January 27, 2020

Brazil breaks oil production record

The daily average stood at 3.106 million bpd, up 7.78 percent on 2018, ANP also said.

More than half of the total oil production Brazil recorded in 2019 came from the prolific presalt zone off its coast. The contribution of the presalt zone stood at 633.98 million barrels, which was an annual improvement of 21.56 percent.

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Brazil’s crude oil production topped 3 million barrels per day for the first time ever in November 2019, the ANP reported last month, adding that total oil and gas production rose to 3.95 million barrels of oil equivalent daily – also a record-breaking figure.

The strong output result came on the back of ongoing ramp-up of production at eight new floating production, storage, and offloading facilities. The ramp-up added more than 100,000 bpd to the country’s total production between October and November.

The presalt zone has become the center of attention of the Brazilian oil industry now that the government settled its dispute with Petrobras regarding the handling of an area that falls within the zone. The area could hold up to 15 billion barrels of untapped crude, which would double Brazil’s total reserves to 30 billion barrels and make it the world’s fifth-largest oil producer.

Also on rt.com All eyes on OPEC as another oil glut looms

Meanwhile, it emerged that Brazil may join OPEC soon, with talks likely to begin in July this year. Brazil’s president is on board with the idea—Jair Bolsonaro said last October that Saudi Arabia had invited Brazil to join the cartel—but the industry is not so enthusiastic.

If the country becomes an OPEC member it would have to comply with production control agreements at a time of rising oil production, and Petrobras plans to further the rise. This could be precisely why OPEC wants Brazil to become a member: according to the group’s production forecasts, Brazil will be the second-largest contributor of non-OPEC production growth this year, after the United States.

This article was originally published on Oilprice.com

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‘Cash is trash’, says billionaire investor Ray Dalio

“Everybody is missing out, so everybody wants to get in,” Dalio told CNBC, referring to people who have been reluctant to put money in stocks.

“You have to have balance… and I think you have to have a certain amount of gold in your portfolio,” said the founder of Bridgewater Associates.

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Dalio has been bullish about the yellow metal, advocating for nearly three years that between five and 10 percent of investors’ portfolios should be in gold.

He has warned that investors should get out of cash, as central banks continue to print money. “Cash is trash. Get out of cash. There’s still a lot of money in cash,” he said.

The billionaire also warned against more speculative investments like bitcoin. “There are two purposes of money, a medium of exchange and a store hold of wealth, and bitcoin is not effective in either of those cases now,” he said.

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Dalio’s firm, Bridgewater, manages about $160 billion. He has been repeatedly calling for investors to avoid staying on the sidelines of the stock market and in 2018 declared that those holding cash were “going to feel pretty stupid” for missing the market’s run-up.

Although the American investor said that he sees a low chance of a recession in 2020, he warned investors to look out further ahead. The risks arise from current monetary policy, which will be less effective when a downturn does come.

“At a point in the future, we still are going to think about what’s a storeholder of wealth. Because when you get negative-yielding bonds or something, we are approaching a limit that will be a paradigm shift,” he said.

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EU carbon tax more about political wrangling than tackling climate change, analysts tell RT

Since taking office in December, Ursula von der Leyen has been pushing for the Green Deal, aiming to make Europe the “world’s first climate-neutral continent by 2050.” The approach includes tax on imports from non-EU countries with less-strict ecological rules. By doing this, Brussels claims it wants to prevent so-called carbon leakage, so importers from countries with “lower ambition for emission reduction” do not benefit from European producers abiding by strict green rules. 

However, the move could be more about raising tax revenue for the EU and gaining political leverage than climate change, according to Richard Werner, university professor in banking and finance at Linacre College, Oxford. While the tax may not be implemented for many years, von der Leyen may currently use her warnings as part of the trade war between China and the US, he noted. 

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“It’s more about political things like protection[ism] or just a bargaining chip in the trade negotiations with China,” Werner said in an interview with RT.

