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Commodities Briefing 23.Jul 2013

Posted on 23 July 2013 by VRS |  Email |Print

Wall Street’s most powerful banks have accelerated efforts to transform the structure and focus of their commodity trading desks to preserve their multibillion-dollar empires from tightening regulation.
Scrutiny of their activities in electricity markets, metals warehousing and oil trading is reaching fever pitch ahead of a Federal Reserve decision in September that may decide how deeply banks can delve into the world of gasoline tankers, piles of copper and power plants………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

JPMorgan Chase & Co. (JPM), Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS) are among lenders whose commodity-trading is in jeopardy as the Federal Reserve reconsiders letting banks ship oil and store metal.
The central bank, ahead of a Senate subcommittee hearing on the issue tomorrow, says it’s reviewing a decade-old ruling to let deposit-taking banks trade physical commodities. A reversal would be the Fed’s biggest exclusion of banks from a market since Congress lifted the Depression-era law against them joining with securities firms in 1999………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Over the past decade, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., and Morgan Stanley bought oil pipelines, metal warehouses and power plants, seeking profits by planting themselves at the center of the global supply chain for industrial materials. Government officials, companies and consumer groups have warned of pitfalls they say arise from allowing banks to play so many different roles in a market.
Those criticisms—and a steep drop in the prices of many commodities since the financial crisis—have led banks to sell assets and reduce trading positions. Banks’ commodity revenue is on track for $3.4 billion this year, a roughly 75% decline from five years ago, according to Coalition, a research firm………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

A tactic devised by Goldman Sachs and other financial players that has inflated the price of aluminum — and ultimately cost consumers billions of dollars — is coming under federal scrutiny.
The Commodity Futures Trading Commission has taken the first step in an examination of warehouse operations that are controlled by Goldman Sachs, Glencore Xstrata, the Noble Group and others and used to store vast amounts of aluminum………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

If you’re wondering why a few very large banks in the United States play such a big role in the commodities markets, you aren’t alone. Most people reading the New York Times’ article on Goldman’s weird, confusing and very profitable role in warehousing aluminum probably found themselves scratching their heads a bit.
Traditionally, banks in the United States were kept out of commercial business. The reason for the separation of commerce and finance was two-fold: to protect the soundness of the financial system from turbulence in the broader economy and to protect the broader economy from being dominated by finance………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Hedge funds are betting on a big commodity price rebound after a dismal second quarter, with trade data showing bets for higher prices at a near six-month peak after the U.S. Federal Reserve softened its stance on tapering its monetary stimulus.
Wagers on U.S. crude oil are already at record highs, the weekly data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday. Bets are also growing for a rebound in gold after its price tumbled 23 percent in the second quarter………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Australia’s massive mineral exports allowed it to weather the global recession, which began in 2008, quite nicely. The US government’s Energy Information Administration noted in its country’s analysis for Australia, “Australia, rich in hydrocarbons and uranium, was the world’s second largest coal exporter in 2011 and the third largest liquefied natural gas (LNG) exporter in 2012.
Australia is rich in commodities, including fossil fuel and uranium reserves, and is one of the few countries belonging to the Organization for Economic Cooperation and Development (OECD) that is a significant net hydrocarbon exporter, exporting over 70% of its total energy production according to government sources………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Energy players are maintaining a cautious stance while expanding operations or joining with other players. According to a report from PLS Inc and Derrick Petroleum Services, global mergers and acquisition activity in the energy sector in 2013 has been one of the lowest since 2007, with exception of the 2009 aftermath of financial crisis.
All put together, in 2013 so far, total deal value was reported at $45.8 billion, which is much below last year………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

A BP official who led the company before the 2010 incident in the Gulf of Mexico marked his return to the region in a $3.75 billion deal with Houston-based Apache. Apache seemingly said goodbye to the Gulf of Mexico in the deal, opting instead to focus its efforts onshore.
Former BP Chief Executive John Browne helped nab 1.9 million net acres in the agreement with Apache last week. Apache’s “good run” in the Gulf of Mexico may suggest assets onshore may hold more long-term value for explorers………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

