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Moody’s: Global base metals, US steel & coal industry fundamentals will remain weak

Posted on 11 December 2015 by VRS  |  Email |Print

Moody’s Investors Service maintains its negative outlook on the global base metals, US steel and US coal industries as persistently low prices and continued volatility in the commodities markets will weaken the operating metrics for issuers in all three sectors in 2016. Slowing Chinese growth will continue to be the main source of volatility for the global base metals market, although weak or contracting growth in Europe and Brazil will also reduce demand and further weigh on prices in 2016, according to “Base Metals - Global, Steel, Coal — US: 2016 Outlook — Gauges Remain in the Red as Price Slide Continues.”
“Single commodity producers, particularly of copper and aluminum, will be more vulnerable than those that are more diversified,” said Carol Cowan, a Moody’s Senior Vice President. “But producers’ costs, liquidity and debt maturity profiles are key considerations that would also affect their credit profiles and ability to weather persistently low prices.” (Press Release)

‘Few reasons’ to expect oil’s recovery in 2016, IEA says

Posted on 10 December 2015 by VRS  |  Email |Print

The International Energy Agency heaped another dose of bearish news on the faltering global energy markets by warning that it sees no recovery in oil prices in 2016 and predicted another year of plunging oil development spending.
Speaking on the sidelines of the Paris climate change conference, Fatih Birol, executive director of the IEA, said, “Looking to 2016, I see very few reasons why we can see growth in prices. I think 2016 will be a year where we will have a lower price environment.”……………………………………….Full Article: Source

Oil price: Why are analysts predicting a crash?

Posted on 10 December 2015 by VRS  |  Email |Print

After months of relative stability, albeit at unprofitable lows, the oil price is in the midst of another sharp downward turn. International benchmark Brent crude dropped below $40 a barrel during yesterday’s session, for the first time since early 2009, while US benchmark West Texas Intermediate fell below $37.
Both have recovered by about $1 since, as markets have regained a degree of poise, but remain at levels not seen for nearly seven years. Sentiment is undeniably bearish and predictions abound of a fresh crash to come. The forecast from Goldman Sachs for prices to hit $20 a barrel in the near future, which seemed far-fetched when first uttered earlier in the autumn, is now seen as a realistic target for a market floor that continues to give way………………………………………..Full Article: Source

Goldman Sachs retains gold outlook; sees risk of oil price declines

Posted on 10 December 2015 by VRS  |  Email |Print

Investment Bank Goldman Sachs says “we maintain our $1,000 per ounce gold price forecast over the next 12 months”. The bank says, “over the next 12 months we forecast (palladium) prices to move up to $750 per ounce, though the risks to this forecast are also skewed to the downside”
“Palladium has fallen sharply over recent weeks on weak Chinese automotive output,” it said. GS sees more downside risk to its copper price forecasts. “We see the risks surrounding our 3/6/12-months copper price forecasts of $4,800 per tonne, $4,800 per tonne and $4,500 per tonne, respectively, as skewed to the downside.”……………………………………….Full Article: Source

How far away are commodities from their bottom?

Posted on 08 December 2015 by VRS  |  Email |Print

By nature, speculators in commodities live on the edge. At any point, they will put their bets based as much on trend analysis as on gut feeling - a combination of logic and emotion. Many of them have begun arguing commodities from oil to coal and steel to copper that are trading at multi-year lows may annually now be closing to the bottom and, therefore, the time is ripe to take long positions.
Their logic is not to be faulted in normal circumstances. However, the reality since the 2008-09 financial crisis has undergone fundamental changes, with growing moderation of China’s till-recently voracious appetite for industrial and energy commodities. China growing at a double-digit rate annually is well in the past………………………………………..Full Article: Source

Copper shorts suggest metal oversold, says Citi

Posted on 08 December 2015 by VRS  |  Email |Print

Copper bears may have gone too far this time. Money managers are holding the biggest net-short position in two years in copper futures traded in New York, US government data show. Total bearish wagers doubled last month, approaching a record set in August even as prices have dropped more than 10 per cent since then.
Now, Citigroup says the metal may be “oversold” and that the near-record short position could exacerbate price swings in 2016. Net-short positions in copper futures and options surged in the past five weeks to 36,893 contracts, the most since April 2013, when they reached an all-time high, according to the Commodity Futures Trading Commission data Friday………………………………………..Full Article: Source

