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Commodities Briefing 17.Jul 2014

Posted on 17 July 2014 by VRS |  Email |Print

A small allocation to commodities is justified based on their diversifying properties, but this year’s strong performance is unlikely to continue, Schroders’ multi-asset team has claimed. Alastair Baker and Patrick Brenner, two managers on the team, said many investors had moved underweight or eliminated commodities from their portfolios, based on extreme underperformance since 2011 and a high correlation with equities.
More recently, however, commodities, as measured by the Dow Jones-UBS Commodity index, have enjoyed a stronger 2014, outperforming equities and bonds in the first half of the year………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Commodities from iron ore to copper and Brent crude are expected to see price falls over the next five years as global supplies increase, according to Goldman Sachs. There will be substantial declines in some metals, energy and bulk commodities, analysts including chief currency strategist Robin Brooks wrote in a report. The period of continued year-on-year price rises for most commodities is over, they said.
Banks from Citigroup to Deutsche Bank have called an end to the commodities super-cycle, when China’s surging demand for raw materials combined with supply constraints at mines and wells to more than double prices in the 12 years to the end of 2010. Commodities rallied this year from three consecutive annual losses as a lack of rainfall in Brazil lifted coffee 46 per cent and a ban of ore exports from Indonesia spurred a 39 per cent increase in nickel………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Investors in some commodities exchange-traded funds are getting a performance boost this year from a quirk of the commodities futures markets. Most commodities ETFs get their exposure by buying futures contracts, and over time they typically shift, or roll, their positions from nearby to later-dated contracts. Sometimes, they have to pay more for the new contracts, which eats into returns.
But this year, declining inventories, a series of supply disruptions and demand jolts across markets from oil to nickel to hogs has resulted in prices being higher for immediate-delivery futures contracts than for contracts for later delivery……………………………………….Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

As trading has become more competitive and markets more transparent, big commodity traders have responded by sinking billion of dollars into refineries, power plants, ports and other assets.
It is a narrative that has taken up many column inches over the past couple of years and there is more than a kernel of truth to it. Some energy and metals traders have indeed become more asset heavy through targeted acquisitions. Vitol, for example, recently acquired Royal Dutch Shell’s Australian refinery and petrol station assets for $2.6bn, while Mercuria is set to buy the physical commodities business of JPMorgan Chase………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

It’s do or die time for commodities. In classic Stage Analysis what we’re seeing right now is a retest of a Stage 1 base that formed over multiple months in 2013. Commodities then broke out of that base in early 2014 but are now retesting the base which is typical in a Stage 2 uptrend.
This retest is kind of a mixed bag in my opinion, because agricultural commodities are acting extremely weak and putting in new lows. Energy is looking weak too. Precious and base metals are probably the strongest portions of the commodities complex currently. Which is interesting because they lagged at the beginning of the year and now they are leading………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

