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Volatility Saps Momentum for China’s Market Reform

BEIJING—As China’s central bank fights to stick with a year-end timetable it set to open up the country’s markets, questions are emerging about whether the creaky financial system, and the people who run it, are up to the task. Permitting market forces more influence over the exchange rate, a path the People’s Bank of China embarked on this week , is only one step on the road to tearing down the barriers that keep money from flowing across China’s borders. While President Xi Jinping himself has promoted the idea of market forces playing a decisive role in China’s economic priorities, the PBOC has led the push to liberalize capital markets. But China’s stock market meltdown exposed significant holes in the country’s financial regulations that its watchdogs are now trying to plug. That leaves political leaders and the technocrats who run the government with little capacity or appetite to oversee […]

Posted On : Published By : Tom Whipple
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Oil Majors’ $60 Billion Cuts Don’t Go Far Enough as Crude Slides

The $60 billion of oil-industry spending cuts this year aren’t likely to be enough to meet sacrosanct dividend commitments as crude languishes near a six-year low. The world’s biggest producers will need to trim investments by a further $26 billion, according to Jefferies Group LLC. Capital spending will have to fall 10 percent next year, Banco Santander SA says. Oil companies are bracing for “lower for longer” prices as a global supply glut persists, dragging crude to the lowest close since March 2009 in New York on Tuesday. Royal Dutch Shell Plc, which has reduced spending 20 percent this year, has “more levers to pull” should the market weaken further, according to Chief Executive Officer Ben Van Beurden. The tightening means international producers such as Shell and Chevron Corp. can break even at a lower crude price — about $10 lower than before they started cuts last year, according […]

Posted On : Published By : Tom Whipple
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BP’s Whiting refinery handicapped for several weeks

Outage at part of BP’s refinery in Whiting, Ind., leaves Great Lakes states spared from national trend of falling gasoline prices. Photo courtesy of BP. WHITING, Ind., Aug. 13 (UPI) — While BP was officially mum on the issue, at least one petroleum analyst said it may be several weeks before the Whiting refinery is running at full capacity. BP said in an emailed statement one of the largest of three crude oil distillation units at the Whiting refinery was closed Saturday for "unscheduled repair work." "While the rest of the refinery continues to operate safely, the outage has reduced production," BP spokesperson Scott Dean said. The refinery is the largest in BP’s portfolio and, with a production capacity of 413,000 barrels per day, the sixth largest in the United States. It can process 19 million gallons of fuel for commercial and private vehicles and the outage has caused […]

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New ozone limits unnecessary, 370 state business groups declare

The US Environmental Protection Agency’s proposal to reduce ozone limits is both costly and unnecessary, 370 state business groups from across the country—including petroleum councils affiliated with the American Petroleum Institute—told White House Chief of Staff Dennis McDonough. EPA’s current regulations are working, air quality continues to improve, and the United States is leading the world in reducing emissions,” the groups said in an Aug. 13 letter to McDonough. “New ozone standards could significantly damage the economy by imposing unachievable emissions limits and reduction targets on almost every part of our country, including rural and undeveloped areas,” they continued. “Therefore, we strongly urge you to retain the current ozone standards when finalizing this proposal.” EPA proposed reducing allowable ground level ozone limits under the National Ambient Air Quality Standard (NAAQS) from 75 ppb, where they were set in 2008, to a 65-70 ppb range late last year ( OGJ […]

Posted On : Published By : Tom Whipple
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U.S. shale firms turn to private equity as market funding tails off

A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013. A renewed slide in crude prices is having the effect U.S. energy sector dealmakers and private equity managers have been looking for: oil companies are now returning calls from potential buyers. Throughout much of the crude market rout that started in mid-2014 oil firms could rely on generous capital markets investors betting on a quick recovery in prices, which made any asset sales look unattractive. But since crude prices began tanking again in early July after a partial three-month recovery, oil firms have finally started to feel the squeeze. A torrent of $44 billion in high-yield debt and share sales in the first half of this year has slowed to a trickle with oil now at just above $42 a barrel, 30 percent below its June levels and 60 percent down from June 2014, […]

