
Oil slips as little impact seen from EU sanctions on Russia
Brent crude futures settled down US$0.07, or zero point one per cent, to US$69.21 a barrel. US West Texas Intermediate crude settled down US$0.14, or zero point two per cent, to US$67.20.
The European Union approved on Friday the 18th package of sanctions against Russia over its war in Ukraine, which also targeted India's Nayara Energy, an exporter of oil products refined from Russian crude.
"The market right now thinks that supply will still make it to market in one way, shape or another. There is not too much concern," said John Kilduff, a partner at Again Capital in New York.
Kremlin spokesperson Dmitry Peskov said on Friday that Russia had built up a certain immunity to Western sanctions.
The EU sanctions followed US President Donald Trump's threats last week to impose sanctions on buyers of Russian exports unless Russia agrees to a peace deal within 50 days.
ING analysts said the part of the package likely to have an effect is the EU import ban on refined products processed from Russian oil in third countries, though ING said that could prove difficult to monitor and enforce.
Curbing some of crude's losses during afternoon trade on Monday were investor concerns around diesel supplies resulting from the sanctions package, analysts said.
"As the day has gone on, the diesel crack spread started to firm quite a bit, suggesting that the market cannot ignore the fact that any disruptions in Russian oil supply could tighten supplies of diesel and that seems to be giving us a bit of support today," said Phil Flynn, senior analyst with Price Futures Group.
Low-sulphur gasoil futures' premium to Brent crude closed on Monday at US$26.31, up around three per cent, marking its highest close since February 2024.
"We have a bit of room for error on the crude side, barrels can be shuffled around a bit, but it is harder to shuffle around tight supplies of diesel," Flynn added.
Iran, another sanctioned oil producer, is due to hold nuclear talks with Britain, France and Germany in Istanbul on Friday, an Iranian Foreign Ministry spokesperson said on Monday.
That follows warnings by the three European countries that a failure to resume negotiations would lead to international sanctions being reimposed on Iran.
In the United States, the number of operating oil rigs fell by two to 422 last week, the lowest total since September 2021, Baker Hughes said on Friday.
"Oil-focused drilling is expected to remain at subdued levels through the balance of the year," StoneX analyst Alex Hodes said in a note on Monday.
"We aren't anywhere close to prices that merit a significant pullback in investment though," Hodes added.
US tariffs on EU imports are set to kick in on Aug 1, though US Commerce Secretary Howard Lutnick said on Sunday he was confident the United States could secure a trade deal with the bloc.
US tariffs are potentially negative for oil demand and economic activity, Again Capital's Kilduff said.
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New Straits Times
27 minutes ago
- New Straits Times
Trump hits India with 25pct tariff and 'penalty' over Russia ties
WASHINGTON: US President Donald Trump said Wednesday that imports from India will face 25 per cent tariffs, while also announcing an unspecified "penalty" over New Delhi's purchases of Russian weapons and energy. The measures will kick in on Friday, Trump posted on his Truth Social platform, adding to a bevy of other tariff hikes – some up to 50 per cent – set to take effect the same day. In a separate post, Trump said the August 1 deadline "stands strong, and will not be extended." He had previously issued multiple delays to his so-called "reciprocal" tariffs since first announcing them in early April, while instituting an interim 10 per cent baseline. The 25 per cent tariff on India would be marginally lower than the rate announced in April, but is higher than those of other Asian countries that have struck preliminary trade agreements with Washington. India, the world's most populous country, was one of the first major economies to engage the Trump administration in broader trade talks. But six months later, Trump's sweeping demands and India's reluctance to fully open its agricultural and other sectors have so far prevented New Delhi from sealing a deal. "Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country," Trump said Wednesday morning. He added that India has "always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE." In addition to the 25 per cent tariff, India will face "a penalty for the above," Trump said, without any specification. Later Wednesday he told reporters that talks on the tariffs were ongoing and "we'll see what happens," but he did not elaborate on the penalty. The measure comes as the 79-year-old Republican has signaled he intends to tighten US pressure on Moscow to halt fighting in Ukraine and negotiate a peace deal. On Tuesday, Trump said he was giving Russian President Vladimir Putin 10 days – which would mean the end of next week – to change course in Ukraine or face new tariffs. He had previously threatened to impose "secondary tariffs" that would target Russia's remaining trade partners – such as China and India – seeking to impede Moscow's ability to survive already sweeping Western sanctions. Despite the tariff threat, New Delhi said it was committed to continuing negotiations on "a fair, balanced and mutually beneficial bilateral trade agreement." Shortly after announcing the tariffs on New Delhi, Trump said he had struck a deal with India's archrival Pakistan to jointly develop its oil reserves. "Who knows, maybe they'll be selling oil to India some day!" he posted on Truth Social. Trump has set out to upend the global economy by trying to leverage US economic power to squeeze trading partners with tariffs and force foreign companies to move to the United States. He has already announced deal outlines with five countries – Britain, Vietnam, Japan, Indonesia and the Philippines – as well as the one with the 27-nation EU. US and Chinese officials held talks this week in Stockholm on extending a trade truce that has temporarily lowered tariffs from soaring triple-digits. While no deal was announced at the meetings, both sides are eyeing an extension ahead of the August 12 deadline. Meanwhile Trump announced 50 per cent tariffs on Brazil – in part to pressure the South American ally to shut down the trial of far-right former president Jair Bolsonaro on coup charges. He has also instituted separate levies targeting specific sectors, including steel, copper and automobiles.

