Dubbed the central bank to the world’s central banks, the BIS raised the concerns in its latest quarterly report, in which it also said this year’s market upheaval had, by and large, been navigated without many major issues.
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Hyperinflationary Hell: Lebanese Central Bank Devalues ‘Lira’ By 90%
Hyperinflationary Hell: Lebanese Central Bank Devalues ‘Lira’ By 90%
Cash is now king in Lebanon, where a three-year economic meltdown has led the country’s once-lauded financial sector to atrophy and turned the country into a Venezuelan-esque hyperinflationary hell. The country has been hit hard by events over the past few years, starting with COVID.
In August 2020, the city of Beiruit was practically destroyed by a massive blast which killed at least 200 people and triggered as much as $15 billion in damage…
In March 2021, violent protests erupted across Lebanon as the currency collapse accelerated and with it the economy and people’s living standards.
And most recently, In December 2022, the Lebanese parliament failed for the eighth consecutive time to elect a new president, as a majority of lawmakers opposed the options laid on the table.
The prolonged power vacuum only exacerbates the situation, as Beirut is currently unable to enact sweeping reforms demanded by international lenders as a condition for releasing billions of dollars in loans.
All of which has sent the ‘parallel’ FX rate to a stunning 60,000/USD (compared to the official Pound – often nicknamed ‘Lira’ – rate of 1500/USD)…
As Reuters reports, Zombie banks have frozen depositors out of tens of billions of dollars in their accounts, halting basic services and even prompting some customers to hold up tellers at gunpoint to access their money.
Not a week goes by without Lebanese depositors storming their own banks in a desperate attempt to access savings frozen after the country’s economy collapsed.
Banks began imposing draconian limits on withdrawals and transfers in 2019, leaving depositors able to access only a fraction of their savings in dollars and Lebanese pounds.
and heists…
The National has recorded 27 depositor bank “heists” since the start of the year, including armed and unarmed hold-ups and sit-ins.
…click on the above link to read the rest…
BIS warns of $80 trillion of hidden FX swap debt
FX swap markets, where for example a Dutch pension fund or Japanese insurer borrows dollars and lends euro or yen in the “spot leg” before later repaying them, have a history of problems.
They saw funding squeezes during both the global financial crisis and again in March 2020 when the COVID-19 pandemic wrought havoc that required top central banks like the U.S. Federal Reserve to intervene with dollar swap lines.
The $80 trillion-plus “hidden” debt estimate exceeds the stocks of dollar Treasury bills, repo and commercial paper combined, the BIS said, while the churn of deals was almost $5 trillion per day in April, two thirds of daily global FX turnover.
“The missing dollar debt from FX swaps/forwards and currency swaps is huge,” the Switzerland-based institution said, describing the lack of direct information about the scale and location of the problems as the key issue.
Crude Prices Jump After Israeli Tanker Hit By Iranian Drone Off Oman Coast
Crude Prices Jump After Israeli Tanker Hit By Iranian Drone Off Oman Coast
Crude prices are higher Wednesday morning after a bomb-carrying drone on Tuesday evening struck an oil tanker owned by an Israeli billionaire, The Associated Press reported.
The Liberian-flagged oil tanker Pacific Zircon was approximately 150 miles off the Omani coast at 730 pm local time when a “projectile” hit the vessel, a Mideast-based defense official told AP. AP said the United Kingdom Maritime Trade Operations was notified about the attack and is monitoring shipping lanes in the region.
“We are aware of an incident and it’s being investigated at this time,” UKMTO said.
Also, the commander of the US Navy’s Fifth Fleet, Timothy Hawkins, was briefed on the incident, according to Reuters.
Brent crude prices, which were down before the news, jumped and traded above $94 a barrel.
In a statement, Pacific Zircon’s owner Eastern Pacific Shipping, which Israeli billionaire Idan Ofer owns, said the vessel was hauling diesel when it was “hit by a projectile … there were no reports of injuries or pollution.”
