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Trump's reversal on emergency oil reserves is not without merit: Bousso
Trump's budget drastically reduces the planned expenditure on SPR Stocks of emergency supplies at 56% capacity Trump has pledged to fill the storage "right to top" Ron Bousso LONDON, 10 July - The signature budget bill of U.S. president Donald Trump slashed the funding for replenishing U.S. oil reserves in an emergency, breaking his earlier promise to "fill them right to the top". This sudden change of heart raises questions about whether the U.S. needs its Strategic Petroleum Reserve. When full, the American SPR can hold 714,000,000 barrels of oil, which is equivalent to 35 days' worth of U.S. consumption. According to data from the government, it only contained 403 million barrels as of July 4. This is far below 2010's record of 727 millions barrels. In July 2023, SPR levels fell to their lowest level in 40 years. This was after Trump's predecessor Joe Biden made several SPR sales in order to lower rising oil prices. At current benchmark U.S. oil prices, filling the SPR up to capacity would be over $21 billion and take many years. The "Big Beautiful Bill", which Trump signed on July 4, reduced the planned spending for SPR repurchases between 2025-2029 to $171 millions, down from $1.3 billion. Another $218 million was earmarked for maintenance. Trump stated on July 1, that he plans to fill up the SPR when market conditions are favorable. Congress could theoretically allocate additional funds for oil purchases. Does the United States need to replenish its enormous oil reserves? Answer: Probably not, considering the dramatic changes that the energy sector in the United States has experienced over the past few years. NET EXPORTER SPR was created in 1975 by President Gerald Ford to address supply disruptions as a response to the Arab oil embargo imposed by members of the Organization of Petroleum Exporting Countries on Western governments that supported Israel during the Yom Kippur War in 1973. The oil embargo imposed by Arab members of the Organization of Petroleum Exporting Countries on Western governments supporting Israel in 1973 Yom Kippur War led to severe fuel shortages, and an increase in oil prices that quadrupled. The SPR was created in 1974 at the same time as the International Energy Agency, which had the goal of coordinating the energy security of Western governments, including by implementing a mechanism of collective action to respond to disruptions of supply. The IEA requires that member states including the United States hold strategic reserves of at least 90 days' worth of net crude oil imports and refined products. However, countries who export more oil than import are exempt from this requirement. In October 2019, the United States became the net exporter for crude oil and refined products, for the first since 1973. This historical shift was largely due to the rapid increase in shale drilling in the U.S. which has made it the top oil producing country in the world in 2018. According to IEA data, the U.S. is expected to produce 13.5 million barrels of crude oil per day in 2018. This will be a new record. According to the IEA, U.S. crude oil and refined products such as gasoline, diesel and other fuels will reach new records in 2024. They are expected to be 4.1 million bpd apiece and 6.6 millions bpd respectively. The U.S. exports of fuels and crude oil will be 2.3 million barrels per day in 2024. What is 'Right to the Top'? It is unlikely that the United States will completely abandon its emergency energy reserves even though it is no longer required as a net oil exporter to keep reserves. The country imports significant amounts of crude oil primarily due to its quality standards. Last year, it imported 6.6 millions bpd of crude oil. Over half came from Canada. The U.S. imports refined products to areas with limited refinery capacity. The SPR website states that the SPR is a "significant deterrent against oil import cuts and a key instrument in foreign policy" because of its size. The SPR could also be seen by some as a symbol of American pride and power, as part of Trump’s vision for American energy dominance. The country's abundant domestic crude production, extensive refinery operations, and decreasing reliance on imported fuel mean that Trump and any future administrations do not need to rush to fill up emergency storage. Global energy markets have been dominated by the scale of buying-and-selling involved in managing these huge storage facilities. Reduced size of America's storage facilities could have a major impact on oil price. You like this column? Open Interest (ROI) is your essential source for global commentary on financial markets. ROI provides data-driven, thought-provoking analysis. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X.
