Commodity demand growth will go up, due to low-income households and green energy – Goldman Sachs

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Global head of commodities research at Goldman, Jeff Currie, stated his position on the future of the sector this week, citing two big factors why commodities would continue to go up.

One was that while historically stimulus benefited high-income households, current stimulus benefits low-income, who spend a lot more on commodities.

The second factor was the future prospects of oil. Because oil will be less in demand in the future, companies won’t be investing in bringing more oil to the market, even if oil prices rise.

Demand growth for oil, Currie said, would start to slow in 2024-2025 and after 2030 would decline. “What that means, the stimulus effect of all this green spending actually amplifies oil demand,” Curry posited, but, “If we know we have a blueprint for energy transition in the U.S., Europe and China, and the clock is ticking on oil, are you going to invest in long-lived oil production? The answer is ‘no.’ So the only thing you’re going to invest in is short cycle production in the U.S., Middle East and Russia. Everything else is too risky to make investments. The hurdle rate to get investment in this sector is substantially higher than what it was historically.”

Currie saw some potential inflation risk accompanying the demand-pull factors that are driving commodity prices. Commodities prices increases, he said, are in part due to the hedging of bond-holding portfolio managers dealing with inflation possibly creeping up into the 2% range.

By Sid Douglas

Criticism by Bolsonaro triggers $12.6 billion drop in market value for Brazilian multinational Petrobras

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SAO PAULO, Brazil – After replacing the state-controlled oil company’s CEO with a retired general, the Brazilian president blasted its pricing policies and said they should be changed to lower gas and diesel prices, causing a 21% drop Monday in the company’s shares on the São Paulo Stock Exchange.

By Milan Sime Martinić

Russia’s Oil Sector Should Be Privatized in 8 Years – Ex-Finance Minister

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According to Alexei Kutrin, speaking at the SPIEF economic forum this week, “The oil sector should be fully privatized in the next 7-8 years. No state companies are required there now as the statehood brings more harm than benefit to those companies.”

He added that oil companies are able to deal with business issues without assistance from the state.

New Loonie Low

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The loonie might go as low as 70 cents to the U.S. dollar in 2017, according to experts.

Right now it’s around 73 cents, a 14-month low.

The fall of the loonie is tied to the same old things: a strong period for the U.S. economy, interest rate hikes by the U.S. Federal Reserve, and oil prices that are expected to stay low.

However, business in the U.S. isn’t doing amazing: This week, the U.S. PMI was below the forcast level, and construction spending contracted very slightly.

Meanwhile, Canadian manufacturing is doing well. Their PMI reported a 6-year high this week.