“All crew are safe and accounted for. There is some minor damage to the vessel’s hull but no spillage of cargo or water ingress,” the Singapore- based Eastern Pacific said.
Bloomberg cited a report via the Israeli Public Broadcasting Company (KAN) that said unidentified Israeli officials pointed the finger at Iran for the drone attack. Tracking data shows the vessel is off the Omani coast.
“While no one immediately claimed responsibility for the attack, suspicion immediately fell on Iran. Tehran and Israel have been engaged in a yearslong shadow war in the wider Middle East, with some drone attacks targeting Israeli-associated vessels traveling around the region,” AP noted.
…click on the above link to read the rest…
Germany To Nationalize Struggling Uniper In Deepening Energy Crisis
Germany To Nationalize Struggling Uniper In Deepening Energy Crisis
Germany on Wednesday announced a move to nationalize struggling natural gas supplier Uniper SE as it strives to keep the industry functioning in the wake of a global energy crisis, according to Reuters.
Uniper is Germany’s largest importer of Russian NatGas and has suffered tremendous losses after Russian energy giant Gazprom slashed Nord Stream 1’s pipeline capacity to zero, forcing the utility to purchase natgas outside contracts on the open market at record high prices.
Berlin agreed to purchase the remaining stake owned by Uniper’s parent company, Finnish utility Fortum Oyj for $1.69 (1.70 euro) per share. Buying Fortum’s stake means Germany will own 99% of Uniper. The cost of nationalization comes as Berlin is set to inject 8 billion euros, equivalent to around $8 billion, into the utility.
The move is to keep the lights on across German homes and businesses as the risk of power rationings increases.
“This step has become necessary because the situation has worsened significantly.
“The state will do everything necessary to keep systemically important companies in Germany stable at all times,” Robert Habeck, Germany’s economy minister, said Wednesday.
Uniper shares crashed by as much as 39% to 2.55 euros. Shares are down 93% on the year…
In July, Berlin injected a whooping 15 billion euros ($14.95 billion) to save the utility though the move to nationalize ahead of winter shows further deterioration in energy security for Europe’s largest economy.
Here’s what Markus Rauramo, CEO and President of Fortum, said about the deal:
“Under the current circumstances in the European energy markets and recognising the severity of Uniper’s situation, the divestment of Uniper is the right step to take, not only for Uniper but also for Fortum.
…click on the above link to read the rest of the article…
Angry Customers Demand Explanation As German Energy Bills Soar
Angry Customers Demand Explanation As German Energy Bills Soar
Utilities in Germany have had to handle a surge in customer service calls in recent weeks from clients angry or desperate about their sky-rocketing energy bills, Reuters reports.
The biggest utility, E.ON, has ramped up its capacity to handle calls from consumers who are shocked to find just how much their energy bills have surged in recent months.
Gas prices in Europe are very high and power prices in many countries, including Germany, have hit record levels this summer after Russia choked pipeline gas supply to Europe and shut down indefinitely the key gas export pipeline to Germany, Nord Stream, at the beginning of this month.
“Some become aggressive out of frustration, others are in tears and need psychological support,” Ingbert Liebing, head of local utilities organization VKU, told Reuters, commenting on the spike in customer calls to utilities’ service centers.
Apart from already high energy bills, German customers will have a surcharge as of October, as part of a government plan to implement a so-called gas levy on consumers in order to help struggling energy firms.
Germany has recently announced it would impose a gas levy on consumers from October 1 through March 2024 as it aims to help energy providers and importers of natural gas, which are struggling with low Russian gas supply and very expensive alternatives to Russian gas. The new natural gas tax is set to cost German families, who will have to foot the bill for the tax, an extra $500 a year.
Meanwhile, the German government is in talks with the biggest German importer of natural gas, Uniper, to potentially lift its 30% stake in the company to majority participation or to nationalize the firm…
…click on the above link to read the rest of the article…
Exclusive: Saudi Arabia doubles second-quarter Russian fuel oil imports for power generation
People walk near power plant number 10 at Saudi Electricity Company’s Central Operation Area, south of Riyadh, April 27, 2012./File Photo
MOSCOW/LONDON/DUBAI, July 15 (Reuters) – Saudi Arabia, the world’s largest oil exporter, more than doubled the amount of Russian fuel oil it imported in the second quarter to feed power stations to meet summer cooling demand and free up the kingdom’s own crude for export, data showed and traders said.
