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China And Saudi Arabia Intensify Energy Cooperation With Critical Deal

China And Saudi Arabia Intensify Energy Cooperation With Critical Deal

Authored by Simon Watkins via OilPrice.com,

Multi-pronged memorandum…

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China And Saudi Arabia Intensify Energy Cooperation With Critical Deal

Authored by Simon Watkins via OilPrice.com,

  • Multi-pronged memorandum of understanding between Aramco and Sinopec lays the basis for increased cooperation.

  • China uses Russia’s new leverage over Saudi Arabia and OPEC to deploy its own strategy to accrete and exploit power over the Middle East’s huge oil and gas reserves.

  • The MoU covers refining, up-and-downstream operations, oilfield services, hydrogen, carbon capture processes and more.

The signing last week of a multi-pronged memorandum of understanding (MoU) between the Saudi Arabian Oil Company – formerly the Arabian American Oil Company - (Aramco) and the China Petroleum & Chemical Corporation (Sinopec) is a critical step in China’s ongoing strategy to secure Saudi Arabia as a client state. As the president of Sinopec, Yu Baocai, himself put it:

“The signing of the MoU introduces a new chapter of our partnership in the Kingdom…The two companies will join hands in renewing the vitality and scoring new progress of the Belt and Road Initiative [BRI] and [Saudi Arabia’s] Vision 2030.” 

The scale and scope of the MoU is enormous, covering deep and broad co-operation in refining and petrochemical integration, engineering, procurement and construction, oilfield services, upstream and downstream technologies, carbon capture and hydrogen processes. Crucially for China’s long-term plans in Saudi Arabia, it also covers opportunities for the construction of a huge manufacturing hub in King Salman Energy Park that will involve the ongoing, on-the-ground presence on Saudi Arabian soil of significant numbers of Chinese personnel: not just those directly related to the oil, gas, petrochemicals, and other hydrocarbons activities, but also a small army of security personnel to ensure the safety of China’s investments.

These developments are all in line with a comment made last March, at the annual China Development Forum hosted in Beijing, by Aramco chief executive officer, Amin Nasser:

“Ensuring the continuing security of China’s energy needs remains our highest priority - not just for the next five years but for the next 50 and beyond.”

At that point in early 2021, Aramco had a 25 percent stake in the 280,000 barrels per day (bpd) Fujian refinery in south China through a joint venture with Sinopec (and the U.S.’s ExxonMobil) and had also earlier agreed (in 2018) to buy a 9 percent stake in China’s 800,000 bpd ZPC refinery from Rongsheng. Several other joint projects between China and Saudi Arabia that had been agreed in principle were delayed due to a combination of the ongoing effects of Covid-19, Aramco’s crushing dividend repayment schedule, and concern from both countries – especially China – on how Washington might react to this clear threat to the U.S.’s own long-running interests in, and geopolitical relationship with, Saudi Arabia.

The basis of this enduring relationship between the U.S. and Saudi Arabia, as analysed in depth in my new book on the global oil markets, had been struck back in 1945 at a meeting on 14 February 1945 between the then-U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz. The first face-to-face contact between the two, this landmark meeting was held on board the U.S. Navy cruiser Quincy in the Great Bitter Lake segment of the Suez Canal, and the deal that they agreed – which had been the basis for all of the U.S.’s Middle East policy up until very recently - was this: the U.S. would receive all of the oil supplies it needed for as long as Saudi had oil in place, in return for which the US would guarantee the security both of the ruling House of Saud and, by extension, of Saudi Arabia.

The landmark deal survived the 1973 Oil Crisis - in which the Saudi-led OPEC placed an embargo on oil exports to various countries that had continued to supply arms to Israel during the Yom Kippur War against it and a coalition of Arab states led by Egypt and Syria – although the U.S. had little choice but to do that, given the dearth of its own alternative oil supply options at that time. It also looked as though the deal might survive the Saudi-led Oil Price War from 2014 to 2016, aimed by Riyadh at destroying or at least severely disabling the then-nascent U.S. shale oil industry, although Washington would never trust the Saudis to the degree it had before the War again. The real death of the 1945 Bitter Lake deal came when Russia emerged at the end of 2016 to support the then-beleaguered Saudi Arabia and OPEC in future oil production deals, given the lack of credibility in the global oil markets that both had at the end of the 2014-2016 Oil Price War. Fully cognisant of the enormous economic and geopolitical possibilities that were available to it by becoming a core participant in the crude oil supply/demand/pricing matrix, as also detailed in my new book on the global oil markets, Russia agreed to support the late-2016 OPEC production cut deal (in what was to be called from then-on ‘OPEC+’), although it did so in its own uniquely self-serving and ruthless fashion. At the end of 2016 at the latest, Washington knew its days of being able to count on Saudi Arabia in any meaningful way were over. 

