Oil

Saudi Arabia is pushing for an oil production cut among its fellow OPEC nations as well as other big producers such as Russia. In China, Beijing is pushing local governments to cut steel overcapacity.

Saudis: Let’s Make a Production Cut Deal

The Organization of Petroleum Exporting Countries will probably revive talks on freezing oil output levels when it meets non-OPEC nations next month as top exporter Saudi Arabia appears to want higher prices, according to OPEC sources, although Iran, Iraq and Russia present obstacles to a deal.

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Riyadh sharply raised expectations for a global production deal between on Thursday when Energy Minister Khalid al-Falih said Saudi Arabia will work with OPEC and non-OPEC members to help stabilise oil markets.

China Vows to Accelerate Steel Capacity Cuts

China should quicken capacity cuts in its bloated steel and coal sectors, the country’s top economic planning agency said on Tuesday, putting pressure on local officials to meet annual targets despite some worries the steps could hurt economic growth.

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China has promised to slash steel capacity by 45 million metric tons and coal capacity by 250 mmt this year, as it tries to rejuvenate two industries suffering from slowing demand and a massive supply glut.

Brazil is considering its options to fight the recent heavy U.S. anti-dumping tariffs on it over cold-rolled steel imports. Hedge funds have turned bearish on oil, encompassing both crude and refined products.

Brazil Might Take Cold-Rolled Dumping Case to the WTO

Brazil will wait for the U.S. International Trade Commission to rule on a Department of Commerce anti-dumping determination on its cold-rolled steel before appealing to the World Trade Organization, a senior Brazilian official said on Monday.

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The Commerce Department said last week that Brazilian cold-rolled steel was being subsidized by seven export promotion programs in Brazil and passed its anti-dumping determination to the ITC to rule whether there is injury to U.S. producers.

Hedge Funds Turn Bearish on Oil

Hedge funds have turned very bearish toward both crude oil and refined products over the last two months amid signs of an oversupply of gasoline.

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Hedge funds and other money managers added the equivalent of 56 million barrels of extra short positions in the three main Brent Crude and West Texas Intermediate futures and options contracts in the week ending July 26.

Russia won’t cooperate with OPEC on oil production cuts and U.S. architecture billings are still up in June, but just not as much as they were in May.

Russia Won’t Coordinate Oil Production Cuts

Russian Energy Minister Alexander Novak said in an interview he has ruled out possible coordination with the Organization of Petroleum Exporting Countries on oil output after a failed attempt to jointly maintain production levels earlier this year.

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“We do not discuss the issues of coordination of actions between Russia and OPEC… We can’t agree on production cuts as we don’t have such tools and mechanisms,” Novak told Reuters in interview cleared for publication on Wednesday.

Architecture Billings Down But Still Up

The Architecture Billings Index was positive in June for the fifth consecutive month. An economic indicator of construction activity, the ABI reflects an approximate nine-to-12 month lead time between architecture billings and construction spending.

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The American Institute of Architects reported the June ABI score was 52.6, down from the mark of 53.1 in May, but this score still reflects an increase in design services (any score above 50 indicates an increase in billings).

China, this year, is becoming more than just the world’s largest metals consumer, it’s also taking a larger role in setting metals prices. While oil prices have crept up this summer, another selloff could be caused when refined products in storage finally come to market.

China is Taking a Bigger Role in Setting Metals Prices

The prices of metals from aluminum to zinc have long swayed to the beat of the world’s largest manufacturing nation, Reuters’ Andy Home writes.

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But this is the year that China has emerged from the limelight to take center-stage in the trading of those metals. On one day alone, March 10, trading volumes on the Dalian Exchange iron ore contract exceeded one billion metric, more than the combined annual output of the world’s biggest three producers, Rio Tinto Group, BHP Billiton and Vale SA.

