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Oil prices rise 2.5% following US sanctions against Rosneft and Lukoil
The oil prices rose by around 2.5% Thursday, continuing gains from the previous day, as concerns about supply resurfaced following the United States' sanctions against major Russian oil companies Rosneft, and Lukoil, over the Ukraine conflict. Brent crude futures rose by $1.56 or 2.49% to $64.15 per barrel by 0303 GMT. U.S. West Texas Intermediate Crude futures gained $1.53 or 2.62% to $60.03. The U.S. declared it was ready to take additional action, as it urged Moscow to immediately agree to a ceasefire of its war in Ukraine. Donald Trump, who is now in his second term as president, has refused to comply with the demands of U.S. legislators to impose sanctions on Russia, hoping to convince them to stop the war. He said that if there was no end to the fighting, it was now time. Last week, Britain sanctioned Rosneft as well as Lukoil. Separately the EU approved a 19th set of sanctions against Russia, including a ban on Russian LNG imports. "President Trump’s fresh sanctions against Russia's largest oil houses aim directly at choking Kremlin revenue - a measure that could tighten the physical flow of Russian barrels, forcing buyers to reroute volumes on the open market," said Phillip Nova’s senior market analyst Priyanka Sahdeva. She added that if New Delhi reduces its purchases due to pressure from the United States, Asian demand could shift towards U.S. crude and increase Atlantic prices. India state refiners said They were reviewing Their purchases of Russian oil to ensure that there will be no direct supply from Rosneft or Lukoil, after the U.S. placed sanctions on them. Brent and WTI futures soared by over $2 per barrel immediately after the U.S. announced sanctions. This was also boosted by a sudden decline in US stocks. The market was sceptical about whether U.S. sanction would result in a fundamental shift in supply, which limited the gains of oil. Claudio Galimberti, Rystad Energy's global market analyst, said that the new sanctions between the US and Russia are increasing the tensions. However, the price of oil is more likely to be a reactionary move by the markets than a structural change. He said that the sanctions imposed on Russia over the last 3.5 years had largely failed to affect either the volume of oil produced or the revenues generated by the country. Some buyers in India and China continued their purchases. The markets expected a near-term surplus of OPEC+ supply due to the unwinding of production cuts to be a major price driver. The three things I'll be paying attention to in November are the unwinding of OPEC+, China's crude stocks, and wars in Ukraine, Mideast and elsewhere, said Rystad analyst Galimberti. (Reporting and editing by Florence Tan, Tom Hogue, Kim Coghill; Reporting by Katya Glubkova from Tokyo)
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Focus on Chinese Communist Party and iron ore
Iron ore futures traded in a narrow band on Thursday, as investors looked for cues to demand from a number of data points and an important Chinese Communist Party gathering. The Communist Party's leadership is expected to announce its five-year plan during a four-day meeting held behind closed doors that began Monday. After a series of disappointing data, and amid the massive uncertainty caused by the US-China trade dispute, there were lingering hopes that China would unveil some stimuli to boost the economy and shore up consumer trust. As of 0237 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange increased 0.19% to reach 775.5 Yuan ($108.87). As of 0227 GMT, the benchmark November iron ore price on the Singapore Exchange had not changed much. It was $104.2 per ton. The market was waiting for data on steel, such as inventory and production to gauge the demand. Ore prices have been limited by the expectation that fundamentals will weaken in the fourth quarter due to robust shipments and declining demand. Analysts at Galaxy Futures stated that "oil prices will likely fall as increased supply coincides falling demand." Fortescue, an Australian company, reported a 4.2% increase in iron ore shipment for the first quarter on Thursday. Vale, a Brazilian mining company, reported its highest quarterly production of iron ore since 2018. Analysts predicted that the supply of coking coal and other steelmaking materials would be constrained in certain key production areas. The benchmarks for steel on the Shanghai Futures Exchange are mixed. Rebar rose by 0.39%. Hot-rolled coils advanced by 0.37%. Wire rod fell 0.18%. Stainless steel remained flat. ($1 = 7.1230 Chinese yuan). (Reporting and editing by Amy Lv, Colleen Howe and Subhranshu Saghu)
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Georgia Governor Kemp meets with Hyundai and LG officials in South Korea, reports media
