Oil prices at multi-year high with demand set to exceed pre-pandemic levels by 2022

Liam Roche
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Oil prices at multi-year high with demand set to exceed pre-pandemic levels by 2022

Brent crude oil futures made it to $72.73 per barrel on Friday

Demand for oil is expected to surpass pre-pandemic levels before the end of 2022, according to the International Energy Agency (IEA).

The Financial Times reported that consumption fell by a record 8.6m barrels per day in 2020 as lockdowns were mandated across the world.

The IEA anticipates an additional 3.1m barrels per day increase in 2022, bringing the average to 99.5m barrels per day, with an increase towards the end of the year that will go past the level of demand last seen before the coronavirus pandemic.

However, the agency also said that oil’s recovery is likely to be “uneven” among both different regions and business sectors. While any delays in the vaccine roll-out could lead to further issues.

Oil prices also jumped to a multi-year high on Friday look set for a third consecutive week of gains as nearer-term expectations are that there will be a recovery in demand across the world as restrictions are eased.

Brent crude oil futures made it to $72.73 per barrel, one day after closing at its highest point since 2019.

Analysts at Goldman Sachs believe that Brent crude oil could reach $80 per barrel this summer.

Support for the price of oil also came as talks between Iran and other nations over a nuclear deal stalled.

Gold touches $1,900 on fastest US inflation since 1992

Liam Roche
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Gold touches $1,900 on fastest US inflation since 1992

Over the past three months gold is now up by 10% as inflation fears mount

The price of gold soared yesterday following three consecutive days of losses as America revealed its inflation rate rose during May at the fastest pace in nearly 13 years.

Compared to the same month a year ago, consumer prices increased by 5% in May, according to the Bureau of Labor Statistics. 

It is the most significant increase since August 2008, when prices rose by 5.4%, and is 0.8% higher than April’s price rise.

While rising prices are not having a negative impact on equities at the moment, gold is starting to enjoy a decent run. The precious metal price is back above $1,900 per ounce and if it can maintain its recent momentum, traders may start to eye last year’s record highs.

Over the past three months gold is now up by 10%.

Along with the inflation figures coming out of the US, wage data is showing “the biggest decline in real average earnings since ’08,” according to Bloomberg columnist John Authers.

“Gold thrived during the 1970s, when inflation was rampant (although it could be argued that stagflation was the problem then), and then fell right out of favour in the early 1980s after the Paul Volcker-led Federal Reserve clubbed it into submission with brutal interest rate increases,” says Russ Mould, investment director at AJ Bell,

“The tide turned again after 2000, since when the precious metal has outperformed even the S&P 500, as gathering Government budget deficits and then record-low interest rates and Quantitative Easing have persuaded some investors to abandon ‘paper’ money and ‘fiat’ currencies in favour of ‘real’ assets.”

“A vindication of central bankers’ view that the current inflationary spike is transitory, or an unexpected tightening of monetary policy, or a new round of tax-rises and hair-shirt fiscal policy could all stop gold in its tracks, and by implication make gold mining stocks less appealing,” Mould said.

FTSE 100 shrugs off inflation fears to trade above 7,125 for first time in a month

Liam Roche
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FTSE 100 shrugs off inflation fears to trade above 7,125 for first time in a month

While the rest of Europe took a nap, the FTSE 100 continued to ascend on Friday morning despite some mixed data coming from the UK.

The FTSE 100 is now trading above 7,125 for the first time in a month and is around 40-50 points away from the then-14 and a half-month peak struck in early May.

“Most of the big figures underperformed. Industrial production for April contracted by 1.3%, against the 1.2% expansion forecast and the 1.8% managed in March. The slowdown in manufacturing production wasn’t quite as severe, but even then, it came in at -0.3%, well off both the 1.5% estimate and March’s 2.1%,” said Connor Campbell, financial analyst at Spreadex.

The monthly GDP reading for the three months to the end of April was slightly more promising, rising from 2.1% to 2.3%, though it did fall short of the 2.4% forecast.

“Yet neither the pound nor FTSE 100 seemed bothered by these misses. Sterling was unchanged against the dollar and down just 0.1% against the euro, while the index climbed 0.6% thanks to its miners,” Campbell added.

Looking to this afternoon and the Dow Jones is heading for another static start, with the futures suggesting an unchanged open just under 34,500.

“Investors may have been nervous ahead of yesterday’s US inflation numbers but despite consumer prices rising at their fastest rate since 2008, and more than economists expected, shares were up,” according to AJ Bell investment director Russ Mould.

“Perhaps central banks really have convinced the markets that any rise in inflation will be short-lived and will not force them to ramp up rates too rapidly.

FTSE 100 Top Movers

Halma (2.76%), along with mining companies, Fresnillo (2.38%) and Glencore (2.27%), headed up the FTSE 100 during the morning session on Friday.

