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Commodities Briefing - Category | Financial more

Hedge, to cope with commodity swings

Posted on 31 August 2015 by VRS  |  Email |Print

Oil, gas and non-ferrous metals are currently undergoing their biggest price correction since the recession of 2008. Economic volatility has shaken up the commodities market. China’s uncertain economic situation is likely to loom large over the metals sector in 2015.Recently, the Thompson Reuters Core Commodity index hit its lowest point since April 2003. Effectively, the market has erased all gains of the decade-long commodities “super-cycle”{+.}
Volatility has not spared the agricultural markets either, with corn showing volatility of over 24 per cent in 2014 and coffee volatility at the end of 2014 increasing to 50 per cent. This is a tectonic shift in the world of commodities — where relying on fundamentals of physical supply, demand and inventory positions alone cannot explain the extent of volatility………………………………………..Full Article: Source

Commodity Rout Erases $2 Trillion From Stock Values

Posted on 21 August 2015 by VRS  |  Email |Print

Prices have plunged after years of overinvestment led to a supply glut at the same time that economic growth is slowing in China. The value that commodity producers have lost in the past year almost equals India’s entire economy.
Slumping prices for raw materials have wiped out $2.05 trillion from the shares of mining and oil companies since the middle of last year, data compiled by Bloomberg show. That compares with India’s $2.07 trillion gross domestic product………………………………………..Full Article: Source

Oil bear market will end in panic liquidation: Gartman

Posted on 20 August 2015 by VRS  |  Email |Print

The bear market in U.S. crude will continue, eventually ending one day in “panic liquidation,” widely followed investor Dennis Gartman predicted Wednesday. “It will end when you’ve had an announcement of five or six bankruptcies. It will end when mergers and acquisitions step in and take over,” the founder and editor of The Gartman Letter said
U.S. crude (WTI) futures closed at their lowest in more than six years on Wednesday at $40.80 a barrel after U.S. data showed an unexpected rise in crude stockpiles. Oil has lost about a third of its value since June. U.S. oil production is at record levels and producer costs appear to be declining, with no output scaleback anticipated………………………………………..Full Article: Source

Commodity assets halve from peak

Posted on 20 August 2015 by VRS  |  Email |Print

Assets invested in commodity funds have halved from their peak four years ago, hitting $127bn (£80.9bn) in July, data from Lipper shows. The assets have been hit by both outflows and underperformance of funds, as commodity prices have plummeted.
Over the past three months to July commodity funds have seen $3.2bn in outflows, with the past month alone seeing $1.7bn in outflows, the worst for any asset group. However, over the longer term outflows have been starker, with $39.8bn leaving the funds in the past three years………………………………………..Full Article: Source

Saudi Arabia tumbles after China depresses commodities

Posted on 19 August 2015 by VRS  |  Email |Print

Saudi Arabia’s stock market fell sharply on Tuesday after U.S. oil prices dropped near six-year lows and equities in China tumbled. Chinese stock prices sank 6 percent as the yuan weakened against the dollar, raising fears that Beijing might further devalue its currency, which could decrease its consumption and imports of oil and other commodities.
The main Saudi stock index tumbled 3.6 percent by mid-afternoon to a seven-month low of 8,134 points with nearly all stocks deep in negative territory. The index plunged this week below technical support around 8,500 points, where it had bottomed in March and April; that triggered a double top formed by the March and April peaks and pointing down to December’s low of 7,226 points in coming months. ……………………………………….Full Article: Source

China’s gold reserves rise 19 tonnes in July

Posted on 17 August 2015 by VRS  |  Email |Print

China’s gold reserves rose by more than 19 tonnes in July, the official Xinhua news agency said yesterday, after the central bank last month gave the statistic for the first time in six years. Bullion holdings stood at 1,677.30 tonnes at the end of July, Xinhua said citing the People’s Bank of China (PBoC), a 1.16 per cent increase on June’s 1,658 tonnes.
The rise is worth nearly $700 million, according to yesterday’s price of $1,118.25 an ounce on the London Bullion Market. The PBoC issued gold reserve figures last month for the first time since April 2009, revealing a rise of 57pc over the past six years………………………………………..Full Article: Source