German economist Max Otte, professor at the University of Applied Sciences in Worms as well as the head of the Cologne-based IFVE institute for asset management, believes that the initiative could be both about ecological concerns and additional benefits for Brussels. The distinctive “positive side effect” of it, however, is that Europe is trying to stand up for its rights in opposition to the US, which has been turning away from global climate initiatives.

“Europe is becoming an actor of its own rights because right now as you know it is dominated by the US,” Otte told RT, adding that it could become a step towards a more common European stance on trade.

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But the idea needs the approval of all 28 members of the economic bloc and that’s where it could face roadblocks, other analysts believe. The EU is already split on many issues, with the views of the “core countries” that currently have surpluses like Germany and the Netherlands far from those facing deficits, like Italy and Spain. On the other hand, non-eurozone states, which kept their own currencies, tend to stand for their policies, including the economy. They have already “resisted quite a few directives” from Brussels and the proposed tax will not be an exception, according to Werner.

“The reality is protectionism has come back somewhat similar to what we saw in the 1930s. And so it’s just fueling the flames of this antagonism between trading partners,” he said.

Who is gonna pay for EU’s green policies?

The implementation of the carbon border tax would eventually lead to another tariff war, as other countries won’t sit idle and will impose tit-for-tat levies, analysts note.

Thus the US, which does not have strict nationwide climate policies, could be one of the first to be hit with tariffs. But as a large and vital market for many European importers, Washington could exploit its position and eventually win this conflict, said Dr Marco Springmann, senior researcher on environmental sustainability and public health at the Oxford Martin School.

“In this political climate, it can easily get out of hand, where we have retaliatory tariffs from the US side,” Springmann said. “Modern analysis shows that because the US is such a big country, they can actually benefit from putting on more taxes.”

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If importers are finally forced to pay this tax, it could hurt some leading European economies, and Germany in particular. Despite the initiative falling in line with German environmental concerns, it could still backfire severely on its key auto industry as steel imports would inevitably be affected.

“European countries are complete commodity importers, they need almost all commodities in the whole world then certainly… it can hurt German economy very much,” Professor Werner said.

Despite the obvious consequences for its carmakers, Berlin is likely to support the idea, according to German economist Max Otte. He noted that the measure could actually boost demand for domestic products, eventually driving wages higher. But consumers will feel the impact of carbon tax as prices in all energy consuming industries – like travel, construction and auto manufacturing – are set to surge.

For more stories on economy finance visit RT’s business section

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Stock market a ‘Ponzi scheme’ that eventually must collapse – Guggenheim

“We will reach a tipping point when investors will awake to the rising tide of defaults and downgrades,” Minerd wrote in a letter from the World Economic Forum meeting. “The timing is hard to predict, but this reminds me a lot of the lead-up to the 2001 and 2002 recession.”

He cited rising defaults despite a rally in riskier assets, and reiterated a warning that BBB-rated bonds risk further downgrades. The chief executive said that the type of debt is at a greater risk of deterioration than it was in 2007.

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Guggenheim Partners, which operates in the global investment and advisory space, manages more than $275 billion in assets as of September last year.

The company’s fixed-income chief Anne Walsh told Yahoo Finance that 15 percent of the US economy is already in recession.

According to her, the Federal Reserve’s efforts to pump liquidity into markets has created “zombie companies” that may see an outflow of capital as the utility of that money continues to diminish. The longer that this market runs, the harder the fall will be when it ends, she said.

For more stories on economy finance visit RT’s business section

Article source: https://www.rt.com/business/478902-market-ponzi-scheme-must-collapse/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

India and Brazil sign over a DOZEN trade treaties as Bolsonaro makes first visit to New Delhi

President Bolsonaro, who became the first Brazilian head of state to visit India, had a seemingly productive one-on-one with Prime Minister Modi earlier in the day. The two leaders exchanged pleasantries and warm words before proceeding with talks – the most closely watched part of the meeting.

