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- South Korea and Japan have welcomed the US’s move to relist North Korea as a “sponsor of terrorism” and ramp up pressure on North Korea to get rid of its nuclear weapons.
- Cabinet members who support Brexit have agreed that the UK should offer to pay more to the EU, but only once a new trade deal is made.
- Robert Mugabe has stepped down as Zimbabwe’s president with Zimbabwe’s former vice-president Emmerson Mnagagwa, having been sworn in as the new president.
- UK Chancellor Philip Hammond has delivered a budget with “bleak economic forecasts” but said he hopes to prove these forecasts wrong. The reduced growth forecasts have been blamed on the economy’s flat productivity.
- Indonesian authorities have raised the state of alert to its highest level and expanded the exclusion zone around Mount Agung, the volcano which has the potential to erupt at any moment. The island is a tourist hotspot and airport on the island is no closed, leaving thousands stranded.
- Bitcoin has reached a record high of $9,700, meaning the virtual currency is now 20% higher than it was on Friday.
- Arabica coffee is currently rangebound between $1.25 and $1.32 /lb since October, traders are looking to Brazil to see which way it breaks:
- Bearish traders are focusing on the expectation of a record 2018 Brazilian crop with rains having returned and the soil seeing a good recovery following several months of dryness. Rabobank are predicting a record 59m 60kg bags to be harvested from June 2018.
- Bullish traders are concentrating on the fact that for the first 10 months of 2017, Brazilian exports were at their lowest levels in 5 years and that a continuation in this sluggish output could scare some speculators to cover their bearish positions. The reason for these sluggish exports is that farmers have retained stocks whilst prices are low and there has been loading problems at the port of Santos.
- Traders are also keeping an eye on inventory levels where although the end of September saw stocks for US, EU and Japanese importers at a record high at the end of September, there are signs that sluggish exports from Brazil could start to impact on inventory levels.
- Global dairy prices are at an 8-month low due to oversupply, predominantly from New Zealand. Fonterra, the New Zealand dairy group, has reported that its domestic milk output rose by 3% last month compared to the year before, thanks to a pickup in weather conditions.
- Malaysian and Indonesian officials have for the first time weighed in on the EU’s call for a greater vetting of palm and other vegetable oils in biofuels.
- Officials from the top palm oil producing countries argue that the EU is singling out palm oil and that discriminating against it is not only unfair trade practice, but also affects the livelihood of millions of people running small-time oil palm plantations.
- Indi a’s duty rate hikes continue to weigh on palm oil prices which are now at a 3-month low as expectations of reduced Indian imports loom.
- Australia’s Weather Bureau has issued a weather warning for La Niña, saying that the chance it would happen starting next month was 70%, three times the normal likelihood.
- The phenomenon occurs when sea temperatures in the Central Pacific drop, leading to stormier and cold winters, and warmer but wetter summers, in the Asian Northern hemisphere.
- The effect could mean dryer conditions in many crop growing regions including the southern US, but hot and unusually wet ones for most of Australia.
- Rising freight rates and the increasingly likelihood of the La Niña weather phenomenon appear to be two of the key uncertainties that farmers, investors and commodity traders face in 2018.
- Although bumper global harvests in recent years have facilitated lower grain and oilseed prices, slowly declining inventories are making markets increasingly more vulnerable to events such as La Niña, meaning major agricultural areas such as the US and South America could see major disruptions.
- Freight rates which have been trending higher since early 2016, limiting the competitiveness of exports which come from further afield could be eroded.
- Russia has announced they plan to temporarily restrict pork and beef exports from Brazil starting in December following the discovery of ractopamine, a feed additive, in some shipments. Brazilian producers deny the claim.
- China has announced starting on December 1st it plans to cut import tariffs on consumer products including food products such as meat and whisky in an effort to drive down costs and stimulate domestic consumer spending,. According to the Chinese Ministry of Finance, following the tariff cuts on consumer products are expected to average 7.7%, almost 10% down from current levels.
- Moves by China’s largest pig farming companies and new entrants look set to upend the traditional flows in meat and grain.
- At least 8 listed companies have announced or confirmed plans to produce around 17m pigs annually in the north-eastern cornbelt, adding to China’s annual $1 trillion pork market.
- Although the costs of farming in the north east are high due to the cold temperatures which means more heating is needed, the sparse population of the area means larger farms can be set up compared to other regions.
- According to the World Platinum Investment Council (WPIC), a decline in production and increase in demand from both the jewellery and industrial sectors will mean that the global platinum market deficit will increase sharply next year. The WPIC expect that the deficit could rise to 250,000 ounces next year, from an expected 15,000 ounces this year.
- According to the International Copper Study Group the world’s refined copper market showed a 85,000 tonnes surplus in August, compared to just 7,000 tonnes in the month prior.
- The Mines and Geosciences Bureau has reported that output of iron ore from the Philippines, the world’s largest supplier of nickel ore, dropped 11% in the first 9-months of this year due to a government crackdown on environmental compliance and bad weather. The report indicated that output from the Philippines, most of which gets shipped to China, was 19.91m tonnes compared to 21.34m tonnes in the same period last year.
- Scientists from the University of Kentucky have developed a new way to extract rare materials and metals from coal in a way which is cheap, efficient and better for the environment.
- The LME has launched an investigation into the use of child labour in cobalt mining following complaints about it allowing a Chinese company to sell untraceable supplies of the metal.
- Data from China’s General Administration of Customs has showed that since the UN penalties came into force on September 5th banning North Korea selling certain commodities abroad, China has not imported any iron ore, lead ore or coal from Pyongyang. The data follows data released yesterday which showed that total trade between China and North Korea fell to its lowest since February.
