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SHB Råvarubrevet 27 april 2012

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Handelsbanken - Råvarubrevet inklusive ädelmetallerRåvaror Allmänt

Våra vyer:

  • Energi: Neutral
  • Basmetaller: Neutral
  • Ädelmetaller: Neutral
  • Livsmedel: Neutral

Marknaden har sedan förra veckobrevet fortsatt att präglas av svagare riskaptit. Europeiska börser har fallit cirka fem procent och krediter har surnat. Europabaisse och sämre makrostatistik har präglat Europa medan amerikanerna har fokuserat på den förvånansvärt starka rapportsäsongen.

I Europa är utvecklingen fortsatt svagare än väntat. Nu senast pekar det sammanvägda inköpschefsindexet på att BNP började krympa igen i början av det andra kvartalet. I detta makroklimat blir det svårt för de flesta länder att möta sina budgetmål. Obligationsmarknaden uttrycker återigen stress efter att LTRO effekten nu är över. Den politiska agendan innehåller många orosmoln och marknaden befarar sannolikt ett politiskt vakuum.

ECB:s Draghi mjuknade något under veckan. I sitt tal till Europaparlamentet hänvisade han inte längre till ekonomins gradvisa återhämtning utan valde istället att betona valutaunionens svåra utmaningar. Bland annat sade han att likviditetsinjektionerna (LTRO) inte gett lika positiva ekonomiska effekter som ECB hoppats och att det är först nu som den finanspolitiska åtstramningen till fullo gör sig känd.

Vi har länge varit oroliga för Europa men påtalar att vi inte tror att krisen kommer att påverka den globala konjunkturen i större utsträckning.

Energi (neutral)

Elmarknaden

Elmarknaden steg något mot slutet av veckan efter att våta och milda prognoser slagit om till temperaturer under normalt för perioden och något torrare än tidigare vilket framför allt stärkt den korta kurvan. Tredje kvartalet handlas i skrivande stund kring 32 euro (en ökning om ca 2 procent över veckan) vilket är en bra bit under marginalkostnaden för kolgenererad kraft (marginalkostnad för kol sätter ofta priset på nordisk kraft under ett normalår, det vill säga normal hydrologi) som ligger kring 41.25 EUR/MWh. Marknaden har sannolikt diskonterat den goda energibalansen och räknat med väldigt låga priser på el under sommaren. Spotpriset för april har hittills blivit 32.30 euro vilket är 5.5 euro högre än den nivå där aprilkontraktet stängde i mars. Detta har sannolikt genererat en del köpintressen för det tredje kvartalet. Vi ser ut att få strax under 4 TWh nederbörd under kommande 10-dagarna vilket skulle innebära att energibalansen i Sverige + Norge kommer att vara ca +10.5TWh efter vecka 18. Med denna prognos räknar vi med att marknaden handlas oförändrat de kommande dagarna. Inte heller energikol eller utsläppsrätterna ger någon tydlig riktning.

Olja

Oljepriset har fluktuerat en hel del under veckan. På onsdagen föll priset på Brent som lägst till 117,45 USD/fat efter rykten om att Iran kan komma att kompromissa med sitt kärnvapenprogram för att undgå sanktioner från EU. Även stigande lager på olja satta press på priset. Amerikanska lagersiffror från Department of Energy visade råoljelager som steg mer än väntat, 3,9 miljoner fat mot väntade 2,8 miljoner fat. I skrivande stund handlas Brent-oljan på 119,73 USD/fat vilket är cirka 1 USD högre än veckans öppning.

