How the world sees Greece
Car registrations grew 20.1% in August to a total 7,039 vehicles (new and used vehicles), up from 5,862 in August 2014 (in passenger cars the increase was 25.8 pct), the Hellenic Statistical Authority said on Wednesday. The statistics service, in a report, said that car registrations were up 20.8% in August 2014 (23.1% up in passenger
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The EEF, a lobby group for UK engineering and manufacturing, on Monday more than halved its growth forecasts for Britain's manufacturing sector this year, from 1.5% to 0.7%. The group blamed what it sees as a "rollercoaster of risk", saying: "Bright spots provided by domestic consumer demand and construction activity are not enough to hold the shadow of global factors at bay." The big problems are China's cooling economy and recent stock market turmoil, Greece's debt crisis, and uncertainty in Europe, with the ECB cutting its growth forecasts on Friday. All three are either directly weakening demand or indirectly hitting it by reducing business' willingness to take risks right now. UK manufacturers' output shrank by 2% in the second quarter, the worst performance since 2009. Exports are also at a 6-year low. As a result, the EEF is cutting forecasts in its quarterly EEF/DLA Piper Manufacturing Outlook survey. Lee Hopely, the EEF's chief economists, says in a statement: "We’ve seen the future of the Eurozone on the line once again, turbulence and uncertainty over China and Greece and, of course, oil and gas are still a concern. Against this backdrop it’s no surprise that confidence is faltering and UK manufacturers are feeling less optimistic about their growth prospects for next year. “However, it’s important to note that confidence has dipped rather than nose-dived and if the global drag lets up anytime soon then UK manufacturing should very swiftly get back into its previous stride." Britain isn't the only one downbeat on manufacturing right now — France's manufacturing sector is in crisis, China's is sector is shrinking, and the US is also in trouble. Join the conversation about this story » NOW WATCH: The one thing you can add to coffee for even more energy in the morning
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NEW YORK (AP) — Commodity markets are renowned for their booms and busts but the last four days in the crude oil market have even experienced traders wide-eyed. The price of oil plunged 8 percent on Tuesday, following a three-day ascent of 27 percent, the biggest such jump in 25 years. "It's wild!" said Phil Flynn, energy analyst at the Price Futures Group. "Buckle up." The stock market has been volatile too, but nothing like oil. The S&P 500 has moved up or down by 6 percent or more only once since 2008. Oil has moved by at least 6 percent each of the last four trading days. Big moves — mostly down — have been a hallmark of the oil market over the past year. Starting last summer oil began to fall, sliding from near $100 to under $45 in March. U.S. oil production was booming, OPEC nations kept oil flowing and even rising demand wasn't enough to absorb the flood of oil. Then oil's moves became more sudden in the spring and summer. Oil rose 25 percent in April. It fell 21 percent in July. It sunk to a low of $38.24 last Monday, the lowest price since the depths of the recession in 2009. The big decline in price was easy to explain. Against a backdrop of rising global supplies came mounting evidence from around the world that demand for oil would be far less than expected. The plummeting stock markets in China and the government's decision to devalue its currency led to fears that economic growth there was slowing sharply. Japan, the world's third largest oil consumer, revealed that its economy contracted in the second quarter. And economic growth in Europe appeared to be in peril as the Greek debt crisis worsened. At the same time, the U.S. and Iran reached an agreement that could lift sanctions against the OPEC nation, paving the way for more Iranian oil to return to the market, adding to already high supplies. But the market was clearly uncomfortable with oil under $40, traders say. And at any sign that perhaps supply and demand weren't quite so out of whack, they were ready to buy. China's stock market soared last week, a possible signal that the worst was over. On Monday the U.S. Energy Department changed how it estimates domestic oil production and revised its numbers significantly lower. A bulletin from OPEC suggested the cartel might be ready to work with other nations to restrict production. Traders bought, and bought, and bought, leading to the nearly 30 percent jump in prices over the span of a few days. Stiil, some traders weren't impressed. Citibank's Ed Morse wrote on Monday that the surge was a "false start" brought on by trading technicalities, a "gross misrepresentation" of OPEC's intentions and confusion about the Energy Department's new methodologies. He predicted oil would head lower. That call looked prescient Tuesday when oil plunged $3.79 a barrel, or 7.7 percent, to close at $45.41 as weak manufacturing data out of China raised concerns — again — about economic growth there. In other energy trading: — Brent Crude, a benchmark for international oil used by many U.S. refineries, fell $4.59 to close at $49.56. — Wholesale gasoline fell 10.3 cents to close at $1.396 a gallon. That will help push retail gasoline prices lower in the coming weeks. The national average retail price of gasoline has been sliding steadily since mid-June and fell a little more than a penny Tuesday to $2.46 a gallon, according to AAA. — Heating oil fell 12.3 cents to close at $1.578 a gallon. — Natural gas rose 1.3 cents to close at $2.702 per 1,000 cubic feet. Jonathan Fahey can be reached at http://twitter.com/JonathanFahey . Join the conversation about this story »