OPEC, excluding Iran, made $982 billion from exporting oil in 2012, the most in 38 years of data, the U.S. Energy Information Administration reported today. It forecast that sales will drop in 2013 and 2014.
Net oil-export revenue by the 12-member organization climbed 5.4 percent last year from 2011, according to the EIA, the Energy Department’s statistical arm. Sales will tumble by 4.3 percent to $940 billion this year and by 3.9 percent to $903 billion next year, the agency said………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries (OPEC) needs to cut its crude oil production later this year in order to prevent sharp price drops, a report by Kuwait’s leading bank said.
The National Bank of Kuwait said that “to prevent prices from falling too far below the organization’s unofficial $100/barrel target level,” production had to be cut. The bank did not specify how much production needed to be cut or how much oil prices would fall if OPEC did not act………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Oil prices continue to edge higher on the chart, and that’s pushing the cost of gasoline higher at the pumps.
Now, while U.S. crude inventories have risen over the past two weeks, I do not believe there’s a supply-demand issue that is propping it up. I believe the demand for oil has more to do with the summer driving season and other unusual factors, not a sustained upward move in oil prices………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

The implosion of the Soviet Union in 1991 produced three petro-states – the Russian Federation, Kazakhstan and Azerbaijan. Of these, Azerbaijan has the longest history, having begun producing petroleum in the late 19th century.
Since the USSR’s demise, Azerbaijan has adroitly developed its energy infrastructure output to the point where the U.S. government’s Energy Information Administration notes simply, “Azerbaijan is an important current and future supplier of both oil and natural gas… Oil and gas development and export are central to Azerbaijan’s economic growth and the country is one of the Caspian region’s most important strategic export openings to the West.”……………………………………….Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Gold traders in India, the world’s biggest buyer of the yellow metal, refrained from striking fresh deals on Monday as prices rose to their highest in more than a month.
Gold imports into India fell about 81 percent in June from the previous month after the government raised import duty and stopped consignment imports………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

In recent months, the price of gold has tumbled. Along the way, lower gold prices have undermined the share price of many mining plays. The yellow metal is selling for its approximate cost of production at many of the world’s largest mines.
Yet for all the gloom and doom within the gold investment space, there are indications that physical gold is becoming scarce. In fact, gold may be setting up for an explosive rebound, both in its nominal price and in the value of companies that mine it………………………………………….Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Now, as silver prices slowly creep up the charts, market participants are wondering whether the white metal is rebounding after hitting bottom or simply enjoying a short-term boost. Mining stocks are doing better than metals: Hamlin notes in his article that in the last week or so, “quality mining stocks” have started to perform better than the metals they represent.
Put more simply, many silver miners have risen upwards of 8 percent while silver is up just 4.5 percent. Up until now, the white metal has been faring better than such stocks………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Silver will continue to underperform gold, according to a report from Capital Economics, despite a recent spike in prices of the silver metal. The price of silver was up by almost 5 percent at $20.42 per ounce on Monday, after hitting a low of $18.22 on June 28 over concerns the U.S. Federal Reserve was about to wind down its monetary stimulus – a major driver of precious metal prices.
But Capital Economics highlighted that silver’s recovery had lagged behind gold, which hit a month-high of $1,327 per ounce on Monday, after falling to $1,180 in June. Comments by Fed Chairman Ben Bernanke last week helped abate fears of a swift end to monetary easing, helping prices gather momentum………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Gold intrigues investors. Silver attracts traders. Silver may be living up to its reputation for being three times more volatile than gold. Bullish calls on the iShares Silver Trust (ticker: SLV) are starting to trade actively in anticipation that a substantial rally will follow silver’s significant fall.
Silver is down 33% this year and in recent weeks, the exchange-traded fund which is the primary equity proxy for the commodity, broke below $20. Many investors viewed $20 as the dividing line between bullish and bearish peregrinations………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Palladium, this year’s top performing precious metal, is heading for a strong end of year as brighter economic conditions favour industrial demand for the metal and supply tightness remains in place, a Reuters poll showed on Monday.
In contrast, confidence in platinum has weakened due to its stronger correlation with gold and softer demand prospects. A survey of 20 analysts, traders and fund managers yielded a median palladium price forecast of $740 an ounce, only slightly below that of $750 in a similar poll done in April………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

