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IIR note: Saudi Aramco closes Jizan oil refining after attack
Saudi Aramco closed its Jizan oil refinery, which produces 400,000 barrels per day in Saudi Arabia, on July 27, following an attack on the facility by Yemeni Houthi militants. A note seen by revealed that this was due to an attack on Saturday by Yemen's Houthi terrorists. The market is already constrained by the tight fuel supply in the world, as well as disruptions from the Middle East and Russia's ban on diesel exports. The outage has also had a significant impact on the refinery profit margins, which have reached'record highs' in certain regions. The note stated that the attack damaged the plant’s Integrated Gasification Combination?Cycle and the tank farm, and added that Aramco would tentatively finish repairs and restart the facility?by August 15?. Aramco didn't respond to a comment request. HOUTHI?SPOKESPERSON CLAIMS A STRIKE ON ARAMCO?SITES Yahya Saree, the Houthi's military spokesperson, said that the group had successfully attacked sites owned by Saudi Aramco at Jizan and Yanbu as the Gulf War which has disrupted the global supply chain extended to a new front. A video shared on social networks and confirmed by showed that a huge column of smoke rose from the Jizan refinery following the attack. Kpler data shows that the refinery exported more than 200,000 barrels per day on average in the last three months. Diesel and 'gasoil were the two main export products that accounted for over half of June?exports, which was around?170,000bpd. Naphtha accounted for about 30%. The European diesel profit margins reached a new record of $70.77 per barrel on Tuesday. This was largely due to the attacks on Middle East oil infrastructure and disruptions in regional export routes, including the Strait of Hormuz. The refinery exports most of its naphtha to Asia through the Bab el-Mandeb strait. This is a 'alternative route to the Strait of Hormuz which accounts for over half of its naphtha sales to Asian buyers. Reporting by Mohi Naira in New Delhi, and Ahmad Ghaddar from London. Editing by Louise Heavens & Jan Harvey.
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The Fed's rate decision is in the spotlight as gold falls against a dollar that remains firm
The 'dollar' weighed heavily on gold as investors waited for the Federal Reserve to announce its policy at the conclusion of their two-day meeting in this week. This would give them an idea of the direction that U.S. rates will take. Spot gold dropped 1.2% per ounce to $4.026.21 by 1200 GMT. U.S. gold contracts for August delivery fell 1.3% to $4.025.70. "Gold has held to a very tight range since late June based on the support in $4,000 region, which suggests at some stage there will be a breakout," said Rhona Connell, StoneX's head of market research. Connell said: "Fundamentally the physical markets are still very quiet, while professionals are contorting over the interaction between interest rates, oil and the dollar. All of these are important drivers." The U.S. Dollar steadied at a four-week-high?on Tuesday. This made greenback-priced gold expensive for buyers abroad. Donald Trump, the U.S. president, said on Monday that Washington is having "good discussions" with Iran, and that there is a chance that a deal will be reached to end their conflict. However, he warned that if talks fail, strikes would resume. The oil prices fell on Tuesday and hovered around their one-week-low amid hope for a resolution to the U.S. - Iran war. Energy prices are on the rise, which increases expectations that interest rates will be raised by the Federal Reserve. Gold is often seen as a hedge against rising inflation. However, due to higher interest rates, gold's appeal tends to decrease. Trump said on Monday that the U.S. must have the lowest interest rate in the world. According to CME FedWatch, market participants are preparing for tomorrow's Fed decision on interest rates. About 36% of participants anticipate a rate hike of 25 basis points. Also, traders are pricing about an 80% chance that the central bank will raise interest rates at its September meeting. (Reporting by Sukanya Mitra in Bengaluru; Editing by Vijay Kishore and Leroy Leo) (Reporting by Sukanya Mitra in Bengaluru; Editing by Vijay Kishore and Leroy Leo)
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HF Sinclair posts highest profit since 2022, plans lubricants separation
HF Sinclair posted its highest quarterly 'profit' since the Russian invasion of Ukraine rocked global oil markets a few years ago. The company also announced that it would'separate" its lubricants & specialties unit into an independent publicly listed company. The U.S. refiner is also beating second-quarter profit expectations. It wants to unlock more value from its specialty products business, which has higher margins, while returning cash to investors. It increased its quarterly dividends by 5%. In premarket trading, shares of the Dallas-based company rose 6.8%. U.S. refining companies have been the most successful in the?war against Iran, as foreign buyers demanded their products and pushed fuel exports into record highs. Franklin Myers, CEO of Franklin Myers, said that the fundamentals which drove the strong results in our second quarter across all business segments will continue into the third quarter. This will provide a positive background as we move through the rest of the year. HF Sinclair’s lubricants & specialties segment reported stronger results in the third quarter, with an adjusted core profit of $207 million, up from $55 millions a year ago, mainly due to higher sales volumes and prices. The company anticipates completing the separation of the unit in 12 to 18 months, and doing so in a tax efficient manner. It said that the separation would allow HF Sinclair's remaining units to concentrate on their core?refining- and marketing-operations. The quarterly adjusted refinery gross profit per barrel rose by 57.3%, to $25.95 from a year ago. The adjusted core profit for its refining division more than doubled from a year earlier to $1.02billion. The company reported a net profit of $892 million, or $4.93 a share. This is its highest quarterly profit since the year 2022, when Russia's invasion in Ukraine disrupted supply chains and drove up commodity prices, which boosted refinery earnings. LSEG data shows that HF Sinclair's quarterly adjusted profit was $5.31, compared to the analysts' average estimate at $4.51.
