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The violent protests that have swept through Kazakhstan are the latest social unrest events to threaten global economic stability.
Liquified petroleum gas prices surged in recent days after the Kazakh government lifted price caps on New Year’s Day, which sparked the first protests in a remote oil town on the Caspian Sea coast in the in the oil-rich Mangistau region responsible for approximately 25% of the country’s oil production. Protests across the Central Asian country ignited into clashes against the government and widespread economic inequality and corruption. This precipitated a Russian-led military intervention from ex-Soviet Union states and the deaths of dozens of antigovernment protesters and security forces, injuries for hundreds of others, and arrests for thousands this week. President Kassym-Jomart Tokayev pledged to reimpose price controls and removed former president Nursultan Nazarbayev from his post as national security council chair on Jan. 5, but this did little to quell the revolt. The country declared a state of emergency from Jan. 5-19.
As the world’s biggest producer of uranium, the second-largest oil producer of the five countries to gain independence from the Soviet Union, and the second-largest cryptocurrency economy in the world, Kazakhstan is in a precarious position. It is unclear whether the violence will result in dramatic political upheaval that would affect commodities production and prices over the medium-term—or rather push a socioeconomic or cultural transformation that could reshape Kazakhstan’s domestic and international standing.
Kazakhstan’s oil and mining operations have felt the immediate implications.
As protests reached the country’s highest-producing oil field, logistics issues at the Tengiz site prompted its operator, the Tengizchevroil consortium, to adjust production levels, according to S&P Global Platts. As the country’s largest private producer, Chevron holds a significant stake in the Tengiz site, leads the consortium that operates the field, and is overseeing its $45 billion expansion project involving as many as 30,000 workers. The site operator confirmed that many of its contract workers have been supporting the protests across the country.
Overall, there have been no reports of output being disrupted at the country’s three main export fields—Tengiz, backed by Chevron, and Kashagan and Karachaganak, backed by Shell—which have all remained operational, according to S&P Global Platts.
"During this period, the regulatory framework should be carefully prepared, the transparent operation of trading platforms should be ensured, and mechanisms to limit the sharp rise in prices should be introduced," President Tokayev said on Jan. 5, when he ordered the introduction of temporary price controls for liquefied petroleum gas over the next 180 days, according to S&P Global Platts. “We cannot do without systemic, but thoughtful and gradual reforms. It is necessary to carry out a quality reset of the gas industry, to ensure full loading of commercial gas on the domestic market.”
The unrest has contributed to global uranium prices skyrocketing, since nearly 40% of the world’s uranium supply is produced in Kazakhstan. China’s copper market thus far appears unaffected. International metals producers active in Kazakhstan told S&P Global Platts that logistical disruptions remain a concern but that the antigovernment protests have not affected mine operations.
"Any disruption in Kazakhstan could, of course, be a significant catalyst in the uranium market," Jeff Hryhoriw, spokesperson for Cameco, the world's second-largest uranium producer that co-owns uranium operations in Kazakhstan, told S&P Global Platts in a Jan. 5 statement. "If nothing else, it's a reminder for utilities that an overreliance on any one source of supply is risky. It also reinforces the shift in risk from suppliers to utilities that has occurred in this market."
Today is Friday, January 7, 2021, and here is today’s essential intelligence.
Uncertainty in the Global Economy
UAE's Oil GDP To Return To Growth In 2022 On Global Crude Demand: Central Bank
The UAE's oil GDP will return to growth in 2022 after contracting in 2021 thanks to an uptick in global demand sparked by vaccination rates in major economies, the central bank said in its latest quarterly economic report, amid an increase in oil prices and OPEC+ production despite the spread of the omicron variant of the coronavirus.
—Read the full article from S&P Global Platts
India's Jet Fuel Demand Facing Headwinds As Third COVID Wave Looms
India's jet fuel demand will likely face headwinds in the coming months, tempering hopes of a robust recovery in 2022, as a third pandemic wave appears imminent after a sudden surge in infections in recent days, industry sources said.
—Read the full article from S&P Global Platts
European Air Traffic To Remain Under 90% Of Pre-COVID Levels In 2022: Eurocontrol
Airline traffic in Europe is expected to recover to 70%-90% of pre-pandemic levels in 2022, according to the European Organization for the Safety of Air Navigation (Eurocontrol), little changed from recent levels as COVID-19 travel restrictions continue to hamper the sector.
—Read the full article from S&P Global Platts
The Credit Cycle
Oil, Gas Upstream Recovers From 2020 Price Crash; Default Risk Declines Sharply
Oil and gas producers' focus on cash returns instead of volume growth — combined with a 65% rise in West Texas Intermediate crude oil prices in 2021 — has lifted the North American industry out of a hole it spent years digging into, analysts said Jan. 4.