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By Paul CarrelBERLIN (Reuters) - Germany's export exposure to China, for years a source of economic strength, is fast turning into a risk that raises questions about the health of other sources of growth in Europe's largest economy.Germany has the greatest trade exposure to China of the 28 European Union nations, largely thanks to demand for its cars and the strength of its engineering industry.For years, its EU peers tried - and failed - to match Germany's export prowess in China, where German companies profited from the infrastructure and consumer spending that have helped make the Chinese economy the world's second largest.But now a slowdown in China means corporate Germany's ventures there risk turning profit streams into cost burdens. Worries about China sent global stocks tumbling on Monday before they rebounded on Tuesday when Beijing cut interest rates."The weaknesses of Germany's 'special relationship' with China are becoming increasingly apparent," said Hans Kundnani at the German Marshall Fund."I think there is a growing perception among German business people that they are too exposed to China."Germany's economic ties to China dwarf those of its European counterparts. Led by the big carmakers, German firms moved into China faster and more aggressively than many of their rivals, and China has been a major source of growth for German exporters.In 2007, the Chinese market accounted for just 3.1 percent of German exports but that figure rose to 6.6 percent last year, Federal Statistics Office data shows. By contrast, the share of exports going to France slipped slightly over the same period.Growth in China made it Germany's fourth biggest export market in 2014, after France, accounting for 9.0 percent of total exports, the United States (8.5 percent) and Britain (7.4 percent).However, this year the Chinese market is fading fast for Germany. In the first half of 2015, export growth to China was just 0.8 percent -- the same as to crisis-burdened Greece, figures from the DIHK chambers of commerce show.ENGINEERS HITGerman engineers' exports to China shrank by 4.9 percent in the first half. Their machine products lag only cars as Germany's largest sector of export goods to China.For companies like German industrial group ThyssenKrupp , the Chinese market is important. China accounts for 16 percent of ThyssenKrupp Elevator's sales, or about 1 billion euros ($1.14 billion) last year.Already some leading German brands are feeling the impact of the slowdown, which saw activity in China's factory sector shrink at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled.Carmaker Volkswagen last month lowered its global sales forecast and said it was braced for stagnant volumes in China, after years of double-digit growth in its biggest market.The German government has been at pains to describe the impact of China's slowdown for Germany as "limited", and Berlin is sticking to its 1.8-percent growth forecast for this year.That throws the spotlight onto more mature markets like the United States and the EU, which Berlin says are holding up well.The United States actually overtook France in the first half of this year to become Germany's top export market for the first time since 1961, the DIHK said. But with European economies struggling to pick up economic momentum, the United States would be a rather singular market for German exporters to depend on.LEANER PICKINGS?Even if Chinese demand does hold up - Beijing still has an official 7-percent target for 2015 - China is morphing from a market for German firms to a source of competition for them."Chinese companies are moving up the value chain and are increasingly competing with German companies," said Kundnani. "The long-term danger for German companies is to get pushed out of the mass market into luxury niches."This is already having an effect on Germany's carmakers, which last year accounted for nearly a third of Germany's 75 billion euros in exports to China.VW said last month profits from its two Chinese joint ventures could even drop this year below 2014 levels amid a shift to lower-priced cars, as demand in is increasingly driven by rural, less wealthy Chinese regions.Klaus Wohlrabe, economist at Germany's Ifo economic institute, said the China factor will grow in importance for businesses in Germany, which drove economic euro zone growth in the second quarter as France stagnated and Italy lost momentum.China's slowdown also risks hurting other German emerging export markets. A senior government official in Brazil said on Tuesday an economic recovery which had been expected later this year could be delayed due to China.That could pose a problem to German firms that have poured over 19 billion euros into the struggling Brazilian economy.Exports remain crucial to Germany's economic health.In the April-June period, they grew by 2.2 percent on the quarter, the biggest increase since the first quarter of 2011 and helped drive economic growth of 0.4 percent on the quarter, Federal Statistics Office data show.But against the uncertain global economic backdrop, Germany could try to refocus its economy away from foreign trade."Germany still has room for maneuver and it would be a good thing to focus more on investment and less on exports," said Sandra Heep, economic policy expert at the Mercator Institute for China Studies in Berlin."With the slowdown in China, this will become more urgent."A breakdown of Germany's economic performance in the second quarter highlighted its persistent weakness in investment. Gross capital investment fell in the three-month period and shaved 0.1 percentage points off economic output."Low investment is the Achilles' heel of the German economy," said Marcel Fratzscher, head of the DIW economic institute in Berlin.Weaknesses in Germany's transport and digital infrastructure, skilled labor shortages and uncertainty around energy policy meant that companies were holding off investments in Germany, he said.German productivity already lags that in France, Belgium, the Netherlands, and the United States, figures from the Organisation for Economic Cooperations and Development show.By focusing so intently on export markets like China, corporate Germany risks further undermining the prospect of the domestic growth engine building steam.($1 = 0.8751 euros)(Additional reporting by Rene Wagner; Editing by Jeremy Gaunt)Join the conversation about this story »
