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Poland finds suspected Russian drone near Baltic Sea
On Monday, the Polish defence minister announced that the Polish military had retrieved what appeared to be a Russian drone from the Baltic Sea?northern Poland. Drone incursions have been repeated in countries on NATO's east flank, causing fears that the conflict between Russia and Ukraine could spill over into the borders of NATO. Wladyslaw KOSINIAK-KAMYSZ wrote on X that "the military has 'located and recovered a droid from the Baltic Sea, near the beach in Rusinowo?near Jaroslawiec. "Preliminary examination indicates that it is a Russian drone." The Russian Embassy in Warsaw didn't immediately respond to a comment request. Jacek Góryszewski is a spokesperson for the Operational Command of the Polish Armed Forces. He told TVN24, that the drone could have come from international waters. It looked like a Gerbera, which is a cheap, long-range aerial robot made of plywood and foam. Gerbera drones are often used to decoy but they can also be loaded with explosives. He said that the object was recovered?by a hydrographic ship?off of the coast of Rusinowo...and is currently on the?beach", adding that safety checks were in progress. Donald Tusk, the Polish prime minister, has warned NATO nations that they should be prepared for a rise in Russian provocations. On Sunday, a Russian drone struck a passenger train near the border of Ukraine and Poland. This was just a few days after Boris Johnson, former British Prime Minister, and other European diplomats used essentially the same line.
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Grain prices rise on Black Sea export disruption fears
U.S. Wheat Futures climbed on Monday, as fears of further disruptions to Russian and Ukrainian exports were sparked by the Black Sea attacks. Corn fell and soybeans were a little?firmer as a stronger dollar made U.S. exports more expensive. Chicago Board of Trade's most-active wheat increased 0.5% at 1134 GMT to $7.29-1/4 a bushel. Soybeans increased 0.08%, to $12.97-12 a bushel. Corn fell 0.09%, to $5.29-3/4 bushel. After attacks on ports and ships, Black Sea exports between Russia and Ukraine are almost at a standstill. Matt Ammermann, StoneX commodity risk manager, said: "Wheat is being strengthened by concerns about the continued interruption of Russian Black Sea exports via ship. Attacks continue and there are no signs of significant peace talks." He said: "There are many headlines about possible peace initiatives in the Black Sea, but nothing concrete seems to have happened and the shipping disruption continues." Ammermann said that while the global demand for wheat has decreased, some demand may return this week due to tenders coming from Pakistan and Algeria. Pakistan has announced a massive tender for the purchase of 750,000 metric tonnes of wheat. Major importer?Algeria is looking for at least 50,000 metric tons, but usually buys more. The U.S. Department of Agriculture (USDA), which raised its forecast for soybean production on Friday, has limited the strength of soybeans. The USDA also forecasted a smaller U.S. crop of corn, but analysts expected a greater reduction. He said that the dollar's strength is causing corn and soybean prices to fall. Profit-taking was a response to the USDA crop forecast. The expectation of increased Chinese purchases of U.S. soybeans has limited the fall in soybean prices. He said that the beans were being prepared in anticipation of a visit by Chinese?President Xi Jinping to Washington.
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FOREX Dollar rallies amid rising oil prices and AI concerns
The U.S. Dollar rose to its highest level in two weeks on Monday, as the conflict in the Middle East drove up oil prices and pushed investors into the "safe-haven" currency. This weighed on the yen's recent gains. The dollar was boosted by the warnings from CEOs of frontier companies about AI's potential dangers. Meanwhile, rising bets placed on the Federal Reserve raising rates on Wednesday also helped the U.S. Dollar. The U.S. Dollar Index, which tracks currency against six major counterparts, rose last by almost 0.4%, after previously touching 99.6, the highest level since September 2. The euro dropped to its lowest level in a month at $1.153, and last fell by 0.4%. Meanwhile, the British pound slid 0.3% to reach $1.35. Brent crude rose 3% to $108 per barrel, unnerving investors. Global bond yields also returned to multi-year highs. The Houthi attacks on Saudi Arabia, the world's largest exporter, came after the Kingdom shut down its main pipe for bypassing Strait of Hormuz. This added to the concerns about energy supply. Diplomacy in the U.S.