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Seoul reports white phosphorus leaks from a US airbase in South Korea
The South Korean authorities ordered a brief evacuation of the surrounding area on Tuesday following a 'leakage of white phosphorus in the?U.S. Safety Ministry reported that Osan Air Base is located south of Seoul. Yonhap reported that no casualties had been reported, and the evacuation order for residents was lifted about a half-hour later, after South Korean fire authorities & U.S. Forces?had completed decontamination. The base issued a statement saying that "at 1708 (808?GMT) due to a mishap on the ground and to be extra'safety, Osan AB established a 1000-foot'safety cordon in order to?protect both base and local population." Our emergency response professionals are managing a isolated situation at the installation. This matter is being handled with "the utmost attention and speed." In response to an inquiry to confirm the type of leak, a spokesperson for the base confirmed that there was a munitions accident. (Reporting by Jack Kim, Hyeyoon Cho and Jihoon Lee; Editing by Ed Davies, Andrew Heavens Kevin Liffey and Hugh Lawson) White phosphorus can be used in smoke screens and incendiary weaponry. (Reporting by Jack Kim, Hyeyoon?Cho and Jihoon?Lee; Editing by Ed Davies, Andrew Heavens, Kevin Liffey, and Hugh Lawson.
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MORNING BID AMERICAS - Chip rout the snowballs
What's important in the U.S. and international markets today by Mike Dolan Editor-at-Large of?Finance and Markets Chip stock corrections accelerated again over night amid concerns about circular financing and rising competition. The correction comes before a series of crucial earnings reports by tech companies in Wall Street and Asia - as well as a further drop?in oil price below $90 per barrel amid a tense pause?in the Iran conflict. Below, I'll go into more detail. Check out my most recent column where I discuss the various inflationary drivers central banks are increasingly struggling to "see through". Listen to the Morning Bid podcast where we talk about the causes of this latest chip sale. Subscribe to the Morning Bid daily podcast and hear our journalists discuss all of the latest news in finance and markets seven days a weeks. CHIP ROUT WINTER BALLS The stock markets were on edge Monday and into Tuesday as a result of a number of catalysts. Shares of U.S. Chip giant Nvidia dropped sharply, partly due to reports about a new round of circular funding with OpenAI. A second possible trigger was the IPO of China’s CXMT, which saw a massive first-day increase of almost 470%. This unveiled a brand new chip giant that is ready to absorb investment funds. The European tech giant saw its shares fall sharply after reports surfaced that Chinese firms are developing chipmaking technologies that mimic ASML's dominant offer. U.S. listed shares of South Korea’s SK Hynix dropped below their recent launch price on Monday ahead of tomorrow's quarterly update. Seoul's volatile KOSPI Index plummeted almost 11% on the same day, its largest daily loss in five months. Samsung Electronics is also due to release its earnings this week. Samsung Electronics is a rival chipmaker that is?also down dramatically. The earnings of both companies come amid reports that hyperscalers are spending heavily to build their AI infrastructure. Hyperscalers' earnings are likely to focus on the size of those expenditures and the associated cash burn. Credit markets are keeping a close eye on the situation. Oil prices dropped further on Tuesday, to $86 a barrel. Donald Trump, the U.S. president, said that negotiations with Iran were going well and a possible deal was in sight. He also reiterated his warning that strikes could resume if talks failed. The Federal Reserve's policy meeting that begins today will undoubtedly include a discussion on the fluctuating energy prices. The futures market still views the Fed meeting as "live", with a 1 in 3 chance that a rate increase will be priced in. Markets now see an increase in rates in September as "almost a certainty". Chart of the Day A new rout is underway in the global chip stock market ahead of this weeks U.S. Megacap Tech Earnings. There's growing unease over the cash burn by the so-called Hyperscalers who are spending hundreds and billions of dollars?building their AI infrastructure. Stock and credit markets are now becoming unnerved by the scale of debt incurred, as borrowings from Big Tech companies this year have almost doubled what they were last year. The debt load will increase as capex increases. Watch today's events * U.S. consumer confidence in July (10 a.m. ET), 7-year notes auction (1 p.m. ET) * ?Fed policy meeting begins * U.S. Corporate Earnings: Boeing, Coca-Cola and Ford. Want to receive Morning Bid every morning in your email? Subscribe to the newsletter by clicking here. Follow us on LinkedIn, X and ROI. The opinions expressed by the author are their own. These opinions do not represent those of News. News is bound by the Trust Principles to maintain integrity, independence and freedom from bias. (By Mike Dolan).
