Energy and Natural Resources Market Cheat Sheet (May 9, 2011)
Strengths
- Colombia’s National Hydrocarbons Agency (ANH) said this week that oil production rose to 903,000 barrels per day on average in April, a 16 percent increase year-over-year and 2 percent higher relative to March this year.
- The Coffee Board of India reported this week that exports from India, Asia’s third-biggest producer, climbed 47 percent in the October 1 through May 2 period year-over-year.
- Crude output in Russia, the world’s largest oil producer, rose to 10.24 million barrels per day in April, up 1.6 percent year-over-year.
- The German engineering federation (VDMA) reported this week that plant and machinery orders in the country grew 18 percent year-over-year in March and 32 percent for the first quarter of the year.
- According to the International Monetary Fund (IMF) and Mexico’s central bank, Mexico made the third biggest one-off purchase of gold by any country over the past decade, which took Mexico’s reserves to 100.15 tons by the end of March from just 6.84 tons at the end of January.
Weaknesses
- This week a USDA crop progress report highlighted the continued lag in planting progress hampered by unfavorable weather. U.S. corn planting at 13 percent is behind the 5-year average of 40 percent; U.S. spring wheat plantings at 10 percent are behind the 5-year average of 43 percent; and U.S. cotton plantings at 18 percent are lagging similarly behind the 5-year average of 24 percent.
- Sugar fell to a seven-month low on forecasts for record production in Thailand, the world’s second-largest exporter. Output will reach 9.47 million metric tons, after rainfall increased yields, boasting exports to an all-time high, reported by the Cane and Sugar Board last week.
Opportunities
- Adani Enterprises is buying Abbot Point coal terminal in Queensland, Australia for A$1.85 billion. Abbot Point is located near the Galilee coal basin, where Adani bought Line’s coal tenements a few months ago.
- According to the Coal Transport and Distribution Association, China’s coal prices, which reached its highest levels in two years, at $124-$126 per tons, will continue to rise ahead of the peak summer season. The coal price rise is due to reducing coal stockpiles, which decreased 13 percent week-over-week to 4.89 million tons this week.
Threats
- India’s central bank raised its key interest rates by a half of a percentage point this week, its ninth hike in over a year, to deal with the increasing inflation. The repo rate will increase from 6.75 percent to 7.25 percent and the reverse repo rate will be 6.25 percent.
- China’s steelmakers are diversifying into sectors unrelated to steel in an effort to stop their profit margins from decreasing further. Last year, the average profit margin for the country’s steelmakers was 2.91 percent, far below that of the industrial sector, which was 6 percent. The reasons stated for the low profits were overcapacity and the increase in iron ore prices and steel production costs.
