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Commodities Briefing 19.Dec 2014

Posted on 19 December 2014 by VRS |  Email |Print

Focus may be on volatile oil prices right now, but investors shouldn’t overlook the strong performance in other commodities, one expert warns. Ten commodities were in backwardation this month, a sign that markets outside of oil are recovering, according to a recent note from S&P Dow Jones Indices: copper, corn, cocoa, silver, coffee, live cattle, feeder cattle, heating oil, Kansas wheat, and lean hogs.
Backwardation occurs when the present spot price of a commodity is higher than the futures price, typically signaling a surge in demand and shortages in supply………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Investors are exiting commodities at the fastest pace in six years, betting a slump in prices isn’t over as corn, oil and gold drop close to their cost of production. Open interest in raw-material futures and options is down 6.5 percent since June, heading for the biggest second-half slump since 2008, exchange data show.
U.S. exchange-traded products tracking metals, energy and agriculture saw net withdrawals of $169.4 million in 2014, marking the first two-year slump since the funds were created a decade ago………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Investing in an index is usually a good way to hedge your bets. In commodities, though, it is hard to get around one thing: energy. The oil market is enormous: Even after the recent slump in prices—and Thursday’s rally fizzled quickly–the notional value of annual oil consumption is around $2 trillion.
That is reflected in the make-up of the Bloomberg Commodity Index, of which oil and refined products such as gasoline constitute 17.2%. Throw in natural gas and the overall energy component rises to 27.2%. In another popular index, the S&P GSCI, oil alone weighs in at 67.2%………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

A freefall in commodity prices has come to a head at the end of 2014 as crude oil, iron ore and coal prices, among others, took a significant tumble and served to bring one global giant – Russia, the world’s ninth-largest economy – to its knees.
The problem facing most resources is that high levels of production have seen supply outstrip global demand, resulting in low commodity prices. Resource giants with low production costs will weather the storm until supply tapers and prices pick up again. High cost producers will probably fall over. The commodity fall can largely be attributed to slowed demand from China which is switching from an investment-focused economy to a consumer-oriented one………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The International Energy Agency does not see oil prices bouncing back to a higher level very soon, the organization’s executive director said. The IEA cut its forecast for oil demand in 2015 to 93.3 million barrels per day last week, shaving 230,000 bpd of growth from an earlier projection.
The organization sees demand growth slowing next year in the former Soviet Union area, China and a number of oil-producing nations, said the IEA’s Maria van der Hoeven. At the same time, the organization believes the market is “well supplied,” she said………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Recent falls in the price of oil are likely to be temporary, says the oil minister for Saudi Arabia, Opec’s biggest producing nation. Ali al-Naimi said commodity price fluctuations were to be expected and said he was hopeful for the future.
He added it was “difficult, or even impossible, for Saudi Arabia or Opec to undertake any measure that would lead to a reduction in [their] share of the market and an increase in of others”. The price of oil has halved since June. On Thursday, the price of Brent crude was just below $63 a barrel, while US crude was near $58………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Saudi Arabia’s powerful oil minister said on Thursday that OPEC could not cut output without the support of other big producers and attempts to get them on board had not worked.
Ali al-Naimi said it was impossible for OPEC to cut alone to reverse the oil price slump—which he called temporary—when others were pumping more, saying that could lead to losing market share and with no guarantee of supporting prices………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Brent oil up in London as Iran’s oil minister turns up the pressure on Opec to act on falling prices. Iran’s oil minister has said that a “political conspiracy” is to blame for the dramatic slump in the price of crude in remarks that could signal that the Islamic Republic will try to exert pressure on the Organisation of Petroleum Exporting Countries (Opec) to again consider cutting output.
Bijan Zanganeh told the country’s state petroleum news agency: “The prolongation of the downward trend of the oil price in world markets is a political conspiracy going to extremes.”……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The sharp drop in oil prices in the past few weeks confirms the oil price forecast that I published back in May 2013, when West Texas crude sold for $94.50: “Oil prices are headed down, and I mean down at least $20 a barrel. The key reason is that prices have been high. It’s not a paradox, but a result of the long time lags in oil production.”
Before going into the forecast, it’s worth mentioning that price can change faster than the fundamentals of supply and demand. In a recent 30-day period the price of oil fell by 20 percent. There was no change in the demand or supply over that month to justify such a large change. ……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The United States needs to develop clear policies to support its ailing nuclear industry—which is prone to seeing old reactors close rather than new reactors open largely because of the impact on energy prices of cheap natural gas from fracking, the International Energy Agency said.
“The domestic nuclear industry is therefore at a critical juncture as a consequence of its declining economic competitiveness, and existing market mechanisms do not favour investment in high capital-intensive nuclear technology,” according to the IEA’s comprehensive review of U.S. energy policy for 2014………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Resurgence in gold demand from China and India, the world’s biggest consumers, is set to restore some shine to the yellow metal in 2015 after a lackluster year. “Physical gold demand in China and India were held back in 2014 amid high stocks and import controls, respectively,” said Victor Thianpiriya, commodity strategist at ANZ. “Both these shackles have been removed, putting demand on a solid footing as we head into 2015.”
In China, physical gold demand will return because stocks are depleting, said Thianpiriya, who sees the precious metal ending 2015 at $1,280 an ounce, up from $1,200 currently………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The gold price still has room to drop further given continued strength in the dollar and the possibility that the Federal Reserve will raise interest rates some time in 2015, Natixis said. Platinum is the more favourable trade next year, it said in a research note on Thursday.
“The strengthening dollar will continue pushing gold prices down. As the dollar strengthens so the need for gold as a safe haven ‘in times of crisis’ dissipates,” Natixis said. “Moreover, the yen and euro are expected to weaken on the back of expanding central bank balance sheets.” ……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Gold prices did not show a huge reaction to the FOMC meeting announcement today in which the Fed appeared to sound more dovish–and perhaps a bit confusing as well. The metal is now hovering around the $1,200 area, and it is likely that no significant changes in price action are seen until the new year.
The central bank left in its language the phrase “considerable time” when referencing interest rate policy and the notion of beginning the tightening cycle. Other parts of the central bank’s statement were considered to be more hawkish, however, and some investors feel that the Fed gave some mixed signals with regards to its intentions………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

