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Aramco’s Carbon Emissions Could Be “Nearly Double” What The Company Discloses

Aramco’s Carbon Emissions Could Be “Nearly Double” What The Company Discloses

It was no secret that leading up to Saudi Arabian Oil Co.’s IPO in 2019 that the company touted its low emissions compared to other producers.

Chief Executive Officer Amin Nasser said while the company was doing its roadshows: “Not because our crude is cleaner than other crudes globally. It’s because of our standards. Even though our numbers are great, climate change is critical for the world.”

But now, it appears the company may have “failed to provide a complete picture”, according to a new Bloomberg report. The report says that Aramco fails to account for emissions generated from many of its refineries and petrochemical plants.

Inclusive of the omissions, Bloomberg estimates that the company’s carbon footprint would “nearly double”, and that Aramco would add as much as 55 million metric tons of CO2 to its annual tally. 

Now that investors “need to be able to put a price on the climate risks that they are running in their portfolios,” as one commodity researcher put it, the carbon footprint numbers can easily turn into a “red flag”.

When Bloomberg reached Aramco for questioning, the company replied: “We have a clear and deliberate path to increase the scope and details of [emissions] disclosure.” It said its current number “reflects emissions from those assets where Aramco has the accountability and ability to manage and control emissions.”

The company gets away with its current disclosures by pointing to the process of extracting the oil in Saudi Arabia. It will often cite studies that show that extraction of Saudi oil generates the second lowest amount of emissions in the world.

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

Bloomberg Analysts: “Gold the Asset to Beat in 2021”

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Gold to spearhead precious metals’ outperformance in 2021, why 2020 was a very good year for national mints, and birdwatcher unearths biggest-ever hoard of Celtic gold in Britain.

Bloomberg analysts: A $2,000 price tag will make gold the asset to beat in 2021

Among traditional assets, it would be difficult to beat gold for the title of top performer in 2020. Having hit a new all-time high of $2,070 in August, the metal has traded around its previous all-time high of $1,911 ever since. And though gold has appeared somewhat rangebound over the previous months, Bloomberg Intelligence senior commodity strategist Mike McGlone sees this as a stepping stone on the way towards an even better year.

According to McGlone, the $2,000 level that gold appears to have had difficulty recapturing is poised to become the metal’s next support, making it the asset to beat once again. “In an investment landscape increasingly dominated by how low — or negative — central banks will set base rates, along with rising debt-to-GDP and QE, we see the foundation solidifying under the price of gold. Resistance at about $2,000 an ounce in 2020 is set to transition to support in 2021,” he explained.

McGlone added rising volatility to the list of reasons why he can’t imagine gold’s price rise stopping, especially as the metal has held steadfast to its upwards-pointing 12-month moving average. In what has by now become a common scenario, McGlone expects gold to continue outperforming the record-setting S&P 500 along with sovereign bonds.

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

 

Peak Oil is Suddenly Upon Us

title

Planes stopped flying. Office workers stayed home. “Zooming with the grandkids” replaced driving to see family. A year of global hunkering yielded the sharpest drop in oil consumption since Henry Ford cobbled together the first Model T. At its worst, global demand dropped by a staggering 29 million barrels a day.

As a once-in-a-century pandemic played out, British oil giant BP Plc in September made an extraordinary call: Humanity’s thirst for oil may never again return to prior levels. That would make 2019 the high-water mark in oil history.

BP wasn’t the only one sounding an alarm. While none of the prominent forecasters were quite as bearish, predictions for peak oil started popping up everywhere. Even OPEC, the unflappably bullish cartel of major oil exporters, suddenly acknowledged an end in sight—albeit still two decades away. Taken together these forecasts mark an emerging view that this year’s drop in oil demand isn’t just another crash-and-grow event as seen throughout history. Covid-19 has accelerated long-term trends that are transforming where our energy comes from. Some of those changes will be permanent.

