Brazil Central Bank studying ‘residual’ cut in Selic rate, says Campos Neto By Reuters



© Reuters. Brazil’s Central Bank President Roberto Campos Neto attends a news conference, amid the coronavirus disease (COVID-19) outbreak, in Brasilia

BRASILIA (Reuters) – Brazil’s Central Bank is studying recent data showing inflation is somewhat above expectations to see if there is room for a “residual” cut in interest rates, its president Roberto Campos Neto told Reuters.

In an interview on Wednesday night, he said he expected the bank’s growth projections to improve as pandemic emergency income relief payments and credit for small and medium companies continued to spur improved growth.

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Indonesia makes year’s third rate cut, signals more easing to fight pandemic By Reuters



© Reuters. FILE PHOTO: The logo of Indonesia’s central bank, Bank Indonesia, is seen on a window in the bank’s lobby in Jakarta

By Gayatri Suroyo and Fransiska Nangoy

JAKARTA (Reuters) – Indonesia’s central bank on Thursday cut its benchmark rate for the third time this year and signalled it may ease further, as Southeast Asia’s largest economy struggles to avoid a recession amid the broadening fallout of the coronavirus pandemic.

Bank Indonesia (BI) cut the 7-day reverse repurchase rate by 25 basis points to 4.25%, the lowest since 2018, and Governor Perry Warjiyo said there was space for more cuts as long as the rupiah remained stable.=eci>

Thursday’s cut was predicted by the majority of economists in a Reuters poll.

The move came a few days after the finance minister warned of recession risks, with gross domestic product expected to shrink by 3.1% in the second quarter – the first contraction since 1999 – and possibly contract again in the following three months.

BI trimmed its outlook for 2020 GDP growth to 0.9%-1.9% from 2.3% and pledged to keep all of BI’s instruments “accommodative”.

“With all of these factors: inflation low, the need to lift GDP growth, a small current account deficit, we say there is room for further rate cuts,” Warjiyo told a virtual briefing.

“The timing would depend on global conditions and ensuring the stability of the rupiah is maintained,” he said.

The rupiah strengthened after the announcement before settling little changed at 14,010 a dollar, while the main stock index () fell 1.3% after the announcement.=>

Warjiyo said the currency was undervalued and could strengthen for the remainder of the year.

In total, BI has trimmed its key rate by 75 bps so far this year to stimulate economic activity, on top of four reductions amounting to 100 bps in 2019.

Capital Economics’ analyst Gareth Leather expects BI to continue with gradual easing over coming months due to “the very poor outlook for the economy”.

Bahana Sekuritas’ economist Satria Sambijantoro in Jakarta, who expects another 25 bps cut, said the pace of economic contraction in the second quarter may not be different to the double-digit falls seen in Singapore and Thailand.

“A response from the central bank, especially rate-cuts, would be necessary to maintain investors confidence that policymakers are ready to mitigate growth risks,” he said.

Bank Danamon and ANZ also see a further 25-bp rate cut.

The government has budgeted nearly $50 billion to support the pandemic-hit economy, but had only doled out a small amount.

The country reported its biggest daily rise in coronavirus cases on Thursday, taking total infections to 42,762, with 2,339 deaths.

(This story has been refiled to clarify finmin made her remarks a few days ago and not a day ago)

 

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



China Signals Further Reserve Ratio Cut to Spur Bank Lending By Bloomberg



© Bloomberg. An employee arranges genuine bundles of Chinese one-hundred yuan banknotes at the Counterfeit Notes Response Center of KEB Hana Bank in Seoul, South Korea, on Monday, Aug. 14, 2017. China’s factory output and investment slowed somewhat in July, according to data released today, yet the yuan appeared not to take the data as negative, if in fact it’s paying attention to it at all. Photographer: SeongJoon Cho/Bloomberg

(Bloomberg) — China’s cabinet signaled that the central bank will act to make more liquidity available to banks so they can lend more, including by cutting the amount of money they have to keep in reserve.

China will reduce the reserve requirement ratio and use its relending policy to keep liquidity ample, state television reported Wednesday, citing a State Council meeting chaired by Premier Li Keqiang. The council, which is China’s cabinet, also urged financial institutions to support companies by sacrificing 1.5 trillion yuan ($212 billion) in profits this year by offering lower lending rates, deferring loan repayments and cutting fees.