OPEC policy risks further oil price pressure: analysts

Posted on 07 December 2015 by VRS  |  Email |Print

OPEC’s policy of maintaining high oil production risks heaping more downward pressure on oil prices, especially with Iranian crude set to enter the global marketplace, analysts say. While lower prices eat into the revenues of the oil cartel’s members, cheap crude may result in lower production from non-OPEC nations — helping countries like Saudi Arabia preserve their market share.
The Organization of the Petroleum Exporting Countries decided at its meeting in Vienna on Friday against cutting the cartel’s oil output despite sliding prices and ahead of higher production from Iran next year………………………………………..Full Article: Source

Moody’s: Stress in commodity sectors will be a key credit hazard in 2016

Posted on 03 December 2015 by VRS  |  Email |Print

The global commodity downturn is exceptionally severe in its depth and breadth and is expected to be a substantial factor driving the number of defaults higher on a global basis in 2016, says Moody’s Investors Service. “Commodity sectors are facing staggering adverse conditions driven by a potent mix of slower-than-expected global demand and excess supply,” said Mariarosa Verde, a Moody’s Group Credit Officer and lead author of the report.
Collapsing commodity prices have placed a significant strain on credit quality in the oil and gas and metals and mining sectors. These sectors have accounted for a disproportionately large 36% of downgrades and 48% of defaults among all corporates globally so far this year. Moody’s anticipates continued credit deterioration and a spike in defaults in these sectors in 2016, according to the report, “Growing Stress in Commodity Sectors is a Credit Hazard for 2016.” (Press Release)……………………………………….Full Article: Source

In Rubble of Commodity Super-Cycle, Citigroup Picks Winners

Posted on 02 December 2015 by VRS  |  Email |Print

There’s still money to be made from investing in commodities, according to Citigroup Inc. While a rising U.S. dollar, sustained oversupply and slowing growth in emerging markets including China are still hurdles to a recovery, many markets may strengthen in the second half of next year as the collapse in prices shrinks production, the bank said in a report.
Citigroup also forecasts “a more persistent price recovery by 2017 for oil and base metals, and possibly agriculture.” The bank predicts the start of a recovery in some raw materials as returns from commodities head for a fifth annual drop amid the slowest growth since 1990 in China and the prospect of a stronger dollar if U.S. interest rates increase………………………………………..Full Article: Source

Citi’s 2016 forecasts for every major commodity, in one chart

Posted on 02 December 2015 by VRS  |  Email |Print

As you can see Citi is forecasting rallies in oil prices and a huge increase in natural gas, which Australia is well positioned to capitalise on as the major LNG export bases such as the Santos operation at Gladstone ramp up operations.
But that’s a whole lot of Australian exports in that bottom five. Specifically on iron ore, Citi is forecasting a fall to $US40 per tonne next year (on The Steel Index, which was at $US42.80 last night) and then a couple of quarters below the $US40 mark in 2017………………………………………..Full Article: Source

Understanding the new global oil economy

Posted on 02 December 2015 by VRS  |  Email |Print

Why have oil prices fallen? Is this a temporary phenomenon or does it reflect a structural shift in global oil markets? If it is structural, it will have significant implications for the world economy, geopolitics and our ability to manage climate change.
With US consumer prices as deflator, real prices fell by more than half between June 2014 and October 2015. In the latter month, real oil prices were 17 per cent lower than their average since 1970, though they were well above levels in the early 1970s and between 1986 and the early 2000s………………………………………..Full Article: Source

The party is over for oil

Posted on 02 December 2015 by VRS  |  Email |Print

When oil prices started taking off in 2004, it was part of the same “commodity supercycle” that sent prices of so many other commodities spiraling up. Oil stayed at the party longer than anyone else but now, the party is over.
The driving force was the surge in economic growth from the emerging markets — especially China. Between 2003 and 2013, China alone accounted for 45 percent of total growth in oil demand. It was a similar story for other commodities………………………………………..Full Article: Source

Oil and gas sector in for “more pain”, says BofAML executive

Posted on 02 December 2015 by VRS  |  Email |Print

The oil and gas industry is in for a “lot more pain” in 2016, according to Julian Mylchreest, Global Head of Energy at Bank of America Merrill Lynch. Speaking at Fitch Ratings’ London Energy Seminar on Tuesday, Mylchreest said, “The industry is by no means out of the woods yet with oilfield services companies appearing to be the most stretched. I see more financial pain for oil and gas companies over the first two quarters of 2016, but expect improvement thereafter.”
Mylchreest opined it was one thing getting to $40 per barrel, but maintaining liquidity at lower oil prices was the challenge. “It’s being met by operating and capital expenditure cuts, with gaps bridged by asset sales.”……………………………………….Full Article: Source

