15 Dec 2008;dailypioneer.com:New Delhi: Global investment banks Merrill Lynch and Goldman Sachs, which had earlier this year forecast oil prices would surge to $200 per barrel level, now foresee it slipping to $25-30 level, while Indian analysts anticipate a strong resistance at 40 dollars.
15 Dec 2008;business-standard.com:Singapore: Oil prices rose to above $47 a barrel today in Asia as investors anticipated OPEC will announce a large production cut at its meeting this week. Light, sweet crude for January delivery was up 92 cents to $47.20 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract Friday fell $1.70 to settle at $46.28.
The Organization of Petroleum Exporting Countries, which accounts for 40 per cent of global supply, has signaled it plans to announce a substantial reduction of output quotas at its meeting Wednesday in Algeria.
Iranian Oil Minister Gholam Hossein Nozari was quoted yesterday on his ministry's web site saying that Iran would push for a production cut of 1.5 to 2 million barrels per day.
Analysts have questioned whether OPEC members will follow through with any announced cut.
"They're talking about a severe cut, but the question is their discipline," said Christoffer Moltke-Leth, head of sales trading at investment firm Saxo Capital Markets in Singapore. "Unless they really surprise the market, this cut may not support the price much."
Oil has jumped from a four-year low earlier this month of $40.50 a barrel on expectations an OPEC output reduction could be the catalyst to stabilise the oil price, which has fallen 65 per cent since July.
Investors largely ignored OPEC's 1.5 million barrels a day output cut in October, focusing instead on a slowing global economy that's hurt crude demand.
More bad macro-economic and company news from the U.S. and Europe over the coming weeks will likely push oil prices lower, Moltke-Leth said.
13 Dec 2008;economictimes.indiatimes.com:NEW YORK: General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand. GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.
Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.
"We're adjusting pretty dramatically," spokesman Chris Lee said.
The move affects most of GM's plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and can apply to receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.
GM and nearly all automakers who sell in the U.S. are mired in the worst sales slump in 26 years. GM reported its sales in the U.S. plunged 41 percent in November and are down 22 percent for the first 11 months of the year compared with the same period last year.
Cash-strapped GM is seeking government loans to stay in operation beyond the end of the year. The White House said Friday it may tap into its $700 billion Wall Street bailout fund to help GM and Chrysler stay in business after the Senate blocked a measure to provide $14 billion in immediate loans.
The measure failed in dramatic fashion late Thursday after Senate Republicans balked at passing the bill without more wage and benefit concessions from autoworkers.
Lee said Friday's production cuts are unrelated to the rescue's failure and had already been planned.
The entire auto industry has been making massive production cuts recently as it adjusts to the reality of lower automobile demand. Earlier Friday, Honda Motor Co. said it was cutting production in North America by 119,000 vehicles for its fiscal year ending March 31.
That brings Honda's expected production for its fiscal year to 1.3 million units, a spokesman said.
Auto demand in the U.S., and increasingly around the world, has been hobbled due to the declining economy and the credit squeeze, which has made it more difficult and more costly for some buyers to obtain financing. Industrywide vehicle sales crumbled 37 percent in November, with every major automaker posting giant sales declines.
Lee said GM's production cuts will be achieved by adding "down weeks" to the schedules at the affected plants. During down weeks, which can be staggered during a given period of time or can come several at once, the plant will not produce anything and employees will be temporary laid off.
"We look at it on a plant-by-plant basis and make decisions regarding their production schedule in terms of market demand, so it's not a blanket ... we look at it plant by plant and make those decisions," Lee said.
Free pricing of petrol, diesel under consideration
12 Dec 2008;business-standard.com:New Delhi: The government has initiated work to free the pricing two of the four subsidised petroleum products -- petrol and diesel. “Freeing pricing is under consideration,” said a senior petroleum ministry official.
While many officials feel that this would be an opportune time to move towards market-based pricing – since the price of petrol and diesel would actually come down by Rs 10 and Re 1, respectively with oil ruling at about $40 per barrel – there is no consensus on how the subsidy on the remaining two subsidised fuels – LPG and Kerosene – will be borne.
After the cut in the price of petrol and diesel last week, gross margin of the oil marketing companies on petrol is at Rs 10 per litre while for diesel it is Re 1 per litre. However, under-recovery on kerosene is Rs 17.26 per litre while on LPG, it is Rs 148.38 per cylinder.
“Daily under-recovery is about Rs 25 crore for us,” said a senior official of the Indian Oil Corporation (IOC), the country’s largest marketer and refiner, which accounts for about half the market. It is about Rs 50 crore for all the three marketing companies – IOC, Hindustan Petroleum and Bharat Petroleum.
Overall under-recoveries for the three companies for the current year are estimated to be Rs 110,000 crore.
