Asian Stocks Hit One-Month Highs, Bitcoin Climbs

By Swati Pandey

Indicators were positive for Europe as well with futures for Eurostoxx 50 up 0.2% and Germany’s DAX adding 0.1% though those for London’s FTSE were barely changed.

MSCI’s broadest index of Asia-Pacific shares outside Japan went as high as 699.70, a level not seen since March 18. It was last up 0.1% at 696.46.

The index jumped 1.2% last week and is up 5.1% so far this year, on track for its third straight yearly gain.

“The extremely supportive monetary and fiscal policy setting continues to provide a fertile environment for risk assets,” said Rodrigo Catril, senior forex strategist at National Australia Bank.

Australian shares finished unchanged from Friday’s close while New Zealand’s benchmark index gained 0.6% and South Korea’s KOSPI added 0.1%. Japan’s Nikkei turned around its losses to end flat.

Chinese shares, which started in negative territory, recouped losses with the blue-chip index up 2.2%. Hong Kong’s Hang Seng index rose 0.6%.

On Friday, the S&P 500 gained 0.4% to close at a new record high while clocking its sixth straight weekly gain. The Dow finished 0.5%, also at a record high while the Nasdaq climbed 0.1%.

The gains are unlikely to extend further with e-mini futures for the S&P 500 down 0.2%.

This week is off to a quiet start with no major data releases slated on Monday.

Investors will keep their eyes peeled for earnings from IBM and Coca-Cola later in the day. Netflix reports on Tuesday while later in the week American Airlines and Southwest will be the first major post-COVID cyclicals to post results.

The European Central Bank (ECB) meets on Thursday with no changes to rates or guidance expected while preliminary data on factory activity around the globe for April is due on Friday.

Elsewhere, Bitcoin, the world’s biggest cryptocurrency, reversed its losses after plunging as much as 14% on Sunday following speculation the U.S. Treasury may be looking at cracking down on money-laundering activity within digital assets, NAB’s Catril said.

Data website CoinMarketCap cited a blackout in China’s Xinjiang region, which reportedly powers a lot of bitcoin mining, for the selloff.

The retreat in Bitcoin also comes after Turkey’s central bank banned the use of cryptocurrencies for purchases on Friday.

Bitcoin was last up 1%. It has risen more than 90% year to date, driven by its mainstream acceptance as an investment and a means of payment, accompanied by the rush of retail cash into stocks, exchange-traded funds and other risky assets.

In currencies, the U.S. dollar loitered near a four-week low against a basket of currencies as investors increasingly bought into the Federal Reserve’s insistence it would keep an accommodative policy stance for a while longer.

The dollar index measuring the greenback against a basket of six currencies was unchanged at 91.567, not far from its lowest since March 18 touched on Friday.

Against the Japanese yen, the greenback was off 0.2% at 108.52. The euro was a tad lower at $1.1964 while the British pound gained 0.2% to $1.3854. [FRX/]

The risk-sensitive Aussie dollar climbed to $0.7740.

In commodities, oil prices were down with the Brent slipping 22 cents to $66.55 a barrel and U.S. crude falling 19 cents to $62.94.

Gold was up a tad at $1,776.7 an ounce.

(Editing by Michael Perry and Sam Holmes)

Oil Slips as Rising Infections Spark Demand Concerns

By Aaron Sheldrick

Brent crude was down 17 cents, or 0.3%, at $66.60 a barrel by 0643 GMT, after rising 6% last week. West Texas Intermediate (WTI) U.S. oil was down 10 cents, or 0.2%, at $63.03 a barrel, having gained 6.4% last week.

“The progress of vaccination drives in the developed markets can be seen in road traffic levels, but resurging case numbers have reversed the recovery in the emerging countries,” such as India and Brazil, ANZ Research said in a report on Monday.

India reported a record rise in coronavirus infections of 273,810 on Monday, increasing overall cases to just over 15 million, making the country the second-worst affected after the United States, which has reported more than 31 million infections. India’s deaths from COVID-19 rose by a record 1,619 to nearly 180,000.

Hong Kong will suspend flights from India, Pakistan and the Philippines from April 20 due to imported coronavirus infections, authorities said in a statement on Sunday.

In Japan, which has had far fewer COVID-19 cases than other top economies, companies there will be a fourth round of infections, with many bracing for a further blow to business, a Reuters monthly poll showed.

Japan’s oil imports in March fell 17% from a year earlier to 2.5 million barrels a day, official data showed on Monday.

In the United States energy companies added oil and natural gas rigs for a fifth consecutive week for the first time since February as higher oil prices this year encouraged drillers to return to the wellpad. [RIG/U]

(Reporting by Aaron Sheldrick; editing by Michael Perry and Jason Neely)

Global Supply Lines Struggle to Clear Container Backlog After Suez Chaos

By Jonathan Saul and Timothy Aeppel

Dozens of container ships were stuck when the 400-metre-long (430-yard) Ever Given ran aground in the canal on March 23, with specialist rescue teams taking almost a week to free the vessel.

The suspension of sailings through the waterway left shipping companies – including container lines – with millions of dollars in extra costs, which were not covered by insurance.

“The blockage of the Suez Canal will increase the negative impact on global supply chains in the coming weeks, as the availability of empty equipment, particularly in Asia and Europe, will be affected,” Reiner Heiken, chief executive of U.S. headquartered Hellmann Worldwide Logistics, told Reuters.

