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U.S. oil exports could derail the global oil rally, says energy expert

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The U.S. is exporting crude oil at a record pace with no signs of slowing down. That has the potential to unbalance a global oil market in recovery, says energy expert Tom Kloza.

“The exports are what we need to focus on through the next 30 days,” Kloza, co-founder of the Oil Price Information Service, told CNBC’s “Futures Now” last week. High U.S. production could decide how oil prices trade in the second half of this year and through 2019, he added.

Domestic exports have not dipped below 1 million barrels a day since late November, as U.S. oil producers fill the void left by reduced capacity from Mexico and Venezuela. Higher demand for petroleum and gasoline in South America has also boosted appetite for North American oil.

U.S. crude oil exports rose to 2.175 million barrels per day, or more than 15 million a week, at the end of March. That marked its highest level on record.

“We think that number is going to go up to probably 20 million or more [a week], get to maybe 2.5 million barrels a day,” said Kloza. “The United States is in essence going to be exporting more than the United Arab Emirates, Kuwait, Nigeria, those individual countries.”

Rising U.S. production and exports comes at a time when other oil producers are ramping up their own activity, said Kloza.

Russia recently had “the highest output in about 11 months and there’s some hints that maybe they’re not going to be in this long-term supply cutting agreement with the Saudis,” said Kloza. On top of that, “we’re going to see higher production from Kazakhstan, from Brazil, from the United States, and from Canada.”

Global oil production may put a dent in the progress made the Organization of Petroleum Exporting Countries in correcting a supply-demand imbalance. In 2016, OPEC and some non-OPEC members had agreed to limit production to re balance oil markets after their late-2014 plunge.

Political events and international relations bring drastic moves to the market come summer. Among them, Kloza sees the Iraqi and Venezuelan elections in May and “superhawks” John Bolton and Mike Pompeo coming into the White House as possible market movers.

Crude oil is “the ultimate macroeconomic product,” Kloza said, saying that major banks like Morgan Stanley and Goldman Sachs estimate oil could top $70, a level Kloza said is “priced for pure perfection.” Still, a number of headwinds are developing to keep crude’s gains curtailed.

West Texas Intermediate and Brent crude were both more than 1 percent lower on Friday, as trade tensions between U.S. and China escalated. On Thursday evening, President Donald Trump announced he would consider levying an additional $100 billion in tariffs against China in response to possible tariffs on U.S.-made products such as soybeans.

“Trade wars, a recession, any notion of any weakness in global economies are going to cut into,” oil prices, Kloza said. “So keep that in mind. We might yet be priced for perfection but perfection is a pretty difficult thing to see.”

Kloza forecasts an average of $67 a barrel for Brent crude oil this year. It currently trades at that level.

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Economy is showing positive signs, but banks will feel the brunt

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Principles of ‘green chemistry’ could have a big impact in the future

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Used in everything from the detergent that washes our clothes to the toothpaste that keeps our mouths clean, chemicals play an integral role in society. 

While it’s hard to imagine life without them, if not used in a responsible way their effect on the natural world – and us – can be harmful.

The European Commission has stated that some chemicals “can severely damage our health or the environment,” while the World Health Organization has previously estimated that exposure to selected chemicals resulted in the loss of 1.6 million lives in 2016.

It’s against this backdrop that the notion of “green chemistry” comes into play. In relatively simple terms, the United States Environmental Protection Agency has defined it as “the design of chemical products and processes that reduce or eliminate the use or generation of hazardous substances.”

The EPA goes on to explain that the idea of green chemistry relates to a product’s entire life cycle, which includes everything from its design and production to utilization and disposal.

Paul Anastas is the director of Yale University’s Center for Green Chemistry and Green Engineering. Speaking on the latest episode of CNBC’s Sustainable Energy, he explained how he became interested in the subject.

“When I was a young chemist, I looked around at all of the technological miracles that chemistry produced,” he said. “And then I looked at the other side of the equation – all of the unintended consequences of pollution and its effect on the environment and on human health,” he added.

“So green chemistry is really a way of keeping all of those technological miracles, those innovations, without all of those unintended consequences.”