China used Russia’s new leverage over Saudi Arabia and OPEC to deploy its own strategy to accrete and exploit power over the Middle East’s huge oil and gas reserves, with the key turning point for Beijing being its own rescue act for Saudi Arabia in the middle of 2017. As also analysed in depth in my new book on the global oil markets, it was at that point that the then-newly appointed Crown Prince, Mohammed bin Salman (MbS), was facing a huge problem at a very vulnerable stage in his rise to power. His problem was twofold:

  • first, he had portrayed himself to the senior Saudis whose support he desperately needed to stay in his new position as a man of canny international business and political instincts, and to this end he had promised them that he could float Saudi Aramco on international stock markets for a price that would value the whole company at US$2 trillion;

  • second, international investors regarded the company as, in market parlance, a ‘dog with fleas’.

It should be remembered that, at this point in 2017, MbS faced real threats at home to his ongoing rise to power, principally from the supporters of the previous King Abdullah and then-heir apparent, Muhammad bin Nayef, who had been appointed the Crown Prince in April 2015, only to be replaced by King Salman with MbS in June 2017. The opposition of these supporters only increased when many of them were rounded up and imprisoned in November of 2017 as part of what MbS’s supporters portrayed as a crackdown on corruption. Others regarded it as a standard criminal shakedown in which those being held were told to hand over US$800 billion-US$1 trillion of their assets to MbS and his supporters or else their lives would become a lot worse very fast. 

It was precisely when MbS was at his weakest that China stepped in and offered to buy the entire 5 percent stake in Aramco for a price that would guarantee the valuation for the whole company of the required US$2 trillion. Crucially as well, this would all be done through a private placement of the entire 5 percent share block in Aramco, which meant that none of the details surrounding the deal would ever get out publicly. As it transpired, several senior Saudis at the time - opponents to MbS’s ascension to power but still powerful voices in the Kingdom at that point – opposed the deal on the basis that it would make Saudi Arabia beholden to China. Although the deal did not go ahead, the subsequent trajectory of China-Saudi relations would suggest that MbS has never forgotten Beijing’s willingness to bail him out of any trouble in which he might find himself. 

Saudi Arabia’s promise to ensure the continuing security of China’s energy needs remains its highest priority for the next 50 and beyond has found concrete expression since that assurance was made, most recently again with Aramco’s senior vice president downstream, Mohammed Y. Al Qahtani, announcing the creation of a “one stop shop” provided by his company in China’s Shandong.

“The ongoing energy crisis, for example, is a direct result of fragile international transition plans which have arbitrarily ignored energy security and affordability for all,” he said.

“The world needs clear-eyed thinking on such issues. That’s why we highly admire China’s 14th Five Year Plan for prioritising energy security and stability, acknowledging its crucial role in economic development,” he added.

It has also found a broader expression in the news just before Christmas 2021 that U.S. intelligence agencies had found that Saudi Arabia is now manufacturing its own ballistic missiles with the help of China. Given China’s long-running and extensive ‘assistance’ to Iran’s nuclear ambitions, as analysed in full in my latest book on the global oil markets, ongoing U.S. fears about what Beijing’s endgame might be in building out the nuclear capabilities of key states – and historical enemies - in the Middle East, look well-founded.

Tyler Durden Fri, 08/12/2022 - 03:30

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International

The 4th Japan SciCom Forum 2022 on October 21 online

A range of experts in social and political science, communications, science engagement, and media production will contribute to keynote talks, workshops,…

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A range of experts in social and political science, communications, science engagement, and media production will contribute to keynote talks, workshops, and a panel discussion at the 4th Japan SciCom Forum (JSF 2022). Topics include media production for scientists, running hybrid and online events, public perception of COVID-19 vaccines, and tips for participating in TED talks.

Credit: OIST

A range of experts in social and political science, communications, science engagement, and media production will contribute to keynote talks, workshops, and a panel discussion at the 4th Japan SciCom Forum (JSF 2022). Topics include media production for scientists, running hybrid and online events, public perception of COVID-19 vaccines, and tips for participating in TED talks.

The fourth edition of JSF 2022 will be hosted by the Okinawa Institute of Science and Technology (OIST) online on October 21, 2022, 10:00 to 17:00 JST, with the support of EurekAlert! AAAS, Earth-Life Science Institute (ELSI), Impact Science, Miratuku, and Falling Walls Engage.

“Science communication is more important than ever. Across mediums, our work must communicate the relevance and impact of science to make it accessible,” said Heather Young, Vice President of Communications and Public Relations at OIST. “We are very proud to host this year’s Japan Scicom Forum to help contribute to training and development within the profession.” 

