Weekly Report of Energy Market in China Chem

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Weekly Report of Energy Market in China Chem Powered By Docstoc
					                                      Energy Market

Crude Oil

Oil Analysis
Market players continued to worry about         Figure 1: Crude Oil Price Movement, USD/bbl
unrest in the Middle East and North
Africa. Crude oil inventories in the US,
especially in Cushing, reached record
highs, which depressed WTI prices, and
front-month       Brent/WTI      premium
widened to $11.56/bbl. On relevant
policy side, president of Libya’s National
Oil Cooperation said Libyan oil output
had decreased by two-thirds, and
deteriorating uprising in the Middle East
kept driving up global crude prices; EIA
will publish the March Short-term
Energy Outlook on Tuesday, OPEC will
                                                Natural Gas Futures Prices for Week Ended Mar
release Monthly Oil Market Report on
                                                                 10, USD/mmBtu
Friday, and IEA will report forecast of
                                                                            Weekly Averages
oil demand on March 15; analysts
                                                Product     Mar 9 Current Prior
expected that rising crude prices would                                                  Markup
                                                                       Week        Week
constrain demand and EIA might revise
                                               Nat. Gas      3.93       3.91        3.91    0
down forecast of oil demand. On the
supply and demand side, according to
                                                    LNG Closing Prices in E-China, CNY/mt
EIA inventory data released on
Wednesday, as of the week ended on                  Product         Mar 10        Mar 3  Markup
March 4, crude oil stocks in the US rose       Domestic-made         6,230        6,230     0
by 2.52 million barrels, and Cushing               Imported          7,000        7,000     0
stockpiles rose 1.7 million barrels to a record high of above 40 million barrels.

The future of geopolitical issues remains unclear. But if these issues ease and don’t affect supply
actually, global crude oil prices will drop. Premium between European and US crude oil prices
will remain wide on high inventories in the US and transportation problems in transit warehouse
in New York. Whilst inflation pressure is intensifying in Europe and debt crisis is still surrounding
European market, so dollar may rebound in the near term. Crude oil prices may drop next week.
                   WTI and Brent Prices for Week Ended Mar 10, USD/bbl
                                   Weekly Averages                     Monthly Averages
  Product     Mar 9      Current        Prior
                                                    Markup        MTD          Feb       Markup
                          Week          Week
   WTI        104.38      104.95        99.61           +5.34     103.29      89.57       13.72
   Brent      115.94      114.68        114.52          +0.16     115.22      104.03      11.19

Refined Oil

This week domestic refined oil market continued previous uptrend, but at a slower pace, since in
most regions prices had reached the highest allowed limit of wholesale or retail prices. Overall
tight supply of gasoline contributed to price hikes. According to Chem99, in most regions, sales
companies of Sinopec and PetroChina limited sales volumes of gasoline to ensure enough supply
in the future. Diesel prices inched up on anticipation of warmer demand, although demand didn’t
recovered now. Currently, increases of change of weighted moving average of a basket of
international crude prices (Brent, Dubai and Cinta) intensified an expectation of price adjustment.
So the major driver for ongoing price hikes is bullish market sentiment. Next week, the room for
further hikes is limited as in most regions prices already reached the highest allowed limit.
                       Domestic Refined Oil Spot Market Prices, CNY/mt
                                   Sinopec&PetroChina             Other Refineries(Shandong)
                              Mar 10       Weekly Markup          Mar 10       Weekly Markup
   Gasoline GBⅡ93#             8,140                0              7,950               +100
     Diesel GBⅡ0#              9,260                0              8,650               +150

