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(Bloomberg) -- Oil traders and analysts expect prices to jump at least $5 a barrel Monday after a strike on a key facility cut Saudi Arabia’s production by half, pulling some 5% of world supply off the market.Saudi Aramco lost about 5.7 million barrels per day of output after several unmanned aerial vehicles on Saturday struck the world’s biggest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais. Saudi Arabia is likely to restore almost half the oil production lost, though a full resumption may take weeks. The Trump administration is ready to deploy the nation’s emergency oil reserves and help stabilize markets if needed.Trading in West Texas Intermediate starts at 6 p.m. New York time, Brent at 8 p.m. In early currency moves in Asia, the Norwegian krone and Canadian dollar strengthened -- both are exposed to oil sentiment.Oil sank 2.1% in London to $60.22 a barrel last week and 3% in New York to $54.85, amid concerns that slowing demand growth may augur another supply glut. Geopolitics wasn’t much of a concern in traders’ minds, but that’s all changed now.“There is almost no geopolitical risk priced into oil markets,” Joseph McMonigle, senior energy analyst at Hedgeye Risk Management LLC, said in a note. Markets have been “focused solely on the macro and trade narratives,” he said.How Long?While most analysts agree that prices will spike initially, the duration of the outage is key. Saudi Arabia has millions of barrels stored in locations around the world, which they can draw down to replace the lost production. A rally could also be tempered if the U.S. and other countries release oil from their strategic reserves to ease the shortfall.“We would expect markets opening up at or near the circuit breaking limit of 7%” unless the Saudis say the damage isn’t too bad, Phil Flynn, senior market analyst at Price Futures Group Inc., said by phoneIf WTI jumps 7% from Friday’s settlement, or $3.84 a barrel, in early trading, a circuit-breaker will kick in, pausing trading for two minutes, according to the CME Group website.“The immediate impact on crude prices could be around $10 a barrel and we expect the impact could be around 5 dollars for weeks, as the situation in the Middle East just got more fragile,” Bjørnar Tonhaugen, head of oil market analysis at Rystad Energy, said by email“We do NOT expect a shock in the market and prices as an effect of the drone attack on Saudi oil facilities, because the market is fully supplied,” Sara Vakhshouri, analyst at SVB Energy, said by email. The price rise Monday will be based on uncertainty over damage and duration of the outage, and fear of the possibility of repeat events, she saidClearView Energy Partners LLC sees potential for prices to rise $10 a barrel, assuming a three-week shutdown, according to a note to clients. If damage turns out to be extensive and the outage is extended, they expect a loosening of OPEC+ supplies and a coordinated release of strategic reserves from the U.S. and elsewhere.“Brent could go to $80 tomorrow, while WTI could go to $75,” said Sandy Fielden, director of research for Morningstar Inc. “But that would depend on Aramco’s 48-hour update. The supply problem won’t be clear right away since the Saudis can still deliver from inventory.”“The initial move higher will depend on the strength of short-covering,” Ole Hansen, head of commodities strategy at Saxo Bank A/S in Copenhagen, said by email. “We finished last week on a weak note after monthly oil market reports pointed to a prolonged supply glut.”Brent may rise more than WTI, as the potential for release from the SPR and growing domestic production could restrain the U.S. benchmark. Bloomberg Intelligence sees Brent climbing back toward levels last seen in April.What Bloomberg Intelligence Says“Brent should regain much of the premium lost to West Texas Intermediate over the past few months. Rapidly increasing U.S. supply, the likelihood of releasing crude from the Strategic Petroleum Reserve and potential for a ban on exports should provide a greater boost to the benchmark.”Mike McGlone, commodity strategistHeavy, high-sulfur crudes will also likely be in demand due to the type of oil that was taken off the market:Andy Lipow, president of Lipow Oil Associates LLC in Houston, on Dubai: “I would expect sour crude differentials to get stronger given the Saudis exports are heavier and have higher sulfur crudes”(Adds analyst comments)\--With assistance from Mahmoud Habboush, Sheela Tobben, Stephen Cunningham, Javier Blas, Grant Smith and Robert Tuttle.To contact the reporter on this story: David Marino in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: David Marino at email@example.com, James Ludden, Linus ChuaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Hong Kong's exchange refused to give up on its bid to take over the London Stock Exchange after the British bourse emphatically rejected its $39 billion takeover offer on Friday. The Hong Kong exchange said it would now hold more talks with LSE investors as it considers its next step, aiming to keep alive its hopes of becoming a more global player to rival U.S. giants ICE and CME. "HKEX believes that shareholders in LSEG should have the opportunity to analyse in detail both transactions and will continue to engage with them," it said in a statement.