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Stocks climbed in the final hour of trading after being relatively flat for much of Friday. The major indexes closed positive for the week, and gold had its best week in two months. First, the scoreboard: Dow: 17,469.65, +61.40, (0.35%) S&P 500: 2,090.77, +7.38, (0.35%) Nasdaq: 5,047.30, +13.74, (0.27%) And now, the top stories on Friday: The US oil rig count rose for a fourth straight period this week, according to driller Baker Hughes. The oil rig count rose by 2 to 672. The gas rig count fell 2 to 211, and the total rig count was unchanged from last week at 884. Crude oil prices rose slightly on Friday after falling to fresh six-year lows. West Texas Intermediate crude oil futures climbed to as high as $42.92 per barrel in New York, after falling to $41.46 overnight. In a note to clients, Societe Generale's Kit Juckes wrote, "It’s now clear to financial markets that tackling oversupply in a world with more modest demand growth, requires a more protracted undershoot in oil prices." The Eurogroup approved an 86 billion euro-bailout for Greece. It was agreed to after a six-hour meeting that followed the stamp of approval from Greece's parliament. The University of Michigan's consumer sentiment index showed a preliminary reading of 92.9 for August, below expectations for 93.5 and compared to 93.1 in July. The nine month average of the reading is at its highest since 2004. "Fortunately, sentiment held up in early August, another sign that the consumer confidence drop in July may have been overdone," UBS' Maury Harris wrote in a client note. Industrial production rose to an eight-month high of 0.6% (0.3% estimated), boosted by auto output. Capacity utilization rose 78%. "The big July increase in industrial production is further proof that the U.S. economy is expanding at an above-trend pace in mid-2015, after a weak start to the year tied to bad weather and the West Coast ports labor dispute," wrote PNC chief economist Stuart Hoffman in a note. The producer price index for final demand rose 0.2% month-on-month (0.1% forecast). Excluding food and energy, prices rose 0.3% versus 0.1% expected. El Pollo Loco shares slumped 19% after the company reported quarterly revenues and same-store sales below forecasts. Second-quarter revenues totaled $89.5 million ($93 million estimated), and sales at stores open for at least one year grew 1.3% (3.2% forecast). The Mexican-style-chicken chain expects to open as many as 24 restaurants during the fiscal year 2015. Lumber Liquidators jumped by up to 10% after hedge fund Tiger Management disclosed in a 13F filing that it took a new position in the hardwood flooring retailer of 238,000 shares. The stock is down about 79% year-to-date following an episode of "60 Minutes" in March that showed the company's laminate flooring sourced in China contained excessive levels of formaldehyde. The story will be rerun this Sunday on CBS. DON'T MISS: Before you totally freak out about China's currency devaluation ... »Join the conversation about this story » NOW WATCH: Something strange is happening with US rainfall
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Here is what you need to know. China devalued its currency even further. The People's Bank of China fixed the yuan weaker by another 1.9% on Wednesday. The fix of 6.3306 comes after the PBOC moved it to 6.2298 on Tuesday. The yuan is now the weakest its been versus the dollar since October 2012. During trading on Wednesday, the yuan fell to a low of 6.4489 per dollar before some late-day strength caused it to settle at 6.3858. China released more bad data. Overnight, China released a trio of disappointing data. Industrial production rose 6.0% versus last year, but that was well below the 6.7% YoY increase that was expected. Fixed asset investment climbed 11.2% YoY, its weakest in several years. Economists were anticipating growth of 11.4% YoY. Finally, retail sales were light, printing up 10.5% YoY on expectations of a 10.6% YoY gain. Greece's vote on its bailout has been delayed. Greece's parliament has delayed the vote on the text of its bailout until Thursday. The delay will give members of parliament more time to review the demands set forth by Greece's creditors. The two sides agreed in principle to €85 billion ($94 billion) bailout package on Tuesday. Greece's 2-year yield is down 12 basis points at 13.96%. The IEA says oil demand is growing. The International Energy Agency says oil demand will grow by 1.6 million barrels per day in 2015, its fastest pace in five years, "as consumers respond to lower oil prices." However, production by non-OPEC producers won't decline until 2016, the agency says. Crude oil is trading up 1.6% at $43.75 per barrel. Capital One is buying GE's health care lending unit. Credit card lender Capital One has agreed to pay approximately $9 billion for GE's health care lending unit. The sale means GE has shed $78 billion in assets this year, bringing it closer to its year-end goal of $100 billion, according to Reuters. "This addition will catapult us to a leading market position in providing financial services to the healthcare sector," commented Michael Slocum, president of Capital One's commercial bank. Ford is starting to make commercial trucks in the US. Production at Ford's Cleveland-area plant will begin on Wednesday for medium-duty F-650 and F-750 commercial trucks. The production shift has been much anticipated after Ford announced the move out of Mexico in March 2014. About 1,000 members of the United Auto Workers union will keep their jobs because of the change, according to Reuters. S&P warns on Berkshire Hathaway. The credit rating agency put Berkshire Hathaway on credit watch negative after its acquisition of Precision Castparts. S&P said the warning "reflects uncertainty around the funding of the acquisition and how it may affect current cash resources and leverage metrics at the holding-company level." On Monday, Berkshire acquired Precision for $37.2 billion and the assumption of roughly $5 billion in debt. Stock markets around the world are lower. Hong Kong's Hang Seng (-2.4%) paced the decline in Asia and Germany's DAX (-2.1%) leads the way lower in Europe. S&P 500 futures are down 17.25 points at 2062.50. US economic data is light. JOLTs - Job Openings will cross the wires at 10 a.m. ET and will be followed by crude oil inventories at 10:30 a.m. ET and the Treasury budget at 2 p.m. ET. Treasury will auction $24 billion 10-year notes at 1 p.m. ET. The US 10-year yield is lower by 4 basis points at 2.10%. Earnings releases continue to slow from their frantic pace. Alibaba and Macy's are the notable names set to report ahead of the opening bell. Cisco Systems and News Corp. highlight the earnings releases coming after markets close.Join the conversation about this story » NOW WATCH: How much sex you should be having in a healthy relationship
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FRANKFURT—Export orders for Germany's important manufacturing industry rose sharply in June in a trend that should bolster industrial production ...
