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Remember, There Are Two Kinds Of Hawks That Live In Europe
For those following the euro, here's a quick reminder that there are two different species of " hawks" in the Eurozone.
Jean-Claude Trichet was sounding " hawkish" last week when he hinted that he could raise rates very soon. That sent the euro higher for the obvious reasons. Trichet is one kind of hawk.
Then there's a different kind of hawk embodied by Bundesbank chief Axel Weber. He also would like to hike rates, but he's also hawkish on the bailout mechanism, and some commentary from him today about not continuing the ECB's ongoing support for the periphery is sending yields sharply higher and the euro lower.
The euro's big run this year has been fueled by the fantasy that the ECB would get hawkish on rates, while staying dovish on debt monetization.
Today that fantasy scenario is being sharply called into question.
It's weird, but the actual fact is that london resistance tip at 6100 points for more upside...
One Key Emerging Market That's Certain To Get Slammed As Oil Prices March Higher
Even if the U.S. economy
remains resilient, that doesn't mean every economy in the world will be able to withstand the rise in oil prices.
South Korea is a notable target. Michael Chung of Citi has already lowered his KOSPI target for mid-year 2011 to 2050-2150 (right now, it's at 1996) as a result of Citi raising their crude price target to $105 for 2011. More worrying is that Chung predicts analysts will cut their earnings outlook for Korean firms by 6-7%.
Here's a full Korean market outlook from Michael Chung of Citi (emphasis ours):
Our overall universe earnings would decrease by 4% if oil price rises by 10% from $90, but the impact would accelerate if oil prices go up by an additional 10%. Based on discussions with managements, we believe most major companies in Korea are able to deal with oil prices up to $100 but, beyond that, they start to suffer on margins, especially SMEs. By sector, utilities would be hurt the most, followed by chemical, auto, and construction. The only sector showing a positive impact would be insurance and shipbuilding (for future rig orders instead of immediate earnings).
Don't miss: Why Bernanke thinks an oil price spike is no reason for a rate hike >
CHART OF THE DAY: A 110-Year Look At Bond Yields Shows Why We're At The Start Of A Huge New Bull Market
A provocative chart here from BofA/ML takes a look at US equities and bond yields 1900.
The gist is this: US equities have had several periods of sideways action (as seen in the red boxes) that ended when bond yields made a major turn in a different direction.
Right now, there's some belief that bond yields are on the upswing -- signaling a direction turn again -- and if that's true, then history suggests we break out of the red box sideways action in equities and head for a big rally in stocks.
10 Things You Need To Know Before The Opening Bell
Good morning. Here's what you need to know:
- Ivory Coast president Laurent Gbagbo has taken over the country's cocoa and coffee industries. The move comes as Gbagbo attempts to cling onto power against his elected rival. Cocoa prices have spiked as a result.
- Starbucks is bringing its instant coffee brand, Via, to the Chinese market in April. The company sees opportunity in the packaged goods space in China.
- Bonus: Emma Watson has dropped out of Brown University for the time-being, so she can focus on promoting Harry Potter and working on other films.
Two Charts Suggesting The US Economy Can Withstand The Oil Price Spike
If the current oil price spike has you frightened and of the belief that the U.S. economy could be crippled by the sharp rise, take a look at these two charts from Citi.
Steven Wieting of Citi argues that, unless North Africa and the Middle East takes another drastic turn, there is no reason for crude prices to go higher. And with U.S. supplies as high as they are, we may even escape this completely unharmed, though the summer driving season will be the real test.
With that in mind, take a look at this chart of the last employment recession from Citi. The spike didn't result in an economic downturn, it followed it, suggesting the causal relationship between WTI and the economy is not perfect.
Second, note the extremely high inventory of crude in the U.S. right now. They're significantly higher than when the oil price spiked in 2008, and suggest that should this crisis in the Middle East abate before the summer, there won't be a significant impact on the U.S. consumer during the all important driving season.
Don't miss: Why Bernanke doesn't think an oil price shock merits a rate hike >
NEWS HEADLINES
- The IPO launch of Hutchison Port Holdings Trust is seeing 'overwhelmingly enthusiastic' response, according to the Chairman of its trustee-manager Mr. Canning Fok.
- To improve the financial management of large public sector projects, those larger than S$500m in value have been subject to staged approvals for concept, design and implementation since June 2010, Second Minister for Finance Lim Hwee Hua said.
