Oil Prices Slide As U.S.-China Tensions Spike – Report

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Oil prices have held onto the gains from the last few weeks, but the recent rally seems to have stalled as demand shows signs of not returning to normal any time soon. Meanwhile, U.S.-China tensions weighed heavily on financial and commodity markets this week.

U.S.-China tensions threaten $52 billion in energy sales. The Phase 1 trade deal between Washington and Beijing is at risk of falling apart. President Trump is set to make a major announcement on Friday regarding China, and amid escalating tension and China’s moves in Hong Kong, the actions will likely be punitive. China had previously pledged to make $52 billion in oil purchases over two years, a total that was always going to be hard to meet.

Oil executives get paid despite the downturn. A number of U.S. shale oil executives continue to receive hefty compensation despite consistently posting unimpressive returns. Part of the problem is the practice of basing compensation off of a company’s performance relative to its peers. Meanwhile, the oil majors continue to take on debt to pay dividends.

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What will OPEC+ do next? Two conflicting reports surfaced this week, one claiming that Russia was considering extending the OPEC+ production cuts beyond June, while the other said the opposite – that Russia would push for loosening the cuts. Saudi Arabia appears ready to extend, but in Moscow, some Russian oil companies may find an extension difficult.

Refineries hit by overcapacity. A wave of refining capacity built over the past few years has squeezed margins, and the downturn in the oil market could push uncompetitive facilities offline permanently.

Alberta cut production by 1 MB/d. Alberta said that it has cut production by 1 mb/d, a quarter of the province’s output.

Bearish EIA data halts momentum. The EIA reported a jump in crude oil inventories this week, made worse by a surge in imports. At the same time, production dipped by another 100,000 bpd.

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Big Oil loses key court case on climate. A U.S. Circuit Court of Appeals ruled against oil companies, deciding that a public nuisance case brought by California cities could move forward in state courts. The case centres on damages inflicted a handful of oil majors – ExxonMobil (NYSE: XOM)Chevron (NYSE: CVX), BP (NYSE: BP)Royal Dutch Shell (NYSE: RDS.A) and ConocoPhillips (NYSE: COP). The companies sought to have the case tossed out, but the decision allows it to proceed. Still, it could be years before the case is heard by a jury.

Read Also:  Oil Prices Fall As Hurricane Fears Subside

Chevron lays off 10-15 percent of staff. Chevron (NYSE: CVX) said it would cut 10 to 15 percent of its global workforce, or between 4,500 and 6,750 jobs.

Clean energy stocks outperform oil. Clean energy stocks are performing better than oil during the global pandemic, according to a new study. U.S. clean energy stocks have increased 2.2 percent in the first four months of the year, even as the S&P 500 declined by 9.4 percent. “We found that renewable power had a bit of a protective property, and that is something we did not know before,” one of the report’s authors told the FT. “After this kind of shock [in the market], this portfolio has done so well. Moreover, between 2010 and 2019, renewable energy stocks returned 200 percent, while fossil fuels returned 97 percent.

Oil majors struggling with coronavirus infections. A wave of infections has hit numerous oil projects around the world. More than 900 workers have been infected at the Tengiz oil field in Kazakhstan, led by Chevron (NYSE: CVX) and a consortium of partners. Royal Dutch Shell (NYSE: RDS.A) said that seven workers at an offshore platform in the Gulf of Mexico have been infected. In recent weeks, other cases have hit ExxonMobil (NYSE: XOM) and Total (NYSE: TOT).

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U.S. LNG exports weaken. Weak economics have already cut into U.S. LNG export volumes, even before accounting for cancelled June and July cargoes. U.S. LNG’s share of European imports has only averaged 15 percent so far in May, down from 23.6 percent in April.

U.S. oil imports jump on the arrival of Saudi “armada.” The widely-publicized “armada” of Saudi oil tankers finally arrived in the U.S., leading to a nearly 1-mb/d increase in oil imports in the latest EIA weekly data. “The optics for Saudi crude aren’t so great in Texas right now,” Bill Farren-Price, director at RS Energy Group, told the FT. “Despite their huge cuts, the April export surge has just started unloading, with yet another clue for Permian operators as to why US oil prices remain on the floor.”

Shale won’t bounce back until 2021. The chief executive of Precision Drilling (NYSE: PDS) said that shale drilling activity won’t begin to grow again for another year.