What a rout in commodities has done to long-term bond yields

Posted on 11 August 2015 by VRS  |  Email |Print

Demand for long-term Treasury bonds has been rising over the past four weeks, as an overarching flight-to-safety theme has emerged out of the global rout in commodities sparked in part by worries about a slowdown in China’s economy.
Treasury investors have been moving money from short-term to long-term Treasury bonds causing a phenomenon that is known as a “flattening yield curve.” “Most [Treasury investors] seem to be playing the curve flattening strategy ahead of the Fed’s September meeting,” Tom di Galoma, head of rates and credit trading at ED & F Man Capital Markets, said in a note………………………………………..Full Article: Source

Poor commodities: an asset without a central bank backer

Posted on 07 August 2015 by VRS  |  Email |Print

Commodity investors stung by the four-year bear market made one simple mistake: investing in an asset class not backed by a central bank. Whereas equities and bonds have benefited from very meaningful support, direct and indirect, from central bank asset-purchase programmes, commodities have not.
That may or may not be good policy; certainly you can argue that the current downdraft in commodities prices reflects a singular lack of inflation risk in the global economy. That might argue for more quantitative easing, but given that what we’ve had so far has neither generated much inflation or kindled demand for raw materials, it would be hard to be too sure that more central bank buying of financial assets would help commodities prices………………………………………..Full Article: Source

Oil’s $4.4 Trillion Hole: Deflation spreads through the global oil industry

Posted on 07 August 2015 by VRS  |  Email |Print

It rankles when you lose $20. But hey, at least it isn’t $4.4 trillion. That is roughly how much revenue the world’s oil producers will forego over the next three years, based on the current outlook for prices and demand, relative to what was expected just a year ago.
With Brent crude having tumbled back below $50 a barrel, the industry has entered a vicious, and spreading, bout of deflation. A year ago, futures indicated an average Brent crude-oil price in 2016 through 2018 of about $101 a barrel. Today, that is just under $60. Estimates of future demand have also been marked down slightly. The implied hit to oil producers’ revenue is about $4.4 trillion spread across those three years………………………………………..Full Article: Source

OPEC leader Saudi Arabia is having to borrow money

Posted on 07 August 2015 by VRS  |  Email |Print

The oil kingdom is facing a big hole in its budget, caused by the slump in oil prices and a sharp rise in military spending. That’s forcing the government to raid its reserves, and it may even borrow from foreign investors, analysts say.
Saudi Arabia has already burned through almost $62 billion of its foreign currency reserves this year, and borrowed $4 billion from local banks in July — its first bond issue since 2007. Its budget deficit is expected to reach 20% of GDP in 2015. That’s extraordinarily high for a country used to running surpluses. Capital Economics estimates that government revenues will fall by $82 billion in 2015, equivalent to 8% of GDP. The IMF is forecasting budget……………………………………….Full Article: Source

Global capex set to shrink as commodities crunch bites

Posted on 05 August 2015 by VRS  |  Email |Print

Conditions for Australia’s engineering and construction companies are set to worsen as the full effect of the post-commodities boom takes hold, with a survey showing business investment globally is likely to shrink for the next two years. Standard & Poor’s Ratings Services’ third annual global capital expenditure survey found non-financial corporate capital expenditure (capex) would fall 1 per cent this year and 4 per cent in 2016 before stabilising.
Energy and mining companies, which made up nearly 40 per cent of global capex in 2014, will drive the continued weakness in corporate spending worldwide as the price of their products remain under pressure. In 12 months, the price of iron ore has fallen 42 per cent to $US55.63 a tonne, while the benchmark brent oil price has dropped 53 per cent to $US49.88 a barrel………………………………………..Full Article: Source

Commodities dip derails Fed rate hike

Posted on 05 August 2015 by VRS  |  Email |Print

The Federal Reserve will have a harder time making the case for a September rate hike if commodity prices continue to slip, JPMorgan Asset Management’s David Lebovitz said Tuesday.
“As commodity prices continue to fall, it’s going to make it more and more difficult for the Fed to reach that 2 percent inflation target and have a reason for hiking rates,” Lebovitz said.”Still, Lebovitz said he expects the Fed will likely raise at least once this year………………………………………..Full Article: Source

Commodities Rout Erases Billions from Africa’s Biggest Fortunes

Posted on 04 August 2015 by VRS  |  Email |Print

The collapse in commodity prices and the rise of the African middle class has flipped the fortune trends of the continent’s richest people. Commodities tycoons Aliko Dangote and Patrice Motsepe have lost almost $4 billion in 2015, while Nigerian telecom billionaire Mike Adenuga and South African retail mogul Christo Wiese have added almost $2 billion, according to the Bloomberg Billionaires Index.
“The go-go years of African billionaires whose wealth has been built around oil is over,” said Martyn Davies, CEO of Johannesburg, South Africa-based investment research firm, Frontier Advisory. “We have placed far too much emphasis on a handful of people making significant capital through distorted-priced resources. True wealth creation is where billionaires are created from non-resource assets.”……………………………………….Full Article: Source

Will commodities crash trigger new financial crisis?