China Wants Banks to Cap Their Profit Gains to Single Digits

The People’s Bank of China is trying to bring down borrowing costs across the economy to aid the recovery from the coronavirus slump in the first quarter, without engaging in large-scale debt stimulus seen elsewhere. That stance has however contributed to rising bond yields and concerns that market and monetary conditions are tightening.

“An RRR cut is likely to come shortly, perhaps even this weekend,” according to Lu Ting, chief China economist at Nomura Holdings (NYSE:) Inc. in Hong Kong. “The policy strategy to squeeze banks might be positive for markets and economy first, but could backfire later if non-performing loans rise too fast and the government has to come to rescue banks on a large scale.”

The government “will continue to guide lending and bond interest rates down, give out loans with preferential interest rates, defer payment of principal and interest on loans to medium-sized, small and micro enterprises, support the issuance of unsecured loans for SMEs, and reduce bank charges,” according to the CCTV statement.

The reserve ratio currently stands at 11% for large banks, with lower requirements for smaller lenders.

PBOC Governor Yi Gang, China Securities Regulatory Commission Chairman Yi Huiman and China Banking and Insurance Regulatory Commission Chairman Guo Shuqing will speak Thursday morning at the annual Lujiazui Forum in Shanghai, according to the forum’s website.

(Updates with PBOC governor speaking on Thursday in sixth paragraph, economist’s comment. The day the state council met was corrected in an earlier version of this story.)

©2020 Bloomberg L.P.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Pemex proposal would sharply cut drilling rigs from private service firms By Reuters



© Reuters.

By David Alire Garcia

MEXICO CITY (Reuters) – Mexican national oil company Pemex has proposed slashing the number of privately owned drilling rigs used this year and next in an internal planning document seen by Reuters.

The document also details 76 separate rig suspensions this year, with 14 planned for the company’s most productive field – Ku Maloob Zaap – responsible for about half of Pemex’s current oil output.

The cost-cutting measures detailed in the plan mirror cutbacks made by other global producers in the wake of collapsing demand and crashing prices this year. But they run counter to President Andres Manuel Lopez Obrador oft-repeated pledge to grow, not cut, oil production. They would directly affect 10 private oilfield service companies that Pemex contracts with for use of their offshore and onshore rigs.

It was unclear if the proposal was actively being considered, but it offers insight into how some Pemex planners are seeking to execute a 40 billion peso ($1.8 billion) cut announced in late April, about 15% of its investment budget this year.

Pemex’s press office did not respond to repeated requests for comment about the proposal dated May 20 titled “Movement of Rigs, Quarterly Operational Program.”

The document, from the Planning and Operational Evaluation unit, provides more details than previously reported of discussions within Pemex about how to weather deep oil market disruptions during the coronavirus pandemic.

Labeled “preliminary,” the proposal details a reduction in offshore drilling rigs from 42 currently to 20 in December, while onshore rigs would go down from 43 to 29. Proposed reductions next year are steeper, with offshore rigs falling to 14 and onshore rigs down to just one by the end of 2021.

The proposal does not appear to affect plans for some 20 priority Pemex development projects unveiled last year.

The private firms named in the document include London-based Seadrill, as well as prominent Mexican service providers Grupo R, owned by billionaire Ramiro Garza, and Perforadora Mexico, the oilfield service company of major miner and rail company Grupo Mexico.

None of these firms immediately replied to requests for comment.

Even before oil prices slumped this year causing Pemex revenue to plummet, the state-run company suffered a series of credit downgrades. Its crude production has fallen every year since 2004.

Lopez Obrador has pledged to revive the ailing Mexican giant, the world’s most indebted oil company, calling its health key to Mexico’s energy self-sufficiency and development.

Rig suspensions at Ku Maloob Zaap would effectively scrap drilling new wells and repairing existing wells for the rest of this year, which would likely reduce output and cost some 5,000 lost jobs spread across several contractors, according to a source with knowledge of the proposal who requested anonymity to speak candidly.

Earlier this week, Mexican newspaper Reforma reported that as many as 8,000 workers had lost jobs due to Pemex budget cuts stemming from cancellation of 45 contracts valued at $160 million.

