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General news

  • Industrial commodities including oil (now trading above $60) and copper (which traded at over $7,000 last month) remain supported by this year’s global growth which has been the strongest and most widespread since the financial crisis.
    • Analysts are warning that the commodity cycle appears to be turning, but this is not a repeat of the “super-cycle” that pushed oil and metals to record highs last decade.
    • VP chairman of metals at Wood Mackenzie has highlighted that this time round the upswing is due to supply constraints rather than a surge in consumption like last time when China’s rapid industrialisation drove prices upwards.
  • 2017 has been forecast to be one of the top three hottest years on record. The World Meteorological Organization has found that the global temperature between January and September of this year was around 1.1 degrees Celsius above those in the pre-industrial era.
  • BMW, Daimler, Ford, the Volkswagen Group and Audi are forming a joint venture called IONITY to develop and implement a High-Power Charging (HPC) Network to make long-distance journeys across Europe easier for road users.
  • According to figures from the Environmental Audit Committee, a third of cars manufactured by Volkswagen with defeat devices, which Volkswagen used to cheat on emissions tests mandated by the Environmental Protection Agency, have not yet been fixed.
  • According to the European Environment Agency, the EU is on track to meet its emissions reduction target set for 2020. The latest analysis suggests that greenhouse gas emissions across the EU decreased modestly in 2016 by 0.7% from 2015 levels.
  • Theresa May has outlined plans to set the UK’s departure date and time from the EU in law, emphasising she will not tolerate any attempt to block Brexit.
  • Speaking at the Asia-Pacific Economic Co-operation (Apec) summit in Vietnam, Trump has warned that the US will no longer tolerate “trade abuses” and that the US will be prepared to work with Apec as long as they abide by fair, reciprocal trade.

Agriculture

  • Sugar market participants are paying close attention to the price gains in the oil market to gauge further price moves.
    • The correlation between sugar and oil has strengthened since Petrobas’ changes to the pricing policy on Brazilian gasoline and diesel.
    • The new pricing policy means prices for these fuels closely follow fluctuations in the international oil market.
    • The result of this is gasoline prices have risen almost 20% in Brazil, widening the gap with cheaper ethanol which in turn is leading to mills producing more of the biofuel to keep up with the rising demand.
  • The USDA has lowered its forecast for the amount of sugar it expects to import from Mexico. The lower forecast comes from a reduced sugar supply and increased demand in Mexico which will make less of the commodity available for export.
    • The lower supply was forecast due to hurricane-related disruptions.
    • Mexican sugar exports to the US are estimated at 1.45m for 2017/18, 81,044 tonnes down from last month’s estimate.
  • Malaysian palm oil achieved its first gain in four sessions last week on the back of stronger soya oil prices on the CBoT. Vegetable oil prices also found  support driven by crude prices, with palm oil gains being capped by a stronger Malaysian Ringgit. The benchmark palm oil contract for January delivery is currently trading at around 2,791 Ringgit a tonne.
  • Soybean prices have edged up for the third consecutive day with the USDA considering to reduce its yield estimate of the US crop which is currently being harvested. CBoT’s most active soybean contract (front-month) is currently at just under $10 a bushel. Price gains are however capped by the abundance of global supplies.
  • The ICO has raised its estimate for 2016/17 global coffee crop to a record high of 157.4m 60kg bags. The revision comes largely thanks to an increase in the forecasted output from Mexico and Central America.
  • The Indian government has doubled its wheat import tax to 20% to support local suppliers and prices.
  • Despite the 20% import tax implemented by the Brazilian government, the US is to export around 1.7 BN Litres of ethanol to Brazil in 2018, compared to a projected 1.8bn litres this year.
  • New York cocoa prices on the ICE  rose to a 9-and-a-half month high last week, rallying for the third consecutive session. March New York cocoa settles up $49, 2.3%, at $2,188 a tonne on Wednesday.
  • With Trump’s crackdown on illegal immigration, many US farmers are looking to increase automation to reduce the number of farmhands they employ.
    • According to the American Farm Bureau, as many as 7 in 10 farm workers in the US are “undocumented”.
    • The shift comes at a time where the sector was already struggling to cope with a shrinking, aging workforce.

Metals

  • Chinese iron ore futures prices have eased after data showed that imports of the material which is used to make steel dropped to 20-month lows as steel mills continue to curb output in line with Beijing’s efforts to reduce smog.
    • Although mills and plants across China have already started to ramp down production, the official government-imposed cuts come into play mid-November, lasting until mid-March.
    • The front month contract, the most active iron ore contract on the Dalian Commodity Exchange, is currently trading at ¥462.50 a tonne.
  • Data released by the World Gold Council shows that demand for gold slumped to an 8-year low in Q3 as the prospect of higher US interest rates and tighter monetary policy decreased gold buying by institutional investors.
    • The data shows that demand for bullion (gold, silver and other precious metals in the form of coins, ingots or bars) fell to 915 tonnes in the three months to September, down 9% from the same period last year.

