Tag Archive for: Trump

A closer look at round seven of the NAFTA negotiations

/, ,

FROM: Lexology / Dentons / 19 de marzo de 2018

 

Round seven of the NAFTA negotiations concluded in Mexico City on March 5, 2018. The talks ended with United States Trade Representative, Robert Lighthizer, indicating that the US is prepared to walk away from NAFTA and replace it with separate bilateral agreements. He urged the parties to finish the negotiations quickly, “Now our time is running very short…I fear the longer we proceed, the more political headwinds we will feel.”1 Lighthizer alluded to several ‘political headwinds’ that could impact the future of negotiations, including the presidential election in Mexico, provincial elections in Ontario and Quebec, and the US midterm elections.

The talks were impacted midweek by an announcement from President Trump that his Administration would impose tariffs on steel and aluminum imports. The proposed tariff would be 25% for steel imports and 10% for aluminum imports.

The proposed tariff triggered controversy within the Republican Party and the Administration itself. US House Speaker Paul Ryan, backed by a number of Republicans who support the President, has urged President Trump to back away from threats of a tariff, fearing that it could spark a trade war.2 In a letter to the President, 107 House Republicans wrote, “We urge you to reconsider the idea of broad tariffs to avoid unintended consequences to the U.S. economy and its workers.”3 On March 6, Gary Cohn, President Trump’s economic advisor, resigned. Cohn was a voice of free trade in a White House that is ambiguous at best on trade agreements.4

While the tariffs announced by President Trump ultimately excluded Canada and Mexico “for now”, the threat of tariffs proposal loomed over the remainder of the negotiations. Reportedly, the proposed tariff was the starting point for many discussions and was often referred to as “the elephant in the room”.5 The tariff proposal further impacted negotiations when President Trump linked the tariffs to the NAFTA negotiations. On March 5, he tweeted “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed”.6 Canadian Trade Minister Chrystia Freeland responded in her closing remarks by saying “Canada would view any trade restrictions on Canadian steel or aluminum as absolutely unacceptable.”7 Mexican Economy Minister Ildefonso Guajardo responded by tweeting “Mexico shouldn’t be included in steel & aluminum tariffs. It is the wrong way to incentivize the creation of a new and modern #NAFTA”.8 On March 7, President Trump announced that he would initially exclude Canada and Mexico from the proposed tariff. However, the exemption could be rescinded if Canada and Mexico do not agree to an updated NAFTA.9

Notwithstanding the short term exemption on steel, supported by the Steelworkers and Speaker Ryan, President Trump again tweeted on March 5 on the Canadian farm system and how Canada “must treat [US] farmers much better.” Thus, US agricultural demands remain on the table, while Canada continues to steadfastly defend its agricultural sector, including the supply management system. Whether and how the negotiators will successfully bridge this issue remains to be seen.

Limited progress was made in other areas, such as the rules of origin provisions. Jason Bernstein, the US negotiator for rules of origin, was called back to Washington on February 26 to consult with US industry representatives, thus halting negotiations. Talks amongst technical experts are scheduled to resume in advance of the next formal round of negotiations. Similarly, investor-state dispute mechanisms and the proposed sunset clause were not emphasized this round.

With respect to energy, we understand there is agreement to include both a standalone chapter on energy as well as energy related sections in other chapters. The standalone chapter, because it will likely include Mexico unlike certain energy provisions in the current NAFTA, will focus on “more interconnectivity across the networks of energy in North America” and will seek to recognize the changes Mexico has made to allow for foreign investment in its energy sector. 10

Negotiators did close a number of smaller chapters, including regulatory practices, sanitary and phytosanitary measures, and telecommunications. Additionally, Steve Verheul, Canada’s chief negotiator, commented that the parties were close to completing sections on technical barriers but required more time on sections regarding the environment.11 While reportedly half of the chapters are between 80-90% settled, Lighthizer commented that only 6 of NAFTA’s 30 chapters have been officially closed.