Container shipping companies, carrying products ranging from mobile phones to designer goods, have been contending for months with disruptions caused by the coronavirus pandemic and a surge in demand for retail goods that led to wider logistical bottlenecks including in top consumer market the United States.

While some transporters of goods have turned to rail, that option has barely made a dent as about 90% of world trade is transported by sea.

European and U.S. retailers have warned about potential supply snags due to the impact from Suez.

Port officials in Europe’s leading gateways say the impact will be felt in coming days, adding to already stretched supply lines.

Barbara Janssens, with the Port of Antwerp, said the port and terminal operators were “already preparing for what’s ahead”.

“The impact on global supply chains is expected to last for several months. There is simply not enough spare capacity across the worldwide container ship fleet to help counter the worst effects of the Suez incident,” Janssens said.

Leon Willems, with the port of Rotterdam, said it expected its container traffic to be around 10% higher than normal every day in the coming weeks.

“Both the port and container terminals are doing everything they can to minimise disruptions,” Willems said.

Maersk, the world’s number 1 container line, said in a customer note that vessels held up in Suez would be delayed for a number of days before they reached U.S. East Coast ports.

In an unusual step, the company urged the ports “to take this opportunity to clear cargo from terminals which will allow them to operate more efficiently”.

The East Coast Port of Newark did not immediately respond to a request for comment.

A source at the southern U.S. port of Savannah said they expected to clear a backlog of ships in the coming days.

LONG WAITING TIMES

While ports on the U.S. East Coast are more exposed to any disruptions in the Suez Canal, the surge in demand for retail goods has overwhelmed West Coast terminals in recent months.

Container ships face longer waiting and discharging times at West Coast ports than in many other ports around the world, analysis from logistics platform project44 showed.

Eugene Seroka, executive director of the Port of Los Angeles, said they were making progress whittling down the backlog, which could be cleared by the end of May or early June.

Mario Cordero, executive director of neighbouring Long Beach port, also expected their backlog to be reduced by summer.

“But for at least the next couple of months, we expect a continuing surge on the volume that we’re seeing.” Cordero said.

Analysts Sea-Intelligence expected a ripple effect in the coming weeks between Asia and Europe and disruption of container trade.

Hong Kong’s Transport and Housing Bureau said the government was monitoring the situation although the disruption had not had a significant impact on shipping operations between Europe and Hong Kong.

Transporters elsewhere have been turning to a rail links between China and Europe to get critical supplies through, although users stressed volumes were still small.

Journey times via the rail routes, which run from China through Kazakhstan or Mongolia to Russia and then on to freight centres across Europe, typically take between 16-18 days compared with four weeks by sea and just under a week by air.

Danish freight forwarder DSV, Dutch freight management company GVT and Maersk all said they were seeing a surge in interest for rail freight between Europe and Asia.

“Land transport between Asia and Europe will always be able to cover only a small share of the total transport volume,” Hellmann’s Heiken said.

(Additional reporting by Nikolaj Skydsgaard in Copenhagen, Bart Meijer in Amsterdam and Donny Kwok in Hong Kong; Editing by Veronica Brown and David Evans)

Oil Falls on Surge in U.S. Gasoline Stocks

By Shadia Nasralla

LONDON (Reuters) -Crude oil prices fell on Thursday after official data showed a big increase in U.S. gasoline stocks on the back of higher refinery runs while demand remained subdued compared with pre-pandemic levels.

Brent crude fell 15 cents, or 0.2%, to $63.01 a barrel by 1154 GMT. U.S. oil fell 28 cents, or 0.5%, to $59.49.

While crude oil stocks in the United States fell more than forecast by analysts, gasoline inventories jumped sharply, the U.S. Department of Energy said on Wednesday. [EIA/S]

“A huge build in road fuel stocks is not what the market was expecting and concerns over the speed of the oil demand recovery resurfaced, leaving traders wondering how stable road fuel usage actually is,” said Rystad Energy analyst Bjornar Tonhaugen.

U.S. crude oil inventories dropped by 3.5 million barrels last week to nearly 502 million barrels while gasoline stocks increased by 4 million barrels to a little more than 230 million barrels as refiners ramped up output before the summer driving season.

“The increase in oil product stocks is probably not due to weaker demand … but to high refinery utilisation,” Commerzbank analysts said.

Still, demand remains weakened by the impact of the coronavirus.

At the same time, Russian oil output increased from average March levels in the first few days of April, traders said.

Iran and the United States held talks with other powers on reviving a nuclear deal that almost stopped Iranian oil from coming to market, reviving tentative hopes Tehran might see some sanctions lifted and add to global supplies.

However, the International Monetary Fund said this week that the massive public spending deployed to combat the COVID-19 pandemic could increase global growth to 6% this year, a rate not achieved since the 1970s.

Higher economic growth would boost demand for oil and its products.

ANZ Research said it expects Brent crude to reach about $75 a barrel in the third quarter.

(Additional reporting by Aaron Sheldrick in TokyoEditing by David Evans and David Goodman)

Shell Expects at Best Steady Fuel Sales for First Quarter

By Shadia Nasralla

Shell said it saw refined oil product sales at 3.7-4.7 million barrels per day (bpd) for the first quarter compared with just under 4.8 million bpd in the last quarter of 2020.

