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Oil settles mixed amid Beijing lockdown fears, tight supplies

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© Reuters. FILE PHOTO: Oil tankers are seen at a terminal of Sinopec Yaogang oil depot in Nantong, Jiangsu province, China June 11, 2019. REUTERS/Stringer

By Laura Sanicola

(Reuters) – Oil prices settled mixed on Thursday as supply concerns and geopolitical tension in Europe got the upper hand over the economic fears dogging financial markets as inflation soars.

Brent crude fell 6 cents to settle at $107.45 a barrel. WTI crude rose 42 cents, or 0.4%, to settle at $106.13.

“The trading has been thin and nobody knows what’s going to move the needle,” said John Kilduff, partner at Again Capital LLC in New York.

A pending European Union ban on oil from Russia, a key supplier of crude and fuels to the bloc, is anticipated to further tighten global supplies.

The EU is still haggling over details of the Russian embargo, which needs unanimous support. However, a vote has been delayed as Hungary opposes the ban because it would be too disruptive to its economy.

More broadly, oil prices and financial markets have been under pressure this week amid jitters over rising interest rates, the strongest U.S. dollar in two decades, concerns over inflation and possible recession.

Prolonged COVID-19 lockdowns in the world’s top crude importer, China, have also impacted the market.

“The slide in demand growth could not come at a better time, with China seemingly on the brink of locking down the capital of Beijing at any given moment,” said Bob Yawger, director of energy futures at Mizuho.

U.S. headline CPI for the 12 months to April jumped 8.3%, fueling concerns about bigger interest rate hikes, and their impact on economic growth.

“Soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023,” the International Energy Agency (IEA) said on Thursday in its monthly report.

“Extended lockdowns across China … are driving a significant slowdown in the world’s second largest oil consumer,” the agency added.

The Organization of the Petroleum Exporting Countries (OPEC)cut its forecast for growth in world oil demand in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation and the resurgence of the Omicron coronavirus variant in China.

On Wednesday, oil prices jumped 5% after Russia sanctioned 31 companies based in countries that imposed sanctions on Moscow following the Ukraine invasion.

That created unease in the market at the same time that Russian natural gas flows to Europe via Ukraine fell by a quarter. It was the first time that exports via Ukraine have been disrupted since the invasion.

Commodities

Oil settles higher on demand optimism, gasoline strength

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© Reuters. FILE PHOTO: An aerial view shows an Idemitsu Kosan Co. oil facility in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

By Laura Sanicola

NEW YORK (Reuters) -Oil prices rose on Monday on optimism that China would see significant demand recovery after positive signs that the country’s coronavirus pandemic was receding in the hardest-hit areas.

Brent crude futures for July delivery rose $2.69 to settle at $114.24 a barrel, a 2.4% gain, while U.S. West Texas Intermediate (WTI) crude rose $3.71, or 3.4%, to $114.20 a barrel.

Shanghai aims to reopen broadly and allow normal life to resume for the city’s 25 million people from June 1, a city official said on Monday, after declaring that 15 of its 16 districts had eliminated cases outside quarantine areas.

However, it is estimated that 46 cities in China are under lockdowns, hitting shopping, factory output and energy usage.

“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

In line with an unexpected sharp fall in industrial output in April, China processed 11% less crude oil, with daily throughput the lowest since March 2020.

U.S. gasoline futures set an all-time high again on Monday as falling stockpiles fuelled supply concerns. [EIA/S]

Stockpiles in the Strategic Petroleum Reserve fell to 538 million barrels, the lowest since 1987, data from the U.S. Department of Energy showed on Monday.

“Record high gasoline pricing has shown no sign of spurring demand destruction with the U.S. economy appearing sufficiently strong to drive a robust kickoff to the heavy driving season in just a couple of weeks,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Oil prices also found some support as the European Union’s diplomats and officials expressed optimism about reaching a deal on a phased embargo of Russian oil despite concerns about supply in eastern Europe.

However, EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto of the proposed oil embargo, with Lithuania saying the bloc was being “held hostage by one member state”.

German Foreign Minister Annalena Baerbock said the bloc would need a few more days to find agreement.

