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US judge declares defaulted Venezuelan bonds valid
On Thursday, a U.S. court upheld the validity and the 2020 bonds of Venezuelan oil company PDVSA. This led to the suspension of an auction of shares of the parent company of Venezuelan-owned U.S. refining firm Citgo. The bonds are secured by a majority stake in Citgo, which is ultimately owned by Caracas-headquartered PDVSA. The company defaulted in 2019 on the bonds, putting the refiner under threat of seizure from creditors. Since years, bondholders and companies expropriated by Venezuela have been fighting in U.S. courtrooms for the country's assets abroad, including Houston-based refiner Citgo Petroleum valued at $13 billion. Venezuela defaulted in the payment of those bonds and others issued by PDVSA and the country. After winning arbitration cases, several companies whose Venezuelan assets had been expropriated from them by the late president Hugo Chavez now seek to seize Venezuela's overseas assets. Citgo cut ties with PDVSA after Washington sanctioned it in 2019 to try and oust Venezuelan president Nicolas Maduro. The Venezuelan political opposition then took over the company's control. The opposition is trying to protect Citgo, and other assets, from creditors or companies that are seeking compensation for expropriated assets or defaulted debt. The opposition argued that 2020 bonds had not been issued in accordance with Venezuelan law. Katherine Polk Failla, U.S. district judge in Manhattan, ruled on Thursday that the bonds had indeed been issued properly. The bonds were declared valid by the judge in 2020. However, an appeals court ordered a further review. Failla's decision led to a brief suspension of a separate Delaware auction for shares in Citgo parent company, before U.S. district judge Leonard Stark. This was done to allow the court time to consider the implications of Failla’s ruling. Citgo, the 7th largest oil refiner in the United States, will likely be determined by the auction. 15 companies, including bondholders, are bidding for Citgo's assets. The auction includes a subsidiary from Gold Reserve, and Amber Energy, a division of Elliott Investment Management. Lawyers for Venezuela said in Stark's Stark courtroom earlier this week that they would appeal if the validity of 2020 bonds was confirmed. Sources close to preparations say that after Failla's decision, the boards overseeing Citgo met urgently with their lawyers in order to plan future action. The sale proceedings are now in their fourth week. The judge has yet to make key decisions regarding pending procedural questions or confirm the auction winner.
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Hyundai Motor will increase US production and trim profit margins on tariff hit
Hyundai Motor announced on Thursday that it will produce over 80% of its vehicles sold in the U.S. by 2030, in response to U.S. Tariff Policies. The South Korean automaker is ramping up capacity at their Georgia plant. In a press release, the automaker announced that it had lowered its target for 2025 operating profit to 6-7%. This was down from an earlier stated 7-8%. The company cited U.S. Tariffs as a reason. The company still expects its profit margins will improve to 7-8% in 2027, and 8-9% in 2030. Hyundai Motor and Kia Corp, the third largest automaker in the world by sales, announced that their Georgia factory would reach a production capacity of 500,000 cars a year by 2020, using a mixture of hybrids and electric vehicles. Jose Munoz said, on Thursday, at a Hyundai Motor investor day in New York that he hopes South Korea and the U.S. can work together to find solutions for short term business travel by specialised workers. Munoz stated that many of the workers detained were helping to calibrate and test advanced production technology in a facility supporting Hyundai's U.S. operation. Hyundai reported that 40% of the vehicles it sold in America, its largest market, which generates about 40% of revenue, were manufactured in America in this year. Shin Yoon Chul, an analyst at Kiwoom Securities, said that Hyundai's plan to produce 80% of its vehicles in the United States, which is the highest production in the industry, may later turn into a fixed cost burden. Shin said Hyundai would need to prove that maintaining U.S. manufacturing at this level makes sense even if the tariffs are removed. For example, by showing that after its Georgia factory breaks-even, humanoid robotics could be deployed there in order to further increase profitability. The automaker will also expand its global lineup of hybrid vehicles to 18 models or more by the end the decade. This is up from the 14 models that were announced last year. It will also launch its first midsize pickup truck in North America in 2030 and extended range electric vehicle (EREV) in 2027. The company's Georgia factory will manufacture a mixture of hybrid and electric models. Donald Trump, the U.S. president, announced on July 30 that the U.S. would charge a tariff of 15% on South Korean imports, compared to the 25% threatened, and lower duties on auto imports, from 25% to 15%, as a reward for Seoul investing $350 Billion in the United States. Washington has implemented a 15% lower tariff rate for imports of autos and auto parts coming from Japan. South Korea, on the other hand, still faces 25% tariffs. Seoul and Washington are still struggling to resolve details of the $350 billion fund for investment that was agreed upon in July. Hyundai Motor reported that U.S. Tariffs cost them 828 billion won (606.37 million dollars) in the second-quarter. The impact is expected to be greater in the period from July to September. Reporting by Heekyong Ya, Joyce Lee and Hyunjoo Ji; editing by Ed Davies, Nia Williams
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A trader claims that diamond selling methods are outdated and harm producers.
