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US sanctions against China's Hengli marks an escalation of Iran oil crackdown
Treasury Department imposed sanctions against China's Hengli Petrochemical Refinery (Dalian), accusing it of "buying billions in Iranian oil", in a significant increase in Washington's effort to curb Tehran's oil revenues. Hengli Petrochemical, the parent company listed on Shanghai's Stock Exchange, denied doing business in Iran and said that sanctions lacked legal and factual basis. It also stated it would work to lift them. The following are?key facts: Why is this an escalation? Hengli operates in Dalian in the north-east a refining facility that can process 400,000 barrels per day. This makes it the biggest Chinese refiner sanctioned by the United States, since the United States re-enforced its crackdown against Iranian oil exports. The designation came shortly after a waiver of 30 days of sanctions for importing Iranian crude oil that had already been loaded had expired, and after U.S. Treasury Sec. Scott Bessent had threatened to sanction 'buyers of Iranian Oil' on April 15, and had said the Treasury Department had sent warning letters to 2 Chinese banks. The move is in anticipation of U.S. president Donald Trump's planned visit to Beijing, which is scheduled for May. Prior to this, the U.S. had imposed sanctions against Chinese entities based on their relationship with Iran. These included three small independent refiners, and several import terminal operators. What has been the impact so far? Hengli Petrochemical shares fell 10% on Monday. Hengli Petrochemical International in Singapore was also restructured by the Hengli Group, which reduced the firm's 100% ownership stake to 5%. The remaining 5% is now owned by a Chinese government entity. Trading executives expressed skepticism that the U.S. measure would protect the Singapore unit against the wariness of its counterparties, given the ownership at the time it was announced. Hengli Petrochemical stated that it had enough crude to cover its processing needs for over three months. It will continue to settle oil purchases in Chinese Yuan. What are the pre-conditions? The U.S. sanctioned several Chinese entities, including three small refiners. According to sources, this caused difficulties in receiving crude oil and forced two of the companies to sell their product under different names. In October of last year, the U.S. Sinopec, the state-owned refinery in China, received one fifth of its crude through an import terminal sanctioned by the U.S. This led to the terminal being idle for months and disrupting crude flow. It also forced cargo diversions because traders avoided the terminal for fear of secondary sanctions. Sinopec's logistics unit sold its stake to a local port operator. Shandong Yulong Petrochemical is another Chinese?refiner that produces 400,000 barrels per day and has a presence in Singapore. Last year, non-Russian customers, foreign banks, and vendors stopped doing business with the company after they were sanctioned by Britain and European Union for dealing with Russian oil. Yulong became more dependent on Russian oil as a result of the measures. What has been the impact of U.S. sanctions on Iranian oil? China, which is the largest oil importer in the world, has been the main buyer of Iranian oil for many years. Vortexa Analytics reports that China brought in a record-breaking 1.8 million barrels per day (bpd) in March. According to traders, China's giant state refiners are not buying Iranian crude after the U.S. reinstated sanctions in 2019. Instead, independent "teapots", who buy discounted Iranian barrels, are the only ones willing to purchase them. Iranian oil shipped to China is usually transshipped on the way and is mainly branded as Malaysian, or Indonesian. Beijing has defended the legitimacy of its trade with Iran and rejected unilateral sanctions it has called "illegal". (Reporting and editing by Raju Gopikrishnan; Tony Munroe)
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The spot crude premium has fallen from its record highs, despite the closure of Hormuz.
