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Sources say that China's Zhenhua has booked the first Saudi crude cargo to be refined by a joint venture with Saudi Arabia.
Two sources with knowledge of the matter confirmed on Wednesday that China's Zhenhua Oil had booked to load 2 million barrels in Saudi crude for August. This is a sign that a new?joint venture? refinery between China and Saudi Arabia will soon begin operations. The crude will be supplied to the newly built 300,000-barrel-per-day Huajin Aramco Petrochemical Co (HAPCO) refinery in northeastern China's Liaoning province, the sources said. HAPCO was formed by Saudi Aramco, Norinco Group (a Chinese state-owned conglomerate) and Panjin Xincheng Industrial Group. HAPCO has delayed its start-up to September or even October due to disruptions in Middle East oil supplies through the Strait of Hormuz. Aramco refused to comment and Zhenhua oil did not respond immediately to the request for comment. Sources said that Zhenhua is a subsidiary of Norinco and procures crude for the refinery. Aramco has said that it will supply HAPCO with up to 210.000 bpd in 2023. Aramco sold around 24 million barrels of crude oil, or 774 194 bpd in total, to Zhenhua, and other Chinese refiners for August, according to trade sources. This is double the record low of 12 million barrels set in July. The top oil exporter in the world has reduced its official August selling price of crude?to Asia from the previous month by $11 per barrel, the largest drop in over two decades. After a U.S./Iran interim deal eased Middle East supply concerns, oil prices fell sharply. However, renewed attacks in the?region since last week have revived supply concerns and slowed shipping again through the Strait of Hormuz. Records show that Zhenhua lifted the last Saudi crude term in August 2024.
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Iran threatens to close more important seaways after Trump renews Iran blockade
The Islamic Revolutionary Guard Corps of Iran has threatened to shut "all other export routes that benefit the United States" Iranian media reported that the U.S. and its allies would be affected by the closure of the Strait of Hormuz after Iran closed it. The IRGC stated in a statement published by Iran's IRNA news agency on?Wednesday that "regional energy?exports" are either shared or denied by all. Analysts say that Iran is signaling it will use its Houthi ally in Yemen to close the Bab el-Mandeb Red Sea gateway, opening a front against Washington. This would put two of the most important energy arteries on the planet at risk. Through this narrow passageway, Saudi oil exports as well as a large share of the global shipping passes. According to a report by Iran's Press TV, a senior Houthi official warned that the group would close the Bab el-Mandeb Strait if Saudi Arabia kept attacking Yemen. He said this could cause oil prices to soar to $200 a barrel. Houthi forces launched missiles against Saudi Arabia on Monday after accusing it of bombing a Saudi airport that they controlled. This broke a four-year-old truce between the kingdom and the Iran-aligned faction. The Houthis already have shown that they can choke off global commerce via the Bab el-Mandeb. The Iran-backed group attacked commercial shipping in Red Sea after the Gaza War erupted on October 20, 2023. They claimed that they were targeting Israel-linked vessels in support of Palestinians. The latest threat to shipping worldwide comes just a day after U.S. forces announced that they had begun a new round of strikes to "continue degrading Iranian capability used to attack commercial ships in the Strait of Hormuz." The United States claimed that Iran attacked seven commercial vessels in the past week. Nearly a dozen crewmembers were killed, injured or went missing. The U.S. Military announced late on Tuesday that it had hit dozens of targets near the 'Strait of Hormuz' and Iranian coastal regions. U.S. Central Command stated in a press release that the wave of strikes lasted for seven hours. "END OF AMERICA’S EVILS" The IRGC announced on Wednesday that it would close the Strait of Hormuz until "the end of America’s evils". The Strait of Hormuz was the route for a fifth daily of all oil and gas shipping before the February war. In response to recent U.S. attacks in the Strait of Hormuz, the Guards claimed they targeted command-and control, logistics, fuel, and military equipment installations