Alaric Nightingale at Bloomberg reports that the Baltic Dry Index fell by 17% this week on reduced Chinese demand for coal and iron.
"'The Chinese have backed off and it’s starting to show in the number of shipments this month,' Gavin Durrell, a Cape Town-based official at Island View Shipping SA, Africa’s biggest commodities shipping line, said by phone today. 'Iron ore and coal seem to be slowing down.'
China’s record coal and iron ore imports in the first half helped the index to advance as much as fivefold this year, reversing some of the record 92% collapse in 2008. Demand rose after the country’s government announced a 4 trillion yuan ($586 billion) stimulus package."
(h/t Yves Smith at naked capitalism.) In that vein, Jonathan Nonis at Platts reports that the 180 CST fuel oil--mostly used for power generation or marine fuel--appears to be set to switch into contango--where the nearby in time price is less than the future price--on increasing supply and less-than-expected demand.
"By 11.00 am Singapore time (0300 GMT) the September/October 180 CST spread was pegged at parity, down 50 cents/mt from the Asian close on Thursday. The last time the prompt 180 CST spread had been in contango at the Asian close was on June 16 at minus 50 cents/mt.In late July fuel oil prices rose to nearly the cost of crude--see Daily Sources 7/28 #8. Meanwhile, Jim Bai and Aizhu Chen at Reuters report that Chinese refiners will cut very slightly crude runs in August to
The weaker market structure on the utility grade also dampened the structure for the 380 CST bunker grade with the September/October 380 CST spread narrowing to 1.50/mt, from $2.20/mt on Thursday's close.
The softer fuel oil sentiment is brought about by larger Western arbitrage volumes in August and September, while demand over the same period is expected to decline on higher outright fuel oil prices, traders said.
Between 3.2 to 3.5 million mt of fuel oil is expected to arrive in Singapore in August, while September volumes were said to be in the range of 3.6-3.7 million mt. Meanwhile, the higher fuel oil prices--prompted by the sharp rise in crude prices--in recent weeks has had a negative impact on bunker demand in Singapore as well as regional buyers.
Reflecting this, heavy distillate stocks in landed storage in Singapore recovered from a seven-month low by a massive 5.26 million barrels (800,000 mt) to 19.320 million barrels for the week ended August 5, data from IE Singapore showed."
"2.63 mb/d of crude oil in August, down marginally from 2.65 mb/d in July.Gasoline and diesel stocks held by CNPC and Sinopec rose by 7.7%
The August volume would represent around 88% of their total refining capacity."
and 7.1% respectively at the end of June from the end of May.
"'Demand is not as high as what is being supplied,' a refinery official in east China also said, declining to be named as he is not authorized to speak to the media.Meanwhile, Bloomberg News reports that the President of China's second-largest bank, the China Construction Bank, Zhang Jianguo, said that it would reduce new loans by 70% in the second half of 2009.
'Some plants may just want to accomplish their full-year plan after a slow start this year,' he added."
"'We noticed that some loans didn’t go into the real economy,' Zhang, 54, said in an interview yesterday at the bank’s headquarters in Beijing. 'I feel that some industries are expanding too rapidly. For example, housing prices are rising too fast, and housing sales are growing too fast.'"
"Construction Bank is one of the main beneficiaries of demand for infrastructure loans induced by China’s 4 trillion yuan economic stimulus package. Established in 1954 to fund building of roads, bridges, dams and other infrastructure, it was the nation’s biggest mortgage lender until the first half of 2008, when ICBC pushed it to second place."The People's Bank of China in its recent quarterly monetary report announced that it would continue its policy of easy credit--see Daily Sources 8/6 #2.
2. INDONESIA TO CUT SUBSIDIES ON FOSSIL FUELS WITHIN A YEAR
Yvonne Chan at Business Green reports that the head of Indonesia's National Council on Climate Change, Agus Purnomo, told Reuters last week that Jakarta was likely to reduce subsidies for fossil fuels within a year.
"Some economists have forecast that fossil fuel consumption would drop by one-fifth if the subsidy were scrapped entirely. However, the complete removal of the subsidies is highly unlikely, given that previous cuts have led to social unrest.Subsidies on propane, for example, which is used for cooking, and especially by the poor, are very difficult to scrap given the consequences.
Purnomo said a subsidy would continue to exist but would be 'below the distortion level that discourages renewable energy'."
3.GERMAN EXPORTS UP 7% IN JUNE FROM MAY, DOWN 22.3% FROM JUNE 2008, IMPORTS UP 6.8%
Der Spiegel reports that Germany's Federal Statistics Office announced today that the country's exports were up 7% in June from May, but down 22.3% from June 2008.
