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Commodities Briefing 25.Jul 2014

Posted on 25 July 2014 by VRS |  Email |Print

The International Monetary Fund on Thursday chopped its 2014 forecast for global economic growth to take into account weakness early in the year in the United States and China, the world’s two biggest economies. The IMF warned that only some of the factors leading to the reduction were temporary, and richer nations in particular faced the risk of economic stagnation unless they took steps to foster sustainable growth.
In an update to its World Economic Outlook report, the IMF said the global economy should expand 3.4 percent this year, 0.3 percentage points below what it predicted in April. Growth should still speed up to 4 percent next year, it said, unchanged from what it predicted earlier this year………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Stephanie Flanders, chief market strategist at JP Morgan Asset Management, believes that now is the time for investors to back commodity companies. She commented that while ‘it is too early’ to call the bottom of the commodity cycle, commodity stocks should still play an increasing role in investors’ portfolios because of the diversification they offer.
Flanders noted that 2014 has seen strong returns for commodities, with the Bloomberg/UBS Commodity Index having returned 7.1 per cent so far this year………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Ask someone to identify a big geopolitical consequence of the ongoing U.S. oil production boom and odds are high that they’ll invoke Iran. (Every one of the links in that last sentence is an example.) Without surging U.S. oil production, they’ll argue, sanctions on Iranian oil exports would have led to a massive oil price spike. Here is a concrete case of the oil boom yielding greater U.S. freedom of action in the world, and a harbinger, it would seem, of things to come.
The historical account seems right, but it’s tough to see how the Iran experience might be repeated. The upshot is that the lessons for future U.S. freedom of action – and for geopolitics more generally – are being badly over-read………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

It is the world’s most famous cartel OPEC that currently controls almost three quarters of the world’s crude oil, a commodity that, as of right now, industrialized nations cannot do without. OPEC is currently an organization comprised of 11 member countries: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.
Formed in 1960 by 5 countries, OPEC clearly dominates world oil as its member countries produce 41% of the world’s oil, and comprise 55% percent of the world’s traded oil. Perhaps the most important statistic is the amount of the world’s oil reserves that OPEC member countries control; they control over 78% of all crude oil reserves………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Once upon a time, you used to hear a lot about the “vampire power” load that televisions, monitors, desktops and other electronics equipment consume while in standby mode. Apparently, we’ve been overlooking “network-connected” things such as set-top boxes, gaming consoles, modems and printers but we shouldn’t, according to a new report by the International Energy Agency (IEA).
That’s because these sorts of technologies are already consuming about 400 terawatt-hours (TWh) of electricity in standby mode alone – the amount of power used by both the United Kingdom and Norway, combined………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Hydraulic fracturing (“fracking”) has flipped the global energy discussion on its head. Over the past five years, the world has watched the U.S. shift its focus from fears of peak oil and its level of oil imports to a new reality where domestic oil and gas production are up and imports are down. And, while global greenhouse gas emissions have continued to increase, U.S. emissions have now decreased down to 1994 levels.
As shown in the graphic below from International Energy Agency’s Unconventional Gas Production Forum, shale gas production has dramatically increased in the United States over the past decade – in particular since 2009………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Traders booked the most tankers in eight months to ship diesel and heating oil to Europe from the U.S. Gulf, where refining is surging as a consequence of America’s rising crude production.
Oil companies either booked or plan to charter 16 tankers to transport cargoes on the route for loading during the next two weeks, according to the survey of six people involved in the trade yesterday. That compares with nine last week and is the highest count since Nov. 6………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

China’s gold demand fell by nearly a fifth in the first half of 2014 from a year ago as consumer interest in bullion bars and coins waned.
Soaring purchases by retail customers in 2013 helped China overtake India as the world largest gold consumer for the first time. That buying “frenzy”, as the metals consultancy Thomson Reuters GFMS described it, was largely driven by the 28 per cent fall in the gold price last year………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Few things attract as many conspiracy theories and theorists as gold does. The most enduring conspiracy theory seems to be that central banks around the world are colluding to keep a lid on gold prices. The logic here presumably is that a spike in gold prices could be construed by market participants as a harbinger of inflation, and if it occurred, would force central banks to raise interest rates from their artificially low levels (2009 – circa 2014).
Another sub-plot is that the biggest gold exchange-traded funds (ETFs) have a huge shortfall in the amount of gold they hold. Here are three reasons why the noble metal is a favorite subject for conspiracy theorists everywhere……………………………………….Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Goldman Sachs’ commodity strategists write this week that they remain doubters of gold’s 2014 rally, sticking to their prediction that the metal will reach $1,050 in price by the end of the year. To come true, it would mean a slump in gold’s price of 19% or greater from current levels. That’s pretty bearish.
But the GS’ strategists’ bearishness has a limit. In a note to clients this week, the strategists write that they expect the $1,200 level, or roughly 7% beneath Thursday’s prices, to function as “a good estimate of the floor price for gold.”……………………………………….Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Gold has had a rough week, no doubt pressured by a rising dollar, weaker demand from Chinese importers, and as one RBC Capital analyst diplomatically put it, “a lack of new geopolitical developments.”
Nor did it help matters that Goldman Sachs has issued a report this week stating that it remains skeptical of the 2014 rally in gold. The influential investment bank, as reported by Barrons.com, is sticking to a prediction that the precious metal will fall to $1,050 an ounce by the end of the year, a slump in gold’s price of 19% or greater from current levels………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

