U.S. to Auction 20MM Barrels of Oil from Strategic Petroleum Reserve

 

 

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The U.S. is holding its largest sale of oil from strategic reserves this year at a time when the outlook for fuel demand is darkening amid the resurgent Covid-19 virus.

The Energy Department plans to auction off 20 million barrels of crude, twice as much as it offered for sale 3 1/2 months ago. The oil will be delivered during the fourth quarter, when U.S. demand for gasoline and other fuels typically falters and refineries slow down oil purchases while they shut down equipment for repairs and maintenance.

The sale also comes after crude prices have dropped 15% since touching a 6 1/2-year high in early July as the spread of the delta variant threatens to derail the economic recovery and return to business as usual. Companies including BlackRock Inc. and Jefferies Financial Group Inc. are postponing plans to return workers to offices.

The reserve, created in 1975 to serve as an emergency stockpile, held 621 million barrels in four underground caverns as of Aug. 13, Energy Department figures showed.

Benchmark American crude futures rose almost 6% on Monday in New York amid a broader rally in commodities and equity markets.

How Afghanistan’s $1 trillion mining wealth sold the war

 

A map of Afghanistan’s resources (USGS)

https://www.mining.com/how-afghanistans-1-trillion-mining-wealth-sold-the-war/?utm_source=Daily_Digest&utm_medium=email&utm_campaign=MNG-DIGESTS&utm_content=how-afghanistans-1-trillion-mining-wealth-sold-the-war 

After the fall of Kabul, US media regurgitates a 2010 New York Times frontpage story on Afghanistan’s mineral riches based on a secret Pentagon memo and a 1977 Soviet geologic map.

Search for Afghanistan minerals and you get dozens of articles written in the last few days quoting a magical $1 trillion number including gems like The Taliban are sitting on $1 trillion worth of minerals the world desperately needs (CNN), Afghanistan: Taliban to reap $1 trillion mineral wealth (Deutsche Welle),  Biden Just Handed Afghanistan’s Mineral Wealth to China (Newsweek), China Eyes Afghanistan’s $1 Trillion of Minerals With Risky Bet on Taliban (Bloomberg) and so on.

All the one trillion dollar articles are derived from a breathless June 2010 New York Times front-page story and interview with General David H Petraeus during which the commander of US forces in Afghanistan referenced a US Dept of Defense “internal memo”. 

The story of how “the vast scale of Afghanistan’s mineral wealth was discovered by a small team of Pentagon officials and American geologists” by the Pulitzer prize-winning journalist James Risen’s opens with a bang (emphasis added):   

“The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.”

“​​The previously unknown deposits including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.”

The tale of the $1 trillion treasure trove – which has more than a whiff of Indiana Jones about it as told by the New York Times – begins three years after the US invaded Afghanistan:

“In 2004, American geologists, sent to Afghanistan as part of a broader reconstruction effort, stumbled across an intriguing series of old charts and data at the library of the Afghan [sic] Geological Survey in Kabul that hinted at major mineral deposits in the country.”  

“Technoexport” 

At first the American geologists only found hints of these huge big veins, but “they soon learned that the data had been collected by Soviet mining experts during the Soviet occupation in the 1980s.”

How soon did the American geologists learn it was a Soviet study? Perhaps when they looked at the author page of the intriguing charts and data and saw this:

Abdullah, Sh., Chmyriov, V.M., Stazhilo-Alekseev, K.F, Dronov, V.I., Gannon, P.J., Lubemov, B.K., Kafarskiy, A.Kh. and Malyarov, E.P., 1977, Mineral resources of Afghanistan (2 ed.) 419 p. and Abdullah, Sh., Chmyriov, V.M. Map of mineral resources of Afghanistan V/O “Technoexport” USSR, scale: 1:500,000. 

Contrary to the article, it was two years before the Soviet army invaded (hmm… what did Breshnev know about Afghan minerals and when did he know it?) and it was done under the auspices of the United Nations Development Programme (AFG/74/12). 

Details. Let’s not get sidetracked. 

Risen, also the recipient of the 2015 Ridenhour Courage Prize, continues:  

“Armed with the old Russian charts, the United States Geological Survey began a series of aerial surveys of Afghanistan’s mineral resources in 2006 using advanced gravity and magnetic measuring equipment attached to an old Navy Orion P-3 aircraft that flew over about 70 percent of the country.”

The legend 

If you have such advanced tech (Shuttle Radar Topography Mission, SRTM, digital elevation model, DEM) why would you need Mineral resources of Afghanistan 2nd ed., and Technoexport? 

The reason is printed on the legend of the map the USGS produced after the SRTM DEM survey:

“The geologic and mineral resource information shown on this map is derived from digitization of the original data from Abdullah and Chmyriov (1977) and Abdullah and others (1977). 

“The classification of mineral deposit types is based on the authors’ interpretation of existing descriptive information (Abdullah and others, 1977) […] and on limited field investigations by the authors.”  

Promising before, astonishing ASTER

“The data from those flights was so promising that in 2007, the geologists returned for an even more sophisticated study” the article continues:

“The handful of American geologists who pored over the new data said the results were astonishing.”

This even more sophisticated study used Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) data from Nasa’s flagship Terra satellite and the astonishing results are summarized in the USGS-Afghanistan Ministry of Mines Joint Mineral Resource Assessment Team Preliminary Assessment of Non-Fuel Mineral Resources of Afghanistan prepared in cooperation with the Afghanistan Geological Survey under the auspices of the US Agency for International Development, October 2007. (Download here)

One can understand that the New York Times would not want to confuse readers with mining jargon but what the paper calls “untapped mineral deposits far beyond any previously known reserves” the USGS report defines as “mean expected values of quantitative probabilistic estimates of undiscovered deposits”. 

Close enough, it’s the New York Times.

Abdullah et al 

That said, there were some pretty mean expected values gleaned from the ASTER and SRTM DEM non-discoveries and the report (the full 810 page study – Open-File Report 2007–1214 available on 1 CD-ROM and 1 DVD – appears now to be off limits to the public) outlines 34 orebodies across 27 metals and minerals.

However, of the 34 deposits outlined in the three-page summary, only four were newly identified: mercury, potash, asbestos and rare earth. 

