Oil prices hit the skids on 25 November after Iran and six world powers sealed a deal curbing its nuclear programme, a fillip for global economic growth that found expression in heartier share prices from Tokyo to Seoul.The agreement gives Iran some relief from crippling sanctions and is considered a big step toward a more lasting treaty. While Iran will not be allowed to increase its oil sales for six months, any easing of Middle East tensions tends to lead to lower crude prices.Brent crude oil shed $2.47 to $108.58 a barrel, its biggest daily drop in a month. US oil lost 88 cents to $93.96 a barrel.If sustained, the drop would be a net plus for spending power globally given high petrol prices essentially act like a tax on consumers."Positive growth signals continue to trickle out across the global economy and there is growth convergence between developed and developing economies," said Peter Dragicevich, a strategist at CBA."Our world GDP "nowcasting" estimate points to accelerating global economic growth in the final months of 2013. This is the general trend we expect to occur in early 2014."Attention in Asia was again on Japanese markets as a sliding yen promises to boost exports and profits. The Nikkei sped ahead by 1.3 per cent, having gained almost 11 per cent in little more than two weeks.On Wall Street, the Dow ended Friday with gains of 0.3 per cent, while the S&P 500 added 0.5 per cent for its first ever close above 1,800. Early Monday, S&P 500 futures had added another 0.3 per cent.But with money flooding into developed world assets, emerging markets are getting cold-shouldered. It was notable that MSCI's broadest index of Asia-Pacific shares outside Japan failed to make any headway at all last week, even as Wall Street made new peaks.So far on Monday, the index was up 0.4 per cent, as Seoul shares led the way with an increase of 0.7 percent.Yen Pain Is Euro's GainIn currency markets, the yen remained under pressure as investors use it for carry trades - borrowing the currency at super-low rates to invest in higher-yielding assets elsewhere.The dollar was up at 101.78 yen having cracked the old July top of 101.53. Much of the action was in the euro against the yen, which has had a barnstorming run to reach four-year highs above 137.80 yen.Euro-yen bulls now have their eyes set on a series of peaks from 2009 ranging from 137.43 all the way to 139.18, the top for that year. A break of the 139.18 level would take the euro to territory not visited since October 2008 -- very bullish from a technical point of view.Oddly, the gains have come even as the European Central Bank sounds ever-more dovish on policy.Earlier on Monday, ECB Executive Board member Benoit Coeure reiterated the central bank would take further action should inflation slow further. The single currency was been particularly strong against the Australian dollar, which has been undone by threats of intervention from the Reserve Bank of Australia.The euro leaped almost four full cents last week as the Australian currency crumpled to a three-month trough.Traders said the commodity currency could continue to struggle particularly if tensions between China and Japan grew.China at the weekend suddenly imposed new rules on airspace over islands at the heart of a territorial dispute with Tokyo, prompting Japan and ally the United States to warn of an escalation into the "unexpected".There is no major economic data due in Asia on Monday, while most of the U.S. economic releases will be front-loaded this week ahead of the Thanksgiving holiday on Thursday.The US diary includes figures on housing starts and prices, consumer confidence, durable goods orders and manufacturing in the Chicago area.(Reuters)
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The rupee is trading at 62.55/56 versus its close of 62.87/88, on gains in the domestic sharemarket.Traders, however, expect further USD/INR losses to be limited on the back of month-end dollar demand from oil firms.The pair is expected to move in a 62.20-62.80 range during the session, two dealers say.The BSE Sensex is trading up 1.4 per cent.(Reuters)
