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Gold Heads for First Weekly Drop in Three as Stimulus in Focus By Bloomberg

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© Reuters. Gold Heads for First Weekly Drop in Three as Stimulus in Focus

(Bloomberg) — Gold headed for a weekly decline, snapping two straight weeks of gains, as investors weighed the outlook for fresh U.S. stimulus.

Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi Thursday that President Donald Trump will personally lobby to get reluctant Senate Republicans behind any stimulus deal they reach.

Trump said he’s willing to go beyond the $1.8 trillion offer for a virus relief plan that’s already been offered by the administration, but Senate Majority Leader Mitch McConnell rejected that, saying GOP lawmakers won’t go along.

Gold’s been trading in a narrow range so far in October amid uncertainty surrounding the prospects of a stimulus deal being passed before the Nov. 3 presidential election. The International Monetary Fund has said that more public spending will be needed to complete the economic recovery from coronavirus.

was steady at $1,907.34 an ounce at 7:48 a.m. in Singapore, and was 1.2% lower this week. The Bloomberg Dollar Spot Index was little changed.

In other precious metals, spot silver dropped 0.2%, platinum rose 0.2% and palladium was steady.

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

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Exxon, Japan’s JERA to build LNG-to-power project in Vietnam By Reuters

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© Reuters. The logo of JERA Co., Inc., the world’s biggest LNG buyer, is displayed at the company office in Tokyo

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SINGAPORE/TOKYO (Reuters) – Exxon Mobil Corp (N:) and Japan’s biggest power generator, JERA, have agreed to build a power station and import facilities for the liquefied (LNG) to fuel it in the Vietnamese city of Haiphong, the companies said on Wednesday.

LNG is growing more popular as a power generation fuel in southeast Asia as coal falls out of favour because of its impact on the climate, while plentiful supplies of gas have sent prices (AS:) tumbling in recent years.

In statements, Exxon and JERA said they had signed a pact with city authorities in the industrial centre of Haiphong, about 80 km (50 miles) from the capital, Hanoi, to build the so-called LNG-to-power project.

“Haiphong is industrializing at a fast pace, with an annual growth rate of over 20 per cent. Therefore, our annual power consumption is growing and is expected to double between 2020 and 2030,” Nguyen Van Tung, chairman of the Haiphong People’s Committee, was cited as saying in the statements.

The project is subject to government approvals, the companies added, but did not detail plant cost, size or estimated annual imports of LNG.

JERA, which is owned by Tokyo Electric Power (T:) and Chubu Electric Power, (T:), is the world’s largest individual buyer of LNG.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Iraq’s Crumbling Economy Is Becoming a Threat to OPEC By Bloomberg

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© Reuters. Iraq’s Crumbling Economy Is Becoming a Threat to OPEC

(Bloomberg) — From his third-floor office in eastern Baghdad, Iraqi Oil Minister Ihsan Abdul Jabbar can see the rowdy protesters below as they march toward Tahrir Square, the symbolic heart of Iraq’s latest uprising.

On Sunday, thousands of Iraqis again gathered with national flags at the square, across the Tigris river from the heavily-fortified Green Zone, where the U.S. has its embassy. Their list of grievances was long: corrupt politicians, daily power cuts, dilapidated hospitals, crumbling roads and a lack of jobs. “We want our country back!” they chanted.

Iraq may be the world’s third-biggest exporter, but its economy is cratering after the coronavirus pandemic sapped global demand for energy and caused prices to collapse. The state’s finances are so dire it can’t pay teachers and civil servants on time, threatening a repeat of the upheaval that last year brought down the government and saw hundreds of protesters killed.

That’s created a dilemma for 46-year-old Abdul Jabbar, a chemical engineer and career oil man who’s now caught between the demands of an angry population and the pledges made to allies in OPEC. The cartel of oil producers is trying to bolster a fragile market by reining in supply and it needs major producers like Iraq to toe the line. For Iraq, restraining supply carries a massive economic — and political — cost. But breaking ranks is risky too: it could mean lower prices for everyone.

Some Iraqis want the government to put them first by simply pumping more , a move that could unravel the finely calibrated output agreement; if a producer as significant as Iraq flouts the pact, there’d be little to stop smaller ones doing the same.

