Wang Ying at Bloomberg reports that PetroChina increased its refining profits in the first half of 2009 on the back of the revised pricing system which allows refiners to pass on the cost of production to consumers. Gasoline and diesel are, as a result, considerably more expensive in China than they are, say, in the US. I suspect it will go some ways to dampen demand. Meanwhile, Beijing made an example of the former ex-Chairman of Sinopec, Winnie Lee at Platts reports that Chen Tonghai was sentenced to death for bribery, but given a two-year reprieve.
"The court said Chen abused his authority ... to pursue material gains for third parties in areas related to business operation, transfer of land, and contract procurement, according to the Xinhua report.2. SOUTH KOREAN COURT HEARS PROPERTY RIGHTS CLAIM BY NORTH KOREAN CITIZENS
The two-year reprieve means that Chen's sentence will be commuted to life imprisonment if he commits no further crime while in jail.
Chen resigned from his posts as the head of China Petrochemical Corporation Group and Sinopec Corporation in June 2007."
Su-Hyun Lee at the New York Times reports that a South Korean court has for the first time decided to hear a case brought by North Korean citizens attempting to establish property rights in the south.
"Four North Korean brothers and sisters have sued their late father’s second wife and that couple’s four children in South Korea for a share of an inheritance from the estate of the father, a successful doctor.Although this is the first suit by North Korean citizens to be accepted by a South Korean court, the right of North Koreans to sue in South Korean courts has already been established by rulings of "the Supreme Court and the Constitution"--though I am left unsure as to exactly what kind of complaint was addressed by the courts establishing this in the absence of a North Korean plaintiff. In any case, the smooth handling of the case may well reassure some of the anxieties of both Northerners and Southerners.
The suit claims at least a quarter of the father’s land and other property, worth about $8 million. He left North Korea for the South with his eldest daughter during the 1950-53 Korean War and never returned. In 1959, he reported that his first wife had died and married a South Korean woman, with whom he had four more children. He died in 1987.
Family members in the south, including the sister who came there with the father, asked that only the family name, Yoon, be used, to protect the relatives in the North and the privacy of those in the south."
3. EUROPEAN CASH FOR CLUNKERS PLAN MAY BE REVERSING DIESELIZATION
Tim Worledge at the Barrel makes the especially interesting observation that Europe's "cash for clunkers" program--designed to slow the steep fall in auto sales--has pushed sales of gasoline-driven cars up above diesel-driven ones.
"According to the European Automobile Manufacturers' Association, ACEA, diesel comprised around 53% of all new car sales in 2007 and 2008, before the scrappage schemes were introduced.
For the first five months of this year, diesel sales fell to 46.3% of the total, apparently marking a reversal in the 20-year 'dieselization' of Europe."
"This threat to diesel's dominance represents a seismic shift.
Bolstered by favorable tax regimes, the growing use of diesel in Europe has done more than any other trend to spur refining investment and shape global trading patterns in the oil market. It has been clear in recent years that Europe is very long gasoline, with the surplus largely shipped to the US, and is short diesel, which it takes from anywhere it can get it.
Within Europe, and further afield, this has spawned massive investment programs as refinery kit designed to meet gasoline demand is re-aligned, augmented and upgraded to produce ever greater volumes of diesel."
"It's the same story in France, regarded as the bastion of diesel and birthplace of the engine's inventor Rudolf. In 2008, diesel sales peaked at a whacking 77.3% of all new cars, but this has now fallen to 71.6%.However, if it does represent a long-term reverse in trend, the window for diesel arbitrage to Europe will mostly be closed, meaning that there will be no outlet for excess diesel supply in the US, which would likely result in another retooling of US capacity back to full gasoline maximization.
Whether this is a blip, a temporary stumble along the road to full European dieselization, remains to be seen, although it's worth noting that even those diesel cars that are being purchased are burning up to 48% less of what is an increasingly bio-blended road fuel."