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Negotiations between the Department of Atomic Energy (DAE) and French company Areva over the Jaitapur Nuclear Power Plant (JNPP) in Maharashtra have hit a hurdle as DAE has questioned the capacity of reactors to generate electricity and its high cost.The bone of contention between the two is the generation of electricity by the EPR reactor, which Areva is planning to give to Nuclear Power Corporation of India Ltd (NPCIL).DAE sources pointed out that the department has raised objections because the "reference plant", which was agreed upon between DAE and Areva, was a plant that generated 1430 MW of electricity, but it says, Areva now wants a plant with enhanced power generation capacity.A reference plant is a nuclear power plant project that has already been tested, commissioned and which has commercially started generating power.According to a top DAE official, the reference plant for building reactors was one at Flamanville nuclear plant in France, which Areva mentioned with a capacity of 1430 MW. But it has now asked the DAE to enhance the power generation capacity to 1600-1700 MW. The DAE has raised an objection to this, the official said."The problem here is Areva is asking us to enhance the power generation capacity. The reference plant mentioned by Areva has not generated electricity between 1600 MW and 1700 MW with this technology. The EPR technology is first of its kind. More importantly, if the technology has been enhanced, even then the reference plant cannot be changed," the official said. The Atomic Energy Regulatory Board (AREB), whose nod at various stages of building a nuclear plant is mandatory, too has raised concerns about it."Areva has said that it will get an enhancement certificate for the plant from French Nuclear Regulatory Body, but we have doubts about this," he said.According to Areva's website, it is building EPR reactors for nuclear plants in Finland, United Kingdom, China and France.Of these, Olkiluoto 3 in Finland is a 1600 MW project, while two reactors for the Taishan plant in China are of 1660 MW each. The Hinckley Point plant project in United Kingdom has two EPR reactors of 1600 MW each and the Flamanville 3 nuclear plant is 1630 MW.A well placed source in Areva, who refused to be quoted, however, denied it."Flamanville 3 has been a reference plant for the Jaitapur project. From the very beginning of the discussions regarding Jaitapur, Areva proposed its EPR design, which is a 1600 MW plant," the source said.Another factor is the issue of the price per unit.Sources said that the price per unit for the JNPP comes to more than Rs 9 in 2021, which, according to the DAE is very high. The initial capital cost for the project per MW is between Rs 27-30 crore.The cost per unit for the Kudankulam Nuclear Power Plant Project (KKNPP) unit I and II is between Rs 3.50 and Rs 4. The cost for the KKNPP III and IV is also under negotiation."Even if we take inflation into account, this rate is too high. We have conveyed that the maximum cost can be Rs 6 per unit," the official said.He also pointed out that both the sides are negotiating hard, but India has made it very clear that it wont accept this high cost for producing energy."We have made it clear that unless the cost comes down, we would not be able to go ahead. Senior French government officials have assured us that they will look into the matter, so that the cost comes down," the official said.PTI made calls and also emailed a questionnaire to seek response from Areva, but did not receive any response.The JNPP project in five villages- Madban, Karel, Mithgawane, Varilwada and Neveli villages- in coastal district of Ratnagiri in Maharashtra, some 350 kms south of Mumbai, is to have six nuclear reactors with the capacity of 1650 MW each with French cooperation.On ground zero, despite the agreement of few groups to the project, the opposition still exists.According to Pravin Khade, the sub-divisional officer of Rajapur tehsil/ taluka (where the site falls), there are some 2336 Project Affected People (PAPs), of which 1311 PAPs have accepted compensation of Rs 11.20 crore and Rs 3.57 crore is yet to be accepted.As per the new compensation package announced by the Maharashtra government in February 2013, Rs 155.61 crore have been disbursed to 1240 people, while the remaining Rs 55.44 crore is yet to be accepted by people.After the plant is fully commissioned, Maharashtra will be the highest nuclear power producing state with it producing over 11,000 MW of electricity (if combined the JNPP and Tarapur Atomic Power Plant, north of Mumbai), the highest in the country.(PTI)
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Stocks in Cairn India surged as much as 5 per cent after the oil explorer said its board would meet on 19 November to consider a proposal to buy back shares.Shares also gained as Brent crude jumped $2 to end at its highest in more than a month on 21 November, fuelled by a sharp run-up in gasoline and gas oil prices on news of dwindling stocks and refinery glitches in the United States and Europe.Higher crude oil prices help increase realisations at oil exploration firms such as Cairn India, which sells crude in dollars. The rupee also weakened, heading for a third consecutive session of falls against the dollar. (Reuters)
