Crude Oil Falls as Equities Tumble on U.S. Recession Concerns

(Bloomberg) -- Crude oil fell to a one-month low as stock markets tumbled in Asia and Europe on concern the U.S. will lead a global economic slowdown.

Oil, down more than 11 percent from its $100.09 a barrel record on Jan. 3, led a decline across commodities markets as gold and copper also fell. The MSCI World Index, a measure of global stock prices, slipped 1.6 percent today. Slower growth may cut demand for energy and metals.

``The market is concerned about a recession,'' Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said today in a telephone interview. ``You will see an effect on demand in the first half of the year.''

Crude oil for February delivery declined as much as $1.90, or 2.1 percent, to $88.67 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Dec. 12. It was at $88.85 at 1:46 p.m . London time. The contract expires tomorrow.

The more active March contract fell $1.49, or 1.7 percent, to $88.43 a barrel at 1:50 p.m. London time. There will be no settlement prices today as the exchange's floor trading session is closed for the Martin Luther King Day holiday.

``Oil prices have lost ground this morning as Asian stock markets plunge lower,'' said Robert Laughlin, a senior broker at MF Global Ltd. in London.

Brent crude for March settlement fell as much as $1.68, or 1.9 percent, to $87.55 a barrel on the ICE Futures Europe exchange. The contract traded at $87.96 in London at 1:51 p.m. local time.

OPEC Waits

OPEC, the producer of more than 40 percent of the world's oil, hasn't yet made a decision on whether to raise output at its Feb. 1 meeting, the United Arab Emirates oil minister told reporters in Abu Dhabi today.

``We are going to meet in February and we will have so many options available,'' Minister Mohammed al-Hamli said. ``We will explore all options. There is a disconnect between the fundamentals and the price.''

Prices advanced earlier after Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said yesterday there is no need for the Organization of Petroleum Exporting Countries to raise output when it meets Feb. 1.

OPEC is ``reluctant to open its taps too wide, especially with a weakening U.S. economic outlook,'' the London-based Centre for Global Energy Studies said in a monthly report today. ``Ministers might veer in the opposite direction and cut production.''

Mexico, the third-largest supplier of crude to the U.S. in 2006, stopped shipments yesterday morning after strong winds and heavy rains shut terminals.

 

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Vale in Xstrata Talks, Says No `Concrete Results'

(Bloomberg) -- Cia. Vale do Rio Doce, the world's largest iron-ore producer, confirmed it's in talks with Xstrata Plc.

No ``concrete results'' have been reached, Vale said today in a statement. The Rio de Janeiro-based company said it's also studying other possible acquisitions. Vale is prepared to bid as much as $90 billion in cash and stock to buy Zug, Switzerland- based Xstrata, Valor Economico newspaper reported today.

Chief Executive Officer Roger Agnelli, who wants Vale to overtake BHP as the world's biggest mining company, is already spending $59 billion over five years to expand in Canada, Mozambique, Australia and China. Rio Tinto Group rejected a takeover bid by BHP last month that threatens to match Vale's iron-ore output.

BHP's three-for-one share offer for Rio added ``momentum'' to mining mergers, and Xstrata is ``perfectly positioned'' to benefit, Xstrata Chief Executive Officer Mick Davis said Dec. 6. Davis has developed the company's copper and nickel mining capacity through acquisitions including the $16.2 billion purchase of Canada's Falconbridge Ltd. in 2006.

Vale is also expanding into nickel, coal, copper and fertilizers. The company bought Canadian nickel producer Inco Ltd. for $17.4 billion in 2006 to become the second-largest producer of the stainless-steel ingredient. Vale has operations adjacent to Xstrata in Canada's Sudbury basin and on the French- controlled Pacific island of New Caledonia.

 

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Fujitsu reorganizes semiconductor operations

(Reuters) - Japanese electronics firm Fujitsu Ltd (6702.T: Quote, Profile, Research) said on Monday it would put its struggling semiconductor operations into a new unit, in a move that could smooth the way for partnerships with other chip makers.

Fujitsu's business building system chips, used in products ranging from digital cameras to supercomputers, has suffered from falling prices and the high cost of keeping up with the latest technology.

The company also said it would transfer development and test production of state-of-the art system chips to its Mie plant in central Japan from a technology centre in Tokyo, at a cost of some 10 billion yen ($94 million).

 

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Northern Rock bids deadline set

(Reuters) - Britain set a two-week deadline for a private-sector rescue of Northern Rock, as it confirmed plans to convert its almost 25 billions pounds ($49 billion) of loans to the stricken bank into bonds in a bid to smooth a deal.

The financing package will tie the government to Northern Rock, Britain's biggest casualty of the global credit crunch, for years to come.

But it also increases the prospect of a private-sector takeover, which would avoid a politically damaging nationalization for Prime Minister Gordon Brown, who has seen his popularity slump in opinion polls in recent weeks.

Details of the plan sent Northern Rock's battered shares soaring on Monday. By 1105 GMT they were up 40 percent at 90.5 pence, valuing the bank at 380 million pounds ($746 million), still down over 90 percent since the end of May.

The financing package will be available to the three front-runners for a private-sector deal -- Richard Branson's Virgin Group, a rival consortium led by investment firm Olivant, and an in-house solution under new Northern Rock management.

 

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BHP Billiton reportedly taps more banks for Rio bid

(Reuters) - BHP Billiton(BHP.AX: Quote, Profile, Research) has brought in more banks to help it find the $70 billion it needs to fund its planned takeover of Rio Tinto (RIO.AX: Quote, Profile, Research), Britain's Sunday Times newspaper reported.

Citing no sources, the paper said BHP has tapped Barclays (BARC.L: Quote, Profile , Research), UBS (UBSN.VX: Quote, Profile, Research), Goldman Sachs (GS.N: Quote, Profile, Research), HSBC (HSBA.L: Quote, Profile, Research), BNP Paribas (BNPP.PA: Quote, Profile, Research) and Santander (SAN.MC: Quote, Profile, Research) to work alongside original banker Citigroup on the funding.

Merrill Lynch, originally the other provider of finance alongside Citi, will remain as broker to BHP but will not provide any money, the paper said.

The new financing arrangements, which come as a global credit crunch makes raising money more difficult, will give BHP the flexibility to execute a $30 billion share buyback proposed as part of the deal, or add cash to the current around $130 billion all-share offer, the paper said.

BHP, the world's biggest miner, must make a formal offer by February 6 or leave Rio alone for at least six months under a deadline imposed by the UK Takeover Panel.

 

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