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Greenergy wants to close the Immingham Biodiesel Plant, putting 60 jobs at Risk
Trafigura, a global commodity trader, said that its UK-based Greenergy biofuel producer will consult with employees about closing the biodiesel factory in Immingham. A spokesperson said that the consultation process will affect 60 jobs. This would be the latest blow to Britain's fuel sector, just a week after Lindsey's oil refinery owner Prax declared insolvency and put 420 jobs on the line. Greenergy closed down the plant at the end May and placed it in strategic review, citing the "unsupportive market conditions" despite having "implemented significant cost-reduction measures". The plant was negatively affected by the company Trafigura acquired last year. It said that UK biofuel mandates were slower than those of other European countries and also due to competition from U.S. imports. Adam Traeger, Greenergy's CEO, said that "in light of continued market pressures we do not have sufficient certainty about the future outlook for UK policy on biofuels to make the significant investments required to create an operation competitive at Immingham." Greenergy's Immingham facility supplies about a quarter (25%) of UK biodiesel. It is one of three plants that Greenergy operates, along with its facilities in Teesside and Amsterdam. The Greenergy plant in Immingham, for example, converts waste oil into biodiesel. This is blended with conventional diesel fuel to reduce emissions and replace some fossil fuels. (Reporting and editing by Barbara Lewis; Robert Harvey)
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Climate body: Tibetan glacial lake discharge caused deadly floods in Nepal
A regional climate monitoring organization said that the flooding in Nepal's Bhote-Koshi River, which killed nine people this week and left over two dozen others missing, was caused by the draining of an supraglacial water in Tibet. After Tuesday's floods, which washed the 'Friendship Bridge,' linking Nepal and China, at least 19 people remain missing, including six Chinese employees of the Beijing-backed Inland Container Depot. China's official Xinhua News Agency has reported that 11 people are missing on the Chinese border. Satellite imagery from Kathmandu's International Centre for Integrated Mountain Development said the flood was caused by the draining of a lake north of Nepal’s Langtang Himal range. Sudan Maharjan is a remote-sensing analyst at ICIMOD and an expert on glaciers. He said, "This is based upon the preliminary analysis based off of the satellite images available." Surrounding debris-covered glaciers can form a supraglacial pond. Experts say that it often starts as a small meltwater pool, which then expands and merges to form a large supraglacial lakes. Saswata Sannyal, a second ICIMOD official said that such events are increasing at a "unprecedented pace" in the Hindu Kush Mountains, which span Afghanistan, Bangladesh Bhutan, China India Myanmar Nepal Pakistan. Sanyal stated that "we need to dig deeper into the triggers which are resulting cascading effects." Nepal's mountainous region is susceptible to climate change effects such as extreme weather patterns, inconsistency of rainfall, flash flooding, landslides, and glacial lake floods. The early monsoons this year have caused deadly damage in Nepal. At least 38 people are dead or missing in Nepal since May 29. This is according to the National Disaster Relief, Reduction and Management Authority. Reporting by Gopal sharma; editing by Raju Gopalakrishnan
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Investors unfazed with Trump's tariff moves, Asian shares are up on Nvidia.