More commodity price uncertainty ahead in 2016, Citi forecast says

Posted on 01 December 2015 by VRS  |  Email |Print

Next year promises to be transitional for the routed commodities market, with “W-shaped” price adjustments lying in wait in 2016, Citi’s annual commodities outlook says. Subtitled Down but not out – On the road to modest recovery, the study said it was difficult to say whether key commodity prices had reached their bottom or whether there was more downside to come.
“As many commodities trade close to production cost levels, it’s tempting to look for a bottom,” the outlook said. “That looks fine for a number of sectors, but should not work across the complex,” Citi’s global commodities team wrote in the paper………………………………………..Full Article: Source

Rio Tinto sees commodity prices subdued in short term

Posted on 27 November 2015 by VRS  |  Email |Print

Commodity prices are likely to remain subdued in the short term as markets come to terms with oversupply and slower Chinese growth, the head of global mining giant Rio Tinto’s copper and coal divisions said on Thursday.
Jitters about China’s fiscal and monetary responses to the slowdown there had rattled markets, but Rio still expects China to grow at around 7 percent this year, Rio Tinto copper and coal chief executive Jean-Sebastien Jacques said in Sydney. “I believe these supply-side issues, combined with certain macro-economic conditions, and the action of some industry players such as hedge funds, mean that some market distortions exist.”……………………………………….Full Article: Source

HSBC analyst: China holds the key to an oil rebound

Posted on 27 November 2015 by VRS  |  Email |Print

The jury’s still out on whether last year’s oil slump was a deliberate Saudi move, aimed at killing U.S. shale production. Whatever the case, engineering a rebound won’t be as simple, says HSBC Holding Plc’s Senior Economic Adviser Stephen King.
Oil prices have slumped 40 percent since OPEC embarked on a strategy last November to keep pumping and drive out higher-cost competitors. But cutting production is unlikely to trigger a sustainable recovery because China’s economic growth is slowing, King said in an interview in Dubai on Wednesday………………………………………..Full Article: Source

Six big risks facing global markets in 2016

Posted on 23 November 2015 by VRS  |  Email |Print

Global markets are ill prepared for the challenges they will face in 2016. Investors are facing a growing number of risks as global capital markets enter 2016, with many of the central pillars that have supported a record bull run during the past six years looking decidedly shaky.
Companies that should never have been able to borrow money have done so in record amounts due to years of near-zero interest rates. However, the era of profligate lending is now coming to a close. In the US energy sector record low oil prices have placed extreme strain on the finances of shale oil drillers………………………………………..Full Article: Source

Commodity rout to continue until at least next month, say analysts

Posted on 19 November 2015 by VRS  |  Email |Print

The current commodities rout – in which iron ore has plunged to within a whisker of July’s lows – will continue at least until the US Federal Reserve’s decision on interest rates is fully priced in, according to resources analysts. And while unwilling to call a bottom to the current cycle, most analysts believe that more downside than upside risk remains for the world’s resources.
Ore with 62 per cent content delivered to Qingdao sank 4.5 per cent to $US45.58 a dry metric tonne on Tuesday night, the lowest since July 8 when it bottomed at $US44.59. Copper, oil, gold and other metals also sank overnight. UBS commodities analyst Daniel Morgan said the biggest factor weighing on commodities was the US Federal Reserve’s interest rate decision in December………………………………………Full Article: Source

Report predicts oil price rise to 60 dollars a barrel

Posted on 19 November 2015 by VRS  |  Email |Print

Oil prices could return to 60 US dollars (£39) a barrel next year as global demand doubles, experts have predicted. A paper from Barclays Corporate Banking insisted there are “growing signs of hope on the horizon” for the industry, which has been hit hard by the drop in price.
Oil costs currently stand at just under 45 US dollars (£29) a barrel, compared to 114 US dollars (£74) a barrel in June 2014, with the fall having forced many North Sea operators to cut jobs. The energy sector is ” facing one of the most challenging periods in its history following the sudden and prolonged fall in oil price from mid 2014,” the Barclays paper said………………………………………Full Article: Source

Commodity slump likely to last a while: BMO

Posted on 12 November 2015 by VRS  |  Email |Print

As the metal price slump drags on, hopes for a near-term recovery are getting dimmer and dimmer. Jessica Fung, a commodity analyst at BMO Capital Markets, agrees with the growing feeling that it will be a prolonged bear market. Instead of a V-shaped recovery, she expects “a grin like a Cheshire cat.” Or, put another way, a drawn-out period of low prices before any recovery.
When will we actually hit the bottom? Fung said it’s difficult to say, because expectations of slowing global demand continue to weigh on metal prices. There have been plenty of supply cuts across the commodity space, which should be bullish for prices. But Fung said they may be less helpful than people think, because they are not permanent closures of capacity………………………………………..Full Article: Source

