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Red Sea fighting traps two oil ships in Houthi waters

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Red Sea fighting traps two oil ships in Houthi waters
© Reuters. FILE PHOTO: Decaying vessel FSO Safer is moored off Yemen’s coast in this undated screengrab taken from a video. Holm Akhdar/Handout via REUTERS/File Photo

By Jonathan Saul, Noah Browning and Mohammed Ghobari

LONDON/ADEN (Reuters) – Two tankers, containing oil and toxic waste, are stuck in the Red Sea in the firing line between Western naval forces and Yemen’s Houthi militants despite repeated efforts by the United Nations to empty and move the ships to avoid a spill.

The vessels, one of which has been stranded for years, are near the port of Ras Issa from where Iran-aligned Houthis launch missiles on ships passing through the Red Sea and where U.S. missiles land as they target the Houthis.

The United Nations last year led efforts to remove a million barrels of oil from the decaying tanker, the FSO Safer, to a new tanker, the MT Yemen, in an operation that cost $121 million.

The UN had hoped to move the FSO Safer, which still contains toxic waste water and oily residue, for disposal elsewhere and sell the oil aboard the MT Yemen.

Neither of the ships has moved since August as the Houthis and their foes in Yemen’s internationally-recognised government could not agree who should receive the money for the oil, a Houthi source speaking on condition of anonymity told Reuters.

The source also said there was no an agreement to tow the ship away.

The UN Development Programme said it was in discussion “with all relevant parties in Yemen” about the handover of the vessel.

“(UNDP) has not had any indication from the de facto authorities in Yemen of threats to deliberately damage the vessel,” a UNDP spokesperson said, referring to the Houthis.

A source with the internationally recognised Yemeni government, also speaking on condition of anonymity, said he believed the Houthis have refused to release either of the ships and were using them to increase their bargaining power.

TOXIC SLUDGE

A former supertanker built in the 1970s, the FSO Safer was converted into a floating storage and offloading facility for oil before the outbreak of civil war in Yemen in 2014.

It is so decayed its rotting hull threatened to spill its cargo into the Red Sea.

Last year, the United Nations contracted Dutch-based SMIT Salvage, which removed the oil. Belgium’s Euronav (NYSE:) provided the MT Yemen vessel.

The toxic sludge and wash water used to scrub oil out of the tanker have still not been removed, a shipping source said.

He asked not to be named due to the sensitivity of the matter and added that some 70,000 metric tons of residue were still onboard the FSO Safer.

A spokesperson for Boskalis, the parent company of SMIT salvage, said it had been contracted to remove the oil but not the Safer vessel.

Belgium’s Euronav has maintained a crew onboard the MT Yemen since August under its contract with the UN.

“Once the handover process is complete, the crew will leave,” the UNDP spokesperson said.

Euronav said it continued to assist the UNDP to safely handover the MT Yemen. It did not specify who might ultimately receive the ship.

Commodities

Oil set for weekly gain on signs of improving demand

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By Shariq Khan

NEW YORK (Reuters) – Oil prices rose in Asian trading hours on Friday, with global benchmark Brent set for its first weekly increase in three weeks on signs of improving global demand and slowing inflation in top oil consumer the United States.

prices rose 21 cents, or 0.3%, to $83.48 a barrel by 0018 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 18 cents, or 0.2%, to $79.41 a barrel.

Brent futures are set to rise about 1% on a weekly basis, and WTI futures are set to gain 1.4%.

Recent declines in oil and refined products inventories at major global trading hubs have created optimism over oil demand growth, reversing a trend of rising stockpiles that had weighed heavily on prices in prior weeks. Through Thursday, Brent crude futures were down around 10% from this year’s peak of $92.18 a barrel on April 12.

U.S. oil and fuel inventories fell last week, while Singapore’s middle distillate fuel stocks dropped to a near three-month low this week. In Europe’s Amsterdam-Rotterdam-Antwerp trading hub, gasoline stocks were down 7.5% in the week to Thursday, data from consultancy Insights Global showed.

Recent economic indicators from the United States have fed into the optimism over global demand. U.S. consumer prices rose less than expected in April, data showed on Wednesday, boosting expectations of lower interest rates in the country.

Those expectations were further bolstered by data on Thursday that showed a stabilizing U.S. job market.

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Lower interest rates could help soften the U.S. dollar, which would make oil cheaper for investors holding other currencies and drive demand.

