Energy and Natural Resources Market Radar (February 13, 2012)
Strengths
- Total SA agreed to sell its ODC and OAM pipeline stakes along with associated assets to Sinochem for $1 billion. Bloomberg noted that Chinese companies have purchased $21 billion of Latin American assets since 2010.
- Tightening corn marketing. The USDA lowered its 2011/2012 estimate of corn ending stocks by 45 million bushels to 801 million bushels. The forecasted stocks-to-use ratio of 6.3 percent, down from 6.7 percent last month, remains well below the previous five-year average of 12 percent.
- The U.S. Energy Information Administration (EIA) reported that it expects West Texas Intermediate to average about $100 per barrel in 2012, up slightly from its prior monthly forecast.
- According to China Iron and Steel Association, the country’s crude steel production increased to an average of 1.673 million metric tons in the last ten days of January, from 1.669 million tons during the second ten days of January.
Weaknesses
- According to Barclay’s, global copper mine supply experienced its first contraction in mine output last year since 2002, and the largest annual decline in tonnage terms on record. The industry has been plagued by a combination of lower ore grades, technical issues, slower-than-expected ramp-ups and labor disputes. Global mine production is anticipated to have fallen 200,000 tons year-over-year to 15.9 million tons in 2011.
- According to Rusal, the global copper demand is reducing by about 400,000 metric tons a year through substitution.
Opportunities
- Corn, soybean and wheat prices remain well above historical averages. USDA forecasts farm cash net income to increase 19 percent year-over-year in 2011, which should be supportive for farm equipment demand this year.
- China’s net crude oil imports are expected to reach 266 million metric tons in 2012, the China National Petroleum Corp. said.
- China National Petroleum Corp. also said that it is planning to increase its natural gas output to 79.3 billion to 82.1 billion cubic meters in 2012.
Threats
- Reuters reports that Iran’s food imports are being hit by U.S. financial sanctions, which could escalate tensions in the oil-exporting region.
- The International Energy Agency (IEA) said that it might reduce its latest world oil demand forecast for 2012 due to a weaker outlook for the world economy.