Asian stocks rose on Thursday on the back of optimism following Nvidia's rise to a record $4 trillion valuation. Investors also shrugged off President Donald Trump's recent tariffs. U.S. Copper Futures increased their premium over the London benchmark overnight, after Trump announced his plans to impose 50% tariffs on copper. Later, on Wednesday, he said that the tariffs would be in effect from August 1. Trump's trade anger also turned against Brazil on Wednesday, as he issued notices of tariffs and threatened a 50% punitive tariff on Brazilian exports to the U.S. The recent moves have not caused much of a stir in the markets. MSCI's broadest Asia-Pacific share index outside Japan is up 0.4%. The Nikkei Index fell by 0.6%. China's blue-chip CSI300 index increased by 0.4%, and Hong Kong’s Hang Seng Index gained 0.1%. The FTSE Futures and EuroStoxx 50 Futures both gained 0.4%. Nvidia, a designer of artificial intelligence chips, became the first company in the world to reach a market cap of $4 trillion on Wednesday. This solidified its position as arguably one Wall Street's favourite stocks. Chipmaker Disco, with a 4.3% increase in value, was the biggest gainer in Japan. U.S. Stock Futures Weakened in Asia on Thursday. Nasdaq and S&P 500 Futures each fell about 0.2% after both indexes had closed higher overnight. Jeff Ng of SMBC, Asia macro strategy head, said that investors are "numb" about the constantly changing situation. "They know there is still room to negotiate." Many of these announcements start with impressive numbers but are not final and are subject to change. "Even if implemented, these changes could be reversed within the next few months or even a year," said he. Expectations of Federal Reserve rate reductions later in the year also kept stocks supported. The minutes of the Fed meeting held last month showed that "most participants" expected rate cuts to occur later this year. Any price shocks from tariffs are expected to be "temporary and modest". Ng stated that markets do not currently price in a large chance of a full blown recession, as the labour market is still quite resilient. However, they are aware that there is a lot pressure on policy rates to drop, which could reduce the opportunity costs of holding stocks. DOLLAR EASES The dollar fell against the euro on Thursday, but held its own against yen, at 146.27. This was after Trump imposed 25% tariffs on Japan earlier in the week. The euro rose 0.17%, to $1.1742. Sterling gained 0.11%, to $1.3605. The Brazilian real was an exception, as it sank to a low of 5.5826 dollars per Brazilian real in response to Trump's threat of tariffs on Latin America's biggest economy. Julia Wang, Global Market Strategist at J.P. Morgan Private Bank, said: "Despite the S&P 500’s impressive rally the U.S. Dollar continues to retreat. This highlights a changing global macro narrative." We believe that the dollar is still 5-15% undervalued. We expect further weakness as cyclical trends and capital reallocation play out. Bitcoin was near its record high at $111 085, ether rose 1.3% to $2 779. "We are seeing our clients adopt a more measured strategy, investing in cryptocurrencies that have real utility rather than chasing short-term movements. Bitcoin is still the most popular choice on OKX Singapore's platform," stated Gracie Lin. Brent crude futures fell 0.16% on Thursday to $70.08 a barrel. U.S. crude dropped 0.22% to $68.02 a barrel. Spot gold increased 0.3% to $3322.69 per ounce.
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Demand for oil is skewed by Trump's tariffs
The oil prices fell on Thursday, as market participants viewed the latest tariff announcements from U.S. president Donald Trump as a threat against global economic growth. However, signs of strong U.S. gas demand helped to limit losses. Brent crude futures fell 3 cents to $70.16 per barrel at 0401 GMT. U.S. West Texas Intermediate Crude lost 6 cents, to $68.32 per barrel. In a recent note, Kpler, an analytics firm, noted that the geopolitical risks premiums had diminished with the Israel-Iran ceasefire. After a public spat, Trump threatened to impose a 50% penalty on Brazil's exports to the U.S. Trump had announced tariffs for copper, semiconductors, and pharmaceuticals. His administration also sent tariff letters to Iraq, the Philippines, and other countries. These letters were added to more than a dozen that his administration issued earlier this week, including to U.S. powerhouse suppliers South Korea, and Japan. Minutes released by the Federal Reserve on Wednesday show that policymakers are still concerned about inflationary pressures caused by Trump's tariffs. Only "a few" officials said they thought interest rates could drop as early as this month. The cost of borrowing increases with higher interest rates, and the demand for oil decreases. The Energy Information Administration reported on Wednesday that the rise in crude oil stocks and declines in gasoline and distillate stockpiles last week helped support prices. The EIA reported that gasoline demand increased 6% last week to 9.2 millions barrels per day. J.P. Morgan stated in a note to clients that global daily flights averaged 107,600 during the first eight days in July. This is an all-time record. Flights in China reached a peak of five months, and port and cargo activities indicated a'sustained growth' in trade activity from last year. The note stated that "year to date, the global oil demand has grown by an average of 0.97 million barrels a day, which is in line with our prediction of 1 million barrels a day." Tony Sycamore is an analyst with IG. He said that there are doubts about the increase in production quotas recently announced by OPEC+, since some members have already exceeded their quotas. He said that "others, such as Russia, are unable meet their targets because of damaged oil infrastructure." OPEC+ producers will approve a big increase in output for September as they finish both the unwinding and the United Arab Emirates moving to a higher quota.
