Energy and Natural Resources Market Diary
Strengths
- OPEC is increasing oil drilling at the fastest rate in 2 1/2 years. The 12-nation group boosted its number of oil and gas rigs by 8.4 percent in January and February, the biggest two-month gain since June 2007.
- Nippon Steel Corp., Sumitomo Metal Industries Ltd. and other Japanese steelmakers agreed to pay $200 a ton for high-grade coking coal from miners Rio Tinto Plc and Teck Resources in the quarter ending in June, Nikkei English News reported. The price is about 55 percent higher than the companies paid for the coal last fiscal year, Nikkei said.
- The spot price for Chinese iron ore imports rose 1.5 percent to $136.30 a dry metric ton for so-called 62 percent fines, Steel Index said this week. The price is the highest in at least 14 months, according to data compiled by Bloomberg.
- Global oil demand was revised upward by 70,000 barrels per day in the latest monthly report by the International Energy Administration (IEA). The latest forecast pegs 2010 global demand at 86.6 million barrels per day (MMb/d), up 1.6 MMb/d or 1.8 percent year-on-year in 2010, compared with a contraction of 1.2 MMb/d (-1.4 percent) in 2009.
Weaknesses
- Natural gas futures dropped to the lowest price in more than five months following a smaller-than-forecast stockpile decline reported the U.S. Department of Energy.
Opportunities
- Coal miner Massey Energy announced it would acquire privately-held Cumberland Resources for approximately $1 billion.
- Bloomberg news reported that India, with $254 billion of foreign-exchange reserves, may create a sovereign wealth fund to help state companies compete for overseas energy assets with China, per the oil ministry.
- Coal miner Consol Energy announced a $3.5 billion acquisition of natural gas reserves and prospective acreage in West Virginia and Pennsylvania from utility company Dominion Resources. Consol will be targeting the gas-bearing Marcellus shale formation.
- Russia aims to build 26 nuclear power reactors in “the very near term” to help boost the share of nuclear energy to as much as 30 percent of the country’s needs from 16 percent now, Prime Minister Vladimir Putin said this week.
- Purchases of secondhand ships to haul iron ore may increase because shipowners expect rising demand for the steelmaking material, the biggest dry-bulk commodity hauled at sea, ICAP Shipping International Ltd. said. Secondhand prices for the ships, known as capesizes, have jumped 10 percent this year to the highest since November 2008.
Threats
- Dow Jones reported that the Chilean government is studying raising the royalty on copper mining companies to finance post-quake reconstruction, per La Tercera newspaper. The government has said it can't rule out raising taxes, mostly likely corporate taxes, to contribute to reconstruction efforts.
