- It appears that Trump is close to deciding on how he will proceed with addressing what he has termed “unfair Chinese trade practices”. Trump is considering initiating an investigation under the 1974 Trade Act which allows him to unilaterally impose tariffs and/or other trade restrictions to protect US industries
- The sanctions imposed by the US on Russia as a result of its alleged meddling in the 2016 US elections and its actions in Ukraine have been criticised by the Russian Prime Minister saying that the imposed sanctions are equivalent to declaring a “full-scale trade war” against Russia. The sanctions limit the amount of money Americans can invest in Russian energy projects and makes it more difficult for US companies to do business with Russia
- USD is back under pressure the lift it from Friday’s US jobs data fades as it once again falls victim to political uncertainty as the White House continues to struggle to pass tax reform and fiscal stimulus measures.
- Former head of diplomatic service Sir Simon Fraser, who now advises businesses on Brexit, has said that Brexit negotiations “have not begun well” and that the UK side had been “a bit absent” from formal negotiations in Brussels.
- The Bank of England has said that persistent uncertainty over the UK’s future relationship with the EU is holding back business investment and household spending.
- According to the USDA, the US is the only major rice-growing country which has seen a reduction in rice growing acreage. This indicates that a drawdown in world supplies of rice is unlikely and that an improvement in rice prices is improbable.
- Australian grain production is likely to be dented following severely dry conditions. Some regions are now facing record-breaking dry seasons.
- US officials have indicated that thanks to better than expected production and a boost in demand from the spring retreat in prices, Indonesia palm oil exports will hit a record high for the 2017-18 harvest. Malaysian palm oil closed last week at RM2,590/tonne.
- The EU’s resolution to ban the use of palm oil in various consumer products including biodiesel could struggle to materialise as a result of the Malaysian government’s efforts to ensure European demand is not lost. This comes as the head of the EU delegation to Malaysia highlight that some of the allegations that lead to the resolution on palm oil were inaccurate.
- France, the EU’s top rapeseed producer, received two upbeat forecasts regarding their harvest, boosting output prospects from the EU. The increase in forecasts reflects in parts the higher expectations in Romania and in the UK where harvest yields have proved better than expected. Rapeseed closed last week’s trading at €369/tonne.
- As part of the 100-day action plan agreed during the meeting between the US and Chinese presidents in April, China is once again allowing imports of US beef. Beef imported from the USA is however twice the price of domestic beef as a result of being transported fresh (not frozen) by air.
- According to US Grains Council economists, Vietnam has will be the international market with the most promise for increasing demand for American corn grown to feed livestock over the next 10 years.
- Both corn and spring wheat futures have crept higher at the start of this trading week as a result of lingering concerns over the crop conditions. This comes despite a positive turn in US weather forecasts.
- Rising Chinese demand for materials needed to produce lithium-ion batteries for electric vehicles and energy storage is driving significant price gains and an asset boom in Australia, the world’s largest lithium producer. Prices of lithium carbonate, the primary base-chemical produced by the lithium mining industry, has more than doubled in the 5 years to 2015 with any price falls over the coming years being dubbed extremely unlikely
- Copper prices surged around 7% in July following concerns over China’s new scrap import ban, a weaker USD and solid demand from China; there are concerns however that the price rally has been mainly driven my speculation (net long positions are at the highest since April) and that could lead to a correction. Copper closed trading on the CME last week at $2.885/lb.
- It is expected that strong demand will support copper prices in the near term but that rising supply and an expected cooling down of the Chinese economy could bring the market back into a small short-term surplus in Q4.
- Despite weaker readings for growth in the Chinese manufacturing and services sector, iron ore prices have jumped to their highest level in almost 4 months following data which indicated China’s construction sector is at its highest level in more than 3.5 years.
- Chinese steel has reached a new 3.5 year high amid continued optimism about the nation’s economy and sustained demand for steel as a result of a crackdown on illegal steel-making capacity which has led to a shortage of certain steel grades. Zinc, which is used in steel-making, has also risen (by 8%) ending the week at $2,797/tonne (LME).
- As anticipated, British Gas owner Centrica have announced they are to increase electricity prices by 12.5% from the 15th of September as a result of “transmission and distribution costs” and “the cost of government policy”; although gas prices are to remain unchanged, 3.1m customers will be affected.
- The world’s first floating wind farm is now being slowly towed 25 miles off the coast of the North East of Scotland. Although wind turbines are common offshore in the North Sea, these 5 wind turbines, each designed to generate 6MW of electricity, are unique in that they are to form part of what is the world’s first floating windfarm.
