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The International Grains Council has revised its forecast for world wheat production down by 3 Mt to 562 Mt for the July 2002 -- June 2003 marketing year. This is mainly due to Australia's continued drought, which could see its wheat crop fall as low as 10 Mt. There are also reductions in predicted wheat crops for the US and EU but there is a sharp rise in estimates for Russia and Kazakhstan.

In contrast to predicted wheat crops, coarse grain production estimates have risen from last month. A 10 Mt increase was fuelled by improved crop prospects for Chinese and US maize and Russia barley.

The latest oil import figures for September show Japanese total imports are down by 9.3% (0.44 m/bd) on year earlier levels. The most significant reduction in Japanese oil imports was in crude from the Middle East, which fell by 0.4 m/bd from September 2001, thus accounting for most of the 0.45 m/bd reduction in total crude imports. The lower levels of imports from the Middle East, if sustained will mainly impact on the VLCC market.

A slight increase in product imports was seen in September when compared to year earlier figures but this did little to boost clean tonnage demand.

Brent Crude was trading at $25.23 a barrel late afternoon in London.

The oil price has been pushed up over the last two days by the physical tightness of the gasoline and fuel oil markets in the US. Several US refineries are shutting for maintenance or are still recovering from recent storm damage. Refinery capacity in Venezuela has been reduced in the short-term which will not help the low stock situation.

Fuel oil stocks are also low and production is reduced, this is not helping consumer confidence at a time where the temperature is falling and stocks should be at their highest in preparation for the oncoming winter.

The fear of reduced gasoline and fuel oil supply has pushed prices upward and if the trend is continued will wipe out the $1.50 drop in price that occurred last week.

Dated Brent was trading at $25.63 per barrel late afternoon in London.

The German government has cut its official economic growth forecast for 2002 to 0.5% down from earlier estimates of 0.75%. The International Monetary Fund has also revised its growth forecast for Germany. Estimated economic growth for 2002 remains at 0.5% but the figure for 2003 has been cut from 2% to 1.75%.

Provisional estimates from the US Department of Commerce indicate that US GDP increased at an annual rate of 3.1% during 3Q02, double the rate of the previous quarter. This represents the strongest quarterly growth since 4Q01. The main factors behind the growth were an acceleration in consumer spending and a slowdown in imports, according to the Department.

Tokyo Electric has recently shut down nine nuclear reactors for repairs these account for half of the company's nuclear power capacity. To fill the gap left by the shut power stations Tokyo Electric has said it may reopen seven oil-fired power stations, four more than was planned a month ago. The reintroduction of the oil power stations will increase the company's fuel oil demand by 71,000 barrels a day, costing it $73 million a month.

Tokyo Electric are already sourcing additional fuel oil supplies (up to double their previously expected consumption figure of 3 billion litres) causing the fuel oil price to increase by more than a third in two months. Tokyo Electric may need to reach out past their traditional home market, the most likely alternative supply source being Korea.

Dated Brent was trading at $25.35 a barrel late afternoon in London.

The drought currently affecting Australia is set to cut this winter's grain harvest by more than half, making it the worst drought Australia has suffered in a generation. The Australian Bureau of Agriculture and Resource Economics has issued a production estimate of 14.8 mt in the year up to June 2003 for the country's four main winter crops -- wheat, barley, canola and lupins. This is a fall of 19.3 mt from the record crop of 34.1 mt Australia produced a year earlier. The drought has caused Australian economic growth to be reduced by 0.7% and reduced rural exports by 6%.

Japanese iron and steel exports from April to September 2002 totalled 18.8 Mt, a year-on-year rise of 17.1%. Exports to Asian countries increased by 37.6% to 16.0 Mt. China's imports of Japanese iron and steel grew by 66.6% year-on-year to 3.8 Mt.

However, Japanese steel exports to China fell from 0.7 Mt in July to 0.6 Mt in August. Chinese steel import tariffs and Japan's self-imposed production restrictions led to a further decline in September, with monthly exports to China down 29% to 0.4 Mt.

