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The Return of Gold Hedging

Posted on 18 July 2014 by VRS  |  Email |Print

It’s baaack… That’s right, I’m talking about gold hedging, the gold stock investor’s bane. You see, gold miners “hedge” by agreeing to sell a portion of their future gold production at a fixed price. That way, if prices fall, they’re guaranteed a better profit.
Hedging was all the rage during the late 1990s and early 2000s, a period in which gold lost more than half its value. At the time, even mining company executives didn’t think gold prices would move up. But with most of their production hedged at relatively low prices, many miners missed out on the gold price boom of the last decade………………………………………..Full Article: Source

Commodity traders and asset ownership

Posted on 17 July 2014 by VRS  |  Email |Print

As trading has become more competitive and markets more transparent, big commodity traders have responded by sinking billion of dollars into refineries, power plants, ports and other assets.
It is a narrative that has taken up many column inches over the past couple of years and there is more than a kernel of truth to it. Some energy and metals traders have indeed become more asset heavy through targeted acquisitions. Vitol, for example, recently acquired Royal Dutch Shell’s Australian refinery and petrol station assets for $2.6bn, while Mercuria is set to buy the physical commodities business of JPMorgan Chase………………………………………..Full Article: Source

To Hedge or Not to Hedge; The Dilemma for Gold Mining Companies

Posted on 14 July 2014 by VRS  |  Email |Print

A major Russian gold producer earlier this month entered into the gold mining industry’s biggest hedging transaction in six years. According to analysts at Thomson Reuters GFMS, gold producers will return to net hedging this year for the first time after 2011. Hedging future production certainly has its benefits.
It guarantees future cash flows, especially during a volatile period like the one seen in 2013 when gold prices fell nearly 30%. However, it also limits the upside potential for mining companies………………………………………..Full Article: Source

Is “Inflation” On Its Way Out? Keep An Eye On Commodities

Posted on 14 July 2014 by VRS  |  Email |Print

Yes we are all too aware that Food, insurance and many other assets are more expensive these days. Speaking purely from a Commodities perspective, the Commodity Index TR has made a series of lower highs over the past few years. Early this year the index rallied up to falling resistance and now its breaking down below a couple of support lines.
Should we listen to the broader global inflation message or lack of with this index break down of late? I believe its important what the basket of commodities does going forward. I doubt that long bond players dislike this price action!!!……………………………………….Full Article: Source

Commodities Prices Point To Bottoming Euro-Zone Inflation

Posted on 18 June 2014 by VRS  |  Email |Print

Fears that the euro zone could be sliding into deflation might be short lived, if commodity prices continue to rise as they have done so far this year.
That’s because, by European Central Bank President Mario Draghi‘s reckoning, some 80% of the decline in euro zone inflation since 2011 can be accounted for by falling commodity prices. But with commodity prices picking up, that deflationary pressure should start to fade………………………………………..Full Article: Source

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Commodity finance in China: An assay-light strategy

Posted on 13 June 2014 by VRS  |  Email |Print

At the best of times, seizing collateral on defaulted loans in China is a fraught task, plagued by patchy enforcement. These are not the best of times in the port of Qingdao, a trading hub in the north-east. Police are investigating whether companies have committed fraud by pledging the same holdings of copper and aluminium to multiple banks, multiple times. The banks are scrambling to see how much of the metal sitting in Qingdao’s warehouses actually belongs to them.
More than just a fraud, the tale exposes China’s financial idiosyncrasies and the lengths to which firms sometimes go to borrow money. Regulators have tried to choke off credit to metal traders in recent years as part of efforts to slow pell-mell construction. Traders have devised a simple workaround………………………………………..Full Article: Source

Have large banks in China fallen victim to a commodities fraud?

