Takeo Kumagai at Platts reports that Japan's Ministry of Economy, Trade & Industry [METI] has decided to move ahead with plans to establish strategic petroleum product reserves beginning in mid-August with a day's worth of kerosene consumption.
"After nearly three years of discussing the matter in depth both internally and at its advisory meetings, METI was set to introduce the national oil products stockpile this year, with one or a combination of light and middle distillates, equivalent to one day's consumption of the particular product or products chosen, Platts reported earlier.2. CHINA'S OFFICIAL PMI UP TO 53.2, CLSA'S CHINA PMI UP TO 51.8; CHINA TO BAN IMPORTS OF US CHICKEN
METI has chosen to start the products stockpile with kerosene because it would affect consumers living in northern Japan during the country's winter demand season, the official said. Kerosene is used as heating oil in Japan, with demand typically peaking over December-February."
Terence Poon at the Wall Street Journal reported yesterday that the official purchasing manager's index for China rose to 53.2 in June from 53.1 in May. (A reading of above 50 indicates expansion; below 50 indicates contraction.)
"The new export orders component of the PMI rose to 51.4 in June from 50.1 in May. June was the second consecutive month where the export-order subindex has remained above 50, suggesting a deterioration in exports in the past several months is abating.Chinaknowledge reports that CLSA Asia-Pacific Markets' China PMI also showed improvement, rising to to 51.8% in June from 51.2% in May. Meanwhile, Lauren Etter and Stephen Power at the Wall Street Journal reports that China is expected to ban imports of US chicken in the next several days.
But the inventory subindex of the PMI fell to 45 in June from 46.2 in May. [Moody's] Economy.com's [analyst] Sherman Chan said that drop suggests manufacturers remain cautious about building up inventories amid an uncertain global economic outlook.
'If the external environment doesn't improve, it will be difficult for the government to sustain its fiscal spending for a long time,' she said."
"The potential ban could be a big blow to the US chicken industry, which has been struggling with high grain prices and a price-depressing oversupply of chicken. Exports had been a bright spot for the industry, and last year China surpassed Russia as the largest destination for US chicken, according to the USA Poultry & Egg Export Council."
"[I]n 2007 lawmakers inserted a provision in the 2008 fiscal-year spending bill that prohibited the USDA from allowing chicken processed in China to be imported. The same prohibition was included in the spending bill in the next two fiscal years.Last week the US and EU lodged a WTO complaint alleging that China was blocking the export of raw materials--Daily Sources 6/24 #2.
Trade tension between China and the US heightened earlier this week when the US International Trade Commission recommended imposing punitive duties of as much as 55% on low-cost Chinese tire imports because they are disrupting the US market, in a move that could sharply increase costs for consumers. GITI Tire, China's largest tire manufacturer, has called the move 'decidedly protectionist' and said it would take its case to President Barack Obama.
Last week, the House approved legislation to curb US greenhouse-gas emissions that includes a provision to impose tariffs on goods from countries that don't match US efforts to combat climate change."
3. ASHGABAT INVITES MEDVEDEV FOR VISIT TO DISCUSS GAS PURCHASES
Upstream online reports that Turkmen President Kurbanguly Berdymukhamedov has invited President Medvedev to visit Ashgabat to discuss the resumption of Turkmen gas exports to Russia.
"Russia, the main buyer of Turkmen gas, halted its imports in April after a pipeline explosion.The move comes after China sealed a deal to increase its gas imports from Turkmenistan by 30% last week--see Daily Sources 6/25 #3. Ashgabat publicly suspected that Gazprom had engineered the explosion at the pipeline in order to stop paying the $340/tcm (~$9.61/MMBtu) price it had reportedly contracted to pay for Turkmen gas on December 31, 2008--see Daily Sources 4/14 #7.
The pipeline has been repaired but the two sides cannot agree on new terms of sales as Russia's Gazprom needs less gas than in the past."
4. INDIAN OIL REFINERS NERVOUS ABOUT DELAYED MONSOON EFFECT ON DIESEL PURCHASES
Murali Gopalan and Richa Mishra at the Hindu Business Line reports that Indian oil refiners are worried about heavy losses on diesel as low rainfall so far this year results in digging and pumping groundwater and diesel electricity generation.
"[W]hile [oil demand] growth figures for May are negative ... , diesel consumption at 4.748 million tonnes ... was otherwise normal and has not fallen in absolute terms.5. MALAYSIA TO PULL BACK MALAY-PREFERENTIAL POLICY
Another reason for this was due to a continuous decline in the industrial sector’s use as diesel-direct sales showed negative growth of 4.7% in May.
