Oil Price – Traders Are No Longer In Panic Mode To Find Buyers For Unwanted Oil As Demand Ticks Up


Oil markets are returning to relative normality, the once yawning gap between the price of an actual physical barrel of oil and futures prices has narrowed sharply.

At its worst in April, a barrel of oil in the North Sea cost $10 less than the price on a Brent oil futures contract, a decade-high gap for the world’s benchmark oil price, according to S&P Global Platts. Now, the gap has shrunk to less than $2 a barrel as the oil market rebalances and traders are no longer in panic mode to find buyers for unwanted crude.

“A few weeks ago, we had armageddon pricing when nobody wanted physical barrels apart from for storage,” said Richard Fullarton, chief investment officer at hedge fund Matilda Capital Management Ltd.

The price of physical oil slipped far below futures prices last month when oil storage ran short and the cost to store crude jumped. The two prices tend to collide ahead of the expiration of futures contracts.

The return to health in the physical oil markets reflects several factors. Oil producers have made large, coordinated cuts in production. China’s economy has restarted and lockdowns in Europe and the U.S. eased, creating an uptick in demand. And a shortage of oil storage, which at one point drove U.S. oil futures prices into negative territory, appears to have peaked.

Oil prices, both physical and futures, have almost doubled since their April nadir, though they slipped Friday after China abandoned its yearly gross domestic product growth target.

Front-month futures for Brent crude, the global benchmark, fell 2.6% to $35.13 a barrel Friday, having rebounded from their $19.33-a-barrel low on April 21. Its physical counterpart was priced at $34.13 a barrel late Thursday.

Physical oil tends to be traded by major commodities trading houses, oil companies and refiners who have the financial heft and logistical capacity to store large amounts of oil in case they need to wait for a better pricing environment.

One of the largest independent traders, Trafigura Group Pte., has been on a buying spree. The Swiss company snapped up at least 15 cargoes of North Sea crude—amounting to 9 million barrels of oil—between May 13 and 21, according to S&P Global Platts. Trafigura declined to comment on its bet on North Sea crude, which was reported by Reuters.

Smaller traders also buy physical barrels of oil or refined products, for instance by filling fleets of tanker trucks with gasoline, selling it on to gas stations when prices move higher.

Overall, the gap between physical oil and futures was more pronounced in international markets than the U.S. As a largely seaborne crude, Brent producers could rush to store oil on massive tanker ships. Sellers of the largely landlocked U.S. benchmark, West Texas Intermediate, had to pay buyers to take it off their hands when futures prices turned negative on April 20.

Unlike Brent oil futures, which are all cash settled, some WTI futures contracts require their owners to take delivery of physical oil when the contracts settle. Even so, physical WTI at the end of March was $6 less a barrel than the futures market.

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That gap is now close to gone. The storage conditions were feared to be most acute in Cushing, Okla., where WTI contracts are settled.

“We didn’t see tank tops at Cushing. Instead we’ve seen phenomenal levels of shut-ins,” said Edward Marshall, a commodities trader at Global Risk Management, referring to the act of oil producers turning off wells to choke supply.

A pickup in refiner demand to supply Americans getting back on the road has helped WTI’s recovery. Pipeline flows from Cushing to Midwestern refiners are 400,000 barrels a day higher than they were in early April, according to commodity-market information provider Genscape.




Stocks Surge As Oil Prices Rally

Stocks have their biggest gain in weeks as Wall Street is encouraged by a vaccine prospectvaccine prospect. Many of the world’s economies have begun to loosen restrictions on commerce, the Federal Reserve chair on Sunday signaled that the central bank has more firepower to lend to recovery efforts, and a drugmaker reported positive developments in an early trial of a coronavirus vaccine.


Taken together, the developments set off a surge in global stock prices and Wall Street had its best day in about six weeks.

The S&P 500 rose more than 3 percent Monday, while stock benchmarks in Europe were 4 percent to 6 percent higher.

Before trading began in the United States, the drugmaker Moderna said its coronavirus vaccine showed promising early results in tests on humans. The early-stage tests were on just eight people, but the hope that a vaccine might be quickly developed was enough to give stock prices a lift.

Also bolstering markets was a pledge from Jerome H. Powell, the Fed chair, that there was “really no limit” to what the central bank could do with its emergency lending facilities.

“The one thing I can absolutely guarantee is that the Federal Reserve will be doing everything we can to support the people we serve,” Mr. Powell said during a television interview broadcast on Sunday.

The Fed chair also suggested that the worst economic readings were yet to come, even as states begin to gradually reopen. He said that he expected “a couple more months” of job losses and acknowledged that the unemployment rate, which hit 14.7 percent in April, could peak at 20 percent or even 25 percent.

Still, investors were looking for silver linings as the world grapples with lockdowns and other restrictions. Japan released economic figures on Monday that showed its economy formally fell into recession, but Tokyo has begun easing some of its containment efforts. Some restrictions have also been lifted in parts of Europe and the United States.

And trading on Monday had all the characteristics of a rally focused on the prospects for a return to normal. Shares of companies that stand to gain the most, like United Airlines, Expedia Group and Marriott International, were among the best performers in the S&P 500.

Businesses that have benefited as Americans stockpiled food and cleaning supplies, like Campbell Soup and Clorox, were among a small number of decliners.

Oil prices also reflected optimism about the economy, with West Texas Intermediate, the U.S. benchmark, rising above $30 a barrel for the first time since March. Shares of energy companies like Chevron and Exxon were also sharply higher.


Oil Outlook Vastly Different Than When It Plunged Into Negative Territory A Month Ago

The fortunes of the oil market have turned around dramatically in the past month. This time last month, investors were watching the futures market in disbelief. The May contract for West Texas Intermediate oil was set to expire, and prices did the unthinkable — they plunged 300% in one day, deep into negative territory. In the spot market all across North America, prices also turned negative, meaning people literally couldn’t even give oil away.


There were dire forecasts of much more pain ahead, and a recurrence of the wild trading was feared for the June contract. But now the outlook is much improved, as the June contract is set to expire Tuesday. The world has changed, and the ugly crisis created by both oversupply and a sudden lack of demand is beginning to reverse.

“We think fundamental right steps have been taken to get us on sounder footing,” said Helima Croft, head of global commodities strategy at RBC. Croft said the “green shoots of recovery in place,” as Chinese and U.S. demand are improving, and OPEC plus ended its feuding and agreed to sharply cut output.

China has been buying more oil, and its demand is clearly strengthening. U.S. drivers are getting back into their cars as coronavirus shutdown restrictions lift. On the supply side, Saudi Arabia last week added another 1 million barrels a day cut of its own to the OPEC plus deal for a 9.7 million barrel reduction, and America’s oil industry has cut its production quickly and sharply.

Oil prices jumped sharply Monday, rising on the positive developments and a rally in risk markets sparked by Fed Chairman Jerome Powell’s comments that the Fed will can do more to support markets and the economy. WTI futures for June were up 7.4% at $31.62 per barrel in afternoon trading.

Now, the demand side of the market and the supply side are improving in tandem, to reduce the oil glut that was close to filling all available storage facilities, including ships at sea. The fact that the world was running out of places to store oil in April was behind the sharp drop in the futures contract. Investors were unable or unwilling to take delivery of oil, and there were also investors who became trapped in the trade as the selling spiraled. Interactive Brokers took a $109.3 million hit to cover its customers’ losses.

Oil is now trading above $30 for the first time since March 17, and RBOB gasoline futures have risen above $1 per gallon for the first time since March 13. The strong move higher in the June contract is also forcing some investors to cover short positions, adding to the rise.

The United States Oil Fund ETF, based on futures contracts, was up more than 8% Monday. Some investors initially blamed USO for causing the market disruption last month, but the fund had already rolled out of the May contract before the market began to crater. A popular oil play for retail investors, USO has since restructured its holdings to distribute them more evenly across later dated contracts, rather than holding them in the front month.

As the June contract gets set to expire, the landscape has changed dramatically for the U.S. oil industry. U.S. production was at a record high in March, and has cut back by 1.5 million barrels a day in just about six weeks, to 11.6 million barrels a day, according to the Energy Information Administration’s latest weekly data. Analysts expect production could be down by another 500,000 to 1 million barrels soon.

“It’s just a massive response by the U.S. industry,” said John Kilduff, partner with Again Capital. “This is a remarkable plunge in activity. … It’s pretty clear the U.S. is now the swing producer.”

Baker Hughes reported that another 34 oil rigs went out of service last week, leaving just 258 active oil rigs, about a third of the rig count last year.

“Storage at Cushing actually fell last week. That was the whole mechanism last month that drove the negative pricing,” said Kilduff. “There were barrels to take in and no place to put them.” Cushing, Oklahoma is the storage hub for WTI, so the market watches storage levels there closely.

“The pace was such that it would have been topped out by the end of June,” Kilduff said, but that seems to have reversed. Traders said oil prices were also lifted Monday by a report from Genscape that showed another big drop in Cushing storage levels. Government data on the latest storage levels will be released Wednesday.

The weekly U.S. government data shows implied demand for gasoline was also up sharply, with demand at 7.4 million barrels a day, from the early April trough of 5.1 million barrels a day. Normal demand for this time of year is about 9.5 million barrels a day, and it peaks ahead of the July 4 holiday. Analysts said the government data overstates retail demand, which is more like 6.5 million barrels a day in mid-May.

Analysts say demand has improved and as of last week, it was off by about 30% from normal levels, much better than the approximately 50% drop in demand in early April. U.S. gasoline demand is key because it is typically equal to about 10% of global oil demand.

Francisco Blanch, head of global commodities and derivatives at Bank of America, said he expects the rally to continue for now, but prices will not go that much higher. “This is a recovery that has a pretty low ceiling. My sense is that if prices approach $40 a barrel, then production will come back pretty quickly,” he said.

Oil prices were also helped Thursday by a news report that Chinese demand has returned to levels near where it was before the lockdown there.

RBC has been tracking Chinese data, including on airline flights, and it expects demand will recover an average 9% this quarter, 17% in the third quarter and 25% in the fourth quarter from the lows seen during the first quarter. Croft expects the recovery in China to be the quickest, relative to other global regions.


Oil Prices Boosted By Saudi Arabia Pledge To Deepen Output Cut

Oil futures rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June in a bid to help drain the glut in the global market that has built up as the coronavirus pandemic crushed fuel demand.

Brent crude (LCOc1) futures advanced 0.5%, or 15 cents, to $29.78 at 0500 GMT, after hitting an intraday high of $30.11 a barrel.

U.S. West Texas Intermediate (WTI) crude (CLc1) futures were up 1%, or 26 cents, at $24.40 after touching an intraday high of $24.77.

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Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40% from April.

“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” Stephen Innes, chief global market strategist at AxiCorp, said in a note. OPEC+ is a group comprised of members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia.

The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total. Kazakhstan has also ordered producers in large and mid-sized oil fields including Tengiz and Kashagan to cut oil output by around 22% in the May to June period.

Still, the moves to deepen cuts raised questions for some about why the further cuts were needed.

“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?'” said Vivek Dhar, Commonwealth Bank’s mining and energy economist.

The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.

However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of COVID-19 cases spurring renewed lockdowns.

Data showing China’s April factory prices fell at the sharpest rate in four years also added to investor jitters as it revealed weak industrial demand.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” said Commonwealth Bank’s Dhar.

Inventory data this week will be key to extending the recent rally in oil prices, analysts said.

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U.S. crude inventories likely rose by about 4.3 million barrels in the week to May 8, a preliminary Reuters poll showed, ahead of reports from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday.


The World Is Running Out Of Room For Its Oil

Lockdown measures are crippling demand, and supply isn’t falling quickly enough to keep up. Oil-storage tanks around the world are rapidly filling with crude, leaving the new production coming out of the ground with nowhere to go.

The overwhelming glut is threatening one of the world’s vital industries and could prolong the economic fallout from the coronavirus. As storage filled, one price for U.S. crude recently fell below $0 a barrel—a first in oil-market history—effectively meaning sellers would have to pay buyers to take barrels off their hands.

Even with a recent rebound as parts of the world reopen for business, oil trades at a fraction of where it started the year. U.S. crude futures closed down 1.8% at $23.55 a barrel Thursday, extending a streak of wild moves by erasing an earlier 11% rally. Most energy companies would lose money producing at these levels.

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Stockpile data are incomplete or delayed, but recent figures already illustrate the crisis. Global oil inventories fall into two main categories: commercial stockpiles and strategic reserves held for emergencies. Most investors focus on changes in commercial inventories because those are most sensitive to shifts in global supply and demand.

Producers and traders who don’t want to sell crude at today’s low prices can try to store it in hubs around the world, then sell in the future. The problem now is that demand for storage space is skyrocketing.

U.S. commercial stockpiles are rising at their quickest pace ever in government data going back to 1982. At 532.2 million barrels during the week ended May 1, inventories are soon expected to blow past a record of 535.5 million barrels set in March 2017.

The increase has been pronounced in Cushing, Okla., a key hub. Analysts said dwindling storage space in Cushing contributed to the recent drop in one futures contract below $0 a barrel. On April 20, that futures contract was close to its expiration date—meaning traders had to either sell it or accept delivery of actual barrels of oil at Cushing by the following month.


Those stuck holding the contracts likely couldn’t find available storage for oil and began paying others to take the contracts from them.

It is hard to know how much space is actually available. Logistical hurdles mean storage tanks can’t be filled to the brim, and competition for remaining space is fierce. That means much of the remaining empty room could have already been claimed for future use. Even so, the official Energy Information Administration figures show Cushing inventories rising at a pace that would have them completely full in weeks.

As a result, crude-futures prices recently traded around their lowest levels in two decades.

Normally, when oil prices slide, consumers travel more, limiting the price drop and eventually spurring a rebound. But with much of the world practicing social distancing, fuel consumption has plummeted.

That means companies industrywide are struggling. Refiners such as Marathon Petroleum Corp. and Valero Energy Corp. that take in oil and turn it into petroleum products including gasoline are bringing in much less crude. The extra crude must find a home in storage.

In addition to Cushing, other U.S. storage hubs are located in the Gulf Coast. A flood of oil from Saudi Arabia, the world’s largest exporter, is starting to arrive in the region—fallout from a March production feud between the kingdom and Russia that raised global supplies even as demand crashed.

That extra crude could make the glut in the U.S. even worse. Oil normally moves seamlessly through a network of pipelines and storage hubs across the country, but more of it will have nowhere to go.

The excess oil is forcing energy companies to curb spending and shut in productive wells. Some companies are starting to go bankrupt and lay off employees. The turmoil is erasing hundreds of billions of dollars from the sector’s market value.

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There is also a large amount of oil floating at sea with nowhere to go, according to cargo tracker Kpler. Some ships have even been crowding off the California coast recently.

Oil-market analysts are also watching inventories overseas, particularly in China, the world’s largest commodity consumer. Figures from analytics company Kayrros show a rise in those stockpiles recently, too.

And with supply projected to continue exceeding demand for now, many analysts expect prices to remain volatile.


Natural Gas Is Flaring Up

Rising Natural Gas Prices Are a Hot Bet…

Investors, who just weeks ago shunned the fuel and the companies that sell it, are unwinding wagers that prices will fall, bidding up producers’ beaten-down shares and even buying their new bonds.

The reason for optimism: The historic collapse in crude prices thanks to the new coronavirus has energy producers racing to close oil wells.

Shutting in productive wells in crude-drilling regions like North Dakota and West Texas not only keeps oil in the ground and off the flooded market, it also chokes off a lot of gas that is extracted as a byproduct. When crude prices last month dipped below $0, natural gas prices had their best day in more than a year, popping 9.75% on the prospect that many money-losing wells will be capped.

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Meanwhile, coal, not gas, has suffered the worst of the reduced demand for electricity during the pandemic. Coal’s share of U.S. electricity generation is down by about a third from last year, according to Energy Information Administration data.

The result is renewed interest from investors in natural gas and its producers.

Hedge funds and other speculators on April 21 became net long—with more wagers on rising gas prices than bets counting on decline—for the first time since last May, according to Commodity Futures Trading Commission data.

They added bullish positions this week. Though the difference between long and short bets is relatively small, it represents a dramatic shift in sentiment. Gas speculators were piled into their largest net short position on record in mid-February.

Since February, shares of Appalachian gas producers EQT Corp. and Range Resources Corp. have more than doubled while CNX Resources Corp. stock has gained 91%. The broader stock market has been down 4.2% over that same time, and the sector’s benchmark SPDR S&P Oil & Gas Exploration & Production exchange-traded fund has lost 19%. Over the past three months, Cabot Oil & Gas Corp., a top producer in Pennsylvania, has risen 45%, second best in the S&P 500 after Regeneron Pharmaceuticals Inc., which investors have banked on developing a Covid-19 treatment.

SunTrust Robinson Humphrey analysts raised price targets for shares of seven gas producers by an average of 69%. Tudor, Pickering, Holt & Co. recommended shares of EQT, Cabot Oil & Gas Corp. and Tourmaline Oil Corp. in Canada to capture near-term gains related to what the Houston firm estimates will be 6 billion to 7 billion cubic feet of gas a day leaving the market as oil wells are shut.

Debt investors are warming too. EQT’s bonds traded down to 61 cents on the dollar in March but are back up to near par. Last week, the Pittsburgh company launched a $350 million convertible bond offering that generated so much interest that it ended up issuing $440 million of debt, according to CreditSights, which upgraded its rating of EQT. CNX followed with its own offering this week of $300 million of debt that can be swapped for shares.

Natural gas futures for June delivery lost 3% on Friday to close at $1.89 per million British thermal units after climbing to $2.016 in early trading. That’s still too low for many gas wells to be profitable, yet the price is up 22% from the 25-year-low of $1.552 on April 2 and the trend is higher heading into summer, when there’s demand to power air conditioners, and more so in winter, when a lot of gas is burned for heat.

Futures for July delivery reached $2.25 Friday before giving up gains. December gas nosed briefly above $3.

“We think the dry gas producers are attractive,” said Mark Unferth, a portfolio manager at Alpine Capital Research, referring to companies that don’t produce much poorly priced oil and natural gas liquids. “We’ve been adding to our exposure the past six weeks and overall it’s about 5% of our portfolio.”

Companies like EQT and CNX, which make their money selling gas, had to rapidly lower operating costs to keep up with oil-drilling competitors that didn’t particularly care about the price of gas and flooded the market with it when crude prices were higher. As U.S. oil production surged to records, so did gas output. Appalachian gas producers had to adapt to prices first below $3 and then this past winter to less than $2.


Those efficiency gains should translate to profits on even small improvements in gas prices, Mr. Unferth said.

“When gas prices were at $3.50 you could afford to be sloppy but low prices have forced people to be a lot more efficient in the field,” he said.


Shell Slashes Dividend For The First Time Since World War II


Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Oil giant Royal Dutch Shell on Thursday cut its dividend to shareholders for the first time since World War II, following a dramatic slide in oil prices amid the coronavirus crisis.

The board at Shell said it had decided to reduce the oil major’s first-quarter dividend to $0.16 per share, down from $0.47 at the end of 2019. That’s a reduction of 66%.

“Shareholder returns are a fundamental part of Shell’s financial framework,” Chad Holliday, chair of the board of Royal Dutch Shell, said in a statement.

“However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the Board believes that maintaining the current level of shareholder distributions is not prudent.”

Shell also reported that net income attributable to shareholders on a current cost of supplies (CCS) basis and excluding identified items, which is used as a proxy for net profit, came in at $2.9 billion for the first quarter of 2020. That compared with $5.3 billion in the first quarter of 2019, reflecting a year-on-year fall of 46%.

Analysts polled by Refinitiv had expected first-quarter net profit to come in at $2.5 billion for the quarter.

Shares of Shell dropped to the bottom of the European benchmark during early morning deals, down more than 7%.

Last week, Norway’s Equinor became the first oil major to cut its dividend this earnings season. It raised concern that other energy giants may follow suit, although BP, which reported Tuesday, maintained its dividend.

Investors will now be watching U.S. oil majors Chevron and Exxon Mobil, which are both due to release results Friday.

Tamas Varga, senior analyst at PVM Oil Associates, told CNBC via email that Shell had taken the “same approach” as Norway’s Equinor by cutting its quarterly dividend by roughly two-thirds.

“As demand destruction bites, cash is king.” Varga said, adding that suspending share buybacks, slashing capital expenditure and reducing dividends were “becoming the norm.” Shell CEO Ben van Beurden described energy market conditions through the first three months of the year as “extremely challenging.”

“Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell,” he added.

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Alongside the cut to its dividend, Shell announced it would not continue with the next tranche of its share buyback program. Since the launch of the program, the oil major said it had bought back almost $16 billion in shares for cancellation.

“On the face of it, the dividend cut and cancellation of share buybacks may be seen by some shareholders as a negative move in the short term,” David Barclay, senior investment manager at Brewin Dolphin, said in an email.

“However, looking further ahead it could well prove to be the right step as Shell looks to strengthen its financial position and cut costs during a very difficult time.”

The energy giant’s results come shortly after a historic plunge in oil prices.

The May contract of U.S. West Texas Intermediate plunged below zero to trade in negative territory for the first time in history last week. Trading volume was thin given it was the day before the contract’s expiration date, but, nonetheless, the move lower was extraordinary.

WTI futures had fetched more than $60 a barrel at the start of the year. A dramatic fall-off in demand as a result of the coronavirus outbreak has sent oil prices tumbling.

On Thursday, the June contract of WTI traded at $16.55 per barrel, almost 10% higher for the session, while international benchmark Brent crude stood at $23.81, up around 5%.

Earlier this week, BP reported first-quarter net profit had fallen 67% compared to the same period a year earlier.


Crude Oil Volatile – Dysfunction In The Oil Market Intensified, Sending The Most Popularly Traded U.S. Oil Contract To A Fresh Low

Oil prices recovered some losses Tuesday after traders scrambled to avoid the worst of the damage wrought by volatile markets. The world is awash with too much oil at a time when coronavirus lockdowns on driving, flying and industrial activity has all but eliminated the need for the stuff.

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June futures contracts for West Texas Intermediate—the main U.S. bellwether—dropped nearly 20% and touched $10.24 a barrel before regaining ground to around $13.56 a barrel, up 6% on the day. Brent crude was up 2.9% at $23.72 a barrel. WTI traded at a massive difference to its European counterpart because of severe bottlenecks in storing oil in Cushing, Okla., where WTI contracts are settled.

The earlier drop in WTI briefly put it on track for the lowest closing level for an actively traded contract since at least 1986, according to data provider FactSet. WTI has only ever settled the day below $11 on six occasions, according to FactSet records, which stretch back to 1986. The last time was in 1998. The all-time low was March 31, 1986, when oil traded for $10.42.

A lightly traded futures contract for WTI traded for negative prices last week, spooking markets, and prompting investors to race out of contracts that require them to take delivery of oil in the coming months. Most oil watchers consider the most actively traded contract at any given time as the price that best reflects market conditions.

The selloff picked up steam Tuesday as investors sold the June contract and into ones that are tied to oil delivered in months down the road, said Giovanni Staunovo, commodity analyst at UBS’s Chief Investment Office.

“Everyone’s running out of the contract and they don’t want to be the last ones on the train, so that’s not helping prices,” Mr. Staunovo said.

S&P Dow Jones Indices said in a statement after Monday’s market close that it would remove the June U.S. crude contract during Tuesday trading hours from its widely followed indexes that track the oil market and switch to the July contract.

The move, which S&P said would include the S&P Goldman Sachs Com modity Index, comes earlier in the trading month than usual, and was “based on the potential for the June 2020 WTI Crude Oil contract to price at or below zero,” the index announcement said. BlackRock’s iShares S&P GSCI Commodity-Indexed Trust exchange-traded fund tracks that index and had around $400 million of assets as of April 27, according to the fund website.

BlackRock didn’t immediately respond to a request for comment.

That followed a decision by the United States Oil Fund —the largest exchange-traded fund that attempts to track oil prices—to sell its positions in the June contract and purchase positions in contracts several months away.

The crash in prices, and the dip into negative territory for the May contract last week, highlighted the dangers associated with holding oil futures that expire soon. Some WTI contracts require owners to take delivery of oil when the contracts expire. With oil tanks and pipelines full, some oil investors were forced to unload the right to collect that oil and pay the buyer to do so.

Many fear that negative oil prices could happen again. Prices on WTI contracts for July delivery have also come down in recent days to $18.99 a barrel. Contracts for delivery at the end of the year are at about $27 a barrel.

Government-imposed lockdowns aimed at preventing the spread of the coronavirus have suffocated global oil demand. Oil majors, frackers and national oil companies around the world have raced to shut off wells. A deal among major oil-producing nations to cut due to take effect Friday that will hold back approximately 13% of global supply.

But investors worry these measures won’t relieve the supply glut fast enough.

A lack of space to store oil onshore in the largely landlocked U.S. market has pushed WTI prices lower, said Bjarne Schieldrop, chief commodities analyst at SEB Markets. The hit to Brent prices, which are tied to oil produced in the North Sea, has been less severe. The Brent market is largely seaborne and space to store oil offshore remains. But as long as production continues amid weakening demand, space will run out, Mr. Schieldrop added.

“The final crunch point in time is still ahead of us,” he said. “Supply and demand will be forced to align meaning that production will have to shut down. That will be the final low point, but we are not there yet.”

Investors will keep a close watch on U.S. inventory data due out this week, with American Petroleum Institute stock-level data expected later Tuesday.




Oil Glut Swells Off Asian Trading Hub On Global Storage Scramble

A narrow waterway off Singapore has become even more congested as oil-laden tankers wait out a slump in global fuel consumption that’s crimped demand and boosted the use of ships to store cargoes.

About 60 clean fuel tankers are currently anchored along the busy strait, up from the usual 30-40 ships, according to Rahul Kapoor, head of commodity analytics and research at IHS Markit. Some vessels are being used to hoard fuel at sea as onshore tanks fill up. Others are probably parked, waiting to be redirected to any willing buyer across Asia and the world as the coronavirus pummels economies worldwide.

Ships filled with gasoline to jet fuel are moving from major refinery hubs such as South Korea and China due to a crash in domestic demand and swelling stockpiles. These tankers are finding their way to the Singapore Strait, where the glut is being compounded by offloading delays at the city state. Vessels currently have to wait about two weeks to discharge cargoes in Singapore, compared to the typical 4-5 days, according to shipbrokers and traders, leaving ships stranded in local waters.

Storage options are dwindling globally as onshore tanks rapidly fill to capacity, prompting traders, refiners and infrastructure companies to seek alternatives such as pipelines and ships. Bloomberg earlier reported that those who managed to snag some highly-coveted tanks in Singapore were being charged much higher rates, even as the nation stopped leasing out space to new customers.

Major fuel-exporting countries are facing difficulties finding homes for their surplus barrels,” said Sri Paravaikkarasu, Asia oil head at industry consultant FGE. In Singapore, crude processing rates at refineries have probably dropped to around 60% of capacity, and may drop further to as low as 50% during the second quarter, she said.

The onshore storage squeeze is being seen across the region. In India, tanks were 95% full as of last week as refiners scrambled to find space to hold their excess fuel, even turning to pump stations and depots. In Singapore, fuel stockpiles rose to a four-year high in mid-April.

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Utilizing tankers has become the next best option, with analytics firm Vortexa estimating floating crude oil storage in Asia at a four-year high. Taking into account the waters off Singapore as well as Malaysia, data intelligence firm Kpler saw a 45% month-on-month increase in the volume of clean fuels — comprising naphtha, gasoline, jet fuel and diesel — stored on ships to 6.64 million barrels as of April 23.

Across the world, freight rates for both clean as well as dirty tankers have surged dramatically along with rising demand for floating storage. Also, shippers are using a strategy known as slow steaming, where they deliberately reduce the speed of tankers to increase the shipments’ transit time while awaiting the emergence of buying interest from customers, or save on fuel.



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Oil Prices Soar As Traders Prepare for Wild Ride to Continue

West Texas Intermediate futures that will deliver oil in June, the U.S. benchmark, rose 20% to $16.47 a barrel. Brent crude futures, used to set prices for oil throughout global energy markets, rose 8.6% to $22.12 a barrel.

Helping prices regain some lost ground: signs of a recovery in demand for oil in China, which is emerging from coronavirus lockdowns, and tensions between the U.S. and Iran. The two nations engaged in a new round of antagonism Wednesday, when Tehran said it had launched its first military satellite into space.

“When you look at China, road traffic and refinery operations are back up,” said Norbert Rücker, head of economics at Swiss private bank Julius Baer. “Don’t forget the geopolitical side too,” he added, referring to the potential for U.S.-Iranian tensions to disrupt the movement of oil through the Strait of Hormuz, a vital channel for tankers.

The advance in prices Thursday continues a period of outsize moves in global energy markets, which have rippled through to oil producers, bond markets and currencies. The price of the most actively traded WTI futures contract has moved up or down 10%, on average, on each trading day since the start of March.

That compares with an average move in either direction of 1.5% in 2019 as a whole, according to FactSet data.

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Traders and analysts say prices will continue to swing. One gauge of how volatile WTI futures prices are expected to be over the next 30 days, the Cboe Crude Oil ETF Volatility Index, has soared more than 730% this year to its highest level on record.

Like the better-known VIX index tracking volatility in the stock market, the index uses options prices to calculate how far traders are expecting prices to move over the next month.

