise. As you can see from the ratio chart below, commodities have been under-performing the 10-year Treasury bond since early 2014, However, it seems we may be seeing a possible double bottom in this relationship, which would favor commodities over Treasury’s. At the same time momentum via the Relative Strength Index (RSI) is creating a positive divergence by putting in a higher low.

I’ll be watching to see if the ratio between $CRB and $UST is able to break above its prior high at 1.80. If this happens then we may begin seeing signs of inflation re-introducing itself. What would cause this? That’s not my concern nor on my radar. All I know is this setup may turn to be bullish for commodities after the terrible performance they have had over the last year.


Read more:
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Atlas Copco, deepening mining slump hits demand

Sweden's Atlas Copco said that weak demand for its mining equipment and large compressors had slumped further in the first quarter.

Atlas, which has long been an investor darling because of its nimble cost structure, strong aftermarket sales and robust cashflow, said orders had fallen furthest for underground mining equipment, in which it is the global market leader.

"We saw strong demand for industrial tools and assembly solutions, while the mining area continued to be challenging," Chief Executive Ronnie Leten said in a statement.

Atlas and its peers in a Nordic cluster of mining gear suppliers, including Sweden's Sandvik, Denmark's FLSmidth and Finland's Metso, have been squeezed by spending cuts among miners in recent years.

Order intake at Atlas rose to 25.5 billion Swedish crowns ($2.97 billion) from a year-ago 22.7 billon, boosted by favourable exchange rates, but fell well short of the 26.4 billion seen in a Reuters poll of analysts.

"The order intake for equipment ... was mixed and, overall, it was weaker than expected," the company said.

Atlas Copco shares were down 7.7 percent by 1222 GMT, heading toward what would be their biggest daily decline in nearly four years, and were the worst performer in the STOXX Europe 600 Industrial Goods & Services Index.

Before the report, the shares were up 37 percent on the year, sharply outpacing the sector.

"This is Atlas Copco. When orders come in like this, this is what happens," Handelsbanken Capital Markets analyst Peder Frolen said, referring to the firm's history of continuously delivering strong results.

The order intake for the mining unit alone lagged analyst forecasts by 8 percent in the quarter while orders at Compressor Technique, its biggest unit, fell short by 5 percent.

Signs mining demand has slowed still further came last week as Metso posted weaker-than-expected earnings and complained of a further slide, though a more upbeat take from Sandvik had lifted Atlas shares on Monday.

Operating earnings at Atlas, whose mining gear includes drill rigs and loaders, rose to 4.5 billion crowns from a year-ago 3.8 billion, lagging a mean forecast of 4.8 billion in a Reuters poll of analysts.

The company said it expected overall demand to rise somewhat in the current quarter.
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Life coming back to the global mining exploration sector

After five consecutive months of decline, global mining exploration began showing signs of life last month, with SNL Metals & Mining’s Pipeline Activity Index (PAI), which monitors the health of the sector, gaining 9.4 points.

There were six positive project milestones last month, compared to only one such announcement in February.

SNL's PAI rose to 58.4 in March from 49 in February. But don’t fool yourself. The figure is not that great, as it only means there were six positive project milestones last month, compared to only one such announcement in February.

The index, which hit an all-time low of 40.2 in April 2014, measures activity in the metals supply pipeline, incorporating four stages into a single comparable index: significant drill results, initial resource announcements, major financings and project development milestones.
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LME moves to cut warehouse queues faster

LME moves to cut warehouse queues faster

New measures to increase the amount of metal withdrawn from warehouses, relative to material brought in, will help to reduce queues faster at London Metal Exchange (LME) registered warehouses, the exchange said on Monday.

The LME, the world's oldest and biggest market for industrial metals which is now owned by Hong Kong Exchanges and Clearing Ltd, oversees warehouses where companiesthat buy metals on its futures market can take delivery of quality-assured supplies if needed.

Big banks and traders that own or owned warehouses and charge rent have profited from letting long queues build up. Some also keep huge stocks of aluminium tied up, unavailable to manufacturers, in long-term financing deals.

Effective Aug. 1, the so-called decay factor under the Linked Load-In/Load-Out Rule (LILO) will rise to 1.0 from 0.5 previously. That means companies will now have to withdraw as much metal as they bring in to a warehouse, compared with the previous requirement to take out half of what was deposited.

The LME's LILO rule is aimed at tackling what the exchange has called embedded queues at locations such as Detroit and Vlissingen and places on warehouse operators additional load-out obligations over and above minimum stipulated requirements.

"This adjustment in the decay factor will, broadly, increase the rate at which queues will fall at affected warehouses, provided such warehouses continue to load in metal," the LME said.

The LME's March report shows queues to load out primary aluminium at Vlissingen at 510 calendar days and at Detroit the queues were 436 days compared with the 50 day delay deemed to be acceptable.

The changes come after a consultation with LME-listed warehouses and other interested parties.

Those in favour said the changes were necessary to cut current queues and to create a disincentive to accumulation of future queues.

"One respondent proposed increasing the decay factor to 1.25x for aluminium for the next two years," the LME said.

"Certain respondents argued that LILO as amended, by itself, would be insufficient to reduce queues in a timely manner, given increases in capacity at certain DP Warehouses and the delays in implementation to LILO."

Affected DP warehouses are those with queues longer than 50 days.
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Are we consensus on Resources

The global economy is awash as never before in commodities like oil, cotton and iron ore, but also with capital and labor—a glut that presents several challenges as policy makers struggle to stoke demand.

“What we’re looking at is a low-growth, low-inflation, low-rate environment,” said Megan Greene, chief economist of John Hancock Asset Management, who added that the global economy could spend the next decade “working this off.”

The current state of plenty is confounding on many fronts. The surfeit of commodities depresses prices and stokes concerns of deflation. Global wealth—estimated by Credit Suisse at around $263 trillion, more than double the $117 trillion in 2000—represents a vast supply of savings and capital, helping to hold down interest rates, undermining the power of monetary policy. And the surplus of workers depresses wages.

Meanwhile, public indebtedness in the U.S., Japan and Europe limits governments’ capacity to fuel growth through public expenditure. That leaves central banks to supply economies with as much liquidity as possible, even though recent rounds of easing haven’t returned these economies anywhere close to their previous growth paths.

“The classic notion is that you cannot have a condition of oversupply,” said Daniel Alpert,an investment banker and author of a book, “The Age of Oversupply,” on what all this abundance means. “The science of economics is all based on shortages.”

The fall of the Soviet Union and the rise of China added over one billion workers to the world’s labor force, meaning workers everywhere face global competition for jobs and wages. Many newly emerging countries run budget surpluses, and their citizens save more than in developed countries—contributing to what Mr. Alpert sees as an excess of capital.

Examples of oversupply abound.

At Cushing, Okla., one of the biggest oil-storage hubs in the U.S., crude oil is filling tanks to the brim. Last week, crude-oil inventories in the U.S. rose to 489 million barrels, an all-time high in records going back to 1982.

Around the world, about 110 million bales of cotton are estimated to be sitting idle at textile mills or state warehouses at the end of this season, a record high since 1973 when the U.S. began to publish data on cotton stockpiles.

Huge surpluses are also seen in many finished-goods markets as the glut moves down the supply chain. In February, total inventories of manufactured durable goods in the U.S. rose to $413 billion, the highest level since 1992 when the Census Bureau began to publish the data. In China, car dealers are sitting on their highest inventories of unsold cars in almost 2½ years.

Central to the problem is a cooling Chinese economy combined with tepid demand among many developed countries. As China moves away from its reliance on commodity-intensive industries such as steelmaking and textiles, its demand for many materials has slowed down and, in some cases, even contracted.

“This fall in commodity demand is counterintuitive, and we have only seen the tip of the iceberg,” said Cynthia Lim, an economist at Wood Mackenzie.

Not all commodities are in excess. China’s strong appetite for materials such as copper, gasoline and coffee will keep supplies tight in these markets.

For nearly a decade, producers struggled to keep up with the robust demand from China. But with Chinese output now slowing—its gross domestic product is expected to rise 7% this year, down from 10.4% five years ago—no economy has emerged to take up the slack.

The slowdown has caught many producers off guard as inventories continue to build.

The backlog is causing a scramble in many markets to find storage for excess supplies, clobbering commodity prices across the board, and foreshadowing painful output cuts down the road for many producers. Over the past 12 months, a broad measure of global commodity prices, the S&P GSCI, has plunged 34%, leaving prices at 2009 levels.

“These inventories have to be drawn down at least to some extent. At that point, prices will be back up again,” said Jeff Christian, managing director at CPM Group, a commodities consultancy.

Countries facing a demand shortfall often move to juice their economies through deficit spending, especially with interest rates so low. But many nations are queasy about adding to their debt burdens.

The world’s major economies have all continued to add debt in the years since the credit crisis, according to calculations from John Hancock’s Ms. Greene. Government, business and consumer debt has climbed to $25 trillion in the U.S. from $17 trillion since 2008, a jump to 181% of GDP from 167%. In Europe, debt has hit climbed to 204% of GDP from 180%, while in China debts have jumped to 241% of GDP from 134% by Ms. Greene’s measures.

Even if governments have the capacity for more fiscal stimulus, few have the political will to unleash it. That has left central banks to step into the void. The Federal Reserve and Bank of England have both expanded their balance sheets to nearly 25% of annual gross domestic product from around 6% in 2008. The European Central Bank’s has climbed to 23% from 14% and the Bank of Japan to nearly 66% from 22%.

In more normal times, this would have been sufficient to get economies rolling again, but Harvard University’s Lawrence Summers is among economists who say interest rates need to fall still lower to reconcile abundant savings with the more limited opportunities for investment, a scenario termed “secular stagnation,” which implies diminished potential for growth.

Not all agree. Former Fed Chairman Ben Bernanke wrote recently that the U.S. appears to be heading toward a state of full employment in which labor markets tighten and inflation will surely follow.

Just as a U.S. economy nearing full employment may help, new demand from emerging markets could help offset China’s waning influence. Enter India. Demand for energy and other commodities from the world’s second-most populous country has been growing rapidly.

But analysts are skeptical if the increased demand is enough to fill the void left by China.

The latest glut also underscores a challenging global trade environment as the dollar appreciates against almost all other currencies.

Exporters in countries such as Brazil and Russia are churning out sugar, coffee and crude oil at a faster pace, as they can fetch more in local-currency terms when it is converted from the dollar.

Producers have their own share of the blame. In a lower commodity price environment, producers typically are reluctant to cut production in an effort to maintain their market shares.

In some cases, producers even increase their output to make up for the revenue losses due to lower prices, exacerbating the problem of oversupply.

“Generally, this creates a feedback cycle where prices fall further because of the supply glut,” said Dane Davis, a commodity analyst with Barclays.

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Oil and Gas

JODI on final demand

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Is Saudi at full capacity?

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Saudi Arabia to restructure Aramco, separate it from oil ministry-Arabiya TV

Saudi Arabia's Supreme Economic Council has approved a restructuring of state oil company Saudi Aramco that includes separating it from the oil ministry, Al Arabiya television channel reported on Friday, citing sources.

There are no indications that the move will lead to changes in the fundamental way the world's top crude exporter makes its oil decisions.

"Saudi Supreme Economic Council agrees on Deputy Crown Prince Mohammed bin Salman's vision of restructuring oil-giant Aramco," Arabiya reported on its Twitter account.

"Restructuring of Saudi Aramco includes separation from petroleum ministry," the channel said.

The Supreme Economic Council is a new body formed by King Salman earlier this year to replace the Supreme Petroleum Council, which used to help set the kingdom's oil policy.

The new council is headed by the king's son Prince Mohammed, a move seen by analysts as laying the ground for a generational shift in how Riyadh develops its energy and economic strategies.

The main tenets of Saudi oil policy, including  maintaining the ability to stabilise markets via an expensive spare-capacity cushion and a reluctance to interfere in the market for political reasons, are set by the top members of the ruling Al Saud family.

On Wednesday, King Salman appointed Saudi Aramco's chief executive as chairman of the state oil firm and health minister, as part of a major reshuffle in the OPEC kingpin.
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Phillips 66 shelves plans for oil processing projects

Facing falling oil prices and a possible slowdown in oil production, Phillips 66 has shelved plans for two projects aimed at processing the glut of oil unleashed by the U.S. shale boom.

Months after the company applied for a permit to build a new condensate splitter, the project has been placed on the back burner for at least a year until prices recover, company officials said Thursday during an earnings call with investors.

The delay underscores the ongoing ambiguity surrounding the rules regarding exporting condensate, an ultra-light oil unlocked from shale, said Colton Bean of Tudor, Pickering, Holt & Co.

A decades-old ban prevents companies from sending shipments of crude overseas, but in confidential rulings last year, the Commerce Department’s Bureau of Industry and Security said two companies — Enterprise Products Partners and Pioneer Natural Resources — could export condensate after distilling it and separating into various components. Other companies have clamored for more clarity, but the agency has not issued further guidance.

Phillips 66 on Thursday also said it will similarly push back plans for a second fractionator, which separates natural gas liquids into its component parts. The first fractionator, under construction at the company’s Sweeny refinery, is slated to start operations later this year.

The Houston-based refining, pipeline and chemicals company said it remains committed to its slate of projects, including the nearly complete fractionator and a liquid petroleum gas export terminal in Freeport

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U.S. shale firms revive hedging as oil rebounds, may vex OPEC

U.S. oil producers are rushing to take advantage of the rebound in oil markets by locking in prices for next year and beyond, safeguarding future supplies and possibly paving the way for a rebound in production.

The flurry of hedging activity in the past month will help sustain producers' revenues even if oil markets tumble again, which is bad news for OPEC nations, such as Saudi Arabia, that are counting on low prices to stunt the rapid rise of U.S. shale and other competitors.

Oil drillers are racing to buy protection for 2016 and 2017 in the form of three-way collars and other options, according to four market sources familiar with the money flows. In some cases, that means guaranteeing a price of no less than $45 a barrel while capping potential revenues at $70.

Implied volatility - a gauge of options prices - tumbled nearly 30 percent this month to a four-month low reflecting increased options selling.

"A lot of producers that have hedges on for 2015 are under-hedged for 2016," said John Saucer, vice president of research and analytics at Mobius Risk Group. The crude's rally from six-year lows plumbed in January and easing option premiums have opened a "great opportunity" to buy extra insurance against a new slump, he said.

Analysts tracking hedging say that U.S. shale producers are protected as much as 50 percent less in 2015 compared with 2014. With new hedges now, producers have found an opportunity to maximize cash flow by selling calls and protecting the downside.
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U.S., Canada ready oil train safety measures

Canada's transport minister will be in Washington on Friday for a joint announcement with her U.S. counterpart aimed at harmonizing safety regulations on shipping crude oil by rail, a politically sensitive issue on both sides of the border.

Lisa Raitt and U.S. Transportation Secretary Anthony Foxx are expected to demand that railroad companies equip cars with electronically controlled pneumatic brakes, a proposal the industry has aggressively resisted.

They are also expected to address the timetable for each country to remove older rail cars from service, as well as set a requirement for thicker hulls on new cars. 

The rail and energy sectors have both resisted measures that they have said are too costly to implement for the small safety improvement they deliver.

Electronically controlled pneumatic brakes trigger all axles simultaneously rather than one at a time in current design and many safety advocates have said it is an important advance.

Large rail operators have lobbied against including an ECP brake mandate in the oil train rules, telling U.S. regulators in March that they "would not have significant safety benefits" and "would be extremely costly."

On Thursday, the leading voice for the refining industry said a five-year phase out of existing tank cars - a timetable endorsed by the U.S. National Transportation Safety Board - was unrealistic.

Of particular concern to regulators is crude oil originating from North Dakota's Bakken energy patch, where about 70 percent of the roughly 1.2 million barrels of oil produced daily moves by rail.
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Vedanta writes down Rs 20k cr on oil business

In the biggest write-down in India's corporate history, Anil Agarwal-led Sesa Sterlite, which was renamed asVedanta last week, has been hit hard by falling crude prices as it booked nearly Rs 20,000 crore ($3 billion) as "goodwill impairment charges" related to its oil and gas business. The write-down resulted in the company posting the biggest quarterly loss in the country's corporate history. Vedanta reported a consolidated net loss of Rs 19,228 crore (about $3 billion) for the January-March quarter as against a profit of Rs 1,621 crore in the corresponding quarter last year.
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ConocoPhillips Profit Declines as Oil Prices Plunge

ConocoPhillips said Thursday that its earnings fell less than expected in the first quarter, even as the price it got for each barrel of oil plunged nearly 50%.

Shares edged up 0.7% in premarket trading as the company also backed its guidance for the year.

ConocoPhillips was the first big U.S. oil producer to slash its 2015 capital spending to deal with the plunging price of crude. In March, it said it would curb capital spending through 2017 to reflect expectations that commodities prices will remain volatile.