The British government announced on Wednesday another 3 million pounds ($5.14 million) a year in funding for the country’s new oil regulator until 2022, after which it will be fully financed by the industry.
The Oil and Gas Authority (OGA), which will be based in Aberdeen, Scotland, will be responsible for ensuring that oil explorers squeeze as much oil and gas out of Britain’s North Sea as possible. It is expected to start operating later this year………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Saudi Arabia exported nearly 1.38 billion barrels of oil in the first six months of the current year (2014) that yielded SR565 billion, an economic expert was quoted by the local media. Local consumption is projected to hit 395 million barrels, or 22 percent of the total production, during the same period, Fahad bin Jumaa told Al-Riyadh Arabic daily.
The figures come at a time when OPEC (Organization of Petroleum Exporting Countries) is poised to shrink its share of the global market for the third consecutive year by 2015 for a number of reasons, including boom of shale oil in the United States despite acceleration of global demand on oil, he said………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Over the last several decades, political and military turmoil in Iraq has been almost immediately associated with rising oil prices and increased uncertainty in energy markets. From a supply and demand perspective, there are some real and appropriate reasons for why this might occur. Iraq is one of the largest contributors in the Organization of the Petroleum Exporting Countries (OPEC), which accounted for more than 80% of world crude oil reserves, as of 2012.
So, it is relatively easy to understand why there is a strong association between political turmoil in the Middle East and the potential for rising prices in oil and many other energy markets. This is also why stocks likeExxon Mobil have rallied to yearly highs above $100 per share………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Optimism about U.S. energy security, which is rooted in the abundant supply of fossil fuels alone, is misplaced, Maria van der Hoeven, head of the International Energy Agency (IEA) said.
The U.S. has seen a dramatic reversal in its energy fortunes over the past seven years that has sent imports falling, product exports surging, and a boom in natural gas production—”so much so that it is muscling out other sources of power,” the IEA’s executive director said in a keynote address at the 2014 Energy Information Administration’s (EIA) Energy Conference………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Gold has been a bit reactionary over the past days bouncing around on geopolitical stress and words from the US Federal Reserve Chief. Mario Draghi just a month ago sent the metals market on a whirlwind when the central bank moved to help the eurozone recovery moving to negative interest rates. Lately global stress shifted from Iran to Ukraine and then to Iraq.
With tensions between Palestine and Israel reaching war, Iraq has been pushed off the front pages of the papers. Gold peaked just a week ago close to 1350 and tumbled yesterday to below 1295 and stands flat this morning at 1297.10 after Fed Chair Janet Yellen’s testimony before the US Senate. Yellen said U.S. labor markets are far from healthy and signaled the central bank would not be in a hurry to hike interest rates………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Just before New York’s opening bell on Monday somebody dumped 14,000 gold contracts onto the market. That’s 1.4 million ounces (a contract is 100 ounces), or $1.8bn worth – around a 65th of annual global production.
And it followed a 6,000-contract dump earlier in the day as markets opened in Europe. Is somebody trying to get the price down? Gold ended last week at $1,340 an ounce. Then, on Monday afternoon, it touched $1,302. That near-$40, 2.5% drop was its biggest daily plunge since December 2013 – the nadir (so far at least) of gold’s bear market………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Gold held above a one-month low on speculation the biggest decline this year may spur demand as holdings in the largest exchange-traded product backed by the metal expanded to the highest level since April.
Holdings in the SPDR Gold Trust climbed this year, rebounding from a 41 percent contraction in 2013, even as the Federal Reserve pressed on with cuts to stimulus. The assets rose 8.68 metric tons to 808.73 tons yesterday, the biggest tonnage gain since October 2012, data from the company’s website showed. Fed Chair Janet Yellen testifies to lawmakers today and may offer clues on the timing of rate increases………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

The unfortunate name will disappear. So too will the private teleconference, as well as the ownership by a handful of banks that have run the London Silver Fix – the global benchmark price – since 1897. And the cloak of secrecy over the trading volumes will be lifted.
But anyone thinking there has been a complete change in the way the daily snapshot of the silver market is conducted would be mistaken. The new benchmark, to be administered jointly by Thomson Reuters and the CME Group from August 15, keeps some of the main features of the silver fixing, in particular the auction-style process used to calculate the reference price………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Peru was once a world leader of silver mine supply but has now fallen to third globally. While the country does boast some large primary silver producing mines, Antamina, the country’s largest silver producing mine is primarily a copper mine, with silver constituting as by-product.
Chungar, also one of the largest silver producing mines in Peru, is primarily a zinc producing mine. Peru’s production peaked in 2009 at 126 million ounces of silver followed by three consecutive years of decline. The country bounced back in 2013 and is expected to produce nearly 120 million ounces of silver in 2014………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