Amerikanska oljelager - 2011 - 2012

Basmetaller (neutral)

Koppar

Koppar har gått upp 2,59 % under veckan och vi kan summera uppgången under året till 10,62 %. Det som drivit uppgången under veckan är rapporter om att Kina ska dra ned produktionen med 700 000 ton på årsbasis. Priset fann också stöd från Federal Reserve som upprepade att de skulle understödja tillväxten om det behövdes. Intressant i sammanhanget är att det förekommit rykten kring världens största kopparproducent, Codelco. Ryktet gör gällande att Codelco fått köpa in koppar på marknaden för att kunna fullfölja sina leveranskontrakt. Anledningen skulle vara produktionsproblem i deras chilenska gruvor. Trots alla dessa faktorer som talar för en stark kopparmarknad, så är vi neutrala till koppar och basmetaller. Den makroekonomiska utvecklingen är fortfarande svårtydd, med ett flertal utestående frågetecken.

Kopparpriset 3 månader rolling forward

Nickel

Nickel har gått upp 2,72 % under veckan och vi kan summera året till -2,24 %. Ett flertal rapporter under veckan har belyst vilka råvaror som kommer efterfrågas i det framtida Kinas konsumtionsstyrda ekonomi. De råvaror som borde gynnas är aluminium, nickel, palladium och guld. De metaller som missgynnas i en icke-investeringsstyrd ekonomi är stål, koppar och zink. Nickel skulle gynnas eftersom en konsumtionsstyrd ekonomi använder en högre andel rostfritt stål, där nickel är en viktig komponent. Efterfrågan på aluminium skulle öka eftersom Kinas nya elnät skulle baseras på aluminium och inte koppar. Palladium används i bilars katalysatorer och med en ökad miljömedvetenhet i Kina kommer efterfrågan att gå upp. Vår vy på nickel och basmetaller är fortfarande neutral, då vi anser att ovanstående faktorer är av långsiktig natur och kommer inte påverka priset i närtid.

Diagram med graf över nickelpriset

Livsmedel (neutral)

Vete

Vetet i Chicago har gått upp något i pris under veckan, + ca. 0,8 procent, medan vetet i Paris är ned drygt 1,8 procent. Det amerikanska vetet har fått lite torrare och varmare väder under veckan, i nästa vecka väntas återigen lite nederbörd vilket kommer gynna grödan. I Europa är situationen ungefär som den var förra veckan, ganska blött och kallt generellt sett men lite torrt i väst och lite blött i öst. I Ryssland och Ukraina önskas mer regn, men än så länge finns det inga större skäl till oro. Skicket på det amerikanska höstvetet är i stort sett oförändrat sedan förra veckan – d.v.s. väldigt bra! 42 procent av höstvetet har nu gått i ax, att jämföra med snittet för de senaste fem åren om 15 procent. Minst lika väl står det till med vårvetet i USA, sådden bedöms vara avklarad till hela 57 procent, långt mer än genomsnittet för de senaste fem åren om 19 procent. Av vårvetet har dessutom 18 procent nått uppkomststadiet, vid samma tidpunkt var siffran 2 procent.

Majs

Majsen i Chicago noteras upp något sedan förra veckan, + ca. 0,4 procent. Lite regn under veckan har saktat ned arbetet med sådden något, men nederbörden gynnar samtidigt redan sådd majs. I nästa vecka väntas återigen lite torrare väder och sådden bör kunna fortgå i bra takt. I söndags uppgavs 28 procent av den amerikanska majsen vara sådd, inte längre rekordsnabbt men fortfarande klart större andel avklarad än genomsnittet för de senaste fem åren om 15 procent. Från Argentina rapporteras om växlande väderlek men inga större problem för pågående sådd.

Sojabönor

Sojabönorna i Chicago fortsätter uppåt i pris och noteras upp ca. 1,8 procent sedan fredagens stängning. Sojapriset är nu uppe på nivåer vi inte sett sedan mitten av år 2008 och för tillfället är det svårt att se några skäl till att priserna ska vända nedåt. Fortfarande är den allmänna uppfattningen att USDA ännu överskattar den sydamerikanska skörden och framtida nedjusteringar väntas, vilket ger viss osäkerhet och stöd till priserna. Starkt stöd under veckan har kommit även från fortsatt stark efterfrågan, främst från Kina som fortsätter köpa amerikansk soja av både gammal och ny skörd.

