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Commodity Tracker: 5 charts to watch this week

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The global oil supply path into 2021 is in focus this week, along with the impact of storms on US  oil output. Away from oil, we also survey they outlook for LNG demand in Asia and the European power mix, and look at the key factors driving the copper market.

1. OPEC+ compliance, Libya output to drive global oil supply growth in Q4

 

Global oil supply forecast 2020 2021

What’s happening? Global oil supply has increased by 3.6 million b/d from July through September after dropping more than 13 million b/d from April to June. This is despite a more active hurricane season in the US Gulf, which has temporarily removed upwards of 100,000 b/d of crude oil production. OPEC+ has carefully managed providing additional barrels to the market as oil demand has recovered from peak pandemic impacts seen in Q2.

What’s Next? Supply increases are set to slow starting 4Q 2020 as OPEC+ pushes for compliance and cohesion. OPEC will meet towards end-November to review market demands and quotas. Production increases in Libya are expected to be choppy and sustainability is uncertain. Geopolitics will take center stage with US presidential elections in November. If the Democrats win the White House some sanctioned barrels (Iran, Venezuela) could re-enter the market. S&P Global Platts Analytics forecasts show non-OPEC supply growth over 2020 and 2021 will be limited to few key areas – Norway (300,000 b/d), Brazil (320,000 b/d), Guyana (120,000 b/d), and Canada (85,000 b/d). Declines will be widespread with the US seeing the biggest falls, of 865,000 b/d in 2020 and more than 1.14 million b/d in 2021.

Go deeper: S&P Global Platts Analytics Client Virtual Seminar, October 13-15

 

2. High hurricane count slashes US Gulf oil production

 

US hurricane impact on oil production

What’s happening? Hurricane Delta is on track to surpass Hurricane Laura as most disruptive so far this season. As of Oct. 9, 92% of crude oil and 62% percent of natural gas production was shut in. Production will begin to return after the storm passes, but it can take as long as 2-3 weeks for full ramp-up, depending on damage and storm severity.

What’s next? With 25 named storms, it is the second most active Atlantic hurricane season on record, behind only the 2005 Atlantic hurricane season. It is also only the second tropical cyclone season to feature the Greek letter storm naming system, with the other season again being 2005. Production outages this season will rival peak levels seen in 2005 and 2008. The US hurricane season runs through end-November, though the probability of landfalls and storm intensity is past peak as weather turns cooler and the jet stream pushes deeper south out of Canada.

 

3. Asian LNG prices hit 11-month high on winter procurement, outages

 

Platts JKM price

What’s happening? The Platts JKM for November was assessed at $ 5.535/MMBtu Oct. 9, its highest in 11 months, after spending much of the year languishing in the $2-$3 range. Some buying interest has emerged from North Asian buyers like Japan and South Korea. There was also a flurry of activity from Pakistan, with tenders being issued for at least nine spot LNG cargoes for this winter in a single week. The country’s government has allowed unutilized LNG terminal to be auctioned, and domestic gas production has been on the decline. On the supply side, Norwegian facilities have been affected by strikes and accidents, and US LNG terminals and gas production shuttered last week in anticipation of Hurricane Delta making landfall.

What’s next? Asian LNG markets are expected to continue tightening due to global producer outages and an uptick in winter procurement from regional buyers. There are indications of healthy downstream demand in North Asia, although high storage inventories are capping demand growth and much of the peak winter demand will depend on colder temperatures going forward.

 

4. European power demand down 6% in 2020, but Q4 tightness in focus

 

EU power trends 2020

What’s happening? Power demand in Europe’s five biggest markets has fallen 6% in the first three quarters of 2020 as the coronavirus pandemic reduced economic activity, data analyzed by S&P Global Platts show. The 85 TWh demand equates to the entire nine-month consumption of the Netherlands. Nuclear absorbed much of the drop, with generation down 61 TWh, while wind and solar output increased 41 TWh year on year. Coal continues to beat a steady retreat, down 39% or 60 TWh YoY, while gas generation was stable on year and up over a two-year view. Gas-fired generation now accounts for over 20% of power demand in the five markets, becoming a significant swing factor in the traditionally coal-dominated German market.

What’s next? While electricity demand is unlikely to see on-year gains before 2021, all eyes are on supply dynamics going into Q4 2020 after warnings of regional tightness across northwest Europe in September. French nuclear has been ramping up sharply and could soon erase deficits running since November last year, while new wind capacity will feed into the general thesis of greater surpluses at times, but also greater volatility when the wind drops. September price spikes reminded the market that lulls in wind can affect the whole of northwest Europe, prompting price-inflation competition on interconnections between the UK, France, the Netherlands and Belgium. Rising gas and falling CO2 prices have reduced gas generation’s advantage over coal, but clean spark spreads still justify the recent return of CCGT units in Germany and the Netherlands.

