Hurricane Ian Spells Trouble for the Fed and Its Inflation Goals

Today, the US State of Florida woke up to the devastation of Hurricane Ian. As residents of the worst-hit parts make the journey home, residents and businesses will begin to assess the financial impact of a storm that peaked at a category four before heading back out to sea.

With parts of the State of Florida still under water and facing high winds and heavy rain, news media outlets report that more than two and a half million are without electricity.

President Joe Biden declared a major disaster, releasing federal-level disaster relief funds to help the State tackle the destruction.

While businesses in the path of Hurricane Ian will face the battle of rebuilding, there will be the indirect effects of the storm on some of the country’s largest multinationals.

Supply Chain Disruption, Fuel Prices, and Inflation

One immediate effect of Hurricane Ian will be on supply chains in and out of Florida.

Across the State, fuel terminals are closed, with oil companies evacuating employees ahead of the storm’s arrival. As reported by Reuters, BP Plc (BP), Chevron Corp (CVX), Occidental Petroleum Corp. (OXY), and Hess Corp (HES) shut down operations in the State.

In the aftermath of the storm, infrastructure is an issue. Reportedly, fuel trucks can’t reach affected parts of the State, with lengthy waiting times likely to impact businesses reliant upon diesel-fueled generators. Shortage concerns were significant enough for the White House to issue a warning to Oil Companies. President Biden reportedly said,

“Do not – let me repeat, do not, do not – use this as an excuse to raise gasoline prices in America.”

According to the US Joint Economic Committee, gasoline prices surged by 46 cents a gallon immediately after Katrina. The JEC noted that ‘some consumers paid almost twice what they paid the year before.’ Higher gasoline prices would spell more trouble for the US economy and the FED grappling with inflation.

Elevated prices would extend beyond the pump, with businesses having to pass on running costs to consumers. The JEC report noted that ‘fuel prices increased quickly after the supply disruption. However, the JEC also observed that prices decreased more slowly after capacity was restored.’

One other area of interest is the Sunshine State’s citrus industry. According to a CNN report, Ian threatened 75% of the citrus belt with heavy rain and floods. With citrus production reportedly under pressure ahead of the storm, supply shortages would lead to higher food prices, another headache for consumers and for the Fed.

Retailers and the Services Sector Likely to Bear the Brunt of the Pain

Reuters reported that Amazon.com (AMZN) paused operations in some sites, with Walmart (WMT) and Sam Clubs closing down more than 100 stores. Walt Disney (DIS) also shut down theme and water parks on Wednesday and Thursday.

With food and fuel prices keeping US inflation at four-decade highs, retailers will likely add to the inflation problem. As water levels decline, supply issues, and strong demand, will drive prices higher.

While the global equity markets may not have reacted to news updates from the State of Florida, the impact may be evident in the months ahead. Florida is among the top five US states by GDP, with a GDP equivalent to Mexico.

US Equity Markets Tumble as Inflation and Economic Woes Hit Sentiment

At the time of writing, the Dow and the S&P 500 were down 1.64% and 1.88%, respectively, with the NASDAQ 100 sliding by 3.01%.

Amazon.com was down 3.34%, with Disney and Walmart seeing losses of 1.73% and 0.50%, respectively. Oil companies were also in the red, with Chevron down 1.41% and BP PLC falling by 1.28%.

Little Hope that OPEC+ Will Reduce Energy Fears

After witnessing crude oil prices slipping on Friday (Feb. 25) – as some major players sold off their positions before the weekend, which was still marked by a context of uncertainty regarding the evolution of the current Ukraine-Russia conflict – lots of concerns remain over potential global supply disruptions from a strengtening set of sanctions on major crude exporting country Russia.

The sanction that is likely to impact the Russian bear the most in the long term was taken by Taiwan in the weekend (under rising pressure from the West) to block the sales of electronic microchips to the Russian Federation.

OPEC+ will meet this Wednesday (Mar. 2) during a surge in the two black gold benchmarks, with little hope, however, that their action will dissipate the feverishness of the energy markets.

British oil giant BP’s shares fell by nearly 7% this morning on the London Stock Exchange, the day after the announcement of its divestiture from the Russian giant Rosneft, in which it held a 19.75% stake.

Technically, the sturdiest support seems to be located around the $93.36-95.01 area for Brent and around the $89.54-90.45 area for the West Texas Intermediate (WTI), as we recently saw some bulls entering long trades around those levels. We could see prices rebounding onto these support zones one more time as volatility stays high.

Chart, bar chartDescription automatically generated

Figure 1 – VIX “Fear Index”

The VIX (aka “Fear Index”) – currently trading around 30 – could spike again depending on how the situation progresses.

Regarding risk management, it is always best to define your strategy according to your own risk profile. For some guidance on trade management, please read this article on how to secure profits.

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Thank you.

Sebastien Bischeri
Oil & Gas Trading Strategist

* * * * *

The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Marketmind: Aussie Cbank Caves in, Who’s Next?

A look at the day ahead from Sujata Rao.

The RBA sets the stage for the U.S. Fed, BoE and the Norges Bank later this week, with markets already pricing multiple rate hikes in the coming year given rising inflation.

But…stock markets don’t seem unduly perturbed. MSCI’s global index is back to record highs hit nearly two months ago and Wall Street is scaling new record peaks.

Leaving aside Monday’s 8.5% jump in Tesla, so-called value stocks outperformed, indicating possibly that recent “curve flattening” momentum on bond markets is abating. Indeed, the spread between two-and 10-year U.S. yields is 10 basis points wider than last Thursday.

Several analysts, including those at JPMorgan, see recent bond and money market moves as technically driven and expect normalcy to return. They advise buying more cyclical stocks to position for higher longer-dated yields. Watch this space.

Meanwhile, inflation is marching higher almost everywhere; South Korean price growth accelerated to a decade peak, staying above-target for the seventh straight month. High prices slowed U.S. manufacturing in October, the closely watched ISM survey showed on Monday. It also hinted at some moderation in demand.

What’s helping stocks stay aloft is of course the earnings season. CEOs may be bemoaning cost pressures, yet there’s no sign of margins being hit. U.S. Q3 earnings are expected to have climbed 39%, Refinitiv IBES says, versus the original Q3 prediction for 29% growth.

And then there’s M&A — $4.7 trillion in deals have been announced year-to-date, according to Refinitiv.

(For graphic on ISM – https://graphics.reuters.com/USA-STOCKS/jnvwewmdjvw/ISMPMI.png)

Key developments that should provide more direction to markets on Tuesday:

-StanChart Q3 profit doubles as bad loans shrink, trade finance booms

-BP to repurchase another $1.25 billion of shares by early 2022, after buying $900 million in Q3

-Shipping group Moller-Maersk said record-high freight rates boosted earnings despite lower container volumes due to port congestion

-U.S. earnings: Dupont, ThomsonReuters, Estee Lauder, Pfizer,  ConocoPhilips, Ralph Lauren, T-Mobile, Mondelez, Western union, Prudential

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sujata Rao; editing by Dhara Ranasinghe)

Earnings Week Ahead: NXP Semiconductors, Pfizer, Ferrari, Expedia and Moderna in Focus

Earnings Calendar For The Week Of November 1

Monday (November 1)

IN THE SPOTLIGHT: NXP SEMICONDUCTORS

The Eindhoven, Netherlands-based semiconductor manufacturer NXP Semiconductors will post earnings of $2.75 per share in the third quarter, which represents year-over-year growth of over 60% from $1.59 per share seen in the same period a year ago.

