This winter could be a bleak one for Amer- ica’s natural gas exporters as the fastest- growing buyer of the fuel threatens to halt purchases amid an escalating trade war. PetroChina, a unit of the state-owned China National Petroleum Corp, may suspend its buy- ing of US liquefi ed natural gas cargoes during the colder months, just as new American LNG ter- minals start up. The move could force gas sup- pliers like Cheniere Energy Inc to cut prices as they seek to lure other buyers during the heating season, when demand peaks. While US LNG companies make the bulk of their money from long-term contracts, Cheniere last winter reaped big earnings from the spot market, which saw Asian prices climb to three-year highs amid booming consumption in China. But with China eyeing a 25% tariff on US LNG, Cheniere and other US LNG traders may have no choice but to sell spot volumes at a discount, Jason Gabelman, vice president at Cowen and Company LLC, said by telephone on Monday. Cheniere didn’t immediately respond to a re- quest for comment. The “US is probably going to have more spot LNG available than it would have had otherwise if it had been selling into the Chi- nese market,” Gabelman said. Other buyers in Asia may look to take advan- tage of low-cost US gas. Cheniere announced August 10 a binding 25-year contract with Taiwan’s state-owned CPC Corp beginning in 2021. “If you’re selling gas in the spot market, you need to fi nd a new place” for cargoes that would have gone to China, said Nikos Tsafos, a senior fellow at the energy and national security pro- gramme at the Center for Strategic and Interna- tional Studies in Washington.

LONDON (Reuters) – Clouds are gathering over the outlook for the oil market, as trade tensions and rising crude supply threaten to swamp demand growth, but some of the world’s most prominent energy investors are convinced the price will return to record highs.

The escalating trade war between the United States and China threatens global growth. The physical markets are already showing signs of strain as unwanted crude builds on ships and crushes prices for cargoes of oil. [CRU/E] [CRU/WAF] [CRU/MED]

Aside from that, interest rates around the world are rising and the dollar is strengthening, which means emerging market oil buyers are seeing their import bill growing almost daily.

Both OPEC and the International Energy Agency have warned about the risk of trade disputes to global demand growth in their most recent monthly market outlooks. [IEA/M] [OPEC/M]

Funds have cut their bullish bets on Brent and U.S. crude futures and options to their lowest in almost a year. [CFTC/] [O/ICE]

Despite all this, prominent hedge funds such as Andurand Capital and Westbeck Capital are betting oil could skyrocket to $150 a barrel from around $75 now LCOc1.

The main driver is expected to be upcoming U.S. sanctions on Iran’s energy sector, which kick in November.

“Our view is that by November 4, we will have lost between 1.3 and 1.4 million barrels (of output) a day. It is a very big number. That’s based on the view that the U.S. will allow a few temporary exception waivers …. Ultimately, we could see losses from Iran exceed 2 million barrels a day,” Jean-Louis Le Mee, chief executive officer of London-based Westbeck, said.

(GRAPHIC: Major forecasters’ estimates of oil demand growth in 2018 – reut.rs/2vIs2Xp)

U.S. President Donald Trump in May walked away from a 2015 nuclear deal between world powers and Tehran that he said was one-sided in Iran’s favour.

Trump has also blamed OPEC for the 45-percent rise in oil prices over the last 12 months and, in June, exchanged sharp words with Iran on the subject.

Pierre Andurand, who runs the $1.2-billion Andurand Commodities Fund and predicted the rise and subsequent crash in the oil price in 2008, responded on Twitter by pointing out OPEC’s spare capacity was at its lowest ever. “There is going to be a real issue,” he wrote, predicting prices above $150 per barrel within two years.

“We don’t sense a great deal of engagement yet from generalist investors. A few of them are starting to look at it now,” Will Smith, Westbeck chief investment officer said.

“This is going to catch everybody by surprise. Some of the specialists are bullish – including Pierre (Andurand), ourselves and Energy Aspects,” he said.

Aside from the risk to Iranian supply, Venezuela’s crude production, which has already collapsed as a result of economic crisis, could fall below 1 million barrels per day (bpd) by the end of the year, compared with 2 million bpd in mid-2017, Smith said.

Andurand Capital declined to comment.

Taking a contrarian view can be costly. Even Andurand took a hit in 2017 when he expected the oil price to rally sharply and, instead, it wallowed around the $50 mark.

And he wasn’t alone. A number of long-time oil investors such as U.S. commodity fund manager Andy Hall were reportedly so badly burned they shut up shop and bowed out.

Westbeck’s Energy Opportunity Fund is up 4.1 percent in the year to July 13, showed an investor presentation shared with Reuters. Andurand’s commodities fund is up 12 percent in the first six months of 2018, according to data compiled by HSBC.