Analysts and traders said that spot premiums on physical crude had fallen from the record highs set during the Iran War as refiners were drawing down their inventories and reducing processing to make up for lost Middle East supply. Citi analysts say that since the U.S. and Israel's war?on Iran began on February 28, the global market lost access to 500,000,000 barrels of crude oil and refined products. This sparked a price spike on panic purchases, but has destroyed demand for consumers and refiners. Refiners searched the world for alternatives and paid premiums. Some grades reached record highs earlier this month of over $30 per barrel. Premiums are decreasing as refiners opt to reduce production and focus on barrels sanctioned previously, while Chinese state-owned companies Sinopec, and PetroChina, tap commercial reserves and offer spot market crude. Analysts at Kpler said that "Asian demand has started to ease, as refiners reduce runs. This is shifting the market from panic buying toward more selective acquisition, with Russian barrels dominating the incremental demand." This?feeds through to the Atlantic Basin where weaker Asian demand and increasing supply are putting pressures on medium sweet and light sweet differentials." While strategic reserve releases and inventory drawdowns provide a buffer, they are insufficient ?to cover the 15-million-barrel-per-day loss in Middle East crude supply, meaning prolonged disruption from the Strait of Hormuz closure will continue to exert upward price pressure. June Goh is a senior analyst with Sparta Commodities. She said that the correction has brought prices to "affordable levels". "The physical crude shortage in the market still exists, so premiums will remain higher than pre-crisis levels. She said that it shouldn't reach the record panicked levels we experienced previously. RESERVE ?RELEASES, FALLING PREMIUMS Sinopec is expected to receive approximately 1 million barrels per day (bpd) of crude oil from its reserves between April and June, according to two traders who are familiar with the situation. This will allow its trading arm Unipec, to sell some cargoes of West African, Brazilian, and Canadian crude on the spot market in this month. CNOOC and PetroChina have also exported Canadian crude from the Trans Mountain Pipeline (TMX) in this month. Requests for comment from the companies were not immediately responded to. Two trading sources said that earlier this month, Canada’s Access Western blend exported through TMX was sold at a record-breaking $8 a barrel for ICE Brent to be delivered to Asia in July. However, the price dropped to $4 last week. Premiums for European crude and West African crude are also declining. Ekofisk, a North Sea oil, was offered at a discount of less than $10 per barrel to Brent dated on Tuesday. This is a 50% reduction from two weeks earlier. Forcados Bonny Light, Qua Iboe and other African grades have fallen to $7.75 per barrel compared to $10 a barril in mid-April. Brazilian crude premiums also fell?after prices rose above $30 per barrel earlier in the month, traders who are familiar with the market reported. They said that Taiwan's Formosa Petrochemical purchased 2 million barrels on Brazilian crude delivered ex-ship at a premium between $8 and $9 per barrel compared to Brent dated. The traders reported that Indian refiners purchased Brazilian crude at a premium of almost $5 to Brent. Middle East crude prices that reached record highs in March have also fallen sharply this past month, which may lead Saudi Aramco to reduce the term price for June. The premiums for WTI Midland oil from the U.S., delivered to Asia, have fallen from record highs near $40 per barrel over Dubai's?quotes. Recent deals for August delivery to Japan are at $20 to $22, similar to the levels of a month earlier, according to two traders. WTI traded in Europe at $7.40 over Brent dated on Tuesday. This is compared to a premium of $22 per barrel two weeks ago. Spot premiums also fall as consumers'simply cut back on consumption of a variety of oil products, including naphtha, for petrochemical manufacturers, liquefied petrol gas, for cooking, and diesel, for hauling cargoes, or fuel oil, for ocean-going vessels. Morgan Stanley estimates demand destruction at 4.3 million barrels per day (bpd) in the second quarter. This will lead to an 800,000-bpd drop in 2026 total oil consumption. It would be the first decline since the COVID-19 epidemic.
