Showing posts with label Commodities. Show all posts
Showing posts with label Commodities. Show all posts

Sunday, August 25, 2019

Trump administration considers boost to biofuel mandates to ease farmer anger: sources

By Stephanie Kelly, Humeyra Pamuk and Jarrett Renshaw

NEW YORK/WASHINGTON (Reuters) - The Trump administration is considering ramping up biofuel blending quotas in the coming years to assuage anger in the Farm Belt over its recent broad use of waivers for small refineries, but is not planning to rescind any of the exemptions it has granted so far, four sources familiar with the matter said.

The approach would mark a mixed result for the agriculture industry and its backers who had been pushing the administration to revoke some of the exemptions, which they argue hurt demand for corn-based ethanol by freeing refiners from their obligation to blend biofuels into their products.

The proposals emerged a day after U.S. President Donald Trump on Thursday summoned his Agriculture Secretary Sonny Perdue and Environmental Protection Agency Administrator Andrew Wheeler to the White House to discuss ways to boost biofuel demand.

The meeting was set after Trump's decision this month to allow the EPA to grant 31 biofuel waivers to oil refiners caused an uproar in farm states key to the Republican president's re-election bid in 2020.

In the meeting, Trump rejected a proposal from the Department of Agriculture to rescind some of the recently approved waivers, according to the sources and a list of items that were largely agreed upon at the meeting’s conclusion.

Instead, the administration is considering lifting its proposed 2020 annual corn-based ethanol mandate by 500 million gallons and 2021 biodiesel mandate by 250 million gallons. It is also looking to reallocate volumes expected to be waived going forward.

The sources said work was still needed to hammer out a plan before end-November, when the mandate is due to be finalized.

"Most of the issues outlined are going to be finalized as we move toward November 30," one industry source with knowledge of the discussions said. "Apart from the rescinding of waivers, conversation on the other items will continue," he said.

The EPA in July had proposed setting the volume of biofuels refiners must blend into their fuel at 20.04 billion gallons in 2020, up from 19.92 billion gallons in 2019. That included 15 billion gallons of conventional biofuels like ethanol, unchanged from 2019. The EPA also proposed setting the 2021 biodiesel volume at 2.43 billion gallons, unchanged from 2020.

Any redistribution of waived volumes or lifting of the annual biofuel mandates will upset the oil industry, another key constituency for Trump, illustrating his difficult balancing act in accommodating the rivaling corn and oil industries.

U.S. regulations require refiners to blend biofuels into their gasoline or buy credits from those that do.

Small refiners can seek exemptions if they can prove economic hardship, but Trump's EPA has granted waivers to refineries owned by the likes of Exxon Mobil Corp (N:XOM), Chevron Corp (N:CVX) and billionaire Carl Icahn.


U.S. farmers have already been suffering due to a slump in crop prices and exports shrinking following Trump's trade war with China. But Trump's latest decision to exempt 31 oil refineries from biofuel laws infuriated American farmers, triggering a mobilization of trade and farm groups piling up pressure on the White House earlier this week.

Refiners and some academics dismiss the argument that waivers undercut demand and say the financial burden of compliance puts thousands of refining jobs at risk. They have fought hard to keep the waiver program unscathed.

On Friday, the American Petroleum Institute (API) said it hoped the administration would not go ahead with the proposal to boost blending quotas. "This rushed policy is arbitrary, cuts against precedent and further pushes us toward E15, a fuel that nearly 70 percent of vehicles on the road today were not to designed to run on," Frank J. Macchiarola of API said.

E15 is a gasoline containing 15% ethanol, a product that would become more common if blending volumes mandates rose much higher.

Throughout the 2016 campaign that brought him to power, Trump championed ethanol but also courted the oil industry.

The backlash from agricultural and biofuel trade groups has been particularly strong in Iowa, the largest producer of corn and ethanol, and a swing state won twice by former Democrat President Barack Obama but which voted for Trump in 2016.

Democratic presidential hopefuls have spent a lot of time in Iowa because it holds an early nominating contest, and they have used the refinery issue as a cudgel.

Renewable fuel credits for 2019 fell during Friday's session, trading at 15.5 cents each, down from 16.5 cents apiece on Thursday, traders said.

Original Article

California rare earths miner races to refine amid U.S.-China trade row

© Reuters.  California rare earths miner races to refine amid U.S.-China trade row© Reuters. California rare earths miner races to refine amid U.S.-China trade row

By Ernest Scheyder

(Reuters) - The owner of the only U.S. rare earths mine is going on a hiring spree as it looks to significantly boost production, part of a strategy to build out American refining capability after China raised tariffs on the minerals amid an escalating trade war.

By next year, MP Materials aims to be the first U.S. company to refine rare earths since 2015 when Molycorp Inc, the former owner of California's Mountain Pass mine, went bankrupt, executives said.

The mine has relied on China for rare earth processing, fueling national security concerns. China is the world's largest processor and producer of the 17 specialized minerals used to build weapons, consumer electronics and a range of other goods. There are no known substitutes.

GRAPHIC: Rare Earth Production -

In June, China more than doubled tariffs on U.S. rare earths imports for refining to 25 percent. On Friday, Beijing said it would add an additional 10 percent on top of that tariff rate starting next month, the latest tit-for-tat exchange in a protracted dispute between the world's top two economies.

The Trump administration has labeled rare earths critical for national defense and ordered the Pentagon to support domestic production.

"What China has recognized is that this is a strategic industry," said James Litinsky, co-chairman of MP Materials.

The company plans to boost its headcount by next year to about 400, up from about 200, and is already producing 68 percent more rare earth concentrate than under Molycorp.

But that concentrate - more than 50,000 tonnes per year - is today shipped to China for processing.

To resume refining in California, privately-held MP Materials is spending $200 million to restart mothballed equipment at the mine and build a large roasting oven.

"The tariffs are very painful, but we remain profitable," Litinsky said.

After processing, rare earths need to be turned into rare earth magnets, found in precision-guided missiles, smart bombs and military jets. But China controls the rare earths magnet industry, too.

Litinsky and peers are betting that by bringing rare earths refining back to the United States, it will encourage other investors to build magnets and other related parts in the country as well.

The mine originally opened in 1948 and has gone through a series of owners, including Chevron Corp (N:CVX), before Molycorp went bankrupt.

MP Materials also plans to re-open the Mountain Pass chlor-alkali facility, which was built by Molycorp, Litinsky said.

The facility will recycle wastewater and produce hydrochloric acid and caustic soda to use in the rare earths separation process, saving the facility the added cost of buying the chemicals on the open market.

The company's new roaster will bake rare earth ore at high temperatures to effectively leach out the high-value minerals.


It's not clear if the group will be able to re-start the processing equipment by next year or instead will face delays common in construction projects.

"Call me cynical, but history just shows if you look back on metals projects, most don't start when they were slated to come online," said Mark Seddon, an Argus metals analyst.

Once the refining equipment does switch online, the goal is to use that material on site to make more than 5,000 tonnes per year of neodymium and praseodymium (NdPr), two of the 17 types of rare earths that are used to make magnets.

