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Oil Speculators Can’t Dump Rally Bets Fast Enough Amid Glut

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  • Oil Speculators Can’t Dump Rally Bets Fast Enough Amid Glut

The bullish sentiment following OPEC’s deal is almost all gone.

Hedge funds haven’t been so skeptical on rising West Texas Intermediate crude prices since Nov. 29, the day before the cartel agreed to cut output, according to U.S. Commodity Futures Trading Commission data. Their net-long position, or the difference between bets on a price increase and wagers on a decline, has dropped 37 percent from a record touched last month as American crude production climbed, sending inventories to an all-time high.

“Things trend, and sentiment from the hedge funds has turned bearish,” Mike Wittner, head of commodities research at Societe Generale SA in New York, said by telephone. “People rushed into the market and their patience ran out, so they ran for the exits. They need a strong signal, and that will be U.S. stockpile draws, probably a few in a row, before they return.”

The net-long position on WTI dropped 9.8 percent in the week ended March 21, following a record fall in the previous week, according to the CFTC. WTI dipped 0.8 percent to $47.34 a barrel in the report week. The U.S. benchmark was trading down 0.3 percent at $47.85 as of 12:07 p.m. in Singapore on Monday.

“This is a market that’s very much on the defensive,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by telephone. “Although net length is greatly reduced, money managers still have a lot of net length. They still remain vulnerable to further price declines.”

The agreement between the Organization of Petroleum Exporting Countries and 11 non-OPEC producers to cut output for six months starting Jan. 1 helped spur a wave of buying. This optimism has crumbled with the resurgence of U.S. drilling rigs and mounting stockpiles in the world’s biggest crude consumer.

Market Fixation

U.S. crude stockpiles rose to 533.1 million barrels in the week ended March 17, the highest in weekly data going back to 1982, according to an Energy Information Administration data. Production climbed to 9.13 million barrels a day, the highest since February 2016. The nation’s active oil-rig count has more than doubled since May to 652 last week, according to Baker Hughes.

“The whole market is fixated on U.S. inventories,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $17.2 billion, said in an interview. “We should start to see them fall as early as early April. When we see that, prices will move back into the $50s.”

The net-long position fell by 28,197 futures and options to 260,577. Longs slipped 4 percent, while shorts advanced 13 percent.

Part of the glut in U.S. stockpiles stems from a surge in imports last month. Arrivals into the country reached the highest level in more than four years in the week ended Feb. 3 as barrels that were pumped before OPEC and its partners made cuts arrived at U.S. ports. These shipments will probably slip in the week’s ahead, according to Thummel.

Seasonal Shift

“Lower OPEC imports and the ending of refinery maintenance will reduce inventories eventually,” Thummel said.

U.S. refineries typically increase activity in April as they finish maintenance before the summer peak driving season. Crude processing volumes have increased in the second quarter in each year in EIA data going back to 1989.

“Rising inventories are temporary headwinds,” Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at U.S. Bank, which oversees $136 billion in assets, said by telephone. “We’re anticipating strong future demand growth, and with the summer driving season inventories will start to decline.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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US 2020 Election: Leading Organisations Donate Over $255m for Campaigns

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Top 1o Leading Organisations Donate Over $255m Towards US Election campaigns

Ten leading global business organisations have donated over $255 million towards the US 2020 election campaigns, according to recent data compiled by Buy Shares.

The data indicates that the top ten organisations contributed a combined $255.20 million towards the U.S elections campaign as of September 8, 2020.

The report also noted that the Democratic Party receives the largest donations at $135.59 million while the Republican Party followed with $119.61 million.

Across both parties, Uline Inc led with $40.09 million contributions towards the Republican Party campaign.

Other top donors towards the Republican Party include Blackstone Group ($31.97 million), American Action Network ($19.88 million), Las Vegas Sands ($14.06 million), and Adelson Clinic for Drug AbuseTreatment & Research ($13.59 million).

On the other hand, Fahr LLC is the largest contributor towards Democratic Party campaigns at $39.65 million. Other leading donors include Sixteen Thirty Fund ($34.33 million), Paloma Partners ($21.76 million), Senate Majority PAC ($21.41 million), and Carpenters & Joiners Union ($18.42 million).

According to the research report: “There is still debate if the organization’s donations influence politics. According to experts, successful companies usually bet their contributions towards the winning candidates. On the other hand, small firms are likely to back candidates who will lose. Political pundits argue that big companies are in a better position at foreseeing future events. To a large extent, the company’s usually support candidates or political parties that are likely to support their priorities. Additionally, in some incidents, stocks of companies that backed the winning candidate might rise after the election. The boost in stock prices tends to attract investors.”