A further four were revised (upwards). 

That is, revised from Abdullah, Sh., Chmyriov and others. Mineral resources of Afghanistan (2 ed.) 1977. 

The 26 deposit estimates from the Soviet scientists were simply copied over and “further study recommended”. 

Astonished but ignored

At this point in the article Risen injects some tension into the story:

“The results gathered dust for two more years, ignored by officials in both the American and Afghan governments.” 

But the story doesn’t end in a dusty library in Kabul or the CD-ROM/DVD storeroom of the USGS: 

“In 2009, a Pentagon task force that had created business development programs in Iraq was transferred to Afghanistan, and came upon the geological data.”

“Until then, no one besides the geologists had bothered to look at the information and no one had sought to translate the technical data to measure the potential economic value of the mineral deposits.”

“Soon, the Pentagon business development task force brought in teams of American mining experts to validate the survey’s findings, and then briefed Defense Secretary Robert M. Gates and Mr. Karzai.”

In these three truly stupefying paragraphs Risen makes it sound that if it was not for the task force coming upon the data after they were transferred (no access to the USGS website from Iraq?) and more importantly, bothered, the world would never have found out about the value of Afghanistan’s mineral wealth.  

Send in the Excel cavalry 

The only reason the geologists – on who The New York Times heaps so much responsibility to give the article a patina of science – did not bother is because that’s not how mining works. 

Not that it’s much of a bother to multiply tonnes and ounces of “probabilistic estimates of undiscovered deposits” with prices. 

To the Abdullah et al copper deposits, the USGS report added 32 million contained tonnes (nice!) to bring overall Cu resources in the country to 60 million tonnes. That’s $453 billion right there at the average price for copper of $7,562/tonne in 2010. 

Some 600,000 tonnes of cobalt ($27 billion at 2010 prices) and 724,000 tonnes of molybdenum ($18 billion) were also put in the copper basket and the 27 million tonnes of potash would’ve fetched just under $10 billion at 2010’s average price.

Rare earth as seen from space 

The global trade in rare earths was before the WTO for arbitration in 2010 and not only were prices volatile (dysprosium went up 12-fold between 2008 and 2011), the 17 elements also trade at very different price points – samarium could be had for $3.40/kg in 2009 but europium would set you back $492/kg that year. 

That would have made it more difficult to assign a dollar value to the 1.4 million tonnes of rare earths as seen from space. Although the Pentagon task force probably found a way. 

The sulfur tonnage was upwardly adjusted to 5.5 million tonnes, but at a ruling price of some $50 a tonne it doesn’t really smell like money. Neither does the newly non-discovered graphite deposit – not too flaky at 1.05 million tonnes but worth only a billion in 2010. 

SRTM DEM and ASTER also zoomed in on 13.4 million tonnes of Afghan asbestos. Asbestos fibre remains a thriving global trade and if you need to get to 12 zeros you can’t just leave it in the ground. At ruling prices of around $1,500 a tonne, that’s $20 billion someone other than the Afghans would have to cough up. 

The world in a grain of sand   

Only 2.7 tonnes or 86,743 troy ounces of gold were identified in 1977. The USGS recommended further study of the primary gold deposits but did associate 682 tonnes gold ($26.8 billion at the average 2010 gold price of $1,226 per troy ounce) and 9,067 tonnes of silver ($5.9 billion) with the igneous copper deposits. 

If the gold non-discoveries seem like an underestimation consider that neither SRTM or ASTER  added to the 36 million cubic metres of sand in the Soviet data. Sand is the world’s number one mining endeavour as per Yale School of the Environment and prices have long been on an upward trajectory. 

Who knows? The task force probably found more sand, but the Pentagon would’ve realized the jokes write themselves if the New York Times article proclaimed that the US military –   ten years into the occupation – discovered vast reserves of sand in Afghanistan.

Don’t be fooled by the rocks that I got 

Afghanistan’s endowment of lead, zinc, tin, tungsten, barite, talc, lazurite, fluorite, halite and celestite et cetera were not estimated by the USGS, and since the task force data is secret, only the Pentagon could put a price on those. Whether the task force incorporated the 32,000 tonnes of hot spring mercury in the $1 trillion would also remain a mystery. 

Not that those treasures are needed – with iron ore 12 zeroes is more than doable. 

The 2007 study did not add rocks to the 2.438 billion tonnes Abdullah et al found thirty years earlier, it didn’t have to – 62% Fe ore was trading at $120 in 2010 putting a price of $292 billion on Afghan steelmaking stuff.

Lithium nirvana

The task force did find ways to warm up the Soviet studies, which likely ignored lithium because commercialisation of the lithium-ion battery only happened more than a decade later. The 2007 USGS report also glossed over the world’s softest metal.

But the Pentagon and the New York Times saw an opportunity to show Afghanistan’s potential in the age of the smart phone and the laptop computer:

“An internal Pentagon memo, for example, states that Afghanistan could become the “Saudi Arabia of lithium,” a key raw material in the manufacture of batteries for laptops and BlackBerrys.” (Blackberrys… chuckle – Ed.)

And the work was ongoing, according to the article:

“Just this month [June 2010], American geologists working with the Pentagon team have been conducting ground surveys on dry salt lakes in western Afghanistan where they believe there are large deposits of lithium. 

“Pentagon officials said that their initial analysis at one location in Ghazni Province showed the potential for lithium deposits as large of [sic] those of Bolivia, which now has the world’s largest known lithium reserves.”

Finding lithium (15th most abundant element, although scarcer than rare earth) in a dry salt lake as large as those of Bolivia which measures 10,000 square kilometres? Maybe the Pentagon team just got lucky. 

Besides if you calculate the value of lithium reserves the way the task force did – and how Elon Musk does it – Nevada also has as much of the battery metal as Afghanistan and Bolivia. 

Round up to the nearest trillion 

The transcript of a Pentagon press briefing a few days later is not accessible due to website maintenance, but contemporaneous reporting suggests the call did not add much besides clarifying that the $1 trillion was actually $908 billion, but then adding that “a lot of people think that is a conservative number”. 

