Which countries have the largest oil reserves and why does it matter?

Liam Roche
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Which countries have the largest oil reserves and why does it matter?

According to the BP Statistical Review of World Energy 2020, 14 countries hold in excess of 90% of the world’s oil reserves across the world.

As a byproduct of this ownership, these countries are able to obtain significant amount of economic power and influence.

Despite its crippling levels of poverty, Venezuela is the leading nation on earth when it comes to oil. The South American country has in excess of 300 billion barrels, over a 17% share of global reserves.

Saudi Arabia is a close second with just under 300 billion barrels, while Canada, with 170 billion barrels, is in third place.

Oil can only be extracted from existing reserves as it is a naturally forming resource which develops over millions of years. This gives those countries an additional advantage.

However, oil reserve levels do not neccessarily correlate to oil production levels. For example, the US and Russia are among the highest producers of oil despite not holding the most reserves within their borders.

It is a critical period for the commodity now as the future influence of oil as a driver of economic growth is set to diminish. Having said that, it remains vital – and profitable – in getting the world economy up and running again in the aftermath of the coronavirus pandemic.

Policies aimed at dramatically reducing carbon emissions will have a massive impact on the industry.

“According to the International Energy Agency, countries that pledged to achieve net-zero emissions cover around 70% of global emissions of CO2. It is likely that policies and measures in this respect will have a profound impact on the oil and gas industry, both in relation to its operations as well as in demand for its products,” said a report by the World Economic Forum.

“The trend to decarbonise the global economy is likely to accelerate peak demand for oil and possibly natural gas as well. Some analysts believe that peak oil will happen in the next few years, others that it has already happened, while some would argue that demand will continue growing for some time yet. Nevertheless, peak demand is on the way.”

Oil producing countries often come together to control supply levels in order to keep prices in a healthy position. As the policy environment across the world changes, in addition to consumer demand for a range of products, this may become more difficult to do.

Oil has many uses beyond energy, including plastics, chemicals and fertilisers, and therefore its demand will not disappear entirely. However, being a top holder of oil reserves may soon not give the same level of economic opportunity as it once did.

OPEC+ representatives will seek to resume talks this week after disagreements within the ranks over proposed extensions to oil curbs.

Markets pause for a breath ahead of Q2 earnings season later this month

Liam Roche
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Markets pause for a breath ahead of Q2 earnings season later this month

The FTSE 100 made a quiet start to the week, with the UK index up by 0.2% to 7,137 points.

The FTSE 250 fared slightly better with a 0.54% as markets in mainland Europe were generally down.

“Markets paused for breath ahead of the second quarter earnings season which begins towards the end of the month. We’re now in a short period with limited corporate news to drive trading volumes,” said Russ Mould, investment director at AJ Bell.

“Second quarter numbers may show divergent fortunes. Investor expectations have arguably been too high for many sectors including travel and leisure, and there could be some disappointed shareholders once the next set of figures are out, particularly if the outlook isn’t as rosy as they hoped and that leads to earnings downgrades.”

Brent Crude oil nudged ahead 0.3% to $76.41 per barrel as oil producers’ cartel Opec will today continue talks about increasing output. “Failure to strike a deal could push up the price of oil further, adding inflationary pressures to businesses and consumers around the world,” Mould added.

FTSE 100 Top Movers

IAG (2.98%), Sainsbury (1.97%) and Barclays (1.65%) are leading up the FTSE 100 less than two hours into the Monday session.

At the bottom end, Just Eat (-1.8%), Aveva Group (-1.76%) and Polymetal International (-1.36%) are trailing the rest of the pack on the UK index.

Morrisons

Morrisons looks set to be taken over following a bid of £6.3m for the supermarket chain by a consortium that appears to have beat the competition to the finish line. 

Fortress, the private equity firm leading the takeover race, seems to be at the front of the pack following its 254p-per-share offer. 

