Too early to call Kurdistan an oil El Dorado -Total CEO

 French oil major Total , which rattled Baghdad two years ago by signing a deal with Kurdistan, says it is too early to predict whether the semi-autonomous Iraqi region may turn into an important oil player.

As violence threatens the unity of Iraq, there are predictions that Kurdistan will seek independence and quickly aim to become a major oil producer.

The regional government hopes output could jump five-fold in the next few years to 1 million barrels per day and is seeking greater autonomy from Baghdad, which insists only the central government has the right to sell Kurdish oil.

Arbil is betting multiple deals with Western companies to explore its reserves will put it firmly on the map among the fastest growing producers, but majors such as Total are more cautious.

"If Kurdistan were a huge petroleum region, we wouldn't have waited until 2010," Total chief executive Christophe de Margerie told Reuters in an interview.

"It is too early to make a judgement. You can't yet see what we call a production curve... You have to avoid underestimating or overestimating the potential."

Total bought stakes in two exploration blocks in Kurdistan in 2012 from U.S. peer Marathon Oil , drawing an angry response from the Iraqi government which has tried to bar companies from dealing directly with Arbil.

Elsewhere in Iraq, Total has a relatively modest exposure as partner at the south-eastern Halfaya field. France's opposition to the U.S.-led 2003 invasion of Iraq did not endear French companies to the new authorities.

Most oil majors cite unattractive terms of Iraqi contracts as being behind their decisions to explore more lucrative Kurdish deals.

"Why hasn't Kurdistan got the right to develop its reserves? I've defended that and it has cost me a couple of problems with Baghdad," said De Margerie.

But he also suggested Kurdistan was unlikely to eclipse Iraq on the global oil map: "Kurdistan isn't Baghdad - one shouldn't make this mistake."
Source: Reuters
He also said companies could not remain indifferent to security risks such as violence in Syria even if Kurdistan looked stable compared to some other regions of Iraq.

"There is escalation in Syria. Every time you want to simplify things because it suits you, those things refuse to be simplified," De Margerie said.

China pushes for speedy political solution in Iraq

China hopes that Iraq can form a new inclusive government as soon as possible and will support efforts by Baghdad to protect its sovereignty, state media cited China's special envoy to the Middle East as saying on a visit to a key energy supplier.

China is Iraq's largest oil client, and its state energy firms, which include PetroChina <0857.HK>, Sinopec Group and CNOOC Ltd <0883.HK>, together hold more than a fifth of Iraq's oil projects after securing some of its fields through auctions in 2009.

China has repeatedly expressed concern about the upsurge in violence in Iraq and the march of the Islamic State of Iraq and the Levant (ISIL), which has seized much of the north of the country as Baghdad's forces there collapsed.

ISIL has renamed itself the Islamic State and proclaimed the establishment of a "caliphate" on land it has captured in Syria and Iraq.

"China remains steadfast in supporting the Iraqi government to protect its sovereignty and independence, and to crack down on terrorism," state news agency Xinhua quoted China's Middle East envoy Wu Sike as telling Iraqi Prime Minister Nuri al-Maliki.

"Beijing hopes that all sections of Iraqi society can promote unity and consensus and form as quickly as possible a new government that highlights inclusiveness and can represent all political powers in the country," Wu added, in comments reported late on Monday.

Iraq's new parliament put off its next session for five weeks on Monday, extending the country's political paralysis.

Wu said that China was urging the international community to step up its aid to Iraq, as "the stability of Iraq is key to the peace and stability of the entire Middle East, as well as that of the world".

China will keep offering political, humanitarian and material assistance and hopes Iraq can continue to protect Chinese companies and workers, Wu added.

China last month evacuated more than 1,000 of its workers who had been trapped by the fighting.

Despite China's reliance on the Middle East for a large part of its energy needs to feed a booming economy, Beijing remains a low-key diplomatic player in the region, having neither the experience nor the ability to get more deeply involved.

Source: Reuters

China should let more ailing firms fail - deputy c.bank governor

 China should let more ailing firms go bankrupt to help improve economic mechanisms rather than allow them to get government-led bailouts, a deputy central bank governor said on Tuesday.

The risk of corporate failures is rising as economic growth slows and the government tries to put a lid on high debt levels in the economy to help ward off financial risks.

"In the course of our surveys, we found that many companies are in the zombie state but they have taken up a large amount of credit," Liu Shiyu told a forum in Beijing.

He urged companies in the coal, steel, machinery and shipbuilding sectors to find ways out of business difficulties, including using a bankruptcy law introduced in 2007.

Local government officials generally mediate between creditors behind closed doors and Beijing has used the law cautiously, fearing the failure of large firms and widespread layoffs could lead to social unrest.

The number of bankruptcies handled by Chinese courts fell to 1,920 last year from 10,000 a few years ago, Liu added.

"When some large companies run into difficulties, creditors and companies are counting on the government to take the lead in administrative settlements," Liu said, warning that government-led bailouts could lead to the "misuse of resources".

In a report issued last month, the central bank blamed some low-efficiency industries and companies for "crowding out" funding for small firms and pledged to improve liquidity and risk management. 
Average non-performing loan ratios at Chinese commercial banks hit a three-year high of 1.04 percent in the first quarter. Given the opacity of the banking system, many analysts believe real levels are much higher.
Source: Reuters

Iraq parliament delayed for five weeks, general killed near Baghdad

 Iraq's new parliament put off its next session for five weeks on Monday, extending the country's political paralysis amid a Sunni Islamist insurgency that claimed the life of an army general near Baghdad.

Citing the politicians' failure to reach "understanding and agreement" on nominations for the top three posts in government, the office of acting speaker Mehdi al-Hafidh said parliament would not meet again until Aug. 12.

