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The global oil price drop may last for the next couple decades, Stanford economist says

Posted on 31 March 2015 by VRS  |  Email |Print

Global oil prices may stay low for the next 10 or 20 years, according to Stanford economist Frank Wolak. The most likely medium-term outcome is $50 to $70 per barrel, according to Wolak. He is the Holbrook Working Professor of Commodity Price Studies in the Department of Economics at Stanford University.

And while geopolitical and environmental issues may unexpectedly arise that turn oil prices upward, Wolak said many factors point to lower oil prices for the foreseeable future. Crude oil prices fell from a high of $115 a barrel in June 2014 to a low of $45 in January of this year. The lower prices have generated ripple effects throughout the global economy………………………………………..Full Article: Source

Morgan Stanley Cuts Commodities Outlook on China Demand

Posted on 25 March 2015 by VRS  |  Email |Print

Morgan Stanley cut its price forecasts for almost all base metals and bulk commodities as China’s “dormant” industry fails to bolster demand in the world’s biggest consumer of copper and iron ore.
The bank reduced its 2015 estimate for nickel by 23 percent from its previous estimate to an average $14,815 a metric ton and lowered copper by 16 percent to $5,945 a ton. It cut its iron ore outlook by 28 percent and coking coal by 16 percent. Industrial metals will perform better than bulk commodities as growth in developed countries supports demand, analysts Tom Price and Joel Crane said in a report on Tuesday………………………………………..Full Article: Source

Fed hike, Indian demand will be key for Gold: Barclays

Posted on 24 March 2015 by VRS  |  Email |Print

A likely Fed hike and seasonal physical demand will determine the intensity for risks in store for Gold, a report by Barclays said. In Q315 gold will likely be caught between scope for disinvestment as markets look for a rate hike and seasonal physical demand materializing from India.
“Our economists now see a much lower likelihood that the committee raises rates in June given the downward revision to NAIRU which means that the Fed’s estimate of labour market slack has risen. In turn, the Fed now looks for the first rate hike to occur in September and for the target range for the federal funds rate to reach 50-75bp in December, the report said………………………………………..Full Article: Source

Commodity Traders Aren’t Too Big Too Fail, Trafigura Report Says

Posted on 23 March 2015 by VRS  |  Email |Print

Commodity traders don’t pose systematic risks to the global financial system and shouldn’t be subjected to bank-style regulation, according to a paper published Monday by the second-largest metals trader Trafigura Beheer BV.
The report ‘Not Too Big To Fail,’ funded by Trafigura and written by University of Houston finance professor Craig Pirrong, argues against imposing capital requirements on commodity trading firms. It says commodity traders aren’t highly leveraged compared with banks, have strong capital structures and use syndicated lending to mitigate risk………………………………………..Full Article: Source

Gold price to double by 2030 thanks to Asia

Posted on 19 March 2015 by VRS  |  Email |Print

Asia’s financial system liberalization and its population’s growing wealth are two key factors expected to boost demand for gold and push the price of the key commodity over US$2,400 an ounce by 2030, a report published Wednesday claims. According to the Australia and New Zealand Banking Group (ANZ) predictions, as incomes rise across Asia, particularly in China and India, so will the appetite for gold rings and necklaces.
In its report “East to El Dorado: Asia and the Future of Gold,” ANZ estimates that annual retail and investor demand for the precious metal in the 10 largest economies in Asia could double to 5,000 tonnes within 15 years. The bank dubbed these nations “the A10″ – China, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam………………………………………..Full Article: Source

Citi Sees Slower Commodities Demand Growth as China Recedes

Posted on 18 March 2015 by VRS  |  Email |Print

Global commodity markets will see slower and less synchronized demand growth from across the world as China’s dominance fades, according to Citigroup Inc. Global demand expansion, which centered on the rise of China in the 2000s, will slow in the next decade and be driven increasingly by India, Southeast Asia, the Middle East, Latin America and Africa, the New York-based bank said in a report e-mailed Tuesday.
While demand will increase from these regions, dubbed the “Emerging 5”, it won’t be enough to offset the impact of slower growth from China, Citigroup said. Commodities tumbled to a 12-year low on Monday, with crude oil in New York slumping 18 percent in 2015. Inventories are rising after a decade-long bull market spurred farmers, miners and drillers to increase production just as economic growth slowed in China………………………………………..Full Article: Source