Posted on 31 July 2015 by VRS  |  Email |Print

The equity market has suffered sharp falls in the last two months, and investors are divided on whether the Hong Kong and A-share markets have stepped into the bear territory. Several commodities like gold, base metal and oil are certainly in the bear market territory. And the meltdown in commodity market may trigger a new financial crisis.
The market predicts that the chance for a “lift-off” within this year has increased to 50 percent from the previous one-third, according to recent remarks by Federal Reserve chief Janet Yellen. If that is the case, the Fed could open a “Pandora’s Box”, which could further strengthen the US dollar and trigger a further slide in the prices of commodities………………………………………..Full Article: Source

Banks see second quarter revenue dip from commodities

Posted on 23 July 2015 by VRS  |  Email |Print

Pinning down the financial performance of energy commodity trading at top financial institutions is complicated by the manner in which banks segment their operations and lump together certain revenue numbers. While differences exist from bank to bank, for the most part the big banks place commodity trading within their fixed-income unit of their investment bank division.
Low commodity prices, less volatility, and thus lower volumes traded, have all had an impact. A review of some of the numbers just released for the second quarter of 2015 at three top banks suggests that commodity trading in Q2 took a big hit. This follows a first quarter in which fixed-income numbers rose on what bank analysts said at the time was bullish volumes………………………………………..Full Article: Source

Commodity selloff: What it means for Fed rate hike

Posted on 22 July 2015 by VRS  |  Email |Print

A broad selloff in commodities and dollar strength point to disinflationary pressures on the horizon that weaken the argument for a near-term rise in U.S. interest rates, according to some analysts. This week has seen gold prices tumble to five-year lows and U.S. oil prices dip below $50 a barrel for the first time since April, with prices stabilizing a little on Tuesday.
“Given that weak commodity prices are likely to prompt a ripple out disinflationary effect it is hard to see how the Fed (U.S. Federal Reserve) would even consider hiking rates against such a weak backdrop, something markets don’t appear to be considering at the moment,” Michael Hewson, chief market analyst at CMC Markets UK, said in a note on Tuesday………………………………………..Full Article: Source

$1 trillion solar, wind finance to outstrip oil and gas industry

Posted on 21 July 2015 by VRS  |  Email |Print

Listed finance vehicles for large-scale wind and solar projects are likely to rapidly overtake the oil and gas industry in the US, but may bypass Australia altogether if the Abbott government continues to send the wrong signals to investors. Deutsche Bank last week released a report which said the renewable energy finance vehicles – known as “YieldCos” – were likely to rapidly outgrow their oil and gas industry equivalents, and become and order of magnitude bigger than their fossil fuel rivals.
YieldCos – listed vehicles that offer a high rate of return for investment in large-scale solar farms and wind farms, in much the same way as real estate investment trusts and the oil and gas industry’s mutual limited partnerships – currently account for less than one per cent of renewable energy financing………………………………………..Full Article: Source

Commodities firms facing tough times in fundraising amid oversupply and weak demand

Posted on 20 July 2015 by VRS  |  Email |Print

China still has great demand for energy and metals to feed its urbanising and industrialising economy, but it is facing challenges in raising funds for new mining projects, with the commodities and energy sectors lingering at the bottom of a down-cycle.
Its demand for products from the core industrial polluters - power, steel and cement - also comes as President Xi Jinping is making ambitious pledges to cut carbon emissions and as influential international investment funds have led a backlash against carbon-intensive mineral projects - particularly coal - divesting holdings and cutting billions of dollars from available funding that China needs. Amid oversupply in most commodities, depressed prices have translated into poor profits or losses for energy and metals producers across the whole supply chain, causing investors to shy away from their shares………………………………………..Full Article: Source