ConocoPhillips has said it would cut back on exploring for new sources of oil and gas, as well as on drilling in some shale formations in North America, including the Niobrara in Colorado.

For the first quarter, ConocoPhillips’ average realized price plunged to $36.96 a barrel from $71.21 a barrel a year ago. Meanwhile, its production level edged up slightly to 1.61 million barrels of oil equivalent a day, excluding Libya.

Overall, ConocoPhillips reported a profit of $272 million, or 22 cents a share, compared with $2.12 billion, or $1.71 a share, a year ago.

Excluding a deferred tax benefit, the company posted a per-share loss of 18 cents, compared with a profit of $1.81 a year ago.

Analysts polled by Thomson Reuters expected a per-share loss of 19 cents.

Operating costs fell to $2.1 billion from $2.3 billion a year ago.
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Exxon quarterly profit falls 46 percent

Exxon Mobil Corp on Thursday reported a 46 percent decline in quarterly earnings as a steep drop in crude prices cut into profits at the world's largest publicly traded oil company.

First Quarter Highlights

Earnings of $4.9 billion decreased 46 percent from the first quarter of 2014.
Earnings per share were $1.17 assuming dilution, a decrease of 44 percent.
Capital and exploration expenditures were $7.7 billion, down 9 percent from the first quarter of 2014, in line with plan.
Oil-equivalent production increased 2.3 percent from the first quarter of 2014, with liquids up 6 percent and gas down 1.6 percent.
Cash flow from operations and asset sales was $8.5 billion, including proceeds associated with asset sales of $484 million.
The corporation distributed $3.9 billion to shareholders in the first quarter of 2015, including $1 billion in share purchases to reduce shares outstanding.
Dividends per share of $0.69 increased 9.5 percent compared with the first quarter of 2014.
Production started at the Sakhalin-1 project's Arkutun-Dagi field, the last of the three fields to be developed. Peak daily gross production from the field is expected to reach 90,000 barrels and will bring total daily production at Sakhalin-1 to more than 200,000 barrels.
Production started at Hadrian South in the Gulf of Mexico with ExxonMobil's deepest subsea tie-back. Daily gross production is expected to reach approximately 300 million cubic feet of gas and 3,000 barrels of liquids from two wells.
Oil production started ahead of schedule at the Kizomba Satellites Phase 2 project offshore Angola. This capital-efficient project utilizes subsea tie-backs to optimize existing Block 15 facilities, increasing current production levels without requiring additional floating production, storage and offloading vessels. The project develops approximately 190 million barrels of oil with peak production currently estimated at 70,000 gross barrels of oil per day. The project is expected to increase total daily Block 15 production to 350,000 barrels.
Construction of an 84 megawatt cogeneration plant is underway at the Singapore refinery, which will improve the energy efficiency of the site upon completion. The project will enable the shutdown of less efficient power generation facilities and reduce carbon dioxide emissions. This project underscores ExxonMobil's commitment to improving energy efficiency, lowering emissions, and reducing costs.
Drilling resumed at Point Thomson on Alaska's North Slope as construction continues toward bringing the initial production systems, designed to produce up to 10,000 gross barrels per day of natural gas condensate, online in 2016. The initial production will provide reservoir development insights and economic benefits to Alaskans.
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Eurasia Drilling extends deadline on Schlumberger deal

Russia's Eurasia Drilling said on Thursday it had agreed to extend a deadline on a proposed deal to sell a stake to international oilfield services firm Schlumberger from to April 30 to May 31.

It said both companies were continuing to cooperate with the Russian Federal Anti-Monopoly Service (FAS) and the Commission on Foreign Investment on the proposed merger.

Last month, Schlumberger said it planned to buy a 45.65 percent stake in Eurasia for about $1.7 billion, potentially paving the way for it to become the sole owner of Russia's most active oilfield services company.

Russian authorities have been concerned about complications that could arise from future international sanctions impeding the activity of investors operating in Russia.

The deal requires approval from the governmental commission.

Eurasia Drilling and FAS declined immediate comment.
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OPEC oil output in April climbs to highest since 2012 -survey

OPEC oil supply in April has jumped to its highest in more than two years, boosted by record or near-record supplies from Iraq and Saudi Arabia, a Reuters survey showed, as key members stand firm in their focus on market share.

The increase from the Organization of the Petroleum Exporting Countries puts output further above forecasts of demand for OPEC oil in the first half of the year, although second-half demand is expected to be stronger.

OPEC supply has risen in April to 31.04 million barrels per day (bpd) from a revised 30.97 million bpd in March, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

"We are in an oversupplied market, and this oversupply is unlikely to disappear any time soon," said Eugen Weinberg, analyst at Commerzbank in Frankfurt.

If the total remains unrevised, April's supply would be OPEC's highest since 31.06 million bpd in November 2012, based on Reuters surveys.

Besides Iraq, the main reasons for the rise are higher Nigerian exports and a further small gain in Libyan production despite the unrest there. Top exporter Saudi Arabia has kept output near a record high in April, sources in the survey said.

Iraq has increased its northern exports further following a deal between Baghdad and the Kurdistan Regional Government, offsetting a slight decline in flows from the south which produces the bulk of Iraq's oil.

Based on this survey, Iraqi exports this month look set to exceed March's record high of 2.98 million bpd. Iraq was hoping to reach 3.1 million bpd of exports in April.

OPEC's largest African producer Nigeria has shipped more cargoes in April, helped by a return to a more typical export rate from its largest crude steam, Qua Iboe.

Iran increased exports as some buyers who stayed away in March in response to U.S. pressure during negotiations on a preliminary nuclear deal, resumed purchases in April, sources in the survey said.

There was not a corresponding increase in Iranian production in April, sources said, as the extra barrels were shipped from storage.

Saudi Arabian output dipped after a rise in March to a record high, the survey found, but remained above 10 million bpd due to increased local requirements in power plants.

Saudi Oil Minister Ali al-Naimi said April output was "around" 10 million bpd.

Riyadh was the driving force behind OPEC's refusal last year to prop up prices by cutting its output target of 30 million bpd, in a bid to discourage more costly rival supplies.

Of countries with lower output, the biggest decline was in OPEC's other West African producer, Angola, where outages at BP's Saturno and Plutonio fields contributed to the drop.
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Range Resources sees fall in NatGas surplus

In the presentation below, they reiterate the high decline rates on shale oil production of 80% (which seems very consistent with CLRs & WLL stats) in the first 12 months. Thus, if rigs fall, even with some uplift in well productivity of 20-30%, production should fall. They argued on the call that unlike in 2008/09 laterals are much longer indicating limited productivity gains vs. that time, hence why the theory that rig drops don’t lead to production cuts is false this time. In addition, we are much further along on horizontal wells vs. vertical wells too. This concurs with our research and thus why 2H both oil and gas production will plateau and, in the case of oil, fall.

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Refining cushions Shell profits after oil price slide

Refining and trading cushioned a drop in Royal Dutch Shell's first quarter profits, which fell less than expected after the collapse in oil prices decimated earnings from oil and gas output.

Shell joined rival oil majors BP and Total which this week reported stronger than expectedprofits thanks to refining, a division the firms have struggled to rationalise in recent years but which proved valuable in the recent oil price downturn.

"Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices," Shell Chief Executive Officer Ben van Beurden said.

Shell however lowered its 2015 planned capital investment to $33 billion (21 billion pounds) from an earlier guidance of $35 billion.

Shell reported a 56 percent drop in first quarter net income at $3.2 billion, beating analysts' expectations of $2.4 billion profits.

It maintained a dividend of 47 cents per share and said it would use its planned $70 billion acquisition of smaller British rival BG Group to further optimise its asset base.

Shell's 6 percent investment cut was lower than its rivals in the sector which reduced 2015 upstream spending by 10 to 15 percent. Van Beurden in January warned against over reacting to the recent oil price fall.

“At last Shell is giving granularity for its 2015 capex guidance compared to its previous vague guidance. There is a relief that Shell is reacting to the lower prices,” Raymond James analyst Bertrand Hodee said.

Profits from refining and trading, also known as downstream, rose to $2.65 billion in the first quarter of 2015 from $1.575 billion a year earlier, offsetting a sharp drop in oil and gas production earnings to $675 million from $5.7 billion.
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Whiting Petroleum Swings to a Loss on Oil Price Drop

Whiting Petroleum Corp. reported it swung to a loss in the first quarter, as tumbling oil prices weighed on results even as production remained strong.

The per-share loss beat expectations, though revenue fell below analyst forecasts. Shares fell less than 1% in recent after-hours trading.

Denver-based Whiting, one of the largest producers in the prolific Bakken Shale formation in North Dakota, has been suffering from the sharp decline in oil prices.

Last December, it closed a $3.8 billion deal to buy rival Kodiak Oil & Gas Corp. The deal saddled the company with more than $2 billion of additional debt, and Whiting now has a so-called enterprise value, which includes debt, of more than $11 billion, according to S&P Capital IQ.

In March, The Wall Street Journal had reported that Whiting is seeking a buyer after plummeting crude prices took a bite out of the oil-and-gas producer’s results and its shares tumbled. However, a stock sale in late March signaled that any larger takeover was unlikely soon.

Chief Executive James Volker said production remained strong though the company was reducing its rig count and well cost. First-quarter production generated 166,930 barrels a day, up 3% pro forma on a sequential basis.

Overall, the company posted a loss of $106 million, or 63 cents a share, compared with a year-earlier profit of $109 million, or 92 cents a share.

Excluding special items, the company’s per-share loss was 23 cents, compared with a year-earlier profit of $1.06 a share.

Revenue dropped 29% to $529 million.
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China's natural gas output up 6.8% in Q1

China's natural gas output rose 6.8% year on year and hit 35.2 billion cubic meters (cu m) in the first three months of 2015, said the National Development and Reform Commission.

From Jan to Mar, the country's natural gas imports amounted to 16 billion cu m, up 16.5% from the previous year.

According to the statistics, China's imports of LNG gas decrease of 2.9% year on year to 6.8 billion cu m in the first quarter, while its imports of pipeline gas surged 36.8% to 9.3 billion cu m in the period.

In the first quarter of this year, China's natural gas consumption amounted to 50.2 billion cu m, up 4.8% from the year before.
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Statoil Adjusted Profit Beats Estimates Amid Trading Gains

Statoil ASA adjusted profit beat estimates in the first quarter on trading and refining as it wrote down the value of mainly U.S. unconventional assets by $6.1 billion amid plunging crude prices.

Adjusted net income fell to 7 billion kroner ($928 million) from 15.8 billion kroner a year earlier, the Stavanger-based company said on Thursday. That compared with an estimate of 4.2 billion kroner in a survey of analysts. It took “significant accounting charges” after asset impairments of 46.1 billion kroner, mainly related to U.S. onshore unconventional assets.

Statoil, Norway’s largest oil producer in February announced it was deepening cost cuts from 2016 and also lowered capital spending plans to preserve its ability to pay dividends. The cuts have sent ripples through Norway, which relies on oil for about 20 percent of its economy, as producers and service companies have jettisoned thousands of jobs.

The company maintained plans for capital spending of about $18 billion and sees costs cuts of about $1.7 billion from 2016. It will pay a 1.8 kroner dividend for the quarter.

Statoil’s production rose to 2.056 million barrels of oil equivalent a day in the first quarter from 1.978 million barrels a year earlier. The average liquids price declined 40 percent.

The company reported adjusted earnings of 6.9 billion kroner for its market and trading unit, amid higher refinery margins and “strong” trading results.

Of the impairment losses 30.4 billion kroner, including goodwill of 4.2 billion kroner, relate to unconventional onshore assets in North America and 14.6 billion kroner on conventional upstream assets.
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Noble Corp's profit beats as contract drilling margins rise

Noble Corp Plc reported a better-than-expected quarterly profit as higher margins from contract drilling services helped offset losses from retirement of rigs due to a slump in oil prices.

The company said on Wednesday that margins in its contract drilling business rose to 59 percent in the first quarter from 50 percent in the prior quarter.

Shares of Noble, which gets about 97 percent of its operating revenue from contract drilling services, rose about 1.5 percent in extended trading.

Noble's average daily revenue rose 2.8 percent from the prior quarter to $340,000, while fleet utilization rose to 86 percent from 82 percent.

The company, however, said it expected its capital spending to fall to about $585 million in 2015 from $1.9 billion in 2014.

Net income attributable to Noble fell to $178.4 million, or 72 cents per share, in the quarter ended March 31 from $256.3 million, or 99 cents per share, a year earlier.

Net income from continuing operations rose to 72 cents from 60 cents a year earlier. In August, Noble completed the spin-off of Paragon Offshore Plc, which owns drilling assets that were previously part of Noble.

Operating revenue rose about 1 percent to $804.3 million.

Analysts on average had expected earnings of 51 cents per share and revenue of $777.4 million, according to Thomson Reuters I/B/E/S.
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Suncor turns to loss on low oil price, foreign exchange loss

Suncor Energy Inc, Canada's largest oil and gas company, reported a loss on Wednesday as oil prices tumbled by half and a foreign exchange loss outweighed higher production.

The company's net loss was C$341 million, or 24 Canadian cents per share, compared with a profit of C$1.49 billion, or C$1.01 per share, in the first quarter of 2014.

Operating earnings, which exclude one-time items like the C$940 million ($781.8 million) foreign exchange loss on the value of the company's U.S.-dollar denominated debt, fell sharply to C$175 million, or 12 Canadian cents per share, from C$1.793 billion, or C$1.22 per share, in the year-ago period.

The adjusted result lagged the average analyst estimate of 14 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Suncor, like its peers, has already slashed jobs and spending to cope with the sharp decline in the oil price over the past year. The company, the dominant producer in Canada's oil sands, said efforts remain on track to cut C$1 billion from its 2015 capital budget while still moving ahead with key growth projects.

Output from Suncor's northern Alberta operations rose 13 percent to 440,400 barrels per day, mainly due to less maintenance activity in the quarter.

Cash costs for its oil sands operations fell to C$28.40 per barrel from C$35.60 in the year-prior quarter, due to the higher production, lower natural gas prices and the company's cost cutting initiatives.

Overall, Suncor produced a total 602,400 barrels of oil equivalent per day (boepd), up 10.5 percent from 545,300 boepd in the fourth quarter of 2014.

The company's cash flow, an indicator of its ability to pay for new projects, fell 49 percent to C$1.48 billion and it said earlier this month that it expected second-quarter production of 598,000 boepd.
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China cuts subsidy for shale gas development for 2016-2020

China will offer smaller subsidies from next year to develop its potentially huge resources of shale gas, the Finance Ministry said on Wednesday, a sign that the industry has managed to cut the cost of production.

China has set a target of producing 30 billion cubic metres (bcm) shale gas by 2020, about 17 percent of current demand, but less than half an earlier goal, due to its complex geology, water scarcity and high drilling cost.

The Ministry said subsidies for shale gas development would be cut to 0.3 yuan per cubic metre from 2016 to 2018. That compares with a grant of 0.4 yuan from 2012 to 2015.

The subsidy will be further cut to 0.2 yuan per cubic meter in the 2019-2020 period, the ministry said on its website (

Sinopec Corp, China's second-largest state energy firm and by far the leader in shale gas development, was unfazed by the lower subsidies.

"Shale gas is a strategic development area for the company and such a strategy wouldn't be affected by lower oil prices or subsidies," said company spokesman Lu Dapeng.

Better technology and a greater scale of development have helped the company cut the gas production cost, he added.

Sinopec, which discovered China's largest commercial shale gas field of Fuling in the southwest, has said it used new drilling technologies and made all the production equipment and tools at home, which has reined in development costs.

With the current subsidy of 0.40 yuan per cubic metre, Sinopec has said its internal rate of return for producing gas at Fuling was 11 to 13 percent.
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Europe’s biggest oil refiner joins those predicting end of boom

The surge in European refining margins, which jumped by the most in 4 years last quarter, cannot be sustained because the region still has surplus processing capacity, Total SA said Tuesday. The French oil producer joins refiners including Gunvor Group and Eni SpA who predicted this month that the favorable market won’t last.

Strong gasoline demand and a high level of maintenance at refineries in the U.S. increased margins, Total said. Eni, whose first-quarter refining margins jumped sixfold, said Wednesday that lower demand, overcapacity, and increasing competitive pressure from imports will be “headwinds” for companies in the region.

“European refiners are benefiting from a double whammy of lower crude oil prices and strong demand,” Hamza Khan, an Amsterdam-based senior commodity strategist at ING Bank NV, said by e-mail on April 28. “They will see a tough operating environment in the long run as new capacity comes online in the Middle East, the U.S. increases product exports and the price of crude recovers.”
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Valero Energy reports on record first quarter

Valero Energy Corporation reported net income from continuing operations attributable to Valero stockholders of US$964 million, or US$1.87 per share, in the first quarter of 2015 compared to US$829 million, or US$1.54 per share, in the first quarter of 2014. The results were a record first quarter for the company.