The US commodity futures watchdog has sent letters to metals warehouse owners demanding they preserve records, in a sign of a looming regulatory probe of their storage practices.
Warehouses where metals such as aluminium, copper and zinc are stored have been a target of consumers from Coca-Cola to General Motors, who complain that long queues to remove metal distort prices………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Exchange traded funds backed by physical gold holdings have been less bad in recent weeks. The ETFS Physical Swiss Gold Shares is a fine example. Since touching its June low on June 27, SGOL is up almost 8%. The bullion-backed ETF was also set for a higher open on Monday as gold prices climbed above $1,300 an ounce.
Palladium has been even better, which is not surprising because as gold and silver ETFs have been severely punished this year, the ETFS Physical Palladium Shares has proven sturdy with a 5.5% gain. PALL was unable to withstand the May/June plunged that plagued precious metals, but the fund’s rebound and encouraging fundamental factors could cement it as the best way for ETF investors to play precious metals for the rest of 2013………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

One of this year’s most embattled sector plays, gold miners and the ETFs those stocks call home, have been showing signs of life in recent weeks. Wary investors are no doubt wondering recent price action in ETFs such as the Market Vectors Gold Miners ETF is nothing more than a dead-cat bounce before the continuation of the recent bearish trend or a harbinger of more bullish things to come.
GDX, the largest gold miners ETF by assets, has gained almost 4% since the start of July and since July 8, the ETF has surged 13%. Showing that leveraged ETFs can work well when properly used as short-term traders, the Direxion Daily Gold Miners Bull 3X Shares has soared 38% since July 8………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

For investors with the view that we have seen the worst of the correction in commodity stocks for 2013, or will soon shortly, the research team at Oppenheimer believes increased exposure to the commodity-sensitive sectors of energy and materials is the way to go.
They also hold a further bias toward materials, given its leverage to any signs of recovery in global growth and its recent historical tendency to lead over the ensuing three- and six-month periods following a corrective trough in equities………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

In a nutshell, currency risk is a kind of risk that stems from the changes in the valuation of currency exchanges. These fluctuations result from the unpredictable gains and losses incurred when profits from foreign investments are converted from the foreign currency into the US dollar.
In order to lower the risk, hedges and other techniques are used to offset any of the gains or losses from the fluctuations………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Nigeria’s central bank will probably lower its targeted trading range for the naira as dwindling foreign-exchange reserves and falling oil prices undermine its ability to halt the currency’s slide, FBN Capital Ltd. said.
Policy makers may adjust the exchange rate to within a 3 percentage-point band of 160 per dollar from 155 over the next six to nine months, Gregory Kronsten, an analyst at Lagos-based FBN Capital, said in an e-mailed response to questions July 18. Lower crude prices are making “it more difficult for the central bank to hold the line on the naira exchange rate,” he said………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Emerging market policymakers who have in recent times tightened monetary conditions in an effort to shore up their currencies, may be digging themselves into a hole, economists have warned.
Brazil, Indonesia and most recently India have tightened monetary policy in the face of rapid currency depreciation stemming from worries over the Federal Reserve scaling back its extraordinary monetary stimulus. But there are concerns that the moves will do little to support currencies with economic growth suffering as a result………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

Many are puzzled by the political theory of carbon markets. Why does the Institute for Public Affairs – a libertarian think tank – oppose a market in carbon?
Tim Wilson, for example, thinks that private property rights are good, intellectual property rights are important, but carbon markets are some kind of socialist plot. The difference seems to be that carbon markets aren’t “free” because they involve regulation, and carbon permits aren’t “natural” property………………………………………..Full Article: Source

Posted on 23 July 2013 by VRS |  Email |Print

In a recent speech in Beijing, Zhao Penggao, an official in the powerful National Development and Resource Commission, announced that China is considering setting binding limits on the levels of particulate matter 2.5 (PM2.5), adding, “As pollution is so serious, if we don’t do something about it, the public won’t agree and heaven won’t accept it.”
Well, there’s no question that air pollution is “so serious.” When flights in and out of Beijing airport are routinely grounded because pilots can’t see, the pollution is serious; it’s serious pollution, too, when a factory in Zhejiang province catches fire but goes unnoticed by neighbors and passers-by for three hours because they can’t see the blaze or the plumes of smoke through the sooty air they’re accustomed to breathing………………………………………..Full Article: Source

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