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Huge drops were noted in apartment prices
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Commodity prices from gold to oil and aluminium to iron are tumbling - here are six big fallersJust when investors thought it might be time for a summer lull, financial markets have shifted their focus from the eurozone and its Greek woes to tumbling commodity prices.A combination of factors have knocked gold, crude oil and industrial metals such as copper in recent days. What commodities are on the move and what are they used for? Continue reading...
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Unilever boss Paul Polman unveils better than expected first half sales figures but says there are challenges aheadUnilever has unveiled stronger than expected first half sales figures, but warned that key markets in Europe and North America continue to be challenging. Paul Polman, chief executive of the group, is “moderately” more optimistic about the world economy than a year ago and predicted further sales growth at Unilever in the second half of the year.Core operating profits rose by 16% and underlying sales growth worldwide was up by 2.9%, although pre-tax profits fell by 14% to £3.6bn over the six-month period, due mainly to gains from disposals last year. The market tanked in Greece due to the economic crisis, but prices also fell across Europe, which offset a growth in the company’s sales. Polman said his programme of cost-cutting and increased innovation would keep the company ahead. Continue reading...
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Can we really be halfway through the year? That’s what my calendar tells me, which means it’s time for the 2015 commodities halftime report. The periodic table of commodity returns, consistently one of our most popular pieces, has been updated to reflect the first half of 2015. Click on the table for a larger image. If you’d prefer your own copy of the original, simply email us. As an asset class, commodities continue to be a challenging space for investors, as they’ve faced many headwinds lately including lackluster purchasing managers’ index (PMI) numbers and a strong U.S. dollar. Crude Pulls off Coup but Faces Strong Downward Pressure The widest expansion this year was made by none other than crude oil, the worst-performing commodity of 2014. As of June 30, oil posted gains of over 11 percent, rising to $59.47 per barrel. After falling more than 50 percent since last summer, though, it had little else to go but up. That oil claimed the top spot just highlights the reality that commodities are in a slump right now. Case in point: This week, West Texas Intermediate (WTI) retreated to $50 per barrel, putting it back in the red for the year. This move was largely in response to Greece’s debt dilemma, China’s slowdown and weakening PMI numbers. After the JPMorgan Global Manufacturing & Services PMI was released, showing a continued downtrend in manufacturing activity, oil almost immediately dropped $4. The lifting of sanctions on Iran, if approved by Congress, could also place downward pressure on WTI, with some analysts seeing it returning to the $40s range. As the 800-pound commodity gorilla, China greatly contributes to the performance of oil. Its own PMI reading remains below the key 50 threshold, indicating that its manufacturing sector is in contraction mode. This has a huge effect on the consumption of oil and other important commodities. The good news is that the projected crude price for the remainder of 2015 should be high enough to support continued production in drilling areas such as the Bakken, Eagle Ford and Permian basins, according to the Energy Information Administration (EIA). The oil rig count, as reported by Baker Hughes, has advanced for the third consecutive week, after 29 straight weeks of declines. King Corn Pops to the Top We all know that corn is in practically everything we eat and drink, from soda to bread to salad dressing. It’s fed to livestock and poultry and used to make ethanol, plastic, glue and more. The grain is so ingrained in our lives that the U.S. government subsidizes it to the tune of $4.5 billion a year. For this reason and more, American farmers favor corn. In 2013, a record amount of it was grown and sent to market, which resulted in a price decline of 40 percent. That year it was the worst-performing commodity. Since then, corn has found its footing and, as of June 30, returned 4.28 percent. Zinc Is Flying off Car Lots Sought for its anti-corrosive properties, zinc is staging a comeback and is set to make its longest run of gains in over a year, according to Mineweb. The reason? Accelerating automobile sales in Europe. Zinc can be found in most car parts, from tires to door handles, and because it can store six times more energy per pound than more conventional battery systems, the metal is also used in electric vehicles. The European Automobile Manufacturers Association reports that demand for new vehicles is up 14 percent year-over-year in June, its largest increase since December 2009. New car registrations in most European markets are seeing double-digit growth, with Portugal, Spain, Ireland and the Czech Republic leading the pack. Gold Demand in China Sparkles In a much-anticipated announcement, China broke its six-year silence on the amount of gold its central bank holds. And although the number jumped nearly 60 percent from 1,054 tonnes in 2009 to 1,658 tonnes, it underwhelmed the market, as many analysts had expected almost double the amount. Bullion fell to a fresh five-year low on Friday, while stock in Barrick Gold, the world’s largest producer, plunged to a level not seen since the Bush Administration—the elder Bush, that is. But other news out of China, the