“Our team’s solid performance and favourable margins helped us deliver impressive results during a heavy planned maintenance period in the first quarter,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer. “Valero’s financial position is strong, and we are clearly executing our strategy, which includes investing to optimise our operations, growing VLP and returning cash to stockholders.”

The refining segment reported first quarter 2015 operating income of US$1.6 billion versus US$1.3 billion in the first quarter of 2014. The US$361 million increase in operating income primarily resulted from the US$1.49 increase in throughput margin per barrel from US$10.90 in the first quarter of 2014 to US$12.39 in the first quarter of 2015. The increase in throughput margin per barrel was mainly driven by stronger gasoline and secondary product margins per barrel relative to Brent crude oil and lower natural gas costs. These positive drivers were partially offset by lower discounts per barrel for most sweet and sour crude oils relative to Brent crude oil.
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US oil inventories are still at an 80-year high

The latest data from the Energy Information Administration showed that commercial crude inventories rose by 1.9 million barrels in the week ended April 24.

The consensus forecast was for a build of 3.3 million barrels.

That brought the total to 490.9 million barrels, keeping inventories at the highest level for this time of year in at least 80 years.

Last week, oil inventories rose by 5.3 million barrels from the previous period, more than the consensus forecast of 3.2 million barrels.

Read more:

For the first time since November 2014, Cushing saw an inventory decline (-514k) last week.

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PIRA: new volumes to overshoot new LNG supply deals

PIRA Energy Group reports that sizable volumes of new production capacity will be coming online in the next 12 months, but the ramp up on contracts tied to this capacity will lag behind by a considerable margin.

In addition, expiring contracts on existing LNG projects offer additional supply to the trading mix, most notably from Indonesia, PIRA said in its report.

The year-on-year U.S. storage surplus is well on its way to inflate an additional ~100 BCF by end-month. The implications of such a massive year-on-year increase will carry forward given that weekly stock builds ahead increasingly must fall below last year’s record pace. Certainly, these issues will make May Bidweek (concluding next Monday) all the more interesting as a test of whether last month’s price action that dragged the prompt month decidedly lower will be repeated.

In Europe, the approach to storage management and the acquisition of supply are quite different from normal at the beginning of the 2015 injection season. The normal rules and assumption will not apply because of the sizable decrease in oil-indexed prices in the coming months, which are causing all kinds of unique optimization plays.

PIRA foresees Mexican energy policy reforms, coupled with low oil prices, increasing the nation’s dependence on U.S. gas exports. Reforms to stimulate foreign investments were aimed to revitalize domestic oil and gas resource development, as well as upgrade critical infrastructure, but the collapse of oil prices has undercut resource investments and depleted already capital-short PEMEX. By comparison, reforms targeting private infrastructure investments are gaining strong traction, signaling more positive momentum for gas demand, especially gas-fired power generation. Stronger gas demand and stiffer domestic gas production headwinds should boost the call on U.S. exports from 2.0 BCF/D in 2014 to 5.6 BCF/D by 2020.
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Hess Reports First-Quarter Loss on Lower Crude Prices

Hess Corp., which sold refineries and gasoline stations to focus on oil production, cut capital spending and reported a first-quarter net loss after crude prices plummeted.

Hess will cut 2015 capital spending 6.4 percent to $4.4 billion, the New York-based company said Wednesday in a statement. The loss was $389 million, or $1.37 a share, compared with profit of $386 million, or $1.20, a year ago.

The loss came even as the company pumped more oil and natural gas to make up for prices that fell by more than half from last year, the company said. Oil and gas production increased to 361,000 barrels of oil equivalent a day from 318,000 barrels a year ago.

Lower oil prices reduced adjusted net income by about $700 million. West Texas Intermediate, the U.S. benchmark crude, fell 0.4 percent to $56.86 a barrel at 8:01 a.m. in New York. Oil is down 47 percent since its June high.

The loss was 98 cents a share excluding some items, narrower than the $1.06 a share average estimate of 20 analysts compiled by Bloomberg.
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Weir expects fall in oil and gas orders to continue falling

Weir Plc said orders from its oil and gas business fell 23 percent in the first quarter, a smaller drop than was expected by the market, sending its shares up as much as 5 percent.

The Scottish industrial engineering firm, which expects the decline in orders to continue in the second quarter, said it would cut costs at its oil and gas segment by another 10 million pounds ($15.35 million).

Companies serving the oil and gas industry have been feeling the pinch as exploration and production majors slash spending in response to the steep fall in crude prices.

Weir, which makes valves and pumps for the energy and mining industries, plans to cut another 125 jobs, mostly in its North American oil and gas business, and consolidate its service centres in the region, Andrew Neilson, Director of Strategy and Corporate Affairs told Reuters.

"We're getting to the point that it might start to impede our ability to respond to market recovery, if we cut it much more," Chief Executive Keith Cochrane said on a call with analysts, when asked if the company could withstand more job cuts.

After the latest round of cuts, Weir will have reduced its North American oil and gas headcount by about 27 percent. It first began taking cost-saving measures in November.
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Global Tertiary Demand

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Thai retail gasoline volumes.
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Total R&M operating numbers (volumes)
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US stocks of crude.

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Gazprom Profit Plunges $19 Billion

Russia’s gas giant OAO Gazprom said Wednesday its 2014 net profit plunged 980.26 billion ruble ($19 billion) on year to 159 billion ruble due to weakness in the Russian currency and instability in Ukraine.

Gazprom, facing tougher conditions in its biggest market Europe, saw its sales to the continent fall to 159.4 billion cubic meters from 174.0 bcm a year ago.

Russia’s ruble plummeted last year, losing around half of its value against the dollar, due to lower oil prices and a crisis of confidence in the currency following Western sanctions on Russia over the crisis in Ukraine. The weaker ruble also pushed Gazprom’s net debt higher by 48% to 1.65 trillion rubles.

The company said it suffered a 34 billion ruble loss on its balance sheet due to a dispute with Ukraine’s state energy company Naftogaz.
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Eni sees higher output this year as first-quarter tops forecast

Italy's Eni said it expects to produce more oil and gas this year after posting a 46 percent drop in first-quarter net profit due to weaker crude prices.

Eni's adjusted net profit fell to 648 million euros (464 million pounds) but easily topped an analyst consensus provided by the company of 460 million.

Benchmark Brent prices averaged $55 a barrel in the first quarter of 2015, down by almost half from a year earlier.

Eni said the impact of fallen oil prices had been partly offset by a better refining margins and higher investment income.

Oil and gas production this year will be higher than last year due to new field start-ups and a ramp-up of projects in places such as Angola, Congo and Egypt, it said.

Eni, the biggest foreign oil producer in Africa, also said it expected to produce higher volumes in conflict-torn Libya.

The group said it would spend less this year than in 2014. Eni has committed to cutting costs and will reduce investments by 17 percent to 2018.
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Range hits record with Marcellus well

Range Resources has drilled a southern Marcellus shale well that logged a record-setting initial production (IP) rate of 43.4 million cubic feet equivalent per day (Mmcfe/d).
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Top Oil ETF Sees Largest Outflow in Four Years on Rebound

The biggest U.S. fund that tracks oil is heading for the largest outflow in four years as investors cash out following a 30 percent rebound in crude prices.

Holders of the U.S. Oil Fund have pulled out more than $500 million this month, after pouring in almost $3 billion in the previous six months, according to data compiled by Bloomberg. Other oil exchange-traded products including ProShares Ultra Bloomberg Crude Oil also saw investor selling.

West Texas Intermediate crude has rebounded more than $10 from a six-year low in mid-March on speculation that the falling number of oil rigs will reduce U.S. production and ease a supply glut. Monthly output will decrease from June through September before rising back again in the fourth quarter, the Energy Information Administration forecast.

“Oil’s had a heckuva bounce off the bottom, and I think people are just cashing in some of their short-term chips,” said Matt Hougan, president of San Francisco-based research firm “It was easier to bet oil would go from $40 to $55 than it is to say it’ll go back to $70.”

A total of $518 million has been withdrawn from the U.S. Oil Fund, which follows WTI prices, heading for the biggest monthly outflow since April 2011. The fund’s shares outstanding dropped to 138.9 million Monday, down from a record 188.4 million on March 19.
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Saudi King Names Al-Falih Aramco Chairman, Replacing Al-Naimi

Saudi Arabia’s King Salman named Khalid A. Al-Falih as chairman of Saudi Arabian Oil Co., the world’s biggest crude exporter, replacing Oil Minister Ali Al-Naimi, according to state television.

Al-Falih, born in 1959, was also named health minister in a royal court statement published by the official Saudi Press Agency on Wednesday. He had been president and chief executive officer of Aramco. No replacement for that job was announced.

“Having Al-Falih as a full cabinet remember now does not preclude him from other ministerial positions including petroleum in the future,” Mohammed al-Ramady, professor of economics at King Fahd University of Petroleum and Minerals in Dhahran, Saudi Arabia, said by phone on Wednesday.

Al-Falih said on Jan. 28 that Saudi Arabia won’t “singlehandedly” balance global crude markets even if prices fall. Saudi Arabia has resisted calls from fellow members of the Organization of Petroleum Exporting Countries to trim output. OPEC kept its production target unchanged at a Nov. 27 meeting, seeking to defend market share rather than support prices which fell about 50 percent last year.

Al-Falih took office as president and chief executive officer of the company on January 1, 2009, according to the company’s website. He spent his entire career at Aramco over a period of three decades.

Al-Falih earned a B.S. degree in mechanical engineering from Texas A&M University in 1982. In 1991, he graduated with an MBA from the King Fahd University of Petroleum and Minerals in Dhahran, Saudi Arabia.
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Russia's Novatek Says 1Q Net Profit Up 23%, Beats Forecast

Russia's No.2 gas producer Novatek said on Tuesday its first-quarter net profit increased by 23 percent to forecast-beating 31.1 billion roubles ($595.6 million) thanks to rising sales and production.

Analysts, polled by Reuters, expected net income at 27.2 billion roubles.

Novatek also said total January-March revenues rose to 113.7 billion roubles from 88.7 billion roubles in the year-earlier period.

- See more at:
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Texas total well completions for 2015 year to date

Texas total well completions for 2015 year to date are 5,946, down from 10,130 recorded during the same period in 2014: Texas RRC

Texas data:
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National Oilwell forecasts declining revenue

National Oilwell Varco Inc, the largest U.S. oilfield equipment maker, reported lower-than-expected quarterly revenue and forecast declining revenue for the next few quarters as weak oil prices reduce drilling activity.

The company, which in February warned of a "severe downturn" in its business, said total backlog fell to $11.86 billion in the first quarter ended March 31 from $14.32 billion on Dec. 31.

Global oil prices have fallen 44 percent since peaking in June last year, prompting oil producers to quickly scale back spending, which in turn has weighed on demand for oilfield equipment.

The average U.S. rig count has also fallen about 40 percent since June and was at 1,110 in March, according to a Baker Hughes Inc survey.

Net income attributable to the company fell 47.4 percent to $310 million, or 76 cents per share, from a year earlier, mainly hurt by $200 million in charges.

Excluding one-time items, National Oilwell earned $1.14 per share, above the average analyst estimate of $1.09, according to Thomson Reuters I/B/E/S.

Revenue fell marginally to $4.82 billion, below analysts' average estimate of $4.84 billion.
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Consol Energy profit falls 35 pct on weak prices

Coal and natural gas producer Consol Energy Inc reported a 35 percent fall in quarterly profit, hurt by weak prices for both commodities.

The company, which has shifted its focus to natural gas production, said its coal mining operations would continue to benefit by partnering with the power plants that will be around for many years to come.

U.S. power companies shut or converted over 4,100 megawatts of coal-fired plants last year and are expected to stop burning coal at another 22,100 MW of plants in 2015, according to Thomson Reuters data.

Utilities are shutting down older coal plants instead of upgrading them to meet increasingly strict federal environmental rules due to high costs and abundant supply of cleaner and cheaper natural gas, an alternative to coal.

Consol said on Tuesday it also signed an "innovative" sales agreement with a utility that allows it to sell either coal or natural gas depending on whichever commodity is morecost-effective for a given month.

The company said it expects second-quarter net gas production of about 71-75 billion cubic feat equivalent (bcfe), compared with 71.6 bcfe it produced in the first quarter.

Consol also forecast current-quarter coal sales of 7.1-7.7 million tons, higher than the 6.5 million tons it sold in the quarter ended March 31.

Net income from continuing operations fell 35 percent to $79 million, or 34 cents per share, in the first quarter.

Excluding a charge of $67.7 million on debt extinguishment and a $60 million gain on commodity derivatives, earnings were 37 cents per share.

Revenue fell 8.2 percent to $889.6 million.
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Beach Energy revenue slumps as oil falls

Oil and gas explorer Beach Energy’s quarterly revenue tumbled amid a slump in global oil prices, while the company also said it planned a “major reduction” in capital spending next financial year.

Total revenue for the three months to March 31 plunged to $131 million, a 33 per cent decline on the December quarter, and 43.5 per cent lower than the same period last year, as sales volumes and oil prices declined, the company (BPT) said today.

Sales volumes fell 5 per cent during the March quarter to 2.2 million barrels of oil equivalent (mmboe) compared to the corresponding period a year earlier, while volumes fell 23 per cent on the December quarter. Year to date sales were in line with the previous year.

Quarterly production was 11 per cent lower than the December quarter, with output reaching 2.1 mmboe.

Beach saw an average oil price during the quarter of $71 per barrel, down 18 per cent from the December quarter, and a 43 per cent plunge from a year ago.

Global oil prices have recently fallen to six-year lows, as the world’s largest oil producers maintain high output amid new sources of supply.

Beach Energy’s capital spend slipped 47 per cent during the quarter to $79m, which was consistent with the company’s revised 2015 plan.

The company also said it planned a “major reduction” in capital expenditure for the 2016 financial year, with its cash reserves and cash flows expected to fully fund the reduced program.
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BP sees profit fall sharply to $2.1bn

Oil giant BP has reported a sharp fall in profit to $2.13bn (£1.39bn) for the three months to the end of March as the dramatic fall in oil prices takes its toll. That compares with $3.5bn for the same period a year earlier.

A big rise in revenue from BP's oil refinery unit made up the bulk of its profits

BP is the first of the major oil firms to report first quarter earrings.

BP chief executive Bob Dudley said the oil company's results reflected the "weaker environment and the actions we are taking in response".

The results were, however, better than expected. Most analysts had forecast the oil company to report replacement cost profit (RCP) of around $1.3bn.

RCP is the method by which oil companies report profitability based on how much it would cost them to "replace" the reserves they sell.

Oil companies' business is largely made up of "upstream" activities - getting oil out of the ground - and "downstream" - refining it into useable products.

BP's downstream business gave BP $2bn in RCP in the first quarter this time, compared with $794m for the same period a year earlier.

That helped offset a big slump in earnings from BP's oil exploration operations which reported RCP of $372m compared with $4.7bn a year earlier.
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India asks Qatar to cut LNG price by 60%

India has asked its largest liquefied natural gas (LNG) supplier Qatar to cut gas prices to match the 60% slump in global rates in last one year.

India buys 7.5 million tonnes a year of LNG on a long-term 25 year contract, indexed to a moving average of crude oil price.

The price of LNG from Qatar comes close to $13 per million British thermal unit as compared to the $6-7 rate at which it is available in the spot or current market.

The high price of LNG under the long-term contract has led to users in fertiliser and power industry finding it cheaper to use alternate fuels like naphtha and fuel oil, a top source said.

Petronet LNG Ltd, which has been buying LNG from Qatar on a long-term contract since 2004, has asked for a 10 per cent cut in import volumes this year, they said.

"The contract is a take or pay wherein the buyer has to take the contracted volume every calendar year or pay for it. But the contract also provides for a flexibility that gives the buyer (the option) to defer taking 10% less of yearly supplies. These volumes can be taken at anytime during the duration of the contract," the source said.

Similarly, the contract also provides for the buyer to seek 10% more quantity over the contracted volume in any year, with the excess volume being adjusted during the remaining duration of the contract.

The source said Petronet has already exercised the 10% option and is in negotiations to raise this volume to 25%.
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Total’s Profit Beats Estimates on Refining Gains, Output Growth

Total SA’s first-quarter profit exceeded analysts’ estimates as refining gains and the fastest rate of production growth in more than a decade helped soften the blow of a 50 percent drop in oil prices.

Net income excluding changes in inventories was $2.6 billion, beating the $2.17 billion average of nine estimates compiled by Bloomberg. Adjusted net operating income from its refining and chemicals unit, which benefits from lower oil prices, more than tripled to $1.1 billion, the Courbevoie, France-based company said in a statement on Tuesday.