Shell’s refining margins have improved to around $2.6 per barrel in the quarter from $1.6 in the previous quarter.

In liquefied natural gas business (LNG) trading, where it is a global leader, Shell said it expected results to be “significantly below average”.

Shell sees its first-quarter LNG production at 7.8-8.4 million tonnes, compared with 8.2 million in the previous quarter.

Total upstream production was expected to rise to 2.4-2.48 million barrel of oil equivalent from 2.37 million in the fourth quarter of 2020.

An extreme cold snap in Texas is expected to have shrunk its output by 10,000-20,000 bpd and to shave up to $200 million from its adjusted first-quarter earnings, due to be reported on April 29.

Benchmark crude prices in the first quarter rose around 24% and were trading near $63 a barrel on Wednesday.

(Reporting by Shadia Nasralla; Editing by Andrew Heavens)

Oil rebounds on robust economic data

By Bozorgmehr Sharafedin

LONDON (Reuters) -Strong economic data from China and the United States helped to lift oil prices on Tuesday, recouping some of the previous session’s losses, as coronavirus-led volatility continues to dominate.

Brent rose 80 cents, or 1.3%, to $62.95 a barrel by 1115 GMT. U.S. West Texas Intermediate (WTI) crude rose 82 cents, or 1.4%, to $59.47.

Both contracts fell by about $3 on Monday, pressured increasing OPEC+ oil supply and rising COVID-19 infections in India and parts of Europe.

Coronavirus-related deaths worldwide crossed 3 million on Tuesday, according to a Reuters tally, as the latest global resurgence of COVID-19 infections challenges vaccination efforts across the globe.

“The current situation is fragile, therefore revisiting the recent highs (of oil prices) … is not imminent,” said PVM analyst Tamas Varga.

“Until there are palpable signs of falling infection rates the oil market is likely to remain violent and hectic.”

Market sentiment was buoyed as March data showed U.S. services activity hit a record high. China’s service sector has also gathered steam with the sharpest increase in sales in three months.

In addition, England is set to ease more coronavirus restrictions on April 12, with the opening of businesses including all shops, gyms, hair salons and outdoor hospitality areas.

However, new restrictions in most of Europe and rising infections in India weighed on prices.

“This will likely raise concerns over demand, given that, at the moment, a large part of the constructive outlook for the oil market is based on the assumption that we see a strong demand recovery over the second half of this year,” ING analyst Warren Patterson said.

Those factors helped to offset worries about the agreement last week by the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to bring back 350,000 barrels per day (bpd) of supply in May, another 350,000 bpd in June and a further 400,000 bpd or so in July.

The market’s attention is now on indirect talks between the United States and Iran in Vienna to revive the 2015 nuclear deal between Tehran and world powers, which could lead to Washington lifting sanctions on Iran’s energy sector.

Goldman Sachs said any potential recovery in Iranian oil exports would not be a shock to the market and full recovery would not occur until summer 2022.

Traders also breathed a sigh of relief after a tanker faced difficulties in the south of the Suez Canal but soon continued its journey.

The Suez Canal Authority (SCA) told Reuters the issue had lasted about 10 minutes and “was fixed”.

Oil prices spiked in late March after a giant container ship blocked the canal for days.

Meanwhile, escalating tensions between Saudi Arabia and India continued. Indian state refiners plan to buy 36% less oil from Saudi Arabia in May than normal, three sources said.

(Reporting by Bozorgmehr Sharafedin in LondonAdditional reporting by Shu Zhang and Sonali Paul in SingaporeEditing by Jason Neely and David Goodman)

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BP Expects to Hit $35 Billion Net Debt Target in First Quarter

The company, which had a debt pile of $39 billion at the end of 2020, had earlier expected to reduce its debt to $35 billion around the fourth quarter of 2021 or first quarter of 2022.

BP plans to start share buybacks once it reaches its debt target. The company said it would provide an update on share buybacks during its first-quarter results on April 27.

The London-based company said on Tuesday it expects sale proceeds in 2021 to be at the top end of its existing $4 billion to $6 billion range.

The oil major plunged to a $5.7 billion loss last year, its first in a decade, as the COVID-19 pandemic took a heavy toll on oil demand and in February warned of a tough start to 2021 amid widespread travel restrictions.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Shounak Dasgupta)

Canada’s Cash-Rich Oil Sands Firms Face Pressure to Spend on Transition

By Rod Nickel, Nichola Saminather and Nia Williams

Their strategy to repay debts and pay shareholders has won praise from investors in Canadian Natural Resources, Suncor Energy and Cenovus Energy who are eager for higher returns. But greener shareholders warn they could divest or oppose management.

The sharp recovery has thrust the companies deep into a debate on returns versus cleaner fuels that will determine the makeup of their business for decades. The oil and gas sector accounted for 26% of Canada’s carbon emissions in 2018, and Prime Minister Justin Trudeau has set a goal of net-zero emissions for the country by 2050.

Canadian Natural expects to generate up to C$5.4 billion ($4.30 billion) in free cash flow in 2021, from C$692 million last year. Suncor projects additional cash flow of C$400 million this year and C$1 billion by 2023. Cenovus could generate C$3.5 billion this year, analysts at investment bank Morgan Stanley estimate, from a loss last year.