China and commodities the trust winners in October

Posted on 12 November 2015 by VRS  |  Email |Print

Trusts such as New City Energy and Fidelity China Special Situations were key beneficiaries of a change in sentiment, found the report, with stronger NAV performance and a narrowing of the discount. Japan too was in vogue in spite of no announcement on policy change from the Bank of Japan: Aberdeen Japan saw some narrowing of its discount in response.
Elsewhere, Alpha Pyrenees extended the maturity of its debt, which boosted the share price. Kuala announced more investments but now trades on a very high premium. Renewable Energy Generation bounced as its manager was linked to a bid for the company’s assets. Under fire, Electra Private Equity realised profits on the sale of Zensar and MIMS……………………………………….Full Article: Source

Why the oil market is behaving normally

Posted on 12 November 2015 by VRS  |  Email |Print

From John Rockefeller’s Standard Oil in the late 1800s, through the Railroad Commission of Texas in 1930, to OPEC since 1960, institutions have long tried to control and stabilise the oil market for their own benefit. Only rarely, says Jason Bordoff, director of Columbia University’s Centre on Global Energy Policy, has the oil market behaved like a normal market, more subject to the laws of supply and demand than to the whims of a cartel. Now is one of them.
Take supply. A year ago Saudi Arabia refused to allow OPEC to try to raise prices by pumping less crude, in the hope that a low price would drive competitors, especially America’s shale-oil producers, out of business. Since then, like any scrappy trader in a tough market, it has used its low cost of production to carve out a bigger slice of the pie. It has fought with Russia and fellow OPEC members to sell oil to China………………………………………..Full Article: Source

World may never see oil price at $100 a barrel again

Posted on 06 November 2015 by VRS  |  Email |Print

Oil today stands at around $50 a barrel, having more than halved since June 2014 after global supplies dramatically rose due in large part to the U.S. shale oil boom…Just as the energy industry has brushed aside concerns that the world could run out of oil, industry executives now say they believe it is demand, rather than supply, that is nearing its apex.
In 1985, Ian Taylor, today the chief executive of the world’s largest oil trader Vitol, was part of a team at Royal Dutch Shell that forecast oil prices would rise five fold to $125 a barrel in 2015 as global reserves were expected to become more scarce. Now he says it is unlikely to ever reach those levels again………………………………………..Full Article: Source

UBS: iron ore hanging tough, other commodities headed south

Posted on 05 November 2015 by VRS  |  Email |Print

There’s more grim news ahead for Australia’s commodities, with all minerals bar iron ore expected to head south. UBS has updated its commodity forecasts offering a mixed outlook, with iron ore expected to do a little better, coal to do worse, and base metals, including copper, expected to plunge.
For iron ore prices at the end of this year, UBS has upgraded forecasts slightly from $US56 to $US57. For the end of 2016 UBS has updated their iron ore price forecast to $US52 per tonne from $US50. The commodity dropped below $US50 last week for the first time since July as the fourth quarter tends to be a weak quarter for Chinese steel production. Steel production in China peaked last year at about 830 million tonnes, according to UBS……………………………………….Full Article: Source

OPEC confidential report sees market share squeeze to 2019

Posted on 05 November 2015 by VRS  |  Email |Print

Global demand for OPEC’s crude oil will remain under pressure in the next few years, the producer group said in an internal report, potentially fuelling a debate on its strategy of defending market share rather than prices. The draft report of OPEC’s long-term strategy, seen by Reuters, forecasts crude supply from OPEC - which has an output target of 30 million barrels per day (bpd) - falling slightly from 2015’s level until 2019, unless output slows faster than expected in rival producers.
OPEC governors, official representatives of the 12 members of the Organization of the Petroleum Exporting Countries, met at the group’s Vienna headquarters on Wednesday to approve the final draft of the report………………………………………..Full Article: Source