The leading supplier of high-performance mixed-signal products would post revenue growth of about 26% to around $2.8 billion. It is worth noting that the company has beaten consensus earnings per share estimates in each of the last four quarters.

NXP Semiconductors (NXP) has attractive exposure to secular growth themes like EVs, increasing penetration of ADAS, connectivity and mobile payments. Furthermore, the company has executed well this cycle and in particular its lean channel inventory positions them well for a snapback as demand improves,” noted Joseph Moore, equity analyst at Morgan Stanley.

“However, we move to the sidelines after a period of strong outperformance in the stock. NXPI’s multiple relative to peers has moved from a material discount to slightly above where it typically trades. Furthermore, we think meaningful EPS revisions are going to be more difficult to come by near term.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 1

Ticker Company EPS Forecast
CCC Computacenter £81.30
MSGS Madison Square Garden Sports -$1.08
RYAAY Ryanair $1.06
ON ON Semiconductor $0.74
TTM Tata Motors -$0.14
L Loews $0.63
CNA CNA Financial $0.66
TKR Timken $1.17
AMG Affiliated Managers $3.91
SANM Sanmina $0.99
CHT Chunghwa Telecom $0.34
BEN Franklin Resources $0.86
CXP Columbia Property $0.02
ANET Arista Networks $2.73
O Realty Ome $0.40
PCG PG&E $0.26
CLX Clorox $1.03
FANG Diamondback Energy $2.78
HOLX Hologic $1.00
SBAC SBA Communications $0.81
WMB Williams Companies $0.28
NXPI NXP Semiconductors $2.75
SPG Simon Property Group $1.06
MOS Mosaic $1.54
BRKR Bruker $0.44
CAR Avis Budget $6.85
CACC Credit Acceptance $11.74
NBIX Neurocrine Biosciences $0.61
CHGG Chegg $0.19
VNO Vornado Realty $0.29
OHI Omega Healthcare Investors $0.43
BRX Brixmor Property $0.09
ADC Agree Realty $0.46
NSP Insperity $0.86
CRUS Cirrus Logic $1.63
OGS One Gas $0.38
FN Fabrinet $1.33
AWR American States Water $0.75
KMT Kennametal $0.38
VRNS Varonis Systems $0.02
LEG Leggett & Platt $0.77
RIG Transocean -$0.16
OTTR Otter Tail $1.13
RMBS Rambus $0.33
BCC Boise Cascade $2.09
MCK McKesson $4.66
PSA Public Storage $2.14
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.45

Tuesday (November 2)

IN THE SPOTLIGHT: PFIZER, FERRARI

PFIZER: The world’s largest pharmaceutical giant is expected to report a profit of $1.08 in the third quarter, which represents year-over-year growth of about 50% from $0.72 per share seen in the same period a year ago. The pharmaceutical company, which ranked 64th on the 2020 Fortune 500 list of the largest U.S. corporations by total revenue, will report revenue of $22.7 billion, up nearly 90% from the same period a year ago.

Pfizer’s revenue and earnings have both reached new highs due to strong sales of its Coronavirus vaccine. Orders of coronavirus vaccines have continued to flood-in this year, which has led the company to upgrade its guidance multiple times.

According to the company’s latest quarterly update back in July, it expects revenue of $78.0 billion to $80.0 billion with adjusted earnings per share of $3.95 to $4.05. That would be a significant improvement from the $41.9 billion revenue and $2.22 EPS the company generated in 2020.

“We project solid growth prospects, and the company’s COVID vaccine offers significant accretion potential in 2021 and 2022. But we expect COVID vaccine sales and profits to decline significantly in 2023+,” noted Matthew Harrison, equity analyst at Morgan Stanley.

Pfizer’s dividend is expected to continue to increases at current level despite Viatris’ dividend payment. Lack of clarity in near to mid-term pipeline potential. Pipeline execution and M&A will be key to investor perception, given late-decade patent expiration exposure.”

FERRARI: The luxury sports car maker is expected to report earnings of $1.19 per share in the third quarter, representing a nearly 30% increase from $0.92 per share seen a year earlier. The company, known for its prancing horse logo, would post revenue growth of over 21% to around $1.3 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 2

Ticker Company EPS Forecast
BP BP £0.15
STAN Standard Chartered £0.22
NRZ New Residential Investment $0.35
MYGN Myriad Genetics -$0.05
ARNC Arconic Inc $0.52
SRCL Stericycle $0.60
IEP Icahn Enterprises $0.11
MPLX MPLX $0.72
TRI Thomson Reuters USA $0.38
MPC Marathon Petroleum $0.70
ZBRA Zebra Technologies $4.06
EIX Edison International $1.74
EL Estée Lauder $1.70
ETRN Equitrans Midstream Corp $0.16
LEA Lear $0.61
LDOS Leidos $1.62
FMS Fresenius Medical Care $0.56
TECH Bio Techne $1.72
LPX Louisiana Pacific $3.47
EXPD Expeditors International Of Washington $1.79
MKL Markel $13.64
SABR Sabre -$0.55
BP BP $0.89
WAT Waters $2.36
XYL Xylem $0.59
UAA Under Armour Inc $0.15
UA Under Armour C share $0.15
WEC Wisconsin Energy $0.78
SEE Sealed Air $0.82
INCY Incyte Corp $0.57
INGR Ingredion $1.45
PEG Public Service $0.92
RL Ralph Lauren $2.00
LGIH LGI Homes $4.12
ARCB ArcBest Corp $2.44
CTLT Catalent $0.65
GNRC Generac $2.37
OMCL Omnicell $0.91
HEP Holly Energy Partners $0.46
IART Integra LifeSciences $0.72
KKR KKR & Co LP $0.93
PFE Pfizer $1.08
MMP Magellan Midstream Partners $0.97
IDXX Idexx Laboratories $1.91
ETN Eaton $1.73
APO Apollo Global Management $1.09
AME Ametek $1.18
DD DuPont $1.12
RHP Ryman Hospitality Properties -$0.28
EPD Enterprise Products Partners $0.51
WLK Westlake Chemical $3.96
IPGP IPG Photonics $1.28
COP ConocoPhillips $1.51
GPN Global Payments $2.15
ROK Rockwell Automation $2.16
MLM Martin Marietta Materials $4.23
IT Gartner $1.56
EXLS ExlService $1.06
HSIC Henry Schein $0.94
BCH Banco De Chile $0.44
VRTX Vertex Pharmaceuticals $3.08
WES Western Gas Partners $0.62
TMUS T-Mobile Us $0.49
RARE Ultragenyx Pharmaceutical -$1.39
AMGN Amgen $4.27
AWK American Water Works $1.52
AKAM Akamai $1.39
LSCC Lattice Semiconductor $0.24
RACE Ferrari $1.19
CMI Cummins $3.93
DOX Amdocs $1.18
PACB Pacific Biosciences Of California -$0.22
EC Ecopetrol $2,419.00
NNN National Retail Properties $0.41
KAI Kadant $1.67
EXEL Exelixis $0.16
STE Steris $1.82
WU Western Union $0.58
RDN Radian $0.71
CRK Comstock Resources $0.35
LSI LIFE STORAGE $0.81
EXAS Exact Sciences -$0.84
HALO Halozyme Therapeutics $0.43
DEI Douglas Emmett $0.07
MANT ManTech International $0.85
VRSK Verisk Analytics $1.37
ENLC EnLink Midstream $0.04
GNW Genworth Financial $0.28
AIZ Assurant $1.37
MCY Mercury General $0.80
FNF Fidelity National Financial $1.65
IOSP Innospec $1.01
HLF Herbalife $1.09
LYFT Lyft Inc -$0.02
AMCR Amcor PLC $0.18
BFAM Bright Horizons Family Solutions $0.63
OKE ONEOK $0.82
Z Zillow $0.15
PAYC Paycom Software $0.90
PEAK Healthpeak Properties Inc $0.10
LPSN LivePerson -$0.15
EGHT 8X8 $0.01
FMC FMC $1.32
ATVI Activision Blizzard $0.70
DVN Devon Energy $0.93
AMED Amedisys $1.36
BKH Black Hills $0.65
PKI PerkinElmer $1.71
MRCY Mercury Systems $0.40
VOYA Voya Financial $1.61
XPO XPO Logistics $0.91
NMIH NMI $0.71
CDK Cdk Global $0.68
SRC Spirit Realty Capital New $0.36
MTCH Match Group $0.57
CZR Caesars Entertainment $0.16
TX Ternium $5.22
FRSH Papa Murphy’s -$0.14
MDLZ Mondelez International $0.70
PRU Prudential Financial $2.76
UNM Unum $1.15
CIB Bancolombia $0.60
AFG American Financial $1.86

