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Commodities Briefing 07.Feb 2013

Posted on 07 February 2013 by VRS |  Email |Print

Pension funds and other institutions are retreating from popular investments linked to commodities after finding they did little to protect their portfolios against inflation risk and the unpredictable returns of stocks.
Investors have yanked nearly $10 billion from tradable indexes tied to energy, food, metals and other commodities after two years of record outflows. That leaves about $133 billion, said Kevin Norrish, a managing director at Barclays PLC……………………………………….Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Commodities hedge funds surrendered at least 20 per cent of their assets last year after investors pulled out large sums following the sector’s worst annual performance in more than a decade, according to fund managers and investors.
The average commodity hedge fund lost 3.7 per cent in 2012, according to a closely watched index compiled by Newedge, the biggest decline since the yardstick was created more than a decade ago and substantially worse than the 1.4 per cent loss of 2011………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

The World Bank has just released its latest Commodity Market Outlook and the short version of the report is that commodity prices should “ease marginally” this year. But as the report notes in its first sentence, it was the volatility that hurt in 2012.
The good news is that the World Bank sees crude oil prices down 3% to an average of $102 a barrel and food prices down 3% as well. There are risks to these prices, of course, and when one of those risks appears on the horizon, commodity prices go up. When the risk recedes or fails to materialize, the price drops. That’s volatility for you………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Commodity price inflation is both a social and an economic issue. In emerging markets in particular, food and energy costs take a deeper slice out of consumers’ income, which can lead to the type of unrest that causes governments to topple. In addition to the potential impact of extreme weather on food supplies, central banks.
Investment Adventures in Emerging Markets - Notes from Mark Mobius . Mark Mobius, Ph.D., executive chairman of Templeton Emerging Markets Group, joined Templeton in 1987. Currently, he directs the Templeton research team based in 15 global emerging markets offices and manages emerging markets portfolios………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Claiming his views “are not very fashionable”, the Turkish-born chief economist of the IEA, Fatih Birol, also describes the IEA’s annual flagship reports the World Energy Outlook as “designed and directed” by himself - and his WEO is obliged to reflect “unfashionable” theories and goals.
These new theories and goals are: universal energy supplies for all, and massive worldwide response to the crisis of global warming. Reconciling these two themes or memes needs high priced oil. Regarding the market price for oil, the IEA pitches for $175 per barrel; concerning new energy taxes in the form of carbon taxes “to fight global warming”, taxes of $500 per tonne of CO2 on all fossil energy, possibly by 2020 or shortly after, are no problem for Fatih Birol………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Oil futures pared some of their losses Wednesday after the U.S. Energy Information Administration reported a smaller-than-expected climb in last week’s crude inventories, along with a decline in distillate stockpiles.
Crude supplies rose 2.6 million barrels for the week ended Feb. 1. Analysts polled by Platts expected a three-million barrel climb. Motor gasoline supplies were up 1.7 million barrels, while distillate stocks fell one million barrels, according to the EIA report………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Oil prices have finished nearly flat, rebounding from earlier declines after news that the US had stepped up sanctions on Iran. The cost of a barrel of West Texas Intermediate oil for March delivery on Wednesday ended two US cents lower at $US96.62 on the New York Mercantile Exchange.
In London, the price of a barrel of European benchmark Brent closed at $US116.73, up 21 US cents from Tuesday. US oil prices were down about $US1.60 a barrel early in the session, but largely recovered those losses after the US Treasury Department announced new sanctions targeting Iranian oil revenue………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

As the global economy slowly recovers from the 2008 financial crisis, indicators point to a significant mid- and long-term rise in energy consumption, specifically in oil and natural gas. Despite recent developments in renewable energy resources and the increasing production of hydrocarbon from shale reserves, it looks likely that both consumption and prices will climb higher over the coming decades.
The International Energy Agency (IEA) in Paris, in its annual review for 2013, reported that, despite energy efficiency regulations by developed countries, global consumption rates are on the rise………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

You could lend it out for interest, say, or raise loans of your own by pledging it as collateral. Or even sell it to raise cash when things get tight. And if your business fails entirely, the “owner” will just have to cue up with all of your other creditors, and be thankful with whatever small change is paid out by the courts.
This is pretty much what big banks get away with in gold – or they did. Now Swiss banking giants UBS and Credit Suisse are changing their gold-account fees for big, institutional clients. The aim is to discourage other institutions from keeping gold with them like this – so-called “unallocated gold”. It looks a lot like putting cash on deposit. The bank gets to own it, and so it gets to go banking with the value as well. But now the business of selling gold but without selling anything no longer pays………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Let’s discuss uranium. The spot price is ridiculously low and set to rebound. I had a long discussion with a couple of serious uranium scholars earlier this week. They’ve been doing uranium in both government and private industry since the 1970s. They’ve seen all the different rodeo acts.
These gents laid out a strong case for strengthening yellowcake prices this year - 2013 - and well into the future. ‘Yellowcake,’ said one, ‘is comparable to where gold was 10 years ago. We’re looking at prices four-six times higher in the out years.’……………………………………….Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

World crude steel production is expected to rise 4.7% to 1620 mn tons, according to MEPS International. Global crude steel output in 2012 was 1,548 mn tons which represented a growth of 1.2% over previous year, according to World Steel Association data. The growth came mainly from Asia and North America while crude steel production in the EU (27) and South America decreased in 2012 compared to 2011.
Blast furnace ironmaking is expected to expand at a rate similar to that of steel in 2013 and reach 1160 million tonnes. Direct reduced iron manufacturing should show better growth as the popularity of this process is increasing in the Middle East and India………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