A leading gem trader stated on Thursday that the sale of diamonds via tenders and auctions was opaque and inefficient. It should be redesigned to help producers earn more money and survive the current price drop. Oded Mansori is the co-founder and managing director of Belgian gem trading company HB Antwerp. He said that inefficiencies within the industry could reduce the impact on the producers. Diamond demand is suffering from global economic uncertainty, and lab-grown diamonds are becoming more popular. Lower revenues have led to the layoff of workers in mines such as Burgundy, and Lesotho’s largest diamond mine Letseng. "For years, miner's relied on auctions and tenders. Systems that appear efficient on paper, but in reality resemble a gambling casino," Mansori stated in a press release, as the mining industry struggles with a crisis thought to be its worst in history. "Rough stones will be pushed onto opaque markets, where the value of these stones is hard to estimate. Producers are exposed when global demand softens as it has done in cycles during the past decade. "Workers pay the price while shareholders watch their assets decline," said he. Rough diamonds can be sold by a system of competitive bidding, whereby buyers make confidential bids for individual stones or parcels. Mansori's company, which operates a profit sharing model with miner Lucara Diamond Corp., believes that producers should tie their revenues to the final polished value of their stones, "rather gambling on rough sales at opaque auctions". HB Antwerp, in partnership with Lucara and the Toronto-listed firm's Karowe Mine located in central Botswana, purchases stones above 10.8 carats at prices based upon the estimated polished value for each diamond. HB Antwerp accounted 72% of Lucara’s $74 million in diamond revenues for the six-month period ending June 30. This is up from 65% a year earlier. The trader claims that producers can make up to 40% extra revenue by using this model. (Reporting and editing by Nelson Banya, Frances Kerry and Brian Benza)
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Wall Street to resume record-breaking run after Fed rate reduction
The dollar and Wall Street futures rose slightly on Thursday following the Federal Reserve’s first rate cut for the year. French markets were jittery, and the pound remained steady after UK interest rates remained unchanged. The Fed's quarter point cut and "steady-as she goes" message helped Europe's stock market climb almost 1%, and Wall Street was set for yet another round of records highs despite the somewhat hesitant response from traders on Wednesday. Asia also rallied over night. Chinese stocks reached a decade-high as local chipmakers rejoiced at reports that U.S. giant Nvidia was banned in China. South Korea, Taiwan, and Japan's Nikkei also ended higher than 1%. Donald Trump, the U.S. President and Xi Jinping, the Chinese president are both scheduled to speak Friday. There was also a sense of relief that the dollar held up well after hitting a three-and-a-half-year low earlier this week. This has caused those who export to the U.S. to grind their teeth. The Fed's "dot plot", which is closely monitored, had indicated that two additional rate reductions would be made over the remaining two meetings of this year but only one in 2026. Fed Chair Jerome Powell also moderated expectations by saying that the central bank didn't need to act quickly, though analysts admit this could change. Richard Cochinos, RBC Capital Markets, said: "We look beyond the volatility of one or two days to find underlying trends." In this case, we expect a weaker U.S. Dollar," Cochinos said. He pointed to the expectation of U.S. interest rates falling to 3% in 2013. The gains of the dollar were trimmed by traders in Europe. The euro was largely unchanged at $1.1825 and sterling was just above $1.36. As expected, the Bank of England maintained UK interest rates at 4%. The vote of 7-2 to reduce the annual rate at which the UK government bonds it bought during the financial crisis and COVID crises are sold to 70 billion pounds instead of 100 billion pounds was viewed with slightly more interest. The poll was mostly accurate, but the gilt markets are now nervous about UK government finances this year. A key budget is due in late November. James Rossiter, TD Securities, said that the bond reduction was not a surprise. He now expects another 25-bps rate cut right before the budget in November. FRENCH FOCUS Wall Street futures saw a 30% jump in Intel shares during premarket trading after news that Nvidia would invest $5 billion into the struggling company. The bond markets began to sputter, as the yield on benchmark Treasury notes of 10 years - which moves in the opposite direction to the price - was little changed at 4.08%. And the two-year rate remained unchanged at 3.53%. The benchmark yield for the Euro Zone, Germany's 10-year bond, was also stuck at 2.69%. However, attention was also focused on France's. Political tensions Its bond yields briefly rose above Italy's. Unions claim that hundreds of thousands protested against austerity in France on Thursday. They urged President Emmanuel Macron, and Sebastien Lecornu, his new prime minister, to acknowledge the anger they felt and cancel looming budget reductions. On the currency markets, the Chinese yuan ticked up after its central banks left the borrowing costs of its reverse repurchase agreement for seven days unchanged overnight. Meanwhile, the New Zealand dollar fell after data showed that the economy there shrank much more than was expected. Norwegian crown, which was flying high in the past few months, also softened after its central banks lowered rates by 25 basis points. However it still remained near a three-year-high against the dollar. After weaker than expected labour market data, the Australian dollar has also fallen from a near-year-high. Brent crude rose 0.4% to $68.25 a barrel, despite an initial dip on the commodity markets. Gold, the safe-haven asset, also rose 0.3% to $3670 an ounce.
