Oil futures shot up to nearly $139 a barrel Thursday after OPEC's president said oil prices could rise well above $150 a barrel this year and Libya said it may cut oil production.
Light, sweet crude for August delivery rose as high as $138.95 a barrel shortly after the New York Mercantile Exchange opened before retreating some to trade up $3.59 at $138.14.
Chakib Khelil, president of the Organization of the Petroleum Exporting Countries, said he believes oil prices could rise to between $150 and $170 a barrel this summer before declining later in the year. Khelil said he doesn't think prices will reach $200 a barrel.
The head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
''Shokri Ghanem, the nation's top oil official, declined to say when a decision would be made on whether to lower production, or give any indication of the size of the cut under consideration,'' said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note.
Oil futures were also rising as investors reassessed comments the Federal Reserve made Wednesday when it held a key interest rate unchanged. Many investors who had expected the Fed to raise interest rates in August now think a rate hike is unlikely until after the November election or next year, said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Interest rates affect the dollar; many analysts believe the Fed's rate cutting campaign, which began last September, had much to do with weakening the dollar against the euro and sending oil prices skyrocketing. Investors buy commodities such as oil when the greenback is falling. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies.
The dollar slid against the euro after the Fed's comments Wednesday, and was down again on Thursday.
''Breaking through $140 now ... seems hard to avoid,'' Cordier said.
Retail gas prices, meanwhile, were unchanged overnight at a national average of $4.067, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. Gas prices have retreated slightly from a record of $4.08 set June 16, but are likely to fall much more as long as crude oil remains in its recent range between roughly $131 and $140.
''If we go through $140, we're at $4.25 on gas within a week,'' Cordier said.
In other Nymex trading Thursday, July gasoline futures rose 8.08 cents to $3.4749 a gallon and July heating oil futures rose 13.09 cents to $3.8801 a gallon. July natural gas futures rose 20.3 cents to $12.956 per 1,000 cubic feet.
In London, August Brent crude futures rose $3.64 to $137.97 on the ICE Futures Exchange.
Thursday, June 26, 2008
At $4 billion PE investments India outpaces China's $570 million in Q1 2008
Despite the slowdown in global venture capital investments, owing to a slowdown in global financial market conditions private equity (PE) investments in India doubled to $4 billion in the first quarter of the calendar year 2008 compared to the corresponding period last year, maintaining its position as the most attrcative destination in Asia (excluding Japan) surpassing China that has recorded just $570 million in investments so far. India had first surpassed China in attracting PE investments towards the end of the second quarter of the calendar year 2007 when it grossed $10 billion compared to China's $8 billion. During the same period in 2006 China had received $13 billion in private equity investments compared with $7 billion in India.
The equation has changed since then, with India well in the lead now, says market research and cross-border M&A advisory firm IndusView Advisors Private Ltd.
The Indian real estate and infrastructure sector has again been the key contributor to this increasing trend this year, emerging a favorite with 28 per cent share in value of all private equity investments at $1.12 billion
The power sector received about 13 per cent share of the pie with $520 million so far this year
Banking & Finance and Telecom sectors tied for the third most favorable sectors for investments with 8.7 per cent of the deals at more than $340 million each.
Globally, real estate and infrastructure fundraising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two, according to estimates. A large percentage of these funds raised are focused outside of the US for investing in emerging markets such as India and China.
''With the economic downturn in developed economies intensifying and the application of capital becoming dearer and pressurising the expected return on investments (RoIs); PE firms are finding their way in to safer investment heavens, that is, emerging markets which have decoupled from the developed markets.'' says Bundeep Singh Rangar, chairman, IndusView.
China will overtake the US by 2025 as the world's largest economy. China's economy is expected to continue to grow to become about 130 per cent the size of the US by 2050, according to estimates.
India will grow to almost 90 per cent of the size of the US by 2050, while Brazil is expected to overtake Japan by 2050 to move into fourth place. Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the UK, by the middle of this century.
''India continues to enjoy a favourable investment flavor among investors due to liberal economic initiatives on the part of the government, compared to China which is much regulated,'' added Rangar.
The Indian government has responded to an urgent demand for new infrastructure, announcing that 9 per cent of the country's GDP will be spent on infrastructure by 2012, presenting an unprecedented investment opportunity.
This has renewed interest in the Indian infrastructure sector with fresh fund raising of up to $8 billion in the pipeline this year with financial entities such as India's State Bank of India (SBI), Australia-based Macquarie Capital Group Ltd, the UK-based private equity firm 3i Group, the US-based Blackstone Group among others, participating.
''Emergence of the non-tech sectors, as favorite for investments is symbolic of the realisation of the need to develop world class infrastructure to accelerate growth in the Indian economy to 10 per cent, which will see the inflow of a resource base of incremental funds, application of internationally applicable best practices and experienced global management expertise & technology.'' said Rishi Sahai, director, IndusView.