Softs

Socker

Priset på socker har sedan årets början sjunkit 2,3 % i London och 6,6 % i New York. Förra veckan såg vi en tillfällig prisuppgång baserat på vad som verkar vara handel inför Ramadan. Egypten har köpt 50,000 ton och Tunisien 54,000 ton inför Ramadan som börjar i juli. Det fortsatta stora utbudet på marknaden fortsätter att hålla sockret på låga nivåer. Estimatet på Brasiliens 2012/13 skörd är upp ca 1,6 M ton. Indien verkar genomgå en normal monsunperiod och kan därmed komma att undvika torka. I och med detta finns det inte längre någon större oro för tillgången av socker på marknaden vilket även det bidragit till prisnedgången i veckan. Sockret är för tillfället nere på elva månaders lägsta.

Sockret är för tillfället nere på elva månaders lägsta

Kaffe

Priset på kaffe föll i veckan till ett månadslägsta till följd av att man påbörjat Arabicaskörden i delar av Brazilien (områdena Rondonia och Espirito Santo) samt p.g.a. att skörden förväntas bli ca 1,8 % större än tidigare estimat. I veckan publicerades siffror från USA, världens största kaffe konsument, som visar på 3% högre kaffekonsumtion jämfört med året innan. Antalet konsumerade koppar var 88,7 miljarder med ett värde på ca 56,95 miljarder US$.

Nybot - CSC Coffe future

Handelsbankens Råvaruindex

Handelsbankens råvaruindex den 27 april 2012

[box]SHB Råvarubrevet är producerat av Handelsbanken och publiceras i samarbete och med tillstånd på Råvarumarknaden.se[/box]

Ansvarsbegränsning

Detta material är producerat av Svenska Handelsbanken AB (publ) i fortsättningen kallad Handelsbanken. De som arbetar med innehållet är inte analytiker och materialet är inte oberoende investeringsanalys. Innehållet är uteslutande avsett för kunder i Sverige. Syftet är att ge en allmän information till Handelsbankens kunder och utgör inte ett personligt investeringsråd eller en personlig rekommendation. Informationen ska inte ensamt utgöra underlag för investeringsbeslut. Kunder bör inhämta råd från sina rådgivare och basera sina investeringsbeslut utifrån egen erfarenhet.

Informationen i materialet kan ändras och också avvika från de åsikter som uttrycks i oberoende investeringsanalyser från Handelsbanken. Informationen grundar sig på allmänt tillgänglig information och är hämtad från källor som bedöms som tillförlitliga, men riktigheten kan inte garanteras och informationen kan vara ofullständig eller nedkortad. Ingen del av förslaget får reproduceras eller distribueras till någon annan person utan att Handelsbanken dessförinnan lämnat sitt skriftliga medgivande. Handelsbanken ansvarar inte för att materialet används på ett sätt som strider mot förbudet mot vidarebefordran eller offentliggörs i strid med bankens regler.

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3 Kommentarer

3 Comments

  1. Yoda

    2 maj, 2012 vid 00:09

    Jag tycker att ni gör ett bra jobb
    men tänk på att världen håller på att tömma sig på naturresursser
    vilket leder till snart galloperande PRISER
    när det sker det är frågan HMMm

    • Redaktionen

      2 maj, 2012 vid 00:25

      Tack Yoda!

      Helt klart använder vi mer naturresurser. Och upplägget många investerar efter är att priserna därför långsiktigt kommer att stiga.

      Men vill samtidigt passa på att tipsa om den ganska färska artikeln nedan från CPM Group, som varnar för att investera enligt den modellen. Enligt deras undersökning har priserna på råvaror, justerat för inflation, inte gått upp, utan ner, trots en mångdubblad användning av råvaror.