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Gold rises on weaker dollar following Fed rate cut
Gold prices rose Thursday on a soft dollar after the U.S. Federal Reserve lowered interest rates by 25 basis point and announced a gradual ease for the remainder of the year. This boosted the metal's appeal. As of 1144 GMT, spot gold rose 0.2% to $3,667.12 an ounce. On Wednesday, prices reached a new record of $3 707.40. U.S. Gold Futures for December Delivery fell by 0.5% to $3701.00. Dollar pared its recent gains, and the dollar hovered around a two-month high. This made gold cheaper for holders of other currencies. The yields on the benchmark 10-year Treasury notes also dropped. The dollar's weakness has returned, and this has supported gold prices. However, the rate decision was on the dovish end, as the statement or dot plots indicated that two rate cuts would be coming in the next year, according to Fawad Rasaqzada. The Fed cut rates by 25 basis point on Wednesday, and said it would continue to lower borrowing costs throughout the remainder of this year. Fed Chair Jerome Powell described the action as risk-management in response to the weakening of the labor market. He said that the Fed is in a situation where it has "meetings by meetings" in regards to the interest rate outlook. In a low-interest rate environment, non-yielding gold bullion is a good investment. It's a safe haven during times of geopolitical or economic uncertainty. Independent analyst Ross Norman stated that "the bull run in gold is still very much present and we are likely to see record highs persist." According to CME Group’s FedWatch tool, traders are pricing in a 90 percent chance that the Fed will cut rates again by 25 basis points at its next meeting in November. ANZ said that it expects gold will outperform the early stages of the easing cycle. The bank said that the demand for safe haven assets in a geopolitical environment of uncertainty is likely to increase investor demand. The price of spot silver was up 0.5% at $41.84 an ounce. Platinum gained 1.9%, to $1,390.43, while palladium fell 1% to $1,142.19/oz. (Reporting from Ishaan Mukherjee, Anmol Choubey and Anushree mukherjee in Bengaluru, and editing by Jan Harvey Frances Kerry, and Bernadette baum)
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Exxon asks for political support from the US to overturn EU climate law
Exxon Mobil has intensified its attacks on a European Union law on corporate sustainability and taken their concerns directly to U.S. president Donald Trump. They warned that the regulation would lead to more companies leaving Europe. Last year, the EU adopted its corporate sustainability due diligence (CSDD) directive. This mandates that companies fix any human rights or environmental issues in their supply chains or risk a base fine of 5% on global turnover. The European Commission, in response to the criticism of businesses and German and French leaders that the law will harm the competitiveness of the EU, proposed a series of changes to the law earlier this year. In an interview, Exxon CEO Darren Woods said that it would not be enough and called for the law to completely be revoked. Woods stated that he had spoken to Trump, and other members of Trump's administration who are involved in trade and EU policy. The administration also expressed concerns over CSDDD during trade negotiations. Washington and Brussels are still at odds over the simmering dispute, which has recently led to the US considering sanctions against EU officials for separate tech legislation. Woods noted that Woods' oil company has closed, sold or exited 19 of its operations because, according to him, red tape was impeding the business. This is yet another piece of legislation which would either accelerate this incentive or cause businesses to reduce their activities in Europe. The European Commission didn't immediately respond to an inquiry for comment. Woods added that an exorbitant fine of 5% on global sales would "break the bones" of Exxon. Last year, the top U.S. oil producers' sales totaled $339 billion. U.S. legislators are also doing their part to help. In March, Senator Bill Hagerty of Tennessee introduced a bill to protect American companies against being forced to comply to CSDDD. Next month, EU legislators and countries will begin negotiations to change the policy. Environmental activists are appalled by the move to weaken corporate accountability. Exxon announced on Thursday that it will also be pausing its investment of 100 millions euros ($118) in European Plastic Recycling due to separate EU draft rules. Woods expressed his hope that U.S. legislators would make progress in addressing CSDDD. However, he has been disappointed with the response from EU regulators so far. He said, "There's some movement but we need resolution sooner than later." Sheila Dang reported from Houston, Kate Abnett contributed additional reporting and Nathan Crooks edited the story.
