Energy and Natural Resources Market Radar (October 22, 2012)
Strengths
- Nymex natural gas futures edged up slightly this week to finish at an 11-month high price of approximately $3.63 per mmbtu on data released by the U.S. Department of Energy which showed gas going into storage continues to decline relative to last year.
- Chinese refineries processed a record amount of oil in September, countering data indicating the world’s second largest economy is slowing. Crude runs for September were 9.47 million barrels a day, passing January’s 9.38 million barrels a day and 6.2 percent higher than the 8.92 million barrels a day refined in August.
Weaknesses
- China’s coal imports fell 18.6 percent year-over-year to 18.63 million tonnes in September, the China Coal Transport and Distribution Association said.
- Bloomberg news reported that oil exporter Norway may miss production estimates. Jan Bygdevoll, the head of forecasting at the Norwegian Petroleum Directorate, released a statement yesterday that Norway may struggle to meet its output target this year due to a worker’s strike, technical problems, and delays to the start of new fields.
Opportunities
- Deep-water oil-drilling permits for the Gulf of Mexico have reached their highest level since 2007 as high crude prices revive exploration slowed by the 2010 BP spill. The U.S. Bureau of Safety and Environmental Enforcement, which regulates offshore drilling, has as of yesterday issued 89 permits this year for new wells in waters deeper than 500 feet (152 meters). The U.S. issued 76 permits for all of 2009, 32 in 2010, and 38 last year, according to the agency’s website. In 2007, 106 permits were issued.
- The head of Codelco, Chile’s large state-owned copper miner, is constructive on the copper market. “We expect to see healthier growth rates as we enter the new year,” Chief Executive Officer Thomas Keller said in an interview in London. China’s new leadership will “provide important stimulus for the economy and for the mining industry at large, and copper in particular,” according to Bloomberg news.
Threats
- In an interview with Bloomberg news, David Cohen, the U.S. Treasury’s undersecretary for terrorism and financial intelligence, stated that the U.S. stands ready to increase pressure on Iran to address concerns over the country’s nuclear plans. He stated that the country is able to intensify sanctions on Iran as it advances on its nuclear program. Iran, which once was the second largest OPEC producer, has cut output to 2.63 million barrels per day in September down from 2.85 million barrels in August. Exports in September decreased to 860,000 barrels a day, down from 2 million barrels a day in early 2012.
- Chinese demand for nickel, a key ingredient in stainless steel, is likely to lag growth in the country’s steel market considerably as producers turn increasingly to scrap for use in their products, the chief analyst at Beijing Antaike Information Development Co. Ltd. said Wednesday. Xu Aidong forecast apparent stainless steel production to reach 17 million metric tons by 2015, up from around 11 million tons this year. Nickel consumption, however, is only estimated to rise to almost 790,000 tons in 2015, from around 642,000 tons this year, she said. “The growth rate (for nickel usage) will be much slower than before…and lower than in the stainless steel market as more scrap is used,” she told a conference in Sydney.