 

5. Copper keeps rising despite inventories, coronavirus woes

 

LME copper price

What happened? Copper has been on a run higher since the initial pandemic-induced sell-off. Back in April, mine closures boosted the metal, but now there are a variety of factors at play including  Chinese stimulus spending, the reopening of economies and general buoyancy in global equities. Another boost came from the UK government’s announced plan to power every home in the UK with wind power by 2030. The turbines required can have anywhere up to 6 mt of copper in them. This news sent the price even higher over the past week, helping copper to recover from a brutal sell-off linked to an increase of around 100,000 mt of metal in LME-registered warehouses.

What’s next? The bullish factors listed above appear to be negating the fact that global copper stockpiles are up, and a second wave of coronavirus is sweeping across Europe. The metal could go either way, but for now many seem to be positioning for a break towards $7,000/mt.

 

Reporting and analysis by Alan Struth, Sami Yahya, Ashutosh Singh, Eric Yep, Andreas Franke, Ben Kilbey



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Biden presidency could cut slow path to resumed Iran, Venezuela oil exports By Reuters

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© Reuters. FILE PHOTO: Democratic presidential candidate Joe Biden attends a Voter Mobilization Event in Cincinnati

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By Timothy Gardner, Marianna Parraga and Bozorgmehr Sharafedin

WASHINGTON/MEXICO CITY/LONDON (Reuters) – Democratic U.S. presidential hopeful Joe Biden’s promised return to diplomacy with OPEC-members Iran and Venezuela could cut a path for a return of their oil exports should he win, but not before many months at least of verifications, talks and deal-making.

The timing of a potential resumption of shipments is crucial to world oil markets: U.S. President Donald Trump’s unilateral sanctions on the two countries since taking office in 2017 have blocked up to 3 million barrels per day (bpd), or 3% of world supply. Iran has taken the biggest hit, with exports shrinking by around 2 million bpd to around 500,000 bpd.

The sanctions fit squarely with Trump’s policy of energy dominance to boost oil exports from the United States, which in 2018 became the world’s largest producer of crude.

A broad change in Iran policy would likely come first, but the soonest that full, sustainable oil exports could return from that country is about a year from now, said Richard Nephew, the lead sanctions expert on the U.S. team that helped land a deal with five other world powers on Tehran’s nuclear program in 2015.

Trump withdrew the United States from that deal in 2018 over the objections of European and Asian counterparts. He argued the deal did not address Iran’s ballistic missiles program and militancy across the Middle East.

Biden, who was vice president under President Barack Obama when the 2015 deal was struck, has said he wants to offer Tehran a path back to diplomacy. If Iran commits to not acquiring a nuclear weapon, he would rejoin the deal and strengthen it.

Nephew, now a research scholar at Columbia University’s Center on Global Energy Policy, said the requirement that Iran return to compliance with the 2015 deal would probably create implementation delays regardless of political agreements.

For example, Iran would need to downgrade its supplies of enriched uranium, which have built up during the Trump administration. Down-blending takes time, and verification by U.N. inspectors could take months.

As for negotiating a follow-on deal, that would take longer. A Biden administration would first be busy with the basic work of finalizing leadership teams and prioritizing policies, he said. Moreover, organizing multilateral negotiations on a new Iran deal would take additional time.

“This is going to wait,” Nephew said.

Bob McNally, a national security council energy expert under former President George W. Bush and president of the Rapidan Energy Group, predicted a return of Iran’s oil exports in the second half of next year.

European officials are eager for a renewed relationship with Iran if Biden wins, but have not attempted to engage with his campaign on the issue ahead of the election, fearing blowback from the Trump administration should Trump win, three EU diplomats said.

The Biden campaign did not comment on Iran about this story, but pointed to a Biden piece https://www.cnn.com/2020/09/13/opinions/smarter-way-to-be-tough-on-iran-joe-biden/index.html on CNN.com in September that said he would make an “unshakable commitment” to preventing Iran from acquiring a nuclear bomb.

Iran is not anticipating quick relief from sanctions that have slammed its economy, said the head of an oil trading firm in Tehran. A presidential election scheduled in Iran for June 18 would almost certainly delay talks on the issue.

“It will take a long time,” the source said.

Once the politics are resolved, large shipments could return quickly. Iran has accumulated about 100 million barrels of oil in floating storage and offshore tanks in countries like China, according to Iman Nasseri, managing director for the Middle East with consultancy FGE.

“Iranian oil can reach markets overnight,” he said. “Iran can rely on this export for months, while working to bring its production to previous levels.”

In the meantime, a Biden administration could be more lax in enforcing sanctions and award a new round of waivers, allowing a few countries to buy limited amounts of Iranian oil, said Ed Crooks, vice chairman, Americas for Wood Mackenzie. Trump axed the waiver program in 2019.

