Energy and Natural Resources Market Cheat Sheet (January 3, 2011)
Strengths
- The International Organization of Motor Vehicle Manufacturers (OICA) has reported that global auto production has increased a massive 32.5 percent year-over-year in the first nine months of 2010. Oil is set to close the year up more than 12 percent and average nearly $80 a barrel--the second highest on record -- driven by a resurgence in global demand, an unusually cold winter and falling inventories.
- U.S. crude oil imports in October hit their lowest level for the month in 14 years, the federal Energy Information Administration said on Thursday.
- The average iron ore spot price over the October-December period equates to $148.4/t on a FOB Australia basis. This represents a 17.5 percent rise over the July-September average.
Weaknesses
- Peabody Energy confirmed yesterday that it has declared force majeure on shipments from its mines in Queensland, Australia due to heavy seasonal rains.
- The People's Bank of China announced over the weekend that it is raising its benchmark interest rate by 25 basis points.
Opportunities
- According to industry analysts, IPOs for mining and basic materials companies could hit a record in 2011 as China and India drive the demand for metals.
- The global economy can withstand an oil price of $100 a barrel, Kuwait's oil minister said last week, as other exporters indicated OPEC may decide against increasing output through 2011 as the market was well supplied.
Analysts have said oil producing countries are likely to raise output after crude rallied more than 30 percent from a low in May because they fear prices could damage economic growth in fuel-importing countries.
- China said on Tuesday it will cut its export quotas for rare earth minerals by more than 11 percent in the first half of 2011, further shrinking supplies of metals needed to make a range of high-tech products. China produces about 97 percent of rare earth minerals, used worldwide in high-technology, clean energy and other products that exploit their special properties for magnetism, luminescence and strength.
- Natural gas and crude oil are poised to see the largest increase in exposure in 2011 from investors passively tracking the DJ-UBS and S&P GSCI commodity indexes, investment bank JPMorgan said. Analysts expect the annual rebalancing of the two indexes, scheduled between the fifth and ninth business days of January, to bring billions of new investment dollars into the sector.
Threats
In a challenge to leftist President Evo Morales, bus and truck drivers and powerful citizen groups took to the streets of several Bolivian cities on Thursday to protest a fuel price increase.