Fuel Oil

Risk aversion and speculative buying this week were               Fuel Oil Prices, CNY/mt
boosted by unrest in Libya and the Middle East.                      Mar 10 Mar 3 Markup
Crude futures remained above S100/bbl. However,             Spot      4,735      4,715        +20
crude price hike was restricted by high inventory
                                                         Futures      4,823      4,847        -24
level and OPEC’s meeting on output increase. Asian
fuel oil prices inched down. In domestic fuel oil market, slurry oil was stable on soft demand,
while residual oil and marine fuel oil kept rising due to tight supply and stable demand. Margins
of marine fuel oil inched up. Deficit of 180cst marine fuel oil blended by 380cst fuel oil decreased.
Next week crude oil market will remain fluctuate and domestic fuel oil market will be stable
basically with slight adjustments.
                                     Financial Brief


After slipping in two weeks in a
                                                     Major Global Stock Indexes
row on geopolitic issue in the
                                        Stock Index       Mar 2           Mar 9       Markup
Middle East, this week global stock
                                            SCI          2,854.67       3,002.15      +147.48
markets rebounded. Positive factors
                                           DOW          12,066.80      12,213.09      +146.29
include: the Federal Reserve
                                         NASDAQ          2,748.07       2,751.72       +3.65
announced on Wednesday that
                                         FTSE 100        5,914.89       5,937.30      +22.41
American economy grew at a
moderate pace at the beginning of        NIKKEI         10,586.02      10,589.50       +3.48
2011 and weak employment market improved, while enterprise cost rose; according to data from
US ISM on Thursday, nonmanufacturing activity in the US expanded further in February although
being affected by cost pressure; ISM nonmanufacturing PMI in February rose slightly to 59.7
from January’s 59.4; the US Department of Labor reported nonfarm payroll employment rose by
192,000 in February, private-sector payroll employment increased by 222,000; nonfarm payroll
employment rose by 63,000 in January after being revised from initial 36,000. Employment
market strengthened, with unemployment rate declining to below 9% for the first time in two
years, which is another signal of an improving US economy. Although this week overall global
stock markets went up, market players began to concern about unsolved tension in the Middle East
and high crude oil prices’ impact on economy. Global stock markets will fluctuate.

Currency Market

This week risk sentiment                         Major Currencies Exchange Rates
dominated currency markets and        Exchange Rate         Mar 2          Mar 9        Markup
USDX fluctuated upward. US                USDX              76.675          76.71        +0.035
nonfarm employment in February           USD/CNY            6.5736         6.5605        -0.0131
rose by 192,000 jobs and
                                         USD/JPY             81.82          82.76         +0.94
unemployment rate declined to
                                         EUR/USD            1.3862         1.3907       +0.0045
8.9%, better than forecast. In spite
                                         GBP/USD            1.6325         1.6204        -0.0121
of the promising data, USD
market was stressed by deteriorating unrest in Libya and intensifying global inflation pressure
caused by rising crude oil prices, together with anticipation of interest rate hikes of ECB. This
week dollar exchange rate rebounded. Risk sentiment became the major factor affecting exchange
rate due to relatively fewer economic data released this week. Rising crude oil prices heightened
worries about global economy recovery. Moreover, European sovereign debt crisis still affected
the market. On Monday Moody’s downgraded Greek debt rating, sending Greek debt
credit-default swap rates to a record high, which hit euro. Portuguese bid interest rate in
Wednesday’s auction of two-year government bond surged to the highest level since the euro was
established in 1999, indicating market players worry the country may need aid. Anticipation that
ECB will raise interest rate in April weakened on worries about European sovereign debt crisis,
since interest rate hikes will damage economic growth capacity of these countries with debt. EU
summit will be held this Friday, and leaders will discuss details of permanent aid system for euro
zone countries facing financial issues in the future. Leaders of 27 EU members will gather two
weeks later to make final decision on establishment of emergency aid fund. European debt crisis
will be the major factor affecting market sentiment.

