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Commodities Briefing 30.Jul 2014

Posted on 30 July 2014 by VRS |  Email |Print

Nickel and palladium are set to outperform iron ore and soybeans as supply outlooks for commodities diverge amid a tentative acceleration in global economic growth, according to Goldman Sachs Group Inc.
The bank kept its 12-month recommendation for commodities at neutral, analysts including Jeffrey Currie wrote in a report dated yesterday. They expect the total return for the Standard & Poor’s GSCI Enhanced Commodity Index to be 0.1 percent in 12 months helped by positive roll yields………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Scotiabank’s Commodity Price Index inched down by 0.7% month-over-month (m/m) in June, but has climbed 8.9% from last December’s low — led by stronger oil and gas prices. “The Metal and Mineral sub-Index retreated in June, but will rally sharply in July amid a spurt in base metal prices and steadier gold prices,” said Patricia Mohr, Scotiabank’s Vice President of Economics and Commodity Market Specialist.
“Exuberance over a moderate pick-up in China’s economy in the second quarter partly accounts for the recent surge in investor interest in base metals, as does a second year of record global auto production, with strength in China (+9.7% YTD), North America (+4.3%) as well as Germany and Spain (+7.9% — the two biggest auto manufacturers in Western Europe).” (Press Release)

Posted on 30 July 2014 by VRS |  Email |Print

The commodities complex saw few changes on Monday, although geopolitical concerns buoyed gold prices while oil futures traders stayed on the sidelines ahead of weekly supply data scheduled for release on Wednesday.
President Barack Obama was expected to meet with four of his European counterparts, with the possibility of new sanctions being levied on specific sectors of the Russian economy a distinct possibility. Gold futures for delivery in December ended trading $3.4 lower at $1,305.8/oz. on COMEX. Front month West Texas crude futures slipped by 20 cents to $101.67/barrel on NYMEX………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

A story recently in Reuters talked about how the biggest trading houses are filling the traditional banks (and mostly European banks role) of funding traders. This got particular attention, especially in light of the Obama administrations sanctions on Rosneft and other big Russian commodity producers.
If you look at the big trading houses, do they really want to take over the role of banks (who have access to historically cheap deposits?). Or is it really a question of providing these large trading houses with huge credit lines to further provide upstream finance to their smaller counterparties?……………………………………….Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Is Crude Oil about to follow in the footsteps of the yield on the bell weather bond and break support? The left chart above highlights that the yield on the 30-year bond is breaking down, below a two-year support line. The right chart highlights that Crude Oil and the yield on the 30-year bond have correlated a little bit over the past couple of years, with the 30-year breaking support.
Could crude oil follow yields and break lower? If they both break support and head lower, what would the macro message be coming from them? If Crude would break 5-year support, traders would expressing some concern about the prospects of global growth………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

How much oil does the world consume? You’d think this would be a fairly straightforward question, given its economic importance to the world economy, and indeed answers are not hard to find. The problem is those answers differ significantly. Even with the development of the Joint Organisations Data Initiative–an evolving beast designed to bring improved transparency to oil markets–oil market data remains messy, inaccurate and opaque.
For 2013, a year which by now should be transitioning from estimate to a matter of historical record, OPEC puts world demand at 90.00 million b/d, the International Energy Agency at 91.40 million b/d and the US Energy Information Administration at 90.49 million b/d. The difference is large in absolute terms–1.4 million b/d between the IEA and OPEC–but small if viewed in percentage terms, about 1.5% of the total market………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

The US continues to dominate both natural gas production (and consumption). In 2013, the US set a new all-time high production record for the third straight year, with gas production rising to 66.5 Bcfd to lead all countries. In fact this was once again more natural gas than any country has ever produced in one year.
Natural gas production in Russia reached 58.5 Bcfd, good for 2nd place globally. The US and Russia cumulatively produce 38% of the world’s natural gas. Far behind in third place was Iran at 16.1 Bcfd — good for 4.9% of global gas supplies. Rounding out the top five were Qatar at 15.3 Bcfd and Canada at 15 Bcfd………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Business Monitor International has released a new report, ‘Saudi Arabia Oil & Gas Report Q3 2014’, in which it indicates the view that crude production in the country will remain elevated by historical standards in 2014 and 2014.
This view is based on continued OPEC outages, a mediocre global supply picture, a continued increase of domestic consumption from the power generation and transport sectors, strong demand from the refining sector and a recovering global demand picture………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

