We need to find a fairer way of providing Goods and Services to the rest of the people on Earth.Cryptocurrencies and/or Gold Standard of money....maybe the answer to fight hyperinflation caused by too much printing of paper/fiat currencies by Governments and Central Banks all over the World. (https://nomorefiatmoneyplease.blogspot.com)
EU probes Halliburton's planned purchase of Baker Hughes
The European Commission said on Tuesday it had launched an in-depth investigation into oilfield services provider Halliburton's planned purchase of its smaller rival Baker Hughes.
PHOTO: REUTERS
[BRUSSELS] The European Commission said on Tuesday it had launched an in-depth investigation into oilfield services provider Halliburton's planned purchase of its smaller rival Baker Hughes. "The commission has to look closely at this proposed takeover to make sure that it would not reduce choice or push up prices for oil and gas exploration and production services in the EU," Commissioner Margrethe Vestager said in a statement. Halliburton offered in November 2014 to buy Baker Hughes for about US$35 billion in cash and stock, creating an oilfield services behemoth to take on market leader Schlumberger NV as falling oil prices force customers to curb spending.
The No 2 and No 3 players in the services industry said the decision is a normal step in the commission's review process.
Halliburton said it expects to offer a substantial remedies package that will address any substantive competition concerns.
The two companies said last month that US antitrust officials were not satisfied with proposed concessions.
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Halliburton's shares were down 2.15 per cent at US$30.88 in afternoon trading, while Baker Hughes was down 2 per cent at US$40.67.
Petrobras cuts spending again as oil-price drop bites
Petróleo Brasileiro SA, Brazil's state-controlled oil producer, on Tuesday slashed its investment budget for the third time in just over six months, to preserve cash to pay debt, the industry's largest.
PHOTO: REUTERS
[SAO PAULO] Petróleo Brasileiro SA, Brazil's state-controlled oil producer, on Tuesday slashed its investment budget for the third time in just over six months, to preserve cash to pay debt, the industry's largest.
With oil prices at about 12-year lows and the company's US$15.1 billion asset sale stalled, Petrobras cut its 2015-2019 capital spending budget by a quarter to US$98.4 billion from US$130 billion in June, according to a securities filing.
With planned 2016 investments of US$20 billion, versus US$27 billion proposed in June, Petrobras also trimmed its outlook for oil production in Brazil this year by nearly 2 perncent to 2.145 million barrels per day from 2.185 million bpd.
The production cut underscores the difficulties facing Chief Executive Officer Aldemir Bendine, as Brazil endures its worst recession in at least 25 years and its currency, the real, has gone into a tailspin. "Every day Petrobras is under more and more pressure," said Fabio Fuzette, who runs Sao Paulo investment fund Antares Capital. "If oil prices stay low, I'm not very hopeful. We will likely see more of the same shortly." Petrobras' preferred shares, the company's most-traded class of stock, fell 9.2 per cent in Sao Paulo to 5.53 reais, their lowest since Aug 26, 2003. The shares are down 9.1 per cent this month and 70 per cent in the last year. "Essentially the market is reacting to most news from Petrobras as bad news," said Luana Sigfried, an oil and gas analyst with Raymond James in Houston. "It's increasingly clear that the company is just trying to adjust to reality, and reality is that it's going to be a smaller and smaller company." Lower spending will free up cash to pay down the company's US$130 billion of debt, but it also threatens to crimp future output, which investors are counting on to satisfy longer-term obligations.
Such risks, including falling oil prices and a giant corruption scandal, led to Petrobras' loss of its coveted investment-grade rating last year.
The company's 5.75 per cent bond due in January 2020 fell 61 basis points to 78.25 per cent of face value to yield 12.6 percent.
In the Tuesday revision, Petrobras cut its outlook for the average benchmark Brent crude oil price in 2016 to US$45 a barrel from US$70 in June.
Brent crude oil fell 1.36 per cent on world markets on Tuesday to US$31.12 per barrel. Some analysts expect it to drop toward US$20 in coming months, slashing potential returns on Petrobras' technically complicated and remote offshore oilfields. If that happens, the company may need to cut spending further.
The situation has worsened because of a nearly one-third decline in the value of Brazil's real against the dollar last year. That means Petrobras needs more local currency to pay its debt, most of which is in dollars.
With Brazil's recession on track to be the longest since 1901 this year, demand for fuel and other Petrobras products in Brazil, the world's seventh-largest economy, is falling. Fuel sales fell for the first time in a decade, Sindicom, Brazil's fuel distributors' association, said on Tuesday.
The revision of the 2015-2019 plan is likely to be the last as the company is expected in February to release a new five-year plan running through 2020.
Under the revised plan, about US$80 billion, or 81 per cent of the planned capital spending for 2015 through 2019, is budgeted for exploration and production. About US$10.9 billion is earmarked for distribution and refining, with the rest being allocated to natural gas, power generation and other areas.
Futures market tumble shows US oil will not reach US$50 for 6.5 years
Hopes for a recovery in oil prices evaporated further on Tuesday as long-dated futures contracts fell even more to show oil will stay stuck below US$50 a barrel until 2022.
