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Commodities Briefing - Archive | November, 2008

Commodity market competition enters bold new era

Posted on 28 November 2008 by VRS  |  Email |Print

From FT: Goldman Sachs and Morgan Stanley have dominated the commodities business for almost two decades, but for the first time their de-facto duopoly is under threat.

The credit crunch has forced the two Wall Street banks, which dominate all areas of commodities, from taking clients’ risk and hedging positions to proprietary trading, to adopt a more cautious approach….. Full Article: Source

UBP strategist poised to buy back into commodities

Posted on 28 November 2008 by VRS  |  Email |Print

From Citywire.co.uk: The risk of further commodities price falls is minimal, according to Union Bancaire Privée (UBP) head of investment strategy Christophe Bernard.

Full Article: Source

Coal prices to slide in 2009

Posted on 28 November 2008 by VRS  |  Email |Print

From Mineweb.com: Prices of thermal and coking coal will fall 20 and 26 percent respectively in 2009, a Reuters poll showed on Thursday, thinning miners’ profits as a slowing global economy chews into demand.

Prices of Asian thermal coal, mainly used to generate power, may fall to $100 a tonne in the 2009 Japanese fiscal year, down 20 percent from this year’s agreed price of $125, a median forecast of 10 analysts said….. Full Article: Source

Ten ways to invest in gold

Posted on 28 November 2008 by VRS  |  Email |Print

From Telegraph: Demand for gold is soaring and Citigroup analysts predict the price could break through the $2,000 an ounce barrier. The price of gold itself has fallen, and is now trading in a range around $720 to $750 an ounce, having peaked at more than $1,000 in the summer. Nevertheless, this reflects a dramatic rise from a bottom of $270 in 2001.

However, the gold price has increased only modestly once inflation is taken into account; current prices match those of the late 1980s and early 1990s in real terms. But the gold price story is more complicated, particularly for sterling investors….. Full Article: Source

Gold holds firm versus non-U.S. currencies

Posted on 28 November 2008 by VRS  |  Email |Print

From Reuters: As a global economic crisis deepens, gold has not only held firm in dollar terms but also appreciated against other non-U.S. currencies, and strong physical buying despite higher prices signals the metal has legs to rally further.

A flight to safety amid economic uncertainties has bolstered the dollar and the yen, which hurt dollar-denominated gold and made bullion more expensive when priced in other currencies….. Full Article: Source

Correcting the errors of a 25-year bull market

Posted on 28 November 2008 by VRS  |  Email |Print

From Fleetstreetinvest.co.uk: Thanksgiving. Other Americans may take the day off. But not us…. not here at the headquarters of the Daily Reckoning. We’ve got some reckoning to do. But let us take a moment to bow our heads and offer this Prayer of Thanksgiving…

Thank you, good Lord, for everything. We are still alive. We are still solvent. Help us stay that way. If not both, at least the former. Lead us not into temptation. Keep us in gold and cash until this is over….. Full Article: Source

Oil producers will face bearish 2009

Posted on 28 November 2008 by VRS  |  Email |Print

From Thenational.ae: Oil producers will face a tough market next year even if Opec trims production by as much as a further one million barrels per day on top of present output cuts, a top commodities official at Morgan Stanley said today.

A slowing economy and significant additions to global refining capacity threaten to weaken the fundamentals of the market for petrol and other oil products, said Hussein Allidina, the head of commodities research for the New York bank, which has a strong focus on commodities….. Full Article: Source

Digging Into commodity funds

Posted on 28 November 2008 by VRS  |  Email |Print

From Investopedia: With boom-and-bust oil prices, many investors feel they have to capitalize on some of this excitement before it’s too late, and so they turn to funds like the DWS Global Commodities Stock Fund. In the end, though, it’s like a dog chasing its tail, going round and round in circles.

The DWS Global Commodities Stock Fund is a closed-end fund that invests in the stocks of companies involved in the commodities business, as well as commodities-linked structured notes. These pay a return (above principal) based on the performance of a basket of commodities over a defined period. …. Full Article: Source

Scotiabank Commodity Index drops 15.6%

Posted on 28 November 2008 by VRS  |  Email |Print

From Theglobeandmail.com: Retreating hedge funds helped drive down the Scotiabank Commodity Price Index by a record 15.6 per cent in October, the sharpest month-to-month drop in the index’s data base, which goes back nearly 37 years.

