Oil Falls Below $90 for First Time in 4 Weeks as Supplies Rise

(Bloomberg) -- Crude oil fell below $90 a barrel for the first time in four weeks after a U.S. Energy Department report showed that supplies rose more than expected.

Inventories surged 4.29 million barrels to 287.1 million in the week ended Jan. 11, the first increase in nine weeks, the report showed. Supplies were expected to rise 1.25 million barrels, according to the median of 15 responses in a Bloomberg News survey.

``This confirms that the seasonal period of crude-oil inventory builds has begun and gotten off to a good start with a larger-than-expected build,'' said Eric Wittenauer, an analyst at A.G. Edwards & Sons Inc. in St. Louis.

Crude oil for February delivery fell $2.47, or 2.7 percent, to $89.43 a barrel at 10:56 a.m. on the New York Mercantile Exchange. Prices touched $89.35 today, the lowest since Dec. 18. Futures reached a record $100.09 a barrel on Jan. 3. Prices are up 75 percent from a year ago.

Brent crude for February settlement declined $2.09, or 2.3 percent, to $88.89 a barrel on London's ICE Futures Europe exchange. Futures touched $98.50 on Jan. 3, the highest intraday price since trading began in 1988.

Refineries operated at 87.1 percent of capacity, down 4.2 percentage points from the week before, the report showed. It was the biggest one-week drop since September 2005 when Hurricane Rita shut refineries in Texas and Louisiana after roaring in from the Gulf of Mexico.

``The big drop in refinery runs is the most shocking number inside the report,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``It could be that we are seeing an early start to the next round of refinery maintenance.''

 

Read more at Bloomberg

Ambac Will Cut Dividend, Raise $1 Billion in Capital

(Bloomberg) -- Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever writedowns by a bond insurer.

The New York-based company fell as much as 28 percent on the New York Stock Exchange, extending a 76 percent decline in the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement today.

Chairman and CEO Robert Genader, 60, will leave after presiding over the company's first ever losses and a decline in shares that wiped out $7.8 billion in market value. Ambac's writedowns, which exceeded those announced last week by larger rival MBIA Inc., failed to convince investors that the worst is over. Ambac and MBIA remain under scrutiny by ratings companies and regulators after their guarantees of bonds linked to subprime mortgages began plunging in value.

``The perception is that their underwriting standards were insufficient and they weren't on top of their business,'' Janet Tavakoli, president of Tavakoli Structured Finance in Chicago, said in an interview. ``This announcement still just says `We're a black box. Deal with it'.''

Ambac, which put its AAA stamp on $556 billion of securities, probably will end up needing more capital because the credit quality of the debt it guarantees will decline, Tavakoli said. Standard & Poor's yesterday changed the way it reviews subprime securities to increase its assumptions for losses, indicating it may further lower credit ratings.

Shares Fall

Board member and former Citigroup Inc. executive Michael Callen, 67, will become chairman and interim CEO, Ambac said.

The reduction in the quarterly dividend to 7 cents from 21 cents reverses a commitment made just three weeks ago to retain the payout. Ambac said it will report a net loss of $32.83 a share for the quarter, equating to more than $3 billion based on the company's 101 million shares outstanding.

Ambac declined $5.79 to $15.35 at 10:35 a.m. in New York after earlier falling as low as $15.12. MBIA dropped $1.91, or 12 percent, to $14.14.

``It's one thing to have a plan and another to have a plan that is credible and will be a long-term fix,'' said Donald Light, an analyst with Boston-based consulting firm Celent. ``Is this just a down payment in what's going to be a series of payments of uncertain length?''

`Clock Ticking'

Ambac is under pressure to come up with enough capital to satisfy Fitch Ratings, which threatened to cut the company's AAA rating unless it raised $1 billion. The bond insurers are under scrutiny from Fitch, Moody's Investors Service and S&P to increase their capital after a slide in credit ratings of the debt they guarantee.

The loss of the AAA stamp of Ambac, MBIA, FGIC Corp. and other insurers would throw into doubt the ratings of $2.4 trillion of municipal and structured finance debt that the companies guarantee. It would also cripple their ability to keep underwriting new bonds.

``The clock is ticking for all these companies,'' Robert Haines, an analyst with New York-based bond research firm CreditSights Inc., said in an interview before the announcement.

The infusion of capital, which may include the sale of shares and convertible stock, will satisfy Fitch, Ambac said in the statement today. Ambac said it may also reinsure more of its bonds or sell debt securities to shore up capital.

 

Read more at Bloomberg

JPMorgan takes $1.3 billion writedown

(Reuters) - JPMorgan Chase & Co said on Wednesday quarterly profit fell a worse-than-expected 24 percent as the No. 3 U.S. bank lost $1.3 billion on risky mortgages and set aside more money for rising losses on home-equity loans.

The bank quadrupled to $1.1 billion the provision it needs to cover continued problems on home equity and subprime mortgage loans. It also said credit card spending slowed in December, a sign the U.S. economy could suffer as cash-strapped consumers face rising food and heating costs while the value of their homes slide.

"We remain extremely cautious as we enter 2008," JPMorgan Chief Executive Jamie Dimon said in a statement. He said a worsening U.S. economy would boost consumer credit losses beyond current levels.

 

Read more at Reuters

Tiger: 'Blatant profiteering'

(Fin24) - The Competition Commission - on Wednesday slammed the bread price increases, saying the "blatant profiteering is an insult to the nation".

Bread maker Tiger Brands (TBS) on Monday implemented price increases on its Albany bread brand - soon after the Competition Commission hit it with a R99m fine for admitting a role in bread price-fixing cartel.

"This blatant profiteering is an insult to the nation, particularly the poor. It demonstrates that either the collusion is continuing or the cartel members are acting to maintain the artificially high margins they achieved by acting unlawfully," said Shan Ramburuth, Competition Commissioner.

The Commission has requested an explanation.

Tiger Brands is the only company that has implemented price hikes. Its peers Pioneer Foods, Premier Foods and Foodcorp, which are also implicated in the bread cartel scandal, are expected to follow suit.

"Should evidence show that the collusive behaviour is continuing we are able to withdraw the immunity we've granted to other players. We are also prosecuting the remaining cartel members, Pioneer and Foodcorp. Perhaps most shockingly, we have received new allegations of other anti-competitive behaviour by these parties, which we are vigorously pursuing," said Ramburuth.

Tiger Brands has denied that prices increases were implemented to plug the gap on the R99m, but has cited higher wheat prices.

Wheat prices - which make about 20% of bread input - nearly doubled in the past year to trade around 3 000 rand per ton as the world's wheat inventories shrunk due to threats of crop failure in the world's top wheat exporters.
 

Read more at Fin24