China is irreplaceable for the commodities market

Posted on 18 March 2015 by VRS  |  Email |Print

The commodities supercycle may be over but there’s no replacement for China as the world’s factory, according to Citi. From now on commodities demand will come from a diversified group of regions including India, the Middle East, Latin America, Africa and countries belonging to ASEAN in Southeast Asia, writes Henry Sanderson, commodities correspondent.
But this won’t be enough to offset China, leading to slower worldwide demand growth for commodities as well as weaker global trade flows, the bank said. Hardest hit will be thermal coal, steel iron ore and coking coal, due to their exposure to China’s manufacturing, infrastructure, and real estate sectors, they said. Base metals such as aluminium and copper are likely to do better, with emerging market demand growth in the 3 per cent to 5 per cent range into the 2020s, they said………………………………………..Full Article: Source

Preqin: Hedge funds turn the tide on poor 2014 performance

Posted on 18 March 2015 by VRS  |  Email |Print

Hedge fund managers have got off to a strong start in 2015. Following a year which saw the average hedge fund deliver returns of 3.78%, managers have already returned 2.52% on average two months into the year. Given that performance was named as the key concern in the industry in 2015 by investors in a Preqin survey at the end of 2014, managers will have been keen to deliver strong performance early in the year. The challenge, and opportunity, still remains for hedge funds to continue this performance, particularly amidst strong equity markets and turbulent commodity markets.
Other Key Hedge Fund Performance Stats: Equity Strategies Leading the Pack: All main hedge fund strategies generated positive returns in February 2015, with equity strategies posting the highest monthly return of 3.28%. . Oil Prices Causing Problems: The reversal in falling oil prices led to CTAs generating their lowest monthly return since October 2014, and only just hung on to positive performance with average returns of 0.20%. (Press Release)

What is a Structured Product?

Posted on 18 March 2015 by VRS  |  Email |Print

Much maligned structured products are back on the investor’s radar as we seek post-retirement solutions that pay a sustainable income. But should they be avoided? A structured product has a very broad definition. It’s a pre-packaged product based around a series of derivatives; and really through a structured product you can get exposure to a range of different underlying assets. It could be single stocks, baskets of stocks, indices.
You can get exposure to commodities, debts, foreign exchange. It’s almost a definition a little bit like hedge fund, in the fact that it’s very broad brush and can really encompass a range of different underlying exposure and risk being taken as well………………………………………..Full Article: Source

OPEC Warns U.S. Oil Boom Could Be Over by Year-End

Posted on 17 March 2015 by VRS  |  Email |Print

OPEC said Monday the U.S. oil boom could be over by the end of this year, offering a pessimistic view of American producers’ ability to withstand a historic collapse in crude prices and predicting that global petroleum supplies would realign with demand.
The cartel, in its closely watched monthly oil-market report, cited spending cuts by U.S. producers and the falling number of American rigs drilling for oil in recent months after crude prices fell by about 60% from last summer to January before rallying in February. For instance, rig counts fell faster in February than they did in January, according to the latest Baker Hughes report………………………………………..Full Article: Source

The Real Reason Behind the Oil Price Collapse

Posted on 13 March 2015 by VRS  |  Email |Print

It’s not overproduction in shale fields, and it’s not global economic stagnation. It’s something far more threatening to Big Oil’s business model. Many reasons have been provided for the dramatic plunge in the price of oil to about $60 per barrel (nearly half of what it was a year ago): slowing demand due to global economic stagnation; overproduction at shale fields in the United States;
The decision of the Saudis and other Middle Eastern OPEC producers to maintain output at current levels (presumably to punish higher-cost producers in the U.S. and elsewhere); and the increased value of the dollar relative to other currencies. There is, however, one reason that’s not being discussed, and yet it could be the most important of all: the complete collapse of Big Oil’s production-maximizing business model………………………………………..Full Article: Source

Oil & Gas: PwC’s Annual Global CEO Survey

Posted on 11 March 2015 by VRS  |  Email |Print

The reality facing oil and gas industries has changed dramatically over the last year. The industry is facing over-supply and lower prices – so it’s not surprising that nearly two-thirds of oil and gas CEOs say their companies are facing more threats to growth than they did 3 years ago.
For oil and gas companies, an increasing tax burden, over-regulation and geopolitical uncertainty top the list, followed by government response to fiscal deficit and debt burden and protectionist tendencies of national governments. Taxes are a particular issue for the sector, which also rates an internationally competitive and efficient tax system as the top outcome it would like to see from government………………………………………..Full Article: Source