Europe’s third-biggest oil company is “demonstrating its resilience and profiting from its integrated model,” Chief Executive Officer Patrick Pouyanne said in the statement.

Total plans to reduce spending, cut jobs and curtail exploration this year after the price of Brent crude, the benchmark for more than half the world’s oil, dropped amid a global supply glut. The average price Total sold its oil for during the first quarter fell 50 percent to $53.90 a barrel from $108.20 a year earlier.

The cost-saving program includes a hiring freeze, cutting 2,000 jobs in marketing and services and a 15 percent reduction in corporate staff through 2017. The company also plans $10 billion of asset sales in the period, including $5 billion this year.

Net income fell 20 percent to $2.66 billion, or $1.13 a share, from $3.34 billion, or $1.46, a year earlier, the company said. Sales dropped 30 percent to $42.3 billion. Total is maintaining its dividend at 61 euro cents (66 U.S. cents) a share, according to the statement.

European refining margins rose to $47.10 a ton in the first quarter from $6.60 a year earlier, driven by strong demand particularly for gasoline. That’s the highest level since the third quarter of 2012.

“Since the beginning of the second quarter refining and petrochemicals margins have remained strong, despite the structural overcapacity in Europe, which will weigh on margins in the medium term,” Total said.

First-quarter production rose 10 percent to the equivalent of 2.395 million barrels of oil a day, in part due to a new concession in the United Arab Emirates. Total warned second-quarter production will be affected by maintenance work in Nigeria, the U.K. and Norway.

Total expects to raise output this year by 8 percent to 2.32 million barrels a day. The increase comes in part from the start up of five more projects including Siberian gas venture Termokarstovoye in the second quarter. Before year-end, Total will commence operations at the Gladstone liquefied natural gas project in Australia, the Laggan-Tormore fields off the Shetland Islands, the Surmont 2 oil-sands development in Canada and Vega Pleyade field offshore Argentina.

The company wrote down the value of assets in Libya and Yemen due to “deteriorating security conditions.”
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Canada's TORC Oil & Gas to buy Surge Energy assets for C$430 mln

Canada's TORC Oil & Gas to buy Surge Energy assets for C$430 mln

Canadian intermediate producer TORC Oil & Gas Ltd is buying light oil assets from Surge Energy Inc in the Canadian Bakken region of southeast Saskatchewan and Manitoba for C$430 million ($354 million), Surge said on Monday.

Calgary-based TORC said in a statement it would acquire the assets from an independent Canadian oil producer. Junior energy company Surge later confirmed it is the seller.

The assets have production capacity of 4,750 barrels of oil equivalent per day (boepd), of which 98 percent is light oil and the rest liquids.

TORC, which has a market value of C$1.21 billion, also raised its 2015 average production forecast to more than 15,400 boepd from 13,000 boepd.

Darrell Bishop, head of energy research at Haywood Securities, said he expected to see more deals in the Canadian energy sector as many companies struggle with oil prices that have slumped by nearly half since June last year.

"The premium go-to names within this space are utilizing their balance sheets and cost of capital to take advantage of asset deals that would probably not normally be available," Bishop said. "They are low decline, free-flowing top assets."

TORC said it had identified about 170 net high quality light-oil drilling locations on the acquired assets, which have total proved reserves of 12.5 million barrels of oil equivalent. The company's light oil and liquids concentration will rise to 89 percent from 86 percent as a result.

To fund the cash deal, the Canadian Pension Plan Investment Board, already a TORC investor, will invest up to C$150 million through a private placement of subscription receipts, and TORC has also signed a deal to raise C$250.5 million through bought deal financing.
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InterOil commences flow testing at the Elk-Antelope gas field,

The Antelope-5 flow rate is constrained by reservoir engineers to a maximum test rate of about 70 million standard cubic feet a day.

InterOil Corporation (NYSE: IOC; POMSoX: IOC) has begun flow testing at the Elk-Antelope gas field in Papua New Guinea as part of the field appraisal.

Papua New Guinea Prime Minister the Honorable Peter O'Neill and the Minister for Department of Petroleum and Energy the Honorable Nixon Duban today visited the Antelope-5 well site in the Gulf Province to see the operation and to be briefed on the Elk-Antelope LNG Project, a joint venture of InterOil, Total of France, and Oil Search.

InterOil Chief Executive Dr Michael Hession, Total Managing Director in Papua New Guinea Philippe Blanchard, and Oil Search Managing Director Peter Botten accompanied Prime Minister O'Neill and Minister Duban.

The Antelope-5 flow rate is constrained by reservoir engineers to a maximum test rate of about 70 million standard cubic feet a day.

Dr Hession said pressure gauges are planned to be placed in the field to monitor the pressure response during an extended test of Antelope-5.

'Antelope-5 has the best reservoir thickness, quality and fracture density of all wells on the field, which signifies a world-class reservoir,' Dr Hession said.

'By flowing the well under different conditions, we will be able to calculate maximum potential flow rates and better understand reservoir size, productivity and connectivity.'

Dr Hession said data from the testing would help the joint venture to optimize design of the LNG plant and associated infrastructure.
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Saipem beats forecast in Q1 as contract margins pick up

Italian oil services group Saipem confirmed guidance for the year after its first-quarter operating profit beat forecasts on healthier profit margins from new orders.

Saipem, 43 percent owned by oil major Eni, is trying to phase out so-called low-margin legacy contracts that were awarded before 2013 and that have weighed on profitability.

The company is looking to phase out most of these contracts by the end of this year.

In a statement on Monday, Saipem said its earnings before interest and taxes (EBIT) came in at 159 million euros ($172 million) compared to a Thomson Reuters I/B/E/S consensus of 85 million euros.

"A lot of people were expecting writedowns on legacy contracts and pending revenues and they didn't come. That's boosted the shares," said Andrea Scauri, energy analyst at Mediobanca Securities.

At 1216 GMT, Saipem shares were up 5.4 percent at 12.1 euros while the European oil and gas index was up 0.3 percent.

Saipem shares have fallen more than 60 percent in the past two years after two profit warnings, a corruption investigation in Algeria and bleak outlook.

State-controlled Eni is drafting in Stefano Cao as Saipem CEO at the end of this month to turn around the company where he used to work and prepare it for a sale.
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Gazprom Neft says no plans to ask for aid from rainy-day state fund

Gazprom Neft, the oil arm of Russia's top natural gas producer Gazprom, has no plans to ask for money from the National Wealth Fund, the company's head said on Monday.

Alexander Dyukov told reporters in Russia's second city of St. Petersburg that Gazprom Neft had not and did not plan to ask for support from the National Wealth Fund.

Last month, Dyukov said the company may apply to receive money to develop some upstream projects.
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PetroChina first-quarter profit dives 82 percent

PetroChina, China's biggest oil and gas producer, reported a sharper-than-expected 82 percent fall in first-quarter profit, due to lower international crude prices and inventory writedowns at its refining division.

Net profit declined to 6.15 billion yuan ($989 million) in the first three months from 34.2 billion a year ago, the state-run company said on Monday. The figures were calculated using international accounting standards.

The unaudited earnings compared with an average forecast of 8.01 billion yuan by four analysts surveyed by Thomson Reuters.

Last month, PetroChina reported a 67 percent slump in net profit for the fourth quarter, lagging forecasts. The company has said it will cut spending and divest more assets this year.

For the first quarter, PetroChina reported a 67 drop in its operating profits to 17.3 billion yuan as its realised crude prices declined 51.2 percent to $48.87 per barrel.

Its refining and chemical segment widened losses to 5.1 billion yuan from 2.2 billion yuan a year earlier, PetroChina said. Its retail and distribution division moved into the red, generating an operating loss of 2.6 billion yuan versus a profit of 3.3 billion yuan a year ago.

Its natural gas import business saw an improvement, with losses shrinking by nearly 5 billion yuan to 7.2 billion yuan in the first three months.

PetroChina and major domestic rival Sinopec Corp on Monday dismissed media reports their parents would merge to create a state-owned group, saying they had never received any official information about such a restructuring.

Shares in Sinopec and PetroChina surged in Shanghai and Hong Kong on Monday after state media reported that China would likely cut the number of central government-owned conglomerates to 40 through a series of mergers as Beijing pushes to overhaul the underperforming state sector.
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Saudi prince sees ‘excellent’ oil market as kingdom meets demand

Saudi Arabia, the world’s biggest oil exporter, will meet any demand for its crude as the kingdom seeks to keep customers happy and maintain a balanced market, Prince Abdulaziz bin Salman, the deputy oil minister, said.

The oil market is in “excellent” condition, he told reporters Monday in the eastern city of Khobar, without elaborating. Benchmark Brent crude has gained 13% this year and was trading 46 cents lower at $64.82/bbl at 10:56 a.m. in London.

“We will supply any demand for Saudi oil, as we are interested in the stability of the market,” Prince Abdulaziz said. “Stability includes price, supply, and demand stability.”

“Saudi Arabia responds to demand in the market,” the prince said. “We will provide oil to whoever asks for it.”

The shutdown of the Khafji offshore oil fields, which Saudi Arabia has developed jointly with Kuwait, removed 300,000 bpd from global supply, Prince Abdulaziz said earlier Monday at a conference in Khobar. The Saudis halted operations at Khafji on Oct. 16, citing unspecified environmental concerns. The halt has reduced Saudi emissions of methane gas, he said.

Saudi Arabia seeks to cut its crude consumption by 1.5 MMboed by 2030, the prince said. The nation plans to begin producing shale gas in 2016 at an initial output of 20 million to 50 million cubic feet per day, before raising it to 500 million in 2018 and 4 billion in 2025, Prince Abdulaziz said.
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Precision Drilling profit beats estimates as costs fall

Precision Drilling Corp reported a better-than-expected quarterly profit as job cuts and other cost-cutting measures helped Canada's largest drilling contractor maintain margins despite a steep decline in drilling activities.

Calgary-based Precision Drilling said it had 2,200 fewer employees on April 24 than it had at the end of 2014, when its workforce stood at 7,834.

The company said it also consolidated three operating facilities in North America.

Precision Drilling's contract drilling services operating expenses fell by 21 percent to C$251.2 million ($206.6 million) in the first quarter ended March 31, from a year earlier.

The fall in expenses helped the company mitigate the impact of a more than 50 percent drop in drilling activity in Canada and the United States due to a dramatic fall in global oil prices.

"During the first quarter, demand for North American land drilling services failed to meet even the most pessimistic forecasts as our customers continue to seek ways to reduce spending and budgets in this low commodity price environment," Chief Executive Kevin Neveu said in a statement on Monday.

Precision Drilling's rig count in the United States fell to 80 in the quarter from 94 a year earlier. Rig count in Canada fell to 69 from 127.

However, the company raised its capital spending forecast for the current year by 8.3 percent to C$506 million due to a stronger dollar.

Net earnings fell 76.3 percent to C$24 million, or 8 Canadian cents per share. Analysts on average had expected earnings of 5 Canadian cents per share, according to Thomson Reuters I/B/E/S.

Revenue fell nearly 24 percent to C$512.1 million but came in above the Wall Street estimate of C$496.4 million.
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Sembcorp Marine posts Q1 profit drop, sees challenging year ahead

Singapore-based rig builder Sembcorp Marine posted its lowest quarterly net profit in at least five years and forecast a challenging year ahead, as new rig orders dry up on weak oil prices and as a corruption scandal in Brazil brings uncertainty.

Sembcorp Marine said on Monday its first-quarter net profit dropped 13.6 percent on the year to S$105.9 million ($79.5 million), hit by lower contribution from rig building and repair work.

Sembcorp Marine, one of the world's top two offshore jackup rig builders alongside cross-town rival Keppel Corporation Ltd , said cuts in exploration and production expenses have resulted in few new orders for rig builders, as crude oil has fallen more than 40 percent since mid-2014.

Its net order book stands at S$10.6 billion, down from S$11.4 billion at the end of February.

Orders for drillships from Sete Brasil, a company set up by Brazil's national oil company Petrobras, along with a group of banks and funds, accounted for about half of the order book as of end-February.

There is uncertainty about these orders. Petrobras reported its overdue 2014 results last week, which showed its biggest-ever loss, the result of a $17 billion write-down in the wake of a massive corruption scandal.
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Crude traders increase bull trades as Saudi orders more tankers.

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Board members of Saudi Aramco visited the headquarters of South Korea’s Hyundai Heavy Industries Co Ltd on Tuesday, as the shipping arm of Saudi Arabia’s state oil firm looks to buy up to 10 tankers, four industry sources said.

Saudi Arabia has been supplying more crude to Asian markets and Saudi Aramco’s shipping arm has tendered to build 5 very large crude carriers (VLCCs) plus up to 5 optional vessels for 2017 delivery, said one of the sources.

All of the vessels the National Shipping Company of Saudi Arabia (Bahri) is seeking are 320,000 deadweight tonnes.

The deal could be worth about $1 billion, based on data from Clarkson, the British shipbroking house, which puts the price of the tankers of this size at $96.5 million.

Saudi Aramco seizes more control over oil supplies flowing from the Kingdom of Saudi Arabia in 2014

SAUDI Aramco’s Khalid Al-Falih retains a high position in shipping’s power elite, due to the progress the company has been making this year to take as much control as possible over the crude oil supply coming out of Saudi Arabia.

His company’s shipping arm, Vela International Marine, received shareholder approval to merge its fleet with that of National Shipping Co of Saudi Arabia, also known as Bahri, in what is the largest merger in Saudi Arabia.

The merger puts the larger entity among the very top of the biggest very large crude carrier fleets in the world, with more than 30 vessels.

The larger fleet allows Mr Al-Falih’s company to retain more control over the oil supply chain from the Kingdom, producing the crude and transporting it to customers.

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Galp net profit more than doubles to 121 mln euros

Portugal's Galp Energia said adjusted first-quarter net profit more than doubled from a year earlier, in line with expectations, thanks to a sharp increase in refining margins and higher oil output.

Galp had a net profit of 121 million euros ($132 million) in the quarter, up from 47 million euros a year earlier. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 50 percent to 398 million euros. The results are adjusted to reflect changes in the company's stocks of crude.

Analysts polled by Reuters had forecast, on average, an adjusted net profit of 122 million euros and EBITDA of 376 million euros.

The benchmark Brent crude price fell in January to its lowest since 2009, helping lift refining margins in Europe.

Galp's refining margin soared to $5.9 per barrel in the period from just $0.9 a year earlier. Galp, which owns both Portugal's refineries, remains heavily reliant on that side of itsbusiness despite having expanded in crude production with projects in Brazil and Africa.

Galp said its oil output soared almost 43 percent to 38,400 barrels per day in the quarter and it refined 34 percent more oil and gas.

Still, higher output only offset part of the impact of low world oil prices as EBITDA at its exploration and production division fell almost 10 percent to 94 million euros.
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India seeks first cut in LNG imports under Qatar deal -source

India is in talks with Qatar to import at least 10 percent less liquefied natural gas (LNG) under a long-term deal after a slide in spot prices has cut demand by local buyers, an Indian government source with knowledge of the negotiations said.

New Delhi would for the first time use a 10 percent reduction permissible under a 25-year contract with Qatar's RasGas to import up to 7.5 million tonnes a year of the super cooled fuel, said the source.

"We want to lift as little volume as possible under the contract," the source told Reuters, adding that India intended to use a tolerance limit of 10 percent in 2015.

"But we are negotiating for cuts deeper than 10 percent. All LNG terminals are running at lower capacity as customers are not lifting volumes," said the source, who declined to be identified due to the sensitivity of the issue.
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Southwestern Energy Q1 Earnings In Line, Revenues Miss

Independent natural gas operator, Southwestern Energy Company (SWN - Analyst Report) reported first-quarter 2015 adjusted earnings of 22 cents per share, in line with the Zacks Consensus Estimate. The bottom line decreased from the prior-year quarter’s earnings of 66 cents.

Quarterly operating revenues of $933 million missed the Zacks Consensus Estimate of $945 million and decreased from $1,113 million in the first quarter of 2014.  

Production and Realized Prices

During the reported quarter, the company’s oil and gas production grew 28% year over year to 233 billion cubic feet equivalent (Bcfe) driven by increased Appalachia production.

The company’s average realized gas price for the quarter, including hedges, fell to $2.99 per thousand cubic feet (Mcf) from $4.19 per Mcf in the year-ago period. Oil was sold at $30.90 per barrel, down from the year-earlier level of $100.43 per barrel. Natural gas liquids were sold at $10.35 per barrel, down from $50.16 in the year-ago period.  

Segmental Highlights

Operating income from the company’s Exploration and Production (E&P) segment was $78 million for the first quarter of 2015 compared with $352 million for the comparable quarter in 2014. The decrease was primarily due to lower realized natural gas prices and increased operating costs from higher activity levels. This was partially offset by the revenue impacts of higher production volumes.

