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Oil prices drop on lower demand forecasts, despite deadlock between US and Iran talks
Oil prices dropped more than $1 Thursday as forecasters reduced global oil demand projections by 2026 due to disruptions caused by the U.S./Israeli war against Iran. However, the supply constraints created by the conflict helped keep the market stable. Brent futures fell $1.29 or 1.5% to $87.69 per barrel at 0100 GMT. U.S. West Texas Intermediate crude (WTI), which is a blend of U.S. West Texas Intermediate and Brent, fell $1.30 or 1.6% to $81.97. In its monthly report on the oil market, published on Wednesday, the Organisation of Petroleum Exporting Countries (OPEC) lowered its forecast of world oil demand growth for 2026 from 588,000 barrels per day to 580,000. The International Energy Agency also said that it expected a 1.6-million-bpd reduction in consumption this year. This is down from a previous forecast of 1,000,000 bpd, due to the U.S./Israeli war against Iran, which has led to higher prices and restricted fuel supplies. The Energy Information Administration reported on Wednesday that oil prices were also being impacted by a sudden build-up in U.S. crude oil inventories. These had posted their largest weekly increase since January 2023, as exports plummeted. The EIA reported that crude inventories increased by 17.4 millions barrels, to 424.4million barrels during the week ending August 7. This is the highest level since June 5. Analysts had expected a draw of 1.4 million barrels based on a poll. Prices are still high due to the deadlocked talks between Iran and the U.S. about ending the Gulf war. On Wednesday, a senior Iranian source stated that there was no progress made in the talks to revive and implement the interim agreement reached in June. The attacks on Tuesday on the shipping in the Strait of Hormuz, and Bab el Mandeb, two vital export routes for Middle Eastern gas and oil, highlighted the risk that remains for the crude supply. Analysts at Haitong Futures wrote in a report that the safety situation in these waters had deteriorated further, forcing ships to turn off their signal, which "reduces visibility in shipping" and makes it harder for the market and its analysts to track and estimate actual supply levels. (Reporting and editing by Christian Schmollinger; Sam Li, Lewis Jackson)
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Brazil's top court upholds the laws related to the collapse of Amazon deforestation agreement
The Supreme Court of Brazil on Wednesday upheld state legislation that effectively ended an initiative that was credited for reducing deforestation in the Amazon rainforest to grow soybeans. The?justices rejected the farmers' claims that a?20 year-old voluntary?soy - moratorium was illegal, shielding grain processors and traders from potentially billions of reais worth of damages. The court supported state actions, like Mato Grosso’s last year’s decision, which revoked the tax benefits of companies that participated in the moratorium. The law that was passed in the state with the highest soy production prompted grain traders from around the world, including ADM, Cargill, and Cofco in China, to withdraw their pledges in January. Environmentalists say this effectively ended the initiative. Brazil is the largest soybean producer in the world. The moratorium, which was introduced after boycott threats, prohibits participants from purchasing soybeans that are grown on deforested land?after July 2008 The voluntary initiative has been found to be effective in reducing the deforestation rate of the Amazon rainforest, the largest in the world. Scientists warn that deforestation could accelerate global warming. Brazilian farmers challenged this moratorium in the Supreme Court, claiming it was unfair and imposed unfair restrictions on them. Brazilian law allows land owners to clear up to 20% of their property, while the moratorium prohibited any deforestation beyond 2008. Abiove, a group of soy processors in Brazil, welcomed the ruling on Wednesday. It said it removed legal uncertainty. Andre Nassar said that members of the group were unlikely to return to the moratorium. Cristiane Mazzetti, of the environmental group Greenpeace, said that the court's ruling was "a setback" which could in the medium-term reverse the positive