The oil volatility options aren’t tied to oil futures prices directly but instead to United States Oil Fund LP, an exchange-traded fund that aims to match U.S. crude prices. The fund has been at the center of the oil price drama in recent days. It accumulated a huge position in the futures market thanks to a rush of cash from individual investors.

The pandemic has stopped the world from consuming tens of millions of barrels of oil it would otherwise use every day, and storage space is filling up. Production cuts by the Organization of the Petroleum Exporting Countries and its allies, led by Russia, won’t immediately offset this decline in demand.

U.S. crude prices remain 41% lower than they were at the end of last week. In an aberration of historic proportions, the lightly traded May WTI futures contracts fell below $0 for the first time on Monday, meaning traders had to pay buyers to take oil off their hands.

“We’re close to capitulation,” said Marwan Younes, chief investment officer at Massar Capital Management. “We’re getting close to the point when people just stop trying to buy this,” he added, referring to U.S. crude oil futures.

Crude-oil stockpiles in the U.S. climbed by 15 million barrels to 518.6 million barrels last week, the Energy Information Administration said Wednesday, putting them about 9% above the five-year average. Production fell by a modest 100,000 barrels a day.

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Global Stocks Steady As Oil Prices Recover

Global stocks were little changed as oil prices regained more ground after days of turmoil.

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Futures for the S&P 500 were flat, suggesting moves in U.S. stocks later Thursday could be muted. The pan-continental Stoxx Europe 600 fell flat. Major benchmarks in the Asia-Pacific region were mixed: Japan’s Nikkei 225 closed 1.5% higher, while indexes in Australia and Shanghai showed little change. Hong Kong’s benchmark gained 0.5%.

The yield on the 10-year Treasury note rose slightly to 0.622% from 0.618% in the previous session. Yields fall as bond prices rise.

Oil prices built on Wednesday’s rebound, which was sparked by the prospect of fresh U.S.-Iran tension. Strains in the Middle East can boost crude prices by signaling potential disruptions to shipments of oil around the world and possible supply shortages.

U.S. crude-oil futures for June delivery advanced 6.9% to $14.71 a barrel. Brent crude, the global equivalent, rose 5.3% to $21.45 a barrel.

Eli Lee, head of investment strategy at Bank of Singapore, said markets had been buoyed by hopes that economies could quickly get back to normal as the coronavirus pandemic came under control, and by hefty support from the Federal Reserve, even extending to riskier assets like lower-rated bonds.

However, Mr. Lee said: “The path towards normality is going to be very gradual.”

History tells us that the market correction during prolonged recessions of more than one year tends to be far deeper” than seen so far, he added.

Fresh coronavirus outbreaks in Asia have added to uncertainty about how quickly governments can safely resume normal economic activity. In the U.S., President Trump said Wednesday that he strongly disagreed with the governor of Georgia’s decision to allow some nonessential businesses to reopen as soon as Friday, saying this was too soon.

Frank Benzimra, head of Asia equity strategy at Société Générale, said China offered a template for economies reopening. “Even if things are getting back slowly to normal, the borders aren’t open, so free circulation of goods and trade isn’t coming back quickly.”

The Dow Jones Industrial Average clawed back some of this week’s losses Wednesday, gaining 2% as oil prices rose and investors looked to corporate-earnings reports to gauge the health of U.S. businesses during the coronavirus pandemic.

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Oil Collapse Continues As Brent Plunges More Than 15%

Oil prices continued to plummet Wednesday as concerns over limp demand and limited remaining storage capacity lingered.

In the afternoon of Asian trading hours, international benchmark Brent crude futures dropped 15.57% to $16.32 per barrel. Meanwhile, the June contract for West Texas Intermediate shed all of its earlier gains as it dropped 6.66% to $10.80 per barrel. The July contract for WTI also declined and was last trading below $19 per barrel.

Per Magnus Nysveen, senior partner and head of analysis at Rystad Energy, warned that the situation in the oil markets is “going to be worse.”

“The world is running out of place to store the oil,” Nysveen told CNBC’s “Street Signs Asia” on Wednesday, adding that storage acts as “a kind of buffer.”

“When the supply and demand balance is positive or negative, then you can build or draw from storage,” he said. “But when the storage gets full, then there is no buffer for this very strong imbalance that we’re seeing.”

Pictet Wealth Management’s Jean-Pierre Durante agreed with Nysveen’s assessment of the situation, commenting in a Wednesday note that the “world is overflowing in oil” despite a recent decision by the Organization of the Petroleum Exporting Countries and its allies — known collectively as OPEC+ — to cut oil supply.

“World storage capacity will rapidly reach saturation point,” said Durante, who is head of applied research at Pictet Wealth Management.

Global demand for oil has fallen dramatically, with major economies worldwide effectively frozen as a result of coronavirus-induced lockdowns imposed by authorities scrambling to contain the spread of the disease.

Wednesday’s moves in oil followed recent sharp declines in the sector. The May contract for WTI, which expired Tuesday, plunged below zero for the first in history before clawing its way back into positive territory. The June WTI contract plunged more than 40% on Tuesday while international benchmark Brent dropped from levels above $24 per barrel.


US Oil Fund Plunges 38%, Halted For Trading Repeatedly

Trading in the United States Oil Fund, a popular exchange-traded security known for its ‘USO’ ticker which is supposed to track the price of oil and is popular with retail investors, plunged nearly 40%.

At one point, trading was halted in morning trading after USCF, the manager of the fund, said that it was temporarily suspending the issuance of so-called creation baskets. It was then halted periodically during the trading day for volatility.

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Creation baskets are how an ETF creates new shares to meet demand. The baskets hold the underlying securities which in this case are plummeting oil futures. With the halting of these creation baskets, the ETF will essentially now trade with a fixed number of shares like a closed-end mutual fund.

On Friday, USCF changed the structure of the USO fund so that it can hold longer-dated contracts. Per a regulatory filing, around 80% of the fund will be in the front-month contract, with 20% in the second-month contract.

John Davi, founder and CIO of Astoria Portfolio Advisors, said the new structure was implemented as a way to try and protect investors from plunging crude prices. The coronavirus pandemic continues to sap worldwide demand for crude, which has sent prices to their lowest levels on record.

According to Davi, the USO is primarily owned by retail investors, which can be dangerous for those who believe they are betting on oil prices moving higher over time, without fully understanding the dynamics in the commodity market.

“To buy USO you have to understand the oil futures market,” Davi told CNBC. “They [retail investors] just buy the ETF because they think the price of crude will go up, but they don’t understand the drivers, which are fairly complicated.”

USCF did not provide a comment.

On Monday, the May contract for oil fell to a negative price, an unprecedented event wreaking havoc on the oil markets. The contract expires today. USO likely had already sold that contract because it has stated in the past that it would invest in the next contract two weeks before expiration. So it owns futures for the June month and now likely the July month, given the revised structure.

June futures began cratering as well on Tuesday, pressuring the fund. June futures expiring in a month dropped 50% to under $10 on Tuesday. July contracts fell 27%. The May contract, however, recovered a bit and was trading with a positive value again of $9.

USO could run into trouble if those contracts also fall to a negative value as they near expiration, mimicking the May contract’s plunge ahead of its expiration.

Negative futures value is unprecedented and it is unclear how products like exchange-traded funds built for the retail investor to participate in the market will handle such events.

Hayman Capital Management CIO Kyle Bass has been warning investors about the danger of exchange traded funds that track oil prices.

“Retail has been plowing into these oil contracts thinking they’re buying spot crude oil when they’re buying the next front month. So they’re paying $22 a barrel when the spot market’s negative $38. Retail investors are going to get fleeced if they continue to fly into these oil ETFs,” he said Monday on CNBC’s “Closing Bell.”

Following Monday’s price action, Bass, who said he holds short positions against some energy-focused ETFs, tweeted that he would demand 100% collateral.

Warren Pies, energy strategist at Ned Davis Research, sounded a similarly cautious tone.

“At best, they are expensive ways to gain programmatic futures exposure,” he said of commodity-based ETFs on Monday. “At worst, they are designed to implode. Still, money continues to flow into the USO ETF. As of last week, USO’s assets reached an all-time high of more than $5 billion. To reiterate: In this environment, USO is a train wreck. Stay away,” he said.

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Oil-Price Crash Deepens, Weighs On Global Markets

The crash in global oil prices deepened Tuesday, as pain spread to currencies of major exporters and shares in energy producers.

Brent crude futures, the international benchmark for oil markets, dropped 15% to $20.67 a barrel, their lowest level since 2002. The decline came a day after the price of West Texas Intermediate, the U.S. crude benchmark, dropped below zero for the first time in history.

U.S. oil markets came under further pressure. The June WTI futures contract, now the most actively traded, dropped 17% to $17.03 a barrel. The May contract, which settled at a historic minus $37.63 a barrel Monday, rose to minus $6.30 a barrel in thin volumes on its final day of trading.

The convulsions in oil markets underlined the huge hit that government-imposed lockdowns designed to stall the spread of the coronavirus have dealt to oil demand. With producers unable to shut wells fast enough, and OPEC and G-20 production cuts not due to take effect until early May, traders say that the world is essentially running out of space to store oil.

“Whatever oil analysts and oil traders have learned over the course of the last 50 years or 100 years was all of a sudden put in question” by Monday’s negative oil prices, said Eugen Weinberg, head of commodities research at Commerzbank. “Everyone has been shocked.”

Oil futures, used by investors to bet on the direction of prices and by producers to protect against market swings, had performed better than the physical oil market for several weeks. Now, they are being stung by the slide in demand for actual barrels of crude.

“This is the market signaling to producers that you need to cut off more production faster because we’re drowning in oil at this point,” said Saad Rahim, chief economist at Swiss commodities trader Trafigura.

The drop in oil prices rippled through to the currencies of oil-producing nations. Russia’s ruble dropped 1.7% to trade at 76.81 a dollar, extending its depreciation against the greenback this year to 19%.

The economy of Russia, the world’s second-largest oil producer in 2019, stands to suffer from lower oil prices. A weak currency could prevent the Bank of Russia from cutting interest rates as much as it would like to bolster growth at a monetary-policy meeting on Friday, said Piotr Matys, a strategist at Rabobank.

U.S. stock futures and European equity markets were down Tuesday, led lower by shares in energy companies. Shares in Noble Energy Inc. fell more than 5% in New York in premarket trading, as did shares in oil-field services provider Schlumberger Ltd. Among Europe’s oil majors, BP PLC lost 4.6%, Royal Dutch Shell PLC 4.5% and Total SA 3.5%.

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The underlying problem for energy markets remains the collapse in demand caused by the coronavirus, which has grounded planes, stopped billions of people from driving and disrupted global trade. Economists have forecast a deep global recession and international oil organizations estimate that demand will shrink in the coming weeks.

“We’re running out of storage,” said Bob McNally, president of consulting firm Rapidan Energy. “Demand is contracting two or three times as fast as supply.” The drop in prices is a “brutal but efficient” mechanism to “persuade producers to keep oil under the crust,” Mr. McNally said.

The drop below zero makes it more likely that President Trump will impose tariffs on oil imports into the U.S., added Mr. McNally, a former White House adviser.

Market mechanisms that might help rectify the slump appear to be breaking down because of the lack of storage space and demand for oil globally.

Typically, low U.S. prices would encourage traders to buy cheap American oil and sell it at a higher price in Europe or Asia. The way Brent crude prices sank in tandem with WTI on Tuesday suggests “the world doesn’t want to take U.S. barrels,” said Vincent Elbhar, co-founder of Swiss hedge fund GZC Investment Management.

Monday’s moves also prompted urgent discussions between Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries about whether to cut production as soon as possible. OPEC members are considering bringing forward the start date for production cuts from May 1.

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U.S. Crude Futures Turn Positive After Historic Plunge

U.S. oil prices hobbled back into positive territory on Tuesday after sinking below $0 for the first time ever, but international benchmark Brent dipped as the global coronavirus crisis severely reduces demand for crude.

U.S. West Texas Intermediate (WTI) crude for May delivery (CLc1) was up $38.99 in thin trade at $1.36 a barrel by 0622 GMT after settling down at a discount of $37.63 a barrel in the previous session. The May contract expires on Tuesday and the more-active June contract rose 94 cents, or 4.6%, to $21.37 a barrel.

Global benchmark Brent crude for June delivery was down 48 cents, or 1.9%, at $25.09 per barrel.

“Demand destruction from COVID-19 will see a slower than expected reopening of the U.S. economy,” said Edward Moya, senior market analyst at broker OANDA, predicting a weak period for oil prices. “The WTI crude June contract was able to hold the $20 a barrel level and is seeing a modest gain following the painful rollover of the May contract.”

Oil prices have skidded as travel restrictions and lockdowns to contain the spread of the coronavirus curbed global fuel use, with demand down 30% worldwide. That has resulted in growing crude stockpiles with storage space becoming harder to find.

The main U.S. storage hub in Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is now expected to be full within a matter of weeks.

Following the collapse in oil prices, U.S. President Donald Trump said on Monday that his administration was considering halting Saudi crude oil imports as a way to help the U.S. drilling industry.

Today it’s pretty clear that a major issue in the market is a glut in the United States and lack of storage capacity,” said Michael McCarthy, chief market strategist, CMC Markets in Sydney.

Faced with the situation, the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, have agreed to cut output by 9.7 million barrels per day (bpd). But that will not take place before May, and the size of the cut is not viewed as big enough to restore market balance.

Supply and inventories are expected to tighten in the second half of the year, while “severe storage distress is likely to drive wild price realizations,” in the next 4-6 weeks, Citi Research said in a note.

Meanwhile, U.S. crude inventories were expected to rise by about 16.1 million barrels in the week to April 17 after posting the biggest one-week build in history, according to five analysts polled by Reuters. Analysts expected gasoline stocks to rise by 3.7 million barrels last week.

The American Petroleum Institute is set to release its data at 4:30 p.m. (2030 GMT) on Tuesday, and the weekly report by the U.S. Energy Information Administration is due at 10:30 a.m. on Wednesday.





Oil Falls More Than 10% To Lows Not Seen Since 1999

Crude oil futures fell on Monday, with U.S. futures touching levels not seen since 1999, extending weakness on the back of sliding demand and concerns that U.S. storage facilities will soon fill to the brim amid the coronavirus pandemic.

The oil market has been under pressure due to a spate of reports on weak fuel consumption and grim forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency.


The volume of oil held in U.S. storage, especially at Cushing, Oklahoma, the delivery point for the U.S. West Texas Intermediate (WTI) contract, is rising as refiners throttle back activity due to slumping demand.

The front-month May WTI contract (CLc1) was down $2.62, or 14%, to $15.65 a barrel by 0142GMT. At one point, the contract had fallen as much as 21% to hit a low of $14.47 a barrel, the lowest since March 1999.

That contract is expiring on Tuesday, and the June contract , which is becoming more actively traded, fell $1.28, or 5.1%, to $23.75 a barrel. Brent (LCOc1) was also weaker, down 21 cents, or 0.8%, to $27.87 a barrel.

The plunge in crude oil prices reflects a glut at the main U.S. storage facilities at Cushing and a big drop in demand, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“It hasn’t reach capacity but the fear is that it will,” he said, adding that once the maximum capacity is reached, producers will have to cut output.

Production cuts from OPEC and its allies such as Russia will also kick from May. The group has agreed to reduce output by 9.7 million bpd to stem a growing supply glut after stay-at-home orders and business furloughs to curb the COVID-19 pandemic that has killed more than 164,000 people worldwide sap fuel demand.

The oil industry has been swiftly reducing production in the face of an estimated 30% decline in fuel demand worldwide. Saudi Arabian officials have forecast that total global supply cuts from oil producers could amount to nearly 20 million bpd, but that includes voluntary cuts from nations like the United States and Canada, which cannot simply turn on or off production in the same way as most OPEC nations.

Numerous majors have announced supply reductions, including Chevron Corp (NYSE:CVX), BP plc (LON:BP) and Total SA (PA:TOTF). But economic growth is sagging, and physical crude markets and an estimated record 160 million barrels of oil stored onboard ships suggest prices will keep falling.

“There’s still some concern that the 10 million barrels per day cut won’t be enough to offset demand destruction so the outlook for oil prices remain subdued,” McCarthy said.

North American exploration and production companies have cut their budgets by roughly 36% on a year-over-year basis, according to a Sunday note from James West, analyst at Evercore ISI, while international companies have cut budgets by 23%.






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Oil Market – Record Cuts In Oil Output

The deal, sealed Sunday, came after President Trump intervened to help resolve a Saudi-Mexico standoff that jeopardized the broader pact.

As part of the agreement, 23 countries committed to withhold collectively 9.7 million barrels a day of oil from global markets. The deal, designed to address a mounting oil glut resulting from the pandemic’s erosion of demand, seeks to withhold a record amount of crude from markets—over 13% of world production. The U.S. has never been so active in forging a pact like this.


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On a hastily convened conference call with delegates from the 13-nation Organization of the Petroleum Exporting Countries and others, including Russia, participants raced to strike a deal before oil markets opened Monday. They expected prices to crash without an accord.

It was a diplomatic victory for Mr. Trump. His allies in the oil industry prodded him to press international rivals to cut supply before it caused a wave of U.S. bankruptcies.

Mr. Trump, on Twitter, said the deal will “save hundreds of thousands of energy jobs in the United States,” and he thanked the Russian and Saudi Arabian leaders for their cooperation.

Mr. Trump and his representatives weren’t present at Sunday’s meeting. Still, the American president’s presence loomed large, after calling the Saudi leadership and Mexican President Andrés Manuel López Obrador over recent days. Mr. Trump also placed phone calls last month urging the Saudi and Russian leaders to call a cease-fire in their price war against each other.

Christi Craddick, a regulator with the Texas Railroad Commission—which regulates oil in the U.S.’s largest oil-producing state—said Mr. Trump’s “aggressive actions and continued engagement to bring Saudi Arabia and Russia to the table to reduce global oil production was crucial to defending the domestic energy industry” and avoiding a downward spiral in oil prices.

Investors remain concerned that the cuts might not be enough to support higher prices in the coming weeks as world-wide lockdowns pummel demand for gasoline, diesel and jet fuel.

The curbs will mitigate some issues in oil markets, but some analysts said they were too little, too late. Amid travel restrictions and work stoppages, oil consumption is expected to fall by as much as 30 million barrels a day this month.

Under the final deal disclosed Sunday, Mexico will cut 100,000 barrels a day of output, some 250,000 barrels fewer than Saudi Arabia initially wanted. The U.S. unlocked the standoff by pledging to compensate for the Mexican amount with 300,000 barrels of reductions of its own, the delegates were told.

It couldn’t be determined whether that was in addition to other U.S. cuts, or how the U.S. cuts would be implemented.

In the end, Saudi Arabia, Russia and their other oil allies expected to bear the brunt of the work rebalancing the historic glut.

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The U.S., Canada, Brazil and the other Group of 20 leading economies that aren’t part of the OPEC alliance will hold back four million to five million barrels a day, OPEC said in a draft press release.

Canada wasn’t asked to impose production cuts on its oil producers, said Sonya Savage, energy minister for Alberta, Canada’s largest oil-producing province. Instead, the decrease will come through market forces, as companies tend to cut production voluntarily when prices drop, she said.

In addition, Saudi Arabia, the United Arab Emirates and Kuwait have agreed to cut a combined two million barrels a day above their quota, Iranian Oil Minister Bijan Zanganeh said in a televised interview.

Industrialized nations that are part of the International Energy Agency are set to announce crude purchases to fill their national inventories as a way to take some surplus oil off the market, according to people familiar with the matter.

Overall, the measures, combined with existing sanctions on Iran and Venezuela and outages in hot spots such as Libya, could withhold 20 million barrels a day of supplies from the market, OPEC said in the draft press release.

The American Petroleum Institute, the largest oil and gas trade group in the U.S., commended a deal to “reduce supply to align with lower energy demand as result of the pandemic.”

Without the deal, the global oil industry would have run out of storage over the next few weeks, and prices would have crashed and hit financial markets, said Daniel Yergin, vice chairman of IHS Markit. “This restrains the buildup of inventories, which will reduce the pressure on prices when normality returns,” he said.

Oil prices are down 40% since early March, when Saudi Arabia and Russia failed to agree on an emergency plan to address the supply glut. After the disagreement, Saudi Arabia embarked on an aggressive price war in an attempt to grab market share from Russia, a key rival.

The international deal had stalled three times in recent days, with scheduled votes canceled and ministers repeatedly dismissed and called back, a senior White House official said.

Tensions grew inside the White House on Sunday afternoon after a fourth vote didn’t start at the scheduled time. Several officials believed it was the last chance for a deal. Mr. Trump grew concerned and made another round of calls to keep leaders at the negotiating table, the White House official said.

For decades, Mr. Trump has been a vociferous opponent of the cartel, deeming its efforts an evil force that squeezed American motorists. But the Saudi-Russia price war‘s threat to the U.S. oil industry led to what seemed to be a change of heart.

In addition to prodding both sides, the U.S. has also warned it would retaliate if Saudi Arabia didn’t turn off the spigots. On April 4, Mr. Trump threatened to impose tariffs on crude imports if he has to protect U.S. energy workers from an oil flood from producers such as Saudi Arabia.

Some Republican senators spoke with the Saudi energy minister for nearly two hours Saturday, warning him a longstanding U.S. alliance with the kingdom would be damaged if he didn’t cut output. “The Saudis spent over a month waging war on American oil producers, all while our troops protected theirs. That’s not how friends treat friends,” Sen. Kevin Cramer, a North Dakota Republican, said.

On Sunday, Mr. Cramer said he would monitor the deal’s implementation. “We have to make sure these countries hold up their end of the deal, and we will be watching every step of the way,” he said.

The deadlock between Mexico and Saudi Arabia proved to be a test for Prince Abdulaziz bin Salman’s uncompromising leadership style, delegates said, as the Saudi energy minister struggled to corral nations into a deal.

At the OPEC-led meeting on Thursday, Prince Abdulaziz appeared to have reached a collective deal when he rebuked a demand by Rocío Nahle, the energy minister of Mexico, to soften production curbs. “He was inflexible,” said a delegate. The prince wanted OPEC to act as a unified group. He has said he believes any exemptions to oil production cuts would bring about a total collapse of the oil market.

Prince Abdulaziz, the son of the Saudi king and half-brother to the designated heir to the Saudi throne, Crown Prince Mohammed bin Salman, was the first royal ever to receive Saudi Arabia’s energy portfolio last fall.

His role as oil negotiator was challenging from the start. He blocked Angola from a technical meeting and then argued with the African producer over small cuts, which almost derailed his first major summit as OPEC’s de facto chief in December.


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Oil Rises As Markets Eye OPEC, Russia Meeting On Output Cuts

Oil rebounded on Wednesday after a two-day fall, lifted by hopes that a meeting between OPEC members and allied producers on Thursday will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic.

Brent crude was up by 21 cents, or 0.8%, at $32.08 per barrel by 0639 GMT after falling 3.6% on Tuesday. U.S. West Texas Intermediate (WTI) crude rose 82 cents, or 3.8%, to $24.45 a barrel after dropping 9.4% in the previous session.


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Thursday’s videoconference meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, is widely expected to be more successful than their gathering in early March. That ended in failure to extend cuts, and a price war between Saudi Arabia and Russia amid slumping demand.

But doubts remain over the role of the United States in any production curbs.

“Whether the United States will join output cuts is closely watched as the market’s focus remained on OPEC meeting,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul. “Oil prices have been volatile as the market is in wait-and-see mode.”

Saudi Arabia, other OPEC member countries and Russia, a grouping known as OPEC+, are likely to agree to cut output, but that accord could be dependent on whether the United States would go along with cuts. The U.S. Department of Energy said on Tuesday that U.S. output is already declining without government action.

Iran’s Oil Minister, Bijan Zanganeh, said Iran does not agree with holding any OPEC+ meeting without a clear-cut proposal and expected outcome from such talks, according to a letter sent to OPEC and seen by Reuters.

“Saudi Arabia and Russia continue to hammer out a deal … What is clear is that the United States must be involved,” ANZ Research said in a note.

U.S. crude production is expected to slump by 470,000 bpd and demand is set to drop by about 1.3 million bpd in 2020, the U.S. Energy Information Administration (EIA) said on Tuesday.

U.S. crude inventories jumped by 11.9 million barrels to 473.8 million barrels in the week to April 3, according to data from the American Petroleum Institute (API) released on Tuesday.

With a drop in fuel demand amid the virus outbreak, gasoline stocks also rose by 9.4 million barrels, marking the biggest one-week gain in the API figures since January 2017.

Official data from the EIA is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.




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Oil Rises 3% On Hopes For Output Cut

Oil prices gained on Tuesday as hopes rose that the world’s biggest producers of crude will agree to cut output as the coronavirus pandemic crushes demand, even as analysts warn a global recession may be deeper than expected.

Brent crude (LCOc1) was up by 93 cents, or 2.8%, at $33.98 a barrel by 0431 GMT after falling more than 3% on Monday. U.S. crude (CLc1) was up by 79 cents, or 3.03%, at $26.87 a barrel, having dropped nearly 8% in the previous session.

The world’s main oil producers including Saudi Arabia and Russia are likely to agree to cut output at a meeting on Thursday, although that would depend on the United States doing its share, sources told Reuters.

But the threat of a major recession hangs over the market due to the halt of much economic activity as a result of the coronavirus pandemic, with half the global population under some form of lockdown or social distancing measures.

“Oil producers have to cut deeply and quickly if they want to avert total saturation of oil markets,” Eurasia Group said.

Worldwide oil demand has dropped by as much as 30%, or about 30 million barrels per day, coinciding with moves by Saudi Arabia and Russia to flood markets with extra supply after an agreement on withholding output fell apart.

Oil prices slumped on Monday after Saudi Arabia and Russia delayed a meeting to agree on output cuts till Thursday.

The Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, a grouping known as OPEC+, had been curtailing production in recent years amid a rapid expansion of U.S. output that made the country the world’s biggest crude producer.

There are also questions over whether the U.S. would join any coordinated action.

U.S. President Donald Trump said on Monday that OPEC had not asked him to push domestic oil producers to cut their production to buttress prices. He also said that U.S. output was declining in response to falling prices.

“I think it’s happening automatically but nobody’s asked me that question yet so we’ll see what happens,” the president told a press briefing on Monday afternoon.

Coordinated action by U.S. oil producers to reduce output would typically be a violation of antitrust laws.

A global recession that economists in a Reuters poll say is under way will likely be more serious than expected a few weeks ago due to the viral outbreak, the latest survey showed.

“We expect energy prices to hover around current levels until economic activity recovers,” Capital Economics said in a note.





Oil Production Cut: OPEC+ Meeting Delayed

OPEC and Russia have postponed a Monday meeting to discuss oil output cuts until April 9, OPEC sources said on Saturday, as a dispute between Moscow and Saudi Arabia over who is to blame for plunging crude prices intensified.

The delay came amid pressure from U.S. President Donald Trump for the Organization of the Petroleum Exporting Countries led by Saudi Arabia and its allies, a group collectively known as OPEC+, to urgently stabilise global oil markets.

Oil prices hit an 18-year low on March 30 due to a slump in demand caused by lockdowns to contain the coronavirus outbreak and the failure of OPEC and other producers led by Russia to extend a deal on output curbs that expired on March 31.

OPEC+ is working on a deal to cut the production of oil equivalent by about 10% of world supply, or 10 million barrels per day, in what member states expect to be an unprecedented global effort including the United States.

Washington, however, has yet to make a commitment to join the effort and Russian President Vladimir Putin on Friday put the blame for the collapse in prices on Saudi Arabia – prompting a firm response from Riyadh on Saturday.

“The Russian Minister of Energy was the first to declare to the media that all the participating countries are absolved of their commitments starting from the first of April, leading to the decision that the countries have taken to raise their production,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement reported by state news agency SPA.

Putin, speaking on Friday during a video conference with government officials and the heads of major Russian oil producers, said the first reason for the fall in prices was the impact of the coronavirus on demand.

“The second reason behind the collapse of prices is the withdrawal of our partners from Saudi Arabia from the OPEC+ deal, their production increase and information, which came out at the same time, about the readiness of our partners to even provide a discount for oil,” Putin said.

The Saudi Foreign Minister Prince Faisal bin Farhan Al Saud disputed Putin’s claims, saying Russia had withdrawn and that statements about the kingdom’s withdrawal from the OPEC+ deal was devoid of truth, state agency (SPA) reported on Saturday.

OPEC sources, who asked not be identified, said the emergency virtual meeting planned for Monday would likely now be postponed until April 9 to allow more time for negotiations.

OPEC sources later downplayed the Saudi-Russia row, saying the atmosphere was still positive, although there was no draft deal yet nor agreement on details such as a reference level from which to make the production cuts.

“The first problem is that we have to cut from the current production level now, not to go back to the one before the crisis,” one of the OPEC sources said. “The second issue is the Americans, they have to play a part.”


Oil recovered from this week’s lows of $20 per barrel with Brent settling at $34.11 on Friday, still far below the $66 level at the end of 2019. Prices had their biggest one-day gain ever on Thursday when Trump said he expected Russia and Saudi Arabia to announce a major production cut.

The United States is not part of OPEC+ and the idea of Washington curbing production has long been seen as impossible, not least because of U.S. antitrust laws.

Still, the oil price crash has spurred regulators in Texas, the heart of U.S. oil production, to consider regulating output for the first time in nearly 50 years.

