Thursday, July 26, 2007

Oil Rises in New York as U.S. Crude Supplies Drop in Cushing

By Eduard Gismatullin


July 26 (Bloomberg) -- Crude oil rose in New York and traded at a premium to London's Brent benchmark for the first time since February after supplies dropped in the U.S. Midwest.

Crude stockpiles in Cushing, Oklahoma, where New York's West Texas Intermediate benchmark, or WTI, crude is priced, fell by 1.4 million barrels last week, the lowest since February, according to Department of Energy data. U.S. refineries increased runs to 91.7 percent of capacity for the same week, the highest this year.

``The most interesting thing is the fact that WTI for September has got to a premium over Brent,'' said Christopher Bellew, a broker with Bache Financial Ltd. in London. ``A lot of that is normalization of crude stock in Cushing.''

Crude oil for September delivery gained as much as $1.36, or 1.8 percent, to $77.24 in after-hours electronic trading on the New York Mercantile Exchange, a new 11-month high. It was at $76.68 at 1:02 p.m. in London after trading as high as 25 cents over Brent, the blend used to price about two-thirds of the world's oil, around 10 a.m. in London.

Brent crude for September rose as much as 84 cents, or 1.1 percent, to $77.16 a barrel on the ICE Futures exchange. It was at $76.79 in London, regaining its premium to WTI.

U.S. oil stockpiles declined by 1.1 million barrels in the week to July 20, the Energy Department said yesterday. Below- average gasoline stockpiles unexpectedly increased by 793,000 barrels, aided by a resurgence in imports, which rose to a record 1.7 million barrels a day last week.

``We expect the petrol demand to remain high also in August,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. ``Even though refinery capacity has increased in the last couple of weeks, the U.S. is heavily dependent on imports.''

End of Premium

Brent briefly lost its premium to WTI because of cutbacks in refinery output and changes in the crude making up Brent.

ConocoPhillips has reduced runs at its 227,000-barrel-a-day Wilhelmshaven refinery in Germany after high oil prices made refining uneconomic, the company's chief executive officer, Jim Mulva, said yesterday. In June, he predicted the WTI discount to Brent would close in August.

Hellenic Petroleum SA, Greece's biggest oil company, cut operations at its refinery because the cost of crude exceeded the profit from refined products, Merrill Lynch & Co. said yesterday. Preem Petroleum AB, a Swedish oil refiner, cut production this month at its refinery in Gothenburg to 75 percent of capacity.

A ``short fire'' at Exxon Mobil Corp.'s refinery in Fawley on the southern coast of England had ``minimal'' effect on production, the company said. The refinery supplies 14 percent of the U.K.'s petroleum products.

``There have been difficulties to keep the refinery fleet up and running at a high capacity level, and we will not be surprised if we see another refinery outage soon,'' Saltvedt at Nordea said. ``The shutdown of the U.K. refinery will increase the competition between domestic, U.K. demand and exports.''

Shifts in Brent

The share of Buzzard crude in the North Sea Forties blend rose 3 percent last week to the highest level since the field began production in January. The percentage of Buzzard, a so-called medium-sour crude, increased to 27 percent in the week ended July 22, according BP Plc, the operator of the Forties Pipeline System.

Forties is one of the four North Sea oil grades that determine the price of dated Brent. Changes in the crudes that make up the blend can affect its quality and consequently its price.

Statoil ASA expects to restart the Heidrun North Sea oil field this week after corrosion in a pipeline forced its closure on July 20, the company spokeswoman Mari Dotterud said. Crude from the Heidrun field loads at the Mongstad terminal in Norway. The Heidrun field produces 120,000 barrels of crude a day.

Nigerian Supply

Royal Dutch Shell Plc said today it has no firm date for when it can return to full production in Nigeria. About 195,000 barrels of oil equivalent a day of its production remained shut down at the end of the second quarter.

Nigeria, Africa's biggest oil producer, has lost a quarter of its daily output because of unrest in the Niger River delta. The nation plans to ship 19 cargoes of the benchmark crude oil grades Qua Iboe and Bonny Light in September, four fewer than are scheduled for August.

Shell's venture in Nigeria has restarted a limited amount of production at pumping stations feeding its Nembe Creek pipeline and the Forcados export terminal, Eurwen Thomas, a company spokeswoman, said July 24. The South Bank flow station, linked to Forcados, started pumping in April, she said.

Thomas declined to say how much oil South Bank, which has a 36,000-barrel-a-day capacity, was producing. The Nembe Creek pipeline, shut down in May because of a leak, hasn't reached its 77,000-barrel-a-day capacity, she said.

