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Saudi Arabia is poised to increase the summer crude burning for power as fuel oil costs rise
Analyst and trade sources say that Saudi Arabia will burn more crude oil this summer for electricity generation than it did last year as the country ramps up production after OPEC+ relaxes supply controls, and fuel oil is becoming more expensive. OPEC's kingpin, by burning more crude oil, could help ease concerns about global oversupply. OPEC+ (which includes the Organization of Petroleum Exporting Countries, as well as allies like Russia) agreed to increase production in April, may and June by almost 1 million barrels a day. Wood Mackenzie predicts that Saudi Arabia will consume 465,000-470,000 bpd for electricity generation this year. This is an increase of 10,000-15,000 bpd compared to 2024. Several traders have also predicted an increase. FGE estimates that Saudi Arabia will consume 423,000 to 428,000 barrels per day (bpd) of crude oil for power generation this year, up from last year by 10 to 15 bpd. During the summer months, when air conditioning is in high demand, the Middle East burns a lot of crude oil and HSFO. Analysts have reduced their oil price predictions for this year, after OPEC+ decided to accelerate output increases. This has stoked concerns about rising supplies. However, the profits of refiners from producing HSFO using Dubai crude hit a record high of $4.45 a barrel. Priti Mehta is a senior analyst at Wood Mackenzie who specializes in short-term refining, oils and oil products. She said that lower crude prices and increased HSFO cracks will shift some demand for power generation from fuel oil towards crude. Saudi Arabia's Energy Ministry and Saudi Aramco have not responded to comments. OPEC data shows that Saudi Arabia's oil output quota in June was 9.367 millions bpd. This is up from the 9.034million bpd of April. David Wech is the chief economist of analytics firm Vortexa. He said that Saudi Arabia has an incentive to increase crude production but not export it. Burning it to generate electricity would be a good choice in this situation. Analysts and trade sources said that high prices will likely limit Saudi Arabia's fuel consumption for electricity generation this year, while its imports of Russian oil are unlikely to surpass last year's records. Since 2023, the kingdom has imported more Russian fuel oil at a discount for summer use as the price of Russian barrels dropped following Moscow's invasion in Ukraine. Saudi Arabia generates most of its electricity using natural gas and oil. Renewable energy sources are minimal. The country has signed agreements to expand the gas network at Jafurah and its production. Woodmac's Mehta stated that "further increases in the liquid burn in 2025 will be limited due to the approximately 6 gigawatts renewable energy power plants being brought online, and the beginning of operations in the Jafurah Shale Gas Field later this year." Rystad expects Saudi Arabia will reduce crude oil use and increase gas production for power generation by 2030.
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Iron ore prices rise as traders assess resilient demand and soft China data
Iron ore futures traded in a narrow range on Tuesday as investors weighed the resilient demand for steelmaking ingredients near term against the subdued data from China, its largest consumer. As of 0252 GMT, the most traded September iron ore contract at China's Dalian Commodity Exchange remained unchanged at 723.5 Yuan ($100.17). On the Singapore Exchange, benchmark June iron ore was trading at $99.6 per ton. This is a 0.15% increase. Mysteel, a consultancy, said that production among Chinese iron ore mines continued to rise last week after more mines reopened. According to Mysteel, the total volume of iron-ore concentrate produced has increased by 2% each week, bringing it to 498,800 tonnes per day in average. Everbright Futures, the broker, reported that hot metal production, which is typically used to gauge demand for iron ore, fell 0.35% on a month-to-month basis to 2,45 million tonnes. Galaxy Futures, a broker, stated that while hot metal production has decreased slightly, it is still high and demand for steel continues to increase. In a report, Hexun Futures said that iron ore shipments from Australia and Brazil, two major producers, increased by 9.53% on a month-to-month basis to 33.48 millions tons. Retail sales and factory output in China were below expectations, while new home prices continued to stagnate. Data released on Monday showed that China's crude-steel output fell 7% in April from March, but production was still high. Coking coal and coke, which are both steelmaking ingredients, were down by 0.76% apiece. The benchmarks for steel on the Shanghai Futures Exchange have lost ground. Rebar fell 0.39%, while hot-rolled coils dropped 0.19%. Wire rods also declined 0.54%, and stainless steel lost almost 1%.