With Wall Street and institutional investors continuing to place some big bets on precious metals, there are growing calls from some analysts that silver is significantly undervalued and is worth $50 an ounce. This may sound ludicrous to some investors — the metal is now trading at U.S. $21 an ounce — but there is a rationale behind the argument.
There is a strong correlation between gold and silver prices and while gold has rallied strongly this year after seeing its price collapse after the Fed started unwinding quantitative easing at the end of 2012, the price of silver hasn’t kept up. The key driver of this emerging view among analysts is the gold-to-silver ratio, which measures how many ounces of silver are required to purchase an ounce of gold………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Participants in precious metals markets are watching to see if geopolitical tensions put more of a risk premium into gold and boost palladium again, says Robin Bhar, metals analyst with Societe Generale. Prices spiked last week when a Malaysian jetliner was reportedly shot down by pro-Russian separatists, but have since pulled back.
“However, with all eyes on (Russian President Vladimir) Putin, aside from some price volatility here and there, the majority of investors seem to cautiously sit on the sidelines watching the action in the political spectrum unfold,” Bhar says………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Goldman Sachs said it expects copper to underperform other base metal prices over the next 12 months, citing the red metal’s heavy exposure to China’s property sector, which it expects to remain bearish this year and next.
The bank also said copper has entered a once-in-20-year supply cycle, which started in the second half of 2012 and is set to last through to 2016/17, following a decade of high capital expenditure investment in the industry, raising trend supply growth to about 4-5 percent from about 2 percent over the past decade………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Goldman Sachs Group Inc. raised its price forecast for nickel as the market is swinging to a deficit next year following an ore-export ban in Indonesia. The bank’s 12-month estimate is now $22,000 a metric ton, up 38 percent from the previous projection of $16,000, analysts led by Max Layton wrote in a report.
They increased zinc and aluminum by at least 11 percent to $2,500 a ton and $2,100 a ton, respectively, saying iron ore, gold and copper have “the greatest downside” among the mining commodities………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Douglas Oberhelman, chief executive officer of Caterpillar Inc., talks about the company’s second-quarter earnings and full-year forecast, share buyback and the impact of global political instability on Caterpillar.
The largest maker of mining machinery forecast full-year sales and earnings that fell short of analysts’ estimates. Oberhelman speaks with Trish Regan on Bloomberg Television’s “Street Smart.”……………………………………….Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Commodity ETFs like PowerShares DB Agriculture Fund (DBA), PowerShares DB Commodity Index Tracking Fund ETF (DBC) and United States Commodity Index Fund ETV (USCI) could all be good plays on the commodity space which has pulled back to key technical levels.
As the rest of the equity markets achieve new historical highs, the commodity space has pulled back to key technical levels providing nice risk/reward entry levels – a reason why we have recently added both the PowerShares DB Agriculture Fund and PowerShares DB Commodity Index Tracking Fund ETF, the latter being similar to the United States Commodity Index Fund ETV, to our SmallCap Network Elite Opportunity portfolio………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

South Korea’s corporate sector reported disappointing profits Thursday due to a strong local currency that’s making it harder to compete in overseas markets at a time of lackluster global growth.
Hyundai Motor, SK Hynix Inc., a chip maker and steelmaker Posco all blamed the currency for sizeable declines in net profits during the second quarter. LG Electronics Inc., whose net profit doubled in the quarter due to a revival of its smartphone business, said profits would have been larger still if the won hadn’t been so strong………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Talks to reach the first settlement in the currency-rigging probe are accelerating, with Britain’s markets regulator preparing to reach a deal with a group of banks this year, people with knowledge of the situation said.
The Financial Conduct Authority is in negotiations with banks including Barclays Plc, Citigroup Inc., JPMorgan Chase & Co. and UBS AG, said the people, who asked not to be identified because the discussions are private. Royal Bank of Scotland Group Plc and HSBC Holdings Plc may also be part of the group settlement, one of the people said………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

Coal’s comeback in Europe could become permanent unless policymakers rethink their approach, campaigners have warned. Carbon emissions from coal power across the EU have risen 6% since 2010, despite falling electricity demand and increased renewable generation.
That is a result of cheap coal displacing expensive, but less polluting, gas in the energy mix. Sandbag, a London-based NGO and think-tank, called for urgent action to curb coal emissions, in a report published on Thursday………………………………………..Full Article: Source

Posted on 25 July 2014 by VRS |  Email |Print

UK Secretary of State for Energy and Climate Change, Edward Davey, has announced that the government will not be making any changes to the fourth carbon budget. Carbon budgets, legally-binding caps on GHG emissions that last for a period of five years, help to lead the way to the statutory target to reduce emissions by 80% by 2050 from 1990 levels.
The fourth carbon budget covers 2023 to 2027, with a 50% emissions reduction aim from 1990 levels. The decision follows a detailed review, which took into account factors such as differing EU Emissions Trading System plans between the UK and other areas of the EU………………………………………..Full Article: Source

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