The 3 Week Diet System

Tuesday, May 23, 2017

At OPEC's Vienna meeting, optics will be key

Myriam Robin

The member countries of the Organisation of Petroleum Exporting Countries will have a delicate balancing act when they meet in Vienna on Thursday to decide whether to extend an agreed cut in oil production that started in January to the end of the year or beyond.
There are near universal expectations that an extension will be negotiated. If it's shorter than the market is expecting, it could lead to a drop in the oil price, causing financial pain for some of OPEC's more cash-strapped nations. But if OPEC's public comments convince traders it will ensure oil stockpiles are reduced to their five-year average, it may embolden US producers to ramp up shale oil production.
The member countries of the Organisation of Petroleum Exporting Countries will have to execute a delicate balancing act when they meet in Vienna on Thursday. Photo: ERIC GAY
US shale oil production is due to technological improvements becoming cheaper, but is still more expensive than the production methods of used by OPEC members and so requires high prices to be profitable.
By June, it is forecast shale US shale oil producers, who have boosted production 10 per cent since September, will add 5.4 million barrels a day to the market. This is almost three times the 1.8 million barrels a day being removed through the OPEC production cuts, and could overwhelm the impact of OPEC's supply controls if prices continue to rise.
Optics are key, Citi's analysts told clients in a May 23 note, and will be more important than fundamentals in driving the oil price over the next month, which was on Wednesday trading at $US54.18, after trading below $US48 on May 5.
Earlier this week, Saudi Arabia's energy minister Khalid Al-Falih told Bloomberg that everyone he's spoken to believed a nine-month production cut was "a wise decision". "We think we have everybody on board", he said. Shortly afterwards, Iran's oil minister indicated his support for a nine-month cut.
Because of this, analysts at Citi expect a nine-month extension, and warn of an upset if it isn't achieved.
"The Saudis have moved expectations towards a nine-month market consensus and thus a six-month extension is likely to be punished," they wrote in a May 23 note.
Citi's analysts believe a six-month extension would be sufficient to tighten oil supplies significantly. But oil prices over the next month are likely to be driven by optics rather than market fundamentals, they wrote. "It would appear that a six-month extension would be a backtracking of sorts."
Citi, like most analysts, expects oil prices to keep their current levels, trading between $US50 to $US60 over the next year.
The big risk to the forecast is posed by US shale oil producers, who are not members of OPEC and may opportunistically add supply to the market if the oil price maintains these levels.
The question of how to keep prices high without encouraging more shale oil rigs to come into production is one that's been assessed by the analysts at Goldman Sachs, who believe the key to achieving this is for the oil market to go into 'backwardation' - a situation where spot prices are higher than futures prices.
Shale oil producers normally hedge their production, while OPEC members do not. As oil spot prices have been lower than futures prices since the end of 2014, shale oil producers have been able to sell their oil at higher prices than major OPEC producers.
Goldman believes futures prices below $US45 a barrel would be enough to halt the growth in shale oil production.
But achieving backwardation would require a coordinated three-part strategy, involving at first. deeper or more extended production cuts. This would then be followed by a commitment to raise production once inventors return to their five-year average (suggesting weaker short-term supply becoming more accommodative in the future) followed by a gradual increase in production, in line with demand to keep spot prices above futures prices.
"This seems quite a tall order," Goldman's analysts admit, "[b]ut it is important to note that this was how OPEC proceeded during the 1990s, with steady production growth, decent compliance with output quotas and a persistent backwardation outside recession."
The US government poses another risk to OPEC's attempts to erode oil stockpiles. US President Donald Trump has proposed selling more than half the country's emergency oil stockpile - which could flood the market with 270 million barrels of oil over the next decade to raise $16.6 billion.


Tycoon Optimistic of Xi-Duterte Energy Deal in South China Sea

by Cecilia Yap
2017 M05 23 17:00 GMT-5

Rodrigo Duterte with Xi Jinping in Beijing on May 15. Photographer: AFP via Getty Images

One of the most prominent tycoons in the Philippines is increasingly optimistic that President Rodrigo Duterte can strike a deal with China to share oil and gas deposits in a disputed part of the South China Sea.
“At some point a commercial deal will be made that will enable us to develop the prospect,” Roberto Ongpin, whose company Atok-Big Wedge Co. Inc. holds a minority stake in a gas field in the South China Sea, said in an interview on Thursday. “It will be astronomical.”
Since taking power last year, Duterte has sought to improve ties with China that deteriorated under predecessor Benigno Aquino. The two countries agreed to work out “mutually acceptable approaches” to the South China Sea at formal talks that began last week, an early step toward reaching a deal to exploit what may be the Philippines’s largest gas field.
Ongpin has a history with Duterte: He was forced to sell his Philippine gaming assets after the president targeted him
in a crackdown on online gaming. Still, Ongpin said he believes the Philippine leader’s approach toward the world’s secondbiggest economy is moving in right direction.
“There’s no way you can bump heads with China,” he said by phone.
Ongpin said his company now owns 20 percent of Forum Energy Ltd., which has a 70 percent stake in the Sampaguita gas field west of the Philippines’ Palawan province. The discovery is estimated to contain 11.4 trillion cubic feet of natural gas, according to a third-party assessment commissioned by PXP Energy Corp. PXP owns 80 percent of Forum. 