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Gold prices fall as optimism about a ceasefire between Russia and Ukraine reduces demand for safe-haven gold.
The gold price fell on Tuesday as the slightly stronger dollar and optimism about a possible ceasefire between Russia, Ukraine and Ukraine reduced investor demand for safe haven assets. As of 0210 GMT, spot gold was down 0.4% to $3,215.31 per ounce. U.S. Gold Futures fell 0.5% to $3218.40. Dollars have recovered slightly after hitting a low of more than a week in the previous session. This makes gold priced in greenbacks less attractive to those who hold other currencies. Kyle Rodda, financial analyst at Capital.com, said that the initial shock of the U.S. downgrade has worn off. There is some hope for a truce to be reached between Ukraine and Russia. Donald Trump, the U.S. president, spoke to President Vladimir Putin Monday. He said that Russia and Ukraine would immediately begin negotiations towards a ceasefire. We are seeing buyers emerge when the price dips below $3200. "I think we're due for a larger pullback, particularly if geopolitical risk is further eased and we start to see yields rising from the U.S. fiscal policies." Rodda continued. Gold, which has been viewed as a safe investment amid geopolitical uncertainties and economic uncertainty, has reached multiple records this year. It is currently up by about 23%. U.S. Federal Reserve officials reacted cautiously to the implications of the latest downgrade in the U.S. Government's credit rating, and the unsettled markets conditions on Monday as they navigated a very uncertain economy. Moody's downgraded the United States' credit rating from "Aaa to "Aa1 on Friday. The company cited rising debt and interest rates "that are substantially higher than similar rated sovereigns". Later in the day several Fed officials will be speaking, which could provide further insight into the economy and central bank policy. The markets are currently pricing in a rate cut of at least 53 basis point this year. Spot silver dropped 0.3%, to $32.25 per ounce. Platinum rose 0.3%, to $1,000.71. Palladium fell 0.1%, to $973.74.
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Asian stocks are rising as traders consider US debt and trade deals
Asian stocks rose Tuesday, while U.S. Treasury rates steadied. This gave the dollar a little breathing room as investors weighed the debt burden of the largest economy in the world and waited for trade deals. Moody's downgraded its rating of U.S. sovereign debt last week due to growing concerns over that nation's $36 trillion in debt. This led to a sell-off on Treasuries Monday, but this stabilised during Tuesday's Asian trading hours. Kyle Rodda is a senior financial analyst at Capital.com. He said that the Moody's downgrade had only a short-term impact and was of little significance in the larger picture. "But we aren't really getting any fresh news to invest in... We haven’t received any new deals." Analysts say that markets struggle to find direction as there is little sign of trade agreements on the horizon. The 30-year bond rate was 3.5 basis point lower at 4,906%, after reaching a 18-month high 5.037% during the previous trading session. The major U.S. indexes recovered quickly from an early loss and ended mostly flat. The MSCI index for Asia-Pacific stocks outside Japan, which includes all shares traded in the region, is now 0.36% higher and hovering around the seven-month-high reached last week. Japan's Nikkei rose 0.65% early in the morning. Chinese stocks opened unchanged after the central bank cut lending rates benchmark for the first since October. Five of China's largest state-owned banks lowered their deposit rates as well. Hong Kong's Hang Seng Index grew 1%, while the blue-chip index rose by 0.15%. U.S. Federal Reserve officials reacted cautiously to the implications of Moody's downgrade, and the unsettled conditions in the market as they navigated an uncertain economic climate following the U.S.'s erratic trade actions. Although not an immediate issue for the Fed higher borrowing costs linked to a deteriorating U.S. Financial Position could make credit more expensive and cause restraints on economic activity. The U.S. Central Bank has cut interest rates twice this year compared to four times last month, when Donald Trump's tariffs shook the markets and caused investors to sell U.S. assets. Charu Chanana is the chief investment strategist of Saxo in Singapore. She said that for now, U.S. exceptionalalism and corporate resilience offsets risks. How long will it be before investors demand a higher premium for risk, with the Fed still in a wait-and see mode and trade negotiations seemingly stagnating? The markets will monitor a U.S. Congress debate on a tax law later that day. Trump is expected to attend the event ahead of the vote later this week. The measure would extend Trump’s 2017 tax cuts, and could add up to $5 trillion in national debt in the next decade. Investors are also watching for the Reserve Bank of Australia to make a decision on policy, as interest rate cuts are widely expected. The Australian dollar was slightly weaker, at $0.64485. Oil prices in commodities were mixed, as investors worried about a possible breakdown of talks between the U.S. & Iran over Iran's nuclear activities and the weakened prospect of Iranian oil entering the market. (Reporting from Ankur Banerjee in Singapore and Johann M. Cherian; Editing by Christopher Cushing).
