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Commodities Briefing 13.Jun 2013

Posted on 13 June 2013 by VRS |  Email |Print

While volatility in the bond and equity markets has increased this past month as a result of QE concerns (which pushed the 10-year treasury yield to its highest level in 14 months), commodities have remained stable, according to a report out this morning by Goldman Sachs.
It is well known that the S&P GSCI index ( GSG ) has traded within a range of plus or minus 1.5% as of late. Putting it simply, commodities price current fundamentals (which have not changed) while financial markets price future fundamentals (which have changed)………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

JPMorgan Asset Management’s Sarah Emly and John Baker said their decision to avoid major mining and oil & gas stocks was the reason for their recent outperformance.
The £132.8m Income and Capital investment trust delivered a share price total return of 16.2 per cent in the year to February 28, outperforming the 13.3 per cent return for its benchmark, which is made up of 90 per cent FTSE 350 index and 10 per cent Barclays Capital Global Corporate Bond index………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Commodity prices are likely to hold in their current range, even as bond and equity markets see large moves, said Goldman Sachs on Wednesday.
The only markets that might see sharper moves are in the agricultural sector, as large grain harvests from North and South America should bring on ample supply and lower prices, barring summer weather scares in North America, the bank said. Goldman retained its year-end outlook on gold, saying prices should trade to $1,435 an ounce………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

International oil prices are likely to decline slowly between now and 2025 to $80/barrel, a level consistent with the real cost of producing oil from Canada’s tar sands, the World Bank said Wednesday in its Global Economic Prospects report.
But the bank also warned that a major oil supply disruption caused by political turmoil in the Middle East could send prices spiking by $50/b or more. The World Bank, which uses a simple average of Dubai, Brent and West Texas Intermediate crudes, expects the oil price to decline to $102.40/b this year and to $101/b in 2014 and 2015 from $105/b in 2012. It currently bases its long-term oil price assumptions on an estimated $80/b for Canadian oil sands output………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

The International Energy Agency trimmed demand forecasts for OPEC’s crude in the second half of the year amid signs of slowing growth in China as output from the producer group rose to a seven-month high.
The Organization of Petroleum Exporting Countries will need to provide an average 29.8 million barrels a day in the second half, the IEA said today in its monthly market report, lowering its assessment from the previous report by 200,000. That would require OPEC to cut output by 1.1 million barrels from the 30.9 million it pumped in May, according to the report. The agency kept its global oil demand estimates for this year unchanged………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

OPEC boosted crude oil production to a seven-month high last month as output increased from Saudi Arabia, Iran, the United Arab Emirates and Kuwait, according to the International Energy Agency.
The 12 members of the Organization of Petroleum Exporting Countries pumped 30.89 million barrels a day in May, up from 30.75 million in April, the Paris-based IEA said today in its monthly oil-market report. That exceeds a target of 30 million that was reaffirmed at the group’s last meeting on May 31………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

OPEC’s own production rose by 106,000 bpd in May to 30.57 million bpd led by higher output in Saudi Arabia. World oil demand will grow more quickly in the rest of 2013 than during the first half due to economic recovery and higher seasonal consumption, OPEC said on Tuesday.
The Organization of the Petroleum Exporting Countries in a monthly report forecast world oil demand would expand by 900,000 barrels per day (bpd) in the second half of 2013, up from 700,000 bpd in the first six months………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

The price of oil was down slightly but remained above $95 a barrel Wednesday as experts said global demand for crude would be slightly lower than previously expected. By early afternoon in Europe, benchmark oil for July delivery was down 7 cents to $95.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 39 cents to close at $95.38 per barrel on Tuesday.
The International Energy Agency cut its forecast for global crude demand in 2013 by 80,000 barrels a day. It now expects the world to consume 90.6 million barrels a day this year, 785,000 barrels a day more than in 2012………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Almost everyone from the consumer to the giant oil company is tired of the very high crude oil prices seen now for over a year. For consumers it’s a drain and a competitor to other disposable income purchases.
For oil companies the high prices over a long time sets up an expectation that rises will stay up and misdirect investments funds, cause excess spending and raise internal costs. The ride down, when it comes will be much better for the consumer than the oil industry. But that just sets up another price rise cycle………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Forget oil for once; the new cause of rising tension in the Greater Middle East (and Africa) today is between two countries that do not even share a common border. They have no real bad history between each other, no direct links or political divergences or land or sea disputes with one another, yet the sudden appearance of tension between them could erupt in a violent conflict.
This new tension stems from a dispute over the most precious commodity in the world today, something far more precious than oil: water………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Do we also know that Coal Combustion Products (CCPs)–by-products generated from coal-fired power plants—also help in saving the environment? Fly-ash, a by-product of coal can be used to substitute or supplement cement in construction!
And cement, as we have seen, is a vital ingredient in the production of concrete, second only to water in total volumes consumed yearly. It takes 200 kilogram of coal to produce 1 ton of cement………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Evidence is growing that the recent downturn in the Canadian materials sector - especially precious metals - has reached its conclusion, points out Dave Harder, analyst with the technical analysis firm Phases & Cycles.
A “double-bottom” - where prices fall, then rise only to dip for a second time - may have formed in gold, silver and precious metals stocks. That tends to foreshadow a more stable recovery where selling has been exhausted………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

The Financial Post reported that the gold-palladium ratio slipped to 1.81 on Monday, its lowest point in over two years, on the back of US jobs data that suggests the country’s recovery is on track and news that Standard & Poor’s has revised its sovereign credit rating for the US upwards.
As quoted in the market news: Rising optimism over the U.S. economy has battered gold, which is widely viewed by investors as a hedge against financial market instability………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