JSF is a community of science communication researchers, practitioners, and learners that gathers annually for the conference and bimonthly for online professional sharing. JSF organization has held three annual conferences, which were hosted by ELSI in Tokyo and gathered over 400 press officers, researchers, and students from across Japan. Last year’s conference was held online and had a significant number of international participants.

“The overarching goal of JSF is to build a network and professional identity, share knowledge and highlight best practices and new tools, and boost the English-language and international initiatives of Japanese higher education and research institutions,” said Thilina Heenatigala (ELSI), JSF organizing team. Ayumi Koso (NIG), JSF organizing team, added, “After three years of running the JSF conference, we are adapting a model to move the conference around Japan, and we are excited to have OIST to host this year.”

Registration is free. Participants from outside Japan are welcome. See the schedule and register here: https://www.japansci.com/conference/jsf22

Contacts:

Tomomi Okubo
Manager, Media Relations Section
Okinawa Institute of Science and Technology (OIST)
E-mail: tomomi.okubo@oist.jp
Tel: +81-080-6483-2675

Thilina Heenatigala
JSF Organising Team
Japan SciCom Forum (JSF)
E-mail: info@japansci.com
Tel: +81-3-5734-3163


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Coronavirus dashboard for October 5: an autumn lull as COVID-19 evolves towards seasonal endemicity

  – by New Deal democratBack in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based…

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 - by New Deal democrat

Back in August I highlighted some epidemiological work by Trevor Bedford about what endemic COVID is likely to look like, based on the rate of mutations and the period of time that previous infection makes a recovered person resistant to re-infection. Here’s his graph:




He indicated that it “illustrate[s] a scenario where we end up in a regime of year-round variant-driven circulation with more circulation in the winter than summer, but not flu-like winter seasons and summer troughs.”

In other words, we could expect higher caseloads during regular seasonal waves, but unlike influenza, the virus would never entirely recede into the background during the “off” seasons.

That is what we are seeing so far this autumn.

Confirmed cases have continued to decline, presently just under 45,000/day, a little under 1/3rd of their recent summer peak in mid-June. Deaths have been hovering between 400 and 450/day, about in the middle of their 350-550 range since the beginning of this past spring:



The longer-term graph of each since the beginning of the pandemic shows that, at their present level cases are at their lowest point since summer 2020, with the exception of a brief period during September 2020, the May-July lull in 2021, and the springtime lull this year. Deaths since spring remain lower than at any point except the May-July lull of 2021:



Because so many cases are asymptomatic, or people confirm their cases via home testing but do not get confirmation by “official” tests, we know that the confirmed cases indicated above are lower than the “real” number. For that, here is the long-term look from Biobot, which measures COVID concentrations in wastewater:



The likelihood is that there are about 200,000 “actual” new cases each day at present. But even so, this level is below any time since Delta first hit in summer 2021, with the exception of last autumn and this spring’s lulls.

Hospitalizations show a similar pattern. They are currently down 50% since their summer peak, at about 25,000/day:



This is also below any point in the pandemic except for briefly during September 2020, the May-July 2021 low, and this past spring’s lull.

The CDC’s most recent update of variants shows that BA.5 is still dominant, causing about 81% of cases, while more recent offshoots of BA.2, BA.4, and BA.5 are causing the rest. BA’s share is down from 89% in late August:



But this does not mean that the other variants are surging, because cases have declined from roughly 90,000 to 45,000 during that time. Here’s how the math works out:

89% of 90k=80k (remaining variants cause 10k cases)
81% of 45k=36k (remaining variants cause 9k cases)

The batch of new variants have been dubbed the “Pentagon” by epidmiologist JP Weiland, and have caused a sharp increase in cases in several countries in Europe and elsewhere. Here’s what she thinks that means for the US:


But even she is not sure that any wave generated by the new variants will exceed summer’s BA.5 peak, let alone approach last winter’s horrible wave:



In summary, we have having an autumn lull as predicted by the seasonal model. There will probably be a winter wave, but the size of that wave is completely unknown, primarily due to the fact that probably 90%+ of the population has been vaccinated and/or previously infected, giving rise to at least some level of resistance - a disease on its way to seasonal endemicity.

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JOLTs jolted: Did the Fed break the labour market?

In the Bureau of Labor Statistics (BLS) August release of the Job Openings and Labor Turnover Survey (JOLTS) report, the number of job openings, a measure…

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In the Bureau of Labor Statistics (BLS) August release of the Job Openings and Labor Turnover Survey (JOLTS) report, the number of job openings, a measure of demand for labour, fell to 10.1 million. This was short of market estimates of 11 million and lower than last month’s level of 11.2 million.