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In the Pertamina case, Indonesia contacts trading firms in Singapore
It was announced on Monday that the Indonesian Attorney General's Office had contacted a number trading firms in Singapore about a corruption probe involving Pertamina. In the first half of this year, a number of Pertamina subsidiaries executives were arrested for alleged corruption in relation to oil imports from 2018 through 2023. This allegedly caused state losses of $12 billion. Pertamina apologized publicly and promised to improve the transparency after the arrests. Harli Siregar, a spokeswoman for the Attorney General's Office said that investigators want to speak with some Singapore trading firms about the case. Siregar stated that earlier attempts to summon these companies to Jakarta, whose names were not disclosed, failed. Therefore, the companies may be questioned in Singapore. Siregar declined to provide any further details. "These companies will also be questioned in order to gather more evidence for the ongoing investigation," he said. In response to an inquiry for comment, Fadjar Santoso, a Pertamina spokeswoman, said: "We respect and support the Attorney General's Office's investigation and law enforcement activities in accordance with the applicable regulations." Four sources familiar with the matter said that at least four trading firms have received a request to help with the investigation by Singapore's Corrupt Practices Investigation Bureau. They asked not to be named due to the sensitive nature. CPIB didn't immediately respond to an inquiry for comment. Bloomberg reported earlier that Singapore trading companies had been approached as part of the investigation. The Indonesian Attorney General's Office has said that it has interviewed hundreds of witnesses as part of the investigation.
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Sources say that RPT-Shanghai Exchange is looking to open up domestic nickel contracts to foreigners in this year.
Two sources familiar with the matter have confirmed that the Shanghai Futures Exchange is looking at opening its domestic nickel contract to foreign investors in this year instead of launching a new contract on its International Energy Exchange. ShFE has been exploring a more internationally-accessible nickel contract since at least 2023 as part of broader plans to build its global presence and challenge the dominance of rival the London Metal Exchange (LME). ShFE, according to industry sources, also wants to provide an alternative to LME Nickel after the trading disaster in March 2022. The LME contract had been suspended for eight consecutive days and left the industry without global benchmark pricing for the metal that is used in electric vehicle batteries and stainless steel. Two other attendees, who spoke on the condition of anonymity, said that ShFE will hold a two-day metals industry meeting in Shanghai this Thursday and Friday where nickel contract plans as well as other topics will also be discussed. The LME Asia Week, which concludes on Wednesday, is bringing together a large part of the global metals sector. Sources with knowledge stated that plans are being considered to open ShFE's existing domestic nickel contract to foreign institutional investors registered in China under the Qualified Foreign Institutional Investor Programme (QFII). QFII status allows the international market trade Chinese markets. A broker source told us that China has around 900 QFIIs. About 200-300 companies registered since September 2022 are primarily interested in commodities. In February ShFE opened a number of futures products, including stainless steel and petroleum fuel oil, to QFII Investors. When contacted by the reporter, a senior ShFE official refused to answer any questions about this topic. After hours, ShFE did't immediately answer questions sent by email. China Securities Regulatory Commission would have to approve any launch of domestic exchanges. According to a source familiar with its thinking, the commission has been encouraging exchanges to introduce international futures contracts in order to attract foreign investors. The market confidence was shaken by 2022, when the nickel price rocketed above $100,000 per metric ton. On March 8, the LME canceled all nickel trades for which the hedge fund Elliott Associates sued it. CME and ICE are also looking at cash-settled nickel derivatives, while Abaxx Technologies has launched a nickel sulphate contract this year.