- Householders could receive a significant price cut in the form of a 15% reduced VAT rate when installing solar panels with battery storage technologies. HMRC have however stressed that the installation would have to qualify to certain conditions including being a single indivisible supply and installation (i.e. if battery is sold separately and retrofitted to the existing solar system, the standard VAT rate of 20% would still apply).
- Venezuela have found themselves at risk of US sanctions following the Venezuelan President’s decision to proceed with an election for an all-powerful political assembly which threatens democracy in the nation; sanctions could involve both blocking Venezuelan crude imports into the US, and blocking US exports of crude to Venezuela.
- The profits of Shell (Netherlands/UK), Total (France), Statoil (Norway) and Repsol (Spain) indicate that thanks to cost-cutting and restructuring efforts, the industry is able to make money at a prolonged period of low prices. BP’s chief executive has said that it is aiming to drive down costs to the point that it can still make money when crude prices are below $40
- As record US refinery consumption coincides with a slowdown in exports from the Middle East, the physical oil market is showing signs of tightening. Analysts however are questioning whether this can last since the throughput increase is likely attributable to the US driving season which has increased demand.
- The supply of heavy crude from Venezuela to US refiner Phillips 66 has dropped by more than two thirds this year. This is due to quality issues and cargo cancellations.
- According to a new report by EY, the low price of oil is driving the governments of many oil and gas producing countries to make essential tax adjustments in order to remain competitive in attracting capital investments. Canada and Mexico are among the most recent to undergo changes.
- Much of the focus of this past week’s energy headlines stem from the recently confirmed US sanctions on Russia, which ban the providing of goods, services, technology, information or support to both the construction and modernisation of Russian energy export pipelines:
- As it stands, Russia currently dominates the European market, feeding gas to Europe via pipelines; the recent sanctions however threaten pipeline projects and could hamper Russia’s ability to proceed with projects it has lined up to ramp up distribution to meet the expected increasing demand (e.g. Gazprom’s Nord Stream 2 pipeline, doubling the capacity of the under-construction Turkish Stream pipeline) to
- One of the main reasons that gas from the US has not yet been competing with Russia for the supply to Europe is that despite the fact that US gas is cheaper than European gas, the need for US gas to be delivered in the form of LNG incurs costs (liquefaction, shipping, gasification) which makes US gas more expensive than Russian and other domestic gas supplies, once in Europe; this could however change as the LNG market grows.
- With the rise in popularity of LNG linking up regional markets such as the Australian and Qatari markets, supplies of LNG are expected to grow by almost 50% between 2015 and 2020 which is likely to increasingly lower prices of the liquefied fuel
- Russia is ultimately going to be forced into deciding whether to “compete on price and defend market share” or “cut back supply to keep prices high”, with the former being the most likely based on current evidence.
- It is also worth noting that many central European nations (e.g. Poland and Latvia) object to Russia’s leverage over their gas supply and so could be supportive of Trump’s move to export more US gas to Europe, even if it does being paying more; furthermore the fact that many LNG deals for long-term buyers involved a fixed “take or pay” portion which mean it can often make more economic sense to lift the gas and sell it on to customers or rival traders (even if the pipeline gas is cheaper), hence making shipments to Europe viable.
- Diesel prices in Europe jumped to their highest level in 5 months last week following a fire at Shell’s Rotterdam-based Pernis plant, which normally processes more than 404,000 barrels a day of crude oil. The fire forced the suspension of the loading of oil products such as diesel, gasoline and jet fuel leading to a restriction of supply at a time of high summer demand from motorists.
- Japanese commodity trading giant Mitsubishi Corp announced today that its Q1 net profit grew by 17% thanks to higher price of coking coal which boosted earnings.
- Data indicates that US coal exports have surged not as a result of Trump, but instead as a result of Chinese domestic policies which have driven up prices.
- South East Asia appears to be emerging as a hotspot for LNG as Pakistan and Bangladesh prepare to join India as a major consumer. As Pakistan and Bangladesh maximise on their strong economic growth and soaring energy demand by increasing the number of import project, there is the potential that this growth in consumption could help ease global oversupply.
- According to Statistics MRC the LNG bunkering market (practice of providing LNG fuel to a ship for its own consumption) is likely to grow from $248.64m in 2016 to $8,187.35m by 2023 thanks to the growing marine logistics business, cost efficient LNG products and the imposition of environmental regulations on chemical emissions; the key limiting factors in the growth of the industry is the development of easy deployment facilities, higher capital investments needed and poor bunkering infrastructure.
- The European Investment Bank (EIB) has approved financing worth £0.9bn to roll out smart meters in Italy; the meters will replace the current first generation meters and is a move which aims to ensure Italy’s compliance with EU energy efficiency requirements.