Energy - UK 

  • SSE and npower are in talks about merging to create a giant energy supplier in the UK. If a merger were to take place, “The Big 6” would turn into “The Big 5”.
    • SSE serves around 7.8m households.
    • Npower serves around 4.8m households.
    • The news follows the launch of the government’s draft  bill to cap energy prices.
  • New statistics from Energy UK reveal that there was an 11% increase in customers switching energy providers from September to October of this year. The increased switching has been driven by over 600,000 customers seeking to save money on their bills. A third of those customers moved to small, mid-tier energy companies.

Energy - International

Oil

  • Oil prices have reached their highest levels since 2015 with Brent reaching over $64, a 40% rally since June. This latest price rally has been driven by the ongoing anti-corruption drive in Saudi Arabia and comes ahead of today’s OPEC World Oil Outlook and the US Energy Information Administration’s Short-Term Energy Outlook. WTI remains steady at just over $57.
  • The latest price rally has influenced many to consider what would have been unthinkable just a few weeks ago – the prospect that oil could trade above $70 by the end of the year. Analysts at Bank of America Merill Lynch have stated it is possible that Brent could see a “cyclical peak” of $75 in the near future.
  • Despite the global push in energy policies which favour cleaner fuels and EVs, OPEC has raised its forecast for oil demand in the coming decades.
    • According to OPEC, global consumption will rise from 95.4m barrels a day in 2016 to 102.3m barrels a day in 2022
    • This forecast is almost 2.3m barrels a day more than the previous forecast.
    • The demand increase is expected to come from China, India and other emerging economies
  • Although the oil markets have been focused on the corruption purge in Saudi Arabia and its tensions with Iran, images taken by Orbital Insight, a Californian company which uses satellite images and algorithms to track above-ground oil storage, indicate that crude inventory levels in the country may not be as low as the kingdom has been indicating.
    • The floating roofs on these tanks enable Orbital Insight to see when inventory levels are rising and falling by measuring the shadows cast across the top of the tanks.
    • The images taken over the past months indicate that levels have not changed much.
    • This contradicts Saudi Arabia’s reports that its inventory levels have been falling, a factor which has played an integral role in propelling Brent prices back above the $60 benchmark.
  • A spokesman for Saudi Arabia’s energy minister has said that the kingdom, the world’s largest exporter, plans to cut crude exports by 120,000 barrels a day in in December, compared to the 7m barrels a day it expects to export this month.
  • Inventory levels of US gasoline and diesel continue to fall despite record refiner runs.
    • According to the USDA, US refineries processed a seasonal record 16.3m barrels a day in the week to November 3rd.
      • This indicates strong demand in both the domestic and export markets.

Other

  • BP and Shell have joined forces with trading houses and banks to develop a blockchain platform for trading energy. The venture seeks to create a secure, real-time blockchain-based platform to manage energy transaction from trade entry to final settlement.
  • Last week saw Asian LNG prices propelled to a 10-month high. The price gains came from strong Chinese and Indian demand at a time when the northern hemisphere is entering its winter season and competing to secure supplies.
    • Chinese demand was boosted by Beijing’s push to replace coal with gas for heating as it tries to reduce its air pollution issues
    • Indian demand has increased on the back of the lack of coal.
    • This time of year is normally a quiet period (shoulder month between summer and winter) but the pickup in Asian demand over the past 4-6 weeks has driven prices upwards.
  • China has preliminarily agreed to develop a massive LNG export project in Alaska.
    • Analysts however have warned that China has not guaranteed that the $43bn development will go ahead.
    • The project includes an LNG export terminal as well as an 800 mile pipeline to deliver the fuel to China.
  • The Asian spot LNG Index Japan-Korea Marker from S&P Global Platts was $9.35 per million Btu, almost a third higher than the same time last year.
  • GE and the Green Investment Group have partnered up to deliver and operate 650MW of onshore wind in Sweden.
  • Total has increased its bet on gas. The French company has bought Engie’s upstream LNG assets for $1.5bn. The move places Total as the second largest in the sector, globally.
  • Michael Bloomberg, the former New York mayor and billionaire, has announced he is to donate $50m to help nations combat pollution and climate change by moving away from coal. The project is to start in Europe and then expand into other countries.
  • French prompt power prices have been boosted by the arrival of cold winter weather in France which has in turn increased demand for electric heating. The increase in demand comes at a time when a number of reactors have lengthened their outage periods. The price for Monday delivery of baseload power in France jumped 20% compared to the price paid for Friday to EUR93 per MWh.
  • US EV charging station manufacturer and operator, ChargePoint, has announced it is to partner up with petrol station service group Technical Services Group to expand its business across Europe.