-Iran conflict appeared to be stumbling, as a meeting was postponed between Tehran and Gulf governments. Supply concerns were exacerbated by attacks on ships in the area. Francesco Pesole is a currency strategist with ING. He said, "Gulf developments are still concerning and AI-related headlines?are further weighing down on equities. In this environment, the dollar should be supported." The Japanese yen was a notable loser, giving up a portion of its recent gains. This has been driven by increasing bets that the Bank of Japan will raise rates. The U.S. Dollar rose 0.7% to 154.55 Japanese Yen from last week's nearly seven-month low of below 153. CENTRAL BANKS UNDER PRESSURE This week, the key question on the markets is whether or not the U.S. Fed raises interest rates this Wednesday as a response to the surge in energy prices which has driven diesel to new record highs. According to CME Group’s FedWatch tool, money markets on Monday indicated a 90% chance of an interest rate hike. This is up from 60% a week earlier. The U.S. Dollar has strengthened modestly this week as a result of expectations that the Fed would begin to tighten monetary policy, said Lee Hardman senior currency analyst at MUFG. Hardman also said that the Fed may be reluctant to raise rates too aggressively during an election year. This could limit the dollar's gains. Bond yields have reached multi-decade or multi-year highs in Japan, Europe, and the U.S. due to the increasing bets placed on rate hikes. The FX market is not yet feeling the full impact of the rate hikes, since yields are moving largely in tandem. The markets are almost certain that the Bank of Japan is going to raise interest rates this Friday. They will be searching for any clues as to whether there will be more. There are signs of a'shift in the market sentiment towards the yen. Speculators have taken a net-long position on the Japanese currency for the first since February. Bank of England will likely keep borrowing costs unchanged on Thursday. However, traders expect an increase in rates later this year as well as more in 2027 following the European Central Bank's hike last week.
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What you need to know about airBaltic, the Latvian flag carrier that files for Chapter 11.
AirBaltic, a Latvian airline, said it filed for Chapter 11 bankruptcy on Monday in the U.S. to?cut its mounting debts and survive a crisis affecting the entire sector brought about by?the Iran War. AirBaltic was the second airline to be affected by the war, after Spirit Airlines collapsed in May. Here are some facts about the Latvian flag airline and its financial problems. Who owns AIRBALTIC? Lufthansa, a German airline, holds 10% of airBaltic. AirBaltic, a joint-venture between the Latvian government and Scandinavian Airlines SAS, was founded in Riga, Latvia, in August 1995, following the collapse of Latvia's previous flag carrier Latavio. The two airlines held respective stakes in the venture of 51% and 28,5%. SAS sold its stakes in 2009. How big is AirBaltic? AirBaltic, the largest airline of the Baltic States, operates scheduled passenger flights throughout Europe and beyond. In 2025, it will carry 5.2 million passengers and employ more than 3,000 employees. Last year, it generated revenue of EUR779.3 millions ($899m) and a loss of EUR44.3m. Where does AIRBALTIC operate? The airline has tried to establish itself in the Baltics as the "dominant carrier", opening a hub at Vilnius in Lithuania in 2004, and then developing bases in Tallinn in Estonia and other European cities. AirBaltic has more than 70 destinations, and Riga is a hub for connecting northern and eastern Europe to the rest of Europe, as well as North Africa and the Middle East. Due to the war, Emirates suspended direct flights from March to Dubai until October. What jets does AirBaltic fly? It began with a Saab Turboprop and now operates a fleet of 54 Airbus A220-300 aircraft. During certain periods of the year, it also leases out aircraft and crews. The company announced in August that it would reduce its fleet from 100 aircraft to 36 by the end 2026. By 2031, they hoped to have a fleet of?about 40 aircraft. Why did Air Baltic run into trouble? AirBaltic warned in March of the liquidity pressures it would face if it did not hedge its jet fuel requirements. The airline proposed to raise up to EUR257,000,000?through super-senior bonds. The proposal, which would have subordinated the existing bondholders claims, increased investor concerns about credit risk, and caused a surge in yields on its EUR380,000,000 bonds due 2029. The Latvian government provided a EUR30m state loan to the airline in April but did not pledge further support. Analysts say that the EU's rules on state aid and political considerations make additional government assistance more difficult. What does Chapter 11 mean for AirBaltic? Chapter 11 allows companies to continue their operations while restructuring debt under court supervision. AirBaltic stated that flights, ticket sales and customer service will continue to be provided as usual during the process. AirBaltic has received a commitment from a group lenders for EUR350m in debtor-in possession financing, subject to approval by the court. The airline anticipates completing the restructuring by June 2027.