Officials also assured reporters that the task force (Task Force for Business and Stability Operations to give its full name which was never mentioned in the article) just used the USGS as a reference point to conduct more “detailed field work” or as The New York Times described it:

“For the geologists who are now scouring some of the most remote stretches of Afghanistan to complete the technical studies necessary before the international bidding process is begun, there is a growing sense that they are in the midst of one of the great discoveries of their careers.”

What the detailed field work and scouring entailed is never stated and once again the geologists are required to do all the heavy lifting to get the article over the low bar of credibility Risen has set.

Whatever technical studies were completed were never considered in any international bidding process and the “growing sense” of career making discoveries Risen thought he detected among the geologists is, not to put too fine a point on it, growing nonsense.

Scientific boots on the ground 

The most well known copper deposit in Afghanistan is Mes Aynak, which translates to “little source of copper” in Pashto/Persian. Copper workings at Mes Aynak date back to the bronze age.

The scientists at the American Association for the Advancement of Science in Science magazine in 2014 in an article titled “Mother of all lodes” wrote that after the USGS and the Pentagon “put scientific boots on the ground“ in Afghanistan they found a “vivid panoply of nonferrous mineral formations”.

Of these, Mes Aynak is surely the vividest. 

Could Mes Aynak – which did go through a real world tender process – prove that the Pentagon was right all along and $1 trillion – a sum even quoted by the World Bank, responsible for drafting Afghanistan’s mining laws – is on the money?

After a bidding process that included Phelps Dodge (now part of Freeport McMoRan) and Canada’s Hunter Dickinson, state-owned Metallurgical Corporation of China and its minority partner Jiangxi Copper struck a $2.83 billion deal in 2007 for a 30-year lease at Mes Aynak. (Only $997,170,000,000 to go – Ed.) 

A stretch

The nine bidders, selected in November 2006, had to rely on a dusty copy of Akocdzhanyan et al., 1974 V/O “Technoexport” Contract 55-184/17500 translated from the Russian.  

In the tender information package about Mes Aynak compiled by the Afghanistan and British Geological Survey, the “systematic exploration” of the Soviet Geological Mission “Technoexport” is praised as “exceedingly thorough and well documented”. (Soviet geologist please let us know why it is called Technoexport – Ed.) 

The work “included the drilling of several hundred exploration, geotechnical and hydrogeological boreholes, nine underground adits, 70 trenches, and geophysical and topographic surveys.” It was also carried out over 13 years and the geologists only pulled out when the Soviet army did in 1989. 

That’s in contrast to the work of “a small team of Pentagon officials and American geologists”, who, according to New York Times’ timeline, were busy for only about a year before the article, and were working in the fields of 24 deposits scattered across the entire country. 

Whether the task force scouring the “remote stretches” of Afghanistan (Mes Aynak is only 30km (19mi) south of Kabul, btw) also included drillholes, trenches and adits is impossible to say. Rather than attracting international bidders and making careers, the Pentagon technical reports remain buried secrets. 

Non-refundable deposit   

The Mes Anyak deal was billed as the largest foreign investment in Afghanistan in its modern history. 

Perplexingly, this May 2008 press release from Jiangxi Copper put the figure paid to the Afghan government for the mining rights not at $2.83 billion but $808 million, a figure not quoted in any media story. 

There were also allegations that the then mines minister Mohammed Ibrahim Adel took some $30 million in bribes related to the tender. (It’s Afghanistan. Don’t get so hung up about missing dollars – Ed.)

The copper project, also the site of an ancient buddhist city, never got off the ground (neither has Hajigak iron ore, the only other deposit which had any prospect of becoming a mine). 

MCC blamed the costs of building a smelter, power plant and railway and the steep royalties for halting work. Mention of Mes Aynak disappeared from Jiangxi’s annual reports after 2013 wherein the company blamed the “relocation of historical relics” as the reason for the delay in the project.     

Now that the Taliban are in charge that could change – they do not exactly care for Buddhist statues.  

Sitting around in pajamas 

There was some criticism of the New York Times frontpage story at the time saying that it wasn’t the scoop it was made out to be because of Abdullah and others’ work in the 1970s the 2007 USGS study. Some questioned the timing of the article when the war was going badly in Afghanistan. 

Risen was irked by the skepticism telling Yahoo News “bloggers” who are “sitting around in their pajamas” instead of doing real reporting — shouldn’t “deconstruct other people’s stories.” (Go put some pants on – Ed.)

Dean Baquet, who edited the piece and was the Washington bureau chief for the New York Times then (now executive editor) said Risen “is the last person the government would try to get to carry their water,” attributed the criticism to sour grapes for not getting the story first, and that the Pentagon holding a briefing was proof of the article’s newsworthiness.

Task Force for BS Ops

The Task Force for Business and Stability Operations (Task Force for BS Ops) also came under scrutiny – albeit only in 2016 – in a 136 page report by the RAND Corporation titled Lessons from the Task Force for Business and Stability Operations in Afghanistan.

To their credit (and I don’t know how much credit, I only know that the US military, air force and Secretary of Defense stuffed $147.1 million in RAND’s coffers in 2020) RAND said the $908 billion “is notional only; it does not reflect the value of commercially exploitable deposits. Therefore, it is misleading.” (p.22)

It also fell to the think tank to address the biggest elephant in the room full of elephants that was the New York Times and Task Force for BS Ops stitch-up, and with admirable succinctness:

“Challenges impede the extraction of this natural wealth. Security concerns aside, most of the mineral rich provinces lack road, rail, or electric power infrastructure, and the nascent mining industry would have to compete with agriculture, an economic mainstay, and municipalities for limited water supplies.”

Let x = x

The manner in which the task force and its teams of mining experts calculated (tonnes x price = x,xxx,xxx,xxx,xxx) the $1 trillion value – or $3 trillion as successive mines & petroleum ministers, and President Karzai was fond of quoting – is not the biggest problem with the New York Times story. 

While the number has no real world meaning, it certainly attracts attention – by the paper’s own reporting it led to greater violence in Afghanistan. 

To focus only on non-fuel resources in the article also smacks of marketing. Afghanistan also has vast oil and reserves but “No war for oil” protesters had grown in ranks seven years into the Iraq occupation and trotting out a crude message would likely have misfired. 

