Economy

(Reuters) -Chevron Corp is marketing its interest in more than 2,000 oil and gas wells in Alaska, the company told Reuters on Monday, in a move that could mark the oil major’s second exit from oil production in the state in three decades.One of the earliest companies to prospect for oil in Alaska, Chevron (NYSE:CVX) helped develop the state’s oil industry last century but later exited output there in 1992. It returned a decade later with its $20 billion purchase of Unocal.The company is offering stakes in three oilfields, it confirmed. It holds around 10% in Alaska’s Endicott field, 5% in Kuparuk field and 1.2% in Prudhoe Bay. Bids are due this month. The stakes are non-operating interests that provide a share of profits.Chevron estimates the proved and developed portion of these assets is worth $655 million, and including future development, it could be worth $926 million, according to a marketing document the company shared.However, at current oil prices, a sale would likely fetch between $450 million and $550 million, according to a Rystad Energy analyst using comparable transactions. If a sale materializes, Chevron would follow in the steps of BP (NYSE:BP) Plc, which in 2020 sold its producing assets to closely-held Hilcorp for $5.6 billion and exited. Exxon Mobil (NYSE:XOM) separately transferred operations of Point Thomson oilfield to Hilcorp last year but retains a majority stake. The properties offered include interests in pipelines in the Kuparuk and Endicott fields, according to the marketing document. ConocoPhillips (NYSE:COP) operates the Kuparuk field, while Hilcorp operates Prudhoe Bay and Endicott, and either could bid on the assets, two people familiar with the companies said, requesting anonymity to discuss private plans.ConocoPhillips declined to comment. Hilcorp did not immediately respond to requests for comment.The oilfields that Chevron is offering produce around 9,400 barrels of oil and gas per day. Overall production in the state has been declining since a peak in 1988 when output exceeded more than 2 million barrels of oil a day. In 2021, Alaska produced 437,000 barrels of oil a day, the lowest since 1976, according to U.S. government data. More

Yields on US government debt reached the highest levels in over a decade on Monday as investors braced for a third consecutive jumbo 0.75 percentage point rate increase from the Federal Reserve on Wednesday. The yield on 10-year US government debt, a benchmark for global borrowing costs, pushed above 3.5 per cent for the first time since April 2011 as investors sold the bonds. The yield on the two-year Treasury note rose to a 15-year high of 3.94 per cent. While the two-year yield tracks interest rate expectations particularly closely, the entire spectrum of yields has rocketed higher as expectations for a longer period of high borrowing costs have set in.On Wall Street, the broad S&P 500 closed 0.69 per cent higher while the technology-heavy Nasdaq Composite gained 0.76 per cent on Friday. Europe’s region-wide Stoxx 600 slipped 0.1 per cent. The subdued performance on Monday comes after MSCI’s broad index of developed and emerging market stocks shed 4 per cent last week in its biggest weekly fall since June. Concerns about the health of the global economy and the spectre of further big rate rises from major central banks have spooked investors. “This feels like a make-or-break week. There is the residual anxiety of the repricing we went through last week and there is no sense at all that the sentiment is turning for something better,” said Samy Chaar, chief economist at Lombard Odier.In currencies, the dollar rose around 0.1 per cent against a basket of other currencies, extending a powerful surge in recent months that had been fuelled by rising US interest rates.“The currency market is probably summarising best how close we are to some kind of breaking point,” said Chaar. “The big question will be whether we will get some positive signal from central banks about when their hiking cycle will peak . . . You don’t see many paths through which the Fed could be reassuring.”The consensus expectation on Wall Street is that the Fed will boost interest rates by 0.75 percentage points at the end of its two-day meeting on Wednesday. Market forecasts for a third consecutive rise of that magnitude were bolstered last week by data showing US consumer price inflation cooled less than expected in August.Pricing based on federal funds futures suggests the Fed will lift its main interest rate to 4.4 per cent in the early months of 2023, from the current range of 2.25 per cent to 2.5 per cent, as policymakers attempt to cool inflation.Fears are mounting among investors that the central bank’s efforts to subdue inflation with monetary tightening will pull the US economy into recession as debt servicing costs rise for companies and individual borrowers. The yield on 10-year, inflation-linked US notes, which indicate the returns investors can expect to receive after accounting for inflation, reached a peak of 1.16 per cent, the highest since 2018. So-called real yields were around minus 1 per cent at the beginning of the year, flattering the valuations of fast-growing tech companies that make up a big weight on US stock indices.The Japanese yen slipped 0.3 per cent to ¥143 against the dollar after last week reaching a 24-year low before the government stepped up its verbal intervention aimed at soothing the country’s currency market.The Bank of Japan is set to make its latest policy decision on Thursday. Most economists expect the BoJ to stick with holding 10-year bond yields near zero as it attempts to stoke more durable inflation in an economy that has gone through decades of tepid price growth.The Bank of England is also set to announce its decision on interest rates on Thursday, with the consensus forecast among City of London analysts pointing to a 0.5 percentage point rise. Asian stocks also declined, with an MSCI gauge of shares in the region falling around 0.4 per cent. Equity markets in the UK and Japan were closed for public holidays. More

