Energy and Natural Resources Market Highlights (3/15/2010)

Energy and Natural Resources Market

The source of this graph is IHS Herold. The securities identified in the graph were selected for inclusion by IHS Herold and may or may not be held by portfolios managed by U.S. Global Investors, Inc., whose holdings may change daily.

Strengths

• Chinese crude oil import surged in the first two months of the year up 45 percent year over year. The apparent demand growth is up 25 percent over the same period.
• Chinese floor space under construction rose 29.3 percent year over year in January and February (combined).
• German crude steel production increased 34 percent year over year to 3.4 million metric tons in February 2010, according to WV Stahl. This marks an acceleration on the rate of increase recorded in January, when crude steel production rose by 28 percent year over year.
• Crude steel production in China, the largest maker, rose 22.5 percent to 50.36 million metric tons, according to data from the National Bureau of Statistics.
• Indian coal imports climbed 20 percent year over year in February. It received 6.1 million metric tons of the fuel from suppliers in Australia, Indonesia and South Africa. India plans to almost double electricity generation capacity by 2012 and by then the shortage of coal is expected to exceed 200 million metric tons.
• In January 2010, U.S. coal exports were up 17.5 percent year over year to 5.8 million tons, driven by a 62.9 percent year-over-year increase in metallurgical coal exports, the highest level since September 2008.
• Copper imports by China, the world’s largest consumer, increased 10 percent in February from the previous month on sustained demand.

• Italian oil and gas group Eni SpA cut its production growth target on Friday and said investors would have to wait until 2011 to see any growth in output or dividends. Eni, the world's seventh-biggest listed oil company, said production is expected to grow more than 2.5 percent per year on average through 2013—this estimate was down from 3.5 percent per year in its previous plan.

Opportunities

• ExxonMobil, the largest U.S. oil company by market value, said at its annual analyst meeting in New York that it expects to boost its capital spending 3.3 percent to $28 billion in 2010 and that it would spend $25 to $30 billion per year through 2014. The bulk of the company's capital budget would go toward developing dozens of major projects around the world.
• Quadra Mining Ltd. gained 10 percent this week after State Grid Corp. of China agreed to buy 9.9 percent of the company for $148 million to secure a share of the copper from Quadra’s Chilean projects. Beijing-based State Grid is the larger of China’s two grid operators.
• BP on Thursday confirmed it would enter the deep waters off the coast of Brazil, one of the world’s most promising areas for oil exploration, with a $7 billion deal to buy international oil and gas assets from Devon Energy.
• The active land-drilling rig count is on the rise, but North Dakota has been one of the fastest growing in the Lower 48 since the bottom last year, more than doubling its rig count since mid-2009. Driving the North Dakota rig count higher has been a sharp rebound in activity in the Bakken Shale, considered one of the largest oil formations in the U.S.

Threats

• China’s inflation reached a 16-month high, industrial output climbed and new loans exceeded forecasts, adding to the case for the government to pare back stimulus measures. Consumer prices rose 2.7 percent in February from a year earlier, the National Bureau of Statistics said, compared with the 2.5 percent median estimate of 29 economists surveyed by Bloomberg News. Seasonal factors stemming from a weeklong holiday may have boosted prices. Production rose 20.7 percent in the first two months of 2010, the most in more than five years.
• A glut of unconventional natural gas supplies from U.S. shale deposits has fundamentally recast the long-term prospects for liquefied natural gas imports that were once considered the linchpin of the nation's energy security, industry executives said at the Ceraweek energy conference in Houston.
• China is idling up to 40 percent of its wind-turbine factories following a surge in investment driven by the government’s renewable energy goals, the vice president of Shanghai Electric Group Corp. said this week.