4. EUROZONE INDUSTRIAL PRODUCTION UP 0.6% IN MAY MOM, DOWN 17% YOY
Gerrit Wiesmann at the Financial Times reports that eurozone industrial production rose by 0.6% in May from April, though it was still down 17% from May 2008.
"Strong monthly increases reported by Germany, France and Italy in recent days had led economists to expect a bounce of 1% in May. However, these hopes were dashed by output decreases in Spain and some smaller countries."5. RUSSIAN RAILWAYS RECEIVES $500 MILLION LOAN FROM THE EBRD, LARGEST LOAN IN THE BANK'S HISTORY
Paul Abelsky and Denis Maternovsky at Bloomberg report that OAO Russian Railways has borrowed from the European Bank for Reconstruction and Development $500 million over 10 years in what is the largest loan ever provided by the bank.
"The deal is the London-based development bank’s largest single investment since it was founded in 1991 to fund infrastructure in former communist nations in Europe and central Asia, the EBRD said in a statement today. Moscow-based Russian Railways sold 90 billion rubles ($2.8 billion) of domestic bonds this year, more than any other company in the country, to finance its investment program."
"Russian Railways, the country’s biggest commercial employer, is seeking fresh funds after posting a loss of 17.1 billion rubles ($534 million) in the first quarter. Rail cargo shipments fell an annual 23% in the first half and may drop 19% in the year, Vladimir Yakunin, the company’s chief executive officer, said July 6.6. BULGARIA TO GET SPUR FROM THE ITGI PIPELINE
Russian Railways cut annual spending by more than 34%, to 252 billion rubles, this year after the government reduced financial support for the company and domestic demand for its services waned, Yakunin said in an interview published today in the Vedomosti newspaper. Railroads account for about 85% of Russia’s total cargo transport capacity, according to VTB Capital data.
EBRD aims to invest a minimum of $3 billion in Russia this year, President Thomas Mirow said last month at an economic forum in St. Petersburg."
Kerin Hope and Theodor Troev at the Financial Times reports that Greek, Bulgarian, and Turkish companies signed an agreement to build a spur from the ITGI pipeline carrying natural gas from Azerbaijan to Turkey and Greece and which is to be extended to Italy. The spur would have a 3-5 bcm/year capacity and is scheduled to be completed by 2012 at a cost of €120 million (~ $167 million).
"The project highlights the new spirit of co-operation between Athens and Sofia. The Balkan neighbors have a history of bilateral disputes, from arguments over sharing water resources to stake-holdings in a proposed cross-border oil pipeline.Sofia has secured about €45 million in EU grants to fund the project. According to a 2007 Edison press release, ITGI as it stands has a capacity of 11.5 bcm/year of which Italy had been slated to receive, following the completion of the final section also in 2012, 8 bcm/year. According to a story featured on the Azerbaijan Business Center, Gian Luigi Mascia, the Italian Ambassador to Azerbaijan, said in Baku today that
Both countries are keen to become regional transit hubs for gas pipelines from central Asia and the Middle East.
Bulgaria signed up on Monday to join Nabucco and, like Greece, is also a partner in the proposed South Stream pipeline to bring Russian gas to the EU under the Black Sea."
"The gas pipeline is designed only for Azeri gas. Its overall capacity will be up to 14 bcm a year, including 1 bcm to be delivered to Greece, 10 bcm to Italy and 1-3 bcm to Bulgaria."
Bulgaria responded to the Russo-Ukrainian gas transit dispute in January by re-starting a nuclear reactor despite it violating the terms for its accession to the EU--see Daily Sources 1/15 #1.
