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Commodities Briefing 01.Aug 2013

Posted on 01 August 2013 by VRS |  Email |Print

The Oil Drum is closing down after eight years, giving up the long struggle to alert us all to “peak oil” and the dangers of an energy crunch. Readers have been drifting away. The theme has gone out of fashion, eclipsed by shale and fracking in the US.
The demise of Britain’s leading website for oil dissidents has been seized on by critics as an admission that peak oil is just another malthusian myth like so many before. It comes amid a spate of reports from global banks announcing the death of the commodity supercycle, slain by creative technology and a surge of new supply………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Implied volatilities (vol) for commodities are low by historical standards. Sure, traders have to pay relatively more for the vol element of precious metal options. But as Bank of America Merrill Lynch points out, three-month at the money (ATM) implied vols for zinc and lead are near their cheapest since January 2005.
Will vols fall further? BoAML thinks a turn in the monetary policy cycle means they are more likely to rise. “Our analysis suggests that, just as Fed easing tends to drive commodity vols lower, higher interest rates tend to push up volatility.”……………………………………….Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Increased regulation of methods used to establish commodities prices could backfire by reducing transparency as market participants may stop giving information, according to Platts, a price publisher.
“Commodity-price discovery depends on the voluntary participation of traders, producers and other market players,” the unit of McGraw Hill Financial Inc. (MHFI) said in an e-mailed response to questions. “Regulation could have the inadvertent consequence of inhibiting participation in the price-assessment process which would, in turn, decrease transparency, thus having the opposite effect of regulators’ intentions.”……………………………………….Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Morgan Stanley’s and other banks’ deep dive into the oil and metal markets might be adding risk to the financial system, and it may be tough for them to get out. Every day a wholly owned subsidiary of Morgan Stanley pumps 300,000 barrels of gasoline from its 49 terminals (a fraction of their total storage capacity of 26.7 million barrels) into trucks to be delivered around the country.
It’s also a major supplier of fuel to cruise lines. It already owns a 67-mile pipeline that moves gas from Missouri to Arkansas………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

United States regulators the Commodity Futures Trading Commission and the Securities and Exchange Commission plan to look more closely at banks’ commodities holdings in an effort to ensure the banks are not manipulating those markets.
According to a report by Bloomberg, CFTC Chairman Gary Gensler and SEC Chairman Mary Jo White both told the US Senate Banking Committee that their agencies have the authority to investigate those businesses. Senator Sherrod Brown, a Democrat from Ohio, has led the latest round of questions about banks’ activities, in particular focusing on Goldman Sachs and how it may have unfairly manipulated aluminum prices, as described by Doug Buchanan of Columbus Business First………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

JPMorgan Chase’s announcement Friday that it will look to exit the physical commodities business steps up the pressure on rivals to follow suit. “All the banks with commodity units are watching and waiting to see if regulators will force them out of physical commodity trading completely or [require them to] make a minor modification. There is no panic but there is a high level of anxiety,” says George Stein, managing director of recruiting firm Commodity Talent LLC.
Goldman Sachs and Morgan Stanley have owned physical commodities assets to supplement their ownership of paper assets going back as far as the 1980s. They continue to be major players in physical commodities, as do other global banking and securities giants such as Citigroup, Bank of America, Barclays, Deutsche Bank and Credit Suisse………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Opening up commodities markets to megabanks has failed. It’s time to break up the banks’ business lines. The Federal Reserve has blood on its hands from the most recent financial crisis. In the 1990s, Alan Greenspan and Fed researchers helped promote the explosive use of securitizations and credit derivatives as risk management tools for financial firms.
A May 1996 speech exemplifies Greenspan’s failure to grasp not only how these approaches would influence bankers’ behaviors but also what the economics and risks would be, calling securitization “a paradigm of the evolving risk management techniques in financial markets.”……………………………………….Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

OPEC crude output hit a four-month low in July as unrest and conflict in Libya and Iraq disrupted supplies, a Reuters survey found on Wednesday, a further unplanned cutback bringing supply closer to the organization’s target.
Supply from the Organization of the Petroleum Exporting Countries has averaged 30.25 million barrels per day (bpd), down from 30.38 million bpd in June, the survey of shipping data and sources at oil firms, OPEC and consultants found………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