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Japan's March industrial production drops on the back of a decline in chemical output
Government data revealed that Japan's factory output unexpectedly dropped in March compared to the previous month. This was due to a decrease in chemical and fuel product production as a result of Middle East supply disruptions. The Ministry of Economic, Trade and Industry (METI) reported that the country's industrial output shrank by 0.5%. This is the second consecutive monthly decrease, and disappointing market expectations for a 1.1% increase. The decline in the production of petroleum-based products was a major factor. In March, polyethylene production fell by 27% and polypropylene by 15%. METI reported that Japan has maintained a stock of?1.8 months worth?of intermediate chemical products. This allows it to minimize the impact of these products on downstream shipments. The data also showed that domestic fuel production was down across the board, with gasoline output dropping 7.3% and diesel output falling?14.3%. Japan gets 95% of its crude from the?Middle?East. Much of it is?channelled? through the Strait?of Hormuz. This waterway has been closed by Iran?after U.S. and Israeli attack. METI surveyed manufacturers who expect output to drop again in April. The adjusted estimate is down 0.7%. (Reporting and editing by Jacqueline Wong; Kantaro Kommiya)
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Mike Dolan: The US inflation expectations are back on the boil after the war-stasis between Iran and ROI
The U.S. headline and core inflation rates are headed back over 3%, and inflation expectations are building steam for the year ahead. Federal Reserve can only take comfort in the fact that long-term price expectations have improved, but even they are irritated by the 'oil shock' related to the war with Iran. Most central banks can tolerate a relatively short energy shortage for a time, but they are more concerned about a prolonged crude oil outage that will feed the expectations of wage-bargaining and price-setting agents over time and cause inflation to rise above target for longer. It may be necessary, in the end, to squeeze borrowing rates to slow credit expansion to dispel these expectations. In this environment, it is unlikely that interest rates will be further lowered. The Federal Reserve's inflation gauge, which is closely monitored by all policymakers, will be released for the first time since the Iran War on Thursday. For the first time since more than two decades, the annual rate of inflation as measured by the personal consumption expenditures gauge (PCE) is expected to rise above 3%. The Cleveland Fed's "nowcaster" inflation estimate pencils in a rate for March of 3.4% - 1.4 points higher than the Fed's target 2%. This month, the rate of inflation has risen to 3.6%. It is the highest since almost three years. Even when you remove energy and food prices, there is no relief. The "core" PCE is expected to have also topped 3% at a two-year low of 3.1% in March, with the Cleveland Fed penciling in 3.2% for this month. Brent crude futures, at $80 per barrel for delivery within 12 months, are still 20 % higher than before the Iran War. Markets and households are both increasing their expectations of inflation over the next year. U.S. One-year Inflation Swap is following those estimates for March and April, and with 3.4%-3.6% it is close to its highest level since the Ukraine shock of 2022. One-year and one-year swaps for forwards are also starting to 'boil higher. At more than 2.7%, they are at their highest level in over a year. The results of household surveys often exceed market expectations. But they're also going higher - the University of Michigan one-year reading is closing in on 5%. The long-term expectations have improved, reflecting the hope for calmer seas in due course. These too 'appear to be a reflection of another shock?, compounding on top if inflation which had not yet returned back to target after the previous one. The 5-year and 5-year forward inflation swap is still above target, but at a relatively low level of 2.4%. The 5-year outlook for households is as high as 3.5%. It remains to be determined whether the trimmed mean PCE, a measure favoured by incoming Fed chair Kevin Warsh?will cut through all this noise. The Fed cannot ignore the fact that U.S. inflation is a serious problem. The administration cannot ignore the results of the most recent polls regarding the cost of living. The opinions expressed are those of Mike Dolan, columnist at. This column is great! Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Ford increases profit forecast for 2026 in spite of nagging aluminum costs