      Å andra sidan, man kan inte alltid lita på historisk utveckling för att förutspå framtiden. Men kanske ändå något att ha i åtanke, innan man tar allt för stora spekulativa positioner :-)

      http://ravarumarknaden.se/a-simple-route-to-ruin-commodity-prices/

  2. Yoda

    2 maj, 2012 vid 00:17

    Jag skulle gärna vilja veta vad ni tror om oljan tio år frammår
    (priser) samt vad tror ni om kopparn mm.
    kan ni dra ned det till fem år tio år samt femtonår så vore det bra
    det vore nått för spekulanter och även andra att bita i

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Analys

Bearish momentum may return but strategic buying is starting to kick in

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SEB - analysbrev på råvaror

EUA price action: The seeds of the rally may have come from Red Sea troubles, higher freight rates and higher ARA coal prices. Add in record short positioning in EUAs, nat gas being cheap relative to oil in Asia, participants in the EU ETS purchasing EUAs strategically, rising temperature adj. nat gas demand in Europe (though absolute demand still very, very weak due to warm weather) and lastly a weather forecast pointing to more normal temperatures in North West Europe. And ”Bob’s your uncle”, the EUA Dec-24 price rallied 10.8% from EUR 52.2/ton on Feb 26 to EUR 57.84/ton ydy.

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

It is normal with short-covering rallies in bear markets. What puzzled us a little was the involvement of coal prices in the rally together with nat gas and EUAs. Did the upturn in coal prices come from the Chinese market with participants there maybe sniffing out some kind of imminent, large government stimulus package and front-running the market?  No. There has been no rally in iron ore and the upturn in coal prices in Asia have been lagging the upturn in ARA coal prices.

Did the rally come from the Utility side in Europe where Utilities jumped in and bought Coal, Gas and EUAs and selling power against it? Probably not because forward fossil power margins are still very negative.

The most plausible explanation for the upturn in coal prices is thus Red Sea troubles, higher dry freight rates and higher ARA coal prices as a result. ARA coal prices bottomed out on 14 Feb and then started to move higher. The Baltic dry index started to rally already in mid-January. This may have been the seeds which a little later helped to ignite the short-covering rally in nat gas and EUAs. Add in a) Record short positioning in EUA contracts by investment funds with need for short-covering as EUA prices headed higher, b) Japanese LNG trading at only 58% versus Brent crude vs. a 2015-19 average of 73% thus nat gas was cheap vs. oil, c) Participants in the EU ETS starting to buy EUAs strategically because the price was close to EUR 50/ton, d) Gradually improving nat gas demand in Europe in temperature adjusted terms though actual.

Mixed price action this morning. Bearish momentum may return but strategic buying is kicking in. Today the EUA price is falling back a little (-0.3%) along with mixed direction in nat gas prices. The coal-to-gas differential (C-t-G diff) for the front-year 2025 still looks like it is residing at around EUR 47/ton and lower for 2026 and 2027. We expect C-t-G diffs to work as attractors to the EUA price from the power market dynamics side of the equation. Thus if nat gas prices now stabilizes at current levels we should still see bearish pressure on EUAs return towards these C-t-G diff levels. The forward hedging incentive index for power utilities in Germany is still deeply negative with no incentive to lock in forward margins as these largely are negative. Thus no normal purchasing of EUAs for hedging of power margin purposes.

That said however. We do see increasing interest from corporate clients to pick up EUAs for longer-term use and strategic positioning and that will likely be a counter to current bearish power market drivers. Even utilities will likely step in a make strategic purchases of EUAs. Especially those with coal assets. Irrespective of current forward power margins. An EUA price below EUR 60/ton is cheap in our view versus a medium-term outlook 2026/27 north of EUR 100/ton and we are not alone holding the view.

The Baltic dry index (blue) bottomed in mid-Jan and rallied on Red Sea issues. European coal, ARA 1mth coal price (white) bottomed on 14 Feb and then rallied. 