The Iraqi Ministry of Oil affirmed that Baghdad’s share in oil production will not be part of the OPEC specified quotas for 2014. The ministry said it was likely for Iraq to reach the required export rate in the next year.
Iraq is one of the founders of OPEC, an organization that brings together 12 oil exporting countries. Iraq’s production quota — which was 3.8 million barrels a day — was suspended during the invasion of Kuwait as part of imposed international sanctions………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Coal will remain the main fuel for electricity generation globally, according to a new report from the IEA Clean Coal Centre. Hermine Nalbandian, senior research scientist, and Nigel Dong, energy strategy researcher, IEA Clean Coal Centre, argue that, although coal’s share of the total electricity generation will fall, the resource will remain the main fuel for electricity generation globally.
In 2010, global consumption of commercial energy totalled 18 billion t of coal equivalent. With a 28% share, coal ranked second after oil as one of the major sources of primary energy and natural gas, at 21%, ranked third. Gross power generation with coal was approximately 41% and gas 22%………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

A few years after the global economy emerged from the economic crisis of 2008, commodity prices began to surge, thanks to ongoing robust demand from China. Chief financial officers at mining firms quickly realized that firm commodity prices implied robust future profit streams, and a broad range of new mining projects were put into motion.
To pay for those projects, billions of dollars were borrowed, and investors began to anticipate impressive cash flow returns from all of that borrowing. Just a few years later, that optimism has evaporated………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

If you want to be an effective and profitable investor, you should look at a situation from different perspectives and make sure that any action you are about to take is really justified.
In the precious metals market, very often it turns out that if you take a look at gold’s price chart only, the outlook is incomplete or even unclear. For this reason, my firm usually complements the yellow metal’s analysis with the analysis of silver, mining stocks, the general stock market, important ratios, and other related markets………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

The Street spoke with Mackie Research’s Barry Allan, who put a list of gold producers to the test. In the scenario where gold hits $1,000 US an ounce, which miners would thrive, survive or die at that price?
John Goldsmith, Vice President of Canadian Equities at Montrusco Bolton also follows gold stocks closely and says while he does not entirely disagree with Allan’s research, there are some other factors that investors need to take into account when looking at gold’s price floor………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

After a lengthy downturn, gold markets have been rejuvenated by the recent 30% drop in gold prices, bringing customers back to Qabil Street in Jeddah’s Al-Balad.
Hamid Al-Hasan, a shopkeeper at a jewelry shop in Al-Balad, said that the market is experiencing a long-awaited resurgence. When gold prices were much higher, African pilgrims were the main customers, Al-Hassan said, followed by the Indian expatriate community. Saudi customers were a rarity back then, except for those seeking to sell their old jewelry………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

All that glitters is not gold – or palladium. Consider – silver. For investors willing to look ahead, and not just avert their eyes from the 26% decline of the metal in the past 12-months, silver right now may be worth a good, hard second look.
At first glance investing in silver might feel like buying fool’s gold, but a harder look at the market reveals that silver may have corrected too far and it is poised for future growth………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Surge in production in China while moderate growth or contraction in many other parts of the world would lead to a record output of 36.4 mn tons of stainless steel in 2013, according to MEPS International, UK. A year on year increase of 7% is forecast for 2013, giving a total outturn of over 17 mn tons.
Stainless steelmaking in the established markets of the EU, United States and the Far East remain below the pre-crisis peak of 2006. Chinese production has more than tripled since that time………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Goldman Sachs said Wednesday it will make changes to its commodities warehousing business to reduce concerns that the warehouses are limiting the supply of aluminum. “In light of those concerns, we are making certain suggestions to improve the LME system and are taking unilateral action to help any end users who have metal in the queue at Metro warehouses,” Goldman said in a statement.
Goldman has proposed increasing the size of metal outflows from storage under London Metal Exchange rules, establishing priorities for metal consumers over other storers, allowing consumers in need to advance in line and enhancing transparency about ownership of LME metals………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

In a recent analysis, John Tumazos Very Independent Research attributed metals and mining writedowns to “volatile reversals from the 1975-78, 1982-86, 1997-2003 and 2012-13 commodity price depressions to 2004-08 to 2010-11 ‘Supercycle Euphoria’.”
Mining and Metals Analyst John Tumazos observed that the total of metals write-downs from 2008 to 2013 will breach the $200 billion mark this year………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Banks are selling the least structured notes tied to commodities in nine years as investors shun the securities amid a slowdown in China’s economy and the prospect of the U.S. Federal Reserve winding down stimulus.
Global issuance in the first half of the year fell to about $2 billion, 41 percent lower than the same period of 2012 and the least since 2004 with securities linked to oil and gold among the biggest losers, according to a report from Barclays Plc………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