largest purchaser of gold, suggests that the yellow metal is still very much on consumers’ minds. Just-released gold withdrawal numbers from the Shanghai Gold Exchange (SGE) came in at 1,180 tonnes—a huge amount—setting a new record for withdrawals in the first half period and leading many analysts to predict a new annual record. Gold demand in China normally cools around this time before picking up momentum in anticipation of the Chinese New Year. That demand has held up so well is a good sign for the second half of the year. Even though gold’s down about 3 percent year-to-date, our Gold and Precious Metals Fund (USERX) is holding up. USERX currently has four stars overall from Morningstar, among 71 Equity Precious Metals funds as of 6/30/2015, based on risk-adjusted returns. This is a testament to the management skills of portfolio manager Ralph Aldis and our team of analysts. Check out Ralph’s MoneyShow interview, where he chats about some of his favorite gold companies. Join the conversation about this story »
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With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran’s crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC’s high production levels and China’s market turmoil have created more pressure on oil prices, making a price rebound look highly unlikely in the near future. So, with the prices of both Brent and WTI moving towards $50 per barrel, the short to medium-term outlook for oil remains mostly bearish. This is bad news for the U.S. shale sector which is already dealing with rising debt and the ever-increasing risk of default. A recent Bloomberg report stated that U.S. driller’s debts stood at $235 billion at the end of first quarter of 2015, which is quite worrying. Does this mean that the U.S. oil sector is likely to witness a lot more layoffs than we have seen so far? Surprisingly, a recent IHS study had revealed that the U.S. shale sector has been boosting job creation in addition to supporting around 1.7 million jobs in U.S. All this as the overall unemployment rate in U.S. has been declining since previous years. But with rising negative sentiment pertaining to oil prices, is U.S. the shale sector prepared to face one of its biggest tests yet? Will the industry be able to sustain another long period of low oil prices or will it once again resort to trimming its workforce? Low oil prices will most likely result in more job losses Since the oil price collapse of last year, we have seen how oil field services and drilling companies have slashed thousands of jobs in order to reduce costs and cut their operational spending. Some of the major oilfield companies like Schlumberger, Halliburton and Weatherford have already announced close to 20,000 layoffs as of February 2015. However, the markets turned bullish when oil prices were hovering in the range of $60 per barrel during the last two months, raising hopes that oil companies would be sending close to 150 drilling rigs back into operation. Now that oil prices are again moving towards the $50 per barrel mark, high drilling costs make almost a third shale oil in the U.S. too expensive to produce. Even Goldman Sachs has admitted that the $50 per barrel oil price level would deter any kind of a drilling recovery in U.S. this year, as there would only be around 20 to 50 rigs returning to work by end of this December. In fact, analysts from Goldman predict WTI will fall to $45 a barrel by October this year. “Oil rebalancing remains in its early stages with the current cash flow and funding mix stalling it, we believe that as fundamentals reassert themselves and we move past the seasonal peak in demand, oil prices will continue to sequentially decline,” said analysts from Goldman Sachs. U.S. shale sector faces another challenge as hedges expire The U.S. shale industry had been somewhat insulated from the effects of low oil prices in the past as companies had hedged their production. This meant that companies had fixed their future selling price in order to temporarily circumvent the ongoing volatility in the oil markets. Since most of the companies had hedged their production before the last oil price crash, they were well protected from the erratic oil price movements. However, the situation is quite different now as most of these hedges are about to expire. For small and medium shale companies that had hedged their production at $85 or $90 per barrel previously, having more of their production exposed to $50 per barrel prices will be painful. What to expect over the coming months The coming few months will prove challenging for the sector, and some small and medium U.S. producers may start missing their debt repayments or even file for bankruptcy. Quicksilver Resources and American Eagle Energy are two of the six U.S. based companies that have filed for bankruptcy in 2015 so far. Sabine Oil and Gas Corp. is the latest, and the biggest, U.S. producer to file for bankruptcy so far. Even mergers and acquisitions have slowed down considerably for the U.S. oil and gas industry in 2015. If the present trend persists, companies will have no choice but to cut their workforces even further to remain competitive and reduce their rising overheads. If oil prices remain in the range of $50 per barrel for longer than expected, even big operators such as Exxon Mobil, Chevron and ConocoPhillips (who have so far not made any major layoffs) could start downsizing their workforce. Join the conversation about this story » NOW WATCH: Scientists just discovered 11,000-foot ice mountains, geysers, and volcanoes on Pluto
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Greece is in an economic depression. Whether or not it agrees to the ruinous terms imposed upon it by its creditors in order to obtain a bailout, or if ...