Ford Motor raised its annual guidance by $500 million on Wednesday, thanks to significant tariff refunds. However, it said it still faced rising material costs as it worked to source aluminum for the?lucrative F150 pickup trucks. Ford Motor Company received $1.3 billion of relief from the U.S. Supreme Court's February ruling that invalidated some Trump Administration tariffs. Ford booked a gain in the first quarter on the expected refund, which boosted its bottom line. However, the company acknowledged that it is uncertain how quickly the government will reimburse them. Ford's guidance was raised by less than the refund amount, as the company is now facing higher-than expected tariff costs. These additional expenses are mainly on raw materials, such as aluminum, since Ford's U.S. major supplier Novelis suffered two large fires by 2025. The automaker said that production at the affected area of the New York factory is expected to resume in May or September this year. Novelis expects that production will resume in the second quarter. Ford increased its forecasted earnings before interest and taxes for the entire year from $8 billion to $10billion to $8.5billion to $10.5billion. After-market trading saw its shares drop by less than 1%. The automaker declined to reveal its total tariff cost, saying that it would only be liable for a net of $1 billion. Ford, based in Michigan, reported adjusted earnings per share (EPS) of 66 cents during the first quarter. This was a far greater result than analysts expected, who had predicted 19 cents. The tariff refund helped to boost this figure. Ford's adjusted earnings were $3.5 billion, while revenue reached $43.3 billion. Ford reported a quarterly net profit of $2.5 Billion. F-150 Production Estimated to Have Fallen According to CatalystIQ data, the inventory of the F-150 fell 38% from April of last year. This was largely due to the Novelis Fires. Ford's F-150 is the top-selling vehicle in America and has been for over 40 years. It is also a major source of profit for Ford. Ford's financial health is at risk if its production is disrupted. According to JPMorgan analyst Ryan Brinkman citing data by?S&P Global Mobility, the F-Series production is estimated to have dropped 12% over the past year in the first three months as of mid-April. This was a greater drop than anticipated. Brinkman, in an analyst note, said that Ford may have a harder time recovering than expected from the Novelis Fire. Ford's total vehicle sale decreased by 9% in the first three months of this year, and the decline was largely due to a decrease in demand for hybrid and electric vehicles. General Motors, a cross-town competitor, reported on Tuesday a 22% increase in its first-quarter profit. It also raised its earnings forecast for the full year. This was boosted by an optimistic $500 million tariff refund and a robust U.S. auto market. Ford's shares have risen by about 20% in the past year, while GM has risen by more than 60%.
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Tinubu, Nigeria's Tinubu, nominates a new oil regulator as the second leadership change within four months
The presidency announced on Tuesday that President Bola Tinubu has nominated Rabiu Abdullahi as the new chief executive officer of the Nigerian Midstream & 'Downstream Petroleum Regulatory Agency (NMDPRA). This is the second 'leadership -change' at the petroleum regulator within the last four months. Umar replaces Saidu Mohammed, who was appointed in December, after their predecessors quit abruptly, amid a high-stakes conflict between one agency, and Africa's wealthiest man,?Aliko Daniel. The nomination of Wednesday comes at a time when Nigeria is grappling with increasing domestic energy prices, partly due to higher global oil costs following the escalation in 'conflict' involving Iran. This has increased concerns about supply disruptions' and volatility on international energy markets. The decision was taken in the public's interest to improve the regulatory effectiveness of the downstream and midstream petroleum sectors. Until the Senate confirms the NMDPRA, the most senior official will be in a?acting?position. Umar has over 25 years of experience in the energy, manufacturing and infrastructure industries. He has worked for Dangote Cement in Nigeria, the largest cement producer. He held senior roles, including operational management, large-scale projects, and project delivery. The NMDPRA, established in '2021 under a new law, regulates Nigeria's'midstream and downstream' petroleum operations. This is a crucial segment of Africa's biggest oil-producing country. (Reporting and Writing by Chijioke Ahuocha, Nick Zieminski and Camillus Eboh)
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Wafa reports that a Palestinian teenager was killed in an Israeli raid on the West Bank.
Wafa, the official Palestinian news agency, reported that a?Palestinian teenager was killed?during a military raid by Israel in?the West 'Bank?occupied on Wednesday. The Palestinian Health Ministry said that the teenager is 16 years old. The Israeli military confirmed that it was investigating the report. Wafa reported that the boy was 'killed by soldiers' gunfire during a raid in the Palestinian city Hebron. The Israeli military had earlier claimed that two Palestinians had attacked and injured?two soldiers near Ramallah, in the area of Silwad. The soldiers opened up fire and killed one of the attackers, while apprehending the second. Was not able to confirm the details of any incident immediately. Palestinian officials reported that an Israeli strike killed a medic in?northern Gaza. The Israeli military did not comment immediately. The Israeli military?said that its forces shot down a militant later on Wednesday in southern Gaza. Reporting by Ali Sawafta from ramallah, and Nidal Al-Mughrabi from Cairo. Editing by David Gregorio.
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The US FDA has concluded that domestic infant formula is safe.