Iranian Defiance

In the Middle East, Iranian President Mahmoud Ahmadinejad said yesterday the Islamic Republic won't yield to demands to halt its uranium-enrichment program, the official Islamic Republic News Agency reported. The U.S. and its allies should accept Iran's right to pursue nuclear research, he said.

The United Nations has imposed sanctions on Iran in an effort to end its nuclear research. The U.S. and Europe say Iran could use enriched uranium to make a nuclear bomb. Some analysts and traders are concerned they might attack Iran, disrupting oil exports from the world's fourth largest producer.

In U.S. dollars, West Texas Intermediate, the New York-traded crude benchmark, has risen 4 percent in the past 12 months. It has dropped 4 percent in euros, 6 percent in British pounds and risen 7 percent in yen.

China tipped to be main driver the global economy this year

Gabriel Rozenberg, Times Online (UK)

China will become the biggest driver of global economic activity this year for the first time, the International Monetary Fund said yesterday as it raised its already bullish forecasts for growth.

China is the world’s fourth-largest economy, but accounts for only 5 per cent of the global economy on market-exchange rate terms.

However, it is projected to grow by a blistering 11.2 per cent this year, far above the predicted 2 per cent expansion of the US economy. It will make the largest contribution to the world’s growth rate of any country, the IMF said.

The forecast was set out in an update to the IMF’s World Economic Outlook first published in April. The IMF raised its forecast for international growth in both 2007 and 2008 to 5.2 per cent, from 4.9 per cent, and said that more than half of growth was now coming from emerging markets.

China would provide a quarter of the annual growth rate of the world economy, while China, Russia and India together will account for more than half of world growth this year, the report said. Next year China’s growth rate was forecast to fall back, but only to a still very strong 10.5 per cent.

By contrast, US growth was revised down slightly, from an earlier forecast of 2.2 per cent, although the IMF said it expected growth in the world’s largest economy to pick up next year to 2.8 per cent.

The report also tipped Britain’s GDP to expand by 2.9 per cent before slowing to 2.7 per cent next year. Growth in the eurozone was predicted to be 2.6 per cent this year and 2.5 per cent in 2008.

Charles Collyns, deputy director of the IMF’s research department, said: “This year for the very first time, with its very strong growth expected, and with the growth slowdown in the United States, China will be contributing the largest part to the increase in the global growth measured at market exchange rates as well as purchasing parity terms.”

He added: “China seems to be going from strength to strength at this point. It’s hitting on all cylinders.”

The world body gave warning that faster growth meant that supply constraints were developing, heightening the risk of inflation, although price rises remained contained for now.

Central banks were now more likely to tighten monetary policy than in the April outlook.

Mr Collyns said: “There are concerns that inflation pressures may be picking up, and central banks will need to respond quickly and in a for-ward-looking way to these pressures.”

The report outlined a largely benign scenario for the US sub-prime mortgage market, arguing that while defaults and foreclosures had led to increased uncertainty, the risks appeared to be contained and should not pose a wider risk to the world economy.

Jaime Caruana, the IMF’s director of monetary and capital market development, said that the process of adjusting to the higher than expected level of defaults had not yet run its course.

The report said that lending discipline had weakened in the corporate credit market. Credit risk “has begun to translate into higher market risk” for sub-prime mortgages and highly leveraged loans, it said.

However, the report said that markets were avoiding panic by discriminating between loans according to the strength of their underlying fundamentals.

“In sum, risks have increased and credit markets could remain volatile in the period ahead with a further repricing of some credit products,” the IMF said in its financial market update. “However, so far, our assessment is that this risk is likely to remain largely contained.”

Mr Caruana said financial markets are “almost around average volatility”.

11.2% - Economic growth forecast for China this year

In Poker Match Against a Machine, Humans Are Better Bluffers


By JOHN MARKOFF (New York Times)

VANCOUVER, British Columbia, July 25 — For anyone stuck on a casino stool, playing hours of video poker, rest assured: humans can still beat a computer. But computers may soon dominate on the felt-top table, as they have on the chessboard.

In a match of wits between man and machine this week, a software program running on an ordinary laptop computer fought a close match, but lost to two well-known professional human poker players.

The contest, which was billed as the “First Man-Machine Poker Championship” and which offered prize money totaling $50,000, pitted two professionals, Phil Laak and Ali Eslami, against a program written by a team of artificial intelligence researchers from the University of Alberta. They gave it a name that probably no gambler would ever choose as a nickname, Polaris.

