Archives for December 2016

Oil prices surge as world unites on production cut

World markets are finishing unexpectedly well in a year full of political shocks such as the Brexit vote and the surprising election of Donald Trump as the American president. US stocks have set records while emerging equities have bounced back eight percent after three years of decline.

MSCI’s global index was flat on Friday, with investors having booked profits off the benchmark’s 13 percent run since the end of June, and European shares opening a touch weaker.

Tokyo stocks closed lower, wiping off most of the year’s quiet gains after the yen soared 21 percent against the dollar. The British FTSE has gained 23 percent from its post-referendum low in June.

After major world producers agreed output cuts, Brent crude and US benchmark West Texas Intermediate gained back over 50 percent following two years of losses.

The dollar lost 0.3 percent on Friday against a currency basket. However, the US currency has strengthened in 2016 for the third consecutive year, recently reaching 14-year highs.

Most experts expect the dollar to strengthen further in 2017 as well as US Treasury yields, as Trump’s possible policy promises to boost inflation and to prompt more frequent hikes of interest rates.

Sterling is closing 16 percent lower versus the greenback, showing the biggest yearly fall since 2008. The British currency has been at 31-year lows following the historic vote in June.

READ MORE: Sterling soars after UK court gives Parliament power to block Brexit

The euro has climbed back this week showing three-week highs against the dollar. The single currency may face challenges next year with elections in France, the Netherlands, and Germany on a trend toward anti-establishment and anti-euro parties.

The Chinese yuan has posted the biggest annual loss against the dollar in more than two decades. The currency is expected to face further weakening due to capital outflows.

Article source: https://www.rt.com/business/372285-oil-equities-emerging-markets-results/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Russian oil exports to China hit record high in April

China’s strong crude demand has prevented oil prices from falling even lower during the 2-year oil price bust. An opportunistic buying strategy focused on filling commercial and strategic oil inventories as well as a strong demand from China’s teapot refineries that resulted in a ‘product glut’ have kept crude demand growth “solid to steady’’ according to OPEC economists.

According to Marketwatch, China imported about 7.9 million barrels of crude oil per day in November, a little bit over 70 percent of its total crude oil demand.

The Chinese General administration of customs reports an 18.3 percent year on year crude import growth in November. Chinese demand for crude may continue to rise in the near-term as domestic production has plunged significantly, but a strong pillar of demand – China’s SPR – may already be fading. Platts however reported a 1.1 percent year on year increase of total Chinese crude demand in October of this year.

Oilprice.com reported in September of this year that while the Chinese SPR is rapidly filling up, the Chinese government has invested in extra storage capacity and energy infrastructure. According to the energy consultants at Energy Aspects, there is no near term limit to the SPR crude hoarding. Michal Meidan, a London based analyst predicted a fall in demand of 100,000 bpd to 300,000 bpd for the second half of 2016 at the time.

READ MORE on Oilprice.com:Natural Gas Drillers Rush To Hedge Production As Prices Soar

Although no one really knows how full the Chinese SPR tanks really are, Energy Aspects estimates that an additional 150 million barrel commercial capacity will be added as more independent refiners are now allowed to import foreign crude. Oil markets should keep a close eye at changes in Beijing’s stance towards smaller independent refiners as they could make or break Chinese crude oil demand.

2017 could see oil rally towards $60 as OPEC follows up on its output cut deal, but in the mid-term, oil investors should keep an eye on China’s crude demand imports, independent refiner regulation and economic growth outlook.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/372283-china-crude-demand-growth/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

‘Ukraine’s $6.6bn fine on Russia’s Gazprom is illegal’– Russian Energy Minister

Naftogaz says Russia is now pumping more gas through Opal, a European pipeline that connects Gazprom’s Nord Stream to Germany and the Czech Republic.

The Ukrainian company says Gazprom’s change of transportation policy does not affect the Russian company’s European clients, as the volume pumped daily to the EU has not changed.

“According to the European Network of Transmission System Operators for Gas (ENTSOG), starting from December 22, Russia’s Gazprom has significantly increased the volume of gas transportation through the Nord Stream gas pipeline. Almost all of the additional volumes went through the Opal pipeline. At the same time, the volume of Ukrainian transit during this time decreased significantly. The daily volume of gas supplies to Europe through the two routes has not changed,” the Ukrainian company said on Friday. 