It’s often difficult to recognize civilization-sized shifts in behavior until after they’ve occurred. Until the pandemic none of the major oil forecasters had seen an imminent demand peak. The debate won’t end now, especially with signs that the pandemic will ease in 2021. But if we look back from here and see the oil peak clearly in the past, what follows will be the evidence of how the energy future snuck up on us.

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

World’s Negative-Yield Debt Pile Has Just Hit a New Record

  •  $17 trillion of investment-grade debt now has sub-zero rates
  •  U.K. and Australian central banks expand bond-buying programs

The market value of the Bloomberg Barclays Global Negative Yielding Debt Index rose to $17.05 trillion on Thursday, the highest level ever recorded and narrowly eclipsing the $17.04 trillion it reached in August 2019.

Almost $600 billion of bonds have seen their yields turn negative this week, meaning 26% of the world’s investment-grade debt is now sub-zero. Thanks to the slew of global issuance in 2020 as governments and companies wrestle with the impact of the coronavirus, that remains below 30% peak reached last year.

Global supply of bonds with negative yields hits record $17 trillion

The borrowing binge has been mostly met with trillions of dollars of quantitative easing that suppress yields. Just this week, the Bank of England and Reserve Bank of Australia announced plans to expand their bond-buying programs, while the Federal Reserve discussed a shift.

For investors watching yields vanish, it’s become a dilemma: make riskier bets in order to boost income or accept lower returns.

“There are still return hurdles that investors will try to reach but that is not something you can get in a large share of fixed income products at this point,” said Richard Kelly, head of global strategy at Toronto-Dominion Bank. “This will drive a further push out the risk curve for investors, be that equities, credit, or long-end bonds.”

While much of the sub-zero debt pile is denominated in euros and yen, dashed expectations for a massive fiscal spending package under a unified Democratic government are also whittling down Treasury yields.

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

“The Largest Ever Physical Transfer Of Gold”

“The Largest Ever Physical Transfer Of Gold”

Two months ago, when the market was in a state of near-total chaos as a result of a sudden collapse in global supply chains due to the hasty coronavirus lockdowns, one market that saw unprecedented turmoil was that of physical gold.

As we pointed out in late March, due to a sudden breakdown in physical gold supply as the world’s top gold refiners, those located in the southern Swiss town of Ticino, namely Valcambi, Pamp and Argor-Heraeus, suddenly stopped producing gold, the  result was a record divergence in the price of spot gold vs gold futures contracts…

… with gold futures decoupling and trading far above spot prices.

The resulting record divergence in gold futures vs spot (in some way analogous to what happened to the price of the prompt WTI contract in April, when the May WTI contract traded as low as ($40) as traders were willing to pay buyers to store oil in a world where there was suddenly no space for the physical commodity), unleashed a flood of physical gold into the US as a record scramble by traders rushing to take advantage of this arbitrage opportunity by shipping bullion to New York sparked what Bloomberg said “may be one of the largest ever physical transfers of the metal.

“The flows into New York are unprecedented,” Allan Finn, the global commodities director at logistics and security provider Malca-Amit told Bloomberg as his company’s teams in New York have been working 24 hours a day to cope with unprecedented demand for physical gold while navigating lockdowns, flight disruptions and social distancing.

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

“Crisis In Processing” – Pandemic Exposes Fragility Of Food Supply Chain

“Crisis In Processing” – Pandemic Exposes Fragility Of Food Supply Chain  

Today’s food supply chain crisis began in the meat industry has been developing for decades, and Tyson Foods has helped to create the disaster that is currently unfolding

The problem is consolidation, and with Tyson, JBS SA and Cargill Inc, three mega-corporations that control 66% of America’s beef, as much of it is processed in just a few dozen meatpacking facilities across the US. Only a few companies also dominate pork and Chicken. 

There have been at least 12 closures of meatpacking plants in April because of virus-related issues among employees. This has resulted in at least 25% of pork and 10% of beef processing capacity coming offline in the last several weeks, reported Bloomberg

“This is 100% a symptom of consolidation,” said Christopher Leonard, author of “The Meat Racket,” which examines the protein industry. “We don’t have a crisis of supply right now. We have a crisis in processing. And the virus is exposing the profound fragility that comes with this kind of consolidation.”