trend towards reduced deforestation?in the Amazon. Farmers group Aprosoja MT announced in a press release that it will evaluate options for reconsidering the compensation claims. The decision of the court adds uncertainty to Brazilian president Luiz Inacio Lula's 2023 bid to stop Amazon deforestation before 2030. Scientists say the Amazon "helps regulate global climate" by storing huge amounts of carbon, and slowing greenhouse gas accumulation in the atmosphere. Researchers from the University of Wisconsin, Madison, World Wide Fund for Nature Brazil, and other organizations published a report in July that found "the moratorium" helped reduce deforestation for soybean production in the Amazon to "nearly 0", and reduced deforestation by 35% for areas susceptible to soy expansion in its first decade. The estimate was that the end of the moratorium would result in an extra 1.4 million hectares of deforestation over the next 10 years, and 745 million tons of greenhouse gas emissions. This is roughly equal to Canada's emissions each year. Reporting by Ricardo Brito and Roberto Samora, in Brasilia; Writing by Fernando Cardoso and Editing by Kylie Madry Brendan O'Boyle Cynthia Osterman
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Brazil's Ultrapar Q2 profits surge as local fuel industry normalizes
The Brazilian energy and logistic conglomerate,?Ultrapar, reported that on Wednesday its second-quarter?net income increased 46% year-over-year?to 1.68 billion reais (323.7 million dollars), boosting its first-half profits by 71% as the ongoing?legalization?of the fuel distribution sector?boosted market recovery. Ultrapar's performance was largely "driven" by its Ipiranga business. This business benefited from the police crackdown against organized crime, and Middle East tensions, which reinforced the advantage for large-scale operators with import capabilities. Alexandre Palhares, Chief Financial Officer at Ultrapar, said that the company's performance was a result of the efforts made by the public authorities to combat illegal activities in the fuel industry. "As a?result of this more normalized?environment, law-abiding actors, including ourselves, but also others, are regaining?market share, recovering volume, and improving?financial?results." A police crackdown on fraud schemes in fuel distribution a year or so ago boosted the shares of major distributors, after it demolished a network of illegal businesses which ran gas stations to compete with firms such as Ultrapar. Since then, more inspections have been conducted to target price gouging. Tax evasion businesses have also been closed, and major distributors are being investigated for their links with PCC. PCC is a criminal ring which used the fuel industry as a means of laundering multi-billion dollar amounts of money. Ipiranga increased imports to combat the global fuel volatility caused by Middle East tensions. This resulted in an 8% increase of its sales volume for the second quarter compared to last year. The unit's revenue net reached 37.5 billion reals, up 24% from the previous year. The CFO said that despite this, Brazil was "one of the least affected countries at the pump," pointing out government actions such as subsidies and tax reductions, along with Petrobras’s strategic pricing policy. Ultrapar's operational?gains?and working capital released at Ipiranga resulted in a record 4.8 bn reais of operating?cash for the quarter, driving leverage to its lowest level since 2008 Ultrapar's financial performance has also allowed for an early dividend distribution. According to the executive, the company has approved 1.085 billion reals in "dividends" for the first six months of the year. This is equivalent to 1.00 reals per share. The program also includes a share purchase of up to 18,000,000 shares. The executive stated that, while Ultrapar does not give any guidance, it expects the fuel distribution sector to operate in a compliant way. Palhares stated that "we are convinced this more fair and compliant competitive atmosphere is here to remain." "I am not in the position to comment on any other effects." ($1 = 5,1907 reais). (Reporting and editing by Chris Reese, Aurora Ellis, and Luciana Magnalhaes)
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Sources say Braskem is looking at restructuring out of court as soon as this month.
