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‘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…

The LNG Market Is “Imploding”

The LNG Market Is “Imploding”

LNG tanker

While everyone is understandably watching the meltdown in the crude oil market, the global market for natural gas is also cratering.

At least 20 cargoes of U.S. liquefied natural gas (LNG) have been cancelled by buyers in Asia and Europe, according to Reuters. The global pandemic and the unfolding economic crisis have slashed demand for gas worldwide. Cheniere Energy, one of the main exporters of U.S. LNG, has seen an estimated 10 cargoes cancelled by buyers halfway around the world, Reuters said.

The price for LNG in Asia was already crashing before the pandemic, owing to a substantial increase in supply last year. Prices for LNG in Asia for June delivery have recently traded at $2/MMBtu, only slightly higher than Henry Hub prices in the U.S.

As recently as October, LNG prices in Asia traded at just under $7/MMBtu.

The problem for American gas exporters is that after factoring in the cost of liquefaction and transportation, gas breakeven prices for delivering to Asia are around $5.56/MMBtu, according to Reuters. But prices are trading at less than half of those levels.

Gas exports tend to be conducted under rigid contracts, but cargoes are now facing cancellation.

“The financial prospects for [LNG] ? once one of the globe’s hottest energy commodities – seem to be imploding before our eyes,” Clark Williams-Derry wrote in a new report for the Institute for Energy Economics and Financial Analysis (IEEFA). He noted that LNG prices in the fall of 2018 were at around $12/MMBtu.

The oil majors have made large bets on LNG in recent years. Royal Dutch Shell spent more than $50 billion to buy BG Group in 2015. The move back then was made with an eye on surging demand for natural gas. “We will now be able to shape a simpler, leaner, more competitive company, focusing on our core expertise in deep water and LNG,” Shell’s CEO Ben van Beurden said after closing on the acquisition of BG Group more than four years ago.

The deal remade Shell into one of the largest traders of LNG on the planet. Several other oil majors – Total SA, ExxonMobil and Chevron, for instance – have also made massive bets on LNG.

FIRST SHALE OIL DOMINO TO FALL: More to Follow

FIRST SHALE OIL DOMINO TO FALL: More to Follow

In a stunning news release, Continental Resources, the largest shale producer in the Bakken, is shutting in most of its production in the region.  That is one hell of a lot of output to shut-in as Continental Resources was producing over 200,000 barrels per day in the Bakken at the end of 2019.

From the data on Shaleprofile.com, Continental Resources had over 2,200 wells in the North Dakota and Montana Bakken producing oil and gas during February this year.  How many wells will Continental’s Harold Hamm shut in the Bakken??  And how many will be brought back online, at to what cost, when the market recovers??

According to Reuters, Continental Resources halts shale output, seeks to cancel sales:

April 23 (Reuters) – The largest oil producer in North Dakota has halted most of its production in the state, notifying some customers it would not supply crude at current pricing, according to people familiar with the matter.

Continental Resources Inc, the company controlled by billionaire Harold Hamm, stopped all drilling and shut in most of its wells in the state’s Bakken shale field, said three people familiar with production in the state. North Dakota is the second-largest oil-producing state in the United States after Texas.

This is terrible news for the U.S. Shale Oil Industry because $200 billion in debt is due over the next four years.  How are they going to repay this debt if shale companies stop drilling and shutting in production??

If we look at the top five shale oil producers in the Bakken, Continental Resources was clearly ahead of the pack:

This chart from Shaleprofile.com shows that Continental Resources produced more than 200,000 barrels per day in the Bakken at the end of 2019.  Hess, which is the second-ranked company, followed by a wide margin at 145,000 barrels per day.  Interestingly, the third-largest producer in the Bakken is Whiting Petroleum that just filed for Bankruptcy on April 1st.

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

World Is “Sleepwalking Into Surveillance State” As COVID-19 Crackdowns Escalate

World Is “Sleepwalking Into Surveillance State” As COVID-19 Crackdowns Escalate

All across the world, starting with China, the COVID-19 pandemic has allowed for the proliferation of the surveillance state. 

More than 100 rights groups are warning that governments and corporations are partnering as a collaborative force to employ big data and increase widespread surveillance that threatens freedoms and privacy, reported Reuters

At the moment, the surveillance tools are being used to mitigate the spread of the virus, tracing infections back to patient zero, monitoring social distancing, and enforcing lockdowns. However, the virus is likely a cover for pervasive snooping.

Human Rights Watch (HRW) and Privacy International said without appropriate safeguards, surveillance tools could remain in place even after the virus has been eradicated, which would erode people’s freedoms on a long enough timeline.

“An increase in state digital surveillance powers, such as obtaining access to mobile phone location data, threatens privacy, freedom of expression and freedom of association,” the groups said.

Edward Snowden, last week warned that the temporary mass surveillance, built to combat the virus, will not be so temporary, and the new measures are the new normal. He said the virus is the perfect cover to usher in the Orwellian mass surveillance state and will long outlast the virus.

Aaron Kesel of ActivistPost recently pointed out that the virus “is proving to be the Trojan horse that justifies increased digital surveillance via our smartphones.” 

“China isn’t the only country looking towards smartphones to monitor their citizens; Israel and Poland have also implemented their own spying to monitor those suspected or confirmed to be infected with the COVID-19 virus. Israel has gone the more extreme route, and has now given itself authority to surveil any citizen without a court warrant.