Over the April to September period, Japanese iron and steel imports fell by 7.9% year-on-year to 2.6 Mt. Despite the fall, iron and steel imports from China rose by 10.1% to 0.4 Mt.

OPEC (including Iraq) production rose by 1.7% to 26.75 mb/d in October the highest in 12 months. The main factor behind this rise was an increase of 31% in Iraqi oil production.

Output figures for OPEC 10 rose by 0.1 mb/d to total 24.2 m/b/d, well above their production quota of 21.7 mb/d. The higher volumes of crude in the market are keeping some positive pressure on VLCC rates this week as they come off slightly from last week's highs.

Dated Brent was trading late afternoon at $25.58/barrel in London.

The predicted recovery of the Brazilian economy of 2.5-3% next year should increase steel consumption in Latin America by 2-3% on 2003, according to the Latin American Iron and Steel Institute.

Over the course of this year Latin America has been the only region in the world to suffer a fall in steel consumption. There is an expected contraction in consumption of 2.2% for rolled steel products, continuing the negative growth of 2001.
The fall across Latin America was mainly due to a reduced Brazilian consumption of 5% which, more than offset the 2% increase in Mexican consumption.

Crude oil prices are apparently stabilising after the rapid decline seen last week (the biggest weekly fall since January), where an 8.5% fall in prices occurred. A combination of increased OPEC production and the increasing likelihood of a peaceful end to the Iraqi situation caused the sharp movement in oil prices.

Despite OPEC's decision to not increase their quotas at the September meeting, the 10 countries are overproducing by more than 2.55 m/b per day. Iraq has also increased its oil production by 0.5 m/b/d because of the removal of an illegal surcharge on oil sales. The increased production of oil coupled with a more diplomatic tone from Washington has removed most of the $5/barrel rise that the threat of hostilities had entailed. This can be seen by today's dated Brent price of $25.32 a barrel.

After the discovery of maintenance irregularities another nuclear reactor has been shut down in Japan. This brings the total to nine out of 17. With the seasonal increase in power demand imminent, this closure increases the already strong possibility of more fuel oil imports in the near term.

Dated Brent was trading at $25.85/barrel by late afternoon Friday.

Russian grain exports are predicted to rise almost 50% to 10Mt for the agricultural year July 2002/June 2003, according to SovEcon, a Moscow Agricultural Research Agency. This total would break an export record set in 1913 and would mark an astonishing revival of Russia as a grain exporter. In 1999/2000 exports were less than 0.5Mt. However, with expanding production and low prices, there is strong potential for trade growth. In the range of $85-95/ton, Russian wheat is currently $50/ton cheaper than its US equivalent and $20/ton less than EU wheat.

The results of a survey by the US Federal Reserve published yesterday paint a becalmed picture of the US economy. The most worrying factor was that weak retail sales in September have continued into October. With a growing consensus in the financial markets that the Federal Reserve will not cut interest rates again in 2002, the US economy looks likely to remain flat for the near term, with little impetus for accelerated growth.

Recently published figures show that Japanese oil demand is on the way back up. In 3q02 demand was 5.2 mb/d, up 1% year on year and 11% up from 2q02. This despite consensus GDP forecasts that project a decline of 0.7% in 2002 and appears to accord with recent positive figures for industrial production. A major bolstering factor for this rise in demand are the problems being experienced by the Japanese nuclear industry, something the IEA predicts will have Japanese power generators entering the oil market for the rest of 2002.

Dated Brent was trading at $26.49/barrel by late afternoon Wednesday.

The Australian Wheat Board (AWB) has reduced its estimate of domestic wheat production for 2002-03 to between 11m and 13m tonnes. This follows on only one month from estimates for the same period being reduced to 14m to 16m tonnes. The reduction in yields is blamed on the effects of El Ni

The recent rise in freight rates is leading to a rush on VL tonnage and could prompt further upward pressure on rates over the next few weeks as tonnage becomes tight. Spot fixture analysis suggests that the number of lay days between the fixing of VL/ULCC cargoes and lifting has increased from an average of 19 days in 1q01 to 26 days so far this month, indicating that charterers are taking ships further ahead.