Posted on 13 June 2014 by VRS  |  Email |Print

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other big Western banks are concerned that their loans may lack the appropriate collateral of big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there………………………………………..Full Article: Source

China Commodity Loans Add to Surge in Offshore Borrowing

Posted on 13 June 2014 by VRS  |  Email |Print

The commodity-backed loans at the center of a probe into an alleged financial scam at a Chinese port are part of a ramp-up in offshore borrowing by Chinese companies that Beijing is looking to tamp down.
As Chinese authorities tightened credit at home in the past year, local firms instead looked abroad for financing. Asian-Pacific banks alone had $1.2 trillion in loan exposure to China at the end of 2013, up two-and-a-half times from 2010, according to Fitch Ratings………………………………………..Full Article: Source

Lenders Fear Spread of Chinese Commodities Fraud Case

Posted on 12 June 2014 by VRS  |  Email |Print

Large banks and trading firms are frantically trying to determine whether they have fallen victim to a suspected commodities fraud emanating from the giant Qingdao Port in northeast China.
Citigroup and several other large Western banks are concerned that their loans may lack the appropriate collateral, big stockpiles of copper and aluminum at the port. The banks have inspectors on the ground who are trying to assess whether enough of the metals are there………………………………………..Full Article: Source

Shift metals in China to secure warehouses, banks tell clients

Posted on 12 June 2014 by VRS  |  Email |Print

At least two global banks involved in commodity financing in China have asked some clients to shift copper and aluminium, used as collateral for loans, to better regulated warehouses, three sources with direct knowledge of the matter said.
Banks and trading houses have been making urgent checks on the security of metal holdings in China, sparked by a suspected fraud at Qingdao Port, the world’s seventh biggest. Police are investigating the duplication of warehouse receipts by a third-party firm on metal cargos used to obtain financing………………………………………..Full Article: Source

Why Metals Buyers Should Worry About China’s Commodity Trade Financing Game

Posted on 12 June 2014 by VRS  |  Email |Print

Chinese companies are getting caught up in commodity trade finance trouble, as borrowers are securing loans using warehoused aluminum and copper as collateral – and allegedly using the same collateralized stock multiple times for multiple loans. Should Industrial Metals Buyers Worry About This?
Surely, it is an internal Chinese matter; if a few Western banks have got themselves caught up in it and get burned as the clients default, the underlying commodity proves to not be there or pledged elsewhere, well, some may say, that’s their fault for lending in such an unregulated market………………………………………..Full Article: Source

OPEC’s Withholding Taxes Oil Majors

Posted on 12 June 2014 by VRS  |  Email |Print

Business lore holds that you can’t cut your way to prosperity. Apparently, no one told OPEC. In December, at its last general meeting, the Organization of the Petroleum Exporting Countries faced a rush of rising oil supply from Libya, Iraq, Iran, and North America. The big question was how far oil prices would fall before the sometimes fractious cartel agreed how to share the pain of output cuts to make way.
Now, with Libya and Iraq in crisis again and U.S. talks with Iran looking dicey, OPEC’s job is a lot easier as it its latest get-together wraps up; the group Wednesday agreed to maintain current production quotas………………………………………..Full Article: Source

Bankers Focus on Trading Firm in Search for Metals Used as Collateral

Posted on 11 June 2014 by VRS  |  Email |Print

Bankers in China are focusing on the actions of a commodities-trading firm as they scramble to find metals they believed were backing loans but which appear to have been used as collateral multiple times.
The operator of Qingdao port, on China’s eastern coast, said this week Chinese authorities were investigating an alleged fraud involving metals stored at the port and used as collateral to obtain multiple bank loans………………………………………..Full Article: Source

China Commodity Financing Seen Declining by Goldman Sachs

Posted on 11 June 2014 by VRS  |  Email |Print

Foreign banks are projected by Goldman Sachs Group Inc. to lend less money against commodity inventories in China amid a probe into metals stockpiles in the biggest consumer of raw materials.
Claims that single batches of copper and aluminum at Qingdao Port were pledged as collateral for multiple loans risks undermining a broader practice in which traders use everything from iron ore to rubber to get funding. The investigation is already weighing down copper prices and may curb foreign exchange inflows to China, according to a report by Goldman………………………………………..Full Article: Source

StanChart says not pulling out of China commodities financing

Posted on 11 June 2014 by VRS  |  Email |Print

Standard Chartered said on Tuesday it acknowledges there are issues in China around commodity financing and while it is monitoring the situation, it is not pulling out of its commodity financing business in the country.
Arun Murthy, global head of comomodities at Standard Chartered, also said in an email response to Reuters that commodity financing remained a key focus for the bank………………………………………..Full Article: Source