belonging to the U.S. Fifth Fleet located in Bahrain. The group also claimed that they destroyed and set ablaze what they called a U.S. logistic?facility located in Kuwait's Mina Abdullah, and that they used their air force to strike what they said was a U.S. military base in Azraq, Jordan. They targeted aircraft hangars. Some of the U.S. strikes were launched from bases in Jordan. Kuwait's official news agency had reported earlier on Wednesday that a fire at a site which was targeted by Iranian attacks, has been brought under control. The IRGC did not specify whether the fire occurred at the same location. Jordan's 'air defence' intercepted and destroyed?three missiles that were launched from Iranian territory into Jordanian airspace early Wednesday morning. Last week, the hostilities between Iran & U.S. were re-ignited. This weakened a fragile truce that was reached in June following several months of combat which has resulted in thousands of deaths. TRUMP THREATENS HAVING HIS ENERGY TARGETS Donald Trump, the U.S. president, threatened on Tuesday to strike Iranian power plants and roads next week if Tehran does not resume negotiations. Trump told Fox News' Trey Yingst that he would save energy targets until the end, but we would still hit them. Trump said that U.S. negotiators were in contact with Iranian counterparts, telling them to "make a deal". Trump floated a 20% shipping fee through the Strait of Hormuz on Monday, as tensions escalated. This idea was criticized by the U.N. Shipping Agency and others. He scrapped it on Tuesday and said, without giving details, that instead he would seek investment agreements with Gulf States. The latest attacks in the Strait of Hormuz have intensified the supply disruption. Brent closed the session at its highest level since June 12, and West Texas Intermediate, at its highest level since June 15. Early Wednesday trading saw both contracts rise further. (Additional reporting by Bureaus; Writing and Editing by Raju Gopikrishnan; Raju Gopalakrishnan).
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ASML's MORNING BID EUROPE - Big Blue's bad Day raises the bar
Tom Westbrook gives us a look at what the future holds for European and global markets. The AI rally is experiencing some speed wobbles as Europe's?valuable? company and top supplier of chip making equipment?reports Wednesday. ASML is the only manufacturer of the lithography machines that cost $300 million and are used to create the circuitry for cutting-edge chips. LSEG estimates show that it is expected to report an 8.8% increase in the second-quarter's net profit of 2.61 billion euro ($2.99 billion), on a revenue growth of 14% at 8.8 billion euro. Analysts also expect the company's revenue forecast for the full year to increase from 36 billion to $40 billion euros. IBM is the latest example of how AI is "upending business models" in software and computing, and how the markets can be fickle when it comes to picking winners and losers during the boom. IBM SHEDS? A QUARTER of its Value "Big Blue" claimed that it failed to keep up with the shift in corporate spending from software towards data-centre infrastructure. The market expected $3.02 for its adjusted earnings per share forecast, but IBM's projection of $2.93 was based on a revenue increase of only 1%. IBM shares fell by 25% as a result. South Korea's volatile KOSPI jumped 8% in Asia. A surprise slowdown in U.S. Inflation cooled bets on rate hikes and gave investors a good reason to smile. Brent crude futures remained above $85 per barrel but fell short of new peaks, as investors wait to see how long oil tankers will be unable to pass through the Strait of Hormuz. Data revealed that?China’s economic growth slowed down to 4.3% in first half of the year, which was below expectations. There was still little reaction because the theme of "export strength and domestic weakening" is well-worn and because investors are hoping the slowdown will lead to a fiscal stimulus. Bank of Canada expected to keep interest rates the same on Wednesday. Markets could be affected by key developments on Wednesday * Earnings: ASML, BNY, Blackrock, Johnson & Johnson, Morgan Stanley, United Airlines * Economics: Eurozone industrial production, U.S. PPI * Bank of Canada holds rates at $1 = 0.8744 Euros (By Tom Westbrook, edited by Christopher Cushing).
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As hostilities in the Middle East worsen, oil prices are rising.
