2024-09-10 20:16

QUITO, Sept 10 (Reuters) - Ecuador's state-owned energy company Petroecuador on Tuesday said it will launch a new bidding process to find a new operator for its offshore Campo Amistad gas field, the Andean country's only such energy operation. The field produces around 21 million cubic feet of gas per day from three operating wells, the company said in a statement. Including the three producing wells, the field has a total of 17 drilled wells, the statement added. "Intense work and evaluation of possible interventions and reconditioning of the existing wells was carried out but an economically viable solution could not be found. Petroecuador does not have the technical know-how or necessary personnel to undertake this operation," it said. The hope of the bidding process is to find an international operator with the correct knowledge base to run the gas field, Petroecuador added. Sign up here. https://www.reuters.com/business/energy/ecuadors-petroecuador-launches-bidding-process-offshore-gas-field-2024-09-10/

2024-09-10 19:33

NEW YORK, Sept 10 (Reuters) - U.S. ultra-low sulfur diesel futures fell to a three-year low on Tuesday, dragged down by concerns of weak economic activity which have also deepened a selloff in the broader oil market. ULSD futures traded on the New York Mercantile Exchange fell 3.6% to settle at $2.06 a gallon, the lowest since August 2021. U.S. crude futures fell 4.3% to end at $65.75 a barrel, their lowest since December 2021. WHY IT IS IMPORTANT Signs of weak economic activity in the U.S. and China, the top oil consumer and top importer, respectively, have weighed heavily on oil and fuel markets in recent months. Diesel is primarily used in industrial activities, tying the fuel's consumption closely to manufacturing growth. CONTEXT The Organization of the Petroleum Exporting Countries on Tuesday lowered its world oil demand forecast for this year and next, with the bulk of the cuts due to expectations of lower growth in China. The producer group said headwinds in China's real estate sector and growing adaptation of liquefied natural gas (LNG) as a trucking fuel in the country will likely weigh on diesel demand going forward. Meanwhile, the U.S. Energy Information Administration on Tuesday lowered its forecasts for this year's distillate fuel consumption in the country, also citing economic concerns from slowing job growth in recent months and the growing use of alternative fuels. BY THE NUMBERS China's LNG-powered truck fleet reached 730,000 in June and is expected to grow to 850,000 vehicles by the year-end, a China oil researcher told Reuters on Tuesday, displacing 280,000 barrels per day (bpd) of diesel in 2024. U.S. distillate demand, which includes diesel and heating oil, is now expected to average 3.83 million barrels per day (bpd) this year, down from a prior forecast of 3.87 million bpd, the EIA said on Tuesday. It estimated demand last year was around 3.92 million bpd. While conventional diesel use is seen declining year-over-year, the EIA expects the biofuel component of the market to grow. Biofuel consumption is expected to rise to 360,000 bpd this year, from 310,000 bpd last year, the EIA said. Sign up here. https://www.reuters.com/markets/commodities/us-diesel-futures-hit-3-year-low-oil-selloff-deepens-demand-concerns-2024-09-10/

