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Top News - Oil

U.S. shale tempers output even as oil price "The quality of the acreage for privates is not as good as jumps the publics," Sheffield said, estimating private companies Even with oil prices surging toward $75 a barrel, U.S. account for 40% to 50% of U.S. rig count. shale producers are keeping their pledges to hold the line "We’re not seeing the upward pressure we would on spending and keep output flat, a departure from normally have predicted based on $73 oil," said Paul previous boom cycles. Mosvold, president and COO of driller Scandrill, which This year's run up in crude prices, and oil output curbs operates super-spec drilling rigs, equipment in high imposed by the OPEC+ producers group, historically demand since the oil market recovered. would have triggered a drilling boom. But investors are Mosvold reported a slight uptick in calls as oil prices have demanding financial returns over more volume and climbed, but said they are "not substantial." energy financiers are shifting to renewables, so shale firms are determined to stay disciplined. U.S. Supreme Court backs refineries in biofuel waiver "I'm still confident the producers will not respond" to the dispute run-up in prices, said Scott Sheffield, chief executive of The U.S. Supreme Court on Friday made it easier for Pioneer Natural Resources, the largest producer in the small oil refineries to win exemptions from a federal law Permian Basin shale . A focus on shareholder returns requiring increasing levels of ethanol and other has kept spending low, he said in an interview with renewable fuels to be blended into their products, a major Reuters. setback for biofuel producers. Last week, benchmark U.S. crude futures traded above The justices overturned a lower court decision that had $73 a barrel, the highest since October 2018. Back then faulted the U.S. Environmental Protection Agency for there were 1,052 U.S. rigs drilling but today there are giving refineries in Wyoming, Utah and Oklahoma much less than half that many: around 470, according to extensions on waivers from renewable fuel standard Baker Hughes data. (RFS) requirements under a law called the Clean Air Act Shale output remains well below the January 2020 peak even though the companies' prior exemptions had of 9.18 million barrels per day (mbpd), with production expired. from the seven largest fields this month running 7.77 The extensions at issue were given to units of mbpd, or 15.4% below that level, according to U.S. HollyFrontier Corp and CVR Energy Inc. government data. Overall U.S. first-quarter oil production The 6-3 ruling, authored by conservative Justice Neil averaged 83% of last year’s peak. The U.S. recently Gorsuch, compared these extensions to ones granted in raised its 2021 average production outlook to 11.08 mbpd everyday life such as to a student wanting more time to due to higher crude prices, but it remains about 200,000 complete a term paper even though the deadline has bpd below last year’s average. passed or a business contract whose term had expired. "Oil prices will probably break $80 a barrel here shortly "It is entirely natural - and consistent with ordinary usage and I don't see any rig adds," Sheffield said. A spike in - to seek an 'extension' of time even after some time oilfield activity could drive up prices, which are lapse," Gorsuch said. already up about 6%. Pioneer may reduce its active rigs In a dissent, conservative Justice Amy Coney Barrett, as its operations have become more efficient, he said. joined by liberal justices Sonia Sotomayor and Elena Kagan, faulted the ruling's interpretation of the word OPEC EASING CUTS "extend." The "EPA cannot 'extend' an exemption that a Shale's restraint is key to OPEC's next step. The no longer has," Barrett wrote. producers' group has gradually added more production, President Joe Biden's administration has been confident U.S. shale will not return to an era of considering ways to provide relief to U.S. oil refiners from growth. It will meet Thursday and consider furthering biofuel blending mandates. unwinding cuts from August. The case reflected a long-running dispute between the oil "So far, activity levels support the discipline and corn industries. The legal battle focused on changes narrative," said Jonathan Godwin, a senior associate at made in 2005 and 2007 to the Clean Air Act to require data provider Enverus. Frack fleet activity has held steady biofuel quotas in U.S. and diesel products - since jumping 20% at the start of the year, he said. intended to reduce dependence on foreign oil and In the United States, closely held companies have support alternatives. contributed substantially to rig additions this year, but Under the program, refiners must blend billions of gallons Sheffield said those smaller firms should not drive up of biofuels such as ethanol into their fuel or buy volumes enough to ruffle OPEC+ producers. compliance , known as RINs, from those that do.

