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Commodities Briefing 14.Mar 2013

Posted on 14 March 2013 by VRS |  Email |Print

Private investors and hedge funds seeking new ways to gain exposure to commodities may provide a lifeline to trading houses desperate for the short-term liquidity that banks used to offer. European banks have cut their lending in commodity trade finance, the $1.5 trillion-a-year business of financing oil shipments or copper deliveries, ahead of Basel III restrictions aimed at reducing systemic risk after the 2008 financial crisis.
Lending cuts coincide with traders’ growing need for funding due to high commodity prices, especially for oil, where a single shipment can cost more than $200 million at current Brent crude prices…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Commodity investors may have dramatically underestimated the length of cycles that commodity prices experience, a paper by a leading academic has claimed. In a paper entitled “From Boom to Bust: A Typology of Real Commodity Prices in the Long Run,” David S Jacks looks into the cycles the asset class have undergone in the past 160 years.
He found that the real value of 30 commodities studied - which represented $7.89 trillion in production in 2011 - had, by the end of 2011, rapidly increased since 1900…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Three of the world’s biggest mining companies are heading for a rough ride over the next few years as the once heavily-promoted commodities super-cycle enters its end game with the price of iron ore tipped to be the next mineral to suffer a sharp price correction as demand for steel in China dries up.
The glut of iron ore developing in the international market is good news for steel consumers such as car makers and builders but will hit the profits of BHP Billiton, Rio Tinto and Vale, the big three of the seaborne iron ore trade……………………………………Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

As China’s economic growth fell to 7.8 per cent last year, its slowest pace in more than a decade, commensurate demand for commodities such as iron ore, copper and coal also slowed to single-digits, sending traders scrambling amid fears of a “hard landing” for the Chinese economy.
This year, though the “hard landing” has been averted, China’s anaemic demand growth for commodities is still sending ripples through the Chinese raw materials market, which had become accustomed to double-digit annual growth…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

In the world of commodities, the past couple of years should be viewed as an abrasive palate-cleanser between the first course of the supercycle — which ran from 2000 until 2008 — and the main course that is now being prepared.
To understand why, one first needs to re-examine the specifics of China’s recent nominal dollar growth in gross domestic product (GDP) — an extraordinary compound annual growth rate of 18.5% over the past decade. Even now, China’s nominal dollar GDP — that pool of demand that matters most to business — is still growing by about 13% a year…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

The Organization of the Petroleum Exporting Countries, the key influencing factor in the oil market since the 1970s, could be set to have its lowest share of the global oil market in more than a decade.
The Wall Street Journal’s Sarah Kent explains that, having initially played down the threat from U.S. production growth, OPEC now expects increases in supply from countries not in the cartel to grow by more than 1 million barrels a day…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Demand for OPEC crude oil is declining as non-cartel producers in North America continue their growth, the cartel said in its monthly report for March. The Organization of Petroleum Exporting Countries, in its March report, said gains from non-OPEC producers were led by the United States.
“As in the previous year, U.S. oil supply in 2013 is expected to achieve the highest growth among all non-OPEC countries,” OPEC said. Adam Sieminski, administrator for the U.S. Energy Information Administration, said trends in the United States meant it was relying less on foreign markets to meet energy demands…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Maintenance at newly built Chinese refineries is weighing on global oil demand, according to the International Energy Agency. In recent years China and other Asian governments have invested heavily in domestic refining capacity to process crude oil into usable products such as petrol and diesel.
The IEA expects Chinese refineries to demand around 300,000 barrels a day less crude oil in March compared with February, and a similar month-on-month fall in demand at refineries elsewhere in the Asia-Pacific region…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

When Prince Turki al-Faisal suggested last year that the House of Saud would join in the U.S.-led sanctions against Iranian oil, by seeking to displace Tehran’s oil exports from the global economy, he was not referring to a novel idea. Indeed, Saudi Arabia has led two prior oil wars against Iran.
As detailed in Andrew Scott Cooper’s The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East, the first Saudi oil war against Iran was intended to weaken the Shah’s modernization programs. The Saudis feared Iran’s rise as a regional power, and wanted to carve out space for independent decision-making in OPEC, which at the time was dominated by Iran…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

OPEC’s biggest oil producers are in talks to supply extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with knowledge of the matter said.
Indian refiners, which are waiting for an order from the oil ministry on whether to stop buying Iranian cargoes, are discussing annual term contracts with Saudi Arabia, Iraq and Kuwait for the year starting April 1, the people said this week, asking not to be identified because the information is confidential…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

OPEC crude output rose in February to the highest level in at least three months, with Iraq and Iran boosting production even as refinery maintenance damped demand, according to the International Energy Agency.
The 12 members of the Organization of Petroleum Exporting countries pumped 30.49 million barrels a day in February, up 150,000 barrels from January’s output of 30.34 million, the Paris-based IEA said today in its monthly oil market report…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

