Oil falls on high inventories, weak demand

By Matthew Robinson

NEW YORK (Reuters) - Oil prices fell on Friday, briefly touching a one-month low as bulging fuel inventories in the United States stirred demand concerns.

U.S. crude futures settled down 59 cents at $76.35 a barrel, after earlier trading down to $75.57 a barrel, the lowest level since mid-October. In London, Brent crude futures fell 47 cents to settle at $75.55 a barrel.

Crude's losses extended a 3-percent drop on Thursday after the U.S. Energy Information Administration reported crude and product stocks in the world's largest energy consumer rose more than expected last week.

A rise of 1.8 million barrels in U.S. crude oil stocks and an increase of 2.5 million barrels in gasoline stocks came as data showed demand still trailing year-ago levels.

Fuel consumption in the United States and other large industrial countries was battered by the economic crisis, pushing crude prices off record highs near $150 a barrel in July 2008 to below $33 a barrel in December.

Prices have recovered since then as markets look toward an economic rebound that could boost oil demand.

"Crude futures are down, still hurt by Thursday's dismal inventory report showing petroleum inventories rose, with demand down, even though refinery rates were down a lot," said Gene McGillian, analyst for Tradition Energy.

"There's a battle in the oil markets between bearish fundamentals and expectations on when the economy turnaround will come."

Oil prices found some support in early afternoon trade from the weaker U.S. dollar following U.S. data that showed a big jump in the U.S. trade deficit.

A weaker dollar can boost demand for oil, which is priced in dollars, since it makes the commodity cheaper for holders of other currencies.

U.S. consumer sentiment fell in early November to the weakest level in three months amid grim expectations for job and income prospects, a survey showed on Friday.

Energy experts say current fundamentals may not support crude prices.

"Today the price of oil may be $70 or $80, tomorrow it may even be $90," Christophe de Margerie, chief executive of French oil major Total (TOTF.PA), said late Thursday. "If you look at supply and demand, the price should be lower.

Exxon Mobil Corp (XOM.N) CEO Rex Tillerson said winter heating demand alone was unlikely to significantly reduce the global fuel inventory glut.

The International Energy Agency, adviser to 28 industrial nations, said on Thursday the world would use more oil in the fourth quarter of this year than in 2008 due to a rebound in energy demand in Asia.

(Reporting by Joshua Schneyer, Matthew Robinson and Gene Ramos in New York; Additional reporting by David Sheppard in London and Felicia Loo in Singapore; Editing by Marguerita Choy)

© Thomson Reuters 2009 All rights reserved

China says Fed policy threatens global recovery

China says Fed policy threatens global recovery

By Geoff Dyer in Beijing and Kevin Brown in Singapore

Published: November 15 2009 16:02 | Last updated: November 15 2009 17:31

The US Federal Reserve is fuelling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned on Sunday just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”.

Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds – has become a trenchant critic of monetary and fiscal policy in the US.The comments came as China and the US sparred at the Asia Pacific Economic Co-operation summit in Singapore over exchange rate policies amid rising international criticism that China’s currency is undervalued.

Since the start of the financial crisis, Chinese officials have issued a number of warnings that the US should not inflate away its mounting debt burden. Before these latest comments, however, Beijing had generally been most critical of US fiscal policy, urging Washington to spend less.

But speaking at a conference in Beijing, Mr Liu said the Fed’s policy of maintaining low interest rates together with the weak dollar posed a threat to the global economic recovery.

“[It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,” said Mr Liu, who is chairman of the China Banking Regulatory Commission.

“The situation has already encouraged a huge dollar carry trade and had a massive impact on global asset prices,” he added.

However, Mr Liu’s criticism of the Fed comes as China’s own monetary policy is attracting growing scrutiny at home. Critics say the massive expansion in bank loans this year could cause asset price bubbles and inflation.

Qin Xiao, chairman of China Merchants Bank, last month said China “urgently” needed to tighten monetary policy to avoid stock and property market bubbles.

At the Apec meeting in Singapore, the final communiqué from the 21 members was delayed as Hu Jintao, the Chinese president, called successfully for the removal of a reference to the desirability of “market oriented exchange rates that reflect underlying economic fundamentals”.