The Star
an hour ago
- The Star
Green hydrogen bubble that BP helped burst
SYDNEY: Australia's long-held ambitions to tap its abundant renewable resources and vast uninhabited landmass to become a global green hydrogen leader is fast unravelling. Despite strong government backing and significant private sector interest, at least seven big hydrogen production projects have been delayed, scaled back or cancelled in the last year. Chief among them was BP Plc's decision last week to exit a US$36bil facility in the Pilbara region of Western Australia, which had targeted starting production this decade. Around the world, project withdrawals have accelerated as developers struggle to secure customers willing to pay a premium for the fuel. Costs remain persistently high, unlike the sharp price drops seen in solar and wind that have boosted their competitiveness. That's raised concerns about the feasibility of using renewable energy to produce hydrogen that can be stored, transported and consumed like a fossil fuel to help nations meet net-zero goals. It also looks set to make Asia's goal of cutting hard-to-tackle emissions tougher to achieve. 'This isn't just an Australian issue. There has been a slowdown in development globally, in large part because the cost hasn't come down as fast as previously forecast,' said Simon Nicholas, an analyst at the Institute for Energy Economics and Financial Analysis, a think tank that seeks to accelerate the energy transition. 'I hope that the bursting of the hydrogen hype bubble is an opportunity for a reset.' There are more green hydrogen projects under development in Australia than in any other country, with a A$225bil (US$147bil) pipeline worth of proposed projects, according to the government. But only three relatively minor plants are actually operational in the country, while most others remain in preliminary planning stages. In recent years, many of the largest energy companies have tempered plans for green hydrogen as a way to better scale up renewable electricity. Plans to produce about 1.67 million tonnes of clean hydrogen had been shelved as of the end of June, according to BloombergNEF (BNEF) – over five times the amount of actual capacity. Meanwhile, just 1.9% of planned projects have secured financing or started construction. Europe, which could become one of the world's largest consumers of green hydrogen in its push to achieve climate neutrality by mid-century, has grappled to overcome high costs, forcing some projects to be abandoned despite government support. Growth of the technology in the United States is also now in doubt after Trump's One Big Beautiful Bill significantly limited tax credits to produce the fuel. A year ago, credits were expected to help lead to about 1.2 million tonnes of annual green hydrogen production by 2030, BNEF said. 'If those incentives don't exist, I don't think this industry will exist,' said Payal Kaur, BNEF's hydrogen analyst. 'There will be cancellations if the economics don't work, and the economics don't work without the credits.' In Australia, the challenges come despite strong government support and some of the world's best natural conditions to produce hydrogen using renewables. The government has committed at least A$4bil to support the green hydrogen industry to bridge the cost gap between production and market prices. However, access to most of this funding depends on developers proving commercial viability upfront, a challenge as long-term buyers remain scarce. The Australian Renewable Energy Agency is responsible for administering the government's Hydrogen Headstart programme and has so far provided more than A$370mil to 65 renewable hydrogen projects. The agency 'appreciates that the renewable hydrogen industry is nascent and will naturally experience challenges as it scales up', it said. Fortescue Ltd and Woodside Energy Ltd said this month they would withdraw from green hydrogen plans in Australia and the United States. While those announcements are disappointing, the clean fuel is essential to manufacturing and industry in a net-zero future, Australian Energy Minister Chris Bowen said. Some green hydrogen projects