"[I]t was the biggest rise in exports since September 2006, when the figure was 7.3%. Experts had only anticipated a 1.1% rise after the figures were seasonally adjusted. The figure in May was a mere 0.2% gain."
"The Federation of German Wholesale and Foreign Trade (BGA) is forecasting an 18% slump in export sales for 2009, the first contraction since 1993 and the largest in postwar history. For 2010, BGA president Anton Börner is anticipating a return to growth of 5 or 10%.3. RUSSIAN ELECTRICITY DEMAND UP 4.2% IN JULY FROM JUNE ON INCREASING INDUSTRIAL DEMAND
Imports to Germany were also up slightly in June, climbing by 6.8% compared to the previous month. In total, goods valued at €56.3 billion euros were imported--17.2% less than the same period in 2008."
James Allen at Platts reports that Russian electricity demand fell by 6.6% in the first seven months of the year, but have risen 4.2% in July from June. Year over year demand was down 5.7% in July.
"'We think the July increase in consumption may be a sign of economic recovery in Russia given the increasing capacity utilization being observed in some industries, particularly the metals sector,' said analysts at Alfa Bank in a daily briefing Friday.4. UKRAINE TO RECEIVE INTERNATIONAL FINANCING TO COVER PAYMENTS FOR GAZPROM GAS
Consumption in the Southern Russian, Mid-Volga and industrialized Urals Integrated Power Systems rose, respectively, 10.7%, 7.2% and 4.8% month on month while electricity demand in the northwestern region stayed flat after falling 7.6% month on month in June."
Doris Leblond at the Oil & Gas Journal report that The European Commission, European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), and World Bank
"have agreed to cooperate on a support package to help Ukrainian authorities develop 'sustainable solutions to Ukraine's medium-term gas transit payment obligations,' and to continue to 'support Ukraine's economic stabilization reform, including reform of the gas sector and accompanying reform of the social safety net,' according to a joint statement by the organizations."The EIB and the EBRD are each considering loan packages of as much as $450 million; the World Bank is considering committing as much as $500 million.
5. UK ENERGY SECURITY REPORT
The recent report by Malcolm Wicks commissioned by UK Prime Minister Gordon Brown on British energy security can be found here. I have not been able to read it, but it was reported that it calls for trebling the amount of nuclear electrical generation in the country--see Daily Sources 8/5 #2.
6. INTERNAL ISRAELI MEMO CRITICAL OF NETANYAHU'S PUBLIC STAND ON SETTLEMENTS
Mark Lavie at the Associated Press reports that an internal memo by the Israeli Consul to Boston which criticized the Netanyahu administration for taking a combative stance with Washington regarding the settlements issue was leaked to an Isreali TV station, which read the report on air. The memo said the disagreement was causing "strategic damage to Israel." It goes on to say:
"In the distance created between us and the US administration, there are clear implications for Israel's deterrent capabilities. ...7. KUWAIT BECOMES NET NATURAL GAS IMPORTER
There have always been differences between the governments, but coordination was always maintained. Now there is the feeling in Washington that Obama has to deal with obstinacy from the governments of Iran, North Korea and Israel. ...
The US administration makes efforts to lower the profile of the disagreements, but ironically, we are the source of the public disputes. ...
The standing of American Jews is also being damaged ... . The perception of confrontation between the governments of Israel and Obama puts the American Jewish community, which is so important to us, in a problematical position. The confrontation is distancing many from Israel."
Chris Stanton at the National reports that Kuwait's first cargo of LNG has arrived at its terminal, making it for the first time a net natural gas importer.
"Officials say LNG is an interim solution to plug the summer deficit, when consumption of gas at power stations spikes. Domestic supplies under development by Kuwait Oil Company (KOC) will eventually supplant the imports, the government said in June when it signed a supply contract.8. 32 MEMBERS OF MEND MEET WITH NIGERIAN PRESIDENT ON AMNESTY PROGRAM
But imports could be necessary for years to come, given the difficulty Kuwait will face in raising domestic production, said Raja Kiwan, an analyst at PFC Energy, a US-based consultancy."
Felix Onuah at Reuters reports that
"[t]hirty-two members of the Movement for the Emancipation of the Niger Delta (MEND) led by the group's leader in Bayelsa state--Ebikabowei Victor Ben, known locally as Boyloaf--met Yar'Adua at the presidential villa in the capital Abuja.9. US TO PROVIDE $10 BILLION IN FINANCING FOR BRAZIL'S EXPLOITATION OF PRE-SALT FIELDS, BRAZIL AND PERU CONSIDERING $15 BILLION IN HYDROELECTRIC PROJECTS
'We on our part in the spirit of fair bargain hereby declare and agree to lay down our arms for this administration to immediately commence the other part of the bargain,' Ben said."