In a surprise move, the reference had been included in a statement by Apec finance ministers on Thursday, in spite of China’s unwillingness to discuss the issue. Mr Hu ignored the issue in both his speeches and earlier contributions to the Apec debates.

Officials confirmed that it had also been included in the final leaders’ statement, but was removed after a discussion between the US and Chinese leaders.

Lee Hsien Loong, the prime minister of Singapore and Apec summit chairman, did not confirm China’s role in changing the wording of the statement.

But he said some countries were concerned of the possibility of some currencies becoming unstable, and the problem that could arise if governments “had to intervene continually in order to manage their currencies”.

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Obama goes to Beijing

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - The dollar's long-term decline as the world's dominant currency will be on display next week when Barack Obama visits China, pledging to address what he sees as a "deeply imbalanced" economic and financial relationship.

Investors can probably sleep easy about any nightmare scenario unfolding -- China deciding suddenly to float its yuan currency, for example, or to sell its U.S. Treasuries and buy up a bunch of euros and other coinage with its huge current account surplus.

Such moves would be immense, sinking the already battered dollar, kicking U.S. borrowing costs skywards and driving up currencies in regions struggling to get out of recession.

But the various components of this will at least be aired.

The U.S. president has pledged to discuss the two countries' imbalances, which include a yawning trade gap and huge Chinese holdings of U.S. debt.

Much focus, accordingly, will be on China's managed exchange rate to the dollar, widely viewed in Washington as being significantly undervalued at around 6.83 yuan to the dollar.

Although China insists that it is constantly seeking to perfect its exchange rate, it has barely moved in the past year.

So the potential for a "gesture" to Obama on his visit could keep investors, and forex traders in particular, on their toes.

Then again -- as Thanos Papasavvas, head of currency management at Investec Asset Management, says -- it may be that the "gesture" has already been made.

The People's Bank of China said this week it would base FX changes on capital flows and fluctuations in the values of major currencies. But departing from past language, the central bank did not mention that it would keep the yuan basically stable.

"The fact that they have identified that something needs to be done is itself an action point," Papasavvas said. "We think they will continue their appreciation program next year. I don't thing it means anything dramatic."

DOLLAR DECLINE

Whatever the outcome of Obama's trip, it comes at a time when the dollar is struggling -- with all the implications that has for everything from more costly euro zone exports just as the bloc is exiting recession to potential currency losses for foreign investors in U.S. stocks and bonds.

The U.S. currency was trading around 15-month lows against a basket of major competitors this week. The euro was also driven up above $1.50 for a time.

The latest weekly data from fund trackers EPFR Global shows about $7 billion being poured into U.S. equity funds, although the firm said only about 7 percent of it came from non-U.S. domiciled funds.

There is also evidence that non-U.S. investors have been hedging heavily to protect themselves from dollar losses.

"Overseas investors in U.S. assets appear to be FX-hedged to a much larger degree than U.S. investors with foreign assets," Goldman Sachs wrote in a note.

"As a result, the global rally in risky assets increases the need for non-U.S. investors to hedge their growing asset portfolios, i.e., sell more dollars."

One impact of the weakening dollar that investors will be watching in the coming week is gold, which drives higher when the dollar falls because it becomes cheaper for non-U.S. investors and holds value for those with dollars.

Spot gold hit at all-time peak above $1,122 an ounce this week with little expectation of any major pullback.

Other dollar-denominated commodity prices also get a boost.

IT'S THE ECONOMY

Equity investors, in the meantime, have entered a kind of holding pattern, with the MSCI all-country world index sitting a few points below its cycle high but not breaking through.

This fits with what State Street is seeing in the flows from its institutional investor clients. They are tapering off but not turning risk averse.

"People are on the sidelines waiting for the next signal," said Andrew Capon, of the financial services company's research group.

Other than news from Beijing, any signals in the coming week are likely to come from consumer-related U.S. data. These include retail sales data on Monday and the National Association of Homebuilders report on housing on Tuesday.

Elsewhere, potential market movers include euro zone consumer prices on Monday and British inflation on Tuesday.

