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Russell: Crude oil prices fall as negative factors increase.
The crude oil market is now expecting a decline in prices. At the largest gathering of the industry in Asia, the discussion was more about timing rather than direction. The outlook for prices is the main topic of discussion and presentations at the annual APPEC Conference. This week was no exception. The market has changed and this year the bull was the least sighted amongst a sea full of bearish participants. The two factors that dominated APPEC, despite the fact that there are many other factors that influence crude oil prices were the decision of OPEC+ not to continue to unwind production cuts as well as the risk to the global economic system from the trade and geopolitical policy of U.S. president Donald Trump. First, there is the supply factor. The market expects OPEC+ to continue adding barrels as gaining market share has become a higher priority now than defending prices. The decision by the eight OPEC+ members to reduce their production on September 7, to 137,000 barrels a day (bpd), was largely viewed to be minor, and unlikely to change the balance of the market. What is significant is that it is expected that the producer group - which includes the top exporters Saudi Arabia, and Russia - will continue to grow their output through the first half 2026, and unwind the 1,65 million bpd in cuts since April 2023. They have already stopped an additional 2.2 millions bpd cut from November 2023. It is unlikely that all these barrels make it to the market. However, with the global demand growth forecasts convergent at a maximum 1 million bpd in this year and the next, OPEC+ are likely to add enough back to overwhelm the demand increase. Market consensus is heavily skewed towards an oversupply in the coming months due to the likelihood that non-OPEC output, particularly from the Americas outside the United States will also increase. Demand is also clouded by uncertainty, mainly due to the impact of Trump's tariffs on imports. The impact of raising the average tariff for goods imports to 18% from just under 2% varies, but there is a consensus that it will be a drag on the growth of the U.S. economy, and increase inflation in the U.S., while likely lowering inflation elsewhere. HIDDEN BULLS APPEC was not all gloom and doom. Some positive factors were also discussed. The bullish case depends on some things going better than anticipated, and others getting worse. The world economy is on the bright side, as it has been able to withstand the Trump attack largely unharmed. Consumer sentiment and spending are holding strong in developed economies, while developing economies continue to be able to attract trade and investment. The worst case scenario would be to take more aggressive and successful measures to reduce the flow to India and China of Russian crude oil, which are the only two major buyers of oil that have been sanctioned in an effort to end Moscow’s war against Ukraine. It is also possible that more effective measures could be taken against Iranian and Venezuelan crude oil. There is also the risk of an increase in tensions between Israel and Hamas, given the conflict. The risk premium on the crude oil market is in some ways largely determined by what Trump decides to do. Ironically, the only thing that the unpredictable and inconsistent U.S. president has consistently said is that he wants to lower oil prices. It is the fear of what he may do that keeps a risk premium on the market and helps to keep Brent futures around $65 per barrel. Unknown is also what strategies China's refiners will likely adopt in the coming months. The International Energy Agency recommends 90 days import coverage. They are storing as much as 600,000 barrels per day. China's stockpiles have been built largely due to discounted Russian barrels, and the lower prices for other grades of oil in the second quarter this year. The Chinese could be moving towards a view that oil prices should be more in the $50-$60 range and they may begin to reduce imports to encourage lower costs. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X and Twitter. Editing by Muralikumar Anantharaman
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Stocks are upbeat due to the prospect of Fed easing, which outweighs political uncertainties