Wednesday (November 3)

Ticker Company EPS Forecast
EMR Emerson Electric $1.18
EVRG Evergy Inc $1.74
SBRA Sabra Health Care Reit $0.14
OMI Owens Minor $0.61
CDW CDW $2.06
CRTO Criteo $0.35
ATRC AtriCure -$0.33
HZNP Horizon Pharma $1.54
CVS CVS Health $1.79
CLH Clean Harbors $1.02
IONS Ionis Pharmaceuticals -$0.51
ETR Entergy $2.40
MDU MDU Resources $0.82
EXC Exelon $1.08
MATX Matson $5.23
EQIX Equinix $1.61
BCRX BioCryst Pharmaceuticals -$0.29
BWA Borgwarner $0.72
BR Broadridge Financial Solutions $0.97
HBM HudBay Minerals Ord Shs $0.05
NVO Novo Nordisk A Fs $0.78
HUM Humana $4.67
CPRI Capri Holdings Ltd $0.94
BIP Brookfield Infrastructure $0.37
MAR Marriott International $0.99
DISCA Discovery Communications $0.38
DISCK Discovery Communications Disck $0.38
DISCB Discovery Communications Discb $0.38
NYT New York Times $0.20
CIM Chimera Investment $0.37
AVA Avista $0.06
SPR Spirit AeroSystems -$0.77
JLL Jones Lang LaSalle $3.53
BGCP BGC Partners $0.15
AAWW Atlas Air Worldwide $4.30
SMG Scotts Miracle-Gro -$0.87
HFC HollyFrontier $0.76
CRL Charles River Laboratories $2.58
BDC Belden $1.18
CWH Camping World Holdings $1.79
VSH Vishay Intertechnology $0.65
NI NiSource $0.09
LANC Lancaster Colony $1.51
LAMR Lamar Advertising $1.15
SUN Sunoco $1.06
MAC Macerich -$0.08
ODP Office Depot $1.51
FUN Cedar Fair $2.09
NCLH Norwegian Cruise Line -$2.04
QGEN Qiagen $0.54
CORT Corcept Therapeutics $0.22
ES Eversource Energy $1.06
PCRX Pacira $0.67
UTHR United Therapeutics $3.59
SHOO Steven Madden $0.77
FOX Twenty First Century Fox $1.03
ITUB Itau Unibanco $0.12
AGIO Agios Pharmaceuticals -$1.57
CVE Cenovus Energy USA $0.34
CLR Continental Resources $1.21
REGI Renewable Energy $1.16
PXD Pioneer Natural Resources $3.88
MFC Manulife Financial USA $0.64
STN Stantec USA $0.55
TTWO Take Two Interactive Software $1.35
APA Apache $0.91
FNV Franco Nevada $0.85
SID Companhia Siderurgica Nacional $0.43
KW Kennedy Wilson -$0.05
SWN Southwestern Energy $0.21
MGM MGM Resorts International -$0.06
FLT Fleetcor Technologies $3.48
EPR EPR Properties $0.28
SJI South Jersey Industries -$0.17
FOXA Twenty-First Century Fox $1.03
OAS Oasis Petroleum $1.75

Thursday (November 4)

IN THE SPOTLIGHT: EXPEDIA, MODERNA

EXPEDIA: The online travel shopping company would post its third-quarter earnings of $1.68 per share, which represents year-over-year growth of over 800% from a loss of -$0.22 per share seen in the same quarter a year ago. The Bellevue, Washington would post revenue growth of about 84% to around $2.8 billion.

“We see a favorable Expedia (EXPE) risk/reward given our expectation for a U-shaped room night decline and recovery as we see online travel room night growth returning to positive growth in ’21,” noted Brian Nowak, equity analyst at Morgan Stanley.

“We are bullish about EXPE’s recent strategic investments to increase its global property supply, invest in VRBO, and improve performance marketing and see these leading to faster long-term room night growth. While these investments are likely the correct long-term strategies for growth, we see higher execution risk, longer payback and more near-term margin pressure.”

MODERNA: The biotech company focused on drug discovery, is expected to report its third-quarter earnings of $9.01 per share, which represents year-over-year growth of over 1,600% from a loss of -$0.53 per share seen in the same period a year ago. The Massachusetts-based biotechnology company’s revenue would post revenue growth of 3,500% to around $6.09 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 4

Ticker Company EPS Forecast
IBP Installed Building Products $1.63
BLDR Builders Firstsource $1.63
TM Toyota Motor $2.62
PZZA Papa John’s International $0.71
TRGP Targa Resources $0.47
ZBH ZIMMER BIOMET HDG. $1.76
W Wayfair Inc. $0.03
MELI MercadoLibre $1.25
PWR Quanta Services $1.45
PENN Penn National Gaming $0.84
NTLA Intellia Therapeutics Inc -$0.85
APTV Aptiv PLC $0.37
IX Orix $2.27
GPRE Green Plains -$0.29
MUR Murphy Oil $0.14
BGNE BeiGene -$4.70
BBD Banco Bradesco $0.12
CVCO Cavco Industries $2.72
PDCE PDC Energy $1.60
ILMN Illumina $1.26
EXPE Expedia $1.68
CYRX Cryoport Inc -$0.15
QDEL Quidel $3.52
IOVA Iovance Biotherapeutics -$0.53
MNST Monster Beverage $0.67
EOG EOG Resources $2.02
NFG National Fuel Gas $0.69
PFSI Pennymac Financial Services $3.43
OXY Occidental Petroleum $0.66
PRTA Prothena $2.26
MTZ MasTec $1.70
GBT BMTC Group -$1.11
TDS Telephone Data Systems $0.27
BAP Credicorp USA $10.73
USM United States Cellular $0.48
NKTR Nektar Therapeutics -$0.80
SWKS Skyworks Solutions $2.55
AL Air Lease $0.71
AIG AIG $0.91