The oil options market shows that, for contracts from October 2018 to December 2020, traders and investors are holding more contracts to buy crude futures – or calls – at $100 a barrel than any other.

However, in line with Westbeck’s view that $150 oil is not one that is widely shared in the investment community, that position has barely changed in the last month, having dropped by a mere 1,500 lots to just over 107,000 lots, equivalent to 100 million barrels of oil.

(GRAPHIC: Brent crude oil investors bulk up on bearish sell options – reut.rs/2P9dAQA)

By contrast, in the last month, the largest change in holdings, or open interest, has materialised in contracts to sell oil – or puts – at $60 to $65 a barrel between October 2018 and December 2020. This position has grown by nearly 45,000 lots to 140,000 lots, or 140 million barrels of oil.

A month ago, the amount of open interest in calls maturing in this time period outnumbered that of puts by nearly three to one. This ratio is now down to two to one.

“If we are right about oil going from $75 to $150 over the next 12 to 18 months, out-of-the-money oil options, further down the curve … look very exciting. The pay back there is just fantastic if we are right,” Westbeck’s Smith said.

ROME (Reuters) – The economic spokesman of Italy’s ruling League party warned on Monday that unless the European Central Bank offers a guarantee to cap yield spreads in the euro zone, the euro will collapse.

“The situation can’t be resolved, and it is going to explode,” Claudio Borghi told Reuters after Italian, Spanish and Portuguese government bond yields rose in the wake of the financial turmoil in Turkish markets.

Borghi said the ECB should guarantee that yield spreads between euro zone government bonds not exceed a certain level, suggesting 150 basis points between the yields of any two sovereign bonds as a reasonable maximum.

The extra yield that investors demand for holding Italian bonds over top-rated German ones rose to its highest since late May earlier on Monday, briefly rising above 280 basis points before easing back to around 275.

A former trader and managing director at Deutsche Bank, Borghi said he expected those now selling peripheral euro zone debt would “end up losing out” because sooner or later the ECB would be forced to issue the guarantee he is calling for.

He said the fact that contagion from Turkey was pushing up yields in several euro zone countries showed that Italy’s domestic political and economic situation was not the main reason for market pressure on its stocks and bonds in recent days.

Safe-haven German Bund yields fell to a one-month low, but Spanish and Portuguese bond yields were dragged higher by their Italian peers and the broader sentiment going against market assets seen as carrying greater risk.

Italy’s 10-year yield at one point reached a two-month high at 3.109 percent, heading towards levels seen in late May when a political crisis triggered a huge sell-off in Italian debt.

The right-wing League has governed since June with the anti-establishment 5-Star Movement, eventually forming a coalition among former rivals following an inconclusive March election.

Ahead of the election, the League had called for Italy to exit the euro, but since forging its alliance with 5-Star it has repeatedly denied any suggestion that it is planning to orchestrate Italy’s exit from the single currency.

Bloomberg New York General Electric Co is working with bankers on a possible sale of its power-conversion business, people familiar with the matter said, as the fallen manufacturer attempts to regain its footing by slimming down. The unit formerly known as Converteam could fetch about $1.5bn, below the $3.2bn GE paid for the assets in 2011, said the people, who asked not to be identified as the matter isn’t public. Credit Suisse Group AG is working with GE on the sale process, which could begin as soon as next month and isn’t guaranteed to lead to a transaction, the people said. The advisers are likely to approach private equity firms and companies such as Caterpillar Inc, Schneider Electric SE and ABB Ltd, the people said. GE will consider all options and could opt to keep the business, which is known for making oil-rig motors. Representatives of GE, Credit Suisse, Schneider and ABB declined to comment. Representatives for Caterpillar didn’t respond to requests for comment. A deal would deepen GE chief executive off icer John Flannery’s eff orts to streamline the conglomerate, which is reeling from cash-flow challenges and a power-market slump. He has already agreed to unload the century-old locomotive business, while also promising to spin off the health unit and sell GE’s majority stake in oilfield-equipment maker Baker Hughes. GE fell 26% this year through Thursday, following a 45% plunge in 2017. The slump, which has wiped out $167bn in investor wealth since the beginning of last year, prompted GE’s recent expulsion from the Dow Jones Industrial Average. The power-conversion unit builds motors, generators and automation controls for industries such as marine transportation and oil and gas. A sale would further unwind the sprawling version of GE pushed by former CEO Jeff rey Immelt, who stepped down last year. During his 16-year tenure, Immelt built a sizeable oil equipment business, started a digital division, expanded the health unit and bought power assets such as Converteam — all of which are being divested or shrunk under Flannery. While GE is keeping its power, renewable energy and aviation divisions under Flannery’s recovery plan, the CEO is still looking to prune unwanted pieces. The company agreed in June to sell its industrial gas- engine business to Advent International for $3.25bn.

