US Inflation: Accelerated in March Due to Strengthening Economy, Rising Energy Prices

U.S. consumer prices rose sharply in March as the economic recovery gained momentum, marking the start of an expected monthslong pickup in inflation pressures.

Some of the price increases reflected temporary factors, but others showed how demand for many goods and services is reviving a year after the coronavirus pandemic shut down large swaths of the economy, analysts said.

Read more at: Inflation Accelerated in March Due to Strengthening Economy, Rising Energy Prices - WSJ

EU -Turkey-Russian Energy Cooperation: "Politics can make strange bedfellows" - Russia’s Gas Strategy Gets Help From Turkey - by Marc Pierini

Politics/Energy can make strange bedfellows

It was November 19 in Istanbul. There, Russian President Vladimir Putin and Turkish President Recep Tayyip Erdoğan held a ceremony marking the completion of the first underwater segment of the Turkish Stream gas pipeline, linking Russia to Turkey’s European shores. The project is a vivid illustration of Moscow’s strategy to strengthen its position in supplying gas to Europe while reducing its reliance on the Ukrainian transit corridor.

For Ankara, the project is a symbol of Turkey’s independent decisionmaking and of the country’s significance in the wider region. Seen from Ankara, Turkish Stream serves a political purpose. It celebrates the blossoming friendship between Turkey and Russia and confirms Ankara’s ambition to be part of the solution to major international issues—in this case, securing the gas needs for a large part of the EU. 

However, Turkish Stream will also increase Ankara’s dependence on Moscow for its energy needs.

The project’s second meaning is that Turkey is contributing to an essential element of Russia’s multi-pronged, long-term strategy of remaining Europe’s major gas supplier, while creating a “third gas corridor” in addition to the Ukrainian and Baltic Sea supply routes. This strategy is unfolding on several fronts: in Ukraine; in the Baltic Sea; and through future extensions of Turkish Stream to southern and central Europe (toward Bulgaria, Serbia, Hungary, Slovakia, and to Greece and Italy.)  

This Russian strategy has raised continuous opposition from the United States.

It is also worth noting that Turkish Stream is not part of the EU’s Energy Union plans since it does not contribute to diversification of supplies. In fact, it will rather reinforce Russia’s market  predominance in both Turkey and the EU.

In Ukraine, the multi-pipeline network channeling Russian gas to Western Europe will remain a vital link. But reducing its use could inflict massive losses in terms of transit costs for authorities in Kiev, which is part of Russia’s strategy in Ukraine.

Much will depend on negotiations for the extension of the Russia-Ukraine commercial agreement, which will end in 2019. To help alleviate Kiev’s concerns, Germany has made the continuation of transit via Ukraine an ingredient of a final agreement on Nord Stream 2, the latter being the subject of controversies within the EU.

The Russian strategy is in no way limited to selling Russian gas on the European continent. It extends much further afield in the wider Eastern Mediterranean region.

Egypt is a case in point.

Following the massive discoveries in the so-called Zohr field to the north and east of the Nile River delta, Russia bought a 30 percent stake from the Italian energy group ENI in 2016 with the consent of the Italian government, which Moscow has had a long and close relationship with. The official reason for the sale was the need for ENI to spread the risk of its Egyptian operation.

Similarly, offshore gas discoveries in Lebanese waters have attracted Russian interest— although drilling off Lebanon is largely dominated by France’s TOTAL and Italy’s ENI, who have a 40 percent share each. Russia’s NOVATEK has bought a 20 percent stake.

Russia has also made moves to control both the oil and gas sector in Syria, despite the ongoing war. The actual effect of these recent maneuvers will very much depend on the final political arrangement expected to end the almost eight-year-old civil war. Many of Syria’s oil and gas fields are located north and east of the Euphrates River, currently outside the control of regime forces. In addition, for reasons linked to the ongoing naval military activities, no offshore exploration has yet taken place in Syrian waters.

In Iraq, Russia is involved in pipeline deals in the Kurdistan region through a number of oil and gas companies, although the actual exports would have to take place through Turkish territory or possibly even through Syria in the distant future.

Such an ambitious Russia strategy is justified by Europe’s gas market fundamentals.

A stronger demand for gas in Europe is good for Russia. According to Oxford Energy, gas demand in Europe (Turkey and non-EU Eastern Europe included, except Serbia) has started rising again for three consecutive years—in 2015, 2016, and 2017—to reach a level of 548 billion cubic meters (bcm), due to continued economic recovery, the impacts of climate change, and the increased use of gas by the power sector. The trend seems to be continuing in 2018.