Friday (November 5)

Ticker Company EPS Forecast
MGA Magna International USA $0.64
HE Hawaiian Electric Industries $0.59
SRE Sempra Energy $1.70
PNW Pinnacle West Capital $2.81
TRP Transcanada USA $0.80
HMC Honda Motor $0.56
VTR Ventas $0.05

 

India’s Reliance Swoops on Solar Capacity as Part of Net Zero Goal

Through its unit Reliance New Energy Solar Ltd (RNESL), Reliance is buying Norwegian-headquartered solar panel maker REC Solar Holdings for $771 million from China National Bluestar (Group) Co Ltd and an up to 40% stake in India’s Sterling and Wilson Solar.

Reliance in June said it would invest $10.1 billion in clean energy over three years.

Owned by Asia’s richest man, Mukesh Ambani, the company plans to build solar capacity of at least 100 gigawatts (GW) by 2030, accounting for over a fifth of India’s target of installing 450 GW by the end of this decade.

India relies on coal for more than 70% of its generation and only 4% is produced through solar power.

Ambani said in a statement on Sunday, Reliance was ready to set up “a global scale integrated photovoltaic giga factory” with initial annual capacity of 4 GW, eventually rising to 10 GW.

He said buying REC Solar would help Reliance to expand in Australia, Europe, the United States and also elsewhere in Asia and that it was seeking to make India a hub for the manufacture of the lowest cost, highest efficiency solar panels.

All fossil fuel companies are under pressure from investors and campaigners to reduce emissions to limit global warming and oil majors including Royal Dutch Shell Plc and BP Plc have set goals to become net zero-carbon firms by 2050.

The statements on Sunday said RNESL’s 40% stake in Sterling and Wilson Solar Ltd will be made through investment, secondary purchase and an open offer. Reliance did not disclose the full value of that deal but has agreed to acquire new share and promoter’s stake in Sterling and Wilson at 375 rupees each.

In August, RNSEL said it would invest $50 million in U.S. energy storage company Ambri Inc.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sethuraman N.R, by William Mallard; editing by Jan Harvey and Barbara Lewis)

Why BP Stock Is Testing Yearly Highs Today

BP Stock Rallies As Oil Gets To New Highs

Shares of BP gained strong upside momentum and moved to yearly highs as Brent oil moved towards the $83 level while WTI oil managed to get above $79.

BP stock was under pressure in summer amid concerns about the negative impact of the Delta variant of coronavirus but started to move higher in the second half of September.

OPEC+ has recently decided to stick to the original plan and increase oil production by 400,000 barrels per day (bpd) in November, which was bullish for oil and pushed it to yearly highs.

Not surprisingly, traders rushed to buy oil-related stocks, so BP managed to get above June highs and continues its upside move.

What’s Next For BP Stock?

Energy giants like BP have been mostly unloved by analysts in recent months as the analyst community focused on energy transition away from fossil fuels.

However, recent events indicate that energy transition should be gradual as attempts to speed up the process have already led to high energy prices.

Analysts expect that BP will report earnings of $3.24 per share in the current year and $3.49 per share in the next year, so the stock is trading at just 8 forward P/E which is very cheap for the current market environment. It should be noted that analyst estimates have been moving higher in recent weeks, which is bullish for BP stock.

The company’s low valuation highlights market’s concerns about the future of fossil fuels, as well as the pressure from some funds who have decided to get out of such investments.

However, analyst estimates will likely continue to move higher as analysts will have to put higher oil prices into their models, so BP shares may gain more upside momentum. In addition, there is potential for multiple expansion as investors may decide to increase their exposure to energy due to the recent developments in oil, gas and coal markets.

For a look at all of today’s economic events, check out our economic calendar.

As Brent Moves Towards $80, Should You Enter a Trade?

Time for Some Fundamental Analysis

With supply slipping and solid prospects for demand, the black gold continues to rise, notably dragged by natural gas along with it, as we may see a shift in demand from natural gas to oil. A barrel of North Sea Brent for November delivery peaked at $79.50, up 1.4% from Friday’s close. After four consecutive sessions in the green, buyers are not weakening. According to Goldman Sachs, the recovery in global demand is indeed faster than expected.

On the supply side, U.S. production in the Gulf of Mexico is still cut by some 300,000 barrels per day, a month after Hurricane Ida hit, according to the latest data from the Bureau of Safety and Environmental Enforcement (BSEE). In this environment, the OPEC+ meeting next Monday should raise more attention, even though an immediate change in the cartel’s policy seems unlikely for now.

On the UK side, BP said 30% of its gas stations ran out of fuel on Sunday as a rush of panicked consumers to pumps forced the British government to suspend competition rules. According to major oil groups, a shortage of truck drivers makes it difficult to get fuel from refineries. Some operators had to implement rationing while others have closed stations.

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Figure 1 – WTI Crude Oil (CLX21) Futures (November contract, daily chart)

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Figure 2 – Henry Hub Natural Gas (NGX21) Futures (November contract, daily chart)

In brief, crude oil is surging. Natural gas rebounded to get back to its previous highs. I’ll assess the current moves and be waiting to see how the $80 level will act both as a psychological and technical resistance level on the Brent prior to drawing new projections. Detailed positions can be found in my premium Oil Trading Alerts. For the time being, given the increasing volatility, my conclusion is that there is too much risk to enter any trade right now.

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For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Sebastien Bischeri
Oil & Gas Trading Strategist

* * * * *

The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

BP Says Nearly a Third of Its UK Fuel Stations Running on Empty

Lines of vehicles formed at petrol stations for a third day running as motorists waited, some for hours, to fill up with fuel after oil firms reported a lack of drivers was causing transport problems from refineries to forecourts.

Some operators have had to ration supplies and others to close gas stations.

“With the intense demand seen over the past two days, we estimate that around 30% of sites in this network do not currently have either of the main grades of fuel,” BP, which operates 1,200 sites in Britain, said in statement.

“We are working to resupply as rapidly as possible.”

The fuel panic comes as Britain faces several crises: an international gas price surge that is forcing energy firms out of business, a related shortage of carbon dioxide that threatens to derail meat production, and a shortage of truck drivers that is playing havoc with retailers and leaving some shelves bare.

Anglo-Dutch oil group Shell said that it had also seen increased demand for fuel.

In response business minister Kwasi Kwarteng said he was suspending competition laws to allow firms to share information and coordinate their response.

“This step will allow government to work constructively with fuel producers, suppliers, hauliers and retailers to ensure that disruption is minimised as far as possible,” the business department said in a statement.

Transport minister Grant Shapps had earlier appealed for calm, saying the shortages were purely caused by panic buying, and that the situation would eventually resolve itself because fuel could not be stockpiled.