- Competition for listings is likely to intensify further for the SGX, with the Taiwan bourse now beefing up its efforts to woo Japanese listings.
- Neptune Orient Lines said its container shipping volumes for the six weeks to 11 Feb rose 5% YoY, helped by higher traffic on the intra-Asia and Asia-Europe routes.
- Mewah International is looking at Indonesia and China as potential sites for expansion as it expects demand for the commodity to outpace supply in the long term.
- Technics Oil & Gas announced that it has won two contracts worth a total of S$13.1m.
- ASJ Holdings said that it has discovered instances of missing and stolen inventory worth S$235k from its warehouse in Senai, Malaysia.
US markets fell on continued supply disruption concerns from Libya and Moody’s downgrade of Greece’s credit rating by 3 notches. Oil price pullback with Brent crude easing to USD115pbl on an unconfirmed report (source: Bloomberg) that Libya’s Qaddafi offered to step down in exchange for his safety.
The International Energy Agency estimates that the current crisis in Libya has cut global oil supply by about 1mil barrels per day, which is being compensated by the 700k barrels a day output increase from Saudi Arabia and 300k barrels a day output increase by the rest of the OPEC members. We continue to see the 3125 level as a likely cap to the current rebound, which appears still ongoing. A temporary rebound opportunity in oil sensitive stocks such as SIA that has been sold down heavily may even materialize if Qaddafi does relinquish power.
Weekly technical indicators for SIA are oversold with the 8-wk RSI reading 14.4 and the weekly stochastics at 13.8. Hyflux has emerged as the preferred bidder for Singapore’s 2nd desal plant on a design, build, own and operate basis over a 25-year concession, worth S$890m. This contract is a key growth driver for Hyflux since its expansion in the Middle East is delayed by the region’s turmoil. This new win has nearly doubled EPC orderbook from S$653m to S$1.27bn. We expect 25% of this contract’s EPC portion to be recognized in 4Q11 when construction begins and the balance over FY12/13. Earnings for FY11/12F raised by 35% and 168% post announcement target price revised up to S$2.47 (Prev S$ 2.01). Upgrade to Buy on renewed growth outlook and attractive price upside.
NOL said its container shipping volumes for the six weeks to Feb 11 rose 5% yoy, helped by higher traffic on the intra-Asia and Asia-Europe routes. NOL carried 321,600 forty-foot equivalent units (FEUs) during the six-week period, up from 307,400 FEUs a year ago. The average revenue per FEU increased 10% yoy to US$2,654 per FEU, helped by improved freight rates on major trade lanes, particularly the transpacific route.
City Developments has raised slightly the average price of its H20 Residences condo in Sengkang to about $920 psf over the weekend, from $910 psf initially when the project's preview began on Friday. The group has sold 150 of the 200 units released so far in the 99-year leasehold condo next to Layar LRT Station in Sengkang. H20 Residences comprises 521 apartments and a shop unit. In property news, Pine Grove is up for sale by public tender with an estimated reserve price of $1.7 bn. The Ulu Pandan HUDC estate can be redeveloped up to a height of 24-storeys and gross floor area of 1.8m sq ft. Based on estimates, developers would have to fork out $1,150 psf ppr for the land, which has been zoned for residential use. Far East Organization is understood to have bought Amber Glades enbloc site for $118.12m through a collective sale. The land cost works out to be $1066psf ppr. Located at the Junction of Amber Gardens and Amber Road, the property is a 40,917sf freehold site with a potential GFA of 114,568sf. We think that the price is reasonable and is comparable to the sale of Marine Point bought by capitaLand at $1,056psf ppr earlier this year. Based on our initial estimates, we reckon the breakeven cost of the project could come in at $1500- 1550psf. Based on the current market transactions of some newer projects in the area of around $1600-1700psf, we believe the group could rake in a margin of 10-15% on this
project.
Moody's Investor Services has downgraded Greece's debt rating even further below junk status amid worries that the bailed-out euro country will end up having to restructure its massive debts. The agency said yesterday that it is lowering its rating by three notches to B1 from Ba1.
Corporate News...
