- Wholesale Prices in U.S. Rose More Than Forecast in September
Wholesale prices in the U.S. rose by more than projected in September, helped by higher costs for energy and food and indicating inflation may be picking up.
The producer-price index increased 0.3 percent, the first gain in three months, after being little changed in August, a Labor Department report showed Friday. The median forecast of economists called for a 0.2 percent gain.
More stable commodity costs and a diminishing effect from last year’s surge in the dollar are allowing for more price pressures in the production pipeline. Federal Reserve officials are watching for consumer inflation to make sustained progress toward their 2 percent annual target as they consider raising interest rates by year-end.
Separately, the Commerce Department reported that retail sales rose 0.6 percent in September from the previous month.
Projections for producer prices ranged from an advance of 0.1 percent to 0.4 percent, according to the Bloomberg survey.
From a year earlier, producer prices increased 0.7 percent, the most since December 2014, after being little changed in the prior 12-month period. Energy costs rose 2.5 percent from the prior month, and food prices showed a 0.5 percent gain.
Excluding food and energy, wholesale prices climbed 0.2 percent from the previous month following a 0.1 percent rise. Those costs rose 1.2 percent from September 2015.
Taking out food and energy and also eliminating trade services, producer costs rose 0.3 percent for a second month. Some economists prefer this reading because it strips out the most volatile components of PPI. Compared with a year earlier, this core measure was up 1.5 percent, the biggest increase since November 2014.
One key takeaway from the report was the change in health care prices that are used to calculate the Commerce Department’s consumer spending inflation index, the Fed’s preferred price measure.
Those costs rose 0.1 percent in September from the prior month, before adjusting for seasonal variations, and were up 1.6 percent from a year earlier. In August, they rose 0.4 percent from the previous month.
The producer price gauge is one of three monthly inflation reports released by the Labor Department, the other two being import costs and consumer prices.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
Unlocking Investments into Africa’s Renewable Energy Market
The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT.
The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.
Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.
In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.
Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustainable energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.
The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.
Shell Signs Agreement To Sell Permian Interest For $9.5B to ConocoPhillips
Shell Enterprises LLC, a subsidiary of Royal Dutch Shell plc, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.
“After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition,” said Wael Sawan, Upstream Director. “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions.”
Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.
The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.
Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.
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