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Commodities Briefing 09.Sep 2013

Posted on 09 September 2013 by VRS |  Email |Print

The European Commission looks set to row back on a number of controversial proposals to regulate commodities benchmarks, contained within its wider benchmark reform, after an industry backlash arguing the new rules would make the market more opaque. The final text on benchmarks, which is due to be published on September 18, is no longer expected to contain an earlier proposal to hold contributors liable for their submissions to commodities benchmarks, according to two sources close to the talks.
Trading in commodities is largely over the counter and relies on submissions from traders to price-reporting agencies, such as Platts. Market participants have argued that if contributors could potentially be penalized for the submissions they make, fewer would do so, reducing transparency……………………………………….Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Recent trading activity has raised questions amongst analysts and investors alike as to whether the mining boom is a thing of the past or whether it still has life left in it. It has also sparked uncertainty regarding which direction prices for commodities such as iron ore will go.
It has commonly been argued that the recent run up in the price of commodities will only be short-lived and that the prices will soon fall back down. Take, for example, iron ore. The steel making ingredient has rallied roughly 61% since September last year from its US$87 per tonne level to US$140 per tonne today………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

China’s imports of crude oil, iron ore, copper and soybeans fell in August from July’s record highs, but shipments stayed at elevated levels as manufacturing activity in the world’s second-largest economy gains pace.
Headline trade data showed China’s overall imports and exports in August were stronger than expected and have sustained the upward trend since July, adding to evidence that the world’s top commodity buyer may have avoided a sharp slowdown………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

“When you invest in energy assets, you are making a bet on human ingenuity,” says Katherine Richard, chief executive of Warwick Energy Group, an Oklahoma-based oil and gas company.
Her point is that while outsiders often focus on resources in the ground, inside the industry there is just as much, if not more, attention paid to human ingenuity. Reserves are important, of course, but what really counts is the insight to understand what is there, and the creativity to be able to extract it in a commercially attractive way………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Pundits are confused. Contradictory signals are keeping the crude markets volatile. Oil futures continued to swing back and forth, throughout the past week, as markets weighed, and indeed awaited the next moves of the world leaders on the geopolitical chessboard.
Concern that a potential US strike on Syria would spread unrest and further disrupt Middle East crude supplies had boosted oil prices in recent weeks. However, sentiments cooled down a bit after Obama faced open resistance from Russia, China, the European Union and some emerging market countries, during the G20 summit at St Petersburg, against striking Damascus without UN Security Council approval………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Sabotage and theft from oil producing regions in Nigeria has left a black mark on the nation’s economy. Oil production is down more than 7 percent this year, bringing the economy along with it. Last week, Royal Dutch Shell announced it entered into talks with Nigerian villagers who said their lives were changed for the worse because of the company’s pipeline spills.
While that may offer some relief for the Niger Delta, the death of at least 20 people at the hands of Islamic militants suggests it’s still no place to do business………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Turmoil in the Middle East and North Africa has been awful for the people of the region. The same cannot be said for Organization of the Petroleum Exporting Countries (OPEC), the oil cartel. The long list of crises - violence in Iraq, fear of sectarian spillover from the Syrian conflict, oil worker strikes in Libya and sanctions against Iran - has conspired to keep crude prices high.
The oil world is changing, and the cartel is losing out. OPEC’s latest Monthly Oil Market Report projects an increase in global demand in 2014 of more than 1 million barrels per day (bpd) to 90.75 million bpd, but the supply needed from OPEC is expected to fall by more than 260,000 bpd to 29.65 million bpd………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

“Will we help Syria? We will!” The statement made by Russian President Vladimir Putin to help its long-time ally in the case of an attack, caused global oil markets to tremble, and saw West Texas intermediate crude rise for the second day in a row.
Traders became fearful that such a declaration of intent is a sign of increasing tensions, and an indication that some form of conflict with the potential to disrupt Middle East oil exports, is imminent………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Gold traders are divided on the outlook for prices next week, weighing signs of an improving US economy against the threat of a military attack on Syria. Two years after bullion set a record, the majority said a new peak won’t be reached in the next 24 months.
Thirteen analysts surveyed by Bloomberg expect prices to rise next week, the same number were bearish and five were neutral. Gold slumped 28% since it reached an all-time high of $1,921.15 an ounce on September 6, 2011………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Hedge funds’ combined holdings in gold futures increased to the most bullish since January on mounting concern that conflict in the Middle East will boost crude-oil prices, slowing economic growth and stoking inflation.
The net-long position rose 3.6 percent to 101,396 futures and options in the week ended Sept. 3, U.S. Commodity Futures Trading Commission data show. Long wagers gained 0.6 percent and short bets contracted 8.6 percent, the fourth consecutive drop and the longest retreat in a year. Combined net-long holdings across 18 U.S.-traded commodities fell 0.3 percent as investors got less bullish on copper………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