On Sunday, Tyson Foods warned in a full-page ad in the New York Times that the “food supply chain is breaking.”

“As pork, beef and chicken plants are being forced to close, even for short periods of time, millions of pounds of meat will disappear from the supply chain,” wrote Tyson Chairman John Tyson, patriarch of the company’s founding family, in a Tyson Foods website post that also ran as a full-page ad in several newspapers. “The food supply chain is breaking.”

Then on Tuesday, President Trump signed an order for meatpacking facilities to remain open during the pandemic. With plants being forced to stay open as the fast-spreading virus infects workers, that doesn’t necessarily mean workers will show up to work. We discussed that over the weekend in a piece titled “American Farms Cull Millions Of Chickens Amid Virus-Related Staff Shortages At Processing Plants.” 

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

Chinese Warns US To Halt Military Operations In South China Sea

Chinese Warns US To Halt Military Operations In South China Sea 

The Chinese military is closely monitoring a US Navy guided-missile destroyer transiting the South China Sea on Tuesday (April 28). 


Global Times✔@globaltimesnews

When US destroyer Barry trespassed into China’s territorial waters off the Xisha Islands on Tue, the PLA Southern Theater Command coordinated with naval and air forces to follow its course; they identified the ship, warned and expelled it:PLA Southern Theater Command spokesperson

View image on Twitter

The People’s Daily, quoting senior colonel Li Huamin, spokesperson for the Chinese Army (PLA) Southern Theater Command, said a US warship entered the “territorial waters off Xisha Islands in the South China Sea without China’s permission. The Southern Theater Command of PLA deployed air and navy forces to monitor and verify the ship, and warned it to leave.”


 People’s Daily, China✔@PDChina

A US warship on Tue entered the territorial waters off Xisha Islands in the South China Sea without China’s permission. The Southern Theater Command of PLA deployed air and navy forces to monitor and verify the ship, and warned it to leave, according to Senior Colonel Li Huamin.

View image on Twitter

Bloomberg reports that the “Chinese navy followed and expelled it [US Navy warship],” citing a PLA Daily report. 

Huamin went on to say, the US Navy violated “relevant international law and was a serious infringement of China’s sovereignty.” 

CGTN News said China urged the US to focus on the COVID-19 pandemic unfolding across the country rather than conduct freedom of navigation missions in the South China Sea. 

The PLA has spent the last 3 to 4 weeks ramping up military operations in the highly contested waters as the pandemic sweeps across the world. 

The US blasted China last week for its “bullying behavior” in the region. The US State Department recently said China is taking advantage of the region’s focus on the COVID-19 pandemic to “coerce its neighbors.” 

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

American Farms Cull Millions Of Chickens Amid Virus-Related Staff Shortages At Processing Plants

American Farms Cull Millions Of Chickens Amid Virus-Related Staff Shortages At Processing Plants

A significant concern that readers should have during an economic collapse and pandemic is food security. We’ve noted over April that troubling news is developing deep inside America’s food supply chain network, suggesting shortages and rapid food inflation could be ahead.

The reason behind the disruptions begins with meatpacking plants across the country are shuttering operations because of virus-related issues. At the moment, we’ve reported at least 10-12 large operations have gone offline in the last several weeks, which could result in pork shortages in the first or second week in May.

“Almost a third of U.S. pork capacity is down, the first big poultry plants closed on Friday and experts are warning that domestic shortages are just weeks away,” reported Bloomberg

We also highlighted additional risks to beef and poultry capacity at processing plants that were starting to develop.

Now, more specifically, diving into the world of poultry, new developments from Maryland, Delaware, and Virginia, a region known to be a top producer of chickens not just in the country but the world, is experiencing logistical issues due to coronavirus.

The Baltimore Sun is reporting that 2 million chickens are set to be culled across farms in Maryland and Delaware amid coronavirus-related staffing shortages at meatpacking plants.