CHANGE IS COMING

Some investors and lenders warn they could walk away if more of that cash is not spent on projects that transition the companies for a low-carbon future.

“They have these ambitious transition targets and a relatively short window to make people believe that their transition plans are real,” said Jamie Bonham, director of corporate engagement at NEI Investments, which owns shares in all three oil sands producers worth a combined C$71 million. NEI could divest or vote against directors if progress does not come soon, he said.

“We will take into account whether they’re moving in the right direction,” said Steve Peacher, president of SLC Management, an investment subsidiary of Sun Life Financial. “We won’t lend to energy firms that we don’t think are doing that.”

Canada’s biggest energy producers trade at a free cash flow yield of 15% for 2021 and 2022, compared with a median of 10% for U.S. peers, Morgan Stanley said in March.

However, oil executives argue it is too soon to take a more aggressive approach, with the pandemic continuing.

“We’re focused on our balance sheet,” Canadian Natural President Tim McKay said, adding that repaying debt is a priority.

Suncor said in February it is spending additional cash on repaying debt and repurchasing shares, with 10% of its capital earmarked for a wind farm and cogeneration project.

“If you’re structurally cutting shareholder returns to take their cash and invest it in the transition, that’s going to be tough, because we need the support of the shareholders and the capital markets,” Suncor Chief Executive Mark Little said.

Cenovus has said it plans to reduce debt this year and did not comment further on spending plans.

‘CARROTS NOT STICKS’

While oil sands companies are being cautious with cash, Alberta has asked Ottawa to fund a C$30-billion, 10-year program to develop carbon capture.

The federal government will require the companies to share the costs of any carbon-capture initiatives, said a senior government source who was not authorized to speak publicly.

One investor, Michael Sprung, said repaying debt and increasing dividends are the right corporate priorities. “I think oil is going to be the primary part of their business,” he said.

But lenders are growing cautious about the sector.

“We’re trying to use carrots, not sticks,” in pushing fossil fuels companies to produce more renewable energy, said Andrea Barrack, global head of sustainability at Canada’s second-largest lender Toronto-Dominion Bank.

If they fail to accelerate the shift to cleaner fuels, lenders will see them as risky over time and require higher interest rates, said Amy West, TD Securities’ global head of sustainable finance.

Bank of Montreal also aims to reach net zero emissions in its lending portfolio by 2050, but without “disruptive change” to Canada’s economy, Chief Executive Darryl White said.

The oil sands companies finally have the cash to put toward greater emissions reductions, said Andrew Logan, senior director of oil and gas at Ceres, a shareholder advisory group.

“There’s a big gap between rhetoric and investment,” Logan said. “They’ve been 20 years away for the last 20 years.”

(Reporting by Rod Nickel in Winnipeg, Nichola Saminather in Toronto, Nia Williams in Calgary; additional reporting by Steve Scherer in Ottawa)

Institutional Investors Add Risk; Outlook More Positive for 2021

By Tom Arnold

Investors had a more positive outlook for 2021, having reached a risk-neutral level across asset classes after starting last year with the highest cash levels since the 2009 financial crisis, the research from State Street Corporation and the International Forum of Sovereign Wealth Funds (IFSWF) found.

Many are also adding to their exposure within private markets, with a particular focus on infrastructure and real estate, hastened by low real returns in public markets, according to the findings, based on State Street data and an IFSWF survey of seven of its largest sovereign fund members.

For example, sovereign fund investments in private markets more than doubled during 2020 to $50.3 billion, IFSWF data showed, in part due to funds helping out their portfolio companies hit by the pandemic.

“The current macroeconomic environment, anticipated fiscal stimulus and portfolio positioning of institutional investors and sovereign wealth funds present reasons to be optimistic as we move further into 2021,” said Neill Clark, head of State Street Associates, Europe, Middle East and Africa at State Street.

There was a marked uptick in interest in U.S. equities in 2020, with IFSWF data showing over $16 billion invested across 46 deals in 2020, up from $2 billion across 28 deals in 2019.

The rise was largely due to Saudi Arabia’s Public Investment Fund’s countercyclical investments in energy, consumer and financial sectors at the peak of the crisis in the second quarter.

Institutional investors also scaled back investments in emerging markets and withdrew from investments in Britain during 2020, according to the research.

Still, IFSWF data indicated an uptick in sovereign fund investments in the country to $4.4 billion in 2020 compared with $1 billion in 2019, almost two-thirds in private markets, as funds eyed deals in the battered economy.

With assets such as global stocks and bitcoin near record highs, talk of bubbles in certain sectors has increased this year.

Yet State Street said it did not see evidence of bubble behaviour and sovereign funds surveyed in the report were generally not worried either.

One IFSWF member surveyed did express concern about the number of special purpose acquisition company (SPAC) initial public offerings, the number of tech firms trading at more than 20 times revenues and multiples that private equity firms are paying for deals.

(Reporting by Tom Arnold in London; Editing by Matthew Lewis)

Saudi Aramco Role in Private Investment Drive Guided by Business not State, Says CEO

By Dmitry Zhdannikov, Ahmad Ghaddar and Shadia Nasralla

His comments in an interview on Wednesday came a day after Saudi Crown Prince Mohammed bin Salman announced the new Shareek (Partner) initiative, in which the state-controlled oil giant and petrochemical firm SABIC would lead private sector investments worth 5 trillion riyals ($1.3 trillion) by 2030.

