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Oil Rises With Dollar Decline Boosting Appeal of Commodities By Bloomberg

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© Bloomberg. An oil worker passes the waste gas venting pipes on an oil platform off the coast of Spain. Photographer: Bloomberg Creative Photos/Bloomberg

(Bloomberg) — Oil rose to its highest in nearly a week amid a weaker dollar and expectations for supply declines in U.S. inventories.

Crude futures gained 2.1% in New York, while the Bloomberg Dollar Spot Index slipped as much as 0.3%, raising the appeal for commodities priced in the currency. Futures clung to gains in after-market trading following the American Petroleum Institute’s report of a 5.42 million barrel decline in stockpiles last week and draws in both gasoline and distillate inventories.

Prices were also supported by increased refinery activity in Asia, signaling strengthening demand. One Chinese mega-refiner is snapping up barrels of Middle Eastern crude, while India’s refiners have cranked up processing to meet higher consumption during a festive period.

“A weaker U.S. dollar tends to boost all dollar-denominated commodities and vice versa,” said Carsten Fritsch, an analyst at Commerzbank AG (OTC:). “This applies in particular to gold, but also to other commodities like crude oil.”

Signs of a demand boost in Asia is helping lift the overall outlook for oil consumption, which continues to struggle to return to normal due to the coronavirus pandemic. At the same time, the structure of the market is pointing to strength ahead. The spread between Brent’s nearest contracts is at its narrowest in six weeks, while the contract’s six-month spread is at the strongest since late July.

Rongsheng Petrochemical Co.’s Singapore unit has purchased at least 7 million barrels in the spot market so far this month for delivery in December and January, according to traders who asked not to be identified because the information is private. The company is buying up crude to feed a trial run operation of its expanded refinery in Zhejiang province this quarter.

“Considering China’s role in the global oil market as largest crude importer, any additional barrels it removes from the rest of the world is an excess barrel missing for the rest of the world,” said Giovanni Staunovo, commodity analyst at UBS Group AG (SIX:). “Definitely positive if this is a start of a trend.”

Traders’ attention has also turned to plans by OPEC+ to raise supply in 2021 in line with its agreement earlier this year. While some producers inside the group are said to have doubts, the United Arab Emirates and Russia have said that, for the time being, the group intends to proceed as scheduled. OPEC+ nations implemented 102% of agreed supply cuts in September, according to delegates who declined to be identified.

The API report showed domestic gasoline supplies fell 1.51 million barrels and distillate inventories declined 3.93 million barrels. If confirmed by government data released on Thursday, the distillate draw would be the largest since March.

Still, the outlook for demand from refineries remains precarious, with refining margins severely depressed for this time of year. The so-called crack for combined gasoline and diesel against West Texas Intermediate futures remains near $9 a barrel. Refineries typically need the spread to be more than $10 a barrel to make a profit processing crude oil.

“They’re minimizing jet fuel, maximizing diesel,” said Stewart Glickman, energy equity analyst at CFRA Research. “There’s only so much you can do with those kinds of levers. The only other lever they have is to start shutting in runs and producing even less.”

©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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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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Gold Down Over Strong Dollar, Fading Hopes for U.S. Stimulus Measures By Investing.com

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© Reuters.

By Gina Lee

Investing.com – Gold was down on Wednesday morning in Asia over a strengthening dollar and fading hopes of the U.S. Congress passing the latest stimulus measures before the country’s presidential election.

edged down 0.14% at $1,909.30 by 12:30 AM ET (4:30 AM GMT), remaining above the $1,900 mark. The dollar was up on Wednesday.

President Donald Trump admitted that the measures were not likely to be passed before the Nov. 3 election, now less than a week away, as the chasm between the Republicans and Democrats over the measures’ price tag remains.

Data released on Tuesday also added to concerns over U.S. economic health. The fell to 100.9 in October, lower than the 102 predicted in forecasts prepared by Investing.com and the previous month’s reading of 101.3. More data, including the third-quarter , is due to be released on Thursday

Across the Atlantic, a second wave of COVID-19 cases continues, and the numbers continue to rise. French president Emmanuel Macron will address his nation, which has recorded the highest number of deaths from the virus since April in a televised speech later in the day. Macron is expected to announce the re-implementation of a national lockdown to begin on Thursday. Elsewhere in Europe, Italy recorded a record number of cases.

John Berrigan, head of the European Commission’s financial services unit, said on Tuesday that the U.K. must indicate how far it will diverge from European Union (EU) regulations if it wants access to the EU financial market from January. Berrigan also requested more clarification on the U.K.’s intentions to work out what is an “acceptable level” of divergence.

A recovery in demand saw China’s net gold imports surge to a six-month high in September as an uptick economic activity increased demand in the world’s top consumer of the yellow metal. Holdings in the SPDR Gold Trust (P:) rose 0.23% to 1,266.72 tons on Tuesday, data showed.

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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