We’ve heard the same story with pork, turkey, and beef processing plants across the country. Reducing operations or shutting down due to virus-related illnesses among staff. 

“With reduced staffing, many plants are not able to harvest chickens at the pace they planned for when placing those chicks in chicken houses several weeks ago,” before strict social distancing rules went into effect, trade group for the Delmarva poultry industry said in a statement.

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

Weekly Commentary: Fault Lines

Weekly Commentary: Fault Lines

Now on a weekly basis, we’re witnessing things that couldn’t happen – actually happen.

April 20 – Bloomberg (Catherine Ngai, Olivia Raimonde, and Alex Longley): “Of all the wild, unprecedented swings in financial markets since the coronavirus pandemic broke out, none has been more jaw-dropping than Monday’s collapse in a key segment of U.S. oil trading. The price on the futures contract for West Texas crude that is due to expire Tuesday fell into negative territory — minus $37.63 a barrel.”

For posterity, the latest numbers on U.S. monetary inflation: Federal Reserve Assets expanded $205 billion last week to a record $6.573 TN. Fed Assets surged $2.307 TN, or 56%, in just seven weeks. Asset were up $2.645 TN over the past 33 weeks. M2 “money” supply surged $125bn last week to a record $16.870 TN, with an unprecedented seven-week expansion of $1.362 TN. M2 inflated $2.329 TN, or 16.0%, over the past year. Institutional Money Fund Assets (not included in M2) jumped $123 billion last week. Over seven weeks, Institutional Money Funds were up $845 billion. Combined, M2 and Institutional Money Funds jumped a staggering $2.207 TN over seven weeks ($100bn less than the growth of Fed Assets).

It’s increasingly clear this pandemic is striking powerful blows at the most fragile Fault Lines – within communities, regions, societies, nations as well as for the world order. To see this disease clobber the most vulnerable ethnic groups and the downtrodden only compounds feelings of inequality, injustice and hopelessness. It is as well stunning to watch COVID-19 hasten the partisan brawl. A nation terribly divided is split only more deeply on the process of restarting the economy. To witness rival global superpowers plunge further into accusation and enmity. And to see the coronavirus viciously attack Europe’s fragile periphery, further splitting a hopelessly divided Europe and pressuring a critical global Fault Line.

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

“Scan Your Code!”: Dystopian Post-Lockdown ‘Normal’ In Wuhan Enforced By ‘Anti-Virus Patrols’

“Scan Your Code!”: Dystopian Post-Lockdown ‘Normal’ In Wuhan Enforced By ‘Anti-Virus Patrols’

The industrial hub of over eleven million people and ground zero for the global outbreak, Wuhan, has come roaring back to life but more in the way of a dystopian version of itself after the virus peaked there in February and now with almost no new infections occurring according to official numbers.

Under strict lockdown since late January as the virus ripped through the original ‘hot zone’ epicenter of Hubei province, the capital city provides a glimpse of what hard-hit urban centers in the West may look like in a new post-lockdown world.

“So far, Wuhan’s answer has been to create a version of normal that would appear utterly alien to people in London, Milan, or New York — at least for the moment,” Bloomberg writes. It’s a situation that appears ‘normal’ but with a totalitarian twist: “Bolstered by China’s powerful surveillance stateeven the simplest interactions are mediated by a vast infrastructure of public and private monitoring intended to ensure that no infection goes undetected for more than a few hours.”Police in some locations have begun to use AI-powered smart helmets to track citizens’ temperatures. Source: China News/Weibo via Daily Mail.

Just to get a major Lenovo tablet and phone factory on the outskirts of the city up and running again – previously closed for over two months – workers are first greeted by a series of four temperature checks. If flagged for even slightly higher than normal temperature (above 99.1F) they get referred to an in-house “anti-virus task force” to make determinations.

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

Eight Meatpacking Plants Close In Weeks Across America Stoking Food Shortage Fears

Eight Meatpacking Plants Close In Weeks Across America Stoking Food Shortage Fears

Update (April 23):  Food shortages across the country are coming a lot quicker than anyone has anticipated. A total of eight meatpacking plants have already gone offline in weeks. On Thursday morning, we noted how pork shortages could hit households by the first week of May.