Gazprom has reportedly increased gas transits through Opal by 41 percent and cut Ukrainian transit by 19 percent. Opal is currently pumping at 80 percent of capacity, compared to 50 percent earlier, claims Naftogaz. The pipeline stretches about 470 kilometers from the German Baltic Sea coast to Brandov on the Czech-German border.

Ukraine to lose $2bn in Russian gas transit revenues from Nord Stream-2

Opal receives Russian gas through Gazprom’s Nord Stream pipeline, but due to the limitations set by European regulators, Opal is not running at full capacity. In late October, the European Commission agreed increasing Gazprom’s access to Opal.

Gazprom CEO Aleksey Miller told the media on Thursday that Nord Stream was working at full capacity.

Russia insists Ukraine has proved an unreliable partner in Russian gas transit to Europe. Moscow is concerned about a repeat of the gas crisis in 2006 which left parts of Europe without heat after Ukraine began to siphon off gas sent to the European market.

To solve the problem, Gazprom is introducing the Nord Stream-2 project that will double Nord Stream’s capacity and Turkish Stream that will deliver Russian gas to Turkey and Europe through the Black Sea.

The gas transit contract between Moscow and Kiev expires in December 2019 and has not yet been extended.

Article source: https://www.rt.com/business/372277-ukraine-russia-gas-transit-opal/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

India braces for large protests after rupee banknote ban

Indians living abroad will be able to exchange their old notes at branches of India’s central bank until the end of March next year. After that, holding withdrawn notes will be considered illegal and could lead to hefty fines.

The 500 and 1,000 rupee bills (worth about $7.50, $15) that make up 86 percent of India’s currency in circulation. They were withdrawn last month in an anti-corruption move by Prime Minister Narendra Modi.

READ MORE: India’s cash crunch cripples global diamond business

He said the measure will encourage more people to have bank accounts and move toward a society less reliant on cash. Almost all of India’s transactions are in cash and many people don’t have a bank account.

The dramatic decision caused chaos as cash machines began to run out of money with people rushing banks to exchange the old currency.

The government fixed a limit of 24,000 rupees ($353) per week on withdrawals from bank accounts and 2,500 rupees ($37) per day from ATMs given the currency crunch.

Cash-reliant businesses, such as real estate, tourism, transportation, gold and gems have been hit the hardest. Some have gone under, while others are suffering significant losses.

Farmers, produce vendors, small shop owners, and laborers who are usually paid in cash at the end of a day were among the worst affected. Many lost their jobs as small businesses shut down.

“The first two months have been so bad for us, we don’t even have enough money to buy food,” a 35-years old day laborer Neeraj Mishra told the Associated Press. “Overall, I think Modi has done some good. People with a lot of money are the ones who have been troubled. I don’t have enough cash for it to bother me much,” he added

Analysts have expressed concerns over the scale of economic and social disruption and warned of impending contraction.

“The countless unpredictable consequences that will continue to show in the coming weeks and months mean that it is, in effect, a huge gamble,” Jan Zalewski, an Asia expert with the Britain-based risk assessment firm Verisk Maplecroft was cited by AP. “Inflicting such huge costs for what is an uncertain outcome is problematic.”

Despite the cash crunch India’s economic growth this year is still expected to reach six to eight percent.

Article source: https://www.rt.com/business/372255-india-rupee-deposit-deadline/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

China connects east west with longest bullet train line

Beijing wants to extend the country’s high-speed rail network to more than 30,000 kilometers. That means adding 11,000 kilometers of track for high-speed trains. China’s high-speed railway currently makes up 19,000 kilometers.

The network will connect more than 80 percent of China’s major cities, according to Vice Transport Minister Yang Yudong.

“We believe these railway lines will break even over time as the flow of people and goods experience fast growth,” he said, adding the government will invite private investment to participate in funding intercity and regional rail lines.

The program includes the construction of integrated transport hubs, renovation of expressways and faster construction of railways to serve less-developed regions in central and western China. The urban rail transit system will be extended by 3,000 kilometers.

On Wednesday, China opened the longest bullet train line linking the country’s east and west. The new 2,264-kilometer line spans five provinces, cutting travel time to 11 hours from 34 hours. It allows trains to travel at speeds up to 330 kilometers per hour.

Over the last two years, Chinese officials ramped up spending on the construction of highways and other public works.

They want to shift to a more sustainable model of growth and restructure the slowing economy toward consumption and services.

The world’s second-largest economy is expected to meet its growth targets of 6.5 to 7 percent this year. Statistics showed China’s industrial development, consumption, and investment maintained stable growth in October-November, with a rapid rise in the service industry.