Poker is thought to be a more difficult challenge for software designers than games like chess and checkers. Computer scientists have to develop different strategies and algorithms to deal with the uncertainties introduced by the hidden cards held by each player as well as difficult-to-quantify risk-taking behaviors such as bluffing.

In the past, research has focused on chess and checkers. In 1997 Deep Blue, a supercomputer-based chess playing software system developed by I.B.M. researchers, beat Gary Kasparov, the world chess champion. The University of Alberta researchers won the world checkers championship in 1994, and earlier this month they reported that they had developed a program that cannot lose, and at best can be tied at checkers.

However, Jonathan Schaeffer, chairman of the University of Alberta computer science department and the researcher who initiated the poker playing research effort 16 years ago, said that the advances that are being made in the development of poker-playing software are likely to be more applicable in the real world than chess research.

“I contend that poker is harder than chess for computers, and the research results that come out of the work on poker will be much more generally applicable than what came out of the chess research,” he said.

Research interest has shifted to games like poker in recent years, in part because chess is no longer of keen interest and in part because rapid progress is being made in developing new algorithms with broad practical applications in areas such as negotiation and commerce, said Tuomas Sandholm, a Carnegie Mellon University computer scientist.

The version of poker used in the match Monday and Tuesday at the annual meeting of the Association for the Advancement Artificial Intelligence was a popular game called Texas Hold ’Em heads-up limit poker, a two-player game in which some cards are hidden and others are playable by both sides. Each hand is played in four rounds during which each side can bet or fold. After four rounds of 500 hands each, lasting about four hours, the player with the most money is declared the winner.

Unlike chess competitions, which are marked by extreme concentration and long moments of silence, the tournament in a hotel here was festive, with each human competitor offering a running commentary on Polaris’s style of play to an audience of several hundred people.

Mr. Laak, who is nicknamed the Unabomber because of his trademark hooded sweatshirt and sunglasses, would frequently gesticulate wildly at the laptop computer screen and repeatedly referred to the computer’s play as “sick” — his way of describing an unexpected or extraordinary action on the part of the machine. His supporters included Jennifer Tilly, an actress who is also a well-known professional poker player.

The contest had to be formatted to accommodate the computer. To counter the luck of the draw, a dominating factor in poker, the human players were put in separate rooms. The hand dealt to the human in one room was identical to the hand dealt to the computer in the other room.

The format also eliminated one of the crucial aspects of traditional poker called the tell, subtle clues such as facial ticks that may permit other players to make accurate guesses about the hidden cards held by their opponent.

Mr. Eslami and Mr. Laak are both well-known figures in the world of poker and are mathematically skilled and familiar with the techniques used by their opponents. Although Mr. Eslami and Mr. Laak are not the best human players in the world, the scientists argued that their knowledge of computing made them more effective opponents than other top-ranked poker players.

The human team reached a draw in the first round even though their total winnings were slightly less than that of the computer. The match rules specified that small differences were not considered significant because of statistical variation. On Monday night, the second round went heavily to Polaris, leaving the human players visibly demoralized.

“Polaris was beating me like a drum,” Mr. Eslami said after the round.

However, during the third round on Tuesday afternoon, the human team rebounded, when the Polaris team’s shift in strategy backfired. They used a version of the program that was supposed to add a level of adaptability and “learning.”

Unlike computer chess programs, which require immense amounts of computing power to determine every possible future move, the Polaris poker software is largely precomputed, running for weeks before the match to build a series of agents called “bots” that have differing personalities or styles of play, ranging from aggressive to passive.

The Alberta team modeled 10 different bots before the competition and then chose to run a single program in the first two rounds. In the third round, the researchers used a more sophisticated ensemble of programs in which a “coach” program monitored the performance of three bots and then moved them in and out of the lineup like football players.

Mr. Laak and Mr. Eslami won the final round handily, but not before Polaris won a $240 pot with a royal flush than beat Mr. Eslami’s three-of-a-kind. The two men said that Polaris had challenged them far more than their human opponents.

Apple Inc. sets record for 3rd-quarter profit


BEIJING, July 26 (Xinhuanet) -- Sparked by demand for Macintosh computers and iPod media players, Apple Inc.'s third-quarter profit set a record by surging upward more than 73 percent.

"We're thrilled to report the highest June quarter revenue and profit in Apple's history, along with the highest quarterly Mac sales ever," said Steve Jobs, Apple's chief executive. "IPhone is off to a great start -- we hope to sell our one-millionth iPhone by the end of its first full quarter of sales -- and our new product pipeline is very strong."

The company also said Wednesday it sold 270,000 iPhones in the first two days on the market, though the multimedia handset had little impact on the quarter's results because the company plans to account for its sales as subscription revenue over two years.

