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Commodities Briefing 30.Nov 2016

Posted on 30 November 2016 by VRS |  Email |Print

The Chinese speculators shaking up global commodity markets are switched-on, flush with cash and probably not getting enough sleep. For the second time this year, trading has exploded on the nation’s exchanges, pushing prices of everything from zinc to coal to multi-year highs and sending authorities scrambling to deflate the bubble before it bursts.
Metals brokers described panic earlier this month as the frenzy spread to markets in London and New York, prompting wild swings in prices that show no signs of abating. While billions of yuan have poured in from herd-like Chinese retail investors who show little regard for market fundamentals, brokers and traders say even more is coming from an expanding army of deep-pocketed hedge funds………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

A recent Rabobank report projects a rise in global demand should bring a three-year decline in commodity prices to an end. Nebraska Farm Bureau Senior Economist Jay Rempe says that outlook should give hope to farmers and ranchers who have been struggling through the downturn in the farm economy.
He agrees with Rabobank officials that global demand for U.S. commodities is improving, especially for beef and pork as the income and diets of consumers improves around the world. Rempe is hoping the incoming Trump administration will work with ag commodity groups to expand export markets………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Hedge funds, despite lifting bullish bets on cotton to a three-year, favoured grains to soft commodities – so much so that many investors saw scope for fresh selling in the likes of corn.
Managed money, a proxy for speculators, lifted its net long position in futures and options in the top 13 US-traded agricultural commodities, from corn to sugar, by 55,896 contracts in the week to last Tuesday, analysis of data from the Commodity Futures Trading Commission regulator shows………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Two years ago, global oil prices crashed after the world started pumping out far more crude than anyone needed. That plunge, from $100 per barrel down to $45 per barrel, completely upended the global economy — and cost oil producers like Saudi Arabia billions of dollars in lost revenue.
Now those oil producers have had enough. This Wednesday in Vienna, the Organization of the Petroleum Exporting Countries will try to reach a deal to cut back sharply on oil production in order to raise global prices. (OPEC is a cartel of 14 major oil exporters, including Saudi Arabia, Iran, and Iraq, that account for 40 percent of global production.)……………………………………….Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Saudi Arabia, Iran, and Iraq can’t agree how to end a fight for market share. Here we go again. Like a year ago, crude oil futures are tumbling again Tuesday as hopes for a cut in output from the Organization of Petroleum Exporting Countries (OPEC) fade due to entrenched differences between its most important members.
The benchmark contract for U.S. crude was down 3.9% at $45.27 a barrel, after Reuters reported that Iran and Iraq–two countries who are ramping up production after years of politically-induced disruptions–are resisting pressure from Saudi Arabia to rein it in………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Saudi Arabia’s problems run far deeper than trying to cobble together a deal with fellow OPEC members to curb crude oil output in order to bolster prices. About two-thirds of Saudi Arabia’s oil exports head to Asia, and the kingdom’s struggles in the region’s two biggest importers, China and India, are symptoms of its wider issues in crude markets.
While Saudi Arabia has been increasing the total volume of crude it ships to China and India, it has steadily been losing market share, something that is likely of deep concern given that much of the current and future growth of oil demand is dependent on these two countries………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

The oil market is pricing in a 30 percent chance of producers reaching a deal to cut output at OPEC’s meeting in Vienna, according to Goldman Sachs Group Inc. Global benchmark Brent crude may swing $6 a barrel on Wednesday, based on implied volatility for options contracts, analysts including Damien Courvalin and Jeff Currie said in a report Monday.
Futures would rally into the low $50s a barrel and average $55 over the first half of next year if the group agrees to a cut, according to the bank. Failure to reach an accord would mean prices would average $45 a barrel through the summer………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Like celebrating Thanksgiving with a houseful of in-laws, OPEC’s autumn meeting in Vienna brings a combination of joy and dread. Something unexpected usually crops up, but the headlines out of both meetings are about the same year after year:
Iran Argues With Saudis. Grandpa Loses Dentures. Venezuela Pleads For Production Cuts. Three Year Old Has A Meltdown. Bomb Blasts Nigeria Pipeline. Sisters Bicker Over Politics………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Conventional wisdom suggests that a Federal Reserve rate hike next month is bearish for precious metals, particularly gold. This is because gold investors aren’t rewarded with the interest coupon payments as Treasury holders are. Thus, the opportunity cost of owning gold is the potential cash flow of interest payments, or dividends if comparing it to equities.
Accordingly, if bond and note yields are on the rise, there is less incentive to be long gold. Or so says the theory. Nevertheless, there is another school of thought which suggests that higher interest rates generally come with higher inflation. This, of course, is supportive to the precious metals markets………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Even though the markets haven’t behaved logically of late, it would have seemed a slam dunk for gold to rise if Donald Trump won. After all, we faced uncertainty around his policies, rising inflation from infrastructure spending, and higher expected growth rates.
But instead, gold has headed back down more sharply. It had its initial rise in the futures market when Trump looked like he was going to win. But since then, it’s reversed course – the opposite of the stock markets. While I’ve been saying for a long time now that gold still has a lot to lose, a new and interesting dynamic has arisen to add more pressure to the downside………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Gold halted its biggest gain in almost a month as investors extended the longest run of sales from bullion-backed funds in a year. Palladium climbed to the highest in almost 18 months.
Holdings in exchange-traded funds backed by gold have fallen for the past 12 days and are heading for the biggest monthly drop in three years. Bullion prices are near a nine-month low as traders are certain that the Federal Reserve will raise U.S. interest rates in December following Donald Trump’s election win………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