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Kuwait Oil Minister expects demand to increase after US rate reduction
Kuwait's oil minister Tariq al-Roumi stated on Thursday that he expected higher demand for oil following the U.S. rate cut this week, especially from Asian markets. On Wednesday, the U.S. Federal Reserve lowered interest rates for the first since December. He also said that he expects new sanctions against Russia to have a positive effect on the oil price. Donald Trump announced on Saturday that the U.S. is prepared to impose new energy sanctions against Russia, provided all NATO countries stop purchasing Russian oil. Eight OPEC+ member countries agreed on September 7, to increase output by 137,000 bpd for October. This is a continuation of the policy of the group since April, which has been to increase production after years of cutting to support the oil markets. Al-Roumi stated that despite the agreement to increase output, "prices were more than satisfactory". He added, "We expected the worst, but everything is fine." The oil market is confusing and difficult to predict. The Minister made these remarks at an event marking the start of oil production at Kuwait Oil Company's Mutriba Field, which is targeting a light oil output between 80,000 to 120,000 bpd. At the event, KOC CEO Ahmad Al-Aidan said: "This step will help Kuwait achieve its strategy of reaching a production capacity for oil of 4 million barrels per day by 2035." The current production capacity is less than 3 million bpd. Reporting by Ahmed Hagagy, Writing by Tala RAMAdan and Ahmed Elimam, Editing by Bernadette BAUCH and Jan Harvey
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Dollar firms after Fed lowers rates and copper falls
The copper price fell on Thursday, as traders took profits after the U.S. Federal Reserve cut rates. Meanwhile, the dollar strengthened after Fed Chairman Jerome Powell said that there would be no further aggressive easing. The benchmark three-month price of copper at the London Metal Exchange fell 0.4% to $9,960.50 a tonne as of 0940 GMT after hitting a low for a week on Wednesday, $9,925. Powell, in his press conference, reacted against the idea of larger cuts. Dollar index rose by 0.1%, to 96.98, on the back of Mr. Trump's remarks. However, it is still down 10.6% for this year. The dollar index is still down around 10.6% this year. Dan Smith, managing Director at Commodity Market Analytics said that the rate decision made on Wednesday was a key driver behind copper's drop. He also pointed out a technical charting pattern called a "triple-top". Smith stated that there has been a significant amount of resistance in the copper market around $10,160. Smith said that the price has turned three times at this point in recent months, which indicates the current momentum will be to the downside. The rest of the base-metals complex was mostly in the red. Aluminium fell as much as 0.6%, to $2,665.50 per ton. This is a new low for the week. It was also down 0.2% at 0940 GMT. The cash aluminum contract premium is added to the contract for three months On Thursday, the price of a ton had dropped to $4 from $16 on Tuesday. Lead was unchanged at $2,012 a ton. Nickel and tin also fell. (Reporting and editing by Rashmi, Harikrishnan Nair, Ed Osmond and Harikrishnan Nair; Additional reporting and editing by Amy Lv & Lewis Jackson)
Nigeria leads the continent-wide campaign for unification of oil regulations
The Nigerian oil regulator announced that African oil regulators, led by Nigeria, have launched a forum to harmonise oil regulation. This is in an effort to attract investment in the rapidly growing energy sector in the region.
African oil regulators, due to the decline in investment dollars, are betting on a more transparent and consistent energy market that is integrated across all jurisdictions.
Sixteen countries gathered at Accra for the signing of the charter establishing African Petroleum Regulators Forum.
Gbenga Kmolafe was the chairperson of the Nigerian Upstream Petroleum Regulatory Commission, which is the upstream regulator of Nigeria.
Eight countries, including Nigeria Ghana, Somalia Gambia Madagascar Sudan, Guinea and Togo have endorsed this charter formally, while seven other countries have pledged their support, pending consultations at home.
AFRIPERF aims at becoming the continent's leading platform for regulatory co-operation, knowledge sharing and promotion of investment in the petroleum industry.
Its mission is to create standards, improve transparency, and address cross-border issues such as the gas trade, emissions, and digitalisation.
Komolafe said that this is a crucial step towards building a sustainable and harmonized petroleum industry in Africa. He noted that the forum would help to ensure Africa's oil and gas resources are managed "with innovation, responsibility and foresight."
The forum's governance will be overseen by an executive committee made up of regulatory heads. They will be supported by a technical panel of subject matter experts, and a rotating Secretariat. In the next few months, AFRIPERF will elect its chairperson and location of headquarters.
This move reflects the growing desire of African nations to align their energy governance standards with global ones, while also asserting a greater voice in international policy.
(source: Reuters)