$34,482.76 

That all US and most international media outlets continue to parrot the $1 trillion tale a decade later also makes its propaganda value clear.

How easily the Western armchair media swallowed the story is inexcusable, but the way Afghans were duped into believing in their country’s mineral wealth seems cruel. 

The New York Times followed up the big scoop a few days later with a piece headlined Afghan Officials Elated by Minerals Report: 

“As they waited to hear Mr. Karzai’s spokesman, some Afghan reporters excitedly calculated among themselves how much each Afghan would theoretically get if the mineral treasure trove were divided equally. 

“Assuming the $1 trillion valuation and Afghanistan’s population of 29 million, that would give each Afghan man, woman and child $34,482.76.”

If not in scope then in tenor, U.S. Identifies Vast Mineral Riches in Afghanistan was not dissimilar to the paper’s weapons of mass destruction coverage of a few years earlier. 

At least the New York Times has taken some responsibility for boosting the case for the Iraq invasion. 

But there’s been no such soul searching by the paper for cheerleading the extension of the US occupation of Afghanistan.

Codelco breaks ground at $1.4bn Salvador copper mine expansion

The Rajo Inca project will convert Salvador, in operation since 1959, from an underground mine to an open pit. (Image courtesy of Codelco.) 

https://www.mining.com/codelco-breaks-ground-at-1-4bn-expansion-of-salvador-copper-mine/?utm_source=Daily_Digest&utm_medium=email&utm_campaign=MNG-DIGESTS&utm_content=codelco-breaks-ground-at-14bn-salvador-copper-mine-expansion 

Chile’s state miner Codelco, the world’s no.1 copper producer, has broken ground at the $1.4 billion expansion of the Salvador copper mine, which will extend the productive life of the aging operation by 47 years and increase output by almost 50%. 

The Rajo Inca project will convert Salvador, in operation since 1959, from an underground mine to an open pit. 

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“Until now this division depended on three underground mines. The new Salvador will obtain all the contribution of the mineral from a single open pit, with copper grades 40% higher than the current ones, which will influence the increase in production and productivity,” Juan Benavides, president of Codelco’s board of directors, said in the statement. 

The mine was expected to run out of ore this year, but the expansion — approved in January — gives Codelco access to another 796 million tonnes of mineral, with an estimated 0.59% copper grade on average. 

The Salvador Division currently has the lowest productivity of any of the Chilean miner’s deposits, generating just 50,600 tonnes, just under 3% of Codelco’s total output, last year. 

With surface exploitation, the mine will yield 90,000 tonnes per year. Full production at the new section is slated to begin in the first half of 2023. 

One of many 

Rajo Inca is one of six major projects the Chilean miner is advancing as part of its 10-year, $40 billion initiative to upgrade its sprawling but depleting mines.  

A new underground operation at the company’s Chuquicamata division entered production in 2019, while a new mine level at the underground El Teniente mine will follow in 2023. 

Source: Codelco’s presentation May 2019.

Codelco, which hands over all its profits to the state, holds vast copper deposits, accounting for 10% of the world’s known proven and probable reserves and about 11% of the global annual copper output, with 1.8 million tonnes of production in 2020. 

The company operates seven mines and four smelters, all in Chile.

Russell: Iron ore price slump justified by improving supply, China steel control

 

https://www.mining.com/web/russell-iron-ore-price-slump-justified-by-improving-supply-china-steel-control/?utm_source=Daily_Digest&utm_medium=email&utm_campaign=MNG-DIGESTS&utm_content=russell-iron-ore-price-slump-justified-by-improving-supply-china-steel-control 

(The opinions expressed here are those of the author, Clyde Russell, a columnist for Reuters.)

Iron ore’s rapid retreat in recent weeks shows once again that price pullbacks can be as disorderly as the exuberance of rallies, before the fundamentals of supply and demand reassert themselves.

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Depending on which price for the steel-making ingredient is used, the price has slumped between 32.1% and 44% since the all-time high reached on May 12 of this year.

The surge to the record did have fundamental drivers, namely supply constraints in top exporters Australia and Brazil and strong demand from China, which buys about 70% of global seaborne iron ore.

But a 51% leap in the spot price of iron ore for delivery to north China, as assessed by commodity price reporting agency Argus, in a mere seven weeks from March 23 to a record high of $235.55 a tonne on May 12 was always going to be far frothier than market fundamentals justified.

The speed of the subsequent 44% tumble to a recent low of $131.80 a tonne in the spot price is also probably not justified by the fundamentals, even if the trend toward lower prices is entirely reasonable.

Supply from Australia has been steady as the impact of earlier weather-related disruptions faded, while Brazil’s shipments are starting to trend higher as the country’s output recovers from the effects of the coronavirus pandemic.

Australia is on track to ship 74.04 million tonnes in August, according to data from commodity analysts Kpler, up from 72.48 million in July, but below a six-month high of 78.53 million in June.

Brazil is forecast to export 30.70 million tonnes in August, up from 30.43 million in July and in line with June’s 30.72 million, according to Kpler.

It’s worth noting that Brazil’s exports have recovered from earlier this year, when they were below 30 million tonnes every month from January to May.

The improving supply picture is being reflected in China’s import numbers, with Kpler expecting 113.94 million tonnes to arrive in August, which would be a record high, eclipsing the 112.65 million reported by China customs in July last year.

Refinitiv is even more bullish on China’s imports for August, estimating that 115.98 million tonnes will arrive in the month, a 31% surge from the official figure of 88.51 million for July.

The figures compiled by consultants such as Kpler and Refinitiv don’t exactly align with customs data, given differences in when cargoes are assessed as having been discharged and cleared by customs, but the discrepancies tend to be small.

Steel discipline

The other side of the coin for iron ore is China’s steel output, and here it seems clear that Beijing’s instruction that production for 2021 shouldn’t exceed the record 1.065 billion tonnes from 2020 is finally being heeded.

July crude steel output fell to the lowest since April 2020, coming in at 86.79 million tonnes, down 7.6% from June.

Average daily output in July was 2.8 million tonnes, and it is likely to have declined further in August, with the official Xinhua news agency reporting on Aug. 16 that daily production in “early August” was just 2.04 million tonnes per day.

