Energy sector CO2 emissions hit record in 2022: study

LONDON - Global energy sector carbon dioxide emissions hit a record peak last year counter to Paris commitments, a key study warned, and highlighted the "worst ever" impacts of climate change.

UK-based global industry body the Energy Institute laid out the main findings of its Statistical Review of World Energy, conducted with consultancies Kearney and KPMG.

"Carbon dioxide emissions from energy use, industrial processes, flaring and methane... continued to rise to a new high growing 0.8 percent in 2022," read the study.

The annual review was historically published by energy major BP but it has been handed to the institute.

Primary energy consumption grew about one percent last year from 2021, or almost three percent when compared with its pre-Covid level in 2019, the review found.

Fossil fuels remain dominant at 82 percent of consumption, despite a strong showing from renewables.

Meanwhile, wind and solar power together hit a record 12 percent of total electricity generation, helped by the biggest ever increase in capacity for both.

Demand for fuel for transportation continued to rebound from pre-pandemic levels, although China held "significantly" below due to the ongoing impact of its prior 'Zero Covid' restrictions.

Energy Institute President Juliet Davenport warned the sector was heading in the "opposite direction" to the goals of the Paris deal.

"2022 saw some of the worst ever impacts of climate change -- the devastating floods affecting millions in Pakistan, the record heat events across Europe and North America -- yet we have to look hard for positive news on the energy transition in this new data," Davenport said.

"Despite further strong growth in wind and solar in the power sector, overall global energy-related greenhouse gas emissions increased again.

"We are still heading in the opposite direction to that required by the Paris Agreement."

Under the 2015 Paris accord, nations pledged to reach net-zero carbon emissions by the middle of the century with the aim of limiting the increase in global temperatures to 1.5 degrees of pre-industrial levels.

Richard Forrest, chair of Energy Transition Institute at Kearney, added that soaring greenhouse gas emissions reinforced "the need for urgent action to get the world on track to meet the Paris targets."

He noted 2022 was a "turbulent year" that saw energy security top the agenda due to key producer Russia's invasion of Ukraine -- and rebounding post-pandemic demand.

Agence France-Presse

Germany faces recession as energy crisis bites: think-tank

FRANKFURT, Germany - Germany will fall into recession next year, a leading think-tank warned Monday, with Europe's biggest economy facing soaring inflation as Russia slashes energy supplies.

The Ifo institute expects the German economy to shrink 0.3 percent in 2023 -- slashing its forecast by four percentage points from a previous prediction in June.

Inflation is expected to hit 8.1 percent this year and 9.3 percent next year, it said. 

"We are heading into a winter recession," said Timo Wollmershaeuser, Ifo's head of forecasts.

"The cuts in gas supplies from Russia over the summer and the drastic price increases they triggered are wreaking havoc on the economic recovery following the coronavirus."

Real household incomes and purchasing power will drop sharply, the think-tank warned.

There is likely to be a "return to normal" in 2024 with 1.8 percent growth and 2.5 percent inflation, Wollmershaeuser said. 

At the start of September, Russian energy giant Gazprom halted gas deliveries to Europe via the key Nord Stream 1 pipeline saying it would be under repair for an unspecified period. 

The shutdown accentuates an energy crisis in Germany, long reliant on Russian gas, and across Europe, with Moscow accused of using energy as a weapon amid tensions over the Ukraine war.

German inflation hit 7.9 percent in August, and earlier this month the government unveiled a new multi-billion-euro relief package to help households cope with soaring prices.

Last week, the European Central Bank hiked interest rates by a record 75 basis points as its seeks to battle sky-high inflation across the eurozone and said more increases were to come. 

Agence France-Presse

Ethereum blockchain set for 'monumental' overhaul

PARIS - An army of computer programmers scattered across the globe is set to attempt one of the biggest software upgrades the crypto sector has ever seen this week to reduce its environmentally unfriendly energy consumption.

Developers have spent years working on a more energy-efficient version of the ethereum blockchain, a digital ledger that underpins a multibillion dollar ecosystem of cryptocurrencies, digital tokens (NFTs), games and apps.

Ethereum -- the second most important blockchain after bitcoin -- burns through more power each year than New Zealand.

Experts say the changeover, expected to take place between Tuesday and Thursday, would slash energy consumption by more than 99 percent.

Enthusiasts hope a greener ethereum will spur wider adoption, particularly as a way of enabling banks to automate transactions and other processes.

But so far the technology has been used largely to create speculative financial products.

The ING bank said in a recent note that the switchover might help ethereum gain acceptability among policymakers and regulators. 

"This in turn may provide a boost to traditional financial institutions' willingness to develop ethereum-based services," the bank said.

The switchover, dubbed "the merge", will change the way transactions are logged.

At the moment, so-called crypto miners use energy-guzzling rigs of computers to solve puzzles that reward them with new coins -- a system known as "proof of work".

The new system will get rid of those miners and their computer stacks overnight.

Instead, "validators" will have to put up 32 ether (worth $55,000) -- ethereum's cryptocurrency -- to participate in the new "proof of stake" system where they earn rewards for their work.

But the merge process will be risky.

Blockchain company Consensys called it a "monumental technological milestone" and the biggest update to ethereum since it was launched in 2015.

Critics have questioned whether such an upgrade will pass off without incident, given the sector's history of instability.

Ethereum went offline in May for three hours when a new NFT project sparked a surge in buyers that overwhelmed the network.

Several exchanges and crypto companies said they would halt transactions during the merge process.

The upgrade also faces a possible rebellion from crypto mining companies whose business will be severely damaged.

They can try to hijack the process or create a "fork", basically a smaller blockchain that would continue with the old mechanism.

And even if the "merge" is successful, ethereum will still face major hurdles before it can be more widely adopted.