OPEC is still kicking, but the World Bank thinks the oil cartel’s days could be numbered

Posted on 11 March 2015 by VRS  |  Email |Print

As OPEC ’s refusal to curb oil production contributes to a nine-month plunge in prices, a new paper suggests the cartel’s days may be numbered. OPEC, the Organization of the Petroleum Exporting Countries, has vowed to defend its market share against higher-cost producers such as U.S. shale drillers and companies developing Canada’s oil sands.
Its strategy hinges on the odds that an extended period of low prices will lead other producers to scale back output, enabling the group to reassert its influence. Yet a brief history detailed by the World Bank Group shows how difficult it can be to maintain a commodities cartel in the face of market forces and technological advances………………………………………..Full Article: Source

World Bank Analyzes Oil Price Plunge

Posted on 06 March 2015 by VRS  |  Email |Print

Rapid expansion of oil supply from unconventional sources, a significant change in OPEC’s policy stance, and weak global demand are driving the recent plunge in oil prices, according to a new paper by the World Bank. These underlying forces are buoyed by a strengthening U.S. dollar and the fact that oil production in the Middle East has not been severely disrupted by ongoing conflict, says the paper, titled “The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses”.
The paper, authored by John Baffes, Ayhan Kose, Franziska Ohnsorge, and Marc Stocker, presents a comprehensive analysis of the causes and economic and financial consequences of the oil price decline………………………………………..Full Article: Source

Global Iron Ore Surplus Seen by World Bank Lasting Two Years

Posted on 04 March 2015 by VRS  |  Email |Print

If history is any guide the global glut in iron ore may persist for as long as two years, according to the World Bank, which forecasts that the steel-making raw material will average $75 a metric ton this year.
“From experience from earlier iron ore episodes as well as other metal markets, it takes about one to two years for either excess supplies to get back to normal levels or excess demand to be met by larger supplies,” John Baffes, a senior economist at the lender, said in an e-mail response to questions……………………………………….Full Article: Source

Why Commodities Are More Than Economic Indicators

Posted on 03 March 2015 by VRS  |  Email |Print

We track the prices of everything from crude oil to milk for clues about the state of the economy. But what could they tell us about the environment? Tune in to any television or radio newscast, and you’ll hear how the stock market is performing today. The New York Times puts market indicators alongside the current temperature at the top of their website. Changes in unemployment or the prices of commodities like oil and milk regularly make headlines.
Environmental historian Dr. Ted Melillo, associate professor at Amherst College, says we need to re-envision what something like the price of oil really means - what it can reveal about not only our economic systems, but also our social, political, and environmental attitudes and practices………………………………………..Full Article: Source

Commodities Bust Leaves Latin America with a Hangover

Posted on 27 February 2015 by VRS  |  Email |Print

Five years ago spirits were soaring across Latin America. The region’s economies were bouncing back with startling speed from the global financial crisis to post their strongest growth rates in more than a decade. Robust Chinese demand for copper, iron ore, oil, soybeans and other commodities was filling government and private sector coffers and lifting millions of people into the ranks of the middle class.
Companies like Brazilian aircraft maker Embraer, Chilean fashion retailer Falabella and Mexican bakery goods manufacturer Grupo Bimbo were extending their reach across the region and around the world. The Economist boldly proclaimed the region to be on the verge of a Latin American decade………………………………………..Full Article: Source

Noble overstated commodity values by at least US$3.8 bln: Iceberg Research

Posted on 27 February 2015 by VRS  |  Email |Print

Singapore-listed Noble Group overstated the value of commodities it holds by at least US$3.8 billion, Iceberg Research said in a report on the Asian commodity trading firm’s accounting practices. “Impairing these fair values dramatically impacts Noble’s performance indicators,” the little-known research firm said on its website on Wednesday, its second report this month raising questions about Noble’s books.
Iceberg released its first analysis on Feb 15, to which Noble issued a detailed rebuttal. The company’s shares fell a combined 13 percent in the two trading sessions following the initial report. It has recovered about 1 percent since then………………………………………..Full Article: Source