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The rupee is at 63.02/63.04 versus its close of 62.93/94, after foreign institutional investors (FIIs) sold a net Rs 598 million in shares on 21 November to snap a 32-day buying streak that totalled Rs 238.84 billion as per exchange and regulatory data.Traders say continued weakness could spark intervention from the central bank.Rallies in US and Japan stock markets are also sparking talk of a shift by global investors to developed markets, with emerging countries with current account deficits such as India seen as vulnerable to future Fed tapering.USD/INR gains also reflecting demand from state-run oil companies, traders say.Still, the Nifty gains 0.5 per cent, recovering from its biggest single-day percentage fall in nearly two months on Thursday, putting a lid on USD/INR gains.The rupee is seen in a range of 62.70/63.30 for the session, traders said.(Reuters)
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India's narrowing current account deficit will not be enough to shield the country from pressures tied to Fed tapering, says Fitch Ratings. However, Fitch adds the spillover effects of the Indian rupee's weakness have not significantly hurt India's credit worthiness and will therefore not trigger any ratings action at this point. "(India's ratings) already incorporate both the sovereign's vulnerabilities and tolerance for volatility in global financial market conditions," Fitch said. Fitch adds India's economy has "not lost much momentum" on the back of "resilient" agriculture and exports, predicts economic growth of 4.8 per cent in 2013/14 and 5.8 per cent in 2014/15. Fitch also notes India's fiscal deficit remains under pressure, especially ahead of the general elections due next year, but says the government is likely to clam down heavily on spending. Fitch rates India at "BBB-minus", the lowest investment grade rating. It revised its outlook for the country to "stable" from "negative" in June. (Reuters)
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State oil group Petrovietnam and the overseas unit of state explorer Oil and Natural Gas Corp have signed a memorandum on joint exploration of crude oil, the Vietnam News Agency reported on Thursday.The exploration pact between Petrovietnam and ONGC Videsh Ltd would allow activities in Vietnam, India as well as in a third country.Vietnam's Industry and Trade Ministry also signed a memorandum with Tata Power Company Ltd on the construction of a $1.8 billion thermal power plant in Vietnam's southern province of Soc Trang, the agency said.The pacts were signed on 20 November during a visit to India by Vietnam's Communist Party General Secretary Nguyen Phu Trong, the report said.(Reuters)
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The sharp depreciation of the rupee in mid-2013 highlights India's difficult transition following an extended period of low growth, high inflation and a widening in the current account deficit.Fitch Ratings says in a report published today that the spillover effects of a weaker rupee have not significantly hurt India's creditworthiness, and hence would not trigger any rating action as this point.The economy has not lost much momentum, with both agriculture and exports remaining resilient and providing a cushion. Fitch therefore expects the economy to recover with real GDP forecast to rise 4.8 per cent and 5.8 per cent in FY14 (financial year ending March 2014) and FY15, respectively, compared with a 5.0 per cent rise in FY13.The modest economic recovery, however, will continue to undermine India's banking sector, which is facing a combination of weakening asset quality, eroding profit and declining capital. Nonetheless, these factors are likely to have only a moderate effect on the banking sector's ability to supply credit to the economy.Inflation has risen only moderately, despite higher import prices stemming from the weaker rupee. The Reserve Bank of India (RBI) has also signalled that it has started to place a greater focus on capping CPI.The current account deficit is narrowing, following measures to curb gold imports, a weaker exchange rate, and softer domestic demand. Fitch forecasts the current account deficit to decline to 3.1 per cent of GDP in FY14 (versus 4.8 per cent in FY13). This fall, however, will not be enough to shield India from further pressures related to the eventual start of Fed tapering.India's budget remains under pressure as the central government's (CG) fiscal deficit in the first six months of FY14 stood at 76 per cent of the full-year target. The authorities have indicated that they are still committed to lowering the fiscal deficit to 4.8 per cent of GDP (versus 4.9 per cent in FY13). To achieve this, the CG is likely to clamp down heavily on expenditures in 2H FY14.The ability to implement fiscal consolidation and continue with the overall economic adjustment process would support India's sovereign credit ratings. Fitch, however, acknowledges that the authorities' resolve to implement both tighter fiscal and monetary policies may be tested as the general election, which must be held by May 2014, approaches.(Reuters)