The index fell to 192.1 points during the month from 227.7 in September, with plunging oil prices leading the way down, Patricia Mohr, Scotiabank’s commodity specialist and a vice-president of economics, said in her latest report Thursday. However, it remained slightly above its year-earlier level of 191 points….. Full Article: Source

Commodity boom is over

Posted on 28 November 2008 by VRS  |  Email |Print

From Moneymanagement.com.au: Commodity prices are not expected to rise until the second half of next year, presenting a gloomy outlook for the resources sector for the next six months.

“From 2004 to just three months ago, commodity prices kept growing, but the commodity boom is now over,” Plato Investment Management managing director Don Hamson said at a Russell presentation. “The calling off of the BHP/RIO deal was the last nail in the coffin for the end of the commodity boom.” …. Full Article: Source

Investing in crude oil could be a slick move

Posted on 28 November 2008 by VRS  |  Email |Print

From Telegraph:It is time to become bullish on the oil price. The marginal cost of producing a barrel of oil is about $50. This is how much it costs the average oil company to drill, dig, pump and deliver a barrel of crude to market.

If the price falls below this level, some producers will be pumping oil at a loss. So, with the oil price close to its marginal cost of production, Questor believes now is the right time to buy oil….. Full Article: Source

Chilean Peso bonds remain at record high

Posted on 28 November 2008 by VRS  |  Email |Print

From Bloomberg: Chile’s fixed-rate peso bonds remained at their highest level since the securities were issued in April amid speculation slowing inflation will allow the central bank to cut the benchmark interest rate.

Chile’s central bank said in a Nov. 13 report, it expects inflation to drop to 3 percent in 2010, from the current 9.9 percent annual pace. Policy makers, who next meet on Dec. 11, have raised the overnight interbank rate 2.25 percentage points to 8.25 percent this year in a bid to stem inflation….. Full Article: Source

Carbon trading scheme ‘discounts altruism’

Posted on 28 November 2008 by VRS  |  Email |Print

From Abc.net.au: Householders who ‘do their bit’ to reduce greenhouse emissions may be wasting their time, says one expert, who is concerned about Australia’s proposed emissions trading scheme.

Economist Dr Richard Denniss of the Canberra-based think tank, The Australia Institute, made the comments in the lead up to the government’s release of a white paper on a national Carbon Pollution Reduction Scheme….. Full Article: Source

Nasdaq to launch UK power market

Posted on 28 November 2008 by VRS  |  Email |Print

From FT: Nasdaq OMX, the transatlantic exchange group, is set to launch Britain’s first electricity exchange after winning a contract to create a power market to match the highly successful ones in Scandinavia and Germany.

The group, which runs the Nord Pool power exchange in Scandinavia, has been chosen to run the market by a group of energy companies and financial institutions after a competitive tender organised by the Futures and Options Association, a London-based industry body whose members are the main participants in exchange-traded derivatives….. Full Article: Source

Global oil demand to decline for the first time in a generation

Posted on 28 November 2008 by VRS  |  Email |Print

From Livemint.com: Global oil demand is expected to decline slightly in 2008 and 2009, the first drop in a generation, as the most severe economic crisis since the 1930s slashes consumption across the developed world.

Worldwide demand will decline by 20,000 barrels per day (bpd) in both 2008 and 2009 to 86.03 and 86.01 million bpd (mbpd), respectively, according to a Reuters poll of 11 analysts, banks and industry groups….. Full Article: Source

Aluminum surplus may widen by 36% in 2009

Posted on 28 November 2008 by VRS  |  Email |Print

From Bloomberg: The global aluminum surplus is expected to rise 36 percent next year as supply increases and demand falls, Goldman Sachs JBWere Pty forecast.

Aluminum supply may exceed demand by 2.18 million metric tons, rising from an excess of 1.60 million tons this year, Goldman said. Further production cuts were “desperately needed in order to avoid a massive inventory-build,” analysts led by Malcolm Southwood wrote in the report yesterday….. Full Article: Source

The crude crunch is coming

Posted on 28 November 2008 by VRS  |  Email |Print

From Guardian: When oil almost topped $150 back in July, politicians flew around the world trying to quell the panic it created. Many commentators declared the era of cheap oil over for ever. Now the price has sunk below $50.