On a per-Mcfe basis, lease operating expenses were 92 cents, lower than the prior-year quarter level of 93 cents. Also, general and administrative expenses per unit of production decreased to 24 cents from 25 cents in the prior-year quarter.

Operating income for the company’s Midstream Services segment was $88 million compared with $83 million in the prior-year quarter. At Mar 31, 2015, the company’s midstream segment was gathering approximately 2.3 Bcf per day through 2,029 miles of gathering lines in the Fayetteville Shale.
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BP and Shell to report 60% collapse in first-quarter profits

BP and Shell will this week report a collapse in first-quarter profits of around 60% on the same period of 2014 underlining the financial damage being inflicted by low oil and gas prices.

Analysts predict BP will be hit the hardest, putting further pressure on chief executive, Bob Dudley, as he tries to steer the company back to full health amid continuing fallout from the Deepwater Horizon accident.

A consensus of 22 analysts expect BP’s underlying replacement “costs profits” – an oil industry accounting measure that incorporates fluctuations in the price of oil – to be down to $1.3bn (£850m) from $3.2bn in the first three months of 2014.

“There will be a huge drop in earnings for all the large integrated oil companies but especially BP. It will be the worst set of results for everyone since 2009,” said Fadel Gheit, veteran analyst with the Oppenheimer brokerage in New York.

Iain Armstrong, analyst with investment manager Brewin Dolphin in London, said BP would be most exposed to the particularly large fall in US natural gas prices slightly tempered by stronger refining margins.

“Upstream (exploration and production) earnings will be most affected, although there could be the initial positive impact of the planned cuts in capital expenditure and the ongoing layoff programme,” said Armstrong.

Gheit believes BP income could fall by as much as 70% while Shell will be down by 68% and Exxon Mobil by 67%. But he also predicts losses for the second tier of oil companies such as Anadarko Petroleum, Apache Corporation and ConocoPhillips.

Gheit believes the “devastating” losses of the oil sector will increase the likelihood of more merger and acquisition activity following the $70bn takeover plan unveiled earlier this month by Shell on BG.

Gheit believes US domestic oil and gas producers will be the hardest hit with financial losses continuing throughout the year. “If there is not a bounce back (in oil prices) they could be even worse next year because they will not be so protected by a hedging strategy.”
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U.S. producers idle 31 more oil rigs

The number of U.S. oil rigs fell once again this week, Baker Hughes said Friday, as producers kept cutting drilling in the face of low crude prices.

The Houston oil field services company counted 31 fewer oil rigs and eight more active gas-drilling rigs this week, a net drop that left 932 U.S. rigs standing  – down 50 percent from a year ago.

More than half of the oil rigs idled this week were in in Texas, as the state’s rig count fell by 19 to 393 — down from 894 a year ago. Of that number, a dozen were sidelined in the Permian Basin in West Texas.

Oil traders have watched the weekly rig count for months now, waiting for signs U.S. oil production may fall and ease a global glut in crude supplies. The Energy Information Administration’s latest monthly drilling report shows U.S. output growth is set to decline by 57,000 barrels a day.
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Libya closes El Feel oilfield due to strike by security guards

A strike by Libyan security guards over salary payments has forced the closure of the western El Feel oilfield, a spokesman for state oil firm NOC said on Sunday.

On Saturday, a field engineer told Reuters the OPEC producer had closed the field, without citing a reason. El Feel is operated by a joint venture owned by NOC and Italy's Eni .

"The field's security guards are on strike because they complain about a delay of their salary payments," said Mohamed El Harari, a spokesman for NOC.

"NOC paid the salaries to the security forces, but they haven't paid the guards yet," he said.

Libya this year had managed to restart El Feel, which analysts say produced about 100,000 barrels per day (bpd). Libya had to shut the field late last year when a group in the Zintan region, which opposes a self-declared government in Tripoli, closed a pipeline.

Harari did not give any production figure, but the latest closure is likely to reduce national output to well below 500,000 bpd, a third of the volume Libya used to pump in 2010 before an uprising toppled Muammar Gaddafi and sent the country into turmoil.

On the bright side, eastern Libyan state firm AGOCO, a unit of NOC, is producing 270,000 bpd, a company spokesman said on Sunday.
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Oil at $65 seen freeing 500,000 barrels from shale fracklog

Oil needs to recover to $65 a barrel for U.S. drillers to tap a pent-up supply locked in shale wells and unleash more crude on markets than is produced by Libya.

Dipping into this “fracklog” would add an extra 500,000 barrels a day of oil into the market by the end of next year, Bloomberg Intelligence said in an analysis on Thursday. Producers in oil and gas fields from Texas to Pennsylvania have 4,731 idled wells at their disposal.

Prices are rebounding from a six-year low after drillers idled half the nation’s oil rigs, slowing the shale boom that boosted production to the highest in four decades. The number of wells waiting to be hydraulically fractured, known as the fracklog, has ballooned as companies wait for costs to drop. That could slow the recovery as firms quickly finish wells at the first sign of higher prices.

“Once service costs come down and drillers begin to work through their higher-than-normal backlog, the market should start to price in that supply coming online,” Andrew Cosgrove, an energy analyst for Bloomberg Intelligence in Princeton, New Jersey, said by phone. “It may act as a cap on prices.”

U.S. oil futures tumbled by more than $50 a barrel in the second half of last year amid a worldwide glut of crude. West Texas Intermediate for June delivery fell 26 cents to $57.48 a barrel in electronic trading on the New York Mercantile Exchange at 11:29 a.m. London time.

Oil production in the lower 48 states would rise to 7.67 million barrels a day in the fourth quarter of 2016 if drillers start shrinking their fracklogs by 125 wells a month in October and put some rigs back to work, Bloomberg Intelligence models show. The U.S. fracklog has more than tripled in the past year, with oil wells making up more than 80 percent of the total.

“One of the big reasons why production is finally falling is because of these fracklogs,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone on Thursday. “That’s an overhanging bearish fundamental.”

The Permian Basin, which covers parts of Texas and New Mexico, had the biggest collection of unfracked wells as of February, with 1,540 waiting to be completed. The count totaled 1,250 in Texas’s Eagle Ford formation and 632 in North Dakota’s Bakken shale.

Last week, Raoul LeBlanc, an oil analyst with Englewood, Colorado-based consultant IHS Inc., pegged the U.S. fracklog at around 3,000 wells. Halliburton Co., the world’s second-biggest provider of oilfield services, estimated there are about 4,000 uncompleted wells, citing “third party estimates.”
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Cabot Oil & Gas Earnings Top As Output Keeps Growing

Cabot Oil & Gas reported first-quarter results above analyst estimates as production increased despite the drop in oil prices.

The exploration and production company's Q1 earnings fell 54% to 12 cents per share, but that was still well above the 3 cents that analysts polled by Thomson Reuters were expecting. Revenue fell 9% to $464.8 million, above views for $417.3 million.

"Our robust production levels were predicated on higher base-load volumes in the Marcellus during the quarter, driven by increased seasonal demand and favorable natural gas sales contracts for the winter heating season," said CEO Dan Dinges in the earnings release.

"However, as we have communicated in the past, our plan is to reduce production levels beginning in the second quarter in response to the current environment throughout Appalachia."

Total production rose 43% while liquids production (crude oil/condensate/natural gas liquids) jumped 132%. Cabot's net production in the Eagle Ford Shale during Q1 rose 145% vs. the year-ago quarter, and production in the Marcellus was up 43%.

In February, Cabot lowered its 2015 capital spending budget to $900 million from an earlier outlook of $1.53 billion to $1.6 billion in October. It now sees production growth of 10% to 18% vs. an earlier estimate of 20% to 30% growth.

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CNOOC Limited announces key operational statistics for Q1 2015

CNOOC Limited announced its key operational statistics for the first quarter of 2015.

Total net production in the first quarter of 2015 increased 9.4% year over year to 118.3 million barrels of oil equivalent, primarily due to the production contribution from new projects that came on stream in offshore China since 2014.

In the first quarter, the Company made 3 new discoveries. In offshore China and overseas, the Company made 9 and 3 successful appraisal wells, respectively. In offshore China, the new discovery Penglai 20-2 is expected to drive the joint development with the adjacent Penglai 20-3 oil field. After successful appraisals, the Bozhong 34-9 oil and gas structure is expected to be developed into a mid-sized oil and gas field.

Jinzhou 9-3 comprehensive adjustment project and Kenli 10-1 oil field commenced production as scheduled in 2015, while other projects progressed smoothly.

During the period, the unaudited oil and gas sales revenue of the Company were approximately RMB35.54 billion, a decrease of 39.9% YoY, due to the sharp decline in international oil prices. The Company's average realized oil price decreased by 49.0% YoY to US$53.40 per barrel while the average realized gas price increased by 5.5% YoY to US$6.68 per thousand cubic feet.

Facing the challenges created by low oil prices, the Company continued to lower costs and enhance efficiency, and adjusted its operating strategy by decreasing capital expenditures. In the first quarter, the Company's capital expenditures decreased by 15.7% YoY to approximately RMB15.94 billion.
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Are we consensus on Oil?

Global oil supply still exceeds demand, but a weaker dollar, military conflict in Yemen and strong stock performances pushed the Brent crude price upward on Friday. Reuters said that Brent crude was trading at $65.80 a barrel, its highest level since December 2014.

Despite oil’s strong recent performance, the supply glut could drive its price down in the coming months.

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Alternative Energy

Caterpillar Expands Renewable Power Offerings in Conjunction with First Solar

Caterpillar and First Solar, Inc. today announced a strategic alliance to develop an integrated photovoltaic (PV) solar solution for microgrid applications. Under the agreement, First Solar will design and manufacture a pre-engineered turnkey package for use in remote microgrid applications, such as small communities and mine sites. The package will feature Cat-branded solar panels manufactured by First Solar and will include a balance of system components.

Caterpillar will exclusively sell and support the integrated solution featuring Cat-branded solar panels through its worldwide Cat dealer network, along with its current offerings of generator sets and energy storage. Acting as a central source, Cat dealers will be uniquely positioned to provide customers with this fully integrated and supported single solution in the large and rapidly growing microgrid market today.

Microgrids provide value to prime power diesel and gas customers by integrating renewable energy, such as solar power, with generator sets. With these solutions, Caterpillar can help deliver reliable, cost-effective and sustainable energy for customers.
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SunPower, First Solar Report Loss as They Hold Onto More Solar Power Assets

SunPower Corp. reported its first loss in two years as the second-largest U.S. solar manufacturer pursues a new strategy to keep control of certain power assets instead of selling them.

The net loss was $9.6 million, or 7 cents a share, compared with profit of $65 million, or 42 cents, a year earlier, San Jose, California-based SunPower said in a statement Thursday. Excluding one-time items, per-share profit was more than the 8-cent average of eight analysts’ estimates compiled by Bloomberg.

SunPower said in February its plan to put some power plants and a group of rooftop solar systems into a joint venture with competitor First Solar Inc. would reduce profit. The so-called yieldco will be publicly traded and a guaranteed buyer of their assets, reducing capital costs. The entity, which will be controlled by its parents and named 8Point3 Energy Partners LP, offers investors steady returns from long-term power contracts.

SunPower slashed its first-quarter guidance 90 percent after announcing the joint venture, dropping it to 5 to 15 cents a share from as much as $1.50 on an adjusted basis. It withdrew its forecast for 2015 profit without providing new figures.

China will be the company’s fastest growing region in the next five years, Chief Executive Officer Tom Werner said in an April 24 interview with Bloomberg Radio. SunPower and Apple Inc. are building two 20-megawatt solar power plants in China’s Sichuan Province.

First Solar Inc. swung to a loss in the first quarter as revenue plunged, saddled by project delays and completed projects held ahead of its proposed joint venture with fellow solar-panel maker SunPower Corp.

The Tempe, Ariz., company had warned last quarter it would post a loss in the quarter as it held on to completed projects, rather than sell them, as it moved to form a “yieldco” with SunPower.

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Tesla Ventures Into Solar Power Storage for Home and Business

In recent years, the fast-growing popularity of solar panels has intensified a central challenge: how to use the sun’s energy when it isn’t shining.

Now, Tesla Motors, the maker of luxury electric sedans, says it is taking a big step toward meeting that challenge with a fleet of battery systems aimed at homeowners, businesses and utilities. The company’s foray into the solar storage market will include rechargeable lithium-ion battery packs that can mount to a home garage wall as well as battery blocks large enough to smooth out fluctuations in the grid.

“We’ve obviously been working on building a world-class battery, a superefficient and affordable way to store energy,” said Khobi Brooklyn, a Tesla spokeswoman. “It’s just that we’ve been putting that battery in cars most of the time.”

To herald its ambitions in the field, the company scheduled an event Thursday night at its design studio in Hawthorne, Calif., with Elon Musk, its chief executive, presiding.

In a news conference before the event, Mr. Musk said the consumer battery, called the Powerwall, would sell for $3,500, and was derived from the batteries that Tesla uses in its Model S vehicles. The device, which Tesla will start producing later this year, will be installed by licensed technicians.

The batteries will be connected to the Internet and can be managed by Tesla from afar. Customers can connect up to nine battery packs to store larger amounts of power.

“If you have the Tesla Powerwall, if the utility goes down, you still have power,” Mr. Musk said. He added: “The whole thing is an integrated system that just works.”

Energy and auto analysts have generally responded positively to Tesla’s move. “Elon thinks that there’s a long-term gain to be made or a long-term play not only in electric cars but also in electric energy storage — and he’s probably right,” said Karl Brauer, an analyst at Kelley Blue Book. “There’s a universal application for portable energy and storable energy that goes to everybody. It’s really just a matter of getting the business model together.”

Tesla’s announcement comes as energy companies are moving in the same direction. Sungevity, a leading solar installer, announced a partnership this week with Sonnenbatterie, a smart energy storage provider in Europe, to begin offering their systems to its customers. NRG, one of the largest independent power producers in the United States, is also developing storage products.

“We have to be in this space,” said Steve McBee, chief executive of NRG Home. “If your goal is to build a meaningful solar business that is durable over time, you have to assume that that solar business is going to morph into a solar-plus-storage solution. That will be mandatory at some point.”
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Myth Of Offshore Wind Being Expensive Debunked

As for efficiency, it is now reported that China’s wind power produces more electricity than the United States’ nuclear power plants.

Now there are reports that wind power isn’t just more efficient than both gas-fired and nuclear power, but is also cheaper. This also includes offshore wind too.

According to Minds, Mike Parr, an analyst from Denmark, uncovered that today’s wind generators are actually cheaper to build and maintain, and they produce cheaper electricity; up to 60 percent cheaper. Utilizing public information on offshore wind turbines, Parr came up with such a conclusion that all three are associated to the fact that wind energy does not require the acquisition of fuel to operate.

“When we analyze the available data, we can draw some interesting conclusions about the evolution of costs in offshore wind. Offshore wind turbines already appear to be cheaper than combined-cycle gas turbines.”

Mike Parr actually goes into further detail in his article for Energy Post, in which he provides answers to some of the big questions pertaining to wind energy. It is also in this article Parr that debunks the myth that offshore wind turbines are too expensive. Apparently, the reason for such a belief is because said offshore wind turbines are receiving large subsidies. However, they are technically not needed, as the efficiency of the offshore wind turbines is analysed to be efficient, ergo its operators are making a ton of cash.
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Portable machine turns salt water into drinking water using solar power

By using solar power to charge a cache of batteries, scientists at MIT have figured out a way to remove salt from water through electrodialysis at an extremely efficient rate.

David L. Chandler explains, "Electrodialysis works by passing a stream of water between two electrodes with opposite charges. Because the salt dissolved in water consists of positive and negative ions, the electrodes pull the ions out of the water, leaving fresher water at the centre of the flow. A series of membranes separate the freshwater stream from increasingly salty ones."

MIT's advancement in the actual membrane is another reason for the increased rate of efficiency.  Compared to the 40% to 60% of traditional reverse osmosis systems, they are able to turn 90% of the saltwater fed into the machine into drinking water.  In one day this machine can filter 2,100 gallons of water.

According to mechanical engineer, Amos Winter, working on the project "both electrodialysis and reverse osmosis require the use of membranes, but those in an electrodialysis system are exposed to lower pressures and can be cleared of salt buildup simply by reversing the electrical polarity. That means the expensive membranes should last much longer and require less maintenance, Winter says."

As David Cohen-Tanugi points out, graphene is the new super filtration material
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China to adjust resource tax and fees

China will reform the resource tax of several natural resources and cut unnecessary fees starting from May, according to a statement released after a State Council executive meeting presided over by Premier Li Keqiang on Tuesday.

Resource taxes of rare earth, tungsten and molybdenum will be levied according to price instead of quantity. Reasonable tax rates will be worked out with no more tax burdens on enterprises.

Meanwhile, the central government will exempt mineral resources compensation fees, and ban illegal charges on the three resources by local governments below the provincial level.