Earnings should grab attention, but watch commodities

Posted on 20 July 2015 by VRS  |  Email |Print

About a quarter of S&P 500 companies report earnings in the coming week, and that could be a positive catalyst for stocks as worries about Greece and China drift into the background. So far, just several dozen companies have reported, and the usual 70 percent-plus beat on the top-line, while just about half beat on revenue. Among the names reporting next week are Apple, IBM, American Express, General Motors, Boeing, Coca-Cola and Amazon.com.
“The reaction to earnings has been relatively good,” said Paul Hickey, co-founder of Bespoke. “Coming into this earnings reporting period, analysts’ sentiment was negative. We were getting more downward revisions than upward revisions, and typically when you see that coming into a reporting period, the market performance is much better than when you see analysts upping their estimates.”……………………………………….Full Article: Source

How Large Was US Gold Market Trade Deficit In Q1 2015?

Posted on 17 July 2015 by VRS  |  Email |Print

While the global financial system remained subdued in the first quarter of 2015, the U.S. Gold Market still suffered a large trade deficit. Matter-a-fact, the U.S. Gold Market deficit in 2015 may surpass its full-year shortfall in 2014 by a wide margin. Furthermore, with the heightened financial turmoil stemming from the Greek situation in Europe during the summer, I would imagine U.S. gold market deficits may be even higher in the second and third quarter.
Before we look at the data for the first quarter of 2015, let’s take a peak at the U.S. gold supply and demand situation for the full-year 2014: Last year, the U.S. imported a total of 308 metric tons (mt) of gold, had domestic mine supply of 212 mt and scrap of 90 mt (my estimates based on GFMS 2014 World Gold Survey). ……………………………………….Full Article: Source

Why Saudi Arabia Makes So Much Money on Oil

Posted on 14 July 2015 by VRS  |  Email |Print

Hint: it has to do with how many new wells the kingdom has to drill each year compared to other oil producers. A lot of reasons have been given as to why Saudi Arabia is allowing the oil price to not only fall but remain weak. Some suggest it’s because it’s seeking to harm emerging rivals like the U.S. and Russia.
Others have suggested that the move is because it wants to keep its regional rival Iran at bay. While both could be true, the reason Saudi Arabia isn’t worried about the oil price is because it doesn’t need a high oil price to justify the drilling costs needed to maintain or grow its production. This is due to the fact Saudi Arabia only needed to drill 399 new wells last year just to keep its daily production at 11.4 million barrels of oil………………………………………..Full Article: Source

Saudi Arabia borrows $4bn as oil price reality hits home

Posted on 13 July 2015 by VRS  |  Email |Print

Saudi Arabia needs an oil price of $105 a barrel to meet planned spending requirements, but the average price for the year is estimated at $58 a barrel, John Sfakianakis, director for the Gulf region at Ashmore, a fund manager said. “If the government continues business as usual and draws down like this it will deplete reserves faster than expected, by the end of 2018 or early 2019,” he added.
Saudi Arabia has borrowed $4bn from local markets in the past year, selling its first bonds for eight years as part of efforts to sustain high levels of public spending as oil prices slump. Fahad al-Mubarak, the governor of the Saudi Arabian Monetary Agency, said the government would use a combination of bonds and reserves to maintain spending and cover a deficit that would be larger than expected………………………………………..Full Article: Source

Bank for International Settlements warns of emerging market risks

Posted on 29 June 2015 by VRS  |  Email |Print

Economists and foreign investors may have overestimated the potential economic output of a quintet of Latin American countries by 2 percentage points, leading to the possibility of sharp financial outflows when reality sinks in. Separately, “massive borrowing” by emerging market companies has also left them vulnerable to funding reversals if and when investor sentiment towards EMs reverses.
These are among the warnings from the Bank for International Settlements, commonly known as the central bankers’ central bank, in its annual report, released on Sunday. Amid slowing economic growth across much of the emerging world, the BIS says that a “moderation” of growth from the very high rates seen in recent years is “probably unavoidable”………………………………………..Full Article: Source

OPEC’s Oil Revenues Have Dropped Below $1 Trillion - Here’s What That Looks Like

Posted on 25 June 2015 by VRS  |  Email |Print

OPEC nations’ oil revenues dropped last year below the psychological $1 trillion mark for the first time since 2010, in the clearest sign yet of the economic impact of lower prices for oil-rich nations.
The Organisation of the Petroleum Exporting Countries said on Wednesday in its annual statistical report that its 12-members earned $964.6 billion selling their petroleum, down 12.7 per cent from $1.1 trillion in 2013 and the lowest amount since 2010. Oil export revenues hit a nominal record of $1.2 trillion in 2012, according to OPEC data………………………………………..Full Article: Source

