Evening Report | November 21, 2023
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Russian forces hit port infrastructure in Odesa…in southern Ukraine this evening. Russia attacked the city’s port infrastructure using X-31 missiles. Ukraine’s military also reported strikes on the Belhorod-Dniester district in the region, with missiles reportedly hitting open surfaces and administrative buildings.
U.S. natural gas futures near 2.5-month low…U.S. natural gas futures are currently trading at around $2.9/MMBtu, marking one of the lowest levels in the past 2.5 months. Several factors contribute to this situation, including ample storage levels, record-high production, and decreased demand. Typically, gas withdrawals from storage commence in mid-November to cater to heating requirements. However, as of the week ending Nov. 10, U.S. gas stockpiles were already approximately 6% above the normal levels, and this is projected to increase to 7% above normal by Nov. 17. The Energy Information Administration attributes this surplus in inventories to robust natural gas production and milder-than-average winter weather conditions, resulting in reduced demand for heating. Weather forecasts indicate a 4% reduction in heating degree days compared to the preceding 10-year average, translating to a 2% decrease in space heating consumption compared to the five-year average. Additionally, with the Thanksgiving holiday approaching, there is an anticipated slowdown in traditional demand. In November, the average daily gas output has risen to 107.5 billion cubic feet per day (bcfd), surpassing the previous record of 104.2 bcfd in October, further contributing to the ample supply of natural gas.
Argentine farmers may be more willing to spend money on inputs…and other agricultural products, hoping that new President-elect Javier Milei’s policies will improve earnings from futures harvests, according to the chief executive of Argentine biotech firm, Bioceres. Milei’s victory and recent rains are fueling optimism among some in Argentina’s agribusiness sector after the country struggled with a historic drought. A far-right libertarian, Milei has promised to eliminate export taxes and move to a single exchange rate.
China warns Argentina severing ties would be 'serious mistake'…China said on Tuesday it would be a "serious mistake" if Argentina were to cut ties, after the weekend presidential election victory in the South American country of a right-wing libertarian who has said he will not deal with communists. Link to more via Reuters.
China plans to boost biodiesel production…China's National Energy Administration (NEA) has outlined plans for a series of demonstration or pilot projects aimed at boosting domestic biodiesel production. The biodiesel is expected to be primarily derived from sources such as palm oil and used cooking oil (UCO). The NEA has also called on regional governments to provide financial support for these initiatives.
The document issued by the NEA emphasizes the expansion of domestic biodiesel applications and envisions a pathway that can serve as a model for renewable or green fuels. Additionally, the plan involves integrating UCO feedstock supply chains and fuel distribution and promoting biodiesel within a voluntary national certified emissions reduction mechanism.
Of note: China currently exports substantial quantities of UCO to the United States and the European Union (EU). While the NEA's effort could potentially limit these exports in the future, the plan does not provide details about financing or an implementation timeline. Given that this initiative is starting at the pilot program level, it may take some time before it translates into a significant increase in biodiesel demand. Moreover, consumption targets would need to be established, as current indications suggest that China only utilizes approximately 40% of the 1.9 billion liters of biodiesel it produces.
RSPO working on new system to trace palm oil sustainability…The Roundtable on Sustainable Palm Oil (RSPO) is actively developing a new system designed to trace the origin and assess the environmental and sustainability aspects of palm oil. They intend to launch this new system in the fourth quarter of 2024. RSPO CEO Joseph D’Cruz emphasized the need to revamp their existing standards and certification framework to meet the demands of contemporary markets, regulators, and consumers for proof of sustainability. This initiative is seen as a response to evolving regulations, particularly those established by the European Union (EU). The EU has implemented an anti-deforestation plan requiring companies to provide detailed information about the production of their commodities, including when and where they were produced. This information must be verifiable and confirm that the commodities were not grown on deforested land after 2020. The EU regulation is set to take effect in late 2024. RSPO's new tracing system aims to assist its members in demonstrating compliance with these regulations and enhancing transparency in the palm oil industry.
Russia has reduced its seaborne crude oil exports to the lowest level since August…ahead of a crucial meeting of OPEC+ oil ministers. During this meeting, there will be a strong emphasis on assessing compliance with production cuts. This decision to cut back exports follows a rise in shipments during the previous month of October.