Another factor worth noting is that China’s iron ore inventories at ports resumed climbing last week, rising to 128.8 million tonnes in the seven days to Aug. 20.

They are now 11.6 million tonnes above the level of the same week in 2020, and up from the northern summer low of 124.0 million in the week to June 25.

A more comfortable level of inventories, and the likelihood they will build further given August’s forecast bumper imports, is another reason for iron ore prices to retreat.

Overall, the two conditions necessary for a pullback in iron ore have been met, namely rising supply and steel output discipline in China.

If those two factors continue, it’s likely that prices will come under further pressure, especially since at the close of $140.55 a tonne on Aug. 20, they remain above the price range of about $40 to $140 that prevailed from August 2013 to November last year.

In fact, apart from a brief summer demand spike in 2019, spot iron ore was below $100 a tonne from May 2014 to May 2020.

The unknown factor for iron ore is what policy changes Beijing may adopt, with some market speculation that the stimulus taps will be reopened to prevent economic growth from slowing too much.

In this case, it’s likely that pollution concerns will be placed second to growth, and steel mills will once again crank up output, but this scenario is still in the realm of speculation.

(Editing by Richard Pullin)

Citgo Petroleum posts first profit in seven quarters

 

https://www.thestar.com.my/business/business-news/2021/08/18/citgo-petroleum-posts-first-profit-in-seven-quarters 

HOUSTON: Citgo Petroleum Corp reported a slim, second-quarter profit, its first in seven quarters, as higher fuel exports helped offset weak margins and the impact of a fuel pipeline shutdown.

Earnings at the US refining arm of Venezuela’s state oil company Petroleos de Venezuela have been under pressure since it lost access to Venezuelan oil due to US sanctions. Citgo is also battling possible seizure by creditors seeking to collect on unpaid debts incurred by PDVSA and Venezuela.

The eighth-largest US refiner posted a US$3mil (RM12.71mil) profit, its first since the third quarter of 2019, for the three months ended June 30 as exports rose and the utilisation rate at its plant in Lemont, Illinois, hit 97%. It suffered a US$5mil (RM21.19mil) net loss in the second quarter a year ago.

“Given the multiple challenges we have faced during 2020 and the first half of 2021, this return to profitability is particularly satisfying,” Citgo chief executive Carlos Jordá said in a statement. Citgo fell deep into the red last year as the Covid-19 pandemic slashed demand for motor fuel.

In May, it reduced production at its 418,000 barrel per day (bpd) Lake Charles, Louisiana, refinery, the largest of its three facilities, after the Colonial fuel pipeline was taken out of commission for a week following a cyberattack.

Total refinery throughput was 732,000 bpd, from 575,000 bpd a year earlier. Exports rose to 130,000 bpd, from 87,000 bpd a year earlier. However, its Corpus Christi, Texas plant ran at a weak 78% utilisation rate, hurt by operational and third-party outages. — Reuters

Resource nationalism sweeps Latin America’s top mining countries

 

Newmont walked away from the $5bn Conga copper-gold project in Peru in 2016, due to relentless community opposition. (Image: Screenshot via YouTube.) 

https://www.mining.com/resource-nationalism-sweeps-latin-american-top-mining-countries/?utm_source=Daily_Digest&utm_medium=email&utm_campaign=MNG-DIGESTS&utm_content=resource-nationalism-sweeps-latin-americas-top-mining-countries 

A move towards resource expropriation, tax and royalty increases, as well as demands for local participation in companies’ ownership, all resource nationalism components, continue to increase, with Latin America taking centre stage, a new study shows.

According to the latest report from risk consultancy Verisk Maplecroft, there is a clear four-year trend in minerals-rich nations to seek greater control over the revenues generated by their natural resources, which is expected to increase over the next two years. 

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The consultancy identified 66 countries out of the 198 included in the resource nationalism index (RNI), or 33% of them, that have tightened the grip on their riches since 2017.  

Latin America is the jurisdiction where risks of expropriation and taxes hikes have increased the most in the past four years

Latin America is the jurisdiction where risks of expropriation and taxes hikes have increased the most, the study says. Mexico stands out as seeing the nation where the risks have climbed the most, driven by López Obrador administration’s nationalist agenda that wields community and environmental arguments as justification for greater state involvement in the extractive sector, Verisk Maplecroft says.  

Mexico’s situation is indicative of a wider regional trend affecting miners and energy firms in the region. South America’s three largest economies, Brazil, Argentina and Colombia are also experiencing substantial negative shifts in the index, while the once stable mining destinations of Chile and Peru are in the midst of political changes that threaten to alter the operating environment for the industry. 

Courtesy of Verisk Maplecroft. (Click to enlarge)

Copper prices have soared to record highs this year, handing unions in the two largest producers of the metal — Chile and Peru — additional leverage. The price rally has also ratcheted up tensions in labour negotiations and put pressure on global supply of the red metal. 

Verisk Maplecroft’s RNI tracks incidents of direct expropriation and nationalization. The highest scores go to cases where there hasn’t been adequate compensation, no compensation, or in which a government hasn’t paid an award to a company following arbitration. 

The ten highest risk countries in the latest edition of the index are Venezuela, Tanzania, Mexico, PNG, Zambia, Russia, North Korea, Kazakhstan, DRC and Zimbabwe.    

The motive behind direct expropriation could be short-term political gain or a genuine attempt to save a vital but ailing industry to support the national interest. “The adequacy of compensation is the key factor from a business perspective,” the consultancy says. 

Politics and community pressure

In Latin America, the push to gain greater benefit from natural resources generally hinges on two factors. In Mexico and Argentina, the main driving force is ideology, while in Colombia and Chile pressure comes from communities — both those hosting mining projects and civil society. 

“While the traditional bastions of stability for Latin America’s mining investors are not yet crumbling, they appear to be joining their regional peers on the path of greater resource nationalism,” the report reads. “Only time will tell how far each one goes down this road.” 

In Africa, motivations are much more diverse. The interventionism seen in Liberia and Mauritania is driven by structural governance shortcomings, not nationalist sentiment, Verisk Maplecroft points out. 

The line between resource nationalism and legitimate national interest isn’t always easy to draw, and this can exacerbate tensions. 