With respect to the sanitary and phytosanitary chapter that governs food safety, negotiators have settled on a fast-track system that would prioritize requests between the US, Mexico and Canada. This system is a first of its kind in international food safety agreements. Minister Guajardo said the chapter will help facilitate agricultural trade and it “guarantees animal and vegetable sanitation based in science.”12Additionally, sector annexes on proprietary food formulas and chemicals were closed this round. The annex protects the intellectual property of certain mixes and ingredients and allows for more regulatory cooperation for the use of chemicals. 13

The eighth round of NAFTA talks is expected to take place in Washington in April, subject to availability of Ministers who are traveling for other international meetings, including the upcoming Free Trade Area of the Americas summit.14

 

 

FROM: Lexology / Dentons / 19 de marzo de 2018

Mexico to Discuss Security With U.S. in Parallel to Nafta

/, ,

From: Bloomberg / Eric Martin / 11 de Diciembre de 2017

 

Mexico’s top diplomatic and interior officials will visit Washington this week to discuss security cooperation with their U.S. counterparts at the same time that negotiators work to overhaul Nafta, according to four people familiar with the plans.

 

The visit by Mexican Foreign Relations Minister Luis Videgaray and Interior Minister Miguel Angel Osorio Chong to meet with Secretary of State Rex Tillerson and Homeland Security Secretary Kirstjen Nielsen on Thursday is a follow-up to meetings in May, according to the people, who asked not to be named before the agenda is made public. It’s aimed at coming up with strategies to combat transnational criminal organizations, the people said. The press office of the Mexican Foreign Ministry and the U.S. State Department declined to immediately comment.

 

The meetings coincide with a sitdown by negotiators from the U.S., Mexico and Canada to update the North American Free Trade Agreement at the demand of U.S. President Donald Trump, who says the deal is responsible for hundreds of thousands of lost manufacturing jobs in the U.S. In an interview last month, Videgaray said that if the Nafta renegotiation encounters trouble, it could impact other areas of cooperation with the U.S. such as security and immigration. Mexico this year has seen homicides surge to the highest levels of this century, surpassing the previous record levels of the drug war from 2010 to 2012.

“It’s good for Mexico that we cooperate with the U.S. on security and also on migration and many other issues,” Videgaray said in the interview in Vietnam on Nov. 11. “But it’s a fact of life and there is a political reality that a bad outcome on Nafta will have some impact on that,” he said. “We don’t want that to happen, and we’re working hard to get to a good outcome.”

Videgaray told reporters last month that Mexico is prepared for the end of Nafta if it can’t reach a deal with the U.S. and Canada that benefits the nation. The three countries in August began talks to rework the pact after Trump pledged during the 2016 campaign to overhaul or end it.

This Week’s Talks

The latest meetings to revamp Nafta, taking place at the Mayflower Hotel, will run through Friday, largely out of the spotlight. Cabinet-level officials aren’t scheduled to attend for the second time since negotiations began, and the Trump administration is preoccupied with efforts to push through tax cuts by year-end and avoid a government shutdown. Videgaray’s portfolio includes the broad bilateral relationship with the U.S., while a team led by Economy Minister Ildefonso Guajardo has been focused on the commercial details of the Nafta negotiation.

videgaray

 

From: Bloomberg / Eric Martin / 11 de Diciembre de 2017

Mexican Peso’s Top Analyst Says Worst Is Over Even If Nafta Dies

/

“Mexico’s peso won’t return to the record lows it reached this year even if the U.S. makes good on threats to undo the trade agreement that transformed Latin America’s second-largest economy into an export powerhouse, according to the currency’s top forecaster.

The selloff that sent the peso plunging to 22 per dollar in the days before Donald Trump’s inauguration was overdone despite the threat to Nafta, said Scott Petruska, a foreign-exchange adviser for Silicon Valley Bank who was the most accurate analyst in the first quarter according to Bloomberg rankings. He correctly predicted that the currency would recover from the rout to become one of the best performers in the world this year.