Gold analysis and forecast for Q4 2015

Posted on 04 November 2015 by VRS  |  Email |Print

Gold prices came under selling pressure in the third quarter amid an unfriendly macro environment stemming from divergence between emerging market (EM) and advanced economies. Although we believe that this tough environment will continue to undermine gold prices in the fourth quarter, near-term appreciation is possible because of several potential tailwinds, including renewed interest in safe-haven assets amid heightened uncertainty, a more dovish Fed, and a strong seasonal period.
Gold prices fell about three percent in the third quarter to a 2015 low of $1,078 per ounce, reflecting weak sentiment, but a recovery seems to have emerged since August, supported by factors including heightened uncertainty following the PBoC’s decision to let the yuan depreciate, lower Fed tightening expectations following the FOMC’s decision in September to leave rates unchanged and a pick-up in physical demand out of Asia due to seasonal patterns………………………………………..Full Article: Source

Gold likely to trade below $1,100 in Q4: report

Posted on 03 November 2015 by VRS  |  Email |Print

Gold is expected to trade back down below $1,100/oz in the fourth quarter (Q4) of 2015, which brings an annual average of $1,159/oz during the year, according to a newly released Thomson Reuters report.
Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rates normalisation, said the report entitled “GFMS Gold Survey: Q3 2015 Review and Outlook”, an authoritative source of independent supply and demand data for the gold industry………………………………………..Full Article: Source

Gold demand up by 7% in Q3 of 2015

Posted on 03 November 2015 by VRS  |  Email |Print

Demand on gold has risen by 7% during the third quarter (Q3) of 2015 compared to the same period last year, Thomson Reuters reported in its GFMS Gold survey. The survey attributed this surge to “the net official sector buying and a stellar level of retail purchases of bars and coins”.
The top consumer of gold during Q3 was India with 193 tonnes, marking a 5% year-on-year (YoY) increase. Thomson Reuters’ report stated that this was “the highest quarterly consumption since Q1 2011 and the highest third quarter demand since 2008”………………………………………..Full Article: Source

Thomson Reuters publishes GFMS Gold Survey: Q3 2015 Review and Outlook

Posted on 03 November 2015 by VRS  |  Email |Print

The GFMS Gold Survey, first published in 1967, is the world’s most authoritative source of independent supply and demand data for the gold industry. Today Thomson Reuters publishes the GFMS Gold Survey: Q3 2015 Review and Outlook. Physical gold demand in Q3 2015 was up by 7% year-on-year, thanks to an increase in net official sector buying and a stellar level of retail purchases of bars and coins.
Jewellery fabrication, the largest consuming sector, was marginally lower year-on-year, as higher demand in India was offset by a slow recovery in Chinese offtake, although demand in the latter was not as bleak as in the first half………………………………………..Full Article: Source

Oil prices to hit US$70 in 2016, Lloyd’s Register Energy study suggests

Posted on 02 November 2015 by VRS  |  Email |Print

A new report reveals that majority of oil and gas executives believe the oil price will remain between US$50-US$70 in 2016, with almost 27 per cent respondents believing it will hover around US$70. However, even while the current environment is creating opportunities for innovation, almost half of the executives admit they have fallen short of their innovation goals since 2014.
These findings form a part of the Technology Radar 2015 report that was launched by Lloyd’s Register Energy. John Wishart, Group Energy Director, Lloyd’s Register, said, “The report Innovating in a New Environment provides data-driven findings on the role of innovation in the current and future upstream oil and gas industry. The oil price slowdown is clearly impacting investment in innovation initiatives………………………………………..Full Article: Source

Cleaning up the precious metals industry

Posted on 29 October 2015 by VRS  |  Email |Print

UvA researchers have discovered a new material that can catalyse the decomposition of cyanide ions in process waste streams. The catalyst has been patented and attracts interest from industry. Germany’s oldest gold and silver refining company Heimerle + Meule is now examining the possibilities of using the catalyst for waste effluent treatment. The research is part of the research priority area Sustainable Chemistry.
Gold, silver, platinum and palladium are used all over the world in coins, bullion, investments, jewellery and electronics. But there is a less shiny side to these metals as well: their production and refining processes typically require large amounts of cyanide salts, which are highly toxic………………………………………..Full Article: Source

Governments shouldn’t count on low oil prices: IEA

Posted on 27 October 2015 by VRS  |  Email |Print

Countries should not bank on oil prices remaining low when formulating their energy policies, as supplies could tighten from mid-2016 due to a drop in investment and falling U.S. output, a senior industry official said on Monday. Global oil prices LCOc1 have more than halved since June 2014 on rising U.S. shale oil output and as members of the Organization of the Petroleum Exporting Countries (OPEC) decided to defend market share rather than cut production.
“It will be a great mistake to index our attention to oil security to the oil price trajectory in the short term,” Fatih Birol, executive director of the International Energy Agency (IEA), said at the Singapore International Energy Week………………………………………..Full Article: Source