Putting off the work of reaching consensus is a slap in the face to efforts by Iraq's Shi'ite clergy, the United States, the United Nations and Iran, who have all urged the swift formation of an inclusive government to hold the country together.

"We're looking at a dire situation on the ground, which is why it's so important that things move forward urgently on the ground,” State Department spokeswoman Jen Psaki told reporters in Washington in reaction to the delay.

With no signs that Shi'ite Prime Minister Nuri al-Maliki will abandon his bid for a third term, his Sunni, Shi'ite and Kurdish opponents warn there is a risk that Iraq will fragment along ethnic and sectarian lines.

"Things are moving faster than the politicians can make decisions," a senior Shi'ite member of parliament told Reuters.

The Islamic State, an al Qaeda offshoot, and a patchwork of Sunni insurgents are holding territory they seized in northern and western Iraq, the majority of it taken last month.

Kurds, who run their own autonomous region in northern Iraq, have taken advantage of the chaos to expand their territory.

Maliki's opponents blame him for last month's defeats and want him to step aside. They accuse him of favouring the Shi'ite majority over the Sunni and Kurdish minorities.

Some hopes remained that parliament would meet again this month, based on local press comments by Hafidh and other comments by a senior U.S. official.

Brett McGurk, deputy assistant secretary of state for Iraq, said on his Twitter feed that Hafidh had clarified that the new date for parliament to resume work was July 13. But parliament would still be required to issue a formal statement to change the date.


HEAVY TOLL

Maliki said last week that he hoped to overcome the challenges blocking the formation of a new government after the new parliament's first session ended without agreement on the top posts of prime minister, president and parliament speaker.

The Iraqi military, backed by Shi'ite militias and volunteers, has yet to take back any major cities but is trying to advance on Tikrit, the late dictator Saddam Hussein's hometown in Salahuddin province.

The fighting is taking a heavy toll. The United Nations said last week more than 2,400 Iraqis had been killed in June alone, making the month by far the deadliest since the height of sectarian warfare during the U.S. "surge" offensive in 2007. 

A senior Iraqi general was killed in fighting with insurgents near Baghdad on Monday, as the army fights to hold militants back from the capital.

Major General Negm Abdullah Ali, commander of the army's sixth division responsible for defending part of Baghdad, was killed just 16 km (10 miles) northwest of the capital.

A few hours later, four policemen and three civilians were killed by a suicide bomber at a checkpoint in the mainly Shi'ite Kadhimiya district of northern Baghdad.

A bomb exploding at a roadside outdoor cafe killed four people late on Monday in the Nahrawan area just south of the capital, a police officer and a medic said.

Top U.S. defence officials said last week the security forces could defend the capital but would have difficulty going on the offensive to recapture lost territory, mainly because of logistic weaknesses.

In the northeastern province of Diyala, Islamic State militants killed four civilians in the town of Udaim, a police officer said.


"AWAKENING" FORCE?

Militants killed six civilians including a woman and an elderly man late on Monday in the village of Zawiya near the northern city of Baiji when they tried to arrest a local police officer, an eyewitness said.

According to the witness, Islamic State fighters accused the policeman, who escaped, of trying to form a "Sahwa" or

"Awakening" force to rise up against the group.

Sunnis and Kurds blame the National Alliance, the Shi'ite grouping that includes Maliki's State of Law list, for failing to name a prime minister.

Most Sunnis and Kurds walked out of the last parliament, saying they believed the prime minister and president should be chosen along with the speaker as a package, not one at a time.

With parliament's session a day away, they could not resolve the impasse, so the acting speaker postponed the meeting.

Shi'ite MP Haidar Abadi of Maliki's State of Law coalition said it viewed the month-long break as a mistake and said that there would be "strong pressure" for a meeting before Aug. 12, the date set for the next session.

Results of April's elections initially suggested parliament would easily confirm Maliki in power for another term. The loss of the Sunni regions in the north has created an opening for Maliki's opponents, however.

Some within his own alliance are whispering about the need for him to step aside, although Maliki has stated publicly he will not give up his candidacy.
Source: Reuters

Freeport agrees contract MoU, Indonesia government officials say

 Freeport-McMoRan Copper & Gold Inc have agreed a Memorandum of Understanding (MoU) with the Indonesian government on contract renegotiations, ministry officials said on Monday, as both sides look to end a six-month dispute that has halted concentrate exports.

Indonesia's biggest copper producer has been involved in lengthy government-led talks aimed at resolving a spat over an escalating export tax and contract renegotiations, after the country introduced new export rules on Jan. 12.

The export tax is part of a government drive to force miners to build smelters and processing plants in Indonesia, while Freeport is seeking assurances it will get a contract extension for its huge Grasberg copper and gold complex beyond 2021.

"We are happy and expect it will be finalised with an MoU signing," said chief economic minister Chairul Tanjung, referring to the contract renegotiations.

Billionaire businessman Tanjung has spearheaded a new government drive to resolve both the export and contract issues.

The draft MoU still needed to be approved by both the cabinet and outgoing President Susilo Bambang Yudhoyono, said Deputy Energy and Mineral Resources Minister Susilo Siswoutomo.

If the draft MoU is approved by the president, although it will be a further step towards resuming copper concentrate exports, there is no indication that it will satisfy the Arizona-based miner.

Freeport Indonesia could not be reached for comment on Monday, and government officials were unable to give a date for when the cabinet would next meet.

Government officials have previously said Freeport can only renew their 2021 deal in 2019 at the earliest, but it now seems likely that the miner will be offered a different type of contract when its current deal ends.

There was renewed hope that the export spat would be resolved last month after the government finalised a new export tax draft regulation, but with a presidential election this week, progress appears to have stalled.

In addition to a contract extension, the renegotiations, which began more than a year ago, include changes to Freeport's mining and exploration area, divestment, royalty payments and plans to build a domestic smelter.

