Energy
Commodity Update: Is the Summer Slump Over?
Commodity Update for Q3 2016
Last update, we triumphantly proclaimed that commodities were “back”.
However, we did forget to add one important caveat, which is that they could still get hit hard in the short-term by the classic “Sell in May and Go Away” market sentiment.
In Q3, commodities as a whole entered a “summer slump”, returning -5.7% as measured by the GSCI (Goldman Sachs Commodity Index). Performance was dragged down mostly by agricultural goods such as wheat, corn, and soybeans, but also by uranium which had another poor quarter.
Despite this bump in the road, most commodities are still having big years on a YTD basis:
- Silver, crude oil, and zinc are all up over 30% on the year.
- Gold, palladium, natural gas, and nickel are all up over 20%
- Uranium is the only metal in red, down over -30%
Here’s Q3 and YTD performance for each commodity:
| Q3 | YTD | |
|---|---|---|
| Silver | -3.2% | 39.0% |
| Brent Oil | -1.2% | 34.2% |
| Zinc | -3.2% | 31.4% |
| WTI | -2.1% | 30.1% |
| Palladium | 19.1% | 28.4% |
| Gold | -1.3% | 24.3% |
| Natural gas | -2.7% | 23.8% |
| Nickel | 11.9% | 23.5% |
| Platinum | -2.8% | 15.9% |
| Aluminum | 1.4% | 12.8% |
| Soybeans | -18.0% | 10.4% |
| Copper | -0.5% | 3.6% |
| Corn | -6.5% | -5.9% |
| Coal | 1.3% | -7.7% |
| Wheat | -6.3% | -14.4% |
| Uranium | -12.0% | -31.6% |
There’s no doubt that Q4 will be another interesting quarter for the sector.
In November, the U.S. election will take place, and pundits are warning that a certain result would cause extreme market volatility. At the same time, some experts think that this unpredictability could fuel a mega-rally in gold and other precious metals. We think both of these things are possibilities.
Meanwhile, the recent tentative OPEC deal has brought crude oil to four-month highs. However, markets are skeptical that the deal is for real, and the general sentiment seems to be that a production freeze may fail to materialize as all parties try to finalize the deal.
What are your predictions for commodities over the next three months?
Energy
Visualizing the Scale of Global Fossil Fuel Production
How much oil, coal, and natural gas do we extract each year? See the scale of annual fossil fuel production in perspective.
The Scale of Global Fossil Fuel Production
This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.
Fossil fuels have been our predominant source of energy for over a century, and the world still extracts and consumes a colossal amount of coal, oil, and gas every year.
This infographic visualizes the volume of global fossil fuel production in 2021 using data from BP’s Statistical Review of World Energy.
The Facts on Fossil Fuels
In 2021, the world produced around 8 billion tonnes of coal, 4 billion tonnes of oil, and over 4 trillion cubic meters of natural gas.
Most of the coal is used to generate electricity for our homes and offices and has a key role in steel production. Similarly, natural gas is a large source of electricity and heat for industries and buildings. Oil is primarily used by the transportation sector, in addition to petrochemical manufacturing, heating, and other end uses.
Here’s a full breakdown of coal, oil, and gas production by country in 2021.
Coal Production
If all the coal produced in 2021 were arranged in a cube, it would measure 2,141 meters (2.1km) on each side—more than 2.5 times the height of the world’s tallest building.
China produced 50% or more than four billion tonnes of the world’s coal in 2021. It’s also the largest consumer of coal, accounting for 54% of coal consumption in 2021.
| Rank | Country | 2021 Coal Production (million tonnes) | % of Total |
|---|---|---|---|
| #1 | 🇨🇳 China | 4,126.0 | 50% |
| #2 | 🇮🇳 India | 811.3 | 10% |
| #3 | 🇮🇩 Indonesia | 614.0 | 8% |
| #4 | 🇺🇸 U.S. | 524.4 | 6% |
| #5 | 🇦🇺 Australia | 478.6 | 6% |
| #6 | 🇷🇺 Russia | 433.7 | 5% |
| #7 | 🇿🇦 South Africa | 234.5 | 3% |
| #8 | 🇩🇪 Germany | 126.0 | 2% |
| #9 | 🇰🇿 Kazakhstan | 115.7 | 1% |
| #10 | 🇵🇱 Poland | 107.6 | 1% |
| 🌍 Other | 600.9 | 7% | |
| Total | 8,172.6 | 100% |
India is both the second largest producer and consumer of coal. Meanwhile, Indonesia is the world’s largest coal exporter, followed by Australia.
In the West, U.S. coal production was down 47% as compared to 2011 levels, and the descent is likely to continue with the clean energy transition.
Oil Production
In 2021, the United States, Russia, and Saudi Arabia were the three largest crude oil producers, respectively.
| Rank | Country | 2021 Oil Production (million tonnes) | % of Total |
|---|---|---|---|
| #1 | 🇺🇸 U.S. | 711.1 | 17% |
| #2 | 🇷🇺 Russia | 536.4 | 13% |
| #3 | 🇸🇦 Saudi Arabia | 515.0 | 12% |
| #4 | 🇨🇦 Canada | 267.1 | 6% |
| #5 | 🇮🇶 Iraq | 200.8 | 5% |
| #6 | 🇨🇳 China | 198.9 | 5% |
| #7 | 🇮🇷 Iran | 167.7 | 4% |
| #8 | 🇦🇪 UAE | 164.4 | 4% |
| #9 | 🇧🇷 Brazil | 156.8 | 4% |
| #10 | 🇰🇼 Kuwait | 131.1 | 3% |
| 🌍 Other | 1172.0 | 28% | |
| Total | 4221.4 | 100% |
OPEC countries, including Saudi Arabia, made up the largest share of production at 35% or 1.5 billion tonnes of oil.
U.S. oil production has seen significant growth since 2010. In 2021, the U.S. extracted 711 million tonnes of oil, more than double the 333 million tonnes produced in 2010.
Natural Gas Production
The world produced 4,036 billion cubic meters of natural gas in 2021. The above graphic converts that into an equivalent of seven billion cubic meters of liquefied natural gas (LNG) to visualize it on the same scale as oil and gas.
Here are the top 10 producers of natural gas in 2021:
| Rank | Country | 2021 Natural Gas Production (billion m3) | % of Total |
|---|---|---|---|
| #1 | 🇺🇸 U.S. | 934.2 | 23% |
| #2 | 🇷🇺 Russia | 701.7 | 17% |
| #3 | 🇮🇷 Iran | 256.7 | 6% |
| #4 | 🇨🇳 China | 209.2 | 5% |
| #5 | 🇶🇦 Qatar | 177.0 | 4% |
| #6 | 🇨🇦 Canada | 172.3 | 4% |
| #7 | 🇦🇺 Australia | 147.2 | 4% |
| #8 | 🇸🇦 Saudi Arabia | 117.3 | 3% |
| #9 | 🇳🇴 Norway | 114.3 | 3% |
| #10 | 🇩🇿 Algeria | 100.8 | 2% |
| 🌍 Other | 1106.3 | 27% | |
| Total | 4,036.9 | 100% |
The U.S. was the largest producer, with Texas and Pennsylvania accounting for 47% of its gas production. The U.S. electric power and industrial sectors account for around one-third of domestic natural gas consumption.
Russia, the next-largest producer, was the biggest exporter of gas in 2021. It exported an estimated 210 billion cubic meters of natural gas via pipelines to Europe and China. Around 80% of Russian natural gas comes from operations in the Arctic region.
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