“Gold prices we see as stabilized at current levels,” said the Credit Suisse Global Metals & Mining Team, “we now expect a $1,100-$1,300/oz trading range, we reduce our gold price forecast for 2015 to $1,225/oz and our long term price from $1,250/oz from $1,300/oz.”
“We see gold price supported at the $1,200/oz level by a lower mine supply and continued global physical investment demand,” the analysts advised. However, they observed, “We see potentially bearish factors for the gold market including the bullish consensus USD outlook and market expectations for higher rates in balance with more bullish fundamental factors that drove gold from 2002-2008; shrinking mine supply, central bank buying and Asian demand.”……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Since bottoming out at US$28 a pound in May, uranium prices have climbed 35%, becoming the one commodity that seems to be resisting the broad selloff. The surge, analysts agree, is due mostly to China’s increased reliance on nuclear energy and renewable energy sources as it moves away from coal-fired plants. But prices are still far from the point that would allow mining activity to pick up again, they warn.
“There’s some movement but I don’t think uranium prices are going to break out of the stalls in near-time,” says Matthew Keane, mining analyst with Argonaut in Perth Australia told Financial Times……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Iron ore prices and shipping costs fell to the lowest levels in five years amid signs China’s slowing growth is sapping demand for cargoes just as the world’s largest mining companies press on with raising output and spur a glut.
The rate to ship the steel-making commodity on a Capesize vessel to Qingdao, China from Tubarao, Brazil slid 4.9% to $11.86 a ton today, the lowest since Jan. 8, 2009, data from the Baltic Exchange in London show. Iron ore delivered to Qingdao fell to $68.05 a ton yesterday, the lowest since June 3, 2009, according to Metal Bulletin Ltd………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The crash in oil prices has truly reached shocking levels at this point. Oil prices which were trading above the triple-digit mark only months ago, but have now given up gains to gravitational forces and are now hovering around the five-year low of $65 a barrel.
Oil has collapsed more than 40% this year, thanks to sluggish global demand, a strong dollar and booming U.S. oil production - which has risen to the highest output from the U.S. in three decades. Moreover, a lack of geopolitical concerns has also dragged oil prices lower……………………………………….Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Countries with heavy oil exposure have faced extremely rough trading in recent months as steep losses started to pile up in the space. This prime commodity has entered bear territory having slid more than 40% since June and touched the five-year low level. Brent crude prices are presently hovering around the $60/bbl. level.
A supply glut, ‘no production cut’ by the OPEC nations and anemic demand outlook are wrecking havoc on this liquid commodity. This has taken a toll on oil-rich nations which are among the top exporters of the commodity. As a result, the stocks and related ETFs of these nations have seen plunging share prices for quite some time now………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Grappling with its biggest ever scam running into Rs 5,600 crore, it appears to be a journey down the hill for the commodity markets with total exchange traded turnover halving to almost Rs 65 lakh crore in 2014.
Although not a formal member of the commodity futures market, the payment default at National Spot Exchange Ltd (NSEL) shook the market to its core, resulting into a series of regulatory steps to revive investor confidence and credibility during 2014 and it is now hoping for a fresh start in the new year………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

The rouble’s volatility has turned deteriorating sentiment into a sharper, broad-based sell-off that is even affecting oil importing countries. In August 1998, Russia announced it would devalue the rouble and default on its domestic debt. The crisis sent shockwaves through the global financial system and led to the collapse of Long-Term Capital Management, a US hedge fund.
The fact that parallels are now being drawn between the currency crisis that Russia is suffering and the country’s 1998 default speaks volumes about the severity of the turmoil that has engulfed Russia’s financial markets and led to sharp declines in other emerging market assets………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Russia has finally lost the economic war on the West, that much is clear. The Russian rouble turned to ‘rubble’ in the last few days as the once great currency went into free fall.
But what is still uncertain is what kind of knee-jerk reaction President Vladimir Putin might try next in a bid to keep his hand on the reins of power. We take a look at the key factors in what will inevitably evolve into an international game changer – if it hasn’t already………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Although plans to link carbon-trading schemes internationally have suffered setbacks over the years, advocates of carbon trading hope the UN climate summit in Paris next year will produce new commitments.
Linked emission trading systems (ETSs) could create a larger and more liquid market, harmonise emission prices and reduce price volatility, according to a number of carbon market researchers. Higher emission prices would benefit gas over other fossil fuels because it is less carbon-intensive………………………………………..Full Article: Source

Posted on 19 December 2014 by VRS |  Email |Print

Washington has become the latest US region to set out plans for a carbon market to limit emissions. The Carbon Pollution Accountability Act would cover 85% of the state’s emissions and raise around US$1 billion in its first year, if passed.
Along with boosts for electric vehicles and clean energy, the cap-and-trade system is to deliver a target to cut emissions 15% by 2020 from 2005 levels. “It’s the smart thing to do because we can make the air cleaner for our children, our businesses can lead the world in clean technology and doing so will bring good-paying jobs to Washington,” said governor Jay Inslee………………………………………..Full Article: Source

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