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Commodities Briefing 05.Feb 2009

Commodities face 'seven thin years'
Increased transparency needed in commodities markets
Exchange-traded commodity inflows surge
Commodity shipping index advances the most since at least 1985
US CFTC nominee backs OTC derivatives clearing
Consensus for derivatives reform-US House chairman
Water Showdown
China puts GBP60bln into energy
Regulator sets tougher green energy guidelines
New forecasts aim to help with wind energy
Is this the dawning of the age of thorium?
Carbon trading: Get set for a change in climate
Has non-OPEC oil production peaked?
OPEC ready to cut more oil to defend price
Oil inches lower near $40 on equities, inventories data
T & K Futures and Options predicts $100 crude oil futures prices in 2009
ETF - The great inflation is coming
Gold ETF impact
View of the Day: Gold shines on
Gold part commodity part currency eyes $1,000 near term
Gold futures rise on demand for store of value; silver advances
Merrill Lynch kisses up to gold, predicts it will hit $1,500
Economic downturn means uranium companies face huge challenge
Blue Systems delivers Chi-X Europe data over mobile platform
DGCX to postpone plastics futures launch
Credit crisis may boost Gulf commods exchanges
Results Of 2008 Global Custodian OTC derivatives prime brokerage survey
Nickel rises in London on speculation surplus is being curbed
Euro trades near 2-month low on eastern Europe economic concern
Why investors have a yen for the yen
China's ore lust is long term not near term
BHP down 57% in commodities slump
Petrobras sells $1.5 bln of 10-year dollar bonds
New IAM fund targets opportunities in CTAs
Orange juice jumps as Florida faces freeze
Metals, oil prices set for weak 2009
Commodity price slide continues

Posted on 05 February 2009 by VRS |  Email |Print

From FT: Commodities prices could remain at their current depressed levels for up to seven years as the global recession hits demand, according to Michael Farmer, founder of hedge fund Red Kite, one of the most closely watched figures in the base metals market.

Mr Farmer, who used to run MG, then the world’s biggest copper trader, runs Red Kite, which consists of five hedge funds with $1bn under management that are among the biggest investors in metals….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Cass-news.com: Congressman Jeff Fortenberry this week called for increased oversight and transparency in commodities markets. During a House Agriculture Committee hearing, Fortenberry heard expert testimony on “credit default swaps,” their effects on financial stability, and ideas for appropriate regulation.

This hearing examined the role of these exotic financial instruments as used for risk management outside of the normal regulatory system….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Reuters: Exchange traded commodities (ETCs) saw strong inflows again last week, with $416 million moving into the market, adding to record-breaking inflows of $581 million the previous week, ETF Securities said on Wednesday.

ETCs are securities which track the value of an underlying instrument, such as gold or oil futures such as U.S. crude oil CLc1 and North Sea Brent crude LCOc1….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Bloomberg: The Baltic Dry Index, a measure of shipping costs for commodities, rose the most since at least 1985 in London as the number of idled capesizes fell to almost zero, indicating strengthening demand for iron ore.

Capesize rates have risen more than ninefold from a record low of $2,316 a day on Dec. 2. Steelmakers may be replenishing stocks in China after they fell 22 percent by mid-January from a record in September. Producers abroad, faced with an oversupply of iron ore, may also be shipping ore to China for storage. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Reuters: The Obama administration’s nominee to regulate the U.S. futures market said in a letter released on Wednesday that he supports mandatory clearing of “standardized” derivatives sold over the counter.

Nominee Gary Gensler said, “I support stronger regulation of U.S. commodity markets” in an 11-page letter that responded to questions from Sen Carl Levin, Michigan Democrat. The letter, dated Jan. 26, was released by Levin….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Reuters: Despite objections from the U.S. financial industry, there is consensus for “real steps to improve the transparency and oversight of derivatives markets,” the House Agriculture Committee chairman said on Wednesday.