German Economy Minister Peter Altmaier has sharply criticised US President Donald Trump’s tariffs and sanctions policies, saying such measures were destroying jobs and growth and that Europe would not bow to US pressure regarding Iran.
The United States has triggered a bitter tit-for-tat trade dispute with import tariffs meant to protect American jobs against what Trump calls unfair trade practices from China, Europe and other countries.
Trump’s determination to push ahead with sanctions on Tehran which also target European companies doing business with Iran has opened another battle front.
“This trade war is slowing down and destroying economic growth — and it creates new uncertainties,” Altmaier told Bild am Sonntag newspaper, adding that consumers suffered the most because higher tariffs were driving up prices.
Altmaier lauded the agreement reached by European Commission President Jean-Claude Juncker during negotiations with Trump last month, saying the interim deal had saved hundreds of thousands of jobs in Europe.
The US and the European Union are embroiled in a spat after Trump imposed tariffs on aluminium and steel imports and Brussels responded with retaliatory tariffs on some US goods.
Trump had also threatened to impose tariffs on EU auto imports but reached an agreement to hold off on taking action after meeting with Juncker at the White House last month.
“The agreement between the EU and US can only be a first step. Our goal is a global trade order with lower tariffs, less protectionism and open markets,” Altmaier said.
Turning to the US sanctions against Iran, the minister said Germany and its EU allies would continue to support companies doing business with Iran despite US pressure.
“We won’t let Washington dictate us with whom we can do business and we therefore stick to the Vienna Nuclear Agreement so that Iran cannot build atomic weapons,” Altmaier said.
German companies should be allowed to continue to invest in Iran as much as they want and the German government is looking for ways together with its European allies to ensure that financial transactions could still take place, he added.
Several European companies have suspended plans to invest in Iran in light of the US sanctions, including oil major Total as well as carmakers PSA, Renault and Daimler.
German business associations have warned that companies are increasingly suffering from Trump’s sanctions policies — including those against Iran — as well as the tariffs he is imposing in the escalating trade conflict with China.
The trade and sanctions disputes are clouding the growth outlook for Germany, Europe’s largest economy, but Altmaier said he nonetheless expected strong growth this year due to vibrant domestic demand, record-high employment and rising wages.
The Federal Statistics Office will publish preliminary gross domestic product figures for the second quarter on Tuesday, with analysts expecting the quarterly growth rate to pick up to 0.4% after 0.3% in the first quarter.

Talks in the port city of Aktau should help ease tensions in a militarised region where the legal limbo has scuppered lucrative projects and strained relations among nations along the Caspian’s 7,000-kilometre (4,350-mile) shoreline.

The Kremlin said the convention keeps most of the sea in shared use but divides up the seabed and underground resources.

It does not allow military bases from any other countries to be sited on the Caspian.

‘Once a frontier oil province’

Sunday’s summit is the fifth of its kind since 2002 but there have been more than 50 lower-level meetings since the Soviet breakup spawned four new countries on the shores of the Caspian.

The deal will settle a long-lasting dispute on whether the Caspian is a sea or a lake—which means it falls under different international laws.

The draft agreement, briefly made public on a Russian government portal in June, refers to the Caspian as a sea but the provisions give it “a special legal status”, Russian deputy foreign minister Grigory Karasin told Kommersant daily.

It is the Caspian’s vast hydrocarbon reserves—estimated at around 50 billion barrels of oil and just under 300 trillion cubic feet (8.4 trillion cubic metres) of natural gas in proved and probable reserves—that have made a deal both vital and complex to achieve.

“Disputes arose when the Caspian was a frontier oil province,” said John Roberts, a non-resident senior fellow at Atlantic Council’s Eurasia Center, while it is “now well established, with major fields approaching peak… production.”

‘Expand cooperation’

Any deal will “expand the field for multilateral cooperation” between the five states, said Ilham Shaban, who heads the Caspian Barrel thinktank.

But some are likely to view it as more of a breakthrough than others.

Energy-rich but isolated Turkmenistan is particularly excited and President Gurganguly Berdymukahmedov has called for annual Caspian Sea Day celebrations from Sunday onwards.

Turkmenistan could benefit from a concession allowing the construction of underwater pipelines, which were previously blocked by the other states.

Nevertheless, analysts caution that Turkmenistan’s long-held plan to send gas through a trans-Caspian pipeline to markets in Europe via Azerbaijan is not necessarily closer to becoming reality.