“Financial markets now have placed the most bets on a September interest rate cut by the Federal Reserve, which would continue to temper the dollar strength and shift that strength over to commodities and equities,” StoneX oil analyst Alex Hodes said on Thursday.

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Commodities

Goldman Sachs discusses what’s next for natural gas prices

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Over the past three weeks, US prices have surged 30% to above $2.50 per million British thermal units (mm/BTU), fueled by production declines and increased feedgas demand for liquified natural gas (LNG) exports.

Moreover, recent producer cuts, maintenance events, and Freeport LNG’s normalization of gas demand post-outage have contributed to this rise. Cheniere’s announcement of no heavy maintenance for its liquefaction trains this year also supports higher prices.

In a Thursday note, Goldman Sachs strategists said the return of gas prices above $2/mmBtu aligns with their expectations, as production curtailments “would ultimately lead to lower storage congestion risks for this summer.”

“That said, we see only limited further upside from current levels, with stronger gas prices risking a return of congestion concerns,” they added.

Goldman notes that prices above $2/mmBtu reduce gas competitiveness compared to coal, with a $0.50/mmBtu increase potentially cutting gas demand by 1 billion cubic feet per day (Bcf/d), especially in shoulder months.

Moreover, higher prices may prompt the restart of previously shut-in wells. EQT (ST:), the largest producer in the Appalachia region, indicated it would resume production if prices sustainably exceed $1.50/mmBtu. And while Appalachia prices haven’t risen as much as NYMEX, the local hub has averaged $1.44/mmBtu month-to-date, up 10¢ from last month, strategists highlighted.

Elsewhere, European gas prices have also risen this summer, though less sharply than in the US.

Title Transfer Facility (TTF) prices increased 18% over the past three months to around 30 euros per megawatt-hour (MWh), holding steady in May.

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However, unlike the US market, this rally lacks fundamental support, with Northwest (NW) European gas storage at record-high levels, Goldman strategists pointed out.

“To be sure, NW European LNG imports have remained weak relative to last year – and are likely to get weaker in the coming weeks owing to a seasonal decline in global LNG production, exacerbated by outages at Australia’s Gorgon export project,” they said.

“Going forward, we expect healthy non-European demand for LNG to continue to incentivize a decline in European LNG imports vs last year,” they continued.

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Commodities

Gold prices trim some weekly gains on tempered rate cut hopes

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Investing.com– Gold prices fell slightly on Friday, trimming some of their gains for the week as comments from a slew of Federal Reserve officials offered a more sobering outlook on interest rate cuts. 

The yellow metal had risen to nearly $2,400 an ounce this week in the immediate aftermath of some soft U.S. economic readings. But it pulled back from these levels on Thursday and Friday.

steadied at $2,377.40 an ounce, while expiring in June fell slightly to $2,381.10 an ounce by 00:19 ET (04:19 GMT). 

Gold retreats as Fed officials downplay rate cuts, but weekly gains due

The yellow metal fell on Thursday after a string of Fed officials cautioned against bets on immediate reductions in interest rates. 

Several members of the central bank’s rate setting committee said the central bank will need much more convincing that inflation was coming down beyond a marginally soft inflation reading for April. 

This saw traders begin pricing out some expectations for a rate cut in September. The and also rebounded from earlier losses this week. 

Still, some softer-than-expected readings put gold on course for a 0.7% weekly gain. 

The yellow metal was also in sight of a record high of above $2,430 an ounce, although it appeared unlikely the level would be met in the near-term. 

Other precious metals retreated on Friday, but were set for bumper weekly gains. fell 0.2% but were trading up 6.2% for the week, while fell 0.4% but were up 4.5% this week. 

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Copper mixed amid middling China cues

Among industrial metals, one-month copper futures tumbled from two-year highs tracking middling economic data. But three-month copper futures pushed higher and were set for a stellar week as markets bet on tighter supplies and an eventual demand recovery in the coming months. 

on the London Metal Exchange rose 0.6% to $10,445.0 a ton, while rose 0.3% to $4.8935 a pound. 

Data from China on Friday painted a mixed picture of the economy. While grew more than expected, growth slowed and shrank at an accelerated pace. Growth in Chinese also slowed.

The readings presented a muddled outlook for the world’s biggest copper importer, as it rolled out more stimulus measures to shore up growth.

Three-month copper futures gained on the prospect of a demand recovery, and were up nearly 4% this week. They were also at two-year highs. 

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