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General news

  • The Euro dropped to a 6-week low last week as the uncertainty and tensions surrounding the Catalonian vote for independence continued to unsettle investors. The Euro dropped as low as $1.1672 during trading last Friday, eventually closing the week at $1.1733. The Spanish government continue to insist that it will intervene and reassert control, warning Catalonia that it risks economic chaos if it continues to pursue independence.
  • EU negotiators have hinted that they are less-than-optimistic about the next round of Brexit talks indicating that they have low expectations of any progress being made in agreeing a post-Brexit trade pact.

Agriculture

  • Delays on the Mississippi River, the main conduit for crops to exports markets, caused shipping backlogs last week, resulting in grain storage on the river’s banks continue to fill up. Delays caused by low river levels and back-ups at ageing locks have driven the cost of transporting Midwestern crops to the Gulf Coast export terminals to near record highs.
  • Puerto Rico has lost 80% of its agricultural value following hurricanes Irma and Maria. Dairy represents the biggest proportion of the country’s agricultural sector, a third of the island’s agricultural production, and is currently only operating at 50% capacity. Crops of plantains, bananas, papaya and coffee have all been lost with many dairy farmers struggling to access their farms, get access to feed mills and get their milk to processors.
  • According to Cargill, the world’s largest trader of agricultural commodities, demand for chocolate in Asia is expected to increase by 3-4% during the current crop year. This will exceed global chocolate demand growth, which is around 2%. This is good news for the cocoa market which has suffered from slow growth due to volatile production and prices, which have in turn impacted on demand for chocolate.
  • The currently underway EU maize harvest is expected to yield mixed results with some countries benefiting from good rainfall over the summer (e.g. France, the EU’s biggest exporter), whilst some suffered losses from summer heatwaves and drought (e.g. Hungary). The forecasted total yield is 59m tonnes, about 1m tonnes below 2016’s harvest.
  • Following a succession of losses at the end of September, Malaysian palm oil achieved a week of consecutive gains last week. Front-month Malaysian palm oil prices rose MYR52 over the course of last week, close to a 2% weekly gain, partly due to a weaker Ringgit. The Ringgit fell to a 4-week low last Tuesday of MYR4.24 per USD, leading to an increase in technical buying.
  • Soybean prices reached a 3-week low of $9.52 a bushel (CBoT front month contract) last week as the harvest of a bumper US crop gathered pace amid reported higher yields. Prices have however recovered this week following rains which have delayed some harvests in the Midwest in the US, and dry weather which has slowed the pace of planting in Brazil. Front month CBoT opened trading this week at $9.72 a bushel.

Metals

  • Offshore companies in the oil and gas sector are eyeing up the potential of deep sea minerals as a new revenue stream. With the increasing demand for metals and rare earth metals as a result of the EV boom, there is growing interest in deep sea mining despite activity being low to date.
  • Two years ago, Glencore made the bold move to cut 500,000 tonnes of zinc production, a third of its capacity, in an effort to lift prices from their 6-year lows as a result of a supply glut. The move seems to have worked with zinc prices now at $3,300 a tonne, the highest in a decade, but many are now questioning whether or not Glencore will continue to show restraint, or will instead start increasing supply to cash-in on the current high prices.
  • Having achieved gains of 15% in 2017 on the back of a weaker USD and series of geopolitical risks, gold appears to have started to “lose its shine”, declining almost 6% since its high of $1,358 on the 8th September. The drop has been predominantly due to the recent gain in momentum of Trump and his administration to deliver tax cuts. Gold did however see some recovery over the weekend as Trump’s moves to tighten immigration laws increased tensions.

Energy - UK 

  • The Scottish government announced it has permanently banned fracking, the practice of pumping water, sand and other chemicals into the ground at high pressure to release gas from tight rock formations. The announcement was welcomed by green groups, but many others are disappointed with the move.
    • INEOS has stated that by banning fracking, Scotland will miss out on economic and employment benefits (estimated 3,100 jobs).
    • UK Onshore Oil and Gas (UKOOG) believes that by ignoring its independent experts, the Scottish Government is favouring a future in which there is a dependence on imported gas highlighting that 30 wells have been drilled over the past 20 years in the Central Belt with no impact to the natural environment or the public.
  • Ofgem has announced it is to change the existing power generation license to make it fit to include storage, which it believes should be treated as a form of generation. The license is to be modified to provide regulatory certainty to storage facilities and encourage the deployment of battery technology into the system.
  • In her speech at last week’s Conservative Party Conference, Theresa May pledged to introduce a draft bill as soon as this week which would cap energy bills. Critics are however sceptical that any long-term improvements for customers will be achieved.

Energy - International

Oil

  • Demand for crude is likely to be subdued as we enter into Q4, the winter period, in which a great deal of refinery maintenance is scheduled.
  • According to Gazprom, Russian gas exports to Europe and Turkey increased by over 11% year-on-year to 141.2bn cubic meters in the first 9 months of 2017.
  • Middle East oil producers are beginning to turn to trading crude as a means of generating new sources of income following 3-years of weak oil prices.
  • OPEC’s secretary-general has said that although there is a growing consensus that a rebalancing of the oil market is underway, in order to sustain the rebalancing into next year and beyond, “extraordinary measures” will need to be taken by both OPEC and non-OPEC producers.
  • As the number of US oil rigs dipped and expectations of Saudi Arabia sustaining output restraint rose, oil prices have stabilised at the start of this week having dropped 2% at the end of last on concerns of overproduction. Brent is trading at $55.62 and WTI is trading at $49.38.
  • Oil ports, producers and refiners in Louisiana, Mississippi and Alabama shut ahead of Hurricane Nate over the weekend, with some now planning to reopen as the hurricane moves inland away from the energy infrastructure.

Other

  • The Senior VP of Nuclear at Rolls Royce, David Orr, has expressed his belief that as intermittent renewables come onto the grid, small modular nuclear reactors (SMRs) would be better suited to providing baseload capacity than large-scale nuclear power stations.
  • In an effort to help France achieve its 2020 target of producing 23% of its energy from clean sources, the EU has approved the financial support of 7.5GW of renewable electricity production in France.
  • According to the International Energy Agency (IEA), global renewable capacity will increase by 43% (1,000GW) within the next 5 years, with renewable energy expected to account for 30% of power generation by 2022.
  • According to the American Petroleum Institute (API), increased US natural gas exports in the form of LNG could add up to $73bn to the US economy by 2040.
  • Statistics from the IEA indicate that solar capacity increased by 50% in 2016, a growth rate faster than any other energy source; China accounted for almost half of this growth with air pollution concerns and ambitious capacity targets driving the industry.
  • According to the IEA, renewable electricity generation is expected to increase by 8,000 terawatt hours by 2022, equivalent to the total power consumption of China, India and Germany combined.
  • The International Renewable Energy Agency (IRENA) has found that battery storage costs could fall by as much as 66% by 2030 as technology improves; this fall in prices could result in a 17-fold growth in battery storage.
  • Chevron has started producing LNG at its Australian Wheatstone project, slightly behind schedule, with the first cargo expected to be shipped in the coming weeks.