Energy and Natural Resources Market Cheat Sheet (March 7, 2011)
Strengths
- Oil is trading at a 29-month high after rising 3 percent during the week. The unrest that has swept Africa and the Middle East, ignited by the ouster of the Tunisian and Egyptian leaders, has spread to Oman and Libya, raising concern production may be further disrupted.
- The International Agency (IEA) this week reported that only 500,000 to 750,000 barrels of crude oil per day have been removed from the world market, which represents less than 1 percent of worldwide consumption. IEA stated that members have 145 days of emergency oil supplies in inventory.
- China’s National Development and Reform comission reported this week that Turkmenistan had committed to supply approximately 2.1 trillion cubic feet of gas annually to China, up from the previously agreed 1.4 trillion cubic feet, and a deal would be formally signed in the second half of 2011. Turkmenistan’s deputy prime minister in charge of energy said talks were still ongoing between the two.
- Platinum prices have traded above $1,800 an ounce so far this year.
- Corn futures prices climbed to $7.24 per bushel, a 30-month high.
Weaknesses
- Thermal coal prices at China’s Qinhuangdao port were 760-770 yuan per ton. Stockpiles at the port went up by 12 percent to 8.47 million tons.
- Iron ore shipments from India will probably fall 25 percent to 64 million tones in the year starting April 1 from a revised forecast of 85 million tones this year, said the Federation of Indian Mineral Industries.
Opportunities
- The global copper price will average $9,850 per ton in 2011, up 31 percent year-over-year, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
- Saudi Arabian Oil Minister Ali al-Naimi stated that his country and other OPEC members would offer extra crude supplies to offset lost Libyan production.
- U.S. Interior Secretary Salazar said he hopes to approve a significant number of permits for deep water drilling in the Gulf of Mexico and the government will comply with court order to decide on five permits.
- World food prices rose to a record in February and grain costs may continue to rise in the next several months, with only rice keeping the world from a repeat of the crisis three years ago, the United Nations said. An index of 55 food commodities rose 2.2 percent to 236 points from 230.7 in January, the eighth consecutive gain, the United Nation’s Food and Agriculture Organization said this week. Wheat rose as much as 58 percent on the Chicago Board of Trade in the past 12 months, corn gained 87 percent and rice added 6.5 percent. “I’ve never loved rice more than now,” said Abdolreza Abbassian, a senior economist at the FAO (Food and Agriculture Organization) in Rome.
Threats
- China will find it difficult to stabilize prices this year although the nation will not see vicious inflation because it has sufficient reserves of agricultural commodities and has had bumper grain harvests, the China Securities Journal reported, citing Yao Jingyuan, Chief economist of the National Bureau of Statistics.
- Rising oil prices driven by turmoil in North Africa and the Middle East may undermine eastern Europe’s economic recovery because industry in the former communist region is less energy efficient than in the west.