The Agriculture Committee is working on a bill to require most over-the-counter derivatives to be cleared by federally regulated clearinghouses and ban “naked” credit default swaps….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Hardassetsinvestor.com: The unfortunate news for a commodity investor is that even though water meets most of the classic definitions of a commodity, it’s not traded. You can’t buy water futures, and there’s no direct way to invest in water itself, which means there’s no option but the pick-and-shovel play.

The good news is that there are four ETFs tracking these buy-the-cow companies….. Full Article: Source

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From Guardian: China will spend 580bn yuan (£59.5bn) expanding its energy sector in 2009 with plans for new solar and wind-powered generating capacity, but also nuclear and coal-fired plants.

State-owned power companies were stepping up investment to meet growing demand and boost economic growth as part of a government stimulus plan, said Zhang Guobao, director of China’s National Energy Administration….. Full Article: Source

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From Reuters: Energy suppliers must abate carbon emissions by at least a tonne for every residential customer signed up to “green” electricity tariffs under new guidelines set by energy regulator Ofgem on Wednesday.

Suppliers in Britain are already obliged to produce some electricity from renewable sources, for which they receive a subsidy….. Full Article: Source

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From AP: Federal researchers are developing pinpoint forecasts to help utilities predict which way the wind will blow — and how strong — so they’ll know how much electricity their wind turbines will generate.

The National Center for Atmospheric Research and Xcel Energy said Wednesday the new, advanced forecasts could cut consumers’ costs and reduce pollution….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Resourceinvestor.com: Thorium-based nuclear power, its implications for nuclear nonproliferation and investment opportunities.

There’s great rejoicing tonight in Salmon, Idaho, because Salmon is the closest town to the Lemhi Pass, and the Lemhi Pass is the location of America’s largest and possibly the world’s richest high-grade thorium oxide deposits. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Moneymanagement.com.au: We’ve all heard the old joke: what did the man say when he walked into a bar? Ouch! Perhaps he was focused on the here and now of getting a drink and forgot to lift his eyes to see what was coming.

Our previous articles in Money Management have focused on the ‘here and now’ challenges of complying with legal obligations. In this article, we lift our eyes to the not too distant future, to a world of trading in carbon emissions, renewable energy and water rights, and ask what challenges and opportunities will exist for financial services businesses. …. Full Article: Source

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From Bi-me.com: A research paper out today from Merrill Lynch says the combination of low oil prices and a global credit crunch will prove rather damaging for the oil industry. Its analysis based on the IEA Field by Field Production database finds decline rates at an average of 4.2% per annum since 2003.

Extrapolating from this sample to create a global production profile, the bank believes the global decline rate has averaged at least 4.5% year on year in recent years….. Full Article: Source

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From Reuters: OPEC stands ready to cut yet more oil output at a meeting next month, its fourth reduction since September, to revive prices battered by the first demand drop in more than 20 years.

A cut of around 1 million barrels per day (bpd) could be discussed by the organisation’s ministers at their March 15 meeting in Vienna, an OPEC source said….. Full Article: Source

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From Reuters: Oil inched down on Thursday, edging closer towards $40 a barrel as share prices continue to fall and U.S. crude inventories rise under the weight of an economic slowdown.

Crude stocks in the world’s top energy consumer jumped by 7.2 million barrels to an 18-month high last week, data from the U.S. Energy Information Administration showed….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

When prices of any commodity are low the producers of that commodity typically cut back on production and innovation costs. In the case of crude oil the producers will tend to limit investments in exploration and production from more expensive sources of crude oil such as deep water deposits, shale and tar sands.

“There is an old saying in commodities that low prices cure low prices and crude oil is currently at a multi-year low”. When prices of any commodity are low the producers of that commodity typically cut back on production and innovation costs. In the case of crude oil the producers will tend to limit investments in exploration and production from more expensive sources of crude oil such as deep water deposits, shale and tar sands….. Full Press Release: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Thestreet.com: The “Great Inflation” is coming. While that statement might seem odd in an environment where economic activity is collapsing and deflation threats remain, we need look no further than last week’s statement from the Federal Reserve that it is intent on creating inflation and will do anything necessary to make it occur.