Freeport, along with fellow copper miner Newmont Mining Corp , halted copper concentrate exports in January when the government introduced the surprise tax, which the two U.S. firms say violates their mining contracts.
Source: Reuters

London copper steady, remains below 4-1/2 mth peaks;Zinc bullish trend stregthening

 London copper steadied on Tuesday, but remained below four-and-a-half month highs seen last week after a surprise drop in German industrial production tempered demand expectations.

The dollar eased and global equity markets fell on Monday after the drop in German industrial output cooled a rally that sent various stock indices to record highs last week.

Germany's industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years, as holiday days ate into working hours, construction slumped and geopolitics weighed, casting a shadow on its role as euro zone motor. 
"Given what we saw out of Europe it's fair enough to see a little bit of hold in the rally," said analyst Dominic Schnider of UBS Wealth Management in Singapore.

"We have a positive view on the economy overall. The newsflow from the U.S. should be very good and the topping out from Europe should be modest ... I could not rule out a technical rally to $7,430 but then I would sell it - we still target a surplus this year."

Three-month copper on the London Metal Exchange had edged down 0.1 percent to $7,119.75 a tonne by 0216 GMT, extending small losses from the previous session. Last week, LME copper prices struck $7,190 a tonne, their highest level since Feb. 19.

The most-traded September copper contract on the Shanghai Futures Exchange eased 0.4 percent to 50,820 yuan

($8,200) a tonne.

China's economic growth quickened in the second quarter from the previous three months, but further modest government support measures will still be needed, Premier Li Keqiang said on Monday.

Potentially easing supply curbs for copper, Freeport-McMoRan Copper & Gold Inc have agreed a memorandum of understanding with the Indonesian government on contract renegotiations, ministry officials said on Monday, as both sides look to end a six-month dispute that has halted concentrate exports.

Meanwhile, CITIC Resources Holdings Limited <1205.HK> has begun court proceedings against the operator of a bonded warehouse at Qingdao port at the centre of an investigation to metals financing fraud.
Among other metals, broker Triland said that zinc was attracting investment fund buying following a strong weekly close on Friday.

"The price has cleared the horizontal resistance zone around $2,230-35 and with all moving averages pointing higher and the price sitting comfortably above them, the bull trend is strengthening," it said.

"We believed there maybe some correction to come this week, but have been proved wrong, to the consternation of some consumers who may have missed the boat now."

Source: Reuters

Gold falls on interest rate fears; palladium near 13-yr high

 Gold ticked lower on Tuesday as investors continued to fret over the possibility of an earlier-than-expected hike in U.S. interest rates, while palladium was trading near a 13-year high on supply worries.

A strong U.S. jobs report last week spurred speculation the Federal Reserve could increase rates soon on the back of a solid economic recovery. A hike would encourage investors to withdraw money from non-interest-bearing assets such as gold.

Spot gold had fallen 0.2 percent to $1,317.80 an ounce by 0307 GMT after closing flat in the previous session.

"Expectations of an early rate hike by the Fed are continuing to weigh on investors," said ANZ analyst Victor Thianpiriya.

"The market has seen several changes from forecasters come through over the past week, with expectations of a rise in U.S. interest rates now sitting at mid-2015 rather than early 2016."

The market is now eyeing the release of minutes from the Fed's June policy meeting to gauge the central bank's view on interest rates and economic strength.

Some traders said a lack of support from physical markets could also weigh on prices.

Physical demand in top gold consumer Asia has been weak as the metal is holding above $1,300. Many are waiting for a drop in prices before making any purchases.
Meanwhile, gold is still seeing some safe-haven demand from geopolitical tensions in the Middle East and Ukraine.

SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 1.8 tonnes to 798.19 tonnes on Monday.

SUPPLY FEARS BOOST PGMS

Platinum group metals (PGMs) continued to benefit from concerns over the supply situation in South Africa, which recently witnessed a five-month long strike at top producers.

The strike ended late last month but other smaller strikes have since broken out, burnishing supply fears.

Impala Platinum said on Monday that wildcat strikers at its Marula mine had indicated they would return to work on Tuesday and press their demands through "formal channels", but tensions remained high.

Palladium was trading near a 13-year peak of $868.50 hit on Monday. The metal, used in catalytic converters, was aided by last week's data showing U.S. auto sales at an eight-year high in June.
Source: Reuters

Brent falls to near $110, heads for 7th straight loss

 Brent crude edged towards $110 a barrel on Tuesday, trading close to its lowest in nearly a month, as fears of supply disruption in Iraq eased and prospects for a rise in Libyan exports improved.

The benchmark is headed for a seventh straight session of losses, the longest-losing streak since October 2012. Brent is down nearly 5 percent since the Iraq crisis drove prices to a nine-month high of $115.71 in June.

August Brent crude was at $110.03 a barrel by 0324 GMT, down 21 cents. U.S. crude futures for August edged down 15 cents to $103.38, after settling down for a seventh session on Monday, the longest decline since December 2009.

"The market appears to be going through a process of removing the Middle East premium attached to Iraq," said Michael McCarthy, chief strategist at CMC Markets in Sydney.

"There is very unlikely to be a sweeping change in Iraq and the market is re-pricing oil on the back of that. To add to the picture, we have some technical selling kicking in."

Investors have pared down the risk that Islamic militants could advance southwards towards Baghdad and disrupt oil flow in Basra, which accounts for the bulk of Iraq's output and exports.

Still, Iraq remained in political limbo as its new parliament put off its next session for five weeks on Monday.