“The Trump administration seems to have Mexico in its cross hairs which makes everybody very nervous, whether it’s negotiating Nafta or slapping some sort of tariff or border tax on imports from Mexico,” Petruska, who was also the top forecaster for Canada’s dollar, said from Boston. “But we can appreciate that Mr. Trump’s bark is often times worse than his bite.”

The peso plunged 15 percent from Trump’s surprise election win to when he took office as investors speculated he would damp foreign investment and suppress exports to the U.S., the destination for 75 percent of the goods Mexico sends abroad. It erased some of those losses in the first quarter as the central bank raised interest rates and U.S. officials indicated they probably wouldn’t seek to scrap Nafta entirely. Mexico central bank Governor Agustin Carstens said Wednesday that the peso — at about 18.8 per dollar — is still undervalued.

Petruska sees the peso weakening to 20 per dollar by September as traders overreact to whatever trade negotiations get underway, but says it will quickly recover to trade at 19 by the end of the year. The currency will gain to 18.3 per dollar by the end of 2018, he said.

With a benchmark lending rate of 6.5 percent, Mexico offers a higher return on local bonds than peers such as India, Peru and Chile. Volatility in the peso, meanwhile, has plummeted in the last few months and “speculators will feel comfortable going into the carry trade,” Petruska said.”

by Isabella Cota / Bloomberg

6 de abril de 2017 4:00 GMT-5

 

 

17 Octubre_Oil Speculators

 

 

Mexico ETF Begins to Rebound Follow Trump Punishment

/

After being punished last year on speculation that now President Donald Trump could win the 2016 presidential election, the iShares MSCI Mexico Capped ETF (NYSEArca: EWW) is rebounding in earnest this year.

EWW, the largest Mexico ETF trading in the U.S., is higher by more than 9% year-to-date and has surged almost 7% over the past month.

With the peso also sliding in the wake of Trump’s win, the Mexico’s central bank could move forward with more rate hikes to stem the currency’s slide.

Although Mexico’s central bank said the first rate hike earlier this year was not the start of a new tightening cycle, the central bank surprised global investors last month when it boosted borrowing costs by 50 basis points to 4.75%, which is good for the country’s highest interest rate since 2009.

However, some investors believe Mexican stocks still offer value, particularly for investors willing to be patient with EWW.

“The central bank will hold its first $1 billion auction of non-deliverable forward contracts on Monday, offering a way for businesses with expenses in dollars but revenue in local currency to hedge against further declines in the peso. Fitch Ratings has said companies including America Movil SAB and TV Azteca SAB are among the most vulnerable to a weaker peso as their overseas debt gets more expensive in local-currency terms,” reports Isabella Cota for Bloomberg.

Investors who believe the Mexican peso may continue to depreciate but anticipate the markets will improve can look to currency-hedged ETF strategies to diminish the currency risks. For instance, the Deutsche X-trackers MSCI Mexico Hedged Equity Fund (NYSEArca: DBMX) and the recently launched iShares Currency Hedged MSCI Mexico (NYSEArca: HEWW) provide exposure to the Mexico’s market without the added currency risk of a depreciating peso currency.

The peso is an important part of the Mexico investment thesis because exports account for over a third of GDP in Latin America’s second-largest economy. So are oil prices because Mexico is one of the largest non-OPEC producers in Latin America.

The peso is “trading near the average price of the past 200 days — a technical indicator that, when breached, may indicate more gains. Trading volume is lower than average ahead of the auction, according to traders,” reports Bloomberg.

 

11 Octubre_shutterstock_377851117

Tom Lydon / ETF TRENDS

March 6, 2017 at 10:29 am

 

Will Natural Gas Go On another Run in 2017?

/

From the multi-year slump of $1.611/MMBtu hit on 04 March 2016, to the highs of $3.902/MMBtu reached on December 28, 2016, natural gas prices have come a long way. Natural gas is 2016’s best performer among major commodities.

However, the big question is – Will the rally continue and what should be the strategy of the natural gas traders in 2017?

Until about November, the underground storage in the lower 48 states consistently stayed above the 5-year maximum levels, indicating a supply glut.

