Energy and Natural Resources Market Radar (April 22, 2013)
Strengths
- The price of natural gas climbed 4 percent this week, to another 52-week high of $4.40 per Mmbtu, on a less-than-expected storage injection following cold weather last week.
- Japan's liquid natural gas (LNG) imports rose 4.4 percent year-over-year to 86.87 million metric tons in the fiscal year ended March, the highest level since the government started collecting data in 1981. By value, LNG imports rose 14.9 percent year-over-year to a record 6.2 trillion yen ($63 billion) which in turn helped to push the country's trade deficit to an all-time high of 8.2 trillion yen.
Weaknesses
- Copper reached the lowest level in almost 18 months in London, heading for a bear market, amid concern that slowing growth from China to the U.S. will curb demand for industrial metals. Copper for delivery in three months slumped as much as 4 percent to $6,800 a metric ton on the London Metal Exchange, the lowest since October 20, 2011, and the first time since that month that prices fell below $7,000. A close at the current level would be 20 percent below the February 2012 peak, deemed a bear market by many investors.
- Brent oil has fallen below $100 for the first time since last July and WTI crude has hit its lowest point in four months due to speculation that that U.S. supplies rose.
Opportunities
- Brent oil prices have been weak recently but analysts at Deutsche Bank believe that physical oil demand will ramp up and spur a recovery in oil prices in the months ahead. Asia is undergoing an extraordinarily heavy refinery maintenance period, which they estimate should peak in April and ease sharply in June. This could mean up to 2 million barrels per day of capacity restarting which implies a significant pick up in feedstock demand. China's crude oil demand is also set to increase not only post turnarounds but for restocking purposes following five straight months of draws that have left inventories at the lowest level since March 2012.
- The coal division head of Indonesian state-owned utility PLN said that âDomestic consumption was only 18 percent of the total 2012 output as the rest was exported. But the domestic need for coal will surge in the coming years and we may have to import coal to meet the demand.â He cited research that with only 3 percent of global reserves, Indonesia was the worldâs largest exporter. In 2012, Indonesia consumed 67 million tons of coal and exported 305 million tons, but by 2020, the domestic needs are expected to climb to 125.7 million tons according to the Jakarta Post.
Threats
- The Democratic Republic of Congo banned exports of copper and cobalt concentrates to force mining companies to add value to minerals before shipping them, Mines Minster Martin Kabwelulu said. Companies have 90 days to clear their inventories of concentrated minerals, he said. âWe want companies to export mineral products with great added value,â Kabwelulu said. A separate letter dated April 12, attached to the decree and signed by Kabwelulu, says that companies can still export concentrated minerals for further processing if they receive permission from the mines minister, count the final metal content as coming from Congo, and pay the related taxes and fees to the Treasury.
- Chinaâs GDP rose 7.7 percent year-over-year, the National Bureau of Statistics said. That number missed the consensus estimate of 8 percent and was below the 7.9 percent growth in the fourth quarter 2012. March industrial production gained less than estimated while retail sales growth matched forecasts. Chinaâs industrial output in March rose 8.9 percent, the report showed. That compares with the consensus estimate of 10.1 percent and a 9.9 percent pace in the first two months combined. Retail sales grew 12.6 percent, matching the consensus forecast. Fixed-asset investment excluding rural households in the first quarter increased 20.9 percent, against the consensus estimate of 21.3 percent and a 21.2 percent pace in the first two months.