“There’s plenty of fuel, there’s no shortage of the fuel within the country,” Shapps told Sky News.

“So the most important thing is actually that people carry on as they normally would and fill up their cars when they normally would, then you won’t have queues and you won’t have shortages at the pump either.”

After meeting Kwarteng, industry figures including representatives from Shell and Exxon Mobil Corp said in a joint statement issued by the business department that they had been reassured, and stressed there was no national fuel shortage.

‘MANUFACTURED SITUATION’

Earlier, Shapps said the shortage of truck drivers was down to COVID-19 disrupting the qualification process, preventing new labour from entering the market.

Others pinned the blame on Brexit and poor working conditions forcing out foreign drivers.

The government on Sunday announced a plan to issue temporary visas for 5,000 foreign truck drivers.

But business leaders have warned the government’s plan is a short-term fix and will not solve an acute labour shortage that risks major disruption beyond fuel deliveries, including for retailers in the run-up to Christmas.

Shapps called the panic over fuel a “manufactured situation” and blamed it on a hauliers’ association.

“They’re desperate to have more European drivers undercutting British salaries,” he said.

An Opinium poll published in the Observer newspaper on Sunday said that 67% of voters believe the government has handled the crisis badly. A majority of 68% said that Brexit was partly to blame.

Opposition Labour Party leader Keir Starmer, speaking at his party’s annual conference in southern England, said ministers had failed to plan for labour shortages following the 2016 Brexit vote and called for a bigger temporary visa scheme.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by William James and Elizabeth Piper; Editing by Angus MacSwan, Emelia Sithole-Matarise and Diane Craft)

Chevron Triples Low-Carbon Investment, but Avoids 2050 Net-Zero Goals

Oil producers globally are under mounting pressure from investors and governments to join the fight against climate change and sharply cut greenhouse gas emissions by mid-century, with U.S. majors lagging efforts by European companies.

Chevron said half of its spending will go to curb emissions from fossil fuel projects. A total of $3 billion will be applied for carbon capture and offsets, $2 billion for greenhouse gas reductions, $3 billion for renewable fuels and $2 billion for hydrogen energy.

Chevron is not ready to commit to net-zero targets. Chief Executive Michael Wirth told investors on Tuesday that the company does not want to “be in a position in which we lay out ambitions that we don’t believe are realistic and deliverable.”

Just a minority of its shareholders currently support a strategy used by European oil companies to invest in less-profitable solar and wind power, he added.

“The board is looking to see, how do you deliver a strategy that meets the needs of shareholders today and the expectations of shareholders for the future?” the CEO said. Directors may re-address a net-zero goal later this year with the company’s climate report, Wirth said.

European oil producers have set plans to shift away from fossil fuels with larger investments in renewables and 2050 emission targets. U.S. oil producers Chevron, Exxon Mobil Corp and Occidental Petroleum sought to reduce carbon emissions per unit of output while backing carbon capture and storage, and doubling down on oil.

BP Plc has said it will invest $3 billion-4 billion a year in low-carbon projects by 2025 and shrink oil and gas production by 40% in the next decade. Royal Dutch Shell Plc in February set annual investments of $2 billion-3 billion in clean energy.

Chevron maintained its goal of paring greenhouse gas intensity by 35% through 2028 compared to 2016 levels from its oil and gas output.

It said it would expand renewable natural gas production to 40 billion British thermal units (BTUs) per day and increase renewable fuels production capacity to 100,000 barrels a day to meet customer demand for renewable diesel and sustainable aviation fuel.

“We expect to grow our dividend, buy back shares and invest in lower-carbon businesses,” Wirth said.

Chevron aims to increase hydrogen production to 150,000 tonnes a year to supply industrial, power and heavy duty transport customers and raise carbon capture and offsets to 25 million tonnes a year by co-developing regional hubs.

Environmentalists said Chevron’s focus is on offsetting emissions from oil and gas output, not reducing oil output.

“Chevron’s new announcement does not represent a particularly large strategic shift,” said Axel Dalman, an associate analyst with climate change researcher Carbon Tracker. “The main item is that they plan to spend more on ‘lower-carbon’ business lines.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sabrina Valle in Houston, Arunima Kumar in Bengaluru; additional reporting by Laura Sanicola in New York; Editing by Arun Koyyur, Will Dunham, David Gregorio and Mark Porter)

Energy Stocks Help Steady FTSE 100 After Worst Week Since Mid-August

By Devik Jain

The blue-chip index climbed 0.6%, after sliding 1.5% last week on concerns of a stalling domestic economic recovery.

Oil majors BP and Royal Dutch Shell each rose nearly 2%, tracking crude prices, while banks were 1.9% higher. [O/R]

The domestically focused mid-cap FTSE 250 index advanced 0.2%.

Investor focus is now on data releases in Britain and the United States later this week, including jobs and keenly watched inflation and retail sales, for clues on monetary policy actions ahead of central bank meetings next week.

“There appears to be a build up in anxiety that the continued rise in inflationary pressure may well be much more persistent than central bankers would have us believe,” Michael Hewson, chief market analyst at CMC Markets UK, said.

“In July both UK and U.S. consumer prices saw a pause as some base effects dropped out of the headline numbers, and while there is some expectation that this might continue in August, this appears to be more of a hope than anything else.”

Last week, a Reuters poll forecast that the Bank of England will raise borrowing costs by end-2022, earlier than previously thought, and it could come even sooner.

Among individual stock moves, Associated British Foods fell 2.4% after fourth-quarter sales at its Primark fashion business were lower than expected.

Recruiter SThree rose 3.8% after forecasting annual earnings “significantly above” estimates.

Transport company FirstGroup jumped 3.2% after saying its First bus passenger volumes reached 65% of pre-pandemic levels on average in recent weeks.

Martin Sorrell’s S4 Capital fell 3.8% despite the advertising group lifting its annual gross profit guidance, driven by strong demand from global tech platforms.

(Reporting by Devik Jain and Amal S in Bengaluru; Editing by Shounak Dasgupta and Alexander Smith)

Fifty Shades of Green: EU Sustainable Fund Rules Muddy the Waters

A Reuters analysis of funds marketed to retail investors increasingly hungry for anything green shows asset managers are adopting a wide range of strategies to justify the sustainable label since the EU brought in disclosure rules in March.

The EU’s Sustainable Finance Disclosure Regulation (SFDR) is an attempt to deliver transparency for investors focussed on environmental, social and governance (ESG) issues but fund managers say the definition of sustainability is too vague and has created confusion about what makes the cut.

Take the Allianz Global Water fund.

It actively invests in companies that improve the supply, management and quality of water and is marketed as falling under Article 8 of the SFDR, which means it is a fund that promotes “among other characteristics, environmental or social characteristics, or a combination of those characteristics”.

Now take one of Legal & General Investment Management’s (LGIM) Article 8 exchange-traded funds (ETF).

The L&G UK Equity UCITS ETF tracks the Solactive Core United Kingdom Large & Mid Cap Index, which excludes coal miners and firms that make weapons such as cluster bombs or have breached U.N. principles on corporate values.

