Energy and Natural Resources Market Cheat Sheet (February 14, 2011)

Energy and Natural Resources Market Cheat Sheet (February 14, 2o11)

Strengths

• The International Energy Agency raised its oil demand forecast for 2011 by 140,000 barrels per day to 89.3 million barrels per day. This was the fifth-straight month the agency raised forecasts, saying inventories in developed countries hit their lowest levels in two years.
• German crude steel production rose 4.4 percent to 3.7 million tonnes in January, the German Steel Federation said.
• Corn led the entire complex higher this week after the USDA slashed U.S. ending stocks of grains by far more than expected driving front month corn future for March above $7 per bushel for the first time in more than 30 months. U.S. corn stocks to use are now at 5 percent, the lowest since 1936-1937. World corn ending stocks were also cut from 127 million tonnes last month to 122.5 million tonnes, in itself a 37-year low.
• Shanghai steel rebar futures rose to a record for the fourth-straight session on Thursday, buoyed by the rising cost of raw materials and expectations of a pickup in demand.
• U.S. exports of ethanol have tripled in the past year, to a projected 350 million gallons in 2010 from 113 million gallons in 2009, with Canada, northeast Europe and Brazil being the main destinations, according to the Renewable Fuels Association, a U.S. trade group.

Weaknesses

• Crude oil fell this week as China reserve ratio requirements rose for the third time in recent months.

Opportunities

• Encana Corp. will sell half of a prolific Canadian shale gas project to PetroChina for $5.4 billion, marking the largest Chinese investment yet in a foreign natural gas asset.
• Power consumption in China, the world’s second-largest electricity user, will likely grow 12 percent this year, according to the China Electricity Council.
• The Guardian reported that confidential cables released via WikiLeaks reveal that the U.S. is concerned that Saudi Arabia may not be able to pump enough oil to keep a lid on prices.
• OAO GMK Norilsk Nickel is looking for potential PGM investments in South Africa and projects in Indonesia as the company seeks to diversify outside of its home country. “We’re quite optimistic about business development in South Africa,” Roman Panov, head of international operations, said in an interview. Norilsk is also seeking opportunities in Indonesia to diversify geographically, he said.

Threats

• Russian media reported that Prime Minister Vladimir Putin declared at a conference that the government may strip Gazprom of the monopoly right to run the gas transportation network if it does not work effectively enough. “Gazprom places its own interests above the interests of the gas industry in general, which is a brake on the economy,” Putin said.