BUDAPEST (Reuters) -Hungary’s government has submitted the first of several anti-corruption bills to parliament on Monday as Budapest scrambles to avoid losing billions of euros in European Union funding.The European Union executive recommended on Sunday suspending funds worth 7.5 billion euros ($7.48 billion) for what it sees as Hungary’s failure to combat corruption and uphold the rule of law.The European Commission also set out requirements for Hungary to keep access to the funding, including new legislation, which Hungary said it would meet.Justice Minister Judit Varga said on her Facebook (NASDAQ:META) page that she had submitted the first bill to parliament as the government “will focus on drafting and implementing the commitments (to the EU) in coming weeks and months.””Hungary could enter the year 2023 without losing any EU funds,” Varga said.The bill modifies legislation relating to Hungary’s cooperation with the EU anti-fraud office OLAF, ensuring that OLAF gets support from Hungarian tax authority officials in its investigations of EU-funded projects and gets access to data and documents on the scene. In addition, it changes rules governing state asset management foundations, obliging them explicitly to issue public procurement tenders for projects and tightening conflict of interest rules in their management.Hungary’s case is the first in the EU under a new sanction meant to better protect the rule of law and combat corruption in the 27-nation bloc. Nationalist Prime Minister Viktor Orban, in power since 2010, has clashed with Brussels repeatedly over his policies that it sees as eroding democracy in Hungary.However, with big challenges over rising energy costs and double-digit inflation, a weak forint and a slowing economy, the veteran prime minister looks willing to fulfil EU demands to finally create institutions that would cut corruption risks in EU-funded projects.”The latest developments in Brussels certainly come at a bad time for Orban, who is struggling with a swath of political and economic problems brought about by both global issues, most notably rising energy prices, so he is likely to go further to satisfy Brussels’ demands,” said Mujtaba Rahman, Managing Director Europe at Eurasia Group.He said Budapest would likely secure the pending deal but that would not resolve all the outstanding disagreements over other chunks of EU funds. “The bigger problem for Orban is the money tied up in the Recovery Fund, because the Commission has more discretion over whether it gives that the green light or not,” Rahman said.Like most EU countries, Hungary last year submitted its blueprint on how it would use EU grants to make its economy more environmentally friendly and high-tech after the COVID-19 pandemic. It has yet to receive approval on that as well. If Budapest does not get the EU funds, the forint – which has lost 8% this year – will almost certainly fall further, complicating efforts to curb inflation and exposing Hungarian assets to any negative shift in global sentiment.Development Minister Tibor Navracsics, in charge of negotiations with the EU, said on Sunday that Hungary would meet all 17 of its commitments made to the commission to stave off the loss of any funding.($1 = 1.0025 euros) More