The United States Food and Drug Administration confirmed on Wednesday that infant formula samples tested in the U.S. contained very low levels contaminants. This confirms the safety of the supply. The agency tested over 300 samples of 16 infant formulas sold across the country, looking for heavy metals like arsenic and cadmium as well as synthetic chemicals, pesticides and phthalates. The agency reported that the majority of samples had very low or undetectable levels of contaminants. The FDA used the drinking water limits set by the Environmental Protection Agency to evaluate infant formula because unlike the EU, it does not have heavy metal standards. The amount of contamination was so small that it is encouraging for families and physicians to know that infant formulas seem very safe, said Valeria COHRAN, professor of pediatrics at Northwestern University Feinberg Medical School. TESTING IS CONTINUING Robert F. Kennedy Jr., Health Secretary of the United States, has been promoting the reduction of food chemicals. He also launched an infant formula nutrition review in 2013. Kennedy will host an industry roundtable in May. The FDA stated that although overall contamination levels were low, some samples required additional testing. The FDA tested powders as well as liquids that are ready to feed and concentrated liquids. The agency intends to continue testing. Katarzyna?Kordas, associate professor, epidemiology and environment health at the University at Buffalo, said that the U.S. diet guidelines do not take into account the risk of exposure to contaminants. This highlights the need for more research. Mercury, lead and pesticides were not detectable in 95% samples. Lead was detected in only 20% of samples. The majority of PFAS compounds also were not detected. The agency also tested some?of human?milk?samples and found that the majority contained at least one detectable contamination, while only 15% did not. Even small amounts of contaminants may be present in food, such as infant formula and breast milk. They can also enter the production process through exposure to environmental factors. Abbott, maker of Similac said on Wednesday that producing infant formula in the U.S. at scale is a matter for national security. These results confirm the safety of the domestic supply. Laura Modi is the CEO of Bobbie baby formula. She also stated that Bobbie will work with FDA to set federal standards on heavy metals found in infant formula. (Reporting and editing by Maju Samuel in Bengaluru, Sahal Muhammed and Sneha S. K.)
Prices of oil continue to rise as US-Iran conflict keeps supply off the market
The oil prices continued to rise on Thursday as there was concern that supply in the Middle East, a key region for producing oil, would remain stagnant due to the deadlock in the talks between the U.S. and Israel over the war against Iran. Brent crude 'futures' for June were up $1.91 or 1.62% to $119.94 per barrel at 0057 GMT, after rising 6.1% the previous session. The June contract expires Thursday, and the July contract is at $111.38 up 94 cents or 0.85% after rising 5.8% the previous session. U.S. West Texas Intermediate Futures for June are up 63 cents or?0.59% at $107.51 per barrel after climbing 7% the previous session. They have risen in eight out of nine sessions. A White House official revealed that U.S. President Donald Trump had discussed with oil companies on Wednesday how to minimize the impact of what could be a months-long U.S. blockade of Iran’s ports. This triggered concerns on the market about an extended disruption of oil?supplies.
Tony Sycamore, IG's market analyst, said that the prospects for a near-term solution to the Iran conflict and a reopening of?Strait of Hormuz remained dim.
The meeting was held after a deadlock occurred in the efforts to resolve a conflict that has caused thousands of deaths and what analysts call the biggest energy disruption the world has ever seen.
Since the U.S. began airstrikes on Iran in February, Tehran has blocked most shipping except its own, through the Strait of Hormuz. This is a major chokepoint for Middle East energy supplies. The U.S. started blocking Iranian ships this month. Sources say that on the'supply side,' the OPEC+ grouping, which includes OPEC and its allies, is 'likely to agree on a.small increase in oil production quotas of 188,000 barrels a day, Sunday. The meeting is just days after the United Arab Emirates announced its withdrawal from OPEC on May 1. This move will 'damage the ability of the oil producer group to control the price'. The Gulf nation's departure would allow it to "raise production" after exports resume, but analysts say that this is unlikely to have a significant impact on the market fundamentals in the coming year, particularly with the Hormuz war and other production disruptions.
Wood Mackenzie analysts stated in a report that it would take several months for Gulf countries, including UAE, to reach pre-war levels of production.
(source: Reuters)