My favorite commodity index has hit an **all-time high**. This is the CRB / BLS US spot raw industrials index, a measure of some really old fashioned commodities. If you are on @TheTerminal, the ticker is CRB RIND Index [GO]. If you want to know more, see the nerd thread 🤓🧵 1/6
The CRB / BLS US spot raw industrials index excludes energy and foodstuff, and focuses on, well, yes, industrial stuff. Its current 13 components are: burlap, print cloth, tin, copper scrap, rosin, wool, cotton, rubber, zinc, hides, steel scrap, lead scrap, and tallow 2/6
It is the oldest of all indices measuring commodities prices. It tracks its origins to Jan 1934, when the U.S. Department of the Treasury asked the Bureau of Labor Statistics (BLS) to prepare a commodity price index. The data was released publicly first in 1940 3/6
Since then, the index has seen several iterations (and it's no longer published by the US gov), including large re-calculations in 1952 and again in 1962. The current version goes back to May 1981. You can read the methodology and components here: barchart.com/cmdty/media/pd… 4/6
The index retains a 'je ne sais quoi' from the old commodity days. If not, look at the specifications of one of its components. Hides: "Cow, light native, packer 30/53 lbs., fleshed, packer to tanner, dealer, or exporter per lb., f.o.b. shipping point". Great, isn't it? 5/6
Finally, because most of the index components do not trade on a futures exchange, you can arguably use it as a financial speculation-free measure of commodity markets. After all, how many hedge funds do you know trading burlap, hides and tallow? 6/6
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DO WE NEED TO INVEST IN OIL? Each year, the @IEA offers some answers. I'm going to focus on the first 10 years, as beyond 2030 the uncertainties are so large there's little point. The IEA tries to answer the question with 3 scenarios (no forecasts)🧵 1/6 #OOTT
Under two of its three scenarios (see below), @IEA sees a need for a huge oil and gas investment surge for the next 10 years (from the 2020 investment level). Even using the 2018-19 baseline, before the impact of low prices on capex, the investment increase is pretty large 2/6
Under IEA middle-ground scenario (APS, which includes current policy and stated net-zero pledges), oil and gas investment needs to increase >70% from $330bn in 2020 to ~$572bn from 2021-2030. That's a scenario in which oil demand has already peaked, and starts to fall 3/6
EUROPEAN ENERGY CRUNCH: While Western Europe worries, the real crisis is the east, particularly in the Balkans. In Kosovo, for example, the country’s largest exporter (Ferronikeli) has shutdown all production sine die. In Albania, the gov has declared a state of emergency 1/2
And the Albanian government is expected to announce a raft of energy emergency measures on Saturday. Earlier this week, in Serbia, the gov warned it might ban electricity exports this winter to keep domestic power prices lower 2/2
And in Eastern Europe, look at the Czech Republic, where one of the country's largest utilities, Bohemia Energy Group with nearly one million households as customers, has just collapsed. Company's statement here: bohemiaenergy.cz
TURNING POINT: Big Oil has suffered a huge defeat today on its climate change strategy, with Exxon, Chevron and Shell (by far the 3 largest Western oil majors) enduring either big shareholder rebellions or losing important legal fights | #OOTT $XOM $CVX $RDSB #ClimateAction
THE LIKELY CONSEQUENCES: 1) Activists and climate change campaigners will be embolden by their victories (if Engine 1, with a ~$50 million stake in Exxon, can get 2 board directors, imagine what a bigger activist can do?), so expect more pressure and more legal fights. 1/5
2) Big Oil will likely have to reduce capex even further. Exxon is likely to have to abandon even its attempt to keep oil production flat (the growth plans were already gone). Exxon and Chevron will follow Shell / BP into managed oil output decline. That's bullish oil price 2/5
Iron ore prices have surged to a RECORD HIGH. And that's a great excuse to tell you about how the market has changed over the last 75 years.
Iron ore is the main raw material to make steel (and that's why steel prices are surging too). And it's a cash cow for big miners 🧵1/15
For decades, iron ore prices were set in secretive annual talks between steelmakers and miners that created a "benchmark price". Once a benchmark was established, the price for iron ore was fixed at that level for the rest of the year for everyone else in the industry🧵2/15
Because the cost of iron ore affects steel prices and, ultimately, the cost of everyday goods, the iron ore benchmark talks were for many years (until 2010) one of the most important commodity price negotiations for the global economy🧵3/15
BIG OIL 1Q EARNINGS: BP delivered a gas trading windfall, making a killing both in Asia LNG and in the Texas freeze, allowing the company to try to win back investors with share buybacks (initially, just $500 million) | #OOTT $BP with @lc_hurstbloomberg.com/news/articles/…
If you want to understand the massive (and super profitable) oil and gas trading business hidden inside BP, Shell and Total, you can take a look at this long-read that @jfarchy and I wrote last month | #OOTT $BP $RDSB $TOT bloomberg.com/news/features/…
BP CEO Bernard Looney refused to disclose how much money the company made from gas trading in 1Q, other than describing the quarter as "exceptional". In the past, BP provided some numeric guidance of the extra profit from trading, as we wrote on our TOPLive Blog this morning $BP
THE SUEZ CANAL has always been a chokepoint for the oil market. And it has loomed large in the history of oil trading, as @jfarchy and I explain in The World for Sale. Marc Rich made a killing bypassing the canal to ship Iranian oil across Israel smarturl.it/lwefbl#OOTT
During the 1956 Suez crisis, @Cargill (via its ever entrepreneurial Tradax subsidiary in Geneva) made money by betting early than others on a rise in freight cost after the waterway was closed.
And Henk Viëtor and Jacques Detiger, the co-founders of Vitol, made strong profits thanks to the closure of the Suez canal after the Six Day War. " The high profit was mainly caused by the crisis in the Middle East," Vitol said in its 1967 report (Vitol was founded in Aug 1966)