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British industry warns of factory closures without help on fuel costs

Stainless steel tubes are stored ready to be made into exhausts at the Eminox factory, during a post-Budget visit by Britain's Chancellor of the Exchequer Philip Hammond, in Gainsborough, Britain October 30, 2018.  Christopher Furlong/Pool via REUTERS

Stainless steel tubes are stored ready to be made into exhausts at the Eminox factory, during a post-Budget visit by Britain’s Chancellor of the Exchequer Philip Hammond, in Gainsborough, Britain October 30, 2018. Christopher Furlong/Pool via REUTERS

LONDON, Oct 9 (Reuters) – Britain’s most energy intensive manufacturers, including producers of steel, glass, ceramics and paper, have warned the government that unless something is done about soaring wholesale gas prices they could be forced to shut down production.

Wholesale gas prices have increased 400% this year in Europe, partly due to low stocks and strong demand from Asia, putting particular pressure on energy intensive industries. read more

Industry bosses held talks on Friday with business minister Kwasi Kwarteng but said these ended with no immediate solutions.

“If the government doesn’t take any action then basically what we’ll see for the steel sector is more and more pauses of production in certain times of the day and those pauses will become longer,” Gareth Stace, director general of UK Steel told ITV News.

Similarly, Andrew Large, director general of the Confederation of Paper Industries, told the same broadcaster that he could not rule out factories having to suspend production due to increased energy costs.

David Dalton of the British Glass Manufacturers Association said some companies were days away from halting production.

After meeting the industry leaders on Friday, Kwarteng’s department said he was determined to secure a competitive future for Britain’s energy intensive industries.

It said he “promised to continue to work closely with companies over the coming days to further understand and help mitigate the impacts of any cost increases faced by businesses.”

…click on the above link to read the rest of the article…

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

European policymakers and some traders blame Russia for the low volume of gas stored across the region which has sent both gas and electricity prices surging to record highs.

Russia’s pipeline gas export monopoly Gazprom has met commitments for long-term contracts, its clients confirm. But it has not raced to book extra pipeline capacity for spot buyers, despite European calls for more supplies.

Some policymakers and traders have speculated additional gas has been deliberately withheld to make a diplomatic point and accelerate the approval of the Nord Stream 2 pipeline. Others say Russia has withheld gas to create a shortage, drive up prices and increase export revenues, similar to the way the OPEC+ producer group raises oil prices and its revenues.

The other possibility is Russia has not supplied more gas because it faces its own shortage and wants to rebuild domestic stocks after they were depleted by a cold winter in 2020/21.

There is no empirical way to determine which theory is correct or what Russia’s intentions have been. But whatever the reason, the result is the same: gas is in short supply and European energy prices have hit record levels.

Escalating energy prices are a global phenomenon. Shortages of gas, coal, electricity and to a lesser extent oil are evident across North America and Asia as well as Europe. In every case, very high and rapidly rising prices this year are a reaction to very low and rapidly falling prices last year during the coronavirus-driven recession.

Energy prices have always been strongly cyclical. In this instance, an exceptionally severe cyclical slump in 2020 has produced an equally extreme cyclical upswing in 2021.

…click on the above link to read the rest of the article…

Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage

Europe’s Gas Prices Surge To Avert Risk Of Winter Shortage

Europe’s gas and electricity prices are setting record highs on a daily basis and rising at an accelerating rate as the market tries to destroy enough demand to protect depleted inventories ahead of the winter.  Gas storage sites in the European Union and United Kingdom are currently just under 76% full, compared with a ten-year seasonal average of almost 90%, according to data compiled by Gas Infrastructure Europe.

In the last decade, storage has emptied by an average of 57 percentage points over winter, but depletion is highly variable, ranging from a minimum of 38 points in 2013/14 to a maximum of 71 points in 2017/18.

If this winter sees an average drawdown, storage sites would be reduced to just 19% full by next spring, the second lowest for a decade, leaving the region with a persistent gas shortage next year.