Futures Market

Rising crude oil prices triggered        Main Domestic Commodity Futures Contract Closing
worries about economic recovery                                   Prices
worldwide.      Combined      with      Contract        Unit       Mar 3      Mar 10 Markup
factors such as unrest in the             L1105       CNY/mt       11,900      11,675        -225
Middle East and spread of debt            V1105       CNY/mt        8,280       8,085        -195
crisis in euro area, this week           TA1105       CNY/mt       11,824      11,454        -370
global     commodity       markets       Fu1103       CNY/mt        4,847       4,823         -24
dropped. LME copper sunk by              Ru1105       CNY/mt       38,460      36,190       -2270
6.8% and TOCOM rubber 13%.              Cu11103       CNY/mt       74,140      69,230       -4910
Crude oil market kept rising to its      Al1102       CNY/mt       16,945      16,785        -160
30-month high due to upgrading           Zn1103       CNY/mt       19,120      17,735       -1385
unrest in Libya, which also              Au1106        CNY/g       301.61      303.17       +1.56
supported noble metal markets
such as gold market. It was                Main Foreign Commodity Futures Contract
said that the unrests in the                               Closing Prices
Middle East and North                 Contract            Unit      Mar 2      Mar 9      Markup
Africa which have lasted            TOCOM NR            JPY/kg       475.9      412.4       -63.5
for nearly a month might
                                COMEX COPPER USC/lb                  449.8     421.25      -28.55
finish, so crude oil and
                                  LME COPPER            USD/mt       9,883      9,275        -608
gold markets will face risk
                                  COMEX GOLD            USD/oz      1,437.7    1,429.6       -8.1
of profit taking. This week
domestic commodity markets dropped sharply tracking global markets. In last week’s government
work report, Chinese government indicates the major target of economic work this year is to
manage inflation. Recently, the central bank keeps withdrawing liquidity through buy-back and
central bank bill. Meanwhile, it’s said that China’s new loan in February dropped sharply, showing
central government’s strong resolution to control inflation. Data of foreign trade shows export
growth in February slowed markedly and trade deficit was 7.3 billion dollar. Market players
believe it is a sign that China’s economy grows at a slower pace, which provides pressure for
commodity prices.

                                       Coal Market

                                Domestic Coal Prices, CNY/mt
                                                                           Markup     Markup
                   Product                        Mar 10       Mar 3
                                                                           (price)    (percent)
      Shanxi high-quality mixed coal               770           770          0         0.00%

     Shanxi mixed coal (5,000kcal/kg)              675          675           0         0.00%
        Zaozhuang 1/3 Coking Coal                 1,450         1,450         0         0.00%
    Hebei Prime Coking Coal,Grade 10              1,563         1,563         0         0.00%
   Jincheng Washed Anthracite Middle
                                                  1,050         1,050         0         0.00%
              Lump Coal
  Yongcheng Washed Anthracite Middle
                                                  1,720         1,680         40        2.38%
             Lump Coal

Steam Coal

This week steam coal market remained stable. Demand was normal. Overall steam coal prices
were basically stable with slight decline in Inner Mongolia. In Shaanxi province, prices were
stable to high on tight supply. Inventories at ports were high, as demand for thermal coal in
southern power plants was flat along with warmer weather. This week prices at ports were stable.
As of Mar 10, inventories at Qinhuangdao port remained high with slight decrease. At present,
inventories at Qinhuangdao port were 8.259 million tonnes. Along with warmer weather, steam
coal market entered its dull season since March. Prices will inch down.

Coking Coal

This week domestic coking coal market performed well. Prices as a whole stabilized at a high
level. Major steel makers’ demand for coking coal was stable. Prices for high grade products were
stable on tight supply. Recently, steel prices fell slightly, which won’t affect demand for coking
coal and its prices. Along with peak season for construction steel market, coking coal market is
bullish and prices may continue to rise at a high level.

Coal for Chemical Industry

This week demand for coal for chemical industry was strong and overall supply was relatively
tight. Prices kept rising in all regions, with a range of CNY20-80/mt. Some producers said current
price levels were high. The reasons behind recent price hikes include: output was limited as
producers focused on safety issues during period of NPC and CPCC; demand for fertilizer was
strong approaching spring plough season, which drove up prices for coal for chemical industry;
anthracite is a scarce resource. Anthracite market will be stable on rising supply, and prices are
unlikely to rise.

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