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Mexican peso plummets on Trump win

  • Spanish Market: Crude oil, Oil products
  • 06/11/24

The Mexican peso fell sharply against the US dollar as markets priced in potential retaliation against Mexico following former president's Donald Trump's victory in the US presidential election.

"A Republican Senate majority and potential House win raise the chances of Trump's radical reforms, which could hurt Mexico's economic dynamism," said a financial analyst from Mexican bank Monex in a note today.

The peso initially dropped around 3pc to Ps20.71/$1 early today, hitting a two-year low before recovering to Ps20.20/$1 by midday. The peso may weaken further, as Mexico is vulnerable to tariff hikes amid strained relations over issues like immigration and the opioid crisis, according to a desk report from a major Mexican bank.

Trump repeatedly threatened tariffs on Mexico during his presidential campaign, most recently pledging a 25pc tariff on all Mexican imports unless President Claudia Sheinbaum's administration launches a severe crackdown on Mexico's drug cartels, which ship fentanyl and other drugs across the border to the US.

Recent constitutional amendments in Mexico, including judicial reforms and proposed eliminations of independent regulators, may also add downward pressure on the peso, according to the report. "The government's goal to direct private-sector involvement could limit market forces," it noted.

Mexico's state-owned oil company Pemex typically offsets peso depreciation due to its dollar-denominated oil export revenues, which help cover increased import costs. "Pemex's exports and domestic sales are tied to international hydrocarbon prices, providing a natural hedge," the company stated in its most recent report.

Still, analysts warn that Pemex's focus on domestic refining over crude exports could erode this hedge, leaving it more exposed to foreign exchange swings on USD-denominated debt.


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09/12/24

German heating oil demand surges before CO2 tax hike

German heating oil demand surges before CO2 tax hike

Hamburg, 9 December (Argus) — Consumers in Germany stocked up on heating oil during the past week in preparation for the CO2 tax hike in 2025, taking advantage of the recent drop in prices. Traded volumes of heating oil, as reported to Argus, rose by almost half last week on the week. Consumers seized the opportunity of low prices — which had fallen by about €4.50/100l since 22 November — to build up their heating oil inventories again, despite storage levels still being unusually high. Privately-owned heating oil tanks were maintained at an average filling level of 60.6pc on 5 December, two percentage points up from 2023, as shown by data from Argus MDX. The continued stocking up on heating oil is largely because of the anticipated price increase from 1 January. Germany's CO2 tax will increase from €45/tCO2eq in 2024 to €55/tCO2eq in 2025. This would result in a price increase of about €2.70/100l for heating oil, according to Argus calculations. But traders are reporting premiums in the range of €3/100l to €4/100l for heating oil in January. Diesel prices could increase by about €3.50/100l in January, Ar gus calculations show. In addition to the CO2 tax increase, the greenhouse gas (GHG) quota, which will rise from 9.35pc to 10.6pc next year, will also impact diesel prices. Diesel for delivery in January is currently trading at between €4/100l and €7.50/100l higher than for December delivery, traders said. As a result, traders anticipate that diesel demand will also increase before the year ends, but it remains low so far. The fill level of industrial diesel tanks has started to recover after hitting a four-year low at the beginning of November. The level was about 53.6pc on 5 December, less than one percentage point below the same time last year. By Natalie Müller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Shale M&A to pick up pace in 2025 after hitting pause


09/12/24
09/12/24

Shale M&A to pick up pace in 2025 after hitting pause

New York, 9 December (Argus) — A slowdown in shale deals in recent months is set to be reversed next year, helped in part by speculation that oil and gas mergers will have an easier time getting anti-trust approval under president-elect Donald Trump. The $12bn in upstream deals recorded in the third quarter was the lowest tally since the first three months of 2023, just before a record-breaking streak that reshaped the shale landscape and was dominated by blockbuster transactions involving ExxonMobil and Chevron. While buyers have been focused on winning approval from a zealous regulator and pushing deals over the finish line, attention is turning to the billions of dollars of unwanted assets they are likely to want to offload, with companies from ExxonMobil to Occidental Petroleum already active on this front. "You do one of these mega-mergers and now you have to pay for it," law firm Hogan Lovells partner Niki Roberts says. "You pay for it by selling off all the stuff you didn't really want to begin with." One potential upside from the Trump administration may be less attention from the Federal Trade Commission, which has paid closer scrutiny to oil deals in recent months as it cracks down on anti-competitive behaviour. Tie-ups have been delayed while the regulator has sought more details, and two high-profile oil executives were barred from the boards of their acquirers as a condition of approving deals. "The antitrust regulators have been viewed by particularly the traditional oil and gas industry of late as not being friendly to that industry," law firm Sidley global leader of energy, transport and infrastructure Cliff Vrielink says. "You're going to see less resistance to consolidation and you're going to see more people pursuing those opportunities." Oil market volatility has hampered mergers and acquisitions in the past, but observers say price swings are less of a factor these days. And more deals are needed to help companies boost their inventory of drilling locations for as long as cash flow remains king and growing through the drillbit is challenged. Lower interest rates, controlled inflation and regulatory reforms all point to a "robust" M&A market, Sidley partner Stephen Boone says. The majority of deal-making has been focused on oil in recent years, but natural gas is "having a bit of a moment", aided by the surge in demand from a boom in energy-hungry US data centres that are developing and supporting artificial intelligence, Boone says. Privates on parade Private equity is also making a gradual comeback, with teams looking to deploy fresh capital in oil and gas. Quantum Capital Group raised over $10bn in October and EnCap Investments has reloaded with about $6.4bn. "We are just now getting back to pre-pandemic levels of commitment," Boone says. "That bodes towards probably more private equity involvement in the oil and gas space." Fierce competition to get a foothold in the prized Permian basin of west Texas and southeastern New Mexico has sent valuations soaring, and prompted some would-be buyers to look further afield to plays such as the Uinta in Utah and North Dakota's Bakken. "The Permian stays of interest to many because of its consistent returns, but the Permian is a crowded place right now, and so I do think we'll see development of other basins," Roberts says. "But it's all going to depend on price." Close to $300bn in upstream deals were signed in the US over the past two years and this has whittled down the list of remaining targets. But the largest producers may not be done when it comes to seeking out potential acquisitions. "We don't stop looking," ConocoPhillips vice-president and treasurer Konnie Haynes-Welsh told the Rice Energy Finance Summit on 15 November. "We're always looking to be opportunistic." By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Republicans weigh two-step plan on energy, taxes