Back in June, Morrisons rejected an offer of £5.5bn from a different consortium, adding that it was an undervaluation of the company.

Pensana begins development of world’s first Freeport rare earth processing hub

Liam Roche
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Pensana begins development of world’s first Freeport rare earth processing hub

Pensana’s announcement follows a recent £15m premium equity raise

Pensana (LON:PRE) confirmed on Monday that it is in the early stages of developing a rare earth processing hub at the Saltend Chemicals Park in Humber.

The announcement follows a recent £15m premium equity raise which received a strong show of support from the company’s shareholders.

The Saltend plant will be the first major rare earth separation facility to be built in over ten years and the first to be located in a freeport.

Pensana’s aim to to establish Saltend is a viable alternative to mining houses which are only able to sell their products to China, having designed the facility to be adaptable to a range of rare earth feedstocks.

“Importantly, for many miners around the world who are looking to access the European and US supply chains, it is becoming increasingly clear that the planned EU and UK carbon border taxation will mean that it is no longer acceptable for manufacturers to source material extracted or processed unsustainably,” the company said in a statement.

Pensana is advancing the front end engineering designs (FEED) for the Saltend and Longonjo projects towards completion in October.

Ongoing continuous process pilot plant runs to confirm equipment selection, sizing and specifications will continue through to September reflecting the importance placed on confirmation of scalability of design.

Paul Atherley, Chairman of Pensana, commented:

“Demands for more secure and responsible supply chains, higher prices on carbon, and policies such as the border carbon adjustments are setting the stage for greater transparency and traceability in minerals and metals – enablers of the global energy transition,” said Atherley.

“The Humber is already the UK’s busiest port complex the freeport status with its customs and tax incentives aimed at levelling up provides the opportunity to establish the world’s first rare earth processing hub within an economic enterprise zone, with the benefits of frictionless trade with Europe and the rest of the world.”

Johnson to tell Brits to ‘learn to live’ with virus ahead of further easing of restrictions

Liam Roche
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Johnson to tell Brits to ‘learn to live’ with virus ahead of further easing of restrictions

Total UK deaths linked to virus now at 128,222

Boris Johnson will on Monday at 5pm announce the beginning of the end of strict Covid-19 measures as of July 19, according to Sky News.

This includes, among other things, the requirement to wear face masks, social distancing and the guidance to work from home where possible.

As the vaccine roll-out is well in effect, Johnson will make the case that now is the time to fully open the economy and that the UK should “learn to live” with the virus, while continuing to warn of its potential harm.

The prime minister will confirm that he expects deaths and illness to carry on as a result of the coronavirus, but levels will remain lower than before the vaccine roll-out.

The last of Johnson’s four step roadmap was put back by a month in June, on a rise in the number of cases, as the prime minister wanted to make sure every adult had the opportunity to be vaccinated.

“We expect, by 19 July, that will be over two-thirds of the adult population having had their second dose – so that is far more protection from COVID,” Health Minister Helen Whately told Sky News.

The UK on Monday reported an additional 24,248 Covid-19 cases and 15 deaths. This compares to 24,855 cases and 18 deaths on Saturday.

45,274,497 people have had at least one dose of a vaccine, while 33,614,952 are 100% vaccinated.

Total deaths in the UK linked to coronavirus, within four weeks of a positive test, are now at 128,222.

Growth in China’s June services activity falls to lowest level in 14 months

Liam Roche
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Growth in China’s June services activity falls to lowest level in 14 months

Caixin/Markit services Purchasing Managers’ Index dropped to 50.3 in June

Growth in China’s services sector slowed well down last month, to the lowest point in 14 months, as coronavirus cases spiked in the southern area of the country.

This is according to the Caixin China General Services PMI survey which appears to show the second-biggest economy in the world may be hesitating on its road to recovery.

The Caixin/Markit services Purchasing Managers’ Index (PMI) dropped to 50.3 in June, well down from 55.1 in May, and its lowest level since April 2020.