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Fitch warns that AI market correction is a major global credit risk
Fitch, the ratings agency, has warned that a global credit risk is emerging from the AI boom, and it's a risk of a possible correction. This comes as a result of growing concerns about the fact that tech?values and AI spending are soaring ahead of uncertain future returns. Fitch's Global Risk Outlook for the third quarter of 2018 focuses on two main short-term credit risks: the growing vulnerability to a market correction related to AI and the continued uncertainty associated with the U.S./Iran conflict. The ratings agency reiterated warnings by global watchdogs, that the AI boom is increasingly intertwined in economic growth, and capital markets, especially in the United States. This increases the risk of a major "selloff". Fitch said that "the scale of AI investments is such that it exposes the economy and the overall capital markets to such a corrective action." VALUATIONS CLOSE TO DOTCOM BOOM The warning is the most blunt yet from a major rating firm. It came at a time when Asia's AI stocks were again in the red on Tuesday, amid concerns about who was paying for the spending explosion and growing evidence of competition from China. Fitch's report highlights that the U.S. S&P 500 cyclically-adjusted price-to-earnings ratio has climbed to close to the levels seen during the dotcom boom of the late 1990s, while U.S. Corporate Bond issuance surged by?26%, driven largely by AI related fundraising, in the first half 2026. Fitch estimates that Alphabet and Amazon will increase their capital expenditures by more than 75% to $700 billion this year. The US government estimated that the boom in IT investment contributed directly 1.4 percentage points of growth to the first quarter GDP, and rising equity prices also supported household spending via a wealth-effect. Uncertainty over future AI revenues and regulation, as well as disruptions to the labour market and competition, could trigger a significant and long-lasting correction in the market, with wide-ranging macroeconomic consequences. Fitch stated that "the extent to which AI has become integrated into capital markets and economies has created a vulnerability in credit." WAR AND EL?NINO The geopolitical risks remain the second major concern. This is especially true with the renewed fighting between Iran and the U.S. in the last few weeks?and the recent closure?of the Strait of Hormuz. Fitch predicts that the world's growth will slow to 2.4% by 2026, and that U.S. inflation for the year will be 3.7%. This is due to the effect of higher energy prices. The credit risk was also elevated by a strong El Nino pattern, given the possibility of severe storms, droughts, and floods. The rating agency warned that the U.S. - Iran conflict could increase inflationary pressures. It added that countries with high debt and "junk" ratings would be especially vulnerable, as food price spikes could complicate monetary policy, increase subsidies costs, and further strain the public finances. Fitch warned that in Latin America, where diesel and fertiliser account for 50% to 70% of agricultural inputs, and 30% of fertilisers are imported from the Middle East (as of 2012), higher costs and lower harvests may squeeze agribusinesses' margins, and affect transport sectors such as ports, railways, and toll roads. (Reporting and editing by David Holmes; Marc Jones)
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Ambuja Cement, India's Ambuja Cement, flags high fuel prices and demand slowdown as Q2 risks
Ambuja Cements, a cement manufacturer in India, reported a 37% drop in its quarterly 'profit' on Tuesday. It was the first time in three quarters that it had seen a decline. The company said that rising fuel prices and a weak monsoon season could put further pressure on profitability. In the second quarter, monsoon related?disruptions?are expected. Meanwhile, higher petcoke costs and freight prices continue to squeeze margins on a market where competition is fierce and producers are unable to increase their prices. The company stated that "the impact of peak fuel cost inflation will coincide with the seasonal weaker Q2, potentially impacting industry profitability near term." The shares of India's No. After the results, shares of India's No. Profit after tax dropped to 5,04 