Commodity crash reflects global economic slump

Posted on 25 February 2015 by VRS  |  Email |Print

Global commodity prices have tumbled to levels below the depths of the Great Recession, underscoring the widespread difficulties facing the global economy. While crude oil’s price collapse has been in the spotlight, a wide range of other commodities are suffering as well, including natural gas, coal, iron ore, copper, grain and pulp and paper.
The commodity crash is the result of too little demand for raw goods now in plentiful supply after producers ramped up capacity in recent years in anticipation of steady global growth. But trouble spots are everywhere. Commodity markets have declined during worldwide turbulence as the pace of growth in China continues to slow, Russia grapples with an imploding economy and ruble and Greece struggles through an economic crisis that Europe must solve. ……………………………………….Full Article: Source

The Streets of China Commodity City

Posted on 19 February 2015 by VRS  |  Email |Print

Yiwu International Trade City, also known as China Commodity City, claims to be the world’s largest wholesale market for small commodities. It is located in a vast warehouse in the province of Zhejiang, where tens of thousands of stalls sell everything from artificial flowers to inflatable pools.
In 2014, the photographer Richard John Seymour captured the “streets” of China Commodity City as part of a project with the design studio Unknown Fields Division. Seymour told me that, despite the disorienting aspects of the market, the familiarity of certain items on sale there—a kitchen sponge, a Christmas decoration—served as a reminder that he “had an intimate connection with this place on the other side of the globe.”……………………………………….Full Article: Source

Commodities explained: Oil data watch

Posted on 18 February 2015 by VRS  |  Email |Print

Concerns about a growing oil supply surplus last year prompted Saudi Arabia, the world’s largest exporter, in November to persuade fellow Opec members that cutting production to support oil prices was not in their interest. The Kingdom said a period of lower prices would shave off some US shale production and other high-cost output and protect Saudi Arabia’s (and in theory the cartel’s) market share.
With the oil market focused on the impact of the plunge in oil prices on supply as well as demand, traders are on tenterhooks. Some are even grumbling that they have to hang around on Fridays for the weekly US rig count announcement — a data point that could provide hints about where oil output is heading particularly in a volatile oil market. But what else is on the list of potentially market moving data?……………………………………….Full Article: Source

Did OPEC engineer the oil crisis?

Posted on 17 February 2015 by VRS  |  Email |Print

Richard Fischer, President, Dallas Federal Reserve, on February 11 said that OPEC engineered the drop in oil prices to put US oil producers out of business. However, Fisher is not the only one calling out OPEC for taking aim at US shale. Dan K. Eberhart, CEO of Canary LLC, picked up on this proactive action months ago.
During an interview on CNBC in early December last year, Eberhart said, “what’s shaping up is a battle royale between the US shale producers and OPEC. It’s a case of who’s going to blink first. I think OPEC, by deciding not to change their production quota, is betting on the US.”Eberhart explained that OPEC is applying downward pressure on oil prices by significantly contributing to excess oil supplies during a period of lessened demand………………………………………..Full Article: Source

Gold demand sinks to five-year low in 2014

Posted on 13 February 2015 by VRS  |  Email |Print

Global gold demand slumped to its lowest level in five years in 2014 as bar and coin buying plunged and jewelry purchases cooled, according to the World Gold Council (WGC). Overall demand totaled 3,924 tonnes, down 4 percent on year at its lowest level since 2009, the WGC’s quarterly demand trends report, published on Thursday, showed.
Total bar and coin investment fell 40 percent to 1,064 tonnes as investors, who had made major purchases in 2013 amid a sharp fall in prices, held back from further purchases, the industry group said………………………………………..Full Article: Source

Indian Gold Consumption Fell, But Is Still the Highest in the World

Posted on 13 February 2015 by VRS  |  Email |Print

In the Olympics, India rarely brings home gold medals but when it comes to actual gold, it brings home more than any other country. The World Gold Council said Thursday that the South Asian nation consumed less gold last year than it had in five years but it still bought tons more of the precious metal than any other country.
India has been desperate to wean its citizens of their addiction to gold. It has slapped new restrictions and import taxes on gold to rein in trade imbalances. Overall Indian consumer demand for gold only fell 12% to 842.7 tons last year. That’s the least amount of gold India has bought in one year since 2010, but still more than China or any other nation bought in 2014………………………………………..Full Article: Source

