August 28th, 2024

<aside> 🛢️ Energy

• [ ] Libya’s Eastern government announced the closure of oilfields which account for essentially all of the country’s production, and exports to be halted; following a rise in tensions over the leadership of the central bank
  • All of Libya’s oilfields are in the East of the country, which is controlled by the Libyan National Army
  • In July, overall oil production was 1.18M bpd; yet if Eastern production is to be halted the El Feel in Southwestern Libya would be the only functioning oilfield with a capacity of 130k bpd
• Oil initially climbed 3% off of concerns of escalating conflicts in the Middle East, following Israels attacks on Lebanon as well as production cuts in Libya, yet has once again decreased by ~0.5% as market participants wait to assess further geopolitical developments
  • Both Brent crude futures and US crude futures gained more than 2%
  • Most oil forecasters expect 2025 demand to hover around 1 million bpd, yet if Libya engages in another civil war; the balances of 2025 are expected to look more similar to this year despite increases in Russian and Saudi oil production
• [ ] UK energy bills for typical dual-fuel households are expected to increase by 10% this year, due to extreme weather events and geopolitical conflicts; to an annual level of 1717.0 pounds. This is 1% above analysts’ forecasts of a 9% increase.
  • The Labour government has further described this as a ‘failed energy policy’ inherited from the Conservative Party
  • Energy bills across the UK remain 65% higher than before Russia’s invasion of Ukraine
• [ ] Morgan Stanley slashes 2024 global oil demand growth forecast for 2024 from 1.2M bpd to 1.1M bpd, and likewise lowered Brent price forecasts from $85/barrel in Q4 2024 to $80/barrel
  • This aligns with the bearish outlook released by OPEC in its oil demand growth forecast for 2024 and 2025, due to the factors including:
    • China’s slower economic growth
    • Increased electric vehicle usage in China
    • A rise in the number of trucks powered by LNG in China

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<aside> 🌿 Renewables

• [ ] The world’s largest uranium producer, Kazatomprom, slashed its production target for 2025 by 17% to 25k-26k tonnes of yellowcake; due to sulphuric acid shortages
  • This threatens to squeeze supplies of radioactive fuel which is vital for nuclear power
  • This is further likely to increase uranium prices, which had decreased from a 16-year high of above $100/Ib to $80/Ib
  • Nuclear power has increased in demand since Russias full-scale invasion of Ukraine, causing a global energy crisis; yet uranium supplies have struggled to keep up with the boost in demand following decades of under-investment in new production
• [ ] Climate advocates have taken the EU to court over 2030 emissions rules, demanding that the Bloc strengthens its climate policy, citing that national limits on greenhouse gas emissions for transportation and agriculture sectors are unlawful and would fail to meet the Paris Agreement goals of limiting global warming to 1.5 degrees Celsius above pre-industrial levels
  • EU laws require these sectors to cut emissions by 10-50% from 2005 levels, whilst requiring sectors such as power generation to cut emissions by over 60%. This case was originally brought to the courts in February, yet was not made public at that time </aside>

<aside> 🚜 Livestock

• [ ] China has opened an anti-subsidy probe into imported dairy products from the EU, following Brussels decision to place tariffs on Chinese EVs
  • This further steps up tensions between the EU and China, as the EU was Chinas 2nd largest source of dairy imports
  • Exporters in South America, the US and Russia could be among those gaining market share if Beijing restricts imports from the EU </aside>

<aside> 🍃 Agriculture

• [ ] Extreme weather conditions, including deadly floods and intense heat waves across China, have devastated millions of acres of farmland and are now affecting consumer spending
  • Data from the Ministry of Agriculture and Rural Affairs reported daily rises in wholesale prices of agricultural products between June25-August21
  • For example: the average price for 28 vegetables tracked from June17-August15 rose from 4.29yuan/kg to 6yuan/kg
  • At Chinas largest wholesale market for agricultural products, the weighted average price of vegetables is up 25% YoY
• [ ] The annual crop tour sampled over 1600 corn and soybean fields across 7 major US-producing states, accounting for 70% of corn and 63% of soybean production
  • The tours average corn yield wasn’t better than in 2021, yet soybean pod counts were up ~6%
  • Following the tour, Pro farmer advisory firm placed US corn yield @181.1 bushels per acre, below the US Department of Agricultures 183.1 bpa
  • The advisory firm further pegged soybean yield @54.9bpa, above the USDAs 53.2bpa
  • Government forecasts have a slight advantage over the Pro Farmers, as the USDAs August corn&soybean yields were more accurate than Pro Farmers in 6 of the last 10 years
• [ ] Fires raging across the Sao Paula state, the largest sugar-producing state globally; have extensively damaged sugarcane fields
  • Raizen SA (Brazils largest sugar group) estimated 2% of the total expected 2024/25 crop to have been affected by the fires
  • Whilst Raizen SA has further stated that the burned sugarcane can still be harvested and processed, Citi analysts have estimated that the fires will have a negative impact on the next crop in 2025, as some fields had cane growing for the next season </aside>

<aside> 🥇 Precious Metals

• [ ] Indias silver imports are expected to double this year, on strong demand from solar panel and electronics makers, as well as investor bets that the metal will yield better returns than gold
  • India remains the worlds largest consumer of silver, and demand for investment purposes in the region have increased after India implemented duty cuts from 15% to 6%
  • India mainly imports from the UAE, Britain and China
• [ ] Rio Tinto seeks alternative solutions to minimize the impact of the Canadian railway shutdown, by increasing use of its own rail network and trucking certain materials and products. Rio Tintos Canadian operations include production of iron ore, aluminum and diamonds, with Canadian operations having contributed $800M to the companys total revenue of $26.8B in the first half of 2024
• [ ] Canada follows US lead in imposing 100% tariff on Chinese EVs, and a 25% tariff on imported steel and aluminium from china; set to begin on October 1st, 2024
  • China is Canadas 2nd largest trading partner, and in 2023 imports of automobiles from China to Vancouver increased by 460% annually, when Tesla began shipping Shanghai-made EVs into Canada
  • This comes as Canada attempts to better integrate itself into the global EV supply chain, and has come under robust domestic pressure to act against China
• [ ] Gold spot price has increased ~22% this year, hitting a peak of $2531.6 last week over expectations of US interest rate cuts and rising tensions across the Middle East

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This weeks big brief is in:Renewables - Exxon Mobil forecasts

• Exxon Mobil forecasts that crude demand will remain above 100 bpd through 2050, 25% higher than what was estimated by BP
  • This reflects Exxons production growth plans, which is the most ambitious amongst all Western oil majors
  • Exxon further plans on pumping 4.3M barrels of oil and gas per day for the remainder of 2024, which is 30% more than Chevrons current output. Meanwhile, BP is reducing production to ~2M bpd by 2030
  • Exxon further predicted that EVs wouldn’t alter long term global oil demand, as the population is expected to increase from 8B to 10B by 2050; generating an increase in demand for energy. Yet without added investments in oil, output will decrease by 15%/yr, which would cause oil prices to quintuple

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