Trailing at the back of the pack are Just Eat (-2.36%), Ashtead (-1.78%) and BT (-1.18%).

Trident Royalties anticipates rise in production at Mimbula copper mine

Liam Roche
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Trident Royalties anticipates rise in production at Mimbula copper mine

Trident expects the production of copper to reach a yearly run rate of 30,000 metric tons by the end of 2022

Trident Royalties (AIM:TRR), announced on Friday a $73 million equity financing for its Mimbula Copper Royalty and the project operator, Moxico Resources.

The mining royalties company also said the move will lead to a substantial increase in production.

Trident has confirmed it will build a self-operated solvent extraction and electrowinning processing facility. This, the firm expects, will allow the production of copper to reach a yearly run rate of 30,000 metric tons by the end of 2022.

Adam Davidson, Chief Executive Officer of Trident commented:

“We are incredibly pleased to see such a significant development for a key asset within Trident’s royalty portfolio. The financing conducted by Moxico to materially expand copper production at the Mimbula copper mine underscores the value of acquiring royalties over quality assets being advanced by experienced management teams,” said Davidson.

“The Mimbula Copper Royalty provides Trident’s investors with long-life copper exposure – a key base and battery metal – from an operating asset with further upside potential located in a prolific copper district.”

Trident Royalties are mining royalties and streaming company with a diverse range of royalties covering precious, base and battery metals.

Having presented at the December UK Investor Magazine Virtual Investor Conference, Trident Royalties returned to update investors of recent progress at the company.

Trident Royalties are on a path achieving critical mass with robust pipeline of deals having already acquired 12 mining royalties.

Naked Wines confirms loss of £10.7m due to pandemic despite surge in sales

Liam Roche
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0
Naked Wines confirms loss of £10.7m due to pandemic despite surge in sales

Naked Wines saw a 78% increase in sales in the US market and will continue its focus on the region

Naked Wines (LON:WINE) saw its sales surge during the pandemic, as the wine subscription company particularly saw growth in the US market.

While pubs, restaurants and bars have remained closed throughout much of last year, Naked Wines saw its sales increase by £340.2m.

The AIM-listed company also saw its customer levels rise by 53% in the year to March.

Naked Wines invested £50m in new customers, up from £23.5m the year before, which the company said will be paid back three times over over the next five years.

The more than doubling of investment saw the firm make a before tax loss for the year of £10.7m.

Naked Wines saw a 78% increase in sales in the US market and will continue its focus on the region.

A of now, the firm is the largest direct to consumer wine seller in America, as it has adapted its operations to the rising levels of consumer demand.

James Andrews, personal finance expert at money.co.uk, said:

“Naked Wines has seen a slump in profits as a result of the COVID-19 pandemic, with many consumers reconsidering whether wine subscriptions are an affordable option in the wake of a financially difficult period.”

“With the recent news of its share price increases, this slump will come as disappointing for shareholders who are yet to see the company turn a profit.”

“Whilst Naked Wines benefited from the closure of the hospitality industry, and some consumers choosing to opt for a more luxury wine subscription service, it’s still not clear whether this will be enough to increase the company’s profitability despite rising share prices. Whilst it’s certainly not too damaging, the next year of growth for Naked Wines will determine its place in the online wine space.”

UK GDP continues to grow in April

Liam Roche
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UK GDP continues to grow in April

GDP in Britain rose by 2.3% in April on strong retail spending

The UK economy expanded in April by the quickest rate since the coronavirus opening last summer.

Data shows strong levels of retail spending, while children have fully returned to school, as the prospect of a return to levels of output last seen before the pandemic looks in sight.

Gross Domestic Product in Britain increased by 2.3% in April, setting the country up for a solid performance during Q2.

Having slightly exceeded economists’ forecasts, the value of goods and services produced was 3.7% below its level from February 2020, before the pandemic. This is the smallest gap since the beginning of the economic crisis.

Jonathan Athow, ONS deputy national statistician for economic statistics, said: “Strong growth in retail spending, increased car and caravan purchases, schools being open for the full month and the beginning of the reopening of hospitality all boosted the economy in April.”

Hinesh Patel, portfolio manager at Quilter Investors, commented on what the data reveals about the path of the UK economy:

“Given this GDP reading covers April and doesn’t quite take into account all of the lockdown easing we have seen to date, the government will be pleased with the direction the economy is heading. Consumers are clearly making up for lost time and the government will be hoping they continue to spend the lockdown savings many have been fortunate to accumulate,” Patel said.

“Real-time data, such as restaurant and holiday bookings, also remains robust after the initial surge in April and we are seeing discretionary spending hold up as things look to get back to normal. There is obviously uncertainty about the last step of easing going ahead on time and Sunak will not want any delay to be long lasting. But, given the depths of where we were last year, the economy is clearly returning to health. The removal of social distancing when the time comes will give an additional turbo charge to the economy.”