Morgan Stanley CEO expects commodities sales to close in 3rd qtr

Posted on 11 June 2014 by VRS  |  Email |Print

Morgan Stanley will “probably” close sales of two physical commodities businesses in the third quarter, Chief Executive James Gorman said on Tuesday.
The Wall Street bank is in the process of selling a global oil merchanting business to Russian energy company Rosneft, as well as its ownership stake in TransMontaigne to NGL Energy Partners………………………………………..Full Article: Source

Worries Hit Commodity Finance Sector as China Opens Investigation

Posted on 10 June 2014 by VRS  |  Email |Print

Is the metal stored in a Chinese warehouse really there? Has the peanut oil shipment that a bank loaned money against been swapped for worthless water? Basic questions like these have begun to play on the minds of traders and bankers doing business in China, the world’s largest importer of raw materials, after an investigation began at Qingdao Port, a huge trading hub in the northeast, into whether more than one license had been issued for the same material.
The duplication, which leaves buyers out of pocket when they claim what they thought was theirs, may be a result of deliberate fraud by a company using the same metal to raise multiple loans………………………………………..Full Article: Source

Time to end use of commodities for credit in China

Posted on 09 June 2014 by VRS  |  Email |Print

The mad dash by banks and traders to see who owns what metal inventories at Qingdao port should help bring a swift, and much-needed, end to the practice of using commodities for credit. For the past few years, one of the known unknowns in the mainland’s metal markets has been the use of imports as collateral to secure financing for investments in higher-yielding assets, such as construction.
This has been most apparent in copper, with iron ore, gold, soya beans and other commodities also affected, with the consequent build-up of so-called dark inventories, which are stocks being held for purposes unrelated to supply and demand fundamentals………………………………………..Full Article: Source

SEC urged to tackle foreign payment disclosure in oil and gas

Posted on 02 June 2014 by VRS  |  Email |Print

The US Securities and Exchange Commission is under growing pressure to tackle the issue of how oil and gas companies disclose payments to foreign governments. Royal Dutch Shell, ExxonMobil, several US senators and aid organisation Oxfam America have urged the agency to write new disclosure rules this year.
The SEC announced recently that it would not address the issue until March 2015, meaning a final rule may not be adopted until the end of next year at the earliest…………………………………….Full Article: Source

India: Banks must quickly get into the commodity market act

Posted on 30 May 2014 by VRS  |  Email |Print

Banks are not allowed to participate in the Indian commodity derivatives markets. Such non-participation of the most important financial institution of the country – banks – is an important missing link in the evolution of this market in India.
While much has been talked about in various contexts recommending banks’ participations, the latest Report of a Finance Ministry committee suggesting steps to fulfill the objectives of price discovery and risk management in the commodity derivatives market, says: “… One way to reduce the cost of capital for the commodities trader is, to make banks … an integral part of trading in commodity derivatives.”……………………………………….Full Article: Source

Commodities Today: Where We Are Putting Our Money

Posted on 28 May 2014 by VRS  |  Email |Print

The commodities markets are mixed as the physical commodities are trading lower for the most part and the equities are marginally higher according to our lists. The SPDR Gold Shares (GLD) caught our eye as gold is down about 2% on the session and the iShares Silver Trust (SLV) are not that much further behind.
It is certainly a rough day for the precious metals, but if the trend lower continues and we break through some important support levels across multiple markets then it could get even uglier quite quickly………………………………………..Full Article: Source

Scotiabank Q2 commodity trading revenue boosted by precious metals

Posted on 28 May 2014 by VRS  |  Email |Print

Bank of Nova Scotia, one of the world’s biggest bullion banks, on Tuesday reported its best quarterly trading revenue from commodities in over a year due to improving precious metals markets even as scrutiny of global bullion pricing intensifies.
In its second quarter to end-March, Canada’s third-largest bank said trading revenue from commodities hit C$98 million, up 9 percent from the prior quarter and highest since the first quarter to end-December 2012, according to a filing………………………………………..Full Article: Source

Trillion-Dollar Question: Are Oil Companies Over-Investing in High-Cost Projects?

