Energy and Natural Resources Market Radar (December 4, 2011)
This chart from Deutsche Bank shows how the projections made by the International Energy Agency (IEA) have progressed since July 2007. In 2007, the IEA estimated that oil demand over 2008 would range between 86 to 88 millions of barrels a day. Except for 2009, the IEA’s forecasts increased. The 2012 projection is currently much higher, with the IEA forecasting oil demand to be around 90 to 91millions of barrels per day.
Strengths
- Crude oil gained 4 percent this week to close above $100 a barrel in response to improving U.S. economic data, and a coordinated effort by global central banks to provide additional liquidity to Europe.
- Palladium is poised for a 12 percent advance this week, the most since December 2010, on concern that stockpiles are dwindling in Russia, the biggest supplier.
- Following months of contraction, steel market trends reversed in November with base prices increasing for all products.
- Iron ore bounced back strongly after more than a week of losses as falling prices encouraged some steel mills in China to return to the market. Iron ore with 62 percent iron content rose more than 2 percent to $133.60 a ton on Thursday.
- OPEC November crude production is up 390kb/d to a total of 30.4 mmb/d, the highest level in three years, says Bloomberg.
Weaknesses
- China’s daily crude steel output fell to 1.664 million metric tons in the first 10 days of November, the lowest level in a year.
- According to the India Coal Market Watch, the country’s coal production decreased by 9 percent to 39.59 mn tonnes in Oct 2011as compared to 43.51 mn tonnes in 2010.
- OECD demand is declining. However, virtually all of the world’s oil demand growth is in non-OECD nations, which has been resilient despite global economic concerns.
Opportunities
- Copper stockpiles monitored by the Shanghai Futures Exchange declined to the lowest level since July 2009, bourse data showed today.
- Vale plans to invest $21.4 billion in 2012 including investment on sustaining capacity. Vale made much of the difficulty it has in spending all the money it would like to and has had to significantly scale back its spend due to ongoing delays in getting project approvals. Its original capex plan for 2011 was $24 billion but in the first three quarters of 2011 it only managed to spend $11.3 billion, implying a major shortfall this year, probably by $6 to $8 billion.
- Iraq's semi-autonomous Kurdish region will go forward with its exploration deal with U.S. oil major Exxon Mobil despite objections by the central government in Baghdad, the Kurdish president said on Wednesday.
- The OPEC Secretariat, using a GDP forecast of 3.6 percent in 2012 believes oil growth will be 1.2mmb/d.
Threats
- Oil price volatility could escalate as tensions between the West and Iran have ratcheted up over Tehran's nuclear program, and with the suggestion that Europe could join the United States in banning the purchase of Iranian crude oil.