The plan was previously opposed by Russia and Iran, which could still attempt to block the pipeline—valued at up to $5 billion—on environmental grounds.

“A deal in Aktau is not a legal prerequisite for the construction of the Trans-Caspian Pipeline,” said Kate Mallinson, Associate Fellow for the Russia and Eurasia Programme at Chatham House.

“Neither will a major transport corridor to export Turkmen gas to Europe emerge overnight.”

Kudos and caviar

As previous exclusive arbiters of Caspian agreements, Russia and Iran could be seen as the new deal’s biggest losers.

But while Moscow has ceded ground on underwater pipelines “it gains political kudos for breaking a log-jam,” enhancing its image as diplomatic dealmaker, said Roberts of the Eurasia Center.

Russia will welcome the clause barring third countries from having military bases on the Caspian, underscoring its military dominance there, said Shaban of Caspian Barrel.

Iran gets the smallest share of the Caspian spoils under the new deal, but could take advantage of new legal clarity to engage in joint hydrocarbons ventures with Azerbaijan.

In the past Tehran has resorted to hostile naval manoeuvres to defend its claims to contested territory.

Beyond military and economic questions, the agreement also offers hope for the Caspian’s ecological diversity.

Reportedly depleted stocks of the beluga sturgeon, whose eggs are prized globally as caviar, may now grow thanks to “a clear common regime for the waters of the Central Caspian,” Roberts said.

The deal could result “not only in stricter quotas for sturgeon fishing, but in stricter enforcement of these quotas,” he added.

La banque investit également lourdement en Asie pour accélérer sa croissance.

President Donald Trump ordered the doubling of steel and aluminium tariffs against Turkey, roiling global markets as relations between the Nato allies hit a new low.
Trump announced the decision in a tweet yesterday morning following a defiantly nationalist speech yesterday by Turkish President Recep Tayyip Erdogan in which he vowed that his country wouldn’t bow to “economic warfare.” Tensions have intensified in recent weeks over Turkey’s detention of an American evangelical pastor.
“I have just authorised a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!” Trump said on Twitter.
Heightening the tension of the day, Erdogan conferred by phone yesterday with US adversary Russian President Vladimir Putin on economic ties, Turkish and Russian media reported.
A US deadline for Turkey to release Pastor Andrew Brunson lapsed less than two days ago, according to an administration official with knowledge of the ultimatum.
The deadline — which had been set for 6 p.m. on August 8 — came just hours after Turkish officials met with counterparts at the State Department and Treasury Department in Washington to try to resolve the dispute.
The clash reverberated across global markets as Turkey’s economic crisis threatened to spread. The S&P 500 Index erased a weekly advance, European and emerging-market equities slid more than 1% and the 10-year Treasury yield slid to 2.90%. The euro sank as much as 1% to the weakest in more than a year, extending a drop triggered earlier by a Financial Times report that the European Central Bank raised concerns about banks’ exposure to Turkey.
Turkey is seeking to stanch an economic meltdown amid fallout from US sanctions imposed last week over the continued detention of Brunson, who was jailed on espionage and terrorism allegations more than two years ago and recently released to house arrest.
The US was Turkey’s fourth largest trading partner last year with $21bn in commerce, behind Germany, China and Russia.
Shares of Turkish steelmakers Kardemir Karabuk Demir Celik Sanayi ve Ticaret AS and Eregli Demir ve Celik Fabrikalari TAS plunged as much as 8% and 9.9%, respectively, after Trump’s tweet. Shares of the bank Turkiye Is Bankasi AS fell 8.7%, more than any full-day drop since 2013.
Steel was Turkey’s fourth-largest export last year, valued at $11.5bn and accounting for about 7% of total exports, according to the country’s Steel Exporters’ Association. Turkey ranks as the world’s sixth-biggest steel producer.
While the US was the top destination for Turkish steel exports last year, it tumbled to third place in the first half of this year as earlier tariffs diminished the trade.
The move against Erdogan’s government also highlights the disconnect between Turkey and the US as they fail to negotiate their way out of an array of conflicts.
Relations used to be based on strategic interests, but more recently they’ve been dominated by discord over alliances in Syria’s civil war, Ankara’s strengthening ties with Moscow, and its uneasy position within Nato. Turkey has been a key ally in the fight against Islamist terrorism in Iraq and Syria, and the US base in Incirlik is an important staging area.
Trump is working “diligently” to bring home Brunson, the president’s lawyer Jay Sekulow said earlier on Fox News. Vice-President Mike Pence and Secretary of State Mike Pompeo are also involved in that effort, he said.
When Turkey moved Brunson from prison to house arrest last month, Pompeo said it was a welcome decision but not enough.