DBS. We met with DBS HK CEO, Mr Sebastian Paredes, yesterday, leaving us excited about the DBS HK franchise this year. DBS’s Asian franchise is a natural advantage for DBS to tap onto intra-Asia business trade flows coming out of China, and it is rightly positioned to take advantage of these flows ahead. The opportunity is there because of the internationalising of the RMB. If DBS HK executes properly, the Hong Kong franchise can turn out to be its valuable springboard into China, much more than it had been in the last decade. Maintain Outperform and target price of S$17.00.
Hyflux is named by PUB as the preferred bidder for Tuas seawater desalination plant, with project cost of the desalination plant and power plant at S$890m. Size of this contract was larger-than-expected (S$400m-S$450m) as a cogent plant was included in the design, build, own and operate (DBOO) award. We think the size of this contract win will excite the market, coming in a time when its shares are oversold in the aftermath of MENA unrest. Maintain Outperform, TP lifted to S$2.76.
Keppel Corp secured a US$195m jack-up contract from Mexican operator, Perforadora Central. The rig which will be based on the LeTourneau Super 116E design will be delivered in 1Q2013. YTD orders are around S$4.1bn or 55% of our S$7.5bn order-win target for 2011. Stock catalysts from announcements of more rig orders and production units. Maintain Outperform, TP of S$15.00.
Technics Oil & Gas has secured two contracts worth S$13.1m. The first involves contract engineering for supply of equipment for modification of a jack-up rig, while the second involves gas compressor packages for LNG Re-gasification project.
Trades of the Day...
Fundamentally:
S-Chips’ trading halts – good hand or bad hand? S-Chips, condemned to the “cold palace” last week, gained favour this week with a water treatment S-chip’s voluntary conditional offer from a private equity firm. When China Hongxing suspended trading of its shares on 25 Feb, the market reacted by fleeing to safety. In our report today, we highlight some S-Chips under our coverage which could be “safer” bets for investors and possible privatization candidates.
RBC On The US Dollar " At The Tipping Point"
RBC is out with a new technical note on the US dollar, noting that it stands on the precipice of breaking a major trend.
There are three big factors weighing on the greenback: Higher commodity prices, unfavorable spreads, and rising equity markets.
Here's their big-picture look at the state of the dollar.
China's Banks Are Now On A Short Leash As Government Does Everything To Crush Inflation
China has just put in place a new set of rules for how it decides the reserve requirements of its banks and, according to Societe Generale's Wei Yao, this is giving the People's Bank of China more flexibility in dealing with its inflation problem.
It may seem China let many of its smaller banks off the hook by first raising their reserve requirements, then cutting them. But actually this is all part of the PBoC's new micromanagement approach, utilizing DD-RRR, or Dynamically Differentiated Required Reserve Ratio, which allows it to set specific reserve rules for its banks and adjust them on a monthly basis.
This does not mean China has lost focus on the issue of inflation..
From Wei Yao:
However, this reversal of earlier extra RRR hikes doesn't mean the end of tightening, in our view. Liquidity conditions are still quite accommodative because of the massive bank lending over the past two years. Inflation pressures remain elevated with the PMI input price index and PPI still steadily on an upward trend. Any forward- looking central bank would not declare success so soon. And we believe China’s policy makers are getting more prudent, as inflation management is now the No.1 policy priority.
And while money growth is closer to the country's target of 16%, the inflation problem persists. The government's recent " state of the union" suggested we should expect more vigilance on inflation and Yao expects 3 more required reserve ratio hikes before the second half of 2011.
Don't miss: Fitich says China has a 60% chance of experiencing a banking crisis by 2013 >
Hey, What's Been Happening With The Baltic Dry Index Lately?
Oh, that's right. The measure of shipping rates has been rallying. No wonder nobody is talking about it.
The Myth Of The Exploding US Money Supply
In recent weeks some hyperinflationists have succumbed to the reality that QE2 isn’t really adding net new financial assets to the private sector – it is indeed just an asset swap. But this hasn’t stopped them from claiming that QE2 directly results in an exploding money supply. This convoluted thinking claims that QE is directly funding government spending (as if the US government would have stopped spending money and folded up shop without QE2). So now the theory is that QE is really resulting in excess of $1.5T in new money in the form of deficit spending. This is flawed for reasons I have previously explained, but let’s not theorize about the money supply – let’s allow the facts to speak for themselves.
