Energy and Natural Resources Market Radar (December 3, 2012)
Strengths
- The latest Energy Information Administration (EIA) report affirmed the rapid rate of U.S. oil production growth. U.S. crude oil production averaged 6.8 million barrels per day, up a whopping 954,000 per day year-over-year as of the week ending November 23. This rapid growth has been driven largely by shale oil production with North Dakota's Bakken field and the Eagle Ford play in Texas leading the trend. Expectations are that U.S. oil production growth will continue to rise robustly next year with the IEA projecting year-over-year growth of nearly 600,000 barrels per day.
- China will add about 1 million metric tons of manufacturing capacity for semi-finished copper products in 2012, even though a slowdown in the world's No.2 economy means less metal is demanded and capacity is idled, an analyst at state-backed research firm Antaike said on Thursday.
- Chile produced 476,202 metric tons of copper in October, a 1.4 percent rise from a year earlier on improved mineral ore grades and increased production at some of the nation's new mines, the government said on Thursday. Chile, the world's No. 1 copper producer, is struggling with dwindling ore grades in many of its aging deposits, although new mines have helped increase output this year.
Weaknesses
- The price of natural gas pulled back from its 52-week high this week as the Energy Department reported an unexpected stockpile gain as mild weather cut demand.
- The price of gold is on track for its biggest weekly drop since the start of the month, with uncertainty about crucial U.S. talks to avert a fiscal crisis continuing to hit sentiment.
- The Chinese aluminum consumption growth rate is at the lowest level in more than 10 years. Aluminum demand gained 5.8 percent from a year ago during the January to September 2012 period to 14.4 million metric tons (vs. 10.8 percent y/y in 2011), according to vice chairman of the China Nonferrous Metals Industry Association.
Opportunities
- Norilsk Nickel, the world's largest producer of palladium and nickel, expects the palladium market to remain in a deficit in the next several years largely due to a near depletion of Russian state supplies. The lower Russian stockpile will be a key driver to palladium's deficit as producers cannot dramatically boost output any time soon, said Bob Lapple, vice president of Russia's Norilsk.
- Macquarie highlighted a report by The China Metallurgical Industry Planning and Research Institute, a government research bureau, which announced its steel market estimates for 2012 and 2013. Crude steel output of 746 million tons next year is expected, up 4.2 percent year-over-year.
- Codelco, the world’s largest copper producer, said there has been “sound and solid” interest from Chinese customers amid signs the country’s growth outlook is improving. “There’s a lot of optimism regarding copper demand going forward,” Chief Executive Officer Thomas Keller said today in an interview in Shanghai.
Threats
- The OECD has lowered its forecast of global economic growth to 3.4 percent in 2013, from 4.2 percent previously published in April. It also expects the recession in the eurozone to continue next year, with a forecast for GDP to fall by 0.1 percent.
- The Wall Street Journal highlighted the headwinds the global steel industry faces as there is still too much capacity in the industry. Steel mills globally have a capacity of 1.8 billion tons but demand is only about 1.5 billion tons. However, instead of cutting back capacity, the steel industry is expanding.
