Energy and Natural Resources Market Cheat Sheet (June 20, 2011)
Strengths
- The National Development and Reform Commission reported this week that China’s oil processing volume for the month of May rose 4.4 percent year-over-year to 34.9 million tons.
- Nickel consumption was 126,000 metric tons in April, exceeding refined metal supplies of 123,200 tons, according to an International Nickel Study Group report. That was the fourth monthly shortage in a row.
- Crude steel production from China, the world’s biggest steel producer, rose 7.8 percent to 60.25 million tons in May from a year earlier, according to data released this week by the Beijing-based National Bureau Statistics.
- U.S. industrial production rose by 0.1 percent month-over-month and 3.4 percent year-over-year, with manufacturing faring better, rising by 0.4 percent month-over-month and 3.7 percent year-over-year, with auto assemblies rising to 7.88 million annually.
- The International Lead and Zinc Study Group estimates that world refined zinc consumption increased by 3.8 percent year-over-year to 4.093 million tons, with China’s zinc consumption increasing by 7.3 percent year-over-year in the first four months of 2011.
Weaknesses
- Preliminary data released this week showed that unwrought copper and aluminum imports continued to decline, falling 36 percent and 21 percent year-over-year. Copper imports in May dropped by 3 percent month-over-month to 254,738 tons from 262,676 tons in April, according to China’s General Administration of Customs.
- Norwegian oil output in May was down due to planned maintenance and technical problems on several fields, with total liquids production at 1.828 million barrels per day and crude production at 1.541 million barrels per day. The total production was down 383 thousand barrels per day year-over-year, one of the largest year-over-year declines ever.
Opportunities
- On July 1, Russia may lower its export duty on most crude shipments by as much as 4.1 percent. This will be the first decrease in its export duty since October.
- Petro Vietnam, the national oil and gas group, intends to build 6 gigawatts of coal-fired power capacity, which is estimated to increase imports to 10 million tons in 2012 and 100 million tons by 2020 from further grid and power plant development.
- The International Energy Agency said that growth in oil demand should average about 1.2 million barrels per day every year for the next five years. It also reported that the 2011 “bull run” in oil was justified by changes in fundamentals.
Threats
- With heavy rainfall resulting in severe flooding at the middle and lower Yangtze River, a major rice producing region, food prices and inflation may remain elevated. China’s inflation rose to 5.5 percent in May from 5.3 percent a year earlier.
- Germany’s 2011 grain crop of all types is likely to fall 7.9 percent on the year as dry spring weather has damaged crops, according to the German Farm Cooperatives Association.
- The U.S. Senate voted 73-27 to approve an amendment to end the 45 cents per gallon subsidy the government gives refiners and to also abolish the 54 cents per gallon tariff on imported ethanol. Republican leaders agreed that removing the ethanol subsidies would not be considered a tax increase, so the amendment could be adopted by the House of Representatives.