London Metal Exchange (LME) copper has closed higher after Freeport McMoRan Copper & Gold Inc declared force majeure at its Grasberg mine in Indonesia, adding to concerns about the global copper supply this year.
At the close of trading on Wednesday, the LME flagship metal three-month copper was 0.8 per cent higher on the day at $US7,120 a metric ton. Freeport, the world’s largest listed copper mining company, on Wednesday said that operations at Grasberg - one of the world’s largest copper mines - remain suspended amid an investigation into the cause of a roof collapse last month that killed 28 workers………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

A number of miners are deferring or scaling back projects and many major players are said to have plans to divest non-core assets. This is in the context of almost half of the 40 largest miners having bulk of their operations in emerging markets in a shifting of the centre of gravity.
Manage productivity; Ramp up efficiency looks to be the mantra of miners world wide. In an anualised report on mining sector, Pricewaterhouse Coopers has said that gone are the days when miners used to rely on ramping up production to generate value………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Credit Suisse Group AG (CS), Switzerland’s second-largest bank, is offering two exchange-traded notes tied to commodities for trading. The Credit Suisse Commodity Rotation ETN is linked to a commodities benchmark where prompt contracts cost more than later deliveries, a phenomenon known as backwardation, according to a prospectus filed with the U.S. Securities and Exchange Commission.
The securities trade under the ticker CSCR and have an annual fee of 0.85 percent. The bank also started trading the Credit Suisse Commodity Benchmark ETN, which is joined to an index of 34 commodities with delivery periods as long as three months, according to a prospectus filed with the SEC………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Last month, the largest commodities fund in the world, the Pimco Commodity Real Return Strategy Fund, fell more than 5 percent, while the worst-performing broad commodities ETF fell slightly more than 2 percent. What gives?
May was a rough month for commodities and bonds. Thankfully, ETF investors only had to worry about the former. The bad news for investors in Pimco’s Commodity Real Return Strategy Fund (PCRAX) is the latter was perhaps even more important………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Maybe he coined the phrase, maybe he did not. But Jim Cramer does deserve credit for, at the very least, popularizing the term “accidental high-yielder.” We do not want to put words in Cramer’s mouth, but an educated guess is that when he says “accidental high-yielder,” it is in reference to a good company that has seen its shares beaten up to the point that the dividend yield is, well, accidentally high.
When it comes to ETFs , finding fair to decent yields is not difficult. Actually, the universe of dividend ETFs is rapidly expanding. The trick is not being seduced by, in some cases, outrageously high yields on some ETFs. These yields are high for a reason(s), most of which are rarely positive. Consider the following trio………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Despite some global commodity uncertainty, Palladium, the lustrous and rare silvery-white precious metal, has established itself as a vital product. The metal once used as coins now attracts millions of investors around the globe and finds its way into a number of industrial uses as well.
Currently, the automobile industry accounts for about two-thirds of the world’s palladium demand every year. Beyond that, the product is used in a variety of electronics, dentistry applications, medicines, and jewelry………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Japan’s Central Bank may want a weaker currency, but the Reserve Bank of India wants nothing to do with a weaker rupee. On Tuesday, the RBI stepped in to save the currency with major currency purchases as the rupee slipped to a new low.
Weaker currencies don’t always make a country more competitive, at least not immediately. It’s a combination of things: labor costs, location, scale. But one thing is for sure, since the 2008 crisis there has been what some call a currency war going on. The big guns are from the Fed, weakening the dollar for a number of reasons. One is to help make U.S. goods cheaper to acquire. Then came the European Central Bank. Call that Currency War I………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

The temptation for central banks to engage in competitive devaluation is fading as rising Treasury yields diminish the allure of assets in emerging markets, Bank of Israel Governor Stanley Fischer said.
“All those who’ve been worrying about so-called currency wars should be feeling better,” Fischer told reporters in London late yesterday. “I am happy to see these rises in Treasury yields because we’ve been dealing with capital inflows which are not particularly wanted.”……………………………………….Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

Corn futures tumbled the most in five weeks, leading declines in wheat and soybeans, after the U.S. said inventories will be bigger than analysts’ forecast as global production rebounds from a drought last year.
Record domestic corn output of 14.005 billion bushels this year will more than double inventories before the harvest in 2014, and soybean production will be 3.39 billion bushels, the most ever, the U.S. Department of Agriculture said today in a report. While drought damage late last year will reduce the 2013 U.S. wheat harvest, global output will rise 6.1 percent………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

China, responsible for about one-quarter of the world’s carbon dioxide emissions, has ambitious goals to reduce them — but has been unwilling to set absolute targets for fear of slowing economic growth. There are now signs that its position is changing.
On 18 June, the country will launch an emissions-trading scheme in the southern city of Shenzhen, marking its first attempt to cut emissions using market mechanisms. Under the scheme, more than 630 industrial and construction companies will be given quotas for how much carbon dioxide they can emit………………………………………..Full Article: Source

Posted on 13 June 2013 by VRS |  Email |Print

A surplus of Emissions Trading Scheme (ETS) carbon permits will require the European Union to cut emissions by an extra 7 percentage points to meet its 2030 climate goals, according to a report by environmental research company Ecofys.
The report, the Next Step in Europe’s Climate Action: Setting Targets for 2030, finds any future emissions reduction goals will have to take into account the effects of the current carbon permit surplus in the ETS, the largest global carbon market. The EU’s emissions reductions should be around 49 percent compared to 1990 levels, Ecofys says in the report………………………………………..Full Article: Source

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