For example, it is expensive to use and the update will not reduce fees.

And the wider crypto sector is beset by wildly fluctuating prices, security flaws and an array of scams.

Crypto lawyer Charles Kerrigan from the firm CMS told AFP that ethereum was "decentralized and complicated" and had not yet been tested enough for governments and banks to get onboard.

"There have been questions about how easily it could deal with upgrades of the type that traditional software vendors provide to customers," he said. 

"A successful merge will answer those questions."

Agence France-Presse

Gas supply shock would cut value of Europe's economy, ECB says

FRANKFURT - A negative shock from any gas supply disruption would eat into the value of goods and services produced in the euro zone, the European Central Bank said on Tuesday, worsening the impact of high energy prices on the bloc's growth.

Record energy prices in response to concern a Russian attack on Ukraine will lead to disruption of fuel exports to Europe have dented euro zone growth. Russia denies any plan to invade.

In an Economic Bulletin article on Tuesday, the ECB said it expected high energy prices would reduce euro zone economic output by around 0.2 percent this year, compared with baseline levels of GDP, with the biggest impact in the first quarter.

Over 90 percent of the gas used in the euro zone is imported, the ECB said, meaning negative economic impacts would be aggravated if the bloc loses some of its gas supply.

"The direct and indirect impact of a hypothetical 10 percent gas rationing shock on the corporate sector is estimated to reduce euro area gross value added by about 0.7 percent," the bank said.

The actual fall could even be greater as the modeling does not consider the effect of energy price changes, the ECB said.

Austria and Slovakia would take the biggest hit, the ECB said, while among industrial sectors, basic metals would likely suffer the most.

(Reporting by Balazs Koranyi; editing by Barbara Lewis)

-reuters-

Saudi Aramco profits dive 73 percent as virus batters oil demand

RIYADH - Energy giant Saudi Aramco said on Sunday its second-quarter profits plunged a massive 73 percent due to sharply lower oil prices as the coronavirus crisis undercuts global demand. 

The behemoth, recently dethroned by Apple as the world's most valuable listed company, posted a net profit of $6.6 billion for the three months to June 30 compared to $24.7 billion for the same period of 2019.

The results are in line with analysts' expectations but stand in contrast to the losses reported by its rival energy giants, which are reeling from a drop in oil demand since the start of the novel coronavirus pandemic.


"Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results," Aramco's chief executive Amin Nasser said in a statement.

"Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce and unrivalled financial and operational strength."

Aramco's net profit for the first half of the year also slumped by 50.5 percent to $23.2 billion, compared to $46.9 billion in the same period last year.

The results underscore a downbeat oil market as pandemic-driven economic shutdowns crush the global demand for crude.

Five other leading oil firms -- BP, Chevron, ExxonMobil, Royal Dutch Shell and Total -- recently reported combined losses of $53 billion for the second quarter.

By contrast, Aramco's results reflected its "financial resilience", Nasser said, as the company presses ahead with a plan to pay $75 billion in dividends this year.

Nasser also voiced optimism over what he called a "partial recovery in the energy market" amid an easing of virus restrictions in some countries.

But amid low crude prices, Aramco is looking at cutting its 2021 budget by between eight and 10 percent from this year's already reduced levels, the Energy Intelligence group reported last month.

Aramco has said it expects capital expenditure to be at the "lower end of the $25 billion to $30 billion range" this year.

That is significantly lower than its expenditure of $32.8 billion in 2019, according to Energy Intelligence.

"Cutbacks have already caused Aramco to delay plans to expand production from its offshore fields," Energy Intelligence said in a report.

"The offshore program was a core element of a push to raise the company's oil production capacity."

The company has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported in June.

Saudi Arabia, the world's biggest crude oil exporter, has been hit hard by the double whammy of low prices and sharp cuts in production.

A sharp drop in oil income is expected to hinder Crown Prince Mohammed bin Salman's ambitious plans to overhaul the kingdom's energy-reliant economy.

Oil prices dropped to a two-decade low below $20 a barrel in April and May as the coronavirus dampened demand, before recovering to around $44 a barrel after the OPEC+ producers agreed to record output cuts.

Following the move, Saudi oil production dropped to 7.5 million barrels per day in June, compared to last year's average of 10 million bpd.

Aramco's profits were also impacted by the losses posted by the Saudi Basic Industries Co. (SABIC), the petrochemicals giant it acquired for $69 billion in a deal completed this year.

The energy giant is bracing for a possible further wave of coronavirus infections that could impact a tentative global economic recovery and erode the demand for crude worldwide, analysts say.

Aramco was listed on the Saudi bourse in December following the world's biggest IPO, generating $29.4 billion for 1.7 percent of its shares.

US technology firm Apple last week replaced it as the world's most valuable company after its capitalisation grew to $1.9 trillion, compared to $1.76 trillion for Aramco.

Nasser said Aramco would distribute $18.75 billion in dividends for the second quarter to keep its listing promise of distributing at least $75 billion in annual dividends for five years.

"We are committed to delivering sustainable dividends through market cycles, as we have demonstrated this quarter," Nasser said in a media call, according to Bloomberg News.

"Our intention is to pay $75 billion, subject to board approval, of course, and market conditions."

Agence France-Presse

Shell says will take up to $22 billion hit from coronavirus

LONDON — Anglo-Dutch energy giant Royal Dutch Shell will take a vast second-quarter charge of up to $22 billion due to coronavirus and collapsing oil prices, it announced Tuesday.

The company said in a statement that it would face a charge of between $15 billion and $22 billion in the second quarter, after reviewing chronic fallout from the deadly COVID-19 outbreak that crashed global demand for energy.

"In the second quarter of 2020, Shell has revised its mid and long-term price and refining margin outlook reflecting the expected effects of the COVID-19 pandemic and related macroeconomic as well as energy market demand and supply fundamentals," the London-listed firm said.