“The key now is to arrive at a formula of addressing under-recoveries which is transparent and acceptable to all,” said another ministry official, adding that there is no estimate of how long the exercise could take.
“It could happen before elections... or could take longer,” the official said.
Since decisions on energy pricing have political ramifications, and are perceived to sway voters one way or the other, a final nod will have to come from the Cabinet.
“Freeing prices is a good idea. It is important that the companies are free to decide prices,” said B K Chaturvedi, member, Planning Commission who headed the high powered committee set up by the Prime Minister to look into the financial position of oil companies and to examine the options for subsidy burden sharing.
Last year, government shouldered about 50 per cent of the subsidy burden through oil bonds, upstream companies contributed 30 per cent and the rest was managed by the oil marketing companies themselves.
Both the upstream and downstream companies say they are not in a position to shoulder any additional burden.
Agency reports said controlled pricing would end if oil remains at around $45 till February.
The government had moved to market linked pricing in April 2002 but controls were brought in 2004 as crude oil prices increased.
Toyota likely to report loss in second half - report
13 Dec 2008;economictimes.indiatimes.com:TOKYO: Toyota Motor Corp is likely to further cut its earnings forecasts and report an operating loss of about 100 billion yen ($1 billion) in the
October-March period, Japanese media reported on Saturday. The revision would come as global auto sales fall and the yen continues to strengthen against the dollar, Kyodo news agency reported, citing "informed sources".
The Asahi Shimbun daily carried a similar report without citing sources, saying the operating loss at the world's No.1 automaker in the second half would be over 100 billion yen if the yen did not weaken significantly.
It would mean its operating profit for the year to March 2009 would amount to 420 billion yen at best, more than 80 per cent lower than the 2.27 trillion yen Toyota made in operating profit last year, Asahi added.
A company spokesman declined to comment. But analysts say that with the yen rising to a 13-year high versus the dollar and global vehicle sales sliding more than expected, it was likely that Toyota will fall into the red in the second half.
Toyota more than halved its profit forecasts last month, saying annual net earnings will plunge to a 9-year low as the financial crisis batters demand for its cars, cuts access to credit and sends the yen higher.
Goldman Sachs recently lowered its full-year operating profit forecast for Toyota to 208 billion yen from 624 billion yen, expecting further production cuts.
Goldman's forecast would signify a loss of 374 billion yen in the second half. Toyota's share price ended Friday down 10 per cent at 2,760 yen.
Govt to move court to allow RIL third-party gas sales
13 Dec 2008;Kalpana Pathak:Mumbai: In an interesting turn of events, the government will shortly move the Bombay High Court requesting it to vacate an interim stay order that restrained Reliance Industries from selling gas from the Krishna-Godavari (K-G) basin to companies other than Reliance Natural Resources Ltd (RNRL) and state-owned NTPC, customers that had signed contracts for the fuel.
Sources familiar with the developments said the government will file an application in the Bombay High Court by the end of December or early January.
RIL on its part has already appealed against the order.
The court’s interim order in May last year had directed RIL not to “create third party interest” for the disputed volume of 40 mscmd (million standard cubic metres per day) of gas from the K-G basin.
Explaining the government’s move, sources said: “The government is a major stakeholder under the production-sharing contract, under which its entitlements can be as high as 85 per cent. A private dispute between two parties cannot threaten the interest of other stakeholders,” the source added.
When contacted, Mukul Rohatgi, senior counsel for RNRL, said: “The interim order is very much in force and will last till the main judgement is pronounced. The substance of the order is that RIL shall not deal with that amount of gas to which RNRL is entitled.”
RIL and RNRL had agreed on a price of $2.34 per million British thermal units (mBtu) in July, 2006, but RIL wanted to charge more after gas prices rose and costs climbed. The government in September 2007 set the price of gas from the K-G field for potential buyers at $4.2 per million mBtu. The price was linked to crude oil equal to or more than $60 a barrel.
The landed cost of the gas is expected to cost around $7 per mBtu, after adding transport and taxes. The alternative naphtha and imported gas cost above $10 per mBtu now, compared to $19 six weeks ago.
The move to get the interim order vacated comes just a day after the government withdrew its affidavit that had made it a party to the case being fought by the Ambani brothers in the Bombay High Court, saying it would expedite the two-year old case.
The affidavit, which the government submitted to the court on November 14, explained why the government wanted consumers to pay RIL $4.2 per unit of gas from the K-G basin. It added that the government had the right to reject the RIL-RNRL contract and that the higher gas price was binding.
RNRL had argued that both contentions in the affidavit were incorrect. RIL has set January as the date for producing gas from the K-G basin. The firm aims to supply more than 40 per cent of India’s requirement of oil and gas in about 18 months.