The drilling rig suspensions detailed in the Pemex planning document do not amount to outright contract cancellations.

The proposal calls for two of Seadrill’s offshore rigs, West Courageous and West Intrepid, to be suspended from Ku Maloob Zaap for the remainder of this year. Three of the firm’s other rigs are listed as suspended during the second half of 2021.

Two of Grupo R’s offshore rigs, Cantarell I and Cantarell II, are listed as suspended next year from August-December, and March-December, respectively.

Meanwhile, four of Perforadora Mexico’s six rigs would be affected by the proposed suspensions later this year or next year, with each rig idled for at least 10 months.



China to cut teapot refining capacity as plans for mega complex By Reuters


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© Reuters. FILE PHOTO: Refinery plants are seen in Boxing

2/2

By Chen Aizhu and Muyu Xu

SINGAPORE/BEIJING (Reuters) – China’s oil hub Shandong has embarked on a plan to shut down capacity of half a million barrels per day shared among small, independent refiners to make way for a giant complex that should spur economic recovery from the coronavirus crisis.

Reuters exclusively reported last week that China, the world’s largest oil consumer after the United States, was going ahead with the $20 billion Yulong Petrochemical complex.

The planned 400,000 barrel-per-day (bpd) refinery and 3 million tonne-per-year ethylene plant in Yantai, Shandong, the country’s hub for independent refineries, sometimes referred to as teapot refineries, had long failed to get approval as China struggled with excess refining capacity.

The drop in demand because of coronavirus lockdowns, as well as expectations climate concerns will reduce conventional motor fuel use, is likely to increase over-supply in the near term.

But state approval was granted last week for a new mega refining complex, weighted towards petrochemical production whose demand is expected to be relatively robust.

That has prompted Shandong to accelerate a plan dating from 2018 to close 500,000 bpd in capacity over the next two-to-three years, Shandong-based industry officials and consultancies said.

That amounts to 20% of Shandong’s capacity, made up of more than 60 small plants.

The Shandong government, which has yet to make public any details of the restructuring, did not respond to Reuters’ requests for comment.

GRAPHIC: Teapot refineries in China’s Shandong province – https://fingfx.thomsonreuters.com/gfx/ce/ygdvzqjlnpw/teapot%20SD.jpg

‘DEAD SERIOUS’

Wang Zhao, senior analyst with consultancy Sublime Information Group, said Shandong will first target plants of less than 60,000 bpd, especially those with financial losses, out of about a dozen that have shown interest in compensation.

“The government is dead serious about restructuring, but its execution hinges on how smoothly the relevant parties reach a deal on compensation,” said Wang, who is based in Shandong’s Zibo city.

The first closures would include Binyang Ranhua, Zhonghai Jingxi Chemical, Yuhuang Chemical and Jinshi Asphalt, with combined crude distillation capacity of just over 200,000 bpd, Wang said. A separate Shandong oil source, who asked not to be named, shared the view.

The semi-official China Chemical News reported last week the Shandong government has asked creditors of the targeted plants, mostly state-run banks, to stop chasing debt repayments and urged compensation to be prioritised for relocating workers and investing in new projects.

Jinshi Asphalt, a bitumen-producing unit with capacity to refine 20,000 bpd of crude, based in Binzhou, northern Shandong, is expected to start closing imminently.

“We’ve received the first payment as compensation to shut down our unit,” a manager, who declined to be named because of company policy, told Reuters. “Dismantling will start soon.”

He did not specify the amount of compensation.

Shandong sources said the government had proposed last year a fee of 800 yuan for each tonne of capacity, taking the total expense to 20 billion yuan ($2.82 billion) for closing 500,000-bpd.

Binyang Ranhua, also based in Binzhou, has agreed to dismantle its 88,000 bpd unit, and will channel the funding into new chemical units, a plant executive said.

Of the others expected to be among the first to close, Zhonghai Jingxi Chemical declined to comment and Yuhuang Chemical could not be reached for comment.

NOT ALL KEEN TO TAKE THE CASH

Some refiners are reluctant to shut capacity.

“We were all legal entities when we started, and our plant is running well. Why should we close down?” said an executive with a refiner based in Dongying on Shandong’s northern coast.