However, it remained above the 50-level – anything below that marker represents a contraction.

In addition to a drop-off in the manufacturing sector, analysts said that China’s demand levels built up through the pandemic may have peaked. This is now causing the country’s rate of recovery to ease off.

An outbreak of the Delta variant of Covid-19 in Guangdong, an area where goods are both exported and manufactured, has seen a slow-down in consumer and business activity.

On a more positive note for China, the report showed an easing of inflation, which has been impacting company’s profit levels in recent months. “Composite input cost inflation softened to an eight-month low, while prices charged by Chinese companies increased only slightly,” the report said.

Commenting on the China General Services PMI TM data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said:

“The Caixin China General Services Business Activity Index came in at 50.3 in June, down from 55.1 the previous month. The June reading was the lowest since April 2020. The services sector expanded for the 14th month in a row in June, but the rate of expansion significantly slowed from the previous month.”

“Both supply and demand in the services sector expanded. The gauges for business activity and total new orders remained in positive territory for the 14th consecutive month in June, but both fell to the lowest in 14 months. The recent resurgence of Covid-19 in the Pearl River Delta had a certain impact on the services sector. External demand marginally improved. The gauge of new export business rose into positive territory, though the rate of expansion was marginal.”

“Employment in the services sector came under pressure. The resurgence of Covid-19, coupled with weakening supply and demand, hurt the labor market. The measure for employment fell into contractionary territory in June for the first time in four months, though the contraction was not sizable. Also, due to the weak market, service enterprises’ outstanding workload decreased.”

Fortress looks to usurp rivals in effort to acquire Morrisons

Liam Roche
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Fortress looks to usurp rivals in effort to acquire Morrisons

Fortress Investment Group is leading the race as rivals consider bids

Morrisons looks set to be taken over following a bid of £6.3m for the supermarket chain by a consortium that appears to have beat the competition to the finish line.

Fortress, the private equity firm leading the takeover race, seems to be at the front of the pack following its 254p-per-share offer.

Back in June, Morrisons rejected an offer of £5.5bn from a different consortium, adding that it was an undervaluation of the company.

The business consists of just under 500 stores and over 110,000 employees across the UK.

Fortress Investment Group took over Majestic Wine in 2019 for £95m and is working with Koch Industries and the Canadian pension fund CPPIB to secure the Morrisons deal. In addition to debt, their offer will amount to £9.5bn.

In addition to Fortress’ offer, which has been deemed acceptable, the investor promised to support the supermarket’s exit strategy, keep its head office in Bradford and protect employees’ pension rights.

Just this morning, an American private equity firm, Apollo Global Management, confirmed it is evaluating a potential bid, intensifying the battle for Morrisons.

“Apollo Global Management, Inc. (together with its subsidiaries, “Apollo”) notes the recent press speculation in relation to Morrisons and confirms that it is, on behalf of certain investment funds managed by it, in the preliminary stages of evaluating a possible offer for Morrisons,” the company said.

“No approach has been made to the Board of Morrisons. There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made.”

Morrisons first existed as a market stall in Bradford in 1899 owned by William Morrison. His son then took over the company and opened the first supermarket in the 1960s.

During the morning session on Monday, the Morrisons share price is up by 11.35% to 267.02p.

Susannah Streeter senior investment and markets analyst at Hargreaves Lansdown commented on the three-way battle for the UK grocer.

“With a trio of hungry firms circling, it shows there is a big appetite for a bite of the UK supermarket sector. W M Morrison is seen as a bargain compared to overseas peers, with its deep integrated supply chain and the fact that it owns much of its store estate,” she said.

“Morrisons is bounding ahead with digital sales, which were up by 113% last quarter. The company is already a prince in Amazon’s e-commerce empire, selling ranges via Prime and via the Amazon Fresh bricks and mortar store in West London, which gives it added reach. The tentacles of W M Morrison expand across multiply supply chains where innovative products are in development.”