Oil prices rose on Wednesday after?President Donald Trump reimposed his naval blockade against all Iranian ports and Tehran launched attacks on U.S. Infrastructure in the region. Brent futures rose?99 cents or 1.2% to $85.72 per barrel at 0400 GMT. West Texas Intermediate futures rose 64 cents or 0.8% to $79.98 per barrel. Tuesday, oil prices rose 2% to a new one-month high as attacks intensified a supply disruption along the Strait of Hormuz. This is where a fifth of all the world's liquefied gas and oil passed before the U.S./Israeli war on Iran. "While the physical market for oil is adequately supplied, a further escalation in the Strait of Hormuz, or any additional'sanctions' on Iranian exports, could quickly tighten the market sentiment, and add more risk premiums," stated Priyanka?Sachdeva, a senior market?analyst with Phillip Nova. The U.S. military announced that early on Wednesday the U.S. began a new round of strikes to "continue degrading Iranian capability used to attack commercial shipping in the Strait of Hormuz." Tehran has closed the Strait again after hostilities erupted between Iran and the U.S. last week. This has weakened a fragile ceasefire reached in June following several months of fighting. Trump said in a Fox News interview that aired on "Special Report With Bret Baier" Tuesday night, "I'll leave the energy targets until last but we'll ultimately hit energy targets". Iran's Army said that early on Wednesday it had launched drone strikes against U.S. positions at Jordan's Azraq Base. Pentagon has not yet responded to the report. The Iranian Islamic Revolutionary Guard Corps claimed that they had targeted weapons and storage in Bahrain? and Kuwait. Could not verify the reports immediately. The recent flare-up has raised doubts about whether a memorandum signed last month will lead to an end to the war that has enveloped Iran's neighbours. Tim Waterer is the chief market analyst for KCM Trade. He said that Brent prices could remain between $75 and $80 per barrel if diplomatic efforts were made to reopen the Strait. "For now, the risk premium is still there, but it's no one-way bet, given that both sides have incentives to find a diplomatic resolution." Helen Clark reported from Perth, and Jeslyn Lerh from Singapore. Editing was done by Lincoln Feast and Thomas Derpinghaus.
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Malaysia: Higher energy prices will support subsidies
Malaysia announced on Wednesday that higher global energy prices have boosted its petroleum revenue enough to cover part of the rising costs for 'fuel subsidies. This has eased pressure on the government's finances. The government said that it may spend as much as 40 billion ringgits ($9.83 billion), far more than the 15 billion ringgits initially allocated?in the budget for 2026, on fuel subsidies in 2019. This is due to higher energy prices related to the Middle East conflict. * Each $1 change in crude oil prices is estimated to affect federal petroleum revenues by?about 300 million ringgit, not including the dividends paid to Petronas. Liew Chin-Tong, Deputy Minister of Finance, told the parliament. This?increased revenue can offset some of this additional pressure on fuel subsidy spending. "The government monitors'revenue -collection regularly to ensure that it can meet federal operating expenses,"?Liew added. Liew stated that if necessary, a review of the fiscal targets for 2026 will be announced as part of 'the federal budget next year', which is due to be presented to parliament in October.
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Copper prices rise as US inflation falls, boosting demand
Copper prices rose on Wednesday as lower than expected U.S. inflation supported demand and lifted sentiment, even though the Middle East crisis continued to weigh. The benchmark three-month 'copper contract on the London Metal Exchange? was up 0.05% to $13,650 per metric ton at 0300 GMT. The Shanghai Futures Exchange's most traded copper contract was up 0.64% at 104,770 Yuan ($15480.89) per ton. Data released on Tuesday showed that U.S. consumer prices slowed down more than anticipated in June. This eased fears about higher interest rates and a possible slowdown of economic activity. Daniel Hynes said in a ANZ note that the fading?prospects for a rate increase boosted sentiment throughout the base metals industry. The U.S. Dollar slipped, boosting prices of commodities denominated in the greenback by making them more affordable for buyers who use other currencies. The market digested?economic data coming from China, the world's largest consumer. The GDP growth of the country slowed to a low not seen in 3.5 years, and missed forecasts. Yangshan Copper Premium The, which tracks the buying interest in China remained strong. It was trading at $90 per ton, its highest level since May 2025. Fighting continued between the U.S.A. and Iran. This undermined hopes for peace negotiations and affected the macroeconomic outlook. Aluminum edged up on LME, adding?0.33%. On SHFE it remained unchanged. Prices have been supported by a disruption in supply from the Middle East, which represents around 9% global capacity for aluminium smelting, as well as dwindling inventories. The consumers are also seeking out alternative sources of supply and purchasing larger shipments from China, who exported an unprecedented volume of unwrought aluminum and its products last month. Nickel rose 0.15%, tin 0.24% and zinc 0.35%. Zinc gained 0.53% on SHFE. Lead dropped 1.8%. Nickel slipped 0.29%. Tin rose 1.68%.