Another Oil Glut is Likely Due to Products in Storage

In its July Oil Market Report, the International Energy Agency warned about shockingly high levels of refined oil products sitting in storage. Gasoline, diesel and heating oil are built up to such high levels in so many parts of the world, that a sharp rise in crude oil prices is unlikely in the short run, oilprice.com reported.

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The IEA said that “the fact that crude oil has in the past two months moved within a range in the high $40s/bbl should be a relief for some producers.” But it went on to caution that “the existence of very high oil stocks is a threat to the recent stability of oil prices.”

Three major German automakers are being investigated by regulators for participating in a steel purchasing cartel. U.S. Shale firms increased their hedging this year to try to offset low oil prices.

VW, BMW, Mercedes Investigated

Volkswagen AG, BMW AG, Daimler AG (Mercedes-Benz) and Robert Bosch GmbH were among six companies raided by Germany’s antitrust regulator in June in a probe of steel purchasing by the auto industry.

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There are indications that antitrust rules may have been violated, and the raids were conducted to investigate the facts, Kay Weidner, spokesman for the Federal Cartel Office, said in an e-mailed statement to Bloomberg News on Tuesday. He declined to identify any company.

BMW, VW, Daimler, Bosch and ZF Friedrichshafen AG confirmed that they were raided and said they are supporting the investigations.

Automakers are one the major pillars of the German economy, and steel is a key component for auto companies.

US Shale Firms Increased Hedging as Oil Prices Fell

As oil prices began recovering from 13-year lows early this year, U.S. shale producers ramped up their hedges against another slump on a scale unseen for at least a year, a Reuters analysis of company disclosures shows.

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A review of disclosures by the largest 30 U.S. shale firms showed 17 of them increased their hedge books in the first quarter, the most at least since early 2015.

Alcoa, Inc. revealed a new name, Arconic, for its value-added business unit in a recent regulatory filing and Iranian oil exports are decreasing but still adding more supply to global markets.

Alcoa Reveals Spinoff Details, Names Value-Added Business ‘Arconic’

Alcoa, Inc. said on Wednesday it will spin off its traditional aluminum smelting business as part of its planned company split and the renamed company will serve the aerospace and transportation industries.

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The company to be spun off will be named Alcoa, Corp. The value-added business unit will take on the name Arconic, Inc., according to a recent regulatory filing. It will make engineered products for growth markets such as automotive and aerospace. Alcoa revealed its plans in a regulatory filing.

Iranian Oil Exports Fall From June High, Still Adding Supply to Markets

Iran’s oil exports in July will fall June levels as the country battles Saudi Arabia and Iraq for market share, but the Islamic Republic’s output is still about 70% higher than a year ago, a source with knowledge of the country’s crude oil lifting plans told Reuters Africa.

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Exports will be about 2.14 million barrels per day in July, down from about 2.31 million bpd in June, but still the highest since January 2012, the source said.

Volkswagen has settled the U.S. portion of its emissions scandal litigation and the Securities and Exchange Commission has written new rules for disclosure of donations by oil, gas and mining companies.

VW Settles U.S. Lawsuts for Nearly $15 Billion

Volkswagen AG will spend more than $15 billion to settle consumer lawsuits and government allegations that it cheated on emissions tests in what lawyers are calling the largest auto-related class-action settlement in U.S. history.

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Under the settlement revealed Tuesday by a U.S. District Court in San Francisco, VW will pay just over $10 billion to either buy back or repair about 475,000 vehicles with cheating 2-liter diesel engines. The company also will compensate owners with payments of $5,100 to $10,000, depending on the age of their vehicles.

SEC Passes New Oil/Gas, Mining Disclosure Rule

The Securities and Exchange Commission on Monday approved a rule requiring oil, gas and mining companies to disclose payments made to foreign governments, capping a process stalled in the courts for years.The rule requires companies to state publicly starting in 2018 how much they pay governments in taxes, royalties and other types of fees for exploration, extraction and other activities.

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An earlier version of the rule was thrown out for being overly broad by a federal judge and the American Petroleum Institute said it is reviewing the new rule and would consider legal action if necessary.