The Baltic dry index (blue) bottomed in mid-Jan and rallied on Red Sea issues. European coal, ARA 1mth coal price (white) bottomed on 14 Feb and then rallied.
Source: Blbrg graph and data

ARA 1mth coal price in orange starting to move higher from 14 Feb. EUA Dec-24 price bottomed for now on 26 Feb

ARA 1mth coal price in orange starting to move higher from 14 Feb. EUA Dec-24 price bottomed for now on 26 Feb
Source: Blbrg graph, SEB highlights

Net speculative positioning in EUAs by financial players. Record short

Net speculative positioning in EUAs by financial players. Record short
Source: Blbrg graph and data

Price of Japanese LNG vs price of TTF nat gas as a spread in EUR/MWh. Rising price of Japanese LNG vs. TTF. But this could be coming from changes in LNG freight rates

Price of Japanese LNG vs price of TTF
Source: SEB graph and calculations

Price of Japanese LNG vs. Brent crude traded all the way down to 58% making it cheap in relative terms to oil.

Price of Japanese LNG vs. Brent crude
Source: SEB graph and calculations, Blbrg data

The German forward hedging incentive index just getting more and more negative

The German forward hedging incentive index just getting more and more negative
Source: SEB calculations and graph

Forward EUA prices in green (today’s prices) and the EUA balancing price for Coal power vs Gas power in lilac. The latter is calculated with today’s nat gas prices and closing prices for ARA coal from ydy. In a medium-tight EUA market the Coal-to-Gas differential in lilac will typically be an ”attractor” for the EUA price in terms of power market dynamics.

Forward EUA prices in green (today's prices) and the EUA balancing price for Coal power vs Gas power in lilac.
Source: SEB graph and calculations, Blbrg data
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Analys

A ”Game of Chicken”: How long do you dare to wait before buying?

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SEB - analysbrev på råvaror

The EUA market rallied 3.4% ydy and is adding another 0.5% this afternoon with EUA Dec-24 at EUR 54.2/ton. Despite the current bounce in prices we think that the ongoing sell-off in EUA prices still has another EUR 10/ton downside from here which will place the low-point of EUA Dec-24 and Dec-25 at around around EUR 45/ton. Rapidly rising natural gas inventory surplus versus normal and nat gas demand in Europe at 23% below normal will likely continue to depress nat gas prices in Europe and along with that EUA prices. The EUA price will likely struggle to break below the EUR 50/ton level, but we think it will break.

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

That said, our strong view is still that the deal of the year is to build strategic long positions in EUA contracts. These certificates are ”licence to operate” for all companies who are participants in the EU ETS irrespective whether it is industry, shipping, aviation or utilities. We have argued this strongly towards our corporate clients. The feedback we are getting is that many of them indeed are planning to do just that with board approvals pending. Issuance of EUAs is set to fall sharply from 2026 onward. The Market Stability Reserve (MSR) mechanism will clean out any surplus EUAs above 833 m t by 2025/26. Medium-term market outlook 2026/27 is unchanged and not impacted by current bearish market fundamentals with fair EUA price north of EUR 100/ton by then. Building strategic long position in EUAs in 2024 is not about pinpointing the low point which we think will be around EUR 45/ton, but instead all about implementing a solid strategic purchasing plan for EUAs for 2024.

The ingredients in the bottoming process will be: 1) Re-start of European industry as energy prices come down to normal, 2) Revival in nat gas demand as this happens, 3) Nat gas prices finding a floor and possibly rebounding a bit as this happens, 4) Asian nat gas demand reviving as nat gas now normally priced versus oil, 5) Strategic purchasing of EUA by market participants in the EU ETS, 6) Speculative buying of EUAs, 7) Bullish political intervention in H2-24 and 2025 as EU economies revive on cheap energy and politicians have 2024-elections behind them.

On #1 we now see calculations that aluminium smelters in Europe now are in-the-money but not restarted yet. On #2 we see that demand destruction (temp. adj.) in Europe is starting to fade a bit. On #3 we have not seen that yet. On #4 we see stronger flows of LNG to Asia. On #5 we see lots of our corporate clients planning to purchase strategically and finding current EUA prices attractive.  On #6 it may be a bit early and so as well for #7.  

