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Commodities: Oil up on US employment, weaker dollar, Gabon oil workers strike

Prices unless otherwise stated are for the close of April 1.

2012 baseload German power: €59.98/MWh, up 1.01%
2012 CIF ARA Coal: €132.08/t, up 106%
Front-month UK natural gas: GBp64.04/therm, up 2.53%
EU emission allowances (EUAs) for December 2011 delivery: €17.23/t, down 0.29%
Certified Emission Reduction(s) (CERs) for December 2011 delivery: €13.14/t, up 0.46%
Brent crude oil futures for front-month 2010 delivery: US$119.50/bbl, up 0.7%, as of 09:45 GMT, April 4
WTI crude oil futures for front-month 2010 delivery: US$108.66/bbl, up 0.5%, as of 09:45 GMT, April 4

Latest buzz

Oil is still benefiting from Friday’s news from the US Labor Department, that non-farm payrolls rose by 216,000, compared to economists’ estimates of a 195,000 increase. The official US unemployment rate is now 8.8%, a two-year low and down from the 8.9% seen a month ago. Oil prices are also benefiting from a weaker US dollar coupled with comments from Iran, the current holder of OPEC’s rotating presidency, that there is no need for the cartel to hold an extraordinary meeting to address high oil prices. Iran is considered to be on of the most hawkish members of OPEC, in contrast to moderates like Saudi Arabia, which tend to be focused on keeping prices in range that will support long-term demand. Brent crude hit a high of US$119.54/bbl today in early morning trading, close to the 2.5 year peak seen on February 24. Violence against protesters in Yemen, the ongoing situation in Libya and upcoming elections in Nigeria are also proving support. A strike by oil workers at Gabon has halted the country’s 240,000bpd of output and there are concerns that efforts by Libyan rebels to resume oil exports could be hindered by logistical and payment issues, according to analysts at JPMorgan.

US natural gas futures fell on Friday, settling down US¢2.7, or 0.6%, at US$4.362/mBtu on the NYMEX, taking losses to 1% for the week and ending a streak of three consecutive advances. Bearish sentiment was boosted by expectations that the current cold weather in the Midwest and Northeast will subside soon, with MDA EarthSat predicting that temperatures should be warmer than normal from the south-central region through to parts of the Midwest and mid-Atlantic over the April 6-10 period. Baker Hughes also reported on Friday that the US rig count rose by 11 to 891, the second consecutive week in which the number of rigs drilling for natural gas in the US has risen.

South African Coal Mining Holdings has predicted that Richards Bay coal prices will remain above US$100/t for the rest of the year and said that it is looking to boost its export capacity. The company is also looking to use its full rail allocation of 277,000t to the Richards Bay Terminal this year. A notice issued by China’s National Development and Reform Commission has urged local authorities to take vigorous measures to insure adequate thermal coal supplies and to keep price volatility down. The notice also called for key thermal coal contracts to this year trade at the same price level as seen in 2010 and emphasised the need for coal-producing regions to properly handle the relationship between safe production and steady supply.

After an initial strong start prior to the release of preliminary 2010 EU ETS emissions data, the Dec11 EUA contract fell back once the data was released at around 11:00 GMT, as the news that emissions had risen by 3.5% was interpreted as a bearish signal by the market, despite being broadly in line with analysts’ forecasts. Total emissions under the trading scheme rose to 1.754bnt, from the 1.695bnt seen in 2009, but emissions were far below the 2010 cap of 1.985bnt, indicating that the market remains oversupplied with EUAS. The data covers roughly 85% of the facilities included in the EU ETS, with no data published for the Czech Republic, which was heavily affected by the cyber attacks that took place earlier this year. The news appears to have outweighed an otherwise supportive energy complex, with 2012 German baseload power gaining 1.01% to finish at €59.98/MWh, on higher fuel costs.

CER futures gained on Friday, with both the Dec11 and Dec12 contracts settling up 0.46%. This caused the CER-EUA spreads to narrow to their lowest point in five days, with the Dec11 and Dec12 spreads ending the day at -€4.09 and -€5.06.  Some of the upward momentum came from a report from the UNEP Risoe research organisation, which reduced its forecast for CER issuances to 2012, by 3.7% to 894. Sunday marked the beginning of the first round of UN climate negotiations in 2011 as delegates met in Bangkok as part of efforts to develop the promises made at Cancun. China’s Guangdong province, which includes the heavily industrialised Pearl River Delta region, is looking to initiate a voluntary industrial sector carbon trading scheme in 2012 or 2013. The region needs to reduce its CO2 intensity by 30% in 2015 and 45% in 2020, from 2005 levels, to met national goals mandated by the NDRC.

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