06/12/24
06/12/24

Republicans weigh two-step plan on energy, taxes

Washington, 6 December (Argus) — Republicans in the US Congress are considering trying to pass president-elect Donald Trump's legislative agenda by voting first on a filibuster-proof budget package that revises energy policy, then taking up a separate tax cut bill later in 2025. The two-part strategy, floated by incoming US Senate majority leader John Thune (R-South Dakota), could deliver Trump an early win by putting immigration, border security and energy policy changes into a single budget bill that could pass early next year without Democratic support. Republicans would then have more time to debate a separate — and likely more complex — budget package that would focus on extending a tax package expected to cost more than $4 trillion over 10 years. The legislative strategy is a "possibility" floated among Senate Republicans for achieving Trump's legislative goals on "energy dominance," the border, national security and extending tax cuts, Thune said in an interview with Fox News this week. Thune said he was still having conversations with House Republicans and Trump's team on what strategy to pursue. Republicans plan to use a process called budget reconciliation to advance most of Trump's legislative goals, which would avoid a Democratic filibuster but restrict the scope of policy changes to those that directly affect the budget. But some Republicans worry the potential two-part strategy could fracture the caucus and cause some key policies getting dropped, spurring a debate among Republicans over how to move forward. "We have a menu of options in front of us," US House speaker Mike Johnson (R-Louisiana) said this week in an interview with Fox News. "Leader Thune and I were talking as recently as within the last hour about the priority of how we do it and in what sequence." Republicans have yet to decide what changes they will make to the Inflation Reduction Act, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans in August said they opposed a "full repeal" of the 2022 law. Republicans next year will start with only a 220-215 majority in the House, which will then drop to 217-215 once two Republicans join the Trump administration and representative Matt Gaetz (R-Florida) resigns. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US House panel approves river infrastructure bill


06/12/24
06/12/24

US House panel approves river infrastructure bill

Houston, 6 December (Argus) — A US House of Representatives committee has approved a bipartisan bill that authorizes improvements to navigation channels by the Army Corps of Engineers (Corps) and maintenance and dredging of river and port infrastructure projects. The House Transportation and Infrastructure Committee advanced the Water Resources Development Act (WRDA) after several months of political wrangling to integrate earlier versions of the legislation approved by the House and Senate . The bill will head to the full House next week, said committee chairman Sam Graves (R-Missouri). This would be the sixth consecutive bipartisan WRDA bill since 2014 if passed by congress. WRDA is a biennial bill that authorizes the Corps to continue working on projects to improve waterways, including port updates, flood protection and supply chain management. WRDA will also "reduce cumbersome red tape", which will allow for quicker project turnarounds, Graves said. The bill authorizes processes to streamline work, he said. The bill also adjusts the primary cost-sharing mechanism for funding for lock and dam construction and major rehabilitation projects. The US Treasury Department's general fund will pay 75pc of costs, up from 65pc, with the rest coming from the Inland Waterways Trust Fund, which is funded by a barge diesel fuel tax. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Opec+ delays unwinding of 2.2mn b/d cut again: Update


05/12/24
05/12/24

Opec+ delays unwinding of 2.2mn b/d cut again: Update

Updates throughout Dubai, 5 December (Argus) — Opec+ producers have delayed a plan to start increasing crude output by another three months to April 2025. Eight members of the group ꟷ Saudi Arabia, Russia, Iraq, Kuwait, the UAE, Kazakhstan, Algeria, Oman ꟷ were scheduled to begin gradually unwinding 2.2mn b/d of voluntary cuts from January over a 12-month period. They agreed today to postpone the start of the production increase until April and to return the full amount over 18 months rather than a year. The delay is designed "to support market stability", the Opec Secretariat said, adding that the unwinding of the cuts "can be paused or reversed subject to market conditions". The Opec+ group also agreed today that a 300,000 b/d production target increase for the UAE will now be phased in starting in April over an-18 month period. It was previously set to be phased in over nine months starting in January. These changes will effectively reduce the amount of additional oil being introduced to the market every month, compared to the previous plan. The return of the 2.2mn b/d of cuts should, in theory, be partially offset by those members that have pledged to compensate for exceeding their production targets this year. These compensation-related cuts were supposed to have been delivered by the end of September 2025 but this has now been extended until June 2026. Opec+ also agreed today to keep in place two other sets of cuts by an additional year to the end of 2026. These cuts — a group-wide 2mn b/d reduction to formal targets and 1.65mn b/d of voluntary cuts by nine members — had been set to remain in place until the end of 2025. And an update to the official crude production capacity levels of each member — from which quotas are calculated — was pushed back by another year to 2027. By Bachar Halabi, Nader Itayim and Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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