Asia stocks rose Tuesday on the back of expectations that the U.S. will cut rates as soon as next week. However, political turmoil around world kept currency and bonds investors on edge. The broadest MSCI index of Asia-Pacific stocks outside Japan rose 0.7%. It took its lead from Wall Street, where the Nasdaq closed at a record-high overnight. Nasdaq Futures rose 0.06% last, while S&P500 futures also ticked upwards by 0.05%. European futures meanwhile eased as regional benchmark indexes recorded gains in the cash sessions on Monday. The EuroStoxx 50 futures declined by 0.2%. The FTSE and DAX Futures both fell 0.13% and 0.26% respectively. The expectation that the Federal Reserve will ease rates at its meeting next week after Friday's disappointing U.S. employment report gave new life to the rally in equities. Investors are betting on a 25 basis-point cut in this month's inflation figures. They are now focusing their attention on whether or not the Fed will deliver a 50-basis point move. Later in the day, the U.S. Labor Department is also expected to report an estimate of the preliminary revisions for the employment levels during the past 12 months up until March. Both publications will influence the central banks' pace on the monetary policy staircase, said Jose Torres senior economist at Interactive Brokers. He was referring to PPI and CPI data. A large subtraction of workers from the roster, coupled with a CPI that is below the target level, will likely increase the odds by a half percent to a coin toss. According to CME FedWatch, the markets now price in a chance of over 11% that the Fed will lower rates by 50bp during this month. This is up from zero a week earlier. Japan's Nikkei index surpassed the 44,000-mark for the first time. The yen was weaker and the fiscal hawk Shigeru Shiba resigned as Prime Minister. Ryosei Acazawa, Japan's chief tariff negotiator, said Tuesday in an X message that U.S. duties on Japanese products including auto parts and cars will be reduced by September 16. The Hang Seng Index in Hong Kong rose by 0.5% while the blue-chip index of China, CSI300, fell 0.7%. POLITICAL TURMOIL In recent sessions, the currency and bond markets have been shaken by renewed uncertainty about the political landscape in various countries. Investors had a lot to consider, from Ishiba’s resignation in Japan to French lawmakers voting to remove Francois Bayrou as Prime Minister, a crushing defeat of the ruling party of President Javier Milei in Argentina’s local elections to the sudden replacement for Indonesia’s Finance Minister. The dollar's decline was the only thing that capped losses in all currencies, and most bond markets are now largely stable. The yen last gained 0.3% at 147.05 to the dollar, recouping its previous losses, while the euro remained steady at $1.1772. After rising the previous session, yields on Japanese government bond fell on Tuesday. Bond yields are inversely related to bond prices. Shier Lee Lim is the lead FX and macrostrategist for APAC, at Convera. The yield on the two-year U.S. Treasury, which is usually a good indicator of near-term expectations, has been stuck at a low for five months, 3.5005%. The benchmark yield on the 10-year bond was also near its five-month low and stood last at 4,0512%. Oil prices rose on Tuesday as OPEC+ increased production less than expected by market participants. Brent crude futures rose by 0.73% to $66.50 a barrel. U.S. crude climbed 0.72%, reaching $62.71 per barrel. Gold spot reached a new record of $3,656.92 per ounce on the back of expectations of imminent Fed reductions.
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Palmetto gains for the third session in a row on stronger Dalian
Malaysian palm futures were little changed on Tuesday, as edible oils traded in Dalian and Chicago sideways. Market participants also awaited the Malaysian Palm Oil Board's (MPOB) data that was due the following day for clues about inventories and demand. By midday, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange for delivery in November gained 1 ringgit or 0.02% to 4,489 Ringgit ($1,067.28) per metric ton. A survey shows that Malaysian palm oil inventories will rise for the sixth consecutive month in august, as production continues outpacing exports, despite an improvement in demand. Darren Lim is a commodities strategist with Phillip Nova, based in Singapore. He said that traders are waiting for official data on supply, demand and stockpiles, which will be released by the MPOB within the next few days. Dalian's palm oil contract, which is the most active contract, was up 0.53%, but its soyoil contract was barely affected, only gaining 0.05%. Chicago Board of Trade Soyoil Prices fell 0.08%. As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils. The oil prices rose on Tuesday as OPEC+ increased production less than the market expected, and concerns about tighter supplies due to new sanctions against Russia also continued to support them. Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger. The palm ringgit's trade currency, the dollar, has eased by 0.21%, making the commodity more affordable for buyers who hold other currencies. Technical analyst Wang Tao believes that palm oil could test resistance around 4,506 ringgit for a metric ton. There is a high probability of it breaking through and moving up towards 4,568 ringgit. ($1 = 4.2060 ringgit)