Two people familiar with the matter said that Braskem is in advanced discussions for a possible 'out-of court restructuring. This could be filed this month. The company has over $10 billion of debt in Brazil, Europe and America. Sources said that the restructuring proposal may come before the August 24 deadline, when Braskem’s 60-day protection ends. Sources said that Braskem (which private equity firm, IG4 Capital, recently purchased from engineering group Novonor) has been experiencing a prolonged down cycle in the petrochemical industry. It is estimated to take three to five year to resolve Braskem's issues. Braskem has been weakened in its cash position by the depressed petrochemical prices and a disaster at one of its salt mines located in northeastern Brazil. The company refused to comment. Sources said that Braskem had been discussing alternative options with its creditors, such as bondholders and the banks, in order to avoid a long restructuring process. However, they have yet to reach a deal. Sources said that creditors rejected Braskem’s offer of repaying principal after a 5-year grace period with a 2-1/2 year grace period for interest. Sources said that if the current restructuring discussions continue, Braskem will have a 90-day period of negotiation to come to a comprehensive agreement. This would allow time for both parties to reach an agreement, while protecting it from creditors' claims. One source said that Braskem is also exploring options to restructure its Mexican subsidiary’s $2 billion debt. This could include a possible U.S. Chapter 11 filing, which would be timed with the Brazilian proceedings.
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Oil prices rise again as global stocks increase
On Wednesday, global equities climbed after mild inflation data reaffirmed bets that the Federal Reserve would hold interest rates at current levels. Oil prices also rose as investors weighed lower demand against a deadlock between the U.S. and Iran. Separate reports of attacks on ships were made by the United States and Yemen’s?Iran aligned?Houthis. Oil prices dropped as investors considered lower demand projections. Data released on Wednesday showed that U.S. consumer price index increased by 0.1% in July. This was in line with the expectations. This small increase may weaken the case for an increase in interest rates by the Federal Reserve. Money markets had a 50% chance that a rate hike would occur before the release of data. The data "relieves a lot of concerns" that the Fed will be forced to raise rates due to the inflation which is being fuelled by higher energy prices, said Robert Pavlik. Senior portfolio manager at Dakota Wealth Management, Fairfield, Connecticut. The data has impacted rate hike bets. U.S. Treasuries gained, boosting yields. Data did not reflect the recent increase in oil prices, which has risen amid tensions between Iran and the U.S. The MSCI index of global stocks rose by 3.90 points or 0.34%. Wall Street saw the Dow Jones Industrial Average fall 21.58 points or 0.04% to 53,770.27. The S&P 500 rose by 20.30 points or 0.26% to 7,748.50. And the Nasdaq Composite grew 143.04 or 0.54% to 26,588.49. CoreWeave's positive results after the close of the market on Tuesday gave the AI industry a boost. Other AI infrastructure providers rose as well. The STOXX 600 index fell by 0.16% in Europe. The broadest MSCI index of Asia-Pacific stocks outside Japan, closed up 0.92% to 1,636.51. Emerging markets stocks rose by 0.95%, to 1,681.25. Talks to End the War in Iran Continue The markets were still closely following the talks to end war and reopen Strait of Hormuz for shipping traffic. Both the U.S., and Yemen's Iran aligned Houthis, reported separate attacks against shipping on Tuesday. Iran and the U.S. both have increased their rhetoric over recent days. Iran's top security official stated on Tuesday that the Strait of Hormuz would?remain shut unless the U.S. accepted Iran's terms. Investors have remained calm. Dorian Carrell is the head of Schroders' multi-asset income. We don't think the Strait of Hormuz will be at full capacity. This puts a floor under the oil prices and keeps the energy-driven inflationary force?in the markets for the short-to-medium-term. Brent futures rose 7 cents to $88.98 per barrel, while U.S. crude oil also climbed 7 cents to $83.27 during a volatile session. Forecasters reduced their global demand forecasts, which led to a drop in prices. Markets anticipate a BOJ hike The yield on the benchmark 10-year U.S. NOTES increased by 1.26 basis points, to 4.697%. The markets are pricing in an earlier rate hike?in Japan. This puts pressure on Japan's short-dated bonds. Investors have priced in a nearly 60% chance of an increase of one quarter point at the Bank of Japan meeting of September. The yen fell 0.07%, to 159.39 dollars per yen. This is still a little below the high of last week of 155.20. The dollar index (which measures the greenback versus a basket of currencies including the yen, the euro and others) rose by 0.17%, to 99.97. However, the euro fell 0.14%, to $1.1524. Spot gold increased by 0.92%, to $440712 per ounce. U.S. futures gold settled at $4,467.5 up 0.6%. (Reporting from Samuel Indyk and Rocky Swift in London, Chris Prentice and Sinead carew in New York, with additional reporting from Sinead carew; editing by Edwina gibbs, Stephen Coates and Barbara Lewis.