China likely to get central bank nod for yuan gold fix soon

Posted on 25 June 2015 by VRS  |  Email |Print

China is expected to receive approval from its central bank for a yuan-denominated gold fix “anytime now”, with more details about the scheme potentially set to emerge at a major industry conference this week, sources told Reuters.
The world’s top gold producer and one of the biggest consumers wants to be a price-setter for bullion and is asserting itself at a time when the global dollar-denominated benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation. If the yuan fix takes off, China could compel buyers in the mainland and foreign suppliers to pay the local price, making the London fix less relevant in the world’s biggest bullion market………………………………………..Full Article: Source

Investors may bond with gold, but not part with yellow metal

Posted on 23 June 2015 by VRS  |  Email |Print

Investors would opt for the gold bonds to be offered by the government, but are not likely to part with their jewellery under its monetisation scheme. The government’s efforts at curbing the insatiable demand for gold would only succeed in halting the purchase of the yellow metal for investment purposes to an extent, say experts.
“The gold monetisation scheme (GMS) will not take off as people have an emotional attachment with gold. They aim to get back the same piece of jewellery even when they pledge gold for raising money,” says Suresh Sadagopan, founder, Ladder7 Financial Advisories………………………………………..Full Article: Source

China’s removal of molybdenum export tax boosts moly metal, scrap trade

Posted on 23 June 2015 by VRS  |  Email |Print

China’s May 1 removal of export taxes on molybdenum products has boosted its exports of moly metal and scrap and left moly oxide and ferromoly markets largely unaffected, sources said Monday. The lifting of the 5% export tax on 99.9% moly metal had an immediate impact, with supply in China tightening as demand for exports surged, mainly from Europe.
June cargoes supplied by around 20 Chinese producers had sold out by end May and July cargoes were already fully booked this week, with the earliest supply currently seen available for August, a South Korean trader said………………………………………..Full Article: Source

Banks Balk at China Commodities Deals

Posted on 18 June 2015 by VRS  |  Email |Print

Once bitten, twice shy. Banks are wary of commodities deals in China a year after officials started investigating alleged fraud that led to a $193 million writedown for Standard Chartered Plc and $147 million at Standard Bank Group Ltd.
Traders in the world’s biggest consumer of metals are finding it harder to get credit from lenders after the probe at the eastern ports of Qingdao and Penglai, according to Guotai & Junan Futures Co. and Everbright Futures Co., Chinese commodity brokers whose clients include trading companies and financial institutions………………………………………..Full Article: Source

OPEC Export Revenue Below $1 Trillion Lowest Since 2010

Posted on 18 June 2015 by VRS  |  Email |Print

According to the report, released on Tuesday, the value of the 12-member organization’s combined petroleum exports dropped from $1.1 trillion in 2013 to $993.3 billion in 2014, the year when oil prices plummeted to less half their prior value.
OPEC upheld its production quota of 30 million barrels per day at its meeting in Vienna on June 5. The group surpassed its self-imposed limits for the past 11 months, according to analysis conducted by Bloomberg………………………………………..Full Article: Source

Citi faces headwinds in commodity trade finance, presses on with expansion

Posted on 16 June 2015 by VRS  |  Email |Print

Citigroup Inc and rivals in the commodity trade finance sector are facing headwinds of weak oil prices, sanctions on Russia and stiff competition, which have pressured fees. The U.S. bank, which launched its business in the sector three years ago, has shifted attention from China, where fees are weak, to Africa and Latin America, said Kris van Broekhoven, global head of commodity trade finance.
“It’s still a tough environment,” he told Reuters. “China is not an easy market. It’s very competitive and pricing is low. We want growth, but not at any cost.”……………………………………….Full Article: Source

Saudi Arabia’s efforts toward diversification cushion oil price drop

Posted on 15 June 2015 by VRS  |  Email |Print

Although Saudi Arabia has substantial financial reserves to withstand low oil prices over the next few years, recent government spending has intensified the need for longer term fiscal, environmental and resource sustainability in the Kingdom, according to a new report commissioned by ICAEW titled “Economic Insight: Middle East Q2 2015” produced by Cebr, ICAEW’s partner and economic forecaster.
Lower oil prices will have a greater impact on Saudi Arabia’s economic growth over the medium rather than the short term. As a result of the government’s decision to allocate additional funding to social activities like education, the breakeven crude oil price has surged from just under $75 in 2009 to $90 in 2015………………………………………..Full Article: Source