Friday's tariff news means that MP Materials will need to find more customers outside of China once it restarts its California processor, pitting it against Australia's Lynas Corp (AX:LYC), the largest rare earths miner and processor outside of China.

Lynas CEO Amanda Lacaze has vowed not to cede her company's market share outside of China.

"This will put MP Materials in direct competition with Lynas. Smart play, China," said Ryan Castilloux, managing director with Adamas Intelligence.

MP Materials is majority controlled by Chicago hedge fund JHL Capital Group and New York's QVT Financial LP, with China's Shenghe Resources Holding Co (SS:600392) holding a 9.9 percent stake.

The group bought the mine out of bankruptcy in 2017 for $20.5 million, a far cry from billions that Molycorp had invested in the facility over the years.

Litinsky says that despite the Shenghe stake, China has no control over Mountain Pass or where its products will go.

"If the (U.S.) Department of Defense came to us and said, 'We need product,' we'll sell there first," he said. "We'll sell wherever we want to sell."

Original Article

Saturday, August 24, 2019

Iranian tanker switches destination, heads to Turkey: ship-tracking data

ATHENS (Reuters) - An Iranian tanker at the center of a confrontation between Washington and Tehran has switched destination and is now heading to Turkey instead of southern Greece, data from real-time ship tracking website MarineTraffic showed on Saturday.

The Adrian Darya, formerly called Grace 1, was released from detention off Gibraltar after a five-week standoff over whether it was carrying Iranian oil to Syria in violation of European Union sanctions in mid-August.

The United States, which says the tanker is controlled by the Iranian Revolutionary Guards, deemed a terrorist group by Washington, has told countries in the region not to assist it.

Previous data had shown that the vessel, which is fully laden with oil, was heading to the port of Kalamata in Southern (NYSE:SO) Greece. But new data from MarineTraffic on Saturday showed the vessel will now sail past Greece through the Mediterranean and dock at the southern Turkish port of Mersin on Aug. 31.

Greece had said it would not offer any facilities to the tanker.

Original Article

Oil spills into U.S.-China trade war, prices slump

By Devika Krishna Kumar

NEW YORK (Reuters) - China said on Friday it would impose tariffs on U.S. crude oil imports for the first time, sending prices down nearly 4% to two-week lows as the escalating bilateral trade war fed worries over a slowdown in global oil demand.

Beijing said crude would be among the U.S. products hit by tariffs of 5% as of Sept. 1. U.S. President Donald Trump responded later in the day saying starting on Oct. 1, the 25-percent tariffs on $250 billion worth of Chinese goods will rise to 30%. Tariffs on remaining $300 billion due to begin on Sept. 1 will now be set at 15%, versus 10%.

The trade war between the world's two largest economies has dragged on for more than a year and roiled financial markets. Though Chinese and U.S. trade negotiators held discussions as recently as this week, neither side appears ready to make a significant compromise and there have been no signs of a truce in the near term.

China, one of the world's biggest crude importers, has sharply lowered U.S. shipments from a record high hit last year. With the latest tariffs, purchases are likely to grind to a halt, traders and analysts said.

A shale boom has helped the United States become the world's largest oil producer, ahead of Saudi Arabia and Russia, and exports have surged to a record above 3 million barrels per day (bpd) after a ban was lifted in late 2015.

"The tit-for-tat trade war now has the oil market officially caught in the crossfire, this time with China striking the heart of Trump's traditional base of support of U.S. oil producers," said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

"With China being the world's foremost crude import growth region, U.S. producers need China, not the other way around," he said. "The U.S. will have to find alternative buyers for their crude, which will be a challenge given the weakening global demand backdrop."

U.S. shipments to China have made up about 6% of total U.S. crude exports on average so far this year, according to data from the Department of Energy and the Census Bureau.

"This escalation of the U.S.-China trade war is another step in the wrong direction, the consequences of which will be felt by American businesses and families," Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute (API), the top lobbying group for U.S. oil and gas drilling, said in a statement.

"We urge the Administration to quickly come to a trade agreement with China that would lift all tariffs under Section 301, including the damaging retaliatory tariffs on American energy exports."

U.S. West Texas Intermediate (WTI) crude futures (CLc1) slumped as much as 3.8% to $53.24 a barrel on Friday, the lowest since Aug. 9, before ending the session at $54.17. The rising trade war is likely to weigh on U.S. crude more than international benchmark Brent (LCOc1), market sources said.

"Chinese buyers will (now) be looking to purchase Brent and Dubai-based crude oil and I would expect that to result in a widening of the Brent-to-WTI spread," said Andy Lipow, president of Lipow Oil Associates in Houston.

"In essence what you've done is created new demand for Brent-based crude oil at the expense of U.S.-origin crude."

U.S. crude exports to Asia so far in August indicate weaker flows around 892,000 bpd, down by 360,000 bpd from last month, according to market intelligence firm Kpler.

The drop was driven by a decrease in shipments to South Korea and China, down by 114,000 bpd and 52,000 bpd respectively month-over-month in August, the firm's vessel-tracking data showed.

"In a world where margins are thin, a 5% tax is significant," said Jim Burkhard, head of oil market analysis at IHS Markit in Washington.

Original Article

Explainer: What tools could Trump use to get U.S. firms to quit China?

WASHINGTON (Reuters) - Hours after China announced retaliatory tariffs on U.S. goods on Friday, President Donald Trump ordered U.S. companies to "start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.".

The stakes are high: U.S. companies invested a total of $256 billion in China between 1990 and 2017, compared with $140 billion Chinese companies have invested in the United States, according to estimates by the Rhodium Group research institute.

Some U.S. companies had been shifting operations out of China even before the tit-for-tat tariff trade war began more than a year ago. But winding down operations and shifting production out of China completely would take time. Further, many U.S. companies such as those in the aerospace, services and retail sectors would be sure to resist pressure to leave a market that is not only huge but growing.

Unlike China, the United States does not have a centrally planned economy. So what legal action can the president take to compel American companies to do his bidding?

Trump does have some powerful tools that would not require approval from U.S. Congress:


Trump could do more of what he's already doing, that is hiking tariffs to squeeze company profits enough for them to make it no longer worth their while to operate out of China.

Trump on Friday boosted by 5 percentage points the 25% tariffs already in place on nearly $250 billion of Chinese imports, including raw materials, machinery, and finished goods, with the new higher 30% rate to take effect on Oct. 1.

He said planned 10% tariffs on about $300 billion worth of additional Chinese-made consumer goods would be raised to 15%, with those measures set to take effect on Sept. 1 and Dec. 15.

In addition to making it more expensive to buy components from Chinese suppliers, tariff hikes punish U.S. firms that manufacture goods through joint ventures in China.


Trump could treat China more like Iran and order sanctions, which would involve declaring a national emergency under a 1977 law called the International Emergency Economic Powers Act, or IEEPA.

Once an emergency is declared, the law gives Trump broad authority to block the activities of individual companies or even entire economic sectors, former federal officials and legal experts said.