For EU ETS participants it may be a ”Game of Chicken”: How long do you dare to wait before buying? Those who wait too long may find the carbon constrained future hard to handle. 

Ydy’s short-covering rally lost some steam this morning before regaining some legs in the afternoon. The EUA Dec-24 ydy rallied 3.4% to EUR 53.97/ton in what looks like a short-covering-rally in both coal, nat gas, power and EUAs. This morning it gave almost all of the gains back again before regaining some strength in the afternoon to the point where it is now up at EUR 54.7/ton which is +1.4% vs. ydy. A weather forecast promising more seasonally normal temperatures and below normal winds could be part of the explanation.

The power market is currently the main driver and nat gas prices the most active agent. The main driver in the EUA market is the power market. When the EUA market is medium-tigh (not too loose and not too tight), then the EUA price will naturally converge towards the balancing point where the cost of coal fired electricity equals the cost of gas fired electricity. I.e. the EUA price which solves the equation: a*Coal_price + b*EUA_price = c*Gas_price + d*EUA_price where a, b, c and d are coefficients given by energy efficiency levels, emission factors and EURUSD fex forward rates. As highlighted earlier, this is not one unique EUA balancing price but a range of crosses between different efficiencies for coal power and gas power versus each other.

Coal-to-gas dynamics will eventually fade as price driver for EUAs but right now they are fully active. Eventually these dynamics will come to a halt as a price driver for the EUA price and that is when the carbon market (EU ETS) becomes so tight that all the dynamical flexibility to flex out of coal and into gas has been exhausted. At that point in time the marginal abatement cost setting the price of an EUA will move to other parts of the economy where the carbon abatement cost typically is EUR 100/ton or higher. We expect this to happen in 2026/27.

But for now it is all about the power market and the converging point where the EUA price is balancing the cost of Coal + CO2 equal to Gas + CO2 as described above. And here again it is mostly about the price of natural gas which has moved most dramatically of the pair Coal vs Gas.

Nat gas demand in Europe is running 23% below normal and inventories are way above normal. And natural gas prices have fallen lower and lower as proper demand recovery keeps lagging the price declines. Yes, demand will eventually revive due low nat gas prices, and we can see emerging signs of that happening both in Europe and in Asia, but nat gas in Europe is still very, very weak vs. normal. But reviving demand is typically lagging in time vs price declines. Nat gas in Europe over the 15 days to 25. Feb was roughly 23% below normal this time of year in a combination of warm weather and still depressed demand. Inventories are falling much slower than normal as a result and now stand at 63.9% vs. a normal 44.4% which is 262 TWh more than normal inventories.

Bearish pressure in nat gas prices looks set to continue in the short term. Natural gas prices will naturally be under pressure to move yet lower as long as European nat gas demand revival is lagging and surplus inventory of nat gas keeps rising rapidly. And falling front-end nat gas prices typically have a guiding effect on forward nat gas prices as well.

Yet lower nat gas prices and yet lower EUA prices in the near term most likely. Nat gas prices in Europe will move yet lower regarding both spot and forwards and the effect on EUA will be continued bearish pressure on prices.

EUA’s may struggle a bit to break below the EUR 50/ton line but most likely they will. EUA prices will typically struggle a bit to cross below EUR 50/ton just because it is a significant number. But it is difficult to see that this price level won’t be broken properly as the bearish pressure continues from the nat gas side of the equation. Even if nat gas prices comes to a halt at current prices we should still see the EUA price break below the EUR 50/ton level and down towards EUR 45/ton for Dec-24 and Dec-25.

The front-year nat gas price is the most important but EUA price should move yet lower even if it TTF-2025 stays unchanged at EUR 27.7/ton. The front-year is the most important for the EUA price as that is where there is most turnover and hedging. The following attractors for the EUA forward prices is with today’s TTF forward price curve (TTF Cal-2025 = EUR 27.7/ton) and today’s forward EURUSD FX curve and with ydy’s ARA coal closing prices. What it shows is that the forward EUA attractors are down at EUR 45/ton and lower.