The Fed indicated it will keep the size of its balance sheet at high levels, will continue purchasing large amounts of agency debt and mortgage-backed securities (MBS), and is prepared to purchase long-term Treasury securities….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Fxstreet.com: In the midst of our seemingly endless slog through the dark sentiment wastelands plaguing the markets, we have a birthday to celebrate. Four years ago this week, a revolutionary exchange traded fund (ETF) was launched that forever changed trading dynamics within the global gold market.

Known today as the SPDR Gold Shares, GLD has been wildly successful by any measure. GLD’s rise to fame has not been easy. While a few contrarians loved the idea of a gold exchange traded fund to broaden investor participation in this gold bull, many investors were very skeptical. Some were downright hostile….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From FT: Gold, one of the best performing assets of 2008, will continue to attract buyers in 2009 because of physical demand for it amid fears about the financial crisis, says John Reade, strategist at UBS.

“We expect the precious metal will average at about $1,000 an ounce in 2009, a level we last saw in March last year. This compares with our old forecast of $700 an ounce,” he says….. Full Article: Source

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From Marketoracle.co.uk: Gold demand in the 3Q of 2008 was very strong after being weak for several quarters. Identifiable demand was 1,133.4 tonnes. That figure was up 170.1 tonnes or 18% year over year. Valued in U.S. dollars gold demand was $31.8 billion and up 51% year over year.

That number is a record and marks a 45% increase from the record numbers set in the 2Q….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Bloomberg: Gold rose for the first time in three days on demand for the precious metal as a store of value amid global financial turmoil. Silver also gained.

UBS AG said today gold will average $1,000 an ounce this year, up 43 percent from its October forecast. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose to a record 853.4 metric tons on Feb. 2….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Seekingalpha.com: Gold prices could hit $1,500 as global plans to rescue the financial industry are set to increase inflation pressures, according to analysts led by Francisco Blanch at Merrill Lynch.

“The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets,” wrote the analysts in a note released Monday. The analysts didn’t say when gold would hit the price target. They also predicted oil prices will rise to $150 a barrel….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Mineweb.com: While the current financial credit crisis and market correction “are of great concern to management,” Strathmore Minerals maintains “our core business strategy of focusing on bringing production on-stream in the coming years for our key projects is still the right one.”

In a news release, Strathmore CEO David Miller said, “The current downturn has created a greater challenge for uranium companies than any time during the past ten years. “…. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Finextra.com: Blue Systems, a London-based provider of global financial information software, today announced that it has made Chi-X Europe’s data available via blue mobile, offering a bespoke service for Chi-X Europe participants in 2009.

Members will be able to receive real-time Chi-X Europe data on their mobile phone, with additional delayed feeds for LSE, EUREX and NASDAQ data, real-time currency, oil and precious metals prices, company financials for 50,000+ global stocks and the Dow Jones Business Newswire….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Mondovisione.com: Dubai Gold & Commodities Exchange (DGCX) announced today that the launch of its Plastics Futures contract is to be postponed.

The launch of Polypropylene and Linear Low Density Polyethylene futures contracts for the Middle East and South East Asian markets was originally scheduled for 5 February 2009. The decision to defer plastic futures is based on feedback from key industry participants. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Fxstreet.com: The Gulf Arab region’s fledgling commodities exchanges could get a boost as investors seek the security offered by clearing houses amid heightened fears over counterparty risks following the global credit crisis.

Global exchanges have benefited from a move away from over-the-counter commodities trading, where deals are typically bilateral agreements between two parties with no backing from a central clearing house. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Globalcustodian.com: Why an OTC derivatives prime brokerage survey, and why now? To say that the OTC derivatives prime brokerage business has changed in the last six months is an understatement.

From the first informal “give-up” arrangements in the early 1990s to the height of the bull market two years ago, market participants paid minimal attention to counterparty credit risk in OTC derivative transactions, because they relied on the supposedly superior creditworthiness of the investment banks to intermediate it….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Bloomberg: Nickel rose for a third day in London on speculation production cuts are starting to curb a surplus of the metal used mostly in stainless steel. Aluminum climbed to the highest in two weeks.