U.S. renewable fuel credits fell on the news, trading at Noting that because the lower court had faulted the $1.55 cents each, down from $1.65 each on Thursday. EPA's decision on other grounds as well, the groups said U.S. gasoline and diesel futures plunged about 3% they were optimistic that Biden's administration and the immediately following the news, but later eased losses. EPA would "take a far more judicious and responsible States backing the refineries included Wyoming. Those approach to the refinery exemption program than their backing biofuels included Iowa. Both sides cited predecessors did." economic threats to their rural economies posed by the Renewable fuel groups said that an increase in waivers litigation. during former President Donald Trump's administration HollyFrontier Corp said in a statement, "We are pleased had undercut the demand for their products by billions of that our longstanding arguments were today validated by dollars. the Supreme Court." HollyFrontier urged the EPA to Small refineries were exempt until 2011 to account for "immediately take action to make the RFS a workable any "disproportionate economic hardship" they would program for U.S. refiners and consumers." endure by complying with volume requirements for American Fuel & Manufacturers President ethanol and other biofuels. Chet Thompson said the renewable fuel standard "is But the EPA was allowed to extend those exemptions for hurting consumers and jeopardizing the viability of certain periods. refineries across the country, as well as the jobs and At issue in the case was whether the EPA impermissibly they support." exempted units of HollyFrontier and CVR Energy in 2017 Biofuel and corn producer groups that challenged the and 2018 when they had not received continuous prior waivers, including the Renewable Fuels Association and extensions of an initial exemption. the National Corn Growers Association, said in a The Denver-based 10th U.S. Circuit Court of Appeals last statement they were "extremely disappointed in this year found that the EPA had exceeded its authority unfortunate decision from the Supreme Court." "because there was nothing for the agency to 'extend.'"

Top News - Agriculture

EU strikes deal on huge subsidies, ending three warning that many measures to encourage to years of negotiations shift to environmentally friendly methods were weak or negotiators struck a deal on reforms to voluntary. the bloc's huge farming subsidy programme on Friday, The deal would require countries to spend 20% of introducing new measures aimed at protecting small payments to farmers from 2023-2024, rising to 25% of and curbing agriculture's environmental impact. payments between 2025-2027, on "eco-schemes" that The deal ends a near three-year struggle over the future protect the environment. of the EU Common , which will suck up Examples could include restoring to absorb around a third of the EU's 2021-2027 budget, spending CO2, or , although the rules did not define 387 billion euros on payments to farmers and support for what would count as an eco-scheme. Any funds below rural development. those limits that are not spent on eco-schemes must be Representatives from EU member states and European spent on green measures in other areas instead. Parliament clinched the agreement, which aims to shift The rules require EU countries to redistribute at least money from intensive farming practices to protecting 10% of CAP funds to smaller farms. Countries could nature, and rein in the 10% of EU greenhouse gases dodge this requirement if they use other methods to emitted by agriculture. distribute the funds fairly. The new CAP rules apply from 2023 and do not cover Countries must hand 3% of subsidies to young farmers, Britain following its exit from the EU. and should use criteria like income tests to define who is "In future, agriculture will not just ensure that farmers an "active " and can receive subsidies - another have a viable business, that we have a fair price for attempt to stop large businesses sucking up money. consumers, but it will also contribute to a greener All farmers' payments would be tied to complying with Europe," said Portuguese agriculture minister Maria do environmental rules, such as setting aside 3% of arable Ceu Antunes, who represented EU countries in the talks. land for areas where nature can thrive. "Small family-run farms will get support," said Norbert The deal also creates a 450 million euro crisis fund in Lins, parliament's chief negotiator, adding that the deal case agricultural markets are disrupted by an emergency gives farmers incentives to protect the environment. such as a pandemic. Campaigners and some lawmakers said the deal failed to EU auditors this week said the current CAP had failed to align farming with EU goals to fight change, reduce emissions. EU agriculture emissions, half of which