—Read the full article from S&P Global Market Intelligence
Market Dynamics
Commodities Crushed It in 2021
The market standard commodities benchmark, the S&P GSCI, crushed it in 2021, rising 40.35% and outpacing other similar commodity indices and asset classes, as high and rising inflation provided a great backdrop for this inflation-sensitive asset class. Commodities finished strong in December, rising 7.59% over the month as energy bounced back and Omicron COVID-19 variant concerns were brushed aside, with global demand still humming. Supply chain bottlenecks are slowly easing, but freight costs around the world continue to be elevated, contributing to higher commodity prices.
—Read the full article from S&P Dow Jones Indices
Banking Industry Under Pressure
UK Banks: Key Themes To Watch For In 2022
The U.K.'s banks go into 2022 well-prepared for an uptick in bad loans and well-placed for additional mortgage lending, in an environment where further interest rate rises are expected.
—Read the full article from S&P Global Market Intelligence
Technology & Media
5G Spectrum Deployment Standoff: What Will Be Different On Jan. 19?
After a second 5G spectrum rollout delay, a statement from the White House suggests AT&T Inc. and Verizon Communications Inc. have come to a resolution with the Federal Aviation Administration to ensure a Jan. 19 launch, easing investor concerns deployment delays could continue for months.
—Read the full article from S&P Global Market Intelligence
Ajit Pai Talks Net Neutrality Past, Present And Future
S&P Global Market Intelligence recently spoke with Former FCC Chairman Ajit Pai, now a nonresident fellow at the American Enterprise Institute, about the impact of the repeal and the future of net neutrality. He led the agency in its repeal of a 2015 order that classified broadband as a Title II telecommunications service, a classification that gave the agency more regulatory authority over broadband service providers, such as Comcast Corp., Charter Communications Inc., AT&T Inc. and Verizon Communications Inc. The 2015 order also established three net neutrality rules that prohibited broadband service providers from blocking or throttling legal internet traffic or prioritizing certain traffic for payment.
—Read the full article from S&P Global Market Intelligence
Commodities 2022: Vehicle Makers Face Challenging Year Amid Persistent Chip Shortage
Global vehicle manufacturers found themselves struggling to meet demand in the second half of 2021 as production was hampered by a semiconductor chip shortage -- and supply is not likely to return to normal in 2022.
—Read the full article from S&P Global Platts
ESG in the Time of COVID-19
EU Policy Clarity 'Significant Signal' For Hydrogen Into 2022
Companies in Europe's emerging hydrogen economy received long-awaited regulatory clarity from the EU as 2021 came to a close, with proposals around a market framework laying the foundations for growth in the coming months. The European Commission's Hydrogen and Decarbonized Gas Package, published Dec. 15, will ease the integration of hydrogen into existing gas infrastructure and remove barriers to entry, giving countries like Germany, France and Spain greater clarity on how they might implement their national targets for hydrogen production.
—Read the full article from S&P Global Market Intelligence
'It's About Trust': EU Green Taxonomy Scrutinized Over Inclusion Of Nuclear, Gas
Plans by the European Union to classify nuclear power and natural gas as "green" investments have divided energy experts, environmental groups and EU members, with some fearing a dilution of sustainability guidance.
—Read the full article from S&P Global Market Intelligence
Shell Cancels Seismic Work Offshore South Africa After Legal Challenge
Shell has suspended seismic exploration activity off South Africa's east coast, terminating a contract for the Amazon Warrior survey vessel after a High Court ordered it to pause work after a legal challenge by environmental groups. Judge Gerald Bloem at the South African High Court in Makhanda said Shell had failed to carry out required local consultations and there were concerns over the impact on marine life.
—Read the full article from S&P Global Platts
The Future of Energy & Commodities
Gas Deliveries To US LNG Export Facilities Flow Full Tilt Into 2022
Natural gas deliveries to U.S. LNG export terminals reached record levels in the closing weeks of 2021, averaging 11.8 Bcf/d in December as the LNG facilities ramped up to meet surging demand in Europe and Asia.
—Read the full article from S&P Global Market Intelligence
Frigid Canadian Winter Slashes Gas Exports To US As Demand Soars To Record Highs
The effects of the Canadian cold spell continue to trickle down to the US Midwest, slashing natural gas exports to the region while propelling prices higher. A cold snap in Western Canada has driven record demand and sharp production freeze-offs over the past 10 days. Exports to the US Midwest fell dramatically, to as low as 2.2 Bcf/d from 3.8 Bcf/d prior to the cold snap, according to S&P Global Platts Analytics.
—Read the full article from S&P Global Platts
Written and compiled by Molly Mintz.