are still moving forward, despite the cost challenges. In Europe, climate policies are encouraging deals, such as the one between Germany's RWE AG and TotalEnergies SE to supply hydrogen to an oil refinery. Those contracts will help to underpin new production. Elsewhere, China and India are pushing ahead in a race to produce some of the world's cheapest green hydrogen. Even so, the clean fuel remains far more expensive than fossil fuels, according to BloombergNEF. For now, demand is mainly concentrated in sectors already using hydrogen, such as oil refining and fertiliser production. China also benefits from a mature domestic supply chain of electrolysers – the machines that convert water into hydrogen and oxygen – that has helped reduce project costs. In contrast, Australia depends on European-made production units, which cost multiples of the Chinese ones, according to Nigel Rambhujun, a hydrogen analyst at Rystad Energy. Australia's hydrogen dreams, meanwhile, risk being left in tatters. The current 'situation may prompt a reassessment of sourcing strategies, with greater emphasis on evaluating alternative regions', said Shintaro Onishi, a hydrogen and ammonia analyst at Wood Mackenzie. The researcher has already incorporated a 'limited future role of Australian hydrogen exports' in its outlook, he said. — Bloomberg


The Star
an hour ago
- The Star
UMB deal makes sense
Kenanga Research said the group could fully fund the latest acquisition internally. PETALING JAYA: United Malacca Bhd 's (UMB) decision to acquire the remaining 17% it does not own in Indonesia-based PT LifereAgro Kapuas (PT LAK) from PT Bank OCBC NISP TBK for US$10mil is a good deal for the planter, according to Kenanga Research. The research house said, in a report, that it made commercial sense to gain full control of a profitable and growing subsidiary. 'The acquisition is also valued fairly, hence neutral to prospective ratings and long-term positive financially as PT LAK has room to expand,' Kenanga Research added. UMB had acquired 83% of PT LAK's equity back in January 2016 for US$66.4mil. PT LAK came with Izin Usaha Perkebunan or a plantation licence for 24,585ha of agriculture land in central Kalimantan. PT Lak is divided into four estates with a palm oil mill. The land is slightly larger at 24,607ha split between Plasma smallholder scheme (10,434ha) and UMB's 'Inti' core holding of 14,173ha. Out of this, 11,419ha can be planted with oil palm. Kenanga Research said strategically, UMB would have full control over PT LAK. At about 10 times PT LAK's earnings in financial year 2025 (FY25), the valuation also looks fair to attractive. Importantly, PT LAK has capacity to grow as 3,312ha or 29% of its total plantable area of 11,419ha are still awaiting oil palm development. Out of the 8,099ha already planted, the trees are still young (10 years of age), and hence, fresh fruit bunch (FFB) yields are still low at 15 tonnes per ha, whereas the group's more matured estates typically yield 19 tonnes to 20 tonnes per ha. Meanwhile, Kenanga Research said the group could fully fund the latest acquisition internally. UMB ended its financial year 2025 with a net cash of RM151mil. 'Even after paying out RM27mil in dividends – seven sen final and six sen special dividends – the group can easily fund this acquisition of RM42mil by cash,' the research house pointed out. Furthermore, the returns from PT LAK should also exceed the rates UMB is earning from its cash deposits, it added. Meanwhile, RHB Research said firm crude palm oil (CPO) prices are also to be expected. CPO prices had eased since the recent peak in November 2024 but a global supply deficit looks set in 2025 with supply tightness likely to persist into 2026. Hence, CPO prices are expected to stay firm with an average CPO price of RM4,000 per tonne expected for UMB over FY26-FY27, the research house explained. Kenanga Research, which has maintained an 'outperform' call on the stock with a target price of RM6, said 'we see deep value at current levels'. The risks to Kenanga Research's call include adverse weather, softer CPO prices and the rising cost of labour, fertiliser and fuel.