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Commodities Briefing 02.Oct 2014

Posted on 02 October 2014 by VRS |  Email |Print

Commodities have slumped to their lowest level in years as growth in China slows and American harvests boom. So is now the time to buy in? Last week, the Bloomberg Commodities index, one of the most widely followed measures of aggregate commodities, fell to its lowest level in four years.
Capital Economics head of commodities research Julian Jessop says the situation with commodities is “far more nuanced” than may be thought. “It is actually encouraging, on balance, for global economic prospects………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

A weakening market for iron ore helped to push export commodity prices down by 2.4 per cent in September to a level 37 per cent below their peak just over three years ago. Australia’s biggest export was the main culprit for the latest monthly fall, measured in foreign currency terms, the RBA said in commentary on its data released on Wednesday.
However prices for base metals and rural commodities also fell. Measured in terms of the Australian dollar, which edged back in September, commodity prices were down by 1.4 per cent in the month………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Oil prices tumbled to more-than-one-year lows Wednesday on news that Saudi Arabia lowered the official selling prices for its crude oil. The price cuts suggest the Kingdom may not reduce output in the coming months to keep prices high.
Ample global oil supplies have weighed on prices in recent months, sending Brent, the global benchmark, to below $100 a barrel for the first time in 16 months Sept. 9. Brent futures haven’t traded above that level since. Some investors have bet that the Organization of the Petroleum Exporting Countries, especially Saudi Arabia, will cut production to keep prices above $100 a barrel………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Energy analysts have made the largest downward revision to their oil price forecasts in almost two years, a monthly Reuters poll showed on Wednesday, with the marked weakness in the price of Brent seen persisting into 2015.
The survey results pose a challenge to members of the Organization of the Petroleum Exporting Countries (OPEC), who have largely argued prices will recover from two-year lows hit below $95 a barrel this week on stronger demand in the fourth quarter………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

A world oil price plunge to $60 per barrel is an unlikely scenario, Russian Finance Minister Anton Siluanov said on Wednesday. “We believe this is unlikely,” the finance minister said, adding the budget of Saudi Arabia, a major oil exporter, was balanced at the oil price of $80-85 per barrel.
Russia’s draft budget for 2015, which envisages a deficit of 0.6% of GDP, is based on an oil price of $96 per barrel. The Russian finance minister said the ministry has not examined a stress scenario of an oil plunge to $60 per barrel………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

NYC-based PIRA Energy Group reports that PIRA is cautiously optimistic the global economy will withstand the Fed’s policy shift. In the U.S., stock build slows. In Japan, crude runs perk up, crude stocks draw. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
World Oil market forecast, September 2014: PIRA is cautiously optimistic the global economy will withstand the Fed’s policy shift and lift into next year with growth above trend. Despite this, and a rebound in oil demand growth, oil market balances are forecast to deteriorate in 2015. Low first half 2014 stocks hid blemishes but now that inventories have rebuilt………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Reports about the death of the Organization of Petroleum Exporting Countries (OPEC) have generally proved to be as accurate as reports about the death of Mark Twain – until now. Back in 1897 the great story teller Twain was able to skewer inaccurate accounts of his passing with an immortal comment that “the report of my death was an exaggeration”.
OPEC, an oil marketing cartel comprised mainly of Arab states, plus a few outliers such as Venezuela, has been able to say the same thing for the past 30 years………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries (OPEC) is steadily losing control of the oil market with the rise of two new industry leaders, Russia and the US. And neither of the member countries has an interest in perpetuating oil-price fixing which is the primary motivation behind OPEC.
Under this scenario, some industry analysts and traders were seeing a bleak future for the organization, anticipating an eventual demise of the 54-year old oil body. Russia needs to produce as much oil and gas as possible to try and balance its budget which is dangerously dependent on petroleum while the broadly diversified US economy is enjoying the benefits of rising domestic production and falling prices………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The U.S. and global economy has been all but crushed by the cartel pricing power of OPEC (Organization of the Petroleum Exporting Countries) for far too long. Worse than a consumption tax, high oil prices, because of our current dependence on internal combustion and compression engines using oil products, have been a burden for decades.
The perpetrators of the cartel force U.S. and global consumers to pay not only for oil but for the costs of social welfare, such as it is, infrastructure and military capability in their respective countries. With the ability to reduce production and their refusal to increase production, despite their available reserves, OPEC members charge what they think the market will bear against what price might otherwise throw the world into recession………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

