Posts Tagged: bp

Emerging Markets: An Update

04 April 2015 - 7:25 am
 
1) China churns out more measures
2) The Bank of Israel increased the level of FX reserves that it considers adequate
3) Nigeria has a new president
4) Chile is joining Mexico in setting a hawkish tone
5) Brazil’s president Rousseff’s popularity fell off a cliff
6) Thailand’s military junta ended martial law after more than ten months
Over the last week, Brazil (+8.4%), Russia (+8.4%), and UAE (+8.0%) have outperformed in the EM equity space as measured by MSCI, while Hungary (-2.3%), Korea (-0.2%), and Singapore (flat) have underperformed. To put this in better context, MSCI EM rose 3.7% over the past week while MSCI DM fell -0.1%.
In the EM local currency bond space, Brazil (10-year yield -26 bp), Ukraine (-22 bp), and Russia (-20 bp) have outperformed over the last week, while Chile (10-year yield +13 bp), China (+7 bp), and Indonesia (+5 bp) have underperformed. To put this in better context, the 10-year UST yield fell -9 bp over the past week. 
In the EM FX space, BRL (+3.3% vs. USD), RUB (+2.0% vs. USD), and CLP (+1.4% vs. USD) have outperformed over the last week, while COP (-0.4% vs. USD), CZK (-0.3% vs. EUR), and ARS (-0.2% vs. USD) have underperformed.
1) China churns out more measures. PBOC Governor Zhou hinted at additional stimulus and the central bank lowered the down payment required for some second home buyers. After increasing the QFII quota for a large US asset manager last week, officials now indicate that money managers no longer need to be part of QFII program in order to invest in HK shares through the exchange link. 

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6 Points For This Week

29 December 2014 - 6:40 am
 
1.  The recent string of US economic data showed not only an upward revision in Q3 GDP to 5%, but also strong consumption data, rising confidence and continued improvement in the labor market (weekly initial jobless claims). This has reinforced market expectations for the Fed’s take-off next year.  Both the December 2015 Fed funds and Eurodollar futures contracts imply the highest rates in two months.   At the same time, it is important to recognize that after growing above trend in Q2 and Q3, the US economy should be expected to return to toward trend, even though holiday sales appear strong.    This anchor of the divergence theme remains solid.  
2.   The divergence theme is not just based on favorable developments in the US, but more accommodative polices in Europe and Japan.  Expectations that the ECB will expand the assets it is purchasing to include sovereign bonds are widespread, and have helped push many European bond yields to record lows (10-year benchmarks).  The money supply and lending report is arguably more important than the final manufacturing PMI (January 2, flash 50.6).  It is slowly improving, and this is important for the second phase of the TLTRO program which is linked to new non-mortgage lending.  
3.  Complimenting the unorthodox Bank of Japan monetary policy, the Abe cabinet approved a JPY3.5 trillion supplemental budget over the weekend.  It estimates this spending will boost GDP by 0.7 percentage points.  It has been under preparation for a couple of months, but follows on the heels of disappointing and unexpected declines in industrial production and retail sales.  Despite the BOJ expanding its balance sheet by 1.4% of GDP a month and the decline in the yen, inflation pressures continue to subside. The supplemental budget will be financed by tax revenue anticipated by the stronger growth and unspent funds.  About half of it will be used to public works.  Of the remaining half, a third will be used to revitalize regional economies and two-thirds on programs to help households (e.g. shopping vouchers and subsidized heating fuel for low income households)  and small businesses (low interest rate loans for businesses hurt by rising input costs, i.e., weak yen).  

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Reliance Industries will relinquish its Krishna Godavari basin gas discovery block, KG-D3, mainly because of operational restrictions placed by the Defence Ministry.

Reliance Industries, which had made four consecutive gas discoveries with close to 500 billion cubic feet of in-place reserves in block, proposed immediate relinquishment, its minority partner Hardy Oil and Gas plc of UK said today.

Hardy said the block oversight panel headed by upstream regulator DGH yesterday considered  Reliance Industries proposal.

Without stating what the Management Committee (MC) decided, Hardy in a statement said the firm has agreed to the relinquishment proposed by the operator, Reliance Industries.

Hardy holds 10 per cent stake in the block which is operated by Reliance Industries with 60 per cent interest. BP of UK has the remaining 30 per cent stake. >> Read More

 

The six-month rout in oil prices is casting a pall over the credit ratings of energy companies BP, Royal Dutch Shell and Total, agency Standard & Poor’s warned on Monday.

The almost 50 per cent decline in crude since the end of June has reverberated through financial markets, precipitated an economic crisis in Russia and has forced oil producers to scale back their ambitions.

The rating agency said:

We have revised to negative our outlooks on three oil majors, while affirming the credit ratings on these companies to reflect that we will further evaluate management’s actions in reducing negative free cash flow by cutting costs and gradually reducing capital expenditures (capex).

BP had its outlook cut to negative from stable.

Royal Dutch Shell had its outlook reduced to negative

Total also had its outlook trimmed to negative >> Read More

 

Reuters reports that a pipeline from the El Sharara field has been closed. The reason for the closure is unclear.