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An Iran nuclear deal could mean bad news for the Russian oil business. The most obvious source of pain is that the introduction of Iranian oil on the market after sanctions are lifted could push oil prices down again. But that's not the only sore spot. In the last few years, Russia encroached on Iran's primary markets, Asia and Europe, and that trend could reverse following the deal. “Iran is going to be competing in Europe head-on with Russia,” Ed Morse, head of commodities research at Citigroup Inc. previously told Bloomberg. Before the Western sanctions, Iran's crude exports "were a regular fixture for European refineries." But since 2012, Iran has been banned from selling oil to Europe, and additional US sanctions made it harder to buy Iranian oil with US dollars. So, "Russia, whose benchmark export grade is similar to Iran’s flagship blend, has been the main beneficiary of that decline," Bloomberg reported recently. "Exports into Iran’s main markets in Asia and Europe have more than doubled, growing by 420,000 barrels a day from 2011 to 2014." Citi's Edward L. Morse included a chart (to the right) in a June 30, 2015 report to clients, showing Iranian crude exports by destination, where the loss of the European market is clear. However, things could be change up now: many Mediterranean refiners are ready and excited for the return of Iranian oil. "Iran has been a long standing valued partner ... We are looking forward to Iran coming back to the market," a spokesman for Greece's biggest refiner Hellenic Petroleum told Reuters. "The volumes of crude oil that will re-enter the Mediterranean market will ease prices and give more options for refiners in the region," he added. He stated, however, that they will not buy any crude before sanctions are officially lifted. Additionally, a spokeswoman for Spain's Compania Espanola de Petroleos (CEPSA) reportedly said that "Iranian crude has largely been part of our supply and we maintained a long commercial relationship with them." "If sanctions are lifted, as it seems, Iranian crudes will definitively be again another alternative to consider," she added in a statement to Reuters. Analysts expect the deal could see Iran increase its oil exports by up to 60 percent within a year, according to Reuters. "It would mean cheaper crude for Mediterranean refineries, especially smaller countries that have been impacted by economic problems – like Greece," Eshan Ul-Haq said, a senior market consultant with KBC told Reuters.SEE ALSO: This map shows what $100 is actually worth in your state Join the conversation about this story » NOW WATCH: 6 compelling correlations that make absolutely no sense
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Stock futures are slightly lower on Tuesday morning. Near 9:10 a.m. ET, Dow futures were down 28 points, S&P 500 futures were down three points, and Nasdaq futures were up four points. Stocks closed firmly higher on Monday. Here's how Accendo Markets wrapped the close in a note to clients on this morning: "US markets closed positive, echoing gains in Europe, with relief on a Greece deal, some welcome progress with Iran’s nuclear agreement (watch oil) and despite attention reverting to the timeline on a US rate rise. Note the S&P 500 delivering its best 3-day advance this year with Technology and Consumer name benefiting most." The economic data out today has not been great. Retail sales flopped in June. The advance estimate from the Census Bureau showed a 0.3% drop, and excluding autos, -0.1%. And, the NFIB Small Business Optimism Index fell to 94.1 in June, missing forecasts. "Taken together with the drop in the NFIB small business survey reported earlier, the numbers today paint a picture of an economy stuttering in June, likely under the weight of the rebound in gas prices and the drop in stock prices," wrote Pantheon Macroeconomics' Ian Shepherdson in a note to clients. Crude oil prices fell 2% overnight but recovered much of the losses in the morning. Iran reached an agreement with several countries over its nuclear program. The deal also includes the lifting of sanctions that would pump Iranian exports into the already oversupplied market. Barclays estimates that Iran could pump 200,000 more barrels per day in the fourth quarter. Wells Fargo beat earnings by a penny, posting $1.04, but quarterly revenues of $21.3 billion missed expectations. JPMorgan beat on the top and bottom lines, posting earnings of $1.54 per share on revenues of $24.3 billion. Johnson & Johnson reported Q2 earnings per share of $1.71 (beating the consensus estimate of $1.67) and sales of $17.8 billion (versus $17.7 billion expected.) Sales dropped 8.8% overall, and in almost every division, again due to the strong dollar.Join the conversation about this story » NOW WATCH: This animated map shows how religion spread across the world
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By Henning GloysteinSINGAPORE (Reuters) - Oil prices opened up lower on Monday as Iran and six world powers were close to nailing down a nuclear deal, while Greece and its creditors failed to find a bailout agreement over the weekend.The potential of Iran soon adding to global oil oversupply and the demand side weakening over China and Europe led several analysts to say that crude would fall further.Iran and six world powers were on the brink of finding a nuclear deal that would bring sanctions relief in exchange for curbs on Tehran's nuclear program.In Europe, the Greek debt crisis continued as political leaders argued late into the night at an emergency summit, so far without result.And in Asia, investors will watch whether China's stock markets can stabilize after a barrage of government support sparked a bounce in its key CSI300 stock index.Front-month U.S. crude futures were trading at $52.13 per barrel at 0025 GMT, down 61 cents from their last settlement. Front-month Brent crude was down 69 cents at $58.04 a barrel.With oversupply ongoing and abundant economic risk, several banks said they had lowered their oil price forecasts."The oil market has faced persistently weak supply/demand balances for months. Now macro risks from Greece, Iran, and China are adding