Posted on 27 May 2014 by VRS  |  Email |Print

Over the next decade, private-sector companies may invest over $1 trillion to develop new sources of high-cost oil production. Much of this future production will (1) be profitable only if oil prices remain near current (historically-high) levels; and (2) come online at a time when global oil demand may be entering the start of a long-term decline.
Investors in oil producers need to ask: how rigorously do these companies stress-test new projects against scenarios of declining oil demand and diminished oil prices? Last year the world consumed 91 million barrels per day of oil to fuel cars and trucks, heat buildings, make petrochemicals, and generate electricity, among other uses………………………………………..Full Article: Source

Money to Burn: OPEC’s Wasteful Energy Subsidies

Posted on 23 May 2014 by VRS  |  Email |Print

Fossil fuel subsidies cost governments in emerging markets more than $500 billion every year and are a major contributor to climate change, according to the International Energy Agency and International Monetary Fund.
The biggest subsidies are concentrated in the Middle East, North Africa, Asia and parts of Latin America, according to the IEA’s Fossil Fuel Subsidy Database. Moreover, energy-exporting countries accounted for three quarters of all consumption subsidies in 2012, according to the IEA and OPEC members account for more than half the world’s subsidies……………………………………..Full Article: Source

Fuel hedgers bemoan bank retrenchment from commodities

Posted on 23 May 2014 by VRS  |  Email |Print

Hedgers such as Delta Air Lines are having a harder time managing their exposure to fuel prices as banks retreat from commodity markets. Ben Bergum, director of fuel hedging for the Atlanta-based airline, said the declining number of bank counterparties meant Delta was now relying more on cleared derivatives for its hedging transactions, forcing it to post additional margin.
“In the past six months, there has been a noticeable decline in liquidity,” Bergum said during a presentation at the conference. “It has forced us to do more transactions through the cleared markets. There are still players out there that make markets – it’s just that fewer of them are banks doing bilateral hedging. We are still able to do what we need to do, but it’s getting more difficult.”…………………………………….Full Article: Source

Allow banks, FIIs in commodities market: Finance Ministry panel India

Posted on 22 May 2014 by VRS  |  Email |Print

A Finance Ministry-appointed committee has recommended allowing banks and foreign institutional investors in the commodity futures market. The committee’s recommendations intend mainly to facilitate frictionless arbitrage between the spot and futures market. This is key to fulfilling the objectives of price discovery and hedging and greater hedger participation in the market, the committee said.
The committee was set up after the commodity derivative market and its regulator, Forward Market Commission, were transferred to the Finance Ministry in September 2013 from the Consumer Affairs Ministry in the wake of the ₹5,600-crore NSEL scam………………………………………Full Article: Source

Fuel subsidies rising in emerging markets

Posted on 20 May 2014 by VRS  |  Email |Print

Fossil fuel subsidies cost governments in emerging markets more than $500 billion every year and are a major contributor to climate change, according to the International Energy Agency (IEA) and International Monetary Fund (IMF).
The biggest subsidies are concentrated in the Middle East, North Africa, Asia and parts of Latin America, according to the IEA’s Fossil Fuel Subsidy Database. Moreover energy-exporting countries accounted for three quarters of all consumption subsidies in 2012, according to the IEA and Opec members account for more than half the world’s subsidies…………………………………….Full Article: Source

Major banks Q1 commodities revenue jumps 26 pct

Posted on 19 May 2014 by VRS  |  Email |Print

Commodities revenue at the top 10 investment banks climbed 26 percent in the first quarter after years of declines, due to higher U.S. power and gas turnover as well as stronger investor interest, a consultancy said on Monday.
Revenue from commodities for top banks in the first quarter rose to $1.8 billion from $1.4 billion in the same period last year, London-based financial industry analytics firm Coalition said in a report. “The cold winter in North America created volatility and had a positive impact on U.S. power and gas revenues,” it said…………………………………….Full Article: Source

Wall Street banks count commodities trading profits

Posted on 15 May 2014 by VRS  |  Email |Print

While the world has been writing epitaphs for Wall Street banks’ commodity trading desks, Wall Street has been counting its ­profits. Banks that held firm amid an industry pullback from energy, metals and agricultural markets – and even some that beat a partial retreat – mined a rich seam as North America’s coldest winter in three decades drove up energy prices, results show.
Citigroup, Goldman Sachs, Morgan Stanley and Macquarie flagged commodities trading as a bright spot in first-quarter earnings. Coalition, a consultancy which tracks banks’ performance, estimates revenues for the top 10 banks in commodities rose 20 per cent year on year in the three months to March………………………………………..Full Article: Source

The Secret World of Bullion Banking: Who Sets Gold Prices?

