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Half of global platinum mining production could be affected by the strikes

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Commerzbank commodities research

Commerzbank commoditiesIn all likelihood, South Africa will face strikes in the platinum mining industry next week. By its own account, the radical AMCU union, which represents the majority of South African mine workers in the platinum industry, will on Monday be issuing an official note to this effect to Lonmin, the world’s third-largest platinum producer. Unless the company submits an improved pay deal, workers will go out on strike there from Thursday. The AMCU’s members have also spoken out in favour of strikes at Impala Platinum, the world’s number two. A vote on whether to call members out on strike at Anglo American Platinum, the world’s largest platinum producer, is to be held at the weekend. Last quarter, the AMCU had already been given the go-ahead to strike by the state mediation authority, but has not taken any action so far. The union is demanding that wages be doubled.

According to industrial sources, up to half of global platinum mining production could be affected by the strikes. The platinum price responded hardly at all to yesterday’s announcement by the AMCU.

Given that Johnson Matthey estimates that the global platinum market showed a high 605 thousand ounce deficit last year and that this is unlikely to change significantly this year – depending on investment demand – we see catch-up potential for the platinum price.

What is more, the price is attempting to gain a foothold above the 200-day moving average, which could result in technical follow-up buying.

Analys

Crude oil comment: A price rise driven by fundamentals

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SEB - analysbrev på råvaror

Brent crude prices have maintained their upward momentum, rebounding from last week’s low of USD 70.7 per barrel, spurred by relief over limited Israeli retaliation toward Iran, which left energy infrastructure (both oil and nuclear) undamaged. Since that point, as projected, prices have risen by USD 4.6 per barrel in just seven days.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

This momentum has been further fueled in the last two days by changes in market fundamentals. Reports confirming OPEC+ plans to delay its previously scheduled oil production increase, originally set for December, have contributed to the continued rise, pushing prices up to the current level of USD 75.2 per barrel.

Late last week, Brent prices were also influenced by Iranian rhetoric, with Iran pledging further retaliation. The latest WSJ report suggests that Iran may be planning a ”strong and complex” response against Israel, likely after the US election. The report also notes that Israel’s October 26 strike inflicted significant damage on Iran’s air defenses, heightening tensions. While the timing of any Iranian response remains speculative, further hostilities between Iran and Israel appear very predictable.

Despite looming geopolitical uncertainty and the potential for a heightened risk premium, the impact of current market fundamentals remains significant. To our surprise, OPEC+ has confirmed it will postpone its planned December production increase of 180,000 barrels per day.

However, this deferral doesn’t remove the target of adding a cumulative 2.2 million barrels by December 2025. OPEC+ will continue to monitor the market, increasing supply as soon as conditions favor it, which will likely keep substantial oil price gains in check over the coming year.

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OPEC+ holds back on December increase while US produces more

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SEB - analysbrev på råvaror

OPEC+ will not to lift production by 180 kb/d in December as planned. Of course an effort to prevent the oil price from sliding lower. US crude oil production is at the same time ticking up by 38 kb/d/month in September and the growth pace looks like it is ticking higher by the month as new US shale oil production is growing faster than losses in existing production. US crude oil reached a new, all-time high of 13.4 mb/d in August. The US is not making it easy for OPEC+. The group is trying to tell the US: ”Slow your growth, because we need to produce more!”. To no wain it looks. Iranian sabre-rattling helps to lift Brent this morning.

Bjarne Schieldrop, Chief analyst commodities, SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Brent crude fell 3.9% last week in a sense of eased Iranian-Israeli tensions. Brent crude traded in a range of USD 70.72 – 76.05/b last week and closed down 3.9% week on week on Friday at USD 73.1/b. The low point last week was driven by relief that the Israeli retaliation towards Iran looked fairly limited with no damage to either oil infrastructure or nuclear installations. Muted rhetoric from Iran Iran to start with also helped to drive the price to its low point last week. Iranian rhetoric with promises of re-retaliation increased through the week and the oil price rose along with that towards the end of the week. What is for sure is that there will be more rocket exchanges between Iran and Israel to come. That barrier is totally broken.

But tensions are rising again as Iranian re-retaliation is in the planning. News this morning (Wall Street Journal) is that Iran is planning a ’Strong and complex’ re-retaliation attack on Israel at some point after the US election. The article also states that the Israeli attack on Iran on 26 October severely damaged parts of Iran’s air defenses. This isn’t over.

OPEC+ holds back planned increase in December to avoid price declines. Brent rises 2% to USD 74.5/b this morning as OPEC+ decides to delay its planned increase of 180 kb/d in December. The planned increase of a total of 2.2 mb/d over a 12 month period has however not been called off. That still hangs over the market as a dark cloud. It tells the market that there is limited upside in the oil price in the year to come. Global demand acceleration in 2025 – OPEC+ will take that. Disruptions in supply in 2025 – OPEC+ will step in and take that. It is only a massive loss of supply involving the Strait of Hormuz which would be out of the hands of OPEC+ to cover.

US crude oil production at new all-time high in August of 13.4 mb/d. Not making it easy for OPEC+. US production reaches new all-time high in August at 13.4 mb/d. Monthly controlled data released in late October showed that US crude oil production increased by 195 kb/d to 13.4 mb/d and a new all-time high in August. US NGLs increase by 135 kb/d to 7.03 mb/d as well. If we add together US crude, NGLs, bio, refinery gains and adjustments, then total US liquids probably came in at 23.13 mb/d in August. With US liquids demand at 20.4 mb/d it leads to a net US liquids export of 2.7 mb/d

US shale oil production growth pace is ticking higher. US shale oil production grew at a marginal, annualized pace of 451 kb/d/month in September. The annualized growth pace was 401 kb/d in August. The pace is picking up. US shale oil producers are not making it easy for OPEC+.

US crude oil production reached a new all-time high in August at 13.4 mb/d. Production of NGLs also increased. US crude + NGLs + bio + refinery gains + adjustments puts US total liquids production at more than 23.1 mb/d in August.

US crude oil production reached a new all-time high in August
Source: Graph by SEB, data by US EIA

US shale oil production grew at a marginal, annualized pace of 451 kb/d in. The growth pace is picking up as new production grows faster than legacy losses. 

US shale oil production grew at a marginal
Source: SEB calculations and graph. Data by US EIA.
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Analys

Brent rises on prospect of Middle East flare-up

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SEB - analysbrev på råvaror

Brent crude prices have extended their recent rally, reaching USD 74.3 per barrel this morning, marking a gain of USD 1.25 per barrel since last evening.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

Earlier in the week, signals pointed towards a potential de-escalation in Middle East tensions, with Israel reportedly considering a US-led initiative to address the conflict in Lebanon. However, as noted in yesterday’s crude oil comment, Israel’s military chief issued a strong warning, vowing a significant response should Iran attempt further aggression.

Fueling the recent surge in oil prices are reports from Axios (an American news outlet) suggesting that Iran is preparing to launch a retaliatory strike on Israel from Iraqi territory in the coming days. This heightens the likelihood of additional hostilities potentially erupting before the US election on November 5th.

According to the source, the anticipated attack would likely involve drones and ballistic missiles, with Iran potentially relying on allied militias in Iraq to carry it out. This approach may be a strategic effort by Tehran to avert a direct potential Israeli re-re-retaliation on Iranian soil.

While the situation in the Middle East could escalate sooner than expected, both Israel and Iran seem reluctant to ignite a full-scale regional war. Thus, any additional responses from Iran might remain restrained, similar to Israel’s limited strike last weekend, hence primarily intended as a demonstration of strength rather than an invitation to open warfare.

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