7. ISRAEL HAVING TOUGHER TIME IN EUROPE, ISREALI WARSHIPS PASS THROUGH SUEZ
Juan Cole has an interesting analysis suggesting that Israel is more on the outs with Europe than usual. He notes that Javier Solana called for the recognition of a "Pelstinian state by the world community by a date certain, regardless of the Israeli position" suggesting that he is more or less Europe's foreign minister. (Much much less, actually, though important, and certainly an interesting development. The analysis contains a goodly share of wishful thinking, on Prof. Cole's part, but it is still interesting and what he records may well be a sign of a sharper move in the European capitals.) Meanwhile, Michael Collins Dunn at the MEI's Editor's Blog notes that two Israeli corvettes (warships slightly smaller than frigates) have been allowed, by Cairo, to pass through the Suez. He notes:
"Warship transits, while guaranteed under the Israeli-Egyptian peace treaty, are rare, given the fact that Israel is concerned about security. As anyone who has seen the canal knows, it is narrow, and warships passing are easily viewed by civilians and others along its banks."8. MEND ANNOUNCES CEASEFIRE, QUICKLY THREATENS TO END IT
Platts reports that MEND earlier Wednesday announced a ceasefire following the release of its leader--Henry Okah--yesterday, but has since threatened to call it off, accusing the government of using it as an opportunity to ramp up its military presence in the region.
9. VENEZUELAN OIL MINISTER SAYS ALL PDVSA EMPLOYEES MUST JOIN "SOCIALIST COMMITTEES"
Marianna Parraga at Reuters reports that Venezuelan oil minister Rafael Ramirez yesterday told a rally of workers who had been employed by PdVSA following the nationalization of oil services firms operating in the country that
"By now, there should not be a single counter-revolutionary in the heart of our company, our industry. There cannot be a single PdVSA installation where socialist committees do not exist. Whoever is not in a committee will be suspected of conspiring against the revolution.""Socialist committees are loosely defined political groups often organized by Chávez's Socialist Party."
10. US COMMERCIAL CRUDE STOCKS DOWN, GASOLINE & DISTILLATE STOCKS UP, REFINERY UTILIZATION UP, BUT US INDUSTRIAL PRODUCTION DOWN 0.4% IN JUNE FROM MAY, 13.6% YOY, CONSUMER PRICES UP 0.7% NEARLY ALL ON ENERGY COSTS, WHILE US WAGES, ADJUSTED FOR INFLATION, FALL 1.2%
The EIA today reported that commercial crude stockpiles fell by 2.8 million barrels to 344.5 million barrels in the week ended July 10. The amount is storage is still above the five year historical range for this time of year, but the draw was for more than the 2.1 million barrel draw expected by Wall Street analysts, per a survey by Bloomberg. Gasoline stocks grew by 1.5 million barrels versus analyst expectations of a 875 kb build and are now near the top of the five year historical range for this time of year. Distillate stocks grew by 600 kb versus analyst expectations for a 2 mb build and are still at extremely elevated levels, about 28% more than what was in storage in the comparable week of last year. Overall US refining capacity went up in the week ended July 10 to 87.87% of total operable capacity from 86.8%. However, industrial production in June was down 0.4% from May and 13.6% from June 2008 according to the Fed's index. From the report:
"For the second quarter as a whole, output fell at an annual rate of 11.6%, a more moderate contraction than in the first quarter, when output fell 19.1%. Manufacturing output moved down 0.6% in June, with declines at both durable and nondurable goods producers. Outside of manufacturing, the output of mines fell 0.5% in June, and the output of utilities increased 0.8%. The rate of capacity utilization for total industry declined in June to 68.0%, a level 12.9% points below its average for 1972-2008. Prior to the current recession, the low over the history of this series, which begins in 1967, was 70.9% in December 1982."Meanwhile, Gerry Shih at the New York Times reports that the Labor Department announced that its consumer price index climbed 0.7% in June from May. The "core" index, which excludes food and energy prices, rose by 2%.
"Compared with a year ago, the Consumer Price Index has fallen 1.4%, the steepest plunge since 1950, as the prolonged downturn takes its toll on demand in the economy. ...
A separate Labor Department report released Wednesday said that American wages, adjusted for inflation, fell by 1.2% in June."