For example, by stating that Chinese theft of U.S. companies' intellectual property constitutes a national emergency, Trump could order U.S. companies to avoid certain transactions, such as buying Chinese technology products, said Tim Meyer, director of the International Legal Studies Program at Vanderbilt Law School in Nashville.

Trump used a similar strategy earlier this year when he said illegal immigration was an emergency and threatened to put tariffs on all Mexican imports.

Past presidents have invoked IEEPA to freeze the assets of foreign governments, such as when former President Jimmy Carter in 1979 blocked assets owned by the Iranian government from passing through the U.S. financial system.

"The IEEPA framework is broad enough to do something blunt," said Meyer.

Using it could risk unintended harm to the U.S. economy, said Peter Harrell, a former senior State Department official responsible for sanctions, now at the Center for a New American Security. U.S. officials would need to weigh the impact of China's likely retaliation and how U.S. companies would be affected.

Invoking IEEPA could also trigger legal challenges in U.S. courts, said Mark Wu, a professor of international trade at Harvard Law School.


Another option that would not require congressional action would be to ban U.S. companies from competing for federal contracts if they also have operations in China, said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies think tank.

Such a measure might be targeted specifically at certain sectors since a blanket order would hit companies such as Boeing (N:BA), which is both a key weapons maker for the Pentagon and the top U.S. exporter.

Boeing opened its first completion plant for 737 airliners in China in December, a strategic investment aimed at building a sales lead over its European arch-rival Airbus (PA:AIR).

Boeing and Airbus have been expanding their footprint in China as they vie for orders in the country's fast-growing aviation market, which is expected to overtake the United States as the world's largest in the next decade.


A far more dramatic measure, albeit highly unlikely, would be to invoke the Trading with the Enemy Act, which was passed by Congress during World War One.

The law allows the U.S. president to regulate and punish trade with a country with whom the United States is at war. Trump is unlikely to invoke this law because it would sharply escalate tensions with China, said Wu.

"It would be a much more dramatic step to declare China to be an enemy power with which the U.S. is at war, given the president has at times touted his friendship with and respect for President Xi (Jinping)," said Wu.

"That would amount to an overt declaration, while IEEPA would allow the Trump administration to take similar actions without as large of a diplomatic cost."

Original Article

Friday, August 23, 2019

Gold Jumps Most in 3 Weeks as Powell, China and Trump Collide

© Reuters.  © Reuters.

By Barani Krishnan - It didn’t go quite the way markets thought, but the longs in gold weren’t complaining.

Federal Reserve Chairman Jay Powell’s decision to leave markets in suspense over the central bank’s upcoming rate moves ought to have led to lower gold prices on Friday. But China’s announcement of new tariffs on U.S. products and President Donald Trump’s demand that U.S. companies pull out of the republic made sure of a rally in the yellow metal instead.

The biggest rally in three weeks, in fact.

Spot gold, reflective of trades in bullion, was up $29.77, or 2%, at $1,527.89 per ounce by 2:25 PM ET (18:25 GMT). Bullion has occasionally moved back and forth between $1,500 this week as some investors bet the Fed wouldn’t add to its dovish tone ahead of its Jackson Hole conference.

Gold futures for December delivery, traded on the Comex division of the New York Mercantile Exchange, settled up $29.10, or 1.9%, at $1,537.60 per ounce in post-settlement trade.

It was gold’s largest rally in three weeks, and the first in a while, driven by safe-haven buying over China. The precious metal had spent much of early April to mid-August in range-bound trading as longs in the market sought signs of Fed rate cuts to add to positions.

The U.S. economy is in a "favorable place," and the Fed will "act as appropriate" to keep the current economic expansion on track, Powell said Friday in a speech at the Fed's annual confab of central bankers in Jackson Hole, Wyo.

Rate cuts weaken the U.S. dollar, making commodities priced in the greenback cheaper for the rest of the world. Dollar-denominated prices of raw materials such as gold often automatically rise after a rate cut, adjusting to the phenomenon.

The Fed cut rates last month for the first time in a decade, dropping 25 basis points. Markets are expecting the central bank to do a similar reduction in September. But the Fed chief has faced relentless criticism and pressure from Trump, who accuses Powell’s slow action in cutting rates as the real reason for the slower-than-desired growth of the U.S. economy.

China was, meanwhile, retaliating against U.S. plans to levy an additional 10% tax on $300 billion worth of Chinese goods, including consumer electronics, through two stages of tariffs scheduled to go into effect on Sept. 1 and Dec. 15.

That got Trump livid, prompting him to order U.S. companies to move their manufacturing facilities in the People's Republic somewhere else. It was not known if any of the firms would comply with the president. Trump also warned of additional retaliation.

Gold's rally on Friday saw the futures contract rise about 1% on the week. It's up 7% so far in August and 20% for the year.

Original Article

Amazon fires could burn Brazil's bid to join OECD rich nations club

By Anthony Boadle

BRASILIA (Reuters) - Uncontrolled fires sweeping through the Amazon (NASDAQ:AMZN) rainforest could scuttle Brazil's chances of becoming a member of the Organization for Economic Co-operation and Development (OECD), worried business leaders said on Friday.

The surge in fires has alarmed environmentalists who blame right-wing President Jair Bolsonaro for undermining protection of the world's largest tropical rainforest and turning a blind eye to illegal deforestation by farmers and land grabbers.

The wildfires have sparked international criticism of Bolsonaro's handling of the destruction of the rainforest, which produces more than 20% of the oxygen in the Earth's atmosphere and is considered a vital brake on climate change.

French President Emmanuel Macron said the crisis should be raised at a summit of G7 leaders in France this weekend, at which he will push for all members to sign a charter on biodiversity.

"The situation is very serious," said Rubens Barbosa, head of foreign trade at the Sao Paulo industry lobby FIESP.

Brazil asked to join the Paris-based club of 37 developed nations in 2017, seeking a seal of approval required by many institutional investors.

But Brazil's entry depends on OECD members agreeing that the country is complying with a series of recommendations, many of them environmental standards.

With the current lack of concern for the environment under the Bolsonaro government, its OECD membership is at risk, said Gabriel Petrus, executive director of the International Chamber of Commerce in Brazil.

"We think it will be a challenge now," Petrus said. He called on the Minister of Environment Ricardo Salles to take immediate action to reinforce protection of the forests to curb the fires and improve Brazil's image abroad.

"Otherwise, we will not get approved to join the OECD," he said.

Salles will travel to Paris in September to attend a meeting of the OECD's Environment Policy Committee where he is expected to be questioned on Brazil's policies.

Bolsonaro has vowed to open up the Amazon region to more agriculture and mining, even on indigenous reservations that are seen as the most protected parts of the rainforest.

His government also plans to pave road through pristine parts of the Amazon, which would open up access to illegal loggers, ranchers and wildcat miners, environmentalists fear.

Business leaders in the farm sector as well as the pulp and paper industry have urged Bolsonaro to change his policies on the environment to avoid the threat of boycotts of their products in foreign consumer markets.

Petrus said large Brazilian companies that are major exporters of food and cosmetics are already complying with the best environmental practices.

"The deforestation we are seeing is being done illegally by farmers and land grabbers and must be investigated," he said.