“Your visit to India has opened a new chapter in bilateral ties between India and Brazil,” Modi said in his media statement while greeting Bolsonaro.

At the end of the day, Brazil and India – both members of the informal BRICS bloc – inked 11 agreements, among them a Strategic Partnership Action Plan and a Bilateral Investment Treaty. Other documents related to bio-energy, cyber security, investment, health, and medicine.

Aside from key ministers, Bolsonaro’s delegation also included representatives of 50 major Brazilian companies ranging from civil aviation and agriculture to defense. As a so-called “chief guest,” he will attend Republic Day – India’s biggest holiday – later on Sunday.

While India and Brazil are the world’s largest emerging economies after China, they perform beyond their potential with bilateral trade amounting to some $8.2 billion a year. India’s red carpet rollout for Bolsonaro signals that New Delhi and Brasilia want their economic ties to thrive.

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Starbucks shutters shops in China’s Hubei Province amid coronavirus outbreak

The coffee chain’s decision to suspend operations for the duration of the week-long Lunar New Year holiday was prompted by “health concerns” for its customers and employees, the company said in a social media post.

The move comes shortly after McDonald’s announced that it will halt operations in five cities in the province. The fast-food giant said the temporary closures were for “for employee and customer health and safety.”

Also on rt.com Chinese doctor battling coronavirus on ‘front line’ of outbreak epicenter in Hubei dies as death toll hits 41

Traced back to Wuhan, the outbreak has spread across China and has now reached Europe, the United States and Australia. Some 41 people in China have succumbed to the deadly virus, while an estimated 1,300 others have been infected worldwide.

Chinese authorities have expanded the quarantine of Wuhan to nearby cities, putting an unprecedented 36 million people on lockdown.

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Why the coronavirus is a real threat to China’s economy

As the death toll and the number of confirmed cases is rapidly rising, China has put on lockdown cities in Hubei province, including Wuhan, from where the outbreak is believed to have originated.

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The virus is set to disrupt the plans for thousands of Chinese right before one of the biggest national holidays — the Lunar New Year, or Spring Festival — that kicked off on Friday. This is one of the busiest periods for travelling, as the holiday is traditionally celebrated with family and is definitely a hot shopping season, when people spend money on leisure and gifts.

Tourism down

With the transport links to the effected cities closed, China’s State Railway Group said passengers could get refunds for rail tickets nationwide from January 24. Apart from cancellation of flights to and from Wuhan, some air carriers are already avoiding the city. Chinese passengers who booked flights to or from Wuhan can ask for a free refund from airlines, the nation’s civil aviation regulator announced earlier this week.

1 Did patient zero really catch new Chinese virus by eating infected bat soup? It’s actually perfectly possible

Meanwhile, cities have started to prevent people from large gatherings in an apparent attempt to stop the risk of infection. On Thursday, Beijing cancelled major public events, including Chinese New Year temple fairs. Another major city, Shanghai, which is much closer to the epicenter of the outbreak, cancelled some activities scheduled for the holiday season and said that some tourist attractions will be closed, including some parks, viewpoints on the skyscrapers and main museums.

The local tourism industry has also begun to prepare, as one of the largest Chinese online travel agencies, Trip.com, also known as Ctrip, offered its clients free cancellation on all hotels, car rentals and tickets for tourist attractions in Wuhan. Some other agencies, including Meituan, ly.com (also known as Tongcheng-Elong), qyer.com and Alibaba’s Fliggy have reportedly followed suit.

Box office blow

The biggest movie-going week has also been disrupted by the deadly virus. All seven Chinese films, that were set for release this weekend and expected to generate as much as $1 billion in ticket sales, announced they were pulling the screenings.

While the withdrawal of film premieres might not be a big deal, it could discourage people from leaving home and spending money, thus affecting local businesses during the usually hot sales season.