Supplies of nickel in warehouses monitored by the London Metal Exchange fell 114 metric tons to 83,964 tons, narrowing this year’s climb to 7.1 percent. Stockpiles are up 47 percent for copper and 22 percent for aluminum over the same period. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Bloomberg: The euro traded near a two-month low against the dollar on speculation the economic slump in Eastern Europe will cause the 16-nation region’s recession to deepen.

The currency may weaken for a second day versus the yen as traders added to bets the European Central Bank will cut interest rates further this year to spur growth, after probably leaving them unchanged at a meeting today. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Theglobeandmail.com: The yen has been supported by a quirk of the investing world known as “carry trading.” Essentially, because Japanese interest rates were at rock bottom for so long, it was worthwhile for investors to borrow yen and use it to buy instruments in other currencies that had a much higher yield.

The yen borrowings - at very low rates - were used in many cases to buy bonds in Australia, New Zealand, Canada and the United States that carried high interest rates….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Mineweb.co.za: China is making moves to secure long term supplies and current markets provide a scenario in which this can be done at bargain prices says analyst and commentator Keith Goode. And, as almost alway with China, all may not be as it seems on surface.

One of Australia’s best known analysts and share market commentators, Keith Goode, of Sydney-based Eagle Advisory Service (ERA), reckons China is clearly on a quest now to control orebodies outside of China to achieve a goal not focused now on three years ahead but for the next 20 to 40 years….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From News.com.au: BHP Billiton boss Marius Kloppers issued his starkest warning yet to investors yesterday: The end of the commodities slump is nowhere in sight.

His bleak prognosis came as BHP unveiled a bigger-than-expected 57 per cent drop in profit for the first half of 2008-09, dragged down by billions of dollars in one-off costs including the closure of the Ravensthorpe nickel mine in Western Australia following a sharp slide in prices for the base metal. …. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Bloomberg: Petroleo Brasileiro SA, Brazil’s state-controlled oil company, sold $1.5 billion of 10-year bonds today, a week after Chief Executive Officer Jose Sergio Gabrielli said he put off plans to issue debt because international markets are “too expensive.”

Petrobras, as the Rio de Janeiro-based company is known, sold the bonds to yield 5.18 percentage points above comparable-maturity U.S. Treasuries, or about 8.13 percent….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From FT Adviser: Specialist fund-of-hedge-funds manager International Asset Management is launching a new fund to capture opportunities in the Commodity Trading Advisers (CTAs) strategy.

Commodity Trading Advisers is an individual or a firm, registered with the Commodity Futures Trading Commission, that receives compensation for giving people advice on options, futures and the actual trading of managed futures accounts….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Reuters: Orange juice futures jumped almost 4 percent on Wednesday as an arctic air blast enveloped Florida and threatened to damage supply from the largest citrus-growing state.

Early optimism that the worst of the global economic downturn may be behind helped support copper and other commodity prices, before the U.S. stock market turned lower late in the day and undermined crude oil prices….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From AFP: Depressed prices for metals and oil are likely to stay weak for most of this year given the worsening state of the global economy, but gold and agricultural commodities are on a firmer trend, analysts say.

“The world recession and debt reduction,” which reduce liquidity on financial markets, “will remain the dominant factors” on commodity markets in the medium term, said Calyon Credit Agricole analyst Robin Bhar….. Full Article: Source

Posted on 05 February 2009 by VRS |  Email |Print

From Stuff.co.nz: Commodity prices have fallen for a sixth consecutive month, down a further 4.3 per cent in January. The ANZ Commodity Price Index has now fallen a cumulative 28 per cent since its peak last July, returning to its October 2006 level.

Pulp and dairy were the biggest losers, with double-digit declines of 13.1 per cent and 12.3 per cent respectively. A worldwide slump in demand took log prices down 7.9 per cent to hit a two-year low….. Full Article: Source

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