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Commodity Markets In 2020
Ways to invest in iron ore

Australia is the largest producer of iron ore by far, with Western Australia’s Pilbara region being a notable hotspot for the commodity. The country’s iron ore production came in at 930 million metric tons (MT) of usable iron ore in 2019, or 580 million MT of iron content, according to the US Geological Survey.

Other major producers in the iron-mining industry include Brazil, China and India.

Most iron ore trades under contracts in which major counterparties negotiate annual price changes. In recent years, oversupply, paired with lower-than-expected demand from the Chinese steel industry, has made things difficult for the iron ore market and has put major pressure on the iron ore price.

Activity in China has traditionally been the key driver of global iron prices, given that it is the world’s largest producer, user and exporter of steel products. Along with concerns about China’s economic growth, ongoing and seemingly escalating global trade disputes have weighed on the price of iron.

However, there are signs of economic recovery in China, and this move is expected to continue. The Chinese government committed in 2020 to investing roughly $500 billion to stimulate the country’s economy, with a heavy focus on infrastructure projects. This large-scale infrastructure spending bodes well for steel demand and the iron market.

Aside from recent developments, in the long run there is no doubt that there will always be demand for steel. The metal alloy is necessary to economies worldwide that want to build out and maintain their infrastructure, transportation and manufacturing industries.

World wheat crop tips record: AMIS

IMPROVED late-season yield prospects in greater Europe and Australia have lifted the estimate for global wheat production by 5.9 million tonnes (Mt) from the previous Agricultural Market Information Systems (AMIS) estimate released last month. The lift was offset by a total 1Mt decline in projections in Canada and Argentina. The net 4.8Mt increase lifts the forecast for the world 2020-21 wheat crop to a record 764.9Mt, pipping by just a few million tonnes the previous records set in 2019-20 and 2017-18. This month’s upward revisions included Australia and the EU, both up 2.2Mt from last month’s estimate, a 1Mt lift for the Russian Federation, and Ukraine up 500,000t. Utilisation in 2020-21 is expected to grow at a slightly faster pace than projected earlier, supported by stronger feed use in China. Trade in 2020-21 (July-June) is also expected to grow following brisk import demand, especially by China and Egypt.

Russia discusses three-month extension of OPEC+ oil production cuts

The top executives of Russia’s oil companies discussed on Monday the future of the OPEC+ deal with Russian Energy Minister Alexander Novak, including an option to extend the cuts as-is for three months until March 2021, instead of easing the cuts from January as planned, sources with knowledge of the matter told Russian news agency Interfax. The OPEC+ group, in which Russia is the leader of the non-OPEC producers, currently plans to taper the 7.7-million-bpd collective cut by 2 million bpd beginning in January 2021. But the second coronavirus wave sweeping across the United States and Europe—and already prompting the return of lockdowns in major European economies—is further delaying the global oil demand recovery. In recent weeks, concerns about demand and rising supply from Libya have weighed on oil prices and intensified market speculation that the OPEC+ group may not have a choice but to roll over the current cuts and delay the plans to ease those cuts in January.

Russian oil firms have openly criticized at times the OPEC+ deal in the past because, they argue, it burdens them with production cuts aimed at supporting oil prices, which in turn help U.S. producers to pump more oil. At the meeting with minister Novak on Monday, the companies discussed several options, as usual in those meetings, Interfax’s sources said.

Saudi gas production jumps to record

Saudi Arabia produced a record volume of natural gas earlier this year, the Kingdom’s state oil giant Aramco said in its Q3 results release on Tuesday, as the world’s top oil exporter looks to boost its position in natural gas. Saudi Aramco “achieved a record historic single-day natural gas production” of 10.7 billion standard cubic feet per day (bscfd) on August 6, 2020, from both conventional and unconventional fields, the company said. Aramco also made two unconventional field discoveries in the third quarter, both in the northern part of the Kingdom, with one field containing both oil and gas and another field with a gas reservoir. The Saudi state oil giant is the biggest oil exporter in the world, but it is not as strong in natural gas. Aramco has set its sights on significantly developing Saudi Arabia’s gas reserves and start exporting gas over the next decade. Currently, Saudi Arabia consumes all the gas it produces, mostly for electricity generation. Despite the rise in gas production, Saudi Arabia’s power plants continue to burn oil for power generation. In August, the Kingdom’s oil consumption for domestic electricity generation was 702,000 barrels per day (bpd), according to data from the Joint Organisations Data Initiative (JODI), cited by Bloomberg. This was the highest oil consumption in power plants in four years because of the very high temperatures and increased domestic power demand as Saudis canceled vacations abroad because of the pandemic. With the development of more gas fields, Saudi Arabia aims to export as much as 3 billion cubic feet of gas per day by 2030, Saudi Aramco’s chief executive Amin Nasser said last year. Aramco will solely develop Saudi Arabia’s conventional and unconventional gas reserves, and the options for exports include exports via pipelines and liquefied natural gas (LNG), Nasser said. Saudi Aramco’s gas development program is expected to attract as much as US$150 billion in investment over the next decade, Nasser said at the end of 2018.

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