Dated Brent was trading at $26.35/barrel by late afternoon Tuesday.

According to China's industrial statistic, domestic coal production for August was 91 Mt. This gave a cumulative total for January to August of 706 Mt, which was up 18.5% on the figure for the same period in 2001. Coke production also increased, to a total of 72 Mt for January to August 2002, representing an increase of 8.7% on the equivalent period in 2001.

Venezuela was the top crude importer to the US in August for the second month in a row. Its supplies to the US rose from 1.55 mb/d to 1.8 mb/d, compared to an average in 1h02 of 1.3 mb/d. The second and third places in the US crude import league went to Canada and Mexico respectively, with Saudi Arabia slipping into fourth with 1.41 mb/d.

The expansion of Venezuelan output comes despite no change to OPEC output quotas. Venezuela's total crude production rose to a 6-month high of 2.53 mb/d in September. The increase in Venezuela's exports is reflected in a significant rise in reported Aframax spot fixture volumes for 3q02 and this trend is expected to continue.

Dated Brent was trading at $27.02/barrel by late afternoon Monday.

Coal imports to Taiwan are expected to rise 12% in 2003 to 46 Mt, up 5 Mt from 2002, according to Platt's International Coal Report published today. The increased demand is expected to come from the independent power producers, cement manufacturers and general industry, rather than from the state-run power utility. The latter accounts for 22 Mt of 2002's anticipated import total of 41 Mt.

With 32 VL/ULCC sales for demolition to date, 2002 has already seen more such transactions than 2001, when there were 30. This is helping to offset this year's considerable deliveries of tonnage to that size group, the highest since the mid-1970s. In doing so, it provides some relief for owners in what has been a difficult market caused by lower cargo supply and soft oil demand.

Dated Brent was trading at $27.81 by late afternoon Friday.

Global crude steel output during 3q02 increased by 8.6% year-on-year to reach 225.2 Mt, according to the latest figures from the International Iron and Steel Institute (IISI). China's 3q02 steel output rose by 27% year-on-year to reach 45.5 Mt. Japan's steel production increased by 6.0% to 27.4 Mt. US 3q output was up 4.5% to 23.9 Mt.

The US Energy Information Administration (EIA) has forecast that the US will account for half a projected increase in world oil demand in 2003 of 1.2 mb/d. China and other non-OECD economies are expected to account for all bar 0.1 mb/d of the remainder. The EIA estimate that 1.0 mb/d of the increase will be met by non-OPEC countries, half coming from Russia and the Caspian Sea region. This makes it highly likely that there will be an increase in Aframax, Suezmax and Panamax traffic from the Black Sea for transfer to larger tonnage and onward transit to these cargoes' final destinations.

Dated Brent was trading at $27.64/barrel by late afternoon Thursday.

The US economy will grow at 2.5% for 2002 and 2.75% in 2003, the OECD has predicted. Its economy entered a mild and short recession in 1q01 and began to emerge from it in 4q01. The prospects for trade are also good, and are likely to get better as the economy grows faster: in 2q02 goods exports increased to $172.7 billion from $164.6 billion in 1q02 and goods imports increased to $295.3 billion from $271.1 billion.

With the majority of the world's economies experiencing low growth, China has continued to buck the trend. Her GDP grew 7.9% in the first nine months of 2002, with the year on year increase for 3q02 even higher at 8.1%. Industrial production rose by 12.2% with exports showing particularly strong growth by rising 19.4% in the period. Oil imports are also on the rise. In July and August this year crude imports rose by about 12% on 2001 levels and product imports increased by about 8% over the same period. This trend is expected to continue through 2002.

Dated Brent was trading at $28.24 by late afternoon Wednesday.