It was the sixth successive month when industrial sales of diesel showed negative growth, coinciding with the onset of the economic recession in the second half of 2008-09. While economics dictated the pace of diesel consumption so far, the weather patterns could change the pattern, fear experts.
However, the consumption trend for diesel seems to be changing in June, with the eastern region recording a 45% growth, with Bihar alone registering nearly 65%."
Thomas Fuller at the New York Times reports that the Prime Minister of Malaysia, Najib Razak, announced a rollback in the policy which required companies issuing stock to reserve 30% of their shares for ethnic Malays.
"'The world is changing quickly, and we must be ready to change with it or risk being left behind,' he said Tuesday.6. IMF EXPECTED TO AUTHORIZE $150 ISSUANCE OF SDR-DENOMINATED DEBT TODAY
The change would leave some ethnic preferences intact and come with caveats. But it would dilute one of the most important components of what is known as the New Economic Policy, introduced in 1971: the requirement that companies listing on the stock exchange sell 30% of their shares to ethnic Malays.
That requirement was scrapped for companies already listed on the stock exchange and reduced to 12.5% for initial public offerings. The requirement will remain in place for 'strategic industries' like telecommunications, water, ports and energy.
Mr. Najib also said he would lower barriers for foreign investors. The government would eliminate a special vetting process for foreign companies wanting to invest in, merge or take over a Malaysian company, he said."
Timothy R Homan at Bloomberg reports that the IMF board of directors are expected to authorize the issuance of as much as $150 billion in SDR-denominated bonds, voting on the matter today.
"The IMF is also considering making them tradable between all central banks from countries that are IMF members, said a G- 8 official, who spoke on condition of anonymity. It would stop short of allowing them to trade on the open market, he said."7. SARKOZY TELLS NETANYAHU TO GET RID OF LIEBERMAN
Michael Collins Dunn at the MEI Editor's Blog notes that President Sarkozy has reportedly expressed in a "private message" to Benjamin Netanyahu that he should remove Avigdor Lieberman from his post as foreign minister.
8. KIRKUK FIRST CITY SINCE START OF IRAQ WAR TO GET 24 HOUR ELECTRICITY
Diaa Al-Khalidi at the Iraq Oil Report reports that Kirkuk has become the first Iraqi city to enjoy 24-hour electricity since 1993--and the first time the city itself has experienced it since 1991, when Saddam Hussein cut power to the regions in order to ensure round the clock access in Baghdad following his defeat in Kuwait. Kirkuk is outside the formal borders of the Kurdish Regional Authority, but, if I understand correctly, currently effectively security in the city is provided by it:
Security is key in the maintenance of energy infrastructure.
9. ARAMCO AND CONOCO TO RESUME BIDDING FOR CONSTRUCTION OF YANBU EXPORT REFINERY
Sheila McNulty at FT Energy Source reports that Saudi Aramco and ConocoPhillips have decided to resume the bidding process for the construction of the 400 kb/d export refinery at Yanbu. "Now some bids are to be awarded in November 2009 and the others in the second quarter of 2010." Evidently, the bidding process has resumed on an optimistic view of the global economy going forward--and that sufficient financing exists to get it done. (I suspect that this would more likely be the view of Saudi Aramco than ConocoPhillips, given the recent statements from OPEC, but Saudi Aramco controls the facts on the ground.)
10. OPEC 11 SUPPLIES 110 KB/D MORE OIL IN JUNE THAN MAY
Reuters reports that OPEC 11 output in June rose to 26.02 mb/d in June from 25.91 mb/d in May--a 72% compliance rate with the implied production target of 24.84 mb/d, down from 75% in May.
11. NIGER DELTA MILITANT GROUP CRITICIZES MEND FOR ATTACKS AFTER AMNESTY OFFER
Platts reports that the Ijaw Youth Campaign for Peace [IYC]--a coalition from the ethnic Ijaw community in Nigeria's Niger Delta--issued a statement today condemning continued attacks on oil installations by MEND following the introduction of the amnesty offer by Abuja.
"'We are shocked by the activities of our sons considering the recent [press] release by MEND [saying] they have vandalized Shell platforms in Forcados,' the IYC said.The story also notes reports that the amnesty offer has hit a snag as the heavy military presence in the region has made militants leery of going to areas designated as arms collection centers.
