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Commodities Briefing 16.Dec 2008

Opalesque Exclusive: As commodity ETFs see an inflow of assets and hedge funds look for the next place to allocate, will the commodity bubble surface again?
Global oil supply will peak in 2020, says energy agency
OPEC clashes with Goldman on $75 oil as demand slumps
No more $200 oil. How about $30?
The low oil price calls for a fresh set of rules
When will the oil run out?
Drop in China's oil demand pressures Opec to cut production
Big oil projects put in jeopardy by fall in prices
Renewable energy boom set to go up in smoke
Cooling on global warming
What are Australia's carbon trading plans?
Green energy investment bubble bursts
DMCC to establish more futures clubs
F&C chief earmarks US as first market to recover
Agora-X starts electronic commodity, derivative market
World economy in big trouble
Who are the beneficiaries of Futures market?
Is the Euro set to become the most influential currency in the world?
The U.S. dollar set to decline further?
Long term/short term investment conflict builds certainty of metals price surge
How a gold fund has held up
Second carbon ETC launches in U.S.
Stocks, dollar in the red
U.S. dollar retreating against commodities
Copper falls to more than three year low as stockpiles increase
Rubber producers unveil export cuts
Gold prices advance; other commodities mixed
Oil steady below $45 ahead of expected OPEC cut
ETF Securities to sell top metals on ASX
Commodity investing: ETFs or ETNs?
Back to basics: How to buy and sell exchange-traded funds (ETFs)

Posted on 16 December 2008 by VRS |  Email |Print

From Kirsten Bischoff, Opalesque New York: At the end of November Bloomberg.com reported that hedge funds have raised their cash holdings to an average of 31% of assets from 7% in the previous two years. Expectations for hedge fund redemptions now continue into the first quarter of 2009, but when managers decide to exit cash positions and enter back into the market, where will they look?

There is speculation that oversold commodities are likely where hedge funds will focus. After a six year-bull run, depressed markets and deep outputs have turned the tide, driving commodities down through the second half of 2008. “The subsequent severity of the decline in commodity prices surely has a lot to do with index speculator liquidation,” Jeff Korzenik, Chief Investment Officer of VC&C Capital Advisers told Opalesque.

While long-speculator liquidation has taken prices low in the second half of the year, false signals (from “paper demand”) in the beginning of 2008 prompted high levels of supply just as physical demand was falling, and Korzenik expects that restoring balance to the underlying physical markets will take some time.

However, it remains to be seen if balance will be restored or if the “bubble” will start growing again. Hedge funds may be looking at oversold commodities, but they are not alone. Korzenik, who delivered testimony this summer to the U.S. House of Representatives Committee on Agriculture on the role of pension and investment money in distorting the futures markets, also sees evidence of the growing appetite to jump back in on the long side.

Barclays Capital’s commodities research team released a report on Dec. 4 showing that exchange-traded commodity products attracted about $700 million last month, with the majority going to energy-related investments.

The underlying market producers, reading demand from a market possibly once again growing with long-biased speculators, may find themselves in an even more dizzying boom/bust cycle.

Stephen Briggs, analyst at RBS Global Banking & Markets, in an interview with Reuters said “The lower prices go and the longer they stay low, the bigger the next boom will be. The key for the next cycle is that projects are being deferred and canceled which means they may not come on stream in time for when demand is growing strongly again.”

Posted on 16 December 2008 by VRS |  Email |Print

From Guardian: Global oil production will peak much earlier than expected amid a collapse in petroleum investment due to the credit crunch, one of the world’s foremost experts has revealed.

Fatih Birol, chief economist to the International Energy Agency, told the Guardian that conventional crude output could plateau in 2020, a development that was “not good news” for a world still heavily dependent on petroleum….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Bloomberg: OPEC, the producer of 42 percent of the world’s oil, may make the biggest supply cut in a decade to halt the plunge in crude prices as demand drops for the first time since 1983.

The Organization of Petroleum Exporting Countries will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Theglobeandmail.com: At Goldman Sachs, the analysts who brought you the now-infamous forecast of crude oil hitting $200 (U.S.) a barrel in a “super-spike” have, um, trimmed their forecast to reflect the new realities surrounding crude. Now, Goldman Sachs predicts that oil will fall as low as $30 a barrel.

“If the call for $30 oil is as accurate as the call for $200 oil, investors may want to fill up their gas tanks and lock in their heating oil prices ASAP,” said Bespoke Investment Group….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From FT: Six months ago when King Abdullah of Saudi Arabia convened an energy summit in Jeddah the mood between producers and consumers was of barely concealed hostility.