There could be significant downside for Brent if it falls below key support at $110, McCarthy said. The next support levels are at $108.50 and $105.50-$106.00, he said.
Source: Reuters

Chinese President Xi Jinping criticizes denial of Japan's aggression on war anniversary

Chinese President Xi Jinping on Monday underscored the intractability of history as the nation commemorated the start of the War of Resistance Against Japanese Aggression 77 years ago.

"History is history and facts are facts. Nobody can change history and facts," Xi said when addressing a crowd of over 1,000 people at the Museum of the War of the Chinese People's Resistance Against Japanese Aggression in the outskirts of Beijing.

"Anyone who intends to deny, distort or beautify the history of aggression will never be tolerated by Chinese people and people of all other countries," he said, referring to widespread concerns that Japan is trying to distort the history of the war.

The War of Resistance Against Japanese Aggression started in 1937 and ended with Japan's World War II defeat in 1945.

"It's a pity that a small minority of people still ignore iron-clad history and the fact that tens of millions of innocent people lost their lives in the war," he said.

This minority has repeatedly denied or even beautified the history of aggression, undermining mutual trust among states and creating regional tensions. Such behavior has been strongly condemned by the world's peace-loving people, said Xi.

"History is the best textbook, as well as the best dose of sobriety," Xi said, adding that Chinese people who remember the torment of war have always been in pursuit of peace.

"History tells us that any aggression by force is doomed to failure," Xi warned. "China will unswervingly pursue the road of peaceful development and hopes all other countries in the world can take the same road."

Xi's remarks came after Japan's reinterpretation of its pacifist Constitution last week.

Japanese Prime Minister Shinzo Abe's cabinet endorsed a reinterpretation of its pacifist Constitution on July 1 for the right to collective self-defense, fueling concerns over Japan's return to its past militarism.

Japan invaded northeast China in September 1931. But historians agree that Japan's full-scale invasion started on July 7, 1937, when a crucial access point to Beijing, Lugou Bridge, was attacked by Japanese troops.

Around 35 million Chinese soldiers and civilians were killed or injured by Japanese troops during the war against Japanese aggression (1937-45), with at least 300,000 people slaughtered in the Nanjing Massacre alone.

Xi said the Chinese nation at that time faced the most direct threats, prompting "all ethnic groups, classes, parties, social organizations and patriots from all circles, as well as Hong Kong, Macao and Taiwan compatriots and overseas Chinese, to unite and throw themselves into a grand struggle which meant life and death for the Chinese nation."

He added that the Communist Party of China had also shouldered its historical responsibilities by calling for a national united front against Japanese invasion.

Calling the Chinese people's resistance against aggression by the Japanese a "heroic ode" in which Chinese patriots "bathed in blood," Xi said Monday's gathering should serve to recall history, commemorate martyrs, cherish peace and sound a warning for the future.

The Chinese president also unveiled a sculpture commemorating the start of China's War of Resistance Against Japanese Aggression in the company of two veteran Chinese soldiers, one from the Communist Party of China and another from the Kuomintang, who took part in the war, as well as with Chinese teenagers.

The sculpture is based on a military medal specially designed for veteran soldiers who fought in the war from 1937 to 1945.

"The inauguration of this sculpture commemorates those who devoted their lives to fighting for national independence and freedom as well as those who made great contributions to peace and justice, and to console the victims of the war," Xi said.

Japan's neighbors have long been disgruntled by the erroneous interpretation of history by Japanese right-wing politicians

Li Buhong, from De'an county in Jiangxi Province, is among the dwindling ranks of veterans who fought the War of Resistance Against Japanese Aggression. He was 13 when the Lugou Bridge Incident broke out and joined the army five years later.

"I have seen the cold-blooded, inhuman violence the Japanese invaders have committed toward my countrymen," said Li, now 90.

"I have seen them cut out a baby from a pregnant woman and spike it with a bayonet... Now they want to deny their invasion. That's senseless talk," he said.

Pan Xun, a professor with the Chongqing-based Southwest University, called on Chinese authorities to enhance research and protection of historical records from the 1937-1945 period to thwart Japanese right-wingers' attempts to distort the country's history of aggression.

"More people, including the Japanese, should learn from history, and face up to history, so that we can understand the brutality of war," he said.

Source: Xinhua

China expects further cooperation with Latin America

China hopes that President Xi Jinping's upcoming visit will promote further cooperation with Latin American countries, Vice Foreign Minister Li Baodong said here Monday. Xi will attend a BRICS summit in Brazil and visit three other Latin American countries later this month. Brazil is the first Latin American country that Xi will visit, Li said,where he will hold talks with Brazilian President Dilma Rousseff and sign agreements on trade and finance. It is the 40th anniversary of diplomatic ties between the two countries. Brazil is an important emerging market, Li said. China and Brazil have common interest in promoting multi-polarization and the democratization of international relations. Xi will also hold talks with Argentina's President Cristina Fernandez. It is 10 years since China and Argentina became strategic cooperative partners, and the two sides have effective cooperation in the fields of energy, mining and finance and are willing to promote pragmatic cooperation and strategic mutual trust. China-Venezuela relations developed rapidly in recent years, Li said, noting that the two countries' friendship was strengthened by President Nicolas Maduro's visit to China last September. China and Venezuela have become good friends with mutual trust and coordination in international and regional affairs, Li said, adding that two countries have pragmatic cooperation in the fields of energy, finance and infrastructure construction. China and Cuba have had mutually beneficial and friendly relations since the two countries established diplomatic ties 54 years ago, Li said. China-Cuba ties have witnessed pragmatic cooperation in renewable energy and agriculture. Xi will hold talks with Raul Castro Ruz, president of Cuba's Council of State and the Council of Ministers. They will make a long-term and strategic plan for bilateral ties. In Brazil, Xi will meet leaders of Latin American and Caribbean nations, exchanging views on regional and international issues of common concern. This month's visit will be Xi's second Latin American tour as president. Last year, he visited Trinidad and Tobago, Costa Rica and Mexico from May 31 to June 6, during which he held talks with leaders of eight Caribbean nations. Source: Xinhua

China expects positive results from BRICS summit: official

China expects positive results from the coming summit of BRICS leaders, Vice Foreign Minister Li Baodong said at a press briefing on Monday.