Inflation fears drive commodities stakes

Posted on 11 June 2015 by VRS  |  Email |Print

Multi-managers are tip-toeing into commodities to protect their funds against an anticipated uptick in inflation. Expectations have increased in recent weeks that inflation could rise more quickly and higher than previously anticipated. Bank of England governor Mark Carney has predicted a 1 per cent rate by the end of the year.
The fears about rising prices come as the UK registered its first negative consumer prices index (CPI) reading since 1960 last month. While strategic bond managers have been buying up inflation-linked and shorter-dated bonds, multi-asset managers have favoured commodities………………………………………..Full Article: Source

More banks to join gold price benchmark in ‘coming weeks’ – IBA

Posted on 10 June 2015 by VRS  |  Email |Print

More banks will join ICE’s new gold price benchmark in the coming weeks, Finbarr Hutcheson, president of ICE subsidiary ICE Benchmark Administration (IBA), said. JP Morgan Chase Bank, Scotiabank, HSBC, Société Générale, UBS, Barclays and Goldman Sachs already participate in the LBMA Gold Price, which formally replaced the near-century-old London Gold Fix on March 20.
“We’re expanding that number very soon,” Hutcheson said at the International Derivatives Expo here on Tuesday. Last month, three more banks were apparently waiting in the wings to join the benchmark, which would bring the total number of participants to 10………………………………………..Full Article: Source

Time for a new toolkit to de-risk portfolios

Posted on 05 June 2015 by VRS  |  Email |Print

With ever-evolving financial markets we have seen increased liquidity, leverage and sophistication but also higher asset volatility and correlations. Cross-asset investors are questioning the efficacy of traditional approaches, having witnessed the failure of risk models over the 2008 crisis.
Asset class diversification, the basic tenet of cross-asset investing, did not work because the risk factors embedded in traditional asset classes turned out to be highly correlated, and provided no shelter in turbulent markets. Investors are now realising that in order to deliver a truly diversified, risk-controlled portfolio, it is necessary to diversify the risk factors themselves – and this means looking outside the traditional asset class toolkit………………………………………..Full Article: Source

Commodities still ‘on life support’ as rally flatters to deceive

Posted on 04 June 2015 by VRS  |  Email |Print

Asset allocators are refusing to be swayed by a recent rally in commodity prices, saying the bounce is far from sustainable for a sector which remains “on life support”. The price of Brent crude oil dropped from $114 a barrel last summer to below $46 in early January, but has since rallied to above $62.
Commodities portfolios have mirrored that rise: some resources funds have rebounded 8% since Brent’s low on 13 January, according to FE. However, fund of funds managers say they are not tempted to view resource funds’ short-term rebound as the start of a more significant recovery for the sector………………………………………..Full Article: Source

Easy Access to Money Keeps U.S. Oil Pumping

Posted on 01 June 2015 by VRS  |  Email |Print

Wall Street’s generous supply of funds to U.S. oil drillers helped create the American energy boom. Now that same access to easy money is keeping them going, despite oil prices that are languishing around $60 a barrel.
The flow of money into oil has allowed U.S. companies to avoid liquidity problems and kept American crude production from falling sharply. Even though more than half of the rigs that were drilling new wells in September have been banished to storage yards, in mid-May nearly 9.6 million barrels of oil a day were pumped across the country, the highest level since 1970, according to the most recent federal data………………………………….Full Article: Source

Financial markets undercut commodities

Posted on 27 May 2015 by VRS  |  Email |Print

Financial markets are undercutting commodities. Renewed concerns about European Monetary Union and the euro have surged again this week, thereby spurring big U.S. dollar gains and sending stock indexes lower. Both of those reactions are seen as negative for commodity demand, which is probably a big reason corn futures fell this morning.
The outsized wheat breakdown apparently weighed on corn as well. July corn futures slumped 5.0 cents to $3.55/bushel just before lunchtime Tuesday, while December lost 5.0 to $3.7275. Argentina’s labor situation may be supporting the soy complex. The recent rebound in palm oil prices is probably boosting the U.S. soyoil market as well, but one has to wonder if the worsening Argentine labor situation is supporting the whole soy complex…………………………………..Full Article: Source

