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Commodities Briefing 20.Sep 2013

Posted on 20 September 2013 by VRS |  Email |Print

The US Federal Reserve has said it will continue with its monthly bond-buying programme (quantitative easing or QE), boosting investor sentiment worldwide because the liquidity tap remains open for now.
What does this mean for commodities, especially metals? Easy liquidity conditions had propped up commodity prices, even when economic conditions were turning weak. But the potential threat to liquidity, from a Fed taper, had resulted in commodity prices retreating after May. This was particularly visible in non-ferrous metal prices. But prices have recovered since August despite the threat of a tapering due to improving economic conditions in parts of the world………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

It was one of the best calls in memory. Back in the late 1990s, when the world was in the thrall of the dotcom bubble, Jim Rogers foresaw a China-driven commodities boom. In the decade-plus since, hundreds of billions poured into the sector — including to investment products from UBS, Merrill Lynch, and others based on his Rogers International Commodities Index — to try to capitalize on the surging prices of oil, metals, and grains.
But lately, with gold 20% below its high and miners cutting back on new projects, a growing chorus of Wall Street voices has begun to declare the boom over. Rogers, 70, disagrees………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

As the Fed considers announces the delay of QE tapering Edith Southammakosane, senior analyst at ETF Securities, explains what this means for commodities.
“The Fed’s decision to maintain its existing policy surprised the audience yesterday as the market expected tapering to start this month. Most asset classes immediately reacted positively to the announcement. The S&P 500 rallied nearly 1% while Eurostoxx 50 jumped 1.3%. Commodity prices also saw immediate gains, with the price of gold surging 3.8% and the price of copper gaining 1.2%………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Wall Street, with all its so-called genius and ingenuity, now has the ability to screw around with the price of your gasoline. That’s not all. Loosely regulated commodities markets appear to be more and more the apple of Wall Street’s eye, even as the major stock market indices on Wednesday hit all time highs.
Banks’ focus on commodities is particularly worrisome, as commodities are extremely volatile and can whipsaw and wipe out investors on the wrong side of a trade in the blink of an eye………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Wall Street launched its first concerted defense of its role in physical commodity markets on Thursday, funding a report that highlighted the risks of banks being pushed out of the sector by political and regulatory pressure, and gaining support from an influential trade group.
The report commissioned by Wall Street’s largest lobby group, the Securities Industry and Financial Markets Association (SIFMA), said banks play a small but vital role in the natural resources supply chain. Their ability to trade in the underlying commodities - not just financial derivatives - helped markets function………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

JPMorgan Chase & Co. (JPM), the largest U.S. bank by assets, generated the most revenue from commodities out of the 10 biggest investment banks in the first six months this year, according to Coalition, an analytics company.
Goldman Sachs Group Inc. (GS) ranked second and Morgan Stanley (MS) was third, Coalition, based in London, said in a report today. For all of last year, Goldman had the most revenue from commodities, followed by JPMorgan and Morgan Stanley. Figures for individual banks weren’t disclosed………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

A study commissioned by a US bank lobby group found financial institutions are “essential” to commodity markets, in a public sign that the industry is mobilising to defend its ability to move raw materials.
The Federal Reserve is reviewing whether to allow large US banks to buy and sell physical commodities, not just futures contracts. Goldman Sachs and Morgan Stanley are also fighting to keep commodity assets like power plants and oil tanks as their five-year anniversary as Fed-regulated financial holding companies approaches this week………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will increase crude shipments by 1.4 percent through to early October as Saudi Arabia boosts output amid losses in Libya, tanker tracker Oil Movements said.
OPEC, which supplies about 40 percent of the world’s oil, will raise exports by 320,000 barrels a day to about 23.9 million a day in the four weeks to Oct. 5 compared with the period to Sept. 7, the researcher said in a report. The figures exclude two of OPEC’s 12 members, Angola and Ecuador, and may be revised lower to reflect recent disruptions in Libya production, according to Oil Movements………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Vince Cable, currently the UK’s secretary of state for business, innovation and skills, once said: “When my job was attempting to predict future economic developments for the Shell oil company, I was frequently reminded of an Arabic saying: ‘Those who claim to foresee the future are lying, even if by chance they are later proved right.”
He might have been talking about the price of a barrel of crude oil – uncertainty is the only certainty, and that uncertainty is today as great as it has ever been………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Oil industry is facing severe pressure on sharp fall in refining margins, according to a new analysis by Bank of America Merill Lynch (BofAML). Refining margins are not at all helathy and brent cracking marings are low levels of $4 per barrel since July.
In Europe refiners have cut crude runs due to weak margins while diesel demand has surged in US markets in first half of 2013 at an annual rate of 2% and German diesel consumption is also moving up at a fast pace. With many of the European refineries being shut down due to low margins, more Asian diesel could flow into the region, BofAML report said………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

