Oil climbed from the lowest price in two weeks after a surprise drop in U.S. stockpiles, and as an unexpected advance in German business confidence countered concern that Europe’s debt crisis will trigger a recession.
New York futures gained as much as 1.1 percent. Crude inventories declined last week to the lowest since January 2010, according to an Energy Department report yesterday. German business confidence unexpectedly rose for the first time in five months in November. The official Saudi Press Agency reported that four people were killed and nine wounded in violence in the kingdom’s eastern province.
“Oil is holding the banner high with strong demand for heating oil as we move into the winter combined with the lack of sweet crude from Libya,” said Thorbjorn Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark, who forecasts Brent will average $107 a barrel this quarter.
Crude for January delivery rose as much as $1.14 to $97.31 a barrel in electronic trading on the New York Mercantile Exchange. It finished the session at $97.03. Prices have gained 6.2 percent this year.
Floor trading on Nymex is closed today for the U.S. Thanksgiving holiday. Electronic transactions will be booked with tomorrow’s trades for settlement purposes.
Brent oil for January settlement on the London-based ICE Futures Europe exchange settled at $107.78 a barrel, up 76 cents. The European benchmark crude was at a premium of $10.73 to New York-traded West Texas contracts. The spread reached a record $27.88 on Oct. 14.
German Business Climate
Oil closed at the lowest price since Nov. 9 yesterday after Germany failed to find buyers for 35 percent of bonds at an auction. Today’s business climate index from the Munich-based Ifo institute, based on a survey of 7,000 executives, rose to 106.6 from 106.4 in October. Economists in a Bloomberg News survey expected a decline to 105.2.
U.S. crude stockpiles fell 6.22 million barrels in the week ended Nov. 18 to 330.8 million barrels, according to yesterday’s Energy Department report, the biggest drop in nine weeks. Supplies were expected to climb 500,000 barrels, based on the median estimate of 13 analysts surveyed by Bloomberg News.
“The decrease in inventory is going to be a supportive factor to keep crude oil from losing too much ground,” said Ken Hasegawa, a commodity-derivatives trading manager at Newedge Group in Tokyo. “One hundred dollars is not far from now but I really doubt it will exceed the recent high of around $103.”
Distillate-fuel stockpiles declined 770,000 barrels to 133 million, the lowest since December 2008, the report showed. Stockpiles were down for an eighth week. Gasoline inventories surged 4.48 million barrels, the most since January.
Goldman Sachs Group Inc. yesterday raised its forecast for West Texas crude to $102 a barrel for the first quarter. The bank cited a Nov. 14 announcement by Enbridge Inc. that it would reverse the Seaway pipeline to boost the flow of oil from Cushing to the Gulf of Mexico. The storage hub in Oklahoma is the delivery point for New York-traded crude futures.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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Thursday, November 24, 2011
Oil Rises From 2-Week Low on U.S. Supply, German Business Data - Bloomberg
Oil Prices to Remain Choppy
By SARAH KENT
LONDON—The sharp price swings seen in the oil market this year are likely here to stay, as the market remains torn between a weakening global economy and heightening risks to an already tight oil supply.
The push and pull of these two competing themes is expected to keep oil prices volatile in the coming months, causing pain to oil traders unable to stay on top of the market fluctuations.
In a sign of just how confusing the current picture is, revisions to major banks' oil-price forecasts—used by traders as useful market barometers—have become common place in recent weeks. But banks are by no means in agreement on which direction the market will go.
On Tuesday, French bank Société Générale raised its price forecast for European benchmark Brent crude by $10 to $110 a barrel, citing the tight global oil supply picture. But that was followed the next day by a forecast from JP Morgan, which trimmed its Brent forecast for the beginning of 2012 to $105 a barrel, from $115 a barrel previously. The U.S. bank said "the headwind of economic and financial market risks is turning into a gale."
In light holiday trading Thursday, the front-month January Brent contract on London's ICE futures exchange was 65 cents higher at $107.67 a barrel. The front-month January contract on the New York Mercantile Exchange was trading 42 cents higher at $96.58 per barrel.
Physical oil inventories have dwindled in recent months following the Libya supply disruption and other factors. But the dismal global economic picture poses a significant threat to oil demand, with concerns over the state of the economy causing Brent to sink around 6% over the last two weeks.
"People are reassessing their economic expectations. There's far too much uncertainty in the euro zone and that at the moment really is the key factor we cannot determine for next year," said Andrey Kryuchenkov, vice president of commodities research at VTB Capital. "Given that macro risks are still there ... volatility is here to stay."