The International Energy Agency says global oil demand will shrink this year, following weak world economic growth, a European slowdown and worsening business sentiment from some of the world’s largest oil consumers.
According to the Paris-based agency’s Monthly Oil Market Report published on their website, US budget cuts and negative business sentiment from China will also weigh heavily on worldwide oil demand…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Gold markets remain sluggish amidst sharp decline in holdings in Gold Exchange Traded Funds (ETF), wait-and-watch attitude in Indian markets and strong buying appetite in China. Barclays retains a broader bullish outlook but maintains a bearish strategy for the time being.
Price forecast: Q1 13: $1710/oz, 2013 annual average: $1778/oz. The macro environment remains bullish for gold as Fed may continue with asset buying as labour data does not show a significatn change. European Central Bank may retain interest rates close to zero lveels as policy rates remained unchanged last week…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

While the “great rotation” into riskier assets has triggered a 4.3 percent fall in the price of gold since the start of the year, this is just a fraction of the losses seen in the shares of gold miners, which have fallen 15 percent on average over the same period.
Worries over the outlook for the precious metal and declining profitability of the miners have led to a continued selloff in their shares, which have struggled to find favor with investors over the past year. As a result, gold miners are now trading at their cheapest level in 25 years relative to the physical metal, according to Point View Wealth Management…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Even as central banks are hoarding more gold than ever, investment gurus are turning bearish on the metal as the recent decline in the gold price and better-than-expected recovery in the US has led many to predict a turn in the gold cycle.
While gold hit a record high in 2011 due to uncertainty over US growth prospects and rising debt problems in Europe, investors today are seen cutting their holdings in gold exchange traded funds and equities as gold prices have declined 5 percent this year to trade below $1,600 since much of their fears have now subsided…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Some years ago the Wendy’s hamburger chain ran what was probably its most successful advertising campaign ever where the punchline – ‘Where’s the beef’ - was uttered by a little old lady.
How much more so might this be relevant to the gold and silver markets today where the volumes traded on the key markets exceed the amount of physical metal available many, many times over. As numerous observers have pointed out this opens them up to accusations of severe market manipulation and seems to be something the various financial authorities seem unable, or unwilling to take a serious interest in curtailing…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Silver has been trading sideways so far in 2013, but what will the rest of the year bring? Will 2013 be the year silver prices break out or crash and burn? What is a sustainable silver price for mining companies and where will the metal come from to supply the next generation of industrial and investment demand?
Most important, how can investors make money off this volatile sector? These were the burning questions The Gold Report took to analysts, money managers and heads of silver mining companies. The answers may surprise you…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

The largest public pension in Los Angeles is investing $800 million in commodities over the next two years, a quarter in actively managed derivatives, as it tries to profit from markets that have frustrated many institutional investors.
The Los Angeles Fire and Police Pension System, with nearly $16 billion in assets, said it is allocating 5 percent of its money to commodities with investments that aim to maximize returns and minimize downside risks. That includes commodity futures, stocks and private equity…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

U.S. stocks as measured by the Dow Jones Industrial Average are trading at all-time highs despite a 5% decline the past month in copper prices, which are seen as a leading indicator for the global economy.
Now technical analysts are eyeing a bearish pattern in copper ETFs that could foreshadow further declines. Some investors say copper isn’t the reliable leading indicator it once was for the global economy, but copper ETFs falling below a key support line has triggered worries about the stock rally…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

ETFs have opened up the doors to previously hard-to-reach reach corners of the market, including foreign equities, commodities and alternative asset classes. Currency ETFs in particular have seen growing interest among investors and traders alike as they greatly simplify the challenges that are otherwise associated with entering the forex market.
Currency ETFs attempt to replicate the movements of a currency on the foreign exchange market (forex) against the U.S. dollar (USD), or a basket of currencies. This is done by using cash deposits, such as holding euros or Swiss cash for example, or through the use of futures and swaps contracts to achieve a desired exposure……………………………………Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

Executives from two of Asia’s largest financial exchanges on Wednesday outlined plans to expand their presence in commodity derivatives, a segment that’s been lifted by the region’s economic expansion.
Hong Kong Exchanges & Clearing Ltd., or HKEx, plans to leverage its newly-acquired metals business and established equities market into an enlarged offering that could develop energy and soft commodities futures…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

The BMC would give additional security to traders from situations such as the flash crash in the US market. The Forward Markets Commission (FMC), the commodity derivatives markets regulator, has levied base minimum capital (BMC) for algo members five times higher than that of normal manual members. Until now, minimum base capital was determined by individual exchanges based on the membership criteria.
Interestingly, FMC has kept both the Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX) in the same category with Rs 50 lakh of BMC requirement for algo traders. Against that, the normal manual members should require to have a BMC of Rs 10 lakh…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

In a world of measly returns, investors have to chase after scraps. At the Bloomberg FX conference at the British Museum this morning, one speaker pointed out that, although the Swedish central bank has cut rates four times over the last 12 months, just the change in policy tone from easing to neutral has turned the krona into a strong currency.
Indeed, the useful WCRS Bloomberg page shows that the krona has been the best performing currency over the last year; the worst (predictably) has been the yen…………………………………….Full Article: Source

Posted on 14 March 2013 by VRS |  Email |Print

The strong performance of many African economies can come with an old fashioned sting in the tail. With import demand outstripping export growth in some of the continent’s fastest expanding economies, rising trade imbalances are putting pressure on currencies.
African and international investors hedge against this by spreading risk – one factor that is driving African banks and businesses across borders…………………………………….Full Article: Source

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