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MORNING BID EUROPE - Markets not shaken by Trump's tariffs
Rae Wee gives us a look at what the European and global markets will be like tomorrow. The price movement of stocks in recent days has shown that investors have become less interested in Donald Trump's tariffs. Asia shares rose on Thursday, riding the wave of Nvidia's quick rise to $4 trillion in valuation. Futures indicated similar gains for Europe in the afternoon. On Wednesday, the U.S. president launched his tariff attack into overdrive. He announced a new tariff of 50% on U.S. imports of copper and a duty 50% on Brazilian goods. Both duties will begin on August 1. The Brazilian real and copper prices fell in Brazil and London, but there was little impact on other markets. Bitcoin was still near its record high, and the dollar dropped as investors took on more risks. They chose to ignore the Trump headlines. Money managers and analysts used the words "desensitized" and "numb", but it is unclear how long they will continue to use them. Investors are waiting to see the progress on a deal between U.S.A. and European Union. Trump said that he "probably" would tell the EU what rate they could expect to receive for their exports to the U.S. soon, and added that the 27-nation group had become more cooperative. EU Trade Chief Maros Sefcovic stated that good progress was made on a trade framework agreement, and a deal could be reached within a few days. Trump's latest delay in implementing tariffs has given hope to Japan, South Korea, and the European Union, that deals could be made to reduce duties. However, some exporters, such as South Africa, are confused and have no idea what to do next. Investors are taking the news with a smile and have little reason to panic. They put their trust in "TACO", an acronym for Trump always chickens out. The following are key developments that may influence the markets on Thursday. Weekly U.S. jobless claims Alberto Musalem and Mary Daly, Federal Reserve speakers Are you trying to stay up-to-date with the latest news on tariffs? Our daily news digest provides a quick overview of the most important headlines that impact global trade. Tariff Watch is available here.
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Top negotiator: Indonesia and US are looking to expand their partnership on critical minerals after a 'positive meeting'
The meeting between Indonesia and the United States in Washington over the impending tariffs was "positive", Indonesia's chief negotiator told reporters on Thursday. Both countries are exploring a broader partnership in the vital minerals sector. The U.S. has imposed a 32% duty on Indonesia, the largest economy in Southeast Asia. This is due to its strategic importance for global trade. Airlangga Hartarto, the chief negotiator of Indonesia and its economic minister, said that he had met Commerce Secretary Howard Lutnick as well as U.S. trade representative Jamieson Greer on Wednesday in Washington. Airlangga’s ministry stated on Thursday that they discussed tariffs, nontariff barriers, and commercial partnerships. They added that both countries would intensify their talks in the coming three weeks. "We have an agreement with the U.S. on the same lines regarding the discussions. Airlangga stated in a statement that we would make every effort to conclude these negotiations according to the principle of mutual benefits. Indonesia and the United States have set their sights on a larger partnership in the crucial minerals sector of the former, citing Airlangga’s Ministry's large nickel, cobalt and copper reserves. Indonesia is the G20's largest economy. It is the world's leading exporter of palm and tin oil, as well as a major metal producer. Indonesia has been a key player in the trade talks. Proposed slashing It offered to reduce the duties on American goods to almost zero, and to increase U.S. investments and purchases in the country. This would amount to about $34 billion Recently, several Indonesian companies signed agreements with their counterparts in the United States to increase their purchases of energy, wheat, corn, and cotton. (Reporting and writing by Bernadette Cristina and Ananda Terresia, with editing by David Stanway.)