"This has resulted in the review of a significant portion of Shell's upstream, integrated gas and refining assets." 

The energy major added that the move also reflected a planned reshaping of refining activities as it seeks to move towards becoming carbon neutral by 2050.

Shell's announcement comes after rival BP revealed earlier this month that it was taking a hit of between $13 billion and $17.5 billion in the same period as a result of "sustained" coronavirus fallout that ravaged the world's appetite for oil.

Agence France-Presse

Oil major BP to cut 15 percent of workforce

LONDON - BP will cut about 15 percent of its workforce in response to the coronavirus crisis and as part of Chief Executive Bernard Looney's plan to shift the oil and gas major to renewable energy, it said on Monday.

Looney told employees in a global online call that the London-based company will cut 10,000 jobs from the current 70,100.

"We will now begin a process that will see close to 10,000 people leaving BP – most by the end of this year," Looney said in a statement.

Reuters had earlier reported the planned job cuts, citing three company sources.

BP shares were up 3.3 percent by 1230 GMT, against a 2.2 percent gain for the broader European energy sector.

The affected roles will be mostly senior office-based positions and not front-line operational staff, the company said.

About a fifth of the job cuts will take place in Britain, where BP employs 15,000 people, a company spokesman said.

Like all the world's top energy companies, BP has cut its 2020 spending plans after the coronavirus pandemic brought an unprecedented drop in demand for oil. BP has flagged a 25 percent cut to $12 billion this year and said it would find $2.5 billion in cost savings by the end of 2021 through the digitalization and integration of its businesses.

On Monday, however, Looney said the company is likely to need to cut costs even further.

BP is giving no pay rises to senior employees until March 2021 and said it is unlikely to pay any cash bonuses this year.

ENERGY TRANSITION

The job reductions are also part of Looney's drive to make the 111-year-old oil company more nimble as it prepares for the shift to low-carbon energy, the sources said.

"It was always part of the plan to make BP a leaner, faster-moving and lower-carbon company," Looney said.

The spokesman said that the coronavirus crisis "amplified and accelerated" BP's transition plans.

Looney last month announced a large round of senior management appointments, halving the size of BP's leadership team under his plan to reshape the company's structure.

Shortly after taking office in February, the 49-year-old CEO said that he was creating 11 divisions to "reinvent" BP and dismantle the traditional structure dominated by its oil and gas production business and its refining, marketing and trading division.

Chevron Corp, the second-largest U.S. oil producer, last month said that it will cut between 10 percent and 15 percent of its global workforce as part of an ongoing restructuring.

Royal Dutch Shell, meanwhile, has initiated a voluntary redundancy program.

(Reporting by Ron Bousso and Shadia Nasralla Editing by Louise Heavens and David Goodman)

-reuters-

Saudi, Russia reach deal on oil cuts, raising pressure for compliance

DUBAI/MOSCOW - OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts, OPEC+ sources told Reuters.

OPEC+ agreed to cut output by a record 9.7 million barrels per day, or about 10% of global output, in May and June to lift prices battered by plunging demand linked to lockdown measures aimed at stopping the spread of the coronavirus.

Rather than easing output cuts in July, OPEC and its allies, a group known as OPEC+, were discussing keeping those cuts beyond June.

"Saudi Arabia and Russia are aligned on the extension for one month," one OPEC source said.

"Any agreement on extending the cuts is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction," the source said.

The group also considered holding an online meeting on June 4 to discuss output policy, after Algeria, which holds the presidency of the Organization of the Petroleum Exporting Countries, proposed bringing forward a meeting planned for June 9-10.

The OPEC source said that an earlier meeting on June 4 is also conditional on compliance and that the discussions now are about implementing criteria for those countries who have not fully complied with the oil cuts and how they can compensate for their overproduction in the coming months.

OPEC members Iraq and Nigeria has shown weak compliance with its output reduction targets in May. OPEC/O

Kazakhstan also failed to fully meet its obligations under the OPEC+ oil cut pact, sources said.

Two sources also told Reuters that Gulf OPEC producers Saudi Arabia, Kuwait and the United Arab Emirates are not discussing extending their deeper voluntary oil cuts of 1.180 million bpd beyond June.

Oil prices rose in recent days from the lows of April buoyed by a continuing recovery in China, the epicenter of the coronavirus outbreak, while other economies are slowly opening up after lockdowns to contain its spread.

"Overall the market is moving in the right direction with the gradual easing of the lockdown. But we still need to be cautious. There is always a risk of another wave of the coronavirus," the first OPEC source said.

"The other thing is how quickly will demand patterns recover. Inventories are still above average levels and that needs to be tackled." (Reporting by Rania El Gamal and Olesya Astakhova, editing by Louise Heavens and David Evans)

-reuters-

Oil and European shares rise as lockdowns ease, gold jumps

LONDON - European stock markets rose on Monday and oil prices climbed to their highest in as much as two months as a loosening of coronavirus shutdowns boosted market sentiment, even though the deadly outbreak has yet to be fully contained.

Warm weather enticed much of the world to emerge from coronavirus lockdowns as centers of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

However, the weekend also saw anti-lockdown protesters in countries such as the United States, Germany, England and Poland arguing government restrictions demolish personal liberties and are wrecking economies.

The pan-European STOXX 600 was up 2% at 1020 GMT, with heavyweight bourses in Britain, Germany and France all comfortably in positive territory, recovering some of last week's losses.

"The resilience of stock markets relative to the awful economic data that we’ve been seeing over the past fortnight speaks to an optimism that... as economies come out of lockdown we can expect to see improvements as we head into the second half of the year," said Michael Hewson, chief market analyst at CMC Markets.