to the poor micro," Bank of America Merrill Lynch said, adding that U.S. crude prices "could soon drop well below our $50 per barrel target in 3Q15".Deutsche Bank said "oil market fundamentals remain weak and, in the absence of OPEC production cuts or material supply disruption, this is unlikely to change."Commerzbank said that a potential return of Iranian supplies could add to current oversupply of 1.5 to 2 million barrels per day put additional pressure on prices from the supply side while there were also downside risks on the demand side."The China Association of Automobile Manufacturers has just lowered its growth forecast for vehicle sales this year sharply from 7 percent to 3 percent, which will no doubt have a dampening effect on gasoline demand," the bank said and added that "a fall below $55 per barrel in Brent and below $50 per barrel in WTI (U.S. crude) is therefore conceivable".China's sentiment this week will be tested by trade flows data to be published later on Monday, as well as its gross domestic product report on Wednesday.(Editing by Michael Perry)Join the conversation about this story »
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By Jonathan Leff and Jessica Resnick-AultNEW YORK (Reuters) - The almost 10 percent nosedive in headline oil prices this week has many hallmarks of a shocking but short-lived slump, triggered by a confluence of external events and exacerbated by safety-seeking investors and momentum-chasing traders.By Tuesday afternoon, the crowded race to the exit was winding down, with prices recovering from three-month lows as traders reassessed the factors they blamed for the worst slide in four months: Greece's debt woes; China's stock market meltdown; talks with Iran over its nuclear program; a stronger dollar; a rise in the number of U.S. oil rigs; a breach of key technical triggers.Yet a deeper look at the market suggests an important and more lasting rethink may now be afoot: longer-term oil prices, normally less volatile and reactive than immediate delivery, have suffered an almost equally violent collapse, pushing crude prices for 2017 to below $60 a barrel for the first time ever.If U.S. shale drillers - the world's new 'swing' producers - can still turn a profit at below $60 a barrel, then the fall in long-dated oil prices may be rational. If not, as some bullish market analysts worry, then lower prices could be choking off new supplies the world may need as soon as next year."If you take the curve at face value, it appears to be saying that U.S. shale can grow ... if WTI stays below $60 for three years. That doesn’t seem very likely," Paul Horsnell, global head of commodities research at Standard Chartered, said, referring to West Texas Intermediate crude."One would guess that all those companies that had been holding back from cutting projects and jobs over the past few months are not going to hold on much longer, and another shakeout will start. And it probably won’t be long before U.S. rig counts start to dive again."Link to chart: http://link.reuters.com/tef25wU.S. oil futures for December 2017 delivery have dropped by as much as $5 a barrel, or 8 percent, in the past two days, an even deeper retreat than last November when OPEC's surprise decision to maintain oil output despite a global glut sent markets into a deepening tailspin.The more liquid frontline prices for delivery in August this year have fallen only slightly further this week and are still several dollars above their trough from March. Longer-dated futures are plumbing contract lows, testing the break-even economics for U.S. shale oil drillers.The cause of this unusual tumble is still a topic of debate.Some link it to a future shift in fundamentals such as the expected boost in Iran's oil exports next year. Others say it may reflect the realization that oil industry costs are falling faster than expected as activity slumps. A few wonder if it is an unusually large producer hedge, or a big macro-economy fund trade unwinding.IRAN, RIGS OR...Longer-term oil futures are normally insulated from the speculative, short-term fluctuations and factors that afflict immediate prices. Too illiquid to attract fast money, they tend to trade on more strategic themes, whether a long-term bet on prices or a corporation seeking to hedge its price risks.Front-month oil futures have posted a daily change of more than $1 a barrel on 62 occasions this year, trading in a range of over $20; December 2017 has moved by that magnitude only 18 times, trading between $61 and $67 a barrel.The fact that this week's activity has affected both ends of the futures curve in nearly equal measure is unusual, says Credit Suisse analyst Jan Stuart."This isn’t a simple front-month correlation trade or a dip in demand," he says. "This is investors who invest all along the curve picking up the ball and going home. That's what this looks like."Some fundamental factors are also in play.Negotiations over Iran's nuclear program, which may conclude this week in Vienna, have increased the likelihood that a country that was once OPEC's second-largest producer will ramp up exports as sanctions are eased - likely adding more supply to the market next year at the earliest.Others pointed to the latest U.S. rig count data released last Thursday, showing the first increase in oil drilling since December. The addition 14 rigs was a bigger rise than expected.The rise suggests that at $60 a barrel, "producers can ramp up activity given improved returns with costs down nearly 30 percent and producers increasingly comfortable at the current costs/revenue/funding mix," Goldman Sachs, which is predicting a deeper and prolonged oil slump, said in a note on Monday.A HEDGE TOO FAR?Some suggested that the selloff, which began last week ahead of the U.S. Independence Day holiday, may have provoked reticent oil producers to hedge, locking in far-forward prices for fear they may fall much further.Oil option volatility fell last month to its lowest level in seven months, making hedging relatively cheaper for drillers who had locked in only 15 percent of their 2016 prices, according analysts at Tudor, Pickering, Holt & Co.The oil VIX index, a proxy for options pricing in the main oil ETF, has surged alongside oil prices in recent days, rising from 33.8 to over 42, its highest since mid-April, in a possible sign of increased demand to buy options protection.Yet market sources saw little immediate evidence of a big hedge that could explain the price move.Trading volumes in the December 2016 and 2017 WTI contracts, which were the fourth and fifth most-active in the market on Monday, was elevated, but not unusually so. The 2016 contract traded just over 35,000 lots, double the 30-day average but a hair less than on July 1, data show."We have not seen a lot of activity in the last 24-48 hours," said John Saucer, vice president of research and analytics at Mobius Risk Group, which advises companies on hedging. "We saw a lot last month."(Reporting by Jonathan Leff; Editing by Alan Crosby)Join the conversation about this story »