The front-year Coal-to-Gas differential is the most important ”attractor” for the EUA price (Cal-2025 = average of Dec-24 and Dec-25) and that is down to around EUR 45/ton with a TTF Cal-2025 price of EUR 27.7/ton. The bearish pressure on EUA prices will continue as long as the forward nat gas prices are at these price levels or lower.

The front-year Coal-to-Gas differential is the most important "attractor" for the EUA price
Source: SEB graph and calculations, Blbrg data

And if we take the EUA attractors from all the different energy efficiency crosses between coal and gas then we get an average attractor of EUR 44.2/ton for EUA Cal-2025 (= average of Dec-24 and Dec-25) versus a market price today of EUR 53.9/ton.

Calculating all the energy efficiency crosses between coal and gas power plants with current prices for coal and nat gas for 2025 we get an average of EUR 44.2/ton vs an EUA market price of EUR 53.9/ton. Bearish pressure on EUAs will continue as long as this is the case.

Calculating all the energy efficiency crosses between coal and gas power plants with current prices for coal and nat gas
Source: SEB graph and calculations, Blgrg data

Utility hedging incentive index still deeply negative: Utilities have no incentive currently to buy coal, gas and EUAs forward and sell power forward against it as these forward margins are currently negative => very weak purchasing of EUAs from utilities for the time being. 

Utility hedging incentive index
Source: SEB calculations and graph, Blbrg data

Natural gas in Europe for different periods with diff between actual and normal decomposed into ”price effect” and ”weather effect”. Demand last 15 days were 23% below normal!

Natural gas demand in Europe
Source: SEB calculations and graph, Blbrg data

Natural gas inventories in Europe vs the 2014-2023 average. Surplus vs. normal is rising rapidly.

Natural gas inventories in Europe vs the 2014-2023 average. Surplus vs. normal is rising rapidly.
Source: SEB graph and calculations, Blbrg data

Nat gas inventories in Europe at record high for the time of year. Depressing spot prices more and more. Nat gas prices are basically shouting: ”Demand, demand, where are you?? Come and eat me!”

Nat gas inventories in Europe at record high for the time of year
Source: SEB graph and calculations, Blbrg data
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Analys

Comfort zone for OPEC+ in 2024 as fundamentals gradually improve in its favor

Publicerat

den

SEB - analysbrev på råvaror

Back to its sideways trade range and inching almost unnoticeable higher as the year progresses. Brent crude is up 0.2% this morning to USD 82.7/b along with copper (+0.3%) and Shanghai equities (+1.0%). Brent crude saw some bearish action at the end of last week but it recovered a good portion of that ydy (+1.1%) and then a little more again this morning. With this it has mostly returned back to its sideways trading pattern.

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

Brent crude averaged USD 79.1/b in January. So far in February it has averaged USD 81.5/b and at the moment it trades at USD 82.7/b. Typical market comments these days are along the theme ”looking for direction” or ”waiting for new signals on supply or demand”. But other comments are more attuned to a view that the direction is indeed sideways this year. Argus last week describe the outlook for the supply/demand balance for 2024 as ”almost perfectly aligned” and Goldman adds to this view in a note yesterday with ”oil set to extend its tight trading range”.

Cease-fire in Gaza on Monday 4 March may create a buying opportunity. News this morning is Biden expressing hopes that a cease-fire in Gaza may start as soon as Monday next week. In our view there is basically zero risk premium in the current oil price due to Middle East tensions. So if the oil price sells off on firm news of a cease-fire, then it is probably a good buying opportunity in our view.

We maintain our strong view of an average Brent crude oil price of USD 85/b in 2024. Total US crude and product stocks including SPR has gone flat sideways since the end of 2022, all through 2023 and has continued to do so in 2023. US oil inventories are below where they were one year ago both when SPR is included and excluded. This is a reflection of a global oil market in balance though OPEC+ has indeed been the balancing agent.