Russia has been selling fuel at discounted prices after international sanctions over its invasion of Ukraine left it with fewer buyers. Moscow calls the war in Ukraine a “special military operation”.
The increased sales of fuel oil, used in power generation, to Saudi Arabia show the challenge that U.S. President Joe Biden faces as his administration seeks to isolate Russia and cut its energy export revenues.
While many countries have banned or discouraged purchases from Russia, China, India and several African and Middle Eastern nations have increased imports.
Biden was on Friday visiting Saudi Arabia and was expected to seek an increase in oil supply to global markets from the kingdom to help to lower oil prices that have aggravated inflation worldwide. read more
There is little spare capacity for Saudi and others to increase production in the short term. Saudi Arabia has also maintained its cooperation with Russia in the alliance of global producers known as OPEC+. The two are the de facto leaders of respectively OPEC and non-OPEC producers in that group.
…click on the above link to read the rest of the article…
Gazprom Reportedly Declares Force Majeure, Will Halt Gas Flows To Germany Indefinitely
Gazprom Reportedly Declares Force Majeure, Will Halt Gas Flows To Germany Indefinitely
Already days before the July 22 European “Doomsday” when the scheduled Russian 10-day maintenance of the crucial Nord Stream pipeline to Germany is slated to end – but which was thrown into deep doubt given Gazprom recently said it can no longer guarantee its “good functioning” due to crucial turbines being previously held up in Canada related to sanctions – the Russian energy giant has declared Force Majeure to one major European customer.
Simply put, Gazprom declared extraordinary and extreme circumstances to void itself from all contractual obligations to this customer, thus the gas will stop flowing indefinitely, as Reuters reports in a breaking development Monday, “Russian gas export monopoly Gazprom has declared force majeure on gas supplies to Europe to at least one major customer starting June 14, according to the letter seen by Reuters.”
The letter invoked “extraordinary” circumstances outside the company’s control, Reuters continues, citing a source saying the customer in question is Germany via the Nord Stream 1 pipeline.
As we’ve been detailing, German authorities have of late taken unprecedented steps in anticipation of an enduring Russian gas halt, essentially dimming the lights across the country – which has included everything from limiting hot water, to shutting down swimming pools, to quite literally dimming city street lights as it entered “alarm” stage over dwindling supply.
It seems this letter declaring its legal release from supply obligations going back to June 14 is in preparation for definitive action on July 22, namely that the pipeline’s operations are likely to remain suspended.
…click on the above link to read the rest of the article…
Starving Sri Lanka Shortens Work Week to Give People Time to Grow Food
Starving Sri Lanka Shortens Work Week to Give People Time to Grow Food
Sri Lanka’s federal government on Monday approved a proposal that would shorten the work week of most public sector staff to four days so that workers will have time to farm their own crops, Reuters reported Tuesday, noting the measure aims to combat Sri Lanka’s worsening food shortages caused by a recent economic crisis.
“Sri Lanka’s Cabinet late on Monday approved a proposal for public sector workers to be given leave every Friday for the next three months, partly because the fuel shortage made commuting difficult and also to encourage them to farm,” Reuters reported on June 14.
“It seems appropriate to grant government officials leave of one working day … to engage in agricultural activities in their backyards or elsewhere as a solution to the food shortage that is expected,” the Sri Lankan government information office said in a statement.
The shortened work week will not apply to public sector employees in “essential” fields, such as health or education, Sri Lanka Cabinet Minister Dinesh Gunawardana said on June 13.
In addition to the four-day work week, Sri Lanka’s federal government approved a program on Monday in which “public servants can apply for five year no pay leave to go abroad for employment opportunities [sic],” Sri Lanka’s Daily Mirror reported on June 14.