The three resources will also be exempt from export tariffs from May, the Ministry of Finance announced last Thursday.
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China’s Checks on Solar Quality Could Spur More Consolidation

China’s National Energy Administration is pressing local governments to inspect and report how much power the nation’s solar panels are producing in an effort to crack down on defects.

The inspections come as flaws found in some Chinese solar panels continue to compromise efficiency, reducing the amount of electricity the panels produce.

Here’s what the crackdown may mean.

1. Inspections to Target Quality of Solar Equipment

According to Bloomberg New Energy Finance, China’s solar capacity has surged almost fivefold since the end of 2012, making it one of the fastest-growing clean energy markets for the past two years. A plunge in panel prices is helping make solar power more commonplace -- both in China and elsewhere. Critics argue the price drop forced panel makers to reduce costs, compromising quality.

2. New Standards or Regulations Expected

China has called for stronger planning and management of photovoltaic power stations. The nation is expected to issue new technology standards or regulations for solar products or power projects after evaluating results of the investigations.

3. Consolidation of Solar Equipment Manufacturers Expected

Consolidation of solar equipment manufacturers is expected as part of a broader industry shakeout.

“Inspections will benefit companies with high-quality products and good technology,” said Nick Duan, a Beijing-based analyst with Bloomberg New Energy Finance. Manufacturers found to be underperforming face being eliminated, he said.

4. A Precursor to a Cut in Preferential Power Prices

The inspections are seen as a precursor to a cut in preferential power prices for solar projects.

China has held its subsidy for ground-mounted projects at the current level since September 2013.
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China scrapping rare earth export tax will boost demand — Lynas

China’s decision to eliminate its export tariffs on rare earths and other metals may boost frozen demand for the products, according to Australia’s Lynas Corp.

In an interview with Bloomberg, the company’s chief executive, Amanda Lacaze, said most customers have been living off inventories while awaiting clarity over China’s policy on rare earths export. “[Now] they’ll come back and start placing orders.”

Her comments follow China’s decision Thursday of killing the controversial policy that caused adiplomatic row and international trade dispute, while driving rare earth prices up.

The country’s Ministry of Finance said tariffs to be removed beginning May 1 include those related to shipments of ferroalloys, indium and aluminum rods and bars, Reuters reported.

Earlier this year, Beijing eliminated its export quotas for rare earths and other metals after the World Trade Organization (WTO) ruled the nation had failed to show the export quotas were justified.
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Mosaic posts 36 pct rise in quarterly profit

U.S. fertilizer company Mosaic Co reported an about 36 percent rise in quarterly profit, helped by lower costs and higher phosphate and potash prices.

Net earnings attributable to the company rose to $294.8 million, or 80 cents per share, in the first quarter, from $217.5 million, or 54 cents per share, a year ago.

Mosaic earned 70 cents per share excluding items in the first quarter, missing analysts' average estimate of 74 cents.

Revenue rose 7.7 percent to $2.14 billion.
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Potash Corp. misses 1Q profit forecasts

Potash Corp of Saskatchewan's quarterly profit missed estimates and the company cut its full-year profit forecast, citing lower-than-expected potash prices.

Smaller U.S. rival Mosaic Co also reported a profit that fell short of estimates, hurt by lower phosphate margins.

Both Potash and Mosaic reported higher prices for potash in the quarter ended March 31. But Potash, the world's biggest fertilizer company by market value, warned that 2015 prices for the crop nutrient would likely be lower than expected.

Potash prices are yet to recover after a collapse in 2013, which was triggered by top producer Russia's Uralkali exiting a trading venture with Belarus. Prices have improved since then but are under pressure due to increased competition.

Potash cut its full-year profit forecast to $1.75-$2.05 per share from $1.90-$2.20 per share, sending its shares down 3.3 percent in premarket trading.

The company also forecast second-quarter profit of 45 cents to 55 cents per share, lower than analysts' average estimate of 56 cents, according to Thomson Reuters I/B/E/S.

Potash, the second-biggest potash producer by output after Russia's Uralkali OAO, reported an adjusted profit of 44 cents per share, missing the average analyst estimate of 49 cents.

Potash's revenue slipped marginally to $1.67 billion, Mosaic's rose 7.7 percent to $2.14 billion.
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Precious Metals

Goldcorp posts loss as gold prices decline

Goldcorp Inc., the world’s biggest gold producer by market value, reported first-quarter earnings that missed analysts’ estimates after gold prices fell.

The net loss was $87-million, or 11 cents a share, compared with net income of $98-million, or 12 cents, a year earlier, the Vancouver-based company said Thursday in a statement. Earnings excluding one-time items were 1 cent a share, trailing the 9– cent average of 16 estimates. Sales increased to $1.02-billion from $878-million, topping the $962.9-million average estimate.

“The decrease in adjusted net earnings was a result of lower realized margin on gold sales, higher depreciation and depletion expense and a higher effective tax rate,” Goldcorp said in the statement.

Like many of its peers, Goldcorp is working to lower costs and focus on the most profitable operations following two consecutive annual declines in the price of gold. The company, which operates in North and South America, is also ramping up production at new mines in Argentina and Canada.

Gold futures averaged $1,217.46 an ounce in the first quarter on the Comex in New York, 5.9 per cent less than a year earlier.

Goldcorp’s all-in sustaining costs, a measure to compare miners’ performance, were $885 an ounce in the first quarter, better than the preliminary guidance of $900 the company reported April 8.
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  1.  Regulatory Standards - Environmental Protection Agency                Beginning June 1, 2006, refiners began producing ultra-low sulfur diesel fuel with ... In addition, emission standard for large commercial marine diesel vessels ...
  2. Image titleWithin a year of the new EPA standard Ruthenium roofed it!
  3. . Ruthenium disulfide appears to be the single most active catalyst, (in the refinery desulphiseration process).
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Yamana Gold pledges to fix executive pay plan after investors vote 'no'

Yamana Gold Inc will change its executive pay plan to better reflect performance, the mid-tier miner told shareholders on Wednesday after they voted against the plan, a day after industry leader Barrick Gold Corp made the same promise to its unhappy investors.

More than 50 percent of Yamana shareholders who voted rejected the plan, according to early returns, Chief Executive Peter Marrone said after Yamana's annual meeting in Toronto.

"We regret this result, although we have clearly understood the message," Marrone told shareholders, adding that he had made a personal decision to waive 450,000 performance share units that he was awarded last June.

Although say-on-pay shareholder votes are not mandatory in Canada, and companies are not required to take action on the outcomes, they are considered important barometers of investor attitudes.

Influential advisory firm Glass Lewis recommended against Yamana's plan, citing excessive compensation and one-off awards, with a "significant disconnect between pay and performance".

The CPP Investment Board, Canada's largest pension fund manager, voted against the Yamana plan, but supported the reelection of the company's directors. All 10 Yamana directors were reelected on Wednesday.

Marrone was paid $8.5 million in 2014, Yamana said, comprised of $5.7 million in compensation and a $2.7 million cash award tied to the Osisko acquisition.

In 2013, Marrone was paid $10.3 million and in 2012 he got $12.1 million.

Yamana will also consider ways to increase share ownership by executives, Marrone said.

Shareholders at the meeting also asked the company to consider holding fewer board meetings, to better detail board compensation and to forgo further dilutive share issues for acquisitions.
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Barrick Gold shareholders reject executive compensation plan

Barrick Gold Corp shareholders have voted to reject the gold miner's controversial executive compensation plan, Barrick Executive Chairman John Thornton said on Tuesday.

Although the final tally of votes on the nonbinding say-on-pay vote were not yet in, Thornton said early returns indicated that about 75 percent of shareholders who voted rejected the pay plan.

"Now that is obviously not where we want to be. And that's obviously not where you want us to be. So I want you to know that we have heard you loud and clear," Thornton said at Barrick's annual meeting in Toronto.

He said Barrick, the world's biggest gold producer, will take the feedback from shareholders on its compensation plan and refine the scheme, especially as it relates to his own package.

Barrick's goal is that next year's vote on executive compensation will be "at a minimum the opposite of the vote this year, and preferably a whole lot better than that," Thornton said.

Although so-called say-on-pay votes are not mandatory in Canada, and companies are not required to take any action on the outcome, they are an important barometer of investor attitudes.

In the lead-up to Tuesday's meeting, some large institutional investors, including the Ontario Teachers' Pension Plan, said they would vote against Barrick's pay plan and withhold votes for directors to express their unhappiness.

At the heart of shareholder discontent was the $12.9 million in compensation Barrick paid to Thornton in 2014. That was a 36 percent increase on his 2013 package and came after a year in which Barrick's stock price fell 39 percent and underperformed its peers.
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Barrick to sell stake in Zaldivar copper mine

Barrick Gold Corp said on Monday it has started the process to sell a stake in its Zaldivar copper mine in Chile as the world's biggest gold miner works to meet an ambitious debt reduction target of $3 billion by year end.

Confirmation of the planned sale was contained in Barrick's quarterly results release, which showed the Toronto-based miner reporting first-quarter earnings below analysts' expectations.

Barrick did not say how much of Zaldivar it was planning to sell but said there has been "strong interest" in the asset.

Sources have said it could be of interest to other mining companies as well as private equity funds like the mining arm of Warburg Pincus and Mick Davis' X2, among others.

Numerous companies have also shown interest in the previously announced sales of its Cowal and Porgera mines, Barrick said.

Earlier Barrick said its net earnings fell to $57 million, or 5 cents a share, in the quarter to end-March from $88 million, or 8 cents a share, in the same period a year ago on the back of a weaker gold price and sales.

Adjusted net earnings were $62 million, or 5 cents a share, below the 10 cents a share that analysts on average were expecting, according to Thomson Reuters I/B/E/S.

The miner produced 1.39 million ounces of gold in the first quarter at an all-in sustaining cost of $927 an ounce. Copper production totaled 118 million pounds at cash costs of $1.84 per pound.

Although Barrick has no plans to expand its existing copper position, the company said it was keen to maximize the value of assets it already owns. To that end, it has formed a strategic partnership to explore for copper deposits in northern Chile.

Barrick also announced what it said was a "significant" new gold discovery, known as Alturas, in Chile.
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Base Metals

BHP declares force majeure due to blockades at Cerro Matoso

BHP, said on Thursday that union blockades at its Cerro Matoso nickel operation had forced it to declare force majeure with some customers. 

Unionised workers have been blocking access to the Cerro Matoso ferronickel mine and processing plant in Colombia since April 14 to protest a change to 12-hour shifts from eight previously. Since last week, BHP has been flying some workers into the ferronickel plant with a hired helicopter in order to resume production, at least partially, despite the blockades that the company says are illegal. 

"As a result of an illegal union work stoppage and blockade of its plant facilities at the Cerro Matoso operation, it is operating at less than full capacity," a company spokesperson said in an emailed statement. "As a result, and, as is normal practice, we have taken the prudent step of issuing force majeure notices to customers and the Colombian State Mining and Environmental Authorities."

 "The company will continue to pursue a resolution of this matter, which relates to a change in work rosters within some business units, directly with the union and through legal avenues."
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Kenmare gets revised bid from Australia's Iluka

Irish titanium miner Kenmare Resources Plc said it had received a revised bid from Iluka Resources Ltd and that it would work with the Australian company on the proposal in the interests of its shareholders.

Kenmare said the revised proposal would trade 0.016 share of Iluka for every Kenmare share.

Kenmare rejected Iluka's offer of 0.036 new Iluka share for each Kenmare share in June 2014. Both shares have fallen since then.
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Lundin Mining reports solid First Quarter Results

Lundin Mining Corporation today reported net earnings of $83.3 million or net earnings attributable to Lundin shareholders (after deducting non-controlling interests) of $71.8 million ($0.10 per share) for the quarter ended March 31, 2015. Cash flows of $224.0 million were generated from operations in the quarter, not including the Company's attributable cash flows from Tenke Fungurume.

Earnings for the three month period included a full quarter of operating and financial results from Candelaria, which was acquired in the fourth quarter of 2014 and Eagle, which was commissioned in the same period. Candelaria and Eagle generated operating earnings of $163.7 million and $56.1 million, respectively, in the current quarter.

Paul Conibear, President and CEO commented, "Our focus on delivering operational and cost efficiencies has resulted in very strong quarterly performance across the Company, and marks an excellent start to the year. During the first quarter, we achieved record copper and nickel production as well as record levels of operating cash flow, which reflects the positive contributions now being attained from our recent acquisitions."

"Eagle performed at or above full design capacities for the entire quarter. Our focus now remains on the efficient transition of Candelaria into Lundin Mining and optimization of its production profile and continuing to deliver robust production, cash flow and earnings from our other operations to further contribute to our healthy balance sheet."
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Antofagasta cuts copper output forecast over rain, protests in Chile

Disruptions at two of Chile-focused Antofagasta’s mines during the first quarter of the year has forced the copper company to scale back its production guidance for 2015.

The miner said Wednesday it lost about 8,000 metric tons of copper output due to a 10-day protest over water supplies at its flagship Los Pelambres mine in early March. Later that month, it was also forced to suspend operations at its Centinela, Michilla and Antucoya operations due to torrential downpours in northern Chile's Atacama desert, one of the world's driest places.

The company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

As a result, the company now expects to mine 15,000 tonnes less than its original forecast of 710,000 tonnes, but maintained its annual net cash cost forecast of around $1.40 per pound.

"Normal operations" have now resumed, said the London-listed miner, including at Los Pelambres mine,which produces more than 400,000 tonnes of copper a year, following anagreement reached with the local community. Antofagasta added it expected to recover some of the lost output through the rest of the year.

The miner, which plans to spend close to $1.3 billion in capital projects this year after $1.6bn of capex in 2014, is in the middle of a sequence brownfield expansions at its Chilean operations.

Construction at the $1.9 billion Antucoya project, said Antofagasta, is on track to be completed in the second quarter of 2015 and in full production by the start of 2016.
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China's top aluminium producer Chalco swings to profit in Q1

Aluminum Corp of China Ltd (Chalco) swung to a profit in the first quarter of 2015 after domestic prices of the metal in the world's top consumer rose.

Chalco reported a net profit of 63.1 million yuan ($10.2 million) for the January-March period after a net loss of 2.16 billion yuan in the same period a year earlier, it said in a filing on the Hong Kong stock exchange on Tuesday.

The top Chinese producer of primary aluminium and raw material alumina had booked a record loss of 16.2 billion yuan in 2014 due to huge writedowns and weak metal prices as the Chinese economy slowed.

Chalco mainly sells its products in China, the world's top producer and consumer of aluminium. Chinese aluminium prices rose 1.4 percent in the first quarter, supported by reduced spot sales by some producers.
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Shanghai copper rises most in a month as stockpiles tumble

The SHFE June futures, the most-active contact, rose as much as 1.7 percent Monday, the biggest intraday gain since March 24. Inventories monitored by the exchange dropped 22,550 metric tons last week, the most by volume since April 2014, bourse data showed Friday. Stockpiles, at the lowest since February, fell a third week since reaching a two-year high.

Benchmark prices in London are headed for a third monthly gain after dropping in January by the most since 2011 on concern China’s demand is stalling as its housing market cools and economy slows. Consumption of the metal typically rises in the second quarter as seasonal construction and manufacturing activity increases, said Chunlan Li, a Beijing-based analyst at CRU Group, a research company.

“Demand is definitely picking up for copper,” Li said. “It’s normal that during the second quarter activity goes up everywhere.”

Shares of Jiangxi copper, the biggest smelter in China and fifth largest globally, rose as much as 2.3 percent in Hong Kong on Monday. Yunnan Copper Co., China’s third-largest publicly traded producer, gained as much as 3.2 percent in Shenzhen.

Inbound shipments of refined copper may rise as it is now more profitable for China-based traders to buy at LME prices and sell domestically at SHFE rates, Barclays Plc analysts Suki Cooper and Dane Davis said in a report Monday. Imports will also gain if domestic scrap market remains tight, they wrote.

“SHFE copper inventories fell as traders moved the metals to the improving physical market,” said Lian Zheng, analyst at Xinhu Futures Co. “We shall wait for a sustainable outflow of the metals before making a conclusion that demand is back on track.”
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Rusal to start aluminium output at Russian project by June – CEO

Top aluminium producer United Company Rusal will start producing metal at its Boguchansk project, in Russia, by June and will ramp up output over the following year depending on demand, the company's chief executive said on Monday.

Weak aluminium prices are forcing many producers to curtail output of the metal. Following a similar announcement by rival Alcoa, the Russian aluminium group said last week it may idle some 200 000 t of loss-making capacity this year due to weak prices and a desire to shift production to cleaner energy sources. 

However, CEO Vladimir Soloviev said in a meeting with reporters that the Boguchansk project would start producing by June and could achieve an annualised rate of 150 000 t by mid-2016, subject to demand. "The important thing is that metal from Boguchansk will be produced in line with Russian consumption. If demand grows we will correct the speed of the ramp-up," he said. 