In the past week, even mildly bullish news has sparked some oil price squeezes.

Update: Now the report is that production was shut down because the pipeline was blocked.

 

 BP Plc today wrote down the value of its $7.2-billion investment in India’s oil and gas fields made in February 2011 by a little over 10 per cent.

Unveiling its third-quarter results on Tuesday, BP said it had written down the value of its investment in KG-D6 — the deep-water field operated by Reliance Industries in Krishna Godavari basin — by $770 million.

The oil behemoth attributed the charge to the “uncertainty in the future long-term gas price outlook following the introduction of a new formula for Indian gas prices”.

On October 18, the Narendra Modi-government approved a new formula that capped the gas price from deep-water fields at $5.61 per million British thermal unit (mBtu).

The new gas price will come into effect from November 1 but it won’t apply to Reliance Industries, which has filed for arbitration in a dispute with the government over the admissibility of certain cost recoveries on account of the huge shortfall in gas production from KG-D6 gas field. >> Read More

 

BP-CRASH

U.S. District Judge Carl Barbier in New Orleans ruled today that BP was “grossly negligent” in the 2010 Deepwater Horizon rig explosion and may face up to $18 billion in civil penalties, according to The WSJ. In addition, Transocean and Halliburton were found ‘negligent’ – a lessor offense – (fines up to $1,100 per barrel for ‘negligence’, $4,300 for ‘gross negligence’). This result comes 2 years after BP agreed to accept criminal responsibility for the disaster and to pay $4.5 billion in fines and restitution. BP quickly issued a statement that it will appeal the decision and believes the findings “are not supported by evidence at trial.”

As Bloomberg reports,

In a turning point after four years of legal wrangling over responsibility, U.S. District Judge Carl Barbier’s ruling laid the bulk of the blame on BP for the explosion, which killed 11 men and caused the largest offshore oil spill in U.S. history.

 

 

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Emerging Markets -An Update

04 July 2014 - 6:08 am
 
1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules
2) The HKMA acted to defend the HKD peg for the first time since December 2012
3) The won continues to strength despite more North Korea threats and official pushback BOK
4) The news out of South Africa remains bad on the labor front
5) Violence is escalating again in Ukraine as the cease-fire breaks down
6) Argentina has missed a payment on restructured bonds coming due Monday June 30
Over the last week, Argentina (+4.3%), India (+3.0%), and Russia (+2.7%) have outperformed in the EM equity space in local currency terms, while Turkey (-1.8%), Poland (-1.6%), and Czech Republic (-1.3%) have underperformed. To put this in better context, MSCI EM was +1.1% over the past week.
In the EM local currency bond space, Sri Lanka (10-year yield -32 bp), Indonesia (-15 bp), and Korea (-10 bp) have outperformed over the last week, while Brazil (10-year yield +23 bp), Mexico (+15 bp), and Hungary (+14 bp) have underperformed. To put this in better context, the 10-year UST yield was +14 bp over the past week.
In the EM FX space, IDR (+1.5% vs. USD), COP (+1.4%), and KRW (+0.8%) have outperformed over the last week, while RUB (-1.9% vs. USD), ZAR (-1.6%), and BRL (-1.6%) have underperformed.
1) China’s FX regulatory body, SAFE, announced additional reforms to its currency trading rules. The new rules will allow commercial banks to set their own rates for non-bank clients (such as retail), instead of having to follow a set of pre-established directive. This should not change anything regarding the CNY fixing.

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 Oil exploration and production companies such as Reliance Industries and ONGC are expecting policy clarity and tax benefits from the first budget of the Modi government.

Most domestic upstream companies invested more in exploration overseas than in India because of the ambiguity over gas price and policy paralysis during the previous UPA government’s rule.

The explorers expect the tax holiday under Section 80-IB (9) of the income tax act to be extended to 10 years from seven years, from the year of commercial production.

This move, industry sources said, will encourage oil and gas exploration that requires heavy investments and involves risks as well as reduces the import bill.

Analysts said “in the initial few years there is hardly any profit to take advantage of the tax holiday. In the initial years, undertakings have larger expenditure to set off and, hence, the actual benefit of tax holiday does not flow to them”. >> Read More

BP signs $20bn LNG deal with China

18 June 2014 - 6:00 am
 

BP has signed a $20bn deal to supply China with liquefied natural gas over 20 years starting in 2019.

Under the terms of the agreement, the UK oil and gas major will ship 1.5m tonnes of gas for Cnooc, the state-controlled Chinese energy group, per year

The annual volumes – equivalent to 72bn cubic feet – represent more than a tenth of the 13m tonnes imported last year by Cnooc, which is ranked as China’s leading and the world’s third largest LNG importer.

Bob Dudley, BP chief executive, said the deal would help China’s drive in switching more of its energy supply from coal to less polluting hydrocarbons.

“We are pleased to support China’s commitment to improving its air quality,” he said. The agreement was signed by company executives in London in the presence of David Cameron, UK prime minister, and Li Keqiang, Chinese premier. >> Read More

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Technically Yours,
Team ASR,
Baroda, India.