“It will not affect their promotions or retirement upon return,” the newspaper said of the work-abroad initiative.
Sri Lanka’s public sector employs roughly one million people, according to Reuters.
The Sri Lankan federal government was forced to give most public sector staff an unplanned day off on June 13 after realizing that worsening power outages and fuel shortages nationwide would make it nearly impossible for the employees to travel to work or conduct business as usual.
…click on the above link to read the rest of the article…
U.S. Midwest may have summer power shortages for years
U.S. Midwest may have summer power shortages for years
June 10 (Reuters) – The power grid operator in the Central United States warned on Friday that problems it may experience keeping the lights on this summer could also occur during the summers of 2023, 2024 and beyond.
The region’s grid operator, Midcontinent Independent System Operator (MISO), has already warned of potential capacity shortfalls and other reliability concerns in parts of its territory this summer.
The northern and central regions are at “increased risk of temporary, controlled outages to preserve the integrity of the bulk electric system,” MISO has said.
MISO operates the grid for some 42 million people in 15 U.S. central states from Minnesota to Louisiana and the Canadian province of Manitoba.
On Friday, MISO released a survey showing it could have a potential capacity deficit of 2.6 gigawatts (GW) during the summer of 2023 depending on market responses over the next year.
One gigawatt can power about a million U.S. homes on average, but as little as 200,000 on a hot summer day.
MISO’s biggest problem is that demand was rising at the same time generation resources have declined due mostly to the retirement of coal and nuclear plants for economic or environmental reasons.
MISO said it may only have 119 GW of power resources available this summer to meet a projected peak demand of 124 GW.
For 2024 and beyond, MISO said “the capacity deficits are projected to widen … due to declining committed capacity and modestly growing demand.”
MISO officials were not immediately available to say what the grid would do to fix this problem.
Sarah Freeman, president of the Organization of MISO States and commissioner with the Indiana Utility Regulatory Commission, said in a statement: “States stand ready to work with MISO … to maintain reliability and resilience throughout this significant resource transformation.”
China, U.S. lead rise in global debt to record high $305 trillion – IIF
A view of the city skyline in Shanghai, China February 24, 2022. Picture taken February 24, 2022. REUTERS/Aly Song
NEW YORK, May 18 (Reuters) – The world’s two largest economies borrowed the most in the first quarter as global debt rose to a record above $305 trillion, while the overall debt-to-output ratio declined, data from the Institute of International Finance showed on Wednesday.
China’s debt increased by $2.5 trillion over the first quarter and the United States added $1.5 trillion, the data showed, while total debt in the euro zone declined for a third consecutive quarter.
The analysis showed many countries, both emerging and developed, are entering a monetary tightening cycle -led by the U.S. Federal Reserve- with high levels of dollar denominated debt.
“As central banks move ahead with policy tightening to curb inflationary pressures, higher borrowing costs will exacerbate debt vulnerabilities,” the IIF report said.
“The impact could be more severe for those emerging market borrowers that have a less diversified investor base.”
The yield on the benchmark 10-year Treasury note has risen some 150 basis points so far this year and earlier this month hit its highest since 2018.
SOVEREIGNS BEWARE
Corporate debt outside banks and government borrowing were the largest sources of the increase in borrowing, with debt outside the financial sector rising above $236 trillion, some $40 trillion higher than two years ago when the COVID-19 pandemic hit.
Government debt has risen more slowly in the same period, but as borrowing costs rise sovereign balance sheets remain under pressure.
“With government financing needs still running well above the pre-pandemic levels, higher and more volatile commodity prices could force some countries to increase public spending even further to ward off social unrest,” said the IIF.
…click on the above link to read the rest of the article…
US Gas Prices Soar As Europe And Asia Scramble For LNG
US Gas Prices Soar As Europe And Asia Scramble For LNG
U.S. gas prices have surged to the highest level in real terms since the financial crisis in 2008 as strong demand for LNG from buyers in Europe and Asia puts pressure on inventories. Front-month futures for gas delivered to Henry Hub in Louisiana are trading at almost $9 per million British thermal units, up from just over $3 at the same point last year and less than $3 in 2019.