Politicians are still flying around the world, trying to quell a different form of panic. Many analysts declare that with the recession, and the drop in demand for the black stuff, cheap oil is back to stay….. Full Article: Source

OPEC weighs steep production cuts as members suffer

Posted on 28 November 2008 by VRS  |  Email |Print

From Theaustralian.news.com.au: Having failed twice in two months to calm plunging oil markets, OPEC ministers are set to weigh another round of steep production cuts as the world’s economic travails continue to drive crude prices to levels not seen in years.

The Organisation of Petroleum Exporting Countries has scrambled since September to stem the fall in oil prices, which is now putting pressure on OPEC budgets from Ecuador to Kuwait. Ineffective in blunting the price spike earlier this year, the cartel is proving similarly hapless in putting a floor under collapsing prices….. Full Article: Source

After the fall, institutional investors wary of oil

Posted on 28 November 2008 by VRS  |  Email |Print

From Guardian: Institutional investors have withdrawn billions of dollars from the oil market as prices have collapsed in the last few months and look unlikely to return until the recession hits bottom — probably well into next year.

Since oil prices peaked in early July at over $147 a barrel, these money managers, who invest in oil in the hope of better returns for their investors and to diversify their portfolios, have become increasingly risk averse….. Full Article: Source

Structural deficit’ in gold supply could send prices higher

Posted on 28 November 2008 by VRS  |  Email |Print

From Mineweb.com: Based on the assumption that current strong physical gold demand highlights an existing supply deficit, Toronto’s Wellington West Capital Markets forecasts that, “if the increased structural deficit in gold supply continues, gold prices should adjust higher.”

Wellington metals analysts also advised, “Given the potential change in market fundamentals, we believe it is time investors revisit investing in the junior and intermediate gold producers.”…. Full Article: Source

Copper falls on persistent demand worries

Posted on 28 November 2008 by VRS  |  Email |Print

From Theglobeandmail.com: Copper fell nearly 3 per cent on Thursday, shrugging off a softer U.S. dollar, dragged lower by the persistent poor demand outlook, while aluminum and lead fell on news that China may cut or abolish export taxes on the metals.

China may reduce or cancel taxes on exports of primary aluminum and refined lead, and it may allow copper smelters to import some concentrates duty free, as part of its move to boost exports and improve firms’ operations….. Full Article: Source

Base metals retreat as demand fears deepen

Posted on 28 November 2008 by VRS  |  Email |Print

From FT: Base metals retreated across the board on Wednesday as fears of falling demand eclipsed news of extraordinary policy moves aimed at boosting economic activity in China and Europe.

Copper sank 1.5 per cent to $3,710 a tonne, approaching last week’s three-year low, as traders shrugged off China’s largest official interest rate cut in a decade and a European Union €200bn stimulus plan, and instead focused on fresh evidence of deteriorating global demand for metals and a glut in supply….. Full Article: Source

Commodity prices decline at historic pace

Posted on 28 November 2008 by VRS  |  Email |Print

From Canada.com: Commodity prices are falling at their fastest pace in decades, cutting a swath through the economy as tumbling crude puts Alberta oilsands projects on ice and crashing base metal prices shutter mines across the country.

Scotiabank reported Thursday its monthly commodity price index fell 16.6 per cent in October, the sharpest monthly decline since the index was created in 1972. The oil and gas sub-index led the plunge, off 21.8 per cent….. Full Article: Source

Expect commodities to come back

Posted on 27 November 2008 by VRS  |  Email |Print

From IHT: Commodities’ fall from grace in recent months has been fast and furious, and further losses cannot be ruled out as the economic and demand landscape deteriorates over coming months.

This will add to deflation fears, but not for long, because many commodities are expected to hit a floor soon as cuts in output curb supplies. The notable exceptions could be copper and oil….. Full Article: Source

Oil prices: The true role of speculation

Posted on 27 November 2008 by VRS  |  Email |Print

From Edhec-risk.com: To analyse the significant variations in oil prices over the past year, EDHEC have produced a new position paper entitled “Oil Prices: the True Role of Speculation,” which argues that, despite the appeal of blaming speculators, supply-and-demand imbalances, the fall in the dollar and low spare capacity in the oil-producing countries were the major causes of the initial sharp rise.