The sixth leaders summit of BRICS - Brazil, Russia, India, China and South Africa - will be held in Brazil from July 15 to 16. Chinese President Xi Jinping, Brazilian President Dilma Rousseff, Russian President Vladimir Putin, South African President Jacob Zuma and Indian Prime Minister Narendra Modi will attend the summit. They will also meet with leaders of South American countries.

Li expects the summit to focus on four areas: experiences of BRICS cooperation; developing BRICS by strengthening coordination; cooperation in the areas of trade, investment, finance, infrastructure and people-to-people exchange; and expanded connection between the markets of BRICS and South America.

He said BRICS should play up the spirit of partnership and explore new avenues of cooperation. Speaking in one voice, BRICS should put forward uniform solutions to improve global economic governance.

China supports the early launch of BRICS Development Bank and Contingency Reserve Arrangement, Li said.

Emerging economies are a rising force in the international arena and dialogue between BRICS and South American leaders will demonstrate the political will to expand connections between the two markets, he said.

The recent slowdown of economic growth in BRICS countries is essentially different from the financial crisis that hit Western countries, Li said.

BRICS economies enjoy sound basics, abundant policy tools and great growth potential. Nearly 100 billion U.S. dollar in the BRICS Development Bank and Contingency Reserve Arrangement and complementary agreements could be sound conditions for sustainable growth, Li said.

"BRICS will be an important driving force of the future world economy," Li said.

On the relationship between BRICS and G7, Li said it is understandable that the G7 group has different views from BRICS and other developing countries on a number of major regional and international issues.

He said BRICS is not interested in confrontation with G7. BRICS' goals are cooperation, world peace and the growth of the world economy. It is important for BRICS countries to maintain international justice, uphold the principles of the United Nations Charter and safeguard their common interest and those rest of the international community.

"BRICS countries seek dialogue and wish to expand common ground and reduce difference through that dialogue," Li said. "Our cooperation mechanism is open, transparent and mutually beneficial. It embodies the spirit of democratization of international relations."

He noted that BRICS is a platform of cooperation for emerging economies, while G7 is a cooperation mechanism of developed countries.

But both are members of G20; both are multilateral cooperation mechanisms with great influence in the global economy and financial sectors. Both play an important role in maintaining the stability of the world economy. The two groups share the same goal of a stable recovery and healthy growth but, Li said.

BRICS cooperation will not be limited in the economic and financial arenas, but includes dialogue on politics and security. Last year, leaders agreed to develop BRICS into a mechanism for daily and long-term coordination on a number of economic and political issues, including cyber security and the fight against terrorism.

"We believe BRICS will definitely make a contribution to the peace, prosperity and stability of the world," Li said.

Source: Xinhua

Xinhua In-Depth: Supporting Abe ending pacifism will ultimately bite U.S.

There is an old Chinese saying that describes those who would drink poison when extremely thirsty. That's exactly what the United States is doing by encouraging Shinzo Abe to castrate Japan's pacifist constitution -- a move which will not only threaten China, but also cost America dearly.

Eager to protect the U.S. strategic interests and preserve its dominant role in the Asia-Pacific, Washington made an imprudent choice to back the Abe administration's decision to reinterpret Japan's constitution and allow it to initiate overseas military operations.

It is important for the Unite States to see clearly that nationalist Prime Minister Abe and right-wing forces in Japan are much more ambitious, with the empowering of "collective self-defense right" as their first step.

More provocative moves by Japan could be expected in the Asia-Pacific region, which would gradually drag the United States deeper into Tokyo's disputes with its Asian neighbors, or, in a worst scenario, even into an unnecessary war instigated or started by Japan.

Washington may think that Japan can never be a real threat to it or to the region, just like it reckoned then militaristic Japan, with its disadvantageous military prowess, would not dare to provoke the United States during WWII.

Unfortunately, the Japanese blitz attack on Pearl Harbor in 1941 was not an accidental and isolated incident. It was indeed an inevitable and typical choice of Japan's right-wing nationalists, with a radical, opportunistic, ruleless and immoral mindset, who were regaining forces in the country and trying to revive its past militarism.

The U.S. backing for Tokyo's move, which heightens tension and increases instability in the region, is likely to take a toll on the mutual trust between Beijing and Washington deemed indispensable for their cooperative and mutually beneficial ties.

A new-type of major-country relationship the two countries are trying to nurture bears a unique significance in safeguarding peace, stability and prosperity in the Asia-Pacific.

Instead of taking on unpredictable risk for Abe's right-tilting Japan, Washington's strategic interests would be better served by cultivating constructive and cooperative ties with China.

The sixth China-U.S. Strategic and Economic Dialogue, to be held in Beijing on Wednesday and Thursday, has been a key platform for the world's two largest economies to strengthen communication, cooperation and exchanges, and offers an opportunity for the United States to sincerely improve ties with China, building mutual trust and properly address eath other's concerns.

It is high time that the United States clarify its stances on China-related issues and take practical actions to prove that it is a constructive participant in the Asia-Pacific region.

Source: Xinhua

Reuters: Breakingviews-Half-decade of $100 oil more blessing than curse By Kevin Allison

The five-year average oil price has entered triple digits for the first time. The occasion didn't receive as much publicity as crude's first trade above $100 a barrel in early 2008. But the rise in the long-term price of Brent, the main world benchmark, is arguably a more significant milestone for the global economy.

