Commodities
Analysis-Can Mexico’s Sheinbaum, a climate scientist, shake Lopez Obrador’s oil legacy?
By Cassandra Garrison
MEXICO CITY (Reuters) – Mexico’s President-elect Claudia Sheinbaum, an accomplished climate scientist, could struggle to fulfill her environmental pledges after she sailed to victory, in part, on the popularity of a predecessor who doubled down on fossil fuels.
Sheinbaum, elected as Mexico’s first woman president by a sweeping margin Sunday, inherits a country grappling daily with climate change and environmental challenges: pervasive drought, a water crisis in the sprawling capital of Mexico City, and rampant deforestation.
The 61-year-old leftist leader, who was part of a United Nations panel of climate scientists that received a Nobel Peace Prize in 2007, has spoken about her belief in an academic and scientific approach to politics. She campaigned on a pledge to significantly boost renewable energy in the oil-producing country to as much as 50% by the end of her term in 2030.
But despite her best intentions to improve Mexico’s green record, Sheinbaum’s mentor, the highly popular outgoing President Andres Manuel Lopez Obrador, spent billions propping up Mexico’s fossil fuel-dependent state energy giants, oil firm Pemex and power utility CFE.
Her overwhelming victory – and the possible congressional super majority won by the ruling coalition – is in many ways a referendum on Lopez Obrador’s policies and initiatives, said Mariana Campero, senior associate with the CSIS Americas Program.
Sheinbaum could be hard-pressed to break cadence with Lopez Obrador’s style at the risk of losing support, limiting her ability to prioritize climate change policies.
“She has said repeatedly that she will continue with his policies and that her government will be a continuation of his government,” said Campero. “But she has always said that green energy is important.. So how will she square that circle?”
GREEN AT HEART?
Sheinbaum has credited her upbringing by a chemical engineer father and cellular biologist mother for fostering her interest in science and politics. She has a doctorate in energy engineering from the National Autonomous University of Mexico.
As mayor of Mexico City, she installed a roof-top solar project at a busy central market and inaugurated a 100% electric bus line.
But she faced criticism for some projects, including the construction of a bridge in the Xochimilco ecological zone that community members said damaged wetlands. She also supports some of Lopez Obrador’s most controversial projects, including the Mayan Train, a tourist railway that activists and scientists decry for endangering pristine wilderness and ancient cave systems beneath the jungle floor.
Still, her rise to the presidency has fueled hope among some that she could turn things around for the country’s track record on climate change policies, which deteriorated under Lopez Obrador, according to the Climate Change Performance Index, largely due to increased subsidies for fossil fuels and poor progress in curbing deforestation.
“I definitely think that she has that will and intention to put Mexico back on net-zero targets and in the good graces of the international community,” Arthur Deakin, director of energy at consultancy America’s Market Intelligence.
THE PEMEX PROBLEM
Sheinbaum has pledged to boost wind and solar energy as part of a $13.57 billion investment in new energy generation projects. She is, however, also facing the biggest budget deficit in decades, left behind by Lopez Obrador, a reality that will force her to pick and choose how to dedicate spending.
Despite being the world’s most indebted energy company, Pemex is still a major contributor to state coffers, said Alejandra Lopez, a public policy consultant who specializes in energy issues.
The firm is a heavy emitter of greenhouse gases, but it is also an important national symbol of energy sovereignty for many Mexicans, including Lopez Obrador.
Pemex stirs a sense of “emotional, historical and sentimental” importance within the country, Lopez said.
Sheinbaum is a vocal believer in the role of the state in Mexico’s energy sector, long dominated by Pemex, which could make it tough to keep her promise to increase renewable energy.
A business-savvy approach could enable her to attract investment and spur realistic change towards decarbonizing the energy and transportation sectors, Deakin said.
Sheinbaum could start by increasing the limit for Distributed Generation (DG) projects, typically small privately-funded solar or wind farms that are built to supply energy to a specific factory or industrial site.
Upping the cap from the current 0.5 megawatts to 5 megawatts, like Brazil has done, could increase clean electricity for commercial industrial users, Deakin said. She could introduce biofuel policies and increase electric vehicle (EV) subsidies and charging infrastructure. A national carbon credit framework could help accelerate interest in low carbon initiatives.
“It’s a little harder when you’re struggling with a more constrained budget, but there’s other ways that emerging markets are able to create a more attractive environment for renewable electricity,” Deakin said.
(Reuters) – Gold hit a record high above $2,600 per ounce on Friday, as the prospect of more U.S. interest rate cuts and global geo-political uncertainty boosted its appeal.
Bullion has risen more than 26% so far this year, and as market bulls lock in further gains, another milestone of $3,000 per ounce is in focus.
Here are the different avenues for investing in gold:
SPOT MARKET
Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics.
London is the most influential hub for the market, largely because of the London Bullion Market Association (LBMA). The LBMA sets standards for gold trading and provides a framework for the OTC (over-the-counter) market, facilitating trades among banks, dealers, and institutions.
China, India, the Middle East and the United States are other major gold trading centres.
FUTURES MARKET
Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in future.
COMEX (Commodity Exchange Inc), a part of the New York Mercantile Exchange (NYMEX), is the largest market in terms of trading volumes.
Shanghai Futures Exchange, China’s leading commodities exchange, also offers gold futures contracts. The Tokyo Commodity exchange, popularly known as TOCOM, is another big player in the Asian gold market.