Amid growing global condemnation, Bolsonaro said on Friday he may mobilize the army to combat the wildfires. [L2N25J10H]

Stung by a global outcry over the destruction of the Amazon rainforest, his government launched a diplomatic offensive to persuade the international community of its environmental credentials

Original Article

Oil Sinks After One-Two Punch from China, Powell

© Reuters.  © Reuters.

By Barani Krishnan – It was bad enough that Fed Chair Jay Powell decided not to give investors a clue on where he thought interest rates were headed.

China and President Donald Trump had to make it a one-two punch for oil and other markets on Friday. China announced a new 10% tariff on $75 billion of U.S. products, including crude, and President Trump got mad and announced he was ordering U.S. companies to move their manufacturing facilities somewhere else.

New York-traded West Texas Intermediate crude fell $1.18, or 2.1%, to settle at $54.17 per barrel, reacting to the lack of clarity by the Federal Reserve on monetary policy as well as Beijing’s latest salvo in its tit-for-tat tariffs war with Washington.

London-traded Brent crude, the benchmark for oil outside of the U.S., slid 58 cents, or 0.8%, to $59.34, staying below the key $60 per barrel level.

Barring Friday’s move, oil prices could spend an extended time boxed in sideways trading, with the occasional spike up or down, due to the countervailing forces of the trade war and supply outages.

“Oil prices have entered the rocky ranges, trapped in a world of wild moves but still getting nowhere, as it appears lost in a range somewhere,” said Phil Flynn.

“Of course, the moves are compelling because whatever way we break out of this range could mean a major move. We think it will be to the upside, but technically it could be a big move to the downside.”

The U.S. economy is in a "favorable place" and the Fed will "act as appropriate" to keep the current economic expansion on track, Powell said on Friday in remarks that gave few clues about whether the central bank will cut interest rates at its next meeting or not.

Rate cuts weaken the U.S. dollar, making commodities priced in the greenback cheaper for the rest of the world. Dollar-denominated prices of raw materials such as oil often automatically rise after a rate cut, adjusting to the phenomenon.

The Fed cut rates last month for the first time in a decade, dropping 25-basis points. Markets are expecting the central bank to do a similar reduction in September, but Powell has so far given little signs it would comply. The Fed chair has faced relentless criticism and pressure from President Donald Trump who accuses Powell’s slow action in cutting rates as the real reason for the slower-than-desired growth of the U.S. economy.

China was, meanwhile, retaliating against U.S. plans to levy an additional 10% tax on $300 billion worth of Chinese goods, including consumer electronics, through two stages of tariffs scheduled to go into effect on Sept. 1 and Dec. 15.

"China's decision to implement additional tariffs was forced by the U.S.'s unilateralism and protectionism," China's Commerce Ministry said in a statement, adding that its retaliatory tariffs would also take effect in two stages on Sept. 1 and Dec. 15.

Hours later, the president ordered companies in the United States to stop doing business with China and warned of additional retaliation.

Original Article

Cold, hard euros: Venezuela turns to European cash after U.S. sanctions

By Corina Pons and Mayela Armas

CARACAS (Reuters) - From supermarket checkouts in the capital Caracas to electronics stores in the central city of Maracay, Venezuelans struggling with hyperinflation and a deep economic crisis are turning to a new form of payment: euros in cash.

Runaway inflation that has made even large piles of the local bolivar currency worthless - combined with the socialist government's relaxation of restrictions on the use of foreign currency - has encouraged Venezuelans to turn to dollar bills for everyday transactions in the past year.

But in the past four months, euros have also started proliferating in markets and stores in the South American country.

With the stock of dollars in circulation still far greater than euros, Venezuelan merchants tend to quote items at the same price in the European and U.S. currency - ignoring the euro's higher value on international markets.

"That's just how it works here," said Oscar Ramirez, an electronics trader at the City Market shopping center in eastern Caracas' Sabana Grande neighborhood, who was quoting phones at the same price in both currencies.

The increased use of euros follows the United States imposing a series of sanctions on the OPEC nation's oil industry.

With the U.S. financial system closed to state oil company PDVSA, as Washington tries to cripple the finances of Venezuelan President Nicolas Maduro's administration, the company has asked clients to make payments for crude exports in euros.

And with international companies increasingly hesitant to pay using traceable bank transfers for fear of being hit with U.S. sanctions themselves, PDVSA has collected payment for at least two shipments of exported crude in euros cash via intermediaries, according to three oil industry sources, who asked to remain anonymous.

Reuters could not independently confirm details of PDVSA's euro transactions. Neither Venezuela's Information Ministry nor PDVSA responded to requests for comment.

The U.S. dollar has traditionally been the currency used for oil deals globally. But with Washington cracking down on several major oil-producing countries - including Venezuela, Russia and Iran - producers are making an effort to conduct business in other currencies.

Russian state oil company Rosneft, for example, has notified customers that future tender contracts for oil products will be denominated in euros rather than dollars.


The oil industry sources said that PDVSA has used euros in cash to pay suppliers and contractors in transactions that previously took place via Venezuelan bank accounts - explaining the broader circulation of European banknotes throughout the economy.

A source from a Venezuelan construction company that has done work for PDVSA, who asked to remain anonymous, said the construction company had accepted payment in euros in cash because it was the only way to charge the state firm.

The source said the construction company - which had previously been paid by PDVSA via Venezuelan bank accounts - then used the euros in cash to pay for lubricants and machine replacement parts from local suppliers.

Other branches of the Venezuelan state are also using euros. According to a source familiar with the deal, Venezuela's Social Security Institute - which supplies the public healthcare network with medicine - paid a vaccine provider in euros in cash in July. The institute did not respond to a request for comment.


While the use of euros in cash in Venezuela is not illegal, opposition lawmakers are concerned that cash could be used to hide illicit money flows that would be easily traceable if payments were made electronically, said Chaim Bucaran, an opposition congressman.

"Organizations have paid for imports, medicines and food in euros," said Carlos Paparoni, another opposition lawmaker, adding that the National Assembly's finance commission was planning an investigation into the origins and uses of cash euros in Venezuela.

He said the committee had detected some private airplanes bringing in euros in cash to Venezuela. He did not provide further details and Reuters was not independently able to verify that information.

One of the oil industry sources said several companies that had accepted payment in euros in cash had been providing services to PDVSA for less than a year.

He added that the practice was limited to fields PDVSA operated on its own, rather than its joint ventures with foreign companies like U.S. oil major Chevron (N:CVX) and China National Petroleum Corp (CNPC).

Chevron declined to comment. CNPC did not respond to requests for comment.

The sources declined to name the companies receiving payment in euros, but said most were small.

PDVSA has offered to pay larger, more established suppliers in euros via bank transfer, according to two of the oil industry sources, though it is not clear whether the companies accepted.

The oil industry is not the only source of the euros. The central bank has received euros in cash for the sale of some of its gold reserves, a source with knowledge of the situation told Reuters in January.

The central bank this year began giving Venezuelan financial institutions foreign exchange in cash rather than via transfer, five finance sector sources said this year.