PHOTO: BLOOMBERG
[HOUSTON] Hopes for a recovery in oil prices evaporated further on Tuesday as long-dated futures contracts fell even more to show oil will stay stuck below US$50 a barrel until 2022.
The December 2017 West Texas Intermediate futures contract slid by more than 3 per cent, or US$1.29 a barrel on Tuesday, to settle at US$42.20 a barrel, while the December 2018 contract sank by US$1.30 a barrel, or 2.8 per cent, to a low of US$45.35 a barrel.
The declines came as the prompt futures briefly fell below US$30 a barrel before settling at US$30.44 a barrel, down 97 cents, or 3 per cent for the day. Oil has shed 20 per cent so far this year and 72 per cent since mid-2014.
At the moment, US benchmark futures are priced below US$50 a barrel through June 2022. Not a single contract, which can trade out to December 2024, is above US$52 a barrel.
The collapse of the back-end of the curve, where prices are generally better insulated from the catalysts that prompt fluctuations in nearby prices, offers a bleak outlook for US oil markets. "Compared to normal, it's just a whole shift lower,"according to John Saucer, vice president of research and analytics at Mobius Risk Group in Houston.
On Tuesday, a government report predicted the global glut would swell through 2017 as the easing of Western sanctions against Iran pushes more oil into the world market. Global production is expected to rise to 96.7 million barrels per day in 2017, up from 95.9 million bpd this year, the Energy Information Administration said.
Demand will grow only 1.4 million bpd in 2017, unchanged from the 2015 and 2016 rate, according to the report.
US output is expected to taper as shale producers pull back from drilling to avoid losing money.
Volumes at the back of the curve were fairly active with roughly 14,600 lots of December 2017 trading, the third most active day for that contract. More than 3,340 lots of December 2018 futures traded, marking its most liquid day of trade this year.
Barclays slashed its 2016 Brent and WTI forecast to US$37 a barrel, down from US$60 and US$56, respectively. French bank SocGen cut its 2016 Brent forecast by US$11.25 to US$42.50, and lowered its WTI outlook by US$9.25 to US$40.50 a barrel.
Standard Chartered said in a worst case scenario oil could potentially reach US$10 a barrel.
John Richard Pilger is an Australian journalist based in London. Since his early years as a war correspondent in Vietnam, Pilger has been a strong critic of American, Australian and British foreign policy, which he considers to be driven by an imperialist agenda.
Pilger has also criticized his native country's treatment of indigenous Australians and the practices of the mainstream media.
In the British print media, he has had a long association with the Daily Mirror, and writes a fortnightly column for the New Statesman magazine.
Pilger has twice won Britain's Journalist of the Year Award, and his documentaries, screened internationally, have gained awards in Britain and worldwide, and the journalist has received several honorary doctorates.
Latest oil slide triggers more bets against commodity currencies
[LONDON] Bets against commodity-linked emerging currencies are on the rise again as crude prices fall to around US$30 a barrel, but volatility remains well below the peaks of last year.
Brent crude's renewed tumble this year has put commodity exporters' currencies on course to extend last year's losses and some, such as the South African rand and the Mexican peso, have hit record lows.
The Russian rouble is inching lower too, 4 per cent off record lows struck towards the end of 2014, and these spot market losses are filtering into options markets where investors can try to hedge against further weakness. "The oil price fall does pose a challenge for commodity exporters as the weakness isn't fully priced into all the fiscal outlooks yet," said Dominic Bunning, a strategist at HSBC.
He said most exporting countries had calculated their 2016 budgets using much higher oil prices - Russia's for instance assumes US$50 a barrel while Saudi's is thought to assume US$40. "Even if oil stabilises at these levels, fiscal assumptions will be impacted quite dramatically," Bunning added.
One-month implied volatility - a gauge of expected exchange rate swings derived from options prices - on the rouble has risen off five-month lows touched at the end of the year , having risen around 4 percentage points to around 20 per cent.
Vols on the South African rand have jumped to a three-week high of 23.6 per cent while those on the Brazilian real last week hit 2-1/2 month highs before subsiding Volatility is on the rise across asset classes, ranging from Wall Street's main fear gauge of US blue-chip volatility to euro/dollar rates and US junk bonds . Among developed currencies, the Canadian dollar has hit near 13-year lows and the Norwegian crown is near its lowest in more than a year. Implied vols on both are at multi-month peaks.
Gulf currencies, pegged to the dollar, are under pressure too, with the Saudi riyal setting record lows in the one-year forward market.
Risk reversals - a gauge of demand for options betting on a currency rising or falling - also show growing bias for dollar strength versus most EM currencies.
One-month risk reversals on the rouble show bias towards the dollar hit six-week highs at the end of last week while dollar/rand reversals were at one-month highs.
Bearish bets on commodity currencies are however well off the peaks hit last August when the Chinese equity market slumped.