Posted on 14 May 2014 by VRS  |  Email |Print

The financial sector has never been known for its transparency or forthrightness. In fact, it’s probably the single most mysterious industry there is. Bullion banking is so shrouded in secrecy that even most bankers don’t understand it. Recently, bullion bankers have come under fire for allegedly dishonestly fixing gold and silver prices.
Whether or not the allegations are true, the ongoing investigation into bullion banking has led to some surprising discoveries about the industry. The question raised by the investigation is whether or not some bullion bankers are playing by the rules………………………………………..Full Article: Source

Bank-led commodity decorrelation theory rejected by analysts

Posted on 08 May 2014 by VRS  |  Email |Print

Unctad economists’ argument that bank withdrawals are loosening correlation between commodities and equities “doesn’t make any sense”, say analysts. Analysts have criticised the findings of two economists at the United Nations Conference on Trade and Development (Unctad), who claim the withdrawal of banks from commodity markets has driven down the correlation between commodities and other asset classes.
“To say that banks exiting creates a decorrelation doesn’t make any sense to me,” says Michael Haigh, New York-based global head of commodities research at Societe Generale Corporate & Investment Banking (SG CIB)………………………………………..Full Article: Source

BTG Pactual’s Esteves sees commodities increasingly adding to profit

Posted on 08 May 2014 by VRS  |  Email |Print

The contribution of commodities sales and trading to Grupo BTG Pactual SA’s profit will rise in coming quarters, Chief Executive Officer André Esteves said on Wednesday, underscoring the synergies the unit has with the investment bank’s trading desk.
A move to extend the offering and trading of specialized products for fixed-income, equities and currencies to commodities since late 2012 was shown to be “the right decision because we leveraged our synergies in a number of key areas,” Esteves said in a conference call to discuss first-quarter earnings………………………………………..Full Article: Source

Oil and gas sales up a fifth according to report

Posted on 07 May 2014 by VRS  |  Email |Print

International sales from companies serving the oil and gas sector grew by more than a fifth to reach £10bn in 2012-13, a new report revealed. Overseas sales from companies providing goods and services to the sector increased by 22%, according to new figures from Scottish Enterprise.
Meanwhile total oil and gas supply chain sales from Scotland amounted to £19.9bn in 2012-13, a rise of 15.4% on the previous year. That meant that international deals accounted for just over half (50.2%) of all sales from the sector, up from 47.6% in 2011-12………………………………………..Full Article: Source

Citi Q1 commodities revenue almost doubles as polar vortex hits

Posted on 06 May 2014 by VRS  |  Email |Print

Citigroup Inc’s revenue from commodities transactions nearly doubled in the first quarter of 2014 year-over-year, making it the latest bank to benefit from this past winter’s soaring power and gas prices as the coldest weather in three decades gripped the United States.
The bank brought in $224 million in principal transactions revenue in “commodity and other contracts,” up almost 90 percent from the first quarter last year and just $43 million shy of its total commodities trading haul for all of 2013………………………………………..Full Article: Source

Global Fossil Fuels Face A Loss Of $30 Trillion

Posted on 02 May 2014 by VRS  |  Email |Print

The global fossil fuel industry faces a loss of $US28 trillion ($A30.2 trillion) in revenues over the next two decades, if the world takes action to address climate change, cleans up pollution and moves to decarbonise the global energy system.
The assessment, made by leading European broking house Kepler Chevreux, underlines what’s at stake for the fossil fuel industry from a push to cleaner fuels and concerted efforts to reduce emissions, and helps explain the enormous push back from the oil and coal industries in particular against such policies………………………………………..Full Article: Source

Some banks haven’t given up on trading commodities. And that’s a good thing.

