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Commodities Briefing 28.Jul 2014

Posted on 28 July 2014 by VRS |  Email |Print

Commodities performance in Q2 and in the beginning of Q3 has been a mixed bag. We have the grains and oilseeds plunging into a bear market, rallies in the softs and better returns in energy and precious metals. These commodity asset classes are re-aligning and being driven by their own fundamentals rather than broad macro-economic drivers. A whole range of factors, especially from the supply side including weather, export bans, unplanned outages and geopolitical risk, are starting to have more influence on commodity prices than announcements from the Fed.
The first half of 2014 has also seen a decline in the correlation between commodities and other asset classes. With the current environment of high bond issuance, tight credit spreads and record low volatility in these other asset classes, the higher volatility in different commodity markets is inducing investors to re-look commodities again………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Industrial metals have emerged stronger in 2014 while weakness continues in energy and bullion complex that emerged recently. The gains in base metals have been driven by increased speculation about a rising supply deficit in aluminum over the coming two years as demand keeps rising at a time where some fo the major producers outside China have reduced production, noted Ole S Hansen, Head of Commodity Strategy at Saxo Bank.
The general imporovement in economic data out of China and the US, the world’s two biggest consumers by far, has also helped improve sentiment during the past couple of months………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

The world feels especially scary lately. There has been mayhem in the Middle East, Russia seems on the verge of becoming a rogue state, violence in Central America is driving children to make the harrowing trek to the U.S. border, and much of Asia is bickering over Pacific islands and political dominance. Global politics are rarely this unstable.
Global financial markets, by contrast, are sanguine. The U.S. stock market is at record highs, and markets in most of the rest of the world aren’t far behind. Investors are willing to buy the bonds of financially challenged companies and countries at record low interest rates. Global commodity prices and most currencies, including the U.S. dollar, are steady………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

The Organization of Petroleum Exporting Countries (OPEC) are expected to see their revenues decline this year and the next as demand for their crude diminishes, according to the Energy Information Administration, the US Department of Energy’s research arm.
The 12-member OPEC net oil export revenues hit an all-time high of USD 900 billion in 2012, before falling to USD 826 billion in 2013. EIA did not include Iran due to lack of available data. This was a 7% decrease from 2012 earnings, but still the second-largest earnings totals during the 1975-2013 period for which EIA has tracked OPEC oil revenues………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Imports of natural gas from Egypt and crude oil from Iraq have been at a standstill since the beginning of this year, according to Energy Minister Mohammad Hamed. “Oil from Iraq is still completely halted due to the deteriorating security conditions there,” the minister told The Jordan Times in a recent interview.
The Kingdom used to import around 10,000 barrels of crude oil per day from Iraq. Jordan has resorted to importing crude oil from the Saudi Arabian oil company, Aramco, he said………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

The U.K. will begin the bidding process today for the next set of onshore oil and gas exploration licenses, including shale gas, which is considered a cheaper and more secure energy source.
Details will be set out by the Department of Energy and Climate Change. About half the U.K. will be open for bids, yet the areas considered to be shale gas prospects are smaller, and are already around half-covered by licenses………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

The price of gasoline in the United States will remain fairly static for the immediate future, even though refineries are working at record levels because of the surge in oil production. The U.S. Energy Information Agency (EIA) said July 24 in its weekly petroleum report that refineries took in 16.8 million barrels of crude per day for the previous two weeks, more than the last record set in 2005.
The refining output broke the old record in the week of July 13 with input levels at 16.6 million barrels a day, particularly at refineries in the Midwest and the Gulf coast, the EIA said. This was the highest level it recorded since 1989………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Speculators are fleeing natural gas after prices dropped below $4 for the first time since December and power plant production fell to a 13-year seasonal low.
Hedge funds reduced net-long positions, or bets on rising prices, by 11 percent in the week ended July 22, the U.S. Commodity Futures Trading Commission said. Bullish wagers have fallen 51 percent since February………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

It is a property of physics that action is met by reaction, as a matter of real science. In the world of financial markets, however, that principle may only doubtfully apply, just as in economics cause and effect are very often difficult to disentangle.
That said, there is a fairly clear counterpart to the supposed likelihood of the US dollar rising with the expected onset of rising interest rates, as related last week. That is the impact on gold, responding both to the same underlying force and to the currency’s behaviour itself………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Goldman equity analysts Andrew Quail and Jitendra Pandey have increased their long term inflation adjusted gold price forecast to $1,200/ounce from $1,066/ounce. They recognize that gold is trading at about a 9% premium to their estimate and foresee the precious metal reverting back to a cost sustaining level.
Such level, which Quail and Pandey estimate to be $1,200/ounce, comprises costs incurred to obtain gold that include extracting, storing, exploring and building infrastructure………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Hedge funds increased their bets on a gold rally, just before prices fell for a second week as an accelerating U.S. economy outweighed concern that violence between Russia and Ukraine will escalate.
Money managers increased their net-long position by 3.1 percent in the week through July 22, U.S. government data show. Two days later, prices dropped to a five-week low amid declining demand. Purchases by China, the world’s biggest user, fell 19 percent in the first six months of the year………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

