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- Stocks have rebounded following last week which saw the highest volatility spike since 2015 and the S&P 500 post its worst week in 2 years with a 5.2% decline.
- Indonesia looks set to become the world’s largest importer of wheat, overtaking Egypt which has held the title since 2007.
- Demand for wheat in Indonesia has been boosted because of the government’s policies to protect domestic corn production by restricting corn imports.
- As a result, corn prices have been pushed upwards making wheat for food and feed a more affordable option.
- Increased consumption of bread and noodles is also supporting wheat demand.
- Costa Rica is to restart growing Robusta coffee following the end of a 30-year ban on the crop which is more resistant to disease and rising temperatures than Arabica trees.
- The move comes as changing climates makes Robusta farming more favourable.
- According to a study published by the journal Climate Change the global area available for growing coffee is expected to shrink by as much as 50% by 2050 due to rising temperatures
- Tangshan, China’s top steel-making city, has announced it will extend production restrictions beyond the end of the winter heating season which ends next month. The extension is expected to affect 9 central steel mills. The city plans to have eliminated 1.2m tonnes of steel capacity by the end of this year, corresponding to a reduction of 1.81m tonnes of coal capacity.
- Copper prices have risen slightly from last week’s 2-month lows on the back of a weaker USD and more stable global markets which encourages investors to riskier assets. The 3-month benchmark LME contract is now trading just above $6,844 a tonne.
Energy - UK
- UK’s latest power capacity auctions have cleared significantly below expectations without many new gas projects securing agreements, despite gas projects thought to be necessary to help bridge the gap when coal and nuclear plants come offline over the next 10 years.
- Last Thursday’s auction for 2021/22 supply cleared at £8.40, well below National Grid’s expected £15-20 range.
- 50.4GW of capacity agreements were awarded, with 48.4GW being for existing capacity and interconnectors.
Energy - International
- Oil prices have had their largest weekly fall in 2 years following data showing rising expectations for US production and a slight reduction in bullish positions in crude held by hedge funds. Last week saw WTI drop below $60 for the first time this year with Brent dropping to just under $62.
- China’s Securities Regulatory Commission has announced that China, the world’s crude importer, will launch its long-awaited crude futures contract at the end of next month. The contract will be the first Asian benchmark for oil deals and will trade on the SHFE.
- India has become the first entrant into Abu Dhabi’s upstream hydrocarbon sector having been awarded a 10% stake in one of state-run Abu Dhabi National Oil Company’s offshore concession areas. India’s entry into the upstream sector highlights the developing relations between India and the UAE.
- LNG suppliers continue to be pleasantly surprised by demand for the super-cooled fuel continuing to soar and defy expectations of an imminent supply glut because of a surge in US supply as a result of the shale revolution.
- Demand for LNG has hit a 3-year high thanks to new buyers emerging in favour of the fuel’s flexibility and lower emission levels compared to coal or oil.
- Chinese imports have risen by 50% over the past year to 38m tonnes due to the clamp-down on coal use.
- Pakistan, Egypt, Lithuania and Jordan have joined the list of buyers as they seek to overcome domestic supply disruptions and decrease dependence on Russian supplies.
- South American countries including Brazil and Argentina have also started taking large volumes of LNG from the US Gulf Coast.
- Althoug h demand is appearing substantial enough to absorb the increasing supply, there are questions as to whether new buyers will be able to be found for the additional supplies expected to come online over the next 3 years. However the markets remain backwardated, and this is a clear watch out for a change in sentiment.