According to the Finnish Institute for International Affairs, Russia took advantage of several factors: economic recovery and decreasing gas production in the EU, lower Russian selling prices, and the current limited availability of non-Russian liquefied natural gas (LNG) on the European market.

In addition, preexisting disputes between the EU and Russia (including an antitrust investigation against Gazprom, and a Russian complaint at the WTO) have been resolved, signaling that commercial interests on both sides have prevailed, despite a less-than-optimal political climate.

In such an environment, Russia is in a strong position to keep dominating gas supplies to the EU, 

which amounted to 40 percent of extra-EU imports in 2016—although new developments could upset the current situation, such as a rapid development of LNG exports to Europe from other sources.

LNG imports amounted to only 14 percent of total extra-EU gas imports in 2017, with the main supplies coming from Qatar (41 percent), Nigeria (19 percent), and Algeria (17 percent).

In this wider context, and seen from Brussels, Turkish Stream—with a final projected capacity to deliver 31.5 bcm/y, of which 15.75 bcm/y would go to Europe —is a relatively small component of the wider gas supply chain to the EU. In fact, it would represent just over 6 percent of the EU’s imports at 2017 levels.

Yet, seen from Moscow, the pipeline is potentially a significant addition to Russia’s capabilities to export gas to Europe (Turkey included). Assuming that Turkish Stream’s second phase will be completed and operational, it would represent between 16 and 19 percent of Russian sales to the EU and Turkey (at 2017 levels and all other factors remaining unchanged).

In that sense, the ceremony on November 19 in Istanbul was more than just another photo opportunity. It was a symbol of the success of Russia’s objectives in the wider Western European area, with Turkey’s help. 

Together with Russia’s S-400 missile deal with Turkey, it was a symbol of how efficiently Moscow has been using Ankara’s relative diplomatic isolation to its advantage. For Ankara, this was another way of telling the world: Turkey matters.

Read more: Russia’s Gas Strategy Gets Help From Turkey - Carnegie Europe - Carnegie Endowment for International Peace

EU: Economy - Annual Inflation up to 2.2 % with energy cost rising to 10.6%

EU Annual Inflation rate rising.  Looking  at  the  main  components of  euro  area inflation, energy expected to have the highest annual  rate in October (10.6%)compared to 9.5% in September.

Read more  at: 2-31102018-AP-EN.pdf

Ukraine - Russia: EU leaders extend Russian sanctions over Ukraine for six more months

US sanctions against Russia are likely to figure large when US President Donald Trump meets,,his Russian counterpart Vladimir Putin in Helsinki on July 16.

Evidence of Russian meddling in the US 2016 election led the US to impose sanctions on Russia in April, but Trump and some European leaders have questioned if sanctions against Russia have the desired effect.

A spokeswoman from the German economy ministry said on Friday that the ministry had received a commitment from the US that any new US sanctions would not affect Russian pipelines, a reference to the controversial Nordstream II pipeline linking Russia and Germany.

Read more: EU leaders extend Russian sanctions over Ukraine for six more months | News | DW | 29.06.2018

USA Energy Spending: Trump Administration spending Billions to keep unprofitable Coal and Nuclear plants alive

Leaked document shows Trump officials planning to force Americans to spend $311m-$1.8b/year to keep unprofitable coal and nuclear energy plants from shutting

For more info go to :

http://flip.it/aYLlaR

Russia-US Sanctions: U.S. lawmakers’ attempt to handcuff Trump on Russia could backfire, Europe says - by Michael Birnbaum

A top E.U. leader warned Wednesday that a U.S. congressional vote to strip President Trump of the ability to remove sanctions against Russia could backfire, dealing a blow to transatlantic efforts to curb Russian aggression against Ukraine and sparking a trade war between Europe and the United States.

The House of Representatives approved the measure Tuesday, 419 to 3, after the Senate passed similar legislation last month in a 98-to-2 vote. The White House has not indicated whether Trump will sign the bill.

The bill’s main goal is to force Trump to consult with Congress before dialing back sanctions, a reaction to a White House plan weighed in his first weeks in office to unilaterally end the measures against the Kremlin. But the legislation would also give Trump the power to ban investments in certain Russian energy projects, most notably a major Russia-to-Germany gas pipeline under development called Nord Stream 2, and to promote U.S. energy exports instead.