Campaign contributions are used to cover the cost of travel, political consulting, and other the direct costs of communicating the party’s agenda.

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Mozambique LNG Project Could Be Transformational for Mozambique – If Western Environmentalists Don’t Interfere (By NJ Ayuk)

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Mozambique LNG Project Will Transform the Country

When Anadarko Petroleum Corp. confirmed last year it would be constructing a $20 billion liquified natural gas (LNG) plant in Mozambique, this was major news. Mozambique’s first onshore LNG plant would be creating tens of thousands of jobs – and contributing to sustainable, long-term economic growth that would impact millions of people.

Two additional LNG projects have been announced since then: the $4.7 billion Coral FLNG Project by ENI and ExxonMobil, and the $30 billion Rovuma LNG Project by ExxonMobil, ENI, and the China National Petroleum Corporation. While these two have been postponed by the COVID-19 pandemic, the original LNG Mozambique project has been moving forward.

French oil major Total acquired the project and finalized project funding in July, even in the face of recent terror attacks in northern Mozambique’s Cabo Delgado province, where Total’s LNG plant will be constructed.

That’s why it’s so disheartening to learn that a UK-based environmental group is pursuing actions that could jeopardize the project’s timely progression, all in the name of preventing climate change. Friends of the Earth has said it will initiate a legal challenge against the UK’s decision to provide $1 billion in funding for the Mozambique LNG project.

Never mind the project’s importance to everyday Africans. Never mind its potential to grow and diversify the economy. Never mind that projects like this are just what Mozambique needs to address its energy poverty, or that the Mozambique government has invested considerable time and resources into making this LNG project possible.

This is not the first time that not so well informed radical activist have attempted to interfere with Africa’s energy industry in ways that do not help poor Africans but serve their own interest. International organizations, including the World Bank, and private investors, under pressure by environmental groups, have been dropping support for African fossil fuel production. A lot of poor people are suffering from this and hundreds of millions more will if we to change direction.

I find it stunning that, during a time when much of the world is talking about the need to respect black perspectives, environmental groups seem to have no qualms about dismissing African voices.

As I’ve said in the past, I agree that climate change should be taken seriously. And I understand the risks it poses to Africa. The thing is, why are non-African organizations trying to dictate how African countries address those risks? The message in this case seems to be that “they know best.” That idea is insulting, and interfering with an African country’s efforts to build up its economy – simply because fossil fuels are involved – is completely unacceptable.

A ‘Missed Opportunity?’ Really?

UK Export Finance (UKEF) is one of eight export credit agencies to provide funding for Total’s Mozambique LNG project, which includes the construction of a two-train liquefaction plant with a capacity of 12.9 million tonnes per year.

UKEF’s $1 billion commitment includes awarding $300 million in loans to British companies working on the gas project and guaranteeing loans from commercial banks worth up to $850 million. The UK’s parliamentary under-secretary for the Department for International Trade, Graham Stuart, has pointed out that Total’s LNG project could be transformational for Mozambique and create 2,000 jobs in the UK as well.

But Friends of the Earth has said they will seek a judicial review into the UK government’s decision to help finance a project that, as they put it, will “worsen the climate emergency.” The group’s director, Jamie Peters, also expressed his disappointment in a letter to the UK government. The UKEF’s funding decision, Peters said, represents a “lost opportunity” for the UK to be a world climate leader.

My question to Mr. Peters is, what about Mozambique’s opportunities? To help everyday people improve their lives? To earn a decent living? To have a reliable source of energy? I’m talking about an opportunity to nudge the average life expectancy in Mozambique above 59 years, where it stands now.

The Mozambique LNG project is poised to make those things possible. As far as I’m concerned, losing that opportunity would devastating.

What Mozambique Stands to Gain

I can’t overstate the far-reaching implications and potential that Total’s Mozambique LNG project represents for local businesses, communities, and individuals.

Total estimates that its plant will generate about $50 billion in revenue for Mozambique’s government during its first 25 years in operation. That revenue can be directed toward much-needed infrastructure, educational programs, and economic diversification programs.

Consider direct foreign investment in Mozambique: Total’s US$25 billion investment in the LNG plant is more than twice Mozambique’s current GDP.

How about the plant construction project? Not only will it generate tens of thousands of local jobs, but it also will provide training opportunities for local people. Indigenous companies will be contracted to provide goods and services.