Over the years many have been quick to cite the monetary base as the direct transmission mechanism that would lead to the great hyperinflation. We all know the story – the Fed’s balance sheet explodes, the monetary base shoots higher and money starts flowing out of bank vaults like a volcanic overflow. But regular readers are all too aware that the monetary base has no correlation with the broader money supply. The reasoning is simple – the money multiplier is a myth. So, it doesn’t matter how many apples (reserves) the Fed puts on the shelves. It doesn’t result in more apple sales (loans). Banks are never reserve constrained. The explosion in reserves and continuing decline in loans makes this crystal clear. The Fed can continue to stuff banks with reserves and unless we see a substantive increase in lending the expansion of the monetary base will continue to be insignificant.
But what about M2? Isn’t it also exploding higher now? Not really. In a recent article Erwan Mahe, an asset allocation and options strategist with OTCexgroup, posted this excellent chart comparing M2 growth across the big three economies. He said:
“As you can see in this graph, China literally allowed its money supply to skyrocket, compared to that of the U.S. or the eurozone, with annual growth averaging +17.4% between 1996 and 2008, which compares to +7.1% in the eurozone and +6.3% in the United States.
Above all, since the beginning of 2009, this divergence has actually widened, despite the Fed’s QEs and 0% interest rates, since Chinese M2 has been growing at 26.6% per annum (!), versus +3.5% in the U.S. and +2.3% in the eurozone.
So, I wonder, is Bernanke truly responsible for the hike in world commodity prices and the ensuing popular upheavals?”
The story here couldn’t be more self explanatory. The US M2 money supply is simply not expanding anywhere close to its historical rate. The only country where the M2 money supply is seeing any sort of substantive growth is in China. And so it’s not surprising to see the combination of commodity hungry China and enormous money supply growth result in higher commodity prices. While I don’t think it’s incorrect to blame some speculative aspect of this rally on the Fed it is entirely incorrect to blame the Fed for the commodity rally due to their “money printing”. The fact is, the USA is not expanding the money supply at an alarming rate. China controls their own money supply. If they desire to print money in order to maintain their flawed currency peg then that’s a policy only they can control. Blaming the Fed for China’s flawed monetary policy is not even remotely fair.
Although the USA stopped issuing M3 we can still measure M3 through various independent sources. Hyperinflationists are often quick to point out Shadow Stats when anyone cites the CPI. Ironically, according to their data the M3 money supply is still shrinking at an annualized rate:
So yes, the US government is running a massive $1.5T deficit, however, by any metric of money supply we can see that this is barely offsetting the continued de-leveraging that is occurring across the US economy. We are certain to see higher rates of inflation in 2011 (especially if oil prices surge higher), however, it is not an accurate portrayal of reality to conclude that the USA is “printing money” uncontrollably and flooding the world with dollars that will lead to hyperinflation. That is simply not the case and the data speaks for itself. At best, we are barely printing enough to offset the destruction of de-leveraging.
Nigeria will boost crude oil output if OPEC asks
By Joe Brock
ABUJA (Reuters) - Nigeria would increase its crude oil production if producer group OPEC requested higher output to cool soaring oil prices, state oil company NNPC said on Tuesday.
Oil prices last month rose to their highest point in more than two years as a brewing civil war in Libya cut out as much as two-thirds of the North African country's oil output, or 1 million barrels per day (bpd).
Nigeria's light, sweet crude oil is similar to the type of oil produced by Libya and would be a good replacement for European refiners, who are lacking adequate supplies because of the North African crisis.
" We will do whatever OPEC asks its members to do. Whatever is needed under OPEC directives," NNPC spokesman Levi Ajuonoma said. He said Nigeria had the spare capacity to increase its production if needed but did not state by how much.
Nigeria's oil ministry said last month its combined crude oil and condensate output was around 2.4 million bpd but it had production capacity of around 3 million bpd.
Kuwait's oil minister said on Tuesday OPEC was in talks to boost production for the first time in more than two years after the recent surge in oil prices on supply worries stemming from unrest in the Middle East.
Brent crude for April edged below $115 a barrel on Tuesday on expectations of a reduction in OPEC production. That's down about $6 from a February 24 peak of $119.79, the highest price since 2008, when it reached a record $147.50.
Libya rebels reject talks on Gaddafi exit
By Tom Pfeiffer
BENGHAZI, Libya (Reuters) - Rebels fighting to overthrow Muammar Gaddafi have rejected an offer from the Libyan leader to negotiate his exit even as they battled to hang on to early gains in the insurrection.