(Bloomberg) -- The expulsion of Einar Aas from Nasdaq Inc.’s commodities unit in Europe is continuing to rattle power markets a year after the trader racked up more than $100 million in debt from bets he couldn’t repay.The default of the Nordic market’s most successful trader forced Nasdaq to focus on restoring confidence to the market. Buying and selling of electricity has been on the decline for years, and the Aas scandal only made matters worse. Activity in 2018 dropped to the lowest in two decades and volumes are down another 21% this year through August. Less trading has widened spreads, especially on contracts for the years ahead, according to market participants.“If there had been 10 traders as big as Einar Aas in the market, the other nine would probably have seized the opportunity and moved in to fill the gap,” said Arne Bergvik, head of analysis at Swedish utility Jamtkraft AB. “Unfortunately, there’s now a void.”His demise took many in the market by surprise. After all, regulators around the world had spent a decade shoring up rules to avoid another default after the collapse of Lehman Brothers Holdings Inc. in 2008. Aas, who traded on the world’s oldest power exchange for his own account, slipped through the net because of his stature, and rival traders had to pitch in to cover his losses.What Has Nasdaq Done Since the default?The exchange shored up rules on trading and capital requirements to make less likely another event like the default of Aas. Those changes include, increased requirements for how much capital and liquidity members of the clearing house has available.“You can never get to a 100% guarantee that this kind of event never happens again, but the actions we are taking now are significantly reducing the risk,” Georg Aasen, vice president for Nasdaq Commodities, said by phone.What are traders and utility executives saying?There’s an open question about how a single trader could be allowed to take the kinds of risks Aas racked up, said Marcus Annell, head of financial trading at the utility Bixia AB. Confidence in the exchange and its risk management has taken a knock.But while the lack of trust in the exchange has meant some business has gone elsewhere, Annell says there will always be a need for utilities to buy and sell power in advance. That means opportunities for traders, albeit at a smaller scale. The default means it will be even more difficult for Nasdaq to regain volume.The exchange should also be wary of too much increased regulation. If paperwork becomes too burdensome for smaller traders, then there’s a risk that the market will just have a handful of giant producers left, Annell said.Simon-Erik Ollus, head of trading at Fortum Oyj, doesn’t blame Nasdaq alone for the failure. In a bid to keep a lid on trading costs, it was a “Nordic compromise” to allow traders to become direct clearing members. But now, “we can probably call it a failure in the design of risk management,” he said.Fortum had to pay 20 million euros ($22 million) into Nasdaq’s default fund to help cover the losses, and has called for more product development in the Nordic market to boost trade. That is a focus right now, he said.Anna Borg, chief financial officer at utility Vattenfall AB, says that’s although volumes are declining it’s premature to call the market’s demise just yet. More regulation makes trading even more complex, but it’s also reducing risk, and this is where the market and the exchange jointly need to find the right balance.