What is key for miners, according to the report, is to detect the signals early on, so that companies can adapt their investment strategies and exploration portfolios to mitigate future exposure to nationalism trends. 

By doing so, the consultancy concludes, companies can also prioritize investment in jurisdictions where they can be part of the solution. They can work with local stakeholders to find a balance between community needs and industry profitability to secure long-term social license to operate.

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Afghanistan before the Russian Invasion (Documentary, 1979)

Gold price steadies ahead of Fed minutes

 

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Gold prices held steady on Wednesday as investors stayed on the sidelines before the release of minutes from the Federal Reserve’s latest policy meeting.

Spot gold declined slightly by 0.2% to $1,781.69 per ounce as of 1:40 p.m. EDT. US gold futures also dropped 0.2%, trading at $1,783.90 per ounce in New York.

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Traders are turning their focus to the Fed minutes due Wednesday afternoon and next week’s Jackson Hole symposium, which may offer clues on the timing of the central bank’s tapering.

In a town hall meeting Tuesday, Fed Chair Jerome Powell flagged that the pandemic is “still casting a shadow on economic activity,” but didn’t discuss the outlook for monetary policy or make specific comments on growth and the risks from the delta variant.

Bullion had slipped Tuesday, snapping four days of gains amid mixed US economic data and lingering concerns over the global recovery as the coronavirus delta variant spreads.

“The biggest positive in gold’s corner may be that the market has likely accounted for coming asset purchase reductions,” said James Steel, chief precious metals analyst at HSBC Securities (USA) in a Bloomberg interview.

“While this does not argue that gold will go higher, it supports the notion that gold may not go much lower. We think gold may be stalled in front of $1,800 an ounce,” he added.

(With files from Bloomberg)

Republicans urge Biden to reverse OPEC plea

 

Trump: Oil will be over $5 per gallon 

Former President Trump discusses American energy and OPEC.

https://www.foxbusiness.com/politics/republicans-biden-reverse-opec 

Republicans are urging President Biden to reverse his decision to ask the Organization of the Petroleum Exporting Countries (OPEC) to produce more oil. 

Sen. Jim Inhofe of Oklahoma, R-Okla., sent a letter to the president on Tuesday with 23 Republican signatories condemning Biden's request to OPEC.

"It is astonishing that your Administration is now seeking assistance from an international oil cartel when America has sufficient domestic supply and reserves to increase output which would reduce gasoline prices," the Senators wrote.

MONTANA GOVERNOR BLASTS BIDEN'S ENERGY POLICIES: ‘HORRENDOUS' MOVE TO ASK OPEC FOR MORE OIL

They continued: "Last month, gasoline prices reached a seven-year high and are forty percent higher than they were on January 1, 2021. … Your Administration’s domestic oil and gas development policies are hurting American consumers and workers, are contrary to an "America First" energy agenda, and reinforce a reliance on foreign oil."

The Biden administration last week urged OPEC and its allies, including Saudi Arabia, to increase oil output to tackle rising gas prices that the administration views as a threat to the global economic recovery.

"While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022," national security adviser Jake Sullivan said in an Aug. 11 statement. "At a critical moment in the global recovery, this is simply not enough." 

Former President Trump, too, criticized the move in a Wednesday interview on FOX Business' "Mornings with Maria."

BIDEN'S INFLATION SWAMPS WAGE GAINS, LEAVING WORKING FAMILIES BEHIND

"We were energy-independent six months ago. Today, they're negotiating with OPEC. And OPEC just told them no," Trump said during the interview in reference to OPEC officials who told Reuters that there is no need to hasten production. "I filled up the national oil reserves when the oil was cheap. I filled them up for almost nothing. And now they want to use that oil because they don't have any oil."

The request for OPEC to boost oil production came as the Biden administration attempts to tackle climate change and discourages drilling at home.  

Biden revoked the permit for the Keystone XL oil pipeline project on his first day in office in a series of orders aimed at combating climate change, which also included temporarily suspending the issuance of oil and gas permits on federal lands and waters.

An oil well pump jack is seen at an oil field supply yard near Denver, Colorado, U.S., February 2, 2015. REUTERS/Rick Wilking/File Photo

White House press secretary Jen Psaki pushed back against the suggestion that the administration's push to reach net-zero emissions by 2050 and a clean power sector by 2035 "are related to domestic oil production" during an Aug. 11 briefing.

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"Our view is, one, that there are steps OPEC can take," she said. "What we’re — what we’re raising here, as we’ve raised in the past: production and the need to increase production, as you’ve said, to make sure we have that available to help address the price of gas. "

The Labor Department on Aug. 11 reported that the price of gas increased 41.8% from the year before.  

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Gas prices have been increasing at the pump for the past few weeks, reaching a national average of $3.19 a gallon as of Monday, which is the most expensive gas price average of the year and $1.01 higher than the same time in 2020, according to AAA. 

On Monday, West Texas Intermediate crude oil, the U.S. benchmark, declined $1.99 to $66.45 a barrel.

Fox Business' Jonathan Garber and Talia Kaplan contributed to this report.

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Uranium tops Morgan Stanley’s commodity thermometer

 

Autunite, frequently used as uranium ore. (Reference image by Parent Géry, Wikimedia Commons).

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Morgan Stanley has placed uranium at the very top of its Metals and Mining Commodity Thermometer.

Uranium was assigned a ‘most bullish’ thesis of 17 mined commodities under the bank’s coverage.

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“Further price upside near term as commercial inventories are drawn down, investment demand continues, and mine supply remains below 2019 levels. Longer term, growth continues to push price higher,” reads a slide shared by a social media user.

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@quakes99

The gap between uranium spot and contract prices has narrowed for a third consecutive month, reaching $32.40 and $33.50 per lb. at the end of July, respectively.

Gold price recovers from recent selloff, supported by physical demand spike

Gold standing its ground in spite of tapering whispers. Stock image. 

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Gold extended its recovery from the recent selloff on Friday as a retreat in the US dollar enticed investors to snap up the safe haven metal.

Spot gold rose 1.3% to $1,776.83 per ounce by 12:10 p.m. EDT, its highest in more than a week, representing a quick turnaround from the four-month lows touched on Monday. US gold futures jumped 1.5% to $1,779.20 per ounce in New York.