If the winter sees a moderately strong draw, in the 75th percentile, storage would be reduced by 68 percentage points to a record low of just 8% next spring, increasing the probability supply will actually run out in some areas.

If the winter sees a maximum draw, similar to 2017/18, storage would be almost exhausted by next spring, making local shortages almost inevitable.

Futures prices are rising to avert this threat by rationing demand now to conserve inventories and reduce the risk of running out later in the winter.

Sharply rising prices are the reason wholesale markets (such as European gas) rarely run into physical shortages, unlike retail markets (U.K. gasoline and diesel) where price rises are typically more limited for commercial and political reasons.

Europe’s gas and electricity prices are likely to remain elevated until there is clear evidence that they have begun to reduce demand and conserve inventories.

Column: Hedge funds flock to oil as energy shortages worsen: Kemp

A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi/File Photo

A petrol station attendant prepares to refuel a car in Rome, Italy, January 4, 2012. REUTERS/Max Rossi/File Photo

LONDON, Oct 4 (Reuters) – Rising oil prices and the spreading global shortage of coal, gas and electricity have drawn fresh buying interest from hedge funds and other money managers in oil-related derivatives contracts.

Portfolio managers purchased the equivalent of 42 million barrels in the six most important petroleum futures and options contracts in the week to Sept. 28, according to records published by regulators and exchanges.

Purchases over the last six weeks have totalled 170 million barrels, reversing more than half of the earlier sales of 268 million barrels over the previous ten weeks (https://tmsnrt.rs/2ZUULKJ).

For many fund managers, concerns about an energy crunch in coal, gas, electricity and to a lesser extent in oil have replaced earlier fears about a resurgence of coronavirus infections.

In the most recent week, the buying was led by the creation of new bullish long positions (+41 million barrels) rather than closure of previous bearish short ones (-1 million).

The total number of short positions has fallen to its lowest level since late 2019 and is in the 20th percentile for all weeks since the start of 2013, as fears about the coronavirus hitting oil demand have evaporated.

In the latest week, funds boosted positions in NYMEX and ICE WTI (+21 million barrels), Brent (+9 million), European gas oil (+11 million) and U.S. gasoline (+3 million), reducing them slightly only in U.S. diesel (-3 million).

Across all six contracts, portfolio managers have a combined net long position of 847 million barrels, which is in the 76th percentile since 2013. Long positions outnumber shorts by a ratio of 6.12:1, in the 81st percentile.

…click on the above link to read the rest of the article…

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

EU To Propose Exempting “Green” Bonds From Deficit And Debt Limit Calculations

Yesterday, the ECB announced that in Q4, it would “modestly lower the pace of net asset purchases under the PEPP than in the previous two quarters” (even as Lagarde scrambled to convince markets not to call it tapering) with Reuters sources adding that “policymakers set a monthly target of between 60 billion and 70 billion euros” down from 80 billion currently “with flexibility to buy more or less, depending on market conditions.” Putting this non-taper taper in context, Nomura calculated that “even if net PEPP is scaled down to €60bn/month the ECB would still buy 85% of the remaining gross supply, strongly supporting EUR rates.”

Despite the shrinkage of ECB bond-buying, Lagarde made it clear that the fiscal spice must flow:

  • *LAGARDE: FISCAL SUPPORT HAS TO BE CONTINUED
  • *LAGARDE: FISCAL SUPPORT NEEDS TO BE MORE TARGETED

The most notable proposal is to exempt “green” investments from calculations of deficit and debt limits and temporarily forgetting existing rules that say debt must be cut every year, Reuters reported citing documents prepared for the ministers’ talks showed.

“The challenge in coming years will be to consolidate deficits while increasing green investments to achieve the ambitious targets of the EU to cut emissions or any other investments,” a note prepared by host Slovenia said.

In other words, the EU will use the “green” strawman of fighting climate change as a loophole to issue debt over and above the EU’s self-imposed ceilings.