- Shanghai steel prices have hit a 6-week high on the back of expectations that Chinese demand will remain firm into 2018. The most active SHFE contract, rebar for May delivery, is currently trading at ¥3,833 a tonne.
- Gold prices have edged higher as the USD touched a 2-month low versus the Euro. Gold is currently trading at around $1,290.66.
Energy - UK
- UK power prices largely dropped over the course of last week due to lower European coal and gas prices and a decline in oil prices as a result of increased US production.
- Despite this reported increase in US production volumes, OPEC still look set to extend the production cut agreement beyond March 2018.
- Al though this week’s price decline have been noteworthy, prices are still at a premium compared to the end of October, suggesting that the market has priced-in the risk of cold weather having an impact later in the winter, considering especially the lack of effective gas storage due to the closure of Rough.
- According to the Energy Networks Association, Distribution Network Operators (DNOs) could deliver major savings by supporting the evolving of networks in a way which new demands (e.g. EVs and batteries) are met in the most cost-efficient way. The Energy Networks Association believes that the UK’s electricity network could deliver £1.7bn of potential savings by 2031.
- Following Centrica’s announcement of its plans to get rid of its standard variable tariffs (SVTs), the energy industry has been responding with mixed reviews.
- Phillip Hammond delivered his second Budget last week making reference to the UK’s oil industry and the UK’s adoption of EVs.
- The Chancellor has said that the North Sea oil and gas industry can expect tax breaks from November next year. It is hoped that the tax breaks will spur investment.
- It was also announced that the government is to introduce a temporary levy on diesel cars from April 2018. The money raised through these taxes will pay for a new £220m clean air fund.
- Hammond also announced that the government is to invest £540m for EVs and charging infrastructure.
- According to Centrica, the wider adoption of distributed energy technologies could achieve almost £1bn worth of energy savings each year and deliver a £18.5bn boost to the UK’s overall economic growth. Centrica found that increased usage of battery storage, onsite generation and energy efficiency devices in the industrial, healthcare, hotel and leisure sectors, which represent more than a quarter of the UK’s economy could help deliver this benefit.
Energy - International
- Oil prices are on the up ahead of next week’s OPEC meeting at which production cuts are expected to be extended. Gains however remain capped by rising US output with analysts expecting Brent to be rangebound between $61 and $63 between now and the outcome of next week’s meeting.
- Oil prices have jumped following a drop in US crude inventories as a result of disruptions to pipeline imports from Canada. TransCanada have said that they expect crude exports via the Keystone pipeline, which can take as much as 590,000bpd of crude from its Alberta oil sands to US refineries, to be cut by at least 85% through the end of November. The pipeline was shut last week following a 5,000 barrel spill in South Dakota, with South Dakota regulators warning that they could revoke TransCanada’s permit to operate the pipeline if an investigation into last week’s spill finds that the company violated its licence. WTI prices are up around 2% to $57.96, and Brent is up 1.2% at $63.30.
- South Dakota’s environmental regulator has said that the clean-up of an oil spill from TransCanada’s Keystone pipeline which resulted in 5,000 barrels of Canadian oil sand crude spilling in north-eastern South Dakota, could take several weeks. It is still unclear when the pipeline will restart.
- WTI prices have reached a 2-year high as the closure of the Keystone pipeline tightens North American markets, with prices now higher than they have been since 1st July 2015. Trading activity today is however expected to be low due to the Thanksgiving holiday.
- Both Brent and WTI are now in backwardation, i.e. spot prices are higher than those for future delivery, making it unattractive for traders to “store” oil for later sale.
- October customs data has shown that Russia has maintained its title of China’s top crude supplier for the 8th month in a row with shipments hitting around 1.095m bpd. Saudi Arabia are a close second at 1.086m bpd.
- A draft agenda for OPEC’s meeting in Vienna next week has been released, with only 3 hours scheduled into the day for oil ministers to decide whether or not to extend their supply cuts. Many analysts believe this is strong indication that the decision-making is expected to run smoothly.
- Thursday’s OPEC meeting in Vienna continues to be the focal talking point amongst oil traders
- It is expected that the 1.8m bpd production cuts will be extended until the end of 2018, but traders will be keeping an eye on Russia comments and views on how long production curbs should remain in place.
- Unlike Saudi Arabia, Russia is less dependent on high oil prices and is wary of conceding too much market share to rivals.
- The LNG market looks set to tighten quicker than expected with India moving to boost its use of gas over coal. India uses virtually no LNG at present, but its state oil refiners aim to raise the contribution of natural gas to 5-15% of their incomes over the coming years.
- Officials from major gas producing countries including Qatar, Russia, Iran, Bolivia and Venezuela are becoming increasingly concerned that the expanding supply of the gas are giving global buyers greater power over purchase and contract terms.
- France’s Prime Minister has said that France will support the uptake of LNG as cleaner fuel for ships saying that the French government will encourage ports to develop the necessary infrastructure.
- A new report from Bloomberg New Energy Finance (BNEF) indicates that the global market for energy storage technologies will double six times between 2016 and 2030 to 125GW, with $103bn expected to be invested before the end of the next decade
- 8 energy companies have committed to making further efforts to reduce methane emissions from their natural gas assets. The companies which include BP, ExxonMobil, Shell and Total have signed a Guiding Principles document which focuses on continually cutting methane emissions and improving the accuracy of methane emissions data.
- Coal imports by India from North America could surge as a result of domestic shortage and a regional ban on petroleum coke.