Governments must balance the economic incentive to re-open businesses with the risk of triggering a deadly second wave of the virus, which has killed more than 312,000 people and spread to at least 210 countries since December.

Deutsche Bank strategist Jim Reid said, "It does feel like we’re in the middle of a phoney war at the moment with all of us waiting to see how efficiently the various economies are able to re-open given all the social distancing that will be required."

There were still lots of obstacles to a rapid recovery, with Federal Reserve Chairman Jerome Powell saying in an interview on Sunday that a U.S. economic recovery may stretch deep into 2021.

The most important data for the U.S. economy now are the "medical metrics" around the coronavirus pandemic, he said.

Health ministers from around the world, including China and the U.S., are expected to call for an independent evaluation of the World Health Organization's handling of the COVID-19 pandemic during a WHO meeting on Monday.

Already rocky U.S.-China relations also saw tensions increase over the weekend, as the United States raised threats over telecoms equipment giant Huawei Technologies and China's treatment of journalists in Hong Kong.

U.S. lawmakers and officials are crafting proposals to push American companies to move operations or key suppliers out of China, including tax breaks, new rules, and carefully structured subsidies.

Japan's preliminary GDP data showed that the world's third biggest economy contracted an annualised 3.4% in the first quarter, slipping into a recession for the first time in more than five years.

But hopes of a worldwide economic recovery saw oil prices climb by more than $1 a barrel on Monday, supported by output cuts.

Brent crude reached as much as $34.35 a barrel on Monday, its highest since April 9, and was last up 5.3% at $34.22 . U.S. West Texas Intermediate crude was up 7.1% at $31.51 a barrel - a two-month high.

In commodity markets, the flood of liquidity from central banks, combined with record-low interest rates and poor economic data from the U.S., lifted gold to a seven-year peak. The metal was last up 1.3% at $1,763 an ounce, with silver and palladium also boosted.

The MSCI world equity index, which tracks shares in 49 countries, was up around 0.4% while MSCI's main European Index was up 2%.

Government bond yields edged higher across the euro area, while France's bonds saw some underperformance after its ratings outlook was lowered by Fitch Ratings.

Europe's biggest budget airline, Ryanair, reported a 13% rise in profit for the year to March 31, but cut its annual passenger traffic target by a further 20% and said it had "no visibility" on customer demand once it reopens much of its network on July 1. Ryanair shares were last up 10.4%.

The dollar fell slightly against a basket of six major currencies in early London trading before recovering somewhat, last down less than 0.1% since New York's close.

The Norwegian crown was lifted by the rising oil prices, up around 0.8% versus the euro.

Sterling fell below $1.21 - its lowest since March 26 - late on Sunday after the Bank of England's chief economist said the bank is looking more urgently at options such as negative interest rates.

It was last up 0.25% on the day at $1.2130, as a lack of progress in Brexit negotiations continue to weigh on the pound.

(Reporting by Elizabeth Howcroft; Editing by Toby Chopra and Peter Graff)

-reuters-

Shell cuts dividend for first time since 1940s as oil demand collapses

LONDON - Royal Dutch Shell cut its dividend for the first time in 80 years and suspended the next tranche of its share buyback program on Thursday following the collapse in global oil demand due to the coronavirus pandemic.

"Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell," Chief Executive Ben van Beurden said in a statement.

Starting in the first quarter, Shell will reduce its quarterly dividend to 16 cents per share from 47 cents in the previous quarter.

For decades, Shell has taken pride in having never cut its dividend since the Second World War, resisting such a move even during the deep downturns of the 1980s.

Shell's first-quarter net income attributable to shareholders based on a current cost of supplies (CCS) and excluding identified items, fell 46 percent from a year earlier to $2.9 billion, above the consensus in an analyst survey provided by the company.

Shell's fourth-quarter net income was also $2.9 billion.

The company said it cut activity at its refining business by up to 40 percent in response to the demand shock. 

-reuters-

Saudi foreign reserves fall at fastest for two decades

RIYADH/DUBAI - Saudi Arabia's central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while the kingdom slipped into a $9 billion budget deficit in the first quarter as oil revenues collapsed.

The world's largest oil exporter is suffering from historic price lows, while at the same time measures to fight the new coronavirus are likely to curb the pace and scale of economic reforms launched by Crown Prince Mohammed bin Salman.

The Saudi Arabian Monetary Authority said late on Tuesday its net foreign assets, which include securities such as U.S Treasuries and foreign deposits, fell in March to $464 billion, their lowest in 19 years.

The nearly $27 billion decline - the biggest monthly drop in at least two decades - signals the kingdom's urgent need to tap into reserves to offset economic damage from oil prices and a severe coronavirus-driven slowdown of non-oil sectors.

"We believe that the magnitude of the drop ... reflected both higher government funding to cover the budget deficit and the support packages announced in March to help counterbalance the impact of COVID-19," said Monica Malik, chief economist at Abu Dhabi Commercial Bank (ADCB).

Finance Minister Mohammed al-Jadaan said last week the kingdom would limit its drawdown to a maximum of $32 billion from reserves this year to fill a widening deficit which it plans to cover instead by increasing borrowing to nearly $60 billion.

Early on Wednesday, the finance ministry reported a first quarter budget deficit of $9 billion, mostly because of a drop in oil revenues that reversed a first quarter surplus of around $7.4 billion in 2019.

Oil revenues in the first three months of the year posted a 24% annual decline to $34 billion and pushed total revenues down 22% year on year.

Saudi Arabia, which had registered more than 20,000 coronavirus cases as of Tuesday with 152 deaths, had originally projected a $50 billion deficit this year, or 6.4% of gross domestic product (GDP), widening from around $35 billion last year.

Jadaan has said the deficit could now widen to up to 9% of GDP this year, but some analysts have predicted 22% with oil prices at $30 a barrel.