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Meanwhile, the dollar index fell 0.4% and US benchmark 10-year treasury yields also weakened, bolstering the appeal of gold, a non-yielding asset.

Providing further support to bullion was an increased physical demand, particularly from top consumers India and China, where premiums rebounded to multi-month highs.

Commenting on gold’s recent movement, TD Securities commodity strategist Daniel Ghali told Reuters that the pullback from Monday’s lows was largely driven by technicals, with increased central bank purchases providing additional support.

“But, this pullback could just be a temporary move higher,” Ghali added, noting that speculative interest was waning amid rising expectations that the US Federal Reserve could cut back on economic support sooner.

The tapering bets received a major boost last week following a strong US jobs report for the month of July, sending gold on a downward spiral for three straight sessions.

“The picture remains nuanced; as positive signs in the labour market and spikes in producer prices support the view that the Fed will bring forward the timing of tapering, but the latest consumer price increases supported the view that inflation spikes are transitory,” said Ricardo Evangelista, a senior analyst at ActivTrades.

“Amidst the mixed signals, investors anticipate what will emerge from the Fed’s Jackson Hole meeting later this month,” he added.

While gold is seen as a hedge against inflation, higher interest rates dull the bullion’s appeal by raising its opportunity cost.

(With files from Reuters)

120-year chart shows commodities have never been this undervalued

 

Image: Codelco via Flickr 

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In its Q2 wrap-up, commodities investment house Goehring & Rozencwajg Associates (G&R) poses the question: Natural resources – Uninvestable assets or unprecedented opportunity?

To help answer the question, the Wall Street firm put together a 120-year chart comparing commodity prices to the Dow Jones Industrials going back to 1901.

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Despite the uptick in metals and mineral prices over the past year, there is still a yawning gap and “real assets have never been as undervalued relative to financial assets,” according to the authors.

The chart shows other major bottoms occurred in 1929, 1969, and 1999 and, like those cycle nadirs, present an “excellent time to establish real asset positions,” according to G&R: 

“Prior catalysts have all been monetary related. This time likely as well.”

In May, G&R made the case for a $30,000 copper price as supply comes under pressure from depletion at the world’s major mines. G&R’s latest research is headlined: The IEA Ushers in the Coming Oil Crisis.

Biden calls on OPEC to increase oil production while limiting US energy production.

 

https://greeleytribune.net/biden-calls-on-opec-to-increase-oil-production-while-limiting-us-energy-production/ 

The White House on Wednesday called on OPEC and its allies to increase oil production as gas prices continue to rise, and the alarm bells ringing over the loss of US energy freedom under President Biden. Is.

Crying at the outreach, domestic oil producers say Mr Biden should have looked to them to boost the country’s oil supply.

Instead, Mr Biden turned to OPEC, a handful of non-member allies, including the world’s 13 largest oil-producing cartels and Russia.

Since taking office, Mr Biden has restricted US oil production, issuing executive orders prioritizing climate change over the US energy industry.

Jason Mogden, president of the Texas Alliance of Energy Producers, said the administration’s policies have hampered U.S. oil production, pushing gas prices north to cut supplies.

“It only stings when the president calls on Russia and Saudi Arabia to increase their energy production when we can do it here in the United States,” he said. “Its first call should have been to American producers to meet the needs of American producers.”

Sen. John Corn, a Texas Republican, added: “It’s sad and embarrassing to ask the Saudis to increase production while the White House is to put a hand behind the backs of American energy companies.”

According to the US Energy Information Administration (EIA), which collects data on the oil and gas industry, US oil production fell from 13 million barrels per day last year to about 11.2 million barrels per day. The EIA predicts that US oil production will increase slightly to 11.8 million barrels in 2021.

David Ripson, director of the Energy Economics Program at the University of California, Davis, said that as US COVID-19 emerges from epidemics and demand for oil increases, so will domestic production.

If we do not allow domestic production to grow in response to demand, we will allow OPEC to set prices. This is going to be a long term problem. “It’s a little weird to call OPEC when prices go up, but it’s also weird to limit production locally.”

Emphasizing whether the administration would consider producing more oil locally, White House press secretary Jane Sackie said it was not under consideration.

“That was not the question we asked,” he said. “We are not questioning supply locally. Obviously, OPEC has its own unique role in the global market.

“We think OPEC can take action,” he added.

The Western Energy Alliance, which represents 200 oil and gas companies based in the West, predicts that a ban on drilling on federal land could cost GDP 33 33.5 billion and lose 58,676 jobs by 2024. Is. GDP loss of 40 640 billion and 343,088 jobs lost by 2040

Mr Mogan said the Biden administration’s policies promised to increase US dependence on foreign oil.

“The cancellation of the Keystone pipeline makes it easier for OPEC to enter our market,” he said. “It makes Saudi Arabia, Russia and Venezuela more competitive.”

The reliance came on Wednesday when the White House National Security Adviser issued a statement urging OPEC to increase production.

Mr Sullivan called on OPEC and its non-OPEC allies, known as OPEC +, to increase oil production by 400,000 barrels a day. But he warned that the COVID-19 epidemic was not enough to make up for the shortfall in early production.

“Although OPEC + has recently agreed to increase production, this increase will not fully meet the previous production cuts that OPEC + implemented during 2022 during epidemic diseases,” Mr Sullivan said. “In a critical moment of global recovery, that is not enough.”

In addition, the White House sent a letter to the Federal Trade Commission asking the agency to investigate any illegal practices by the oil industry that could lead to a rise in gas prices.

Brian Dess, director of the National Economic Council, wrote in a letter to the FTC that such illegal activities could include manipulating market prices or mergers and acquisitions that reduce competition.

“During this summer’s driving season, there is a huge difference between oil prices and the price of gasoline at the pump,” Mr Des wrote. “Although many factors can affect gas prices, the president wants to ensure that consumers do not pay more for gas due to competition or other illegal means.”

He also asked the Federal Energy Regulatory Commission, the Commodity Futures Trading Commission, the Department of Justice and the State Attorney General to resolve the issue.

Gas prices continue to rise across the country, according to AAA data.

