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Copper Tip Energy Services
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Copper Tip Energy

What to Watch in Commodities: Truce, OPEC+, Alberta, Iron, Tesla

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These translations are done via Google Translate
Dec 3, 2018, by Jake Lloyd-Smith and Mario Parker

Commodity investors face a tumultuous week after two major decisions by leaders at the G-20 in Argentina, while up north, Canada’s largest oil-producing province just ordered significant supply curbs. In Buenos Aires, there was a 90-day truce in the U.S.-China trade fight, and separately Russia and Saudi Arabia struck a deal to extend into 2019 their deal to manage the oil market. Beyond that, Alberta will chop a third of a million of barrels a day.

While the G-20 outcomes and oil’s rally are the top items on the agenda, they aren’t the only ones. It’s a big week for iron ore as Vale SA briefs investors on the market and separately, Singapore Exchange Ltd. started trade in a contract for high-grade material. In Europe and the U.S., the future of agriculture is up for discussion, while in Poland there’s a critical climate conference. And lastly, we’ll get an update on what Elon Musk’s Tesla Inc. has been up to Down Under.

‘Amazing and Productive’

U.S. President Donald Trump has plenty of form when it comes to talking up his own achievements, and “amazing and productive” was his view of the weekend dinner with his Chinese counterpart Xi Jinping. At the gathering on the sidelines of the G-20 in Argentina, the two sides agreed to put their bruising trade war on hold for 90-days, with the mainland lining up to boost purchases of farm, industrial and energy products. There’ll also be more talks on thorny issues including forced technology transfers and intellectual property protection.

The step forward will be significant for raw materials, especially soybeans, with the White House saying that China will start buying U.S. agricultural products “immediately.” But after the initial euphoria wears off, there may well be a reassessment. “The jury is out on whether these short-term wins will convert to longer-term gains,” Mohamed A. El-Erian said. And Goldman Sachs Group Inc. noted the rapprochement doesn’t solve all trade problems.

Now for the Hard Part

With Brent’s collapse in November to concentrate their minds, Russia and Saudi Arabia agreed at the G-20 to extend their deal to manage the market, known as OPEC+. That opens the door for a deal at this week’s OPEC meeting in Vienna, although plenty of work remains, including how much to cut. As markets reopened on Monday, crude soared, with the jump aided by one of Canada’s provinces, Alberta, doing for oil what another, Quebec, does for maple syrup.

“There is no final decision on volumes, but together with Saudi Arabia we will do it,” Russian President Vladimir Putin said. Getting to an agreement will not be easy, however, as commentator Julian Lee points out: while Saudi Arabia is adamant the burden of a cut must be shared, others in the group argue the kingdom’s output boost since June has created the problem, and it’s now up to the kingdom to solve it by bearing the brunt.

As if to underline that it will still be a tough session in Vienna, Qatar said it will leave OPEC next month. While the nation accounts for less than 2 percent of OPEC’s output, it sets a troubling precedent as the toxic politics of the Middle East rupture a group that had held together for decades through war and sanctions.

The Miner Details

It’ll be an important week for iron ore, which got beaten up in November. Brazilian giant Vale will meet investors in New York on Tuesday and in London on Thursday to discuss expansion plans and its outlook for demand. The largest producer of the raw material used in steelmaking has benefited as Chinese mills boost purchases of higher-grade ore that contains less impurities.

Aside from the miner’s take, investors will also track developments in Asia where Singapore Exchange Ltd. will on Monday introduce a much-anticipated futures contract that’ll allow bets on high-grade material — just the kind that Vale supplies. China’s moves to battle pollution have spurred rising demand for top-quality ore over the past two years, widening spreads between grades.

Switched On?

For better or worse, Elon Musk doesn’t do low key. The headline-grabbing entrepreneur famously won a bet with fellow tech billionaire Mike Cannon-Brookes that Tesla Inc. could install a 100-megawatt storage facility within 100 days Down Under to help support the South Australia’s blackout-plagued grid. Following that wager win, it’s now time for an update on operations at the plant that was touted then as the world’s biggest lithium-ion battery.

For stories related to Musk’s Tesla and Australia’s power crisis: Musk Wagers Tesla Can Quickly Fix South Australia Power Woes Musk’s Battery Boast Will Be Short-Lived as Rivals Go Bigger Where Cheap Power Matters More Than Risk of Climate DisasterWhile it may be hard for outsiders to grasp quite why Australia — laden with coal, blanketed by sunshine, and blessed with extraordinary troves of gas offshore — can’t manage to keep the lights on, Musk’s offering, owned by French company Neoen SA, helps to highlight the future as new forms of power and technology come to the fore. The briefing comes on Wednesday, and while Musk himself won’t be on hand, executives will provide their latest thoughts.

Feed Me

What could be more important than where our next meal is coming from at a time of trade-war disruption, climate change and new technology? All that, as well as immediate reaction to the outcome at the G-20, will be scrutinized at two major conferences. In Brussels on Thursday, Phil Hogan, the European Commissioner for Agriculture and Rural Development, will feature in the opening session of the 2018 EU Agricultural Outlook Conference. The event will examine issues from blockchain to biofuels, with input from commentators including supermarket operator Carrefour SA and food giant Nestle SA.