But U.S. Energy Secretary Dan Brouillette, in a call with oil industry leaders on Friday, did not mention the possibility of U.S. production cuts, a source who listened to the call said.

On Saturday, U.S. President Donald Trump focused instead on tariffs as a response to the oil price crash.

“If I have to do tariffs on oil coming from outside or if I have to do something to protect our … tens of thousands of energy workers and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump told reporters in a briefing about the coronavirus outbreak.

“The President has now told us what Plan B is: tariffs,” said Robert McNally, president of Rapidan Energy Group in Bethesda, Maryland.

Russian Energy Minister Alexander Novak told Russian state media he understood that the United States had legal restrictions on output cuts but it should still be flexible.

Other oil producers that do not belong to OPEC+ have indicated a willingness to help. Canada’s Alberta province, home to the world’s third-largest oil reserves, is open to joining any potential global pact.

Norway, Western Europe’s largest oil and gas producer, said on Saturday it would consider cuts to its oil output if a wide global deal is agreed.

Mexican President Andres Manuel Lopez Obrador on Saturday called on Russia and Saudi Arabia to reach a deal soon to end their price war.

The International Energy Agency warned on Friday that a cut of 10 million bpd would not be enough to counter the huge fall in oil demand. Even with such a cut, inventories would increase by 15 million bpd in the second quarter.



Trump Says He’d Use Tariffs If Needed To Protect Oil Industry

Trump said Saturday at a White House press briefing he’d use tariffs if needed to protect the domestic oil industry, a day after meeting with U.S. industry leaders. A gathering of OPEC and other major producers scheduled for Monday was delayed until later in the week as Saudi Arabia and Russia traded barbs about who’s to blame for the collapse in crude prices.

Optimism over prospects for a deal sent benchmark oil futures to a record gain this week, despite an unprecedented global demand loss from the Covid-19 outbreak. A failure to come to an agreement would likely cause prices to crater again. The U.S. oil industry is split on the idea of tariffs, with some independent shale producers — who’ve been hardest hit by the recent market slump — in support, while refiners and large integrated companies are typically opposed.

The American Petroleum Institute, which helped arrange Friday’s meeting, argues tariffs would inject uncertainty into an already rattled global marketplace.

“If I have to do tariffs on oil coming from outside, or if I have to do something to protect thousands and tens of thousands of energy workers, and our great companies that produce all these jobs, I’ll do whatever I have to do,” Trump said Saturday. Low oil prices are “going to hurt a lot of jobs,” he said.

Measures to stem the coronavirus outbreak has forced businesses to shut and billions of people around the world to stay at home, causing demand for gasoline, diesel and jet fuel to collapse by tens of millions of barrels a day.

Hundreds of thousands of U.S. oil industry jobs are hanging in the balance, with about $15 billion of investments wiped out from the budgets of shale explorers and many of them on the brink of bankruptcy.

On Friday, Trump had suggested he wasn’t inclined to target Russia or Saudi Arabia with oil tariffs.

“It’s a free market. We’ll figure it out,” he told reporters after Friday’s meeting with the heads of Exxon Mobil Corp., Chevron Corp. and other major producers. “Ultimately the marketplace will take care of it.”

In a statement early on Saturday, the Saudi Foreign Minister Prince Faisal bin Farhan said comments by Putin laying blame on Riyadh for the end of the OPEC+ pact between the two countries in March were “fully devoid of truth.”

Trump still expressed optimism that Russia and Saudi Arabia would reach a deal.

“I think they’re going to settle it, you know why? Because they’re going to be destroyed, they’re destroying themselves if they don’t.”



Russia Press U.S. To Coordinate Oil Cuts, Pushing Up Prices

Saudi Arabia and Russia are pressing the U.S. to coordinate oil output cuts in an attempt to stabilize prices, OPEC officials said, as the demand for crude plummets amid the coronavirus pandemic.

U.S. oil companies are divided over the proposed cooperation between the world’s three biggest crude-producing nations, which would be unprecedented. Some major oil companies, including Exxon Mobil Corp. and Chevron Corp., are opposed to the plan. Some American shale producers, including Pioneer Natural Resources Corp., are trying to find ways to join the Saudi-and-Russia-led plan.

Top executives from U.S. energy companies were expected to take up the matter in a White House discussion convened by President Trump on Friday. Oil prices jumped by double-digit percentages a second straight day on hopes of a detente in the global price war.

The Saudi-led Organization of the Petroleum Exporting Countries and 10 nations led by Russia are set to hold a virtual emergency meeting on Monday. The group is considering whether to invite representatives from the U.S. and Canada, including from Texas and Alberta. The outcome of Monday’s summit will largely depend on whether Mr. Trump and U.S. oil companies can reach a consensus Friday on oil production cuts.

While the U.S. government and some companies cannot formally join the 23-nation Saudi-and-Russia-led alliance because of antitrust and sovereignty issues, they are trying to figure out ways to convince Saudi Arabia and Russia to reduce output. Riyadh and Moscow have privately made it clear they won’t cut output unless U.S. producers do so as well.

Mr. Trump said Thursday he was hopeful that a truce could be worked out in the oil-price war between Saudi Arabia and Russia after he had spoken to Saudi Crown Prince Mohammed bin Salman.

Saudi Arabia, the world’s largest crude exporter, slashed its prices and said it would unleash a flood of oil last month after it failed to reach a deal with Moscow on a response to falling demand. The ensuing price war, along with lockdowns and travel bans amid the pandemic, have pushed oil prices to their lowest level in 18 years.

Mr. Trump’s remarks on Thursday sparked a record-breaking percentage climb in oil prices, with Brent and U.S. crude notching gains of 21% and 25%, respectively.

Brent crude, the global benchmark rose another 14% to $34.11 a barrel on Friday. West Texas Intermediate futures, the U.S. bellwether, gained 12% to $28.34 a barrel. Still, both price gauges have lost about half their value since the start of the year.

The drop has prompted U.S. producers to slash drilling budgets and idle rigs. The number of rigs drilling domestically fell to 664 Friday, down from 770 a month ago, according to Baker Hughes Co.

Yet it could be months before the slowdown results in diminished output. U.S. crude production has held near a record level of 13 million barrels a day through March 27.

The Saudi-and-Russia led alliance will discuss output curbs of 10 million barrels a day including North America, on the Monday conference call, the officials said. It wasn’t clear whether North American producers would participate. They haven’t attended OPEC gatherings in many years.

Under that option, Saudi Arabia would reduce output by 3 million barrels a day from current levels, a group of other Persian Gulf countries and Russia by 1.5 million barrels a day each, these people said. Oil producers outside the Saudi-Russian oil alliance, in the U.S., Canada, Brazil and others, would reduce output by about another 2 million barrels a day, they said. The rest of the cuts would be shared between smaller producers who already belong to the Saudi-Russian alliance.

Among those are some U.S. shale producers, who have told OPEC they were ready to carry voluntary production cuts amid a ballooning oil glut, said people familiar with the matter. Some of them, in Texas, are backing the possible curtailment of 500,000 barrels a day, these people said. But major oil companies are worried any concerted curbs could expose them to risks of lawsuits on antitrust grounds, they said.

Russian President Vladimir Putin said Friday that his country was ready for a deal with OPEC and the U.S. He said that a collective cut of 10 million barrels a day would be needed to balance the market.

“We are all concerned about the way the situation is developing, everyone is interested in joint and—I’d like to stress it—coordinated actions to ensure long-term market stability,” Mr. Putin said during a video meeting with Russian oil officials.

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Vagit Alekperov, the head of Russian oil major Lukoil, said that it wasn’t clear by how much Russia would cut production as the situation “changes every day.”

The U.S. Department of Energy is also looking at ways to convince the Saudi-and-Russia-led groups that U.S. producers can follow through with any voluntary curbs they propose, the people said. Many OPEC officials don’t believe the U.S. producer will voluntarily reduce production without U.S. government intervention.

While the output reductions could help cushion the current oil price crash, most analysts say it won’t be enough to make up for how much fuel demand the pandemic has erased. Goldman Sachs, for instance, estimates oil demand this week fell by 26 million barrels a day—or a quarter of global demand.

“The benefits from a likely modest reduction in global crude oil supply are still likely to be swamped by the decline in crude oil demand,” said CFRA Research analyst Stewart Glickman.


Precious Metals: Traders Working From Home Exacerbate Big Swings, Analysts Say

Front-month gold futures jumped 5.9% to $1,660.20 a troy ounce in New York, extending a surge that began Monday. Tuesday’s advance was gold’s biggest one-day increase since March 2009. Silver, platinum and palladium all rose at least 7.6%, paring some of their recent declines.

The rally is a reversal for the metals, which had tumbled in recent weeks with investors liquidating easy-to-sell assets to meet margin calls and raise cash. For investors who had used stocks as collateral to buy other securities, banks can demand repayment when the value of those positions shrinks dramatically, resulting in the forced sale of unrelated assets.

This week’s surge has put gold back around a seven-year peak from March 9. Prices are up more than 30% from a low hit last April, with recent gains coming as traders brace for the coronavirus to tip the world economy into a recession.

“I’ve never seen anything like this,” said George Gero, managing director at RBC Wealth Management. “The demand is huge.” Mr. Gero still expects prices to remain volatile, with investors often needing to sell liquid assets to raise cash when markets fall rapidly.

The big moves up and down in precious metals are another sign of market fragility. Stocks, bonds and commodities have all been extremely volatile in recent weeks with the coronavirus halting the global economy and many traders working remotely.

There are also concerns about shortages of gold bars and coins because of heavy retail buying and refinery shutdowns in Switzerland, a major refining hub.

“This is an environment when most people work from home, even traders, and airlines aren’t flying, so there is some sort of discrepancy in the market,” said Frederic Panizzutti, managing director at MKS Dubai, part of refining and trading company MKS PAMP Group Co. “The market is in panic.”

One sign of stress: In the spot gold market, the gap between bid and offer prices has widened to around $25 an ounce, according to Mr. Panizzutti, when it would normally range between 20 and 30 cents. Meanwhile, the gap between futures prices in New York and spot prices in London, the world’s biggest wholesale gold market, jumped.

The London Bullion Market Association, the organization that oversees the U.K. capital’s gold market, said volatility in U.S. futures prices on the Comex division of the New York Mercantile Exchange had caused liquidity to decline. The LBMA and Comex discussed whether to allow traders to settle futures using gold from London without having it melted down and recast into a new set of bars, according to a person familiar with the matter.

This could ease a shortage of physical gold in New York but would require a rule change or relaxation. LBMA-approved bars weigh 400 troy ounces, while Comex futures must be settled using either one bar weighing 100 ounces or three bars weighing a kilogram each.

Hedge funds and other speculative investors sharply lowered net bets on higher gold prices during the week ended March 17, pushing them to a nine-month low, Commodity Futures Trading Commission figures show. Investors were liquidating bets on a range of assets to cover losses suffered in stocks and other riskier areas.

Data for the week ended Tuesday will be released on Friday.

The Federal Reserve’s pledge on Monday to buy an unlimited amount of government debt to shield the U.S. economy also drove gold prices higher. The opportunity cost for investors owning the precious metal, which pays no income, declines when bond prices rise and yields fall.

“We have now a lot of central banks with very, very low rates and quantitative-easing programs, which in general is positive for gold prices,” said Georgette Boele, a strategist at ABN Amro. “Investors are getting more concerned about the doom and gloom of the global economy and they want to have physical gold in their safe.”

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Extreme volatility in currency markets also drives gold, which is used in some countries as a liquid asset that can be turned into any currency depending on fluctuations. A weaker dollar was supporting Tuesday’s rally by making commodities denominated in the U.S. currency cheaper for overseas buyers.

Elsewhere in commodities Tuesday, U.S. crude oil added 2.8% to $24.01 a barrel, trimming a sliver of its recent declines. Tumbling demand and excess supply have sent prices crashing about 60% for the year. Brent crude, the global gauge of oil prices, ended the day up 0.4% at $27.15 a barrel.

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Goldman: U.S. Measures Could Support Oil Prices Near Term

Supply restraint by core-OPEC producers could push second-quarter Brent oil prices up to $30 a barrel, while U.S. measures to support the market could underpin prices in the near term, Goldman Sachs (NYSE:GS) said in a research note.

Citing Wall Street Journal reports that the United States was considering intervening in the ongoing Saudi-Russian price war and Texas regulators may curb oil output, the U.S. investment bank said such action would reduce global and U.S. domestic supplies.

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U.S. crude oil prices rose more than $1 on Friday, extending steep gains from the previous session, after U.S. President Donald Trump said he would “get involved” in the price war at an “appropriate time”.

While any U.S. measures could support the oil market into the second half of the year, however, Goldman Sachs said accompanying supply cuts would still not be enough to offset the 8 million barrels per day (bpd) demand loss – brought about by countries slowing economic activity to halt the spread of the coronavirus which has caused nearly 10,000 deaths worldwide.

“Medium-term, the impact of such policies will depend on their political viability given the upcoming presidential election,” Goldman Sachs said in the note issued on Thursday.

U.S. production quotas could create a $5 to $10 upside to Goldman Sachs’ West Texas Intermediate price forecast of $40 to $45 a barrel in 2021, the bank said.

While a return to U.S. oil supply management policies of the 1970s and 80s would “help support prices in the third and fourth quarter above our $30 and $40 a barrel Brent forecast, they would simply replace OPEC’s artificial price support policy with another,” the bank said, referring to the Organization of the Petroleum Exporting Countries, of which Saudi Arabia is a key member.

Oil extends recovery as Trump hints at intervening in Saudi-Russia price war

Oil prices recovered further on Friday, following steep gains in the previous session after U.S. President Donald Trump hinted he may intervene in the price war between Saudi Arabia and Russia at an “appropriate time”.

Prices were also supported by United States’ plans to buy up to 30 million barrels of crude oil for its emergency stockpile by the end of June, while regulators in the country’s largest oil-producing state Texas were reportedly considering curtailing production.

The more active West Texas Intermediate (WTI) crude futures contract for May was up 43 cents, or 1.7% at $26.34 a barrel by 0540 GMT. The contract rose as much as 5.5% to $27.34 per barrel earlier in the session.

U.S. crude futures for April (CLc1) also rose 43 cents to $25.65 a barrel. The front-month April contract, which spiked 24% on Thursday, expires later on Friday.

“An astonishing rebound in crude oil prices overnight was primarily driven by U.S’s consideration to intervene in the oil market by increasing strategic reserves, while slashing some oil production,” said Margaret Yang, market analyst at CMC Markets.

“The underlying issue is that global energy demand is falling sharply as more countries join the ‘lockdown’ club. The severity of Covid-19 for the macro-economy could exceed anyone’s expectation, and it could last for a long period of time.”

Brent crude futures (LCOc1) climbed 28 cents, or about 1%, to $28.75 per barrel.

The international benchmark rose 14.4% on Thursday in its biggest one-day gain since September, but was on track for its fourth consecutive weekly drop on Friday.

U.S. crude and Brent have both collapsed about 40% in the last two weeks since talks between the Organization of the Petroleum Exporting Countries and its allies, including Russia, broke down, which led Saudi Arabia to ramp up supply.

The Trump administration is considering a diplomatic push to get Saudi Arabia to close its taps and using the threat of sanctions on Russia to force them to reduce output, the Wall Street Journal reported, quoting unidentified sources.

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“The outsized gains by WTI reflect the hope and not the reality of the U.S. shale industry. Russia and Saudi Arabia have zero interest in helping US shale survive. Just the opposite, in fact,” said Jeffrey Halley, senior market analyst at OANDA.

“Once this reality finally sets in, I expect the rally in oil to disappear as quickly as it began.”

Oil’s Spectacular Collapse Continues

Oil prices extended the gloom on Monday after a Saudi-Russian price war and an equities meltdown sparked by the coronavirus pandemic saw their biggest weekly losses in more than a decade. US benchmark West Texas Intermediate (WTI) briefly fell below $30 a barrel, or 5.5 percent, in morning Asian trade before regaining its footing.

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It was trading at $31.13 a barrel at around 0530 GMT, down nearly two percent from Friday’s close. The Brent global benchmark was down 3.28 percent at $32.74 a barrel.

Last week’s price war began after Saudi Arabia and other members of an informal alliance of major crude producers led by the OPEC oil cartel pushed for an output cut to combat the impact of the virus outbreak.

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But alliance partner and non-OPEC member Russia, the world’s second-biggest oil producer, refused — prompting Riyadh to drive through massive price cuts and pledge to boost production.


The COVID-19 outbreak added to downward pressure as it throttled global equities, with growing concerns over a potential worldwide recession and escalating travel restrictions prompting a crash in demand forecasts.

Prices made a feeble rally late last week after US President Donald Trump announced $50 billion in Federal spending to stem the damage from the coronavirus and plans to buy “large quantities of crude oil” to top up strategic reserves.

But both benchmarks still fell by around 25 percent in the biggest weekly drop since the global financial crisis in 2008, and more losses are expected.

Rallies will likely continue to fade so long as the market continues to weigh the double-whammy of the COVID-19… and the massive jump in supply,” said Stephen Innes, global chief markets strategist at AxiCorp.

“The rare combination of severe shocks to both supply and demand has caused the crude market to collapse as producers… steel themselves for an unexpected glut of oil in coming weeks,” added Sukrit Vijayakar of Trifecta Consultants.


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Global Markets In Turmoil As Oil Plunges

Oil plunged more than 25%, 10-year Treasury yields dipped below 0.4%, stocks dropped, and currencies swung as the prospect of an energy glut ratcheted up turmoil across markets world-wide.

Investors are responding to Saudi Arabia’s decision over the weekend to cut most of its oil prices and boost output, despite existing threats to demand from the coronavirus epidemic. The move escalates a clash with another major oil producer, Russia.

“The fear today is about a global recession,” said Thomas Hayes, chairman of Great Hill Capital, a hedge fund-management firm based in New York. He said lower oil prices make it more likely some companies would default on their debts.


If Russia doesn’t come back to the negotiation table soon, investors worry companies will default, making banks less willing to lend, and causing the economy to stutter, he said.

Trading in futures tied to the S&P 500 fell by the maximum 5% allowed in a single session. This meant trading was limited for the first time since shortly after President Trump’s 2016 election victory. By early afternoon in Hong Kong on Monday, S&P 500 e-Mini contracts were 4.9% lower at 2,819.00, about 16.8% below a recent high registered on Feb. 19.

U.S. government bonds, which have already rallied to unprecedented highs, extended gains. The yield on the 10-year Treasury tumbled to 0.387%. Yields move inversely to prices. In Europe, the pan-continental Stoxx Europe 600 index dropped 2.8% with France’s CAC 40 benchmark dropping 2.7% and the U.K.’s FTSE 100 off 8.4%.

In the Asia-Pacific region, the S&P/ASX 200 index in Australia dropped 7.3%, suffering its worst day since October 2008, during the depths of the global financial crisis. The Australian dollar, which is sensitive to shifts in demands for commodities, fell more than 1%, with one Australian dollar buying 65.35 U.S. cents.

Japan’s Nikkei 225 declined 5.1%, its biggest daily drop since 2016. The yen, which often rallies in times of market stress, surged to trade below 103 to the dollar, at its strongest levels since 2016.

Benchmark stock indexes in Hong Kong and Shanghai dropped more than 4% and 2%, respectively. China’s onshore markets, in Shanghai and Shenzhen, have been comparatively resilient in recent weeks.

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Saudi Arabian state oil giant Aramco said in a notice to buyers sent Saturday that it was cutting most of its prices, while preparing to boost crude output. Oil prices dropped after the market reopened Sunday evening in New York. Brent crude, the global gauge of oil prices, fell about 27.5% to $32.84 a barrel, and U.S. crude futures fell by a similar amount.

Last week, Saudi Arabia was unable to persuade Russia to join its plan for deeper crude production cuts at a gathering of the Organization of the Petroleum Exporting Countries and its allies in Vienna. The failure signaled the end of a four-year collaboration between OPEC’s member nations and 10 nonmembers led by Russia.

“The collapse of the talk between Russia and OPEC crushed investors’ confidence,” said Alvin Ngan, a strategist with Zhongtai International Holdings in Hong Kong, adding that sentiment was already fragile given the uncertainties created by the novel coronavirus.

In Australia, large energy stocks plunged by double-digit percentages on fears of a prolonged period of low crude-oil prices. Shares in Woodside Petroleum Ltd. fell by 18% while mining giant BHP Group Ltd. dropped by 14%.

The ASX 200 has now fallen 19.6% since hitting an all-time high on Feb. 20, putting it close to bear-market territory, which is typically defined as a peak-to-trough decline of more than 20%. The Nikkei 225 has fallen more than 18% from its highest closing level this year.



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Berkshire Hathaway Backs Away From Canadian Gas Project

Berkshire Hathaway Inc. has backed out of financing a major gas project in the Canadian province of Quebec, prompting worries that international investors are increasingly shunning the country after protests over another energy project.

Warren Buffett’s conglomerate pulled out of providing roughly 4 billion Canadian dollars ($2.99 billion) in equity financing for the Énergie Saguenay Project, a proposed Canadian natural gas export facility to be built 130 miles north of Quebec City, according to three people familiar with the matter.

Berkshire’s move was spurred by a series of rail blockades set up to oppose construction of a natural-gas pipeline in British Columbia, said a person with knowledge of the decision.


Canada has been roiled by activists and indigenous groups who have obstructed the country’s rail network and its supply chain since early February to protest the pipeline. Such strident opposition to big energy projects has worried investors that the investment climate in Canada is too risky for large deals.

Berkshire’s decision to scrap the deal, first reported on Thursday by the Montreal-based newspaper La Presse, comes despite the conglomerate’s earlier willingness to invest in Canadian energy. The company’s energy arm owns AltaLink Transmission, the largest regulated energy transmission company in the province of Alberta. Berkshire also owns a large stake in Suncor Energy Inc., Canada’s largest crude-oil producer.

Énergie Saguenay confirmed in a blog post on its website that a “potential private investor” had decided at the last moment to step away, though it declined to name the firm.

“This decision was taken because of the political context that has prevailed for a month now in Canada,” said the post, which was written in French.

The energy project, jointly owned by California-based investors James Illich and James Breyer through their investment companies Freestone International and Breyer Capital, said the project is still on track. It is seeking other potential investors ahead of a final decision to proceed in 2021.

According to one person familiar with Berkshire’s decision, the company had initially agreed to invest a few hundred million dollars in the project, ramping up to C$4 billion in stages. But during the second week of the rail blockades, the company signaled it was concerned by the uncertainty caused by the disruption and was losing interest in the investment. Berkshire walked away a week later, this person said.

Canadian police dismantled the most disruptive blockade, which had choked off east-to-west freight rail traffic, late last month. The last remaining major blockade, in the Montreal area, was taken down on Thursday.

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The Énergie Saguenay Project is just one of several Canadian projects that hit hurdles recently, creating doubts about Canada as a place to invest. Prime Minister Justin Trudeau’s Liberal government failed to get approved energy projects completed, such as the expansion of the Trans Mountain energy pipeline. The pipeline has been mired in court cases for years.

Houston-based Kinder Morgan Inc. became so frustrated with opposition to the Trans Mountain expansion that it sold the pipeline to the Canadian government in 2018, and sold its Canadian assets to Pembina Pipeline Corp. a year later.

“There’s a question vis-à-vis domestic and international investors if Canada is open for business,” said Pat Fiore, president of GNL Quebec, the company that runs the Énergie Saguenay project. “Can we get these large projects across the line?”

The concern isn’t limited to international investors.

Last month, Canadian mining company Teck Resources Ltd. announced it was shelving a proposed C$20 billion energy project in the Canadian oil sands, home to the world’s third-largest oil reserves. Teck Chief Executive Don Lindsay said the company was withdrawing from the project because of the widening schism in the country between resources development and environmental policy.

Mr. Trudeau on Thursday noted that foreign investment in Canada rose more than 18% last year, but acknowledged the country needs to send a unified message to investors, emphasizing environmental policy.

“We need to do more to show that the jobs we’re creating and the investments we are making and attracting will allow us to succeed in a world where climate change is hitting us harder and harder,” he said. “That is why we need to have a united message across this country in terms of our leadership and the leadership we can show on fighting climate change.”



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OPEC Agrees To Drastic Oil Cuts

The plan approved Thursday by the Organization of the Petroleum Exporting Countries would involve production cuts of 1 million barrels a day through the end of June to be shared among its 13 member nations. It also calls for another 500,000 barrels of daily cuts to be divided among the cartel’s 10 Russia-led oil-producing allies.

OPEC earlier in the day had agreed to only a three-month cut. But Saudi Arabia decided it wanted to force Russia into a more ambitious effort. Other OPEC members worried that the plan announced earlier in the day had failed to stimulate flagging prices, cartel delegates said.

“It’s a gamble,” one delegate said.

Brent crude, the global benchmark oil price, ended the day down 2.2%.

The production cuts would come on top of 500,000 barrels a day of existing curbs, which OPEC has agreed to carry through the end of the year, the cartel said. Saudi Arabia and other Persian Gulf producers are also considering additional production cuts outside the group, delegates said.

The coronavirus’s impact on oil demand has weighed heavily on recent talks among members of the so-called OPEC+ alliance led by Saudi Arabia and Russia. Brent is down 23% so far this year, as the virus outbreak hammers global demand.

The epidemic is expected to diminish global crude demand by as much as 2.1 million barrels a day in the first half of 2020, according to an estimate from Goldman Sachs. Meanwhile, IHS Markit and Standard Chartered forecast a decline in demand for 2020’s first two quarters by around 2 million barrels a day from the same period a year earlier. Gulf nations’ additional cuts would take OPEC+’s cuts to 2.1 million barrels a day.

“It’s not just about bleeding demand growth,” said Mohammad Darwazah, director for geopolitics and energy at Medley Global Advisors. “We’ve had inventories building through this whole period and it’s about cleaning up the market and 2.1 [million barrels in cuts] would go a long way to reversing these builds.”


The OPEC plan needs the approval of Russia and other non-OPEC allies, which are set to weigh the proposal on Friday. Russia has agreed in principle to reduce its output but hasn’t approved any production figure, OPEC officials said.

“Tomorrow, everything depends on a non-OPEC agreement,” Iran’s oil minister, Bijan Zanganeh, told reporters as he exited the meeting. “If [Russia] doesn’t accept it, we have no deal…We have no plan.”

Russian Energy Minister Alexander Novak refused to endorse the Saudi-backed plan at a technical meeting Wednesday and flew back to Moscow to consult with President Vladimir Putin, according to OPEC delegates. Mr. Novak also wants Russia to increase output this summer, a move that contradicts the cartel’s nine-months plan, according to one delegate.

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An OPEC official who attended Wednesday’s gathering said Moscow’s delays are negotiation tactics aimed at securing a deal that would have Russia cut relatively little. Russia is now seeking cuts of about 100,000 barrels a day, leaving Saudi Arabia to bear the brunt of the reduction effort, OPEC officials said.

Russia’s hard bargaining is increasingly wearing down Saudi Arabia and its Gulf allies, casting a cloud on the future of their four-year alliance. “Maybe it’s time to consider the whole point of non-OPEC,” said one Persian Gulf official.

The Saudis’ commitment to carry the bulk of the cuts on their own could lead to further complacency among OPEC nations, some of which have historically flouted production cut agreements.

“The Saudis want collective action, and going above and beyond means they may only encourage more free-riding,” said Medley Global Advisors’ Mr. Darwazah.

Oil prices swung higher following the news that Saudi and its Gulf neighbors were considering their own additional cuts, before quickly reversing those gains.



Oil Steadied Above $56 A Barrel After Two Days Of Declines

Oil steadied above $56 a barrel on Tuesday after two days of declines as OPEC output cuts and Libyan supply losses balanced concerns about the spread of the coronavirus and its impact on oil demand.

Crude fell almost 4% on Monday, with other commodities also reporting losses while U.S. and European equities suffered their steepest declines since mid-2016 on concern the coronavirus outbreak could turn into a pandemic.

Brent crude rose 5 cents to $56.35 a barrel by 1338 GMT. U.S. West Texas Intermediate crude was up 16 cents at $51.59.

“Risk appetite appears to be growing again on the markets,” said Commerzbank (DE:CBKG) analyst Eugen Weinberg. He added that the virus and resulting impact on demand is not expected to disappear anytime soon.

South Korea aims to test more than 200,000 members of a church at the centre of a surge in coronavirus cases. The virus is also spreading in Europe and the Middle East.

The Richdad Summit – By Robert Kiyosaki

Concern about the demand impact from the virus has pushed Brent down by almost $10 a barrel this year despite the shutdown of most of Libya’s output and a supply pact between the Organization of the Petroleum Exporting Countries (OPEC) and allies.

Prices received further support as lawmakers based in areas of eastern Libya on Monday said that they would not participate for now in peace talks.

“Libyan peace talks appear to have taken a further blow with both sides announcing the end of their participation, pointing to lost crude volumes from the country carrying on for now,” JBC Energy analysts said in a report.

However, oil could come under more pressure from the latest U.S. supply reports.

Crude inventories are expected to rise for a fifth week running. The first of this week’s two supply reports, from the American Petroleum Institute (API), is due at 2130 GMT.

Potential support for prices could also come from OPEC and allies including Russia, which are considering whether to curb output further. However, scepticism is growing about the chance of further action.