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Perpetua Resources has received the final federal permit to develop Stibnite Gold Project
The U.S. Army Corps of Engineers has issued the final federal permit to Perpetua Resources for its Idaho antimony-and-gold Stibnite Project. In March, President Donald Trump used emergency powers to increase domestic production of vital minerals. This was part of an effort to counter China's near total control of this sector. The White House announced in April that it would expedite the permitting process for 10 mining projects throughout the United States as part of President Donald Trump’s efforts to increase critical minerals production. The Pentagon-backed project would be the first antimony mine in the country. Its estimated reserves are 148 million pounds, and the metal is used for bullets, tanks, flame retardants, and alloys in electric vehicle batteries. China is expected to account for almost 60% of global antimony production by 2024. The United States banned the export of the metal in December of last year. This has led to calls for increased domestic production. The project of Perpetua, which supplies copper, antimony, and other minerals, was given FAST-41 status. This is a federal initiative that launched in 2015 for streamlined approvals. "We think that the commitment of this administration to boost efficiency without compromising strict environmental standards could have a transformative impact on American mining," stated CEO Jon Cherry. The U.S. Army Corps has been involved in the interagency review of Perpetua’s Section 404 Clean Water Act permit application since 2017. It began formally evaluating Perpetua’s Section 404 Clean Water Act permit in 2023. The company stated that it will now focus on obtaining the state permits, and the project financing required to start construction. (Reporting and editing by Alan Barona in Bengaluru. Pooja Meon is based in Bengaluru.
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Treasury yields increase, dollar falls amid fiscal concerns following US downgrade
The dollar weakened on Monday as the yields of longer-dated Treasury bonds rose, amid worries about the U.S. government's debt and the tax cut bill following Moody's decision to downgrade the country's credit rating. The major U.S. stock indexes recovered early losses and ended the day in a flat or slightly higher range. Moody's Investors Service lowered the United States' sovereign rating to triple-A late on Friday night, underscoring the country's worsening fiscal outlook. A key congressional committee approved the massive tax-cutting bill of U.S. president Donald Trump on Sunday. Republicans in the U.S. House of Representatives, who currently control it, will push for the bill's passage this week. The yield on 30-year Treasury bonds reached a high of 18 months before reversing. Investors are concerned that tax bills will increase debt loads by more than expected. The 30-year bond rate rose 3.7 basis points, to 4.934%. It had previously reached 5.037% - the highest level since November 2023. The yield on the benchmark 10-year U.S. notes increased 3 basis points, to 4.469%. It had earlier reached 4.564%. What Moody's has done is more symbolic than anything. Peter Cardillo is the chief market economist of Spartan Capital Securities, a New York-based brokerage. Yes, the yields have risen in response to news reports... "But they're moving up also for other reasons," he said. "In general, the stock market (has) not really reacted all that much to Moody's' announcement. It's more of a market that has risen and is trying to consolidate recent moves. Moody's downgrade follows similar actions by Fitch and Standard & Poor's, both in 2011. Scott Bessent, the U.S. Treasury secretary, used Sunday's television interviews to dismiss this downgrade. Several Federal Reserve officials commented on the U.S. market on Monday following the downgrade. John Williams, New York Fed president, said that investors were "clearly weighing" their options at a Mortgage Bankers Association conference in New York. He said that investors still see the U.S., "including Treasuries and fixed income assets" as a "great place to invest." The Dow Jones Industrial Average rose by 137.33, or 0.32 percent, to 42.792.07. The S&P 500 gained 5.22, or 0.09 percent, to 5,963.60, and the Nasdaq Composite increased by 4.36, or 0.02 percent, to 19,215.46. On Friday, the S&P 500 posted its fifth consecutive day of gains. MSCI's global stock index rose by 1.77 points or 0.20 percent to 882.39. The pan-European STOXX 600 rose 0.13% while Europe's broad FTSEurofirst 300 rose 2.80 points or 0.13%. MSCI's broadest Asia-Pacific index outside Japan