Low oil price won’t spur global growth: Moody’s

Posted on 12 February 2015 by VRS  |  Email |Print

Lower oil prices will be sustained throughout 2015 but don’t expect any boost for the majority of the world’s countries, according to a global growth forecast from Moody’s Investor Service. “Lower oil prices, which we expect to be sustained, would in principle provide a significant boost to global growth,” Marie Diron, senior vice-president of Credit Policy at Moody’s and author of the agency’s “Global Macro Outlook 2015-16″ report published Wednesday.
“However, we are maintaining our G-20 forecast,” she said. “For the G-20 economies, we expect gross domestic product (GDP) growth of just under 3 percent each year in 2015 and 2016, unchanged from 2014 and from our November 2014 Global Macro Outlook,” Diron added………………………………………..Full Article: Source

IEA: New normal for oil as cheap prices fail to ignite demand

Posted on 12 February 2015 by VRS  |  Email |Print

The global oil market is entering a new phase where cheap oil is failing to ignite growth in demand, the International Energy Agency (IEA) says. Demand growth will remain sluggish because of fuel switching, more fuel-efficient cars, reduced oil subsidies and structural changes in the global economy, according to the IEA’s Medium-Term Oil Market Report.
Market dynamics suggest oil demand should increase strongly in response to falling oil prices, which have halved since last summer. But the IEA argues oil markets are entering a “business-as-unusual” phase, where the usual rules of supply and demand have changed………………………………………..Full Article: Source

Citigroup; Oil’s Heading To $20 And Opec’s Days Are Over

Posted on 11 February 2015 by VRS  |  Email |Print

Citigroup is telling us that oil is going to head down to $20 a barrel soon enough. Further, that Opec’s hold over the oil price is now definitively broken. That’s a pair of pretty strong claims and of course we need to take them both with the appropriate amount of salt. But I think the first is possible and the second is likely.
Even though I agree that that second, the days of Opec’s control being over, is the more remarkable claim I do think it is the stronger of the two. The reason for this is two little bits of economics. The first being that monopolies and cartels do indeed exist but in the end they always fall over. If it’s not because of legal action against them, or because of cheating among the cartel’s members, then in the end technological advance will indeed get them………………………………………..Full Article: Source

Oil market rebalancing ‘could take years’: IEA

Posted on 11 February 2015 by VRS  |  Email |Print

The global oil market could be out of balance for years, and it will never be the same because of U.S. shale production, the International Energy Agency said Tuesday.
“A partial rebound in oil prices over the last month following a 60 percent crash since June suggests market participants are seeing light at the end of the tunnel and growing confident that spending cuts by oil companies will lead to a market recovery,” the IEA said in its February oil market report……………………………………….Full Article: Source

US to remain world’s top source of oil supply growth up to 2020: IEA

Posted on 11 February 2015 by VRS  |  Email |Print

The United States will remain the world’s top source of oil supply growth up to 2020, even after the recent collapse in prices, the International Energy Agency said, defying expectations of a more dramatic slowdown in shale growth.
The agency also said in its Medium Term Oil Market report that oil prices, which slid from US$115 a barrel in June to a near six-year low close to US$45 in January, would likely stabilise at levels substantially below the highs of the last three years………………………………………..Full Article: Source

Russia will be biggest loser from oil price fall, warns IEA

Posted on 11 February 2015 by VRS  |  Email |Print

International Energy Agency uses market report to point to biggest potential loser from oil price slump. Russia will be the biggest loser from the current downturn in oil prices as the Organisation of the Petroleum Exporting Countries (Opec) seizes back a bigger share of the world crude market, the world’s top energy watchdog has said.
In its closely-watched medium-term market report the International Energy Agency (IEA) said that Russia’s output of crude would contract by 560,000 barrels per day (bpd) through to 2020. “Russia facing a perfect storm of collapsing prices, international sanctions and currency depreciation, will likely emerge as the industry’s top loser,” said the IEA………………………………………..Full Article: Source

The global economy: Reasons to be cheerful

Posted on 06 February 2015 by VRS  |  Email |Print

The conventional wisdom about the state of the world economy goes something like this: since the start of the 2007-2008 financial crisis, the developed world has struggled to recover, with only the United States able to adjust. Emerging countries have fared better, but they, too, have started to flounder lately. In a bleak economic climate, the argument goes, the only winners have been the wealthy, resulting in skyrocketing inequality.
That scenario sounds entirely right – until, on closer examination, it turns out to be completely wrong. Start with economic growth. According to the International Monetary Fund, during the first decade of this century, annual global growth averaged 3.7%, compared to 3.3% in the 1980s and 1990s. In the last four years, growth has averaged 3.4%………………………………………..Full Article: Source