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come from , have not decreased since 2010. transported via Lithuania, the head of Lithuanian European Parliament and EU member states must both Railways said on Friday. formally approve the agreement. About 11 million tonnes of Belarus crossed the Lithuanian border last year, with about 2.5 million tonnes Most Belarus potash exports not affected by EU falling under EU sanctions, Mantas Bartuska told sanctions - analysts reporters. The European Union's ban on imports and transit of Klaipeda port shipped almost 10.7 million tonnes of potash from Belarus will not affect most exports of the Belarus potash last year via a terminal 30% owned by nutrient from the world's top producer, provided the Belaruskali. restriction stays in its current form, potash transporters The ban was part of wide-ranging EU economic sanctions and analysts said. against Belarus, a month after Minsk scrambled a The curbs apply to Belarus Potash Company (BPC) warplane to force a Ryanair flight to land in order to arrest which exports potash -- Minsk's main foreign currency a government critic who was on the aircraft. earner -- mostly via the Baltic port of Klaipeda in EU- Brussels imposed sanctions on Belarusian potash with a member Lithuania. content of less than 40% or more than 62% in But its main export product, namely potash with 60% the dry product. potassium content, is not on the EU's list of sanctioned "The measures do not cover the key Belarusian potash items, the industry analysts pointed out. export, potassium chloride, which is 40-62% K2O by In total, the sanctions imposed on Belarus potash have weight, and accounts for 80% of the country's supplies to put limits on only about 20% of exports of the product the EU," analysts at VTB capital said in a note.

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The Russian Foreign Ministry said the broader EU costs, but this accounts for less than 10% of the current sanctions were "unacceptable" and promised a helping price, VTB Capital added. hand to Belarus. BPC, Belaruskali's export arm, whose supplies account "Russia, together with Belarus, intends to closely for 20% of global potash trade, competes with Canada's coordinate measures needed for sustainable and Nutrien and Mosaic among others. sovereign development of the brotherly country," ministry "Every type of product is important to us, irrespective of spokesperson Maria Zakharova said in a statement. the volumes supplied," BPC said on Friday about the EU's sanctions list, without providing details. COMMITMENTS TO CUSTOMERS BPC will make every effort to meet its commitments to "It seems BPC can largely run unaffected," analysts at customers, which include China and , it added. BMO Capital markets said in a note. The sanctions impact on Klaipeda port will not be major Worries about possible damage to European agriculture and is likely to be compensated by growth elsewhere, the from the sanctions on the , as well as a wish to port said in a statement. keep space for further pressure on Belarus, limited the Lithuanian Raiways' Bartuska said Belarus is likely to scope of the sanctions on potash, two diplomatic sources export the sanctioned produce via ports in Russia and told Reuters. Ukraine, to buyers outside the EU. The sanctions on potash agreed by member He added that Lithuanian Railways, which has a states' leaders are wider reaching than were initially transportation contract with Belaruskali until the end of proposed by the European Commission, one of the 2023, stands to lose 14 million euros in income per year sources said. due to the sanctions, which could result in it asking for The ban on transit of production by state-run potash about 10 million euros of state support for its miner Belaruskali through the EU increases transportation infrastructure arm.