EXCHANGE TRADED PRODUCTS
Exchange Traded Products (ETPs) or Exchange Traded Funds (ETFs) issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself. [GOL/ETF]
ETFs have become a major category of investment demand for the precious metal.
Global physically backed gold ETFs attracted a fourth consecutive month of inflows in August after North American and Europe-listed funds increased holdings, the World Gold Council (WGC) said.
BARS AND COINS
Retail consumers can buy gold from metals traders selling bars and coins in an outlet or online. Both gold bars and coins are effective means of investing in physical gold.
DRIVERS:
INVESTORS AND MARKET SENTIMENT
Rising interest from investment funds in recent years has been a major factor behind bullion’s price moves.
Sentiment driven by market trends, news, and global events can also lead to speculative buying or selling of gold.
FOREIGN EXCHANGE RATES
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the U.S. dollar as weakness in the U.S. unit makes dollar-priced gold cheaper for holders of other currencies and vice versa.
MONETARY POLICIES AND POLITICAL TENSIONS
The precious metal is widely considered a “safe haven”, bought during uncertain times in a flight to quality.
Major geopolitical events, such as extended conflicts in the Middle East and Europe have added to uncertainties for global investors and burnished gold’s appeal.
Policy decisions from global central banks also influence gold’s trajectory. Lower rates reduce the opportunity cost of holding gold, since it pays no interest.
Gold’s latest rally was triggered after the U.S. Federal Reserve began its easing cycle with an outsized half-percentage-point cut on Wednesday.
CENTRAL BANK GOLD RESERVES
Central banks hold gold as part of their reserves. Buying or selling of the metal by the banks can influence prices.
Central bank demand has been robust in recent years because of ongoing macroeconomic and political uncertainty, analysts have said.
More central banks plan to add to their gold reserves within a year despite high prices for the precious metal, the World Gold Council (WGC) said in its annual survey in June.
Investing.com– Oil prices retreated Friday, but were still headed for a weekly gain as a bumper U.S. interest rate cut helped quell some fears of slowing demand.
At 08:20 ET (12:20 GMT), fell 0.6% to $74.47 a barrel, while dropped 0.5% to $70.79 a barrel.
Oil heads for weekly gains on rate cut cheer
Crude prices have staged a strong recovery from near three-year lows hit earlier in September, with a bulk of their rebound coming this week as the dollar retreated on a by the Federal Reserve.
was trading up about 3.95% this week, while WTI futures were up 4.4%.
Increased tensions in the Middle East also aided crude, after Israel allegedly exploded pagers and walkie talkies belonging to Hezbollah members, sparking vows of retaliation. Fighting in and around Gaza also continued.
A softer aided crude prices after the Fed cut interest rates by the top end of market expectations and announced an easing cycle, which traders bet will help spur economic growth in the coming quarters.
Lower rates usually bode well for economic activity, which in turn is expected to buoy crude demand.
China demand concerns persist
But China remained a key point of contention for crude markets, as economic readings from the world’s biggest oil importer showed little signs of improvement.
The People’s Bank of China kept unchanged on Friday, despite mounting calls on Beijing to unlock more stimulus for the economy.
Data released earlier in September showed Chinese refinery output slowed for a fifth straight month in August, while the country’s oil imports also remained mostly weak.
Concerns over China dragged oil prices to a near three-year low earlier this month, and have limited any major recovery in crude.
“China has obviously been the key concern when it comes to demand, but there have also been reports of refiners in Europe cutting run rates due to poor margins,” said analysts at ING, in a note.
(Ambar Warrick contributed to this article.)
By Arunima Kumar
(Reuters) -Oil prices eased on Friday, but were on track to register gains for a second straight week following a large cut in U.S. interest rates and declining global stockpiles.
Brent futures were down 50 cents, or 0.67%, at $74.38 a barrel at 1004 GMT while U.S. WTI crude futures fell 48 cents, or 0.65%, at $71.47.
Still, both benchmarks were up 3.7% and 4% respectively on the week.
Prices have been recovering after Brent fell below $69 for the first time in nearly three years on Sept. 10.
“U.S. interest cuts have supported risk sentiment, weakened the dollar and supported crude this week,” UBS analyst Giovanni Staunovo said.
“However, it takes time until rate cuts support economic activity and oil demand growth,” he added, regarding crude’s more muted performance so far on Friday.
Prices rose more than 1% on Thursday following the U.S. central bank’s decision to cut interest rates by half a percentage point on Wednesday.
Interest rate cuts typically boost economic activity and energy demand, but some also see it as a sign of a weak U.S. labour market.
The Fed also projected a further half-point rate cut by year-end, a full point next year and a half-point trim in 2026.
“Easing monetary policy helped reinforce expectations that the U.S. economy will avoid a downturn,” ANZ Research analysts said.
Also supporting prices were a decline in inventories, which fell to a one-year low last week. [EIA/S]
A counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) will support prices in the $70 to $75 a barrel range during the next quarter, Citi analysts said on Thursday, but added prices could plunge in 2025.
Crude prices were also being supported by rising tensions in the Middle East. Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.
Security sources have said the Israeli spy agency Mossad was responsible, but Israeli officials have not commented on the attacks.
China’s slowing economy also weighed on market sentiment, with refinery output in China slowing for a fifth month in August and industrial output growth hitting a five-month low.
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