Now we’re starting to learn the dominos are falling, with meatpacking plants shuttering operations across the country because of the coronavirus outbreak.

Tyson Foods Inc. has announced the third plant closure in about a week and the second closure within 24 hours. The latest announcement crossed the wires on Thursday afternoon, specifies how a major beef facility in Pasco, Washington, is shutting down operations because of the virus outbreak, reported Bloomberg.

“We’re working with local health officials to bring the plant back to full operation as soon as we believe it to be safe,” Steve Stouffer, head of Tyson Fresh Meats, said in the company’s statement. 

“Unfortunately, the closure will mean reduced food supplies and presents problems to farmers who have no place to take their livestock. It’s a complicated situation across the supply chain.”

In total, eight major meatpacking plants have closed in the last several weeks. We noted on Thursday morning that a “rash of coronavirus outbreaks at dozens of meatpacking plants across the nation is far more extensive than previously thought.” 

As for the plant in Washington, well, it produces enough beef to feed four million people per day. Just imagine what happens when people who have just lost their jobs experience food shortages, or maybe rapid food inflation. It could be a trigger for social unrest.

* * * 

Update (19:50):  It appears meatpacking facilities in America’s heartland could be the next epicenter of the coronavirus outbreak.

On Wednesday, Tyson Foods announced two closures of meatpacking facilities because of coronavirus related issues.

Here’s the timeline of closures:

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

The Liquidity Crisis Is Quickly Becoming A Global Solvency Crisis As FRA/OIS, Euribor Soar

The Liquidity Crisis Is Quickly Becoming A Global Solvency Crisis As FRA/OIS, Euribor Soar

One month after turmoil was unleashed on capital markets, when the combination of the Saudi oil price war and the sweeping impact of the coronavirus pandemic finally hit developed nations, what was until now mostly a liquidity crisis is starting to become a solvency crisis as more companies realize they will lack the cash flow to sustain operations and fund debt obligations.

As Bloomberg’s Laura Cooper writes, cash-strapped companies are finding little relief from stimulus measures, and from Europe to the US, cash in hand has been hard to come by even as governments pledge funds for small businesses to bridge the financial gap until lockdowns are lifted:

  • US: The March NFIB survey of U.S. small businesses noted challenges in submitting loan applications and the urgent need for federal assistance
  • UK: A British Chamber of Commerce survey showed only 1% of companies reported being able to access funds dedicated for business. A complex application process for the U.K. Coronavirus Business Interruption Loan Scheme comes as 6% of U.K. firms say they have run out of cash while nearly two-thirds have funding for less than three months
  • Canada: A proposed six-week roll out of emergency funds is unlikely to prevent 1 in 3 companies from laying off workers. More than 10% of the labor force has already filedemployment claims
  • Europe: existing structures are aiding in the deployment of funds, but concerns remain that more is needed with EU leaders failing to reach agreement on further initiatives

As we have noted previously, small businesses – everywhere from China, to Europe, to the US – make up the majority of firms in advanced economies and account for a sizeable share of private sector employment. Quick delivery of stimulus measures is needed to curb widespread insolvencies. This could mean the difference between a short, yet sharp recession and a prolonged erosion to the labor market and economy regardless of containment of the health crisis.

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

China Suffers Economic Double-Whammy As Current Global Demand Collapse Follows Earlier Supply Crash

China Suffers Economic Double-Whammy As Current Global Demand Collapse Follows Earlier Supply Crash

As the first quarter is about to close, many Chinese factories are still operating below full capacity, have been gradually ramping up production over the last several weeks as government data suggests the country’s pandemic curve has flattened.

But as Bloomberg notes, there is a serious problem developing, one where the virus crisis is locking down the Western Hemisphere, has resulted in firms from Europe and the US to cancel their Chinese orders en masse, triggering the second shockwave that is starting to decimate China’s industrial base. 