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U.S. refinery outages give European gasoline late boost

British Petroleum oil refinery as seen in Whiting, Indiana, August 16, 2007. A string of refinery outages across the United States and unrelenting demand for gasoline in the country have given European gasoline a late boost to counter the traditional decline in overseas demand as summer draws to a close. About 1.7 million tonnes of gasoline have been booked for loading in August from Europe to the east coast of the United States and the Gulf Coast, Reuters ship-tracking data showed, in what traders said has been an exceptionally strong month. With oil prices more than halving over the past year, demand for gasoline in the United States has surged in recent months as motorists drive more and buy larger cars. U.S. and global demand for gasoline has been the main engine supporting refining margins in recent months. The difference between the prices of crude oil and gasoline, used […]

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States Move to Block Obama Administration’s New Carbon Rules

WASHINGTON—Fifteen states asked a federal court Thursday to temporarily block Obama administration carbon regulations while they mount a full legal challenge to the rules. The move is the first step in what is expected to be a yearslong court battle over recently completed Environmental Protection Agency rules that call for carbon emissions from power plants to be cut 32% by 2030 from 2005 levels. The rules are the cornerstone of President Barack Obama ’s climate agenda. The states asked the U.S. Court of Appeals for the District of Columbia to issue an emergency stay blocking the rules, noting that they would be required “to spend significant and irrevocable sovereign resources now” to be in a position to meet the initial deadline of Sept. 6, 2016 for states to submit compliance plans to the EPA. The states are mostly from the South and Midwest, including Ohio, Michigan, Florida Georgia, West […]

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BP Manipulated Texas Natural Gas Market in 2008, Judge Says

A U.S. regulatory judge ruled BP BP -1.43 % PLC manipulated the Texas natural gas market in 2008 and said fines against the British energy company could increase because the scheme took place after earlier market manipulation. The ruling by Carmen A. Cintron, an administrative law judge for the U.S. Federal Energy Regulatory Commission, found BP flooded a Texas delivery point with natural gas to drive down prices there in the physical market, while at the same time placing trades in related financial markets that would benefit from the reduced price. BP said Thursday it disagreed with the judge’s conclusions and would appeal the decision to the full FERC commission. “BP is committed to adhering to the highest ethical standards,” the company said. It had maintained in case filings and an earlier hearing that the trading wasn’t improper and that FERC’s analysis of the evidence was flawed. A FERC […]

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Oil at $30 Is No Problem for Some Bakken Drillers Cutting Costs

The lowest crude prices in six years might not be enough to put the brakes on the U.S. energy renaissance. Some parts of North Dakota’s Bakken shale play are profitable at less than $30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That’s less than half the level of some estimates when the oil rout began last year. The lower bar for profitability is one reason why U.S. oil production has remained near a 40-year high even as crude prices fell more than 50 percent over the past year to the lowest level since March 2009. “One of the explanations for why production hasn’t fallen off is that the cost has gone down so much,” David Hackett, president of Stillwater Associates LLC, an energy consulting firm in Irvine, California, said by phone. “The marginal cost to produce has […]

Posted On : Published By : Tom Whipple
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Euro zone economy sputters as China risks loom

A steel-worker is pictured at a furnace at the plant of German steel company Salzgitter AG in Salzgitter, Lower Saxony on March 17, 2015. Germany enjoyed robust if unspectacular growth in the second quarter while the French economy stagnated, leaving policymakers looking at a fragile euro zone recovery and risks from volatile Chinese markets. The German economy, Europe’s largest, grew by 0.4 percent on the quarter — a slight acceleration from 0.3 percent in the first three months of the year but below expectations for a 0.5 percent expansion as weak investment acted as a drag. In France, a jump in exports was not strong enough to offset the impact of weak consumer spending and changes in inventories and growth came to a standstill after a strong first quarter. Data for the whole of the euro zone is expected at 0900 GMT. The readouts from the euro zone’s two […]

Posted On : Published By : Tom Whipple