China’s apparent oil demand* in June turned directions from May and climbed 2.7% versus the same month a year ago to 41.94 million metric tons (mt) or an average 10.25 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data. On a month-over-month basis, apparent oil demand was up 8.6% from May.
“Analysts attributed the June increase to stronger fuel demand by the farming and agricultural sectors for the summer planting season,” said Song Yen Ling, Platts senior writer for China. “It’s also interesting to note that June marked the second month that China’s apparent oil demand crossed the 10 million b/d this year, following February’s 10.62 million b/d.”……………………………………….Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

President Barack Obama’s proposed rule to curb carbon emissions from the nation’s power plants could raise costs and affect reliability in the U.S. electricity system, federal regulators told Congress.
But the commissioners of the Federal Energy Regulatory Commission, the government agency charged with overseeing the electric grid and other parts of the nation’s energy infrastructure, also said at a House hearing the government has a responsibility to act on climate change………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Fossil fuels have had a banner year so far. Both prices for oil and natural gas have surged on the backs of higher demand and a dose of geopolitical tension. Likewise, oil and gas stocks – as represented by the Energy Select Sector SPDR ETF (XLE) – have also produced some hefty returns this year.
The same can’t be said for old king coal, however. A host of issues from lower demand to emissions regulation have sent prices for both the underlying commodity and the companies that extract it down into the basement………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Gold was little changed just above USD 1,300 an ounce on Tuesday, supported by geopolitical tensions in the Middle East and Ukraine, with investors also focusing on U.S. jobs data and a Federal Reserve policy meeting this week.
The Fed kicks off its two-day meeting later on Tuesday, with markets watching for clues as to when the U.S. central bank will begin increasing interest rates. The Fed will make a statement on Wednesday at the end of the meeting. “Gold is going to be range-bound until the Fed meeting and economic data later this week,” said Mark To, head of research at Hong Kong`s Wing Fung Financial Group………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Sometimes I see an important economic or geopolitical event in screaming headlines and think: “That’s bullish for gold.” Or: “That’s bad news for copper.” But then metals prices move in the opposite direction from the one I was expecting. Doug Casey always tells us not to worry about the short-term fluctuations, but it’s still frustrating, and I find myself wondering why the price moved the way it did.
As investors we’re all affected by surges and sell-offs in the investments that we own, so I want to understand. Take gold, for example. Oftentimes we find that it seems to tease us with a nice run-up, only to give a big chunk of the gains back the next week. And so it goes, up and down………………………………………….Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

The banks that conduct the century- old gold fixing and the London Bullion Market Association will seek proposals next month for a new administrator to run a revamped process for the benchmark by year-end.
The London Gold Market Fixing Ltd., which manages the procedure, and the LBMA will open a market consultation in late August and plan to announce a third-party administrator by the end of September, the association said in a statement today. The process will be open and not restricted to firms who pitched to run a mechanism that will replace the silver fixing on Aug. 15………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

While gold has been nabbing the bulk of the recent commodity headlines, investors have missed what has been — and will likely continue to be — the better long-term, safe-haven holding. Surprise! Silver has actually outpaced gold since both hit a short-term bottom on June 2. Specifically, even with last week’s tumble, the iShares Silver Trust (SLV) is still up 10% since that point, while the SPDR Gold Trust (GLD) is only up 4.9% for the nearly-two-month timeframe.
In fact, SLV has outpaced the SPDR S&P 500 ETF Trust (SPY), the iShares Barclays 20-Year Treasury Bond ETF (TLT), and a whole slew of other asset classes over the past couple of months………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Hong Kong will maintain its status as an Asian precious metals hub in the face of competition from Shanghai and Singapore, according to Brink’s Co, which is opening a new vault in the city. The Richmond, Virginia-based maker of surveillance systems and armored trucks should finish the vault early in the fourth quarter, Guy Bullen, senior vice-president for Asia Pacific, said in an interview last week. That will double Brink’s gold and silver handling capacity in the city, Mr Bullen said, without elaborating.
China overtook India as the largest gold consumer last year, according to the World Gold Council. Singapore Exchange Ltd will introduce a physical gold contract this year while Shanghai will start international gold trading in the fourth quarter, a government official had earlier said………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Zinc prices matched three-year highs hit the session before on Tuesday and lead inched to a new 17-month top as investors ploughed into metals that have lagged this year and appear undervalued on prospects of reviving global growth.
Manufacturing growth in the world’s top metals user China expanded at its fastest clip in 18 months in July, an initial survey showed, while in general the U.S. economy has gathered pace, with a brightening picture seen in its labour market………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