Posted on 30 April 2014 by VRS  |  Email |Print

As expected, the recent by some of the largest energy trading banks has created a temporary dearth of capability, and sometimes liquidity, in the international commodity markets. Born a child of the Financial Crisis and the BP Deepwater Horizon oil spill, and later ensconced into law through Dodd-Frank, the Volker Rule and other international regulations, the anti-bank sentiment amongst policymakers has driven many of the largest players into various stages of transition toward smaller footprints.
The likes of JP Morgan, Morgan Stanley, Barclays, Deutsche Bank and Bank America – to name a few – are staring at the exit signs for some or all of their business. This is not good………………………………………..Full Article: Source

U.S. commodity regulators looking into banks’ swaps move

Posted on 30 April 2014 by VRS  |  Email |Print

U.S. commodity regulators are inquiring about Wall Street banks’ recent push to remove parent-company backing of some overseas swaps. Scott O’Malia, a Republican commissioner at the Commodity Futures Trading Commission, said in an interview he has asked the agency’s acting chairman, Mark Wetjen, a Democrat, to issue a legal opinion as to whether any of the banks’ exercises have run afoul of the agency’s rules.
On Sunday, The Wall Street Journal reported that banks, including Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Morgan Stanley, were changing the terms of some swaps made by their offshore units so they could avoid U.S. regulations, according to people familiar with the situation………………………………………..Full Article: Source

Fossil fuel subsidies growing despite concerns

Posted on 30 April 2014 by VRS  |  Email |Print

Government subsidies for renewable energy cause great consternation to those who believe in the sanctity of free markets. “If they can’t stand on their own feet, then why support them?” the argument goes.
But in actual fact, most energy sources are subsidised, and none more so than fossil fuels. Indeed in straight numerical terms, subsidies for oil, coal and gas far outweigh those for renewables………………………………………..Full Article: Source

Financial intermediation and shadow banking through commodities

Posted on 29 April 2014 by VRS  |  Email |Print

Commodity trading firms are not systemically risky because they do not engage in the sort of maturity transformation that banks do. They also tend mostly to operate on a hedged basis, via “basis trade” exposure.
Short-term assets meanwhile are funded with short-term debt while long-term assets are funded with long-term debt, meaning the institutions are not heavily leveraged at all, though balance sheets are exposed to liquidity or rollover risk………………………………………..Full Article: Source

Here’s why some of the world’s big banks are dumping their commodities desks

Posted on 29 April 2014 by VRS  |  Email |Print

A number of the world’s big banks have either dumped or downsized their commodities trading businesses because of falling returns. The latest, Barclays, announced last week it will stop the majority of its commodities activities as it ups its focus on electronic trading. The UK bank will continue to trade precious metals.
In March JPMorgan Chase sold off its commodities division to Swiss trading company Mercuria for $3.5 billion and has also retained precious metal trading activities………………………………………..Full Article: Source

On the intriguing drop in commodity correlation

Posted on 29 April 2014 by VRS  |  Email |Print

Banks are selling off their commodity divisions for regulatory reasons but also because commodities are turning out to be less profitable for them than they used to be.
On which note, an interesting development has emerged since banks started winding down their commodity divisions in 2013. According to David Bicchetti and Nicolas Maystre, who wrote a paper in 2012 highlighting increasing correlations between a number of major commodities and indices from 2008 onward, these correlations have now begun to dissipate………………………………………..Full Article: Source

Trafigura says commodity traders don’t pose same risk as banks

Posted on 28 April 2014 by VRS  |  Email |Print

Commodity trading firms probably don’t pose systemic risks to the global economy as the companies draw increased scrutiny and banks step back from raw materials, Trafigura Beheer BV said in a report.
Trading houses, such as Amsterdam-based Trafigura, are smaller than banks and have less debt, according to the study, written by Craig Pirrong, a finance professor at the University of Houston. The firms use financial derivatives mostly to hedge their physical activities, rather than to speculate on price swings, Pirrong said in the report……………………………………….Full Article: Source

