Energy and Natural Resources Market Cheat Sheet (April 11, 2011)
Strengths
- Crude oil climbed to a two-year high on deepening worries in the Middle East and Africa (MENA) and the recovering U.S. labor market, with Brent crude oil rising above $120 per barrel. Delays in Nigerian presidential elections were also seen as supportive for the oil complex.
- India Coal Market Watch, citing estimates based on port data, reported that Indian imports of power station coal rose by 33 percent to 65.7 million tons in the year ending March 2011, up from 49.4 million tons a year earlier.
- Base metals continued to push upwards this week, supported by further weakness in the U.S. dollar, with nickel leading the way, up 1.4 percent to just shy of $27,000 per ton.
- According to the customs statistics released by the Ministry of Finance, Japan’s steel exports in February this year amounted to 3.72 million tons, rising by 8.6 percent year-over-year and 6 percent compared to January.
Weaknesses
- Anglo American said it will struggle to meet its 2011 production target at the Collahuasi copper mine in Chile after heavy rains reduced output in January and February of this year.
- Drilling activity in the U.K. North Sea slumped by 25 percent in the first quarter in a further blow to the languishing sector, according to a new report. The drop, revealed in a report from Deloitte comes as several players said they were putting field investment plans on hold in the wake of a massively unpopular budget tax increase.
- The chairman of Libya’s National Oil Corporation said the nation’s oil output had fallen to only 250-300 thousand from about 1.6 million before the rebellion.
Opportunities
- Global hunger for coal and natural gas is outpacing demand for renewable energy, the International Energy Agency said in a report asking governments to ramp up incentives for clean power and to cut them for fossil fuels. Coal has met 47 percent of new worldwide electricity demand in the past decade and gas accounted for 33 percent, the Paris-based agency said in a report. That compares with a 6.5 percent share for plants that burn waste or use renewable sources such as the wind and sun.
- Xstrata said rising costs at planned projects are hampering supply of copper as demand grows. Capital costs for the next generation of mine projects are almost double that of mines already in production.
Threats
- International Energy Agency (IEA) Executive Director said that the increased public fear about nuclear energy, which could affect its development, could make cutting carbon emissions more expensive. The agency earlier projected the world will add 360 gigawatts of nuclear generating capacity to the existing 390 gigawatts by 2035.
- Chinese customers stopped new orders of scrap steel and blocked existing cargoes from Japan due to radiation concerns.
- The Globe and Mail reported that a draft plan announced this week to protect some 20 percent of the province's oil sands zone would affect properties held by 24 companies, including Nexen, Suncor, Canadian Natural Resources, and Imperial Oil. Conventional oil and gas companies will be able to keep their existing leases, but they will operate under greater scrutiny. A government minister says compensation may be lined up for the companies. The goal for the new law is to be finalized within 90 days.
- Oil prices could leap to $200-300 per barrel if Saudi Arabia is hit by serious unrest, former Saudi oil Minister Yamani said.
- India's Supreme Court overturned Karnataka's state ban on iron ore exports, with export to recommence by April 20. The ban was in place for approximately nine months and largely centered on illegal mining and the preservation of resources for domestic use.