The legislation’s language was softened in the days ahead of the vote, in apparent acknowledgment of European worries. But many policymakers and experts in the European Union’s capital, Brussels, and in Berlin still say that Congress may ultimately harm its own effort to pressure Russia. The worries are also a measure of the Trump White House’s diminished standing in Europe, since the policymakers are mistrustful of U.S. natural-gas exports that were welcomed during the Obama administration.

Read more: U.S. lawmakers’ attempt to handcuff Trump on Russia could backfire, Europe says - The Washington Post

Wall Street Under Pressure: Russia, Saudi Arabia to pump as much as possible

 Ahead of the doomed Doha talks last weekend, Russia and Saudi Arabia said they were willing to discuss freezing oil output, but less than a week later both have threatened to ramp up production. On Friday, the head of the Oil Industry and Markets Division at the International Energy Agency (IEA) told CNBC that he believed both producers will continue to "pump as much oil as possible."

"In the post-Doha world, when we're still in what is essentially a free market for oil, they (the Russians) will pump as much oil out as the market will absorb and the Saudis have said much the same thing," the IEA's Neil Atkinson told CNBC."

"We're back to where we were before Doha where people produce what they can, sell what they can for whatever price they can achieve and the market takes care of the surpluses in time."

Atkinson noted that "as far as the Russians are concerned, even in the run-up to Doha when they were going to be party to an agreement to freeze production, they were actually pumping up production anyway."


 Russia, Saudi Arabia to pump as much as possible: IEA expert

Oil Supply: Is there a possibility of an OPEC production cut?

The speculation surrounding the possibility of an OPEC production cut have not gone away, despite the comments from Saudi oil minister Ali al-Naimi earlier this week.

Venezuela’s oil minister stoked the markets when he said on Thursday that representatives from Russia, Saudi Arabia, Qatar, and Venezuela would meet in mid-March to discuss cooperative efforts to stabilize oil prices. Oil prices shot up more than 1 percent on the news, but there isn’t much new here to trade on.

hese countries will move forward with the production freeze, but that will likely have only a limited effect on the fundamentals in the short-term. An actual production cut remains a remote possibility for now.

Insure-Digest

Wall Street Casino Roller Coaster : Dow closes up triple digits as 3M climbs, oil bounces

U.S. stocks closed higher Tuesday, helped by a bounce in oil and some earnings beats, ahead of the release of the Fed meeting statement Wednesday.

"Again it comes back to our high correlation to oil," said JJ Kinahan, chief strategist at TD Ameritrade.

"I would say there's some short-covering to this rally and there's a little bit of expectation that Apple can help things with earnings tonight," he said.

he major averages closed off session highs but held more than 1 percent higher as oil topped $31 a barrel.

The Dow Jones industrial average outperformed, closing nearly 1.8 percent higher for its best day since December 4 as 3M surged on its earnings report.

"I think this is a lot of noise, a lot of volatility before we hear from the Fed," said John Caruso, senior market strategist at RJO Futures.

Despite Tuesday's gains, the major averages were still lower by almost 7 percent or more for the year so far and more than 10 percent below their 52-week intraday highs, in correction territory.

Note EU-Digest: The unregulated Wall Street Casino - up 200 one day - down 200 the next, as the manipulating management of this Casino. (the  financial Industry) laugh all the way to the bank.

Read more: Dow closes up triple digits as 3M climbs, oil bounces

Oil: Will Cheap Oil Kill Global Stability ? "No it won't say experts-Yes it will says Wall Street PR on steroids" - by Judy Dempsey

Kris Bledowski, Director of economic studies at the Manufacturers Alliance for Productivity and Innovation notes:

"The answer depends on how “stability” is defined. In political terms, one could see some instability creep in or deepen in countries where oil plays a disproportionately large fiscal role.

Yet this impact would be felt locally rather than globally, andmostly in countries with already-weak polities. Venezuela, Nigeria, or parts of the Middle East come to mind. It’s less likely  that potential conflicts could spill over outside domestic or localtheaters.

The economic impact has already been felt the world over. In the United States, mining activity has depressed industrial output, while in Canada the entire economy plunged into recession in 2015 as a result of sharply lower oil prices.

At the same time, income losses are being at least partly offset by gains on the consumer end. Shifts in relative prices of major inputs or outputs occur all the time,and the world economy is resilient enough to absorb them. Overall, oil and its derivatives make up a small and declining share of unit energy costs.

If global investment flows are more unpredictable, currencies more volatile, and changes in income more pronounced, other factors should be taken into account as well. Among them are differences in monetary policies (in the United States and the EU), private debt levels (in Brazil and China), and economic governance (in Russia and Saudi Arabia).