Top News - Metals

Rio kept destruction of Ice Age Australia heritage artefacts had been thrown in a Darwin rubbish heap. secret, Aboriginal group says Rio Tinto Iron chief executive Simon Trott said in a A Rio Tinto Ltd forerunner failed to protect 18,000-year- statement: "We’re not proud of many parts of our history old artefacts showing how people lived during the last Ice at Marandoo and we reiterate our apology to the Age, part of destruction that the giant kept secret Traditional Owners of the land, the Eastern Guruma for decades, an Australian Aboriginal group alleged on People, for our past actions. We know we have a lot of Friday. ahead to right some of these historical wrongs, The group said that Rio, despite pledges to improve how which fell well short of the standards we expect today." it protects Indigenous heritage after its destruction of Trott's statement did not address the Indigenous group's sacred sites last year, did not come clean about the specific allegations. Rio declined to comment beyond the 1990s destruction of heritage at an mine that statement. local Aboriginal people still do not have access to. The Aboriginal group's submission highlights an Australian mining "is an industry that hasn’t behaved Australian legal structure that has long greenlighted responsibly and an industry that needs far greater mining development at the expense of historically oversight in heritage protection and agreement making," important cultural sites. the Wintawari Guruma Aboriginal Corporation (WGAC) "Any site dating from the last Ice Age is significant said in a statement. because people were using these sites as refuges, so we The troubled relationship between mining, a core industry can get a sense of how they were reacting to glacial for Australia's economy, and the nation's Aboriginal conditions," said Duncan Wright, a specialist in heritage attracted global attention last year when Rio, Indigenous archaeology at Australian National . with state approval, blew up two ancient rock shelters "If you had sites of this significance in , they considered sacred to Indigenous people in Western would be protected - it's like destroying Stonehenge," said Australia. Wright, who has not seen the material. The sites could, in Outrage at the legal destruction featured in Black Lives fact, have been significantly older, given the Matter protests in a country where Aboriginal people have available in the 1990s, he said. long suffered higher rates of imprisonment, unemployment and lower life expectancy. HERITAGE 'IN THE BIN' The furore led Rio to replace top executives and promise Hamersley Iron Pty Ltd and the Western Australia state to overhaul its heritage protection practices. government knew by May 1992 "that rock shelter 'MG2' in Friday's claims, in a submission to a government inquiry, Manganese Gorge contained Aboriginal cultural material concern different sites in the same region, around the dating back 18,000 years," the first evidence of Aboriginal Marandoo iron ore mine. The group said it had learned habitation through the Ice Age, WGAC said in the that material dating back at least 18,000 years and other submission. Rio acquired Hamersley in 2001.