Westpac eyes China, India for commodities trade growth

Posted on 25 May 2015 by VRS  |  Email |Print

A recent entrant in Asia’s commodities markets, Australia’s Westpac Banking Corp is ramping up to take advantage of a commodities “supercycle” that it says has at least another 30 years to run. While some global banks have exited commodities due to more stringent regulations, Westpac is setting itself to support a deeper push into the region by its corporate customers, a senior executive told Reuters.
“The commodity cycle is still in the supercycle phase. The urbanization of Asia has not stopped - all we’re getting at the minute is a correction,” said Paul Gardner, the bank’s Singapore-based Global Head of Structured Commodity Finance………………………………………..Full Article: Source

Banks getting nervous about exposure to mining loans

Posted on 25 May 2015 by VRS  |  Email |Print

Banks are increasingly combing through portfolios heavily ­exposed to mining regions as the fallout from the collapse in commodity prices raises concerns that pain is spreading across loan books. While mining companies make up a small portion of the major banks’ total lending, industry sources said loans to other business customers in cities such as Perth were showing greater stress as the flow-on effect of lower commodity prices took its toll.
Last week, listed Perth contractor Macmahon advised that a 90-day review with nine lenders that had provided a $317.5 million ­facility — of which $159m has been drawn — had been ­extended by one month………………………………………..Full Article: Source

Saudi central bank insists economy can manage oil price slump

Posted on 22 May 2015 by VRS  |  Email |Print

The Saudi central bank, the Saudi Arabian Monetary Agency (SAMA), has announced that the recent slump in oil prices had not hurt the country’s economy. In a rare statement, Governor of the Central Bank Fahd al-Mubarak expressed his “confidence in the steadfastness of the Saudi economy in the face of the oil price decline in the medium term.”
The governor’s comments come amidst reports of potential massive losses in revenues by the countries that mainly export oil. Saudi Arabia is the number one economy in the Middle East in terms of size, but that’s mainly due to its 10.5 million barrels of oil being produced on a daily basis………………………………………..Full Article: Source

Aluminum financing to continue in non-registered LME warehouses: Macquarie

Posted on 22 May 2015 by VRS  |  Email |Print

The financing of aluminum will continue in non-registered London Metal Exchange warehouses, Colin Hamilton, head of global commodity research at Australian investment bank Macquarie said Thursday. “Essentially given where the contango is, it makes more sense, if you’re sitting with material in those off market warehouses, especially with the contango we’ve seen in recent weeks, we’ll certainly see financing coming back,” Hamilton said at presentation at the bank’s offices in London to launch its commodities outlook.
Basis the LME official prices, the cash-threes spread was in a $40/mt contango (when the spot price is lower than the forward price) May 21, having been in a deep and prolonged backwardation (when the forward price is lower than the spot price) for most of the first quarter………………………………………..Full Article: Source

Major banks’ commodities revenue down 28 pct in Q1 -report

Posted on 21 May 2015 by VRS  |  Email |Print

Commodities revenue at the top 10 investment banks slid by 28 percent in the first quarter after power and gas activity returned to normal levels after last year’s jump, a consultancy said on Wednesday.
Revenue earned by leading banks from commodity trading, selling derivatives to investors and other activities in the sector declined to $1.6 billion in the first three months of the year compared to the same period of 2014, London-based financial industry analytics firm Coalition said. “Revenues declined due to the absence of one-off gains in power and gas. This weakness was partially offset by an increase in oil trading results,” Coalition said………………………………………..Full Article: Source

Moody’s Predicts Big Jump in Oil and Gas Defaults

Posted on 20 May 2015 by VRS  |  Email |Print

So far oil and gas companies have largely weathered the sharp drop in oil prices with minimal carnage. But that carnage is coming, according to a new report from Moody’s Investors Service. Analysts at Moody’s predicts that the default rate for oil and gas companies with lower credit ratings — B2 or lower — could increase to 7.4% by March 2016 from 2.7%.
Moody’s Senior Vice President David Keisman said in the report that even if energy prices recover gradually to roughly $70 to $75 per barrel in 2016, the “weaker oil & gas issuers” will still be positioned for a “much greater risk of default.”……………………………………….Full Article: Source