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Technical selling and pressure from the grain markets are to blame for the fall in LIVESTOCK CME cattle futures.
Market analysts say that the Chicago Mercantile Exchange's live and feeder cattle prices fell?sharply? on Wednesday due to a flurry of technical selling?, the pressure of a rally on the Chicago grain markets, as well as growing concerns about the?stress? in the U.S. econom?y, which could.chill broader consumer demand for more expensive cuts of meat. Analysts said that CME lean-hog futures were mainly higher on spread trading despite the CME August Lean Hog Futures easing. Don Roose said, "There were a number of spreads that were unwound by people who were?long hogs and short cattle" According to the Consumer Price Index published by the federal Labor Department, the U.S. consumer prices barely rose in July, as gasoline costs declined for the second consecutive month. According to the report, grocery store prices dropped 0.1% amid a 1.5% decrease in the price of pork. This is the biggest?decrease?since November 2023. Walmart cut ground beef prices by a staggering 16% last month, the biggest drop since September 2020. However, ground beef prices have increased by 9.0% in the past year. Analysts said that the report was released just days after the government reported that the U.S. economy had unexpectedly shed jobs during July. Department of Agriculture prices for choice cuts of beef increased by $2.47 on Wednesday morning to $373.78 per?hundredweight (cwt). Department of Agriculture set the price of choice cuts of beef at $373.78 a hundredweight (cwt), an increase of $2.47. Select cuts were priced at $350.20 a cwt. This is an increase of 40 cents. CME August Live Cattle Futures ended 2.175 cents lower at 230.575 cents per pound. Most-active October finished 2.525 cents lower at $223.800. CME August feeder beef futures dropped 3.825 cents, to 346.350 cents a pound. On Wednesday afternoon, the USDA set the price of the 'carcass cutout' at $100.15 per hundredweight. This is down $1.33 compared to the previous day. CME lean hog contracts for August settled at 95.67 cents per kilogram, down 0.200 cents. October's contract ended 0.225 cents lower at 83.55cents per kilogram. Reporting by P.J. (Reporting by P.J.
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Investor rewards boosted for top US refiners as profits soar
Fuel prices and refinery margins soared in the second quarter, as a result of the disruptions of crude oil supplies via the Strait of Hormuz. Analysts said that the massive profits of refiners and their strong buyback programs were likely to continue in the third quarter. This highlights how U.S. fuel?makers are among the largest financial beneficiaries from the Iran War. International buyers are willing to pay higher prices to secure supplies due to the disruption of global energy shipping caused by the conflict. The attacks on Russian oil refineries have further restricted supplies and increased prices for consumers already under inflationary pressure. Marathon Petroleum, Phillips 66, and Valero Energy, three of the largest independent U.S. oil refiners have earned combined profits in the quarter of $12.6 billion, the highest since Russia invaded Ukraine 2022. Simon Wong, Gabelli Funds Portfolio Manager said that to say they made "a lot of money" is an understatement. According to calculations by? Calculations show that the three refiners returned $6.3 billion to shareholders through stock repurchases and dividends in the second quarter, which is the highest amount for more than two-years. This compares to $2.6 billion in profits returned during the same period last year, which totaled $2.9 Billion. Jason Gabelman is an analyst with TD Cowen. He said, "We believe the buyback program will continue to be pretty robust" for Valero. Gabelman estimates that between the third and end of the year, the two refiners would repurchase around 20% of their current market value. Valero's value is around $90.1 billion, while Marathon is worth about $91.3 billion. Gabelman stated that Phillips 66 is 'expected to repurchase around 10% of its $81.2 billion