U.S. oil companies plan to lean hard on lawmakers to loosen restrictions on oil exports as crude production soars in North America, according to Scott Sheffield, chief executive of Pioneer Natural Resources.
“I think the industry will be making a push over the next five years to export,” Mr. Sheffield said, speaking on the sidelines of Hart Energy’s DUG Eagle Ford conference in San Antonio………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

To put it mildly, natural gas simply doesn’t get as much attention as crude oil, or even gold. Mr. Speculator, my good old friend, once said, “Why would you want to even bother looking at it? The prices have collapsed and have been ranging for years.”
It’s certainly true that natural gas prices have come down from where they used to be. Just take a look at the chart below to see what has happened to the price of natural gas in the past few years………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

A new report from the International Energy Agency takes a global overview of biomass use in the industrial and transport sectors, identifying leading countries and the top 15 production companies in each sector. The IEA’s Bioenergy Task40 report, “Large Industrial Users of Energy Biomass,” was released in early September.
Currently biomass covers approximately 10 percent of the global energy supply, of which two-thirds is used in developing countries for cooking and heating. In 2009, about 13 percent of biomass use was consumed for heat and power generation, while the industrial sector consumed 15 percent and transportation 4 percent. The global consumption of biofuels in transportation equaled 2 percent of the transport sector total………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Commodities investor Jim Rogers tells The Daily Ticker that gold, having lost its luster as a safe haven, could drop to $900 or $1,000 in the next 1-2 years. Longer term, he has a very different forecast. Gold will soar to “well beyond $1,900 an ounce,” topping its record $1,920 high reached in September 2011, says Rogers, author of Street Smarts: Adventures on the Road and in the Markets.
The reason: “massive currency debasement” around the world. “Every major central bank in the world is printing a lot of money plus war, chaos, riots in the street, governments failing,” says Rogers………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Gold prices have failed to halt the relentless slide seen since the start of the year, the effect of improving investor sentiment and rising real interest rates squeezing appetite for the safe-haven asset.
Still, the metal has been touted in some quarters to stage a significant comeback in the near future as political troubles internationally and in the US ratchet up in the coming months. And bullish investors can latch onto a potential gold-lined ascent by purchasing SPDR Gold Trust and Gold Bullion Securities, exchange-traded instruments designed to track movements in the metal price………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

It was not too surprising that there is going to be no tapering for some very good reasons. The commencement of tapering would have led to bond yields rising, triggered by an increase in sales of government bonds to the public and at the same time escalating sales by foreign governments as they attempt to retain control over their own currencies and interest rates.
This was the important lesson from floating the rumor of tapering in recent months. The reason tapering was not going to happen is summarized as follows: Monetarists and therefore central bankers believe that rising bond yields and interest rates will strangle economic recovery. They want to see more robust evidence of recovery before permitting that to happen………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Commodity ETFs rallied sharply higher on Wednesday after the US Federal Reserve (Fed) said it would leave its quantitative easing programme unchanged, a policy largely seen as supporting commodity prices.
Following comments from Fed Chairman Ben Bernanke in May, investors had priced in some degree of ‘tapering’, the term coined by the Bernanke to describe a gradual unwinding of the stimulus programme………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Once you understand that futures prices are driven by more than just the spot price, it is possible to remove some of the confusion about securities products that use futures to track the price of important commodities. First, let’s review the claim about tracking error in exchange-traded products (ETPs), and then explain why those products function better than many investors realize.
A common tactic for skeptics of ETPs that track commodities like crude oil or natural gas - think of USO or UNG - is to show the change over some period in the spot price of the commodities and compare that change with the return achieved by the ETPs………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