PRICE PLUNGE

International oil prices have shed around two thirds value since the start of this year and are trading around $21.

"If Finance Minister al-Jadaan's plans are for merely $32 billion of reserves drawdown then, following a $27 billion reduction in March alone, that means almost all the remainder will be covered by new sovereign debt issuance, assuming there are no further privatisations, because of market conditions," said Hasnain Malik, head of equity strategy at Tellimer.

Saudi Arabia and other large producers recently agreed to cut output by almost 10 million barrels per day (bpd), in May-June, in an attempt to balance the market, but demand kept falling nonetheless due to the global slowdown.

Jadaan said last week he expects the pandemic to cause a slump in activity in the non-oil private sector too this year and that the government could take more actions on top of $32 billion in emergency stimulus measures announced last month.

Private sector loan growth, however, was solid in March, central bank data showed, "potentially reflecting the higher borrowing requirements of corporates with COVID-19 impacting cash flows," said ADCB's Malik.

Non-oil revenues in the first quarter fell 17% compared to the same period one year earlier, with revenues from taxes on goods and services plunging, in a sign of overall slowdown.

Saudi Arabia has already cut its 2020 budget by nearly 5% and further spending curbs are likely.

In Q1, however, capex spending declined only 4%, the finance ministry said.

Riyadh last month raised its debt ceiling to 50% of GDP from 30%. It has already borrowed $12 billion in international bonds this year.

($1 = 3.7600 riyals) (Reporting By Marwa Rashad and Davide Barbuscia; Additional reporting by Ahmed Tolba; Editing by Himani Sarkar, Shri Navaratnam, Barbara Lewis and Andrew Cawthorne)

-reuters-

Saudi says total oil curbs could reach 19.5 million barrels

RIYADH - Oil output cuts by OPEC and its allies, together with pledges from other G20 nations and purchases by strategic reserves, could remove 19.5 million barrels per day from the market, the Saudi energy minister said.

US President Donald Trump said Monday that the actual output cuts may be deeper than the headline figure of 9.7 million bpd -- with top producers considering slashing output by 20 million barrels a day under the deal.

"People are saying 10 million but we think the number they will actually hit is going to be closer to 20 million barrels a day," Trump said at a press briefing. 

He did not give details, but the figures chime with the Saudi breakdown.

The OPEC+ alliance, led by Riyadh and Moscow, agreed on Sunday to slash daily production by 9.7 million bpd over the next two months to arrest a slump triggered by the coronavirus shutdown and a price war between Saudi Arabia and Russia.

Saudi media on Tuesday quoted Energy Minister Prince Abdulaziz bin Salman as saying that G20 producers outside OPEC+ have pledged to cut 3.7 million bpd.

He also estimated purchases for countries' strategic petroleum reserves for use in emergencies at 200 million barrels over May and June, boosting the total impact to 19.5 million bpd.

Prince Abdulaziz said the kingdom could cut below its quota of 8.5 million bpd if necessary.

According to the deal, Saudi Arabia and Russia will cut 2.5 million bpd each from their production of 11 million bpd in October 2018.

But the minister was quoted by Energy Intelligence as saying that Riyadh will effectively be cutting 3.8 million bpd from current record-high output levels of 12.3 million bpd which were boosted during the price war.

Other Gulf states will be also cutting from recently increased output levels, he said.

"So, in reality, what OPEC+ will be doing effective May 1 will be a total of 12.5 million bpd," the minister said. 

The spread of the coronavirus has hit oil demand hard, with experts estimating that one-third of global demand -- which stood at 100 million bpd before the disease -- is being wiped out.

"We have to watch what is happening with demand destruction and demand improvement, depending on how things evolve," the minister said.

Agence France-Presse

OPEC, Russia meet again to approve biggest ever oil cut

BAKU/DUBAI/LONDON - OPEC, Russia and other oil producing nations were meeting on Sunday in a bid to clinch a deal on the biggest oil cut ever, amounting to 10 percent of global supply, after their initial efforts to support oil prices amid the coronavirus pandemic were blocked by Mexico.

The group, known as OPEC+, was expected to start a video conference at 1600 GMT.

On Thursday, OPEC+ outlined plans to cut output by more than a fifth, or by 10 million barrels per day (bpd), but Mexico balked at the production cuts it was asked to make, delaying the signing of a final deal.

"The ministerial meeting between OPEC and non-OPEC members is a follow-up after the April 9 meeting," the energy ministry of OPEC+ member Azerbaijan said on Sunday.

Measures to curb the spread of the coronavirus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.

OPEC+ also said it wanted producers outside the group, such as the United States, Canada, Brazil and Norway, to cut a further 5% or 5 million bpd.

Canada and Norway signalled willingness to cut and the United States, where legislation makes it hard to act in tandem with cartels such as OPEC, has said its output would fall steeply by itself this year due to low prices.

Mexico President Andres Manuel Lopez Obrador said on Friday that U.S. President Donald Trump had offered to make extra U.S. cuts on his behalf, an unusual offer by a Trump who has long railed against OPEC.

Trump, who had threatened Saudi Arabia with oil tariffs if it did not fix the market's oversupply problem, said Washington would help Mexico by picking up "some of the slack" and being reimbursed later.

He did not say how this would work and OPEC leader Saudi Arabia has so far refused to accept the fix, according to OPEC sources.

Global oil demand is estimated to have fallen by a third as more than 3 billion people are locked down in their homes due to the coronavirus outbreak.

A 15 percent cut in supply might not be enough to arrest the price decline, banks Goldman Sachs and UBS predicted last week, saying Brent prices would fall back to $20 per barrel from $32 at the moment and $70 at the start of the year.