Gas Shortage
That’s more than four times the 2.7 trillion cubic feet of reserves in Malampaya gas field, the largest in the Philippines, which currently fuels several power plants and generated hundreds of billions of pesos worth of royalties for the government. Supply from the Malampaya gas field will last only until 2024, prompting the Energy Department to consider importing liquefied natural gas to ensure stable supplies.
In dealings with President Xi Jinping, Duterte has set aside an international court ruling
last July that said China had no historic rights to the resources in waters claimed by the Philippines. The case was brought by Aquino’s administration, which had criticized a deal in the 2000s between the Philippines, China and Vietnam to cooperate on energy exploration across a large swath of disputed waters.


MARKET REPORT: Emergency home repair giant Homeserve hits a record high after revenues surge 24%

Emergency repairs ╩irm Homeserve hit an all-time high yesterday after beating
expectations with a 24 per cent surge in revenues for the year ended March 31.
The FTSE 250 ╩irm added £234.5million to its value, leading the pack in a strong day
of results for medium-sized companies.
Turnover rose to £785million from last year's £633.2million, while pro╩its rose 20 per
cent to £104.7million.
The ╩irm was given a major boost by its purchase of a 40 per cent stake in online
tradesman directory Checkatrade for £24million in December.
It made the purchase as part of an ongoing effort to offer a more complete home
repair and improvement service.

Analysts at broker Liberum praised the investment and said it will give Homeserve
access to a currently untapped market.
Investors were further enlivened by a shake-up at the company's board. Tom Rusin,
chief executive of Homeserve USA, was made executive director while former
Hastings Insurance chief executive Edward Fitzmaurice joined as a non-executive

director. Shares rose 10.8 per cent, or 75.5p, to 777.5p.


Saudi Arabia Signs $50 Billion Worth Of Oil Deals With The U.S.

By Tsvetana Paraskova - May 23, 2017, 4:00 PM CDT

U.S. companies signed billions of dollars worth of deals with Saudi Arabia’s oil and gas industry during President Donald Trump’s visit to the Kingdom over the weekend, boosting bilateral business ties while the oil market continues to follow the shale-OPEC rivalry.

The US$110 billion worth of U.S.-Saudi defense capability deals made up for much of the value
of the bilateral agreements during President Trump’s visit, but Saudi Aramco also signed an
estimated US$50 billion worth of deals with U.S. companies, many of which envisage

investments in the digitalization of Aramco’s business, o􀃗shore and onshore rig development,and oil eld services.

The flurry of U.S. deals with Aramco comes as the Saudi oil giant is preparing to launch what is expected to be the world’s biggest IPO, in which Saudi Arabia plans to sell 5 percent of its national oil company, listing it on one or more international markets.
GE signed memorandums of understanding (MoU) and agreements worth a total of US$15
billion with Saudi companies, including an MoU with Aramco for a digital transformation of
Aramco’s operations with the goal of generating US$4 billion in annual productivity
improvements. The two companies also agreed to examine the feasibility of new business
developments across the energy value chain, including enablers covering upstream, midstream, and downstream oil and gas businesses, including the development of Oil eld Services and Equipment (OFSE) manufacturing hubs.
National Oilwell Varco entered into an MoU with Aramco to set up a joint venture in Saudi
Arabia that would manufacture high-speci cation land rigs, rig and drilling equipment, and o􀃗ercertain aftermarket services.
Aramco also entered into a non-binding MoU with drilling services provider Rowan to develop designs of jack-up rigs planned to be produced in Saudi Arabia. The MoU is a follow-up to the November 2016 agreement under which Rowan and Aramco agreed to create a 50/50 joint venture to own, operate, and manage o􀃗shore drilling rigs in Saudi Arabia.
Then, Aramco followed up on its MoU with Nabors from last year and updated it with an
agreement to explore improving and optimizing land drilling supply logistics, services
deployment, and rig moves for the Onshore Rig Ownership & Operations JV. Nabors Industries and Aramco agreed in October 2016 to set up a JV in Saudi Arabia that would own, manage, and operate onshore drilling rigs.


Trump’s NASA Budget Cancels Most Of Obama’s Legacy, Boosts Science By $134 Million Photo of Andrew Follett ANDRE

Andrew Follet
3:54 PM 05/23/2017

President Donald Trump’s NASA budget eliminates Obama-era global warming and earth science missions, while increasing spending on the space agency’s science program by $134 million.
Trump’s NASA budget recommends Congress give the space agency $19.1 billion, or about 0.8 percent less than it received in 2017.
The budget maintains NASA spending on space exploration missions and technology development programs, but reduces funding for earth science and global warming research.
If enacted, the budget will increase spending on NASA’s science missions by $134 million dollars in 2018.