Rouble vols, for instance, were around 70 in early 2015 while rand vols remain off four-year highs hit last month after the sudden removal of a respected finance minister. Brazilian vols rose to around 20 last week but are nowhere near last September's levels around 30.
Indonesian rupiah vols inched up last week but have slipped back to mid-December lows. "Vol markets have not reacted massively to the latest leg down in oil markets and that's possibly because ... positioning is already very long vol," said Luis Costa, head of CEEMEA FX and debt strategy at Citi.
There may also be a sense of many currencies being fairly valued after last year's 20-30 per cent falls versus the dollar.
The rouble for instance has shed 2.2 per cent so far this year, far less than Brent's 12 per cent plunge. There is also little sign of panic-selling among the public - a factor that influenced central bank intervention in 2014. "There are arguments why the weakness may not be as acute as last year and that comes down to valuations," Bunning of HSBC said. "Second, the market is getting used to the idea that the yuan will trade with more volatility. Last August it was like a big bang, now the shock value is not there to the same degree."
Chinese regulator asks banks to cut wealth management yields: sources
China's banking regulator and main bond clearinghouse have asked commercial banks to reduce rates they offer on high-yielding wealth management products, five sources told Reuters, an apparent back-pedalling on commitments to let markets price credit.
PHOTO: REUTERS
[SHANGHAI] China's banking regulator and main bond clearinghouse have asked commercial banks to reduce rates they offer on high-yielding wealth management products, five sources told Reuters, an apparent back-pedalling on commitments to let markets price credit.
The beneficiaries of such a cut could be companies struggling with punishing debt loads as China's economy slows, who have often had to turn to the wealth management product (WMP) sector for funds, but at a cost of double-digit interest rates for capital borrowed for relatively short periods.
The move to suppress returns on the WMPs would both reduce the cost of capital for such firms, many of which are simply rolling over debt to stay afloat, and reduce their appeal to retail investors considering selling out of Chinese stock markets, which have had a turbulent start to 2016.
The sources said the regulator and clearinghouse did not specify any particular class of WMP in its guidance but wanted to lower yields across the board to control the scale of assets in this investment space.
The high level of indebtedness is of growing concern as Chinese policymakers try to bolster economic growth and financial stability at a time of high volatility in its currency and share markes.
Reuters reported on Tuesday that new non-performing loans (NPL) held by Chinese banks more than doubled in 2015 from the previous year.
WMPs, marketed by banks but often backed by third-party loans or other risky assets, continue to offer interest rates of up to 10 per cent or higher, even though domestic benchmark rates and bond yields have fallen sharply over the past year.
But in such a weak domestic economic environment, analysts have raised concerns that many of the assets underlying such products may be of poor quality, shifting default risks onto retail investors and directing more credit to low-quality firms.
Third-party data from CN Benefit, an independent research firm that tracks the wealth-management sector, found that WMPs were increasingly backed by bond and money market instruments in the second half of 2015, even as bond defaults have accelerated sharply over the past year.
Moreover, a recent Reuters analysis of exchange data found that a disproportionate percentage of new bond listings on the Shanghai exchange were issued by local government investment or infrastructure firms, a major source of China's existing nonperforming debt problem.
Nonetheless with stocks swooning, the real estate market still vulnerable and high-rated bond prices bid up to multi-year highs, WMPs are one of the few options left for domestic investors seeking high returns.
Retail investors also often assume that banks will stand behind such products, even when marketing materials indicate that they are not guaranteed.
The China Banking Regulatory Commission could not be reached for comment, while the Central Depository and Clearing Corporation declined to immediately comment.
HSBC is likely to stay based in London, Aberdeen's CEO says
HSBC Holdings Plc is likely to stay based in London rather than move its headquarters to Asia, according to Martin Gilbert, chief executive officer of one of the British bank's biggest shareholders.
PHOTO: AFP
[LONDON] HSBC Holdings Plc is likely to stay based in London rather than move its headquarters to Asia, according to Martin Gilbert, chief executive officer of one of the British bank's biggest shareholders.
"The logistics of moving their headquarters out of London are so vast," Gilbert, CEO of Aberdeen Asset Management Plc, said in an interview with Bloomberg Television on Tuesday. "I suspect much as they might want to move their headquarters, they will probably on balance stay here."
Gilbert said he had no knowledge of any choice being made by Europe's largest lender, but Aberdeen would back HSBC's board regardless of the decision. Aberdeen holds 2.3 per cent of HSBC's shares, making them the bank's sixth largest investor, according to data compiled by Bloomberg.
The bank, which generates most of its earnings in Asia, is weighing a move partly because of increasing taxes and some of the strictest banking regulations in the world. Among the criteria listed as part of its assessment are also economic growth and long-term stability.
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HSBC's board delayed a final decision on the headquarters last year, saying it required further information.
HSBC's weighing where to place its headquarters as Britain explores leaving the European Union. Prime Minister David Cameron is expected to hold a referendum by the end of the year.
Separately, Gilbert said that stopping the "stream" of new laws from the EU would be desirable and that a UK vote in favor of leaving the 28-nation bloc would be "inconvenient but would not be too disastrous."