Front-month futures have surged into a record backwardation of almost $4 above futures for delivery one-year from now, as traders anticipate inventories will remain under pressure through the rest of the year.
Working gas stocks in underground storage are 335 billion cubic feet or 18% below the pre-pandemic five-year seasonal average for 2015-2019.
Inventories have remained low despite a fairly mild winter, with population-weighted heating demand this winter in the Lower 48 states around 7% below the average.
Domestic gas production has recovered to its pre-pandemic peak, according to data from the U.S. Energy Information Administration. But exports especially in the form of LNG have risen sharply, which is keeping inventories low and putting upward pressure on prices.
In recent months, LNG exports have been equivalent to 10-12% of domestic dry gas production, up from around 4% in early 2019. Exports have become a big enough share of the market they have started to enforce a partial convergence with prices in Europe and Asia.
U.S. gas supplies have tightened as Europe and Asia scramble to buy LNG to refill their own depleted storage after last winter and amid fears about a disruption of gas supplies from Russia.
The rise in prices will enforce maximum fuel-switching among power generators from gas to coal to conserve fuel stocks this summer, with spot gas now uncompetitive against coal except for peak generation.
…click on the above link to read the rest of the article…
Ukraine Grain Strain: Almost 25 Million Tonnes Blocked From Export
Ukraine Grain Strain: Almost 25 Million Tonnes Blocked From Export
A massive backlog of grain shipments is piling up in Ukraine to the tune of nearly 25 million tonnes due to ‘infrastructure challenges’ and blocked ports in the Black Sea, including Mariupol, Reuters reports, citing a UN food agency official.’
Ukraine was the fourth-largest exporter of maize (corn) in the 2020/21 season, and the sixth-largest wheat exporter in the world, according to the International Grains Council.
It’s an almost grotesque situation we see at the moment in Ukraine with nearly 25 mln tonnes of grain that could be exported but that cannot leave the country simply because of lack of infrastructure, the blockade of the ports,” said FAO Deputy Director Josef Schmidhuber during a Geneva press briefing via Zoom.
According to Schmidhuber, the full silos could result in storage shortages for this year’s July and August harvests.
“Despite the war the harvest conditions don’t look that dire. That could really mean there’s not enough storage capacity in Ukraine, particularly if there’s no wheat corridor opening up for export from Ukraine.”
He alluded to destroyed grain storage as a result of the Russian invasion, without elaborating.
CNN, however, reports from ‘multiple sources’ that Russian forces have allegedly plundered farm equipment and hundreds of thousands of tonnes of grains from Ukraine, with the Ministry of Defense estimating on Thursday that 400,000 tonnes of grain had been stolen to date.
[And given the source(s), the usual ‘grain of salt’ disclaimer applies as to the extent and accuracy of claims.]
Oleg Nivievskyi at the Kyiv School of Economics told CNN the thefts of farm equipment, such as tractors and harvesters, by Russian forces have been absolutely devastating for Ukrainian farmers.
…click on the above link to read the rest of the article…
India Facing Widespread Blackouts This Summer
India Facing Widespread Blackouts This Summer
India faces a persistent shortage of electricity over the next four months as rapid demand growth from air conditioners overwhelms the available generation on the network.
India’s grid reported a record load of 200,570 megawatts on July 7, 2021, at the height of last summer, according to the National Load Despatch Centre of the Power System Operation Corporation (POSOCO).
But since the middle of March, the grid has routinely reported maximum loads above 195,000 MW, including a peak of 199,584 MW on April 8 – less than 0.5% below the record.
In the evening, when there is no solar generation available and supplies are even more stretched, peak loads have hit a new record in recent days.
Exceptionally high loads have arrived far earlier this year, well before the most intense period of summer heat, implying the grid is in trouble.
In a symptom of the struggle to meet demand, the grid’s frequency has faltered since mid-March, dropping persistently below target, with longer and more severe excursions below the safe operating range.