Sky Eye Measurement
Sky Eye Measurement

Before that in Chicago, U.S. Agriculture Secretary Sonny Perdue and industry experts including farmers and analysts will convene at DTN’s 2018 Ag Summit. Perdue is expected to discuss prospects for global trade and the economic outlook as it relates to agriculture. With U.S. soybeans rallying on Monday after the trade truce struck on the sidelines of the G-20, he’ll also offer perspective on how significant that initial agreement will prove in the long term.

COPing Mechanism

Few things affect commodities as much as global warming and efforts to stem it: old energy including coal is tagged for causing the problem, while new forms of power may help fix it; foodstuffs are in the firing line as temperatures rise; and metals such as copper and nickel feature in new battery technology. So investors will be tracking a mammoth United Nations climate conference this week and next in the Polish city of Katowice.

The meeting, known as COP24 in UN jargon, will seek to transform pledges made in Paris three years ago into an international rulebook aimed at curbing greenhouse gas emissions. The first week begins with world leaders arriving for a summit hosted by Polish President Andrzej Duda on Monday. Energy and finance ministers are expected to show up starting Dec. 10 to turn progress into decisions, and by the weekend of Dec. 14, if talks go smoothly, the Katowice Rulebook will be adopted.

Bulls Versus Bears

The outlook is turning positive in the soybean market, with bulls outnumbering bears by the most since July, according to a Bloomberg survey. Sentiment shifted on optimism the leaders of the world’s two biggest economies would call a trade truce during their meeting at the weekend. That shift that looks set to pay off given developments at the gathering, with China agreeing to start purchasing agricultural products from U.S. farmers immediately.

In the gold market, traders are bullish for a third week as dovish comments from the Federal Reserve on the outlook for interest rates bolster the appeal of the non-interest bearing metal. Respondents were also bullish on sugar, while sentiment was mixed for crude oil and natural gas. Terminal subscribers can see the other commodity surveys here.

For the Diary


Glencore Plc investor update call U.S. Agriculture Secretary Sonny Perdue speaks at Ag Summit in Chicago Singapore Exchange Ltd. starts trade of high-grade iron ore futures The 24th Conference of the Parties to the UN Framework Convention on Climate Change (COP24), Katowice, Poland, through Dec. 14. Discussions will focus on implementing the 2015 Paris Agreement PNG Mining and Petroleum Investment Conference, Sydney, through Wednesday. Speakers include PNG Prime Minister Peter O’Neill, Oil Search Ltd. MD Peter Botten Benchmark Minerals press briefing on battery metals, London USDA soybean crush and corn for ethanolTUESDAY, DEC. 4

Vale SA holds Vale Day, New York Abares Australian crop report China National Grain and Oils Information Center (CNGOIC) estimates on country’s grains supply and demand, including corn, soybeans Australia weather bureau El Nino outlook 24th Annual Asia International Coffee Conference, Ho Chi Minh City, through Thursday API Oil Inventory report Federal Energy Policy Summit, through ThursdayWEDNESDAY, DEC. 5

Federal Reserve Chairman Jerome Powell testifies on the economic outlook before Congress’s Joint Economic Committee LBMA seminar, biennial dinner, in London. Speakers include LBMA CEO Ruth Crowell, HSBC Plc’s James Steel, Suki Cooper from Standard Chartered Plc Event to mark one year since start of Tesla Inc./Hornsdale battery in South Australia China Nuclear Engineering holds EGM 24th Annual Asia International Sugar Conference in Ho Chi Minh City, through Thursday EIA crude inventory report BofAML 2019 Year Ahead Event S&P Global Platts Global Energy Outlook Briefing Newmont Mining Corp. guidanceTHURSDAY, DEC. 6

OPEC ministerial meeting, Vienna, with delegates including Saudi Energy Minister Khalid Al-Falih. Click here for Top Live blog Bloomberg hosts ‘‘The Year Ahead’’ in Tokyo. Global CEOs talk about trends and challenges in the year ahead Russian refining maintenance schedule from ministry EU Agricultural Outlook conference, Brussels, through Friday. Speakers include European Commissioner for Agriculture and Rural Development Phil Hogan Vedanta Zinc Ltd. site visit at Gamsberg project, South Africa UN FAO Food Price Index Vale SA executives hold Vale Day, London S&P Global Platts Analytics Outlook Themes 2019 EIA natural gas storage report Federal Energy Policy Summit U.S. Census Bureau Oil Exports U.S. soy, wheat, corn export salesFRIDAY, DEC. 7

OPEC, non-OPEC meet, press conference Funding set to end for some U.S. federal agencies, leading to a partial government shutdown unless Congress approves budgets The U.S. jobs report. Economists expect payroll growth stayed strong in November with 205,000 gain Baker Hughes rig count ICE weekly commitments of traders report for Brent, gasoil CFTC weekly commitments of traders report on U.S. futures and options Origin Energy Ltd. investor day webcast, Sydney Agroinvestor magazine agriculture conference, Moscow. First Deputy Agriculture Minister Dzhambulat Khatuov, Ros Agro Plc CEO expected to attendSATURDAY, DEC. 8

China’s customs office commodity & energy trade data for November, including crude oil, gas, coal, steel, iron ore, soybeans China’s National Bureau of Statistics may publish country’s grains output in 2018, including corn, wheatWhat We’ve Been Reading

Oil Gets Caught Up in a Perfect Storm: Mohamed A. El-Erian Chokepoint Blockade Exposes Supply Risk for Black Sea Grain Goldman Predicts Commodities Will Soar in ‘19 as Oil, Gold Climb

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