However, in December, the weather turned colder than normal, leading to a large drawdown in gas stocks. In the last six weeks of 2016, the U.S. working gas stocks in underground storage declined by 687 billion cubic feet, the largest seasonal decline since 2013, said John Kemp of Reuters.

In their Natural Gas Weekly Update released on December 22, 2016, the EIA said that in the first three weeks of December the U.S. natural gas consumption averaged 92 billion cubic feet per day (Bcf/d), 21 percent higher than the previous year and 17 percent higher than the five-year average (2011-2015), according to data from PointLogic.

As temperatures fell in December the consumption of natural gas increased from 80 Bcf/d in the first week of December to 98 Bcf/d between December 8-21.

The EIA report said: “Triple-digit consumption days are generally rare in December. However, from December 15–21, natural gas consumption has averaged 103 Bcf/d and topped 100 Bcf during 4 out of 6 days”.

Latest weather report stems the rally

A week ago, the weather reports were forecasting extremely below-normal temperatures in parts of the Northwest and solidly below-normal temperatures in at least half of the country, however, the weather did a ‘U’ turn of sorts and the latest reports are forecasting higher-than-normal temperatures.

As a result, natural gas prices fell about 11.4 percent on January 3, 2017. Prices are now down close to 16.5 percent since touching the high on December 28, 2016.

So, is this the end of the rally or is this a buying opportunity?

Rig count on the rise

Along with the weather, the natural gas production is also a key factor in determining gas prices. In 2016, gas drilling rigs are up from a low of 81 in August to 132 at the end of the year. Along with it, the increase in oil-well drilling and the U.S. President elect’s supportive policy can also give a boost to natural gas production.

Hence, production in 2017 is likely to surprise on the upside compared to the previous year if prices remain supportive. The EIA forecasts natural gas marketed production to reach 79.94 Bcf/d) in 2017, an increase of 2.46 Bcf/d over 2016 and 1.166 Bcf/d above the 2015 level.

On the other hand, consumption is expected to rise to 75.96 Bcf/d in 2017, an increase of 0.74 Bcf/d over 2016 and 1.31 Bcf/d over 2015 levels.

Price forecast for 2017

The EIA expects natural gas prices to average $3.27/MMBtu in 2017 compared to the average of $2.49/MMBtu in 2016.

The World Bank and IMF, on the other hand, forecast natural gas to average $3/MMBtu in 2017.

The natural gas futures are rising within the uptrending channel. Two attempts to breakout of the channel have been unsuccessful; hence, we don’t see a sharp spike in prices in the near-term and expect the intraday highs of $3.90/MMBtu to be a major hurdle to cross.

Nonetheless, a drop to $2.8/MMBtu levels is a good opportunity to accumulate long positions for a target of $3.8/MMBtu. Traders should wait for dips to accumulate long positions, rather than buying the breakouts.

However, a lot will depend on the policy announcements from the President-elect Donald Trump, which will decide the trajectory of natural gas prices in 2017.

 NRGI-broker-news-grupo-carso-wins-gas-pipeline-contract

By Rakesh Upadhyay for Oilprice.com

More Company Climate Votes Ahead, As Trump May Loosen Energy Rules

/

Activist shareholders plan a record number of resolutions focused on climate change at U.S. company annual meetings in 2017, even as President-elect Donald Trump looks set to loosen environmental regulations.

Based on filings so far, U.S. companies are on track to face roughly 200 resolutions on climate matters at their shareholder meetings next year, according to Rob Berridge, who follows the subject for Ceres, a sustainability advocacy group.

There were 174 such resolutions this year, Berridge said, compared with 167 in 2015 and 148 in 2014. Many have been directed at big oil and gas companies, though other sectors have also been targeted, including technology and retail.

Activist shareholders broadly aim to curb companies’ carbon emissions and make energy usage more efficient, or at the very least, to draw the attention of companies and investors to climate change as an urgent problem.

They have had some limited success. Investors at Exxon Mobil Corp the world’s largest publicly traded oil producer, passed a measure this year that could lead to an environmental activist joining its board. “Our position is that the risk of climate change is clear and warrants action,” said Exxon spokesman Alan Jeffers.