Global base metal prices to remain weak in 2016: Moody’s

Posted on 27 October 2015 by VRS  |  Email |Print

Slowing growth in China and Brazil, muted conditions in Europe and a weak recovery in the US will continue to pressure global base metal prices, says Moody’s Investors Service. Moody’s outlook for the global base metals industry remains negative. Uncertainty regarding growth in China is one of the primary factors underpinning Moody’s negative outlook, with the country accounting for more than 40% of global demand for most key base metals, according to the report “2016 Global Base Metals Outlook: Downside Risk Remains on China Concerns, Slowing Global Growth.”
Weak global macroeconomic conditions and volatility in base metal prices have also dampened investor sentiment, which could pressure future growth rates. “We expect base metal prices to continue to trade at lower levels, and expectations for slower growth and reduced demand could result in further downside risk for the sector,” said Carol Cowan, a Moody’s Senior Vice President………………………………………..Full Article: Source

Tough times may linger for commodities

Posted on 23 October 2015 by VRS  |  Email |Print

Bureau for Economic Research (BER) senior economist Hugo Pienaar said on Thursday that he expected commodities to face the pinch for some time to come. “We don’t think it is going to be a robust story for commodity prices any time soon. The global situation is not positive for South Africa,” he told a BER conference in Stellenbosch.
This was despite the fall in the rand to record low levels. Major producers were showing pessimistic numbers and price outlooks, although there was a window of hope come 2017. “Our five-year outlook is that we will start to see moderate increases in commodity prices from 2017 onwards as the global economy starts to recover,” advised Pienaar………………………………………..Full Article: Source

Canadian commodities are fluctuating, expert says

Posted on 23 October 2015 by VRS  |  Email |Print

Commodities have taken a wild ride since the 2008 financial crisis, bobbing under the forces of supply, demand and international economic uncertainty. Canadians can expect commodity prices to remain down for the foreseeable future, with a gradual rebound for different commodities over the next two to three years, said Patricia Mohr, vice-president, economics and commodity market specialist, Scotiabank.
Emerging economies such as China have been driving demand for oil and metals, and led to a rapid rise in 2011 of the Scotiabank Commodity Price Index, even while the U.S. remained in recession, notes Mohr………………………………………..Full Article: Source

Bearish commodities face U-shaped recovery: DBS

Posted on 22 October 2015 by VRS  |  Email |Print

The global commodities bear market is likely to experience only a U-shaped recovery as producers consolidate to shed excess capacity amid slower growth in China, Singapore’s DBS Bank said. “We are in the bottom shape of the U where it’s going to take a while to go through this cycle,” Chean Wai Leong, head of commodity derivatives at DBS told the Reuters Commodities Summit.
“We need more corrections on the supply side to cut back in both energy and base metals… Demand is going to be a slow story as well,” she said. A supercycle in commodities ended last year as demand slowed in China, the world’s largest buyer of most raw materials, but producers ramped up output in the fight for market share………………………………………..Full Article: Source

Oil price crunch could leave Middle East’s export giants out of cash within five years, warns IMF

Posted on 22 October 2015 by VRS  |  Email |Print

The Middle East’s oil export giants face a $1 trillion (£700bn) crunch over the next five years if oil prices remain at their post-slump levels, the International Monetary Fund has warned. A vicious oil price rout since last summer has seen the revenues of oil exporting nations eroded away, wiping out a combined $360bn in exports over the past year.
The IMF predicts that oil will average $52 a barrel this year - well below the $115 it fetched last June - indicating that many governments will struggle to make ends meet. The rise of conflict has delivered a second blow to the Middle East, North Africa, Afghanistan and Pakistan, or “MENAP” region. The IMF said that fighting in Iraq, Libya, and Yemen could spillover into neighbouring countries………………………………………..Full Article: Source

What happens if the global oil price doesn’t bounce back?