“I waited more than 45 days for my so-called monthly salary,” said Ziyad Al-Mustansir, a 44-year-old secondary school teacher in Baghdad. “The government should have looked after the country’s interests when it came to OPEC. If such deals mean losses for the country, we shouldn’t go with them.”

Under a deal reached in April between Iraq and other members of OPEC+, a grouping of the Organization of Petroleum Exporting Countries and others such as Russia, Baghdad had to curb its daily production by around 1 million barrels — worth roughly $40 million — to 3.6 million.

The idea was that supply cuts would raise crude prices enough to make up for lost exports. While prices have more than doubled since the agreement was struck to $40 a barrel, they’re still down almost 40% this year, languishing at levels far below what Iraq needs to finance its budget. The government’s monthly revenue, at $3 billion, is less than half what it was last year.

Iraq has already breached its output limit on several occasions and angered OPEC+’s de facto leaders, Saudi Arabia and Russia. The danger for them is if Baghdad starts to push even more barrels onto the market to eke out every last dollar it can.

Iraqi officials have repeatedly said they’re committed to the agreement, that they’re pumping in line and will compensate for over-production. But after earlier breaches, traders are watching closely for signs it will surpass the cap again.

“It will become increasingly difficult for OPEC+ to maintain discipline as countries, especially Iraq, become more desperate,” said Tarek Fadlallah, the chief executive officer of Nomura Asset Management’s Middle Eastern unit.

All nations within OPEC+ have been stung by oil’s crash. Russia’s ruble has lost almost a fifth of its value, Saudi Arabia tripled value-added tax to make up for shriveling oil income, and more than 60 people died this month during protests in Nigeria.

But Iraq, where oil accounts for almost all government revenue, is in about the worst position. Its gross domestic product will contract 12% this year, more that of any other OPEC member under a production quota, according to International Monetary Fund forecasts.

It’s been in chaos for much of the period since the U.S.-led invasion of 2003 that toppled Saddam Hussein, suffering civil war, an insurgency by Islamic State and a push by the Kurds for independence in the north, a major oil-producing region. And while OPEC+ includes all of Iraq’s production in its calculations, the Kurdistan region has its own say over oil policy.

The latest crisis is causing divisions between lawmakers and Prime Minister Mustafa Al-Kadhimi, who only came to power in May. His administration says it won’t be able to pay Iraq’s roughly 7 million public workers and pensioners next month unless parliament approves a law allowing the government to borrow an extra $35 billion.

Opposition politicians say the country’s debt load is already too high and its leaders can’t be trusted to take on more. Iraq’s dollar-bond yields have surged almost 300 basis points since early September, an indication investors are fretting. At more than 10%, they’re the highest in the Middle East.

“The borrowing could lead to the collapse of our economic system,” Mohammad Saheb Al-Darraji, a member of parliament’s finance committee, said.

Kadhimi, who traveled to France, Germany and the U.K. this month to try to woo money from oil and gas investors, is also struggling to restrain militias backed by neighboring Iran. Iraq’s a hotbed in the proxy war between the Islamic Republic and the U.S., which has threatened to close its Baghdad embassy unless the government stops the militias from firing rockets on it.

Lockdowns to stop the spread of the coronavirus, meanwhile, have hammered businesses across the country, which has recorded more cases and deaths than anywhere in the Middle East aside from Iran. Unemployment has soared to 14%.

The latest protests are a test for Kadhimi, who’s tried to present himself as a champion of the demonstrators’ demands. It was mass demonstrations a year ago that forced his predecessor, Adil Abd Al-Mahdi, to resign.

Pressing for Aid

As one of the five original members of OPEC, which was founded in Baghdad in 1960, Iraq’s unlikely to quit the organization. If it did, it would risk Saudi Arabia retaliating by increasing production and sending oil prices even lower.

Iraqi officials may instead press the Saudis for financial aid if crude prices remain below $45 a barrel in the first half of 2021, according to a person familiar with the matter.

The country’s economic malaise and the tens of billions of dollars it spent in the war to defeat Islamic State between 2014 and 2017 justify an exemption from its quota, according to Jabbar Al-Luaibi, who was oil minister between 2016 and 2018.

“Instead of cutting around 1 million barrels a day, Iraq could have cut 500,000,” he said. “Lower the percentage. We don’t want to hit OPEC policy, but this is the country’s situation and OPEC members should take it into consideration.”