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Material from that rock shelter was accidentally dumped Australia is the world's largest exporter of iron ore, LNG in , and Hamersley later approved plans to discard and coking used to make steel. unanalysed material from 20 of 28 sites that were It ranks second behind Indonesia for thermal coal and salvaged, it said. third in shipments of ore, and is a major producer "It is a wound that has not healed - that so many cultural of both and alumina, the used to sites were lost, blasted into fragments, without even a make the refined metal. record, note or photograph kept," the group said. "Nothing Australia is also the world's third-largest gold producer remains today beyond a deep hole in the ground." and the biggest net exporter of the precious metal, and is The group said this contravened state regulations a top supplier of battery metals such as nickel and . requiring the miner to safeguard salvaged material, part Iron ore is the heavy hitter of Australia's resource exports, of an arrangement that exempts Rio from complying with with the country responsible for 53% of the world's state heritage laws. exports, or more than double that of number two Brazil's Indigenous groups have mounted opposition to state 21% share. government revisions of heritage protection laws that It has also been a stellar performer in the 2020-21 year have legalised the destruction of ancient sites. as robust Chinese demand collided with supply issues as Trott said Rio also supports repealing the law that created the coronavirus pandemic affected shipments from Brazil the exemption, the Marandoo Act 1992, and that and number three exporter South Africa, and Australia "discussions with Traditional Owner groups to better experienced some weather disruptions. understand and reflect their wishes are ongoing." This sent the spot price from a 2020 low of $79.60 a The Aboriginal group said artefacts in early reports had tonne to a record high of $235.55 on May 12, with the included grinding material, hearths, marine shell, bone, steel-making ingredient largely holding on to its gains, stone and wooden items from an area that contained ending at $217.75 on June 25. numerous rock shelters, a ceremonial area and a The Australian government forecasters tend to be waterhole with . cautious in their price assumptions and they expect iron "So little was the respect for either the State’s conditions, ore to average $137 a tonne in 2020-21, before retreating or for the cultural heritage that was destroyed on a to $129 in 2021-22 and $100 in 2022-23. massive scale, hundreds of Eastern Guruma cultural Australia's iron ore exports are expected to be around artefacts ended up in the bin," it said. 871 million tonnes in 2020-21, before rising to 904 million The group noted reports of vandalism at the M2 rock in 2021-22 and 954 million in 2022-23. shelter, including a drill rig putting a hole through its roof. This extra supply will drive prices lower, especially as WGAC said they remain unable to assess the heritage at China, the world's biggest buyer of iron ore, is forecast to Marandoo that is not included in their legal native title keep imports largely steady over the coming years. claim, and that Rio does not pay royalties on the three Overall, the report forecasts the value of iron ore exports oldest of its six mines on its ancestral land. to decline from A$149 billion in 2020-21 to A$137 billion "It is not surprising that this sort of behaviour occurred in in 2021-22 and A$113 billion in 2022-23. Western Australia, some 28 years before Juukan Gorge," For copper, the forecast is that the industrial metal has the area of last year's destruction, the WGAC board in a already had its run, and the next couple of years will see statement. consolidation, with the price retreating from its recent record above $10,000 a tonne to an average $8,579 in COLUMN- outperformance switching to 2021-22 and $7,994 in the following fiscal year. energy from metals: Russell Australia's export earnings from copper are forecast to be The rally in commodity prices is likely to see a shift from largely steady at A$13 billion in both 2021-22 and 2022- metals to energy resources, such as crude oil, liquefied 23. (LNG) and coal, according to the latest It's a similar story for other metals with prices and forecasts from the Australian government. earnings expected to be fairly stable to gently higher for While the June quarter report from the Department of aluminium and alumina, nickel and zinc. Industry, Science, Energy and Resources doesn't foresee Lithium export revenue is forecast to surge to A$2.5 a major retreat in the prices of metals such as copper, billion in 2022-23 from A$900 million in 2020-21, but this iron ore, zinc, aluminium and nickel, it does forecast because of a 53% jump in output. stronger performances from energy . The headline number from the report is that Australia's BULLISH ENERGY commodity exports are expected to reach a record A$310 In contrast to the steady picture for metals, the outlook for billion ($235.3 billion) in the 2020-21 fiscal year that ends energy commodities seems brighter, with LNG a standout on June 30. as export earnings are forecast to rise from A$32 billion in This is up some 6% from the previous record in 2019-20, 2020-21 to A$49 billion in 2021-22 and stay at A$46 and the outlook remains positive with the government billion in 2022-23. forecasting a further 7.7% gain to A$334 billion in 2021- This is because prices are forecast to rise from A$7.80 a 22. gigajoule, equivalent to $5.61 per million British thermal

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units (mmBtu), to A$11.2 a gigajoule in 2021-22, or about power generation, are forecast to increase to A$21 billion $8.06 per mmBtu. from A$17 billion. Australia isn't a major producer or exporter of crude Given volumes are forecast to be largely steady, the oil, but even its modest exports are forecast to rise gains are all down to higher prices. to A$10.9 billion in 2021-22 from A$7.7 billion in Overall, the outlook is for steady to lower prices for 2020-21. metals, with battery metals lithium and nickel being This would mean that LNG and crude oil combined will exceptions, while LNG, crude oil and coal are set to earn more than the total for coking and thermal coal, even perform strongly. though both coal grades are forecast to see strong export Another point worth making is that the Australian revenue growth. government's forecasts don't exactly scream out that a Earnings from coking coal, used to make steel, are commodity supercycle is underway, rather they point to a expected to rise to A$30 billion in 2021-22 from A$22 period of cyclical strength for energy and at best billion the prior year, while those for thermal coal, used for consolidation for industrial metals.