“Doubts are emerging about the willingness of OPEC+ to extend and expand the necessary production cuts,” said Commerzbank’s Weinberg. The producers are due to meet in Vienna over March 5-6 to decide policy.

Saudi Arabia’s energy minister on Tuesday said OPEC+ should not be complacent about the coronavirus. But Russia, key to any deal, has yet to announce its position on further curbs.



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Gold Traded Near a Seven-Year High On Concern That The Coronavirus Outbreak Will Retard Global Growth

Bullion is rising at a time U.S. stocks are at an all-time high even as traders weigh the disease’s impact. While Hubei, the center of the outbreak, reported fewer cases after another revision, there are signs of deepening economic damage. In addition, two deaths were reported in Iran and two people from a quarantined ship in Japan died, highlighting the threat outside China.

The traditional haven has climbed more than 6% this year amid mounting concern over the effects of the virus, with companies from Apple Inc. to Burberry Group Plc cutting guidance. While minutes from the latest Fed meeting showed that officials indicated they could leave rates unchanged for many months, futures traders maintained expectations for at least one cut over 2020.


“Support for the yellow metal is driven by economic uncertainty related to the coronavirus – i.e. how long could the pandemic last and what will its ultimate impact be on world economic growth?” Gavin Wendt, senior resource analyst at MineLife Pty in Sydney, said in an email.

“Importantly, we’ve seen gold performing strongly in a range of currencies, hitting new all-time highs during 2019 and 2020,” said Wendt. That reflects not only investor uncertainty, but also a likelihood more stimulus will be required, including lower rates, to boost activity in a post-coronavirus world, he said.

Spot gold was steady at $1,610.43 an ounce at 11:27 a.m. in Singapore, near Wednesday’s peak of $1,612.98, which was the highest since March 2013. Holdings in global exchange-traded funds backed by bullion have risen to a record, and are on course for a sixth weekly expansion.

Prices may top $1,650 over the coming weeks, according to UBS Group AG’s Global Wealth Management unit, which says it remains long on the precious metal.


“With U.S. equity valuations elevated, any further upsets could see another bout of volatility, a further rally in government bonds and a higher gold price,” analysts Wayne Gordon and Giovanni Staunovo wrote in a report dated Feb. 19.

Palladium climbed 0.5% to $2,731.09 an ounce. The metal used to curb emissions from vehicles touched an all-time high of $2,849.61 on Wednesday on concerns over a widening global deficit, and as the Chinese government pledged to stabilize car demand in the country.

Among other main precious metals, silver was flat, while platinum dropped.




OPEC Wants To Raise Oil Prices

◊ OPEC and Oil Prices News ◊

⇑⇓ StockMarketNews.Today ⇓⇑

The coronavirus outbreak has interrupted economic activity in China with entire cities on lockdown and travel restrictions putting a huge dent in demand for oil. Quite how much this will hit crude demand is unclear — but Chinese energy executives have said oil consumption in the country in February could be 25 per cent lower than a year earlier. That is the equivalent of a 3 per cent drop in global consumption.

As uncertainty lingers about when the transmission of the virus will peak, oil prices have tumbled more than 15 per cent since the beginning of the year to trade around $55 a barrel, a level at which many smaller producers struggle to remain profitable.

The demand shock and resulting price plunge is jolting Opec nations led by Saudi Arabia and ally producers including Russia into action to support prices. The group’s advisory body has recommended that they deepen their existing supply cuts by 600,000 barrels a day to a total of 2.7m b/d for the first half of 2020.

The question for oil traders is whether this will be enough to steady the oil market and push prices higher. Optimism in the market is hard to find. “It may prove to be a damp squib,” said Stephen Brennock of PVM, a broker. “After all, a hefty supply imbalance prevailed even before the outbreak of the coronavirus. There is therefore no guarantee that the proposed cuts will rid the oil market of its current malaise.” Moscow is also sceptical about supporting the cuts until there is more clarity.

The suggestion of Opec’s advisory body that the extra 600,000 b/d of cuts last through the second quarter of 2020 reflects some optimism about how quickly the impact of the virus outbreak will be contained. But it risks underwhelming the market even if it can be agreed. Harry Dempsey

Will China’s central bank step up measures to offset the coronavirus impact?
As China battles to contain its health crisis, many economists are pencilling in a substantial hit to the economy in the first quarter. This has increased speculation that the country’s central bank could ease monetary policy more to soften the blow.

But with consumer inflation still near a seven-year high, it has limited room to cut interest rates further. On Monday investors will get their first hint at the answer when Beijing releases January readings for its consumer and producer price indices.

Serious easing would entail the People’s Bank of China trying to guide the country’s new, more market-driven lending benchmark lower. But at 4.15 per cent, the so-called loan prime rate is already below December’s consumer price index reading of 4.5 per cent. If consumer inflation does pick up, it could leave China grappling with negative real interest rates should the central bank decide to ease.

Last week, the PBoC announced it would pump extra cash into China’s financial system as part of a package of emergency measures to shield the economy from the effects of the coronavirus outbreak. It said it would provide Rmb1.2tn ($173bn) in additional liquidity to money markets.

But as the death toll continues to mount and the economic impact deepens, analysts are predicting even stronger action from the central bank.

Beijing is likely to “step up” its policy easing when there are signs that the outbreak is proving a headwind to economic growth, Prashant Bhayani, BNP Paribas Wealth Management’s Asia chief investment officer, said in a note. Hudson Lockett

Will cost of living data increase US inflation fears?
The US will receive its own inflation reading on Thursday, with the release of the consumer price index (CPI), which tracks common goods such as food, housing and fuel.

The cost of living as measured by CPI has increased in the past year, with price rises at 2.3 per cent year on year as of December. Yet, despite this uptick, officials at the Federal Reserve remain profoundly concerned about the low level of inflation in the US.

On a separate measure — the Fed’s preferred — the problem looks much more pronounced. The personal consumption expenditures (PCE) price index, at 1.6 per cent year-on-year, remains well below the central bank’s target of 2 per cent.

Jay Powell, Fed chairman, stressed this issue at his first post-meeting press conference of 2020, stating that the central bank was not comfortable with inflation running so persistently below its 2 per cent target.

Moreover, he resolved to act to ensure the US evades the low-inflation trap that has ensnared the likes of Europe and Japan. “We have seen this dynamic play out in other economies around the world, and we are determined to avoid it here in the United States,” he said.

One solution that has gained traction is a so-called “make-up strategy”, in which the central bank commits to raising its inflation target after periods of undershooting in order to make up for lost inflation.

The Fed is nearing the end of a once-in-a-decade review of its monetary policy toolkit, and such a change could be announced when that is released.

Stock Market – Top 5 Things to Watch This Week

⇑⇓ StockMarketNews.Today ⇓⇑

Coronavirus headlines could hang over the market in the coming week, as China reported an additional 89 deaths on Sunday, bringing the total number of deaths in the mainland to 811.

The global death toll from the new coronavirus is now at 813, higher than that of SARS.

There will also be important testimony from Federal Reserve Chair Jerome Powell, who appears Tuesday and Wednesday before congressional panels on the economy and monetary policy.

Meanwhile, on the data front, market players will pay attention to this week’s U.S. consumer price data, which should give clearer signs on the pace of inflation.

There are also U.S. retail sales figures for January, which investors will be eyeing for further signs on the strength of the American consumer.

In earnings, there are 68 S&P 500 companies reporting results in the week ahead, as the earnings season on Wall Street starts to wind down.

1. Coronavirus Headlines

China reported an additional 89 deaths on Sunday, bringing the total number of people killed by the fast-spreading coronavirus to 811 in the mainland. The global death toll for the new coronavirus currently stands at 813, including one death in the Philippines and another in Hong Kong.

That number exceeds the global number of deaths from SARS, which killed at least 774 people and infected 8,096 people worldwide in 2002 and 2003, according to data from the World Health Organization.

The National Health Commission said on its website that 2,656 new cases were confirmed as of end Saturday. This brings the total number to 37,198 in mainland China.

Hubei province, the epicenter of the outbreak, accounts for most of the deaths and cases around the world.

The cumulative number of deaths in the province reached 780 after an additional 81 deaths were recorded as of end Saturday. The Hubei Provincial Health Committee said there was an additional 2,147 new cases, bringing the total of confirmed cases to 27,100.

The Chinese economy will sputter towards normal on Monday after the coronavirus outbreak forced an extended holiday, although numerous stores and factories will remain shut and many white-collar employees will continue working from home.

The toll on China’s already-slowing economy has been heavy, with Goldman Sachs (NYSE:GS) cutting its first quarter GDP target to 4% from 5.6% previously and saying an even deeper hit is possible.

2. Fed Chair Powell Testifies

Federal Reserve Chair Jerome Powell is set to deliver his semi-annual monetary policy testimony on the economy before Senate and House committees in Washington DC.

Powell is scheduled to testify before the House Financial Services Committee at 10:00AM ET (1500GMT) Tuesday. On Wednesday, he will appear in front the Senate Banking Committee, also at 10AM ET.

Text of the testimony will be released 90 minutes before he starts speaking.

The Fed chair is expected to reinforce the signal that policy is on hold given the labor market continues to tighten and private consumption growth remains solid.

3. U.S. Inflation

The Commerce Department will publish January inflation figures at 8:30AM ET (1330GMT) Thursday.

Consumer prices are expected to have risen 0.2% last month, according to estimates, matching the increase seen for December. On a yearly base, CPI is projected to climb 2.5%, up from 2.3% a month earlier.

Excluding the cost of food and fuel, core inflation prices are forecast to have gained 0.2% last month and 2.2% over the prior year.

Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected. Weakening inflation will likely add to expectations that the U.S. central bank will need to slow its pace of rate hikes.

4. U.S. Retail Sales

The Commerce Department will release data on retail sales for January at 8:30AM ET (1330GMT) Friday.

The consensus forecast is that the report will show retail sales rose 0.3% last month, after rising at the same pace in December. Excluding the automobile sector, sales are also expected to increase 0.3%.

Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.

5. Earnings Season Starts to Wind Down

Earnings season on Wall Street moves into its final stretch.

Results from Restaurant Brands International, Allergan (NYSE:AGN), and Loews (NYSE:L) will capture the market’s attention on Monday.

Lyft (NASDAQ:LYFT), UnderArmour, AutoNation (NYSE:AN), Hilton, Hasbro (NASDAQ:HAS), Dominion Energy, and Lattice Semiconductor are on the agenda for Tuesday.

CVS Health (NYSE:CVS), Shopify, Cisco (NASDAQ:CSCO), Applied Materials (NASDAQ:AMAT), CyberArk, CME Group (NASDAQ:CME), Barrick Gold, Teva Pharma, and MGM Resorts report results on Wednesday.

Thursday sees Alibaba (NYSE:BABA), Nvidia, Pepsico (NASDAQ:PEP), Kraft Heinz (NASDAQ:KHC), Roku, AIG (NYSE:AIG), Expedia (NASDAQ:EXPE), Mattel (NASDAQ:MAT), Wyndham Hotels, and post earnings.

Finally, Canopy Growth, and Newell Brands are among the few reporting on Friday.


Turmoil In Global Gas Market

◊ Natural Gas News China

⇑⇓ StockMarketNews.Today ⇓⇑

Chinese importers threatening to cancel up to 70 per cent of seaborne imports in February as demand collapses and companies struggle to staff ports. The move by China, the world’s second-largest importer of liquefied natural gas, has sent prices to their lowest level on record and sparked a row with suppliers, which claim the Chinese companies are breaching their contracts to secure lower prices on the spot market.

The stand-off is the latest sign of the economic damage being wreaked by the coronavirus outbreak, which is expected to curtail global growth as large parts of the world’s second-largest economy essentially are in lockdown.

Lower gas prices are a potential boon for manufacturers and consumers but a problem for energy companies, which have warned of a big hit to profits in the first half of this year. Oil demand in China is also estimated to have fallen by as much as a quarter in February, as big cities have been quarantined, flights cancelled and public holidays extended to try to contain the spread of the virus, which has killed more than 600 people and infected more than 31,000.

Two of China’s largest energy groups have already declared “force majeure” on at least 14 LNG import cargoes, invoking a clause usually reserved for natural disasters or war that frees both sides from the contract. Chinese LNG buyers are likely to issue more such notices in the coming days, according to people with knowledge of the transactions.

Some LNG tankers are said to have been diverted from southern Chinese ports to the north. But analysts say other large markets in Asia and Europe are saturated amid a global supply surfeit, meaning ships are likely to anchor off Chinese shores as floating storage. Wholesale gas prices in the UK are close to the lowest level since the financial crisis.

“The prospect of a flotilla of diverted LNG carriers sailing around the world looking for a home only adds to the bearish sentiment,” said Frank Harris, global head of LNG at consultancy Wood Mackenzie.

A glut of natural gas has already depressed Asian LNG prices to a historic low of $2.95 per million British thermal units. LNG sellers complain that China’s use of the force majeure clause is at least partly motivated by importers’ desire to buy at cheaper spot prices instead of cargoes imported under their long-term contracts.

The LNG market has grown rapidly in recent years, boosted by greater supplies from the US and Australia. The rise in seaborne gas trade has connected regional markets and brought prices closer together, meaning a drop in Asia can now mean cheaper prices in Europe, and vice versa.

Of the cargoes already cancelled under force majeure, 10 were issued by China National Offshore Oil Corporation (Cnooc) to Royal Dutch Shell, with PetroChina refusing to take two cargoes from Qatar and two from Malaysia — including one due for delivery in March — according to people with knowledge of the contracts.

As many as 50 cargoes, or 70 per cent of February’s total imports, are now thought to be at risk of cancellation over the coming days, as buyers including Sinopec have sent out notices saying they will struggle to take them.

China imported an average of almost 7bn cubic metres a month of the supercooled fuel last year, according to consultancy Energy Aspects. Although China has expanded its storage in recent years, capacity remained limited, analysts at ANZ said. LNG suppliers, traders and lawyers are questioning the legitimacy of declaring force majeure due to a drop in demand following the spread of the coronavirus.

“There are substantial questions about whether it’s appropriate,” said Jason Feer, global head of business intelligence at Poten & Partners, a broker. “They’re getting a lot of pushback from suppliers saying low prices and full tanks is not a force majeure event.”

France’s Total said it had rejected a majeure notice from one Chinese company.

“Our legal analysis is that there is no force majeure,” said Philippe Sauquet, Total’s president of gas, renewables and power. “We have to be careful because if there is a real quarantine in a loading or unloading port, there will be a real case for force majeure in China.”



Tesla Resume Production In Shanghai

U.S. electric carmaker Tesla‘s factory in China’s financial hub of Shanghai will resume production on Feb. 10 with assistance to help it cope with a spreading epidemic of coronavirus, a Shanghai government official said on Saturday.

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future

Many factories across China shut in late January for the Lunar New Year holiday that was originally due to end on Jan. 30 but which was extended in a bid to contain the spread of the new flu-like virus that has killed more than 700 people.

Tesla warned on Jan. 30 that it would see a 1-1.5 week delay in the ramp-up of Shanghai-built Model 3 cars as a result of the epidemic, which has severely disrupted communications and supply chains across China.

Tesla Vice President Tao Lin said this week that production would restart on Feb. 10.

“In view of the practical difficulties key manufacturing firms including Tesla have faced in resuming production, we will coordinate to make all efforts to help companies resume production as soon as possible,” Shanghai municipal government spokesman Xu Wei said.

The $2 billion Shanghai factory is Tesla’s first outside the United States and was built with support from local authorities. It started production in October and began deliveries last month.

The Shanghai government also said on Saturday it would ask banks to extend loans with preferential rates to small companies and exempt firms in hard-hit sectors like hospitality from value-added tax, among other measures to prop up businesses during the epidemic.

Such assistance would also apply to foreign companies, it added.

Best Books For Making Money In The Stock Market

#1 – The Intelligent Investor. (Revised Edition)

This classic text is annotated to update Graham’s timeless wisdom for today’s market conditions… The greatest investment advisor of the twentieth century, Benjamin Graham, taught and inspired people worldwide. Graham’s philosophy of “value investing” — which shields investors from substantial error and teaches them to develop long-term strategies — has made The Intelligent Investor the stock market bible ever since its original publication in 1949.

Over the years, market developments have proven the wisdom of Graham’s strategies. While preserving the integrity of Graham’s original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today’s market, draws parallels between Graham’s examples and today’s financial headlines, and gives readers a more thorough understanding of how to apply Graham’s principles.

Vital and indispensable, this HarperBusiness Essentials edition of The Intelligent Investor is the most important book you will ever read on how to reach your financial goals.

#2 – Encyclopedia of Chart Patterns

In this revised and expanded second edition of the bestselling Encyclopedia of Chart Patterns, Thomas Bulkowski updates the classic with new performance statistics for both bull and bear markets and 23 new patterns, including a second section devoted to ten event patterns. Bulkowski tells you how to trade the significant events — such as quarterly earnings announcements, retail sales, stock upgrades and downgrades — that shape today?s trading and uses statistics to back up his approach. This comprehensive new edition is a must-have reference if you’re a technical investor or trader. Place your order today.
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#3 – How to Make Money in Stocks

Anyone can learn to invest wisely with this bestselling investment system!… Through every type of market, William J. O’Neil’s national bestseller, How to Make Money in Stocks, has shown over 2 million investors the secrets to building wealth. O’Neil’s powerful CAN SLIM® Investing System―a proven 7-step process for minimizing risk and maximizing gains―has influenced generations of investors.

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China Energy Executives Braced For 25% Fall In Domestic Oil Demand

⇑⇓ China Oil Demand ⇓⇑

Executives at some of the country’s largest refineries expect that nationwide demand will fall by a staggering 3.2m barrels a day in February from last year — a drop equivalent to more than 3 per cent of global consumption.

Oil prices have already crashed on expectations of plunging demand as the Chinese authorities quarantined cities, restricted air and road travel, and extended factory closures following the lunar new year holiday.

But the projections of senior executives in China — the world’s top oil importer — are likely to undermine market confidence further.

Chinese oil demand in February 2019 was just under 13m barrels a day, according to the International Energy Agency.

Opec countries and allies including Russia are scrambling to thrash out a response to a demand shock that could rival the drop in consumption witnessed at the nadir of the global financial crisis in 2008.

Trade Oil: Crude Oil Trading and Price Charts

The oil major BP warned this week that the coronavirus outbreak could cut global oil demand by 300,000-500,000 barrels a day on average this year.

Brent crude, the international benchmark, has dropped more than 20 per cent since early January, falling below $55 a barrel earlier this week. It rebounded slightly on Wednesday amid hopes that a treatment for the virus would be found.

Chinese refiners, which process crude to create fuels such as petrol and diesel, are facing a big hit to sales as Beijing struggles to control the spread of the virus.

“The epidemic has dealt a huge blow to our business,” said one executive at a Chinese refinery, who asked not to be identified because of the sensitivity of the issue.

An executive at another refinery said that if the spread of the virus peaked in the coming weeks, China’s oil demand could remain at least 10 per cent lower in March than a year ago.

“We are highly likely to see a 3-4m b/d impact [this month] when you consider the economy has virtually ground to a halt,” said Michal Meidan at the Oxford Institute for Energy Studies.

“Industrial activity is down, passenger movement is down 70 per cent, freight movement is down 50 per cent. The timing question is key. We know for sure there is an effective standstill for two weeks at least.”

If China can quickly contain the spread of the virus, less dramatic forecasts about the demand hit are more likely to prove correct. Chevron said last week it saw a hit of 200,000 b/d on average for the year.

The Opec grouping is considering calling an emergency meeting to decide on the next steps to stop oil prices falling further. Talks are ongoing about whether they need to cut production by 500,000 b/d or more but no decision has yet been made.

Independent Chinese refiners have been particularly hard hit, cutting crude processing rates by at least half, one of the executives said.

They said daily sales of products such as fuel oil and asphalt have dropped by 90 per cent since the end of January, as logistics have been hampered by road restrictions. This has prompted inventories to rise by more than 50 per cent and put pressure on cash flows.

The country’s gasoline and diesel consumption fell almost two-thirds during the new year holiday from a year earlier, said another executive.

The average capacity utilisation rate among independent refineries in Shandong — a centre of the refining trade — has fallen to between 40 per cent and 50 per cent, a historical low, two of the executives said.

“Everyone is waiting for the turning point but no one knows when,” said a refinery executive.

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Goldman Says Oil Rally Likely Shortlived


StockMarketNews.Today — A flare-up in U.S.-Iran tension may be keeping oil elevated, but an actual disruption to global crude supplies is needed to keep prices at current levels, according to Goldman Sachs Group Inc .

Price risks for Brent, which has surged about 6% since the U.S. strike killed a top Iranian general, are skewed to the downside in the coming weeks without a major supply disruption, Goldman said in a note dated Jan. 6. Oil was already trading above the bank’s fundamental fair value of $63 a barrel prior to the attack, buoyed by an “over-enthusiastic December risk-on rally” despite limited evidence of an acceleration in global growth, they said.

“It is not a given that any potential retaliation by Iran would target oil producing assets,” Goldman analysts including Jeff Currie said. “The recent incident at the U.S. embassy in Iraq occurred while there was no disruption to neighboring oil fields.”

Brent rallied above $70 a barrel and New York crude edged closer to $65 on Monday as the U.S. warned that there’s a “heightened risk” of missile attacks near military bases and energy facilities in Saudi Arabia, while Iran stated it no longer considers itself bound by the 2015 nuclear pact.

The rhetoric turned even more hostile after President Trump warned Iran of major U.S. retaliation “in a disproportionate manner”, and threatened heavy sanctions on its ally Iraq after its parliament voted to expel American troops from the country in response to the Baghdad attack.

The September strike on key oil producing facilities in Saudi Arabia indicated that the market has significant supply flexibility, according to Goldman. There is only “moderate upside” from current levels, even if an attack on oil assets actually occur, the bank said.

Being long gold is a better hedge than oil to such geopolitical risks, according to Goldman, adding that history shows under most outcomes, the precious metal will likely rally well beyond current levels. The bank maintained its three-, six- and 12-month forecast at $1,600 a ounce.

Natural Gas News Today



◊ Best Books For Making Money ◊

#1 – The Book on Making Money

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A Glut Of Cheap Natural Gas Is Wreaking Havoc On The Energy Industry

A decade ago, natural gas was heralded as the fuel of the future. In shale fields across the country, hydraulic fracturing uncorked a lucrative new source of supply. Energy giants like Exxon Mobil and Chevron snapped up smaller companies to get in on the action, and investors poured billions of dollars into export terminals to ship gas to China and Europe.

The boom has given way to a bust. A glut of cheap natural gas is wreaking havoc on the energy industry, and companies are shutting down drilling rigs, filing for bankruptcy protection and slashing the value of shale fields they had acquired in recent years.

The New Geopolitics of Natural Gas

We are in the midst of an energy revolution, led by the United States. As the world’s greatest producer of natural gas moves aggressively to expand its exports of liquefied natural gas (LNG), America stands poised to become an energy superpower―an unanticipated development with far-reaching implications for the international order. Agnia Grigas drills deep into today’s gas markets to uncover the forces and trends transforming the geopolitics of gas.

Chevron, the country’s second-largest oil and gas giant after Exxon, said on Tuesday that it would write down $10 billion to $11 billion in assets, mostly shale gas holdings in Appalachia and a planned liquefied natural gas export facility in Canada. The move was an energy company’s clearest acknowledgment yet that the industry has been far too optimistic about the prospects for natural gas.

While cheap natural gas continues to take market share from coal in the electricity sector, supply of the fuel has far outstripped demand. As a result, once-booming gas fields in Arkansas, Louisiana and Texas have become quiet backwaters. The number of gas rigs deployed nationwide has dropped to 132, from 184 last year.

“In the short term the gas market is oversupplied and is likely to remain so for the next few years,” said Andy Brogan, oil and gas global sector leader at EY, the firm formerly known as Ernst & Young. “It’s a cyclical business, and we’re at the bottom of the cycle.”

Some analysts said the gas slump could persist for some time because the cost of wind and solar energy has tumbled in recent years, making those renewable sources of energy more attractive to power producers. And while gas exports are climbing, growing production of the fuel in Qatar, Russia and Australia threatens to drive down international prices over the next few years.

Nowhere are the declining fortunes of natural gas more in evidence than in Appalachia, where the Marcellus field centered in central and western Pennsylvania was once viewed as the most promising in North America. With gas prices slashed nearly in half from a year ago, the number of drilling rigs operating in Pennsylvania has dropped to 24, from 47, over the last 12 months. EQT, one of the premier producers in the Marcellus, recently cut nearly a quarter of its work force, eliminating 196 positions.

That is a far cry from the picture Chevron painted when it acquired Atlas Energy almost exactly 10 years ago for $3.2 billion, while assuming $1.1 billion in debt, cementing its foothold in southwestern Pennsylvania. At the time, George L. Kirkland, then Chevron’s vice chairman, predicted that the “strong growth potential of the asset base and its proximity to premier natural gas markets make this targeted acquisition a compelling investment.”

Other energy companies have also acknowledged losses, though not to the same extent. Exxon Mobil wrote down the value of its American natural gas assets by $2.5 billion in recent years after buying the natural gas producer XTO Energy for more than $30 billion in 2010.

Gas producers have struggled in part because New York and other Northeastern states have made it harder to build pipelines to transport the fuel. But analysts point to a far bigger problem: The industry is just producing too much gas. In some oil fields where gas bubbles to the surface with crude, it has become cheaper for producers to burn the gas than gather it and send it to market.

“Natural gas is in the tank,” said Patrick Montalban, president of Montalban Oil & Gas Operations. “We’re looking at a project right now of over 200 wells in Montana that are for sale, but they are uneconomic. Not only are the wells uneconomic, the gathering of the gas is uneconomic.”

American natural gas inventories are about 19 percent higher than a year ago, according to the Energy Department. The government estimates that the average spot price for natural gas will be $2.45 per million British thermal units in 2020, about 14 cents below this year’s average. At its peak in 2008, the benchmark price topped $10 per million British thermal units.

Exports of liquefied natural gas are rising sharply, but future profits may be meager. S&P Global Platts warned this week that European gas prices could slide next year, reducing how much money United States exporters can earn.

Moody’s Investor Service predicted that several gas exploration and production companies active in the Marcellus will face heightened financial risks over the next three years because of the debt they have accumulated. Between 2021 and 2023, companies such as Antero Resources, CNX Resources, EQT and Gulfport Energy will need to refinance between $3.5 billion and $4 billion in debt. All told, the producers have to repay lenders more than $12 billion during that period.

“If low natural gas prices persist beyond 2020,” the Moody’s report said, “companies may need to reduce debt to maintain compliance with financial covenants or amend covenant levels.”

Many smaller companies have sought bankruptcy protection or indicated that they could go out of business. Shares of Chesapeake Energy, the Oklahoma-based champion of shale gas drilling, traded at more than $60 in 2008. Now they sell for less than a dollar. Chesapeake warned in a recent securities filing that if prices remained low and it was unable to comply with the conditions of its debt, “there is substantial doubt about our ability to continue as a going concern.”

Such pessimism is widespread… “We expect the trend of write-downs to continue as price outlooks are adjusted down,” said Tom Ellacott, senior vice president at Wood Mackenzie, a research firm.

Of course, low natural gas prices have been a boon to users of the fuel, especially electricity utilities, which are increasingly replacing coal-fired plants with ones that use gas. Gas is expected to have provided about 37 percent of electricity produced in the United States this year, up from 34 percent in 2018, according to the Energy Department. But renewables are climbing even faster.

In a recent report, Morgan Stanley estimated that demand for natural gas would grow for a few years but fall 13 percent between 2020 and 2030 as utilities increasingly switch to wind and solar power. Future regulations or a carbon tax put in place by lawmakers worried about climate change could accelerate the transition to renewables.

Exports offer perhaps the greatest growth potential for American natural gas. But even as companies build more liquefied natural gas export terminals across the Gulf Coast, competition from Russia and Qatar is intensifying and analysts fear there could soon be a global glut of gas.

“There is significant uncertainty as to the scale and durability of demand for imported L.N.G. in developing markets around the world,” the International Energy Agency said in a recent report. Considering the high cost of processing and transporting liquefied natural gas, the report added, “competition from other fuels and technologies, whether in the form of coal or renewables, loom large.”

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EIA: Oil Markets Could Face Oversupply in 2020

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Oil markets are expected to face excess supplies in 2020 due to a production boost amid weak demand growth, the director for energy markets and security at the International Energy Agency said Tuesday. “Overall, we will continue to see a well supplied market in 2020,” said Keisuke Sadamori at the Singapore International Energy Week.

“Unless other things change, we will see a surplus probably, unless there is very strong demand growth recovery,” Sadamori told CNBC. In its latest monthly report, the Paris-based agency cut its oil demand growth figure by 100,000 barrels a day for 2019 and 2020. Oil demand is expected grow at a “still solid” 1.2 million barrels a day in 2020, IEA said in the report.

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Global macroeconomic concerns such as the United States-China trade dispute and the developments surrounding Brexit — the UK’s exit from the European Union trade bloc — are issues clouding the oil market outlook, said Sadamori. The Organization of the Petroleum Exporting Countries, and other producers including Russia, have implemented an output cut by 1.2 million barrels per day since January in a bid to support the market.