Soloviev said he expected Russian domestic consumption to fall by about 5% this year due mainly to higher interest rates in Russia, which have hurt the ability of final users of aluminium to get funding and working capital. Concerns about oversupply in the aluminium market have put pressure on prices of the metal use in packaging and vehicles. 

Rusal's director for sales and marketing, Steve Hodgson, estimated that global off-warrant aluminium stocks, excluding China, stand at around 3.3-million tonnes, down about 500 000 t from last year.
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Copper price through 2020: Onwards and upwards

Sentiment on coal and iron ore markets are almost uniformly negative, recent rallies notwithstanding. At the same time everyone is singing the praises of zinc, nickel and even lowly lead.

As for bellwether copper. Well, it's somewhere down the middle. The copper price has recovered from five-and-half-year lows struck in January but at around the $2.70 a pound / $6,000 per tonne level is down double digits from this time last year.

Sentiment aside, the outlook for the price of the metal based on the fundamentals of the industry is uneven too.

Most analysts believe demand will moderate but continue to grow at a pace of around 3% – 4%, helped by still robust, albeit slowing, demand from China which consumes 45% of the world's copper. The majority of analysts expect copper to move into a surplus this year with as much as 400,000 excess tonnes on the market. Others, like Christine Meilton, principal consultant on copper supply at commodities researcher CRU Group, predict a tiny deficit this year, before a shift to more substantial surplus of 260,000 tonnes next year.

Typical disruptions associated with adverse weather, technical problems, power shortages or labour activity coupled with falling grades and dirty concentrates at old mines make forecasting a tough proposition.

Meilton says CRU allows for an annual disruption allowance at the beginning of the year of 6% – 7% which is then adjusted on a quarterly basis throughout the year. The consultancy also allows for a 3.5% swing in refined output. The long-term incentive price for new projects is now north of $3 a pound

However, Meilton doesn't think more frequent supply disruptions are necessarily a trend: "The Chile floods did not amount to a huge loss of copper – probably around the 50,000 tonnes mark. It had disrupted logistics so there may be delays getting it to market. Olympic Dam in terms of global output [of 20 million tonnes] will not have a dramatic impact on supply."

CRU expects to see the copper price continue to make modest gains over the remainder of the year as demand recovers from the seasonal first quarter low. "Q1's almost always bad, people always get gloomy but generally the price does come back. Today's price is at or near a bottom and new projects definitely need a price above $2.70," says Meilton.

"Our short term forecast is the price rising through the decade. Prices have typically been above the cost curve in the past although the price this year is biting into the cost curve," says Meilton

An emerging tightness in 2017, driven by deficits in the raw materials markets, will support a higher price in 2017. Thereafter the price will continue to improve due to the deficit market, moving above $8,000 a tonne ($3.60 a pound) in 2019 says Meilton.
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Callinex Mines Drills 44.2 Meters of 4 Percent Copper Equivalent at Pine Bay

Callinex Mines has completed phase 1 of a previously announced 4,000 meter drill campaign. Two of the five holes drilled intersected high-grade copper mineralization, with one hole intersecting 18.1 meters of 5.5 percent copper equivalent over a broader interval of 44.2 meters of 4 percent copper equivalent.

As quoted in the press release:

A total of five holes were completed for 1,425m in the vicinity of the Pine Bay deposit. The drilling campaign was successful in intersecting high-grade copper mineralization along with verifying the Company’s recently compiled geological database. These results, combined with recently verified historic work, will be valuable in the expanded Phase Two drilling campaign to be conducted this summer.

The Phase One drilling campaign focused on confirming historic mineralization and testing targets in the immediate vicinity of the Pine Bay deposit. After the first four holes were completed the Company postponed drilling several high priority targets along the favorable Sourdough Trend. The decision to postpone further drilling was due to safety concerns over ice thickness in the Sourdough Bay area of Athapapuskow Lake. The successful confirmation holes and validated geological database will be instrumental in moving forward on plans to complete a NI 43-101 Technical Report and Resource Estimate at the Pine Bay Project.

… The expanded Phase Two drilling campaign will consist of approximately 10 holes totaling a minimum of 2,500m. The objective will be to test prospective land-based targets at the Pine Bay and Flin Flon projects. The geology of the targeted areas consists of several mineralized horizons[IP1] that are similar to host rocks of the historic Flin Flon mine, where more than 60 million tonnes of ore have been mined. The Company is currently conducting ground geophysics to further evaluate the most prospective targets for drilling.
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Southern Copper boosts Q1 copper output by 8.9%

Southern Copper's copper production total increased 8.9% year on year in the first quarter of 2015 as a result of higher output from its Buenavista mine in Mexico.

Southern's copper output rose 8.9% to 177,616 mt in Q1, the Phoenix-based company said Friday. The company's molybdenum production increased 5.2% year on year to 5,856 mt, while its silver output fell 6.5% to 3.2 million oz and zinc production dropped 27% to 15,195 mt.

Southern said it sold copper at $2.66/lb on Comex in Q1, down 17.9% from a year earlier. Silver prices dropped 18.4% to $16.70/oz and molybdenum fell 15.3% to $8.41/lb, while zinc rose 2.2% to 94 cents/lb.

The company cut its cash costs net of by-products to 98 cents/lb in Q1 from $1.02/lb in the year-ago period. Its capital expenditure fell 27% year on year to $245.8 million, with the bulk of spending on the $3.4 billion Buenavista expansion.

The Buenavista expansion is 96%-complete and scheduled for completion in the third quarter, the company said. Testing is complete at a new 120,000 mt/year, $524.5 million SX-EW plant and work is 67%-completed at the $340 million Quebalix heap leaching project.
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Company plans $2.8b Indonesian ferro-nickel smelter facility

China's Tsingshan Group plans to invest $2.8 billion to set up a high-capacity ferro-nickel smelter plant in Indonesia by mid-2017, with the aim of producing 2 million tons of stainless steel per year.

The plant's projected annual capacity will be equivalent to 40 percent of the capacity in Europe and 5 percent of the world's, says Huang Weifeng, vice-chairman of the board at Tsingshan.

Based in Wenzhou, Zhejiang province, Tsingshan is the largest producer of ferro-nickel-an alloy of nickel and iron - and the second-largest stainless steel producer in China. Tsingshan began investing in Indonesia in 2009, in the China-Indonesia Industrial Investment and Cooperation Zone on the eastern Indonesian island of Sulawesi, covering an area of 1,364 hectares.

"The establishment of a ferro-nickel smelter in Indonesia is beneficial for us, as it will help us to reduce our transport costs and enhance our competitiveness," said Huang, who also is chairman of Shanghai Decent Investment, a unit of Tsingshan.

The first phase of the project was completed in March with an investment of $630 million, according to Huang, who also oversees the group's industrial park in Indonesia. It has an annual production capacity of 300,000 tons of ferro-nickel for export. The company also is building a 130,000-kilowatt power plant in the park.

Construction of the smelter project's second phase - with a total investment of $1.02 billion and a projected annual capacity of 600,000 tons of ferro-nickel - is underway and expected to be completed by the end of this year.

The third phase will reach an annual production capacity of 2 million tons of stainless steel. With a total investment of $970 million, the 300,000-kW facility is scheduled to be completed by mid-2017.
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Steel, Iron Ore and Coal

India to cut export tax on low-grade iron ore in boost for Goa

India will cut an export tax on low-grade iron ore to 10 percent from 30 percent, Finance Minister Arun Jaitley said on Thursday, in a big boost for top exporting state Goa which is close to restarting its mining industry.

Court action against illegal mining has shut the industry in Goa for more than two years, although companies including top miner Vedanta Ltd are starting to get approval to resume work in about a month.

The new export duty will be effective from June 1, Jaitley told the parliament on Thursday. The tax stays at 30 percent for higher grades.

Iron ore prices have almost halved in the past 12 months, and are hovering near their lowest in a decade. This has made Goa's low-quality ore, which contains less than 58 percent iron, unappealing to traditional buyers in China, who can now buy better grades of the steelmaking raw material at competitive prices.

Goa Mineral Ore Exports Association Secretary Glenn Kalavampara welcomed the move.

"Now the head is slightly above water," Kalavampara said. "We can at least breath now but prices are still a concern."

Goa is unlikely to be able to start exports before October at the earliest pending some approvals and as the four-month monsoon season begins in June, an official with a mining company in Goa said.
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Atlas Iron to keep mining, mega producer cuts may help

Australia's Atlas Iron Ltd , which halted mining in April after a slump in iron ore prices pushed it into the red, said it will keep producing at two of its mines this month, supported by its contractors and a rebound in prices.

Australia's fourth-largest iron ore miner, which has been in talks with its creditors to keep it afloat, said it would now seek more permanent arrangements with key contractors so it can operate in the long term.

Tumbling iron ore prices fell to decade lows in early April, hurt by a rise in output from mega miners as demand growth slows in China, threatening the survival of many smaller producers, like Atlas.

"The company's operational review, while incomplete, is generating encouraging results and negotiations with key creditors (including secured creditors) are ongoing," it said in its quarterly production report.

Analysts said the miner's position had been improved by firmer prices and a new product it can sell at a premium, but it may benefit most from signs that mega miners may be more cautious on big production increases.

Brazil's Vale, the world's top iron ore miner, said on Thursday it would cut 30 million tonnes of high-cost production over the next two years with prices still wallowing near 10-year lows.

"What that really says is: 'We're not going to compete on price anymore.' It's a signal that the iron price has hit a bottom," said Mike Harrowell, director of resources research at broker BBY Ltd.

Spot iron ore rallied 25 percent between April 10 and 28, with the benchmark 62-percent grade .IO62-CNI=SI hitting $59.20 per dry metric tonne on Tuesday, its highest since March 5. It stood at $56.90 on Thursday.

Atlas, which aimed to produce 13 million tonnes this year, said its new operating model was based on breaking even at an iron ore price of less than $50 a tonne, including its interest and sustaining capital expense.

The price rebound was partly spurred last week after world no.3 producer BHP Billiton's flagged it would slow its long term expansion by 20 million tonnes.

Analysts do not expect rival Rio Tinto to follow suit as it has long had a mantra to keep producing at full tilt as long as it's making a profit.

Atlas said its Abydos mine had continued operating and it would reopen its Wodgina mine, its lowest-cost operation, in May. It was assessing options for its Mt Webber mine.

It said it significantly cut costs at two of its three operations with the help of its contractors, transport group McAleese Ltd and stevedore group Qube Holdings Ltd

The miner said it remained solvent and had not breached any debt covenants on its $275 million five-year loan which matures in 2017. Its shares, which were put on a voluntary suspension on April 7, would remain suspended.
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Brazil's Vale plans to substitute out old production, reports Q1

Brazil's Vale SA said on Thursday it expects to replace some old higher-cost iron ore production as new capacity comes on stream, the clearest sign yet the miner could cut future output forecasts due to weak prices.

Any move to curb output growth by the world's largest producer of iron ore will be closely watched by a market currently in oversupply due to new capacity from Australia and Brazil combined with slower demand growth in China.

This glut, as well as expectations it could get worse, has caused the price of iron ore to fall 47 percent over the past 12 months.

This year "we are removing 22 million tonnes which have less important, weaker margins," Vale's Head of Ferrous Peter Poppinga said during a conference call to discuss first quarter results. This will be replaced with new, cheaper iron ore coming on stream from expansion projects, he said.

"If the market demands, we are prepared to reduce production from the south and southeast system," Poppinga added, referring to the company's mines in the Brazilian state of Minas Gerais.

Poppinga said Vale's production forecast for 2015 would remain 340 million tonnes, but did not specify whether adjustments could be made to forecast for next year and beyond.

Vale has previously said it expects to continue increasing production over the next few years, reaching 376 million tonnes next year and 453 million tonnes in 2018.

The company reported a first quarter net loss of $3.2 billion on Thursday as it grapples with lower iron ore prices.
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Iron ore price rally turns into dead cat bounce

A two week hot streak that saw iron ore enter a new bull market came to an abrupt halt on Wednesday with the steelmaking raw material suffering its worse one day drop in a month.

The 62% Fe import price including freight and insurance at the Chinese port of Tianjin fell $2.30 or 3.9% to $56.90 a tonne on Wednesday after failing to break the psychologically important $60 a tonne level according to data provided by The SteelIndex.

After a rally that began on April 16 the iron ore price added 26.7% since hitting record lows at the beginning of April of $46.70 a tonne. A more than 20% appreciation from a low is considered a bull market. Iron ore hit an all-time high of $191 a tonne in February 2011.

Many industry players view the recent rally in iron ore prices as being overdone as the fundamentals still remain off balance

The advance in the Metal Bulletin's benchmark 62%-index at the ports of Qingdao-Rizhao-Lianyungang in China also reversed on Wednesday  with the price pulling back to $57.13 a tonne after falling just 12c short of $60.

Recent strength came on the back of a period of restocking by Chinese steelmakers where the beleaguered industry enjoyed a rise in rebar prices which also fizzled out on Wednesday.
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Vale, China in talks to build 50 giant bulk carriers — report

Iron ore giant Vale the world’s No. 1 producer of the steel-making material, is said to be negotiating the manufacture of 50 giant bulk carriers with Chinese shipbuilders.

The Rio de Janeiro-based miner aims to increase its fleet of mega ships, the world's biggest bulk ore carriers, to transport iron ore from Brazil to China.

According to Wall Street Journal, the Rio de Janeiro-based miner aims to increase its fleet of mega ships, the world's biggest bulk ore carriers, to transport iron ore from Brazil to China.

The newspaper added that China Cosco Holdings, ship financier Shandong Shipping Corp., ICBC International Leasing Ltd. and China Merchants Energy Shipping are all involved in the ongoing negotiations.

Vale's carriers were barred from China from Jan. 2012 to Sept. last year, due to rules preventing ships of more than 250,000 dwt in capacity from docking at mainland ports.

In February, Beijing finally amended rules around vessels allowed to berth at its harbours, paving the way for the entry of Vale's giant ships, known as Valemaxes, which can carry up to 400,000 deadweight tons.

Vale's inability to dock its iron ore carriers at Chinese ports had stymied its efforts to reduce freight costs and to compete with Australian based-rivals like BHP Billiton (ASX:BHP) and Rio Tinto (LON:RIO), which are closer to China.

If the shipbuilding deal rumour were confirmed, the order would be the largest in history for this kind of massive ore carriers.
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Goa iron-ore mining resumption delayed again

With the monsoon season ahead and the disincentives of low international prices, iron-ore mining operations in the western Indian coastal province of Goa are not expected to resume before October or November, at the earliest.

According to an official in the Goa Mineral Exporters’ Association (GMEA), if mining operations were to restart, production would have to be reduced within the next month or so with the onset of the monsoon rains. Simultaneously, miners were not keen to resume operations as the cost of mining had increased to meet stricter mandatory environmental norms and these costs would not be covered by the current low international prices, he said.

According to Goa miners, export offers for benchmark high-grade iron-ore would need to move up by at least $15/t to $20/t from current levels, to ensure miners of sufficient margins from outward shipments. A GMEA official said that even though current export offers for high grade iron-ore had bounced back to levels of $60/t cost and freight to China after falling to a recent low of $50/t, during April, the government increase in royalty payments and mandatory contributions towards the District Mineral Fund had increased the cost of production which would not be covered by current prices.

 In April 2014, the Indian Supreme Court lifted an 18-month ban on iron-ore mining in the province, but resumption of mining operations was made subject to a yearly production ceiling of 20-million tonnes a year and stricter environmental guidelines. Since then the Goa government had 72 mining leases which had been cancelled in the wake of the court orders.

But as a silver lining, miners were looking towards a hike in the yearly production ceiling imposed by the apex court. A committee appointed by the Supreme Court to monitor and oversee resumption of mining in the province was expected to submit another report before the court, and indications available from the industry suggested that the committee could recommend an increase in the yearly production ceiling of another 15-million tonnes a year in addition to the already imposed 20-million tonnes a year limit, enabling miners to produce an aggregate 35-million tonnes a year.
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Indonesian coal miners move on as cash runs out

Indonesian coal miners are diversifying into other businesses to offset a collapse in demand from China, which has slashed their cash flows to the lowest levels in months.

The free cash flow of the 15 biggest coal miners and contractors on Jakarta's stock exchange averaged $10.7 million in the three months ended December, Thomson Reuters data shows. Six of the firms, including PT Indo Tambangraya Megah Tbk and PT Golden Energy Mines Tbk, experienced negative free cash flow. That means the cash they generated could not cover operating costs. Company executives and industry groups are not expecting a pickup anytime soon in demand especially from China, the world's top consumer of the commodity.