market value, due to its increased focus on debt reduction and growth investments. Phillips 66 approved a $10 Billion increase in its share repurchase programme by the board of directors. A filing revealed that Valero Energy had authorized a $5 billion share purchase program to be added to its existing $2.5 billion program. HF Sinclair, a smaller rival, increased its quarterly dividends by 5%. Marathon shares, the largest U.S. refiner based on volume, have risen around 110% in value to $342 as of Wednesday. Valero shares, the second largest U.S. refining company by capacity, have risen more than 98%. Phillips 66 shares are up around 75%. This compares to the S&P 500's energy sector, which has seen a 36% increase so far this year. CAUTIOUSLY OPTIMISTIC Fuel supply disruptions that have slashed global inventories, have pushed U.S. gasoline crack spreads and diesel crack spreadings, a measure for refiner profitability to record levels. On?August 10, the ultra-low sulfur futures crack spread reached a new record high of $93.84 a barrel. On July 17, the U.S. gasoline crack spread reached $60 per barrel, its highest level since early 2020. For the first time since more than three decades, the average U.S. 'price at pump' rose above $4 per gallon by the end of march. This was the largest monthly increase in many years. Refining executives are cautiously optimistic as we enter the second half of this year. Typically, the demand for gasoline and heating oil is weaker during the transition from summer driving to winter heating. Rick Hessling said that product margins are still robust but have slowed down from their previous levels in the second and early parts of the third quarters. He made this statement during a conference call with investors held earlier this month. Gary Simmons, Valero Energy's chief operating officer, stated that Valero had benefited from strong jet fuel margins during the second quarter. However, this support has not been present in the third. He said that an arbitrage opportunity had reopened in the jet fuel exports into Europe. The company also expects the jet fuel margins will improve over the rest of the quarter, as refiners switch from winter diesel specifications. Simmons: "I'm sure we'll see the jets get stronger as we progress through the quarter."
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Oil prices drop on forecasts of demand, but global stocks gain
Global equities rose on Wednesday, after mild inflation data confirmed that the Federal Reserve would keep interest rates unchanged. Oil prices fell as investors weighed a drop in demand against an impasse in U.S. - Iran talks. Separate attacks on ships were reported by the United States and?Yemen?s Iran-aligned Houthis. Oil prices dropped as investors considered lower demand projections. Data released on Wednesday showed that U.S. consumer price index increased by 0.1% in July. This was in line with the expectations. This small increase may weaken the case for a Federal Reserve interest rate hike next month. Money markets had a 50% chance that a rate hike would occur before the release of data. Robert Pavlik is a senior portfolio manager with Dakota Wealth Management, Fairfield, Connecticut. He said that the data "relieves a lot of concerns" about the Fed being forced to raise rates due?to higher energy prices, which are fueling inflation. The data has dented bets on rate hikes. U.S. Treasuries gained, resulting in higher yields. Data did not reflect the recent increase in oil prices, which have "hurtled" higher amid tensions with Iran and the U.S. The MSCI index of global stocks rose by 0.33%, to 1,154.42. Wall Street saw the Dow Jones Industrial Average rise 0.05% to 53.820.52, the S&P 500 add?0.31% at 7,752.45 while the Nasdaq Composite rose 0.64% at 26,613.91. CoreWeave's positive results after the close of the Tuesday market gave the AI industry a boost. Other AI infrastructure providers rose as well. The STOXX 600 index fell by 0.16% in Europe. The broadest MSCI index of Asia-Pacific stocks outside Japan, closed up by 0.92% to 1,636.51 in Asia. Emerging Market Stocks rose by 0.95% to 1,681.25. Talks to End the War in Iran Continue The