Stock markets commodities feel a chill

The epidemic came as investors are still reeling from US-China trade tensions, driving down some key Asian stock markets. Despite Hong Kong’s Hang Seng index edging higher on Friday, it finished the week down 3.8 percent, posting the largest weekly decline since November 2019.

The Shanghai stock exchange was closed on Friday due to the public holiday, and finished the week in the red on Thursday, with the Shanghai Composite index losing 3.17 percent in one week.

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The Nikkei 225 in Japan closed a fraction higher on Friday, but fell nearly one percent compared to the previous week.

Meanwhile the virus has also had an effect on the oil markets, with futures for both global benchmarks Brent and WTI tumbling this week. China is one of the major importers of crude and its demand is far greater than that of the US. The outbreak could cut oil demand by 260,000 barrels per day and push prices down by $3 per barrel, Goldman Sachs has warned.

Can the new virus be as deadly as SARS?

The new coronavirus is so far less lethal than a similar virus outbreak that spread from China in the early 2000s, known as severe acute respiratory syndrome (SARS). However, there are concerns about the disturbing similarities in the way the disease is spreading, with fears that it could be even worse, as China today has a much better transport infrastructure and links to other countries.

Also on rt.com Beijing city cancels major public events including Chinese New Year temple fairs due to coronavirus outbreak

“If you look at what happened in 2003, estimates range from [reducing GDP in China] by 0.5% to 2%, half a percent for Southeast Asia, and the stock markets sold off double digits,” billionaire investor Paul Tudor told CNBC during the World Economic Forum in Davos.

Others think that it may be too early to speak about macro effects of the virus, as the World Health Organization (WHO) has recently calmed investors when it did not qualify the outbreak as a global emergency.

For more stories on economy finance visit RT’s business section

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Art of the deal? US reportedly pressures India to buy $6bn more American farm produce in exchange for some tariff cuts

The multi-billion-dollar purchase would see New Delhi boost imports of American farm products such as poultry, despite India already having offered relief on price caps impacting US pharmaceutical firms, four sources familiar with the trade talks told Reuters – dubbing the purchase a “sweetener.”

The forthcoming deal could be unveiled when US President Donald Trump visits New Delhi next month to meet his Indian counterpart on his first trip to the country, intended to scale back some of the trade antagonism between the two allies.

Also on rt.com US wants trade deal with India to put pressure on China

Tensions came to a head last year after the US removed India from its “Generalized System of Preferences” (GSP), a trade mechanism which grants tariff concessions to a number of favored nations. While the move was intended to compel India to open its markets to certain American goods, it instead triggered a raft of retaliatory tariffs from New Delhi on dozens of US products.

Current negotiations ahead of Trump’s visit also include talk of lowering some of those Indian tariffs, including on almonds, walnuts and apples. “The deal has to be agriculture focused,” Reuters quoted one of its sources as saying.

The US is putting a number on everything (if India wants GSP back).

The American trade team has also signaled that Washington could be persuaded to make concessions if India diverts purchases into the US energy sector. While India’s oil minister said New Delhi was ‘looking forward’ to increased energy cooperation with the US, he announced no concrete plans.

India had originally proposed a scale-back of levies on high-tech products from the US as part of the deal, but has since rescinded the offer.

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US shale patch sees huge jump in bankruptcies

From 2015 through November of last year, 208 companies filed for bankruptcy, according to a new report from law firm Haynes and Boone. Those filings involved a combined $121.7 billion in debt.

Since the last update from Haynes and Boone at the end of the third quarter last year, nine firms went bankrupt. In fact, in 2019, bankruptcies surged by 50 percent compared to a year earlier, and hit the highest number since 2016.

Also on rt.com Goldman: China coronavirus could push oil down by $3

The rate of bankruptcies could accelerate this year as the price of natural gas recently tumbled below $2/MMBtu and crude oil prices have fallen back once again. “I think the trend line should be moving up in the first half of 2020,” Buddy Clark, partner at Haynes and Boone, told Reuters.