(Reporting by Reuters OPEC Team, Nailia Bagirova in BAKU, Katya Golubkova in MOSCOW and Tamara Vaal in NUR-SULTAN; Writing by Andrey Ostroukh and Dmitry Zhdannikov; Editing by Jason Neely, Alsion Williams and Alex Richardson)

-reuters-

Oil crash piles pressure on virus-hit Saudi economy

RIYADH - From empty hotels to shuttered beauty salons, oil-dependent Saudi Arabia is bracing for a coronavirus-led economic slump on top of possible austerity measures as crude prices go into free fall.

Huge losses are expected after the Arab world's biggest economy shut down cinemas, malls and restaurants, halted flights, suspended the year-round umrah pilgrimage and locked down eastern Qatif region -- home to around 500,000 -- in a bid to contain the deadly virus.

The top crude exporter also faces plummeting oil prices, which slipped below $30 a barrel this week for the first time in four years, on the back of sagging demand and a price war with Russia.

The shock of this liquidity sapping cocktail of events has necessitated austerity measures which are likely to imperil grandiose diversification projects.

Adding to the chain of events are the recent arrests of King Salman's brother and nephew, which triggered speculation of political instability amid the government's public silence on the royal purge.

"It's crisis time," said a Saudi government employee, explaining why he had begun converting part of his salary into US dollars and gold coins.

"Everything is unpredictable and we should be ready for the worst."

The central bank has shrugged off fears that plunging oil prices were straining the kingdom's currency, pegged for decades to the US dollar.

A jeweller in Riyadh told AFP he had fielded a number of enquiries to convert "substantial amounts of cash" into gold bars and coins.

SPENDING CUTS

Many government workers fear cuts to state allowances are coming despite rising living costs.

Some Saudis also worry that recruitment in the public and private sectors will freeze, just as unemployment was already high. 

Meanwhile, Saudi students are worried that government scholarships for overseas education will take a hit.

The finance ministry has instructed government bodies to submit proposals to slash this year's spending by 20 to 30 percent, the economic consultancy Nasser Saidi and Associates said in a research note.

"This will likely take the shape of postponed projects and delays in awarding contracts" among other economizing measures, the note said.

The kingdom is now preparing budget scenarios in which crude prices could drop as low as $12 to $20 per barrel, according to the Energy Intelligence Group.

"Public confidence depends on government spending and oil sentiment -— both are down," said a consultant advising a Saudi ministry on a major project.

"We don't know if we will have our jobs tomorrow."

The once free-spending OPEC kingpin has instructed Saudi ministries that they need to account for "every penny" they spend, the consultant added.

Saudi authorities did not respond to requests for comment.

Several Riyadh hotels —- many of them empty amid falling tourist numbers —- have been forced to send their staff on unpaid leave.

But providing some support, the health ministry has booked multiple Riyadh hotels to quarantine people after the coronavirus scare, according to several staff and guests who were forced to empty the properties at short notice.

'SURVIVAL OF FITTEST'

The oil crash follows the crude exporter's decision to hike production from April and offer the biggest price cuts in two decades, in retaliation for Russia's refusal to tighten supply as the virus saps demand.

Saudi Arabia has shrugged off criticism that the move could bankrupt its oil-producing rivals, indicating it was no longer willing to play the role of "swing producer" that bears the burden of stabilizing the markets.

"The days of Saudi Arabia absorbing oil market shocks on behalf of the global economy and other producers are probably over," said Saudi expert and author Ali Shihabi. 

"The energy game... is now a survival of the fittest."

The deep-pocketed kingdom, with fiscal reserves of around $500 billion, has reiterated it is an ultra low-cost producer of crude and can withstand low prices for years.

But Riyadh has posted a budget deficit every year since the last oil price rout in 2014. It has borrowed over $100 billion and drawn from its reserves to plug the deficit.

Crown Prince Mohammed bin Salman's multi-billion dollar projects to wean the economy away from oil remain vulnerable, and Saudi Arabia needs a crude price of about $80 a barrel to balance its budget.

As economic challenges rise, the detention of royal princes Ahmed bin Abdulaziz al-Saud and Mohammed bin Nayef has fueled fears of instability.

One source close to the royal court dismissed such concerns and said the detentions were meant to send a stern warning within the royal family not to oppose the crown prince.

Yet "the threat to Prince Mohammed isn't coming from his royal rivals," said Kristin Diwan of the Arab Gulf States Institute in Washington.

"It's from the collapse of oil revenues and with them his ambitious economic plans."

source: news.abs-cbn.com

Oil subdued after heavy falls on price war

SINGAPORE — Oil prices were subdued in early Asian trade Thursday following sharp falls overnight, after Saudi Arabia and the UAE escalated a price war by vowing to pump millions more barrels of crude.

Both main contracts fluctuated between small gains and losses. West Texas Intermediate was trading at around $33 a barrel while Brent crude was at about $36 a barrel. 

Crude markets suffered their biggest 1-day drop in a generation on Monday after top exporter Riyadh began a price war following a refusal by Moscow to reduce output to combat the coronavirus impact.

Prices have swung wildly since and fell heavily again Wednesday, mirroring falls on global stock markets, after Saudi Arabia and Gulf partner UAE said they would open the oil taps further.

They said they will together boost production by at least 3.5 million barrels per day (bpd), to 16.3 million bpd, from April.

Investors were also waiting for an address by US President Donald Trump, who is set to explain his plan for tackling the virus outbreak -- which has now been declared a pandemic by global health officials -- and economic assistance. 

The collapse of oil prices came after OPEC kingpin Saudi Arabia had led a push to reduce output further to shore up prices amid slumping demand.

But the move was blocked by Moscow, the world's second-biggest oil producer, prompting Riyadh to slash prices.

Analysts see no end in sight to the turmoil.