Its top 10 holdings are the same as for L&G funds tracking the FTSE 100 index that don’t carry the Article 8 label and include oil giants BP and Royal Dutch Shell, miner Rio Tinto and British American Tobacco.

L&G said the fund was considered Article 8 because it promotes sustainability characteristics by applying LGIM’s Future World Protection List and this was a “binding element” of the investment process.

“The lens we should use is what is right. It’s not just about what is legally required because it seems not very much is legally required,” said Eric Christian Pedersen, head of responsible investments at Nordea Asset Management.

GREEN RUSH

The new EU rules have sparked a rush by investment firms to badge products as sustainable as they seek to grab a share of the booming market in sustainable mutual funds that hit a record $2.3 trillion in the second quarter.

From March 10, the rules automatically placed all investment funds into a coverall Article 6 category. Managers could then upgrade them to Article 8, or Article 9 which is for products with an explicit sustainable investment objective.

The investment industry has dubbed Article 8 funds “light green” and Article 9 “dark green”, though the EU regulations do not use those terms.

A European Commission spokesperson said its rules were designed to ensure funds were transparent about the sustainability of products so investors could make choices, and was not a labelling scheme.

Reuters asked 20 of the biggest fund houses for a list of products they market as Article 8 or 9.

An analysis of the funds of the 14 firms that replied shows some Article 8 products have limited claims to sustainability, such as those tracking conventional stock and bond indexes, investing in fossil fuels or buying debt from countries with weak ESG standards such as Saudi Arabia and Nigeria.

Some claims hinge on funds excluding securities they would not have bought anyway, based on the index being tracked.

For some in the industry this represents so-called greenwashing, where the benefits of a business or asset are exaggerated to attract environmentally aware investors.

Hortense Bioy, director of sustainability research at Morningstar, said Article 8 funds ranged from climate-themed green to “very, very light green”, excluding just a few firms.

“Managers need to ask if they are even relevant,” she said. “That is the key message: investors shouldn’t expect anything from Article 8.”

INDEX TRACKERS

Industry experts say none of the asset managers is breaking any rules. Managers determine themselves which article to apply and Brussels does not check whether claims are justified.

The Reuters analysis shows some managers are more likely to brand funds as sustainable than others.

Two of Europe’s biggest firms, Alliance Bernstein and AXA Investment Management, classify nine in every 10 euros of assets they manage under the scope of SFDR as Article 8 or 9, according to data they supplied to Reuters.

Others such as Pictet Asset Management and Allianz Global Investors place a little over half of their relevant assets in those categories, their data showed.

Morningstar data published in July shows a third of the assets falling under SFDR are now billed as Article 8 or 9, with Article 6 products disappearing from recommendation lists sent by investment advisers to retail investors.

Many Article 8 funds have clear sustainability criteria, such as strategies that invest in businesses with the lowest carbon impact in their sectors, or Allianz’s water-focused fund.

For others, that’s not always the case. Candriam’s Cleome Index Europe Equities is another Article 8 product. It tracks the MSCI Europe index but excludes companies that don’t comply with the U.N. principles.

Critics say such exclusions are very limited.

When asked for an example, Candriam did not point to any company expelled from the U.N. list that is also part of MSCI Europe. The Candriam fund’s top 10 holdings replicate the index.

A Candriam spokesperson said it also applies exclusions on companies materially involved in controversial weapons, tobacco and thermal coal, and the Cleome equity fund uses proprietary ESG analysis relative to the benchmark, justifying Article 8.

Morningstar analysis shows one in four Article 8 funds has exposure to companies involved in controversial weapons and one in five to tobacco. A third of Article 8 and 9 funds have more than a 5% exposure to fossil fuel firms.

‘NASTY’ ESG?

Demand for funds with a sustainable label is soaring.

“There is a clear commercial opportunity,” said Eric Borremans, head of ESG at Switzerland’s Pictet Asset Management, which classes 57% of its assets as Article 8 or 9.

Borremans said Pictet had no index-tracking Article 8 funds but planned to apply the label to some after incorporating more exclusions.

U.S. investment giant BlackRock told Reuters it expected to exceed a target of putting 70% of its new, or rebranded, products this year under Articles 8 or 9.

Some funds use ESG thresholds to justify sustainable labels.

JPMorgan Asset Management says 51% of the securities in its Article 8 range must carry an ESG score in the top 80%. These are scores fund firms or third-party providers give companies based on ESG metrics such as carbon usage, governance or human rights in supply chains.

Critics say such thresholds are too weak.

“You have funds saying most of our holdings are not nasty and therefore I’m ESG,” said Pedersen at Nordea, which requires 100% of its Article 8 holdings be above a minimum ESG score.

The JPMorgan threshold, for example, also means 49% of companies in its funds could rank in the bottom 20% for ESG goals, although the funds exclude sectors such as tobacco, controversial weapons and coal miners.

JPMorgan Asset Management did not respond to questions about ESG scores. A spokesperson said the firm remained “focused on a thoughtful and thorough approach to the implementation of SFDR”.

Pictet’s Borremans said funds interpreting the rules loosely now can get away with it, but strategies sailing close to the wind will eventually be exposed.

By next year, the EU will flesh out its taxonomy — a list of environmentally sustainable economic activities — and from July 2022 funds must detail how they meet sustainability criteria based on the EU’s Regulatory Technical Standards (RTS) that will clarify disclosure requirements.

“It could hurt the reputation of an asset manager to offer financial products as falling under Article 8 and 9 or as taxonomy aligned if this cannot subsequently be backed when the RTS enters into application,” the European Commission spokesperson said in emailed comments.

Amundi’s head of cross-border product, Florian Schneider, said SFDR rules made clear products with minimal exclusions were Article 8.

“The danger is everyone blindly assuming all Article 8 funds offer the same level of ESG integration when there are very different shades of green.”

For a look at all of today’s economic events, check out our economic calendar.

($1 = 0.7274 pounds)

(Additional reporting by Simon Jessop; Editing by Sujata Rao, Alexander Smith and David Clarke)

Why BP Stock Is Up By 6% Today

BP Raises Dividend And Announces New Buyback Program

Shares of BP gained strong upside momentum after the company released its second-quarter results. BP reported revenue of $37.6 billion and GAAP earnings of $0.92 per share, exceeding analyst estimates.

The company has also increased its dividend by 4% and announced that it would execute a share buyback of $1.4 billion prior to announcing its Q3 2021 results. A strong buyback program which will be completed in just several months provided additional support to the stock during the current trading session.

BP has also noted that the company expected that it would be able to deliver buybacks of about $1 billion per quarter in case Brent oil price stays around $60 per barrel. Currently, Brent oil trades near the $72 level. In addition, the company has the capacity to increase its dividend by around 4% annually through 2025.

What’s Next For BP Stock?

BP shares remain attractive for income-oriented investors after the recent increase of the dividend, and such investors may provide additional support to the company’s stock in the upcoming trading sessions. The new buyback program and the company’s plans to buy back $1 billion of its stock each quarter will serve as additional catalysts.

Analysts expect that BP will report earnings of $2.8 per share in 2021 and a profit of $3.12 per share in 2022, so the stock is trading at roughly 8 forward P/E which is very attractive in the current market environment. Earnings estimates have been trending higher in recent weeks and will likely move even higher after the solid second-quarter report.