Citi: The oil (and gas) plunge isn’t over yet

Posted on 05 February 2015 by VRS  |  Email |Print

The oil crash — and cheap gas bonanza — probably isn’t over yet. For a few days, oil was showing real signs of life following last year’s meltdown. Prices spiked above $54 a barrel on Tuesday after oil’s best three-day performance in six years. Drivers may have even noticed a little pop in gas prices. The national average price of gasoline jumped nearly five cents a gallon on Wednesday, according to AAA. The oil bounce also caused stock prices to surge on Tuesday.
But the rebound is already looking like it may be short lived. Oil plummeted nearly 9% on Wednesday to settle at $48.45 a barrel. That’s the commodity’s worst day since November 28 when OPEC rattled the market by deciding to keep production steady………………………………………..Full Article: Source

Global deflation risk deepens as China economy slows

Posted on 03 February 2015 by VRS  |  Email |Print

The risk of global deflation looms large for 2015 as surveys of China’s mammoth manufacturing sector showed excess supply and insufficient demand in January drove down prices and production. While the pulse of activity was livelier in Japan, India and South Korea, they shared a common condition of slowing inflation.
“The slide in global oil prices and inflation has turned out to be even bigger than anticipated,” said David Hensley, an economist at JP Morgan, and central banks from Europe to Canada to India have responded by easing policy. “What is now in the pipeline will help extend the near-term impulse from energy to economic growth into the second half of the year.”……………………………………….Full Article: Source

Standard Bank considers 2015 a tough year for commodities (Video)

Posted on 03 February 2015 by VRS  |  Email |Print

Standard Bank has said it considers 2015 to be a tough year for commodities, favouring precious and base metals over bulk for the next three years. The bank released its 2015 mining outlook ahead of the Indaba taking place in Cape Town next week. CNBC Africa’s Christine Mhundwa caught up with Rajat Kohli, global head of mining and metals at Standard Bank for more.……………………………………….Full Article: Source

Goldman puts end date on commodities slump

Posted on 29 January 2015 by VRS  |  Email |Print

The light at the end of the tunnel for commodities may be but one year away. Goldman Sachs is sceptical that there will be any gains for commodities over the next three months, but is much more optimistic there will be gains over the next 12 months. In the short-term, things could get worse.
“Despite the large declines in commodity prices, we see risks as still skewed to the downside over the near-term,” Goldman Sachs advised. Much is down to oil. The plunge in oil prices will weigh on investment indexes based on commodities in the short-term. Until oil settles or starts to rise, there will be downward pressure in copper and gold markets, according to the bank………………………………………..Full Article: Source

Barclays, Goldman forecast bearish first half for oil prices

Posted on 29 January 2015 by VRS  |  Email |Print

Barclays Plc and Goldman Sachs Group Inc issued even more bearish forecasts for oil prices on Wednesday, predicting no significant recovery in the first half of 2015.
Barclays slashed its 2015 Brent crude oil price forecast to $44 a barrel from $72, while Goldman said it expected prices for West Texas Intermediate crude to trade close to $40 per barrel for most of the first half of 2015………………………………………..Full Article: Source

Goldman Downgrades Commodity Outlook as Energy, Metals Tumble

Posted on 28 January 2015 by VRS  |  Email |Print

Goldman Sachs Group Inc. downgraded its three-month commodity outlook to underweight as mounting global supply gluts sent energy and metals prices tumbling this year. There is a greater risk that raw material prices may drop in the near term than rise, Goldman strategists and analysts including Christian Mueller-Glissmann, Peter Oppenheimer and Jeffrey Currie wrote in a research report.
The Bloomberg Commodity Index of 22 components reached a 12-year low this week, with crude oil, hogs and copper leading losses in 2015. Inventories of grains, metals and energy are rising after a decade-long bull market for commodities spurred miners, drillers and farmers to increase production………………………………………..Full Article: Source