The rising number of shareholder votes reflects a growing concern among big investors about the environment, encouraged by steps by some boards to embrace reforms.

Deadlines are fast approaching to get resolutions on the ballot for shareholder meetings to be held in the spring.

The election victory of Trump, who is set to take over as U.S. president on Jan. 20, only seems to have added impetus.

On the campaign trail, Trump dismissed human-caused climate change as a “hoax” and pledged to dismantle the Environmental Protection Agency. He also threatened to withdraw the United States from the landmark 2015 Paris Agreement to combat climate change, although he appeared to step back from that position on Tuesday.

He vowed instead to revive the U.S. coal industry, encourage oil drilling and to scale back regulation of the energy sector.

“Despite what the administration may or may not do, I really believe that corporations understand the risks posed by climate change,” said Danielle Fugere, president of As You Sow, a California nonprofit campaign group. It sponsored 18 climate-related shareholder resolutions in 2016 and expects to file a bigger number next year.

One resolution for 2017 calls on Anadarko Petroleum Corp to report on how it would address the risk of so-called stranded assets, such as high-cost deepwater project investments, that might be caused by a drop in demand for oil and gas. The idea won support from 42 percent of shares voted at the company’s 2016 meeting, up from 29 percent in 2015.

Anadarko’s board last year called the idea “unnecessary and unproductive.” Spokesman John Christiansen said it is reviewing the proposal.

To be sure, among S&P 500 companies, investor support for climate resolutions has been relatively weak, holding steady around 22 percent since 2014, according to research firm Fund Votes.

But activists often won more backing for ideas such as urging companies to report on their strategy for dealing with climate change, according to the Sustainable Investments Institute, a research firm specializing in shareholder votes, supported by universities, pension funds and other institutional investors.

Anne Simpson, director of sustainability for the California Public Employees’ Retirement System (Calpers), which manages about $300 billion, said it plans to file or back resolutions at U.S. oil and gas companies for 2017, though she declined to discuss specifics.

Last year the boards of mining companies including Rio Tinto Plc and Glencore Plc endorsed resolutions Calpers submitted calling for reports on climate risk, and the measures passed by wide margins.

More companies will likely embrace shareholder proposals to head off disruption caused by climate change, Simpson said.

“Economics is driving this, not politics,” she said.

Copyright: Rigzone

Oil Bets Are Biggest in 9 Years Amid OPEC, Trump Volatility

/

Money managers, producers and consumers made the biggest bets on West Texas Intermediate crude prices in nine years, amid signals more volatility is coming.

Global markets were roiled after Donald Trump’s election as U.S. president and as OPEC continued negotiations on a deal to cap output. The U.S. dollar climbed to the highest since January. A measure of oil volatility surged last week to a seven-month high, a sign that traders were anticipating bigger price swings.

Wagers on higher and lower prices held by speculators and hedgers reached 1.47 million contracts in the week ended Nov. 15, the most since 2007, U.S. Commodity Futures Trading Commission data show. Trading volume of calls giving investors the right to purchase WTI futures rose to a record that day. The CBOE Crude Oil Volatility Index reached the highest since April. Brent oil shorts, bets that prices will fall, rose to the highest in more than two years.

“There’s tension in the market, with both producers and consumers worried about what OPEC does or won’t do on Nov. 30,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “They want to be protected from surprising price moves.” 

OPEC Meeting

Investors are weighing the chances that the Organization of Petroleum Exporting Countries will complete a deal to cap output at its Nov. 30 meeting in Vienna. While Saudi Arabian Energy Minister Khalid Al-Falih told Al Arabiya television he’s optimistic a deal will be reached, only seven of 20 analysts surveyed by Bloomberg last week expect the group to set output targets for its members.

OPEC agreed in September to cut their collective output to 32.5 million to 33 million barrels a day and has been trying to persuade other suppliers, notably Russia, to join the cuts. OPEC Secretary General Mohammed Barkindo said he’s confident the group can reduce record oil inventories and bring forward the rebalancing of the market.