The Maeil Business Newspaper reported on Thursday that Brian Kemp, governor of Georgia in the U.S., will meet with South Korean leaders of business this week. This includes executives from Hyundai and LG Energy Solution. Kemp's trip comes after U.S. Immigration authorities raided in September the construction site of an under-construction battery plant in Georgia owned jointly by Hyundai Motor, LGES and LGE. After a week-long negotiation between South Korea, the United States and South Korea, hundreds of South Koreans were arrested on suspicion of working without visas. The local public relations agency that handled Kemp's visit refused to comment. Hyundai Motors and LG Energy Solution declined to comment as well. The raid shocked the South Korean government as well as the public, and revealed the lack of access for South Koreans to visas of the right type that are needed by investment sites. In the first week of this month, The United States allowed South Koreans working on equipment in U.S. facilities under temporary visas. They also opened new channels for South Korea to send workers into the country to conduct business. Hyundai Motor and LG Energy have announced a $4.3 billion joint venture to produce EV batteries near Savannah, Georgia. Each company will hold a 50% share. The plant will provide batteries for Hyundai, Kia, and Genesis EVs. Hyundai's CEO stated that the raid will delay the startup of the battery plant by at least two or three months. Hyundai has invested $12.6 billion in the state. This includes the newly opened car factory. It is the "largest economic development project" in the history of the state. According to the Governor's Office, South Korea was Georgia’s third largest trading partner in 2018. Total trade exceeded $17.5 billion. (Reporting and editing by Christian Schmollinger; Heekyong Yahng)
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Asian markets fall on possible new US trade restrictions against China
On Thursday, Asian stocks fell a second time as Wall Street was stung by disappointing earnings reports for tech giants. Meanwhile, U.S. sanctions on Russia and China rekindled geopolitical fears. Oil prices surged. The broadest MSCI index of Asia-Pacific stocks outside Japan fell 0.3% last week, while Japan’s Nikkei225 dropped 1.5%. Chinese stocks fell 0.4% in Hong Kong following reports that the White House was considering a plan aimed at curbing a range of software-powered products exported to China as retaliation against Beijing's recent round of export restrictions on rare earths. Charu Chanana is the chief investment strategist for Saxo Bank, Singapore. "Without fresh macro data to anchor investor sentiment, investors lean defensive as Trump's Asia trip stirs up geopolitical nervousness," she said. The chatter about U.S. software import curbs to China is hurting tech sentiment. And renewed sanctions against Russia remind us that geopolitical risk will not go away. As the corporate earnings season begins, global equity markets are beginning to ease off their record highs. Investors may have been disappointed by the results and outlooks of megacap companies, but most of the companies have exceeded analysts' expectations. South Korean stocks dropped 0.2% after Bank of Korea held rates, as analysts expected. Brent crude rose 2.3% to $64 a barrel on Wednesday after U.S. president Donald Trump imposed sanctions related to Ukraine for the first in his second term. The sanctions targeted Russian oil companies Lukoil, and Rosneft. The move was made on the same day that EU countries approved their 19th package on Moscow, which included a ban of Russian liquefied gas imports. Energy Information Administration reported on Wednesday that U.S. crude, gasoline, and distillate inventory fell last week due to increased refining and demand. S&P 500 futures rose 0.1%, after the second consecutive day of stock market declines in the United States. Wall Street analysts were disappointed by earnings reports released by tech giants. Netflix shares dropped more than 10% Wednesday after the streaming giant revealed its outlook for the next quarter. Tesla shares dropped 3.8% after-hours after the company reported a profit that did not meet analysts' expectations despite a record third-quarter sales that exceeded estimates. Apple shares dropped 1.6% on Wednesday after two civil rights groups filed a complaint with EU antitrust regulators over the App Store terms and conditions and its devices. The groups claimed that Apple had violated landmark rules intended to rein in Big Tech. The yield of the 10-year Treasury Bond in the United States was last stable at 3.955%. This is a 0.2 basis points increase compared to a previous closing of 3.953%. Investors think that the Federal Reserve will continue to ease policy. Fed funds futures indicate a 96% probability that the U.S. Central Bank will cut interest rates by 25 basis points at its meeting on October 29. This is compared to a 98.3% possibility on Wednesday. The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, last traded 0.1% higher at 99.03. In early Asian trading, gold prices were close to $4,000 per ounce as investors took profits before the U.S. inflation report due this week.
