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Commodities Briefing 31.Jul 2013

Posted on 31 July 2013 by VRS |  Email |Print

Wall Street banks face the prospect of increased scrutiny of their commodity businesses as U.S. regulators and lawmakers on Tuesday pressed for a closer look at their roles in owning warehouses and in trading everything from oil to metals
Under pressure from a handful of lawmakers to explain why banks including JPMorgan Chase & Co. and Goldman Sachs have been allowed to own warehouses and trade physical commodities, regulators have scrambled this month to demonstrate that they are tackling the issue………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

A U.S. Senate panel known for hard-hitting investigations of Wall Street and financial markets has launched a preliminary examination into potential conflicts of interest posed by banks’ role in physical commodity markets, according to people familiar with the matter.
The U.S. Senate Permanent Subcommittee on Investigations, led by Sen. Carl Levin (D.,Mich.), has sent information requests in recent months to banking giants J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, as well as their primary regulator, the Federal Reserve, one of the sources said………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

There’s no denying China’s massive economic growth over the past decade, as the country recorded an average GDP of more than 10 percent per year. In only seven years, China’s economy doubled; in 13 years, it tripled.
With this incredible expansion, China began to import commodities at an incredible pace. In 2000, the country imported only 70 million tons of iron ore; today, it’s more than 10 times that amount, at 763 million tons. Copper imports increased dramatically too, growing from 1.6 million tons in 2000 to more than 4 million tons per year today, according to BCA Research data………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

JPMorgan has announced that it plans to exit the physical commodities businesses, while remaining committed to its historic roots in commodity financing and risk management, and to the precious metals business. Is this Jamie Dimon recognizing an unstoppable paradigm shift now taking place in the financial sector as policymakers finally find the political will to reign in the power of too big to fail banks?
This announcement comes in the wake of market manipulation accusations by the Federal Energy Regulatory Commission against Wall Street commodity dealers, including Barclays, which was ordered to pay a $487.9 million fine, and JPMorgan, where a $500 million settlement is rumored. Barclays denies wrong-doing and said it would fight the penalties………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

Oil production from Iraq may be in decline along with political stability in the country. The government aims to produce 9 million barrels of oil per day by the end of the decade. A weekend attack on an oil pipeline to Turkey, however, highlights some of the export restrictions that are keeping investors at bay.
Iraq’s oil production increased exponentially between 2010 and 2012. Without the external support keeping the country’s economic and political systems in check, however, the country may collapse under the weight of both domestic and regional pressures………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

The price of oil closed at a four-week low Tuesday as traders awaited comments from the U.S. central bank as well as data releases later in the week, including U.S. jobs figures.
Benchmark oil for September delivery fell $1.47 to finish at $103.08 per barrel on the New York Mercantile Exchange. That’s the lowest closing price since July 3. Brent crude, the benchmark for international crudes, fell 54 cents to end at $106.91 on the ICE Futures exchange in London………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

The purpose of OPEC for members is to “co-ordinate and unify their petroleum policies in order to promote harmony and stability in the oil market.” OPEC members collectively supply about 40% of the world’s oil supply.
Together, OPEC members control about 75% of the world’s total proven crude reserves. OPEC member countries monitor the market and decide collectively to raise or lower oil production in order to maintain stable prices and supply………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

Members of the Organisation of Petroleum Exporting Countries (OPEC), excluding Iran, recorded about $982 billion, or five per cent increase in net oil export revenue in 2012, according to recent estimates of the United States Energy Information Administration (EIA).
The Western energy watchdog noted that the amount was estimated to be the largest level over the 1975—2012 period. In its newly-released revenue fact sheet, the EIA estimated that Saudi Arabia earned the largest share of these earnings, $311 billion in 2012, or approximately 32 per cent of total OPEC revenues………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

By now, you have probably noticed that prices at the pump have been anything but kind. Gasoline prices have been steadily rising in the US as the summer months continue to heat up. While it is true that gasoline prices are typically higher during the warmer months as demand also rises, the current spike is also due to some behind the scenes issues that many consumers may not be aware of.
Believe it or not, ethanol has been one of the main culprits behind the higher cost of filling your tank. It started with the 2005 Clean Air Act, which mandated that refiners needed to blend a certain amount of ethanol with gasoline that was being produced………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

Investors who flocked to “safe haven” assets over the past several years suffered a rude shock in 2013. Government bonds, the security blanket of choice for investors traumatized by the global credit crisis, lost 2.2% in the first half of this year. Yet, this disappointing performance looks absolutely scintillating compared to gold bullion.
Gold, whose reputation resides in its ability to act as portfolio insurance in difficult times, went into free-fall in 2013 losing nearly a quarter of its value. The hefty returns racked up over the previous three years just evaporated. Unquestionably, more than one gold bug feels like they have splatted on a windshield………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

