Energy and Natural Resources Market Cheat Sheet (February 22, 2011)

Energy and Natural Resources Market Cheat Sheet (February 22, 2011)

Strengths

• According to analysts at Macquarie Capital, 2010 saw the fastest liquefied natural gas (LNG) demand growth on record, up over 30 million tonnes or almost 18 percent over the past year (to approximately 215 million tonnes), reflecting the considerable capacity additions brought on during 2010.
• Copper broke a new all-time high at $10,190 this week.
• Prices of precious metals edged higher across the complex for a second session this week, as equity markets eased and the dollar stabilized against the euro.
• Palladium prices reached $825.10 this week, the highest since March 20, 2001.
• The Baltic Dry Index has now moved up for the eighth consecutive session, in line with the rise in freight rates after the Chinese holidays.

Weaknesses

• Chinese banks extended 1.04 trillion Yuan ($157.8 billion) of new loans in January. The figure was 318.2 billion Yuan lower than a year ago, according to the People’s Bank of China (PBOC). This pullback in economic growth is due to inflation concerns.
• The world’s largest gold-backed ETF, SPDR Gold Trust said its holdings fell to 1,224 tonnes by February 15, a nine-month low.

Opportunities

• China’s steel output may rise 5 percent to 660 million tonnes this year, the Ministry of Industry and Information Technology said.
• Australian floods seem to be serving U.S. coal miners. According to the Energy Department in Washington, U.S. coal exports are poised to rise 8.8 percent this year to about 86.5 million tons, the highest since 1996.
• Silver’s use in the solar power industry has received much press this week. Silver is used in photovoltaic (PV) cells in solar panels, and as this industry grows rapidly, so has its demand for silver. This sector’s requirement for the metal has now become larger than the silverware market.
• Chinese oil major PetroChina Co. Ltd. plans to boost annual coal bed methane (CBM) gas output 12-fold to 4 billion cubic metres (bcm) by 2015 from 0.3 bcm in 2010, a company official said.
• Rio Tinto Group forecasts high copper prices will continue amid rising demand and before output from new projects eases a supply shortfall. Tom Albanese, CEO of Rio Tinto, said in Australian Broadcasting Corp.’s “Inside Business” television program that he expects to see a continued period of strong copper pricing, largely because many of the large mines, including Rio, see declining grades, deepening pits.

Threats

• China’s inflation exceeded the government’s 2011 target for a fourth month as prices excluding food rose the most in at least six years. Consumer prices rose 4.9 percent last month from a year earlier after a 4.6 percent gain in December, the statistics bureau said. Producer-price inflation quickened to 6.6 percent from 5.9 percent. The acceleration reflects higher rents, a 53 percent surge in money supply in the past two years and increasing domestic demand in China.