Original Article

Oil Prices Dip Ahead of Powell Speech

© Reuters.  © Reuters. - Oil prices traded slightly lower on Friday with macroeconomic events dominating, as markets prepared for a speech from Federal Reserve Chairman Jerome Powell at the Jackson Hole Economic Symposium.

New York-traded West Texas Intermediate crude futures slipped just 2 cents, nearly unchanged on a percentage basis, to $55.33 a barrel by 7:44 AM ET (11:44 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., fell 12 cents, or 0.2%, to $59.80.

The speech at 10:00 AM ET (14:00 GMT) is expected to provide clues on whether the U.S. central bank will cut interest rates for a second time this year to boost the world's largest economy.

Oil markets are keen on economic stimulus to support demand for crude. Growth has slowed under the influence of the U.S.-China trade conflict, which was given another stir on Friday when China unveiled tariffs on $75 billion worth of U.S. imports, including autos and crude oil. The move is a response to the U.S. decision to tariff all remaining Chinese imports by the end of the year.

“Oil longs are counting on Powell to sprinkle some magic dust on crude,” senior commodity analyst Barani Krishnan said in a note. “Bears, meanwhile, are counting on ramping U.S. crude production to continue offsetting supply outages or sudden spikes in demand.”

The tariff battle between the world’s two largest consumers of oil has been blamed with contributing a weakening global economy.

Krishnan said oil has been “experiencing some of their greatest volatility ever as the U.S.-China trade spat yanked crude around like a yo-yo”.

He said that, with the U.S. summer driving season nearing its end on the Sept. 2 Labor Day holiday, longs in the market are clinging to any support they can find.

“But range-bound trades may be their best hope if the Fed doesn't resort to cut rates like they expect, or the U.S.-China trade spat continues to be a drag on the global economy,” Krishan said.

Later on Friday, market focus will shift to Baker Hughes’ weekly rig count data at 1:00 PM ET (17:00 GMT).

In other energy trading, gasoline futures lost 0.5% to $1.6600 a gallon by 7:45 AM ET (11:45 GMT), while heating oil declined 0.6% to $1.8307 a gallon.

Lastly, natural gas futures traded down 0.2% to $2.154 per million British thermal unit.

-- Reuters contributed to this report.

Original Article

Gold Prices Drop Ahead of Jackson Hole Symposium

© Reuters.  © Reuters. - Gold prices traded lower on Friday in Asia ahead of the Federal Reserve’s annual Jackson Hole Symposium, where Fed Chair Jerome Powell is expected to provide clarity on future monetary easing plans.

Gold Futures for December delivery, traded on the Comex division of the New York Mercantile Exchange, fell 0.2% to $1,504.85 by 1:11 AM ET (05:11 GMT).

Markets currently expect the Fed to slash rates again at its next meeting in September, but uncertainties surrounding the direction of future monetary policy increased following the release of minutes from the central bank’s latest policy meeting.

The Fed did not reveal plans for a series of rate cut some expected previously, suggesting the cut last month was a one-off move.

Powell was said to be under pressure from President Donald Trump to announce a full percentage point cut in rates support the Wall Street and other markets. But most economists also expect Powell to uphold his independence and ignore the president.

Non-yielding bullion is generally considered to benefit from lower rates.

Developments in the on-going political unrest in Hong Kong and Sino-U.S. trade talks are also expected to dictate the safe-haven gold’s direction next week.

Original Article

Oil prices creep up ahead of speech by Fed chair

© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas

By Florence Tan

SINGAPORE (Reuters) - Oil prices clawed back the previous day's losses on Friday, with Brent nudging above $60 a barrel, as tighter supplies from key producers offset slowing demand growth and investors await clues on the U.S. Federal Reserve's monetary policy.

Brent crude (LCOc1) rose 9 cents to $60.01 a barrel by 0422 GMT, and U.S. crude futures (CLc1) were at $55.38 a barrel, up 3 cents. Both contracts were on track for a second week of gains.

"Oil is set to trade quietly today as it's all about the Jackson Hole (meeting) tonight," said Jeffrey Halley, a Singapore-based senior market analyst at brokerage OANDA.

A speech by Fed Chair Jerome Powell later on Friday at a meeting of global central bankers in Jackson Hole, Wyoming, is expected to provide clues on whether the U.S. central bank will cut interest rates for a second time this year to boost the world's largest economy.

Traders' expectations of further U.S. monetary easing were clouded by comments from two Fed officials on Wednesday who said they do not see a case for a rate cut now.

"If Powell talks about lower for longer and reverses some of the hawkish comments that we heard from Fed members earlier this week, we could see it supporting oil," said Michael McCarthy, chief market analyst at CMC Markets in Sydney.

McCarthy also said Brent has good support at $60 a barrel on technical charts and may have some upside potential.

Oil prices fell in July and are down so far in August, dropping after the International Energy Agency and the Organization of the Petroleum Exporting Countries (OPEC) cut demand growth forecasts due to risks to global economy from the U.S.-China trade war.

Production cuts from OPEC members and Russia, and reduced exports from Iran and Venezuela because of U.S. sanctions, have continued to support oil prices.

Original Article

Thursday, August 22, 2019

China eases restrictions on gold imports: sources

By Peter Hobson and Yawen Chen

LONDON/BEIJING (Reuters) - China has partially lifted restrictions on imports of gold, bullion industry sources said, loosening curbs that had stopped an estimated 300-500 tonnes of the metal worth $15-25 billion at current prices from entering the country since May.

China's central bank had for several months curtailed or not granted import quotas to commercial banks responsible for most of the gold that enters the country, Reuters reported last week.

Sources said those measures had possibly been designed to reduce capital outflows and bolster the yuan, which has slumped to 11-year lows against the dollar as a trade dispute with the United States batters China's economy.

The central bank began to issue quotas again last week, but for lower amounts of gold than considered normal, three people with direct knowledge of the matter in London and Asia said - without specifying exact amounts.

"Some (quotas) have been given," said one of the sources, adding that these were "less than usual."

It's a "partial lift" of the restrictions, another source said.

The Chinese central bank did not respond to a request for comment.

China is the world's biggest importer of gold, with around 1,500 tonnes of metal worth some $60 billion - equivalent to one-third of the world's total supply - entering the country last year, according to its customs data.

Chinese demand for gold jewelry, investment bars and coins has trebled in the last two decades as the country has rapidly become wealthier. China's official gold reserves meanwhile rose fivefold to nearly 2,000 tonnes, according to official data.

Beijing has previously taken steps to curb capital outflows when its currency weakened. These steps included some restrictions on gold imports in 2016, sources have said.

No clear data for capital outflows exist but a measure from China's balance of payments called errors and omissions points to $88 billion leaving in the first three months of this year, the most on record.

(Graphic: Chinese capital outflows link: )

Chinese customs figures show the country imported 228 tonnes less gold in May and June - the last month for which data is available - than in the same two months of 2018.

(Graphic: Chinese gold imports link:

By mid-August, up to 500 tonnes less gold had entered China since May than over the same period last year, people in the bullion industry said.