MURKIER PATH ON MADURO

Biden shares Trump’s desire to see the replacement of Venezuelan President Nicolas Maduro, a socialist whose 2018 election was widely seen as fraudulent.

Biden would likely retain sanctions against Venezuela’s state oil company PDVSA in the near-term, according to Leopoldo Martinez, a strategist for Biden’s campaign on the Latino vote.

But the strategy would probably shift substantially under Biden, with more input from allies and trading partners on a path forward.

“We are not seeking to dismantle the sanction policy, but to apply sanctions in an intelligent way, helped by a multilateral effort and with specific goals to be achieved, mainly free, fair and credible elections,” Martinez said.

Sanctions could theoretically be lifted once those goals are achieved.

Meanwhile, a Biden administration would also push for humanitarian relief in Venezuela, where much of the population has suffered under sanctions on oil, the lifeblood of its economy, Martinez said.

Rapidan, McNally’s group, said in a note that humanitarian relief could include an easing of U.S. sanctions on Venezuelan imports of fuels like gasoline, but not a break on sanctions on petroleum exports.

Even in the event of a change of leadership that resulted in a lifting of sanctions, a quick return of Venezuela’s exports beyond about 1 million bpd, up from about 500,000 bpd currently, is unlikely for six months to a year, Rapidan said.

A lack of investment has left equipment and fields in Venezuela, which holds the largest oil reserves in the world, in a state of disrepair.

“That one is a much more distant scenario than Iran,” Columbia’s Nephew said about Venezuela. “I’m not sure we have the same ability to call the shots there.”





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Monsanto loses final appeal over French farmer’s weedkiller accident By Reuters

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© Reuters. The logo of Monsanto is seen at the Monsanto factory in Peyrehorade

PARIS (Reuters) – Bayer’s (DE:) Monsanto (NYSE:) division on Wednesday lost a final appeal in a long-running French legal battle in which the crop chemical maker has been held liable for the accidental inhalation of a weedkiller by a crop farmer.

Monsanto had been trying to overturn a decision by an appeals court in 2019 that had found the company’s product safety information to have been inadequate in relation to the accident involving farmer Paul Francois in 2004.

France’s highest court rejected Monsanto’s latest appeal in a ruling published on Wednesday, opening the way for another court to decide on what damages should be awarded to Francois.

The farmer has argued that the fumes he inhaled from the weedkiller Lasso, a product that was subsequently withdrawn from the French market, caused neurological problems, including memory loss, fainting and headaches.

Bayer said in an emailed statement that it was reviewing the court ruling. Bayer also said in the statement that court-appointed medical experts had found previously that the incident did not cause the illnesses cited by Francois.

Crop protection products “do not present a risk to human health if they are used under the conditions of use defined in the context of their marketing authorisation,” Bayer said.

Anti-pesticide group Generations Futures, which has supported Francois in his court case, said it welcomed “this historic decision in which an agro-chemical multinational is at last found liable for the harm caused to this courageous farmer.”

Francois has previously sought damages of around 1 million euros ($1.2 million).

Bayer, which acquired Monsanto for $63 billion in 2018, has been facing a wave of litigation in the United States over allegations that Monsanto’s glyphosate-based weedkiller Roundup causes cancer.

Bayer, which argues Roundup is safe, is trying to settle the litigation through a proposed $11 billion payment.

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How High Are Copper Prices Going ? – Growing Your Money

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How High Are Copper Prices Going ?

Copper Futures—Copper futures in the December contract is trading higher for the 3rd consecutive session up another 465 points at 3.1955 a pound hitting a 2 ½ year high continuing its bullish momentum as this trend is strong to the upside.

Copper prices are trading far above their 20 and 100 day moving average as this trend continues to accelerate on a weekly basis as the housing market in the United States is extremely strong therefore demand for copper at the present time remains high as I still do not believe a top has been formed.

At the current time I’m not involved, however I do believe the entire precious metal sector is headed higher as I am keeping a close eye on gold and silver as I see no reason to be short copper and if you are long a futures contract continue to place the stop loss under the 10-day low which stands at the 3.03 level as an exit strategy.

The next major level of resistance is between the 3.30 / 3.50 level as there is still room to run to the upside as the volatility could even increase exponentially as historically speaking copper can have crazy price swings on a daily basis.

TREND:HIGHER

CHART STRUCTURE: POOR

VOLATILITY: HIGH

 

If you are looking to contact Michael Seery (CTA—COMMODITY TRADING ADVISOR) at 1-630-408-3325 I will be more than happy to help you with your trading or visit www.seeryfutures.com 

 

TWITTER—@seeryfutures 

 

 Email: mseery@seeryfutures.com

If you’re looking to open a Trading Account click on this link www.admis.com 

 

There is a substantial risk of loss in futures and futures options. Furthermore, Seery Futures is not responsible for the accuracy of the information contained on linked sites. Trading futures and options is Not appropriate for every investor.

 



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