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Oil Prices Slide As U.S.-China Tensions Spike - Report - Brand SpurOil Prices Slide As U.S.-China Tensions Spike - Report - Brand Spur

Latest News

Asia Pacific Rayon Raises US$300m from National and International Affiliated Banks to Expand Production Capacity

  • Continued capital expenditure aims to boost production and support the recovery of Indonesian economy
  • Loan agreements aligned with Indonesian Government's strategy to drive investment growth in 2021
  • APR is a member of the RGE group of companies

JAKARTA, INDONESIA - Media OutReach - 12 April 2021 - Asia Pacific Rayon (APR), the largest integrated rayon fiber producer in Indonesia, today announced that it has secured a syndicated loan facility of Rp 4.5 trillion (US$300 million) with national and international affiliated banks. The funding will be used to support continued capital investment in the company's production facilities at Pangkalan Kerinci, Riau Province, Sumatra.

APR is vertically integrated through its supply chain, from renewable fiber plantations to high-value textile development. It commenced operations in 2019 and was formally inaugurated by President Jokowi Widodo in February 2020. APR plans to increase its production capacity over the coming year to capture the strong growth potential of viscose staple fiber (VSF), strengthening its market position in Indonesia and in export markets across the region. APR is a member of the RGE group of companies. Founded by Sukanto Tanoto, RGE manages a group of resource-based manufacturing companies with global operations.

The syndicated loan participating banks are PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Central Asia Tbk, PT Bank Pan Indonesia Tbk, PT Bank Pembangunan Daerah Jawa Barat, PT Bank Woori Saudara Indonesia 1906 Tbk and PT Bank KEB Hana Indonesia

The joint mandated lead arrangers and bookrunners for the syndicated loan are PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Central Asia Tbk, and PT BANK Pan Indonesia Tbk.

Basrie Kamba, Director, Asia Pacific Rayon, said: "This funding will be used to support continued investment in our operations in Kerinci. Rayon fiber, or viscose, is a textile raw material derived from sustainably managed plantations. As rayon is both renewable and biodegradable, it supports the trend towards sustainable fashion in Indonesia and in other markets around the world."

APR's planned expansion is aligned with the Indonesian Government's strategy to increase investment and boost employment to support the recovery of the country's economy and address the continued impact of the COVID-19 pandemic. Following the passing into law of the Omnibus Bill in October last year to streamline investment and stimulate job creation, President Widodo said last month that investment would be the key factor in achieving 5% economic growth in 2021.

"This loan facility and our continued investment in our operations are evidence of the growth potential of the viscose rayon sector in Indonesia and around the world. We are committed to supporting the Indonesian Government's efforts to improve the investment climate in export-oriented manufacturing industries, and its efforts to create upstream jobs in plantations and the processing of raw materials, and downstream opportunities in textile factories and related businesses," said Basrie.

Hari Setiawan, Executive Vice President of PT Bank Rakyat Indonesia (Persero) Tbk said : "As Representative of JMLAB and all lenders, I hope this collaboration will be useful to support the growth and development of PT Asia Pacific Rayon in increasing production and operations and also supporting the recovery of Indonesia's export growth."

"Support from BCA and other Banks reflect our confidence in APR, and as our contribution to promote a sustainable and environment friendly industry. We hope this cooperation will tighten our relationship as well," said Susiana Santoso, Executive Vice President of PT Bank Central Asia Tbk.

About Asia Pacific Rayon

Asia Pacific Rayon is the first fully integrated viscose rayon producer in Asia. Located in Pangkalan Kerinci, Riau, the company uses the latest production technology to produce high-quality rayon to meet textile needs. APR is committed to becoming a leading viscose rayon producer with the principles of sustainability, transparency and operational efficiency, serves the interests of the community and the country, and provides value to customers. APR is part of the RGE (Royal Golden Eagle) group of resource-based manufacturing companies. Sustainability is fundamental to APR. The APR Sustainability Policy, updated in September 2020, include additional commitments on pulp sourcing and clean manufacturing.

About RGE

RGE Pte Ltd manages a group of resource-based manufacturing companies with global operations. Our work ranges from the upstream, comprising sustainable resource development and harvesting, to downstream, where our companies create diverse value-added products for the global market. Our commitment to sustainable development underpins our operations, as we strive towards what is good for the community, good for the country, good for climate, good for customer, and good for company. RGE was founded in 1973. The assets held by RGE companies today exceed US$20 billion. With more than 60,000 employees, we have operations in Indonesia, China, Brazil, Spain and Canada and continue to expand to engage newer markets and communities. www.rgei.com

Oil Prices Slide As U.S.-China Tensions Spike - Report - Brand Spur
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