Energy and Natural Resources Market Radar (January 6, 2014)
Strengths
- Global oil demand is projected to reach new record highs in 2013 at 91.2 million barrels per day (91.2mb/d). Notably, this is 5.0mb/d higher than before the financial crisis in 2008.
- According to the statistics of China’s National Development and Reform Committee (NDRC), China’s crude steel production from January to November reached 712.86 million metric tonnes, up 7.8 percent year-over-year. Despite weaker pricing, the steel sector's profit from January to October reached Rmb 157 billion, up 39.9 percent from the prior year.
- According to Macquarie Research, the final Manufacturing purchasing managers’ index numbers (PMIs) of 2013, released this week, suggest all key manufacturing regions continued to expand in December, but the momentum remains more with the developed economies than with emerging markets.
Weaknesses
- The price of WTI crude oil fell 6 percent this week to $94 a barrel, the biggest weekly drop since June of 2012 following a disappointing weekly inventory report.
- Despite cold temperatures across much of the northeast United States, the price of natural gas fell 2 percent this week.
- The Pipeline and Hazardous Materials Safety Administration (PHMSA) is issuing a safety alert to notify the general public, emergency responders, and shippers and carriers, that recent derailments and resulting fires indicate that the type of crude oil being transported from the Bakken region may be more flammable than traditional heavy crude oil.
Opportunities
- China will impose tiered power pricing on all aluminium smelters starting in January to help eliminate inefficient plants and tackle severe overcapacity in the sector, according to the NDRC. Power prices will remain unchanged for smelters that use less than 13,700 kilowatt per tonne (13,700 kW/t) of aluminium produced, while those that use between 13,700 and 13,800 kW/t will be charged an additional RMB 0.02/kW. Smelters that consume more than 13,800 kW/t will be charged an additional RMB 0.08/kW.
- The China Iron and Steel Association said total crude steel output in China is likely to increase to 800 million metric tonnes in 2014, implying growth of 2 to 3 percent from last year.
- Construction directly associated with the 2020 Summer Olympic Games in Tokyo will generate an estimated 2 to 3 million metric tonnes of new steel demand after the 2016 fiscal year, the Japan Iron & Steel Federation (JISF) has calculated.
Threat
- Following a number of railway explosions in the Bakken oil field of North Dakota, the region’s energy production, as well as the local economy could be dampened as new safety rules are proposed and implemented.