Six years ago, former U.S. Secretary of State Henry Kissinger and economist Martin Feldstein warned in the New York Times that the tripling of oil prices from 2001 to 2008 represented the "largest transfer of wealth in human history." They fretted that prolonged high prices would cut living standards, create an unfavorable balance of payments and stoke inflation in advanced economies, foment political unrest in poor countries, and give petrostates undue political influence.

Yet despite persistent $100 crude, global GDP growth has ticked along at a rate of 2 percent to 4 percent annually since 2010. While subdued by pre-crisis standards, that's hardly 1970s-style stagflation. Indeed, the long period of high prices has brought some clear benefits.

For one thing, it has given U.S. oil and gas producers the assurance they needed to ramp up investment in hydraulic fracturing. Prolific shale drilling at a breakeven price of $60 to $80 per barrel has unlocked huge new supplies of domestic natural gas and oil. That in turn has given U.S. manufacturers an energy-cost advantage, especially in plentiful home-produced natural gas, and generated interest in the potential for gas to substitute for oil as a transport fuel.

Eventually, the shale boom may turn the United States into a net oil exporter, further reducing reliance on volatile regions like the Middle East, where oil sales sometimes help fund regimes that aren't friendly to western interests. Taking a cue from the U.S. success, wannabe fracking powers China, Argentina and Russia are trying to develop their own vast shale reserves.

Meanwhile, the unsubsidized cost of solar power systems has plunged by more than three-quarters in six years as investors – including China, now the world's largest net importer of petroleum – have pumped money into the industry. That has not only transformed solar from a costly curiosity into a competitive energy source, helping to smooth Germany's shift away from nuclear power after the 2011 Fukushima disaster, for example. It has also created jobs. A recent survey by the Solar Foundation, an industry group, found that more than 140,000 Americans were employed in the solar sector last year, up nearly 20 percent from the year before.

Consumers, companies, and even politicians have started paying closer attention to energy efficiency and renewable energy options. Stung by higher gasoline bills, some Americans have fallen in love with the Toyota <7203.T> Prius and Tesla Motors' electric cars, and out of love with gas-guzzling SUVs.

They are also driving less. Breakingviews calculations based on Department of Transportation data show the average number of miles driven each year by over-16s in the United States has dipped 9 percent since 2005 – a big shift for a car-obsessed country.

And after barely budging for nearly two decades, the amount of energy consumed per dollar of U.S. GDP has fallen 10 percent since 2007, according to Energy Information Administration figures. The International Energy Agency has estimated that investments in efficiency could cut global oil consumption by up to 13 million barrels per day by 2035 – about equal to the current combined crude output of Russia and Norway, or about 14 percent of today's oil demand.

Moreover, throughout the last five years inflation has been subdued while labor productivity has improved, if sluggishly.

Kissinger et al weren't completely wrong. Five years of relatively expensive fuel have probably slowed global growth somewhat. Wealth has also shifted from petroleum importers to exporters, and high oil prices have flooded markets with potentially distorting petrodollars. That effect could, in theory, help explain everything from Qatar's successful 2022 World Cup bid to Russia's recent assertiveness in Syria and Ukraine.

Still, the fact that the global economy has carried on growing during half a decade under what might once have been considered a crippling constraint suggests the cheap energy of yore was often squandered. Pricier crude, by contrast, has fostered greater discipline and spurred innovation.

The lesson shouldn't be lost on policymakers weighing action to slow greenhouse gas emissions. If the global economy can handle half a decade of $100 crude without going off the rails, it could probably handle the gradual introduction of a carbon tax, too.

Libyan oil output 326,000 bpd, El Sharara field still blocked -NOC

 Libya's oil output is currently 326,000 barrels a day, a spokesman for National Oil Corp (NOC) said on Monday.

NOC spokesman Mohamed El Harari also said the western El Sharara oilfield was still blocked by a protest at a connecting pipeline.

He said it was too early to say when the first tanker would dock at the eastern ports of Ras Lanuf and Es Sider to load oil from storage after rebels handed over the terminals to the government last week.
Source: Reuters

Asia shares pause after recent climb, eyes on earnings

Asian stocks were subdued on Tuesday as Wall Street turned cautious ahead of the corporate reporting season and as earnings guidance from regional tech heavyweight Samsung came in well short of forecasts.

Investors could also be forgiven for feeling a touch of altitude sickness after many indices recently hit all-time or multi-year peaks.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> eked out marginal gains to reach a fresh three-year high at 502.00, but faced tough resistance at the 2011 top of 512.12.

Samsung Electronics Co Ltd <005930.KS> said its operating profit likely fell 24.5 percent in April-June to 7.2 trillion won ($7.12 billion), under the 8.3 trillion mean estimate of 38 analysts polled by Thomson Reuters. 
Its shares, however, still managed to bounce 1.8 percent, perhaps because they have been falling for most of the past month as the market priced in a poor result.

Japan's Nikkei followed Wall Street's lead and fell 0.9 percent, so failing to sustain last week's six-month high.

The Dow  had lost 0.3 percent on Monday, while the S&P 500  shed 0.4 percent and the Nasdaq  0.8 percent.

Those cyclical stocks tied to the pace of economic growth, ranked among the weakest of the day. The S&P industrial sector index  fell 0.7 percent.

Wall Street had hit a number of milestones last week, with the Dow topping 17,000 for the first time and the S&P 500 closing at a record high after a strong June jobs report.

The earnings season kicks off with Alcoa <.AA> later on Tuesday and dozens of major companies are scheduled to report next week, including numerous Dow components.

Profits are forecast to grow 6.2 percent for the quarter, according to Thomson Reuters data, but investors see a slight chance of a return to double-digit growth for the first time in nearly three years.


DOLLAR FADES

Markets are also on guard for minutes of the Federal Reserve's last meeting due on Wednesday, which will be scoured for hints on when the policy committee might consider raising interest rates.