Shandong in any case is expected to proceed with caution.

“The main preoccupation for local authorities is likely to be employment and tax revenue, so protecting these through the consolidation process will be the top priority,” Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies, said.

GRAPHIC: China’s mega-sized oil refineries with annual refining capacity over 10 million tonnes – https://fingfx.thomsonreuters.com/gfx/ce/xegvbybgdpq/China’s%20mega-sized%20refineries.jpg

GRAPHIC: Utilisation rates at Chinese oil refineries in 2012-2019 – https://fingfx.thomsonreuters.com/gfx/ce/qzjvqjylapx/utilisation%20rate%20at%20Chinese%20refineries.JPG



Reopening Economy Drives India Bond Rebound Despite Moody’s Cut By Bloomberg



© Reuters. Reopening Economy Drives India Bond Rebound Despite Moody’s Cut

(Bloomberg) — Private-sector Indian companies have fared well in the bond market this week despite a sovereign rating downgrade by Moody’s Investors Service, as investors focus more on early signs of some improvement in the economy.

Spreads on the firms’ U.S. currency notes dropped 5.7 basis points compared with last week, according to DBS Bank Ltd. data, even after Moody’s cut India’s rating to the lowest investment grade with a negative outlook on Monday.

There have been some signs of nascent economic recovery as India begins to ease the world’s most stringent restrictions. After 122 million people lost their jobs as a result of a nationwide lockdown, the total number of people employed increased by 21 million in May even before the gradual lifting of the restrictions, according to Center for Monitoring Indian Economy Pvt. data released this week. Services sector activity in the nation also picked up slightly last month, data showed Wednesday.

“For now, markets could look past India’s rating downgrade,” Chang Wei Liang, a macro strategist at DBS Bank, said in a note.

The muted reaction to Moody’s sovereign downgrade on dollar-denominated papers comes amid a global rally in risk assets with the premiums on investment-grade bonds declining across Asia.

Still, despite the early signs of improvement, the challenges India faces remain stark, after its lockdown resulted in record low economic activity and fueled the biggest earnings decline in at least six years.

And state-owned Indian firms’ dollar debt didn’t hold up quite as well after Moody’s also took negative actions including one-level rating cuts and changes in outlook against a swathe of government-backed firms. Spreads on their securities widened slightly after the cut, according to DBS Bank.

©2020 Bloomberg L.P.

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UAE’s ADNOC to cut July crude nominations by 5% after OPEC+ pact: sources By Reuters



© Reuters.

DUBAI (Reuters) – State-run Abu Dhabi National Oil Company (ADNOC) has informed customers of a cut in its nominations for July in line with a decision by OPEC+ last month to reduce supplies, three sources with knowledge of the matter told Reuters.

Nominations for all crude grades – Murban, Upper Zakum, Das and Umm Lulu – will be cut by 5% for all term lifters in July, the sources said, citing a letter to buyers dated May 28.

OPEC and allies led by Russia, a group known as OPEC+, agreed in April to a new supply pact from May 1 to shore up the market following a slide in demand caused by lockdowns to contain the new coronavirus.

OPEC+ plans to reduce output by a record 9.7 million barrels per day for May and June.

For May, ADNOC reduced the supply of its Murban and Upper Zakum crude by 15% and reduced the supply of its Umm Lulu and Das crude by 5%.

For June, ADNOC has told buyers of a cut of 20% in both Murban and Upper Zakum crude grades and a 5% cut in Das and Umm Lulu crude grades.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Amtrak needs $1.5 billion bailout, prepares to cut up to 20% of workforce


WASHINGTON (Reuters) – U.S. passenger railroad service Amtrak said on Tuesday it needs a further $1.475 billion bailout and disclosed plans to cut its workforce by up to 20% in the coming budget year.

FILE PHOTO: An Amtrak passenger train sits in New York City’s Pennsylvania Station, U.S. April 27, 2017. REUTERS/Mike Segar

Amtrak said it also plans to reduce its operating costs by approximately $500 million.

The company, which has been devastated by the coronavirus pandemic, in April received $1 billion in emergency funding from Congress.

Ridership and revenue levels are down 95% or more year-over-year since the pandemic began, Amtrak said.