The IEA predicts that the oil market will remain in a state of surplus this year, even after taking into account the recent OPEC+ cuts. The IEA said that OPEC+ may need to cut deeper in order to avoid a chronic surplus.

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The problem for the sector is the tidal wave of debt that comes due in the next few years. According to the Wall Street Journal, North American oil and gas companies have a combined $200 billion in debt that matures over the next four years, with $40 billion due this year alone.

The financial stress is causing a slowdown in the pace of drilling. Already, gas production in the all-important Marcellus shale may have come to a halt. The EIA sees gas production contracting in the Anadarko, Appalachia, Eagle Ford and Niobrara shales. As for oil, US production growth is expected to rise by 22,000 bpd in February, a tepid rate compared to typical months last year and the year before. Some shale basins are facing decline, including the Anadarko, Eagle Ford and Niobrara.

But less drilling has knock-on effects, dragging down oilfield service companies which make their money on drilling activity. The same is true for pipeline companies, which make their money on oil and gas flows. Kinder Morgan just announced a $1 billion impairment charge on one of its gas pipeline assets.

Halliburton also announced a 21-percent decline in revenue in the fourth quarter in its North American division, due to weaker activity and pricing reductions. “The US shale industry is facing its biggest test since the 2015 downturn,” Jeff Miller, Halliburton CEO, said on an earnings call on January 21. “As expected in the fourth quarter, customer activity declined across all basins in North America land, affecting both, our drilling and completions businesses. The rig count in US land contracted 11% sequentially and completed stages had the largest drop we have seen in recent history.”

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The squeeze on Halliburton and other service providers will continue. Miller said the “equipment attrition” – jargon for idling or scrapping rigs and other unneeded equipment – began to pick up last year. But, “this is just the beginning,” Miller said. “We believe a lot more equipment will exit the market as lower demand, increasing service intensity and insufficient returns take their toll.” Halliburton cut its capacity by 22 percent last year.

He added that “gassy” regions, such as the Marcellus, will be hit hardest. “Gas prices in the US are below breakeven levels,” he added.

The message from Schlumberger was similar. The oilfield services giant expects 2020 to mark the second year of contraction in North America, with “high single-digit to double-digit” decline, as the company’s CEO Olivier Le Peuch put it on an earnings call. Schlumberger said it would slash its oilfield service capacity in North America by 30 percent and put a “self-imposed cap” going forward.

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It all points to a potential peak in drilling and production, although many analysts still see modest growth. Capex from all US shale EPs is expected to decline around 14 percent this year.

But cutting spending may not save a lot of indebted drillers. More bankruptcies are inevitable.

This article was originally published on Oilprice.com

Article source: https://www.rt.com/business/479106-us-shale-bankruptcies-surge/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

McDonald’s shuts down restaurants in five Chinese cities as coronavirus spreads

The restaurant chain has dozens of locations in the region, including in the city of Wuhan, which is considered to be the epicenter of the virus.

Apart from Wuhan, where most infections have occurred, McDonalds will close restaurants in Ezhou, Huanggang, Qianjing and Xiantao. The company says that the temporary measure is introduced for “for employee and customer health and safety.”

In a statement to RT, McDonald’s said that its restaurants operate normally in cities where public transportation is available, unlike the five cities in Hubei province.

Also on rt.com China coronavirus infections soar to 830 with 26 deaths as WHO says it’s too early to declare global emergency

Chinese authorities have placed several cities on lockdown, restricting movement for over 30 million people to halt the spread of the virus. The number of confirmed cases has neared 900 and the death toll reached 26 and rising, with no vaccine available so far.

The spread of the virus comes as China is celebrating one of the biggest holidays of the year, the Spring Festival, or the Chinese New Year. Major Chinese cities, such as Beijing and Shanghai, cancelled large public events and closed tourist attractions.

For more stories on economy finance visit RT’s business section

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