It also identifies many of the excessively opaque facets of the world oil markets and argues that greater transparency would enable policymakers to make sound economic decisions. Oil futures markets are shown to contribute to the greater transparency of oil markets in general. …. Full Article: Source

BHP Billiton sees weakness in commodities demand

Posted on 27 November 2008 by VRS  |  Email |Print

From Reuters: Top global miner BHP Billiton, which scrapped a bid for rival Rio Tinto Ltd, expects a 17 percent fall in Chinese steel production, BHP told a shareholders meeting on Thursday.

BHP also forecast continued weakness in commodities and said it would respond it any of its operations were to lose cash. BHP declared the bid officially had lapsed on Thursday, after the European Commission closed its investigation on the deal, first proposed a year ago….. Full Article: Source

The softs side of recession

Posted on 27 November 2008 by VRS  |  Email |Print

From WSJ: “Soft” commodities are toughing out the hard times. Sugar, cocoa and coffee have outperformed energies, metals and even grains this year. The resilience is thanks to the recession argument that “people still have to eat.”

In recent weeks, all three commodities have shown resilience after a period of falling prices. Sugar and cocoa are among the few commodities up for the year, 7.3% and 11%, respectively, while the overall Dow Jones-AIG Commodity Index is down 35%. Coffee is down 17%….. Full Article: Source

Commodities may fall further before rebound- ANZ

Posted on 27 November 2008 by VRS  |  Email |Print

From Bloomberg: Commodity prices may fall a further 10 percent to 15 percent before nearing the end of their decline next year as a faltering world economy stifles demand for raw materials, Australia & New Zealand Banking Group forecast.

Crude oil is the “most vulnerable” and may fall as low as “late $40s” a barrel, Geoff Clear, executive director and head of commodities, said today. Copper may “disappoint” despite tight supply, while zinc and lead may fare better, he said….. Full Article: Source&sid=aUYRVoa15Yao&refer=commodities

Gold prices ‘could hit $9,000 per oz’ by 2015

Posted on 27 November 2008 by VRS  |  Email |Print

From Bullionvault.com: Dennis van Ek, a principal at Mercer in Amsterdam has claimed today (November 26th) that gold prices could eventually hit $9,000 per ounce in 2015.

He has explained that he believes buying gold is the ultimate insurance policy against other currencies around the globe imploding….. Full Article: Source

Impending rally in the commodities market?

Posted on 27 November 2008 by VRS  |  Email |Print

From Investingblog.org: The market still needs to settle out the speculation and digest much of the speculative supply that is rushing into the markets. Other commodities such as silver are now on the radar with a rapidly expanding money supply and a heavily deflated price per ounce.

The metals bust happened far before that of oil and was not as well covered….. Full Article: Source

Commodity fall fuels deflation fears

Posted on 27 November 2008 by VRS  |  Email |Print

From Reuters: Commodities’ fall from grace in recent months has been fast and furious and further losses cannot be ruled out as the economic and demand landscape deteriorates over coming months.

This will add to deflation fears, but not for long because many commodities are expected to soon hit a floor as output cuts curb supplies. The notable exceptions could be copper and oil….. Full Article: Source

Banking on gold

Posted on 27 November 2008 by VRS  |  Email |Print

From Globalpensions.com: Gold reached its highest price ever in March this year when it hit US$1,000 an ounce. Though it has since fallen back from those giddy heights, it was still trading at around US$740 an ounce in mid-November.

And while gloom and uncertainty look likely to dominate the outlook at least for the foreseeable future, the glittering allure of gold looks likely to get stronger….. Full Article: Source

Food prices still high, but will fall slowly

Posted on 27 November 2008 by VRS  |  Email |Print

From Sfgate.com: A turkey dinner with all the trimmings will cost more this year as food prices remain stubbornly high despite an economic crash that has, among other things, driven down the price of gas.

But after this day of thanks, experts say, the cost of eating will slowly decline now that the commodity bubble that had driven up food prices continues to subside….. Full Article: Source

Gold ETFs fly on weakening dollar

Posted on 27 November 2008 by VRS  |  Email |Print

From Investors.com: Gold pulled back slightly Tuesday and Wednesday following three straight days of sharp gains. The rally lifted the yellow metal above its 10-week moving average for the first time in more than a month.