(Editing by Ruth Pitchford)

© Thomson Reuters 2009 All rights reserved

La Fed ne perçoit pas encore de risque de reprise de l'inflation

La Tribune.fr - 24/06/2009 Ã 20:49 - 402 mots

Après deux jours de discussion, la Fed vient de décider qu'elle ne touchera pas à son taux directeur. Mais elle a surtout annoncé que l'inflation va rester encore contenue pendant "un certain temps".

La Banque centrale américaine vient de rendre son verdict après deux jours de discussions. Comme prévu, la Fed ne touche pas à son taux directeur. Elle a indiqué que ce dernier devrait rester "extrêmement bas", entre 0 et 0,25%, pendant une "longue période". C'est le niveau auquel il est fixé depuis décembre.

Selon elle, l'économie doit rester faible et l'inflation "contenue" encore un certain temps. "Le rythme de contraction de l'économie ralentit", mais l'activité économique devrait rester faible pendant un temps" encore, a écrit le Comité de politique monétaire (FOMC) de la banque centrale. "Bien que les prix de l'énergie et des autres matières premières aient augmenté récemment", la faiblesse de l'activité "devrait amortir les pressions sur les prix", écrit le Comité, prévoyant que "l'inflation restera contenue pendant un certain temps".

De plus, la Fed a annoncé qu'elle allait conserver en l'état sa politique anti-crise et n'évoque plus la déflation. En effet, la Banque centrale a constaté un ralentissement de la récession aux Etats-Unis et a laissé entendre que le risque de déflation avait diminué. Elle a également confirmé le calendrier et le montant de son programme de rachats d'emprunts sur les marchés financiers, une mesure non-conventionnelle destinée à favoriser le crédit. La Fed va donc continuer à agir sur les marchés comme elle le fait depuis plusieurs mois pour assurer le flux du crédit.

Pour Jim Awad, directeur exécutif chez Zephyr Management, "cela n'a aucun effet sur le marché, à la rigueur un effet légèrement défavorable parce que la Fed est un petit peu plus prudente que ne l'était le marché. Je m'attendais à ce qu'elle tienne un discours un peu plus positif sur l'économie. Le fait qu'elle souligne les faiblesses est un peu décevant pour moi, et pour le marché."

En revanche, selon Michael Woolfolk, stratege devises chez Bank of New York-Mellon "C'est exacterment ce que nous attendions. C'est certainement plus subtil que ce beaucoup de gens espéraient mais cela représente néanmoins un message clair sur le fait que l'inflation et l'économie vont rester faibles pendant un certain temps".

Marc Pado, stratege USA chez Cantor Fitzgerald & Co abonde dans le même sens : " Même si l'on assiste à un début de ventes sur la nouvelle dans l'immédiat, je pense que c'est exactement ce que le marché voulait entendre. La Fed va maintenir sa politique pour conserver des taux bas et elle attendra que la reprise soit réellement engagée avant de la modifier."

latribune.fr

Etats-Unis : récession moins forte mais hausse du chômage

La Tribune.fr - 25/06/2009 Ã 15:15 - 276 mots

Le PIB américain a reculé finalement au premier trimestre de 5,5% en rythme annuel contre 5,7% estimés précédemment et attendus par les analystes. Les inscriptions hebdomadaires au chômage ont augmenté de 15.000 à 627.000, nettement plus qu'attendu.

La récession perd de sa méchante vigueur outre-Atlantique. Le département (ministère) américain du commerce a annoncé ce jeudi que le PIB (produit intérieur brut) a reculé finalement au premier trimestre de 5,5% en rythme annuel contre 5,7% estimés précédemment et attendus par les analystes.

Au dernier trimestre 2008, l'activité avait plongé de 6,3%. Elle avait déjà baissé au deuxième. Cela fait donc trois trimestres consécutifs de recul du PIB (deux suffisent pour qualifier techniquement une récession). Le trimestre qui s'achève ne devrait pas marquer de rebond.

Les plus optimistes espèrent un retour à la croissance ou au moins à la stabilité au troisième trimestre de cette année. D'autant que le phénomène de déstockage qui a amplifié la récession (et l'a même causé, selon les plus extrêmes) tend à se réduire.