The answer to the question above unfortunately is maybe. There are definitely warning signs springing up. The first sign of trouble popped up last week when the miners generated a key reversal on huge volume, and on a day when gold was actually positive. Something about that day smells very fishy to me.
It looks like big-money traders had advance notice that a false breakout to new highs was going to be manufactured to give insiders an exit after a two-month 40% rally. The high volume follow through the following day confirms that something is not right………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Since June the price of gold has shot up by 20pc. Should you be joining the buyers? Gold has bounced back as investors seek exposure to the metal in all its forms. Fears of inflation and of conflict in the Middle East are just two of the factors driving demand. Should you be joining the buyers?
The gold price crashed in the first part of 2013 but staged a recovery in late June; the price has risen by more than 20pc. Now consumers in Asia, along with other investors spooked by events in Syria, are driving stronger demand – just as supply is falling as miners scale back production………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

I often talk about how the gold trade is really two separate trades. There’s the Fear Trade that buys gold out of fear of war or poor government policies. This crowd sees the precious metal as a safe haven during times of crisis, such as when gold rose over the fear of a war in Syria, but eased when a much more limited military action became likely.
However, there are other factors beyond Syria this week driving gold. That’s the Love Trade. This group gives gold as gifts for loved ones during important holidays and festivals. This is the time of the year that we are in the midst of right now. Historically, September has been gold’s best month of the year. Looking at more than four decades of monthly returns, the precious metal has seen its biggest increase this month, averaging 2.3 percent………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Of late, the likelihood for a drastic lowering of gold prices has become a common talking-point, with many analysts – ourselves included – believing that a drop to $1,000/oz should not be ruled out in the next year.
Indeed, although the Syria-led rally in oil prices has resulted in a recent upturn in gold prices, the rise is unlikely to be cemented in any longer-term positions. Certainly, a more accurate outlook for gold prices needs to take into account the impacts of developments in three key areas: Investor demand, central bank behavior and trends in the mining industry………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

How things change. This time last year, the biggest story in mining was the noise around commodity trading giant Glencore’s $54bn (£35bn) tie-up with mining group Xstrata, the largest yet seen in the sector.
After the deal was announced in February 2012, the merger finally completed in May this year. That did not mark the end of big M&A however. This month alone, Vodafone has sealed the $130bn sale of its stake in US mobile network Verizon Wireless, the world’s biggest deal for more than a decade, and we have also had Microsoft’s $7.2bn purchase of Nokia’s phone business………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

The exchange traded fund market in Asia has been growing rapidly over the past decade. Industry participants, however, say there is much more to be done in terms of investor education if the market is to mature.
The Asian ETF market as a whole has grown to some $150bn in size from just $35bn a decade ago, with currently about 550 products on offer, compared with 35 then, according to Jackie Choy, Hong Kong-based ETF strategist at Morningstar………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

The government plans to bring the Forward Markets Commission (FMC) under the finance ministry and then consider making it an arm of market regulator Sebi, following the payment crisis at NSEL.
The government is also taking a close look at whether hawala, or illegal money, was used in trading at NSEL — a bourse which seemed to have taken bids far more than the underlying commodities and for longer time frames than allowed. The two groups appointed by the Centre to probe the crisis are expected to submit their reports next week………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Whilst most of the recent media and political attention has been focused on conflict in Syria, there is another war being waged at the moment. I am not talking about the “currency wars” which captured much attention during the midst of the GFC.
No, I am talking about the war on emerging markets and the so called BRICS nations – Brazil, Russia, India, China and South Africa – which, with the exception of China, have seen some massive capital outflows in recent times………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

Gold denominated in Indian rupees just skyrocketed up near record highs, a far cry from recent dollar-gold action. Much of this extraordinary rally was fueled by the near-collapse of the Indian currency to new record lows against the US dollar. India’s deepening currency crisis has major implications for domestic gold demand and thus global gold prices. Nothing ignites gold buying like a collapsing currency.
Indians’ deep cultural affinity for gold is legendary. For decades it was the world’s biggest consumer of gold, although China is overtaking it now………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

This is an extract from the forthcoming collection of essays ‘Green conservatism: protecting the environment through open markets’. Similar collections will be published under the Green Alliance’s ‘Green social democracy’ and ‘Green liberalism’ projects as part of the Green Roots programme, which aims to stimulate green thinking within the three dominant political traditions in the UK.
There’s no use denying it, the environment is a difficult area for the Conservative Party. And the biggest environmental issue, climate change, presents the greatest difficulties………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

European Union carbon permits posted their biggest weekly gain in four months as the bloc’s regulator scaled back the handout of free allowances, reducing the risk of a sell-off by polluters.
December allowances climbed 17 percent this week, the biggest increase for the period since May 3, on the ICE Futures Europe exchange in London. The European Commission yesterday lowered its allocation of free allowances to industry by 12 percent through 2020, and delayed selling an additional 66 million metric tons of permits until next year………………………………………..Full Article: Source

Posted on 09 September 2013 by VRS |  Email |Print

The abrupt flight of capital from Asian markets in recent months would appear to suggest that the Eastern growth story may have run its course.
Almost as soon as Ben Bernanke announced in May that the US Federal Reserve would start to consider winding back its money-easing activities, investors began withdrawing funds from Asian markets. That not only triggered sharp falls in some Asian currencies such as the Malaysian ringgit, the Indonesian rupiah and the Indian rupee, but also sparked a drop in Asian stock markets too………………………………………..Full Article: Source

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