Central Banks Increase Demand for Gold

Posted on 19 May 2015 by VRS  |  Email |Print

Gold has actually been one of the flattest and least volatile investments over the last couple of years. It has been bumping around the $1,200 per ounce price level, just recently getting above $1,220.
While it hasn’t been an exciting investment, or a very profitable one, over the last couple of years, it has actually held up reasonably well considering the strength of the U.S. dollar. The World Gold Council recently released its latest report on gold holdings by country. The report stated that global demand dropped by about 1% in the first quarter on a year-over-year basis………………………………………..Full Article: Source

Rethinking Commodity Trade Finance

Posted on 18 May 2015 by VRS  |  Email |Print

Is traditional commodity finance dying? Has the slack been taken up or is the commodity finance market underfunded? Are producers and traders getting the right products at the right prices? These are just some of the question we would like you to help us answer in our 2015 Commodity Finance Survey.
Trade finance – and commodity trade finance in particular, which involves lending to and servicing commodity producers, processors and traders – remains pivotal to the workings of a globalised and growing world economy, and to international development. The WTO says world trade will double in the next 15 years and the global population will be in excess of 9 billion by 2050, even though the growth rate of international trade has dropped drastically compared to the years before the global financial crisis………………………………………..Full Article: Source

Qatar Petroleum Sees Rising OPEC Demand as Price Drop Hits Shale

Posted on 18 May 2015 by VRS  |  Email |Print

Demand for OPEC’s crude will rise as the drop in oil prices below $100 a barrel continues to hinder shale production, Qatar Petroleum International’s Chief Executive Officer Nasser Khalil Al-Jaidah said.
“The coming period will witness an improvement in prices but they will not reach $100,” he said in an interview published Saturday by the official Qatar News Agency. Current prices will hinder the expansion in shale oil, “which signals an improvement in demand for OPEC’s oil.”……………………………………….Full Article: Source

Global Debt Now $200 Trillion!

Posted on 15 May 2015 by VRS  |  Email |Print

Global debt is now in the region of $200 trillion. The McKinsey Global Institute recently published a report highlighting the bloated, unsustainable levels of debt that have been accumulated globally and the huge risks when interest rates begin to rise again.
McKinsey concluded that total global debt was $199 trillion and the little covered report was released in February – 3 months ago – meaning that the figure is likely over $200 trillion. With a global population of 7.3 billion this works out out at over $27,200 of debt for every man, woman and child alive in the world today. Almost 29% of that debt – $57 trillion – has been accumulated in the relative short period since the financial crisis erupted in 2007 – just 8 years…………………………………..Full Article: Source

Big banks flag dangers of financial bubble in oil and commodities

Posted on 12 May 2015 by VRS  |  Email |Print

Barclays warns that the latest commodity boomlet has charged ahead of economic reality across the world: ‘Watch out: this rally may not last’. The big global banks have begun to warn clients that the blistering rally in oil and industrial commodities in recent weeks has run far ahead of economic reality, raising the risk of a fresh slump in prices over the summer.
Barclays, Morgan Stanley and Deutsche Bank have all issued reports advising investors to tread carefully as energy and base metals fall prey to unstable speculative flows in the derivatives markets………………………………………..Full Article: Source

Commodities hit bonds again

Posted on 12 May 2015 by VRS  |  Email |Print

The first half of Q2 has seen a strong rally develop in commodities prices. Brent crude oil is up 24% (after performing flat in Q1), copper 12% and even gold has risen a little. Despite the fact that agricultural commodities and livestock prices have continued to be weak, the S&PGSCI spot price index has made its best start to a year since 2011, up 8% in the year-to-date.
Although the price rebound is directly benefitting commodity index investors much less then the spot price gains might suggest (because the high cost of carry has reduced total returns), the strength of the commodity recovery is greatly influencing global growth expectations and movements in other asset classes………………………………………..Full Article: Source

World Seen Saving $153 Billion on Food Bill After Costs Tumble

Posted on 08 May 2015 by VRS  |  Email |Print

Hefty supplies and cheaper shipping costs mean countries will pay less to import food than anytime in the past five years, the United Nations predicted. Food prices globally have fallen for most of the past year given an oversupply in everything from wheat to sugar and dairy, according to a report released Thursday by the UN’s Food & Agriculture Organization.
The group said the world food import bill may drop $153 billion, or 12 percent, to $1.13 trillion this year. While poorer countries, such as those in sub-Saharan Africa, will be able to get cheaper food in the international market, in some cases the benefit is diminished because their currencies have weakened relative to the dollar, the FAO said………………………………………..Full Article: Source

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