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Morning bid Europe - Political turmoil is thick and fast
Rae Wee gives us a look at what the European and global markets will be like tomorrow. Politics is never quiet. In the last few days, British Deputy PM Angela Rayner, and Japanese Prime Minster Shigeru Ishiba resigned. French lawmakers voted Francois Bayrou out of office. The party of Argentinean President Javier Milei suffered a crushing defeat. And Indonesia replaced its longtime finance minister. Investors will be watching to see who President Emmanuel Macron appoints France's 5th Prime Minister in less than 2 years. Macron has not yet called a snap election. He appears to be set on appointing a new premier, perhaps a centre-left candidate. Macron's office has said that he will appoint a new president in the next few weeks. There are no specific rules about who he must select or when. In Asia, the euro has remained stable while French bond futures have barely moved. It is clear that political volatility can have little or no impact on the markets. Sometimes, though, it's huge. Investors in Indonesia are worried that the hard-fought fiscal credibility under President Prabowo Subito could be undermined by the populist spending plans. The rupiah has fallen more than 1%, and the yield of the 10-year government bonds has risen. After Milei's electoral defeat, the Argentine peso fell as much as 5,6% against the dollar. Investor sentiment in the broader markets remained positive on the prospect that the U.S. Federal Reserve will cut interest rates next week. The markets have already priced in a 25 basis point cut. Now, the question is whether or not the Fed can deliver a 50 basis point move. The preliminary revision estimate of employment for the year up to March, which will be released by the U.S. Labor Department on Tuesday afternoon, may provide clues ahead of the readings on consumer price inflation and producer prices later this week. The CME FedWatch tool indicated that a surprise to the downside in any of these figures could lead traders to price in an increased chance of a cut of 50 bp, which is currently just above 11%. The following are key developments that may influence the markets on Tuesday. The U.S. Labor Department has released its preliminary estimate of the employment levels for the period from March to December.
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Oil prices rise on modest OPEC+ production hike decision and Russia's supply problems
The oil prices rose on Tuesday as OPEC+ increased production less than the market expected, and concerns about tighter supplies due to new sanctions against Russia also continued to support them. Brent crude rose 35 cents or 0.53% to $66.37 a bar by 0335 GMT. U.S. West Texas intermediate crude rose 32 cents or 0.51% to $62.58 a bar. OPEC+ is a group of eight countries and their allies that have agreed to increase production by 137,000 barrels a day starting in October. This is a much smaller increase than the monthly gains of approximately 555,000 barrels per day for September and August and 411,000 barrels per day in July and Juni. This is less than what some analysts expected. In a Tuesday client note, Daniel Hynes said that the October move was "a reversal" of cuts which were to be in place until 2026. This follows the rapid return of barrels idled in recent months. Haitong Securities stated that despite the fact that OPEC+ has increased output faster this year than expected and the demand is once again below expectations from the beginning of the year, the looming oversupply on the crude market remains the main driver for prices in this year. The speculation that more sanctions would be imposed on Russia following the largest air strike by Russia on Ukraine, which set a Kyiv government building on fire, also helped to support prices. Donald Trump, the U.S. president, said that he is ready to implement a second round of restrictions. The top European Union sanctions official, along with a team experts from Washington, discussed what would be the very first coordinated transatlantic measure against Russia after Trump's return to office. Additional sanctions against Russia could reduce its oil supplies to the global market, which would support higher oil prices. Next week, the U.S. Federal Reserve’s Federal Open Market Committee will meet. Traders predict an 89.4% probability of a quarter point interest rate reduction. Lower rates can reduce borrowing costs for consumers and boost the economy. (Reporting from Anjana Anil and Sam Li in Beijing, edited by Christopher Cushing.)