When it comes to conductivity, copper is king of the industrial metals. Thanks to its low level of resistivity – how strongly a material opposes the flow of current – the red metal’s main use is in electrical applications.
Aluminium is copper’s closest rival, albeit an inferior one by most measures. When the prices of the two metals were similar, as at the start of 2002, the choice of copper for cabling in everything from power lines to automotive wiring was a no-brainer………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Global mining activity showed steady signs of improvement in the first half of the year, but recover is still expected to be slow, the latest study by SNL Metals Economics Group published Tuesday shows.
Its closely watched Pipeline Activity Index (PAI)— one of the most trusted indicators of the global exploration sector’s overall health — recovered a bit in May after an all-time low in April, but still sits at low levels, SNL notes………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

As the mining boom ends, confidence in the industry has hit a new five year low. An annual study of mining bosses has found they think the industry is out of their control, raising the prospect of a big shake up. Commodity prices and Chinese demand are expected to keep falling.
The mining executives that we have been interviewing have extremely low confidence in their future, and particularly when they look at the main factors that are going to affect their businesses in the next one to three years………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Goldman Sachs Group Inc’s metals warehousing unit is exploring its first foray into China, and privately held C Steinweg has expanded capacity there, sources said, as a financing scandal in a major Chinese port fuels a scramble for market share.
The alleged scam - in which a Chinese trading firm is suspected by local authorities of fraudulently using a single cargo of metal as collateral for multiple loans - has shaken the confidence of banks and merchants in Western metals storage firm that rely on local agents to oversee warehouse operations………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Commodity exchange traded funds help diversify an investor’s portfolio, but traders can also dive into the market to pick and select potential opportunities while avoiding duds. According to the Goldman Sachs Group, nickel and palladium are set to outperform in an uneven global economy, reports Glenys Sim for Bloomberg.
“While cyclical recovery tends to see rising commodity demand, prices will likely largely be determined by more structural supply factors,” Goldman Sachs analysts wrote in a note. “Accordingly, not all boats are expected rise with the tide created by continued improvement in global macroeconomic data.”……………………………………….Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Issuers have brought to market 110 new ETFs so far this year, offering exposures that run the gambit—and few resemble what we would consider “plain vanilla” strategies. But only a handful of these new funds have gathered any traction with investors.
Among the most popular newcomers, there is no common denominator when it comes to a theme that is resonating with investors. Instead, there’s evidence of demand for minimal exposure to interest-rate risk, as well as appetite for value and momentum opportunities, and gold………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

The Shanghai free trade zone (FTZ) will get a physical commodity trading exchange towards the end of this year, and copper will be its first product, market sources told Metal Bulletin.
“This new platform is likely to debut towards the end of this year,” a source with government connections said. “With this new exchange, investors will be able to trade cargoes in the bonded zone - for example, copper warehouse receipts - more freely, transparently and efficiently.”……………………………………….Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

The International Monetary Fund said Brazilian central bank President Alexandre Tombini shouldn’t shore up the real as Latin America’s largest economy stalls and inflation accelerates.
Adjusting for inflation, Brazil’s currency was 5 percent to 15 percent stronger than “implied by fundamentals and desirable policies” in 2013, IMF economists wrote in a research report published today. The real has appreciated 5.9 percent this year against the dollar while inflation accelerated to a 13-month high and economic growth slowed………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

Looking across developed markets today, a common thread is that central bank policies have pushed interest rates to very low levels to support their economies. Looking at the major central banks—the U.S., the European Central Bank (ECB) and the Bank of Japan (BOJ)—it appears that Europe and Japan are still expanding their accommodative policies, while the U.S. is reducing and is anticipated to be the first among these banks to raise interest rates.
This change has important implications for currencies that play a role in international equity returns. We believe it is important to maintain a globally diversified international equity portfolio, but we question the rationale of being fully exposed to foreign currencies………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

California Governor Jerry Brown and Mexican environmental officials signed a pact on Monday aimed at reducing greenhouse gas emissions, an agreement that could eventually expand the market for carbon credits.
The six-page memorandum of understanding calls for cooperation in developing carbon pricing systems and calls on the partners to explore ways to align those systems in the future. “California can’t do it alone and with this new partnership with Mexico, we can make real progress on reducing dangerous greenhouse gases,” said Governor Brown………………………………………..Full Article: Source

Posted on 30 July 2014 by VRS |  Email |Print

The man Julia Gillard wanted to become her successor as prime minister, Greg Combet, says Labor must again go to war with Tony Abbott on carbon - but this time win the politics. Speaking at the launch of his book The Fights of My Life, the former climate change minister said Mr Abbott’s abolition of the carbon tax was only a temporary setback.
“Ultimately, all of the work that we did will return because if you are making a reform of that nature, you’ve got to find the most economically efficient, environmentally effective and socially fair way of enacting it - and that is the reform that we made,” he said………………………………………..Full Article: Source

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