“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near $110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory.

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Moscow says G7 attempts to isolate Russia make global food crisis worse

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© Reuters. FILE PHOTO: Ears of wheat are seen in a field near the village of Zhovtneve, Ukraine, July 14, 2016. REUTERS/Valentyn Ogirenko

(Reuters) – Russia’s foreign ministry said on Monday that attempts by the West and the G7 group of nations in particular to isolate Moscow have worsened global food shortages.

G7 foreign ministers promised on Saturday to reinforce Russia’s economic and political isolation, continue supplying weapons to Ukraine and work to ease food shortages stemming from Russia’s Feb. 24 invasion of its neighbour.

“Attempts to divert Russia economically, financially and logistically from long-standing channels of international cooperation are only exacerbating economic and food crises,” the foreign ministry said in a statement on its website.

“It should be noted that it was the unilateral actions of Western countries, primarily from the Group of Seven, that exacerbated the problem of breaking the logistics and financial chains of food supplies to world markets.”

Before the war Ukraine and Russia combined accounted for about 29% of wheat production for the world market.

Moscow calls its actions in Ukraine a “special military operation” to disarm Ukraine and protect it from fascists. Ukraine and the West say the fascist allegation is baseless and that the war is an unprovoked act of aggression.

(Reporting in Melbourne by Lidia Kelly; editing by Grant McCool)

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After fires and floods, climate-conscious independents could determine Australian election

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3/3

© Reuters. Local residents Fiona and Ian Stuart stand near blackened trees on their property, burnt during the bushfires of the “Black Summer,” in Yatte Yattah, Australia, April 11, 2022. Picture taken April 11, 2022. REUTERS/Jill Gralow

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By Kate Lamb

SYDNEY (Reuters) – After some of the worst fires and floods ever to hit Australia, a new cohort of climate-conscious independents are threatening to shake up the federal election on Saturday, putting the government under pressure in key districts and potentially reshaping the country’s political landscape.

Enraged by the lack of government action on climate change, the candidates are campaigning hard on environmental issues in the hope of wooing moderate voters away from the major parties. 

“There is deep frustration that real action hasn’t been taken on climate change,” said Allegra Spender, 44, an independent candidate in the wealthy Sydney electoral district of Wentworth. “It’s become ideological rather than based on science and business, and that’s what people are seeking: just a rational, proportional response to the evidence.”

Spender, a former analyst with McKinsey & Co, is one of more than 20 independent candidates, predominately women, who are running for seats in traditionally conservative, mostly urban districts, and who draw some of their funding from Climate 200, a fund set up three years ago to back candidates looking to advance climate policy.

About half a dozen of these candidates have come to be known as the “teal independents,” reflecting the combination of their appeal to ‘blue’ moderate liberals and ‘green’ stance on climate change.

Opinion polls show the group is gaining traction among voters with their environmental, anti-corruption and gender equality policies, posing a threat to the established parties which have trodden lightly around the climate issue for fear of alienating voters in a country that is one of the world’s largest exporters of coal and gas.

Liberal Party leader Scott Morrison, who became prime minister in August 2018, seems likely to lose power at the election, ending nine years of conservative government. A poll conducted last week suggested the Labor Party would win 80 seats, more than the 76 needed for majority government. The poll showed the current government could be reduced to 63 seats with the remaining eight seats won by minor parties and independents. If the polls are wrong, as they were at the last election, a hung parliament where independents hold the balance of power is possible.

Treasurer Josh Frydenberg – the country’s most senior finance minister and widely seen as the next leader of the Liberal Party – is in danger of losing his Melbourne seat of Kooyong to a teal independent, neurologist Monique Ryan, according to a recent poll. Another independent, former journalist Zoe Daniel, is leading a poll in her Melbourne seat.

Spender appears to be attracting voters across the spectrum in Wentworth, which includes Bondi and some of the country’s most affluent harbourside areas.

“Climate change,” said 36-year-old Jess Daniel, when asked about her top priority after casting an early ballot in Bondi. “I have a little one and I am thinking of him, not just the here and now.”

After 58 years of voting conservative, Ian Tresise has donned the teal T-shirt and joined Spender’s army of 1,000 volunteers. 