'If the purported sabotage was actually true we in the Ijaw Youth Campaign for Peace hereby condemn it in all facets,' the group stated.
The group said the continued sabotage of oil installations 'will present our people as not actually fighting for a genuine cause, but personal gain, which the government can see as armed robbery and criminality.'"
12. OAS GIVES HONDURAS ULTIMATUM, UN CALLS FOR ZEYALA'S RETURN, ARGENTINA'S FERNANDEZ TO TRAVEL TO HONDURAS TO NEGOTIATE SOLUTION, CHAVEZ SAYS VENEZUELA MAY CEASE ALL CRUDE EXPORTS TO HONDURAS--ALL 0 KB/D OF THEM
Ginger Thompson at the Washington Post reports that the Organization of American States on Wednesday gave Honduras three days to restore ousted President Manuel Zelaya to power or face expulsion from the organization.
"Diplomats said they had rarely seen the OAS unite so solidly behind a common cause, and that it was the first time the group had invoked its so-called Democratic Charter since it was adopted in 2001 as a clean break with the region’s history of authoritarian rule."The United States is the only country in the Western Hemisphere which has not reacted to the coup by withdrawing its ambassador. On the other hand, Joshua Goodman and Andres R Martinez at Bloomberg report that yesterday the UN General Assembly passed a resolution, co-sponsored by the US, calling for the restoration of Zelaya.
"OAS Secretary General Jose Miguel Insulza said yesterday he wanted to return to the Central American nation with Zelaya to demand his reinstatement. Argentine President Cristina Fernandez de Kirchner will accompany the mission, Buenos Aires newspaper Infobae reported.Paul Talley at the Compass comments:
As protests against Zelaya swell, a showdown is imminent. [Interim Honduran President Roberto] Micheletti said that Zelaya faces arrest and 20 years in prison should he attempt to return to Honduras, Central America’s third-poorest country.
The country’s Supreme Court, congress and business groups have also expressed support for Zelaya’s removal, over concerns he was seeking to retain power beyond his original mandate by ignoring court rulings and changing the constitution through a referendum on term limits.
Approval for the Zelaya government fell to 30 percent in February from a high of 57 percent in January 2007, according to a nationwide poll by CID-Gallup. The former cattle rancher lost support over the past two years as he strengthened ties with Chavez ... ."
"For Fernandez, accompanying Zelaya gives her a chance to play a popular role in world politics that might offer a distraction from her own political problems at home."Talley seems skeptical about the practical effect however--his post is worth a look. Meanwhile, Carlos Camacho at Platts reports that Hugo Chávez has delayed a trip to the Dominican Republic to finalize PdVSA's purchase of a 49% stake in the Refidomsa refinery there until the Honduran crisis is resolved. Chávez has reportedly threatened to halt all exports of crude to Honduras until Zelaya is reinstated. Of course, Honduras has no refining capacity, so a halt in crude exports wouldn't have much of an effect upon the country.
13. SURVEY SHOWS OBAMA MOST TRUSTED LEADER IN THE WORLD
World Public Opinion recently conducted a survey of 19,224 people in 20 countries, asking them to rate their confidence in leaders of foreign countries. The margins of error in the polls range from ±3-4%. "The survey was conducted between April 4 and June 12, 2009, prior to Obama's speech in Cairo but subsequent to his Ankara speech." The poll seems to show that Obama has by far the most trust of any world leader internationally.
That's a fair amount of political capital. The poll includes ratings for Putin (somewhat oddly), Ban Ki-Moon, Merkel, Brown, Sarkozy, Hu Jintao, and Ahmadinejad. (h/t Greg Scoblete at the Compass.)
14. KC FED CHIEF SAYS THE GOVT HAS INSTITUTIONALIZED "TOO BIG TO FAIL", ST. LOUIS FED CHIEF SAYS FED RATES LIKELY TO STAY UNCHANGED FOR "FORESEEABLE FUTURE," SF FED CHIEF TAKES AIM AT INFLATIONISTAS, SAYING DOWNTURN LIKELY TO BE PROLONGED
Greg Robb and Kate Gibson at MarketWatch report that Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, has criticized the "ad hoc" approach to the financial crisis, saying it has institutionalized the notion of "too big to fail."
"'The current crisis has made it clear that the group of systemically important firms that might be deemed worthy of special consideration by policy-makers is larger than previously thought,' Hoenig said in a Tuesday speech at New York University."