LONDON (Reuters) – The world’s central bank umbrella body, the Bank for International Settlements (BIS), has urged major economies to forge ahead with forceful interest rate hikes despite the growing threat of recessions and currency market volatility. The Switzerland-based BIS’ quarterly report acknowledged that both recession and debt risks were rising, but said that bringing soaring global inflation back down remained paramount.”It is important to act in a timely and forceful way,” the head of the BIS’ Monetary and Economic Department, Claudio Borio, said. “Front-loading (of rate hikes) tends to reduce the likelihood of a hard landing.”This week is expected to see another super-sized rate hike from the U.S. Federal Reserve, whose sharp moves this year have, alongside Russia’s invasion of Ukraine, already triggered widespread financial market turbulence. Asked if there was a point at which central banks might go too far, Borio said that is the “1 billion, 3 billion, whatever number of billions you want to say, dollar question”.What makes it particularly complex, he added, is that this is the first time since at least World War II when policymakers are trying to tackle soaring inflation at a time when debt crises are already breaking out and when serious worries exist about overpriced property markets.On top of that, growth forecasts have continued to be revised down whereas inflation forecasts have continued to rise.”We know that the path is quite narrow,” Borio said. “Clearly if there was a risk of a recession before, the risk has increased”. Graphics: Euro falls as Ukraine war stokes gas crisis: https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwdlzjvo/Pasted%20image%201662469552346.pngThis year’s rapid rise in inflation, interest rates and energy prices has triggered one of the biggest ever sell-offs on financial markets. Global stocks indicies are down more than 16% since January. The yen, the euro and most emerging economy currencies have been hammered, and yields on U.S. Treasury bonds, the benchmark of world borrowing markets, have surged to the highest since 2011.A special section of the BIS’ report also pointed to the potential for further trouble ahead.It warned that replacing Russian oil would be difficult given the limited spare capacity of other major producers and subdued investment in new projects. Graphics: Russian oil hard to replace: https://fingfx.thomsonreuters.com/gfx/mkt/zdvxomedopx/Pasted%20image%201663548217165.pngThat could lead to persistent price rises in oil-related goods while the leap in natural gas prices could have a large and protracted impact on electricity prices and provide a major headwind to industrial production.Outside the United States, the surge in the dollar is adding to inflation problems and also piling pressure on lesser developed countries who have borrowed heavily in dollars but now struggle to pay the money back as their own currencies crater.”This could put some further pressure to tighten monetary policy to prevent a big depreciation and could also induce, as an additional tool, foreign currency intervention as it has already in a number of countries,” Borio said. Graphics: World currencies in 2022: https://fingfx.thomsonreuters.com/gfx/mkt/znpnewgbbvl/Pasted%20image%201663548490760.png More