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

MSCI Warns US Stocks Could Fall Another 11% As Coronavirus Outbreak Worsens

MSCI Warns US Stocks Could Fall Another 11% As Coronavirus Outbreak Worsens

Shortly before US stocks suffered another triple-digit point drop at the open – dampening the cheers of traders and pundits who gleefully celebrated stocks going positive for the week on Wednesday – MSCI warned on Thursday that another double-digit drop could be in store for US stocksReuters reports.

Like most other analysts, Thomas Verbraken, the executive director for risk management at the research and indices giant, said his risk models suggest that a short-term drop in growth of 2 percentage points, and an attendant drop in corporate earnings, could hammer stocks even lower, erasing much (but not nearly all) of the gains since President Trump’s inauguration.

“We’ve conducted a what-if scenario analysis that assumes a short-term drop in growth of 2 percentage points and a risk-premium increase of 2 percentage points,” Thomas Verbraken, executive director at MSCI’s risk management solutions research told clients.

“Our model indicates that, in such a scenario, there’s room for further short-term losses: U.S. equities — already down 11% from Feb. 19 through March 3 – could drop a further 11%.”

Earlier this week, the OECD became the first major NGO to warn that the virus could seriously restrain global growth if the outbreak doesn’t fade with the warm spring weather, like President Trump hopes it will. The OECD said that global growth could shrink “by half” thanks to the outbreak, as the twin supply- and demand-side disruptions wreak havoc on consumption and manufacturing.

All told, two consecutive 11% drops would be equivalent to a more than 20% decline from the all-time highs, which would put the US market solidly into bear-market territory.

Most Wall Street banks have been slower to lower their equity year-end forecasts, but suffice it to say, a 20% drop would leave stocks well below where most of the big banks expect they will be at year’s end.

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

Chinese Firms Ask For Billions In Loans Amid Virus Outbreak

Chinese Firms Ask For Billions In Loans Amid Virus Outbreak 

In response to the economic paralysis brought about by the coronavirus, Chinese banks are offering billions of dollars in loans to Chinese companies, according to two banking sources via Reuters.

About 300 Chinese firms, including top food delivery company Meituan Dianping and smartphone maker Xiaomi, have requested upwards 57.2 billion yuan ($8.2 billion) in loans to prevent a hard landing as China’s economy grinds to a halt.

The sources said the firms seeking loans are either the hardest hit or have an active role in the control of the virus outbreak. 

Evercore ISI Chairman Ed Hyman warned last week that China’s GDP growth could post “zero for the first quarter … China is really slowing and that’s worrying people for sure.”

“We are so solid,” Hyman said. “It’s not the virus, it’s the trade that matters. People are not going out. They are not shopping, and that’s what’s hurting particularly China.”

The scale of disruption in China is already staggering and is already spreading worldwide… and fast, China is effectively shut down and goods are now stranded in floating quarantines.

As Goldman noted here, the overall impact on global growth is about a 2% cut in Q1…

Extended factory closings and supply chain disruptions have forced many companies to request loans for “fast-track approvals and preferential rates,” the sources said. 

The sources reviewed several lists of companies that Chinese banks will be distributing loans to. They said no official data is showing total loans requested. 

The list includes pharmaceutical firms and restaurants, who’ve requested help from banking authorities. 

“Banks will have the final say on lending decisions,” one of the sources said. “The interest rates are likely to be on par with those offered to banks’ top clients.”

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

IEA: The Oil Glut Is Going Nowhere

IEA: The Oil Glut Is Going Nowhere

Barrels

Global oil markets will remain well supplied this year, with a possible overhang of some 1 million bpd, the head of the International Energy Agency, Fatih Bitol, told Reuters.close [x]ReplayUnmuteLoaded: 0%Progress: 0%Remaining Time -0:00CaptionsFullscreen

“Non-OPEC production is very strong. We still expect production coming from, not just United States, but also Norway, Canada, Guyana, among other countries,” Birol said, adding “Therefore, I can tell you that the markets are, in my view, very well supplied with oil, and as a result of that, we see prices remain at $65 a barrel.”

Norway is about to experience a sharp jump in oil production in the next four years, a new forecast from its Petroleum Directorate has shown. After a steady decline over several years, production is set for a 43-percent increase between 2019 and 2024, the NPD said, reaching 2.02 million bpd in 2024. This will be thanks to the start of production at the Johan Sverdrup offshore field along with several smaller fields.

In Guyana, Exxon has just begun production from the Liza-1 well. Daily output from the deepwater field should reach 120,000 bpd before the end of 2020. Exxon is also building a second production vessel that should raise the total to 220,000 bpd.

In Canada, meanwhile, oil production is also set to grow despite a government-imposed curtailment aimed at supporting prices. The curtailment was relaxed twice in 2019 and it only concerns large producers, allowing smaller ones to pump as much as they can sell. Based on this, the Canadian Conference Board recently forecast oil production in the country will be growing at 4.2 percent annually between this year and 2024.

Demand growth, however, will be slow, according to Birol.

“We are expecting a demand growth of slightly higher than 1 million barrels per day,” the top IEA man told Reuters.

This means that except sudden spikes in prices due to geopolitical factors or possible production outages in a major producer, oil prices this year will remain largely range-bound.

By Irina Slav for Oilprice.com

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