However, oil supplies this year have been boosted by non-OPEC members such as the U.S. in shale oil production. Brazil and Norway will also produce more oil next year, said Sadamori. Meanwhile, demand in 2019 has been weak, amid weak growth in the first half and India demand growth slower than expected, he said. Growth in the second half of 2019 is being supported by a low base over the same period in 2018.


In September, Saudi Arabia was forced to cut its oil production by half following a series of drone strikes on its oil processing facility. The closure affected nearly 5.7 million barrels of crude production a day — or about 5% of the world’s daily oil production.

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While there were concerns about the supply security after the attack, claimed by Yemen’s Houthi rebels, the recovery in supplies has been “quite impressive,” said Sadamori, giving comfort to the Kingdom’s customers around the world and assurance of the stability of world oil markets.




Commodity Market Insights

Prospects for a “mini” trade deal between the U.S. and China leading to further progress have lifted agricultural commodities, taken the wind out of gold and left energy markets unimpressed.


CRUDE OIL prices fell for the first time in four days yesterday despite the announcement of the first steps in a trade deal at the end of last week, which would have lifted hopes for global growth. Customs data from China showed its crude oil imports for September were 2.2% lower than a month earlier at 41.2 million tons. Russia’s energy minister Alexander Novak was in Jeddah yesterday to sign a long-term charter with OPEC. He commented that it was important that OPEC+ can react quickly to market changes.

Meanwhile, Saudi Arabia said that all damages from the September 14 attacks had been repaired and that production was back to pre-attack levels at 9.9 million barrels per day (bpd). The number of U.S. rigs producing oil rose for the first time in eight weeks, hitting 712 as at last Friday. Speculative accounts trimmed net long positions for a fourth straight week in the week to October 8, the latest data from CFTC show. Net longs are now the lowest since the week of June 11. West Texas Intermediate (WTI) remains capped by the 55- and 100-day moving averages at $55.40 and $55.73 respectively. The 100-day average has capped prices on a closing basis since September 24.

NATURAL GAS is in the process of staging a recovery from the seven-week lows struck last Friday amid forecasts for colder weather across the U.S. in the October 19-23 period. Prices have risen for the past three days and are edging toward the 55- and 100-day moving averages at 2.3229 and 2.3281, respectively. China’s headline imports for September showed a sharp deterioration but imports of natural gas were 8.2 million tons, bringing the year-to-date total to 71.2 million tons, a 10% increase from the previous year. Last week’s inventory data to October 4 showed a smaller total of 98 billion cubic feet (bcf) compared with 112 bcf the previous week. That’s still above the 5-year average of 89 bcf.

Precious Metals

GOLD is holding steady after a two-day decline at the end of last week as U.S. President Trump announced a “mini” trade deal with China dubbed Phase 1. The deal is seen as a major breakthrough and paves the way for a partial trade deal, though China have been quick to state that a lot of work still needs to be done. The improvement in sentiment took its toll on gold and the Thursday/Friday losses tipped the precious metal into negative for the week. It’s still trading within the downward-sloping channel mentioned last week, with the outer limits now approximately at 1,447 and 1,513. Exchange-traded funds (ETFs) added to gold holdings for a 20th session, Bloomberg reported yesterday. That’s the longest buying streak in a decade.

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SILVER has fared a tad better than gold, rallying for the past three days with exchange-traded funds adding to their existing holdings for the past six sessions, according to Bloomberg reports, bringing total net purchases for 2019 to 108 million ounces. Speculative investors had also been net bullish at the last reporting date on October 8, turning net buyers for the first time in five weeks, according to CFTC data.

PLATINUM continues its retreat from two-week highs as the metal struggles to sustain a move above the 55-day moving average attempted on Thursday. That moving average is now at 898.65 with platinum currently trading at 894.48.

PALLADIUM reached a new record high yesterday as the implications for some sort of trade deal boosted the metal. The assumption is that a deal would improve the prospects for global growth, which in turn would increase demand for cars and hence boost demand for the metal in pollution control devices in those cars. Speculative investors were well positioned for the latest record-breaking rally, having increased net long positions for the past six weeks, lifting net longs to the highest in more than seven months.

Base Metals

COPPER’s rally after the mini trade deal announcement is currently stalling at the 100-day moving average at 2.6293. That moving average has held on a closing basis since September 13. China’s headline import and export data for September were dismal, with a three-year equaling low 8.5% contraction. However, copper imports were a bright spot in the report, rising to the highest this year at 445,000 tons, but still down 15% from a year earlier. Copper stocks at warehouses monitored by the London Metal Exchange (LME) were higher for a second straight week, the first time this has happened since July. Speculative investors remain a bit skeptical about the industrial metal’s rise, having increased net short positions for a third straight week, according to the latest report to October 8 from CFTC. Net shorts are now at a five-week high.


U.S. President Trump said that China has agreed to increase purchases of U.S. agricultural products to $40-$50 billion annually under the “Phase 1” trade agreement. This compares with the 2017 U.S. exports total of $19.5 billion. It was inevitable therefore that agricultural commodities rose, with SOYBEANS an outperformer. The commodity hit a 16-month high of 9.38 yesterday, having risen for seven consecutive days. Soybeans were given an additional boost from the recent World Agricultural Supply and Demand Estimates (WASDE) report from the U.S. Department of Agriculture on Friday, which pegged U.S. soybean supply lower than expected. Speculative investors were already bullish on the commodity prior to the latest surge, having boosted net long positions for a fourth straight week to hit the highest since June 2018.

CORN also benefitted from the trade deal announcement, rising to the highest since August 12 yesterday. The rally hit the 100-day moving average at 3.9568 but failed to trade above it. That moving average has capped prices for nine weeks. Speculative investors trimmed net short positions for a second straight week, reducing them to the lowest since September 3.

SUGAR is consolidating gains made since the beginning of September as the market faces a supply shortage for this season. The International Sugar Organisation (ISO) has pegged the 2019/20 season deficit at nearly five million tons, which is helping to support prices. However, the shortfall comes after two straight years of surpluses and the ISO reckons there is still a 95 million ton backlog to clear.

WHEAT prices touched a near three-month high yesterday following last week’s trade deal framework. Prices have stalled near the 61.8% Fibonacci retracement of the drop from June 27 to September 3 at 5.109 and could be facing their first down-day in three today.

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Oil Jumps as Iran Tanker Blast

Oil jumped back above $60 a barrel after a reported explosion on an Iranian tankerFutures jumped by almost $1 a barrel after the Islamic Republic News Agency reported a National Iranian Oil Company tanker caught fire after a blast, taking the day’s gains to more than 2%. Prices were already higher after U.S. President Donald Trump said talks with Chinese counterparts are going “really well” and that they will continue on Friday, offering a glimmer of hope for global demand.

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The tanker explosion will spur fresh concern about potential conflict in the world’s most important crude-producing region after attacks on ships and drones earlier this year, and most recently a strike on Saudi Arabian energy infrastructure. Oil is still down about 19% from its peak in April as the prolonged U.S.-China dispute adds to a bleak economic outlook.

“The explosion points to potential geopolitical risks and that has once again surprised the market to the upside,” said Will Sungchil Yun, a commodities analyst at HI Investment & Futures Corp. in Seoul. “It still remains to be seen whether prices will keep rising as investors are putting their focus on the trade talks and the gains won’t last long if the negotiations result in a no-deal.”

Brent crude for December settlement rose as much as $1.36, or 2.3%, to $60.46 a barrel on the London-based ICE (NYSE:ICE) Futures Europe Exchange. The contract is up 3.5% this week and traded at $60.44 a barrel at 7:37 a.m. in London.


West Texas Intermediate for November jumped as much as $1.14, or 2.1%, to $54.69 a barrel on the New York Mercantile Exchange. The contract climbed 96 cents to $53.55 on Thursday, the highest level in more than a week. Prices are up 3.5% this week.

See also: Oil Market Next Year ‘a Mess’ for Shale Drillers, Seaport Says

Key Saudi Arabian oil-processing facilities were attacked on Sept. 14, a strike that curbed about 5% of global output and was blamed on Iran. In July, a U.S. ship down an Iranian drone, while oil tankers have been targeted in the Persian Gulf.

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Saudi Arabia Oil Attacks Were Launched From Iran

Saudi Arabia Oil Attacks – Stock Market News — American intelligence indicates Iran was the staging ground for a debilitating attack on Saudi Arabia’s oil industry, people familiar with the discussions said Monday, as Washington and the kingdom weighed how to respond.

The assessment, which the U.S. hasn’t shared publicly, comes as President Trump raised the prospect of a joint U.S.-Saudi retaliatory strike on Iran, a scenario that risks quickly broadening into a regional armed conflict.

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U.S. officials shared with Saudi Arabia the images, intelligence reports, and their assessment that Iran launched more than 20 drones and at least a dozen ballistic missiles at the Saudi oil facilities on Saturday, the people familiar said.

The Saudi-led coalition leading the war in Yemen said Monday the weapons used to hit the kingdom were Iranian, in its first assessment of the weekend attacks. The coalition dismissed Yemeni Houthi rebels’ claims of responsibility for the strikes. And Secretary of State Mike Pompeo told Iraqi leaders that the U.S. didn’t believe their country was used to carry out the attacks.


But Saudi officials said the Americans didn’t provide enough proof to conclude that Iran was the staging ground and didn’t blame Iran, indicating the U.S. information wasn’t definitive. U.S. officials said they planned to share more information with Riyadh in the coming days. Unless Riydah makes the same determination, the U.S. would have trouble in its attempt to galvanize regional support for a unified response, said Western officials and analysts in the region.

Asked by reporters on Monday whether Iran is responsible for the attacks, Mr. Trump said: “Well, it’s looking that way.” Mr. Trump, who had been scheduled to meet with the Crown Prince of Bahrain on Monday, before the attacks took place, said that the U.S. is prepared for war “if we have to go that way.”

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“With all that being said, we’d certainly like to avoid it,” he added, noting that diplomacy is “never exhausted until the final 12 seconds.” Mr. Trump noted that the Saudis “very much” want U.S. protection but he expects them to take a significant role if any action is taken. He said he took the decision Sunday to release the country’s strategic oil reserves “Just in case we ran a little bit low on oil.”

After weighing the Trump administration information, Saudi Arabia announced that it was going to invite United Nations experts to come investigate the attacks, a decision likely to prolong the debate over any military response. Saudi Arabia said it would wait for the results of any such investigation before deciding how to respond.

In Washington and Riyadh, government officials are split over how to respond. Some want to strike Iran military, while others worry that an attack could trigger a wider regional fight, said officials in both countries.

The Saturday attack hit the heart of Saudi Arabia’s oil industry with a series of drone and missile strikes that left Riyadh reeling. The country is struggling repair the damage and limit the fallout to the energy industry.

Brent crude, the international benchmark for crude prices, was up over 14% on Monday at $68.51, one of the biggest one-day increases in memory. Higher fuel prices pose another threat to the world economy amid a U.S.-China trade dispute, although Saudi and U.S. officials said they would ensure that the oil market remains well supplied.

As a result of the attack, Saudi Arabia is considering whether to delay plans by Aramco, Saudi Arabia’s state oil-and-gas company, for an initial public offering, The Wall Street Journal reported Monday, citing people familiar with the matter.

The developments have already undermined efforts to broker a meeting between Mr. Trump and Iranian President Hassan Rouhani next week at the United Nations General Assembly. Iran said on Monday that its president wouldn’t meet Mr. Trump after the U.S. said it was open to such a meeting.

Mr. Rouhani on Monday said the attack was an act of self-defence by Yemeni Houthi rebels, who are allied with Tehran. “Every day, Yemen is being bombed and peaceful civilians are dying,” Mr. Rouhani said during a trilateral summit with Russian and Turkish counterparts in Ankara. “When security is restored in Yemen, then it will be possible again to produce oil safely in [Saudi Arabia].”

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The latest attacks pose a critical test for the U.S.-Saudi relationship, especially for Mr. Trump and Saudi Crown Prince Mohammed bin Salman, the country’s de facto ruler. They have both shifted their country’s foreign policies toward confrontation with Iran.

Mr. Trump met Monday with his national security team to discuss the attacks on Saudi Arabia and escalating tensions in the Middle East, said a person familiar with the meetings.

Mr. Trump and his team, which included Secretary of Defense Mark Esper and acting national security adviser Charles Kupperman, discussed possible military action against Iran, but made no decisions, said a second person familiar with the discussions.

Mr. Trump has warned that the U.S. is “locked and loaded,” but that it is waiting for Saudi Arabia’s assessment of the attacks before deciding what to do next. “Both President Trump and Mohammed bin Salman feel the need to respond but neither wants war,” said Robert Malley, president of International Crisis Group and former White House Middle East coordinator under President Obama. “The question is how they achieve the former without provoking the latter.”

The U.S. has taken the lead in providing security for the Persian Gulf monarchies for decades in part out of a strategy of protecting the world’s oil supply. As a result, observers of the region expect Saudi Arabia might defer any military action to the U.S.

“At the end of the day, conventional military action is a last resort for any state, and it is something that would be done in coordination with regional and international stakeholders,” said Mohamed Alyahya, a Saudi political analyst and editor of the English website of Saudi-owned al-Arabiya television.

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“Any reaction whatsoever, or lack thereof, will have significant consequences on the future of the region,” he said. On Monday, Mr. Trump tweeted a reminder of Iran’s behavior when it shot down a U.S. drone in June, a strike that led the U.S. to prepare a military strike against Iran. Mr. Trump called off the strike after having second thoughts.

“Remember when Iran shot down a drone, saying knowingly that it was in their ‘airspace’ when, in fact, it was nowhere close,” he said. “They stuck strongly to that story knowing that it was a very big lie. Now they say they had nothing to do with the attack on Saudi Arabia. We’ll see?”

The weekend strikes marked the most significant attack in a simmering conflict pitting America and its Middle East allies against Iran and its proxies around the region.

Mr. Trump imposed crippling sanctions on Iran that have delivered a blow to the country’s economy. Iran’s crude oil production capacity was nearly 4 million barrels a day before the revival of U.S. sanctions, making it a leading oil supplier. The country’s refining capacity now is roughly half that amount.

In recent months, the U.S. has accused Iran of carrying out a series of attacks in the region, including blasts that crippled several tankers in the Persian Gulf.

The prospect of U.S. military action drew divergent reactions from lawmakers. Sen. Lindsey Graham (R., S.C.) called over the weekend for the U.S. to put an attack on Iranian oil refineries “on the table.”

Others cautioned against military action. Sen. Mitt Romney (R., Utah) warned on Twitter Monday that any “direct engagement by U.S. military in response to Iran’s attacks on Saudi oil infrastructure would be a grave mistake.”

Sen. Tim Kaine (D., Va.) was more blunt: “The U.S. should never go to war to protect Saudi oil,” he tweeted on Sunday.

Saturday’s strikes demonstrated how a war with Iran could be devastating for Saudi Arabia, with the lifeblood of the kingdom’s economy vulnerable to attack despite hundreds of billions of dollars spent on its military.

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The attacks have amplified the pressure on the Saudi government to respond. Its air defenses have failed to stop the attacks on Saturday and other incidents involving the Houthis in the months before, despite the kingdom having the world’s third-largest military budget. The Saudis have spent hundreds of billions of dollars spent over the years on tanks, jet fighters and other hardware.

Among other weapons, the kingdom has both American-made Patriot and Hawk missile systems, both of which failed to stop a series of drone and missile attacks since May. The Saudi government says it has shot down several drones in the past.


Trade War – As U.S. and China Squabble, Australia Seizes Trade Opportunities

♦ Australia Trade Opportunities – Stock Market News ♦ … — Luckily for Australia, the U.S.-China trade war happened. Australia faced a personal-credit crunch, housing slump and weak business confidence, threatening to derail the longest-running growth streak in the developed world. Then it got a trade boost as U.S.-China relations soured.

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Australia ships around a third of its exports to China, mostly commodities a such as iron ore and coal that are used by heavy industry and in the building of apartments. Those exports are in demand as Beijing accelerates construction spending to head off damage caused by Washington raising tariffs.

Trade has been so buoyant that Australia logged its first current-account surplus—a measure of trade and financial flows with other countries—since 1975 in the second quarter of this year. That has provided some much-needed juice to Australia’s economy, on a 28-year run without a recession, as other headwinds to growth intensify. Australia’s gross domestic product expanded at its slowest pace since the financial crisis in the second quarter.

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“It seems like a contradiction,” said AMP Capital chief economist Shane Oliver. “We are hearing all this talk about trade wars, which should obviously affect trade, and yet we have a record trade surplus that’s been far greater than anyone expected.”

Australia’s trade experience is unusual for a U.S. ally, some of whose economies have become collateral damage in the trade dispute. Germany’s exports in June fell 8% on a year earlier, and its current-account surplus has declined.

Global trade volumes grew 4.4% in the first quarter of 2018, when the first U.S. tariffs were imposed, from the same period a year before, according to the International Monetary Fund. But growth had slowed sharply by year’s end, with trade up 1.6% in the fourth quarter from the prior year. Trade volumes fell 0.4% in the second quarter of 2019 versus the same period a year ago.

Investors are skittish, evidenced by a global selloff of equities last month and the yield on the U.S. 30-year Treasury bond falling to a record low.

The trade war continues to take twists and turns. Chinese and American officials last week agreed to meet next month for high-level trade talks, although expectations for a breakthrough are low. The U.S. is in the process of introducing additional levies on clothing and other imports from China, while China is retaliating with its own measures.

To be sure, a sharper slowdown in global growth would hurt Australia. Businesses could become more reluctant to invest, consumers unwilling to spend and foreign demand for Australian goods could weaken.

Much depends on Beijing’s response. “The domestic stimulus in China to offset the trade dispute has contributed to a short-term boost to the Australian economy and significantly mitigated the impact of the trade disputes on us,” Reserve Bank of Australia Deputy Governor Guy Debelle said on Aug. 15.

Australia has logged a 30% rise in nominal exports to China since early last year, around the time the U.S. tariffs were first imposed, said J.P. Morgan, which thinks Beijing would again turn to stimulus rather than risk a deeper economic slowdown.

Adding ballast to that view is how Australia’s economy behaved during the financial crisis a decade ago. China’s huge economic-stimulus program drove up prices of iron ore—Australia’s No. 1 export—and helped to prevent a recession Down Under.

The iron-ore price has surged again this year. It rose 74% in roughly six months to a peak in July, as Chinese mills churned out steel at record rates to support the national economy and the market adjusted to supply cutbacks in Brazil.

While iron-ore prices have fallen by almost a third since then to US$88 a metric ton, some forecasters think they won’t decline much further, and might even rebound.

Investors fearful of global recession risks have also been buying gold. That is good for Australia, which counts the precious metal among its top exports.

Meanwhile, Australia appears to be benefiting from tighter U.S. visa procedures for Chinese students. Growth in higher-education enrollments by Chinese students in Australia far outpaced the U.S. in 2017-2018, said Australian education provider Navitas.

The question is whether Australia’s terms of trade have peaked. Many economists think the drop in iron-ore prices means it won’t be long before Australia returns to a current-account deficit.

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Australia is also vulnerable if Beijing calibrates its trade response to hurt Washington’s allies. For months now, Australian coal cargoes have struggled to pass Chinese ports quickly—a headache for miners and widely viewed as a political maneuver by Beijing. Australia irked China by tightening laws on political interference, and banning Huawei and ZTE from its 5G telecommunications network.

Australia faces bottlenecks that restrict its ability to displace U.S. exports to China. A severe drought means Australia can’t quickly add production of many farm goods. Most exports of liquefied natural gas are locked into 20-year contracts with other Asian customers.

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There are also questions around the limits of China’s ability to stimulate its economy. “People shouldn’t take China stimulus for granted,” said IBISWorld senior industry analyst Jason Aravanis.




Precious Metals Enjoy Resurgence in Negative-Yield World

♦ Precious Metals – Stock Market News Today ♦ … – Gold purchases by everyone from central banks to retail buyers have boosted the metal to its highest level in six years, with a coterie of famous investors now touting its role as a haven from market turmoil. Silver and platinum have outpaced all other major asset classes so far in the third quarter, while palladium is up about 30% this year.

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The sudden interest in precious metals follows years of sideways trading as investors bet that steady growth would allow the world’s central banks to raise interest rates and end an era of miserly debt yields.

Instead, a deepening trade war between the U.S. and China has weighed on the outlook of nearly every major economy, adding pressure on many central banks to further cut rates—even those that already stand below zero.

Precious metals fell sharply Thursday as stocks and other risky investments rallied on hopes that coming trade talks will relieve some pressure on the world economy. Gold, silver and platinum each dipped 2% or more, trimming some of their sizable quarter-to-date gains.


While these nonyield-bearing assets struggle to compete with bonds when the outlook for the world economy is stable, their appeal has risen as negative rates have proliferated in Europe and Japan. It also has boosted interest in stocks that are expected to pay high dividends even when growth slows, such as shares of utilities and makers of consumer products.

“There is so much flight to safety right now and metals is where a lot of that money is going,” said Bob Haberkorn, senior commodities broker with RJO Futures in Chicago.

“Traders that had been out of the metals market are coming back…and there’s been a lot of buying from new accounts,” Mr. Haberkorn said. “It’s been great, great for business.”

Another factor boosting them this summer: falling yields and growth fears have dragged a long list of currencies, from the euro and British pound to the Chinese yuan, to their lowest levels in years. Unlike currencies, gold and other precious metals aren’t under the sway of any global central bank, further heightening their appeal.

Additionally, while stocks remain near records, a recent burst of market volatility has unsettled many investors. So has a steady world-wide decline in bond yields that many believe is a harbinger of weaker growth.

Although they rebounded Thursday, yields on the U.S. 10-year Treasury note dropped near a record low earlier in the week as disappointing manufacturing data and trade tensions pushed investors into government bonds and other safe assets. Yields fall as bond prices rise.

In Europe and Japan, some bond yields have been negative for years, and investors expect they will fall further as the European Central Bank and Bank of Japan unleash more monetary stimulus. More than $15 trillion in government debt around the world now has a negative yield, meaning essentially that savers holding these bonds are paying the government to store their money.

“Gold yields zero, but zero is still much better than negative,” said Bart Melek, head of commodity strategy at TD Securities.

Hedge funds and other speculative investors are wagering on further gains. They have pushed net bullish bets on gold to their highest level since 2006, as far back as Commodity Futures Trading Commission figures go. They also have lifted bullish wagers on platinum and silver, which both are on track for their best quarter in several years, according to Dow Jones Market Data.

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Their advance comes after years of tepid investor interest, particularly in platinum, which is used as a component in auto exhaust filters for diesel engines. Platinum prices had previously tumbled as environmental concerns cut demand for diesel vehicles across the world.

But the precious-metals rally spread to platinum in July, and prices logged their biggest weekly gain in eight years last week, advancing nearly 9%.

The gains have rippled to shares of companies that mine the metals, in part because mining stocks offer individual investors easier exposure to the sector than trading metals futures contracts.

The NYSE Arca Gold Miners Index is up about 40% this year, and shares of some smaller precious-metals producers have risen even more than that. Royal Gold Inc. is up 58% for the year, while First Majestic Silver Corp. has climbed 70%.

After an extended stretch of rangebound trading, the combination of falling rates and sluggish economic activity set up the sector’s rally this quarter, said Rhona O’Connell, head of market analysis for Europe, the Middle East, Africa and Asia at INTL FCStone.

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“It was looking a bit like a pressure cooker,” she said. “It’s a sharp move that becomes self-fulfilling because you get the momentum traders involved.”

Natural-Gas: Prices in Europe and Asia Plummet to Historic Lows

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 ◊ Natural Gas News Today ◊

♦ Natural Gas – Stock Market News ♦ … — Natural-gas prices in Europe and Asia have plummeted this year to historic lows in the midst of reduced demand, the trade dispute with China and brimming storage facilities in Europe. The biggest driver of falling prices, though, has been the U.S. Natural Gas that is spilling into global markets.

“It was inevitable,” said Ira Joseph, head of global gas and power analytics at S&P Global Platts. “There is simply too much supply coming into the market at one time.”

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The price decline has eliminated some of the allure involved in liquefying cheap U.S. gas and shipping it abroad, where it typically fetches much higher prices.

That is a concern for the exploration-and-production companies that have flooded the market with cheap shale gas and are already struggling with flagging shares and restive shareholders.

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The more international prices fall, the better the chance that the waterfront facilities that produce liquefied natural gas, or LNG, for overseas shipment will reduce their intake of gas, which has helped keep domestic gas prices from collapsing completely this year.

U.S. natural-gas futures for September delivery settled Tuesday at $2.202 per million British thermal units. That is down about 25% from this time last year despite the surge in exports and record consumption among U.S. power plants this summer to generate electricity in response to sweltering heat.


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The benchmark price for natural gas in Asia, the Japan Korea Marker, has fallen to as low as $4.11 per MMBtu this summer, down from more than $11 per MMBtu a year ago, according to S&P Global Platts. Meanwhile, a widely used European price set in the Netherlands has dropped to nearly $3, from about $9 a year ago.

Those prices don’t leave much margin for U.S. sellers. Though processing and shipping costs can vary by exporter and destination, $2 per million BTUs is typical, analysts say. Houston’s Tudor, Pickering, Holt & Co. estimates that about 25% of the global LNG market is subject to spot prices, as opposed to pricing that is sketched out in long-term supply contracts.

The squeeze comes in the midst of the biggest expansion yet of LNG shipping capacity.

Earlier this month Freeport LNG Development LP’s export terminal in a beach town south of Houston began buying and liquefying gas with the expectation of sending out its maiden cargo in September. The Freeport facility, the fifth to begin operating in the lower 48 states since the first opened in early 2016, should help push gas consumption from LNG exporters to a new high. Last week, a record nine LNG vessels left the U.S. carrying cargoes, according to Jefferies Financial Group Inc.

In July, LNG exporters consumed an average of about 6 billion cubic feet of gas per day, according to the U.S. Energy Information Administration. That is the most yet and is equal to roughly 7% of total U.S. gas production. Analysts expect demand from LNG facilities to absorb about 12% of total production by next summer as additional facilities start up and existing terminals boost their capacity.

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But if those projects are delayed because of low prices overseas or if existing LNG plants slow down or take advantage of the lull to perform extended maintenance, then the domestic gas market could be swamped, sending prices even lower.

“If that demand goes away even for a couple months, it becomes a real problem for the balance of the market,” said Welles Fitzpatrick, an analyst with SunTrust Robinson Humphrey.

The reliance of U.S. producers on demand around the world is a stark change from just a few years ago, when domestic gas prices were isolated from global markets and depended mostly on weather-related demand.

These days, though, U.S. gas prices take into account a range of overseas factors, such as Japan’s nuclear-reactor output, trade negotiations with Beijing and Dutch stockpiles.

The EIA, for instance, has estimated that Japan’s imports of LNG will decline by as much as 10% this year as nuclear reactors that were shut down after 2011’s Fukushima accident return to service.

At the same time, shipments to China essentially ended after the country placed a 10% tariff on U.S. LNG last September and boosted the levy to 25% in June in its tit-for-tat trade dispute with President Trump. Meanwhile, EIA data shows an increase in shipments to European countries, including the Netherlands and Spain, where gas is stored for later use.

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Many of those facilities are reaching capacity, however, and some analysts have expressed concern that buyers in those European markets may become sated until inventories are drawn down to heat homes this winter.




Gold Falls as Risk Appetite Grows

{ Gold Price News – Stock Market News } … The Federal Reserve’s upcoming Jackson Hole, Wyo. retreat Is expected to boost gold prices on speculation of an imminent rate cut. But creeping risk appetite in the meantime is spoiling the party for longs in the yellow metal.

Spot gold, reflective of trades in bullion, was down $15.22, or 1%, at $1,498.32 per ounce by 2:10 PM ET (18:10 GMT), extending Friday’s 0.8% loss.

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Gold futures for December delivery, traded on the Comex division of the New York Mercantile Exchange, settled down $12, or 0.8%, at $1,511.60. On Friday, gold futures fell 0.5%. Monday’s decline came as stocks were mostly higher around the world.

Still, gold futures are up about 18% this year… The Fed’s annual gathering of central bankers and policymakers from Thursday through Saturday is expected to lend direction on when the next U.S. rate cut will be.

While Fed Chairman Jay Powell’s speech on Friday will be a highlight of the gathering, other discussions that even remotely touch on interest rates can trigger significant market moves, especially with investors psyched up for another Fed cut in September. The Fed’s last rate change was a 25-basis-point reduction in July and any hints of further cuts will almost certainly boost gold prices.

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Ahead of the Wyoming event, the Fed on Wednesday will publish minutes of its July 30-31 meeting. The meeting ended with the Federal Open Market Committee, the Fed’s rate-setting body, cutting the key federal funds rate for the first time in a decade.

Jackson Hole aside, there will be more central bank watching this week, with the European Central Bank reporting its July minutes on Thursday, a day after the Fed’s.

While the ECB left rates unchanged last month, it did adjust its forward guidance to indicate that rates could go lower. That essentially means the ground has been laid for a potential September cut. It also indicated that it could revive its quantitative easing program in coming months.

Fed Rate Monitor Tool suggests a 96.2% chance the Fed will cut the fed funds rate to 1.75% to 2% from 2% to 2.25% now. President Donald Trump has been calling for deeper rate cuts. But until Wednesday, the bullion market is expected to take its cue from a wide variety of drivers.

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“A combination of a firmer U.S. dollar and modestly higher real U.S. yields is weighing on gold at the moment,” said John Reade, chief market strategist at the World Gold Council.