BERLIN/PARIS (Reuters) -European governments outlined new measures on Monday to cope with potential energy shortages this winter and raced to improve energy networks to share power, with Russian gas flows still running at severely reduced rates amid the Ukraine war.Germany said it was expecting to sign liquefied natural gas (LNG) contracts in the United Arab Emirates. With the major Nord Stream 1 pipeline to Russia shut, it is planning to build new LNG terminals to ship in gas, while European partners Spain and France were also working on contingency plans.”If everything goes well, savings in Germany are high and we have a bit of luck with the weather, we … have a chance at getting through the winter comfortably,” Economy Minister Robert Habeck said after a tour of a future LNG terminal in Lubmin in northern Germany.Habeck said Germany will not let large gas importers like VNG become insolvent, while an economy ministry spokesperson said “focused” discussions on aid were ongoing with ailing importer Uniper.Russia, which had supplied about 40% of the European Union’s gas before its February invasion of Ukraine, has said it closed the pipeline because Western sanctions hindered operations. European politicians say that is a pretext and accuse Moscow of using energy as a weapon.German buyers briefly reserved capacity on Monday to receive Russian gas via the Nord Stream 1 pipeline, once one of Europe’s major gas supply routes, for the first time since the line was shut three weeks ago. But they soon dropped the requests.It was not immediately clear why buyers had submitted requests for capacity when Russia has given no indication since it shut the line that it would restart any time soon.Russian gas flows to Europe via Ukraine, although much reduced, have continued.But the sharp drop in Russian fuel exports, in retaliation for Western sanctions over Moscow’s invasion of Ukraine, has left governments scrambling to find energy resources, but also to warn that power cuts could happen, amid fears of recession.The German economy is contracting already and will likely get worse over the winter months as gas consumption is cut or rationed, the country’s central bank said on Monday.POWER CUTS?In France, exports of natural gas to Germany could start around Oct. 10, the head of France’s CRE energy regulator said, following an announcement by President Emmanuel Macron that the two EU neighbours would help each other with electricity and gas flows.”Gas was (until now) only flowing from Germany to France, so we did not have the technical tools to reverse the flows and we did not even have a method to regulate prices,” CRE chief Emmanuelle Wargon told franceinfo radio.While French energy group EDF (EPA:EDF) is racing to repair corrosion-hit nuclear reactors, “exceptional” measures this winter could include localised electricity cuts if the winter is cold and EDF’s plans are delayed, Wargon said.”But there will be no gas cuts for households. Never,” she said.Spanish Industry Minister Reyes Maroto said that obliging energy-intensive companies to close down during consumption peaks is an option on the table this winter if required.The companies would be compensated financially, she said in an interview with Spanish news agency Europa Press, adding there is no need to impose such closures now.And Finns were warned by national grid operator Fingrid that they should be prepared for power outages.Reflecting the disruptions caused across the continent, Finnish power retailer Karhu Voima Oy said it had filed for bankruptcy due to a sharp rise in electricity price rises.’GOING BACK IN TIME’Meanwhile, Ukraine accused Russian forces of shelling near the Pivdennoukrainsk nuclear power plant in Ukraine’s southern Mykolaiv region.Since its forces were driven out of Kharkiv, Russia has repeatedly fired at power plants, water infrastructure and other civilian targets in what Ukraine says is retaliation for defeats on the ground. Moscow denies deliberately targeting civilians.European gas storages are now 85.6% full, with stocks in Germany close to 90%, data from Gas Infrastructure Europe showed.”Stocks are set to continue to be built further, supported by the finalisation of planned maintenance work and increasing Norwegian flows as of this week,” analysts at Energi Danmark said in a morning note.Meanwhile, Europe’s imports of thermal coal in 2022 could be the highest in at least four years, analysts said.European imports of thermal coal this year could rise to about 100 million tonnes, the most since 2017, according to Noble Resources International Pte Ltd, while commodities pricing agency Argus expects shipments to reach a four-year high.”Europe is going back in time,” Rodrigo Echeverri, head of research at Noble, told a conference.Oil prices fell by more than 1% on Monday, pressured by expectations of weaker global demand and by U.S. dollar strength ahead of a potentially large interest rate hike, though supply worries limited the decline.Oil has also come under pressure from forecasts of weaker demand, such as last week’s forecast from the International Energy Agency that the fourth quarter will see zero demand growth. 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Of the 30 economists surveyed, 28 predicted Norges Bank will hike by 50 basis points (bps) on Sept. 22 to a rate of 2.25%, the highest level since 2011.One forecaster said a 25 bps increase to 2.0% was the most likely outcome, while another predicted a rise of 75 bps to 2.50%.Central banks globally are struggling to contain inflation in the wake of the pandemic and the Ukraine war, leading to sharp rate hikes.Norway’s August consumer prices rose 6.5% year-on-year even though the government has partly capped soaring electricity bills. Core inflation, which excludes energy, meanwhile stood at 4.7%, exceeding the central bank’s goal of 2.0%.A majority of participants in the Reuters poll now say rates will likely hit 2.75% by the end of the year, well above the 2.25% projected by the central bank in June.Norges Bank last raised rates in August, by 50 basis points, and said it would likely hike again in September without indicating how big that increase would be.Handelsbanken Capital Markets predicted that the monetary policy committee this week would deliver another 50-point hike, but said the market was pricing in a high probability of 75 points.”Further ahead, we believe that Norges Bank will fully indicate that the policy rate will be hiked to 2.75% by the end of this year, although there is a significant chance that it will rise to 3.0%,” Handelsbanken said.The central bank last week released a businesses survey indicating a weaker outlook for companies.The Reuters poll predicted that Norges Bank could begin cutting its policy rate in 2024. More

The 10-year yield, the most significant interest rate benchmark globally, rose as much as six basis points to 3.508%, the highest since April 2011. The Fed meets on Wednesday. Money markets are pricing in around an 80% chance of a 75 basis-point move, and a 20% chance of a larger, 100 basis-point rate hike. More

The world’s second-biggest economy slowed sharply in the second quarter, dragged down by a deepening property crisis, and slowing exports and imports.However, it showed surprising resilience in August, with faster-than-expected growth in factory output and retail sales, although the property crisis continues to hang over recovery prospects.”The economy is at a critical juncture in its recovery, as the foundation of the domestic economic recovery is still weak despite main economic indicators showing positive changes,” said spokeswoman Meng Wei at the National Development and Reform Commission (NDRC).Shanghai, which lifted a two-month Covid lockdown in June, said it would hand out “consumption vouchers” worth around 100 million yuan ($14.3 million) to residents starting Tuesday, for use in a major shopping district.The southern island province of Hainan on Monday also said it would issue vouchers, again totalling 100 million yuan, to make consumption the main driver of the recovery. China’s cabinet has rolled out a raft of measures since late May to bolster an economy ravaged by disruptions caused by government restrictions and lockdowns.”Stringent COVID restrictions amid the Omicron variant have led to frequent local lockdowns and weighed on China’s economic activity this year,” said Goldman Sachs (NYSE:GS) in a research note.”We estimate the current level of restrictions is suppressing the level of GDP in China by 4-5%.”($1 = 7.0190 Chinese yuan renminbi) More