After reviewing the numbers from America’s oil and gas patches, Per Magnus Nysveen of Rystad, an international oil consultancy in Norway, declared that the United States is now taking on the role of “swing producer” that used to be played by Saudi Arabia and other members of OPEC, the oil producers’ cartel.
Those numbers are impressive. Fracking technology has led to a 65-percent increase in U.S. crude oil output in just the last six years and, according to Wood Mackenzie, another highly regarded energy consultancy firm: “The shale industry is just starting out; it is not even a teenager yet…. There is still plenty of room for growth.”……………………………………….Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Traders are increasingly taking control of failing refineries in Europe, betting they can make profit from plants that lose money for conventional oil companies, the International Energy Agency said.
The refineries, often acquired for almost no fee, will increase output quickly when margins from fuel sales surge and keep run rates down at other times, Antoine Halff, the head of the IEA’s oil industry and markets division, said at a conference in Singapore today. Conventional oil companies maintain higher processing rates during periods of weaker demand, he said………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

A client of respected market research firm Ned Davis Research asked the question: If gold follows its 1980s market path, what kind of gold price would we be looking at? The answer: $660. From the January 1980 peak to the February 1985 trough, gold lost 65.8%, according to a note posted today by John LaFarge, commodity specialist for Ned Davis. So far this cycle, gold is down -35.7% from its August 2011 $1888/oz. peak. If it follows the path of the 1980s bear market, it lands at $660 an ounce.
Gold’s biggest foe back then is the same as it is now: The soaring value of the U.S. dollar. Gold fares best when paper money is losing its value. But the dollar has surged against the euro and the yen, in large part because U.S. interest rates, low as they are, are higher than those of other major countries. And gold, after all, pays no interest or dividends………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Gold prices turned higher Wednesday as investors locked in gains on bearish bets following the metal’s recent steep downturn, while platinum futures fell to the lowest level in almost five years.
Gold for December delivery, the most actively traded contract, settled up $3.90, or 0.3%, at $1,215.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices fell to $1,205 an ounce earlier in the session………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Gold prices have been in secular decline ever since the summer of 2011, peaking at $1,921.50 per ounce then to just above $1,200 today. The first 10 years of the 2000s — often referred to as the “lost decade” for stocks — saw bullion prices soar as investors fled to safety in times of war and recession. A print-happy Federal Reserve and rock-bottom interest rates put the cherry on top.
However, a slowly improving economy and sluggish inflation have brought prices closer to earth, and with the Fed now signaling that the days of easy money are likely winding down in 2015, goldbugs look to be in even more trouble………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Silver - for which Australia is one of the world’s leading producers - has hit four-year price lows, falling beneath $US16.90 per ounce during intraday trading on Wednesday. Although not one of Australia’s major resources in terms of production or export value, 59.2 million ounces of the precious metal was extracted from the country’s mines in 2013, just over $US1 billion worth. This puts Australia in fourth place worldwide, behind China, Peru and top producer Mexico.
Unfortunately for silver fans, it’s all been downhill since April 2011 when silver reached its nominal record high of $US49.76 per ounce. The reason is simple, say analysts: silver tends to track gold very closely. Gold has become less popular as monetary policy in the United States normalises and silver is following faithfully behind………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Some precious metal bulls like to dismiss price declines in gold and silver by pointing to the strength of “physical demand.” (Savers who put their wealth into precious metals never seem to get paid for this “physical demand”, but whatever…)
For example, here is Jim Rickards: So we thought it would be worth sharing some charts from Nick Colas over at Convergex that track spending on gold and silver coins issued by the US Mint. This isn’t a perfect measure of “physical demand” for bullion but it ought to be consistent over time………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Aluminum, the biggest gainer among base metals on the London Metal Exchange last quarter, will fall into a deficit almost four times larger than previously estimated as demand grows faster than expected, according to Standard Bank Plc.
Global consumption will outstrip production by 806,000 metric tons this year, more than a previous estimate of 217,000 tons, the bank’s analysts including Walter de Wet and Leon Westgate said……………………………………….Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The falling copper price — which has held its value much better this year than its metal peers, down just 8 per cent so far — will not bounce back any time soon, due to a series of one-off developments in China, which consumes 40 per cent of the world’s production.
That is the verdict of Michael Komesaroff, a leading Australian expert on China’s mining industry — a former Rio Tinto executive in Asia, who then worked for a major Chinese resource corporation — writing in new analysis for China-based GavekalDragonomics………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Investors last month pulled more money out of U.S. exchange-traded products backed by commodities than they have all year, as signs of supply gluts drove the biggest price slump since the financial crisis.
About $1.05 billion was removed from the ETFs in September, the biggest monthly withdrawal since December, data compiled by Bloomberg show. Outflows were led by redemptions from precious metals and energy………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Agricultural commodities performed impressively in the first four months of 2014 helped by a weaker dollar, adverse weather and greater demand. However, the space snapped the trend soon to reflect a benign weather outlook and accelerated crop plantation that exceeded demand.
If this was not enough, the six-year high U.S. dollar against the yen put pressure on commodity prices. Sluggish global demand thanks to rough global recovery has also been playing a crucial role in pulling down agricultural commodity prices. Some crops including corn, soybeans and wheat are expected (by market participants) to leave the year with huge inventories………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The list of ETF providers who are cutting fees, or launching ever-cheaper funds, continues to grow and this can only be good news for investors. There’s been a hotly-denied price war taking place in the passive fund space for some time now. The reputation of exchange-traded funds as one of the cheapest ways to get exposure to a broad range of markets and indices has fuelled ETF providers to repeatedly try to undercut each other.
Though the providers have repeatedly denied there’s any war going on, this is a battle that should be welcomed by the end investor, who will benefit by having to give up less and less of their returns in the forms of fees………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The 3rd quarter of 2014 is over, and some interesting things have happened in the metals sector. The most critical thing has been the remarkable surge of the dollar against other currencies. The US Dollar Index raised over 7% this quarter. This had a depressing effect in the commodities market, and therefore metal prices took a hit.
In the 2nd quarter, we pointed out that some industrial metals (nickel, zinc and aluminum) were showing some strength while others were still lagging (copper, lead and tin). The stimulus measures taken by Beijing were giving some economic momentum in China, helping support industrial metal prices. However, the recent upturn of the dollar changed the picture, making the leading metals to correct while the laggards were pulled to low levels………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Cuba’s central bank chief is giving new details about the elimination of a special currency, saying that the shift will require putting more pesos into circulation and issuing higher-denomination bills.
Elimination of the stronger currency is one of the toughest challenges facing Cuba’s struggling socialist economy, forcing officials to eliminate a distorted double set of prices for many goods without spawning inflation………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