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Asian stocks benefit from the drop in US inflation rate
The Asian markets rose on Wednesday, after a surprise drop in U.S. consumer inflation reduced market expectations of interest rate increases. Oil prices also dipped as the U.S. canceled a plan to tax shipping through the Strait of Hormuz. Investors also cheered the stellar earnings of Wall Street banks, though a 25% decline in IBM's stock price after the company missed its revenue forecast showed just how stretched the market has become. In early trading, South Korea's chipmaker heavy KOSPI soared 6% and Japan's Nikkei gained 0.4%. MSCI's broadest Asia-Pacific share index outside Japan rose by 1.7%. The U.S. Dollar fell in?currencies except for the stubbornly low yen. Short-end bonds rose, bringing two-year Treasury yields down to 4.19%, from a 17-month high near 4.3%. Annualised core inflation was 2.6%, compared to expectations of?2.8%. In a note to clients, J.P. Morgan analysts said: "For bulls on the market this is better than Goldilocks ever could have imagined." "Inflation is lower with positive earnings growth. This should ease any concerns about a rate hike in July and could also calm fears for September. This allows the market to rise and broaden at the same time. The market price for a U.S. rate hike in July has been halved from 36% to 16%. The Australian dollar, which was testing $0.70, held on to its 0.8% gain. Brent crude futures remained at $85.50 per barrel after gaining more than 12% in the past week due to a flare up of fighting in the Middle East. U.S. president Donald Trump reimposed on Tuesday a naval blocade of Iranian ports and threatened to strike power plants and bridges unless Iran resumes their negotiations to end the conflict. However, he canceled a plan to impose a 20% surcharge on shipping through Hormuz. Overnight, the Nasdaq rose 0.9% while the S&P 500 gained 0.4%. U.S. Futures were slightly higher Wednesday. ASML's earnings, Europe's most valuable company and data on Chinese industrial production, retail sales, and gross domestic product will be the focus of 'Asian trade' before ASML's earnings, which is the world's largest supplier of AI chips. BNY, Johnson & Johnson, and Blackrock will report their earnings in the U.S. before the morning bell, and United Airlines, after the market close. (Reporting and editing by Christopher Cushing; Tom Westbrook)
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Oil prices rise after US-Iran hostilities flare up again with attacks on energy targets
Oil prices rose Wednesday after President Donald Trump reimposed his?naval ban on all Iranian ports, and Iran launched a retaliatory strike on U.S. facilities in the region. Brent closed at its highest level since 'June 12' and West Texas Intermediate?at its best since june 15 for the second consecutive session. Both prices rose on Wednesday morning trade. Brent climbed $1.46 or 1.72% to $86.19 per barrel at 0029 GMT, while WTI rose $1.11 or 1.4% to $80.40. Oil prices rose 2% on Tuesday to an all-time high, as the supply disruptions in the Strait of Hormuz - where one-fifth of world oil and LNG transited before the start of the war - were intensified. The U.S. began a new round of strikes early on Wednesday to "continue degrading Iranian capability used to attack commercial ships in the Strait of Hormuz", the U.S. Military said. Tehran claims it has 'closed the Strait again after hostilities between Iran & the U.S. re-ignited last week, fraying a fragile?truce already reached in June following several months of fighting. Trump said in an interview with Fox News that aired on "Special Report With Bret Baier" Tuesday night, "I'll leave the energy targets until last but we'll ultimately hit energy targets". Early on Wednesday, the Iranian army announced that drones had been used to attack U.S. positions in Jordan's Azraq base. Pentagon has not yet