Purplebricks likely to set out strategy

Andrew Hore
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Purplebricks likely to set out strategy

Estate agency Purplebricks (LON: PURP) is reporting its 2020-21 results on Tuesday 7 July and this will provide an opportunity to update the market on trading. There should also be news concerning the strategy of the business and its pricing levels.
Peel Hunt forecasts an underlying pre-tax profit of £3m, although market consensus is £6m. Given the May trading statement it seems likely that the outcome will be nearer to the consensus figure. Much of this profit was made in the first half. Purplebricks lost money in the previous year.
Purplebricks continues to spend significant amounts of money...

New Aquis admission: Voyager Life

Andrew Hore
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New Aquis admission: Voyager Life

Voyager Life is an early-stage company offering CBD-based products. The company has been in existence for around eight months and revenues are small.  
The latest share issue was eligible for Enterprise Investment Scheme and Venture Capital Trust tax benefits. The cash raised in the past few months will be spent on further product development and increasing marketing, which includes rebranding. There are also plans for retail stores.
Voyager Life has raised its profile thanks to the Seedrs crowdfunding and flotation. It is still early days, but revenues and orders are growing from a low b...

US non-farm payrolls blow past expectations as stock markets reach record highs

Liam Roche
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US non-farm payrolls blow past expectations as stock markets reach record highs

The leisure and hospitality sectors led the jobs recovery in June

Hiring was on the up again in June, as non-farm payrolls jumped by 850,000 jobs.

The increase was well above market expectations of 711,000, although unemployment increased by 0.1% in June to 5.9%.

The news comes as companies are pulling out the stops to match high levels of demand, by raising wages in order to bring Americans back into the workforce.

“Commenting on the US non-farm payrolls, Rupert Thompson, Chief Investment Officer at Kingswood, said: “Employment remains some 6.7mn below its pre-pandemic peak. The return to work is speeding up but far from complete, hindered by factors ranging from increased unemployment benefits, lack of child care facilities and fear of catching covid.”

“These obstacles, however, should fade over coming months, allowing the Fed to move closer to attaining its full employment objective. Only when it has made further substantial progress on this front, does it plan to start tapering its quantitative easing,” Thompson added.

The numbers show that leisure and hospitality led the recovery, increasing by 343,000, as states across the country eased their restrictions.

Average earnings also rose last month by 0.3%, or just over 10 cents an hour, and are now 3.6% higher than 12 months ago.

Stocks reached new highs on Friday as investors reacted positively to non-farm payroll numbers.

The S&P 500 is up by 14.4 points, or 0.33%, to 4,334 during the morning session, while the Nasdaq jumped by 54 points to a new high of 14,576.

Ali Jaffari, Head of North American Capital Markets for Validus Risk Management, said that the US Federal Reserve will likely hold off from hiking interest rates based on the numbers emerging on Friday.

“Employment data remains a key focus for the Fed and a continued convergence to pre-pandemic levels will certainly drive the thinking on tapering discussions and supports a build in US rate hike expectations. However, with two more job prints until the Sep FOMC, the Fed will likely hold off until there is a clear view on the return of labor force supply.”

IronRidge: Laughing All the way to the Bank

Jon Levinson
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IronRidge: Laughing All the way to the Bank

IronRidge Resources (LON:IRR) have improved from 17.6p to currently 24p since our last recommendation. Its Cape Coast Lithium Portfolio seemed materially undervalued, and it seems to be picked up by Piedmonth Lithium. This £billion Nasdaq listed lithium explorer and developer has agreed to Fully Fund IRR’s project to production and subscribed to £10.8m of IronRidge shares at 20p and will fund an additional £15m to advance the project to its Definitive Feasibility Study. At this stage the project in Bankable and will become a mine IRR. It is predicted to produce an average of 295,000 tonnes per...

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