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Commodities Briefing 07.Feb 2014

Posted on 07 February 2014 by VRS |  Email |Print

“The oil price” has a comforting ring of clarity about it. But in reality many benchmark prices for oil and other commodities are merely estimates based on incomplete information from unregulated, illiquid markets. They rely at best on a seasoned reporter’s ability to interpret what his sources tell him about bids, offers and deals, and at worst on a gullible greenhorn’s guesswork.
The standardised commodity contracts that trade transparently on busy exchanges do not always cater to the many different specifications required by industry. Other benchmarks—such as the evocative Light Louisiana Sweet, or the North Sea’s unsentimental Dated Brent—are the work of price-reporting agencies (PRAs), businesses which make money by gathering market information and selling it to subscribers………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

So far so good: Commodity prices suggest that the global economy is holding up well despite the latest emerging markets crisis. This confirms that the crisis remains contained mostly to the “Fragile Five” and isn’t morphing into a contagion–so far, knock on wood.
I construct a YRI Global Growth Barometer by simply averaging the price of a barrel of Brent crude oil with the CRB raw industrials spot price index………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

We have obviously been early in buying this dip, but truth be told we would rather be early in buying a correction during a bull market than early buying in a downturn during a bear market.
The fact that we have spread out our purchases is also of comfort, but the point that we want readers to take away from all of this is that we continue to average down in our recent purchases as we are using cash and not margin in those accounts buying this high quality commodity names………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The Mercuria Energy Group, a fast-growing energy and commodities trading company, is in exclusive talks to acquire the physical commodities business of JPMorgan Chase, according to a person familiar with the discussions.
JPMorgan announced in July that it was exploring strategic alternatives, including a possible sale or spinoff, for the business, which deals in commodities like metals and oil. The business holdings include trading desks and warehouses to store metals………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries will increase shipments this month to the highest level since late July to meet final winter demand from Asian refiners, according to Oil Movements.
OPEC, supplier of about 40 percent of the world’s oil, will bolster sailings by 730,000 barrels a day, or 3.1 percent, to 24.2 million barrels a day in the four weeks to Feb. 22, the highest level since July 27, the researcher said today in a report. That compares with 23.47 million in the period to Jan. 25. The figures exclude two of OPEC’s 12 members, Angola and Ecuador………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The United States is awash in oil, yet analysts at RBC Capital Markets don’t expect that to pull benchmark crude prices much lower. In its five-year outlook, published Thursday, RBC analysts said soaring U.S. production will be absorbed by the rest of the world “with only modest price impact” over the next year.
The world’s largest economy is churning out record amounts of crude, and is mulling whether to export some of it abroad—something it hasn’t done in decades………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Saudi Arabia’s decision to cut March oil prices for Asian customers by more than expected appears to be a three-pronged move to maintain market share, boost refining margins and stave off demand destruction.
Saudi Aramco, the world’s biggest oil exporter, cut the official selling price (OSP) for its benchmark Arab Light grade to a premium of $1.75 a barrel over Oman/Dubai, down from $2.45 in February and lowest since July last year………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

It is the world’s most famous cartel. OPEC currently controls almost three quarters of the world’s crude oil, a commodity that, as of right now, industrialized nations cannot do without.
Ever since the 1973 Arab oil embargo when the cartel caused global oil prices to quadruple, the twelve nation group has been the judge, jury, and executioner for global oil prices………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Claims that high energy prices are making European industry less competitive are overblown according to new research showing a relatively small number of companies are affected and most get special protection.
“European economic competitiveness is not determined by energy prices,” says a study by a group of EU research bodies, the latest volley in a growing debate over whether climate and energy policies are sapping the bloc’s ability to compete………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The global supply of coking coal is expected to remain elevated in 2014, a trend that prevailed in 2013. Metallurgical coal – or coking coal – is a vital ingredient in the steel making process. Global steel production is dependent on coal and 70% of the steel produced today uses coking coal.
Enhanced global supply of coking coal in 2013, caused the continued prices decline of Premium Hard Coking Coal (PHCC), Hard Coking coal (HCC) and bearish global demand. But coking coal witnessed an increased global import rates; China, India and Japan importing million tonnes of coking coal, according to The Steel Index (TSI)………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Weak physical gold buying in India and China may pull global gold prices to 1,000 an ounce this year, said Bank of America Merrill Lynch in a research note (BofAML). According to BofAML, the likelihood of continued selling by tactical investors and a lack of physical buying in China and India are expected to pressure gold this year, possibly to $1,000 an ounce.
“If investors stopped selling gold, prices could stabilize around $1,200/oz. Yet, this is not our base case, and a more likely scenario is for investors to continue reducing their exposure. Our models suggest that this could take prices down to $1,000/oz,” said BofAML analysts, reported Platts………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

