Daily Sources 10/14

1. Clifford Kraus at the New York Times reports that wheat and corn prices have dropped 40% and aluminum, copper, and nickel have dropped by a third or more.

"Big increases in world wheat production because of increased acreage in the United States, Canada, Russia and much of Europe have brought wheat prices to less than $6 a bushel today from nearly $13 in March."

It is in that context that Dealbreaker reports that shortages are beginning to show up in the supermarkets in Iceland, where the stock exchange fell by 75% in a single day. Anecdotal evidence perhaps, but gives some more credence to John Greenwood's story published October 8 in the (Toronto) Financial Post that grain is piling up in ports because people cannot get letters of credit. Though they're both all about calories, energy security is one thing and food security another. A truly nominal crisis if Tony Gray's at Lloyd's List report is to be believed. That is that shippers are receiving calls from their bankers asking if they would redeem their loans and offering 25-30% discounts. This would be due to a "liquidity at any cost" policy at some banks. The Baltic Dry Index gives you a sense of how much demand there is for shipping, more or less:



2. Xinhua reports that the decline in the oil price has forced the Nigerian Administration to delay the presentation of a 2009 budget to the National Assembly. The budget originally had a projected oil price for 2009 of $62.50/b, which now seems iffy. There are budgets likely to be hit worse assuming overly optimistic price scenarios--ie, Iran and Venezuela. Given ambitious financial restructuring by both Chavez and Ahmadinejad we might see some local political fireworks over it in both countries going forward. That said, just now I do not think that oil is likely to remain below $70/b for a very long time. I doubt it would for longer than 6 months, but that may be enough given upcoming Iranian elections to put in a less revanchist President there.

3. AKI reports that New Delhi is starting its new nuclear program with plans for 21 new nuclear power plants.

These include the setting up of six French reactors of 1,600 MW, four Russian reactors of 1,000 MW and four American reactors of 1,500 MW within the next five years.
Apart from the 10 LWRs envisaged under the Indo-US nuclear cooperation deal, the Nuclear Power Corporation of India, Ltd (NPCL) is also planning to set up eight reactors of 700 MW, three fast breeder reactors and one advanced heavy water reactor of 300 MW.

4. Swissinfo reports that scientists predict that nuclear fusion will be a practical reality within 30 years.\

5. Anna Shiryaevskaya at Platts reports that Moscow has decided to give $9 billion in aid to Rosneft, Lukoil, TNK-BP, and Gazprom.

6. Charles Lee at Platts reports that the Korea National Oil Company has failed to find private South Korean corporate partners in its $2.1 million oil-for-infrastructure deal with Iraq. I believe it is fairly unusual for major Korean corporations to buck the goals of Seoul. However,

"Indications to this effect came from the country's energy ministry as a group of South Korean construction firms Monday decided to withdraw from a separate $10.8 billion project to provide infrastructure in Iraq in return for stakes in oil fields in the Kurdistan region due to a funding squeeze."

7. Lucian Kim and Tony Hopfinger at Bloomberg report that Gazprom sent eight senior executives to Anchorage to discuss possible partnerships in gas projects in that state with Alaska's Department of Natural Resources and ConocoPhilip's CEO Jim Mulva. C'mon, you gotta admit that's kinda funny. Putin rears his head and ... sees an investment opportunity ... Palin authorizes F-18s to take off and investigate this rearing.

8. Salman Abduhoo at Islamabad's The Nation reports that 1,200 MWe of power have been shut down in Pakistan following the suspension of gas imports feeding several thermal plants in and around Lahore. This would be in addition to the 4,000 MWe shortfall Pakistanis have seen as a result of the crisis. The 4,000 MWe original shortfall comes as a result of winter reducing the basic hydropower potential in the country. Natural gas imports are used to fill the shortfall.

9. Market Wire ran the story that CNPC is nearing the completion of the refinery expansion project in Fujian province backed by the provincial government, Sinopec, Saudi Aramco, and ExxonMobil. The project expanded the existing refinery's capacity from 80 kb/d to 240 kb/d and included sophisticated upgrading units to run Saudi heavy (and sour) crudes. The project includes an ethylene cracker (for plastics) and the deal allowed for participation in retail in the province.