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Orsted Gets Go-Ahead for $9.4B Emergency Rights Issue
Offshore wind developer Orsted won shareholder approval on Friday for a $9.4 billion emergency rights issue to help fund U.S. projects thrown into uncertainty by President Donald Trump's opposition to the renewable energy source.The stakes are high for the Danish state-controlled firm, which was once celebrated as a trailblazer in offshore wind but is now struggling to stave off a potentially crippling credit rating downgrade.Orsted, previously an oil producer under the name DONG Energy, transformed itself into a global renewables leader, increasing its market value five-fold between its 2016 IPO and 2021.But supply chain disruptions, surging interest rates, project delays, and Trump's anti-wind policies have battered the offshore wind sector, sending Orsted's share price tumbling by 85% from that 2021 peak.At the heart of the current drama are Orsted’s U.S. projects Sunrise Wind and Revolution Wind.Two-thirds of the new capital is earmarked for Sunrise Wind, a project that saw potential co-investors flee after the White House ordered Norway's Equinor EQNR.OL to halt a neighbouring wind farm in April.Last month, U.S. officials also issued a stop-work order for the nearly completed Revolution Wind facility, prompting the joint venture running the project to sue the administrationOrsted CEO Rasmus Errboe told Reuters the company is incurring weekly costs of nearly 100 million Danish crowns ($15.7 million) for its 50% stake in Revolution Wind, co-owned with Skyborn Renewables."We have extensive dialogue with all stakeholders in Washington and at the state level," CEO Rasmus Errboe told Reuters.He warned that costs could rise significantly by October if specialised vessels contracted to install the remaining substation and cables are no longer available within their contracted period, forcing Orsted to re-enter the market at potentially much higher rates.The stop-work order has also driven up costs for Sunrise Wind by 60 million to 70 million crowns per week, as Orsted uses the same vessel to install turbines for both projects.Adding to Orsted's troubles, low wind speeds in July and August and a delay to a project under construction off Taiwan prompted it to cut its 2025 operating profit outlook on Friday.The rights issue is critical for Orsted's survival and its ability to avoid a further credit downgrade.Ratings agency S&P Global, however, warned that the equity raise might only buy the company three to six months of relief before construction delays trigger renewed pressure."It's going to be a long, tough journey to reerect Orsted," company chair Lene Skole told shareholders.S&P already downgraded Orsted to BBB-, the lowest investment-grade rating, in August. Any further downgrade would push it into junk territory, complicating future financing.Norwegian energy firm Equinor, a 10% shareholder in Orsted, said it would invest up to 6 billion crowns ($941.2 million) into the rights issue.($1 = 6.3751 Danish crowns)(Reuters - Reporting by Stine Jacobsen and Jacob Gronholt-Pedersen in Copenhagen and Nora Buli in Oslo; additional reporting by Kate Abnett, editing by Jan Harvey and Joe Bavier)
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Halliburton Shrinks Workforce as Oil Activity Plummets
U.S. oilfield services provider Halliburton has been cutting staff in recent weeks, according to two sources familiar with the matter, marking the latest workforce reduction in the U.S. oil industry as it faces rising costs and a period of lower prices and volatility.Global benchmark Brent crude oil prices have dropped more than 10% this year amid uncertainty over global trade policies and as the Organization of the Petroleum Exporting Countries and allies raise output. U.S. oil company ConocoPhillips this week announced it would cut up to 25% of its staff to reduce costs.The scope of Halliburton's layoffs was not immediately clear.Halliburton has rolled out the cuts over several weeks, according to the sources, who were directly involved in layoffs but not authorized to speak publicly. At least three business divisions had lost between 20% and 40% of employees, the sources said.Halliburton, the third-largest global oilfield services company by revenue, did not respond to a request for comment.Oilfield services companies provide technical expertise, equipment, and labor, including drilling, to support oil and gas exploration and production.Houston, Texas-based Halliburton had 48,395 employees at the end of 2024, according to its latest annual report.The company in June said it expected a sharp decline in full-year revenue, as it