Oil prices were $130 a barrel and rising and the Organisation of the Petroleum Exporting Countries and other producers seemed indifferent to the consequences. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Guardian: In the 2007 report, the IEA does appear to support the government’s view. “World oil resources,” it states, “are judged to be sufficient to meet the projected growth in demand to 2030,” though it says nothing about what happens at that point, or whether they will continue to be sufficient after 2030.

But this, as far as Whitehall is concerned, is the end of the matter. Like most of the rich world’s governments, the UK treats the IEA’s projections as gospel….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Timesonline.co.uk: China’s once ravenous hunger for energy is weakening at a record rate, compounding the pressure on Opec to slash global oil production this week by as much as two million barrels a day to prevent a glut.

With China’s economy slowing sharply, the country’s electricity output during November fell 9.6 per cent from a year ago to just over 254 billion kilowatt-hours, according to official figures published on Monday. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Nytimes.com: From the plains of North Dakota to the deep waters of Brazil, dozens of major oil and gas projects have been suspended or canceled in recent weeks as companies scramble to adjust to the collapse in energy markets.

In the short run, falling oil prices are leading to welcome relief at the pump for American families ahead of the holidays, with gasoline down from its summer record of just over $4 to an average of $1.66 a gallon, and still falling….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Smh.com.au: Until yesterday the so-called “green revolution” was ready to roll, but the renewable energy industry doubts the Government’s white paper will allow it to get out of first gear.

The fear is that since carbon permits are limited to $25 a tonne, and many are being given away, the emissions trading scheme will simply add a little lead to the saddlebags of heavy polluters without giving enough incentive for investors to switch to emissions-free technology….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From WSJ: Participants at last week’s United Nations climate conference in Poznan, Poland, were taken aback by a world seemingly turned upside-down.

The traditional villains and heroes of the international climate narrative, the wicked U.S. and the noble European Union, had unexpectedly swapped roles….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Reuters: Australia unveiled long-awaited details of its plans for carbon trading on Monday, and its greenhouse emissions targets for 2020.

Australia has set a minimum target to cut emissions by five percent by 2020, based on year 2000 levels. But Australia will cut by up to 15 percent if international negotiations in Copenhagen in late 2009 agree on tough global action….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Wealth-bulletin.com: A slackening in the growth rate of fossil fuel consumption gave comfort to environmentalists in 2008, as recession began to grip global economies. But, in most respects, this year was awful for the green bandwagon, which came to a halt as debt and equity finance dried up.

Clean energy stocks crashed by two thirds. The chart of the WilderHill New Energy Global Innovation index resembles the Nasdaq Technology index in 2000….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Business24-7.ae: The Dubai Multi Commodities Centre (DMCC) may set up more ‘clubs’ in the coming months to raise awareness for futures trade in the UAE, senior exchange officials have said. The awareness level for futures trade remains abysmally low in the region, DMCC officials said.

“It is quite possible that we will be setting up additional clubs. Not necessarily for just exchange traded materials but for those where we have expertise and if the industry would have a use for such an organisation,” said James Bernard the Associate Director (Commodities), DMCC….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Easier.com: Jeremy Tigue, fund manager of the Foreign & Colonial Investment Trust, one of Britain’s most popular investment funds, writes: “2008 has been an unprecedented year and one we hope will not be repeated in our lifetime.

The biggest issues actually occurred away from the equity market, in banking and commodities….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Kansascity.com: Kansas City-based Agora-X LLC has launched its electronic market for over-the-counter commodity transactions and derivative contracts.

The market is designed to allow institutional traders to conduct business in a more liquid and transparent market. Such trades currently take place through telephone calls, e-mails and instant messages among participants….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Battling the worst financial crisis in nearly 70 years, the world economy will brake sharply in 2009, with the United States, Western Europe and Japan in recession. Developing economies in Asia, Africa and the Middle East will experience curtailed growth due to plunging commodity prices and a world trade contraction,
but likely will escape the red ink.

Evidence of the global slide is still mounting. Manufacturers around the world are under severe strain and laying off hundreds of thousands of workers; banks are failing, triggering a severe credit crunch; home foreclosures are skyrocketing; and auto sales are plummeting, which could push some carmakers into bankruptcy…. Full Press Release: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Commodityonline.com: The Chicago Board of Trade was set up in 1848 by a group of merchants wanting to minimize price risk. The first commodity Futures exchange in India was set up by Bombay Cotton Trade Association Ltd, again a group of merchants.

However, it is not that farmers aren’t prone to price risks. In fact, price risk is only one of the risks that farmers face as they also have to deal with vagaries of weather, pests and diseases affecting the crop….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Financialadvice.co.uk: As rumours circulate Wall Street that the Federal Reserve is set to slash interest rates by 0.5% the dollar has taken a serious hit against the Euro.