The price gains in base metals complex may be limited by higher inventories and excess capacity in 2013 coming close on the heels of a disappointing market in 2012, according to Natixis.
“In particular, the disappointing pace of growth last year led to a rise in stockpiles of most base metals, which may limit potential price gains in 2013. Our optimism regarding growth across the developing world suggests that base metal prices can rise this year, even if this price appreciation is likely to be limited by high inventories and excess capacity for many metals.”……………………………………….Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Global investment in commodity-based exchange-traded products, structured notes and index swaps totalled approximately USD100 billion in 2006. Six years later, this number had risen to a record high of USD415bn. This is largely explained by the fact that commodities are now standard components of strategic asset allocation as they generate equity-like returns in the long run, act as risk-diversifiers, and serve as an inflation-hedge.
However, given the practical, regulatory and ethical difficulties of investing in physical commodities, the challenge of choosing from a bewildering multitude of index products, and the recurring bull and bear markets in commodities, “the decision to invest in a diversified commodity hedge fund manager seems almost a no-brainer” (Source: Barclays Capital - Hedge Fund Pulse, September 2011)………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Assets invested globally in Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) broke through the $2 trillion milestone at the end of January 2013 to reach a new all-time high of $2.05 trillion. ETF and ETP assets have increased by 5.2% from $1.95 trillion to $2.05 trillion during January, according to figures from ETFGI’s monthly Global ETF and ETP industry insights.
Market performance contributed to the increase in the value of assets held in ETFs and ETPs as 18 of the top 20 markets globally showed gains in January. Two of the markets with strong gains were the US and the UK where history has shown that a strong January tends to be a good predictor for the rest of the year………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

The most popular precious metal, gold, has seen rough trading to start 2013. As investors embrace risky assets in droves, this hedge has fallen by the wayside leaving many investors to look at other commodities for exposure in this climate.
Two increasingly popular choices are palladium and platinum, white precious metals which are both dominated by South African production (although a big chunk of palladium does come from Russia). While this hasn’t been much of an issue in the past, the increasingly onerous government presence in South Africa is beginning to weigh on miners in the region………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

A lot of exchange-traded products try to beat the market, but it’s only in commodities that the more active products are often more popular than their plain-vanilla counterparts.
The most popular basket commodities fund, the PowerShares DB Commodity Index Tracking Fund, has over $7 billion in assets under management-more than three times the assets of the iPath Dow Jones-UBS Commodity Total Return ETN and nearly six times the assets of the iShares S&P GSCI Commodity-Indexed Trust………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

To lose money one year may be regarded as a misfortune. But for two years in a row now commodity hedge funds have not only lost money, but underperformed even the most basic index investments in raw materials. To some of their investors – typically large pension funds or insurers – that looks like carelessness.
Some pension funds, therefore, have begun to lose enthusiasm for the hedge fund sector, fund managers report………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

The Merchant Commodity Fund, managed by Doug King and Michael Coleman, cut a third of its staff after two consecutive years of losses during which assets under management slumped almost 90 percent.
The hedge fund cut five jobs last month, including traders and analysts in Singapore and London, Chief Operating Officer Coleman said in an interview. Assets fell to $170 million in January after investors withdrew money, according to Coleman, who’s also chief risk officer. Merchant, set up with $10 million in June 2004, had managed $1.56 billion at the end of 2010………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Leading interdealer brokers in the European energy markets, ICAP, Marex Spectron, and Tullett Prebon, today launch ‘Tankard,’ a series of trade-backed natural gas indices for UK and European hubs. The Tankard indices will initially cover the four leading traded natural gas hubs in Europe – the UK National Balancing Point ( NBP), Dutch Title Transfer Facility (TTF), German NetConnect Germany (NCG) and GASPOOL.
Each Tankard index is calculated exclusively using transaction prices for contracts for physical delivery at their respective hub, executed via one of the three brokers that comprise Tankard. ICAP, Marex Spectron, and Tullett Prebon provide comprehensive coverage of the OTC natural gas market……………………………………….Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

Iran faces a fresh obstacle to turning its most lucrative export into cash as the U.S. tightens sanctions this week to keep importers from paying for the oil with dollars and euros.
Under penalty of expulsion from the U.S. banking system, Iranian crude customers such as China, Japan and India will be restricted to using their own currencies for the purchases, starting Wednesday. Importers will be compelled to keep the payments in escrow accounts that Iran can use only for locally sourced goods and services, in what will amount to barter arrangements………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

States involved in the developing northeastern U.S. carbon market are expected to announce on Thursday that they will reduce the program’s emissions cap as a way to stimulate allowance trading and strengthen its environmental goals, according to the Natural Resources Defense Council.
The Regional Greenhouse Gas Initiative’s (RGGI) nine member states have agreed to lower the market’s carbon cap to 91 million short tons from the current level of 165 million for the next phase, which will run from 2014 to 2017, said Dale Bryk, an attorney for the Natural Resources Defense Council (NRDC), which is a RGGI stakeholder and observer………………………………………..Full Article: Source

Posted on 07 February 2013 by VRS |  Email |Print

European Union carbon permits rose to their highest in two weeks as policy makers consider a plan to combat a glut of allowances by limiting their supply.
EU carbon permits for December rose as much as 7.7 percent to 4.76 euros ($6.44) a ton on London’s ICE Futures Europe exchange and were at 4.73 euros at 11:58 a.m. in London. United Nations Certified Emission Reduction credits for December rose 2 cents to 36 cents a ton………………………………………..Full Article: Source

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