Posted on 22 October 2015 by VRS  |  Email |Print

Suppose the oil price stays low – either around its present level of $45 a barrel, or even lower – what are the consequences? The question is worth asking because there is a tacit assumption that the halving of the oil price at the end of last year is not sustainable and that prices will gradually recover, perhaps to around $80 a barrel, though this may take several years.
That at least is the Opec position, but there is no consensus on this, for some forecasters have argued that prices will stay low for longer. Goldman Sachs is among the bears, predicting that prices will remain low for 15 years, while Barclays’ mid-range estimate is $85 a barrel by 2020, with a top range at $100. The truth is, of course, that no one can know, just as hardly anyone spotted the collapse of the price last year ahead of the event………………………………………..Full Article: Source

5 reasons oil could be nearing a new tipping point

Posted on 22 October 2015 by VRS  |  Email |Print

Oil’s bounce back from the summer’s lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over. “I’m pretty sure we’re going to see a new low. The probabilities are that we see a new low or two or three,” said Edward Morse, head of global commodities research at Citigroup.
The negative factors that have pounded oil prices continue to hang over the market, and the world is still facing oversupply of about 2 million barrels a day. Strategists say the chief wild card that could send oil to new lows is Iran — and uncertainty about when and how fast it can bring crude back to the market………………………………………..Full Article: Source

Goldman Says Fed Raising Rates in December Will Hurt Bullion

Posted on 22 October 2015 by VRS  |  Email |Print

The Federal Reserve will probably raise interest rates in December and follow that with a further 100 basis points of increases over 2016, according to Goldman Sachs Group Inc., which said the shift in U.S. monetary policy will hurt gold.
“The Fed’s rationale for wanting to start the normalization process is straightforward,” analysts including Jeffrey Currie said in a report. “In their view, labor-market slack has diminished substantially, the link between slack and inflation is stronger than widely believed, and the funds rate is far below the longer-term equilibrium rate, so they need to get started well before the economy is back to normal.”……………………………………….Full Article: Source

World Bank Revises Down Forecasts for Oil Prices, Other Key Commodities in 2015 and 2016

Posted on 21 October 2015 by VRS  |  Email |Print

In its latest commodity update, the World Bank is lowering its 2015 forecast for crude oil prices from $57 per barrel in its July report to $52 per barrel. The revised forecast reflects a further slowing in global economic performance, high current oil inventories, and expectations that Iranian oil exports will rise after the lifting of international sanctions, according to the Bank’s new Commodity Markets Outlook, a quarterly update on the state of the international commodity markets.
The Bank’s Energy Price Index tumbled 17 percent in the third quarter of 2015 from the previous three-month period, led by a renewed plunge in oil prices prompted by expectations of slower global growth, particularly in China and other emerging markets, abundant supplies, and prospects of higher Iranian exports next year. Energy prices are expected to average 43 percent lower in 2015 than in 2014. For commodities excluding energy, the World Bank reports a 5 percent decline in prices in Q3, and forecasts that non-energy prices will register a 14 percent decline in 2015 from the previous year’s levels. (Press Release)……………………………………….Full Article: Source

Commodity Price Drop Puts Pressure on Monetary Policy in Low-Income Countries

Posted on 21 October 2015 by VRS  |  Email |Print

While much attention has been paid to monetary policy reforms in advanced economies in recent years, problems facing low- and lower-middle income countries seeking to stabilize their economies remain largely under researched, said Maurice Obstfeld, the IMF’s chief economist. Obstfeld’s comments came while moderating a panel discussion entitled, Monetary Policy Frameworks in Low-Income and Developing Countries, during the IMF-World Bank Annual Meetings.
“Many low and lower-middle income countries have made progress on a number of fronts including stabilizing inflation rates,” Obstfeld said, but added that good monetary policy will be necessary if this group of countries is to achieve rapid, stable, sustainable, and inclusive growth………………………………………..Full Article: Source

Slowing growth in China raises red flag for global economy

Posted on 20 October 2015 by VRS  |  Email |Print

China’s economic growth slowed in the latest quarter to a six-year low of 6.9%, adding to concerns that the world economy is entering a period of low growth that will extend into next year. One economic forecaster immediately cut its global growth forecasts for 2016 in response to the official figures from China, while stock markets and oil prices slid backwards.
The decline in heavy industry and construction has depressed demand for oil, iron ore and other commodities, dragging on growth in Australia, Brazil and other supplier countries. Oxford Economics, an independent forecaster, said it cut its forecast for world economic growth to 2.5% for 2015 and 2.7% for 2016, down from 2.6% and 3% respectively in June………………………………………..Full Article: Source

Moody’s downgrade 2016 oil prices estimates

Posted on 20 October 2015 by VRS  |  Email |Print

Ratings agency Moody’s has cut its price outlook for the both Brent crude and WTI, believing the rise in prices will take place at a much slower pace than originally forecast as oversupply and demand issues show no signs of waning. The agency downgrade it price assumption in 2016 for Brent crude to $53 per barrel, down from $57. WTI was cut to $48 from $52 per barrel.
Moody’s expects both prices to rise by $7 per barrel in 2017, which is down $5 per barrel from its prior forecast. “We believe that oil prices will remain lower for a longer period, as large built-up inventories and oversupply cause oil prices to increase at a slower rate,” said managing director of corporate finance at the group, Steve Wood………………………………………..Full Article: Source