2024-09-10 19:31

Sept 10 (Reuters) - U.S. natural gas futures climbed about 3% on Tuesday as oil and gas producers cut output ahead of a hurricane expected to hit Louisiana on Wednesday. The U.S. National Hurricane Center projected Tropical Storm Francine will strengthen into a hurricane on Tuesday before hitting the Louisiana coast on Wednesday. Louisiana is home to three of the nation's seven big operating LNG export plants. Front-month gas futures for October delivery on the New York Mercantile Exchange rose 6.2 cents, or 2.9%, to settle at $2.232 per million British thermal units (mmBtu). Prices rose even though Francine is expected to cut demand by curtailing gas flows to Gulf Coast liquefied natural gas (LNG) export plants and cause homes and businesses to lose power. Because over 75% of U.S. gas production comes from big inland shale basins like Appalachia in Pennsylvania, West Virginia and Ohio and the Permian in West Texas and eastern New Mexico, analysts said hurricanes were more likely to reduce gas prices by cutting demand through power outages and knocking LNG export plants out of service. That is different from 20 years ago when about 20% of the nation's gas came from the federal offshore Gulf of Mexico. Back then Gulf Coast hurricanes usually caused gas prices to spike higher, but now that offshore region produces only about 2% of the country's gas. In the spot market, pipeline constraints caused next-day gas prices at the Waha hub in the Permian Shale in West Texas to fall to an all-time low and average in negative territory for a record 34th time this year. Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six times in 2020 and once in 2023. SUPPLY AND DEMAND Financial firm LSEG said gas output in the Lower 48 U.S. states has slid to an average of 102.2 billion cubic feet per day so far in September, down from 103.2 bcfd in August. On a daily basis, output was on track to drop by 2.9 bcfd to a preliminary 16-week low of 99.9 bcfd on Tuesday. Analysts said some of that output declined probably because some energy firms shut production ahead of Francine. They also noted, however, that preliminary data is often revised later in the day. Meteorologists forecast weather across the U.S. would remain mostly near normal through Sept. 12 before turning warmer than usual from Sept. 13-25. Analysts however noted that warmer-than-normal weather in mid-September would still be pretty mild, keeping demand for heating and cooling low. LSEG forecast average gas demand in the Lower 48, including exports, will rise from 99.4 bcfd this week to 100.4 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday. Gas flows to the seven big U.S. LNG export plants have risen to an average of 13.3 bcfd so far in September, from 12.9 bcfd in August. That compares with a monthly record high of 14.7 bcfd in December 2023. On a daily basis, total LNG feedgas was on track to decline to a one-week low of 12.4 bcfd on Tuesday after the amount of gas flowing to the 2.0-bcfd Cameron LNG export plant in Louisiana fell from 2.2 bcfd on Monday to 1.3 bcfd on Tuesday, LSEG data showed. The NHC forecast Francine would hit the Louisiana coast near Cameron as a hurricane on Wednesday. LNG plants pull in more gas than they can turn into LNG because they use some of that gas to fuel equipment. Sign up here. https://www.reuters.com/business/energy/us-natgas-prices-climb-3-producers-cut-output-ahead-storm-francine-2024-09-10/

2024-09-10 17:02

LONDON, Sept 11 (Reuters) - Trend-following hedge funds took a hit from their bets on the New Zealand dollar and Japanese stocks and bonds in August, when global markets were rattled by extreme volatility, according to Societe Generale data seen by Reuters. These funds finished August with long positions in Japanese government debt, U.S. equities and the Australian and New Zealand dollars, SocGen data showed. Some of the asset classes now favoured by the trend hedge funds that use algorithms to catch and ride price movements have proven loss-making this year, according to the data. However, it was not clear whether they held bullish or bearish positions when they incurred the losses. August's worst bets for hedge funds were in 10-year Japanese government bonds , the Nikkei 225 (.N225) , opens new tab, the New Zealand dollar as well as German (.GDAXI) , opens new tab and Italian stock markets (.FTMIB) , opens new tab, the SocGen note said. The Mexican peso , the British pound , the euro , blended gasoline and U.S. 2-year Treasuries have all been losing trades this year so far, but in August they proved profitable. The sudden reversal of crowded equity and foreign exchange trades last month was sparked by the unwinding of massive carry trades - in which investors had borrowed low-yielding currencies like the Japanese yen to buy higher-yielding assets - that in turn generated a vicious feedback loop of equity price drops, volatility and hedge fund selling. The market ruction was short-lived and world stocks returned to record highs later in that month. This proved tough for some trend followers, which saw double-digit performance declines during August, including funds within Eclipse Capital Management, Drury Capital and SEB Asset Management, which all posted negative performances of over 10%, the note showed. The funds within Drury Capital Management and SEB Asset Management are still up 3.45% and 0.57% for the year to end-August, respectively, according to the SocGen data. Hedge funds which put on shorter-term trades recorded the best August results. These included funds within Revolution Capital Management, Altiq and Crabel Capital Management, showed the bank data. These firms finished August with between a 3.8% and 4.5% positive performance, according to SocGen. Altiq and SEB Asset Management declined to comment. The other funds did not immediately respond. Sign up here. https://www.reuters.com/markets/nz-dollar-japan-bonds-zap-trend-hedge-fund-august-returns-bank-data-shows-2024-09-10/

2024-09-10 16:26

NEW YORK, Sept 10 (Reuters) - Morgan Stanley expects activity for mergers, acquisitions and initial public offerings to remain below trends for the rest of the year, its co-president Dan Simkowitz said on Tuesday. Activity will probably pick up next year as central banks cut interest rates, said Simkowitz, who also leads the Wall Street giant's Institutional Securities Group. Transactions will probably increase when U.S. interest rates fall, Simkowitz told investors at a conference in New York. Private equity firms, which have held off on selling assets to get higher valuations, will also come under more pressure to strike deals, he said. Morgan Stanley's net interest income, or the difference between what the bank makes on loans and pays out on deposits, to be modestly lower in the third quarter, he said. Shares fell almost 3% in early afternoon trading in New York. Simkowitz highlighted private markets as a large growth area for Morgan Stanley. The bank has about $500 billion in private market assets managed among its wealth and investment management divisions, he said. Sign up here. https://www.reuters.com/markets/deals/morgan-stanley-expects-mergers-ipos-lag-trends-through-2024-2024-09-10/