But countering the current economic uncertainty and boosting oil prices are continuing geopolitical tensions with the potential to severely disrupt oil supply.
Iran has been the key focus in recent days, after the U.S., the U.K and Canada imposed fresh sanctions on the country Monday. But a resurgence of protests in Egypt as well as ongoing problems in Syria and Yemen also pose potential threats to the crude markets.
The risks presented by the current unrest in the Middle East and North Africa are heightened as they follow on from a year in which supply was already interrupted, leading to a drain on crude stockpiles, analysts said.
The loss of some 1.3 million barrels a day in Libyan crude exports for much of the year put a big dent in global oil supply, while production problems in the North Sea, and disruptions due to sabotage and civil unrest in Nigeria, Yemen and Syria further depleted supply.
According to the most recent data from the International Energy Agency, oil inventories in Europe in September were at their lowest level since November 2007, while preliminary data from October show further stock draws.
"Volatility is going to be there right through next year," said Amrita Sen, oil -market analyst at Barclays Capital. "Supply buffers are very thin and in a market like that, there is much higher volatility."
Write to Sarah Kent at sarah.kent@dowjones.com
Wednesday, November 23, 2011
Nokia Siemens to Cut 17,000 Jobs
By CHRISTOPHER LAWTON And ARILD MOEN
HELSINKI—Network-equipment vendor Nokia Siemens Networks said it would cut nearly a quarter of its staff and restructure its business in a last-ditch effort to reach profitability and position itself for independence.
Rajeev Suri, chief executive of the joint venture owned by Nokia Corp. and Siemens AG, said the company would cut 17,000 jobs globally, or 23% of its work force of 74,000, to save €1 billion ($1.35 billion) in annual costs by 2013—double its current target. Mr. Suri also pledged to double down on its mobile broadband businesses, promising to divest other noncore businesses or manage them for value.
"While we plan to reduce our work force significantly, we will not make simple across-the-board reductions. We will focus on doing what we do best," Mr. Suri said in a conference call Wednesday. He declined to specify which regions would be affected.
Up until earlier this year, Nokia and Siemens had hoped they could unload a controlling stake in the unprofitable venture onto a consortium that included private-equity firms Gores Group LLC and Platinum Equity LLC, but the talks fell through. Previous talks with private-equity firms Kohlberg Kravis Roberts & Co. and TPG Capital also fell through.
Instead, in September, Nokia and Siemens injected €1 billion into the struggling joint venture, which recorded a €114 million operating loss in the three months to Sept. 30 despite a 16% rise in revenue to €3.41 billion. They also appointed Jesper Ovesen, the former chief financial officer of Danish operator TDC A/S, as the company's new chairman.
The level of job cuts was surprising, but necessary as Nokia Siemens works to position the venture to go public, said Swedbank analyst Jari Honko. "The present chairman of the board has a task to prepare Nokia Siemens for an initial public offering. The company can't really continue with the current setup. It's not that profitable," Mr. Honko said.
Nokia in September listed an IPO as one option for Nokia Siemens, as it works to be more of a "stand-alone" entity. In a statement, Mr. Suri on Wednesday said that as Nokia Siemens looks toward an "independent future," it needs to take action now to improve its profitability and cash generation. The joint venture is scheduled to come to an end in 2013. Of the last five consecutive quarters of revenue growth Nokia Siemens has recorded, only one was operationally profitable. The venture has been hurt by stiff competition from rivals, such as Telefon AB L.M. Ericsson, the market leader by sales in wireless gear.
Nokia and Siemens each own half of the venture, but Nokia has four of its seven board seats and consolidates the venture's results in its financial statements.
Nokia Siemens Networks Wednesday said it will focus its strategy on mobile network infrastructure and services, with a particular emphasis on mobile broadband.
The planned cost-cutting measures include site consolidation, cost synergies from the integration of Motorola's wireless assets and efficiencies in service operations, it said. Nokia Siemens acquired Motorola's wireless network equipment unit for $1.2 billion in July.
Cost cuts will largely come from shedding jobs but also from general cost cuts and selling of real estate.
Tuesday, November 22, 2011
MF Global Trustee Says Shortfall Could Exceed $1.2 Billion
David Goldman for The New York TimesJon S. Corzine on the trading floor of MF Global last year.
6:35 a.m. | Updated
The amount of customer money missing from the collapsed trading firm MF Global may be more than $1.2 billion — double previous estimates — the trustee dismantling the firm’s brokerage unit said on Monday.