Original Article

On the front lines: Trade war sinks North Dakota soybean farmers

© Reuters. Vannessa Kummer evaluates soybeans near Colfax, North Dakota© Reuters. Vannessa Kummer evaluates soybeans near Colfax, North Dakota

By Karl Plume

COLFAX, North Dakota (Reuters) - North Dakota bet bigger on Chinese soybean demand than any other U.S. state.

The industry here - on the far northwestern edge of the U.S. farm belt, close to Pacific ports - spent millions on grain storage and rail-loading infrastructure while boosting plantings by five-fold in 20 years.

Now, as the world's top soybean importer shuns the U.S. market for a second growing season, Dakota farmers are reeling from the loss of the customer they spent two decades cultivating.

The state's experience underscores the uneven impact of the U.S.-China trade war across the United States. Although China's tariffs target many heartland states that, like North Dakota, supported President Donald Trump's 2016 election, those further south and east are better able to shift surplus soybeans to other markets such as Mexico and Europe. They also have more processing plants to produce soymeal, along with larger livestock and poultry industries to consume it.

For North Dakota, losing China - the buyer of about 70% of the state's soybeans - has destroyed a staple source of income. Agriculture is North Dakota's largest industry, surpassing energy and representing about 25% of its economy.

"North Dakota has probably taken a bigger hit than anybody else from the trade situation with China," said Jim Sutter, CEO of the U.S. Soybean Export Council.

In its second-quarter agricultural credit conditions survey this month, the Federal Reserve Bank of Minneapolis said 74% of respondents in North Dakota reported lower net farm income.

China shut the door to all U.S. agricultural purchases on Aug. 5 after Trump intensified the conflict with threats to impose additional tariffs on $300 billion in Chinese imports, some as soon as Sept. 1.

Some farmers were relying on the Trump administration's $28 billion in farm aid payments to compensate them for trade war losses, only to be disappointed with new payment rates for counties in North Dakota.

The rates are below those for some southern states that rely much less on exports to China. The U.S. Department of Agriculture determined other states had a higher "level of exposure" to tariffs than North Dakota because they also grow other crops, such as cotton and sorghum, that were hit by Chinese tariffs, according to a brief written statement from the USDA in response to questions from Reuters.

(For a graphic on farm aid:

With record soy supplies still in storage and another crop to be harvested soon, farmers in the U.S. soybean state with the best access to ports serving China are unable to sell their crops at a profit.

Rail shippers would normally send more than 90 percent of the North Dakota soybeans they buy to Pacific Northwest export terminals. Now they are trying unsuccessfully to make up the shortfall by hauling corn, wheat and other crops with limited demand. Some are moving soybeans south and east to domestic users, a costlier endeavor that ultimately thins margins for both shippers and farmers.


Soy farmers who planted this spring - when the White House was talking up a nearly finished trade deal with China - watched as those trade talks collapsed in May, sending prices well below their costs of production.

Vanessa Kummer's farm in Colfax, North Dakota, has yet to sell a single soybean from the fall harvest because of the low prices. Normally, the farm would have forward-sold 50% to 75% of the upcoming harvest.

She fears the U.S.-China soy trade is now "permanently damaged" as China shifts its purchases to Brazil, uses less soy in animal feed and consumes less pork as African swine fever kills of millions of the nation's pigs.

"It will take years to get back to any semblance of what we had over in China," Kummer said, standing in a sparse field of ankle-high soy plants, where two weeks earlier she hosted a delegation of soy importers from Ecuador and Peru.

Though it is the No. 4 soy state overall, North Dakota is home to two of the top three U.S. soy producing counties in the nation.

Options for North Dakota farmers are limited. U.S. wheat has been losing export market share for years. Demand for specialty crops such as peas and lentils, which grow well in the northern U.S., has been dampened by retaliatory tariffs imposed by India, a major importer of both products.


North Dakota's farmers never set out to become so dependent on a single buyer of one crop. But with wheat profits shrinking and Chinese demand for soy growing, soybeans increasingly seemed like the obvious choice.

Companies including Berkshire Hathaway's BNSF expanded rail capacity to open up a West Coast shipping corridor, and Pacific Northwest seaports expanded to handle more exports to China. Seed companies offered North Dakota farmers new varieties that allowed soybeans to thrive in the state's colder climate and shorter growing season.

A $200 million crop two decades ago blossomed into a $2 billion crop, topping the value of wheat, once North Dakota's top crop.

The number of high speed shuttle train loading terminals in North Dakota tripled from about 20 in 2007 to more than 60 currently, according to industry data, with investments totaling at least $800 million.

But one of those facilities, CHS Dakota Plains Ag elevator in Kindred, North Dakota, has gone three or four months without loading a soybean train this year, said Doug Lingen, a grain merchant there. Normally the elevator would load at least one train a month with beans bound for the Pacific Northwest.


The drop in demand has soybean prices in North Dakota trading at an historic discount to U.S. futures prices, and farmers are putting investments on hold.

Justin Sherlock, who grows corn, soybeans and other crops near Dazey, North Dakota, had been planning to buy a used grain drier this year for around $100,000 to $150,000, passing on a new one that would be at least $350,000.

But an uncertain future has now shelved those plans, even with the latest promise for government aid. According to rates published last month, farmers in Sherlock's county can apply for aid of $55 per acre, well below the maximum $150 rate offered in 22 counties nationwide.

Sherlock called the latest announcement "disappointing."

"I'm just going to defer all my investment," he said, "and try to limp along for a few years."

Original Article

OPEC's market share sinks - and no sign of wavering on supply cuts

By Alex Lawler

LONDON (Reuters) - OPEC's share of the global oil market has sunk to 30%, the lowest in years, as a result of supply restraint and involuntary losses in Iran and Venezuela, and there is little sign yet producers are wavering on their output-cut strategy.

Crude oil from the Organization of the Petroleum Exporting Countries made up 30% of world oil supply in July 2019, down from more than 34% a decade ago and a peak of 35% in 2012, according to OPEC data.

OPEC crude as a percentage of world oil supply -

Despite OPEC-led supply cuts, oil has tumbled from April's 2019 peak above $75 a barrel to $60, pressured by slowing economic activity amid concerns about the U.S.-China trade dispute and Brexit.

The decline in prices, should it persist, and erosion of market share could raise the question of whether continued supply restraint is serving producers' best interests.

OPEC and its allies have a deal to limit supply until March 2020.

The group tried to defend its market share under the previous Saudi oil minister, Ali al Naimi, who sharply ramped up production in a pump war campaign in 2014.

Naimi was hoping to win the battle, arguing that OPEC's output was the world's cheapest and would allow the group to outdo other producers such as the United States.

As a result of his strategy OPEC's market share rose, while oil prices crashed to below $30 a barrel, triggering many bankruptcies of U.S. oil firms and over-stretching the Saudi budget.

OPEC's share of global oil supply shrinks -

Riyadh and OPEC were forced to return to output cuts in 2017 to support prices, and sources within OPEC say there is no sign of any willingness to return to a pump war at the moment.