EFE News Services reports that Brazilian Planning Minister Paulo Bernardo da Silva on Wednesday indicated that the US National Security Advisor, Gen. James Jones, indicated that the US was prepared to offer $10 billion in loans to develop the country's sub-salt reserves off its coast.
"He said the US Export-Import Bank already has signed a letter of intent in that regard with Brazilian state oil company Petrobras.Meanwhile, Andre Soliani Costa and Alex Emery at Bloomberg report that the Brazilian Energy Minister, Edison Lobao, told reporters that Brazil and Peru are considering five hydroelectric projects that may cost as much as $15 billion.
The loan is equal in value to a similar credit line agreed to with the China Development Bank, also for exploiting Brazil's 'pre-salt' area, so-named because the estimated 80 billion barrels of high-quality crude in that new oil frontier lie far beneath the ocean floor under layers of rock and an unstable salt formation."
"'We need to have energy, to ensure Brazil’s energy security,' Lobao said. 'Whatever exceeds Peruvian needs will be exported to Brazil, which may re-ship the energy to other neighboring countries.'10. NEW ENHANCED RECOVERY TECHNOLOGY DEVELOPED BY CHEVRON MAY SUBSTANTIALLY INCREASE THEIR BOOKABLE BARRELS
Brazil is expanding its electricity grid to link jungle dams to industrial centers and reduce costly diesel-fuel generation. Latin America’s largest economy needs to boost its generating capacity by 50% in 10 years to 150,000 megawatts, Lobao said in March."
Sheila McNulty at FT Energy Source reports that Chevron has invented an innovative carbonated steam flood technology to enhance recovery from oil fields--Berstein Research says it could several times over.
"It notes in a new report that the Middle East has many other examples of large scale heavy and intermediate oil accumulations trapped within carbonate reservoirs, and the role of steam assisted recovery in accessing these resources is only just getting started.Berstein estimates that the new method of enhancing recovery could increase Chevron's booked barrels quite substantially,
Chevron’s technology works by pumping steam into the carbonate reservoir, which heats up the heavy oil in the reservoir, reducing its viscosity so that it can more easily flow. At the same time it creates a pressure gradient, which pushes the oil towards vertical production wells.
Chevron this year began testing the technology in the partitioned neutral zone between Saudi Arabia and Kuwait, in which Chevron owns a 50% share of the resources."
"this could equate to an additional 600-1,800 million barrels of oil equivalent of booked reserves being added over a number of years. This equates to approximately 5%-16% of Chevron’s 2008 end of year reserve base."Worth reading in full.
11. UNEMPLOYMENT DOWN TO 9.4% IN JULY FROM JUNE, PRIVATE SECTOR HAS ADDED ZERO NEW JOBS IN 10 YEARS
Justin Fox writes that the July monthly employment report by the Bureau of Labor Statistics showed that non-farm employment was
"down 247,000 in July—compared with 395,000 in June and an average of 645,000 during the dark months of November through April."The official unemployment rate fell to 9.4% from 9.5% in June. The U-6 number, for "marginally attached workers," also fell.
"Without the seasonal adjustments, employment fell a whopping 1.3 million in the month. And there were 5.9 million fewer jobs in July 2009 than in July 2008.'Floyd Norris at the New York Times reports that for the first time since the Great Depression, the US has added virtually zero jobs in the private sector.
"Until the current downturn, the long-term annual growth rate for private sector jobs had not dipped below 1% since the since the early 1960s. Most often, the rate was well above that."12. NEW FED REPORT SHOWS RATE OF GLACIERS MELTING IN NORTH AMERICA ACCELERATING
Jim Tankersley at the Los Angeles Times reports that the federal government yesterday released its most comprehensive study yet of melting glaciers in North America which showed that their rate of shrinkage is accelerating.
"For five decades, USGS researchers have periodically measured the glaciers' size with tools including measurement stakes and photographic surveys. Their data include tallies of winter snow accumulation and summer melt.
In each case, the data show that summer melting accelerated in the last 20 years. At the same time, winter snowpacks have tapered off. The reduced accumulations and increased melts have resulted in shrinking glaciers.
South Cascade Glacier, for example, had a volume of nearly 0.06 cubic mile of water in 1958, Josberger said. By 2008, it was down to 0.03 cubic mile.
When glaciers shrink, water runoff declines, setting the stage for drier conditions in the region, particularly at the end of summer, when other supplies of water dwindle."