In a year when almost all metals are falling, record car sales and mining strikes mean the best forecasters are favoring platinum over gold as investors lose faith in bullion as a store of value.
Platinum prices that were lower than gold in April, when bullion entered a bear market, cost 11 percent more on July 15, the most in almost two years. The current 8.5 percent premium will expand to an average 19 percent in the fourth quarter, according to estimates from the five most-accurate precious metals analysts tracked by Bloomberg over the past two years………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

The fees paid by jewelers to banks and other importers reached new heights as the fresh central bank curbs limited the supply of gold in India. The gold premiums jumped to more than double during the week, according to recent data released by the country’s trade body.
The gold imports, which stood high at 162 tonnes during the month of May, had plunged by 81% to reach nearly 31.5 tonnes during June. Gold premiums, which were as low as $4 per troy ounce during the last week have now shot up to levels of $10 per ounce over the London Gold Market cash price………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

Gold bullion prices fell below $1,200 an ounce by the end of June; now, they are trading above $1,300, down from well above $1,600 in January. Looking at this price action in the gold bullion market,investors are asking if the recent surge after making lows is just a rally based on short covering—investors who were short-closing their positions—or if it’s due to fundamental reasons.
I stand in the camp that believes the rise in gold bullion prices we are seeing is due to fundamental reasons. That said, the sell-off we witnessed in the precious metal prices could take some time to recover………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

Oil production in America is booming, especially after the discovery of shale oil in regions of North Dakota and Texas. The development of these resources is now beginning to have a huge impact on the global hydrocarbon markets, as evidenced by a report from the Energy Information Association (EIA) which states that, last month, shale oil production had reached 7.4 million barrels per day.
Further, an estimate by the International Energy Agency (IEA) projects that the world’s largest economy will achieve shale oil production of 9 million barrels a day by 2018. In fact, some believe that the country will surpass Saudi Arabia in oil production by 2020, underscoring America’s dramatic rise up the oil charts……………………………………….Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

For those who want to build an investment portfolio with exposure to the performance of a diversified group of assets, exchange traded funds (ETFs) are becoming an increasingly popular choice.
ETFs aim to replicate the performance of a particular index or asset by investing in its component parts. A standard S&P ASX 200 index ETF, for example, would effectively give you exposure to the 200 companies that make up the index through a single trade and for a tiny proportion of the cost of investing in them directly………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

After rallying in May, Scotiabank’s Commodity Price Index fell by 4.1% month-over-month (m/m) in June - the sharpest decline since late 2012. “The Index will be underpinned in July by a return to stronger oil prices in Western Canada and the beginning of another upswing in lumber and oriented strandboard (OSB) prices, after a sharp, seasonal inventory correction,” said Patricia Mohr, Scotiabank’s Vice President of Economics and Commodity Market Specialist.
“The All Items Index remains 1.7% above a year earlier, with Oil & Gas up +17.8%, Forest Products +1.5% and Agriculture +0.1% just offsetting a -13.6% decline in Metals & Minerals.” (Press Release)

Posted on 31 July 2013 by VRS |  Email |Print

The U.S. dollar moved higher versus the euro and the Japanese yen Tuesday, extending a modest gain in the wake of data that showed consumer confidence fell more than expected in July while the Federal Reserve began a two-day monetary-policy meeting.
The ICE dollar index , a gauge of the greenback’s movement against six other major currencies, changed hands at 81.815, up from 81.663 late Monday in North America………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

The Indian rupee fell below the key psychological level of 60 to the dollar to a three-week low on Tuesday, posting its biggest fall in a month, as the central bank kept interest rates on hold and failed to announce any additional steps to defend the currency.
The rupee has now erased all gains since the Reserve Bank of India first announced steps to defend the rupee by withdrawing cash on July 15, and is within sight of a record low of 61.21 hit early this month……………………………………….Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

The paradox du jour: people who like free markets don’t want a carbon market, and the people who don’t trust capitalism want emissions trading. So why are socialists fighting for a carbon market? Because this “market” is a bureaucrat’s wet dream.
A free market is the voluntary exchange of goods and services. “Free” means being free to choose to buy or to not buy the product. At the end of a free trade, both parties have something they prefer………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

California’s greenhouse gas cap and trade program will basically merge with a similar program in Quebec in January. If a Tuesday announcement by the California Air Resources Board (CARB) is any indication, Australia may be next.
The announcement comes in the form of a Memorandum of Understanding (MOU) between CARB, which manages the state’s greenhouse gas emissions credit auction and trading program, and the Australian Government Clean Energy Regulator………………………………………..Full Article: Source

Posted on 31 July 2013 by VRS |  Email |Print

China’s spending to develop renewable energy may total 1.8 trillion yuan ($294 billion) in the five years through 2015 as part of the nation’s efforts to counter climate change, according to a government official.
China may invest another 2.3 trillion yuan in key energy-saving and emission-reducing projects, Xie Zhenhua, vice chairman of the National Development and Reform Commission, said today at a conference in Beijing. China stands by its pledge to cut carbon emissions per unit of economic output by as much as 45 percent before 2020 from 2005 levels, he said………………………………………..Full Article: Source

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