The euro remained under pressure and European stocks fell Wednesday amid the latest signs the recovery inside the currency bloc is cooling. The common currency dropped 0.3% against the dollar to $1.2584, close to Tuesday’s two-year low.
The decline came after eurozone manufacturing data disappointed, with the sector barely managing to expand in September. Figures for Germany, the region’s largest economy, showed an unexpected contraction………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

With a new Global Alliance dedicated to Climate-Smart Agriculture, you’ll be hearing more about this effort with a goal to improve agriculture and food security. At the end of last month, the U.N. held a one-day Climate Summit in New York City. The day was a pre-curser to next year’s 21st Conference of the Parties on Climate Change 2015 that will take place in Paris.
From what I understand, the NYC summit focused on identifying the major challenges we’re facing with climate change and mentioned some possible solutions. The longer Paris summit will attempt to provide more solutions and specific ideas on how to implement them………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

Canada will launch the world’s first commercial-scale carbon capture and storage project at a coal-fired power plant on Thursday, a closely watched experiment designed to cut 90 percent of the plant’s carbon emissions.
The carbon-capture unit at the Boundary Dam power plant in Estevan, Saskatchewan, will be formally commissioned after a four-year C$1.35 billion ($1.21 billion) retrofit. Governments and industry around the world will be watching to see if the plant’s operator, SaskPower, can turn large-scale carbon capture and storage (CCS) into a commercial success………………………………………..Full Article: Source

Posted on 02 October 2014 by VRS |  Email |Print

When it comes to cutting carbon, what’s old, it seems, is new again. Exelon Corp. executives are using terms like “cap and trade” and “carbon tax” in describing how they think Illinois should lower its carbon footprint in anticipation of the Environmental Protection Agency’s bid to cut greenhouse gases from power plants.
At its first public presentation to Illinois regulators last week, Exelon Corp.’s remarks were brief. The Chicago-based parent company of Commonwealth Edison presented just three slides that explained how a more than $10-per-ton tax on carbon pollution could aid the company’s financially flailing nuclear plants………………………………………..Full Article: Source

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