"Saudi Arabia is committed to do whatever it takes to keep the market balanced next year," a Saudi official said on Aug. 8. "We believe, based on close communication with key OPEC+ countries, that they will do the same."

OPEC, Russia and other producers have been restraining supply for most of the period since Jan. 1, 2017. The alliance, known as OPEC+, in July renewed the pact until March 2020.

While helping to boost prices, OPEC's market share has fallen steeply in the last two years. World supply has expanded by 2.7% to 98.7 million barrels per day, while OPEC crude output has fallen 8.4% to 29.6 million bpd.

OPEC crude and world oil supply -

While OPEC agreements apply to production, OPEC's exports are also falling as a percentage of world shipments, according to data from Kpler, which tracks oil flows. Iran has led the decrease in recent months.

OPEC crude exports as a percentage of world exports -

Nonetheless, Swedish bank SEB said that for now OPEC+ still has room to act, as the countries making most of the voluntary curbs - Russia, Saudi Arabia, Kuwait, UAE and Iraq - are still pumping at relatively high rates.

Venezuela and Iran, under U.S. sanctions and being forced to curb shipments, have delivered the bulk of the cuts. Venezuelan supply was already in long-term decline before Washington tightened sanctions this year.

"The active cutters are not very stretched at all," SEB analyst Bjarne Schieldrop wrote in the report. "They have not lost market share to U.S. shale. Venezuela and Iran are the big losers."

While Saudi Arabia holds the biggest sway in OPEC as its largest producer, some in the group are not convinced further OPEC+ action to support prices will happen or would work.

"I really doubt there will be further action," an OPEC delegate said. "If it did happen, it will have a temporary impact because the driver is trade and the economy."

Original Article

Putin’s Budget Has Lowest Break-Even Oil Price in Over a Decade

(Bloomberg) -- Oil prices may be recovering, but Russian President Vladimir Putin isn’t taking any chances, running a budget that balances at the lowest crude price in more than a decade.

“Putin’s sticking to a tight financial policy, worried about new sanctions and a repeat of 2009, when GDP contracted by nearly 8%,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki.

The budget for this year balances at a price of $49.20 a barrel for Urals crude, Russia’s main export blend, the lowest break-even level in more than a decade, according to Alexandra Suslina, a budget specialist at the Economic Expert Group, a Moscow think-tank that frequently advises the government. That puts it close to the bottom of the rankings of major oil producers by that measure.

So far this year, the figure was actually under $42 as the government raised taxes but was slow to release planned spending, according to Kirill Tremasov, a former Economics Ministry official and now director of analysis at Loko-Invest in Moscow. For the first seven months of the year, the government reported a surplus of 3.4% of gross domestic product, double the full-year target.

The darker side of the Putin’s fiscal cautious has been sputtering economic growth, which slipped to 0.7% in the first half, below the government’s modest 1.3% target for the full year. Still, the Kremlin has been cool to calls to rev up expenditure to get the economy going amid fears of new U.S. sanctions and a possible global slowdown.

What Our Economists Say:

“There’s no denying Russia has prioritized long-run fiscal stability over stimulating the economy. But there are signs the authorities are preparing to loosen their stance to boost growth. Tapping into oil savings seemed off limits just a few months ago, and now it’s a strong possibility.”- Scott Johnson, economist, Bloomberg Economics

“It happens in Russia that money earmarked for stimulating economic expansion don’t lead to any growth at all,” said Suslina. “The effectiveness of state spending is very low.”

Original Article

Oil prices rise after U.S. crude stocks draw

By Koustav Samanta

SINGAPORE (Reuters) - Oil prices rose on Thursday following a drawdown in U.S. crude inventories, but gains in fuel inventories and persistent concerns over the global economy and future demand outlook capped gains.

Brent crude futures (LCOc1) climbed 27 cents, or 0.5%, to $60.57 a barrel by 0051 GMT on Thursday.

West Texas Intermediate (WTI) crude (CLc1) futures rose 35 cents, or 0.6%, to $56.03 per barrel.

U.S. crude inventories fell more than expected last week as refineries hiked production, but gasoline and distillate stockpiles showed bigger-than-expected builds, the Energy Information Administration said on Wednesday.

Crude inventories fell by 2.7 million barrels in the week to Aug. 16, compared with analysts' expectations for a drop of 1.9 million barrels. However, gasoline stocks rose by 312,000 barrels and distillate supplies grew by 2.6 million barrels.

"With two weeks left in the critical driving season, the surprising build in U.S. fuel inventories is being viewed as a counter-seasonal Grim Reaper of sorts suggesting that gasoline demand has peaked, and the worst is yet to come," said Stephen Innes, a managing partner at Valour Markets.

"If trade uncertainties persist it will be difficult for oil to shrug off concerns about the threat to global demand," Innes added.

U.S. President Donald Trump on Wednesday said he was "the chosen one" to address trade imbalances with China, even as congressional researchers warned that his tariffs would reduce U.S. economic output by 0.3% in 2020.

Trump defended his actions and said he believed a trade deal between the world's largest economies was still possible.

Asian shares edged ahead on Thursday after Wall Street got a boost from strong retail results, but minutes of the Federal Reserve's July meeting showed policymakers were deeply divided over whether to cut interest rates as sharply as markets were wagering.

Meanwhile, oil markets were also supported by simmering tensions between the United States and Iran, with Iranian President Hassan Rouhani cautioning Washington against tightening pressure on Tehran.

If Iran's oil exports are cut to zero, international waterways will not have the same security as before, Rouhani said on Wednesday.

Echoing Rouhani's tone, Iranian Foreign Minister Mohammad Javad Zarif said Tehran might act "unpredictably" in response to U.S. policies under President Donald Trump.

Original Article

Wednesday, August 21, 2019

Illinois corn yields seen below average but improve as tour scouts go West

By P.J. Huffstutter

CARROLL COUNTY, Ill. (Reuters) - Corn farmers in west-central Illinois are facing potentially smaller corn yields this fall in what has been a challenging growing season after extreme weather and heavy rains delayed plantings across much of the U.S. Midwest, scouts on an annual tour said on Wednesday.

Many of the soy fields surveyed in Illinois on the third day of the Pro Farmer Midwest Crop Tour were also behind their normal growing schedule, as they were in parts of Indiana and Ohio, with fields of short soybean plants an indication of the late planting.

But the corn crop improved significantly the further west the scouts traveled despite the later-than-normal plantings, and there were few signs of unplanted fields.

"There were some strong yields and some clunkers, which will pull down that higher average a bit," said Brian Grete, director of the tour's eastern half. "This was on a better area than what we’d seen previously and it is a better crop - and it should be, given where we are.”

Soybean pod counts continued to be hit and miss, but soybean fields in this stretch may not need as much time as other parts of the state.

"It's all going to depend on what that weather looks like in September," Grete said.

Chicago Board of Trade soybean futures closed higher on Wednesday on technical buying and uncertainty about U.S. yield prospects.

The farm community and commodity traders are closely watching the four-day crop tour after grain futures prices plunged in the wake of a U.S. Department of Agriculture report earlier this month that forecast a larger-than-expected corn crop.