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Empire Energy, Ellevo Set Up Joint Offshore Wind Lifting and Transport Unit
Empire Energy and Ellevo Group have launched a strategic joint venture for offshore wind lifting and transport consultancy services to meet the evolving demands of the offshore wind industry across the globe.The collaboration combines Empire’s hands-on operational experience with Ellevo’s technical expertise to enhance project delivery in the lifting and transport consultancy sector.Operating under the name Empire Energy – Ellevo (e³), the joint venture provides coordinated solutions for lifting and heavy transport operations across the offshore wind project lifecycle.From Pre-FEED and FEED studies through to marshalling, pre-assembly, commissioning, and operations and maintenance, it integrates engineering assurance with on-the-ground delivery experience.The joint venture is focused on supporting clients with early-stage constructability reviews, engineered lift planning, lifting operations management, inspection and verification, third-party assurance, and specialist consultancy services.“This joint venture marks a pivotal moment for both organizations. With Empire Energy’s operational footprint and Ellevo Group’s specialized engineering expertise, we are uniquely positioned to deliver next-generation lifting and transport consultancy services across the energy and infrastructure sectors,” said Jordan Kelly, Managing Director of Ellevo Group."At Empire, our strength has always been in delivering offshore wind managed services with precision, reliability, and scale. This joint venture with Ellevo brings in world-class engineering, lift planning, and assurance capabilities that perfectly complement our operational expertise. It’s a powerful combination that reinforces our position as a trusted delivery partner in the sector,” added Mike Milledge, President of Empire Energy.
China's Xi signss treaty to enhance ties with Central Asia
China's President Xi Jinping has signed a treaty that will strengthen ties with Central Asian countries. Beijing is looking to deepen its cooperation with this resource-rich area in the areas of trade, energy, and infrastructure.
Beijing has intensified its efforts since Russia invaded Ukraine to strengthen economic ties with Central Asian countries, which are traditionally in Russia's spheres of influence. This is due to their strategic location and abundant energy resources.
Xinhua, the official news agency of China, reported that at a regional summit held in Astana, Kazakhstan's capital, Xi hailed a landmark by signing a treaty establishing "permanent friendship and good neighbourliness" with leaders from Kazakhstan, Kyrgyzstan and Tajikistan. Turkmenistan, Uzbekistan and Turkmenistan also signed the document.
This week's summit is the second of its kind, after the pompous inaugural meeting in Northwest China in 2023. Both times, the summits coincided with G7 meetings.
"At the moment, the world is undergoing accelerated changes, unseen for a century. We are entering a period of turbulence, and transformation," Xinhua reported Xi saying during a speech to the summit.
"Trade Wars and Tariff Warfare Produce No Winners, and Unilateralism, Protectionism, and Hegemonism will harm others as well as oneself," he stated, in an apparent jab at the United States, which had escalated tariffs against Beijing.
"China is prepared to work with Central Asian nations to safeguard international justice and oppose hegemony and power politics," Xi stated.
He also promised 1.5 billion yuan (208.86 millions) in grant aid to Central Asian countries to support their livelihoods and development projects this year, and called for greater cooperation in areas such as trade, minerals, and agriculture.
Beijing is keen to consolidate its relations with regional partners despite a truce in trade with the U.S.
China's bilateral trade with five Central Asian nations reached a record of 286.42 billion yuan during the first five month this year. This represents a 10.4% increase year-on year, according to Xinhua, citing Chinese Customs.
Turkmenistan is the only Central Asian country with a surplus in trade with China. Turkmenistan is a major natural gas supplier to China. Kazakhstan and Kyrgyzstan have trade deficits in the tens or billions of dollars with China.
ENERGY AND MINERAL COOPERATIONS
According to the summaries published by the Chinese Foreign Ministry, Xi requested expanded cooperation with regional leaders in the areas of natural gas, minerals and international railway.
In meetings with the Uzbek and Kyrgyz presidents on Tuesday, he urged progress on the China-Kyrgyzstan-Uzbekistan railway, an overland route bypassing Russia
Since the 1990s, the project has been in the spotlight. However, it gained renewed importance when the sanctions against Russia led to shippers from China and Europe not sending their goods through Russia.
In the event that other routes are disrupted, China can use alternative routes to obtain fuel and food.
The Central Asia route may help reduce the time it takes to transport freight between China and Europe in the future.
In a separate discussion with Turkmen President Serdar Berndymukhamedov Xi stated that "both sides must expand the scope of natural gas collaboration, explore cooperation outside of resource fields, and optimize their trade structure." $1 = 7.1818 Chinese yuan renminbi (Reporting and editing by Alex Richardson, Bill Berkrot and Ellen Zhang)
(source: Reuters)