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Asian refiners are waiting for word from Saudi Arabia on shipments and expect a tighter supply
Industry sources reported on Monday that Asian refiners were preparing for a tighter supply of sour oil as they awaited Saudi Arabia's guidance on exports via Red Sea following the attacks on the East-West Pipeline. Saudi Arabia closed a pipeline on Friday after it was attacked. The shutdown helped?push up the oil prices by 3% Monday. Sources at Asian refineries say that Saudi Arabia hasn't said how long it may take to repair the pipeline and Saudi Aramco is not providing updates on shipment schedules or supply allocations. Sources said that they were notified of a delay in loading, but weren't given any specific dates. Three other people said that they were not informed whether the cargoes being loaded from the Red Sea port of Yanbu will be delayed or suspended. However, they did expect delays in shipments as well as a tightening of crude oil supplies. "Getting sour oil is a difficult task. "We will have to pay more as everyone will be chasing the limited supply from?Iraq and UAE, among others," said one refining source. Aramco has not responded to the request for immediate comments. Saudi Arabia's exports through the Red Sea have already dropped sharply over the past few months. ANZ analysts wrote in a Monday note that the yanbu loadings dropped in July to between 500,000-1 million barrels a day, from around 6 million barrels a day in June. This was after Yemen's Houthis announced a blockade. Some ships were loading into ports with their AIS transponders turned off, making it difficult to track flows. Kpler shiptracking showed that the Suezmax-sized tanks Lahore, Aspen, and Kenya B were expected to load crude oil from Yanbu, on Monday. At least one large crude carrier is also expected to load within the next few days. Due to the Houthi Blockade, few refiners from the top-buying region of Asia are willing to load in Yemen. "For China, it is indirect as Chinese refiners stopped loading from the Red Sea including Yanbu and Sidi Kerir since August," Emma?Li said, an analyst at shiptracker Vortexa. Li stated that the pipeline shutdown has pushed Gulf-to Asia tanker rates to new highs and increased costs for Chinese refiners who are transferring Gulf crude by ship to ship.
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Asia's oil traders remain bullish on prices despite the Middle East conflict.
As fresh attacks dim the prospects of an end to the Middle East conflict, oil traders in Asia expect prices to stay high. Meanwhile, strong refining margins are driving demand for physical supply. Benchmark Brent crude futures rose back to?above 100?a barrel in the past week, and rose another 3% on Sunday. This is their highest level since May. Last week, the rally spilled over to physical markets where premiums on benchmark Dubai and Oman oil rose to their highest level since March. This highlights fierce competition among cargoes. The premiums for crude oil from West Africa, America and Latin America have also reached multi-month highs. A trader at an Asian refiner said, "Unlike March, when there was no oil in the market, we now have oil but must pay higher prices." The trader declined to be identified as he wasn't authorized to speak with media. TRADERS: PREMIUMS ARE WELL ABOVE THE LEVEL OF LAST MONTH SK Energy, a South Korean company, bought 4,000,000 barrels of?U.S. WTI crude oil for December delivery was purchased last week with a premium of around $24 per barrel over November ICE Brent swaps. The sources said that GS Caltex bought 2 million barrels on a delivered basis of U.S. Crude at a similar 'premium' to the benchmark price in November Dubai. This compares to a premium of around $13 per barrel to the?Dubai quotations on delivered basis? for U.S. shipments?sold in last month. Chinese independent refiners are looking for alternatives to the dwindling Iranian, and Russian, supplies. Shenchi Petrochemical bought al-Shaheen last week at about $23 per barrel over Dubai's delivered quotes, according to trade sources. Andreas H. Lien said, "The crude market is looking relatively positive and tightening" on the sidelines last week of APPEC, an industry gathering. "That's because Asia is pulling cargoes out of the U.S.A. and South America with high delivered prices." HORMUZ UNCERTAINTY, TIGHTENING SUPPLY Three Asian refiners claimed to be running at maximum capacity in order to maximize margins for products and petrochemicals. One of them reported that Iraq's Basrah Medium was still widely available but with a premium of around $20 per barrel compared to Dubai quotes, for loading via ship-to -ship transfers outside the Strait of Hormuz. Last month, there were only single-digit premiums. Three other traders estimated last week that 6 to 8 million barrels of oil a day were passing through the Strait of Hormuz. A naphtha trader said naphtha flow had recovered from 50-60% of its pre-war level. The Strait of Hormuz was the transit point for 20% of world crude oil and natural gas before the war with Iran began on 28 February. Price forecasts have been influenced by the uncertainty over the speed of recovery of Hormuz flow. S&P Global Energy's base-case scenario predicts that crude oil prices will average under $100 per barrel next year. Prices could rise to $120 per barrel if disruptions in Hormuz traffic continue, but fall below $60 if a rapid recovery scenario occurs. Wood Mackenzie predicted that Brent prices would rise to close to $110 per barrel around the end of 2026 and the beginning of 2027 before falling to about $60 per barrel until the start of 2028, assuming that the Strait of Hormuz will resume full flow in January 2027.