"The Obama administration's overhaul of financial rules is only a start of a dialogue on the issue, Hoenig commented. 'The most important part of any plan ... will be the requirement that public authorities resolve such institutions by taking them into receivership and restructuring them to emerge under new and more careful management and ownership,' without exceptions."Worth reading in full (h/t Yves Smith at naked capitalism.) Meanwhile, Jon Hilsenrath at Real Time Economics reports that James Bullard, president of the St Louis Fed, said in a talk at Philadelphia’s Global Interdependence Center today that the Fed Funds Rate is likely to remain at its current rate for the "foreseeable future." He also said that the Fed's
"'liquidity programs', such as efforts to support the commercial paper market or money market mutual funds, are on track to end next year 'if financial conditions continue to improve."He further indicated that the Fed may reevaluate its purchases of mortgage-backed securities in its next meeting in August. In a story which has received wide coverage in the econoblogosphere, Jon Hilsenrath at Real Time Economics reports that Janet Yellen, President of the Federal Reserve Bank of San Francisco, took aim at the inflationistas, saying:
"We are far from the kinds of unemployment rates that would make inflation a danger. ... The very weak economy is, if anything, putting downward pressure on wages and prices ...The full text of her speech can be found here.
In past deep recessions, the Fed was able to step on the accelerator by cutting the federal funds rate sharply, causing the economy to shoot ahead. This time, we already have our foot planted firmly on the floor. We can’t take the federal funds rate any lower than zero. I believe that the Fed’s novel programs are stimulating the flow of credit, but they simply aren’t as powerful levers as large rate cuts, so this time monetary policy alone can’t power a rapid recovery.
I also think that a massive shift in consumer behavior is under way—one that will produce great benefits in the long run but slow our recovery in the short term. 4 American households entered this recession stretched to the limit with mortgage and other debt. The personal saving rate fell from around 8 percent of disposable income two decades ago to almost zero. Households financed their lifestyles by drawing on increasing stock market and housing wealth, and taking on higher levels of debt. But falling house and stock prices have destroyed trillions of dollars in wealth, cutting off those ready sources of cash. What’s more, the stark realities of this recession have scared many households straight, convincing them that they need to save larger fractions of their incomes. In the long run, higher saving promises to channel resources from consumption to investment, making capital more readily available to retool industry and fix our infrastructure. But, in the here and now, such a rediscovery of thrift means fewer sales at the mall, and fewer jobs on assembly lines and store counters."
15. FORD TO RAMP UP PRODUCTION
Nick Bunkley at the New York Times reports that vehicle sales were down 11% in June from June 2008, the lowest annual rate of decline seen by any major carmaker since last Summer.
"Ford said this week that it was increasing production in the third quarter, which starts Wednesday, to match the rise in demand its dealers were seeing. The company now plans to build 67,000 more vehicles, a 16% increase, than it did in the third quarter of 2008.16. CRUDE STOCKS SHARPLY DOWN, BUT PRODUCTS STOCKS SHARPLY UP ... REFINING UTILIZATION SLIGHTLY DOWN
Over all, industry sales are expected to be down at least 25% compared with June 2008. Though dismal by any measure, it could be the first time since September that total sales fell by less than 30 percent on a year-over-year basis, a positive sign.
June could also be the first month this year in which new vehicles sold at an annualized rate of at least 10 million. For most of the last decade, auto sales in the United States were around 17 million a year before plummeting in 2008. Fewer than 5 million vehicles were sold in the first half of 2009, a decrease of nearly 37%."
The EIA reports that commercial crude stocks were drawn down in the week ended June 26 by 3.7 million barrels to 350.2 million barrels, still above the historical range for this time of year, but not dramatically higher any more. Gasoline stocks grew by 2.3 million barrels, and are now in the middle of the five-year historical range for this time of year. The median analyst expectation per a Bloomberg survey was for a 2 million barrel build. Distillate stocks also grew by 2.9 million barrels to 155 million barrels, 34.3 million more barrels than were held in commercial inventories in the comparable week last year. The analyst expectation was for a 1.5 million barrel build. The national average price of gasoline for the week ended June 29 fell by 4.9¢ to $2.642/gallon. Refinery utilization for the week ended June 26 fell .06% to 86.99%.
17. 10 TOP US CITIES GROWING FASTER THAN THEIR SUBURBS SINCE 2007
Conor Dougherty at Real Time Economics notes the report by Mark Mather at the Population Reference Bureau which shows that population in the ten largest American cities have been growing faster than the areas around them since 2007:
Worth reading in full.