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As US sanctions Russia's Rosneft and Lukoil, oil prices continue to rise
The oil prices increased by over $1 per barrel in the last session after the United States placed sanctions on Russian oil firms Rosneft, and Lukoil for the Ukraine conflict. Brent crude futures rose by $1.76 or 2.81% to $64.35 at 0041 GMT. U.S. West Texas intermediate crude futures also increased by $1.68 or 2.87% to $60.18. The U.S. has said that it is prepared to take additional action, as it calls on Moscow to immediately agree to a ceasefire of its war in Ukraine. U.S. president Donald Trump did not impose sanctions against Russia for the war before, instead relying on trade measures. Treasury Secretary Scott Bessent issued a statement saying that "given President Putin's unwillingness to end this senseless conflict, Treasury sanctions Russia's largest oil companies who fund the Kremlin war machine." Last week, Britain sanctioned Rosneft as well as Lukoil. Separately the EU approved a 19th set of sanctions against Russia, including a ban on Russian LNG imports. The rise in crude oil prices has been modest so far, Tony Sycamore said, a market analyst with IG. "The sanctions news has boosted the crude oil price but the rise has been relatively small because previous sanction/tariff threat have been diluted or deferred and also due to the difficulty of enforcing these sanctions." Brent and WTI rose more than $2 per barrel after U.S. sanction announcements, also boosted by the growing U.S. demand for energy. The U.S. urged Japan last week to stop importing Russian LNG ahead of Trump's visit to Asia. Washington is also increasing pressure in the region to reduce Russian supply. (Reporting and editing by Florence Tan, Tom Hogue and Katya Glubkova from Tokyo)
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BHP warns of 'difficult' decisions ahead for the Australian coking coal industry
BHP Group's CEO stated at the annual general meeting that it will be forced to make "difficult" decisions for its metallurgical business in Australia, if no regulatory changes are made to help it. BHP announced last month that it would cut 750 positions and suspend operations at a Queensland coal mine, which it shares with an affiliate of Mitsubishi. It blamed low prices and high royalties from the state government for its poor returns. Mike Henry, CEO of the miner’s annual general meeting, said: "Without change there will be without a doubt more difficult decisions." The incoming chair Ross McEwan, of the largest company in Australia and the top miner in the world, said that this week's critical minerals agreement between the U.S.A. and Australia was "a good start". On Monday, U.S. president Donald Trump and Australian prime minister Anthony Albanese inked a crucial minerals agreement to counter China. "It's too early to see what I think is a positive meeting between the Prime Minister of Australia and President of the United States." McEwan stated that the meeting was "a good way to begin these conversations". BHP is more interested in producing copper, iron ore, and steelmaking coal than it is in niche markets that are critical to the economy, he said, even though copper is increasingly seen as a strategic material due to its role in energy transition. Henry, a Rio Tinto executive, and two other Rio Tinto executives, met Donald Trump and Interior Sec. Doug Burgum at the Oval Office in August. Henry was "impressed" by the intensity of the U.S. focus on getting new mines and processing plants up and running. BHP and Rio Tinto are looking to build Resolution Copper Mine in Arizona. This mine could meet a quarter of the U.S. copper demand. Henry stated that the agreement was symbolic in the sense that it showed how serious the issue had been taken and what role Australia could play in supporting the U.S. Reporting by Melanie Burton and Renju José in Melbourne; editing by Himani Sarkar, Sonali Paul and Himani Sarkar
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McGeever: Investors are hearing Powell clearly because Treasury yields have plunged.