Pour cela, il faudra que la consommation résiste malgré la hausse du chômage et surtout que l'investissement reparte après une chute de 48,9% en rythme annuel au premier trilmestre, du jamais vu depuis 1975, ce qui a fait perdre 8,20 points de croissance aux Etats-Unis. Ce sont surtout les entreprises qui ont stoppé leurs investissements (-37,6%).

Il faudra aussi pour cela que la situation de l'emploi aux Etats-Unis s'améliore. Or, les inscriptions hebdomadaires au chômage y ont augmenté de 15.000 à 627.000 lors de la semaine au 20 juin, contre 612.000 (révisé de 608.000) la semaine précédente, selon le département du Travail, et 600.000 attendus par les économistes.

La moyenne mobile sur quatre semaines s'établit à 617.250 contre 616.750 (révisé de 615.750) la semaine précédente. Le nombre de personnes percevant régulièrement des indemnités s'est élevé à 6,738 millions lors de la semaine au 13 juin contre 6,709 millions la semaine précédente.

latribune.fr

France : récession confirmée en début d'année, le moral des consommateurs s'améliore en juin

La Tribune.fr - 26/06/2009 Ã 08:48 - 362 mots

Le produit intérieur brut (PIB) de la France s'est contracté de 1,2% au premier trimestre 2009 par rapport aux trois mois précédents, a confirmé ce vendredi l'Insee. En revanche, le moral des consommateurs s'est nettement amélioré en juin pour revenir à son meilleur niveau depuis mars 2008, tout en restant en territoire négatif.

Le PIB français a bien baissé de 1,2% au premier trimestre, confirme ce vendredi l'Insee. Le chiffre du quatrième trimestre a été révisé en recul de 1,4% au lieu d'une baisse de 1,5% initialement annoncée.

Ces chiffres confirment que la France traverse la plus grave récession de son histoire, tout en résistant mieux que ses voisins, mais les indicateurs déjà disponibles pour le deuxième trimestre laissent prévoir une atténuation de la contraction du PIB qui selon l'Insee devrait être de l'ordre de 0,6% en avril-juin.

Au premier trimestre, les dépenses de consommation des ménages ont légèrement progressé selon les chiffres détaillés de l'Insee (de 0,2% après 0,1% au trimestre précédent). La formation brute de capital fixe (FBCF) totale connaît un nouveau recul (-2,4% après -2,5%), à l'image de la FBCF des entreprises non financières (ENF) (-3,4% après -2,8%) et de la FBCF des ménages (-1,6% après -2,6%).

Les exportations ont chuté de 6,4% après un recul de 4,7% au quatrième trimestre, et les importations de 5,3% après une baisse de 3,2%. Au total, le solde extérieur contribue pour -0,1 point à l'évolution du PIB ce trimestre (après une contribution de -0,3 point au trimestre précédent).

Enfin, les variations de stocks ont contribué pour -0,7 point à la croissance du PIB, comme au quatrième trimestre 2008. L'Insee signale encore que le taux de marge des entreprises non financières a augmenté de 0,4 point à 37,5% au premier trimestre et que la hausse du pouvoir d'achat du revenu disponible brut des ménages a ralenti à 0,4% (après 1% au quatrième trimestre 2008).

Par ailleurs, le moral des consommateurs s'est nettement amélioré en juin en France pour revenir à son meilleur niveau depuis mars 2008, tout en restant en territoire négatif, selon l'enquête mensuelle de conjoncture auprès des ménages publiée vendredi aussi par l'Insee. L'indicateur résumé de l'opinion des ménages en données corrigées (CVS) ressort à -37 après -40 en mai.

L'indice retrouve ainsi son niveau d'il y a quinze mois et se situe à 11 points au-dessus de son plus bas record de -48 touché en juillet 2008. L'enquête, publiée au lendemain de l'annonce de 36.400 demandeurs d'emplois supplémentaires en mai, montre que l'opinion concernant le chômage s'est de nouveau détériorée.

latribune.fr

Exclusive: The return of blood diamonds

The Independent

Six years ago, the world came together to stop a trade in gems that was fuelling civil war in Africa. Now the architect of the deal has quit, warning that jewels 'have blood all over them' again

By Daniel Howden, Africa Correspondent

Thursday, 25 June 2009

The leading architect of the international system to stop the trade in blood diamonds has warned that the safety net is close to collapse with governments and the industry failing to act against gross violations.