Goldman cuts base metal price forecasts, ups gold

Posted on 27 January 2015 by VRS  |  Email |Print

Goldman Sachs Group Inc on Friday slashed its 2015 price forecasts for several base metals including copper and aluminium while raising its estimate for gold by $62 per ounce. “The primary reason for the changes to our forecasts is cost deflation – driven by a combination of actual and anticipated U.S. dollar strength, cheaper energy and other input costs, and our expectation of an improvement in mining productivity,” Goldman Sachs said.
Weaker-than-expected Chinese and European demand has also contributed to the deflationary environment, it added. Goldman cut its 2015 average copper price forecast to $5,542 per tonne from $6,400, and aluminium to $1,788 per tonne from $2,075………………………………………..Full Article: Source

All of the major commodities may fall in price this year, World Bank says

Posted on 23 January 2015 by VRS  |  Email |Print

This year could mark the rare occurrence when all of the nine major commodity price indexes decline, according to a World Bank forecast released Thursday. The latest report on commodities comes at a time when oil prices have seen a 55% drop over the past seven months, only topped by the 75% drop during the Great Recession, and the 67% drop from November 1985 to March 1986.
John Baffes, senior economist in the World Bank’s development prospects group, says he hasn’t seen a decline in all of the major commodities simultaneously in at least the past 12 years. Though changes in index composition make comparisons difficult, the last time there was the simultaneous decline could have been the Asian financial crisis or the downturn in 1984 and 1985………………………………………..Full Article: Source

Commodities explained: The price-supply disconnect

Posted on 22 January 2015 by VRS  |  Email |Print

The commodities cycle is all about supply and demand responding to prices. To put it very simply, as prices rise companies invest and supply increases. Prices then fall, which leads to production cuts, and eventually demand increases, pushing up the market and the cycle starts all over again.
That is, at least, the theory. In practice the price signal usually takes time to take effect, especially in a market downturn. Although there are signs of oil producers responding to price declines, in some other commodities, such as metals, coal and sugar, the reaction has not been immediate………………………………………..Full Article: Source

IEA economist sees upward pressure on oil prices by year-end

Posted on 22 January 2015 by VRS  |  Email |Print

Oil prices will face upward pressure by the end of the year, the chief economist of the International Energy Agency (IEA) said on Wednesday, as a fall of more than 50 percent in the price of crude since last June is expected to eventually curtail some production.
Fatih Birol of the IEA was appearing on a panel with OPEC Secretary General Abdullah al-Badri at the World Economic Forum in Davos, Switzerland. Badri argued that OPEC oil producers were right not to cut production despite the price fall………………………………………..Full Article: Source

Commodities Are Pulling Chile And Brazil Lower

Posted on 19 January 2015 by VRS  |  Email |Print

For much of the past several months, investors have been keeping a close eye on plunging commodity prices and trying to decipher how lower prices will influence the value of their investments. South America is rich in oil and base metals, commodities that have been particularly hard hit recently, and the region is popular for investors interested emerging markets.
In the article below, we’ll take a look at several key exchange traded funds (ETFs) that are used by traders to track the performance of primary South American markets and see if the bottom is priced in or whether the momentum will continue to send prices lower………………………………………..Full Article: Source

Commodities Explained: Qingdao

Posted on 19 January 2015 by VRS  |  Email |Print

Qingdao is a port city in China famous for its Tsingtao brewery, but the name continues to cast a long shadow over the global metals market. Here’s why. What has happened?
After reports emerged last May alleging a fraud in the city’s warehouses, some of the world’s largest banks have been scrambling to assess the damage. That spurred a flurry of lawsuits, with a judgment due in the first case between Mercuria, a commodities trader based in Switzerland, and Citigroup, this month. Citi argues it is owed more than $270m………………………………………..Full Article: Source

December Sees Further Consolidation in Commodity Markets

Posted on 16 January 2015 by VRS  |  Email |Print

Commodities were lower in December, largely characterized by fundamental factors, according to Credit Suisse Asset Management. The Bloomberg Commodity Index Total Return performance was negative for the month, with 16 out of 22. Index constituents trading lower. Credit Suisse Asset Management observed the following: Energy was the worst performing sector, down 22.06%, led lower by Natural Gas.
Crude oil and petroleum products also declined due to increasing production amid expectations for weaker oil demand growth. Livestock declined 4.84%, led lower by Lean Hogs, as cheaper feed costs allowed farmers to achieve heavier hog weights, which increased pork supply expectations throughout the period. Industrial Metals ended the period 4.34% lower. Weak economic data out of China, including lower-than-expected Industrial Production data for November, heightened demand concerns for base metals. (Press Release)