HSBC, Deutsche Bank and the Bank of Nova Scotia have been accused of rigging the price of silver. According to J Scott Nicholson, an investor who filed a lawsuit against them in the US, the banks abused their position of controlling the daily silver benchmark by unlawfully manipulating it to reap illegitimate rewards from trading.
This would have been detrimental to other investors in the $5-trillion silver market, who base billions of dollars worth of transactions on the benchmark………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Demand is soaring for lithium, which is used in rechargeable batteries for smartphones, iPads and electric vehicles. Weeks ago I wrote in this article that “Despite the lithium sector being in a correction for six weeks, attention should be paid to this dynamic sector which may be just on the verge of breaking out higher.” The lithium ETF was trading below $13 when that article was written testing the 200 day moving average.
Now the lithium ETF is poised to make a powerful breakout at new 52 week highs at $14. A game changing event occurred last week when Albemarle paid over $6.2 billion to buy the world’s largest publicly traded lithium producer Rockwood Holdings………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Zinc prices extended a rally to a 35-month high as speculation mounted that global demand will exceed supplies. Lead rose to the costliest this year.
Zinc inventories monitored by the London Metal Exchange have tumbled 30 percent this year to 653,900 metric tons, the lowest since December 2010. Goldman Sachs Group Inc. forecasts a global production deficit will widen to 154,000 metric tons next year………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Access to water has become one of the most significant business risks for miners, says a report that also highlights the threat to the sector from rising energy costs in some resource-rich areas.
EY, the consultancy, said affordable water and energy should now be viewed as one of the 10 biggest problems for miners. The threat was particularly acute in South America and Africa, it said. These continents are significant in the global supply of many metals, particularly copper………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

If you believe that Nifty and Sensex will scale new peaks over the next three-to-five years and are wondering how to bet on them, ETFs and Index funds are the two options that you can explore. Though both are passively managed funds and their returns closely track that of the benchmark, they are not the same. Here are the differences.
How to buy them? ETFs, as the name suggests, are traded on the exchange and are bought and sold only through the exchange. ETFs being similar to equity shares, you will need demat and broking accounts to buy them. But Index funds can be bought or sold directly from the fund house, similar to other mutual fund schemes………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Agri-commodity counters are witnessing volatility due to the revival of monsoons in the second half of July. While this could be a short-term phenomenon, in the medium to long-term agri-commodity prices are still looking bullish.
Between June 1 and July 15 there was a 43 per cent deficit in rainfall. However in the second half of July there was some recovery and the deficit narrowed down to 25 per cent. This has led to slight correction in most of the agri-commodities and some have also remained volatile in the past week………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Here’s a good one for those who think the dollar’s days are numbered. A survey released last week by HSBC Global says more U.S. multinationals are closing trade transactions in…you guessed it…the Chinese yuan.
Of course, this sort of news is right up HSBC’s alley. They are one of the premier financial centers in Hong Kong, where much of the off-shore Chinese currency transactions take place. It’s like a dream come true for the old colonial bank: the yuan increasingly being taken seriously as a viable trade currency………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Last Thursday, the Superintendent Of Financial Services for the state of New York, Benjamin M. Lawsky, proposed regulations for virtual currency companies operating in the state. Lawsky proposed a “BitLicense” plan, which includes rules on consumer protection, the prevention of money laundering, and cybersecurity. It is the first such proposal by a state to create guidelines specifically for virtual currency.
“We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation,” Lawsky said in a statement. “Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”……………………………………….Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

Australia’s repeal of a pioneering tax on carbon emissions has dealt a sharp blow to struggling international efforts to coordinate on global warming and comes ahead of key climate-change talks next year.
On July 17, Australia’s parliament pulled the plug on the 2012 tax, which charged 348 businesses such as steelmakers and power companies A$25.40 (US$24) per ton of carbon dioxide emitted. The levy was slated to evolve next year into an emissions-trading system that would link to the European Union’s………………………………………..Full Article: Source

Posted on 28 July 2014 by VRS |  Email |Print

The carbon tax may have gone, but the players have not moved on. For the Greens, its resurrection is only a matter of time. Labor, ever reluctant to face realities, pretends to maintain the rage, much as it did with the GST. Meanwhile, the lessons of the fiasco, and its implications for the Abbott government, are ignored.
At the heart of those lessons is a simple fact: the electorate is unwilling to bear crippling costs for the purely hypothetical benefits of decarbonisation. Despite all their apocalyptic rhetoric, the climate change advocates cannot secure and sustain popular support for the taxes needed if large-scale reductions in emissions are to occur………………………………………..Full Article: Source

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