“The Saudis are working hard to reach a deal,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “You don’t fight the Fed in the bond market and when it comes to oil you don’t fight the Saudis.”

The September agreement marked the end of OPEC’s two-year long experiment with pumping at will. Saudi Arabia led the group in the effort to grab market share and curb the development of more expensive reserves such as U.S. shale.

U.S. Production

While U.S. production has dropped from last year’s 44-year high, the decline is slowing. The Energy Information Administration this month raised its output forecast for 2017. Rigs targeting oil in the U.S. rose the most in 16 months last week, according to Baker Hughes Inc.

Producers and merchants increased short positions, or protection against lower WTI prices, to the highest level since March 2011. They added 66,613 bearish contracts over the past two weeks as prices retreated from last month’s peak at above $50 a barrel.

“The Saudis want higher prices but won’t sacrifice just to see a major competitor, U.S. shale, benefit,” said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. “The Trump election changes things. In one day the U.S. shale business got better. The government will be more responsive to the industry.”

Money managers’ net-long position in WTI advanced for the first time since mid-October, climbing by 3,906 futures and options to 163,321. Shorts climbed 14 percent while longs rose 8.1 percent. WTI gained 1.8 percent to $45.81 a barrel in the report week. It rose 2.7 percent to $46.93 as of 8:48 a.m. on Monday.

Brent Bets

In the Brent market, money managers increased short positions by 11 percent to 157,016 during the week, the highest level since September 2014, according to data from ICE Futures Europe. The net-long position in the global benchmark slipped by 4.6 percent during the week to the lowest since January.

In fuel markets, net-bullish bets on gasoline decreased 35 percent to 25,796 contracts, as futures slipped 2.5 percent in the report week. Money managers were net-short 393 contracts of ultra low sulfur diesel, from net-long 7,791 the previous week. Futures advanced 0.2 percent.

“I suspect that when the OPEC meeting is over there will have been a lot more smoke than fire,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “If they don’t come up with a convincing agreement, they’ll be forced to revisit the issue before long.”

 

Copyright: Bloomberg

Oil stays low ahead of Opec meet

/

Oil fell to its lowest in three months on Monday, as the prospect of another year of oversupply and weak prices overshadowed chances that Opec will reach a deal to cut output.

Donald Trump’s surprise win in last week’s US presidential election boosted the dollar and stocks but undermined oil. Crude has also fallen because of waning expectations that the world’s largest exporters will agree to reduce production this month.

Brent crude futures fell 50 cents on the day to $44.25 a barrel by 2:50pm GMT, while NYMEX crude futures dropped by 57 cents to $42.84 a barrel.

“In the same way that a strong Opec agreement was needed to continue the rally above $55, a lack of agreement will be needed to break below $40 and right now, we’re at $45,” Petromatrix strategist Olivier Jakob said.

Opec plans to cut or freeze output, but analysts doubt the group’s ability to reach an agreement at its meeting on 30 November.

Opec said on Friday its output hit a record 33.64 million barrels per day in October, and forecast an even larger global surplus in 2017 than the International Energy Agency (IEA) on Thursday.

Yet, Saudi Energy Minister Khalid al-Falih has said it was imperative for Opec to reach a consensus on activating a deal made in September in Algiers to cut production.

“Opec know what needs to be done but too few members will agree to take the production pain for the price gain, knowing also that the price gain incentivises non-Opec to produce more, lengthening the rebalancing process,” PVM Oil Associates analyst David Hufton said.

The dollar index hit an 11-month peak on Monday, driven by an aggressive sell-off in bonds that has pushed Treasury yields to their highest since January.

Ordinarily, a strong dollar would push oil lower, but the correlation between the two is at its most positive in two months, suggesting they are more likely to move in lockstep with one another than in opposite directions.

Data from the InterContinental Exchange on Monday showed investors delivered the largest weekly cut on record to their bets on a sustained rise in the price of oil.

15 Noviembre_shutterstock_349461494

Copyright: Up Stream