Top News - Carbon & Power EU drafts plan to toughen carbon market - report Citing a draft of the ETS proposal, Bloomberg reported The European Union is planning to toughen its carbon that the supply of CO2 permits in the ETS will face a one- market to cut emissions faster and put a price on off cut. in new sectors, Bloomberg News reported on Sunday. The number of permits entering the ETS each year would The EU's emissions trading system (ETS) is the bloc's also decrease at a faster rate, although this rate was not central climate policy, forcing power plants, factories and specified, the report said. running European flights to buy permits when A Commission spokesperson declined to comment on the they emit CO2. draft proposal, which could change before it is published. The European Commission will next month propose a The proposal would strengthen the ETS "market stability revamp of the system as part of a package of policies reserve", a mechanism designed to avoid a build-up of designed to meet a more ambitious excess permits that could depress EU carbon prices. target. When the ETS contains more than 1.096 billion spare

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permits, the reserve would absorb 24% per year until crunch to ease and coal prices to fall in July, according to 2030, the report said. When there are 833 million to 1.096 a report from the official Xinhua on Sunday. billion permits in circulation, the reserve would absorb "With the growth of hydropower and solar power enough permits to bring that down to 833 million. generation in the summer, as well as the increase in coal EU member states and the European Parliament must production and imports, the contradiction between coal negotiate the final reforms, a process that could take supply and demand will tend to ease," said the National roughly two years. Development and Reform Commission, according to the Free carbon permits would end for industries covered by report. the EU's planned carbon border levy - a move that could "It is expected that coal prices will enter a downward increase carbon costs for producers of steel, , channel in July, and prices will drop significantly." aluminium and fertilisers. China's state planner and market regulator earlier in The report confirmed plans to expand the ETS to include June jointly launched an investigation into coal prices, shipping, and create a new, separate ETS for saying they would crack down on speculation and and heating systems in . hoarding. The Commission has said it will create a fund to support China also plans to release more thermal coal from its vulnerable households if the carbon pricing system raises reserve to ensure market supply ahead of summer peak fuel bills. demand, although the amount was not disclosed, according to the report. China state planner says expects coal supply crunch The state planner has said it plans to build up around 100 to ease in July million tons of deployable coal reserves in the country in China's state planner said that it expects a coal supply 2021. Top News - Dry Freight

Iron ore seen driving Australia's resources export country's top export. earnings to a record in 2020/21 Australia expects iron ore prices to average $137 this Booming iron ore prices are expected to account for financial year from a March forecast of $128, and $129 nearly half of Australia's record export earnings from re- next financial year, the government report said. sources this financial year and the country anticipates LNG export earnings are expected to jump 53% to A$49 further gains ahead, according to a government report on billion in the year to June 2022 on the back of higher oil Monday. prices and a 5% rise in export volumes as problems at Earnings from Australian resources exports are estimated the Gorgon LNG and Prelude floating LNG are resolved, to come in at a record A$310 billion ($235.41 billion) in according to the report. The government has also revised the 2020-2021 financial year ending in June, rising to up expectations for thermal coal prices this year to $74 A$334 billion the following year as industrial activity from $60, and to $82 next year. Copper price expecta- ramps up following COVID-19 restrictions. tions stand at $7,882 from a March forecast of $7,649, The Department of Industry revised its estimate up by and are seen at $8,579 next year. 14% from a March forecast due to strong iron ore prices, which hit an all-time high above $200 a tonne in early Taiwan bought 55,000 tonnes of U.S.-origin in May on strong steelmaking demand. tender "This is a very strong result in the context of the global The Taiwan Millers' Association purchased an esti- COVID-19 pandemic," it said in its June quarterly report. mated 55,000 tonnes of milling wheat to be sourced from "Advanced economies and most of Australia’s major trad- the United States in a tender which closed on Thursday, ing partners are continuing to recover strongly from the European traders said on Monday. economic impacts of the COVID-19 pandemic." The wheat was bought in one consignment comprising Australia's mining sector makes up around 10% of the various wheat types for shipment from the U.S. Pacific country's' gross domestic product and iron ore is the Northwest coast in August.

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A farmer examines tomatoes at Hengda greenhouse in Shanghai, China. REUTERS/Aly Song

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