Ian Bremmer, President and founder of Eurasia Group says: 
"Did Mikhail Gorbachev’s reforms kill Soviet stability? No. They hastened the melting of frozen instability. That’s the impact of cheap oil on the Middle East, in particular the Sunni Arab petrostates and the governments that rely on their largesse.

There’s already little domestic legitimacy keeping these regimes in place. The United States has little desire toact as the region’s policeman, and nobody else is going to pick up the baton.

Communication technologies allow disenchanted young men to more easily mobilize.

And there are scant few social, economic, and political reform efforts among the governments themselves; security solutions don’t address the underlying problems. Cheap oil makes those conflicts grow sharper. And faster."

Jan Cienski, Energy and security editor at POLITICO says:
"No, cheap oil won’t kill global stability—infact, it will bolster it. That doesn’t mean low oil prices aren’t terrible news for a host of countries like Russia, Saudi Arabia, Venezuela, Angola, and other emerging markets that have built their budgets on oil exports. But as their revenues shrink, their largely autocratic rulers will have to focus more on keeping their people from rebelling over budget cuts and less on causing trouble abroad.

No, cheap oil won’t kill global stability—in fact, it will bolster it. That doesn’t mean low oil prices aren’t terrible news for a host of countries like Russia, Saudi Arabia, Venezuela, Angola, and other emerging markets that have built their budgets on oil exports.

But as their revenues shrink, their largely autocratic rulers will have to focus more on keeping their people from rebelling over budget cuts and less on causing trouble abroad."

Deborah Gordon, Director of Carnegie’s Energy and Climate Program notes: "mighty global omnipotence is often attributed to oil. But it’s unclear whether low (or high) oil prices themselves can be squarely blamed for growing global instability. Increasing oil market volatility, however, could prove to be a stronger destabilizing force.

If oil prices continue to swing wildly back and forth in the years ahead, this could confound economic, technological, and geopolitical fundamentals."

Note EU-Digest: Wall Street and the financial Industry seem to be the only ones who are saying that lower oil prices will contribute to Global Economic and Political Instability , mainly because it hurts their energy investments and market portfolio's . The drop in oil prices, however, has been very beneficial  to consumers and the the economy in general.

EU-Digest

Oil Prices Rebound Above $30. Is A Rally Finally Here?

Oil prices plumbed new lows this week, dropping below $28 per barrel. But oil also closed out the week on a positive note, with huge gains on Thursday and Friday, rallying back above $30 per barrel. The price increase could be a sign that the markets think that oil has been far oversold, that trading this low has been “irrational,” as the head of Saudi Aramco put it this week.

Adding to the upsurge was growing speculation that central banks around the world will take additional action to provide some monetary stimulus amid worrying signs of faltering growth. EU central bank chief Mario Draghi provided the clearest indication yet that his institution may act as soon as March.

It’s a little premature to say a rally is on, but oil prices are going to have to rise at some point with so much production currently underwater. CMC Markets, a UK-based trader, says that $34 is the next resistance point for oil, from a technical perspective. If oil can break above $34 per barrel, then the rally could have some momentum.

At the World Economic Forum in Davos, Nigeria’s oil minister Emmanuel Kachikwu said that he expects oil to rise to $40 by the end of the year. Oil prices could get worse in the short-term, but “the second half of this year holds more promise,” he said.

Insure-Digest

Oil Price: Saudi Arabia Cuts Subsidies As Budget Deficit Soars - by Andy Tully

The price of crude oil has dropped so low that Saudi Arabia is facing a growing budget deficit, prompting the rich oil kingdom to make sharp cuts in its budget, levy new taxes and reduce government subsidies for water, electrical power and even gasoline.

This is an abrupt change in the country, OPEC’s largest oil producer, which has used its vast oil revenues to prop up the national economy to serve a population of about 30 million people. But even Saudi Arabia can’t sustain such practices when it runs a $98 billion deficit this year – about 15 percent of its gross domestic product.

As a result, Riyadh announced Monday it will cut government spending by 14 percent in the coming fiscal year as it sees no quick end to the depression in oil prices, especially now that Iran, expected to be free of Western sanctions in the near future, will return to the global oil market.

And without even waiting for 2016 to arrive, the government immediately raised the price of retail gasoline by 50 percent, from 0.60 of a riyal to 0.90 of a riyal per liter of premium gasoline – or from 16 cents to 24 cents. That may not seem a huge cost compared with even today’s lower gasoline prices in the West, but it’s crucial in a country that relies on cars because there is no public transportation.