…click on the above link to read the rest of the article…

Aramco On Lockdown After Houthi Missile Attack

Aramco On Lockdown After Houthi Missile Attack

Saudi Arabia had intercepted a ballistic missile attack on facilities owned by state oil major Aramco in the Eastern Region, Reuters has reported, citing the Saudi defense ministry.

Earlier reports said Aramco facilities in Dharan had gone on lockdown because of a suspected attack.

The Iran-affiliated Yemeni Houthi group claimed responsibility for the attacks on Sunday, saying it had used ballistic missiles and drones.

Ras Tanura, which is home to extensive oil infrastructure, was not the only target of the attack: the Houthis also targeted Aramco property in the southern Saudi provinces of Jizan and Najran, according to the rebel group’s spokesman who claimed responsibility for the attacks.

Aramco oil facilities are understandably a preferred target for the Houthis, which Saudi Arabia is trying to oust from Yemen after they removed the Saudi-affiliated government of the country in 2014 and has since then assumed power in most of Yemen. The Yemeni war, which has resulted in the worst humanitarian crisis in modern times, is widely seen as a proxy war between regional rivals Saudi Arabia and Iran.

The Saudis most often intercept the Houthi attacks but not always. The most notable attack that the Yemeni rebel group claimed responsibility for was the September 2019 attacks on Saudi Aramco’s oil facilities, including an oil field and a processing plant

That attack cut off 5 percent of the daily global supply for weeks, sending oil prices soaring. But Saudi Arabia and the United States said at the time that it was Iran—and not the Houthis—that was responsible for the attack, even though the Yemeni group again claimed responsibility for the strikes.

Since the start of the Yemen war, several attempts have been made at reaching a ceasefire agreement, but so far, all have failed, locking the Saudis and the Houthis in a stalemate.

‘Spend as much as you can,’ IMF head urges governments worldwide

MOSCOW (Reuters) – Policymakers worldwide should embrace more spending to help revive their stuttering economies, the head of the International Monetary Fund said on Friday at Russia’s annual Gaidar economic forum.

Managing Director Kristalina Georgieva did not give any specific economic forecasts, but made clear her desire for governments to up their spending and that a synchronised approach internationally was best for growth.

In 2020, the IMF provided support to 83 countries, she said.

“In terms of policies for right now, very unusual for the IMF, starting in March I would go out and I would say: ‘please spend’. Spend as much as you can and then spend a little bit more,” Georgieva said.

“I continue to advocate for monetary policy accommodation and fiscal policies that protect the economy from collapse at a time when we are on purpose restricting both production and consumption,” she said.

Georgieva praised Russia’s synchronised response to the economic challenges created by the COVID-19 pandemic, mentioning both the central bank’s monetary easing and fiscal stimulus from the finance ministry.

She also called for more international cooperation, as has been seen in the race for a COVID-19 vaccine, on the push for digital and green growth.

“IMF staff calculated that a coordinated G20 fiscal stimulus in green infrastructure, if it is done in a coordinated manner, would deliver two-thirds more in growth … than if each country acts on its own,” she said.

Britain’s National Grid forecasts tight electricity margins for Wednesday

LONDON (Reuters) – Britain’s National Grid, which is responsible for ensuring supply and demand are balanced in Britain’s energy systems, has issued a tight electricity margin notice for Wednesday afternoon and evening.

In a market message, National Grid said there is a reduced margin between the hours of 1600-1900 GMT on Wednesday, with a system shortfall of 584 megawatts.

“An electricity margin notice is used to send a signal to the electricity market. It highlights that, in the short-term, we would like a greater safety cushion (margin) between power demand and available supply,” National Grid said.

“It does not signal that blackouts are imminent or that there is not enough generation to meet current demand.”

A further update will be issued tomorrow.

U.S. crude output to decline more than previously forecast in 2020 -EIA

NEW YORK (Reuters) -U.S. crude oil production is expected to fall by 910,000 barrels per day (bpd) in 2020 to 11.34 million bpd, the U.S. Energy Information Administration (EIA) said on Tuesday, a steeper decline than its previous forecast for a drop of 860,000 bpd.