Vietnam and Thailand placed tariffs on Chinese steel exports. China’s Southeast Asian neighbors are joining an international effort to limit its massive steel industry’s influence on world prices led by Europe and the U.S.

Low oil prices forced OPEC’s accounts to dip into deficit for the first time since 1998.

China’s Neighbors Are Sick of Steel Dumping, Too

Countries such as Vietnam, Indonesia and Thailand are challenging a flood of imports from China. They are retooling their steelmaking technology and imposing tariffs as a construction boom spurs steel demand across Southeast Asia

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Steel from China is expected to dominate the market for many years, but swelling demand is driving efforts in countries such as Vietnam and Indonesia to build more modern plants, impose tariffs and better compete with China’s vast mills.

Vietnam imposed temporary anti-dumping tariffs ranging from 14% to 23% on steel imports from China and elsewhere in March. It recently slapped additional import duties of up to 25% on more Chinese steel products that will last until October 2019.

Thailand’s commerce ministry is working on the final draft of an anti-dumping law. The government there expects to propose the draft for approval by end-2016, according to a spokeswoman.

OPEC Accounts Fall into Deficit, First Time Since 1998

OPEC’s 2015 oil export revenues slumped 46% to a 10-year low, the group said in a report published on Wednesday, underlining the impact on producers’ income from a collapse in prices.

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Oil prices are at about $50 a barrel, half their mid-2014 level after being pressured by oversupply. OPEC’s decision in November 2014 to not cut supply, hoping a drop in prices would curb supply from competitors, deepened that decline.

While Saudi Arabia’s grip on oil prices has waned and shale drillers have survived its attempt to undercut them with crude prices nearing $50/barrel, China might just be the new Saudi Arabia of metals markets.

Resilient Shale Drillers Investing Again

Two years into the worst oil price rout in a generation, large and mid-sized U.S. independent producers are surviving and eyeing growth again as oil nears $50 a barrel, confounding the Organization of Petroleum Exporting Countries and, particularly, OPEC heavyweight Saudi Arabia with their resiliency.

Free Download: The June 2016 MMI Report

That shale giants Hess Corp., Apache Corp. and more than 25 other companies have beaten back OPEC’s attempt to sideline them would have been unthinkable just months ago, when oil plumbed $26 a barrel and collapses were feared.

Is China Metals’ Saudi Arabia?

Speaking of countries that dominate the market for important commodities, is China doing for metals markets what Saudi Arabia used to do for crude oil?

Free Download: The June 2016 MMI Report

The world’s largest producer and consumer of industrial metals may be acting as a de facto, if unwitting, type of OPEC for metals, adjusting supply in response to price signals and balancing the market.

OPEC oil export revenue is down and if Hong Kong Exchanges and Clearing Ltd. can’t bring China to the London Metal Exchange, it’ll bring the LME to China.

OPEC Export Revenues Down Again

OPEC’s full-year 2016 oil export revenues will probably fall 15%, down for the third straight year and possibly the lowest in more than a decade before rising in 2017, the U.S. Energy Information Administration (EIA) said on Wednesday.

Free Download: The June 2016 MMI Report

Members of Organization of the Petroleum Exporting Countries (OPEC), including Iran, will likely earn about $341 billion in 2016, about 15% below 2015 levels, based on projections of global oil prices and the group’s production levels, the U.S. government’s EIA said in a report.

HKEx Tries Bringing the LME to China

Some four years after shelling out a top-of-the-market $2.2 billion for the London Metal Exchange, it appears owners Hong Kong Exchanges and Clearing Ltd. (HKEx) are still battling to make the venerable old Western institution work with China, the new and dominant center for metal demand.

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HKEx Chief Executive Charles Li used the LME Week Asia seminar today to tout the latest plan, which involves bringing the LME’s expertise in physical metals markets to China, where financial instruments dominate trade.