The new programme is part of efforts to mobilise private investment in the world’s biggest oil exporter, helping the kingdom diversify away from crude sales that still generate more than half the state’s income.

“You can look at Shareek as a catalyst in making Saudi Arabia even more compelling as an investment destination for both local and foreign investors,” Aramco Chief Executive Amin Nasser told Reuters.

The government has not spelled out how the programme will work in detail, but Nasser said private companies would seek incentives from the government – whether infrastructure, fiscal or regulatory support – and Aramco would determine whether to back a project as a partner.

“This is a voluntary programme. It’s on the private sector to bring these projects, to ask for incentives,” he said.

He promised Aramco’s shareholders, who include a small minority of private investors since the company began trading on the stock exchange in December 2019, that the firm would set prudent capital allocation and cost criteria.

But Nasser said it was too early to say how the new programme would affect Aramco’s dividend and investment plans.

The crown prince said the government had asked the biggest firm’s participating in the programme to lower their dividends to raise capital spending, although he said dividends for those owning shares in Aramco would remain stable.

The new programme has raised some investor concerns that Aramco might start building stadiums or launch other infrastructure projects unrelated to its energy business, mirroring its activities in earlier years of Saudi Arabia’s oil boom.

But Nasser said the government, which still owns 98% of the company since its initial public offering, was not pushing Aramco to take part in specific projects.

“There is nothing about the government asking for this or that,” he said when asked if Aramco was shifting towards becoming more of a conglomerate than an energy-focused business.

He said the programme would allow Aramco to improve its supply chains and the profitability of some of its energy projects, which in turn would make it more attractive for Aramco’s international partners to invest in the kingdom.

“We will bring each project as a unique case, and I’m sure like other companies we will have specific details that will be discussed with the committee in charge of granting these incentives,” he said.

(Reporting by Dmitry Zhdannikov, Ahmad Ghaddar and Shadia Nasralla; Editing by Edmund Blair)

OPEC+ Panel Lowers Oil Demand Growth Forecast

The Joint Technical Committee, which advises the group of oil-producing nations that includes Saudi Arabia and Russia, met on Tuesday ahead of a ministerial meeting on Thursday to decide output policy.

“Despite the ongoing destocking of commercial OECD stocks, they remain above the 2015-2019 average, while recognising that prevailing volatility in the market structure is a signal of fragile market conditions,” the panel said in the report.

Under its base case scenario, it expects oil demand to grow by 5.6 million barrels per day this year, down by 300,000 bpd from its previous forecast.

It also raised its global supply growth forecast by 200,000 bpd to 1.6 million bpd.

As a result, it sees oil stocks in the industrialised world dipping below the 2015-2019 average in August, a month later than it previously forecast.

The Organization of the Petroleum Exporting Countries and allied producers, a group known as OPEC+, are curbing output by just over 7 million bpd to support prices and reduce oversupply. Saudi Arabia has added an additional one million bpd to those cuts.

Saudi Arabia is prepared to support extending oil output limits and is also ready to prolong its own voluntary cuts, a source briefed on the matter told Reuters on Monday.

JP Morgan in research note said it believes OPEC+ will tread cautiously by largely rolling over its production cuts into May and that Saudi Arabia will extend its additional cut until the end of June.

“We expect the alliance to start adding production in 500,000 bpd increments beginning in June and lasting through August,” the bank added.

(Reporting by Rania El Gamal and Ahmad Ghaddar; editing by Tom Hogue, Jason Neely and Barbara Lewis)

U.S. Gasoline Demand Exceeds 2020 Levels for First Time in 2021: OPIS

By Stephanie Kelly

However, demand still trails pre-pandemic levels, and the year-on-year increase is a bigger reflection on last year’s demand destruction rather than strong economic recovery this year, the report said.

U.S. oil consumption crashed by 27% in April last year from the year prior, the Energy Information Administration said, as aircraft were grounded and people were forced to remain at home to curb the spread of the coronavirus.

Gasoline same-store sales for the week ended March 20 were 10.1% higher than 2020, said the report, which surveyed 25,000 fuel stations nationwide. Sales were still 16% below pre-pandemic levels.

Since the start of 2021, gasoline volumes have mostly ranged between 15% to 18% below prior-year levels, the report said.

“(T)he real measure of recovery will be a return to pre-pandemic levels,” said Brian Norris, executive director of retail fuels for OPIS. “It’s there that progress remains slow and, looking at gasoline, we still have a long way to go.”

(Reporting by Stephanie Kelly; Editing by Steve Orlofsky)

Saudi Wants OPEC+ to Extend Oil cuts Into June

By Rania El Gamal, Ahmad Ghaddar and Olesya Astakhova

After steady oil price gains earlier this year, OPEC and its allies, known as OPEC+, had hoped to ease output cuts.

But a fresh wave of lockdowns to prevent a new surge in the virus has pushed oil off this year’s highs, and four OPEC+ sources told Reuters this would most likely encourage the group to extend cuts into May when it meets on Thursday.

The source briefed on the matter said on Monday that Saudi Arabia was keen to extend cuts beyond May and into June.