Some expected more volatility instead of gains by Friday.

“Given the policy uncertainties that may or may not unfold later in the week from the Jackson Hole symposium, gold could consolidate with a downward bias before eventually resuming its upward momentum,” Stephen Innes, managing partner at VM Markets, said in a note.






Trump Wants to Buy Greenland … But Why?

{ Trump Confirms Interest in Greenland – Stock Market News } … Mr. Trump has become entranced by the idea of the U.S. buying this vast, ice-shrouded island on the roof of the world, people familiar with discussions said. President Trump on Sunday confirmed his interest in potentially purchasing Greenland, but said it wasn’t a priority. The territory’s appeal seems rooted in its natural resources in addition to providing the U.S. with another doorstep to the Arctic as the ice sheet shrinks.

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But the president’s interest has drawn mixed reactions in Nuuk, the country’s capital, a sparse city just 150 miles south of the Arctic Circle. Lapped by the Labrador Sea, its low-rise, brightly painted houses and apartment blocks are home to around a third of Greenland’s 56,000 inhabitants.

For some, the idea of buying and selling their homeland is a highhanded reminder of a painful and unresolved colonial legacy, which saw its indigenous inhabitants’ culture and language suppressed during centuries of rule from faraway Copenhagen. Others discern in the president’s apparent fascination a sign of the geostrategic importance of the self-governing territory, which is part of the Kingdom of Denmark. Many simply see it as a joke.


All insist that Greenland isn’t for sale, as do its political leaders. Greenland is the world’s largest island, covering more than 800,000 square miles in the North Atlantic and Arctic Sea northeast of Canada. It is larger than Mexico and around the same size as Saudi Arabia. Around 80% of the country is cloaked in ice, with human settlements hugging the coast. A network of airstrips and helipads, some dating from World War II, allow residents to jump from city to city in the absence of major roads.

Its economy is sustained by shrimp and fish exports and a $591 million annual subsidy from Denmark. Growing industries include tourism and mining. Active mines churn out rubies and minerals used to make fiberglass, and projects are under way to assess the feasibility of mining rare earths and uranium, Greenlandic officials say.

The abundant resources mean any buyer for Greenland would struggle to make a fair offer for the country…

Whether the president’s aspiration is serious or not, Washington will continue to view Greenland as vital to American national-security interests. A decades-old defense treaty between Denmark and the U.S. gives the U.S. military virtually unlimited rights in Greenland at America’s northernmost base, Thule Air Base, which houses part of a U.S. ballistic missile early-warning system.

Greenland’s strategic importance to the U.S. was underscored further last year when the Pentagon worked successfully to block China from financing three airports on the island. With American prodding, Denmark’s government instead asked a consortium led by Danske Bank to help assemble an alternative financing package.

In Copenhagen, which still sets Greenland’s foreign and defense policies, news of Mr. Trump’s enthusiasm for the territory has been interpreted as the latest signal from Washington that the U.S. is an engaged player in the Arctic, a zone of increasing economic and strategic rivalry with both China and Russia.

“The U.S. wants to make everyone aware the U.S. is an Arctic power,” said Nils Wang, a retired Royal Danish Navy rear admiral and director of Naval Team Denmark, an association for navy suppliers.

Denmark, too, aims to explore new research and economic opportunities as the Arctic opens up, and has warned that Greenland will lose its annual subsidy if it pushes for independence. Mr. Trump is due to meet the Danish and Greenlandic premiers during a previously planned visit to Copenhagen next month, alongside the leader of the Faroe Islands, another autonomous Danish region.

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Múte Bourup Egede, leader of the left-wing, pro-independence Inuit Ataqatigiit party in Greenland’s parliament, said such strategic games—and Mr. Trump’s icebound fantasy—serve to remind Greenlanders of their country’s outsize importance in world affairs.




U.S. Agriculture

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China is the fourth largest market for U.S. farm exports, behind Canada, Mexico and Japan. Former Iowa Lt. Gov. Patty Judge said the loss of a trading partner like China sets up a “dangerous situation.” …  With China officially pulling out of buying U.S. agricultural products, American farmers are losing one of their biggest customers. It could be a devastating blow in an already tough year for crops and commodity prices. It may also dent U.S. gross domestic product and hurt companies like Deere, whose business is directly tied to farming in the Heartland.

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“Sales have already been lower this crop year because of the existing tariffs. If we went all the way to no China exports whatsoever, that would of course result in even larger market and price impacts,” said Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri. “Cutting China completely out of the market would be a very big deal.”

China made up $5.9 billion in U.S. farm product exports in 2018, according to the U.S. Census. It’s the world’s top buyer of soybeans and purchased roughly 60 percent of U.S. soybean exports last year. Westhoff estimated that soybean prices have already dropped 9% since the trade war began last July. From September 2017 to May 2018, soybeans exports to China totaled 27.7 million tons. That number dropped by more than 70% to 7 million tons during the same nine-month period in 2018 and 2019, according to an analysis by University of Missouri.

Westhoff estimated an additional $4 billion drop on soybean exports after the effects of tariffs but before the total loss of China as a customer. Tariffs also have a ripple effect across other crops, he said. With less demand for soybeans, farmers end up planting more crops like corn. That results in lower corn prices because there’s much more supply.

Former Iowa Lt. Gov. Patty Judge said the loss of a trading partner like China sets up a “dangerous situation.” … “There are going to be some serious repercussions for farmers,” Judge said.

China is the fourth largest market for U.S. farm exports, behind Canada, Mexico and Japan. She also highlighted a “languishing” trade pact with Canada and Mexico that has yet to be signed. New tariffs are another “financial whammy on top,” said Judge, who was also Iowa’s secretary of Agriculture.

While farming exports are a relatively small portion of the United States’ annual $20 trillion in GDP, Judge said it will directly hit farmers and exacerbate other problems they were already facing.

U.S. net farm income has been falling in the past six years, well before the effect of tariffs. Income has dropped 45 percent since a high of $123.4 billion in 2013 to about $63 billion last year, according to the U.S. Department of Agriculture.

In addition to tariffs, farmers were faced with floods and African swine fever this year, which has softened demand for soybean and farm products that pigs feed on. The White House began rolling out a $16 billion federal aid package in May to help farmers weather the trade war and other circumstances. But Judge said much of that bailout has skipped over small farmers and isn’t widely embraced as a permanent solution — at least in Iowa.

“Farmers want to have a fair profit at the end of the year— they would like to do that in the marketplace rather than through a government program,” Judge said, adding that it’s also difficult for small farmers to get access to loans if they don’t have certainty of customer demand to pay it off.

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On Tuesday, President Trump tweeted that farmers know that China “will not be able to hurt them,” since “their President has stood with them.”

Election issue… Agriculture has been a sensitive issue for President Donald Trump. He claimed he had secured large quantities of agricultural purchases when he met with President Xi Jinping at the G-20 summit in June, then later accused China of not following through with those purchases. That led Trump to announce last week 10% tariffs on the remaining $300 billion in Chinese imports that had escaped his previous duties.

On Monday, a spokesperson for the Chinese Ministry of Commerce said Chinese companies have stopped purchasing U.S. agricultural products in response to Trump’s surprise tariffs. “This is a serious violation of the meeting between the heads of state of China and the United States,” the ministry said in a statement Monday, as translated via Google.

John Rutledge, chief investment officer of global principal investment house Safanad, said it’s no mistake that agriculture was China’s weapon of choice in upping the trade war ante. On one hand, It hurts GDP and Trump’s political base of small farmers — but perhaps more importantly, it hurts corporate farming companies that tend to be huge Republican donors.

“Clearly this was retaliatory,” Rutledge said. “It’s a really serious area to go after.” Rutledge, who said he has met with the Trump administration’s core trade team on multiple occasions this year, said Trump “cannot allow the trade war to end before the next election” because of its political value.

China’s end to agricultural buying may also hurt sales at U.S. companies like Deere and Caterpillar, which rely on farmers for much of their business. Deere said in May that farmers were delaying buying products based on uncertainty. Shares of Moline, Illinois-based Deere dropped 4.8% Monday after reports that China would stop buying U.S. farm products.

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Judge pointed to the farm crisis in the 1980s, when low crop prices led to farm operators falling behind on land and equipment loans. Based on few signs of progress in trade talks, Judge said she fears a repeat of the painful decade for farmers.

“We don’t want to see people losing their farms and people unable to meet your financial obligations,” she said. “But it doesn’t look like trade is going to get any better, so I think we’re in for a very rough ride.”

Corn Is America’s Largest Crop In 2019

Farmers have planted 91.7 million acres of corn in 2019, according to the National Agricultural Statistics Service (NASS).

USDA’s Economic Research Service (ERS) publishes a monthly Feed Outlook report that analyzes supply and demand data to provide information on expected prices, production, exports, and feed uses for corn and other feed grains. The following is just some of the information available.

Corn farmers faced one of the most challenging planting seasons in recent memory, and while the corn did get planted, farmers planted much of it later than usual. In early July, 57 percent of the crop was reported to be in good or excellent condition, while last year 75 percent was reported good or excellent by that time.


Based on the late start to the crop and the continued cool weather, USDA is forecasting slightly lower yields than last year. At present, however, USDA forecasts that corn supplies will be sufficient to meet demand because farmers have plenty of corn stored from last year’s crop. That ear of corn on the cob you may enjoy at a summer picnic is just one of many uses of corn. Here are a few more:

About a third of America’s corn crop is used for feeding cattle, hogs, and poultry in the U.S. Corn provides the “carbs” in animal feed, while soybeans provide the protein. It takes a couple of bushels of American corn to make corn-fed steak; by some estimates, a beef cow can eat a ton of corn if raised in a feedlot. Both dairy cows and beef cows also consume silage, which is fermented corn stalks and other green plants.


Just over a third of the corn crop is used to make ethanol, which serves as a renewable fuel additive to gasoline. The Renewable Fuel Standard requires that 10% of gasoline be renewable fuel, but you can find E15 (15 percent ethanol) or E85 (85 percent) ethanol in some areas, particularly in the Midwest.

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The rest of the corn crop is used for human food, beverages, and industrial uses in the U.S., or exported to other countries for food or feed use. Corn has hundreds of uses. It is used to make breakfast cereal, tortilla chips, grits, canned beer, soda, cooking oil, and bio-degradable packing materials. It’s the key ingredient in the growing medium for life-saving medicines including penicillin. Corn gluten meal is used on flower beds to prevent weeds.

America’s biggest customers are Mexico, South Korea, Japan, and Colombia. U.S. white corn is particularly prized in Mexico and Colombia as a high quality food ingredient, while Japan and South Korea pay a premium for high quality, USDA-inspected feed corn for poultry and beef.

Why does corn have the most acres of any major crop in the U.S.? It can be grown in nearly every State in the U.S. Seed companies provide hybrid, organic, and bio-engineered varieties that are specially bred to be the best for different soil and weather conditions. Seed companies have developed different corn varieties for different end uses, including feed corn, sweet corn, white corn, and popcorn.

You can learn more about corn from a variety of USDA sources. ERS maintains a feed grains database with historical information on production, trade, prices, livestock feed demand, and many other data items.

The Agricultural Research Service (ARS) researches insect and weed pests, and new crop varieties. The World Agricultural Outlook Board, part of the Office of the Chief Economist, coordinates economic analysis from across USDA to provide monthly reports on the supply and demand of corn and other crops, while the Foreign Agricultural Service (FAS) and ERS also publish more detailed analysis of specific issues like ethanol usage and foreign demand for feed and food corn and many other crops.

Update: In July, USDA’s National Agricultural Statistics Service (NASS) collected updated information on 2019 acres planted to corn, cotton, sorghum, and soybeans in 14 states. NASS previously collected planted acreage information during the first two weeks of June, with the results published in the June 28 Acreage report.

Excessive rainfall had prevented planting at the time of the survey, leaving a portion of acres still to be planted for corn in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, New York, North Dakota, Ohio, South Dakota, and Wisconsin; cotton in Arkansas; sorghum in Kansas; and soybeans in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, New York, North Dakota, Ohio, South Dakota, and Wisconsin.

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If the newly collected data justify any changes, NASS will publish updated acreage estimates in the Crop Production report to be released at noon ET on Monday, Aug. 12. It will be available online at www.nass.usda.gov/Publications.

Today Is A Good Time To Invest In Latin American Mining

After Latin American countries gained independence, roughly 200 years ago, international mining investors had to change their approach. But the lure of Latin America’s mining sector remains just as strong. It has the planet’s largest reserves of copper, lithium and silver with plenty of gold to boot. While modest local demand – it has less than 10% of both world population and GDP – makes it a natural exporter.

Latin America has emerged as a mining-friendly jurisdiction with a wide range of international mining companies listed on Canadian, US, Australian and British stockmarkets. The development of solid democracies across the region since the 1980s has allowed many Latin American countries to finally develop fair systems to manage international mining investment.

The best thing about Latin America for mining investors is that it is incredibly rich in base and precious metals. The region’s mining powerhouses of Chile, Peru, Brazil and Mexico are particularly blessed. According to the US Geological Survey, Chile has the world’s largest reserves of both copper and lithium and the seventh-largest silver reserves.


Peru has the world’s largest silver reserves, third-largest copper reserves, third-largest zinc reserves, fourth-largest nickel reserves and fifth-largest gold reserves. Mexico has the world’s fourth-largest zinc reserves, fifth-largest lead reserves, sixth-largest copper reserves, sixth-largest silver reserves and is also a top-ten gold producer. Finally, Brazil has the world’s second-largest reserves of iron ore, third-largest reserves of nickel and fourth-largest reserves of tin and seventh-largest reserves of gold.

Outside of the established powerhouses, you also have world-class metal deposits scattered around the region. So, for example, the Dominican Republic has the world’s third-largest gold mine, while Guatemala has its second-largest silver mine. Argentina and Bolivia form part of the ‘lithium triangle’ with Chile that together holds around 54% of global resources -that is to say potential reserves. While Bolivia also has top ten reserves of zinc and lead.

Moreover, it is likely that Latin America has even more mineral wealth than the official statistics suggest as a mix of political and economic factors have prevented international miners from extensive exploration in Argentina and Ecuador. Given that most of Peru and Chile’s largest mines are found in the Andes, it seems reasonable to suppose that their neighbour’s stretches of the mountain range are also rich in minerals.

Latin America isn’t just rich in metals – it’s rich in the right metals. Copper and lithium have exciting medium-term prospects while gold miners present an interesting opportunity. That’s confirmed by in a recent study from the market intelligence division of ratings agency, S&P Global, which notes that “for the first time since 2014, base metals matched gold as the top Latin American exploration target, with each garnering 42% of planned spending.” The rise in base metals exploration is being driven by bullish long-term views on copper.

As the commodity supercycle began to unwind in 2012, investors turned sour on copper. Its rise had been powered by massive Chinese demand but conventional thinking figured that the infrastructure glut in the Middle Kingdom, combined with efforts to move its economy away from heavy industry, would limit future global copper use.

However, the rapid growth in electric vehicles has transformed the outlook for the red metal. A battery-powered electric vehicle uses about 83 kg of copper compared to just 23 kg in an internal combustion engine. Hybrid vehicles, like the Prius are normally somewhere in the middle.

Consultant McKinnsey estimates that yearly electric vehicle sales will hit 4.5 million in 2020, up from 1.2 million in 2017. That would still just be 5% of annual light electric vehicle sales, leaving plenty of room for further growth. Copper has been hit by worries of a trade war between China and the US, and prices are still 40% below their 2011 peak.

Another clear winner from the transition to low carbon energy systems is lithium. It’s already established as the battery of choice for electric vehicles. While the search for renewable energy’s holy grail – a cheap efficient battery that can store excess electricity produced by intermittent sources such as wind farms and solar panels – may yet give lithium another boost.

At present Australia has managed to become the world’s largest producer despite the fact its lithium is made mined from ore – a more expensive process than extracting it from the lithium-heavy salt brines found in the lithium triangle. That’s because historically Australian has been more welcoming to lithium investors than Chile, which treats the white metal differently to copper, Argentina or Bolivia. Now that’s starting to change, with Argentina in particular receiving a mix of international investment.

Finally, you have gold. Alex Black, a mining industry veteran who helped investors strike rich in Peru when he turned Rio Alto, his last company, from a penny stock gold explorer into a billion-dollar miner, told us that he’s never seen such tough financing conditions. “Trying to raise $20million for mine development now is like asking for $250million in 2014. We have more than 5 million ounces and a market cap of less than $50million, so investors can get an ounce of gold for under $10.”

Of course, a CEO is going to talk up his company to a journalist but the S&P Global report backs him up. “Although financings are moving in the right direction, the $9.6billion raised in 2017 and $9.4billion raised in 2018 remain well below the $19.4billion raised in 2011.

Capital offerings targeted primarily for exploration purposes in 2018 were down slightly compared with 2017 and 2016, with the totals for all three years returning to 2012 levels, when equity markets were just beginning to shun the industry.” One theory is that the proliferation of cannabis stocks and crypto currencies have diverted more speculative capital from gold explorers. Gold’s main use is not industrial, so it’s impossible to know if the price will be higher or lower in a few years’ time.


Mining investors judge potential projects on ‘above ground’ and ‘below ground’ risk. Latin America’s geology means it has plenty of exciting mining projects yet the above ground risks have often made it difficult them difficult to realise. Latin America was blighted by political instability ever since independence, with frequent periods of military rule and most countries only returning to democracy within the last 40 years.

The political instability hindered mining investment in the region because you need a relatively stable and efficient state to create a fair mechanism for the ongoing transaction between the country’s citizens – the ultimate owners of the metal – and the mining company Mining has a massive environmental impact on local citizens, while there are also political and economic consequences of extracting a non-renewable resource to export for profit.

In many Latin American countries, the state’s role as arbiter is complicated by the fact that strong indigenous populations have alternative concepts of land ownership, such as ancestral community territories. Those community rights are recognised in many Latin American post dictatorship constitutions but not clearly defined, leading to a legal standoff as miners and locals vie for a greater share of profits in proposed projects.

These political issues can have a direct hit on investors’ pockets. Investors in US-listed precious metals miner, Tahoe Resources, learnt that first-hand when it was forced to cease operating Escobal, the world’s second largest silver mine, because of opposition in Guatemala. Its shares plummeted and was bought out by a rival for a knockdown price earlier this year.

Even well-established mining jurisdictions, such as Peru, can have problems. For example, one of the country’s most important mining investments, the $7billion Las Bambas copper mine, has spent two months this year under a blockade from angry members of the neighbouring communities.

Those costly lessons have taught mining companies that they need to get community relations right. That begins when they assess a potential project, as there are big differences in local attitudes to mining. For example, central Peru, which has a longer mining tradition, typically sees less protests than the north or south of the country. But ultimately miners need to follow the minerals, so it’s also important for investors to pick firms that have a well-thought out community strategy.

Last month in Lima we interviewed Victor Gobitz, CEO of Buenaventura, a Peruvian non-ferrous metals miner, and he explained how the firm has learned to work with local groups. “If a miner just tries to exchange money for lands it is a big mistake. You need to create a long-term relationship based on generating employment for local workers and providing some social infrastructure such as drinking water, energy, sewerage and so on.”

Not only are miners becoming more adept at handling these issues, there are also signs that most Latin American states are improving their ability to regulate this complex transaction between investors and the citizens. The Fraser Institute is a Canadian think tank that publishes a global ranking of mining jurisdictions. It judges both the mineral endowment and the policy framework to score the overall attractiveness for investors.

Latin America and the Caribbean was the standout performer in the latest report, with the region’s median investment attractiveness jumping 16% in 2018, more than any other region. That’s even more impressive considering the negative weighting of disaster cases such as Venezuela, Nicaragua and Guatemala.

Unsurprisingly Chile, Peru and Mexico were in the top three. However, Ecuador and Colombia also made big improvements, jumping into the top half of the regional table and overtaking Brazil. However, just as with community protests, the reality of mining policy can differ greatly within countries. Argentina’s national score was poor, dragged down by the extreme anti mining policies of some individual provinces, yet others, such as Catamarca scored excellently. So, investors need to understand the local reality of a company’s projects.


This improving policy landscape isn’t down to luck. It reflects the trend of general improvement in Latin American institutions as the young democracies across the region begin to mature. Barring sad cases, such as Venezuela, most other states in the region are gradually becoming more efficient, less bureaucratic and now, thanks to the repercussions of long-running, region-wide graft scandal, slightly less corrupt.

The fact that industry insiders are targeting Latin America for future projects shows that the region is fertile ground for profit-hunting investors.

Oil Gains As Gulf Tanker Seizure Raises Tensions

Stock Market News Today… Oil prices rose on Monday on concerns that Iran’s seizure of a British tanker last week may lead to supply disruptions in the Middle East Gulf, although gains were capped as Libya resumed output at its largest oil field.

Brent crude futures climbed 88 cents, or 1.4%, to $63.35 a barrel by 07:07 GMT.

West Texas Intermediate (WTI) crude futures were up 58 cents, or 1%, at $56.21 a barrel.

WTI fell over 7% and Brent fell more than 6% last week.

“Falling global demand and rising U.S. stockpiles have helped turn oil charts very bearish, but that may not last as tensions remain high in the Persian Gulf,” Edward Moya, senior market analyst at OANDA in New York, said in a note.

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Iran’s Revolutionary Guards said on Friday they had captured a British-flagged oil tanker in the Gulf in response to Britain’s seizure of an Iranian tanker earlier this month.

The move has increased the fear of potential supply disruptions in the Strait of Hormuz at the mouth of Gulf, through which flows about one-fifth of the world’s oil supplies.


Britain was weighing its next moves on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized the ship.

Meanwhile, a senior United States administration official said on Friday the U.S. will destroy any Iranian drones that fly too close to its ships, a day after the U.S. said one of its navy ships had “destroyed” an Iranian drone in the Strait of Hormuz. Iran said it had no information about losing a drone.


Crude oil supply outages and curbs also helped lift prices higher. “Oil prices got a small boost this morning after Libya’s (NOC) declared force majeure on Sharara crude loaded at Zawiya port,” said Stephen Innes, managing partner at Vanguard Markets.

The Sharara oilfield resumed production at half capacity on Monday after being shut down since Friday, which caused an output loss of about 290,000 barrels per day (bpd).

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Meanwhile, data late last week showed shipments of crude oil from Saudi Arabia, the world’s top oil exporter, fell to a 1-1/2 year low in May.

Speculative money is flowing back into the oil markets in response to the escalating dispute between Iran and the United States and other western nations playing out in the Gulf waters along with the signs of falling supply.

Hedge funds and other money managers raised their combined futures and option’s positions on U.S. crude for a second week and increased their positions in Brent crude as well, according to data from the U.S. Commodity Futures Trading Commission and the Intercontinental Exchange.

Goldman Sachs (NYSE:GS) on Sunday lowered its year-on-year oil demand forecast for 2019 to 1.275 million bpd, citing disappointing global economic activity.

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The forecast was still above the consensus of about 1.05 million bpd for 2019, it said, adding that “we see increasing scope for oil demand to finally start exceeding beaten-down expectations.”

The World’s Biggest Diamond Mine⁠ Is Being Shuttered By Rio Tinto Group After Almost Four Decades

< Stock Market News Today > … Rio’s Argyle mine in remote Western Australia has transformed the sector since 1983 when the operation began supplying gems for both ends of the market. RBC Capital Markets and Panmure Gordon are among brokers, banks and competitors forecasting the closure could kick-start prices that have waned since 2011, according to PolishedPrices.com, an industry data provider.

Production at Argyle, about 2,600 kilometers (1,600 miles) northeast of the state capital Perth, is scheduled to end before the end of next year after finally exhausting its supply of economically viable stones, said Arnaud Soirat, Rio’s head of copper and diamonds.

“There is going to be a fair bit of supply which is going to come out of the market,” Soirat said in an interview Friday at the mine site. “In late 2020 we’ll be stopping operations and will start the rehabilitation of the site.”

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Argyle is best known as the source of about 90% of the world’s prized pink diamonds—rose-to-magenta hued stones that command among the sector’s highest prices. Sotheby’s auctioned the 59.6 carat “Pink Star”, mined by Rio’s rival De Beers, for $71 million in April 2017, a record auction price for any gem. While they attract most attention, the pink stones account for less than 0.01% of Argyle’s total output.

More than three-quarters of Argyle’s output is comprised of lower value brown diamonds, and the mine’s overall output sells for an average of between $15-$25 a carat, Canaccord Genuity Group Inc. estimated in 2017. That’s far less than the $171 a carat average price realized last year by De Beers.

The mine also is the biggest diamond producer by volume and that’s what has put the operation at the center of global oversupply. More than three-quarters of Argyle’s output is comprised of lower-value brown diamonds, and the mine’s overall output sells for an average of between $15-$25 a carat, Canaccord Genuity Group Inc. estimated in 2017. That’s far less than the $171 a carat average price realized last year by De Beers.

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A glut of cheap and small diamonds has eroded profits for nearly every miner and made it increasingly hard for the industry’s cutters, polishers and traders to make a profit. In December, some of Rio’s customers refused to buy cheaper stones, while De Beers has been forced to cut some prices and offer concessions to buyers.

Yet, with consumer appetite for diamonds stable, and major mines including Argyle scheduled to shutter, “the rational offset between supply and demand should lead to price growth,” Stornoway Diamond Corp. Chief Executive Officer Pat Godin said in March. Declining output, led by Argyle’s closure, will help revive prices, Toronto-based producer Mountain Province Diamonds Inc. said in May.

About 21 million carats a year of global diamond production—including about 14 million a year from Argyle—are scheduled to exit the market by 2023, a volume that’ll only partially be offset by the addition of new mines, according to Russia’s Alrosa PJSC, the world’s diamond biggest producer. The shortfall between annual demand and supply could be between 11 million and 35 million carats by 2023, the company said in a presentation last month.

“In terms of the pink diamonds, the impact is going to be even more dramatic” from Argyle’s closure, Rio’s Soirat said in the interview. “You can imagine the laws of supply and demand will apply, and you can imagine the impact that will have on those very rare pink, red, blue and purple diamonds.”

The producer estimates Argyle has only about 150 colored diamonds of sufficient quality left to extract and make available for its annual tender, a sale to invited buyers that showcases 50-to-60 of the year’s most valuable gems, he said.

Prices of pink diamonds have already as much as quadrupled over the past 10 years, and buyers are “now just waking up to the potential impact that Argyle’s closure will have” in lifting values further, said Frauke Bolten-Boshammer, proprietor of Kimberley Fine Diamonds, a retailer based in the town of Kununurra, about 200 kilometers north of the mine. She has traded the gems since the 1990s.

Overall, the diamond sector probably also needs a boost to downstream demand, according to Richard Hatch, a London-based analyst at Berenberg. Mine closures that tighten supply “will help, but is it the shot in the arm that the industry really needs? Probably not,” Hatch said.

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Buyers have been hit by a shortage of finance and stagnant end markets, while a weaker rupee has made gems more expensive for Indian manufacturers, who cut or polish about 90% of the world’s stones.

The closure of Argyle will remove about 75% of Rio’s diamonds output, yet the impact on the producer’s earnings will be negligible. Diamonds bring in only about 2% of earnings, while iron ore—the company’s top commodity⁠—accounts for almost 60%.

Rio in 2016 shuttered the Bunder development project in India and in 2015 exited the Murowa mine in Zimbabwe. The producer’s only other producing diamond asset, Diavik in Canada, is scheduled to close in 2025, though exploration work is continuing to potentially extend that site’s life, Soirat told reporters Friday at Argyle.

Still, the company aims to retain a presence in the sector. While it could consider acquisitions to add new output, Rio’s main focus is on exploration⁠—an option that’ll take longer to deliver new output growth. Work is advancing on the Fort a la Corne project in Saskatchewan, a joint venture project that potentially could enter production within five to 10 years, Soirat said.

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Diamonds is “not a big business in Rio, however it is a very profitable business,” he told reporters, adding that the company has advantages in the sector that it can look to continue to exploit, including technical expertise and branding. “It’s not a commodity, it is luxury goods, and so the market dynamics are completely different.”

The U.S. Is Overflowing With Natural Gas But The Infrastructure Needed To Move Gas Around The Country Hasn’t Kept Up

America is awash in natural gas…. Earlier this year, two utilities that service the New York City area stopped accepting new natural-gas customers in two boroughs and several suburbs. Citing jammed supply lines running into the city on the coldest winter days, they said they couldn’t guarantee they’d be able to deliver gas to additional furnaces. Never mind that the country’s most prolific gas field, the Marcellus Shale, is only a three-hour drive away.

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Meanwhile, in West Texas, drillers have so much excess natural gas they are simply burning it off, roughly enough each day to fuel every home in the state.

U.S. gas production rose to a record of more than 37 trillion cubic feet last year, up 44% from a decade earlier. Yet the infrastructure needed to move gas around the country hasn’t kept up. Pipelines aren’t in the right places, and when they are, they’re usually decades old and often too small.

The result, despite natural-gas prices that look low on commodities exchanges, is energy feast and famine.

This spring, the price of natural gas at a trading hub near Midland, Texas, dropped as low as negative $9 per million British thermal units—meaning that producers were paying people to take it off their hands. (A million British thermal units is enough to dry about 50 loads of laundry.)