“Nasdaq has shot itself in the foot,” said Fredrik Bodecker, head of adviser Bodecker Partners AB and a former trader. While there are potentially new types of market participants, including wind power producers, the increase in margins and compliance is forcing smaller traders and producers on to the bilateral market, where they are instead trading directly with utilities, he said.What action has the regulators taken?Norway’s financial supervisory authority, after carrying out an audit of Nasdaq’s Norwegian unit, concluded in January that the exchange had lapsed in its oversight of Aas. It found that he had other people trading on his account, even if it was solely personal. There wasn’t sufficient investigation by the bourse and in the aftermath, Nasdaq had failed to disclose such vital information voluntarily.Sweden’s FSA, which oversees Nasdaq’s Nordic clearinghouse in Stockholm, still has separate investigations underway into the company, focusing on risk management, participation requirements, default management procedures and margin calculation.Have others markets benefited?“Not yet,” said Steffen Riediger, director of European power derivatives at the European Energy Exchange AG, a rival bourse. The company said in the aftermath of Aas’s default that it would expand in the Nordic power market. Volumes are up, but to a small extent he said, adding that more participants are setting up the product now.What about Aas himself?Aas, who declined to comment when reached by phone, avoided bankruptcy after striking a deal with the other traders and utilities at Nasdaq who were forced to top up the clearing house’s default fund.He got to keep his main house in Grimstad, a few hours’ drive southwest of Oslo. But he has sold other assets to settle claims, including sea-side properties, a mountain cabin, shares in an oil company and a painting by Andy Warhol.So far, those sales have brought in more than 160 million kroner ($18 million), according to Bloomberg calculations based on reports in Norwegian media. A few other major assets remain: investments in real-estate projects in Spain, and a possible tax refund stemming from a rule that would let Aas deduct 2018 losses from income in earlier years.“The sales process involving the Spanish real-estate investments is in full swing,” Aas’s lawyer, Marius Moursund Gisvold, said by phone, declining to provide any other details.The book value of his Spanish investments was set at 258 million kroner in the 2018 annual report of Aas’s investment firm Toppen Invest AS. The tax refund could be worth more than 200 million kroner, according to calculations published by local paper Agderposten.\--With assistance from Mathew Carr.To contact the reporters on this story: Lars Paulsson in London at firstname.lastname@example.org;Jesper Starn in Stockholm at email@example.com;Mikael Holter in Oslo at firstname.lastname@example.orgTo contact the editor responsible for this story: Reed Landberg at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
HONG KONG/LONDON/NEW YORK Sept 12 (Reuters) - The London Stock Exchange's board will meet in coming days to decide on the Hong Kong bourse's surprise $39 billion takeover proposal, a source close to the British company said on Thursday, as the market poured cold water on the deal. The unsolicited takeover offer is not expected to succeed given a preference among LSE investors for the exchange to complete its $27 billion proposed acquisition of data and analytics group Refinitiv, the source close to the LSE said. The exchange wants to focus on executing that deal, rather than risk it being derailed by the Hong Kong bourse, the source said.
CME is "laser focused" on the integration of its recent $5 billion acquisition of UK-based financial technology company NEX and growing its core franchise, Chairman and Chief Executive Officer Terry Duffy said in an interview in New York. Duffy said he was not surprised by Hong Kong's interest in LSE, which is separately pursuing a $27 billion deal to buy data company Refinitiv, but added that the premium for the centuries-old British bourse was getting pretty high.