A significant share of international real estate funds will find their way in to the Indian real-estate and infrastructure market, which has the capacity to absorb as much as $500 billion over the next five years, according to government estimates.
Global private equity funds that have mapped out investment strategies for the Indian market include some of the largest private equity investore such as:
The equation has changed since then, with India well in the lead now, says market research and cross-border M&A advisory firm IndusView Advisors Private Ltd.
The Indian real estate and infrastructure sector has again been the key contributor to this increasing trend this year, emerging a favorite with 28 per cent share in value of all private equity investments at $1.12 billion
The power sector received about 13 per cent share of the pie with $520 million so far this year
Banking & Finance and Telecom sectors tied for the third most favorable sectors for investments with 8.7 per cent of the deals at more than $340 million each.
Globally, real estate and infrastructure fundraising by international real estate private equity funds, has been brisk, with as much as $130 billion raised over the last two, according to estimates. A large percentage of these funds raised are focused outside of the US for investing in emerging markets such as India and China.
''With the economic downturn in developed economies intensifying and the application of capital becoming dearer and pressurising the expected return on investments (RoIs); PE firms are finding their way in to safer investment heavens, that is, emerging markets which have decoupled from the developed markets.'' says Bundeep Singh Rangar, chairman, IndusView.
China will overtake the US by 2025 as the world's largest economy. China's economy is expected to continue to grow to become about 130 per cent the size of the US by 2050, according to estimates.
India will grow to almost 90 per cent of the size of the US by 2050, while Brazil is expected to overtake Japan by 2050 to move into fourth place. Russia, Mexico and Indonesia all have the potential to have economies larger than those of Germany or the UK, by the middle of this century.
''India continues to enjoy a favourable investment flavor among investors due to liberal economic initiatives on the part of the government, compared to China which is much regulated,'' added Rangar.
The Indian government has responded to an urgent demand for new infrastructure, announcing that 9 per cent of the country's GDP will be spent on infrastructure by 2012, presenting an unprecedented investment opportunity.
This has renewed interest in the Indian infrastructure sector with fresh fund raising of up to $8 billion in the pipeline this year with financial entities such as India's State Bank of India (SBI), Australia-based Macquarie Capital Group Ltd, the UK-based private equity firm 3i Group, the US-based Blackstone Group among others, participating.
''Emergence of the non-tech sectors, as favorite for investments is symbolic of the realisation of the need to develop world class infrastructure to accelerate growth in the Indian economy to 10 per cent, which will see the inflow of a resource base of incremental funds, application of internationally applicable best practices and experienced global management expertise & technology.'' said Rishi Sahai, director, IndusView.
A significant share of international real estate funds will find their way in to the Indian real-estate and infrastructure market, which has the capacity to absorb as much as $500 billion over the next five years, according to government estimates.
Global private equity funds that have mapped out investment strategies for the Indian market include some of the largest private equity investore such as:
- Temasek Holdings (Pte) Ltd, the investment arm of the Singapore government .
- Blackstone Group L P, a global private equity and investment management firm .
- Warburg Pincus, with approximately $14 billion under management .
- The Carlyle Group, Washington DC-based private equity investment firm with more than $75 billion of equity capital under management.
- Actis Capital LLP, a leading private equity investor in emerging markets with $3.5 billion of funds under management.
New fertilizer policy likely to push up subsidy bill considerably
India might have to spend more to subsidize fertilizer prices when a group of ministers meets on Thursday to consider a new policy that is likely to peg the subsidy to the international prices of key ingredients phosphorus and potassium, say industry watchers.
The government currently subsidizes fertilizer costs by fixing retail prices. It then pays manufacturers the difference between the sale and production prices, plus a reasonable profit. To arrive at this, the government looks at the actual cost of production while determining the price at which the producer sells to the government.
Under the new policy, which will replace one that expired on 31 March, the cabinet committee on economic affairs will discuss whether the government will reimburse producers for the use of phosphorus and potassium determined by global prices.
“The price of phosphorus, as calculated from the imported diammonium phosphate (DAP), will be the benchmark in this regard,” said a senior fertilizers department official who did not wish to be identified.
DAP, urea and muriate of potash, or MoP, are the three most widely used fertilizers in the country.
The cost of producing the phosphatic component of a fertilizer domestically would be linked to the international cost of production of phosphorus as calculated from imported DAP.
The MoP used in the country is entirely imported and the cost of production of potassium is likely to be linked to the cost of production of potassium in the imported MoP.
The Fertiliser Association of India, or FAI, the apex industry body, has been demanding that the government announce a policy, in the absence of which the industry does not know the producers’ price.
“Our basic demand is that the policy should allow us to not only cover our costs but also give some margin,” said FAI director Satish Chander.