"We suspect that Russia and Saudi Arabia may not be interested in a de-escalation for the time being," said investment firm DWS in a note.

Agence France-Presse 

OPEC to try to stem oil price plunge amid coronavirus slowdown

LONDON — The OPEC club of oil-producing countries meets Thursday in Vienna as they weigh how to react to a sharp drop in global oil demand due to the outbreak of the new coronavirus.

The extraordinary 2-day meeting will see OPEC, led by Saudi Arabia, and its allies in the so-called OPEC+ group -- foremost among them Russia -- discuss how to halt the sharp fall in oil prices in the past two months as the epidemic has spread.

At their last meeting in December, the producers agreed to cut production by 500,000 barrels per day, with Saudi Arabia offering a further 400,000 barrels of "voluntary" cuts.

Prices were already under pressure at that point from abundant reserves and weak global growth.

The cuts announced in December initially had the desired effect of an uptick in prices but the epidemic has since sent them plunging back down again.

The 2 benchmarks for oil prices, Brent in Europe and WTI for the US, have fallen around 30 percent since early January and have tested their lowest levels for more than year.

In Asian trade on Tuesday Brent crude was up 2.5 percent at $53.17 per barrel and West Texas Intermediate was 2.7 percent higher at $48.01.

OPEC's "joint technical committee" (JTC) met last month and recommended a cut of 600,000 barrels to ward off the effects of the coronavirus slowdown.

But according to Craig Erlam, analyst at Oanda, this figure "won't be enough", with huge oil consumer China still mired in the fallout from the virus and outbreaks now occurring around the world.

Last week the Financial Times reported that Saudi Arabia wanted to bring the cut up to a million barrels a day.

RUSSIA'S MIXED SIGNALS

The success of this week's summit, which is being held three months ahead of OPEC's next scheduled meeting, will hinge on the alliance between Saudi Arabia and Russia which has been much in evidence at previous meetings.

However, Russia's leadership has been sending mixed signals.

On Thursday, Russian Energy Minister Alexander Novak said Moscow wanted "to cooperate further in the context of the multilateral relations of OPEC".

But on Sunday President Vladimir Putin was quoted as saying that "the current level of oil prices is acceptable" as it was still above the "42.4 dollars per barrel of Brent that is used as a base level in our macroeconomic policy" -- notably for calculating the budget.

Saudi Arabia is thought to be counting on prices being twice that high, SEB analyst Bjarne Schieldrop told AFP.

"Russia is sending a double message" to other producers and to the market, according to Schieldrop.

Now that there is "more clarity that demand will be hurt badly (from the epidemic), Russia will likely join in with cuts," he said, adding: "The only doubt is how much and how long."

CAUGHT IN A BIND

The International Energy Agency has revised down its forecast for demand for oil in 2020 due to the effects of the virus, estimating it at 825,000 barrels per day, the lowest level since 2011.

Producers outside OPEC are helping to keep supply plentiful, chief among them the US, followed by Brazil, Norway and even Guyana, which has just started shipping oil from a recently discovered field.

All that has added to the downward pressure on prices and left OPEC caught in a bind with no clear options before it.

Another production cut would boost prices but would further diminish OPEC's market share, while a more conservative cut might fail to register on the markets.

Rober Yawger of Mizuho told AFP that he was expecting a cut of around a million barrels per day.

But even that "will probably be enough to support the market (only) a little bit, maybe for a day or so," he said.

Contacted by AFP meanwhile, the Austrian foreign affairs ministry said it had reminded OPEC of its coronavirus recommendations for international meetings -- with Vienna a common venue -- including the option of delaying a meeting altogether.

Agence France-Presse

Virus to cut forecast oil demand growth by a quarter this year - Rystad Energy

OSLO - The coronavirus outbreak will cut growth in global oil demand by a quarter this year compared to earlier forecasts, Norway's biggest independent energy consultancy Rystad Energy predicted on Tuesday.

Oslo-based Rystad now predicts global oil demand will grow by 820,000 barrels per day (bpd) in 2020, down from a December forecast of 1.1 million bpd.

Crude prices have fallen sharply since news of the virus outbreak first emerged in mid-January.

The outbreak will primarily affect demand in the early part of the year, with the first quarter now expected to see growth of just 100,000 bpd, before consumption recovers later in the year, Rystad argued in a research note.

"Our current assessment implies that the impact of coronavirus will persist throughout all of February and March and will then gradually subside towards June," it added.

In a worst-case scenario however, if travel restrictions last longer, the overall impact for the year could be to lower 2020 demand growth to 650,000 bpd, the consultancy said. (Reporting by Terje Solsvik; Editing by Gwladys Fouche and Jan Harvey)

source: news.abs-cbn.com

WHO: World currently ‘not in a pandemic’ of China virus

GENEVA, Switzerland - The World Health Organization (WHO) said Tuesday that the outbreak of the deadly novel coronavirus, which has spread from China to two dozen countries, does not yet constitute a "pandemic".

"Currently we are not in a pandemic," Sylvie Briand, head of WHO's Global Infectious Hazard Preparedness division, told reporters in Geneva.

Instead, she said, "we are at the phase where it is an epidemic with multiple foci."

The disease has killed more than 425 people and infected a further 20,000 in China, nearly all of them in central Hubei province -- the epicenter of the outbreak -- and spread to two-dozen countries since it emerged in December.

Briand said that while there is rapid spread of transmission in Hubei, the cases outside the province are mainly "spillover cases" with sporadic clusters of transmission.

At the same time, authorities in China have taken dramatic measures to halt transmission, while other affected countries have also taken steps to avoid the spread of the virus.