But the surprise finding, which caught regulators off guard, may be overstated, according to a person briefed on the investigation. Some regulators say they believe that the trustee double-counted $220 million that had been transferred between units of MF Global, this person said.
Still, the much higher number highlights the disarray of MF Global’s records and raises significantly the hurdle for tens of thousands of customers seeking to get their money back. The trustee’s estimate represents a significant portion of customer funds held by MF Global.
Regulators suspect that as investors and customers fled MF Global in the last week of October, the firm used some of the customer money for its own needs — violating Wall Street rules that customers’ money be kept separate from the firm’s funds. Much of that money may never return.
Now the challenge has grown for investigators trying to determine exactly what happened in those last frantic days. Just days ago, investigators believed that they were closing in on what they thought was about $600 million in missing customer funds, according to people briefed on the matter. Regulators were relying on estimates from the firm and the CME Group, the exchange where MF Global did most of its business.
But after weeks of reconstructing MF Global’s books, forensic accountants from Deloitte and Ernst & Young working for the trustee concluded that the account shortfall was much greater than originally estimated. Regulators have yet to verify the new numbers. While they are expected to raise their estimate above $600 million, it is unlikely to reach the trustee’s $1.2 billion figure.
Kent Jarrell, a spokesman for the trustee’s office, stood by that figure, but he noted that it was preliminary.It is unclear what was behind MF Global’s original lower estimates. Some authorities chalk up the inaccuracies to the firm’s sloppy bookkeeping, and only slowly discovered additional holes in customer funds over the last three weeks.
The search for MF Global’s missing money has consumed a growing number of authorities, including the Federal Bureau of Investigation and federal prosecutors in New York and Chicago.
These inquiries have increasingly homed in on the theory that much of the customer money had left the firm, the people briefed on the matter said.
Regulators currently suspect that MF Global — at the time run by Jon S. Corzine, the former Democratic governor of New Jersey — improperly used customer money for its own purposes in the days before filing for Chapter 11 protection on Oct. 31.
Investigators are considering two possible situations. One is that MF Global used the money to meet trading partners’ demands for extra cash, which could come back. The other is that it was used to cover trading losses, which would mean that the money cannot be recovered.
MF Global’s management, however, has maintained that some of the money is still sitting at clearinghouses and banks, according to a person close to the company. Though they have not disputed that some of the money is gone, these executives think that other funds were trapped after the firm rapidly unwound more than half of its trading book as it was collapsing.
No one at MF Global, including its former chief executive, Mr. Corzine, has been accused of wrongdoing.
Representatives for MF Global, the CME and the Commodity Futures Trading Commission declined to comment.
The trustee, James W. Giddens, held a four-hour conference call on Sunday evening with staff members in New York City andChicago to discuss the latest shortfall numbers, according to Mr. Jarrell.
Ultimately, Mr. Giddens — under pressure from customers demanding the return of their money — decided to provide his fullest update yet on the progress of his investigation.
“He felt duty-bound to say” that more money was missing, Mr. Jarrell said.
In Monday’s announcement, the trustee said that his office controlled about $1.6 billion in customer funds, but most of that wasalready earmarked to be paid out. The trustee said he was close to exhausting those funds. But the person briefed on the investigation said that the trustee would soon be able to tap more than $1 billion in customer money that is trapped in Harris Bank.Beyond the shortfall in customer accounts, Mr. Giddens’s office said it did not have access to money that was held in foreign subsidiaries of MF Global, which are under the control of trustees in those countries.
“While the trustee will pursue them vigorously, it has been his experience that recovery of these foreign assets may take more time,” the office said.
In a separate move on Monday, MF Global’s estate requested court permission to appoint a trustee to oversee the winding down of the firm’s parent company. Such an authority would replace the company’s existing board. The trustee would be responsible for coordinating responses to regulators, among other duties.
MF Global is still running on about $8 million in remaining cash, and has yet to secure additional financing to support it through what will be a long bankruptcy case, lawyers for the estate said on Monday.
The fallout from the collapse of MF Global has renewed calls for tougher regulation of the futures industry, which has long relied on the principle that customer money is always safe.
While brokerages can use customer funds, they must put up sufficient collateral. Days before its Chapter 11 filing, however, MFGlobal was taking what amounted to free loans from its clients.
If federal prosecutors determine that MF Global intentionally tapped the customer funds, they could file criminal charges. But in a speech on Monday, David Meister, the C.F.T.C.’s enforcement chief, said that his agency need not show intent.
“You should know the commission takes the laws on segregated funds very seriously,” Mr. Meister said.