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The flop in oil prices this week has been several months in the making. On Monday, West Texas Intermediate crude oil fell nearly 8% as part of a global sell off in virtually all assets after the Greece referendum results Sunday. And then on Tuesday, oil prices fell another 4% before regaining some ground in late morning trade. But even with the reversal, oil is now near a three-month low. Quickly. For the last couple months, oil had been relatively stable near $60 per barrel, and it seemed like the worst of the oil crash was over. Then last week, the oil rig count turned positive for the first time this year, hinting that perhaps it oil producers were ready to ramp up production with prices seemingly stabilized. But then on Monday, oil suddenly had its worst day in three months. This tumble, however, was not just about what happened in Greece over the weekend. It had been coming for months. The Energy Information Administration put out its latest short-term outlook on Tuesday, just in time for an assessment of what's prompted the most violent move in oil prices that we've seen in months. Here's the EIA's analysis of what's moved crude oil this week, which covers the main catalysts (emphasis added): "Crude oil prices fell by about $4/[barrel] on July 6 in the aftermath of the 'no' vote in Greece on the economic program, as well as lingering concerns about lower economic growth in China, higher oil exports from Iran, and continuing growth in global petroleum and other liquids inventories." The key theme there is oversupply, and the warning signals have been flashing for some time now. Oil inventories remain near the highest levels for this time of year in about 80 years, even though they had recently declined for eight straight weeks, a streak that was only broken last week. In a note last month, Morgan Stanley's Adam Longson noted that even with peak summer demand, there were still oil tankers sitting on the Atlantic, waiting to be bought. Longson's concern was that when seasonal demand dies down, it would be even harder to get rid of all the stockpiles that should have been sold. And then there's Iran. Iran is in negotiations with the US and other countries over its nuclear program. If sanctions that have been imposed since 2012 are lifted, Iran could pump up to 400,000 extra barrels per day. It's not a game changer to the 90 million-barrel-per-day oil market, as PIMCO points out. But it's not nothing, either. Another anecdote of the oil glut came through the surge in the cost of oil tankers. Back in May we highlighted a Bloomberg report showing that the daily rate of oil supertankers surged to the highest level in seven years on a sudden rise in demand from producers. But the US is not the only one doing all the pumping. It's an open secret in the industry that the 12-member oil cartel OPEC is pumping more oil than its official target of 30 million barrels per day; in fact, it has for the past year. One sign of a drawdown in production has come in the EIA's short-term forecast, which projects that US production peaked in May and will decline sequentially through 2016. Still, this remains a forecast. And so even though this week's crash came suddenly, and while it coincided with a global selloff on concerns about Greece, it was long overdue. SEE ALSO: Here's a brief, somewhat disturbing stock market history lesson Join the conversation about this story » NOW WATCH: We snuck a camera inside a Cuban supermarket
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By Henning GloysteinSINGAPORE (Reuters) - Crude oil prices stabilized on Tuesday morning after posting one of their biggest selloffs this year the previous day over Greece's rejection of debt bailout terms and China's stock market woes.Front-month U.S. crude futures were trading at $52.91 per barrel at 0011 GMT, up 38 cents from their last settlement. The slight gain followed an almost 8 percent fall on Monday that pulled the contract down to levels last seen in April.Front-month Brent crude was stronger, rising over half a dollar to $57.07 a barrel following a more than 6 percent fall the previous session."Crude oil prices hit a two month low amid mounting concerns over economic stability in Europe and Asia. On the supply side, an increase in Iranian supply is expected to compete with Russian sales when the new supply hits the market," ANZ bank said on Tuesday.Major global powers and Iran are negotiating a nuclear compromise that could end sanctions against Tehran and open up oil exports into an already oversupplied market, although diplomatic sources told Reuters on Monday that important issues remain unresolved.And not all analysts are bearish in their oil price outlook.U.S. PIRA Energy Group said in a note published on Tuesday that "the worst of oil market imbalance is over with inventory overhang being much less than generally expected" and that "longer-term supply/demand fundamentals are bullish."(Editing by Michael Perry)Join the conversation about this story »
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The August contract for crude oil futures was down $2.70 to $54.23 in morning trading — a drop of 4.7 per cent. That's a three-month low for oil. Brent crude slipped below $60 US for the first time since April. Oil was being pressured by a broadly ...
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