Output next year is expected to slide by 240,000 bpd to 11.10 million bpd, a smaller decline compared to the previous forecast for a slide of 290,000 bpd.

U.S. shale production has languished as oil prices collapsed after the coronavirus pandemic eroded global demand. But as hopes for a widespread rollout of a vaccine rise, U.S. crude oil production has recovered from the two-and-a-half-year lows touched in May.

Producers have begun to add drilling rigs and brought wells back online in response to the rebound in prices. [RIG/U]

Still, the EIA said that U.S. crude oil production will decline to less than 11 million bpd in March 2021 mostly because of falling production in the lower 48 states, where declining production rates at existing wells is expected to outpace production from newly drilled wells in the coming months.

The agency also expects U.S. petroleum and other liquid fuel consumption to decline 2.38 million bpd to 18.16 million bpd in 2020, unchanged from its previous forecast.

In 2021, U.S. oil demand is expected to climb by 1.63 million bpd to 19.79 million bpd, a smaller increase than its previous estimate for a rise of 1.69 million bpd.

Global consumption of petroleum and liquid fuels is expected to average 92.4 million bpd for all of 2020, which is down by 8.8 million bpd from 2019, before increasing by 5.8 million bpd in 2021, the EIA said.

Global Food Prices Rise As Famine Threat Emerges 

Food prices continue rising during the coronavirus pandemic, jeopardizing food security for tens of millions worldwide.

On Thursday, the Food and Agriculture Organization (FAO) of the United Nations said world food prices rose for the fourth consecutive month in September, led by surging prices for cereals and vegetable oils, reported Reuters.

FAO’s food price index, which tracks the international prices of the top traded food commodities (cereals, oilseeds, dairy products, meat, and sugar), averaged 97.9 in September versus a downwardly revised 95.9 in August.

FAO’s cereal price index jumped 5.1% in September and is 13.6% above its value one year earlier.

“Higher wheat price quotations led the increase, spurred by brisk trade activity amid concerns over production prospects in the southern hemisphere as well as dry conditions affecting winter wheat sowings around Europe,” FAO said.

Vegetable oil price soared 6% in September, over August prices, due to rising palm, sunflower seeds, and soy oil prices, hitting 8-month highs.

Dairy prices barely budged over the month, with moderate price increases for butter, cheese, and skim milk powder, offset by a decline in whole milk powder.

Sugar prices declined 2.6% over the month, mainly because of a global glut expected to persist through the 2021 season.

Meat prices slipped .9% on the month and were +9.4% year-on-year, with prices for pork slumping due to China’s ban on pork imports from Germany after several cases of African swine fever were recently found.

As outlined by The World Bank in September, rising food costs because of the virus pandemic have significant impacts on vulnerable households, many of which are being crushed into poverty and hunger.

“As the coronavirus crisis unfolds, disruptions in domestic food supply chains, other shocks affecting food production, and loss of incomes and remittances are creating strong tensions and food security risks in many countries,” The World Bank said. 

…click on the above link to read the rest of the article…

As Long As Mass Media Propaganda Exists, Democracy Is A Sham

As Long As Mass Media Propaganda Exists, Democracy Is A Sham

A new Reuters/Ipsos poll has reportedly found that a majority of Americans believe the completely discredited narrative that the Russian government paid Taliban-linked fighters to kill the occupying forces of the US and its allies in Afghanistan.

“A majority of Americans believe that Russia paid the Taliban to kill U.S. soldiers in Afghanistan last year amid negotiations to end the war, and more than half want to respond with new economic sanctions against Moscow, according to a Reuters/Ipsos poll released on Wednesday,” Reuters reports.

“Overall, 60% of Americans said they found reports of Russian bounties on American soldiers to be ‘very’ or ‘somewhat’ believable, while 21% said they were not credible and the rest were unsure,” says Reuters.