markets were still closely following the talks to end war and open the Strait of Hormuz for shipping traffic. Both the U.S., and Yemen's Houthis who are aligned with Iran, reported separate attacks against shipping on Tuesday. Meanwhile, both Iran and U.S. rhetoric has increased in recent days. Iran's top security official stated on Tuesday that the Strait of Hormuz will remain closed until the U.S. agrees to Iran's terms. Investors have remained calm. Dorian Carrell is the head of Schroders' multi-asset income. We don't think the Strait of Hormuz will be at full capacity. This puts a floor under the oil prices and keeps an energy-driven inflationary force in the markets for?the short-to-medium-term." After forecasters lowered their projections for global demand in 2026, oil prices dropped after rising $1 earlier during the session. Brent crude futures fell by 0.37%, to $88.58 a barrel. U.S. crude dropped by 0.26%, to $82.98. BOJ HEADING UP? MARKETS PREDICT A BOJ INCREASE The yield on the benchmark U.S. 10 year notes dropped 1.6 basis points, to 4.668%. The markets are increasingly pricing in an early rate increase in Japan. This puts pressure on Japan's short-dated bonds. Investors have priced in a nearly 60% chance of an increase of one quarter point at the Bank of Japan meeting of September. The yen has weakened by 0.07%, to 159.39 dollars per yen. This is still below the highs of last week of 155.20. The dollar index, which measures greenbacks against a basket including the yen, the euro and other currencies, increased by 0.15%, reaching 99.95. However, the euro fell 0.1% to $1.1528. Spot gold increased by 0.88%, to $4405.10 per ounce. (Reporting from Samuel Indyk and Rocky Swift in London, Chris Prentice and Sinead carew in New York, and additional reporting from Sinead carew; editing by Edwina gibbs, Stephen Coates and Barbara Lewis)
BofA will take 49.9% of Jio Credit in India for $1.9 billion
Bank of America is set to acquire up to a 49.9% share in Jio Financial Services' non-bank lending arm in a deal worth 182.68 billion rupees ($1.92 billion). The lender is expanding its presence in India's rapidly growing financial sector.
The deal is a continuation of a recent trend of large foreign investment in Indian banks and nonbank lenders. These institutions are experiencing a high demand for credit, and low delinquency rate.
Recent deals include MUFG's investment into Shriram Finance in Japan, Emirates NBD of Dubai's purchase of 60% stake in RBL Bank, and Sumitomo Mitsui Financial Groups' investment in Yes Bank.
The two companies announced on Wednesday that Bank of America would become a partner in the non-banking finance firm Jio Credit by way of a preferential allocation of equity shares and warrants.
Access to a rapidly growing market
BofA initially holds a stake of 26.5% in the transaction. This could increase to 49.9% if the warrants are exercised.
As part of the agreement, Jio Credit will provide BofA with shares and warrants valued up to 66.13?billion?rupees.
BofA CEO Brian Moynihan stated that by combining Jio Financial Services’ scale, local expertise, and customer base with Bank of America’s global reach and digital experience, and its close to 250-year leadership in banking we can expand access to financial products and services, and support India’s continued economic development.
In just two years, Jio Credit has grown to be one of India's fastest-growing NBFCs. Its assets under management topped $3 billion at the end of June.
Bank of America stated that the investment will provide Jio Credit with capital to help it grow, while also gaining access to global financial expertise.
Credit from non-bank sources in India is growing rapidly at over 14%, across all segments such as personal loans for gold and small business credit.
JV STRATEGY of JIO FINANCIAL
Jio Financial is a company that operates in digital lending, payments and insurance brokerage.
The company has decided to form joint?ventures across its various business lines. Through its joint ventures, it offers asset and wealth management. It also has a joint venture with Germany's Allianz, which offers general and health insurance.
(source: Reuters)