For the year to come, total US hydrocarbon liquids production is forecast by the US EIA to go flat sideways until October this year and in Q4-24 US production is forecast to be only 0.1 m b/d above Q4-23. So no damaging super-growth from the US to kill the oil party this year. In its last monthly report the US EIA actually reduced its forecast for US production by 100 k b/d to 22.3 m b/d (all liquids included). Russia’s energy minister, Nikolay Shulginov, stated in Tass news agency recently that he expects Russian oil production to decline to 530 mn ton in 2024 from 523 mn ton in 2023. That’s a decline of 1.3% YoY and would equate to a decline of 120-130 k b/d decline YoY. So neither of these oil producing giants are set to unsettle the global oil market this year with too much supply.

Demand growth looks set to be a normal 1.3 m b/d in 2024. The most bearish on oil demand growth is probably the IEA which predicts demand to grow on by 1.2 m b/d YoY in 2024. The US EIA expects demand to grow by 1.4 m b/d. But if we look closer at the numbers from the IEA it expects demand to rise by 1.6 m b/d YoY from Q4-23 to Q4-24. Together with muted supply from both the US and Russia this year this all sums up to a gradually rising need for oil from OPEC through 2024. This made us write the headline ”Better and better every day” in a crude oil comment in late January. Demand for oil from OPEC doesn’t look stellar. But it looks set to be better and better through the year and that is most definitely a great comfort zone for OPEC+.

Sideways, yes, but normal trade range around the mean is still usually +/- USD 20/b. Amid all the current calmness, let us still not forget that Brent crude usually trades in a range through the year of +/- USD 20/b around the mean as there are always some surprises along the way. We don’t think that the situation in the Middle East will spiral out of control into an all-out regional war involving Iran and resulting in large losses of oil supply to the market. And we don’t think there are much risk premium in current oil prices related to this either. But at times in 2024 it may look like it might happen. And that’s probably when you would see the high price point of the year. Maybe as high as USD 105/b. On the bearish we do not think that we’ll have a major economic slowdown or a recession in 2024. But at times in 2024 it may look like we are about to tip into a major slowdown and that would probably be when you’d see the low price point of the year. Maybe as low as USD 65/b.

Total US crude and product stocks incl. SPR has gone sideways since end of 2022, all through 2023 and so far in 2024. Currently it is only 13 m b above the low-point in late 2022!

Total US crude and product stocks incl. SPR
Source: SEB graph, Blbrg data

Commercial US crude and product stocks are below normal and below last year.

Commercial US crude and product stocks are below normal and below last year.
Source: SEB graph and calculations, Blbrg data

US Commercial oil inventories vs. the 2015-19 average. Still struggling with a significant deficit of middle distillates.

US Commercial oil inventories vs. the 2015-19 average.
Source: SEB graph and calculations, Blbrg and EIA data

US refinery utilization at very low level vs. normal. Extensive maintenance this spring is expected. Result will be low production of oil products, falling inventories of oil products, higher refining margins but also rising crude stocks.

US refinery utilization at very low level vs. normal.
Source: SEB graph and calculations, Blbrg data

US EIA forecast for total US liquids production. To go sideways in 2024 to Oct-2024.

US EIA forecast for total US liquids production
Source: SEB graph and calculations, US EIA data STEO

Strong growth in US supply in 2022 and 2023. But 2024 is only set to grow 0.5 m b/d YoY on average. The growth in 2024 is in part a result of production in 2023 starting low and ending high. But from Jan to Oct 2024 US production will go sideways and only rise by 0.1 m b/d YoY from Q4-23 to Q4-24.

YoY change in total US hydrocarbon liquids production
Source: SEB calculations and graph, US EIA data STEO

Global floating crude stocks at 66 m b and not too far above the more normal 50 m b level.

Global floating crude stocks
Source: SEB graph, Blbrg data

IEA Feb-2024 OMR: Call-on-OPEC is rising gradually through 2024. Better and better for OPEC every quarter to Q3-24

Source: SEB graph, IEA data
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