The decline in Treasury yields against the backdrop of record stock prices, tight spreads on credit and persistent inflation suggest that investors have accepted Federal Reserve Chairman Jerome Powell's view that policy is driven by employment rather than inflation. There's even a danger that a feedback loop could take hold whereby concerns about the labor market depresses yields and exacerbates fears of an economy slowing down, which in turn could maintain downward pressure on the yields. CPI inflation, a rare indicator of economic growth, will be released on Friday to investors who have been deprived of official data for three weeks due to the government shutdown. It's just not what they wanted. The report due on Friday is expected to reveal that the core annual inflation rate remained at 3.1% for September. This is more than a point higher than the Fed's target of 2%. Since nearly five years, the annual core CPI is at 3% or more almost every month. Bond market will likely shrug this off. Last week, the yield on two-year Treasury bonds fell to its lowest level since August 2022. This reflects investors' beliefs that the Fed would cut rates again next weekend, in December and even into next year. The 10-year yield has fallen below 4.00% and reached its lowest closing daily level in over a year. Even if the inflation rate is on the higher side, it's unlikely that this will cause a spike in yields. ASSESSING THE FRAGILIOUS LABOR MARK Investors have filled in the blanks with their own doomsday scenarios, as there were no official economic statistics during the three-week shutdown of the government. The slump in employment growth is what they have been wallowing over. The dramatic decline in job creation, which has been mostly offset by the shrinking labor pool until now, is alarming. Goldman Sachs economists outlined on Monday five reasons for the rapid decline in job creation: a slowdown of immigration, a reduction in government hiring and funds, adoption of artificial-intelligence technology; tariffs and trade uncertainty as well as costs related to tariffs; and macroeconomic risk. The underlying trend in payroll growth is now 25,000 per month, 125,000 less than the projections made in January. This is also below the "breakeven pace" of job growth required to stabilize unemployment, which was estimated at 75,000. This is on the higher side of estimates for breakeven. Anton Cheremukhin of the Dallas Fed estimates it at 30,000. This is down from 250,000 just two years ago. A low level of break-even job growth can help keep the unemployment rate down, but masks an even greater fragility on the labor market. Net job growth can quickly turn into job losses if the economy deteriorates. MESSAGE IN BARREL The Fed is well aware of this danger. Chair Powell indicated last month that fear of a rapid deterioration of the labor market was the main reason for the decision to continue cutting interest rates, even when inflation exceeded the 2% target. Investors and the Fed may both have other reasons for looking past the inflation rate that is still high. One is the signals from the oil markets. The link between the crude oil price and inflation may be weaker now, but that doesn't mean it should be ignored. Brent crude is near $60 per barrel, and oil prices are at a five-month low. This is down about 15% compared to the same time last year. The majority of energy analysts, such as those at the International Energy Agency (IEA), predict a persistent imbalance in supply and demand for the coming year. This is due to both increased production and weakened demand. If Eurasia Group analysts have it right, the glut could drive prices down to $55 per barrel by the end this year. This would be a 5-year low. Oil prices that are moderate have been exerting downward pressure on the inflation rate almost all year. Although cheaper crude oil won't help inflation reach the Fed's target of 2%, it can explain why investors and the Fed have turned their attention away from inflation towards the deteriorating labor market.
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Fortescue maintains its fiscal 2026 outlook, despite a rise in Q1 iron ore shipments
Fortescue, an Australian company, reported a 4.2% increase in iron-ore shipment for the first quarter on Thursday. The firm also set a new record for the first quarter production due to higher hematite shipping. The firm's hematite operation shipped 47.6 millions metric tons (Mt) in the first quarter. This was 3.3% more than the previous year. Fortescue has announced that it has drawn the loan in yuan denominated worth 14,2 billion Chinese Yuan ($1,99 billion) it secured in August for its decarbonisation plan. The five-year term loan facility, with an interest rate of 3.8% per year, was supported by major Chinese, Australian, and international lenders at the time. These included Bank of China, ICBC, and others. The fourth largest iron miner in the world saw its production costs drop 9.9% to $18.17 per metric tonne of wet iron during the first quarter. Fortescue has maintained its guidance of 195-205 Mt for fiscal 2026.
Russia's idle oil refining capability to fall by 15% in later half of October, information programs
Russia's offline main oil refining capability is seen declining by around 15% in the later half of October from the first 15 days of the month, Reuters calculations based upon information from market sources revealed on Wednesday.
A decrease in idle oil refining capability generally causes less available crude oil and a resulting fall in exports as refineries consume more feedstock to produce fuel.
Such capacity is seen being up to 131,500 metric loads per day ( 964,000 barrels daily) typically in between Oct. 16 and Oct. 31 from 155,000 lots a day in the first half of the month.
The schedule for offline main refining capabilities suggests that it will gradually decrease to 125,000 loads daily by the end of October from 170,000 heaps a day in the start of the month.
The estimations likewise showed that Russia has most likely passed the fall peak of idle refining capacity of 192,000 heaps reached on Sept. 22.
Russia plans to take offline 4.4 million metric tons of refining capability in the whole of October, an increase of 10%. from an earlier strategy, raising the amount of petroleum offered. for export.
(source: Reuters)