Elsewhere, prices soared due to bouts of cold weather coupled with supply disruptions, including an explosion along a British Columbian pipeline and a leaky underground storage facility near Los Angeles. At a trading hub in Sumas, Wash., natural gas rose to $200 per million British thermal units in March, the highest ever recorded in the U.S. In Southern California, prices went as high as $23; the average over the winter was a record $7.23.

The national benchmark, which is set at a knot of pipelines in Louisiana, recently hit a three-year low of $2.19 and has hovered below $3 for much of the year.

“I don’t recall a situation when we’ve had the highs and lows happen in such extremes and in such relatively close proximity,” says Rusty Braziel, a former gas trader who now advises energy producers, industrial gas buyers and pipeline investors.


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With U.S. homes, power plants and factories using more natural gas than ever, the uneven distribution of the shale boom’s bounty means that consumers can end up paying more or even become starved for fuel, while companies that can’t get it to market lose out on profits. Around New York City, the dearth of gas has cast uncertainty over new developments and raised fears of stifling economic growth.

One reason for the problem is that pipelines have become political. Proponents of reducing the use of fossil fuels have had little luck limiting drilling in energy-rich regions. Instead, they’ve turned to fighting pipeline projects on environmental grounds in regions like New York and the Pacific Northwest, where they have a more sympathetic ear.

Even in Texas, the heart of the oil-and-gas industry, new pipelines have started to meet more local resistance. In April, landowners, Hays County and Kyle, a booming city on the outskirts of Austin, sued to block construction of a 430-mile pipeline that would move gas from the West Texas drilling fields, where it is being burned up, to buyers near Houston. The case was dismissed by a Texas judge in June.

Before pipelines… Natural gas, which is often found alongside oil and coal, was once a nuisance to drillers and miners alike. It would send crude shooting up out of wells like flammable geysers and was at risk of exploding in mineshafts. Before the advent of arc-welded pipelines that could be laid over long distances, gas had little value unless it happened to be very close to early industrial cities, like Pittsburgh or Cleveland.

After World War II, energy producers repurposed oil pipelines to ship gas to fuel the hungry furnaces and factories of the Northeast. By the beginning of the 21st century, many thought the U.S. was running out of gas. The national price averaged about $6 over most of that decade and at times rose to more than $12. Pipelines were built to move imported gas from the country’s borders, particularly along the Gulf Coast, into the interior.

Then the fracking revolution arrived, flooding domestic gas markets and rendering a lot of supply routes irrelevant. Within a generation, the U.S. has gone from importing gas to becoming a leading exporter.

These days, it’s a hassle getting gas from drilling fields like the Marcellus and Utica shales in Appalachia, and the Permian Basin in West Texas, to customers in northern cities. Many pipelines now run the other way: to move gas toward the Gulf Coast, where exporters can usually buy it for less than $3 per million British thermal units, and ship it overseas as liquefied natural gas, or LNG, for higher prices.

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A 99-year-old law prevents foreign tankers from shipping gas within the U.S. There are no domestic LNG tankers, mostly because the hundred-million-dollar-plus ships are much less expensive to build in Asia. So consumers in New England relied on importing liquefied natural gas from Trinidad and Tobago and even Russia to keep prices in check this past winter.

n New York, commercial real-estate broker John Barrett said he was completing the sale of a development that would become a 66-unit apartment building, when Consolidated Edison Inc. announced it would no longer take on new gas customers after March 15 in the southern part of Westchester County. The developer canceled the deal signing and backed out of the purchase two weeks later.

The future of a nine-figure development in New Rochelle, which would include a new city hall, fire station and affordable housing units, is suddenly in doubt. In Yonkers, Mayor Mike Spano worries that the gas moratorium will foul up plans for a mixed-use development on a big downtown parking lot.

Homes that don’t come with natural gas lines are now a tougher sell, said Mark Nadler, director of Westchester sales at Berkshire Hathaway Homeservices, unless buyers don’t mind cooking on an electric range or refilling tanks of heating oil each autumn.

Con Edison is trying to adapt to a world without additional pipelines. Scott Butler, from the company’s “utility of the future” department, said the team has explored trucking in emergency fuel supplies and even making its own fuel. The utility has proposed building three new facilities in the New York City area to turn compost and food scraps into gas. It is also planning to haul in natural gas on trucks, as many as 180 of them on the coldest days.

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Natural gas has long been considered a transition fuel—a placeholder that’s cleaner-burning than coal or oil but more dependable than renewables like wind or solar. But natural gas still releases carbon dioxide into the atmosphere, and fracking has its own environmental consequences, including the production of toxic wastewater. That has raised resistance to building new pipelines as well as enlarging old

OPEC And Allies Set To Extend Oil Supply Cuts

OPEC and its allies led by Russia are set to extend oil output cuts until March 2020 on Tuesday to try to prop up the price of crude as the global economy weakens and U.S. production soars.

The alliance, known as OPEC+, has been reducing oil supply since 2017 to prevent prices from sliding amid increasing competition from the United States, which has overtaken Russia and Saudi Arabia to become the world’s top producer.

Benchmark Brent crude (LCOc1) has climbed more than 25% so far this year after Washington tightened sanctions on OPEC members Venezuela and Iran, causing their oil exports to drop.

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But fears about weaker global demand as a result of a U.S.-China trade spat have added to the challenges faced by the 14-nation Organization of the Petroleum Exporting Countries.

Brent was trading flat on Tuesday at around $65 per barrel after OPEC approved the supply-cut extension the previous day.

Monday’s OPEC meeting will be followed by talks with its allies on Tuesday. The gathering is due to start after 08:00 GMT.

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Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to extend the existing OPEC+ pact and continue to cut combined production by 1.2 million barrels per day, or 1.2% of world demand.

Oil prices could stall as a slowing global economy squeezes demand and U.S. oil floods the market, a Reuters poll of analysts found.

Saudi Energy Minister Khalid al-Falih said on Monday he was growing more positive about the global economy after a G20 meeting of world leaders over the weekend.

“The global economy in the second half of the year looks a lot better today than it did a week ago because of the agreement reached between (the United States and China) and the truce they have reached in their trade and the resumption of serious trade negotiations,” Falih said.

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The meeting on Tuesday will also discuss a charter for long-term cooperation between OPEC and non-OPEC producers.

Gold Rally: The Price Of The Precious Metal Is Heading Toward A Fresh Six-Year High

… “When the real value of money is being debased, then gold is viewed as the asset to own” …

The price of gold is rising at the quickest pace in years, illustrating the extent to which global investors are anticipating lower interest rates around the world and seeking alternatives to bonds and currencies.

The most-active gold futures contract climbed as much as 1.5% Tuesday before closing slightly higher at $1,418.70 a troy ounce—its highest level since August 2013. Tuesday’s rise brought gains in the past four sessions to 5.2%. As the rally continues, speculators are boosting wagers that prices will continue to climb and billions of dollars are flowing into gold-focused exchange-traded funds. Shares of gold miners are also hitting multiyear highs.

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Driving the gains are concerns that global central banks will work to spur growth by lowering interest rates, driving their currencies lower. Those expectations have already led to a global collapse in bond yields—the yield on the benchmark 10-year U.S. Treasury note closed below 2% on Tuesday for the first time since 2016, while those across Europe and in Japan are already negative.

The drop in bond yields has boosted the allure of gold, which has traditionally been a popular destination for investors when yields fall and fears of currency devaluation arise. Similar claims have also been made by proponents of bitcoin, which topped $11,000 on Tuesday, its highest level since early in 2018.

The recent spike in gold prices comes after years of listless trading in bullion, which had generally stayed between $1,100 and $1,350 since June 2013. The momentum in the sector has coincided with a surge in the broader stock market, with major indexes supported by bets that lower interest rates will lower borrowing costs and support corporate profits. Big-name investors such as Paul Tudor Jones and Jeffrey Gundlach have also publicly touted gold’s appeal in recent weeks.

“When the real value of money is being debased, then gold is viewed as the asset to own,” said Hugo Rogers, who oversees $5 billion as chief investment strategist at Deltec International Group. “The environment really plays into the hands of some kind of store of wealth that you cannot debase by printing more.”

Mr. Rogers bought gold for his fund earlier this year, and believes prices are likely to keep climbing.

With Tuesday’s rise, gold logged its best four-day stretch since February 2016. It is now heading for its best month and quarter since that period, when fears about a Chinese economic slump and an oil-price slide roiled markets.

Both the S&P 500 and gold are on track to rise at least 6% in the same month for the first time since October 2011, according to Dow Jones Market Data. “Spikes like this are very rare,” said Chris Mancini, an analyst at Gabelli Gold Fund. “A move like this tells you something has changed.”

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At its meeting last week, the Federal Reserve hinted that it would lower interest rates in the coming months if the outlook for the economy doesn’t improve. Gold fell alongside stocks during Tuesday’s session after Fed Chairman Jerome Powell said the central bank shouldn’t overreact to individual data points or sentiment shifts, surprising some analysts who expect multiple interest-rate cuts this year.

Many still expect lower rates to support gold. Hedge funds and other speculative investors pushed net bets on higher gold prices to their highest level since February 2018 during the week ended June 18, Commodity Futures Trading Commission data show. During the most recent week, bullish wagers outnumbered bearish bets by a ratio of 8-to-1, compared with a ratio of 3-to-1 just two weeks prior.


Figures for the week ended Tuesday will be released on Friday. More than $1.5 billion flowed into the SPDR Gold Trust exchange-traded fund last week, FactSet data show, the largest inflow since August 2011.

The investor interest has been a boon for beaten-down shares of gold miners, pushing up the VanEck Vectors Gold Miners ETF up 25% in the past month. Shares of Barrick Gold Corp. and other mining companies are up 30% or more in that period, compared with a 3.2% gain for the S&P 500.

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Bill Garrett, a 58-year old who works for a home-healthcare business in Wilmette, Ill., said he has been buying gold coins recently, citing steady physical buying from countries such as China and a belief that currencies around the world will become less valuable. “I think gold is really, really going to take off,” Mr. Garrett said.

Still, many analysts remain wary that a U.S.-China trade deal could lift the outlook for the world economy, spurring growth and sending gold prices sharply lower once again.

And although the Fed has hinted that it could reduce interest rates, many analysts say it is unlikely the central bank will cut them as quickly as the market currently expects.

That gap in projections is one of the largest threats to both stocks and gold, analysts say. “If the Fed doesn’t ease, then I think there’s a good chance they both do come back down,” Mr. Mancini said.

U.S. Crude Extends Weekly Gains To 10%

Stock Market News TodayOil prices extended gains to a three-week high on Friday as escalating tensions between the U.S. and Iran added to a rally of nearly 10% in U.S. crude.

New York-traded West Texas Intermediate crude futures rose 45 cents, or 0.8%, at $57.52 a barrel by 7:56 AM ET (11:56 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S. gained 84 cents, or 1.3%, to $65.29.

WTI oil was on track for weekly gains of 9.5%, while Brent was up 5.3% from a week ago.

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U.S. President Donald Trump had authorized military strikes against Iran in response to the strike against a U.S. surveillance drone late Thursday, but called off the attack at the last minute, according to a New York Times report.

The report is the latest development in escalating tension between Washington and Tehran in the Gulf region where six oil tankers have been damaged by explosions in the past six weeks.

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“We continue to believe amid this growing tension in the Middle East, along with expectations of an OPEC+ deal extension, that oil prices will trend higher over the second half of the year,” ING commodities strategists Warren Patterson and Wenyu Yao said in a note.

OPEC producers have postponed their official meeting to July 1 with non-members joining the following day. “A weaker U.S. dollar, with a more dovish Fed only adds further support,” they added.

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In other energy trading, gasoline futures surged 3.4% at $1.8465 a gallon by 7:58 AM ET (11:58 GMT), while heating oil jumped 1.9% at $1.9197 a gallon.

Lastly, natural gas futures traded up 1.1% at $2.208 per million British thermal unit.



Trade Tensions Are Pushing Makers Of U.S. Farm-Equipment Into A Deeper Ditch


Deere & Co., CNH Industrial NV and other makers of the tractors and combines used to plant and harvest American crops are already facing weak demand from farmers as a result of a five-year slump in the agricultural economy.

That downturn is worsening this year as China buys less soybeans and other crops from the U.S., and manufacturers pay more for the steel and other materials they import to build their machines.

“People just aren’t buying. They’re afraid,” said David Savoie, vice president for Sunshine Quality Solutions, a Deere dealer in Louisiana where sales of big machinery have dropped significantly since last year.

During the first three months of 2019, U.S. agricultural exports to China were 40% below the same period last year, according to Agriculture Department data. And that comes on top of a steep decline in 2018, when the U.S. sold $9.2 billion worth of farm goods to China, versus $19.5 billion in 2017, the department estimates.

Deere said May 17 that it will cut production in the second half of its fiscal year by 20% compared with the same time last year. The Moline, Ill.-based company expects to record up to $75 million in higher costs this year for steel and metal components driven up by U.S. tariffs.

CNH, the U.K.-based manufacturer of Case IH and New Holland equipment, expects to pay tariff-related costs of between $50 million and $100 million this year. CNH manufactures farm equipment in the U.S. and is the second-largest seller of machinery in the domestic market behind Deere.

CNH and Duluth, Ga.-based AGCO Corp., whose machinery brands include Massey Ferguson and Challenger, reported lower farm-equipment sales in the first quarter from a year earlier.

U.S. farmers are holding machinery longer while their incomes are depressed. Sales of large, high-horsepower tractors in the U.S. and Canada are down 50% from 2013, even though sales grew last year, according to trade group data.

Farmers interested in buying new machinery are finding it tougher to trade in their older models because dealers are already stuck with inventories of used equipment that can’t sell. “That used market is fairly saturated now,” said Barry Alexander, manager of 13,000-acre Cundiff Farms in western Kentucky.

A long-running trend toward consolidation in the Farm Belt also leaves fewer customers for equipment dealers. And the larger tractors bought in recent years have given farmers more horsepower and greater efficiency, allowing them to buy fewer machines and replace them less often.

Deere’s production cut is rippling through its supply chain, where profits are already shrinking from weather-related delays in planting this year’s crop and lower grain exports. “Farmers are the collateral damage of that ongoing China-U.S. trade dispute,” George Reitz, the chief executive of Quincy, Ill.-based off-road tire maker Titan International Inc., told analysts earlier this month.

Titan on May 6 reported a 35% reduction in first-quarter profit from its farm business. At the same time, U.S. tariffs on metal and components from China are hurting other farm-focused manufacturers.

Pella, Iowa-based Vermeer Corp., which makes hay balers, said it expects to pay $4 million in direct tariff costs this year. Its steel costs rose 50% last year, but prices have been declining in recent months as steel inventories rise. Lindsay Corp. , based in Omaha, Neb., said profit from its irrigation business fell by 31%, as sales dropped 16% in the three months through February.

The Trump administration has said it would spend $16 billion to offset the impact on American agriculture from the trade dispute between the U.S. and China. Yet even if the dispute is resolved, some manufacturing executives say U.S. farmers might still be worse off than before if China continues to buy some grain from farmers in South America, which has increased output to accommodate the demand from China.

“Once those supply chains move, it’s not guaranteed they’ll come back,” CNH Chief Executive Hubertus Mühlhäuser said. “Brazil will keep its customers. They’ll put more acres under the plow.”

Saudi Arabia’s Energy Minister Says Sees No Oil Shortage, But OPEC To Act If Needed

Saudi Arabia’s Energy Minister Khalid al-Falih said on Saturday that he saw no oil supply shortage as global oil inventories are still rising, particularly from the United States, but OPEC will be responsive to the oil market‘s needs.

Speaking in Jeddah ahead of a ministerial panel gathering on Sunday of top OPEC and non-OPEC producers, including Saudi Arabia and Russia, Falih told Reuters OPEC will not decide on output until late June when the group is due to meet next.

“I am not sure there is a supply shortage, but we will look at the (market) analysis. We will definitely be responsive and the market will be supplied,” Falih said, when asked whether an increase in output was on the table due to oil shortage concerns.

“But all indications are that inventories are still rising. We saw the data from the U.S. week after week, and they are massive increases, so there is obviously supply abundance.”

The Organization of the Petroleum Exporting Countries (OPEC), Russia and other non-OPEC producers, known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.

“We will be flexible. We are going to do the right thing as we always do,” Falih said of any decision at the meeting in June on continuing the reductions.

Falih said OPEC was guided by two main principles: “One to keep the market in its direction towards balancing, and inventories (are) back to normal level. And two to be responsive to market needs. We will strike the right balance I am sure.”

Saudi Arabia does not see a need to quickly boost production now with oil prices around the $70 a barrel level, as it fears a crash in prices and a build-up in inventories, OPEC sources said. But Russia wants to increase supply after June when the current OPEC+ pact is due to expire, the sources said.

The United States on the other hand, which is not a member of the OPEC+ but is a close ally of Saudi Arabia, wants the group to boost output to bring oil prices down.

Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of the OPEC+, the sources said.

OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under U.S. sanctions and exempt from the voluntary reductions under the OPEC-led deal.

U.S. President Donald Trump has called on OPEC and the group’s de facto leader Saudi Arabia to lower oil prices.


Sunday’s ministerial panel meeting, known as the JMMC, comes amid concerns of a tight market as Iran’s oil exports are likely to drop further in May, and shipments from Venezuela could fall more in coming weeks due to the sanctions by Washington.

Oil contamination also forced Russia to halt flows along the Druzhba pipeline – a key conduit for crude into Eastern Europe and Germany – in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.

But U.S. crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, the Energy Information Administration (EIA) said on Wednesday. [EIA/S]

Tensions between Saudi Arabia and fellow OPEC member Iran are also running high, after last week’s attacks on two Saudi oil tankers off the coast of the United Arab Emirates and another on Saudi oil facilities inside the kingdom.

Saudi Arabia accused Iran of ordering the attack on state oil giant Saudi Aramco’s oil pumping stations that Yemen’s Iran-aligned Houthi militia has claimed responsibility for.

An OPEC and non-OPEC technical committee found that oil producers’ compliance with the supply-reduction agreement reached 168 percent in April, three sources told Reuters on Saturday.

That shows that OPEC+ producers are cutting output by more than their share. Saudi Arabia has been pumping below its production target since January to keep oil inventories and prices in check.

‘Ebola’ Virus Sends Shock Waves Through Global Food Chain

Stock Market News Today — Financial and Business News — SMN.TODAY

— What started with a few dozen dead pigs in northeastern China is sending shock waves through the global food chain.

Last August, a farm with fewer than 400 hogs on the outskirts of Shenyang was found to harbor African swine fever, the first ever occurrence of the contagious viral disease in the country with half the world’s pigs. Forty-seven head had died, triggering emergency measures including mass culling and a blockade to stop the transportation of livestock. Within days, a government notice proclaimed the outbreak “effectively controlled.”

It was too late. By then, the disease had literally gone viral, dispersed across hundreds of miles in sickened animals, contaminated food, and in dirt and dust on truck tires and clothing. Nine months later, the contagion has spread nationwide, crossed borders to Mongolia, Vietnam and Cambodia, and bolstered meat markets globally.


While official estimates count 1 million culled hogs, slaughter data suggest 100 times more will be removed from China’s 440 million-strong swine herd in 2019, the Chinese zodiac’s “year of the pig.” The U.S. Department of Agriculture forecast in April a decline of 134 million head — equivalent to the entire annual output of American pigs — and the worst slump since the department began counting China’s pigs in the mid 1970s.

“This is an unprecedented situation,” said Arlan Suderman, chief economist for INTL FCStone Inc., who has been analyzing commodity markets for almost four decades. “This will impact food prices globally.”

Like Ebola… The strain of African swine fever spreading in Asia is undeniably nasty, killing virtually every pig it infects by a hemorrhagic illness reminiscent of Ebola in humans. It’s not known to sicken people, however.

The harm to pigs is especially critical for China, with a $128 billion pork industry and the world’s third-highest per-capita consumption. China’s hog herd may decline as much as 30 percent, said Juan R. Luciano, chief executive officer of Archer-Daniels-Midland Co., one of the biggest agricultural commodity traders.

“China will clearly need to import substantial amounts of pork and likely other meat and poultry to satisfy demand,” Luciano told analysts on an April 26 conference call. Chinese meat purchases may also boost sales of soybean meal, a source of livestock feed, in North America, Brazil, and Europe, he said.


Wholesale pork prices in China are already 21 percent higher than a year ago, and have risen in the U.S. and EU after processors sent more of their product to China. The price of bacon in Spain jumped about 20 percent during March, while pork shoulders climbed 17 percent in Germany, according to Interporc, a Madrid-based industry group.

“The potential quantum of this is huge,” said Angus Gidley-Baird, a commodities analyst with Rabobank in Sydney. “It’s the biggest thing to affect the animal-protein market this year, and will probably have a lasting effect for a number of years. It will move markets and possibly influence geopolitical situations.”

The rally has spread to other meats. Australia’s beef exports to China surged 67 percent in the first quarter. In Brazil, shares in meatpackers such as JBS SA and Minerva SA have soared amid optimism of stronger sales to China.

Contagion Effect… Increased Chinese meat imports will result in higher food costs that impact on economies across the globe. The extent of those ripple effects depends on how quickly the epidemic can be stopped. Official data show a slowdown in the number of pigs affected since late 2018, supporting the government’s assessment that the disease is “under effective control.”

Analysts from Morgan Stanley to Citigroup Inc. to the U.S. Department of Agriculture aren’t convinced that the disease isn’t still spreading.

Pork is the largest component of China’s consumer price basket, and its influence on other meat prices means that a doubling of pork prices in China would boost the country’s inflation by 5.4 percent, all other things being equal, according to Citigroup, which is forecasting a 2.6 percent inflation rate for the country in 2019.

The Chinese government will likely treat any pork-related inflation as an extraordinary event separate from general cost increases, said Liu Ligang, chief China economist at Citigroup. in Hong Kong. Still, if rising pork prices elevate inflation beyond a ceiling rate of 3 percent, it could constrain the People’s Bank of China from taking aggressive measures to boost the economy.

Supply Shock… “The more field studies people tend to do, the more fear they tend to have,” Liu said. “This is a supply shock, not a demand shock, and as a result this could be transitory. But this could be a prolonged supply shock given the severity of the disease.”

The epidemic could have political repercussions as well. Xi Jinping may want to finalize trade negotiations with U.S. President Donald Trump to both ease the importation of much-needed pork, poultry and beef supplies, and to enable Chinese lawmakers to focus solely on quelling outbreaks, said INTL FCStone’s Suderman.


The contagion is also highlighting the urgent need for government investment in outbreak preparedness, said Amanda Glassman, chief operating officer at the Center for Global Development. African swine fever in China shows that “animal and human disease surveillance systems are not working as well as they should,” she said. “This should concern everyone given that the potential economic impact of large-scale outbreaks is huge.”

Oil Prices Were Torn On Thursday, Supported By Tightening Sanctions Against Iran Announced This Week

Stock Market News Today Oil prices were torn on Thursday, supported by tightening sanctions against Iran announced this week and pressured by a surge in U.S. supply and concerns of an economic slowdown.

Brent crude futures were at $74.60 per barrel at 0512 GMT, 3 cents above their last close. U.S. West Texas Intermediate (WTI) crude futures were at $65.80 per barrel, 9 cents below their previous settlement.

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Crude futures rose to 2019 highs earlier in the week after the United States said on Monday it would end all exemptions for sanctions against Iran, demanding countries halt oil imports from Tehran from May or face punitive action from Washington.

“Following the U.S. decision to toughen its sanctions on Iran … we have revised up our end-year forecast for Brent crude from $50 to $60 per barrel,” analysts at Capital Economics said in a note.

U.S. sanctions against Iran have denied its government more than $10 billion in oil revenue since President Donald Trump first announced the move last May, a U.S. official said on Thursday during a media call.

“Before sanctions … Iran generated as much as $50 billion annually in oil revenue. We estimate that our sanctions have already denied the regime more than $10 billion since May (2018),” said Brian Hook, U.S. Special Representative for Iran and Senior Policy Advisor to the Secretary of State.

The U.S. decision to try and bring down Iran oil exports to zero comes amid supply cuts led by producer Organization of the Petroleum Exporting Countries (OPEC) since the start of the year aimed at propping up prices. As a result, Brent crude oil prices have risen by almost 40 percent since January.

Despite this, Capital Economics said “we still expect oil prices to fall this year as sluggish global growth weighs on oil demand, U.S. shale output grows strongly and investor aversion to risk assets like commodities increases.”

In Asia, South Korea’s economy unexpectedly shrank in the first quarter, the Bank of Korea said on Thursday, marking its worst performance since the global financial crisis.

China’s Premier Li Keqiang saying on Wednesday that his nation’s economy “still faces downward pressure”.

On the supply side, U.S. crude oil production has risen by more than 2 million barrels per day (bpd) since early 2018 to a record of 12.2 million bpd currently, making the United States the world’s biggest oil producer ahead of Russia and Saudi Arabia.

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In part because of soaring domestic production, U.S. commercial crude oil inventories last week hit a October 2017 high of 460.63 million barrels, the Energy Information Administration said on Wednesday. That was a rise of 1.3 million barrels.

Gold Prices Rose On Monday As Investors’ Appetite For Riskier Assets Faded On Concerns About A Potential U.S. Recession

Spot gold gained 0.3 percent to $1,316.40 per ounce as of 0800 GMT, while U.S. gold futures also added 0.3 percent to $1,316.50 an ounce. The metal last week posted its third consecutive weekly gain and rose 1 percent, the most since the week ended Feb. 1. Investors dumped shares and fled to the safety of bonds, while the Japanese yen hovered near a six-week high.

Market is in a risk aversion mode. It seems that the data from Friday night, of U.S. and Europe, didn’t come as expected,” said Michael McCarthy, chief market strategist, CMC Markets.


Data on Friday showed that U.S. manufacturing activity unexpectedly cooled in March and businesses across the euro zone performed much worse than expected this month, fanning concerns on global growth. “If data continues to be as weak as forecast then there is very good chance we could see significant higher gold prices,” McCarthy said, adding that the inversion of yield is a sign of concern.

Yields on benchmark U.S. 10-year treasury notes fell further below three-month rates in Asia, an inversion that has in the past signalled the risk of economic recession. The yield curve inverted on Friday for the first time since mid-2007. Lower yields reduce the opportunity cost of holding non-yielding gold and weigh on the dollar. A weaker dollar makes bullion cheaper for non-U.S. investors.

Chicago Federal Reserve Bank President Charles Evans said on Monday that it is a good time for the U.S. central bank to pause and adopt a cautious stance, adding that he did not expect any interest rate hikes until the second half of next year. Gold is set to make another run for the $1,350 price level that has proved resilient,” OANDA said in a note.

Volatility fuelled by uncertainty and with plenty of Fed speakers expected to reinforce the dovish rhetoric from the central bank, the U.S. dollar will be limited on the upside.” Indicating appetite for the safe-haven bullion, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose about 1 percent in the previous week.

Investors also raised their bullish wagers in COMEX gold in the week to March 19, the U.S. CommodityCommodity Futures Trading Commission (CFTC) said on Friday. Among other precious metals, palladium slipped 1 percent to $1,547.90 per ounce. Silver gained 0.5 percent to $15.49, while platinum was up 0.4 percent at $847.50 an ounce.


Budget Needs Are Forcing Saudi Arabia To Push For Oil Prices Of At Least $70 Per Barrel This Year

The export cuts are designed to prop up prices, sources close to Saudi oil policy say. Saudi officials say the kingdom’s output policies are merely intended to balance the world market and reduce high inventories. “The Saudis want oil at $70 at least and are not worried about too much shale oil,” said one industry source familiar with Saudi oil policy.

Another source said Saudi Arabia wanted to “put a floor under oil prices” at $70 or slightly lower, and added: “No one at OPEC can talk about output increases now.”

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Officially, Saudi Arabia, which plans to raise government spending to boost economic growth, does not have a price target. It says price levels are determined by the market and that it is merely targeting a balance of global supply and demand.

Even a price of around $70 a barrel would not balance Saudi Arabia’s books this year, according to figures cited by Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia department in February. For that, he said, Riyadh needs oil prices at $80-$85 a barrel.

Saudi Arabia, the world’s largest oil exporter, also wants to make sure it avoids a repeat of the 2014-2016 oil price crash below $30 per barrel, sources familiar with Saudi policy said. Saudi Arabia plans to reduce March and April oil production to under 10 million barrels per day — below its official OPEC output target of 10.3 million bpd.

A Saudi official told Reuters this month that despite strong demand from customers, state oil giant Saudi Aramco had cut its allocations for April by 635,000 bpd below nominations — requests made by refiners and clients for crude.

Saudi Energy Minister Khalid al-Falih said such swings were not unusual because last year the kingdom had raised output and exports above targets to avoid imminent shortages. Saudi Arabia has also been advocating an extension of OPEC-led supply cuts beyond June until the end of 2019.

Russia, which is not an OPEC member but is cutting output in tandem with OPEC, can balance its budget at oil prices of $55 per barrel and has not made clear yet whether it is prepared to extend them when OPEC next meets in June.

“With budget needs at above $85 per barrel, the Saudis desperately need prices at above $70 per barrel,” said Gary Ross, CEO of Black Gold Investors and a veteran OPEC watcher. “They also need to convince Russia that the strategy of output cuts makes sense despite the loss of market share to the United States,” he said.

The United States and Russia produce 12 million and 11 million bpd respectively. Unlike Russia, the United States pumps at will via its commercial energy sector, led by shale. The International Energy Agency forecasts its output will soar by another 4 million bpd in the next five years.