“The cost-plus (expired) policy did not provide anyincentive to an efficient producer since all productivity gains were mopped up by the government.”
India’s fertilizer subsidy is likely to skyrocket to an estimated Rs95,000 crore in the year to March 2009, or 1.9% of the country’s gross domestic product, from Rs15,779 crore in the fiscal year 2004-05.
The department of fertilizers has also proposed subsidizing two new fertilizers—triplesuper phosphate (TSP) and ammonium sulphate.
Although these are now produced in negligible quantities, the government expects the production of TSP—a DAP substitute—will increase once it is subsidized.
The department official said presently only two plants in the country have the capacity to produce TSP—Fertilisers and Chemicals Travancore Ltd and Gujarat State Fertilizers and Chemicals Ltd.
The new policy is also likely to exclude the so-called outliers—those who managed to import at a price that is lower by $30 (Rs1,284) per tonne than the price at which the others import—while calculating the average import price. The government uses this average import price to arrive at the formula to compensate manufacturers.
In fiscal year to March, India produced 32.3 million tonnes (mt) of fertilizer and imported 14mt of it.
The government currently subsidizes fertilizer costs by fixing retail prices. It then pays manufacturers the difference between the sale and production prices, plus a reasonable profit. To arrive at this, the government looks at the actual cost of production while determining the price at which the producer sells to the government.
Under the new policy, which will replace one that expired on 31 March, the cabinet committee on economic affairs will discuss whether the government will reimburse producers for the use of phosphorus and potassium determined by global prices.
“The price of phosphorus, as calculated from the imported diammonium phosphate (DAP), will be the benchmark in this regard,” said a senior fertilizers department official who did not wish to be identified.
DAP, urea and muriate of potash, or MoP, are the three most widely used fertilizers in the country.
The cost of producing the phosphatic component of a fertilizer domestically would be linked to the international cost of production of phosphorus as calculated from imported DAP.
The MoP used in the country is entirely imported and the cost of production of potassium is likely to be linked to the cost of production of potassium in the imported MoP.
The Fertiliser Association of India, or FAI, the apex industry body, has been demanding that the government announce a policy, in the absence of which the industry does not know the producers’ price.
“Our basic demand is that the policy should allow us to not only cover our costs but also give some margin,” said FAI director Satish Chander.
“The cost-plus (expired) policy did not provide anyincentive to an efficient producer since all productivity gains were mopped up by the government.”
India’s fertilizer subsidy is likely to skyrocket to an estimated Rs95,000 crore in the year to March 2009, or 1.9% of the country’s gross domestic product, from Rs15,779 crore in the fiscal year 2004-05.
The department of fertilizers has also proposed subsidizing two new fertilizers—triplesuper phosphate (TSP) and ammonium sulphate.
Although these are now produced in negligible quantities, the government expects the production of TSP—a DAP substitute—will increase once it is subsidized.
The department official said presently only two plants in the country have the capacity to produce TSP—Fertilisers and Chemicals Travancore Ltd and Gujarat State Fertilizers and Chemicals Ltd.
The new policy is also likely to exclude the so-called outliers—those who managed to import at a price that is lower by $30 (Rs1,284) per tonne than the price at which the others import—while calculating the average import price. The government uses this average import price to arrive at the formula to compensate manufacturers.
In fiscal year to March, India produced 32.3 million tonnes (mt) of fertilizer and imported 14mt of it.
Textile Firm GHCL Courting UK Funds Too
Some new suitors may have emerged for Ahmedabad-based GHCL, which is into soda ash, textiles and home textile retailing business. Among those who are in the race for a controlling stake in Sanjay Dalmia led GHCL include a few UK-based companies. One of the suitors has offered $175 million for a 20 per cent stake in the company, which would value the firm at $875 million or Rs 3,675 crore or Rs 365 per share, six times its current price.The report cites a source close to Mumbai-based investment advisor, Sanghi Advisors, saying that one of its UK-based client is engaged in negotiations for determining the control premium for eventual transfer of the controlling stake. The deal may be wrapped up by the middle of next month. Once this deal is through, GHCL may opt for restructuring of its two businesses – soda ash and home textiles – by creating two separate entities.GHCL had earlier announced that it would hive off its home textile retail and B2B businesses into two separate firms while retaining soda ash and home textile manufacturing business in the parent firm.This report comes at a time when Dubai-based diversified group Al Rostamani has already made an expression of interest to acquire upto 25 per cent stake in GHCL. This could be through a mix of 15 per cent stake sale by the promoters followed by an open offer which could take its stake to 35 per cent if fully subscribed.Two other British investors have also shown interest in GHCL’s home textiles and retail business which is looking to expand in UK besides expansion in Eastern Europe and South East Asia. GHCL is present in the UK retail home textiles market through Rosebys, which it acquired two years back.
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