“They don’t see demand as yet strong enough and want to prevent prices from falling,” the source said.

A Saudi oil source said on Tuesday OPEC+ had not taken any decision yet and discussions about policy had yet to start.

Under existing curbs, OPEC, led by Saudi Arabia, and non-OPEC producers, led by Russia, have cut just over 7 million barrels per day (bpd), while Saudi Arabia has made an additional voluntary reduction of 1 million bpd.

Last year, the group agreed to cut 9.7 million bpd, or about 10% of world output, but then eased back as demand recovered.

At a meeting on March 4, OPEC+ surprised the market by deciding to hold output broadly steady, although Russia and Kazakhstan were allowed slight increases.

A source familiar with Russia’s thinking said on Monday Moscow would support extending cuts again while seeking another small rise in production for itself.

Benchmark Brent crude, which climbed above $71 a barrel shortly after the OPEC+ decision, reaching its highest since the pandemic began, is now trading around $65.

Alongside concerns about the pandemic’s impact on demand, a rise in Iranian oil exports is also prompting caution. Iran has recently boosted shipments despite U.S. sanctions.

(Writing by Dmitry Zhdannikov; Editing by Cynthia Osterman and Edmund Blair)

Oil Falls as Suez Opens, Focus Turns to OPEC+ Output Cuts

By Ahmad Ghaddar

Brent crude was down 73 cents, or 1.1%, at $64.25 a barrel by 1226 GMT. U.S. oil was off by 83 cents, or 1.4%, at $60.73 barrel.

Ships were moving through the Suez Canal again on Tuesday after tugs refloated the giant Ever Given container carrier, which had been blocking a narrow section of the passage for almost a week, causing a huge build-up of vessels around the waterway.

With concerns about a shortage of physical supplies abating, the market is turning its focus to Thursday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+.

Saudi Arabia is prepared to accept an extension of production cuts through June, and is also ready to prolong voluntary unilateral curbs amid the latest wave of coronavirus lockdowns, a source briefed on the matter said on Monday.

“The wobble we have seen in prices means that OPEC+ will likely need to take a cautious approach once again,” bank ING said. “We are of the view that the group will likely hold output levels unchanged, with OPEC+ wanting to avoid another sell-off,” it added.

Renewed lockdowns and problems with vaccinations could prevent the recovery of up to 1 million bpd of oil demand in 2021, Rystad Energy said.

Stymieing efforts to contain global supply are rising under the radar exports from OPEC member Iran to China, which is ignoring U.S. and United Nations sanctions on the country and importing higher amounts of Iranian oil, according to traders and analysts.

China may receive as much as 1 million barrels a day this month in imports from Iran passed off as crude from other origins.

A U.S. dollar rally also weighed on oil prices. As crude is priced in dollars, a stronger greenback makes the commodity more expensive to holders of other currencies.

(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Kirsten Donovan and Louise Heavens)

Brazil’s Oil Industry Battles Deadliest COVID-19 Wave Yet

By Gram Slattery and Marta Nogueira

New COVID-19 cases among offshore oil workers rose to 46 on March 24 from 17 on March 3, based on a 15-day moving average, data from national oil regulator ANP showed.

Active cases are at their highest level since December at Brazil’s largest oil producer, state-run Petrobras, with 294 cases among employees as of Monday, according to Mines and Energy Ministry data.

Petroleo Brasileiro SA, as the firm is formally known, told Reuters it has adopted “rigorous measures” since the beginning of the pandemic to protect workers, carrying out some 650,000 COVID-19 tests among its workforce of roughly 46,000.

When employees are confined to enclosed spaces, as is common on offshore platforms, the company monitors them for 14 days prior to the beginning of their shift, Petrobras said.

Still, those efforts have not insulated the company from a nationwide surge in COVID-19 cases in recent weeks.

Brazil’s death toll from the virus hit a record high 3,251 on Tuesday, the Health Ministry reported, with 1,171 in the states of Sao Paulo and Rio de Janeiro, the heart of Brazil’s oil industry.

Automakers Volvo AB, Volkswagen AG and Mercedes Benz have scaled back production, citing health risks to workers.

PRODUCTION

The virus is also hitting output at Petrobras.

Production slowed last week at two platforms at the major Marlim Sul oilfield after an outbreak, a branch of the national FUP oil union told Reuters.

By the end of last week, lost production totaled roughly 64,000 barrels, the union said.

Petrobras said it had brought back to shore all workers who tested positive for the virus, along with those who had come in close contact with them. The company confirmed that production levels had been reduced at two platforms, but said they had since returned to normal levels.

On Monday, workers at Petrobras’ REGAP refinery walked off the job, the local FUP branch said in a statement, alleging that some 200 workers were currently sick and 10 were hospitalized with COVID-19.

Petrobras said that REGAP production had not been affected.

“Unfortunately, there has been an increase in cases throughout the country and that increase in COVID-19 is also present among Petrobras workers,” the company said.

(Reporting by Gram Slattery and Marta Nogueira; additional reporting by Luciano Costa in Sao Paulo; editing by Jason Neely)

Ships Carrying Commodities Stuck After Vessel Grounding in Suez Canal

By Jonathan Saul

Efforts were underway on Wednesday to refloat the 400-metre, 224,000-tonne Ever Given, which got stranded on Tuesday morning after losing the ability to steer amid high winds and a dust storm.