Certainly the low price of oil isn’t the only reason Saudi Arabia is running a deficit. It’s also spending generously on military action in the Middle East. It is giving financial support to rebels opposed to Syrian President Bashar al-Assad, whom Riyadh wants out. And since last spring it has waged an air war in Yemen against Houthi rebels, who are supported by Iran, a religious rival of Saudi Arabia.

But the biggest reason for the deficit is the price of oil. In June 2014, the average global price for a barrel of crude was above $110. Increased production in non-OPEC countries began to create a supply imbalance, putting downward pressure on oil prices. Now a barrel of oil costs less than $40.

Read more: Saudi Arabia Cuts Subsidies As Budget Deficit Soars | OilPrice.com

OilPrice Intelligence Report: Outlook For Oil In 2016 Still Grim

As we head into the holidays, there may be a shortage of holiday cheer for energy companies and their investors. Here’s hoping to a much improved New Year!

Oil prices saw no relief since last week, with the surprise jump in the active rig count in the United States weighing on the market. Baker Hughes reported an increase of 17 for oil rigs (offset by a decline in the gas rig count), a bearish signal that suggests that some drillers feel they can still make money drilling despite rock bottom oil prices. To be sure, there is a lag time between oil prices and the rig count figures, and the metric is not a perfect measure of market conditions. But the increase caught the markets by surprise, sending oil prices down to 11-year lows, surpassing the low points logged during the depths of the financial crisis in 2009.

There are few reasons to be bullish right now, although most market watchers still target late 2016 as the period in which things start to turn around. "We view the oversupply as continuing well into next year before rebalancing in the fourth quarter 2016," Goldman Sachs said in recent report. "Our base case remains that the global oil stock build will on aggregate remain shy of storage capacity, although the storage buffer has once again narrowed." Mild temperatures continue to suppress demand across the United States for natural gas and liquid fuels, which could ultimately result in a much smaller drawdown during winter heating season than is typical.

Of course, oil prices staying below $40 per barrel is extremely negative for oil and gas producers. With hedges rolling off, 2016 is shaping up to be a very painful year for the entire sector. S&P recently warned that financial stress in the energy industry will likely rise as we head into the New Year. “Hedges represent 8% (1.619 MMboe/d) of total expected oil and gas production in 2016, a marked decline from the 15% hedged last year,” S&P said this month. “The trend continues for speculative-grade companies, which have just 29% (1.437 MMboe/d) of total oil and gas production hedged next year compared with 45% in 2015.”

The economic damage inflicted upon oil-producing countries has also been well documented and closely watched. Nigeria is one such country. The West African OPEC member has seen its budget decimated by low oil prices, and the government has come under increasing pressure to devalue its currency, the naira, because of the weakening economy and shrinking foreign exchange. Nigerian President Muhammadu Buhari has held out, projecting confidence that Nigeria can maintain the peg. However, he recently opened the door to a potential devaluation in January.

Buhari said that the central bank could introduce “some flexibility” that would encourage some capital inflows. Nigeria has suffered from a shortage of dollars, which has made some economic transactions difficult in the country. A devaluation would logically address this problem. “I am aware of the problems many Nigerians currently have in accessing foreign exchange for their various purposes,” the president said. “These are clearly due to the current inadequacies in the supply of foreign exchange. We are carefully assessing our exchange-rate regime, keeping in mind our willingness to attract foreign investors, but at the same time managing and controlling inflation to a level that won’t harm average Nigerians.”

Weakening currencies is a problem throughout the oil-producing world, with significant declines exhibited in South America, Africa, the Middle East and Eurasia. Countries with flexible exchange rates have seen their currencies plunge over the past year while countries with fixed exchange rates are coming under extreme pressure to abandon their pegs and devalue. Nigeria’s naira peg could be next on the firing line, but it surely will not be the last.

Another bearish black swan event looming over the oil markets is latent Libyan oil capacity. Rival factions in Libya have carved up the country and kept the North African oil producer from exporting to its full potential. Libya’s oil output has been down around 400,000 barrels per day for the past year or two, while its Qaddafi-era capacity stood at 1.6 million barrels per day. However, the rival governments in Libya have started the peace process, and signed an UN-brokered accord last week. It is unclear whether the peace deal will hold, but if violence and instability begins to abate, Libya could start to bring some oil production back to international markets. The exact amount is unclear, but if, say, 500,000 barrels were brought back online sometime in 2016, that would be extremely negative for oil prices. That would essentially offset the expected declines from U.S. shale next year.