Energy and Natural Resources Market Radar (March 17, 2014)

March 16, 2014

2 minute read

The International Energy Agency (IEA) boosted its demand forecast for global crude oil consumption by 95,000 barrels a day due to improving economic growth. The IEA now forecasts global consumption to increase by 1.4 million barrels per day, or 1.5 percent, to a record 92.7 million barrels per day.
February saw the first monthly inflows into U.S. and European commodity exchange traded products (ETFs) in over 12 months.
The best performing commodity this year has been coffee, where prices are up over 80 percent in response to extreme droughts across Brazil. Additionally, uncertainty over grain shipments from Ukraine has also supported prices of corn and wheat.
Despite concerns over China’s economy, the price of nickel on the London Metals Exchange gained nearly 3 percent this week on further concerns over the export ban in Indonesia.

Chinese commodity imports showed a slow return from Chinese New Year. February imports saw a decline in copper, crude oil, petroleum product and iron ore. Steel product, net exports also decreased somewhat during the month, but remained up year-over-year. Soybean imports remained strong.
The debt default by a Shanghai solar company, followed by weaker-than-expected Chinese trade data, sparked a sharp decline in iron ore and copper prices. The declines are also due to fundamental weakness of physical markets for both commodities due to increasing supply and weakening demand from China.

Recent weakness in WTI crude oil could be temporary as the turnaround season for refineries comes to an end. This is especially true given that the test sale of Strategic Petroleum Reserves contributed to the selloff in WTI this week, pushing the brent-WTI differential past $10.

The U.S. Geological Survey estimates that 3.5 billion tonnes of undiscovered copper may exist globally, enough to satisfy current world demand for more than 150 years. This assessment also notes that 2.1 billion tonnes of copper resources have been discovered.
Utilities cash flow and dividend yield is supporting performance. European utilities have outperformed the market by 4.2 percent year-to-date supported by stable earnings forecasts, declining rates and a high appetite for dividend yield.

Indonesia’s next president is unlikely to make major changes to the tough mineral export rules, after major political parties backed an export ban. This will disappoint miners hoping the tough new rules were temporary measures imposed by a lame duck administration.
Libya’s central government suffered another setback this week as Prime Minister Ali Zeidan was forced out office. This could lead to further unrest in the country and disrupt the global oil market in 2014.