There are over 1,400 exchange traded funds that are currently trading. The following guidelines can help investors weed out any duds and pick an ETF that is right for their portfolio or investment goals.
Some of the best ETFs trading have at least one or more traits in common with the others. There are four major points of reference that investors can look into that will help streamline the process of choosing an ETF……………………………………..Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

As a multi-agency probe continues into the Rs 5,600-crore payment crisis at National Spot Exchange Ltd (NSEL), the government may consider streamlining the norms for commodities and capital markets, regulated by FMC and Sebi, respectively, to plug potential regulatory gaps.
The idea is to make the regulations governing commodity derivatives markets much more stringent and bring them at par with the norms applicable for Sebi-regulated capital markets, sources said………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

The Federal Reserve’s surprise decision to sustain its stimulus programme has given policy makers in emerging markets a reprieve from market pressures that could allow several countries to scale back support for their currencies.
Emerging markets currencies have now recovered about half the losses they had sustained against the dollar since May in a sell-off sparked by the Fed’s tapering plans. They rallied almost without exception on Thursday as markets absorbed the Fed’s announcement, with the biggest gains seen in those that had been hardest hit………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Summer is usually a relatively peaceful time for foreign currency markets, as investors make use of their annual leave. But this year things have been slightly different. Emerging markets have made headlines as currencies such as the Brazilian real, Indian rupee and Indonesian rupiah tumble.
Talk of the US Federal Reserve moving to taper its asset purchases – known as quantitative easing – acted as a catalyst but worries about emerging market debt and unrest in the Middle East have also had an impact………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

Australia is at risk of breaching a global agreement to cut greenhouse gases as power markets signal Prime Minister Tony Abbott will exploit the widest election victory in nine years to repeal the nation’s carbon system.
Electricity futures prices show the implied costs of emitting a metric ton of carbon in Australia plunged 18 percent in the two days following the Sept. 7 election, bringing its monthly decline to 55 percent, according to data compiled by Bloomberg. At their lowest, prices indicated an 80 percent probability that Abbott will overturn the law that charges the nation’s polluters for their CO2 emissions, according to Bloomberg New Energy Finance………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

The European carbon market is likely to remain oversupplied until 2027 even if the EU adopts stricter emissions reduction targets, analysts have warned. Thomson Reuters Point Carbon says the 2.5 billion excess carbon credits likely to be in the emissions trading scheme (EU ETS) in 2020 will not be fully eroded until allowance prices start to rise dramatically in the mid-2020s.
Prices in the market are currently around €5.5 per tonne of CO2, which is well below the €40/t level most analysts agree is needed to drive large-scale low carbon investment. And prices will average only around €7.7/t between now and 2020, according to Point Carbon, when the return of around 900 million allowances likely to be temporarily removed from the market may force prices down to a little as €5/t………………………………………Full Article: Source

Posted on 20 September 2013 by VRS |  Email |Print

World trade is expected to grow 2.5% in 2013 and 4.5% in 2014 as against earlier estimates fo 3.3% and 5% in 2013 and 2014 respectively, according to World Trade Organisation (WTO).
Import demand from developing countries is gaining but at a slower pace and hence the lower growth forecast compared to previous one made in April, WTO added. “There is a message for the WTO in this,” said WTO Director General Roberto Azevêdo. “The past two years of sluggish trade growth reinforce the need to make progress in the multilateral negotiations………………………………………Full Article: Source

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