Those 21 percent are objectively correct: the story is not credible, and it’s not even close. Gareth Porter shows in The Grayzone how the “Bountygate” narrative is so utterly baseless that even US intelligence agencies have dismissed it, Joe Lauria of Consortium News explains how it doesn’t make any sense on its face, and FAIR’s Alan MacLeod breaks down the appalling journalistic malpractice that went into circulating this incredibly thinly sourced story to the mainstream public.

The story advances no solid facts or verified information. What it does advance is pre-existing imperialist agendas like remaining in Afghanistan, killing the last of the remaining nuclear deals with Moscow, and manufacturing public support for new Russia sanctions.

And yet a majority of people believed it, and still believe it. The narrative that Russia paid Taliban fighters to kill occupying forces is now regarded as an established fact in many key circles, despite being backed by literally zero facts.

…click on the above link to read the rest of the article…

Huge Debt Payments Come At Worst Time Possible For Canadian Drillers

Huge Debt Payments Come At Worst Time Possible For Canadian Drillers

The collapse in oil prices has significantly deteriorated Canada’s oil companies’ finances and has made repaying their debt more challenging. Over the past decade, Canadian firms have borrowed money to survive the previous oil crisis of 2015-2016 and boost production post-crisis. But now the second price collapse in less than five years is leaving Canada’s oil patch, especially the smaller players, extremely vulnerable as debt maturities approach.   

This year, the oil crash coincides with the highest-ever annual debt maturities in the Canadian energy sector, according to Refinitiv data cited by Reuters. In 2020, oil and gas firms have to repay US$3.7 billion (C$5 billion) in debt maturities, up by 40 percent compared to last year.  

The debt pressure adds to the Canadian energy sector’s new predicament with low oil prices, low cash flows, and low overall demand for crude oil due to the coronavirus pandemic.

Some companies are set to default on debts, while others are looking at restructuring options and refinancing. Banks are not generally too keen to own energy assets. But the banks may be the ultimate judge of who can refinance, who can stay afloat, or who can go belly up in this crisis, legal and industry professionals told Reuters.

Some of Canada’s oil and gas firms had not overcome the previous crisis when this one hit.

According to Bank of Canada’s recent Financial System Review—2020, the COVID-19 crisis led to widespread financial distress in all sectors, but “Canada is also grappling with the plunge in global oil prices, which hit while many businesses in the energy sector were still recovering from the 2014–16 oil price shock.”

The energy sector has the most refinancing needs over the next six months, at US$4.43 billion (C$6 billion), and faces the most potential downgrades, according to Bank of Canada.

…click on the above link to read the rest of the article…

Weekly Commentary: Update COVID-19

Weekly Commentary: Update COVID-19

Can we even attempt a reasonable discussion? Someone’s got this wrong.

June 12 – Reuters (Judy Hua, Cate Cadell, Winni Zhou and Andrew Galbraith): “A Beijing district put itself on a ‘wartime’ footing and the capital banned tourism and sports events on Saturday after a cluster of novel coronavirus infections centred around a major wholesale market sparked fears of a new wave of COVID-19… ‘In accordance with the principle of putting the safety of the masses and health first, we have adopted lockdown measures for the Xinfadi market and surrounding neighbourhoods,’ Chu said.”

June 14 – Financial Times (Don Weinland): “Over the weekend, authorities closed the Xinfadi market, a sprawling complex that provides most of Beijing’s fresh seafood, fruits and vegetables. Several residential compounds on the west side of the city have been locked down and more than 100 people have been put in quarantine… China has adopted a ‘zero tolerance’ stance toward new cases. Areas that present any new cases have been quickly locked down, often trapping millions of people.”

June 19 – CNN (Nectar Gan): “Within a matter of days, the metropolis of more than 20 million people was placed under a partial lockdown. Authorities reintroduced restrictive measures used earlier to fight the initial wave of infections, sealing off residential neighborhoods, closing schools and barring hundreds of thousands of people deemed at risk of contracting the virus from leaving the city.”