The frontline in east Libya was static on Tuesday, with forces loyal to Gaddafi and rebels manning defences in a stretch of barren coastline near oil terminals between the towns of Ras Lanuf and Bin Jawad, about 550 km east of Tripoli.
On the international front, Britain and France led a drive at the United Nations for a no-fly zone over Libya, a move that would prevent Gaddafi from unleashing air raids on rebel fighters and towns or from flying in reinforcements.
But the U.S. government resisted pressure from some U.S. lawmakers for direct intervention, saying it first wanted to figure out what military options could achieve in the oil-producing desert state.
The Libyan uprising is the bloodiest of a tide of pro-democracy protests against autocratic rulers and monarchs in North Africa and Middle East which has already seen the longtime leaders of Tunisia and Egypt dethroned this year.
The phenomenon has left the West struggling to formulate a new direction for a region that sits on vast reserves of oil and where stability was until now the political priority.
A spokesman for the rebel National Libyan Council said it had spurned an overture from Gaddafi's camp for talks on him relinquishing power.
" We are not negotiating with someone who spilt Libyan blood and continues to do so. Why would we trust the guy today?" spokesman Mustafa Gheriani told Reuters.
Al Jazeera television reported that the council said it may not pursue Gaddafi, who has ruled for 41 years, for crimes they accuse him of committing if he steps down.
Jadallah Azous Al-Talhi, a former prime minister, earlier appeared on state television to urge rebels to " give a chance to national dialogue to resolve this crisis."
It was impossible to discern if the offer from Gaddafi, who had earlier vowed victory or death, was sincere or a tactic to play for time and confuse rebel strategists.
The rebel army -- a rag-tag outfit largely made up of young, enthusiastic volunteers and military defectors -- made swift gains in the first week of the uprising which saw them take control of the east and challenge the government near Tripoli.
But their momentum appears to have stalled as Gaddafi's troops pushed back using war planes, tanks and heavy weapons.
Gaddafi now appears to be tightening his grip in the capital and the movements of foreign correspondents' there have been restricted.
TANKS DUG IN
Rebels had said on Monday Gaddafi's forces dug in their tanks outside the town of Bin Jawad after recapturing it, while rebels retreated to Ras Lanuf and set up their forward checkpoint just outside the oil town. The two towns are about 60 km apart.
A rebel source said he had reports that Gaddafi's forces launched an air strike on Tuesday on Ras Lanuf.
" Our last checkpoint is still in the same place. We've launched some forward attacks though. Es Sider is in our control. Gaddafi's forces haven't moved either," rebel fighter Hussam al-Rammahi told Reuters.
Es Sider, like other towns along the Mediterranean coast such as Ras Lanuf, Zueitina and Brega, has an oil terminal.
In the rebel-held city of Misrata, between Tripoli and the eastern frontline, the wounded were treated on hospital floors because of a shortage of medical facilities, a resident said.
Misrata is the biggest city in the west not under Gaddafi's control and its stand against a militia commanded by his own son has turned it into a symbol of defiance.
Zawiyah, just 50 km from Tripoli, was in rebel hands but came artillery bombardment on Tuesday as government forces encircled the town, Al Jazeera said.
One of Gaddafi's sons, Saadi, said in an interview with Al Arabiya television his father had not yet thrown his army into full battle against the rebels.
" The tribes are all armed, there are forces from the Libyan army and the eastern region is armed. The situation is not like Tunisia or Egypt," said Saadi, an ex-professional footballer in Italy.
PEOPLE ARE DYING
U.N. aid coordinator Valerie Amos said the fighting across Libya meant that more than a million people fleeing or inside the country needed humanitarian aid.
" Humanitarian organisations need urgent access now," she said. " People are injured and dying and need help immediately." The United Nations appealed for $160 million (98 million pounds) for an operation over the next months to prepare shelter, food and medicine.
British Foreign Secretary William Hague said London was talking to its allies on a resolution for a no-fly zone, including an " appropriate legal basis." A French source said France also was working on such an initiative.
The Arab League and several Gulf states have also called for a no-fly zone, important support given suspicions in the Muslim world about Western intentions following the U.S.-led interventions in Iraq and Afghanistan.