Shipping sources say the grounding has disrupted regular voyages through the Canal, which is one of the world’s critical chokepoints and the quickest sea route between Asia and Europe.

Kpler said more than 20 oil tankers carrying crude and refined products were affected by the disruptions.

The Suez Canal is also a major route for LNG tankers bringing supplies and seven LNG vessels were stuck on Wednesday, Refinitiv ship tracking data showed.

Any delays can have a knock-on effect for both LNG and European gas prices.

There were also more than 13 container ships anchored around Suez with at least two others waiting in the Mediterranean, Refinitiv ship tracking data showed.

The world’s biggest container line A.P. Moller Maersk said seven of its vessels had been affected so far, adding that “four of them are stuck in the canal system while the rest are waiting to enter the passage”.

Shipping sources said if the delays extend ships could potentially start re-routing around Africa, which takes a week longer to navigate, if they were unable to sail through the Canal.

“The next 24 hours will be critical in determining the longer-term impact,” said Chris Evans, international supply chain specialist with professional services company Colliers.

“If there is a significant delay, then it is likely that the Cape of Good Hope will serve as an alternative route to keep things moving.”

Disruptions caused by the coronavirus and a surge in demand for retail goods by consumers have led to wider logistical bottlenecks around the world for container lines and supplies in recent months.

“With the Asia-Europe supply chain already stretched to the limit, the Suez Canal blockage comes at a particularly unhelpful time,” said Greg Knowler with IHS Markit’s Journal of Commerce.

“Container shipping lines have deployed every available vessel to serve heavy demand from European and UK importers, with congestion delaying the handling of inbound cargo.”

(Additional reporting by Nina Chestney; Editing by Emelia Sithole-Matarise)

Global Edible Oil Prices near Their Peak, but Retreat May be Slow

By Mei Mei Chu and Gavin Maguire

Major vegetable oil prices such as palm oil and soybean oil have likely already peaked at multi-year highs in 2021, lifted by a cocktail of production hiccups, recovering food consumption and an upbeat outlook for biofuel demand, leading industry analysts said at the Virtual Palm and Lauric Oils Price Outlook Conference.

But a constrained recovery in palm oil production due to an enduring labour shortage in Malaysia, and a slowdown in soybean oil output in China due to stalled soymeal demand growth, will prevent prices from falling too steeply.

Malaysian benchmark palm oil futures in mid-March topped 4,000 ringgit ($968.76) a tonne for the first time since 2008 and is trading at an average of 3,638 ringgit ($883.01) per tonne so far this year. It averaged at 2,700 ringgit a tonne last year.

“We are in a bubble, and the bubble will pop, but I don’t expect prices to collapse” said James Fry, the chairman of commodities consultancy LMC International said.

Fry forecasts Malaysian palm oil futures to fall to 3,300 ringgit ($799.22) by the end of 2021. Mistry pegged prices to hold at 3,300 ringgit until June, before bottoming out at 2,700 ringgit ($653.91) around September.

“For 2021, my (production) estimate has been trimmed from 20 million tonnes to 19.6 million tonnes in Malaysia and from 49 million to 48 million for Indonesia,” Dorab Mistry, director of Indian consumer goods company Godrej International, said.

World palm oil supply is expected to expand by 3 million tonnes in 2021 after suffering a decline of 2.5 million tonnes last year, Mistry added.

The modest recovery in global palm oil supply will limit the price decline, said Thomas Mielke, head of Hamburg-based analyst firm Oil World.

The higher palm oil prices have rationed food demand in price sensitive markets like India, but U.S. President Joe Biden’s biodiesel agenda will spur demand from the fuel sector, the analysts said.

Palm oil, the world’s cheapest and most widely used edible oil, is found in everything from biscuits to biofuel.

Mielke pegged biodiesel production to rise by 2.2 million tonnes this year, with 17.9 million tonnes of palm oil likely to be used for biodiesel and Hydrotreated Vegetable Oil (HVO).

“‘B’ in 2021 is very important because it stands for Biodiesel and Biden…. It has completely transformed the scenario. People are as bullish as hell that green energy will take over,” Mistry said.

(Reporting by Mei Mei Chu, Gavin Maguire and Mai Nguyen; Editing by Marguerita Choy)

Commodities Take a Hit as Stronger US Dollar, Bearish Fundamentals Weigh on Demand

Commodities took a hit on Tuesday, led by a steep drop in crude oil prices. A sharp rise in the U.S. Dollar was among several factors driving oil prices lower, but it was the main reason for the plunge in gold prices. Natural gas prices also retreated on weather-related concerns.

The dollar index rose against a basket of most major currencies on Tuesday, surpassing a two-week high, while yields on U.S. Treasuries slipped as U.S. Federal Reserve Chair Jerome Powell told Congress inflation will not get out of hand.

The dollar index reversed course from Monday when it dipped but hovered below four-month highs, as investors sought safe havens. Contributing to market caution was a potential currency crisis in Turkey and a third wave of COVID-19 pandemic in Europe. Germany is extending its lockdown and urging citizens to stay at home over the Easter holidays.

Crude Oil

Crude oil prices plunged on Tuesday, pressured by a sharp rise in the U.S. Dollar, concerns over lockdowns in Europe and an unexpected rise in U.S. fuel inventories.