China is said to have mobilized its 100,000-strong infection tracing force. More than 1.1 million tests were administered in Beijing over the past week. From the UK Guardian (Lily Kuo): “Officials have ordered all residents to avoid non-essential travel outside of the capital, and suspended hundreds of flights and all long-distance buses. Other cities and provinces have begun to impose quarantine measures on travellers from Beijing… ‘Everyone is scared. No one wanted this to happen,’ says Zhang, waiting in the queue near Chaoyang park.”

…click on the above link to read the rest of the article…

COVID Crisis Could Unify World’s Largest Oil Companies

COVID Crisis Could Unify World’s Largest Oil Companies

Sir Winston Churchill once admonished leaders to never let a good crisis go to waste. Wall Street banks and other large banks have been paying attention: They were shrewd enough to seize the opportunity presented by the last financial crisis to get hard-nosed government agencies to approve giant M&A deals they would otherwise have frowned upon.

The oil sector should take its cue from the banking sector and try out a little Churchillian wisdom. 

Rob Cox, global correspondent for Reuters Breakingviews, seems to feel that is inevitable. He has told Reuters that the Covid-19 crisis could lead to merger mania in sectors like telecoms, auto, consumer goods, and energy.

But unlike the mid-cap energy mergers that had begun to break out before the crisis struck, Rob says tie-ups between giant producers like ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX) and BP(NYSE:BP) among others is now within the realm of possibility.

Cutting Costs

Pre-crisis notions about competition and antitrust concerns, Cox argues for Reuters, might take a backseat as economies emerge from lockdowns with governments changing tack and beginning to prioritize building industries with better operational efficiencies, lower costs, and healthier balance sheets. 

Giant energy companies could use the cost-cutting gambit to justify mammoth deals that would otherwise fail to pass muster.

Under this backdrop, Exxon and Chevron might bandy together, and even throw in BP for good measure, to form the acronymous “ExChevBrit” whose combined market cap of $425 billion and reserve pool of ~70 billion barrels of oil equivalent would still pale in comparison to Saudi Aramco’s $1.6 trillion value and 270 billion Boe.

The financial crisis of 2008 that crippled the global banking sector, Cox notes, opened the way for mega-mergers such as Bank of America paying $50 billion for Merrill LynchWells Fargo ponying up $15.1B to snag West Coast rival Wachovia and high-street lender Lloyds TBS coughing up £12bn for HBOS.

…click on the above link to read the rest of the article…

China Warns Of Possible Armed Conflict With US Over Coronavirus Backlash

China Warns Of Possible Armed Conflict With US Over Coronavirus Backlash

An internal report presented to Chinese President Xi Jinping and other top leaders concludes that global anti-China sentiment is at a level not seen since the 1989 Tiananmen Square crackdown, and recommends preparing for a worst-case scenario of armed conflict with the United States, according to Reuters, citing people familiar with the content of the document.

The report, created by the China Institutes of Contemporary Internal Relations (CICIR) – which is affiliated with the Ministry of State Security – suggests that the wave of anti-China sentiment is led by the United States, which sees China’s rise as a global superpower as a threat to Western democracies.

One of those with knowledge of the report said it was regarded by some in the Chinese intelligence community as China’s version of the “Novikov Telegram”, a 1946 dispatch by the Soviet ambassador to Washington, Nikolai Novikov, that stressed the dangers of U.S. economic and military ambition in the wake of World War Two.

Novikov’s missive was a response to U.S. diplomat George Kennan’s “Long Telegram” from Moscow that said the Soviet Union did not see the possibility for peaceful coexistence with the West, and that containment was the best long-term strategy. –Reuters

Reuters, which hasn’t seen the paper, couldn’t determine to what extent the report’s grim outlook reflects positions held by China’s state leaders, nor how much it might influence policy. That said, it suggests Beijing is taking the threat of global backlash over the coronavirus pandemic – which Western intelligence agencies suspect originated at a Wuhan biolab which was experimenting with bat coronavirus, and had previous concerns raised over the pandemic potential of such research.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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