Energy and Natural Resources Market Diary (November 8, 2010)
This chart shows a sharp rise in the supertanker rate for oil shipments in the Persian Gulf. A report from Bloomberg this week said that the Persian Gulf, which is the world's largest crude-oil loading region, doesn't have enough of the supertankers to meet demand. Just a week ago there was a 20 percent surplus of these ships, but Bloomberg's survey this week showed a 1 percent shortage. This region feeds 20 percent of the world's crude oil demand, so a shortage of ships means that global demand for oil is picking up.
Strengths
- Crude oil futures closed at a 24-month high of $87.11 per barrel this week.
- Russia's oil production rose 4 percent to a new record 10.26 million barrels per day in October. This beats the high of 10.16 million barrels per day set in September.
- Turkey's gold imports rose to 9.07 tons in October, compared with 2.45 tons the previous month.
- A report from the Bombay Bullion Association says that Indian gold imports rose to 43 tons, an 18 percent increase from the same time last year.
Weaknesses
- Despite price gains for most commodities this week, natural gas remains below $4 per million British thermal units (Mmbtu) and is down 2.7 percent over the prior five days.
- The Baltic Dry Freight Index, typically an indicator of global commodity demand, declined by 7 percent to 2,510 over the past five days through Thursday.
Opportunities
- China's real consumption for copper may rise to 8.5 million tons by 2015. This would be a 25 percent rise from 2010 demand forecasts.
- China Steel Corp is in talks with five groups to buy stakes in iron ore and coal mines to reduce its reliance on raw material suppliers as it increases production. Australia is the main target for these investments, while Brazil and Africa are among prospective locations. The company aims to raise the portion of iron ore and coal it receives from its mines to 30 percent from 2 percent through investments over the next five years.
- China's gold market may double in the next decade as retail investment and jewelry demand gain, the World Gold Council's China General Manager said. Consumption may rise to 900 tons over the next ten years. China's jewelry and investment gold demand was 428 tons in 2009, according to the council.
Threats
- Canada blocked BHP Billiton's $40 billion hostile bid for Potash Corp. of Saskatchewan, saying a sale wouldn't provide a net benefit to the country. BHP has 30 days to appeal, at which point the government will make a final decision.