billion?rupees (52.59 millions) for the quarter ending June 30, from 7.97 billion rupees the year before, due to lower volumes and increased costs related to the Middle East Conflict. Analysts said that although cheaper fuel inventories cushioned the first-quarter effect, rising fuel and freight prices are likely to further erode margins in the coming month. While producers increased prices in April to offset higher costs of inputs, the strong competition forced a partial rollback, which limited the benefit. Ambuja Cements, owned by the Adani Group, reported sales of 17.1 metric tons during the first quarter. This is down from 18.4 metric tons a year earlier. Operating EBITDA per ton (earnings prior to interest, taxes and depreciation) decreased from 1,069 rupees in a year's time, down to 931 rupees. Adani Group, since acquiring Ambuja Cements in 2022 from Holcim, has been working to improve efficiency and increase?capacity in order to close the gap with UltraTech Cement, which reported a 17% quarterly profit rise last week. Reporting by Urvi dugar in Bengaluru, Editing by Subhranshu sahu and Eileen Soreng
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The Fed's rate decision is in the spotlight as gold falls against a dollar that remains firm
Investors were waiting for the Federal Reserve to announce its 'policy' verdict at the conclusion of their two-day meeting in this week, hoping for some insight on the direction U.S. rates will take. Spot gold dropped 1.3% to $4.021.18 an ounce at 1020 GMT. U.S. gold contracts for August delivery fell 1.4% to $4.021.50. "Gold has held to a very narrow?range, based on the support in $4,000 region, since late June. This suggests that there will be a breakout at some point," said Rhona OConnel, head of StoneX's market analysis. Connell said that the fundamentals of the oil market, interest rates, and the dollar are still important drivers, while the professionals are busy analyzing the interactions between these three factors. The U.S. Dollar steadied at a four-week-high on?Tuesday making greenback priced bullion?expensive for buyers abroad. Donald Trump, the U.S. president, said on Monday that Washington is having "good discussions" with Iran, and that there's a chance that a deal can be reached to end their conflict. He also warned that if talks fail, strikes will resume. The oil prices fell on Tuesday and hovered around their one-week-low amid?hopes of a resolution to the U.S. - Iran war. Energy prices are on the rise, which increases expectations that interest rates will be raised by the Federal Reserve. Gold is often seen as a hedge to inflation. However, due to its non-yielding nature, it loses some of its appeal when interest rates rise. Trump said on Monday that the U.S. must have the lowest interest rates in the world. According to the CME FedWatch Tool, market participants are preparing for tomorrow's?Fed decision on interest rate. About 34% of participants anticipate a 25 basis-point increase. Also, traders are "pricing in" an 81% chance of an interest rate increase at the central banks September meeting. (Reporting by Sukanya Mitra in Bengaluru; Editing by Vijay Kishore) (Reporting by Sukanya Mitra in Bengaluru; Editing by Vijay Kishore)
India's industrial output in June grew 7.3% year-on-year on a manufacturing boost
Data released on Tuesday showed that 'India's industrial production growth increased to 7.3% in the month of June. This was due to a strong manufacturing sector, boosted by government spending and an expansion in electricity generation. The economists polled expected the industrial output to grow to?5.7% from a revised 5.0%?a month before. In May, government began using producer prices instead of wholesale prices to calculate factory output.
KEY NUMBERS * Electricity production increased 10.6% on an annual basis in June, compared to a revised 10.3% increase a month before. The mining activity increased 1% year-on-year from a revised fall of 1.4% in May. In June, the production of consumer durables (including cars and phones) increased 7.7% compared to a revised 8.0% increase in May. * The output of capital?goods rose 14.2% year-on-year compared to a revised 15.5% rise in May. * Industrial output in April-June increased by 5.8% compared to a 3.4% increase a year ago. Reporting by Shubham Bhatra in New Delhi, Editing by Harikrishnan Nair
(source: Reuters)