“It is clear we have no choice but to reduce our overhead structure to better align our costs with our revenues,” CEO Bill Flynn told employees Tuesday in a memo seen by Reuters.

“This reduction is necessary to ensure we have a sustainable Amtrak that can continue to make critical investments in our core and long-term growth strategies, while also keeping safety as our top priority.”

Without the additional emergency funding, Amtrak said it would need to suspend some long-distance routes, and that others would operate on a thinned-down schedule. It would also need to greatly reduce its high-speed Acela service.

Amtrak said it now expects the massive travel demand fall-off due to the pandemic to result in a full year 50% reduction in system-wide revenue. It expects passenger demand will fall from 32 million in 2019 to 16 million in the 2021 budget year.

House Transportation Committee chairman Peter DeFazio said Congress “must make sure that Amtrak, its states and commuter rail partners, and the Amtrak workforce get the support they need.”

Even with new funding from Congress, Amtrak still plans to extend some service cuts.

Amtrak projects revenue to fall by $1.6 billion and to run a $1.4 billion loss after it nearly broke even last year.

The $1.475 billion request, for the fiscal year that begins Oct. 1, is in addition to an annual $2 billion in support it has been receiving from Congress in recent years.

Reporting by David Shepardson; Editing by Bernadette Baum and Rosalba O’Brien



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Oil prices rise on supply cut hopes, easing of coronavirus lockdowns By Reuters



© Reuters. FILE PHOTO: The sun sets behind a pump-jack outside Saint-Fiacre

By Sonali Paul and Seng Li Peng

MELBOURNE/SINGAPORE (Reuters) – Oil prices climbed on Tuesday, boosted by increasing faith in the market that producers will to stick to commitments to cut crude supply while demand picks up with more cars back on the road as coronavirus lockdowns are eased around the world.

U.S. West Texas Intermediate (WTI) crude futures gained 3.2%, or $1.06, to $34.31 a barrel as of 0429 GMT, just off an intra-day high of $34.33.

There was no WTI settlement on Monday because of the U.S. Memorial Day holiday.

futures were up nearly 1.7%, or 59 cents to $36.12, adding to a 1.1% gain on Monday in thin holiday trading.

The market was buoyed by comments from Russia reporting its oil output had nearly dropped to its target of 8.5 million barrels per day (bpd) for May and June under its supply cut deal with the Organization of the Petroleum Exporting Countries (OPEC) and other leading producers, a grouping known as OPEC+.

“There’s definitely a feeling those cuts have come through as well as you could expect,” said Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group.

OPEC+ countries are set to meet again in early June to discuss maintaining their supply cuts to shore up prices, which are still down around 45% since the start of the year. The big producers agreed in April to cut output by nearly 10 million bpd for May and June.

Russia’s energy ministry on Monday quoted minister Alexander Novak as saying a rise in fuel demand should help cut the current global surplus of around 7-12 million bpd by June or July.

“With economies restarting, the focus definitely is on the improvement in the fundamentals, rather than what seemed like a complete collapse in demand only a few weeks ago,” said strategist Hynes.

Meanwhile data from energy services firm Baker Hughes (N:) showed the United States’ rig count hitting a record low of 318 in the week to May 22, also indicating lower output in the future.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Huawei says expect business impact from U.S. move to cut off chip supply


A man in a face mask walks past a Huawei shop, amid an outbreak of the coronavirus disease (COVID-19), in Beijing, China, May 18, 2020. REUTERS/Thomas Peter

SHENZHEN, China (Reuters) – Huawei Technologies said on Monday that its business will be inevitably impacted by the latest U.S. move to restrict chip sales to the Chinese technology company, but it is confident of finding solutions soon.

Guo’s comments are the company’s first official response after the Trump administration announced new measures to try to block global chip supplies to Huawei Technologies on Friday.

The new rule from the Commerce Department expands U.S. authority to require licenses for sales to Huawei of semiconductors made abroad with U.S. technology, vastly extending its reach to halt exports to the world’s No. 2 smartphone maker.

Speaking at Huawei’s annual global analyst summit, the company’s rotating chairman Guo Ping also said that the company is committed to complying with U.S. rules, and it has significantly increased R&D and inventory to meet U.S. pressures.

Reporting by David Kirton, editing by Louise Heavens



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