2024-09-10 15:37

Volatility elevated as risks mount VIX hovers around 20, above 2024 average of 14.8 Fed, economy on investor radar Analysts advise staying hedged NEW YORK, Sept 10 (Reuters) - Growing risks to the U.S. stock rally are spurring demand for portfolio hedging, options markets showed, as investors grapple with U.S. economic uncertainty, shifting Federal Reserve policy and a looming presidential election. As the spotlight turns toward Tuesday's high-stakes televised debate between Democrat Kamala Harris and Republican Donald Trump, the Cboe Volatility Index (.VIX) , opens new tab is hovering around 20. That compares with a 2024 average of 14.8 for the index, which measures demand for protection against stock swings. The VIX typically rises around 25% between July and November in election years, as investors sharpen their focus on the market implications of candidates' policy proposals, BofA data showed. This year, however, political concerns have coalesced with more pressing catalysts for volatility, such as worries over a potentially softening U.S. economy and uncertainty over how deeply the Fed will need to cut interest rates, investors said. The S&P 500 notched its worst weekly percentage loss since March 2023 last week after a second-straight underwhelming jobs report, though the index is still up nearly 15% this year. The Fed meets on Sept. 17-18. "This is an uncertain market," said Matt Thompson, co-portfolio manager at Little Harbor Advisors. "The market is essentially saying, we know risk is elevated, but ... we don't know what the problem is going to be." With volatility already percolating, the "election bump" in October VIX futures, which also encompass the Nov. 5 vote, is smaller than in previous years. On Tuesday, they traded at 19.47, just over 1 point above the September contracts. The gap between the contracts with the highest and lowest volatilities was about 1.4 volatility points. In the 2020 and 2016 election cycles, the futures curve presented a 7.3 and 3.4 point gap, respectively, between the months with the highest and lowest volatility, a Reuters analysis of LSEG data showed. That's not to say politics haven't had any impact on markets this year. A June debate saw a disastrous performance by President Joe Biden boost bets on a Trump win, fueling rallies in corners of the U.S. equity market that could benefit from Trump policies such as such as tax cuts and regulatory easing, including small caps and energy shares. Many of those "Trump trades" abated after Harris replaced Biden as the Democratic contender and the candidates' standings in polls narrowed. “Because there is no obvious frontrunner in the polls, Tuesday's debate will be important in terms of lending clues to who the eventual winner may be, which of course has market and policy implications,” said David Bahnsen, chief investment officer at The Bahnsen Group, in a Monday note. SPEED BUMPS AHEAD? The VIX has been in sharp focus for investors in recent weeks after the index posted its largest ever one-day spike on Aug. 5, during a sharp market sell-off spurred by economic worries and an unwinding of the global yen carry trade. Though volatility took only days to subside, the index has crept up again as markets have grown choppy again in recent days. Societe Generale analysts advised investors on Monday to stay hedged for the next three to six months, warning of possible volatility from economic surprises and geopolitical factors, including the U.S. election. Others, however, see reasons why investors are less nervous about election risks this time around. Stocks have done well under both Trump and Biden, noted Seth Hickle, managing partner at Mindset Wealth Management. With Harris' policies seen as sticking close to Biden's, either candidate's victory does not present a major challenge to investors. "We don't really have a whole lot of uncertainty when it comes to what's going to change. I don't think it really spooks the market because we have already been through it," Hickle said. POLICY DETAILS Investors on Tuesday night will be looking for details on everything from deficit spending and clean energy to tax policy. Trump has promised lower corporate taxes and a tougher stance on trade and tariffs. He has also said a strong dollar hurts the U.S., though some analysts believe his policies could spur inflation and eventually buoy the currency. Harris last month outlined plans to raise the corporate tax rate to 28% from 21%. Clean-energy initiatives launched under Biden may continue under a Harris administration, potentially boosting shares of solar companies, which have faced headwinds from elevated U.S. interest rates. Some analysts believe her push to lower drug prices may weigh on healthcare stocks. With uncertainty swirling over the U.S. economy and Fed policy, investors might have a narrow range of pure election trades to target in coming days, according to strategists at Citi. "Once the Fed decision is out of the way, election trades may become broader again," they wrote. Sign up here. https://www.reuters.com/markets/us/us-election-is-just-one-risk-among-many-nervous-stock-market-2024-09-10/