Apple shares jumped more than 8 percent in extended-session trading Wednesday even as the company issued a conservative outlook that fell short of Wall Street's expectations.

For the quarter ended June 30, Apple's profit rose to 818 million U.S. dollars, or 92 U.S. cents per share, up from 472 million dollars, or 54 cents a share in the year-ago quarter.

Sales grew to 5.41 billion dollars from 4.37 billion dollars last year.

Apple's established products were the money makers. The company said it shipped a record 1.76 million Macs, up 33 percent from the year-ago period, accounting for 2.5 billion dollars, or more than 60 percent of the quarter's revenues. Unit sales of iPods increased by 21 percent from last year to 9.8 million and generated 1.57 billion dollars in revenue.

Festive mood at Chrysler fades fast

BY TOM WALSH (FREE PRESS)

Chrysler and Cerberus Capital Management won't be formally joined until at least next week, but it's already clear that their union won't begin with a relaxing honeymoon.

Can it be only two months since Cerberus Chairman John Snow and Chrysler Chief Executive Officer Tom LaSorda gave us their best Louis Armstrong impressions, warbling about what a wonderful world it will be for Chrysler under the nurturing wing of private ownership?

But look what's happening now:

• Wall Street balked Wednesday at buying a $12-billion debt offering Chrysler was trying to peddle to raise cash, even after delaying the offering a week as Chrysler's banks tried to find takers for the debt.

• Chrysler has banned more than 450 of its dealers from attending factory auctions of used cars because those dealers were falling way short of new-car sales targets set by the company, according to Automotive News.

• And Chrysler has acknowledged sending letters to dozens of poor-performing dealers, threatening to force them out of business. Leo Jerome, a Chrysler Jeep dealer in Lansing, told the Free Press on Wednesday that he has been given six months to improve sales or face losing his franchise.

None of these problems are expected to impede or delay the closing of the deal for Cerberus, the New York private-equity firm, to buy 80.1% of Chrysler from DaimlerChrysler AG, Chrysler officials insist.

But they illustrate how rocky the road ahead remains for the Auburn Hills automaker, no matter how strong the commitment or how deep the pockets of its new owner.

Financial markets have been jittery in recent weeks for a number of reasons, including heavy default rates on subprime mortgage loans, which back some junk bonds and risky corporate loans.

Chrysler's debt is viewed as riskier than that issued to finance most private-equity deals because the company is burning cash in a weak but hotly competitive market for new car and truck sales.

Chrysler lost $680 million in 2006 and nearly $2 billion in the first quarter of this year. The more nervous investors are about a company, the higher interest rates they charge for the debt, and underwriters have reportedly increased the rates for Chrysler's loans by more than 0.5% in recent weeks.

Meanwhile, Chrysler is playing hardball with some of its dealers, just months after LaSorda worked hard to defuse an angry uprising in the wake of last year's huge inventory buildup. Dealers were choking on a glut of cars and trucks factories kept churning out despite weak sales.

"I certainly was not feeling loved by the old regime," said Carl Galeana, owner of Van Dyke Dodge in Warren and Chrysler-Jeep stores in South Carolina and Florida, referring to former Chrysler sales chief Joe Eberhardt, who was forced out after the inventory fiasco.

Galeana said he is meeting his sales targets, so he personally is not being threatened with closure or banned from used-car auctions.

But Jerome, who got a threatening letter for missing his sales targets, said he sells about 50 new Chrysler vehicles a month in a town populated by thousands of current and former General Motors Corp. workers. He said he is angry and worried about the future of Chrysler.

"My question," Jerome said, "is what is Cerberus going to do differently than its predecessors? Knock off a few dealers? ... I don't think that's the problem. In my opinion, they've got other issues to address."

A Chrysler spokesperson said that thinning the dealer ranks, particularly in older, slow-growth markets east of the Mississippi River, was part of the company's turnaround strategy spelled out in February, months before the sale to Cerberus. But Jerome and some industry analysts see the hand of the new owner-in-waiting behind the effort to step up pressure on the weak dealers.

Snow, a former Treasury secretary, has been Cerberus' public face in the Chrysler deal, although Stephen Feinberg is the founder and chief executive officer. Snow consistently has sung a song about Cerberus being a patient long-term investor in Chrysler, with faith in its turnaround plan and management team.

But that doesn't mean hooey to guys such as Jerome, out there trying to move the metal in a very difficult market.

"What does he know," Jerome, asked, speaking of Snow, "about selling cars in Lansing, Mich.?"