The main risk for BP shares right now is the potential sell-off in the oil market, which could be triggered by problems with coronavirus in China. However, internal positive catalysts may provide enough support to BP shares even in this negative scenario. In case oil prices stay near current levels, BP stock will have a good chance to get back to yearly highs due to solid financial performance, higher dividend and a new buyback program.

For a look at all of today’s economic events, check out our economic calendar.

BP Shares Climb After Payout Boost, Energising Transition

By Ron Bousso

The strong results, underpinned by higher sales at petrol stations, went some way towards easing investors’ concerns over BP’s plan to shift away from oil and gas to renewable and low-carbon energy to combat climate change.

The 4% dividend increase coupled with a $1.4 billion share repurchase over the next three months drove BP shares 5.6% higher by 1130 GMT, exceeding peers Royal Dutch Shell and TotalEnergies, which were up by over 2%.

Tuesday’s announcement brings BP’s total shareholder payouts in 2021 to around 4.4 billion pounds ($6.13 billion), representing more than 7% of its market capitalisation, said Russ Mould, investment director at AJ Bell.

BP, which plans to reduce its oil output by 40% or 1 million barrels per day by 2030, generated surplus cash of $2.4 billion in the first half of the year.

“Investors must now weigh up whether that return offers more than compensation for the risks associated with owning BP’s stock, as the company tries to maximise the value of its existing hydrocarbon assets… while investing in renewables,” Mould said.

Rivals, including Shell, TotalEnergies and Chevron, also boosted shareholder returns last week, reflecting a recovery from the impact of the pandemic on energy demand.

BP increased its dividend to 5.46 cents after it was halved to 5.25 cents in July 2020 for the first time in a decade.

BP’s dividend BP’s dividend https://graphics.reuters.com/BP-DIVIDEND/gdvzyrarapw/chart.png

The company is repurchasing shares after in April announcing a $500 million buyback plan to offset dilution from an employee share distribution programme.

Chief Executive Bernard Looney said stronger performance and an improving outlook would allow the company to press ahead with a shift to cleaner energy.

“The strengthening of the balance sheet and the excess cash flow allow us to prosecute our agenda around the energy transition,” Looney told Reuters.

BP expects global oil demand to recover to pre-pandemic levels in the second half of 2022.

Its underlying replacement cost profit, the company’s definition of net earnings, reached $2.8 billion in the second quarter, beating the $2.15 billion expected by analysts.

That was up from $2.63 billion in the first quarter and marked a rebound from a loss of $6.68 billion a year earlier.

The results were also buoyed by stronger demand for fuel, including aviation fuel, and higher profit margins at convenience stores in BP’s petrol stations, it said.

BP’s net debt fell dropped to $32.7 billion from $40.1 billion.

BP’s profits https://graphics.reuters.com/BP-RESULTS/xmpjogqwbvr/chart.png

STRONGER OUTLOOK

BP said it has increased its price forecast for benchmark Brent crude oil to 2030 to reflect expected supply constraints, while also lowering its longer-term price forecast because it expects an acceleration in the transition to renewable energy.

As a result, the company increased the pre-tax value of its assets by $3 billion, following writedowns of more than $17 billion last year.

The company said at an oil price of $60 a barrel, it expects to be able to buy $1 billion in shares and boost its dividend by 4% annually through 2025.

Brent oil prices rose in the second quarter to an average of $69 a barrel from $61 in the previous quarter and from $29.56 a year earlier.

($1 = 0.7177 pounds)

(Reporting by Ron Bousso, editing by Anil D’Silva, Jason Neely and Barbara Lewis)

BP, EnBW Enter Joint Bid in Scottish Offshore Wind Lease Round

Crown Estate Scotland’s ScotWind wind leasing tender is its first for a decade, and is aimed at supporting the development of around 10 gigawatts of offshore capacity.

BP said its joint bid with EnBW represented a potential 10 billion pound ($14 billion) investment into Scottish offshore wind projects and support infrastructure including ports, harbours and shipyards.

The bid focused on fixed-bottom wind turbines rather than floating turbines which other companies bid for, Dev Sanyal, BP’s head of for gas and low carbon, told Reuters.

Floating offshore wind technology is still in early stages of deployment around the world and is significantly more expensive than fixed-bottom technology.

Under the rules of the tender the amount of money companies are expected to pay for the seabed lease is capped, unlike an auction round held earlier this year for seabed leases around the coast of England and Wales which attracted record prices.

BP said it would also invest in net zero industries, including green hydrogen production and accelerate the expansion of Scotland’s electric vehicle charging network.

BP and EnBW formed a 50-50 joint venture this year to develop and operate two offshore wind leases in the Irish Sea.

They face competition in ScotWind from companies such as Equinor, Orsted, Royal Dutch Shell, RWE, TotalEnergies and Macquarie Group’s Green Investment Group.

The results of the ScotWind leasing round are expected to be announced early next year.

($1 = 0.7261 pounds)

(Reporting by Nina Chestney, Susanna Twidale and Ron Bousso; Editing by Jason Neely and Mark Potter)

Consumer Staples, Energy Stocks Boost FTSE 100; Delayed Reopening Cap Gains

The blue-chip index rose 0.4% to its highest close since February 2020 highs. Dollar-earning consumer staples stocks, including Unilever, Reckitt Benckiser Group, British American Tobacco and Diageo Plc gained between 0.58% and 1.77%, on the weaker pound.

Energy stocks gained 0.32% as oil majors including BP and Royal Dutch Shell gained 0.7% and 1.8% respectively, tracking crude prices.

The domestically focused mid-cap FTSE 250 index fell 0.5%. Prime Minister Boris Johnson pushed back plans to lift most remaining COVID-19 restrictions to July 19, citing the rapid spread of the more infectious Delta variant.

Travel and leisure stocks fell 0.8%, with Flutter Entertainment Plc and Entain Plc among the top decliners.

There was good news however on the jobs front, as the number of employees on British company payrolls surged by a record 197,000 in May as COVID-19 restrictions eased, tax data showed.

Meanwhile global markets including London are focused on the U.S. Federal Reserve meeting for clues to a sooner-than-expected tapering of its monetary policy, prompted by rising inflation.

“The latest test of the market’s more relaxed attitude over rising prices is likely to come with the next meeting of the Federal Reserve tomorrow when its position on rates and stimulus will be announced,” said Russ Mould investment director at AJ Bell.

The FTSE 100 and the FTSE 250 have gained more than 11% this year, but they have oscillated in a narrow range since mid-April on worries that a COVID-19 resurgence might crimp the recovery, and rapid economic growth could lead to higher inflation.

Among stocks, Boohoo Group Plc gained 1.07% after the British online fashion retailer reported a 32% rise in sales in its latest quarter benefiting from rising demand as lockdown restrictions eased.

However, Non-Standard Finance slipped 17.2% as the subprime lender plans to raise around 80 million pounds ($112.98 million) in the third quarter potentially through a share sale.

(Reporting by Devik Jain and Amal S in Bengaluru)

 

Why BP Stock Is Trading At Yearly Highs

BP Stock Gains Ground As Oil Moves To New Highs

Shares of BP gained strong upside momentum and moved to yearly highs as oil continued to move towards the $75 level.