Banks and commodity trading: Sell signals

Posted on 25 April 2014 by VRS  |  Email |Print

Thin margins, tough regulations and worries about reputation make trading commodities look like a source of worries not profits for nervous bank bosses. Barclays, one of the biggest in the business, is the latest to head for the exit. This week it announced it would give up most of its metal, crop and energy trading.
Barclays is following JPMorgan Chase, which last month sold its physical commodities division to Mercuria, a private trading firm based in Switzerland, and South Africa’s Standard Bank, which sold its commodities unit in London to Industrial and Commercial Bank of China in January………………………………………..Full Article: Source

Bank cutting commodities trade severs link with equitiess

Posted on 25 April 2014 by VRS  |  Email |Print

Banks’ pullback from commodities trading is weakening the link between raw materials and equities and helping to re-establish supply and demand as the main factor in setting prices, United Nations researchers say.
As Barclays Plc, JPMorgan Chase & Co. and Morgan Stanley leave parts of the business, prices of commodities are moving more independently of stocks. The correlation between U.S. equities and corn, cattle and wheat fell to less than 0.05 in January, compared with almost 0.3 in 2008, an analysis by David Bicchetti and Nicolas Maystre, economic affairs officers at the UN Conference on Trade and Development in Geneva, shows………………………………………..Full Article: Source

Oil and gas industry ‘worth GBP35bln annually’ to UK economy

Posted on 24 April 2014 by VRS  |  Email |Print

The oil and gas industry is worth about £35bn to the UK economy, according to a new study. The research, commissioned by industry body Oil and Gas UK, found more than 3,000 companies were directly involved in the industry.
The number of people employed by UK firms grew by more than 20,000 in the four years to 2012. The report said a key challenge was the availability of skilled and experienced workers. It also suggested the industry needs to increase exports to sustain growth………………………………………..Full Article: Source

Money flowing back into commodities

Posted on 22 April 2014 by VRS  |  Email |Print

Money is flowing back into commodity investments this year as the sector has broken out of lock-step with other asset classes and outperformed them, attracting investors who aim to diversify portfolios.
After $50 billion of net redemptions in 2013, total inflows so far this year into passive commodity index products and commodity-linked exchange traded funds (ETFs) have amounted to about $5.8 billion, according to estimates by Citi………………………………………..Full Article: Source

Influence of banks, hedge funds on commodities lowest since 2008

Posted on 17 April 2014 by VRS  |  Email |Print

United Nations economists who previously called for government intervention to tame volatile swings in commodity prices say banks and hedge funds have since reduced their influence to the lowest level since 2008.
In a 2012 report for the UN Conference on Trade and Development (UNCTAD), David Bicchetti and Nicolas Maystre said the rise of financial players in commodities markets over the previous decade had moved prices of oil and grains away from the fundamentals of supply and demand………………………………………..Full Article: Source

Banks tussle to join next generation of commodity dealers

Posted on 16 April 2014 by VRS  |  Email |Print

Facing low volatility, a lack of trading opportunities and compliance headaches, major global investment banks are pulling back from commodities. But at the same time, a number of smaller and regional players are actively seeking to increase their involvement.
A sinking feeling has pervaded Wall Street recently. During the past few years, commodity revenues have been falling at major global investment banks. Industry titans such as Deutsche Bank, JP Morgan and Morgan Stanley have decided to quit large parts of the commodities market, or leave it altogether………………………………………..Full Article: Source

U.S. bank regulator issues bulletin on oil, gas lending risks

Posted on 10 April 2014 by VRS  |  Email |Print

A U.S. regulatory agency on Wednesday issued tips for bankers and examiners on potential risks involved with loans for oil and natural gas production, as the domestic energy boom continues.
The U.S. Office of the Comptroller of the Currency (OCC) published on its website a bulletin laying out supervisors’ expectations for energy production lending and spelling out new examination procedures for banks issuing the loans………………………………………..Full Article: Source

Why are banks closing commodity arms?

Posted on 10 April 2014 by VRS  |  Email |Print

Higher regulatory pressure and diminishing profit potential. Are these just excuses, or are they the real reasons we’ve seen a major shift by the investment banks out of commodities and physical trading?
Over the past two years, if we look at two headliners for commodities and metals - gold and corn- we can see why. Not pretty. Actually, ugly. So as you can see, probably more of a problem with diminishing profitability rather than regulatory oversight………………………………………..Full Article: Source

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