Its strength goes hand in hand with weakness in the dollar as it takes more dollars to buy the commodity, which is traded in the U.S. currency….. Full Article: Source

Chinese steel production to drop - BHP

Posted on 27 November 2008 by VRS  |  Email |Print

From News.com.au: BHP Billiton expects Chinese steel production to drop 17 per cent year-on-year amid the financial crisis, but says emerging economies, particularly China, will drive natural resources demand growth.

The company says it is better placed than any other major miner to withstand the global financial and commodities markets turmoil….. Full Article: Source

Dairy index falls on global woes

Posted on 27 November 2008 by VRS  |  Email |Print

From Stuff.co.nz: The dairy industry continues to be buffeted by the global economic downturn, with sharemarket operator NZX’s Agrifax dairy index showing a 5 percent fall in November.

The index fell 70 points to 1255 this month, down from 1325 in October, and well below its peak of 1474 six months ago….. Full Article: Source

Investors are going for gold

Posted on 27 November 2008 by VRS  |  Email |Print

From Financeasia.com: In a crisis, gold really comes into its element as a safe haven investment, and this time is no different as investors rush for the precious metal at an unprecedented rate.

According to the World Gold Council, demand for gold was at an all time high at $32 billion in the third quarter – 45% higher than the investment record set in the previous three months….. Full Article: Source

Lost in commodity futures, bankruptcy on a roll

Posted on 27 November 2008 by VRS  |  Email |Print

From Commodityonline.com: Stories of investors committing suicide after losing out in stock market are obsolete. But what are not coming to surface are stories of big entrepreneurs who have gone bust in commodities market.

So are the players in commodities better equipped to handle the crisis than those in the stock market? The answer lies in the testimonies of hundreds of ‘big fishes’ who lost heavily in crude oil speculation….. Full Article: Source

Canadian dollar dips on worry over commodity demand

Posted on 27 November 2008 by VRS  |  Email |Print

From Forbes: The Canadian dollar dipped 0.4 percent against the U.S. dollar Wednesday on worries over slackening demand for Canadian commodities, but it closed well off its lows for the day as North American stock markets rebounded and commodity prices made gains.

Canadian bond prices rallied along with the larger U.S. market on weaker-than-expected U.S. data, which increased the allure of safe-haven government debt….. Full Article: Source

Gold holds firm vs non US currencies, seen bullish

Posted on 27 November 2008 by VRS  |  Email |Print

From Guardian: As a global economic crisis deepens, gold has not only held firm in dollar terms but also appreciated against other non U.S. currencies, and strong physical buying despite higher prices signals the metal has legs to rally further.

A flight to safety amid economic uncertainties has bolstered the dollar and the yen, which hurt dollar-denominated gold and made bullion more expensive when priced in other currencies….. Full Article: Source

FOA choses NASDAQ OMX Commodities and Nord Pool Spot to deliver market and clearing services

Posted on 27 November 2008 by VRS  |  Email |Print

NASDAQ OMX Commodities and Nord Pool Spot AS have been chosen by the Futures & Options Association (FOA) in UK to establish a spot and cash-settled derivatives power market with a full range of clearing services.

FOA has chosen the consortium NASDAQ OMX Commodities and Nord Pool Spot for the delivery of market and clearing services for the UK Wholesale Power Market. The parties plan to establish the exchange within Q2 2009. Nord Pool Spot has experience from operating power markets since 1993, while NASDAQ OMX supplies exchange technology to over 60 financial marketplaces in over 50 countries….. Full Press Release: Source

Copper jumps on China’s big rate cut

Posted on 27 November 2008 by VRS  |  Email |Print

From Theaustralian.news.com.au: Copper rose almost 4 per cent to as investors bet a rate cut in China, the world’s top consumer of the industrial metal, could help boost growth and demand.

However, metals trimmed some of their gains as the US dollar rose against the euro later in the day on renewed risk aversion and European shares fell along with Wall Street, dragged down by weak US data that fanned recession fears….. Full Article: Source

OPEC likely to debate, not decide another supply cut

Posted on 27 November 2008 by VRS  |  Email |Print

From Guardian: OPEC ministers will debate a deep cut in oil supply when they meet this weekend in Cairo for urgent talks aimed at arresting a downward price spiral that sucked oil below $50 a barrel.