A manager from Shandong Pangu Industrial Co. told Bloomberg that 60% of their orders go to Europe. In recent weeks, manager Grace Gao warned that European clients are requesting orders to be delayed or canceled because of the virus crisis unfolding across the continent.

“It’s a complete, dramatic turnaround,” Gao said, estimating that sales in April to May could plunge by 40% over the prior year. “Last month, it was our customers who chased after us checking if we could still deliver goods as planned. Now it’s become us chasing after them asking if we should still deliver products as they ordered.”

A twin shock has emerged, one where China shuttering most of its industrial base from mid-January through early March, generated a supply shock. Now, as those Chinese firms add capacity, expecting to be met with a surge in demand from Western companies, that is not the case and is resulting in a demand shock. 

“It is definitely the second shockwave for the Chinese economy,” said Xing Zhaopeng, an economist at Australia & New Zealand Banking Group. The pandemic across the world “will affect China manufacturing through two channels: disrupted supply chains and declining external demand.”

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

“The World Has Changed” – What Was Our Biggest Mistake?

“The World Has Changed” – What Was Our Biggest Mistake?

This is going to take time. Sorry to have to say it, but patience will be required and undoubtedly tested. By far the best thing that central banks can do is keep the global financial and funding markets functioning and not especially worry about whether the stock market, within some reason, has a good or bad day. We need to keep our eye on the ball. Unfortunately, the reality is that, until the virus starts to visibly recede, the best we should plan for is getting by as best we can.

The worst mistake that was made up until now was trying to pretend that it was business as usual.

I was reading through my emails and IBs this morning and was really surprised how many people essentially asked whether I thought the Fed‘s move over the weekend would “solve” the problem. What an extraordinary example of how we have been conditioned. The Fed can’t fix this. They can just help us get through it. It also was striking, how few people brought up the coordinated actions by multiple central banks. This is a global problem. The Fed isn’t in this alone. To think that way, misses the whole point. And, not to beat a dead horse, there will have to be some action on the fiscal policy side. We’ve seen that global monetary policy can be somewhat synchronized. Now we will see if the politicians can do the same.

One thing you can be sure of is that trying to trade these markets is unlikely to be easy. Equities will most likely be heavy. They should be.

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

Only 5 Shale Drillers Are Still Profitable At $31 Oil

Only 5 Shale Drillers Are Still Profitable At $31 Oil

Haynesville

Most shale oil wells drilled in the United States are unprofitable at current oil prices, Rystad Energy has warned. The Norwegian consultancy said, as quoted by Bloomberg, that drilling new wells would be loss-making for more than 100 companies.

Just five shale drillers—Exxon, Chevron, Occidental, and Crownquest—can drill new wells at a profit at $31 per barrel of West Texas Intermediate.

The problem is the nature of shale oil wells: while quick to start production and expand it, they are also quick to run out of oil, so drillers need to keep drilling new ones to maintain production, which is what U.S. shale patch players have been doing for years. However, this has affected investor returns, Bloomberg notes, and now it is affecting spending plans.

“Companies should not be burning capital to be keeping the production base at an unsustainable level,” Tom Loughrey from shale oil data company Friezo Loughrey Oil Well Partners LLC told Bloomberg. “This is swing production — and that means you’re going to have to swing down.”

The situation is more positive for drilled but uncompleted wells, according to Rystad. The consultancy said yesterday that as much as 80 percent of DUCs in the U.S. shale patch have a breakeven price of less than $25 per barrel of WTI. Yet this is dangerously close to current prices.

If nobody blinks in this supply war, prices may have to go this low in order to properly reduce production and get supply-demand back in balance,” Rystad’s head of shale research, Artem Abramov, said in the news release.

“This could turn out to be one of the greatest shocks ever faced by the oil industry, as coronavirus containment measures will add to the headache of producers fighting for market share. And OPEC has clearly stated that it won’t be coming to the rescue in the second quarter of 2020,” he also said. 

Olduvai IV: Courage
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Olduvai II: Exodus
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