(Bloomberg Opinion) -- London Stock Exchange Group Plc left gatecrashers a window of only a few months to try to break up its $27 billion takeover of data provider Refinitiv. Hong Kong Exchanges and Clearing Ltd. has moved fast and first with a potential bid for LSE worth 30 billion pounds ($37 billion). On the surface its proposal is better than the LSE’s own deal, but the path to a firm offer from Hong Kong that runs all the way to completion is fraught with uncertainty.LSE’s agreement to buy Refinitiv (which competes with Bloomberg LP, the parent of Bloomberg News) has forced the hand of anyone who wants to buy the London bourse. If LSE’s shareholders approve the Refinitiv deal, the British company will become too big a target. With the vote on that transaction due by the end of 2019, any auction among LSE bidders would have to happen this year.Of course, investors liked the Refinitiv deal. LSE’s shares rose 20% afterwards. That gain reflected both the probable value creation from a tie-up and the possibility of an approach from an interloper stung into action, such as the one that’s just arrived from Hong Kong.But a bidder doesn’t have to offer a huge premium on top of where LSE shares are now. The real benchmark for a bid is where the LSE shares were trading before its offer for Refinitiv. The choice now for the LSE’s board and shareholders is between a future reaping synergies from Refinitiv or being taken over by another exchange and taking an upfront premium.A suitor therefore just has to offer more value than what comes from the Refinitiv deal, with comparable certainty. HKEX is certainly trying hard. Its cash and stock proposal is worth nearly 84 pounds per LSE share based on its last closing price. That’s almost 50% higher than where LSE was trading in July before the Refinitiv deal. It’s also 23% above where LSE was trading yesterday. These are serious numbers.That said, the proposal is only one-quarter in cash. Investors therefore need to believe that the long-term investment case for an Anglo-Asian tie-up is stronger than that for the LSE-Refinitiv combination. HKEX’s ownership of London Metal Exchange hasn’t been an unmitigated success. The company argues that its LSE bid could let shareholders capture capital market opportunities from a rising China. That alternative growth story may be persuasive.The odd aspect is HKEX’s tactics in making its proposal public without any evident support from LSE. The target has said cautiously that it will weigh the approach, while noting it was a long way from being fully baked. But HKEX’s decision to reveal its hand, however warm, isn’t altogether friendly. It’s designed both to show commitment and to put pressure on the LSE’s board to engage. Stock exchanges are – rightly or wrongly – national treasures. It’s hard to imagine a hostile bid succeeding so Hong Kong will somehow need to bring LSE management onside.That dovetails with the political considerations. The LSE deal with Refinitiv would create a London-based global exchange and data powerhouse. Hong Kong is proposing a straight takeover. There are questions too over the territory’s future as a financial center after the recent protests. And while the LSE may not be cheap on financial metrics – the proposal values it at 26 times expected Ebitda – this might be seen as the ultimate Brexit grab of a prize U.K. asset.These considerations leave the LSE vulnerable to other bids too. The obvious candidate is Intercontinental Exchange Inc of the U.S. Watch this space.To contact the author of this story: Chris Hughes at firstname.lastname@example.orgTo contact the editor responsible for this story: James Boxell at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
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(Bloomberg) -- Intercontinental Exchange Inc. is closer to offering Bitcoin futures trading as its Bakkt unit opens its digital-asset custody warehouse today to customers. Here are the nuts and bolts of how it will work.Once the futures begin trading on Sept. 23, actual Bitcoin can be acquired by going long in the one-day or 30-day contract and holding to delivery.Trades will occur on ICE Futures U.S.Clearing is through ICE Clear U.S.Custody is handled by Bakkt Trust Co., which received a charter from the New York State Department of Financial Services last month to hold customer tokens. This warehouse will move Bitcoins from short positions to long positions at expiration, resulting in actual delivery of Bitcoin.The early opening of the warehouse is meant to allow customers to move Bitcoin in and out of their accounts to become comfortable with the process prior to Sept. 23.Both futures contracts will be margined, meaning there’s no need for users to pre-fund their trading accounts or collateralize them at 100% as was previously envisioned by ICE.ICE hopes the futures will create price discovery for Bitcoin apart from any cash market influence, as the company has cited abuse and manipulation in spot Bitcoin trading. Whether that will come from the one-day or 30-day contract is yet to be seen.It’s rare in the futures world for a company to act as exchange, clearinghouse and settlement authority; this last part delayed ICE’s plans for months as it sought the NYDFS approval to become a trust.This is not the first Bitcoin futures contract, but the first to offer physical delivery. CME Group and Cboe Markets have both offered Bitcoin futures that are cash-settled. Cboe discontinued its contract. Read More: Buying Your Starbucks Fix With Bitcoin Is Now Closer to RealityTo contact the reporter on this story: Matthew Leising in Los Angeles at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Dave Liedtka, Rita NazarethFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
From Land Rover's new Defender to a hybrid hypercar — there are lots of major launches to keep an eye out for.