For centuries, gold was seen as a secure investment because it acted as a substitute for legally tendered money and served as a hedge against inflation. Both institutions and individuals invested in the safe haven, believing gold would keep them safe from the vagaries of economic misfortune.
In September 2011, gold prices reached a record high of more than $1,900 per ounce. But two years later in 2013 prices for the shiny metal had fallen almost 30 percent. So far in 2014, gold prices have recovered slightly but economists disagree on whether gold is going to recover its recent sparkle………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The likelihood of continued selling by tactical investors and a lack of physical buying in China and India are expected to pressure gold this year, possibly to $1,000/oz, Bank of America Merrill Lynch said Wednesday. COMEX gold for April delivery closed $5.70/oz higher at $1,256.90/oz Wednesday.
“If investors stopped selling gold, prices could stabilize around $1,200/oz,” BofA Merrill Lynch analysts said in a report. “Yet, this is not our base case, and a more likely scenario is for investors to continue reducing their exposure. Our models suggest that this could take prices down to $1,000/oz.”……………………………………….Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Silver prices, which jumped the most in more than four months yesterday, may extend a rally today as signs that the U.S. economy is slowing boosted the appeal of haven assets. U.S. companies boosted payrolls by 175,000 last month, trailing the 185,000 projection in a Bloomberg survey, ADP Research Institute said.
The data added to economic concerns after a private report this week showed factories expanded in January at the weakest pace in eight months. Silver and gold are rebounding after declines last year that were the biggest since 1981. A brightening growth outlook prompted the Federal Reserve to start cutting stimulus in December………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Nickel gained in London for the first time in four sessions on signs that demand for the metal used to make stainless steel will accelerate just as supply tightens on an ore-export ban from top producer Indonesia.
Crude stainless-steel output will rise to a record 39 million metric tons this year on Chinese production, industry consultant MEPS (International) Ltd. said yesterday. U.S. jobless claims fell as companies retained workers to meet demand. Indonesia will be consistent in applying the export limits, the government said………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Ernst & Young (EY) 2013 trends, 2014 outlook: A look back at 2013 as an inflection point, a year when management and investors finally came to terms with a new investing paradigm.
The extreme price volatility and rapid changes to the global economy persisted through 2013. Year-end reporting announcements were littered with headlines of impairments and recriminations that forced changes in strategy and senior management across many of the industry’s participants during 2013………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

In analysis published Wednesday, Hallgarten & Company’s Christopher Ecclestone suggests, “The storm of the last two years has winnowed the wheat from the chaff (largely) in the REE space.”
“The two bulk producers managed to get into production after a titanic struggle and have been rewarded for their perseverance with relatively lowly market caps,” he noted, adding that the fact Lynas and Molycorp have started churning out light rare earths products “are undermining Chinese dominance in some metals.”……………………………………….Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Tin, nickel, zinc and select copper prices dropped at the non-ferrous metal market here today on stockist selling amidst lower demand from industrial users on the back of bearish London Metal Exchange (LME) cues.
The industrial metals were trading lower at the LME, supported by expectations of improving - if fragile - economic growth this year, and as traders expected a pickup in prices when China returns after a holiday week on Friday………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Shares of metal companies have been in a downtrend since the beginning of the year, but the correction intensified in the last week of January as currencies of emerging markets came under intense pressure.
If that was not enough, reports of slowdown in China led to a sell-off. China’s Purchasing Managers’ Index slipped to 50.5 in January 2014 from 51 in December 2013. The factory growth eased to six-month low in January, hurt by weaker local and foreign demand. There are also concerns of rising debt in the system which pose risks to the economy………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The exchange traded funds (ETF) industry could surpass the hedge fund industry in assets under management (AUM) in the next 12-18 months according to EY’s Global ETF Survey.
The report said while growth rates will be highest in Asia and lowest in the more mature US market, the growth drivers will be the same across all markets - foreign currency share classes, fund of fund ETFs, new emerging market funds and commodity ETFs………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Agriculture ETFs are heating up, led by an explosive move in Coffee, while Cocoa is at new 52-week highs after several weeks of basing action (though it doesn’t trade much volume).
Powershares DB Agriculture Fund, which has about 11% exposure to Coffee and Cocoa, has also made an impressive move off the lows, breaking through the 40-week moving average on big volume:……………………………………….Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The commodity derivatives market regulator, Forward Markets Commission (FMC), is in the process of relaxing curbs to help brokers with a small shareholding in an exchange to start trading on it.
Chairman Ramesh Abhishek said at an Assocham conference here on Thursday that “the guidelines do not allow brokers with shareholdings in exchanges to trade even if these are in some other exchanges. We are in discussions with the government to change these. We feel brokers with up to two per cent or some such percentage can be allowed to trade as long, as they have no say in the management or on the board.”……………………………………….Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

Traders who anticipated a year when riskier bets would pay off are overhauling their foreign-exchange positions after an emerging-markets rout led to the worst start to the year for currency funds since 2004.
Hedge funds and other large speculators shuffled holdings of the dollar, yen, pound, Mexican peso and four other major currencies by a net 102,115 contracts in the week ended Jan. 28, according to Commodity Futures Trading Commission data. That’s the biggest realignment since September, with updated figures due tomorrow………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

The European Parliament agreed to speed up the approval of a carbon-market rescue plan, enabling an intervention aimed at bolstering prices to begin as soon as this quarter.
Carbon permits for December jumped 6.2 percent to close at 6.54 euros ($10.69) a metric ton, the highest in more than a year on the ICE Futures Europe exchange in London, after lawmakers in Strasbourg, France, endorsed the plan 306 votes to 276, with 14 abstentions………………………………………..Full Article: Source

Posted on 07 February 2014 by VRS |  Email |Print

EU lawmakers are completing details of a plan to curb an unprecedented oversupply and boost prices, which fell to a record in April. Allowances may rise to as high as 15 euros by 2015, according to Patrick Hummel, an analyst at UBS AG.
“There’s no reason why the market shouldn’t double within the next 18 months,” said Redshaw, who also worked as a trader at Enron Corp. and Electricite de France SA. (EDF) “At 6 euros, it’s still cheap.”……………………………………….Full Article: Source

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