Anastas, together with John Warner — a chemist who is now president and chief technology officer of the Warner Babcock Institute for Green Chemistry — co-authored the book “Green Chemistry: Theory and Practice,” a key body of work in the field.

First published in 1998, the book lists 12 principles of green chemistry, one of which focuses on the prevention of waste, a subject that Anastas expanded upon when speaking to CNBC. 

“Waste, we need to recognize, is a man-made concept,” he said. “In nature, there is no waste: every time a waste is generated, an organism evolves to use that waste as a feedstock.”

He added: “And so, we think about how to do the same thing in industry, how you either prevent or avoid waste, or utilize whatever waste in a valuable way.”

With attitudes regarding pollution and the environment shifting in recent years, many governments and businesses are emphasizing their commitments to sustainable practices.

But while actions need to match words and there is clearly a long way to go, Anastas sought to emphasize the changes that were being made.

“I simply cannot name an industry sector that isn’t using green chemistry,” he said. “Everything from pharmaceuticals, to plastics, everything from … cosmetics to the way that we generate, store and transport our energy,” he added. “Now, I’m not going to say that companies are doing it systematically or in all of their products, but great strides are being made.”

When it comes to the production of chemicals, there is some serious work to be done, however. According to the International Energy Agency (IEA), in 2018 direct carbon dioxide emissions from primary chemical production hit 880 million tonnes, a jump of almost 4% compared to 2017. The IEA goes on to describe the chemical sector as being “the largest industrial consumer of both oil and gas.”

Anastas was asked how easy it would be to lower the use of energy in chemical production by applying the principles of green chemistry.

“We’ve forced chemicals to do things they didn’t naturally want to do,” he said. “So we’ve heated them up, we’ve put them under pressure and we’ve tortured them to obey and become the things we want them to become,” he added.

“But it’s not just the quantities of energy that’s important, it’s the character and the nature of energy that we use: it needs to be renewable and non-depleting, and nontoxic, and not polluting.”

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UBS oulook on gold price, Southeast Asian stock markets

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SINGAPORE — Gold prices — which surged nearly 30% this year — could rise further and remain high as global uncertainties persist, according to Swiss banking giant UBS.

“We are very bullish on gold. We think that the prices will go higher and what is interesting is we think it will stay higher for longer than expected,” Yeoh Choo Guan, the bank’s head of Asean global markets, told CNBC’s “Squawk Box Asia” on Friday.

She said the bank has raised its forecast for gold next year from $1,850 to $2,100 per ounce. Spot gold was trading at around $1,953 on Friday — roughly 29% higher than where it was at the start of the year.

An environment of negative real interest rates and global uncertainties, such as the upcoming U.S. presidential election, are among the reasons that have pushed investors to build up their gold holdings, said Yeoh.

Gold bars being manufactured at the Prioksky plant of non-ferrous metals in the town of Kasimov.

Alexander Ryumin | TASS via Getty Images

“So recently we have a retracement in the equity market. What was interesting is that gold was very resilient despite the equity’s pullback, suggesting that there’s ongoing buying support,” she said.

“On top of that, gold is also a very attractive portfolio diversifier. I think a lot of investors have been piling into bonds and REITs (real estate investment trusts), so gold is viewed as an alternative to that, in case that particular segment gives you pressure,” she added.

REITs are publicly traded companies that manage a portfolio of properties such as shopping malls, hotels and offices. They typically attract investors who want a steady and regular dividend payout.

Growing ‘domestic wealth’ in Southeast Asia

In addition to gold, Yeoh said she’s also bullish on Southeast Asian stock markets.

Share prices in the region have suffered as foreign funds retreated from several markets. But Yeoh pointed out that the markets have rebounded “much faster than we anticipated,” helped by greater participation from retail investors and domestic funds.

She explained that “domestic wealth” in Southeast Asian countries have been growing, as is evident in the expansion of local asset managers. That’s good news for markets in the region, she said.

“This stock market, or capital market in general, will continue to be resilient and very strong — not only in the short term, but also in the mid term.”

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