On Wednesday, corn yield potential averaged 175.56 bushels per acre (bpa) through eight stops in the Illinois counties of McLean, Tazwell, Peoria, Knox, Stark and Henry.

That is down from last year's crop tour average in those areas of 201.45 bpa and the three-year tour average of 194.77 bpa.

The tour does not estimate soybean yield potential, but instead calculates the number of soy pods in a 3-foot-by-3-foot square.

In those Illinois counties, soybeans averaged 1154.42 pods, down from 1307.06 pods last year and the three-year average of 1260.09 pods.

But the findings this year have been highly variable - more than normal, scouts said.

A second leg that scouted six counties in Illinois - Bureau, Carroll, Marshall, Putnam, Woodford and Whiteside counties - with 10 stops found soybeans averaged 688.76 pods. That was below last year’s 1257.83 pods and the three-year average of 1246.61 pods.

Scouts on the route also found corn yield potential averages of 150.1 bpa. That is down from last year’s 194.31 bpa and from the three-year average of 191.60 bpa.

The eastern leg of the tour began in Columbus, Ohio, and the western leg in Sioux Falls, South Dakota.

Scouts from the different routes are set to meet in Rochester, Minnesota, on Thursday for the final tour summary. The trade publication Pro Farmer, which organizes the annual tour, will crunch the collected data and release its U.S. crop production and yield forecasts on Friday.

Original Article

Alberta's smaller oil producers eye output boost after curbs lifted

By Rod Nickel and Nia Williams (NYSE:WMB)

WINNIPEG, Manitoba/CALGARY, Alberta (Reuters) - Small and mid-sized Alberta oil producers are looking to increase drilling as early as this autumn after the Canadian province exempted a dozen of them from government-mandated oil production cuts, boosting the struggling industry.

Alberta's previous New Democratic Party government imposed production limits in January to drain an oil glut that built up due to congested pipelines.

On Tuesday, the new United Conservative Party government extended curtailments through 2020, citing a delay to Enbridge Inc's Line 3 replacement that could swell inventories again unless the limits remained in place.

It also doubled an exemption threshold in the curtailment policy to 20,000 barrels per day (bpd), eliminating constraints on 13 companies whose output falls below that level. Alberta's 16 biggest producers will be the only ones receiving curtailment orders starting in October.

"We were diverting capital into share buybacks and into Saskatchewan," Tamarack Valley Energy Ltd Chief Executive Brian Schmidt told Reuters in an interview. "Now we'll put capital back to work in Alberta."

Tamarack will adjust 2020 capital spending plans because of the changes and could lift its Alberta production by another 2,000-3,000 bpd, Schmidt said. The Calgary-based company currently produces 11,000 bpd in Alberta, just under half its total output.

Other producers that benefit include Whitecap Resources Inc, Athabasca Oil Corp, Pengrowth Energy Corp, Baytex Energy Corp and Obsidian Energy Ltd, AltaCorp Capital Research said in a note.

Pengrowth deferred spending more than half of its C$45 million ($33.9 million) capital budget earlier in 2019, but now looks to increase drilling as early as October, Chief Executive Pete Sametz said. That will also reduce the need to buy credits from other producers that allowed Pengrowth to produce over its quota, he said.

"We're really happy about (the higher exemption). That's good for our company."

Whitecap, which shifted capital to neighboring province Saskatchewan this year because of curtailments, can now consider restoring Alberta production for 2020, said CEO Grant Fagerheim.

The company has capacity to produce 15,000-16,000 bpd in Alberta.

"This is a very wise move by the Alberta government," Fagerheim said. "Now as we go into our budget cycle (for 2020), it changes the way we think for sure. We can look at our assets on a total basis to get the best returns."

Tweaking the exemption will prop up Alberta's struggling oilfield services companies by increasing drilling, said Gary Mar, CEO of the Petroleum Services Association of Canada, but he said the outlook is still challenging.

"Making small adjustments so small producers are exempt will help keep people in the service business around. It's the best of a bad situation," Mar said.

With curtailments lasting longer, differentials between Canadian heavy and U.S. light crude look more stable, giving investors reason for greater comfort in heavy oil producers Canadian Natural Resources Ltd, Cenovus Energy Inc, MEG Energy Corp and Athabasca, CIBC analyst Jon Morrison said in a note.

Toronto-listed shares of MEG and Cenovus led the way higher among producers on Wednesday, rising 4% and 3% respectively.

Extending curtailments is modestly negative for integrated producers Suncor Energy Inc, Imperial Oil Ltd and Husky Energy Inc, as their operations, which include refineries, are less vulnerable to discounted Canadian prices, Morrison said.

All three have supported ending curtailments as soon as possible. A Suncor spokeswoman said on Wednesday the company does not support government intervention in the markets, while a Husky spokeswoman said uncertainty about how long curtailments will last had dented investor confidence.

Original Article

U.S. Crude Slips Despite Inventory Draw; Fed Shows No Aggressive Rate Cut Plan

© Reuters.  © Reuters.

By Barani Krishnan – The EIA delivered a larger weekly crude drawdown number than thought today. But oil traders quickly discounted that, turning their attention to the Federal Reserve’s July meeting minutes that showed no plans for a series of rate cuts, disappointing longs in the market.

New York-traded West Texas Intermediate crude settled down 45 cents, or 0.8%, at $55.68 per barrel.

London-traded Brent crude, the benchmark for oil outside of the U.S., gained 27 cents, or 0.4%, staying above the key $60 per barrel mark at $60.30 per barrel.

The Fed said in its July meeting minutes that it was important for the central bank to assess incoming economic data to determine the future path of monetary policy.

It also said most participants at its July meeting viewed the quarter-point policy easing they agreed to as “part of a recalibration of the stance of policy, or mid-cycle adjustment”, without seeing the need for an aggressive follow-through plan of rate cuts.

The Energy Information Administration reported earlier in the day that decreased by 2.7 million barrels during the week ended Aug 16, more than the drop of 1.89 million forecast by analysts. A good chunk of the drop came from Cushing, the storage hub for U.S. crude in Oklahoma, which by itself saw a 2.5-million-barrel deficit.

The EIA also reported that gasoline inventories rose by 300,000 barrels and thatdistillate stockpiles surged by 2.6 million barrels.

The Fed’s Aug 22-24 Jackson Hole symposium in Wyoming is another event that’s likely to disappoint those hoping for a big rate cut, especially if Fed Chairman Jay Powell’s speech on Friday makes no inferences of the central bank turning more dovish.

“The main factor that will dictate the next move in the energy sector is the Fed,” said Tariq Zahir, managing member at the oil-focused New York fund Tyche Capital Advisors.

“All eyes will be on Jackson Hole on Friday where we will get some comments out of Powell regarding the Fed’s outlook on the economy. We could expect volatility return to the markets in the weeks to come, especially if the bond markets flatten out further from here or go inverted.”

In such a scenario, Zahir added, the reading on the global economy would translate to a slowdown.

“This would impact demand forecasts for crude oil, especially going into the weaker demand period of the upcoming fourth quarter and first quarter of next year," he said.

Original Article