Commodities explained: Contango

Posted on 16 January 2015 by VRS  |  Email |Print

The oil price plunge over the past several months has spooked the world’s biggest producer countries and energy companies. But those traders who buy and sell physical barrels of oil, such as Vitol and Trafigura, have spotted a moneymaking opportunity. It’s all about “contango”.
When the current price of a commodity, such as oil, is lower than prices for delivery in the future, the market structure in industry jargon is known as “contango”. This means it is attractive for traders to buy oil now at cheaper rates, store it, either on land or at sea, and sell it in time to come for higher prices and make a big profit. They lock in the profits by buying physical oil and selling forward on the futures market………………………………………..Full Article: Source

UBS lower 2015 gold price forecast, others also revised downward

Posted on 16 January 2015 by VRS  |  Email |Print

UBS has downgraded its average gold price forecast for gold largely because of greater downside risks stemming from lower oil prices and the implied absence of an inflation threat, it said. The broker lowered its 2015 gold price forecast to $1,190 from $1,200 – the spot metal price was last at a little-changed $1,228/1,228.70 per ounce.
“While the expected price direction remains the same, the magnitude of our previous price expectations was too aggressive and needed to be revised lower,” it said in a release on Thursday. “Fed [monetary policy] normalisation and dollar strength are considerable hurdles for gold, but reduced market length and the fact that much of the adjustment had already been made in the last couple of years should help limit the force behind a move lower,” it added………………………………………..Full Article: Source

ANZ: Falling Commodity Prices Will Not Help Global Growth

Posted on 15 January 2015 by VRS  |  Email |Print

ANZ’s head of market strategy Richard Yetsenga reckons there is more going on in global commodities than just the dynamics of supply and demand. He says even though there has been a big focus on the interaction of supply and price in the big price crashes of iron ore and crude oil, the broad-based nature of the commodity rout means US dollar liquidity is playing a big part in the falls.
Yetsenga says: While the focus in the past year has largely been on individual commodities — iron ore, coal, oil and increasingly copper — it has become a much broader story than that………………………………………..Full Article: Source

Is a global economic recession coming? Copper price say ‘yes’

Posted on 15 January 2015 by VRS  |  Email |Print

The market for copper, a metal that two years ago was being stolen by thieves looking for big profits, is crashing – the latest in a string of commodities nosedives that have experts worried about the broader implications for the global economy. The copper market crashed overnight to its lowest level since the middle of the financial crisis in 2008, fueling fears that the global economy is slowing more sharply than many experts had anticipated.
Wednesday’s drop is the sixth consecutive decline in copper prices. Currently trading at around $5,560 a ton, the prices are causing significant pain to mining companies like Glencore, whose stock responded to the copper crash by hitting a record low………………………………………..Full Article: Source

Global Economic Prospects to Improve in 2015, But Divergent Trends Pose Downside Risks, Says WB

Posted on 14 January 2015 by VRS  |  Email |Print

Following another disappointing year in 2014, developing countries should see an uptick in growth this year, boosted in part by soft oil prices, a stronger U.S. economy, continued low global interest rates, and receding domestic headwinds in several large emerging markets, says the World Bank Group’s Global Economic Prospects (GEP) report.
After growing by an estimated 2.6 percent in 2014, the global economy is projected to expand by 3 percent this year, 3.3 percent in 2016 and 3.2 percent in 2017 [1], predicts the Bank’s twice-yearly flagship. Developing countries grew by 4.4 percent in 2014 and are expected to edge up to 4.8 percent in 2015, strengthening to 5.3 and 5.4 percent in 2016 and 2017, respectively………………………………………..Full Article: Source

Why Africa is becoming less dependent on commodities

Posted on 12 January 2015 by VRS  |  Email |Print

For decades commodities have shaped Africa’s economic growth. When prices were high, growth was good; when prices dipped, so did the continent. But that is slowly changing. Despite big commodity-price falls this year—oil is down by 50%—the continent will probably grow by 5% in 2015 (and more in the following years). While lots of African currencies lost value in 2014, they have performed much better than during other periods when commodity prices were falling.
Few African countries will fall into recession in 2015—unlike other commodity exporters such as Russia and Venezuela. Why is Africa doing better than many expected? Two reasons stand out. First, the continent’s economic growth is coming from other places. Governments have worked hard to make life easy for investors. Second, many African governments are better at managing the inevitable booms and busts of commodity markets………………………………………..Full Article: Source

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