fell by 0.5%. A mixed bag of Chinese economic data revealed a struggling economy. The U.S. Dollar fell, reaching a low of more than a week against the safe haven currencies, including the yen and Swiss franc. The dollar fell 0.55% against the Japanese yen to 144.82. Trump's tariffs war has weakened consumer sentiment. Analysts will be looking at Home Depot and Target earnings this week to get an update on trends in spending. Home Depot will report Tuesday morning before the opening bell. Trump said that Walmart would be forced to raise prices because of the levies if it didn't "eat the tariffs". Raphael Bostic, Atlanta Fed president, told CNBC Monday that the central bank might only be able reduce interest rates by one quarter point for the remainder of the year due to concerns over rising inflation caused by increased import taxes. The Group of Seven Democracies' finance leaders will try to show unity this week when they meet on topics other that Trump's tariffs. These include economic security, Ukraine, and artificial intelligence collaboration. The oil price ended up slightly higher, as the Moody's downgrade was offset by signs of an impasse with Iran in U.S. nuclear talks. Brent crude futures increased 13 cents, settling at $65.54 per barrel. U.S. West Texas Intermediate crude increased 20 cents, settling at $62.69 per barrel. Gold prices rose, with spot gold rising 0.9% to $3,229.51, while U.S. futures gold settled 1.5% higher, at $3233.5.
Stocks of arms companies soar after the German parties' defense sea change
After reports that the next likely government would be considering a major fiscal overhaul for Europe's largest economy, Europe's defense stocks surged.
Shares of defence contractors such as Thyssenkrupp Hensoldt Renk Rheinmetall BAE Systems, Leonardo, and Hensoldt rose by double digits after news broke that the Social Democrats and Conservatives, who won the elections, were considering debt-financed funds for infrastructure and defence worth under one trillion euros.
No one has confirmed the existence of a 400 billion euro fund for defense and infrastructure, which could be as high as 500 billion dollars. This would equal 20% of German GDP.
Senior officials on both sides spoke of urgent needs.
Matthias Miersch, SPD General Secretary, said on Monday that "there is a huge need for investment. We won't be able to create consent if we only invest in defense." "The two must be considered in tandem."
The talks are the latest result of the United States' cool attitude towards backing up Europe's defense since President Donald Trump returned the White House. Friday's confrontation between Trump and Ukrainian president Volodymyr Zelenskiy was a dramatic example.
In a note, Deutsche Bank stated that even if the money was spent over ten years, it would still be as much as East Germany has invested since reunification. It would be a fiscal system shift of historical proportions.
Bild reported that an extra session of the parliament could be called next Monday. This would allow for the measure to pass with the support of the Greens.
The Left Party, which is skeptical of defence, will need to be supported in order to achieve the two-thirds requirement.
Germany has lagged behind in defence for decades. It will spend less than NATO's 2% target on defence until 2023, despite the Russian invasion of Ukraine, and Chancellor Olaf Scholz’s "Zeitenwende", or sea change, only producing modest results.
The use of the special fund, which is essentially a credit line, reflects the difficulty in circumventing the constitutional spending cap. This limit limits the amount that German governments can borrow each year.
The stock price explosion reflects investor confidence in the fact that manufacturers of military vehicles, ammunition, and other battlefield equipment will reap the benefits.
Scholz's prior attempts to increase military spending relied also on a separate fund, which is formally separated from Germany's public spending of 2 trillion euros.
It's a tricky legal situation: A court ruling against the use of another fund led to the fall of his government, and he lost the election last month. The state auditor wants their use to be restricted.
Deutsche Bank stated that the economic impact of the Defence Fund would be minimal in the short-term, as much of it will be spent on imported goods.
A larger impact would be made by the infrastructure fund. Years of frugal spending have left Germany's public sphere in a poor state.
The Deutsche Bank stated that the fiscal stimulus could be worth as much as 2% of GDP if they were spent over a period of 10 years. (Reporting and Editing by FriederikeHeine and Angus MacSwan, $1 = 0.9602 Euros)
(source: Reuters)