U.S. Defence Secretary Robert Gates said action should be taken only with international backing. The White House said all options were on the table, including arming rebels.
Russia, a permanent member of the U.N. Security Council with veto powers, said it opposed foreign military intervention.
The Libyan government says it is fighting against al Qaeda terrorists and maintains its security forces have targeted only armed individuals attacking state institutions and depots.
Shipping sources said the fighting had closed the Ras Lanuf terminal and the oil port of Brega. Brent crude prices rose above $118 a barrel on Monday before falling back to $115 and U.S. prices pushed to their highest level since September 2008.
Youcef Yousfi, president of the Organisation of Petroleum Exporting Countries, said there were no plans for a crisis meeting of the group and high prices were short term.
(Additional reporting by Michael Georgy in Tripoli, Alexander Dziadosz in Ajdabiya, Mohammed Abbas in Ras Lanuf, Stefano Ambrogi in London, Writing by Angus MacSwan: Eediting by Giles Elgood)
HK stocks jump on HSBC, energy Shanghai firm
Center of Hong Kong
HONG KONG, March 8 (Reuters) - Hong Kong stocks finished higher on Tuesday as a late jump in heavyweight HSBC built on an earlier rally in energy counters, lifting the benchmark up 1.7 percent.
The Hang Seng Index ended at 23,711.7 while the China Enterprises Index advanced 1.3 percent.
The Shanghai Composite recouped earlier losses to close slightly higher on the day.
HIGHLIGHTS:
* HSBC Holdings arrested its two-week slide from the highest level in over a year as a late rally saw its shares rise 2.3 percent, providing the biggest boost to the benchmark.
* Energy shares continued their strong run on the back of high oil prices led by Sinopec, which rose 3.6 percent, and PetroChina, up 1.8 percent, on healthy volume.
* Two sources told Reuters that China had reversed punitive increases of required reserves for certain banks because they had been more cautious in issuing loans in February. They said the change was part of China's " dynamic differentiated required reserve ratio" system.
DAY AHEAD:
China's trade and inflation data expected later this week will be foremost on market players' minds. Inflation is expected to ease as measures to curb prices take hold but rising oil and commodity prices could still prompt further tightening. (Reporting by Vikram Subhedar Editing by Jacqueline Wong) (vikram.subhedar@thomsonreuters.com +852 2843 6975 Reuters Messaging: vikram.subhedar.reuters.com@reuters.net))
Neste Oil Bio-Diesel Singapore
Neste Oil has opened the world’s biggest renewable diesel plant in Singapore, taking advantage of massive palm oil production in nearby Malaysia and Indonesia.
“Asia in the next five years is not going to be a big market for us,” Neste Oil Corp president and chief executive Matti Lievonen said at the plant’s opening.
With an annual capacity of 800,000 metric tons, the Singapore facility is the biggest renewable diesel plant in the world, Neste Oil said.
Neste Oil has been selected for inclusion in the Global 100 list of the world’s most sustainable companies for the fifth year in succession. The company is now ranked 20th, compared to 85th in 2010. The list is based on an analysis of 3,000 listed companies in different sectors from 22 countries.
The Global 100 list is coordinated by Corporate Knights – working together with Inflection Point Capital Management, Legg Mason’s Global Currents Investment Management, and Phoenix Global Advisors LLC – and is published annually at the World Economic Forum in Davos.
Clean diesel produced from the 550 million-euro ($769 million) plant using feedstocks such as palm oil and animal fat will be marketed in Europe, Canada and the United States, which already have legislation in place supporting biofuels.
The plant produces Neste Oil’s patented NExBTL renewable diesel, which the company says is the cleanest diesel fuel in the world, although it is more expensive than conventional diesel.
NExBTL can be used in all diesel engines and significantly reduces exhaust emissions compared with regular diesel, the company says.
About 45 percent of the facility’s feedstock is currently palm oil from neighboring Malaysia and Indonesia, while the rest comes from other by-products of the palm oil production process and waste animal fat from Australia and New Zealand.
The palm oil industry in both Malaysia and Indonesia has come under pressure from environmental campaigners who believe it causes deforestation and threatens species such as orangutans and rhinos.
Neste Oil said that its Singapore plant had obtained an International Sustainability and Carbon Certification (ISCC) certificate from Germany, guaranteeing that it has met tough environment standards.
