Emerging Markets Monitor - June 15
Demand to Outstrip Oil Supply, India Rupee at All-Time Low, Shipping Stocks Cool, Russia Oil Revenue Rises, South Africa Tops Africa Entrepreneurship Rankings
The Top 5 Stories Shaping Emerging Markets from Global Media - June 15
Oil Supply Will Struggle to Keep Pace with Demand in 2023, IEA Says
Financial Times
“Global oil supply will ‘struggle’ to meet still rising demand next year, the International Energy Agency said, despite early signs that record prices are starting to weigh on consumption.”
“In its first 2023 forecast, the Paris-based energy think-tank, which advises major oil-consuming nations on energy policy, on Wednesday predicted that demand next year would grow by 2.2mn barrels a day to 101.6mn b/d, driven by developing countries.”
“While the IEA expected the US to significantly increase domestic production in 2022 and 2023, members of the Opec producers’ group and its allies, including Russia, would find it harder to keep increasing output to meet rising consumption, it said in its monthly report.”
“…The IEA expects Russian output to fall by close to 3mn b/d this year as more sanctions kick in, resulting in a total drop in Opec+ production of 520,000 b/d in 2023. Oil prices have hit near-record levels in the past six months as the disruption to energy flows due to the war in Ukraine exacerbates supply problems due to under-investment and rebounding demand after the Covid-19 emergency.”
“…While the 1.8mn b/d growth in global oil demand this year is being driven by increased consumption in advanced economies as pandemic-related curbs are lifted, 80 per cent of next year’s growth will come from non-OECD countries, according to the IEA.”
“Callum Macpherson, head of commodities at Investec, said the IEA’s supply and demand forecasts implied oil prices would increase further next year, adding that rising prices would have to eventually curb demand.” Tom Wilson reports.
India Rupee Hits All-Time Low on US Interest Rate Hike Fears
NDTV
“The rupee slipped provisionally to a new all-time low of 78.17 against the US dollar as investors remained wary of the US interest rate hike and the resultant market moves after.”
“Indeed, at the interbank foreign exchange market, the currency opened at 77.99 to a dollar and finally settled at its all-time low of 78.17, down 13 paise over its previous close of 78.04.”
"‘Expectation is that US central bank could raise rates by 50 bps. Hawkish comments could continue to keep the dollar supported at lower levels. Major crosses remained under pressure following broad gains in the dollar,’ Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal Financial Services, told PTI.”
“…The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.64 per cent to 104.84…the Indian currency, weighed by persistent capital outflows, weak domestic equity markets, and higher energy prices, has hit record lows repeatedly in recent months after breaching 77 per dollar for the first time in March, a few days after Russia invaded Ukraine in late February.” NDTV reports.
Shipping Stocks ‘Unable to Escape the Torrent’
FreightWaves
“Bulk commodity shipping stocks kept rising in May even as the broader market fell, offering shelter from the storm. Not so in June. With few exceptions, dry bulk and tanker stocks that previously held up are sinking. Declines for container shipping stocks have accelerated.”
“Shipping stocks have been ‘unable to escape the torrent,’ wrote Clarksons Platou Securities analyst Frode Morkedal. ‘Demand destruction is a major source of concern.’”
“Ben Nolan, shipping analyst at Stifel, said, ‘The equities of a number of sectors in shipping are extremely sensitive to the shift in the broader market.’ In the past week alone, shipping stock sentiment have been hit by a World Bank warning on stagflation; a report from FreightWaves maintaining that import demand is ‘dropping off a cliff’; the announcement of an 8.6% inflation gain for May, the highest increase since 1981; and resurgent COVID restrictions in Shanghai and Beijing.”
Container and dry bulk stocks have fallen faster than the DJIA, S&P 500 and NASDAQ Composite, whereas tanker stocks have lost less ground than the indexes. “Energy-related shipping equities were more insulated,” noted Nolan. FreightWaves reports.
Russia’s Oil Revenue Jumps to $20 Billion in May
Bloomberg
“Russia’s oil-export revenues surged to around $20 billion in May despite shipping lower volumes, as a rally in global energy prices buoyed its coffers, according to the International Energy Agency. That’s a 11% increase from a month earlier, taking Russia’s total revenue for shipping crude and oil products roughly back to levels before the invasion of Ukraine, even as exports fell by about 3%, the IEA estimates in its monthly report published Wednesday.”
“The decline in overall export volumes is mainly due to lower oil-product flows, while Russian crude shipped in May grew nearly by 500,000 barrels a day compared to the start of the year, mainly thanks to higher deliveries to Asia.”
“‘China and India, which have both sharply increased crude oil purchases from Russia, are net product exporters and have no need to lift Russian products,’ the IEA said. Oil and gas supplies are the single-largest source of revenues for the Kremlin, and since Russia invaded Ukraine in February, Western nations and their allies have been imposing sanctions aimed at curbing the flow of money that finances the war.” Bloomberg reports.
South Africa Ranked Top African Country for Entrepreneurs. Rwanda and Morocco in Second and Third Place.
Business Insider Africa
“A new report compiled by the CEOWORLD magazine has found the best African countries to become an entrepreneur.”
“The Entrepreneurship Index evaluates a total of 100 economies based on a wide range of factors to create an overall ‘best countries for entrepreneurship’ index, including innovation, competitiveness, infrastructure, labour skills, access to capital, and openness for business.”
“According to the report, South Africa tops the local ranking for the best African countries to be an entrepreneur. With a highly-skilled workforce, competitiveness and openness for business, the country has the second-largest economy in Africa, after Nigeria, and is also unarguably the most industrialised nation in sub-Saharan Africa.”
Here are the top 10 most entrepreneurial countries in Africa according to CEOWORLD magazine Entrepreneurship Index, 2021.
South Africa
Rwanda
Morocco
Kenya
Nigeria
Tunisia
Ghana
Botswana
Cameroon
Egypt
Business Insider Africa reports.
“It is nothing to die; it is dreadful not to live.” — Victor Hugo, Les Misérables
highly suggest peter zeihan's writings\videos on russia's mid-long term energy prospects. basically, china\india are near capacity and do not have a short term option for significantly increased buys. longer term, production will be permanently damaged when enough pipelines close, wells back up, and costly winter maintenance omitted...anything remaining viable probably does not have the west's knowledge to keep running.
what would be left is a trickle to china via pipelines on the east side, and a few tankers running to india. and am guessing those will not be at seller's prices. so the race is on for russia to sell as much as possible at high prices before time runs out.
Thank you. Agreed. Losing insurance on their tankers is also a heavy blow.