Trump administration draft budget slashes DOE and EPA funding in favour of nuclear

The latest draft of the Trump administration’s 2018 federal budget calls for cuts to clean energy and environmental-related departments, while providing a boost to nuclear power.
From the campaign trail, Trump had pledged to get rid of “burdensome regulations” and the draft budget reflects that in light of the president’s views on clean energy and climate action.
The leaked Department of Energy budget cuts aptly foreshadowed what the administration had in store for the nation’s clean energy, and science-focused departments.
The budget features an overall cut to the Department of Energy (DOE), but an 11.4% financial boost to its nuclear weapons budget. All other DOE energy programmes such as the SunShot Initiative, will get an 18% budget cut. This would reduce funding for the Department’s science and research limb – affecting pioneering clean energy research labs such as the National Renewable Energy Laboratory (NREL). 
Source: Draft budget via The White House
Source: Draft budget via The White House
"We were disappointed to see the administration’s proposal to slash programmes that promote American-made clean energy,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA), in a statement. “Clean energy research programmes have been priorities of both Republican and Democratic administrations and Congresses and the investments have paid off many times over.
"Renewable energy innovations in rapidly commercializing technologies ranging from inverters, to storage, to advanced infrastructure have vast promise for American industry, as solar energy becomes an increasingly large part of our nation’s energy portfolio.”


Source: Draft budget via The White House
Source: Draft budget via The White House
Similarly, the Environmental Protection Agency (EPA) is destined for cuts under the budget proposal – actually the hardest hit department with a 31.6% decrease on its current budget – stripping it of US$2.7 billion.
The EPA is principally responsible for environmental spending and climate action initiatives – both of which have been a prime target for Trump even before he took residence in Office.
“I will also cancel all wasteful climate change spending from Obama-Clinton, including all global warming payments to the United Nations,” said Donald Trump during a pre-election stump in Michigan on 31 October last year. “These steps will save US$100 billion over eight years, and this money will be used to help rebuild the vital infrastructure, including water systems, in America’s inner cities.”
The EPA was created in fact to protect the environment and US water and air standards by enforcing regulations passed by Congress for subsequent state compliance. Its most notable work is the Clean Power Plan that was designed to lower greenhouse gas (GHG) emissions by up to 32% on 2005 levels by 2030. The initiative has been stalled by the Supreme Court since February 2016, with Trump securing a freezing order on litigation at the start of this month.
The percentage cuts featured in the administration’s ‘March skinny budget’ remain unchanged; signalling that the administration was not dissuaded by pressures asserted from Democrats and environmental lobbyists who called for the government to protect environment and clean energy funding.
However, when the March proposal went to Congress, it did not approve the cuts. Regardless, Trump marches on with the same cuts outlined in this latest proposal. The overall budget is still subject to final approval from Congress; of which many Democratic members have already indicated a strong dissent on social media. 
The EPA cuts alone would close 50 agency programmes and eliminate 3,200 agency jobs.
If enacted, the budget would fulfil a key campaign pledge from Trump, who has voiced his disdain for the “unnecessary” environmental and renewable energy regulations implemented by the previous administration. 

Brazil's Eletrobras keeps asset sale program despite political crisis

By Luciano Costa | SAO PAULO
May 23 Brazil's state-controlled power holding company Centrais Elétricas Brasileiras SA is still seeking to sell assets to cut debt despite concern that a political crisis could spook potential buyers, its chief executive said on Tuesday.
Eletrobras CEO Wilson Ferreira was in New York meeting with investors last week when news broke about the plea bargain deal of Joesley and Wesley Batista, owners of meatpacker JBS SA , which set off a political fire storm and calls for President Michel Temer to resign.
Brazilians who have become inured to a massive, three-year corruption investigation were shocked last week by the disclosure of a recording that appeared to show Temer condoning the payment of hush money to a jailed lawmaker.
Eletrobras' meetings with investors had been going well until Thursday when they became worried about the release of the taped conversation between Joesley Batista and Temer and started asking about its consequences, Ferreira said on the sidelines of an event in Sáo Paulo.
He said the company would keep looking for buyers for the assets and not change the sale schedule.
"We may have trouble selling for the prices we were expecting," he told journalists.

Eletrobras plans to raise up to 4.6 billion reais ($1.4 billion) in asset sales to reduce debt. The company expects to raise half of it this year.
Ferreira declined to speculate whether he would stay at the company's helm should Temer resign or forced to leave. But he pointed out that Energy Minister Fernando Coelho Filho had defended Eletrobras' restructuring and new rules to attract foreign investors to the sector.
The minister's party, PSB, is supporting Temer's resignation and also wants Coelho Filho to resign and leave the government.
($1 = 3.2755 reais) (Writing by Tatiana Bautzer; Editing by Christian Plumb and Richard Chang)