Saudis Resolute

Saudi Arabia, nervous that giving one country an easier ride would lead to others demanding the same, won’t budge easily. The kingdom’s energy minister, Prince Abdulaziz bin Salman, has insisted on total compliance.

OPEC+ had planned to ease some production cuts in January. But with oil prices under renewed pressure from an acceleration in virus cases and rising production in Libya, it may be forced into a delay. The risk for OPEC is that it’s even harder to persuade governments to comply if restraints are in place for longer.

It would be the last thing Iraq needs as anger builds among public sector workers, who increasingly fear they will never get paid.

“We hear rumors we might even have our salaries cut,” said Al-Mustansir, the teacher. “If this happens, it will be catastrophic.”

©2020 Bloomberg L.P.

 





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Drop in leisure driving stalls global recovery in fuel demand By Reuters

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By Stephanie Kelly

NEW YORK (Reuters) – Brandon Thompson was planning on making an eight-hour drive this year from his home in Iowa to Ann Arbor, Michigan, to see his favorite college football team play. Then the pandemic hit.

“We realized very early on if there was a season, there would be no fans,” said Thompson, a University of Michigan Wolverines fan.

Millions of people like Thompson worldwide continue to cancel or curtail leisure trips as the COVID-19 pandemic maintains its grip on many countries. That is contributing to a slower-than-expected recovery in fuel demand.

Thompson would have driven more than 500 miles (805 km) to see the game and go tailgating, where thousands of fans arrive hours early to sit in the parking lot and eat and drink. Across the country, fans of many sports would have made similar journeys.

Traffic outside of the 7 a.m. to 10 a.m. and 4 p.m. to 7 p.m. rush hours accounts for about 55% of overall U.S. fuel demand, according to Rystad Energy. That includes trips to sporting events, shuttling kids to activities, or going to the movies. Non-rush leisure travel was down by 12% from pre-virus levels as of early October, Rystad said.

Mobility is again declining in Europe, where several nations are reimposing lockdowns due to a spread in cases, which are soaring as well in India and Brazil.

“The downwards trend in European mobility indicators is likely to continue, with pressure on road transportation fuels demand probable in the weeks ahead,” JBC Energy said in a note.

The Organization of the Petroleum Exporting Countries (OPEC) warned that the recovery in fuel demand from strict lockdowns earlier this year has been anemic and could hamper oil markets for months to come.

The United States at 9 million barrels per day is the world’s biggest gas guzzler, more than double the second-largest consumer, China, according to U.S. Energy Department figures. Demand in China has rebounded more than in other major world economies.

Non-rush traffic had been recovering in the United States until September when it stalled, according to Artyom Tchen, senior oil market analyst at Rystad.Non-rush traffic levels globally are currently off by 1 million barrels per day from pre-COVID levels, Tchen said, to about 25.2 million barrels per day.

“The kids today, their parents are crazy: They’ll drive like 300 miles for a hockey game,” said John Kilduff, partner at Again Capital in New York. Without those trips, gasoline demand is likely to remain near its current 8.5 million barrels per day, Kilduff said.

The United Kingdom is one of the worst hit countries in Europe, with its driving mobility falling to levels last seen in March, when the first round of restrictions came into effect, according to Apple (NASDAQ:) mobility data. 

In Germany, traffic is even lower, with visits to restaurants, cafés, shopping centers, theme parks, museums, libraries and cinemas falling by 12% last week.

EMPTY STADIUMS

College football in parts of the United States has been cancelled, leaving towns that normally swell to 100,000 or more on game day empty. Teams in the U.S. Big Ten Conference, home to storied football schools like Ohio State and Michigan, started its schedule last weekend, several weeks late, with fewer fans.

“Think of all of the idling vehicles waiting in line to get into the tailgate areas and then parking,” said Neal Hawkins (NASDAQ:), associate director of the Institute for Transportation at Iowa State University. “Game day versus no game day, there’s a significant impact.”

In 2013, more than two-thirds of fans who attended University of Nebraska games came from outside the Lincoln metropolitan area, many driving at least 60 miles, according to Eric Thompson, professor of economics at the University of Nebraska in Lincoln.

Stephanie Reinhardt, a librarian from Bay City, Michigan, used to travel or dine outside almost every weekend, but with winter coming, those opportunities are disappearing.

“It’s going to be hard as the weather cools. There’s not a lot of places to go out and see people,” said Reinhardt, 32.





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