This pattern will continue once the plant is operational. Locals can train for and take a wide range of positions, including professional and leadership roles. Over time, subject matter experts who can share their knowledge in Mozambique, and with other African companies, will be cultivated. And, once again, the plant will be looking to local companies to provide products and services.

LNG Can ‘Em-power’ Mozambique

In addition to these far-reaching economic opportunities, the LNG produced at the plant will provide affordable energy for Mozambique.

The need is urgent. Only about 29% of the population has access to electricity today. Medical care is hindered. Education is impacted. And sustainable economic growth is an uphill climb.

Earlier this year, I praised the government of Mozambique for negotiating for part of the LNG production to be diverted to the domestic market, meaning it can be used for power generation. Since then, the government secured financing for a 400MW gas-fired power plant and transmission line to Maputo, the country’s capital, which will dramatically improve power reliability there.

By the way, when the Mozambique government ensured that some of the plant’s LNG production would be available for domestic use, it also laid the foundation for monetization and economic diversification. In Mozambique, LNG will be available to serve as feedstock for fertilizer and petrochemical plants. It can be exported by pipeline to neighboring companies. And that, in turn, can help Mozambique build even more infrastructure and contribute to even greater widespread prosperity.

Mozambique Has Been Working for This

I’d also like to point out the thought and preparation that the Mozambique government has put into making its natural gas operations beneficial for the country as a whole since approximately 180 trillion cubic feet of natural gas reserves were discovered there in 2010.

Mozambique’s national oil company, ENH, hired global energy research and consulting firm Wood Mackenzie to help it prepare for the responsibility of managing and selling its corresponding portion of the resources. Since then, ENH formed a consortium with international oil and gas trader, Vitol.

The government also has sought the support of more experienced energy producers and international partners. Earlier this year, President Filipe Nyusi met with Norway’s Crown Prince Haakon and signed an agreement for support on natural gas resource management.

But even before that, Mozambique laid the foundation for a successful oil and gas industry with the new Petroleum Law of 2014. And with that legislation in place, the country completed a successful bidding round for exploration blocks. These efforts, along with careful negotiations with international oil companies, is what brought Mozambique to where it is today: on the cusp of becoming a major LNG producer. And these efforts are what will make Mozambique’s LNG industry a success, not just in terms of government revenue, but also in improving the lives of everyday people.

We Must Put People First

Mozambique is not asking for aid to lift its people out of poverty. It’s attempting to capitalize on its own natural resources. The government isn’t trying to make a quick buck. It’s working to lay a foundation for long-term growth. And efforts like the Exxon and Total Mozambique Projects are more than an opportunity for international oil companies, or even Mozambique’s government. They have the potential to improve the lives of millions of everyday people.

I recognize the need to protect our planet and prevent climate change. But interfering with financing for Africa’s fossil fuel projects is not the right path. We must not dismiss the value of projects like these or their ability to make meaningful changes for the better in Mozambique. And we must not put environmental ideals ahead of the pressing needs that are facing people right now.

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Oil Rises to $43.76 Despite Falling Oil Demand

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Brent Crude Rises to $43.76 Per Barrel on Friday

Oil price extended its gain on Friday despite OPEC and other experts predicting a further decline in demand for the commodity.

The Brent crude oil, against which Nigerian oil is priced, rose from $39.44 per barrel on Tuesday to $43.76 per barrel on Friday before pulling back to $43.42 per barrel.

The oil surged after reports showed that US oil producers were shutting down due to hurricanes and also that crude oil inventories dropped by over 9 million barrels in the week ended September 11, 2020.

The commodity started its bullish run a day after OPEC lowered its demand outlook for the year through the first half of 2021, saying recovery without COVID-19 remained slow.

“Once again, OPEC+ meets against a worrying backdrop of soft global oil prices and an uncertain demand outlook,” Cailin Birch from The Economist Intelligence Unit told CNBC via email on Thursday.

“We maintain our view that Brent crude prices will average just over $42 a barrel in 2020, assuming that OPEC+ partners reconfirm their commitment to output cuts at their September meeting,” Birch said.

Another expert, Tim Bray, a senior portfolio manager at GuideStone Capital Management, through an email said “I do not believe we should expect any material change of course out of the OPEC meeting this week when they review market fundamentals, in part because compliance with previously agreed production cuts has been high,” Tim Bray, senior portfolio manager at GuideStone Capital Management, told CNBC via email.

“It might set the stage for action at future meetings, however,” Bray said.

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