The rally in metals is showing no signs of slowing down. The Bloomberg Industrial Metals sub-index posted the biggest five-day gain since 2011, as zinc touched a nine-year high. Prices rallied after China’s top economic commission approved a $36 billion plan on new rail links around Beijing, boosting demand for industrial raw materials.
Zinc for delivery in three months rose 2.9 percent to settle at $2 900 a metric ton at 5.50pm on the London Metal Exchange, after touching $2 985, the highest since October 2007………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Japan’s need for aluminum premium futures is limited, London Metal Exchange CEO Garry Jones told the LME Tokyo Gala event Tuesday. LME launched four physically settled regional aluminum premium contracts, including Northeast Asia premium contracts for delivery to Japan and South Korea, in November 2015.
“They were launched when the market was high. Premiums have since come down and there is less demand,” Jones said. Chicago Mercantile Exchange launched a cash-settled Japan premium contract, settled against S&P Global Platts CIF Japan spot premium assessment, in December 2015………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Industrial metals slumped, paring the biggest monthly rally in four years, on signs that China is taking steps to cool a trading frenzy in commodities. The Shanghai Futures Exchange and Dalian Commodity Exchange have raised margins and fees to ease a trading frenzy that’s fueled aggressive price gains this month, and further measures are expected, according to Citigroup Inc. analysts.
“Chinese investors trigger copper prices back to life, but not back to reality,” Citigroup analysts including David Wilson wrote in an e-mailed note. Prices may fall as China takes steps to “skim speculative froth on industrial commodity markets,” they said………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

It’s no secret that base metals have done well in the month of November. Copper is up 20% month-to-date, its best monthly showing in a decade, according to Bloomberg. Everything from lead to zinc to nickel is up double-digit percentages also.
The PowerShares DB Base Metals Fund (DBB)―which holds futures on copper, aluminum and zinc―now has a gain of more than 33% for the year. These monster moves come despite a surge in the U.S. dollar during November, a factor that normally weighs on commodity prices………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

So far, the year 2016 has been moderate for agricultural commodities with some specific grains like sugar, soybean and coffee seeing a spike in prices while most other still reeling under pressure as evident by the 1.5% year-to-date decline (as of November 25, 2016) in the broader soft commodity ETF PowerShares DB Agriculture ETF DBA.
Even a subdued greenback could not turn the tide for all soft commodity exchange-traded products. While the likelihood of a stronger U.S. dollar in the wake of a Fed rate hike bet can spoil the party for agricultural commodities going forward, cheaper valuation and some grain-specific factors may provide support to a few agricultural ETF/ETN investing………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

As an exodus of money adds to the pressure on a slowing economy, regulators are trying to put the brakes on overseas use of China’s currency by increasing the scrutiny of certain overseas deals. The decision to restrict overseas use of the renminbi represents a setback in China’s long-term drive to turn the currency into a rival to the dollar and euro in the global marketplace.
Beijing had pursued a greater role for the renminbi as a way to increase its economic influence. Part of the renminbi’s appeal in international finance was that most Chinese companies could borrow and spend it overseas while seldom seeking approval from financial regulators in Beijing………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

It has been more than three weeks since the government announced its decision to demonetise old Rs 500 and Rs 1,000 currency notes. There has been a wide-ranging debate on whether the government’s move will indeed succeed in curbing black money hoarding and tax evasion.
Analysts have argued on the short-term and long-term impact of the move. Citizens have stood in queues for hours outside bank branches and Automated Teller Machines (ATMs). Some have praised and supported the move while others have called it a grave inconvenience, especially for India’s middle classes………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

Polluters who have reduced their carbon emissions can now apply for a reduction to their electricity bill, thanks to a new system rolled out by the carbon trade center in Beijing. Electric Carbon Contract, a cooperation project between Beijing Environment Exchange and GP Power Electricity Group, was launched on Tuesday in Beijing.
The system links carbon trading with preferential electricity rates, said Mei Dewen, director of Beijing Environment Exchange. Since 2013, China has tested carbon trading in seven pilot cities, including Beijing. Local governments assign tradable carbon emission allowances to key emitters based on their emissions history………………………………………..Full Article: Source

Posted on 30 November 2016 by VRS |  Email |Print

The EU carbon market is supposed to make polluters pay. But generous handouts to industries deemed at risk of losing business abroad are undermining the system, a watchdog has warned. Cement producers reaped a €5 billion windfall from the emissions trading system (ETS) between 2008 and 2015, their annual reports reveal.
Companies like Lafarge, Heidelberg and Cemex profited from selling carbon allowances they received for free, substituting cheaper international offsets and passing through costs to customers………………………………………..Full Article: Source

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