Some analysts have brought that day forward following June's upbeat payrolls report. Yet most assume a move is still a whole year away, which was too distant to trouble Treasury investors right now.

Yields on 10-year paper were back at 2.6170 percent, having retraced all of Thursday's spike to 2.69 percent.

The lack of a sustained increase in yields sapped the strength of the U.S. dollar, which lapsed back to 101.72 yen from a peak of 102.21 . The dollar index traded at 80.203 <.DXY>, off a 1-1/2 week top of 80.359.

That helped the euro pop back above $1.3600 , recovering from a low of $1.3576 hit when Germany reported a surprisingly steep 1.8 percent drop in industrial output.

There is little in the way of major Asian data due on Tuesday, though top Chinese and U.S. officials, including U.S. Treasury Secretary Jack Lew, will hold their annual talks in Beijing on July 9-10.

China and the United States will discuss the yuan's value as well as the impact of U.S. monetary policy, Chinese Vice Finance Minister Zhu Guangyao said on Monday.

In commodity markets, gold was steady at $1,317.60 an ounce , having held to a relatively tight $1,305.90/$1,332.10 range for the past two weeks.

Oil prices extended their recent decline as events in Iraq and Ukraine have so far not led to any serious disruptions in the low of the fuel. Brent dipped 26 cents to $109.98 a barrel, and U.S. oil lost 11 cents to $103.42 a barrel.
Source: Reuters

Samsung Elec says Q2 profit likely down 24.5%; worst in 2 yrs

Samsung Electronics Co Ltd  on Tuesday said operating profit likely fell 24.5 percent in April-June, its lowest in two years due to slowing growth in the company's cash cow smartphone business and the strength of the South Korean won.

The world's largest smartphone maker has seen profit fall as competition heats up from Chinese makers of low-priced yet feature-heavy handsets, as the market's growth area shifts to low-end handsets in emerging economies.

The South Korean company said operating profit likely fell to 7.2 trillion won ($7.12 billion) during the quarter. That compared with an 8.3 trillion won mean estimate of 38 analysts polled by Thomson Reuters I/B/E/S.

The result, released ahead of final second-quarter figures due around the end of July, would be the lowest since it posted 6.5 trillion won profit in the second quarter of 2012. It is also weaker than a 7.6 trillion won tipped by StarMine's SmartEstimate, which gives greater weighting to more accurate analysts.

In a separate statement, Samsung said the won's strength during the second quarter and a slowdown in overall smartphone market growth hurt the company's bottom line. It also reported higher marketing costs as it tried to cut inventories.

"The company cautiously expects a more positive outlook in the third quarter with the coming release of its new smartphone lineup," Samsung said, adding that it expected stronger smartphone sales as well as a seasonal lift in demand for its memory business.

Nevertheless, analysts say the streak of on-year profit decline could extend into the third quarter, with Apple Inc widely expected to launch a successor to the iPhone 5 to compete with Samsung's flagship smartphones. The year-prior's record profit of 10.2 trillion won could also be difficult to beat.

In the mid- and low-end of the smartphone market, Samsung may have to slash prices to retain market share, which will further narrow profit margins and drag on growth, some analysts said.

Samsung on Tuesday also said second-quarter sales likely fell 9.5 percent to 52 trillion won.

That would compare with analysts' estimate of 54 trillion won and would be the first annual decline since Samsung adopted new accounting standards in 2009.

Shares of Samsung fell 1.1 percent on Monday ahead of the second-quarter guidance but opened slightly higher on Tuesday morning.
Source: Reuters

Speculators trim bets on higher Brent, gasoil

Large money managers trimmed their bets on higher oil prices last week, data from the InterContinental Exchange (ICE) showed, reducing long positions as crude oil prices slipped lower after a sharp spike on worries over fighting in Iraq.

Speculators cut their net long positions in Brent crude oil futures and options by 6,414 contracts to 235,787 in the week to July 1, ICE figures showed.

Gasoil net long positions were reduced by 1,319 contracts to 75,937 in the same week.

Source: Reuters

Oil steadies below $111 as supply fears fade

Brent crude oil steadied under $111 a barrel on Monday, just above a three-week low, as Libya geared up to resume oil exports from two ports closed for nearly a year.

The North Sea oil benchmark dropped 2.3 percent last week, its biggest weekly decline since January, on the Libyan news and as Iraq's oil exports have remained largely unaffected by fighting in the north of the country.

Supply of oil to several major markets, including Europe, remains ample at a time when demand for several light oil products such as gasoline and diesel has been fairly sluggish.

German industrial output logged its biggest drop in more than two years in May, data showed on Monday, dampening fuel consumption in Europe's biggest economy. [ID:nL6N0PI18U]

"Aside from fading Iraq fears and the possible return of some Libyan volumes, key light product and distillate (margins) have been weakening," said Michael Wittner, oil analyst at French bank Societe Generale.

Brent was up 5 cents at $110.69 a barrel by 1340 GMT after reaching a three-week low of $110.40. U.S. oil fell 20 cents from Thursday to $103.86 a barrel. Friday, July 4, was a public holiday in the United States.

Libya's state-run National Oil Corp lifted force majeure from the major eastern Ras Lanuf and Es Sider oil ports after rebels agreed last week to end a blockade.

The two ports had been exporting about 500,000 barrels per day (bpd) of crude, still a long way below the 1.4 million bpd that the OPEC producer pumped in the second quarter of last year, before protests started.

"If the agreement holds, it will take some time, probably a week or two, to inspect both the oilfields and the export facilities for damage and to complete any required maintenance or repairs," Societe Generale's Wittner said.