They have downplayed the prospect of any decision until a policy-setting meeting in Algeria on Dec. 17, but OPEC needs to send a strong signal of its intention to remove more supply or the risk is oil prices will hurtle lower still….. Full Article: Source

The 10 big energy myths

Posted on 27 November 2008 by VRS  |  Email |Print

From Guardian: There has never been a more important time to invest in green technologies, yet many of us believe these efforts are doomed to failure. Myth 1: solar power is too expensive to be of much use.

In reality, today’s bulky and expensive solar panels capture only 10% or so of the sun’s energy, but rapid innovation in the US means that the next generation of panels will be much thinner, capture far more of the energy in the sun’s light and cost a fraction of what they do today….. Full Article: Source

EU mulls state aid for companies hit by CO2 costs

Posted on 27 November 2008 by VRS  |  Email |Print

From Guardian: European Union negotiators are considering allowing state aid to companies hit by any increases in electricity prices due to the cost of permits to emit carbon dioxide, a document seen by Reuters on Wednesday showed.

The measures are aimed at easing the risk that manufacturers could move overseas to avoid the cost of buying permits to pollute under the EU’s flagship Emission Trading Scheme (ETS), which is central to the bloc’s efforts to fight climate change….. Full Article: Source

India to demand greater resource allocation towards climate change

Posted on 27 November 2008 by VRS  |  Email |Print

From Financialexpress.com: Notwithstanding the global financial crisis, India would push for larger financial allocation by the developed countries towards climate change mitigation and adaptation in the forthcoming meet under the United Nations Framework Convention on Climate Change (UNFCC).

“Funds accumulated under the Clean Development Mechanism (CDM) is in adequate to take up any mitigation work as the current scale of funding in really small,” Vijai Sharma, secretary, ministry of environment and forest said….. Full Article: Source

Gold is the answer. Now what was the question?

Posted on 27 November 2008 by VRS  |  Email |Print

From Mineweb.com: Among the world’s gold bulls, investment in the yellow metal seems to be the answer to all evils and in times of financial and political crisis, as at the present, they may well have a point.

Whether it is protection of one’s wealth against inflation or against deflation - two diametrically opposed potential consequences of the current global financial breakdown (and fears of the former seem to be changing to perhaps the even more worrying latter possibility) - both seem to be assessed to be positive for gold. Or at least less negative for gold than for most other investments….. Full Article: Source

Nodal exchange completes successful mock auctions

Posted on 27 November 2008 by VRS  |  Email |Print

Nodal Exchange, the first independent electronic commodities exchange for forward locational electric power trading, announced today that it completed successful mock auctions for potential participants of the exchange.

These mock auctions were held November 18th and 19th, 2008, in preparation for Nodal Exchange’s early 2009 launch. Over 50 entities signed up to participate in these mock auctions. These entities account for 85% of the recent prompt month congestion trading in the four Regional Transmission Organization (RTO) markets Nodal Exchange will be initially supporting: PJM, MISO, NYISO, and ISO-NE. In addition, the mock auction included participants who do not currently trade in the congestion markets, but are looking forward to trading on Nodal Exchange because of the more frequent auctions and clearing of all nodal transactions….. Full Press Release: Source

Shipping costs plunge to 22-year low

Posted on 27 November 2008 by VRS  |  Email |Print

From FT: The cost of shipping dry bulk commodities such as iron ore, coal and grains plunged to a near 22-year low on Wednesday, as worldwide demand for raw materials continued to decline.

The Baltic Dry Index, a global benchmark, fell 5.1 per cent to 762 points, the lowest level since January 1987. The index has tumbled 93.5 per cent since reaching an all-time high of 11,793 points in May….. Full Article: Source

World sugar deficit may be at least 1mt

Posted on 27 November 2008 by VRS  |  Email |Print

From Livemint.com: The world sugar deficit for the year ending 30 September may be “at the low end of estimates” at 1 million tonne (mt), said Christoph Berg, managing director of research company FO Licht.

“That’s taking into account the world economic outlook as a result of the financial crisis and how it affects consumption, particularly of Asian markets,” he said….. Full Article: Source

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