A rally in base metals may be “overdone,” says Citi Research. The London Metal Exchange Index is up 7.2% since June 12. “However, we do not believe that current supply-(and)-demand fundamentals justify this rally and expect prices to correct lower,” Citi says.
The bank says the rally has been driven by paper-market positioning on the back of improving macroeconomic sentiment, money inflows including those from commodity trading advisers, and anticipation of more positive supply/demand conditions next year, such as zinc mine closures. ……………………………………….Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Agricultural commodities had a smooth ride in the first four months of 2014. A weaker dollar, adverse weather and higher demand brightened the potential of the space. However, the space bucked the trend lately thanks to a favorable weather outlook and accelerated crop plantings. The latest data by USDA on monthly agricultural demand-supply report released on July 11 confirms the fact as well.
Below we have highlighted three agricultural commodity ETFs which harbor a bearish trend as of late and have retreated considerably in July. Thus, investors should keep a close eye on these ETFs, which might continue to plunge if things remain against this space in the near term:……………………………………….Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Within 18 months of commencing operations, IT People-promoted Universal Commodity Exchange (UCX), India’s sixth nationwide commodity futures trading platform, has suspended trade in all commodities, with immediate effect. With this, UCX became the second exchange to suspend futures trade in commodities. Early this year, MMTC-Indiabulls-promoted and Reliance Group-anchored Indian Commodities Exchange (ICEX) had suspended trade.
In a circular, UCX said, “Due to prevailing market conditions, it has been decided to suspend the trading activities of the exchange temporarily, subject to the approval of the regulator Forward Markets Commission (FMC) till the time a renewed plan is put in place.”……………………………………….Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Asian commodity trader Noble Group and private equity firm EIG Global Energy Partners this week announced a joint venture, Harbour Energy, that will seek to buy operating companies world-wide in the oil and gas exploration and production, gathering, processing and transmission sectors.
The deal is part of a larger effort by Noble to focus on its trading business while relying on partners to handle production of physical commodities. Singapore-listed Noble has formed two other joint ventures over the last year to deal with production of commodities in the agriculture and mining sectors. In both cases, it teamed with buyout shops………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Bearish trend is prevailing in most agri-commodities traded in Chicago Board of Trade (CBOT) and Intercontinental Exchange (ICE) amidst rise in acreage, record production estimates and falling demand.
Soybean has slumped more than $1.50 a bushel to trade under $11 for the first time in a year. Reuters analyst said that soybean still remains at an unusually large premium to its competitor rapeseed, the second widely produced and consumed oil seed in the world. Hence investors must be ready for further drop in soybean prices, the analyst said………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

U.S. precious metals dealer Anthem Vault Inc. said on Wednesday it has launched the first digital currency backed by physical gold, with an aim to increase the use of bullion as an accepted form of electronic money. Las Vegas-based Anthem said it will launch 10 million “INNCoins” backed by 100 grams (3.5 ounces) of gold, with all coins expected to be in circulation by July 2015.
“It should make gold more acceptable as a form of currency by combining its appeal as a store of value and a much more efficient medium of exchange,” said Anthem Blanchard, chief executive of Anthem Vault, who previously worked at online precious metals market GoldMoney………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Headed overseas for summer vacation? It’s easy to get hit with extra fees and expensive exchange rates when switching currencies. Some currency exchange tables in airports and tourist areas offer bad rates, taking more of your money. And some credit cards and banks can add fees when you buy something with your card.
Your best bet is to bring a credit card that doesn’t charge currency exchange fees and some cash for backup. Most purchases should be done on the credit card, says James Gambaccini, a certified financial planner at Acorn Financial Services. That’s because credit cards offer fraud protection. If you lose cash, or it gets stolen, you won’t get it back………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

President Barack Obama recently said in an interview on climate and energy that if there’s one thing he would like to see, it would be for the U.S. to be able to put a price on carbon emissions. He is right — an effective market-driven approach to carbon pricing is crucial to tackling climate change and reducing emissions. The U.K. was the first to adopt carbon trading in 2002, and it continues to trade under the European Union’s Emissions Trading System.
The EU cap-and-trade system is the world’s largest. By putting a price on every metric ton of carbon emitted and allowing companies to trade allowances, the system enables carbon-reduction targets to be met at the least cost………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

South Korea’s emission trading to start next year will cost a total of 27.5 trillion Korean won ($26.64 billion) for the next three years and should be delayed to 2020, a business lobby group said.
The scheme is due to start January 1, 2015 to cap greenhouse gas emissions from over 400 of the country’s major polluters such as power generators and manufacturers. It aims to cut emission in 2020 at 30 percent below business-as-usual levels………………………………………..Full Article: Source

Posted on 17 July 2014 by VRS |  Email |Print

Britain said it wants deeper reforms to the EU Emissions Trading System than those proposed by the European Commission and Germany, favouring cancelling a “significant number” of carbon permits over launching a tool to regulate market supply.
In a report detailing its vision for the fourth phase of the EU ETS, which will run from 2021 to 2030, Britain said major changes to the system are needed to help businesses cut their greenhouse gas emissions, to protect them from foreign competitors, and to foster investment in low-carbon technology………………………………………..Full Article: Source

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