“Much of this optimism though is fairly priced into markets, however, and the Bank of England won’t be able to sit on their hands if the economic recovery strengthens further. With inflation concerns persisting, although slightly overblown in our opinion, Bailey and co may need to act sooner than they may wish.”

JLEN NAV falls, but dividend remains attractive

Andrew Hore
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JLEN NAV falls, but dividend remains attractive

JLEN Environmental Assets Group Ltd (LON: JLEN) continues to build up its portfolio of environmental infrastructure assets, although recent changes to UK tax rates have hit the stated NAV. The annualised total shareholder return since flotation is 7.4%.
Wind still dominates the portfolio, accounting for nearly one-third of its value, while anaerobic digestion accounts for 26% and solar for 23%. The company’s assets produced 977GWh of electricity in the year to March 2021.
JLEN generated £39.5m in cash from operations, up from £36.2m the year before. The proposed increase in UK corporation tax ...

Bitcoin pushes past $38,000 as banking regulator calls for tough controls

Liam Roche
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0
Bitcoin pushes past $38,000 as banking regulator calls for tough controls

The committee proposed a risk weighting of 1,250% for bitcoin

Global regulators are calling for the toughest possible capital rules for crypto assets, even more so than more traditional assets such as stocks.

Proposals by the influential Basil Committee on Banking Supervision have suggested that bitcoin should be subjected to a new “conservative prudential treatment”.

The committee’s findings were part of a report released on Thursday as policy officials across the world put together plans to regulate the volatile yet rapidly growing market.

While banks’ exposure to the industry is still limited, the Basel Committee suggested that “the growth of crypto assets and related services has the potential to raise financial stability concerns and increase risks faced by banks”.

The report cited a number of risks including market and credit risk, fraud, hacking, money laundering and terrorist financing risk.

Bitcoin surpassed $38,000 on Thursday, making further ground on Wednesday’s rally, after the digital currency became legal tender in El Salvador.

The committee proposed a risk weighting of 1,250% for bitcoin, but not for stable coins which are fully backed by reserves.

“A $100 exposure would give rise to risk-weighted assets of $1250, which when multiplied by the minimum capital requirement of 8% results in a minimum capital requirement of $100 (ie the same value of the original exposure, as 12.5 is reciprocal of 0.08),” the proposal said.

Although bitcoin has been ruled as a risky asset, the reaction by the market suggests it was expecting an even stricter ruling.

“As cryptocurrencies begin to make their way into the traditional financial ecosystem, it is only normal to expect various regulatory bodies to begin to set and then also try to coordinate regulatory initiatives to protect savers and investors,” Denis Vinokourov, head of research at Synergia Capital told CoinDesk.

“Risk is over-regulation, but equally lack of regulation will also prevent further adoption en masse. Basel’s proposal to split assets into groups makes logical sense given the different volatility and risk parameters,” Vinokourov added.

US inflation climbs at fastest rate in nearly 13 years

Liam Roche
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0
US inflation climbs at fastest rate in nearly 13 years

US consumer prices rose by 5% in May

US consumer prices rose by the most since 2008 during the month of May as concerns over inflation escalate.

Compared to the same month a year ago, consumer prices increased by 5% in May, according to the Bureau of Labor Statistics.

It is the most significant increase since August 2008, when prices rose by 5.4%, and is 0.8% higher than April’s price rise.

Pent-up demand in the US is facing up to a shortage of goods, from lumber and steel to chemicals and semiconductors, that are used in the manufacturing processes of key goods.

As consumers are increasingly venturing outside of their homes, services such as restaurants and hotels have also seen rising inflation.

The Bureau of Labor Statistics said in its report that when volatile goods, such as food and energy, were not accounted for, core CPI increased by 3.8% in May, compared to 3% the month before.

The Fed has said on a number of occasions that inflation levels were likely to be temporary.

This, and the fact the prices were subdued for some time, meant that the Fed took a more relaxed approach towards inflation.

Robert Alster, CIO at investment management firm Close Brothers Asset Management comments: “Inflation has been the measure to watch in recent months amid the deployment of Covid stimulus packages and the vaccine rollout. With prices rising, economists are left with a key question, what is driving the surge in inflation and, critically, is it transitory or persistent?“

“The reality is there are a number of factors at play ranging from oil prices to wage growth – all underpinned by a surge in demand. What is abundantly clear is that the Fed, and policy makers around the world, will be keeping a close eye on US inflation in the coming months to see whether this is a trend.”

“Regardless, we’re likely to hear more calls for action to deter rising inflation from the hawkish side of the administration. Whether these calls are heeded, and we see monetary policy levers being pulled, will depend on the next few months of data.”

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