This year, oil majors faced skepticism from analysts due to pressure from environmental activists and governments around the world. However, BP stock is up by almost 40% this year, and shares of other oil majors are also moving higher.

The rally in the oil market served as the main catalyst for BP, but cheap valuation also played an important role.

Aanalysts expect that BP will report earnings of $2.67 per share this year and $2.92 per share in 2022. At current price levels, the stock is trading at less than 10 forward P/E for 2022 which is cheap for the current market environment.

In fact, BP is trading at a discount to peers like Chevron and Exxon Mobil, which serves an additional bullish catalyst for the company’s shares.

What’s Next For BP Stock?

In the near term, dynamics of BP shares will depend on the fluctuations of the oil market. Oil gained strong upside momentum in recent weeks, which is bullish for oil-related stocks, including BP.

It should be noted that earnings estimates for BP have been moving higher together with the price of oil, and this trend may be continued in the next few weeks since estimates typically lag market developments.

At less than 10 forward P/E for 2022, the stock looks really cheap. Unlike its American peers like Exxon Mobil and Chevron, BP stock is still well below pre-pandemic levels, and there is plenty of work to do to close the gap.

At this point, it looks that it will be hard for traders and investors to ignore cheap oil majors despite risks of the energy transition. In this light, BP stock has decent chances to continue its current upside move.

For a look at all of today’s economic events, check out our economic calendar.

Singapore’s Pavilion Energy Signs 10-year LNG Deal With BP

By Jessica Jaganathan

The long-term binding LNG sale and purchase agreement (SPA) is for the supply of about 0.8 million tonnes of LNG a year to Singapore, Pavilion and BP said in a joint statement. They did not give financial details.

This is the third long-term deal that Pavilion, owned by Singapore state investor Temasek Holdings, has signed since November. The other two deals were with Chevron Corp and Qatar Petroleum Trading.

Singapore is trying to diversify its gas imports as its long-term piped-gas contracts with neighbouring Indonesia start to expire from 2023.

As part of the deal, Pavilion and BP will also aim to jointly develop and implement a greenhouse gas quantification and reporting methodology, they said, adding that the methodology will cover emissions from wellhead-to-discharge terminal.

When issuing a buy tender for LNG last year, Pavilion had asked potential suppliers to outline their carbon mitigation efforts because it aims to eventually make its purchases carbon neutral.

Leading industry traders and consumers have been seeking more transparency on carbon and methane emissions in the gas value chain amid a global decarbonisation push.

While LNG is generally considered a cleaner fuel than coal or oil, there is no accepted standard for measuring the emissions from producing and transporting the fuel, which needs to be cooled to minus 162 degrees Celsius (minus 260 degrees Fahrenheit).

Eugene Leong, chief executive of BP’s trading & shipping division of Asia Pacific and Middle East, said the deal with Pavilion will not only help supply the Singapore market with LNG but also “co-develop a methodology to quantify the carbon intensity associated with the supply”.

(Reporting by Jessica Jaganathan; Editing by Muralikumar Anantharaman)

BP invests $220 Million in U.S. Solar Projects

The deal, for assets with production capacity of 9 gigawatts, marks BP’s first independent investment in solar since buying a stake in Europe’s largest solar developer, Lightsource, in 2017.

BP said the new assets will be developed and operated through its 50-50 joint venture with Lightsource BP.

BP CEO Bernard Looney last year launched a strategy to sharply reduce carbon emissions by 2050 by reducing oil output and growing its renewables business 20-fold between 2019 and 2030 to a capacity of 50 gigawatts (GW).

The deal will grow BP’s renewables pipeline from 14GW to 23GW. The company expects to start developing around 2.2 GW of the acquisition’s pipeline by 2025.

BP will integrate the new solar output into its large U.S. power trading business, which includes onshore wind and natural gas electricity. In future, it will also have offshore wind from a project it is developing off the East Coast with Norway’s Equinor, Dev Sanyal, BP head of gas and low carbon energy, told Reuters.

BP is confident it can reach returns on investment of 8% to 10% on its renewable investments, Sanyal added.

“This acquisition gives us a very significant development pipeline in one of the most important markets,” Sanyal said.

The projects acquired are spread across 12 U.S. states, with the largest portfolios in Texas and the Midwest.

(Reporting by Yadarisa Shabong in Bengaluru and Ron Bousso in London; Editing by Devika Syamnath and Barbara Lewis)

BP Says It Will Stick with Top U.S. Oil Lobby After Climate Shift

By Ron Bousso

BP, which plans to sharply cut its oil output and boost its renewable energy capacity over the next decade, said in a report that despite “uneven progress”, the API was “heading in the right direction”.

The API has faced growing pressure from member companies and activist groups to change its policies relating to climate change and drilling regulations.

The trade group started to shift some of its positions as the climate-focused Biden administration came to power this year. In March it said it supports a carbon price as one measure to mitigate climate change risk.

BP said it was “encouraged” by the API’s support for federal regulation on limiting emissions of methane, a potent greenhouse gas and its support for carbon pricing as well as improving its transparency.

“API’s progress has been uneven at times but, on the whole, the organization has moved considerably over the past year and is heading in the right direction,” BP said in the report.

“We will continue to make our case – as members – to influence API on climate and many other areas relevant to our business in the US.”

London-based BP, led by CEO Bernard Looney, last year quit the main U.S. refining lobby and two other trade groups but stuck with the API despite saying it was only “partially aligned” with its policies.

BP will publish a comprehensive review of its membership of the API and other associations next year.

France’s Total in January became the first major global energy company to quit the API due to disagreements over its climate policies and support for easing drilling rules, saying it would not renew its 2021 membership.

Total’s stance put pressure on other European oil majors that have set out strategies to sharply reduce carbon emissions.

Royal Dutch Shell also chose to extend its API membership despite “some misalignment” with its climate stance.

BP’s interim report also reviewed its participation in four other associations which were partly aligned with its policies including the Australian Institute of Petroleum and the Canadian Association of Petroleum Producers.

BP said it was encouraged by progress made by all four groups over their climate stances.

(Reporting by Ron Bousso; Editing by Alexander Smith)

BP Seeking to Build Wind Farms Off Scotland

BP Chief Executive Officer Bernard Looney told The Times the firm was looking at bidding in the forthcoming Crown Estate Scotland auction to lease the seabed off Scotland for offshore wind projects.

Bids for the ScotWind process, offering 17 areas spanning 8,600 square km (3,320 square miles) of seabed, are yet to be finalised with a deadline of July 16, The Times reported.

BP is working on bidding jointly for the Scottish leases with EnBW Energie Baden Wuerttemberg AG, the German regional utility it partnered with on its first move into Britain’s offshore wind market in February in the Irish Sea, The Times report said.

In February, BP won two sites representing a total of 3 gigawatts (GW) jointly with EnBW, in what Bernstein analysts called a “highly contested race”.

It aims to ramp up renewable power generation from 3.3 GW at present to 50 GW by 2030, while slashing oil output to reduce greenhouse gas emissions.

(Reporting by Anirudh Saligrama in Bengaluru; Editing by Kim Coghill and Karishma Singh)