warned of lower activity in the oil and gas sector. It posted a 33% fall in second-quarter profit this year amid weaker demand.On a conference call with analysts after reporting second-quarter earnings, CEO Jeff Miller noted the oilfield services market appeared very different than it did 90 days ago, citing a slowdown in North America and among large national oil companies elsewhere."To put it plainly, what I see tells me the oilfield services market will be softer than I previously expected over the short to medium term," he said.Brent crude was trading below $66 on Friday, down nearly 20% from this year's peak north of $82 a barrel in mid-January, as investors braced for the OPEC+ group's meeting on Sunday. Reuters earlier reported the group will consider raising output further at that meeting.(Reuters - Reporting by Liz Hampton in Denver and Shariq Khan in New York; Additional reporting by Arathy Somasekhar and Georgina McCartney in Houston; Editing by Rod Nickel)
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Iron ore rallys due to concern over Simandou supply and restocking of demand
Iron ore futures rose for the sixth consecutive session on Tuesday. This was due to growing concerns about the supply prospects of the massive Simandou project, in Guinea, and the expectation that demand will improve in the top consumer China. As of 0330 GMT, the most traded January iron ore contract at China's Dalian Commodity Exchange rose 2.53% to $809.57 ($113.57), a metric tonne. It reached its highest level since the 25th of July at 814 Yuan during the session. As of 0320 GMT, the benchmark October iron ore price on Singapore Exchange was 1.59 % higher at $107.1 per ton. The contract reached its highest level at $107.65 on February 25, earlier. Financial Review, Australia's Sunday newspaper, reported that Rio Tito may be forced to build refineries for Simandou ore. Simandou's iron ore project will have a production capacity of 120 millions metric tons and the first shipment is expected in November. This will put pressure on ore price in coming years. Analysts and traders said that the government's intention to process ore in Guinea may result in a reduction of the amount of ore exported, which would support prices. Analysts at Shengda Futures stated that the market also pays attention to the speed of the production resume during the peak season, and the subsequent restocking requirements for raw materials. Steel mills have slowly resumed production after a three-day suspension of production to allow for a military display in Beijing to mark the end World War II on September 3. Analysts at Jinrui Futures predicted that hot metal production would increase to a high level in the coming week, which will support ore demand. Analysts at Shengda said that shrinking margins and accumulated stocks of steel may reduce mills' buying appetite. Coking coal, coke and other steelmaking components rose by 0.35% and 0.433% respectively. The benchmarks for steel on the Shanghai Futures Exchange have advanced. The Shanghai Futures Exchange saw a rise in steel benchmarks. ($1 = 7,1231 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)
Bloomberg News reports that Anglo American is close to a deal with Teck Resources.
Bloomberg News reported Monday that Anglo American was close to a deal for the acquisition of Canadian miner Teck Resources. The report cited people who were familiar with the matter.
Separately, The Financial Times reported Monday that the potential acquisition could be valued at around $20 billion.
Reports said that the London-listed global mining company is considering paying a majority in stock and an announcement could be made as soon as this week.
The report said that the terms and timing of the agreement are still uncertain and the talks could collapse without an accord.
According to LSEG, Teck Resources is valued at approximately C$23.69 (about $17.17 Billion), while Anglo American's market value is around 26.82 Billion Pounds (roughly $35.35 billion), according to LSEG.
Anglo American, as well as Teck, have attracted interest in recent years from bigger rivals. Anglo rejected a $49billion takeover offer from BHP Group in the past year. Teck also turned down a $22.5billion full buyout from Glencore.
Glencore has said that it is still interested in Teck, the Canadian miner. If Anglo makes an approach, there could be a bidding war.
We could not verify the information immediately. Teck, Anglo American, and Glencore didn't immediately respond to requests for comment. ($1 = 1,3797 Canadian Dollars) ($1= 0.7378 Pounds) (Reporting and editing by Mohammed Safi Shamsi, Rashmi Anich and Dheeraj Misra from Bengaluru)
(source: Reuters)