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CPC increased oil output by 22% in august after fewer tanker attacks, say sources
Two industry sources reported that the Caspian Pipeline Consortium increased its oil exports by 22% in August compared to the previous month. This is equivalent to 1.6 million barrels per day. The increase was due to a stabilisation of loadings and fewer attacks on tankers. CPC Blend oil loads in July fell to 5.172 millions tons or 1.32million bpd as a series of attacks against tankers on the Black Sea caused the terminal to suspend loadings, and the majority of shipowners to refuse requests to sail to Russian ports. According to a source, exports of Kazakh crude oil via the CPC increased to?5.7m tons in August, from 4.6m tons in July. This represents a 25% increase on a daily base. Shipments of Russian crude dropped 4%, to 550,000 tons from 570,000 ton. CPC doesn't comment on its commercial activities. The total oil loadings on CPC's Black Sea Terminal fell from 48.9 millions tons to 44.8 in January-August. This is a decline of 8%. Due to maintenance at the Karachaganak oil & gas -condensate?field in Kazakhstan, the consortium expects to reduce its exports to 1.5 million bpd by September. CPC, which mainly exports Kazakh oil, suspended oil flow in July following drone attacks near its Black Sea terminal, Yuzhnaya Ozereyevka. CPC is responsible for shipping more than 80% Kazakhstan's crude oil exports. Most of the crude oil comes from the massive Tengiz, Kashagan and Karachaganak fields. CPC's shareholders include Russia, with 31%, Kazakhstan, with 20,75%, Chevron, with 15% and several private companies.
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Palm oil prices close up following a rise in crude prices
Malaysian palm oil futures rose on Monday due to higher crude oil prices. Also, rival soy oil prices in the Chicago market also helped. At closing, the benchmark palm oil contract on Bursa Malaysia's Derivatives exchange was up 39 Ringgit or 0.81% at 4,853 Ringgit ($1,191.21) per metric ton. A Kuala Lumpur trader stated that "Today's FCPO is holding steady on the back of a strong?crude?oil with the anticipation of better demand?for bio-diesel use in the future." Crude oil prices rose more than 3% on the Monday after a new attack on Saudi Arabian energy infrastructure and an attack on ships in Middle East. Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger. Dalian's soyoil most active contract fell 1.08% while palm oil?contract dropped 1.24%. Prices of soyoil on the Chicago Board of Trade rose by 0.14%. As palm oil competes for a piece of the global vegetable oils' market, it tries to keep up with rival edible oils. The palm ringgit's currency has weakened by?0.15% versus the dollar. This makes the commodity cheaper for buyers with foreign currencies. Exports of Malaysian palm oil products fell between 11.7% to 17.5% in September, based on cargo surveyors.
EU truck manufacturers seek a 3-year delay in 2030 CO2 target
On Monday, Europe's truckmakers urged the EU to delay compliance with 2030 CO2 reduction targets by three year - due to insufficient charging networks and high energy costs.
Manufacturers in the European Union must reduce CO2 emissions from new heavy-duty cars by 43% in 2030, compared with 2025 levels. They will also have to cut them by 64% in 2035, and 90% in 2040. There are fines for non-compliance, but there is the option to earn emission credits between 2025 and 2029.
The European Automobile Manufacturers' Association (ACEA) said that only 2.4% new 'heavy duty' vehicles are currently zero-emission. This is far below the target for 2030.
In a joint statement, the CEOs of Europe’s leading truck and bus producers, including DAF Trucks and Daimler Truck as well as Iveco, Scania and Iveco, said that compliance with 2030 should be deferred by three years.
They added that policymakers should create conditions for accelerating?the roll-out?of charging station, speeding up grid connections, expanding CO2-based tolls, and reinvesting?revenues from emissions trading into infrastructure and promoting?zero emission vehicle adoption.
After pressure from the automotive industry to relax green policies, EU policymakers are currently debating the European Commission's?proposal? to lift the bloc of 27 member countries' effective ban on new combustion engine cars by 2035.
(source: Reuters)