In a world where currency fluctuations have never been more severe it is the Euro which appears to come out best against both sterling and the dollar. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Forexnews.com: The Federal Reserve could cut rates again this week, or at the beginning of the new year, since the economic slowdown is permeating various levels of the U.S economy.

The work to be done by the new administration will be enormous, while hopes for change are at the extreme. The U.S. dollar has found good resistance levels and could soften further against major currencies….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Mineweb.com: It seems inevitable that we are in for a surge in metal prices as current financial strictures will lead to severe supply shortages medium to long term – but the question is when.

The mining industry as a rule looks to the long term but investment nowadays is more and more dependent on rapid short term gains….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From WSJ: The First Eagle Gold Fund has roughly a third of its assets in gold bullion, avoided the base metals before their free fall, and tends to invest in shares of more-established producers rather than junior mining companies, said manager Jean-Marie Eveillard.

This approach enabled it to hold up better than many other gold-oriented funds during a recent downturn in share prices of mining stocks and a general weakness in commodities….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Indexuniverse.com: The second exchange-traded product providing access to global carbon emissions markets is set to launch Monday in the U.S., bringing an alternative to a much-discussed new asset class that’s also spreading through Europe.

The AirShares EU Carbon Allowances Fund is actually a commodity pool that tracks a basket of exchange-traded futures contracts for European Union Allowances (EUAs). Each contract provides for delivery of 1,000 EUAs at a specified price….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From WSJ: Investors are holding off on any year-end shopping spree for now. Financial names led the stock market lower and the dollar sank as market participants looked ahead to the interest-rate decision due from the Federal Reserve on Tuesday.

Investors also digested a mix of other developments. Most were downbeat, including new data on manufacturing activity and analyst downgrades of several bellwether companies….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Dailyreckoning.com.au: Like a giant laxative in the world’s monetary system, the Federal Reserve’s quantitative easing is starting to have an effect. You wouldn’t necessarily call it the desired effect.

After all, we’re talking about the eventual destruction of the U.S. dollar and the global monetary system upon which it’s based. But it’s an effect nonetheless….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Bloomberg: Copper fell to near the lowest price in more than three years as stockpiles of the metal gained, indicating a deepening recession and slowdown in demand for raw materials.

The London Metal Exchange-monitored stockpiles jumped by 8,000 metric tons yesterday to 314,825 tons, the highest since February 2004. Industrial production grew at the weakest pace in almost a decade in China and fell in the U.S. last month. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From FT: Rubber prices in Japan reacted positively on Monday to news that the world’s top three rubber producing countries plan to cut exports by one-sixth next year to stem declining prices.

The benchmark Tokyo Commodity Exchange May rubber contract rose 8 per cent to Y114.3 a kilogramme, up 14.5 per cent since reaching a six-year low of Y99.8 this month….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Forbes: Gold prices advanced Monday as the U.S. dollar weakened against other major currencies, prompting investors to buy into the commodity as a hedge against inflation. Other commodities were mixed.

The dollar fell against the euro and the British pound ahead of the Federal Reserve’s Tuesday decision on interest rates. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Reuters: Oil steadied below $45 on Tuesday, bolstered by expectations that OPEC will agree its largest supply cut ever, after dropping 4 percent the previous day on persistent worries of a deepening economic slump.

A weaker dollar, which tends to support commodities, also lent a hand. U.S. light crude for January delivery rose 11 cents to $44.64 a barrel at 0115 GMT (8:15 p.m. EST on Monday) after falling as low as $44.10 on Monday….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Theage.com.au: Exchange traded commodities (ETCs) group ETF Securities Ltd will offer a range of precious metals securities on the Australian Securities Exchange.

The four new metals securities to be quoted are ETFS Physical Platinum, ETFS Physical Palladium, ETFS Physical Silver, and ETFS Physical PM Basket which will consist of platinum, palladium, silver and gold….. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From ETFguide.com: Earlier in the year, it appeared that commodities would be a rare haven in 2008’s downward spiraling financial markets. Then, out of nowhere, the Jim Rogers commodity bus got blindsided.

One of the broadest measures of commodity performance, the iShares S&P GSCI Commodity Index Trust has fallen a steep 44.10% since the beginning of the year. The underlying index is heavily weighted towards energy commodities (68.39%) with agriculture, metals and livestock accounting for the balance. The dramatic decline in crude oil prices to under $50 a barrel from around $150 has contributed to GSG’s fall. …. Full Article: Source

Posted on 16 December 2008 by VRS |  Email |Print

From Examiner.com: ETFs are practically a growth industry in and of themselves these days. New ones, it seems, spring up on nearly a daily basis. In fact, these funds have become so popular lately that I think that 2008 may well go down as the year of the ETF.

In the U.S alone, there are now 533 ETFs with over $530 billion invested in them. …. Full Article: Source

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