Ian Smillie, the "grandfather" of the landmark Kimberley Process, that was agreed in response to appalling civil wars in Africa fuelled by illegal gems, said he had "stomped out" on his scheme as it was no longer working.

"It isn't regulating the rough diamond trade," the Canadian expert said yesterday. "It is in danger of becoming irrelevant and it's letting all manner of crooks off the hook."

The Kimberley safeguards came into effect in 2003 and helped restore consumer confidence in precious stones. Today they regulate 99.98 per cent of the rough diamond trade, but if the process loses credibility, experts say criminals will re-enter the trade with conflict diamonds quickly reappearing in shops in London, Paris and New York.

Mr Smillie was one of the authors of the Kimberley Process Certification Scheme (KPCS), the UN-backed agreement credited with breaking the link between the diamond trade and vicious conflicts, mainly in southern and western Africa. His comments came as the 49 members of the Kimberley Process – made up of governments, industry and civil society – met in Namibia with a growing list of concerns.

Top of those is Zimbabwe, where hundreds of diamond miners were massacred by the army as the government effectively militarised a key mining area late last year. Some in the industry have questioned whether Zimbabwe's gems match the definition of conflict diamonds as they are helping to fund a government, not a rebel army, but Mr Smillie rejected this: "They are blood diamonds, they have blood all over them."

Zimbabwe is not alone and a host of other cracks have emerged in the system of safeguards meant to "ensure that diamond purchases were not funding violence". Monitors have pointed to the illegal trade flourishing in Ivory Coast, Guinea, Venezuela and Lebanon.

One-hundred percent of Venezuela's diamonds are being smuggled, according to the UK-based Global Witness; Guinea has reported an unfeasible 500 per cent increase in diamond production year on year; and Lebanon is exporting more rough diamonds than it imports despite having no local deposits. None of those countries have been suspended from the process and while inspection teams have been dispatched and reports commissioned, no action has been taken.

"The Kimberley Process is always the last to wake up and smell the coffee," Mr Smillie complained. It was claimed that he had "retired" from his role as one of the group's chief monitors earlier this year but the Canadian dismissed this report, saying he had "stomped out". "If it was working I would be there in Windhoek arguing with them or celebrating with them... but governments want to pretend that it is working." He said the mantra of KPCS has become "let's not do anything now" and accused them of "fiddling while Rome burns".

The KPCS is under strong pressure to act against Zimbabwe. "Hundreds of miners have been killed by their own government," said Annie Dunnebacke, lead campaigner from Global Witness. "How can that country still be part of the Kimberley Process? What's the point of having a stick if the stick is never used? Zimbabwe should be suspended."

The Namibia meeting which ends today has agreed to send an inspection team to the troubled southern African nation next week but it's unlikely they will be given serious access to the Marange area where the killings occurred. Inspectors have privately admitted that people they want to interview have been arrested or intimidated already.

Global Witness and Mr Smillie's Partnership Canada-Africa NGO were among the pressure groups who put blood diamonds on the agenda of the UN Security Council in 2000. At that stage rough gems were helping to pay for vicious civil wars in Sierra Leone, Liberia and Angola that cost hundreds of thousands of lives.

A UN resolution in December 2000 launched the Kimberley Process, and it was signed three years later. On its own website the organisation trumpets its success: "Diamond experts estimate that conflict diamonds now represent a fraction of one per cent of the international trade in diamonds, compared to estimates of up to 15 per cent in the 1990s. That has been the Kimberley Process's most remarkable contribution to a peaceful world."

The key to that success was ensuring that it reached all countries involved in the trade. Its future depends on ensuring there are no grey areas for blood diamonds to exploit. "Diamonds travel quickly," explained Mr Smillie.

The consequences of a collapse of the Kimberley Process would be twofold, he warned. "The diamond trade would go back to its criminal past and rebel armies would have no problem finding buyers for their blood diamonds. The potential for diamonds fuelling conflict would be back," he said.