The equities market, along with stock exchange traded funds, sprinted through July, reaching new record highs, after the quick correction in June. The Dow Jones Industrial Average was 4.3% higher over July. Meanwhile, the Nasdaq Composite increased 6.3% and the S&P 500 rose 5.1%.
The top non-leveraged ETFs over July include the Guggenheim Solar ETF up 19.8%, PureFunds ISE Junior Silver ETF up 18.0% and the SPDR S&P Biotech ETF up 15.9%………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Whether you are a gold bug or not it’s been tough holding gold in 2013 as gold investors watch the price of gold drop over 20% in 2013. Has the appetite for gold dimensioned?
There could be renewed appetite for gold as China launched not one but two gold backed ETFs on the Shanghai exchange as China attempts to open the country’s gold market. Keywords here gold backed another words the ETF buys and sells physical gold similar to the SPDR Gold Shares Trust………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

National Spot Exchange (NSEL) has suspended trading of all contracts, other than e-Series and deferred the settlement, sparking fears of cash crunch and default of payment in the Financial Technology-promoted commodity bourse. The exchange has blamed the government for the structural changes it has instructed a few weeks back for creating market disequilibrium.
While NSEL officials were unavailable for comments, brokers said that the exchange has stopped payouts on Wednesday due to financial crisis, which could impact operations of many of the brokers who are into commodity trading on Thursday………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

I was talking with senior reporter Dan Freed about the announcement JPMorgan Chase made about exiting its physical commodities business. From the 1980s up until the late 2000s, the trend for investment banks was to buy various physical assets in commodities in order to augment the financial proprietary trading that most of the big banks were engaged in.
That may sound complicated, but the idea is simple: You can be a more successful trader in the financial instruments related to oil, copper, aluminum and gold if you also have the insight from a connection to the physical trade of those commodities………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

China’s state-controlled Industrial and Commercial Bank of China is in advanced talks with South Africa’s Standard Bank to buy its London commodities trading business for around US$500 million, a person familiar with the matter said Wednesday.
ICBC, China’s largest bank by assets, has been pursuing such a deal for months. Late last year, The Wall Street Journal first reported the bank held talks to acquire a 60% stake in Standard Bank’s London-based commodities and foreign-exchange business with the aim of expanding that to 80% ownership over time, people familiar with the situation said………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

Brazil’s central bank sold 30,000 currency swaps to alleviate a critical dollar shortage that has driven the real to four-year lows in recent sessions.
The real has been the worst-performing emerging market currency, falling 12.4 per cent against the dollar this year, and the US currency on Wednesday briefly jumped above R$2.30 for the first time since May 2009………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

The Russian ruble fell Wednesday to a near four-year low against the euro-dollar basket, the central bank’s main currency-market gauge, market participants said, adding that profit-taking could slow further weakening.
The ruble has weakened 8.1% against the basket since the beginning of the year, touching on Wednesday RUB37.87, a level last seen in September 2009. The ruble’s latest round of weakening has occurred in the last six trading days after companies had paid the bulk of their monthly taxes, which involved the conversion of foreign currency for many firms to meet their local liabilities………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

China plans to invest 2.3 trillion yuan ($375 billion) in energy saving and emission-reduction projects in the five years through 2015 to clean up its environment, the China Daily newspaper reported on Wednesday, citing a senior government official.
The plan, which has been approved by the State Council, is on top of a 1.85 trillion yuan investment in the renewable energy sector, underscoring the government’s concerns about addressing a key source of social discontent………………………………………..Full Article: Source

Posted on 01 August 2013 by VRS |  Email |Print

European Union carbon permits for December dropped the most in three weeks as record-low power prices in Germany reduced demand for emission allowances.
The benchmark carbon contract fell as much as 4 percent to 4.12 euros ($5.49) a metric ton on ICE Futures Europe exchange, and traded at 4.13 euros at 12:47 p.m. in London. The contract is heading for its first monthly decline since April after dropping 1.7 percent this month………………………………………..Full Article: Source

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