Despite experts’ concerns, Chinese officials are confident in the country’s economy. President Xi Jinping said China will achieve its major economic targets this year and the positive trends will continue into 2017.

Article source: https://www.rt.com/business/372145-china-rail-expansion-growth/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Toshiba cuts executive salaries as $1.2bn accounting scandal widens

The stock continued to plunge on Thursday after the corporation announced it may write down billions of dollars in losses because of its takeover of a US nuclear construction firm.

Westinghouse had warned that its subsidiary’s costs of nuclear reactor projects in the US had greatly surpassed estimates.

“We’re still figuring out the exact numbers, but it could reach up to several hundred billion yen,” Toshiba CEO Satoshi Tsunakawa said earlier this week.

This week’s bad news compounded Toshiba’s problems. The company is still recovering from a $1.2 billion accounting scandal in which Toshiba admitted it had been doctoring financial results for years. Last year, the Japanese conglomerate reported a loss of $3.9 billion.

Moody’s pushed Toshiba further into ‘junk,’ or non-investment grade territory, lowering its rating to CAA1 on Wednesday. SP Global Ratings downgraded the company’s long-term corporate credit to B- from B and senior unsecured debt ratings to B+ from BB-, putting the firm on negative watch.

“The downgrade of Toshiba’s ratings principally reflects Moody’s deepening concerns over the sustainability of Toshiba’s near-term liquidity. The impairment loss could further lead to a breach of Toshiba’s bank debt financial covenants,” said Masako Kuwahara, a Moody’s senior analyst, as quoted by Bloomberg.

Toshiba-owned Westinghouse Electric implemented a deal to acquire US-based nuclear construction company CBI Stone Webster in January.

According to Westinghouse, the potential write-down will exceed initial estimates of $87 million, potentially running into billions. This was due to cost overruns incurred by CBI Stone Webster.

READ MORE: Toshiba unveils Fukushima spent nuclear fuel removal robot (VIDEO)

The exact losses from the acquisition will be revealed next March, at the end of the company’s accounting year. The final amount has not been calculated.

Toshiba’s market value has fallen to 800 billion yen ($6.8 billion) within the week.

Article source: https://www.rt.com/business/372144-toshiba-shares-losses-rating-downgrade/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Oil prices surge as OPEC reaches deal to cut production by 1.2 million barrels

OPEC and several major non-OPEC producers led by Russia agreed to reduce output by nearly 1.8 million barrels per day. The pact, intended to reduce global oversupply and increase oil prices, comes into effect next year.

“Without prejudicing its international contractual obligations, from January 1 2017, [Venezuelan state oil firm] PDVSA and its subsidiaries will implement a reduction in the volumes of its main crude sale contracts, all in conformity with existing terms and conditions,” the country’s Energy Ministry said, as quoted by Reuters.

Venezuela currently pumps over 2.4 million barrels of crude and condensates a day, according to data from the ministry.

The country has been one of the worst affected by the fall in crude earnings since 2014 after oil prices plummeted from above $100 a barrel to as low as $27 in January.

The production cap deal should lead to a re-balancing of inventories, according to Venezuela’s Oil Minister Eulogio Del Pino. He expects Brent crude to settle at about $60-$70 per barrel with Venezuela’s crude basket to rise to $55.

Venezuela’s basket commonly trades at a discount to other benchmarks due to a higher content of heavy oil.

READ MORE: Non-OPEC countries agree to cut oil production by 558,000 barrels per day

Oil prices gained on Tuesday, extending a recent rally on expectations of lower supply after the deal between the producers comes into effect. Brent oil was trading at $56.45 per barrel, while US benchmark WTI grew half a percent to above $54 per barrel.

Article source: https://www.rt.com/business/372034-venezuela-cut-crude-output-opec/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Industrial production grew by 1.5 percent this month over November, slightly below the 1.6 percent predicted by experts. The figure followed a 0.6 percent gain in September and a flat reading in October.

Japan’s parliament passes Pacific trade pact despite Trump promise to pull US out

Retail sales were also up in November while inventory dropped for three straight months with a recent recovery in exports boosting growth.

The data strengthens the view of the Bank of Japan that growing global demand will bolster a steady improvement in the economy with the regulator holding back from extending monetary stimulus in the coming months.

READ MORE: Moscow and Tokyo strengthen economic ties during Putin visit

“While domestic demand still lacks strength, a pick-up in exports is driving up production. Output will likely continue recovering moderately ahead,” said Takeshi Minami, chief economist at Norinchukin Research Institute as quoted by Reuters.