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The annual headline inflation is expected to moderate to near 5 per cent as there was reasonable price stability in some major commodities, the finance minister said on 19 November.P. Chidambaram made the comment in a lecture at the National University of Singapore.India's wholesale price index based headline inflation rose to an eight-month high in October at 7 percent, driven by costlier fuel and manufactured goods, raising the prospect of a fresh interest rate hike.Chidambaram also said the fiscal deficit target of 4.8 per cent of gross domestic product in 2012/13 would not be breached under any circumstances, even as many private economists say the deficit could cross the 5 per cent mark. (Reuters)
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The government has slapped an additional penalty of $792 million on Reliance Industries for producing less than targeted natural gas from its eastern offshore KG-D6 block.A notice disallowing $792 million out of the cost already incurred on the Bay of Bengal fields was sent to RIL on November 14, an oil ministry official said here.With this, a total of $1.797 billion penalty in form of cost being disallowed, has been levied on RIL for producing less than targeted output during the past three years.The company has till date spent $10.76 billion on the block, which it can contractually recover from sale of oil and gas. It is obliged to share the profits with the government only after recouping those expenses.It may be remembered that on October 27, the Planning Commission had warned that imposing a second penalty on Reliance Industries for producing less-than-projected natural gas from its KG-D6 fields could impact investment climate in the same manner as retrospective tax amendments.Read Also: Reliance Refuses To Sign Oil Ministry ResolutionRead Also: Double Penalty On RIL To Hit Investment Climate: Plan PanelThe Planning Commission, in its comments on a draft Cabinet note floated by the Oil Ministry seeking to deny higher prices for the currently producing main fields in the KG-D6 block from April 2014, said the move "creates the possibility of potential arbitrariness.""It could impact adversely on the investment climate, in the same way as retrospective tax amendments did," it said.Meanwhile, on 20 November, the official said the cost has been disallowed as RIL and its partners BP plc of UK and Canada's Niko Resources did not drill the committed number of wells, which led to output dropping by over 80 per cent from the main Dhirubhai-1 and 3 (D1&D3) gas fields in the KG-D6 block.D1&D3 fields have in the first fours years of production (2009-10 to 2012-13) produced a total of 1.853 Trillion cubic feet of gas, 1.196 Tcf short of 3.049 Tcf that RIL had committed to produce in the 2006 development plan.But for the first year, the output has lagged the targets in all subsequent years, which has led to a huge chunk of facilities built lying unutilised, the official said.RIL had built facilities to handle 80 million standard cubic metres per day of gas from D1&D3 but the present output is just 8.78 mmscmd.As per the production sharing contract, RIL and its partners BP Plc and Niko Resources are allowed to deduct all of the capital and operating expenses from sale of gas before sharing profits with the government.Creation of excess or unutilised infrastructure impacts government's profit share and this is being sought to be corrected by disallowing part of the cost.According to the approved field development plan, the output should have reached 80 mmscmd last fiscal.The government had previously issued a notice to RIL disallowing$1.005 billion in cost for shortfall in production during 2010-11 and 2011-12. ($457 million for 2010-11 and the rest $548 million for 2011-12).The Mukesh Ambani-run company, which blamed unseen geological complexities for the fall in output, has initiated arbitration against the levy. The new levy would be opposed.The DGH blames RIL for not drilling its committed quota of wells for the fall in production that has resulted in a large chunk of production facilities lying unused or under-utilised.(Agencies)
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