The national average price for a gallon of gas was 3. 3.185 on Wednesday morning, the travel organization said. It was 3. 3.144 a gallon a month ago and 2. 2.174 a gallon last year.

In May, the national average crossed $ 3 for the first time since 2014, and last week, gasoline demand hit a 2021 high.

With the end of the holiday season and the reopening of the school for the fall, that number could be slightly lower, but it’s not clear if the reduction will be enough to cover the prices that have been rising steadily for the past year.

Also, the demand for fuel has eased epidemic restrictions that have forced workers to seek refuge in their homes and forced millions of Americans to cancel their travel plans.

OPEC allies cut production to meet lower demand, but cut oil supplies, pushing prices north as demand soared this summer.

During epidemics, crude oil prices fell so much, they were trading at negative prices. According to the US Energy Information Administration, a form of crude was being sold in Europe at ڈالر 9 a barrel, its lowest price in decades.

Gold price rebounds on signs of peaking US inflation

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Gold prices rebounded on Wednesday after the latest US inflation data showed consumer prices rose at a slower pace last month, easing fears that the Federal Reserve may taper its economic support sooner than expected.

Spot gold rose 1.2% to $1,749.62 per ounce by 11:45 EDT, recovering some ground after four straight sessions of declines. US gold futures gained 1.1%, trading at $1,751.30 per ounce in New York.

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Earlier, the Labor Department stated that the US consumer price index rose 0.5% in July, after a 0.9% rise in June. This was the largest month-to-month drop in 15 months, a tentative sign that inflation may have peaked as supply chain disruptions work their way through the economy.

Additionally, core CPI, which excludes the volatile food and energy components, rose 0.3% last month after increasing 0.9% in June, which was weaker than expected.

Traditionally a hedge against inflation, bullion has been held back by concerns over central bank tapering, keeping it below the key $1,800 mark especially after a strong US employment report last week.

However, Phillip Streible, chief market strategist at Blue Line Futures in Chicago, told Reuters that Wednesday’s inflation data have helped ease those concerns, buoying gold even with inflation pressures waning.

“An inflation number that’s in line leaves the Fed scratching their heads and has them more on a wait-and-see-and-interpret-more-data type of approach,” Streible said. “The gold market is not going back up till $1,835, but I don’t think the bottom is going to fall out yet.”

Providing a further boost to gold, the dollar fell from a more than four-month high, and US Treasury yields too weakened, largely on the back of the new data.

(With files from Reuters)

U.S. sees 'collective response' to ship attack blamed on Iran

 

https://www.reuters.com/world/middle-east/us-confident-iran-carried-out-attack-tanker-secretary-blinken-2021-08-02/

WASHINGTON, Aug 2 (Reuters) - The United States is confident Iran attacked an Israeli-managed tanker last week, killing two, the top U.S. diplomat said on Monday, predicting a "collective response" but saying he did not think the incident necessarily signaled anything about Iran's incoming President Ebrahim Raisi.

"We have seen a series of actions taken by Iran over many months, including against shipping. So I am not sure that this particular action is anything new or augurs anything one way or another for the new government," Secretary of State Antony Blinken told reporters. Raisi takes office on Thursday.

"But what it does say is that Iran continues to act with tremendous irresponsibility when it comes to, in this instance, threats to navigation, to commerce, to innocent sailors who are simply engaged in commercial transit in international waters," he added of the attack, which killed a Briton and a Romanian.

"We are in very close contact and coordination with the United Kingdom, Israel, Romania, and other countries, and there will be a collective response," Blinken said.

Tehran has denied any involvement in the attack on Thursday in which the two crew members were killed. read more

The United States and Britain said on Sunday they would work with their allies to respond to the attack on the Mercer Street, a Liberian-flagged, Japanese-owned petroleum product tanker managed by Israeli-owned Zodiac Maritime.

"We've conducted a thorough review and we're confident that Iran carried out this attack," Blinken said on Monday.

Reporting by Simon Lewis, Doyinsola Oladipo, Daphne Psaledakis and Jonathan Landay; Editing by Richard Pullin

Gold price dives to 4-month low on concerns of early Fed tapering

 

 Gold investors grappling with Fed’s potential hawkish shift. Stock image.

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Gold extended its slump after a stronger-than-expected US jobs report last week fueled bets that the Federal Reserve may start paring back its massive monetary stimulus soon.

Spot gold fell by as much as 4.4% during the early hours of Asian trading, but clawed back to recover about half of those losses once markets opened in New York.

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As of 11:15 a.m. ET, gold was down 2.0% to $1,728.04 per ounce, the lowest since early April. US gold futures also declined 1.9% to $1,729.30 per ounce.

Silver, too, took a tumble as it dropped by as much as 7.5%, hitting a more than 8-month low of $22.50 per ounce earlier in the session. It was last down 3.7% to $23.44 per ounce.

[Click here for an interactive chart of gold prices]

Data released by the US Labor Department on Friday showed employers hired the most workers in nearly a year in July and continued to raise wages.

That underscored remarks by Fed officials suggesting a sooner-than-anticipated rollback of the pandemic era stimulus on the back of a solid labour market recovery.

The jobs data “beat expectations by a mile last week, which led to both gold and silver selling off into the close. This morning we are seeing the overhang of that as perhaps those traders a bit late to the party are panic-selling the open,” John Feeney, business development manager at Guardian Vaults, said in a Bloomberg interview, adding:

“With low liquidity at this time of the week combining with a large number of stop losses being triggered we have seen a volatile open to start the week.”

The technical picture does not look good for gold and short-term negativity is likely to continue, Harshal Barot, a senior research consultant for South Asia at Metals Focus, told Reuters.

However, “the pandemic is not truly behind us… There will be investors who will be looking for these levels to buy up gold as a protection,” Barot added.

The jobs data helped lift the benchmark US 10-year treasury yields in the process, hurting gold’s appeal as an inflation hedge. Meanwhile, the dollar index also hit a two-week high on Monday, pulling investors towards the greenback.

Gold has been losing ground on investor concern that an improving US economy and rising inflation will spur the Fed to pull back on unprecedented economic support.

Low rates help make bullion more competitive against assets that offer yields, while the strengthening dollar and record equity markets are also curbing demand for the haven metal.

(With files from Bloomberg and Reuters)