Analysts say the Japanese economy is back on track due to more demand for electronics abroad and a rebound in domestic demand for such items as vehicles. Sales of cars in the home market have grown for the four months through November according to industry data.

Producers surveyed by Japan’s trade ministry expect output to rise two percent in December and 2.2 percent in January.

Separate data from the government revealed that sales increased by 1.7 percent in November from a year earlier, leaving behind a median market outlook of a 0.6 percent gain.

READ MORE: Japan approves $274bn stimulus package to revive economy

The central bank raised its assessment of the economy last week with the government revising the estimate to positive for the first time in almost two years.

Article source: https://www.rt.com/business/372022-japan-economy-brightens-industry-data/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

The 2,264-kilometer Shanghai-Kunming rail line runs across the five provinces of Zhejiang, Jiangxi, Hunan, Guizhou and Yunnan. It cuts the travel time from Shanghai to the capital of Southwest China’s Yunnan province Kunming from 34 to 11 hours.

According to train driver Wang Jinda, the trains can travel at speeds up to 330 kilometers per hour.

In 2012, China started operating another high-speed link, the 2,298-km Beijing-Guangzhou line which stretches north to south.

READ MORE: China to build ‘world’s largest’ high-speed railway station under Great Wall

The country has more than 20,000 km of high-speed rail lines and expects to more than double that to 45,000 km by 2030.

Beijing is also actively developing its own high-speed train technology. In the summer it set a new speed record with a train reaching 840 km per hour on a test run. Two trains were tested at the same time to prove the quality of Chinese technology. The trains, known as Golden Phoenix and Dolphin Blue zipped past each other with only 1.6 meters of space between them.

China recently unveiled plans to build the world’s deepest and largest high-speed railway station as part of its preparations for hosting the 2022 Winter Olympics. The station will be constructed directly underneath Badaling – the most-visited section of the Great Wall of China, which attracts tens of thousands of visitors a day. The three-floor underground station will be located along the railway which is currently being built to connect the cities of Beijing and Zhangjiakou. The track will stretch 174km and is expected to be finished by 2019.

READ MORE: China to build 400km/h train for Russia’s high-speed railway

China is also developing a new generation of trains capable of reaching speeds of 400 kilometers per hour for Russia’s Moscow-Kazan high-speed railway. Beijing plans to provide a $6 billion loan for the route which in future may become a part of a $100 billion high-speed railway connecting the two countries.

WATCH MORE:

Article source: https://www.rt.com/business/372021-china-longest-railway-launch/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Beijing threatens retaliation against US companies if Trump starts trade war

According to China Beige Book’s chief economist Derek Scissors, Trump may start with something like hiking tariffs on Chinese steel.

“But then China retaliates. Then the Trump people don’t like that, and they retaliate, and we get a spiral,” Scissors told CNBC.

“Then we have the question: in a year where there’s going to be a Communist Party Congress, how does China respond? Do they keep themselves under control?” said the economist. The previous Congress was in 2012.

Scissors added that Beijing is unlikely to devalue the yuan further, as it will cause cash outflows and provoke other countries.

Last week, Trump appointed longtime China critic Peter Navarro as the head of a new national trade body, the White House National Trade Council. Navarro has written books like The Coming China Wars and Death by China. In a preamble to one of his books he wrote: “help defend America and protect your family – don’t buy ‘Made in China.’

Donald Trump has taken a tough line on China since winning the US presidency in November. Besides attacking China on Twitter, Trump angered Beijing by talking to the Taiwanese president.

China trade growing but foggy future ahead with Trump

Trump is yet to take office, but the world’s two largest economies have begun to trade blows.

Last Friday Chinese e-commerce giant Alibaba was included in the US list of “notorious markets” for its alleged sale of counterfeit goods. Alibaba Group President Michael Evans has doubted whether the decision was “based on actual facts or influenced by the current political climate.”

China was quick to respond by slapping US automaker General Motors with a $29 million antitrust penalty.

The Beijing-run Global Times newspaper has warned that if Trump starts a trade war with China, it would have consequences.

“The new president will be condemned for his recklessness, ignorance, and incompetence and bear all the consequences. We are very suspicious the trade war scenario is a trap set up by some American media to trip up the new president,” the newspaper said.

Article source: https://www.rt.com/business/372017-china-us-trade-2017/?utm_source=rss&utm_medium=rss&utm_campaign=RSS