Those increases would be likely to outpace the growth of global demand and give Washington an even bigger share of the global market, making it a bigger exporter than Saudi Arabia. Riyadh has long been a close ally of the United States and the two countries have coordinated oil policy more closely since Trump became president than under his predecessor, Barack Obama.

Trump has supported Saudi Crown Prince Mohammed bin Salman despite a global outcry over the killing of journalist Jamal Khashoggi, a critic of the Saudi government, and has made clear he expects OPEC to help lower global oil prices.

Last year, Saudi Arabia raised output steeply under pressure from Washington. But it later heard that the United States had granted Iranian oil customers unexpectedly generous waivers and the price of oil subsequently fell to $50 per barrel.


On Monday, OPEC and its allies, led by Russia, scrapped a planned meeting in April and will decide instead whether to extend output cuts in June, once the market has assessed the impact of new U.S. sanctions on Iran due in May over its non-compliance with a deal to curb its nuclear program. “We have to wait and see what the Americans will do first,” a second OPEC source said.

There is, however, no guarantee Saudi policy will remain unchanged if Washington puts pressure on Riyadh to raise supply. “They (the Saudis) do care about Trump, but they can’t do whatever he says every time,” an OPEC source said.

Citigroup Inc Plans To Sell Several Tons Of Gold Placed As Collateral By Venezuela’s Central Bank On A $1.6 Billion Loan

Citigroup Inc plans to sell several tons of gold placed as collateral by Venezuela’s central bank on a $1.6 billion loan after the deadline for repurchasing them expired this month, sources said, a setback for President Nicolas Maduro’s efforts to hold onto the country’s fast-shrinking reserves.

Maduro’s government has since 2014 used financial operations known as gold swaps to use its international reserves to gain access to cash after a slump in oil revenues left it struggling to obtain hard currency. In the past two years, however, it has struggled to recover its collateral.

Under the terms of the 2015 deal with Citigroup’s Citibank, Venezuela was due to repay $1.1 billion of the loan on March 11, according to four sources familiar with the situation. The remainder of the loan comes due next year.

Citibank plans to sell the gold held as a guarantee – which has a market value of roughly $1.358 billion – to recover the first tranche of the loan and will deposit the excess of roughly $258 million in a bank account in New York, two of the sources said.

The ability of Maduro’s government to repay the loans have been complicated by the South American country’s dire economic situation as well as financial sanctions imposed by the United States and some European nations.

Most Western nations say that Maduro’s re-election to a six-year term last year was marred by fraud and have recognized opposition leader Juan Guaido as Venezuela’s legitimate president.

Guaido invoked Venezuela’s constitution to announce an interim presidency in January. However, Maduro retains control over state institutions in Venezuela and has the support of the powerful military. He has branded Guaido a U.S. puppet.

With Washington’s support, Guaido’s team has taken control of state oil company PDVSA’s U.S. refining subsidiary but its attempt to negotiate a 120-day extension of the repurchase deadline for the collateral was unsuccessful, the sources said.


“Citibank was told that there was a force majeure event in Venezuela, so the grace period was necessary, but they did not grant it,” said one of the sources, who belongs to Guaido’s team.

A Venezuelan government source familiar with the matter confirmed that the country’s Central Bank did not transfer the money to Citibank this month. Citigroup declined to comment. The Venezuelan Central Bank did not immediately respond to a request for information.

In a report presented to the U.S. securities regulator in February, Citibank said Venezuela’s Central Bank had agreed four years ago to buy back in March 2019 a “significant volume of gold” as part of a contract signed to obtain some $1.6 billion. Citibank said that, following the transaction, it owned the gold.

Guaido is attempting to freeze bank accounts and gold owned by Venezuela abroad, much of which remains in the Bank of England. At the end of 2018, the Central Bank paid investment bank Deutsche Bank AG about $700 million to recover ownership of a portion of gold used as collateral for a loan.

However, the bullion remained in the custody of the Bank of England, despite the Central Bank’s request to repatriate it. In light of that transaction, the sources said there was no incentive for the Central Bank to repay Citibank. Guaido’s team also began preparing this month for a possible debt restructuring in a bid to ease payments and stop any hostile action by creditors, said two sources who took part in the discussion.

In meetings between members of Guaido’s team with legal advisors in the United States, there were discussions of starting renegotiations soon not only with Venezuelan bondholders, but also with the Chinese and Russian governments and companies affected by a wave of nationalizations, said the sources.

“We want to address the debt in a comprehensive way. We calculate that it totals $200 billion,” said one of the sources. The Citgo refinery unit, Venezuela’s main asset abroad, is under scrutiny because it serves as a guarantee for the issuance of a PDVSA bond and a loan from Russian oil company Rosneft.

Guaido’s advisers are also evaluating the payment in the coming weeks of around $72 million in interest coming due on PDVSA’s 2020 bonds to avoid any action by creditors against Citgo.


Crude Oil Production Cuts: Iraq, OPEC’s Second-Largest Producer, And Russia, Failed To Respect Their Commitments In The First Two Months Of The Year

OPEC and a group of 10 oil-producing nations led by Russia are deepening their crude production cuts, but remain split on whether the curbs should remain in place through the end of the year, officials said Sunday.

Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, met with Russia and a few other countries to review how the 24-nation coalition is complying with a December agreement to withhold 1.2 million barrels a day from global markets.

The broad coalition implemented cuts in February that achieved about 90% of the amount it agreed to, Saudi Energy Minister Khalid al-Falih said at a press conference following the group’s technical meeting. In March the cuts will be “above 100% easily,” he said, meaning the coalition will hold back slightly more than the 1.2 million daily barrels.

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The output cuts were meant to shore up oil prices in the midst of a global glut of crude. The effort has led to a more than 25% rise in price of Brent oil, the global benchmark, since the year began.

Iraq, OPEC’s second-largest producer, and Russia, the cartel’s largest external ally, failed to respect their commitments in the first two months of the year. But Russian Energy Minister Alexander Novak said his country is now complying with agreed-upon reductions of 230,000 barrels a day. He said the delays were due to freezing weather conditions.

His Iraqi counterpart, Thamir Ghadhban, said Baghdad was sharply reducing exports. Even so, a divide emerged among the coalition on when the output cuts should end. The current agreement expires in June, and the group disagrees about the impact of U.S. sanctions on OPEC members Venezuela and Iran.

The Trump administration banned Iran’s oil exports beginning in November but granted waivers to a limited number of countries to allow for continued crude purchases. The administration is due to decide on whether to extend the waivers by May. Washington also prohibited the purchase of crude from the Venezuelan regime of Nicolás Maduro in January.

Production levels from Iran and Venezuela “have not declined precipitously—to the point where we see there are still inventory builds,” Saudi Arabia’s Mr. Falih said. “We need to stay the course certainly until June,” he said, adding that the output cuts may have to be pursued until the end of 2019.

Russia’s Mr. Novak said uncertainty over the implementation of U.S. sanctions blurred the group’s planning on future curbs. “We don’t know what will happen in April, so we can’t forecast the second half,” he said.

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Shale Companies, Adding Ever More Wells… Newer Wells Drilled Close To Older Wells Are Generally Pumping Less Oil And Gas And Could Hurt Output

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Shale companies’ strategy to supercharge oil and gas production by drilling thousands of new wells more closely together is turning out to be a bust. What’s more, the approach is hurting the performance of older existing wells, threatening the U.S. oil boom and forcing the maturing industry to rethink its future.

To maintain America’s status as an energy powerhouse, shale companies in recent years have touted bunching wells in close proximity, greatly increasing the number of wells drawing on a promising reservoir. The added wells would produce as much as older ones, many drillers believed, allowing them to extract more oil overall while maintaining strong returns from each well.

Those rosy forecasts helped fuel investor interest in shale companies, which raised nearly $57 billion from equity and debt financing in 2016, according to Dealogic, even as oil prices dipped below $30 a barrel. That was up from nearly $34 billion five years earlier, when oil topped $110 a barrel.

Now the results are coming in, and they are disappointing. Newer shale wells drilled close to older wells are generally pumping less oil and gas than the older wells, according to early corporate results. Engineers warn the new wells could produce as much as 50% less in some circumstances.

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The newer shale wells often interfere with the output of older wells, because blasting too many holes in dense rock formations can damage nearby wells and lower the overall pressure, making it harder for oil to seep out. The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir.

Known in the industry as the “parent-child” well problem, the issue is surfacing in shale hot spots across the U.S. as companies ramp up production. Most of the tens of thousands of planned new wells will be child wells—wells drilled close to an already producing well.

It is one of the primary reasons why thousands of shale wells drilled in the past five years are producing less oil and gas than companies forecast to investors, a Wall Street Journal examination of drilling data has found.

In February 2018, RSP lowered its estimate of drilling spots in the area to 2,440 wells. The company said it had found that spacing wells closer than 400 feet hurt production, and it had come to believe that 450 feet was the optimum spacing in the Midland area.

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A month later, in March 2018, Concho Resources acquired RSP for $9.5 billion, or about $75,000 per acre, creating a Permian giant. In a presentation announcing the deal to investors, Concho estimated RSP’s total inventory of drilling sites, which includes areas outside Midland, was about 30% lower than RSP’s previous estimate.

A Concho spokeswoman declined to comment. The company has previously said it would drill wells 660 feet apart in the Midland area and that synergies created by the merger will save money and allow it to go into a “manufacturing mode” of large-scale drilling projects.

When the deal closed in July, the combined market cap of Concho and RSP was nearly $30 billion. The current value of the combined company is $22 billion.

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Trump Asked China To Remove All Tariffs On US Agricultural Products

President Donald Trump on Friday said that he has asked China to “immediately remove all tariffs” on U.S. agricultural products, in return for his decision to postpone a March 1 deadline to raise U.S. tariffs on Chinese imports.

Trump made the request “based on the fact that we are moving along nicely with trade discussions,” he said.

On Sunday, Trump announced that he would delay the additional tariffs that were scheduled to go into effect at the beginning of March.

By Marco Vinci | marcovinci2030@gmail.com

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President Donald Trump on Friday said that he has asked China to “immediately remove all tariffs” on American agricultural products, in return for his decision to postpone a March 1 deadline that would have dramatically raised U.S. tariffs on Chinese imports.

Trump made the request “based on the fact that we are moving along nicely with trade discussions,” he said. The president called in particular for Beijing to lift its levies on products such as beef and pork.

On Sunday, Trump announced that he would delay the additional tariffs that were scheduled to go into effect at the beginning of March and would have more than doubled levies from 10 percent to 25 percent on $200 billion in Chinese goods. The president has not announced a new deadline for that round of tariffs.

Trump also said Sunday that if more progress is made toward a resolution of the long-running trade negotiations between the two countries, Chinese President Xi Jinping would be invited to a summit at Trump’s Florida golf course, Mar-a-Lago, to “conclude an agreement.”

Trump’s top economic advisor, Larry Kudlow, painted a rosy picture of the ongoing trade negotiations in an interview with CNBC on Thursday. “The progress has been terrific,” Kudlow said, while adding that “we have to hear from the Chinese side. We have to hear from President Xi Jinping, of course. I think we’re headed for a remarkable, historic deal.”

A day before Kudlow’s interview, U.S. Trade Representative Robert Lighthizer gave a more cautious outlook in testimony before Congress. “Much still needs to be done both before an agreement is reached,” Lighthizer testified, “and, more importantly, after it is reached, if one is reached.”

Trump’s request could also suggest he recognizes the impact of the U.S.-China trade war has taken on American farmers. Growing tariffs have led to China scaling back purchases of U.S. grain, and have affected the storage, shipping and freight operations that American farmers need to move their crops to market.

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Last July, Beijing imposed an additional 25 percent retaliatory tariff on U.S. beef imports. The U.S. Department of Agriculture said last year in a report that China’s middle class continues to grow in size and so does their appetite for Western-style diets, including beef. Still, most of China’s beef imports currently come from Australia and South American countries.

The National Cattlemen’s Beef Association, the trade group for the U.S. beef industry, responded to Trump’s tweet Friday by suggesting China’s president “shouldn’t have to fly all the way to Mar-a-Lago to enjoy a USDA Prime Ribeye. It’s time for China to lift the trade barriers on U.S. beef so our 1.4 billion Chinese consumers can enjoy beef again.”

At the same time, American pork now faces hefty import taxes from China that exceed 70 percent, which includes two rounds of tariffs that took effect last year.

China is the world’s largest pork producer but outbreaks of the deadly African swine fever virus have led to tighter pork supplies domestically and the possibility of increased demand for American pork products in 2019. The volume of American pork exports to China fell by 20 percent in the first 11 months of 2018, according to the U.S. Meat and Export Federation.

“The United States produces the safest, highest-quality and most affordable pork in the world,” said Jim Monroe, a spokesman for the National Pork Producers Council, the industry’s largest trade association. “China represents an enormous opportunity for U.S. pork producers and we are eager to gain more favorable access to this market.”

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U.S. Crude Prices Are Up 25% So Far This Year

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Oil prices are off to their best-ever start to a year as fears of a supply glut cool, part of a 2019 recovery in risky investments from stocks to commodities.

U.S. crude-oil futures have rebounded 25% in the first two months of the year, according to Dow Jones Market Data, the best January-February performance in figures going back to 1984. Oil is also heading for its best two-month stretch generally since 2016—when prices recovered in April and May of that year after dipping below $27 a barrel.

Oil rose 2.6% Wednesday to $56.94 a barrel after Saudi Arabia’s energy minister reiterated the country’s commitment to curbing output, the latest example of the de facto head of the Organization of the Petroleum Exporting Countries defying calls by President Trump to keep prices low. Crude had tumbled Monday after Mr. Trump tweeted prices were too high. Wednesday’s rebound puts prices near the highest level since November.

This year’s rally comes after a punishing decline. Crude prices fell 44% from their multiyear peak in early October to a Christmas Eve trough as investors fretted that a global economic slowdown would weaken demand for a range of commodities.

Energy investors have been among the biggest beneficiaries of the Federal Reserve signaling a cautious approach to further interest-rate increases and the U.S. and China moving toward a trade agreement. The S&P 500 energy sector has risen 14% so far this year, versus 11% for the broader index.

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On Wednesday, energy stocks were among the market’s best performers, with the S&P 500 energy sector rising 0.4%. Fears linger that demand for oil will stall. But the International Energy Agency still expects consumption to increase each quarter this year from a year earlier, albeit at a slower-than-usual pace in the first quarter.

Additionally, Saudi Arabia and other OPEC members have curbed output, despite calls from President Trump for the cartel to keep prices low. Anxiety also remains about the impact of U.S. sanctions on Iran and Venezuela, fueling bets that prices can at least stay steady even if the rally stalls.

“Too many international barrels have been taken off the market,” said Bob Yawger, director of the futures division at Mizuho Securities USA. “There’s a lot of uncertainty around production.”

Because of the Venezuela sanctions, some analysts expect the U.S. will extend waivers to buyers of Iranian crude that were exempted from last November’s penalties to avoid significant market disruptions. The waivers allowed several countries to continue buying Iranian crude through April.

Both Iran and Venezuela were exempted from the December OPEC agreement to lower output because of the sanctions on their respective oil industries. Saudi Arabia and others in OPEC are likely to back a continuation of production curbs when the group meets in April, The Wall Street Journal reported Monday. Saudi Arabia accounted for much of the cartel’s drop in January production, lowering output by 400,000 barrels a day, while Russian supply came down by just 78,000 barrels a day, IEA data show.

Energy Information Administration figures on Wednesday showed U.S. crude imports fell to their lowest level since 1996 last week, a sign of steady domestic oil demand.

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But many analysts are keeping a close eye on output from Saudi Arabia and Russia because many expect steady U.S. shale production growth to continue. The EIA said Wednesday that U.S. oil production climbed to a record 12.1 million barrels a day during the week ended Feb. 22.

That compares with January U.S. output of roughly 11.9 million barrels a day and 11.4 million barrels a day from Russia and 10.7 million from Saudi Arabia. Worries about steady U.S. supply pushed West Texas Intermediate futures, the U.S. oil benchmark, down more than 3% Monday, though they have recovered much of that slide. Crude-oil futures began trading in 1983.

“I would be surprised if WTI got above $60,” Mr. Yawger said. “Domestic production is too great.” Some analysts also worry lockstep moves by stocks and commodities have set markets up for another rapid reversal if momentum changes and investors retreat from risk. U.S. crude and the S&P 500 have moved in the same direction 60% of the time so far this year.

The rolling correlation between the S&P 500 and S&P GSCI commodity gauge—heavily weighted toward oil and other energy products—increased to 0.94 last week for the first time since March 2016, according to Dow Jones Market Data, which looked at time spans of 50 days. Correlation is measured on a scale of minus-1 to 1. A reading of minus-1 means two assets are moving perfectly in opposite directions, while a correlation of 1 means they are moving in tandem.

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China-U.S. Trade – Oil Prices Pressed Higher, Marking Fresh Three-Month Highs On Friday

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Oil prices pressed higher, marking fresh three-month highs on Friday, as investors celebrated a meeting between U.S. President Donald Trump and China’s top trade representative, Vice Premier Liu He.

New York-traded West Texas Intermediate crude futures rose 50 cents, or 0.88%, at $57.46 a barrel by 9:39 AM ET (14:39 GMT), after touching $57.81 earlier, its best level since November of last year. Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., traded up 32 cents, or 0.48%, to $67.39, backing off of $67.72, which was also its best level in three months.

Markets interpreted the fact that Trump agreed to meet with Liu at 2:30 PM ET (19:30 GMT) on Friday as a sign that trade discussions were progressing and the implementation of an increase in U.S. tariffs on Chinese products on March 1 would likely be delayed.

Investors have feared that the standoff between the U.S. and China could negatively impact economic growth, diminishing the demand for oil from the world’s two largest consumers. Apparent progress in negotiations this year along with OPEC-led efforts to slash production has supported the rally in oil prices, with gains of more than 20% in 2019.

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Some analysts remained cautious, however, amid a wide range of pending issues, including sanctions on Venezuela and Iran, a bottleneck in the Canadian production pipeline and maintenance difficulties in Saudi Arabia.

“Slower global growth, a resurgent dollar and record U.S. production are all weighing on prices and causing any rallies to stall relatively quickly,” OANDA market analyst Craig Erlam said. “It has recovered from its selloff late last year, but not as much as you may have expected and there does seem to be a reluctance to hop on board,” Erlam added.

Investors are also wary of escalating production in the U.S., which the Energy Information Administration reported Thursday had hit a record high of 12 million barrels per day last week. In that light, investors will pay close attention as Baker Hughes releases its weekly rig count data, an early indicator of future output, at 1 PM ET (18:00 GMT).

In other energy trading, gasoline futures slipped 0.03% to $1.6139 a gallon by 9:41 AM ET (14:41 GMT), while heating oil advanced 0.16% to $2.0396 a gallon. Lastly, natural gas futures lost 0.22% to $2.691 per million British thermal units.

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Glencore PLC Plans To Curb Production At One Of Its Biggest Copper And Cobalt Mining Operations

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Glencore ( GLNCY ) plans to curb production at one of its biggest copper and cobalt mining operations, Mutanda Mining Sarl in Congo, according to people familiar with the matter, potentially taking a sizable portion of two important industrial metals out of circulation.

The company intends to cut about 2,000 workers at Mutanda, mostly contractors, the people said. The cutback in production is likely to be temporary as Glencore explores new copper-mining methods for the mine.

No full-time employees will be laid off from the mine, which at full capacity employed about 7,500 workers at the end of 2018, including contractors, a person familiar with the matter said. About half of the workforce cut will come from contractors whose terms with Mutanda are expiring, the rest will come from contracts that are being terminated, the person said.

Glencore’s copper operations in Africa produced 410,000 metric tons of copper in 2018, up 72% from 2017, and 38,000 tons of cobalt, a 61% increase. Mutanda, its most productive Congo mine, produced 199,000 tons of copper and 27,000 tons of cobalt last year.

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That is about one-fifth of global cobalt production, making it the world’s most prolific producer of cobalt. The metal is a key ingredient in the lithium-ion batteries that power electric vehicles and smartphones.

Glencore in 2016 temporarily suspended mining operations at its other Congo copper mine, Katanga Mining Ltd., amid a sharp downturn in copper prices. That move caused copper prices to shoot higher. Glencore halted exports of cobalt from Katanga last year after it discovered some of the metal was radioactive. The company is installing new technology to decontaminate the metal.

Glencore could announce further details about its plans for Mutanda when it releases its annual results for 2018 on Wednesday.

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Gazprombank Freezes Accounts Of Venezuela’s PDVSA To Reduce The Risk Of The Bank Falling Under U.S. Sanctions

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Gazprombank has decided to freeze the accounts of Venezuelan state oil company PDVSA and halted transactions with the firm to reduce the risk of the bank falling under U.S. sanctions, a Gazprombank source told Reuters on Sunday.

While many foreign firms have been cutting their exposure to PDVSA since the sanctions were imposed, the fact that a lender closely aligned with the Russian state is following suit is significant because the Kremlin has been among Venezuelan President Nicolas Maduro’s staunchest supporters.

“PDVSA’s accounts are currently frozen. As you’ll understand, operations cannot be carried out,” the source said. Gazprombank did not reply to a Reuters request for a comment.

Reuters reported this month that PDVSA was telling customers of its joint ventures to deposit oil sales proceeds in its Gazprombank accounts, according to sources and an internal document, in a move to try to sideline fresh U.S. sanctions on PDVSA.

Washington says the sanctions, imposed on Jan. 28, are aimed at blocking Maduro’s access to the country’s oil revenue after opposition leader Juan Guaido proclaimed himself interim president and received widespread Western support.

Gazprombank is Russia’s third biggest lender by assets and includes among its shareholders Russian state gas company Gazprom. The bank has held PDVSA accounts for several years. In 2013, PDVSA said it signed a deal with Gazprombank for $1 billion in financing for the Petrozamora company. The source said that Petrozamora accounts were frozen, too.

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Russian officials have said they stand by Maduro and have condemned opposition actions as a U.S.-inspired ploy to usurp power in Caracas.

But Russian firms find themselves in a quandary, caught between a desire to endorse the Kremlin line and back Maduro, and the fear that by doing so they could expose themselves to secondary U.S. sanctions which would harm their businesses.

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China Has Been Holding Talks With Venezuela’s Political Opposition To Safeguard Its Investments


By Anne Losuck | leckben@smn.today | StockMarketNews.Today

China has been holding talks with Venezuela’s political opposition to safeguard its investments in the troubled Latin American nation, hedging its bets as pressure builds on Nicolás Maduro, the embattled leader for whom Beijing has been a vital ally.

Chinese diplomats, worried over the future of its oil projects in Venezuela and nearly $20 billion that Caracas owes Beijing, have held debt negotiations in Washington in recent weeks with representatives of Juan Guaidó, the opposition leader heading the U.S.-backed efforts to oust Mr. Maduro, according to people familiar with the talks.

Today’s Stock Market News – China Has Been Holding Talks With Venezuela’s Political Opposition
Today’s Stock Market News – China Has Been Holding Talks With Venezuela’s Political Opposition

“China recognizes the increasing risk of a regime change and does not want to be on the bad side of a new regime,” said R. Evan Ellis, an expert on Chinese relations in Latin America at the U.S. Army War College. “While they prefer stability, they realize they have to put eggs in the other basket.”

The talks are a sign of the apprehensions building with creditors of Venezuela’s leftist government. Over nearly two decades, loans-for-oil deals with China and Russia have provided vital support for Venezuela. Relations flourished under Mr. Maduro’s predecessor, the late socialist strongman Hugo Chávez, who fortified ties with those countries, Cuba, Iran and even India in an effort to combat U.S. power.

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But commercial and financial ties with these countries have been strained since Mr. Maduro, Mr. Chávez’s handpicked successor, took power in 2013 and the economy began to shrink, with oil production plummeting by more than half after years of rampant graft and mismanagement.

Sanctions leveled by Washington last month on Venezuela’s oil industry have exacerbated Mr. Maduro’s difficulties, cutting off Venezuela’s only meaningful source of income and portending further declines in oil output.

China’s Foreign Ministry didn’t respond to a request for comment about Beijing’s contacts with the Venezuelan opposition. In recent weeks, the ministry has suggested that discussions are taking place and Beijing wants to see its interests respected. Asked about rumored talks at a media briefing on Feb. 1, Foreign Ministry spokesman Geng Shuang said Beijing “has been in close communication with all parties in various ways on the situation in Venezuela.”

“No matter how the situation evolves,” Mr. Geng said, “China-Venezuela cooperation should not be undermined.” Mr. Guaidó has publicly extended olive branches to China and Russia. The young National Assembly chief, whom lawmakers chose to lead an interim presidency in a direct challenge to Mr. Maduro, has argued that political change would be a precursor to economic reforms to restore stability.

Venezuela, which sits atop the world’s largest oil reserves, should maintain ties with China, the world’s biggest oil importer, he said. The fall of the Maduro government could work to China’s advantage, said Mr. Ellis. “Guaidó could help lift [U.S.] sanctions and get oil flowing again. At the end China has everything to gain from Guaidó,” he said.

People familiar with the debt-repayment talks said there are significant hurdles. Venezuela has borrowed from China more than $50 billion in a series of loans-for-oil agreements since 2007, and according to estimates by China’s Commerce Ministry it still owes Beijing around $20 billion.

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China is unwilling to take a significant loss on its loans, as some of the opposition’s economic advisers have suggested for lenders, including holders of the country’s defaulted bonds, according to two of the people familiar with the talks. Both sides have been discussing grace periods on repayment plans to give any potential Venezuelan transitional government breathing space, they said.

Opposition lawmakers have also long clamored to make the terms of China’s loan deals with Venezuela more transparent, which Beijing opposes, according to two of the people familiar with the negotiations.

Like China, Russia has publicly supported Mr. Maduro but has shown little willingness to prop up the government with fresh funds. Neither ally has granted large loans to Venezuela in recent years. Their joint oil ventures in Venezuela have been subject to the corruption and operational difficulties felt across the country’s oil industry, energy consultants said.

One director of a company that provides oil-field valves and tubes to Chinese and Russian state firms operating in Venezuela said the company had only made one sale in all of 2018. “The Chinese, the Russians, I just don’t see them putting any money in,” the director said. Moscow is open to dialogue with Mr. Guaidó, Kremlin spokesman Dmitry Peskov suggested this month, saying Russia expected to maintain cooperation with Caracas “regardless of political developments in the country.”

The Trump administration’s sanctions aim to redirect oil assets and revenue away from Mr. Maduro and into the hands of Mr. Guaidó, closing off access to Venezuela’s biggest cash customers. Venezuelan officials have been seeking new buyers for their heavy oil, which until January could be refined at specially fitted American installations.

On Sunday, the state-run Saudi tanker company, Bahri, said one of its vessels had traveled to Venezuela to load crude for one of Caracas’s regular customers in India. Bahri said the shipment would be completed before the end of a grace period set by U.S. sanctions.

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On Monday, Venezuela Oil Minister Manuel Quevedo was in New Delhi, seeking to increase sales to India, his ministry said. But Indian officials have said privately that they have grown impatient with Venezuela, which for several years has delayed repayment of nearly $500 million owed to state oil company ONGC Videsh Ltd.

Venezuela’s government has also fallen into arrears with Indian pharmaceutical companies that once thrived here, forcing many of them to shift operations out of the country as social and economic conditions deteriorated. “Private entities in India have little reason to go out of their way to ramp up imports in such a chaotic situation,” said Smita Purushottam, a former Indian ambassador to Venezuela who recently retired from the Foreign Ministry.

“My view is that the people of Venezuela are fighting for survival,” she said. “They have suffered for too long and perhaps the only way forward is to start anew, under international supervision, to minimize their suffering and rekindle hope.”

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Venezuela Seeks OPEC Support Against U.S. Sanctions Imposed On His Country’s Oil Industry

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By Liz Kirbayeva | kir75bayeva@smn.today

Venezuela’s Nicolas Maduro has sought OPEC support against U.S. sanctions imposed on his country’s oil industry, citing their impact on oil prices and potential risks for other members of the producer group.

But a source familiar with the matter said the Organization of the Petroleum Exporting Countries, of which Venezuela is a founding member, had declined to make any formal statement. OPEC says it is concerned with oil policy, not politics.

Today’s Stock Market News – Venezuela Seeks OPEC Support Against U.S. Sanctions
Today’s Stock Market News – Venezuela Seeks OPEC Support Against U.S. Sanctions

More than 40 nations including the United States, European powers and most of Latin America have recognized Maduro’s rival, Juan Guaido, as the country’s rightful head of state, following disputed elections last year.

The request was made in a letter sent to OPEC Secretary-General Mohammad Barkindo dated Jan. 29 and seen by Reuters, a day after the United States imposed sanctions on Venezuelan state oil firm PDVSA.

“Our country hopes to receive the solidarity and full support of the member countries of OPEC and its ministerial Conference, in the fight we are currently having against the illegal and arbitrary intrusion of the United States in the internal affairs of Venezuela,” Maduro wrote.

I seek “your firm support and collaboration to jointly denounce and face this shameless dispossession of … important assets of one of the members of OPEC, the letter said. He wrote that OPEC should help to determine potential solutions based on “the impact that this action has on the global energy market, and the risk it represents for the other countries … of this organization”.