Chronic under-frequency is a sign the grid cannot meet the full demand from customers and makes planned load-shedding or unplanned blackouts much more likely.
India has a frequency target of 50.00 cycles per second (Hertz), with grid controllers tasked with keeping it steady between 49.90 Hz and 50.05 Hz to maintain the network in a safe and reliable condition. Since the middle of March, frequency has averaged just 49.95 Hz and has been below the lower operating threshold more than 23% of the time.
On April 7, the average frequency fell as low as 49.84 Hz and frequency was below the lower threshold for 63% of the day, according to POSOCO data.
Frequency has been below target so often for so long in recent weeks it has sometimes appeared the system is operating according to a much lower informal target.
…click on the above link to read the rest of the article…
Food Crisis About To Get Worse After China Says Winter Wheat Condition Could Be Worst In History
Food Crisis About To Get Worse After China Says Winter Wheat Condition Could Be Worst In History
The condition of China’s winter wheat crop could be the “worst in history,” the agriculture minister said on Saturday according to Reuters, raising concerns about grain supplies in the world’s biggest wheat consumer. Speaking to reporters on the sidelines of the Chinese regime’s annual political meetings, Minister of Agriculture and Rural Affairs Tang Renjian said that heavy rainfall last year delayed the planting of about one-third of the normal wheat acreage.
A survey of the winter wheat crop taken before the start of winter found that the amount of first- and second-grade crop was down by more than 20 percentage points, Tang said.
“Not long ago we went to the grassroots to do a survey and many farming experts and technicians told us that crop conditions this year could be the worst in history,” he said. “This year’s grain production indeed faces huge difficulties.”
As the Epoch Times notes, the minister’s comments underscore concerns about China’s grain supply at the same time as the war between Russia and Ukraine, which together account for about 29% of global wheat exports, has disrupted supplies causing wheat prices to surge to 14-year highs.
However, Tang is confident China can ensure a bumper harvest of summer grain thanks to strong policy and technical support and the improving crop condition for the grain.
Fuelled by the Ukraine crisis, wheat prices in China soared to a record this week on existing domestic supply worries.
Tang’s comments also come as Beijing has refocused on food security, a long-standing priority for the central leadership that has become increasingly prominent in policy since the COVID-19 pandemic began in early 2020.
…click on the above link to read the rest of the article…
Global Oil Inventories Are Exceptionally Tight: Kemp
Global Oil Inventories Are Exceptionally Tight: Kemp
Global petroleum inventories are the tightest for years in a sign the market is overheating, as the global economy recovers rapidly from the coronavirus pandemic and major oil producers refuse to increase output faster.
Commercial inventories held in the countries of the Organisation for Economic Co-operation and Development (OECD) totalled 2.68 billion barrels at the end of December 2021, down from 3.21 billion in July 2020.
Since peaking after the first wave of coronavirus infections in 2020, inventories have fallen at the fastest rate for decades, and ended last year at the lowest seasonal level since 2013.
OECD commercial inventories ended December roughly 8% below the previous five-year seasonal average, with or without the pandemic year, based on data from the U.S. Energy Information Administration (EIA). There is no precedent for such rapid depletion of stocks in recent decades and the EIA estimates stocks have fallen further in January and February (“Short-term energy outlook”, EIA, Feb. 8).
The result has been a surge in both nearby oil futures prices and calendar spreads, reflecting concerns about the availability of sufficient oil. Front-month Brent futures prices have climbed roughly 25% in the last two months, as the latest wave of coronavirus infections has ebbed and had limited impact on global economic growth or oil consumption.
Brent’s six-month calendar spread, which is closely correlated with stock levels, has surged into a backwardation of more than $8 per barrel this week, within the 99th percentile for all trading days since 1990.
The current combination of rapidly escalating front-month futures prices and backwardation is the most bullish since at least 1993.
Overheating
Low and falling inventories are a sign of excess demand and inadequate supply, putting continuous upward pressure on prices.
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