PT Adaro Energy Tbk, Indonesia's biggest coal miner by market value, is turning its focus to its logistics business and power generation. Sinarmas Group, parent of Golden Energy Mines, is investing as much as $700 million to build two coal-fired power plants in Indonesia. PT Bukit Asam Tbk is conducting feasibility studies on setting up power stations in Vietnam and Myanmar.

Indonesia's coal production may slide as much as 24 percent this year as miners slow output and concentrate on stabilising their businesses, said Pandu Sjahrir, chairman of the Indonesian Coal Mining Association. "The Chinese slowdown is worse than we thought," Sjahrir said. "India and Japan have improved. The problem is that China overpowers everyone else."

Adding to the industry's woes, the government is planning to double coal royalties from next month.
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Cliffs quarterly revenue falls, cuts capex

Coal and iron ore producer Cliffs Natural Resources Inc reported a 28 percent fall in quarterly revenue, and the company cut its capital budget as prices tumble.

Iron ore prices have been weighed down by weak demand for the steel-making ingredient in both domestic and international markets such as China.

Revenue from the company's U.S. iron ore operations decreased about 14 percent to $311.8 million in the first quarter.

Spot iron ore prices .IO62-CNI=SI fell about 28 percent in the January-March quarter.

Cleveland, Ohio-based Cliffs said it expects to produce and ship 20.5 million tons of iron ore in 2015 from its U.S. business, compared with 22.4 million it produced in 2014.

The company said it was considering a sale of its North American business, which produced 1.4 million tons of coal in the quarter ended March 31.

"They're looking to exit both North American coal and Asia Pacific iron ore but the problem is, I don't think they have a buyer right now for either business," Wolfe Research analyst Gordon Johnson told Reuters.

The company recently sought creditor protection for its Canadian arm and sold its chromite assets in the northern Ontario Ring of Fire district.

Cliffs cut its capital expenditure budget to $100 million to $125 million for 2015. The miner had earlier set a capital budget of $125 million-$150 million.

The company's net loss attributable to shareholders widened to $772.6 million, or $4.26 per share, in the first quarter ended March 31, from $83.1 million, or 54 cents per share, a year earlier.

Revenue fell to $446 million from 615.5 million.

The company said the first-quarter results take into account the impact of the North American Coal and the Canadian businesses being treated as discontinued operations.
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Nippon Steel to cut output by 9 pct in April-June to reduce stock

Nippon Steel & Sumitomo Metal Corp, Japan's top steelmaker, plans to cut crude steel output in the April-June quarter by 1 million tonnes, or about 9 percent, from the previous quarter because of rising inventories at home.

The reduction is bigger than the 4.9 percent fall forecast by Japan's industry ministry this month in the country's crude steel output for the period, which would take it to the lowest level for the quarter in six years.

Steel product inventories at major Japanese wholesalers totalled 5.91 million tonnes as of February, up 4 percent from about a year earlier, due to lower automobile output and weaker housing starts, both hit by a sales tax rise in April last year.

"We are worried about a surge in inventories," Nippon Steel's executive vice-president, Katsuhiko Ota, told reporters.

"We will cut output to help reduce stocks," he said.

Nippon Steel reported that its 2014/15 recurring profit, which is pre-tax before one-off items, rose 25 percent as lower material costs boosted margins. It did not provide a profit forecast for this year.
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Mechel posts record loss on weaker rouble, assets sale

Indebted Russian miner Mechel posted a record 2014 net loss on Tuesday of $4.3 billion because of $3.9 billion in non-cash write-offs caused by a weaker rouble and assets sales.

The profits of many Russian exporters have been hit by the rouble, which plunged against the dollar last year on weaker oil prices and Western sanctions over Russia's role in the Ukraine crisis.

"The downside of our asset disposal process and national currency devaluation was the decrease of the group's (full year) revenue by 25 percent and a major paper loss of $4.3 billion," Mechel said in a statement.

The net loss in the fourth quarter reached $3.1 billion compared with a net loss of $575 million in the previous quarter. Its net loss stood at $2.9 billion in 2013.

But the rouble depreciation has also made Mechel's coal products more competitive on dollar-denominated markets, boosting its export sales and reducing its net debt by 23 percent to $6.8 billion.

Mechel, controlled by businessman Igor Zyuzin, had accumulated much of its debt before the economic downturn. It invested heavily in expansion before the 2008 financial crisis hit demand and then had to sell some of its assets when they became loss-making.

"The company's management is making every effort to resolve our debt issue as soon as possible," Mechel said in its statement. It gave no details.
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China drives global stainless steel output to 2014 record

A jump in stainless steel output in top producer China drove global production to another record high last year, outstripping demand growth and weighing on prices, an industry report showed on Tuesday.

Global stainless steel output rose 8.3 percent last year to a record 41.7 million tonnes, with output gains in all regions except central and eastern Europe, according to theInternational Stainless Steel Forum (ISSF).

China, which produces about half the world's stainless steel, saw output jump 14 percent year-on-year to 21.7 million tonnes, while the Americas saw output jump 15 percent to 2.8 million tonnes.

China's 14 percent output growth rate was lower than last year's 18 percent rate, but it was still enough to keep stainless steel prices depressed ST-CRUSTL-IDX.

Global prices are are at their lowest since last March, and not far off a 4 year low hit in August 2013.

Output in Asia excluding China rose by just 0.6 percent to 9.3 million tonnes, while output in Western Europe rose 1 percent to 7.6 million tonnes. Output in central and eastern Europe fell 0.6 percent to 277,000 tonnes.
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Iron ore recovery gives miners breathing space

The spot price of iron ore extended its recent gains on Monday, sitting at a seven-week high and providing this way some breathing space to miners, particularly mid-tier producers.

Prices for the steel-making material added Monday US$1.28 or 2.17% to US$59.09 a tonne, taking its gain since bottoming at $47.08 on April 2 to 25%, according to data provided by the Metal Bulletin's benchmark.

The revival means that at least three Australian miners, previously in the red or dangerously close to it, have resumed making money.

Those companies, Fortescue Metals Group , BC Iron , Mount Gibson Iron and US miner Cliffs Natural Resources , are now believed to be above their "break-even" price, the Sydney Morning Herald reports.

Fortescue, the world's fourth biggest producer, needs iron ore prices to be about $50 per tonne to cover its cost of production, royalties, maintenance spending and its debt obligations.
BC Iron can generate cash as long as the benchmark iron ore price is $55 per tonne or higher.
Mt Gibson Iron should also be breathing better, as it estimated "break-even" price is $53.
And Cliffs Natural Resources, set to update investors on Wednesday, has said its cash costs of producing iron ore are around $39 per tonne.

In contrast, mid-tier producer Atlas Iron  —which needed an in ore price of $60/t to keep its head above water— is mothballing its WA mines under a staggered plan announced earlier this month.
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China Iron ore mine support in 2015

China will see less iron ore mine closures in 2015 thanks to government support to the industry, which has been suffering from low prices, global rating agency Fitch said Friday.

The domestic iron ore market faces high smelting costs and insufficient production. A slew of mines were forced to close as a result of the price drop of iron ore in 2014, which increased China's dependance on imported iron ores. Now only about 60 percent of iron ore firms are in production.

Support from the government will provide a lifeline to keep domestic supply in the market longer, Fitch said.

Resource tax on domestic iron ore producers will be reduced to 40 percent from 80 percent as of May, the State Council announced earlier this month.

Fitch expects more subsidies will be offered to support iron ore miners.

Data from the China Iron and Steel Association (CISA) shows that a record high of 933 million metric tonnes of iron ore was imported in 2014, up 13.8 percent from a year earlier. About 78.5 percent of iron ore was imported last year.
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China specifies coal resource tax favourable policies

China has specified favourable policies concerning coal resource tax, in a bid to raise resource recovery rate and ease burden for struggling miners, according to a document jointly released by the State Administration of Taxation (SAT) and National Energy Administration (NEA).

The move followed the government’s reform on coal resource tax to value-based from previous quantity-based from December 1 last year, which included favorable policies on coal from resource-depleting mines or mined in the form of backfilling.

For resource-depleting mines, the operator should register them to local taxation administrations to enjoy the favorable policy, and resource depletion evaluation shall be performed on an individual mine rather than all the mines operated by a company, the document said.

The resource tax for resource-depleting mines – with mineable reserves no more than 20% of the designed mineable reserves or mining life less than five years – would be cut by 30%; if designed mineable reserves are not available for a mine, resource depletion evaluation should be based on its mining life.

The resource tax for coal mined in the form of backfilling would be halved, it said. Backfilling refers to the coal mining technology of refilling an excavated working face with gangue and other materials.

The two ministries also specified calculation method for the volume of coal mined in the form of backfill. For mines installed with metering equipment in the backfilled working face, the coal volume shall be recorded by the equipment; for mines with no such equipment, the coal volume shall be the product of backfill materials’ volume and backfilling ratio, according to the document.

China’s coal miners are battling with sluggish demand and an excess of supply that have reduced prices of the fossil fuel back to a nine-year lowest since mid-2006. The government’s reform of coal resource tax has to some extent increased miners’ cost burden, due to slow progress in clearing of unreasonable local government charges.
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Big China steel thrives, stoking export fears

Plunging iron ore prices are providing a lifeline for some of China's biggest steel mills, but raising the prospect of a rising tide of exports and increased friction with the European Union and countries such as India.

Even as China's domestic steel demand shrinks and the industry battles chronic overcapacity, lower iron ore prices have helped many large mills post better earnings in 2014 than a year earlier, supported by record exports.

That doesn't bode well for struggling steelmakers elsewhere in the world, which have been hoping for a shake-out of the industry in China, the world's top steel producer.

"(Cheaper ore) obviously encourages Chinese steelmakers to still produce because their costs are lower, and because of the overcapacity there's a strong incentive to still export," said Jeremy Platt, an analyst at London-based steel consultancy MEPS.

China boosted exports of the alloy by some 50 percent last year to a record 94 million tonnes, and western industry bodies see little sign of a major rationalisation of the industry.

The latest batch of Chinese steel earnings shows just three of 18 big mills to report so far suffered losses in 2014, down from five the year before. Six of the 13 profit-making mills in 2013 increased profits last year.

"Big Chinese integrated coastal mills are among the most competitive in the world as they have benefited the most from sharp falls in imported iron ore prices, helping them to gain growing market share both at home and abroad," said Zhao Chaoyue, an analyst with Merchant Futures in Guangzhou.

Big Chinese mills are able to ship in cheaper seaborne ore direct to their coastal steelmaking operations, selling to customers nearby or shipping steel overseas.

The iron ore price fall also encouraged large mills - those with an annual output of more than 10 million tonnes - to buy more from the spot market, winning benefits once garnered mainly by more flexible private mills.

Despite the scrapping of tax rebates for exports containing boron that had helped boost sales, Chinese exports rose 41 percent in the first quarter, increasing concerns from rival producers around the world.

Baoshan Iron & Steel will start production at an integrated coastal plant this year, while Wuhan Iron & Steel is building a similar coastal production base.
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BHP faces A$522 mln tax bill on Singapore marketing hub

BHP Billiton is contesting A$522 million ($409 million) in Australian tax bills on its Singapore marketing operations up to 2010, after having paid almost no tax in Singapore since 2006, the global miner told an Australian Senate panel.

The figures were released on Monday by a Senate committee that is investigating corporate tax avoidance. BHP was forced to send written responses to the panel after refusing to disclose the figures at a hearing on April 10.

The company revealed that between 2006 and 2014 its Singapore marketing businessearned profits of $5.7 billion, on which it paid just $121,000 in tax in Singapore.

"The Singapore Government has granted BHP Billiton Marketing AG a tax incentive for its marketing activities. BHP Billiton Marketing AG was awarded this incentive for its contributions to the development of Singapore's commodities sector," the company said in its response to the Senate inquiry.

However BHP highlighted that its Singapore marketing hub is 58 percent owned by BHP Billiton, which is dual-listed in Australia and Britain, and paid tax on those earnings also in Australia.

"It is important to note that 58% of the profit which BHP Billiton Marketing AG earns in Singapore from the on-sale of commodities acquired from Australian entities controlled by BHP Billiton Limited is subject to tax in Australia at the company tax rate of 30%," BHP said.

The company paid A$945 million in tax in Australia on its Singapore marketing operation earnings between 2006 and 2014.

The A$522 million in tax bills it faces from Australia include contested tax plus interest and penalties owed on transfer pricing, the price at which BHP's Australian entities sell commodities they mine to the Singapore marketing business.

It also includes tax, interest and penalties the Australian government says is owed from the marketing hub under controlled foreign company rules.
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Germany to review jobs impact of coal levy before decision

Germany will make no decision on a proposed coal levy before a review is conducted regarding possible job losses, Economy Minister Sigmar Gabriel has told energy unions in a letter seen by Reuters on Friday.

Germany is looking to safeguard its energy supply while reducing its C02 emissions by 40 percent by 2020 and exiting nuclear power two years after that.

The government has proposed penalties for the oldest and most polluting coal-fired power plants to help cut emissions.

But energy companies and German states fear the measure will damage coal generation and cost jobs. Mining unions plan mass demonstrations on Saturday in Berlin against the proposed coal levy, which union IG BCE says could put 100,000 jobs at risk.

Germany's largest power producer, RWE, and other energy groups have said the levy would lead to the immediate closure of RWE's lignite-fired power plants.

"We need certainty about the numbers and consequences," Gabriel said in the letter to IG BCE and another union Verdi dated April 24. "Nothing will be decided prior to that."

Gabriel said he had commissioned a review into the impact of the proposals on electricity prices, CO2 emissions targets as well as on the operations of power stations and mines.

"Should this in fact confirm the misgivings expressed by IG BCE and Verdi of an industry meltdown with a considerable loss of jobs, then the Economy Ministry will of course change its proposals to achieve its climate targets," Gabriel said.

Rainer Baake, state secretary for energy in the Economy Ministry, proposed linking the levy on C02 produced by coal plants above a certain level to the electricity price.

Under this scenario, the levy would increase when the electricity price is high and fall when the electricity price sinks below a level of 40-42 euros per megawatt hour, he said.
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Vattenfall faces delay in German lignite sale -sources

Swedish utility Vattenfall is facing delays in the planned sale of its brown coal assets in Germany, three people with direct knowledge of the matter said, pointing to concerns over a proposed coal levy that could threaten any deal.

Memos to potential buyers were originally meant to be sent out in April, the people said, adding this was now expected only later in the year and may take until the end of the European summer.

"The deal is delayed, on hold," one of the people said.

Vattenfall, which is scheduled to present first-quarter results on April 28, declined to comment.

Scandinavia's biggest utility last year announced plans to divest roughly 9,000 megawatt (MW) worth of lignite-fired plants in eastern Germany, responding to mounting writedowns on past acquisitions that pushed it deep into loss.

The company, which posted an after tax loss of 8.3 billion Swedish crowns ($966 million) for 2014, has said it aims to complete a deal this year.
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Indonesia's 2015 coal output may slide 24 pct as low prices hit - association

Coal production in Indonesia, the world's top exporter of seaborne thermal coal, could drop by up to 24 percent this year as producers stop ramping up output and concentrate on business stability, the country's main coal association said.

A global oversupply has cut benchmark Asian coal prices by more than 20 percent over the past 12 months, pushing more and more firms into the red.

Previously, producers increased output to maintain cashflow and service debt, exacerbating the oversupply and the downward pressure on prices, but the picture is changing, said Pandu Sjahrir, newly appointed chairman of the Indonesian Coal Mining Association.

"People are no longer chasing cashflow, or increasing their EBITDA figure on income statements. Now they are more focused on guarding business stability - where they have to have enough cash in hand," Sjahrir said.

"What this means is that most of the players have started to reduce production - all the more so if that production is not profitable."

Coal production could drop to between 350 and 400 million tonnes in 2015 from 458 million in 2014, Sjahrir said. That would be the second year in a row that output has declined after rising for at least 30 years.

Stripping ratios and the removal of overburden - the amount of dirt miners remove to expose mineral deposits - have declined by 15 to 20 percent, indicating further output declines can be expected. "You can see a lot of players have reduced their stripping ratio by about 15 percent overall."

Annual domestic coal demand in Southeast Asia's largest economy is currently around 90 million tonnes, Sjahrir said, noting the industry was now monitoring a government programme to build 35 gigawatts of new power stations by 2019.

"In the next six to nine months, we'll know what Indonesian demand will be like. Even if only half of it happens - 17 gigawatts - let's say around 60 percent of that would be coal. That means 150 million to 200 million tonnes of extra coal would be needed."

If firms sign power purchase agreements this year, their power plants would take 2 to 2-1/2 years to complete, Sjahrir said.

"Indonesia is the biggest swing factor in the world. If Indonesia's demand can increase from 90 million tonnes to 200 or 250 million tonnes, that could influence Newcastle prices, but that's a big if," he said, referring to the Asian coal benchmark.
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