Lievonen said the firm had earmarked 80 percent of its research and development for finding ways to produce clean diesel from other feedstocks like algae and microbes.
Algae will not compete for fresh water or land because production plants can be built on wasteland and the algae can be grown in seawater, said the company, adding that research was still in its early stages.
Neste Oil Share on the Nordic Exchange, Helsinki
there is no much worry to oil price though. countries can depend on their reserve ratio to hedge present price. I believe the drop would be some form of profit taking. April contracts? suppose western countries start work liao
CNN reports gadafi in talks with oppositions on exit deal. Opec looking into boosting oil outputs.
Oil Drops First Time in Three Days Goldman Raises Brent Outlook
March 8 (Bloomberg) -- Oil fell for the first time in three days as speculation that fighting may subside in Libya eased concern supply cuts will spread through the Middle East.
Crude slid as much as 2 percent after al-Jazeera reported an offer by Libya’s Muammar Qaddafi to relinquish power. The Organization of Petroleum Exporting Countries has made up for supply cuts in the North African country, Qatar’s oil minister said today. Goldman Sachs Group Inc. increased its second- quarter Brent price forecast to $105 a barrel as OPEC spare capacity shrinks amid the disruptions.
Oil Drops First Time Three Days
“There’s a sense in the market that the civil unrest will ease and oil will probably collapse,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. Prices may slip to $85 a barrel should the market start focusing on rising U.S. inventories, he said.
Crude for April delivery fell as much as $2.11 to $103.33 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.02 at 4:25 p.m. Singapore time. Yesterday, the contract settled at $105.44, the highest since Sept. 26, 2008. Prices are up 27 percent from a year ago.
Brent crude for April settlement tumbled as much as $2.25, or 2 percent, to $112.79 a barrel on the London-based ICE Futures Europe exchange. The spread between the European benchmark and New York-traded West Texas Intermediate was at $10.04 a barrel from $9.60 yesterday.
Goldman Forecast
Goldman Sachs raised its outlook for both Brent and WTI crude by $4.50 a barrel on estimates that spare capacity in OPEC has dropped below 2 million barrels a day, according to a report dated March 7.
OPEC members and producers outside the group have made up for the reduction in shipments from Libya, Qatari Oil Minister Mohammed Saleh al Sada said today. “There was hardly any effect” on supply because of the Libyan unrest, he said at a conference in Doha.
Violence has cut output in Libya by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.59 million barrels a day in January, Bloomberg News estimates show.
Technical indicators showed New York oil futures were “overbought” for a sixth day. Crude’s 14-day relative strength index was at 72.1 from 77.6 yesterday, Bloomberg data showed. A reading of 70 typically indicates prices are set to retreat, while 30 suggests they may rise.
“Prices are really too high, too overbought and too susceptible to a sell-off to buy,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in a note.
Offer Rejected
The interim rebel council in Libya rejected Qaddafi’s offer, al-Jazeera reported, without saying how it obtained the information. Libyan government warplanes repeatedly bombed rebel positions near the oil hub of Ras Lanuf yesterday.
Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, OPEC’s biggest producer, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
The turmoil, which has pushed Brent close to $120 a barrel, has driven holdings of the European benchmark grade to the lowest level in five months relative to New York oil futures.
Open Interest
The ratio of open interest, the number of contracts that haven’t been closed or delivered, in Brent to those for WTI tumbled to 55 percent on March 2, the lowest level since Sept. 22, according to data compiled by Bloomberg. It was 66 percent as recently as Jan. 21.
Oil climbed to a record $147.27 a barrel on July 11, 2008, before plunging 78 percent in the next five months to a low of $32.40 as the financial crisis unfolded.
The prices of oil products have surged amid the Libyan unrest. Gasoline advanced 11 percent on the New York Mercantile Exchange last week. Futures for April delivery dropped today, sliding as much as 0.7 percent to $2.9828 a gallon.
An Energy Department report tomorrow will probably show U.S. gasoline inventories dropped 2 million barrels from 234.7 million, according to a Bloomberg News survey of analysts. It will be a third week of declines.
The report due out at 10:30 a.m. Washington time tomorrow may show U.S. crude inventories rose 1 million barrels last week. Stockpiles increased in six of the last seven weeks. The industry-funded American Petroleum Institute will publish its own data today.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