responded to the report. The Iranian Islamic Revolutionary Guard Corps claimed that they had targeted weapons and storage in Bahrain and Kuwait. ? The reports could not be verified immediately. The recent flare-up has raised doubts about whether a memorandum signed last month will lead to an end to the war that has engulfed Iran’s neighbors. Tim Waterer is the chief market analyst for KCM Trade. He said that Brent prices may remain at $75-$80 per barrel if diplomatic measures are successful in reopening the Strait. "For now, there is still a risk premium, but this is not a one way bet, as both sides are motivated to find a diplomatic resolution." (Reporting and editing by Helen Clark)
Asian stocks benefit from the drop in US inflation rate
Stock markets in Asia rallied Wednesday, after a surprising slowdown in U.S. Inflation lowered expectations for interest rate increases. Meanwhile, oil prices took a break as the U.S. canceled a plan to levy shipping across the Strait of Hormuz.
South Korea's volatile KOSPI Index surged by 7% before the next test of the AI rally. Earnings are due from ASML, Europe's largest company and world's leading supplier of equipment to make AI chips.
The Nikkei 225 index in Japan rose by 1%, while the MSCI broadest Asia-Pacific share index outside Japan rose by 2.4%.
IBM's stock price dropped by 25% overnight after its?revenue estimate missed analyst expectations. This shows how stretched the rally for AI-related stocks is.
The S&P 500, Nasdaq, and U.S. Futures all rose on Tuesday, thanks to the stellar profit made by Wall Street banks.
The U.S. Dollar was lower in terms of currencies, except against the stubbornly low yen.
Short-term bonds also rallied. Two-year Treasury yields fell 11 basis points, to 4.19%, from a 17-month high near 4.3% on Tuesday.
In the U.S., the headline consumer price index fell by 0.4% in June. This was its first drop since COVID-19. Core inflation, however, rose to 2.6% annually, versus expectations of 2.8%.
In a note to clients, J.P. Morgan analysts stated that "for market bulls, this is even better than Goldilocks would have imagined."
"Inflation is lower when earnings are growing positively. This should ease any concerns about a rate hike in July and could also calm fears for September. This allows the market to rise and broaden at the same time.
The market price for the likelihood of an interest rate increase in July has been halved, to 16%.
CHINA GROWTH MIS
Official data released on Wednesday showed that China's economic growth had slowed to just 4.3% for the second quarter. This was below analysts' expectations due to weaker domestic demand, the oil shock caused by the war in the Middle East, and a lack of exports.
Investors have a positive outlook on the Chinese retail sales rebounding in June, a relatively strong nominal GDP and the hope that authorities will respond.
Woei Chen, economist at UOB, said: "I do not think they will be concerned?enough to?announce any big'stimulus. But it will be targeted. They are aware that the growth is only in the tech areas, whereas the overall economy continues to underperform."
The yuan of China traded at an all-time high of 6.7635 per dollar. The euro was stable at $1.14, and the Australian Dollar held on to its 0.8% gain.
Brent crude futures remained at $85.80 per barrel after gaining almost 13% on the back of a flare-up in Middle East conflict.
U.S. president Donald Trump reimposed on Tuesday a naval blockade against Iranian ports and threatened to attack power plants and bridges if Iran did not resume negotiations with the United States in order to end their conflict. He also scrapped his plan for a 20 percent fee on shipping through Hormuz.
BNY, Morgan Stanley and Johnson & Johnson report their earnings in the U.S. before the morning bell, and United Airlines reports after the market close. (Reporting and editing by Christopher Cushing; Tom Westbrook)
(source: Reuters)