“The world’s going to be cooked at 3 degrees,” he told Reuters, referring to global warming, as he handed out flyers at a Bondi pre-polling booth. “It’s getting pretty cooked at 1.5.” 

The goal of the Paris Agreement, which came into force in 2016, is to limit global warming to below 2 degrees Celsius, preferably to 1.5 degrees, compared to pre-industrial levels.

‘RACK AND RUIN’

A survey published by the Lowy Institute independent think-tank last May showed that concern over climate change is rising, with 60% of Australians agreeing that “global warming is a serious and pressing problem,” up from 56% the year before.

But away from the big cities, in areas which have experienced some of the country’s worst natural disasters in the last few years, opinions remain deeply divided.

In Conjola, a quiet holiday town on the south coast of New South Wales, some doubt climate change has anything to do with the fires that ripped through the town in the so-called “Black Summer” of 2019-2020, or the floods that followed weeks after, and again in recent months. The fires came after Australia’s hottest and driest year on record.

“These days we sneeze and its climate change,” said Barry, 59, who witnessed the Conjola fires. He asked to use his first name only, for fear of being targeted by climate activists.

For some in Conjola, as in the nation’s coal and gas heartlands, distrust of climate science is fused with concerns over jobs and rising living costs, which opinion polls show are still the most important issues for voters. Inflation hit a 20-year high in the first three months of the year, and voters are feeling the pinch as interest rates start to rise.

The fossil fuel industry is a significant employer in every Australian state. Mining accounts for 11.5% of the country’s economic output and fossil fuels make up about a quarter of total exports, according to Australia’s central bank.

“It’s a climate change election in that I want to vote for the government that is going to do the least,” said Barry. “Because closing coal-fired powered stations is going to cost jobs.”

Another Conjola resident, Samantha Kneeshaw, a high school science teacher who survived the fires by jumping in her pool with a scuba tank, said climate was the most important issue for her in the upcoming election.

“It is going to cause rack and ruin for so many people,” she said. “I cannot fathom this government getting back in again and not doing anything, because Australia is so crucial to this climate debate.” 

SHIFTING THE BALANCE

To achieve the Paris Agreement goal of keeping global warming under 2 degrees, the Intergovernmental Panel on Climate Change says the world needs to cut greenhouse gas emissions by 50% by 2030 and reach net zero by 2050.

Australia is well below that and was branded a “holdout” by United Nations Secretary-General Antonio Guterres in March. At global climate change talks in Glasgow last year, Australia refused to commit to phasing out coal or increase its carbon emission reduction targets.

Morrison’s coalition government has pledged to reduce emissions by 26% to 28% below 2005 levels by 2030 and hit net zero emissions by 2050, among the least ambitious of developed nations. But divisions within conservative ranks have raised questions over their commitment to the targets. In April, one Nationals senator in Queensland declared the government’s net-zero 2050 target “dead.”

After years of climate wars, many of Australia’s politicians have shied away from promoting renewable energy or trying to wean the country off fossil fuels for fear of a backlash from industry and some voters.

On the campaign trail, Deputy Prime Minister Barnaby Joyce, the leader of the Nationals, said he would not use the term “transition” applied to a move to cleaner energy as it “equals unemployment.” The opposition Labor Party is only slightly more ambitious, pledging a 43% reduction in emissions by 2030.

That has given the teal independents room to campaign on much more aggressive emissions targets. The group has already had an impact on the country’s politics, and has put establishment parties on the defensive.

New South Wales treasurer and energy minister Matt Kean, representing the Liberal Party, warned voters specifically not to vote for the teal candidates running against progressive Liberal Party candidates.

“To see what happens when the progressive voices are removed from centre-right political parties, just look at the Republican Party in the United States,” Kean said in an opinion piece published in the Sydney Morning Herald last weekend.

Frank Jotzo, a climate economist and professor at the Australian National University, said a general shift toward firmer climate change policies was underway.

“The fact that some of these climate change independents are getting so much interest and support in their respective electorates will shift the balance and is already shifting the balance among the parties they are competing with, in particular the Liberal Party.”

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