"We hope that based on those measures in Hubei but also in other places where we have had spill-over, we can stop transmission and get rid of this virus," she said.

source: news.abs-cbn.com

Iraq says OPEC weighing output cut over virus outbreak

BAGHDAD - OPEC members and their ally Russia are discussing a further cut to crude oil output at a meeting in Vienna because of China's coronavirus epidemic, Iraq's oil ministry said Tuesday.

Crude prices have tumbled since the deadly outbreak in the world's second-biggest economy, which is a huge consumer of crude.

The Organization of the Petroleum Exporting Countries is holding a meeting of a "joint technical committee" in Vienna on Tuesday and Wednesday to discuss the virus's impact and whether an output reduction is needed.

"Depending on the needs of the market and how it's been affected by the coronavirus, will a cut be necessary? This is being discussed as the technical reports are presented," said Iraq's oil ministry spokesman Assem Jihad.

"The technical committees are discussing the recommendations, which they will elevate to their ministers. Any further cut to outputs would only be announced in a ministerial meeting," Jihad told AFP. 

He said those gathered would also consider bringing forward a March ministerial meeting to February "depending on the market's needs and what happens with the virus."

Iraq is OPEC's second-biggest oil producer.

The new coronavirus has killed more than 400 people and infected a further 20,000 in China since emerging in December, and has also spread to more than 20 other countries.

The US benchmark oil contract, WTI, has fallen by around 18 percent over the past month.

"For now, the market seems content that China will contain and manage the virus situation, and that the worst will soon be over with no accelerated spreading outside of China, and that OPEC+ will step in with cuts and prevent a surplus and a stock building," said Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB.

Top oil exporter and OPEC kingpin Saudi Arabia said this week that the impact of the virus on oil demand was "extremely limited" and "driven by psychological factors".

But if the virus continues to spread, there could be a more severe hit to the market, said Neil Wilson, chief market analyst for Markets.com in London.

"This kind of oil demand shock has not been seen for over a decade. The longer the lockdown in China and travel restrictions globally, the greater the impact," he said. 

Russian energy minister Alexander Novak, said Friday the crisis could lead to lower demand for hydrocarbon fuels.

The OPEC cartel regularly convenes with non-members led by Russia over how to influence oil prices.

OPEC and its allies in December extended an existing agreement to curb crude oil production to prop up

source: news.abs-cbn.com

Stocks, oil fall as China virus rattles markets

NEW YORK - Global stocks and oil dropped Monday as panicked investors fled risky assets for safer bets gold, bonds, the dollar and the yen, after China warned that a deadly new coronavirus was spreading fast.

Luxury goods makers and airlines suffered particularly on equity markets, as Chinese tourist spending is a key factor for them. Shares of energy and technology companies were also weak.

China extended its traditional Lunar New Year holidays to buy time in the fight against the epidemic but fears of a repeat of the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak, which also began in China, spooked investors.

Recent record highs on stock markets gave them plenty of room for a reverse.

Key European stock markets dropped more than two percent, while losses on Wall Street were only slightly less severe.

Oil prices also retreated on concerns over demand from China, the world's top energy consumer.

'MAJOR PANIC' 

"The bottom line is that the virus has become deadly and it has caused a major panic in markets," said Ava Trade analyst Naeem Aslam.

Art Hogan, chief market strategist at National Holdings, said rising investor unease has reflected an increased number of cases and as the virus has spread to more regions.

"The escalation of the news causes more uncertainty," especially for travel-oriented companies, Hogan said.

"I think it's very logical, especially given that the sectors that would be affected by any slowdown are getting hit the hardest."

Analysts said there were growing fears the crisis could become as bad as the SARS outbreak that hammered markets and the global economy 17 years ago.

The new outbreak has led China to lock down Wuhan, epicenter of the disease and home to 11 million people, while imposing tight travel restrictions on a number of other cities including Beijing.

The move comes during the Lunar New Year holiday when hundreds of millions of people crisscross the country and spend huge amounts of money.

FLIGHT TO SAFETY 

Most Asian markets were closed for the Lunar New Year break but Tokyo was open and fell two percent. Bangkok plunged nearly three percent on worries over the Thai travel sector.

The flight to safety saw the yen rally against the dollar, with the Japanese unit now up more than one percent from eight-month lows reached earlier this year.

The dollar however rose against the euro and pound.

Gold, another go-to asset in times of turmoil and uncertainty, seemed headed back towards $1,600 per ounce and the six-year peaks touched at the start of January.

While the main focus is on the spread of the virus, traders will also be keeping an eye on the release of earnings this week from top companies including Apple, Facebook and Samsung.

KEY FIGURES AROUND 5:40 A.M. TUESDAY MANILA TIME

New York - DOW: DOWN 1.6 percent at 28,535.80 (close)

New York - S&P 500: DOWN 1.6 percent at 3,243.63 (close)

New York - Nasdaq: DOWN 1.9 percent at 9,139.31 (close)

London - FTSE 100: DOWN 2.3 percent at 7,412.05 (close)

Frankfurt - DAX 30: DOWN 2.7 percent at 13,204.77 (close)

Paris - CAC 40: DOWN 2.7 percent at 5,863.02 (close)

EURO STOXX 50: DOWN 2.7 percent at 3,677.84 (close)

Tokyo - Nikkei 225: DOWN 2.0 percent at 23,343.51 (close)

Hong Kong - Hang Seng: Closed for a public holiday

Shanghai - Composite: Closed for a public holiday

Brent Crude: DOWN 2.3 percent at $59.32 per barrel

West Texas Intermediate: DOWN 1.9 percent at $53.14 per barrel

Dollar/yen: DOWN at 108.88 yen from 109.28 yen Friday

Euro/dollar: DOWN at $1.1019 from $1.1025

Pound/dollar: DOWN at $1.3055 from $1.3073

Euro/pound: UP at 84.40 pence from 84.34 pence

Agence France-Presse