It also marked the fifth consecutive month of decreases in job openings this year, while the August unemployment rate had ticked higher to 3.7%, near a five-decade low.

In the latest numbers, the total job openings were the lowest reported since June 2021, while incredibly, the decline in vacancies of 1.1 million was the sharpest in two decades save for the extraordinary circumstances in April 2020. 

Healthcare services, other services and retail saw the deepest declines in job openings of 236,000, 183,000, and 143,000, respectively.

With total jobs in some of these sectors settling below pre-pandemic levels, the Fed’s push for higher borrowing costs may finally be restricting demand for workers in these areas.

The levels of hires, quits and layoffs (collectively known as separations) were little changed from July.

The quits rate (a percentage of total employment in the month), a proxy for confidence in the market was steady at 2.8%.

Source: US BLS

From a bird’s eye view, 1.7 openings were available for each unemployed person, cooling from 2.0 in the month prior but still above the historic average. 

The market still appears favourable for workers but seems to have begun showing signs of fatigue.

Ian Shepherdson, Economist at Pantheon Macroeconomics noted that it was too soon to suggest if a new trend had started to emerge, and said,

…this is the first official indicator to point unambiguously, if not necessarily reliably, to a clear slowing in labour demand.

Nick Bunker, Head of Economic Research at Indeed, also stated,

The heat of the labour market is slowly coming down to a slow boil as demand for hiring new workers fades.

Ironically, equities surged as investors pinned their hopes on weakness in headline jobs numbers being the sign of breakage the Fed needed to pull back on its tightening.

Kristen Bitterly, Citi Global Wealth’s head of North American investments added,

(In the past, in) 8 out of the 10 bear markets, we have seen bounces off the lows of 10%…and not just one but several, this is very common in this type of environment.

The worst may be yet to come

As for the health of the economy, after much seesawing in its projections, which swung between 0.3% as recently as September 27 and as high as 2.7% just a couple of weeks earlier, the Atlanta Fed GDPNow estimate was finalized at a sharply rebounding 2.3% for Q3, earlier in the week.

Rod Von Lipsey, Managing Director, UBS Private Wealth Management was optimistic and stated,

…looking for a stronger fourth quarter, and traditionally, the fourth quarter is a good part of the year for stocks.

As I reported in a piece last week, a crucial consideration that has been brought up many a time is the unknown around policy lags.

Cathie Wood, Ark Invest CEO and CIO noted that the Fed has increased rates an incredible 13-fold in a span of just a few months, which is in stark contrast to the rate doubling engineered by Governor Volcker over the span of a decade.

Pedro da Costa, a veteran Fed reporter and previously a fellow at the Peterson Institute for International Economics, emphasized that once the Fed tightens policy, there is no way to know when this may be fully transmitted to the economy, which could lie anywhere between 6 to 18 months.

The JOLTs report reflects August data while the Fed has continued to tighten. This raises the probability that the Fed may have already done too much, and the environment may be primed to send the jobs market into a tailspin.

Several recent indicators suggest that the labour market is getting ready for a significant deceleration.

For instance, new orders contracted aggressively to 47.1. Although still expansionary, ISM manufacturing data fell sharply to 50.9 global, factory employment plummeted to 48.7, global PMI receded into contractionary territory at 49.8, its lowest level since June 2020 while durable goods declined 0.2%.

Moreover, transpacific shipping rates, a leading indicator absolutely crashed, falling 75% Y-o-Y on weaker demand and overbought inventories.

Steven van Metre, a certified financial planner and frequent collaborator at Eurodollar University, argued

“…the next thing to go is the job market.“

A recent study by KPMG which collated opinions of over 400 CEOs and business leaders at top US companies, found that a startling 91% of respondents expect a recession within the next 12 months. Only 34% of these think that it would be “mild and short.”

More than half of the CEOs interviewed are looking to slash jobs and cut headcount.

Similarly, a report by Marcum LLP in collaboration with Hofstra University found that 90% of surveyed CEOs were fearful of a recession in the near future.

It also found that over a quarter of company heads had already begun layoffs or planned to do so in the next twelve months.

Simply put, American enterprises are not buying the Fed’s soft-landing plans.

A slew of mass layoffs amid overwhelming inventories and a weak consumer impulse will result in a rapid decline in price pressures, exacerbating the threat of too much tightening.

Upcoming data

On Friday, the markets will be focused on the BLS’s non-farm payrolls data. Economists anticipate a comparatively small addition of jobs, likely to be near 250,000, which would mark the smallest monthly increase this year.

In a world where interest rates are still rising, demand is giving way, the prevailing sentiment is weak and companies are burdened by excessive inventories, can job cuts be far behind?

The post JOLTs jolted: Did the Fed break the labour market? appeared first on Invezz.

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