Lower commodity prices indicate a slowdown

Posted on 19 October 2015 by VRS  |  Email |Print

The International Monetary Fund (IMF) has just released its bi-annual update to its flagship publication the World Economic Outlook (WEO). Having the sub-title “Adjusting to Lower Commodity Prices” the report is both provocative as well as portentous. Provocative because it raises some fundamental questions on the assumptions that have guided policy makers around the world recently.
It is portentous because the scepticism over recent policy assumptions will lead to a different way of looking at the global economy, its strength and weaknesses. The key question is whether the steady decline in commodity prices around the world has been an unmixed blessing it has been claimed to be? For us In India,that question would appear most inappropriate,After all ,one of the tangible benefits of the global decline in oil prices has had a visible impact on day to day living ……………………………………….Full Article: Source

Now’s the time to invest in commodities and emerging markets, says Morgan Stanley

Posted on 15 October 2015 by VRS  |  Email |Print

Morgan Stanley has turned contrarian investor on emerging markets, saying now is the time to buy emerging market and commodity-exposed stocks and currencies while anticipating a sharemarket bounce to finish the year.
The US-based investment bank’s global strategy team doesn’t share market concerns that emerging markets, led chiefly by China, would send the developed world spiralling into a recession. “We believe [global economic] expansion is still in tact, with strong consumer trends in developed markets helping to offset the drag of [emerging markets] growth,” Morgan Stanley said in its updated Autumn Outlook paper………………………………………..Full Article: Source

Oil price forecasts: should we score their accuracy?

Posted on 15 October 2015 by VRS  |  Email |Print

Who is the top forecaster in the oil market? The surprising answer is that nobody knows because the accuracy of predictions is never properly tracked and measured after they are made. Banks, consultancies, government agencies and even journalists routinely issue predictions about what will happen to oil supply, demand and prices in future.
Forecasts about the trajectory of prices over the next few months and years drive decisions affecting billions of dollars of investment. Oil companies rely on them to decide whether to drill more wells, develop new fields and hedge their future production………………………………………..Full Article: Source

ANZ lifts gold forecasts as investors turn less bearish

Posted on 15 October 2015 by VRS  |  Email |Print

A less bearish tone in the gold market has prompted ANZ Research to lift its near-term forecasts for gold. Indications that investors have become a lot less bearish on the metal include a recovery in gold exchange-traded fund (ETF) holdings, the bank said in a report on Wednesday.
After falling 90 tonnes in almost a straight line in July, ETF holdings reached a low of 1,509 tonnes in early August before investors added 20 tonnes to holdings, it noted. Also, the skew in 25 delta gold options has risen to the highest since January, which was the height of the Grexit crisis, it added………………………………………..Full Article: Source

Citigroup’s Morse Says Commodities Drop Hasn’t Hit Bottom

Posted on 12 October 2015 by VRS  |  Email |Print

Ed Morse, Citigroup Inc.’s global head of commodities research, said the worst slump in commodities prices in a generation isn’t over. “I think we are not at the bottom because we are still seeing consistent cost deflation,” Morse said Saturday at a meeting of the Institute of International Finance in Lima, Peru.
The Bloomberg Commodity Index on Sept. 30 capped its worst quarterly loss since the depths of the recession in 2008. The economy in China, the biggest consumer of grains, energy and metals, is expanding at the slowest pace in two decades just as producers struggle to ease surpluses. Alcoa Inc., once a symbol of American industrial might, plans to split itself in two, while Chesapeake Energy Corp. cut its workforce by 15 percent………………………………………..Full Article: Source

UAE-Commodities recovery set to begin in H2 of 2016

Posted on 12 October 2015 by VRS  |  Email |Print

The next six months may prove to be a pivotal turning point in the recovery of global commodities markets according to Ole Sloth Hansen head of commodity strategy at Saxo Bank the online trading and multi-asset investment specialist. During his visit to Dubai Hansen outlined his thoughts on several major milestones achieved during 2015.
On the top of Hansen’s list were the international launch and rollout of the SaxoTraderGO platform - Saxo Bank’s new and intuitive multi-asset trading platform - as well as the launch of a dedicated Arabic website a key asset in the bank’s drive to encourage and empower retailers and investors across the Middle East………………………………………..Full Article: Source

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