Oil shrugged off news of a heavier-than-expected maintenance programme for North Sea oilfields in August that is due to reduce loadings of crude from the four main export streams to just 695,0000 bpd from over 900,000 bpd in July.
This is the first time supplies of the four big North Sea oil streams have been below 700,000 bpd since 2010, according to Reuters data. The previous lowest output for a month was 740,000 bpd last June.

But fighting in Iraq is still likely to underpin oil prices, traders said. Brent hit this year's high above $115 in June when conflict broke out in northern Iraq.

Iraq's parliament is deadlocked over the formation of a new government. Shi'ite Muslim cleric Moqtada al-Sadr has urged Prime Minister Nuri al-Maliki's coalition to withdraw its support for his bid for a third term and pick another candidate.
Source: Reuters

Metals. Copper slips off 4-month peak, tight supply limits fall.Lead up at USS 1926 a tonne. Zinc traded up at 2,247 a tonne

 Copper edged further off 4-month peaks on Monday as investors took profit and stocks rose for a second day running, though lingering supply concerns put a strong floor under prices.

London Metal Exchange data showed stocks rose by 2,850 tonnes - a second straight day of gains - though overall, stocks remain near their lowest levels in six years, supporting prices. 
Also, the market was ripe for a bout of profit-taking, traders said. Comex copper speculators raised their net long position by 10,441 contracts to 24,767 in the week to July 1, the most recent data from the Commodity Futures Trading Commision showed.
"We think the rally is overdone. We've got tightness in the market but it's going to be temporary. Mining supply will steadily increase (in the second half) and China is not exactly booming," said Jesper Dannesboe, senior commodity strategist for Societe Generale.

Three-month copper on the London Metal Exchange was last bid at $7,115 a tonne in official midday rings, down 0.49 percent. Copper closed down on Friday but still posted its biggest weekly rise in more than nine months, after touching a four-month peak earlier in the session.

Investors are waiting to see if record share prices will be justified by quarterly earnings reports and forecasts in the United States and elsewhere, with aluminium producer Alcoakicking off the U.S. earnings season on Tuesday.

Also, a six-month halt on exports from major producer Indonesia has exacerbated tight conditions.

"Most of the copper that was meant to be exported has been produced. It's going to come to market eventually. We just don't know when. If it comes to light that nothing is going to come out of Indonesia, that will be a game-changer for copper this year," said analyst Joel Crane of Morgan Stanley in Melbourne.

Freeport-McMoRan Copper & Gold Inc is still in talks with Indonesia over the six-month dispute that has halted copper exports, and has no plan yet to follow Newmont Mining Corp in seeking international arbitration, it said last week.

On the demand side, global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, International Monetary Fund chief Christine Lagarde said on Sunday, hinting at a slight cut in the IMF's growth forecasts.

China's economic growth quickened in the second quarter from the previous three months, but further modest government support measures will still be needed, Premier Li Keqiang said on Monday.

German industrial output fell 1.8 percent on the month in May, its biggest drop in more than 2 years, the Economy Ministry said, blaming mostly the way public holidays fell but also pointing to weakness in construction and geopolitical effects.

Nickel traded down 0.64 percent in rings at $19,275 a tonne.

Six potential bidders, including Dutch commodity trader Trafigura and Hong Kong-listed MMG Ltd <1208.HK>, are looking at the books of BHP Billiton's Australian nickel unit, the Australian Financial Review reported on Sunday, without saying where it got the information.

Aluminium traded up 0.16 percent at $1,926 a tonne, not far off a recent 10-month high.

Rising demand and the closure of some 2 million tonnes of aluminium capacity are likely to shrink an expected surplus of aluminium in China this year.

In other metals, lead traded up 0.50 percent at $2,192 a tonne; zinc traded up 0.45 percent at $2,247 a tonne; while tin traded down 0.29 percent at $22,710 a tonne.

German industrial output posts surprise slump in May

Germany's industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years, as holiday days ate into working hours, construction slumped and geopolitics weighed, casting a shadow on its role as euro zone motor.

The drop was a surprise and sent the euro weaker - the consensus forecast in a Reuters poll was for industrial output to be unchanged. The economy ministry also slightly downwardly revised April data to -0.3 percent from a previous -0.2 percent.

The disappointing data added to mounting signs of a weaker second quarter in Europe's largest economy, after it enjoyed quarterly growth of 0.8 percent in the first three months of the year, its fastest growth rate in three years.

The figures also fanned expectations that the European Central Bank (ECB) may have to loosen monetary policy further in coming months in the face of disinflationary pressures and subdued growth.

"After a strong first quarter, industry output weakened over the last months. Besides the effect of the bridge (holiday) days in May and weakness in construction, which was to be expected after the mild winter, geopolitical factors may also have played a part," the ministry said in a statement.

"However sentiment indicators and general economic conditions suggests that output will rise again in the rest of the year after a weaker second quarter," it said.

The ministry did not specify which geopolitical areas were of concern but economists such as the influential Munich-based Ifo think-tank say business is worried about the Ukraine crisis and the impact on oil prices of the insurgency in Iraq.

"The second quarter is gradually turning into a massive disappointment. So far, May has brought disappointing retail sales, falling industry orders and now a significant fall in production," Dekabank economist Andreas Scheuerle said.

"Even if some of this is down to missing days at work because of the bridge days, and might be recovered later, there was simply not the momentum in the second quarter. That said, the general state of the German economy is not in question. The third quarter should be strong again," he said.

The German government forecasts growth of 1.8 percent for the year as a whole on the back of strong domestic demand and a healthy jobs market. However, expectations of a disappointing second quarter are now widespread.

Output in the construction sector fell 4.9 percent in May, after an exceptionally mild winter allowed much more building work to take place in the first months of the year. Output in intermediate goods slipped 3.0 percent on the quarter.
Source: Reuters