U.S. crude oil stocks rose and gasoline inventories fell in the most recent week, according to trading sources citing data from industry group the American Petroleum Institute.

Crude inventories jumped by 2.9 million barrels in the week to March 19, compared with analysts’ expectations in a Reuters’ poll for a decline of about 300,000 barrels, sources said.

Gasoline stocks fell by 3.7 million barrels, compared with expectations for a build of 1.2 million barrels.

Distillate fuel inventories, which include diesel and heating oil, rose by about 246,000 barrels, versus expectations for a draw of 100,000 barrels.

Gold

Gold prices fell on Tuesday as the dollar’s rally to a two-week peak offset a dip in U.S. Treasury yields. The price action suggests safe-haven buying is behind the moves with the U.S. Dollar rising along with Treasury bonds. Once again, gold was not in the mixed because contrary to belief in the brokerage community, gold is not considered a true safe-haven asset.

The rise in the dollar offset foreign demand for dollar-denominated gold. Some gold bulls are trying to build a case for buying gold due to the Fed’s signaling of low-interest rates and the likelihood for further fiscal stimulus from a potential resurgence in COVID-19 cases.

Natural Gas

Natural gas futures retreated on Tuesday, ending hopes of a three-day winning streak. The bulls have been helped this week by increasing liquefied natural gas (LNG), but that news wasn’t enough to overcome continued bearish weather forecasts that pointed toward weak demand.

According to NatGasWeather, both the European and domestic weather models on Tuesday showed “emphatically bearish” conditions in terms of domestic natural gas demand for the remainder of March and into April.

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

Saudi Aramco to Prioritise Energy Supply to China for 50 Years, Says CEO

By Muyu Xu and Florence Tan

Saudi Arabia, the world’s biggest oil exporter, retained its position as China’s top supplier in the first two months this year, with volumes up 2.1% to 1.86 million barrels per day (bpd), China customs data showed on Saturday.

The kingdom beat Russia to keep its ranking as China’s top crude supplier in 2020 despite unprecedented production cuts in a pact between the Organization of the Petroleum Exporting Countries and its allies to balance global markets after demand plunged during the COVID-19 pandemic.

“Ensuring the continuing security of China’s energy needs remains our highest priority – not just for the next five years but for the next 50 and beyond,” Nasser said in a video speech.

“We appreciate that sustainable energy solutions are crucial to a faster and smoother global energy transition … But, realistically, this will take some time since there are few alternatives to oil in many areas.”

Nasser told an earnings call earlier on Sunday that Chinese demand was very close to pre-pandemic levels while Asia, East Asia in particular, had seen a strong pickup.

Besides being a top supplier of China’s energy needs, Nasser said Aramco is also well-placed to help China achieve its second centennial goal in energy transition.

Chinese President Xi Jinping announced in September that China will bring its carbon emissions to a peak before 2030 and reach carbon neutrality by 2060, a pledge that is expected to create a tectonic shift in its energy and manufacturing sectors.

The state oil giant also expects opportunities for further investment in downstream projects to help to meet China’s needs for heavy transport and chemicals, as well as lubricants and non-metallic materials, Nasser said.

He added that Aramco is working with Chinese universities and companies in cleaner engine fuel systems and technologies to convert crude to chemicals and to reduce greenhouse gas emissions from existing energy sources.

“In fact, we have even bolder ambitions to expand and intensify our research collaboration with China,” Nasser said, adding that additional collaboration is likely on so-called blue hydrogen, ammonia and carbon-capture technologies among others.

Experts from China National Petroleum Corp’s (CNPC) research institute have forecast that China’s oil demand will be capped at 730 million tonnes by around 2025 under Xi’s climate pledge.

(Reporting by Muyu Xu and Florence Tan; Editing by David Goodman and David Evans)

Oil Steadies on Demand Recovery Hopes Despite European Lockdowns

By Noah Browning

Brent crude was up 2 cents at $64.57 a barrel by 1201 GMT and U.S. oil was up 13 cents, or 0.2%, at $61.55. Both contracts fell more than 6% last week after making steady gains for months on the back of output cuts and an expected demand recovery.

“Oil (had) its worst week this year as concerns grow over a flaring up in COVID-19 cases across Europe,” Dutch bank ING said in a note. “This comes at a time when there are clear signs of weakness in the physical oil market.”

Nearly a third of French people entered a month-long lockdown on Saturday while Germany plans to extend its COVID-19 lockdown into a fifth month, according to a draft proposal.

While a broad economic recovery remains elusive, Saudi Aramco Chief Executive Amin Nasser remains optimistic on prospects for the world’s top oil exporter later in the year.

Nasser said on Sunday that global oil demand is on track to reach 99 million barrels per day (bpd) by the end of 2021 thanks to ramped-up coronavirus vaccination programmes.

The Organization of the Petroleum Exporting Countries (OPEC)and its allies, together known as OPEC+, have put in place unprecedented production cuts in a pact to balance global markets after demand plunged during the COVID-19 pandemic.

U.S. drillers, meanwhile, are starting to take advantage of the recent spike in prices, adding the most rigs since January in the week ending last Friday. The rig count has been rising over the past seven months and is up nearly 70% from a record low of 244 in August.

(Reporting by Noah Browning and Aaron Sheldrick; Editing by David Goodman)

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