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Commodities Briefing 20.Aug 2014

Posted on 20 August 2014 by VRS |  Email |Print

BHP Billiton Ltd. announced what’s poised to be the biggest spin-off in the mining industry, separating aluminium, coal and silver assets to create a company valued at about $15 billion after it begins trading next year. The new unit will operate in five countries from Australia to South Africa, the Melbourne-based producer said on Tuesday in a statement, while announcing a 10% jump in full-year profit to $13.4 billion.
BHP’s London-listed shares fell the most in 14 months. A decision to skip a widely anticipated share purchase will disappoint investors, who had expected a $3 billion buyback, Citigroup Inc. said………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Rio Tinto’s heavy exposure to iron ore shouldn’t necessarily be seen by the market as a bad thing, according to Investec. The broker has maintained its ‘hold’ rating for the stock, but hiked its target price from 3,220p to 3,552p. Investec analyst Hunter Hillcoat said that the miner’s single-commodity exposure is ‘often portrayed as a weakness’.
However, he said that the iron ore division’s ‘exaggerated operating margins’ means that Rio Tinto has the capacity to withstand high price volatility. Iron ore margins are running at 60-70% this decade, twice that of other commodity classes………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

OPEC is not worried about a slide in oil prices towards US$100 a barrel, delegates from the producer group said, with current levels seen as acceptable for producers while higher seasonal demand in the coming weeks was expected to support the market.
Brent crude fell to a 14-month low of US$101.11 a barrel on Monday as investor concerns over conflict in Ukraine and Iraq eased and Libyan output rose. The drop brought prices below the level some in OPEC need for their budget needs. But delegates from three members of the Organization of the Petroleum Exporting Countries told Reuters on Tuesday the decline in prices was not an immediate concern………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

The barrel price of West Texas Intermediate crude oil has been falling since late June, and the fall is accelerating. Monday’s closing price was $96.63; Tuesday’s opening price was $94.02. Back in early July, I argued that oil’s downward move was not over , but I confess, I’m surprised by the speed of the current drop.
Factor in seasonal considerations, and the drop appears even more extreme, as oil prices tend to be high in August and September. Does that mean that we should expect oil prices of $90, $85 or even lower in October and November, when prices typically fall? I believe it does, for two reasons………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

European natural gas prices are reversing their biggest slump in five years as concern mounts that tension between Russia and Ukraine will again disrupt flows to the region. Gas for next-month delivery in the U.K. rallied 21 percent over the past six weeks as Ukraine said it may ban OAO Gazprom, Europe’s biggest supplier, from shipping the fuel across its territory because of Russia’s support of separatists.
The Moscow-based company, which meets 15 percent of European gas demand through Soviet-era pipelines across Ukraine, halted supplies to its neighbor on June 16 in a debt and price dispute………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

A fall in the price of Urals crude oil, the benchmark on which Russia bases its budget calculations, is adding to the government’s problems at a time when western sanctions are already hurting the economy. Urals, fell below $100 per barrel on Monday for the first time in 15 months and was trading just below $97 on Tuesday, extending a trend of falling oil prices that reflects abundant supply on global markets.
Russia relies on oil and gas for around two-thirds of exports and half of federal budget revenues. Over the course of a year, each $1 fall in the oil price wipes around $1.4 billion off federal tax revenues………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Big Oil has been very successful at developing sophisticated technology to access oil in some pretty remote areas. Consider the technological skill necessary to drill several miles below the seabed at staggering depths, or the processing equipment needed to transform viscous bitumen into usable fuel – these are impressive feats of engineering and science.
But after years of spending billions of dollars on these challenges, the world’s largest oil companies are running into a serious problem: Many of their projects are not profitable and won’t be anytime soon………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

In 2013, the total disclosed oil and gas transaction value was US$ 337 billion. This total was significantly lower (down 21%) than the record high of US$ 423 billion posted in 2012. EY notes that in 2013, there was a reduced willingness to commit to larger transactions. In 2012, 98 oil and gas transactions exceeded US$ 1 billion, compared with just 70 in 2013. In 2012, there were four ‘mega-deals’, with reported values over US$ 10 billion, but in 2013 there were only three.
Transaction activity in the oilfield services (OFC) sector declined in 2013, with 185 deals announced compared with 243 in 2012 and 201 in 2011. According to EY, the average disclosed deal value fell from US$ 244 million to US$ 179 million, marking a continuous decline from the 2011 peak of US$ 416 million………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

The latest World Gold Council Gold Demand Trends report, covering the period April – June 2014, shows that global gold demand continues to demonstrate a return to long-term trends after an exceptional year in 2013. Total global gold demand in Q2 stood at 964 tonnes (t), 16% lower than the same period last year, as consumers and investors pulled back and consolidated their activity.
Global jewellery demand, which represents more than half of total global demand, was unsurprisingly down 30% year-on-year to 510t. In comparison Q2 2014 was 11% higher than Q2 2012, extending the broad upward trend evident since 2009. India and China remain significant drivers of the global jewellery market, purchasing 154t and 143t respectively……………………………………….Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

China has allowed three more banks, including a foreign lender, to import gold, sources with direct knowledge of the matter said, as the world’s top gold buyer gears up for its strongest effort yet to gain pricing power of the metal.
The move, which brings the number of firms allowed to import gold into China to 15, comes ahead of the launch in September of a new international bullion exchange in Shanghai with which China hopes to become a price-discovery centre………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Too often silver falls in the shadow of its flashy, favored cousin gold, but the precious metal grabbed headlines last week when a 117-year-old tradition came to an end. Until last week, the price of silver had been decided, or “fixed,” each day at noon in London by representatives from three different banks. The process was conducted in private and it was all very secretive.
Now, regulators have finally dragged the silver “fix” into the 21st century in an effort to improve transparency and reduce the risk of price manipulation. The new system, called the London Silver Price, is run by CME Group and Thomson Reuters. It uses trading on the over-the-counter market and determines the price through an algorithm………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Actively managed ETFs are gaining immense popularity in recent months courtesy of increasing demand and the potential for more favorable regulations. While these represent just a small slice of the broad ETF world, they aim to beat the benchmark index or the passively managed counterparts even if the odds are against them.
Geo-politics make counter attacks on the economy and investors are seeking such smart investments for diversification and superior returns. Keeping this in mind, First Trust launched the multi-manager, multi-strategy First Trust Strategic Income ETF on the NASDAQ on August 14. It is the eleventh actively managed ETF issued by First Trust……………………………………….Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

The summer slowdown in filings is picking up, with filings from ETF Securities, State Street Global Advisors and Pacer Financial that should stir investor interest. ETFS is looking to expand its lineup to include equities funds, while SSgA has outlined its plans to launch another actively managed ETF. Meanwhile, newcomer Pacer is laying the groundwork to enter the ETF market as a first-time issuer.
ETF Securities, a longtime presence in the physical and futures-based commodity ETFs space, has filed paperwork with the Securities and Exchange Commission that outlines plans for its first equity ETFs………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

“True faith,” said William Ralph Inge, the one-time dean of London’s St. Paul’s Cathedral, “is belief in the reality of absolute values.” Apparently, American exchange-traded fund (ETF) investors can be counted among the faithful. Why? Because they’ve committed nearly $1.7 billion into so-called “absolute return” products.
These funds aim to consistently produce positive returns, regardless of market conditions, through non-traditional management, i.e. by employing short sales, derivatives, leverage and/or investing in unconventional assets. Rather than being benchmarked against the more common metrics such as the S&P 500 or the Barclays Capital Aggregate Bond Index, the hurdles for absolute return ETFs are typically the Consumer Price Index (CPI), the London Interbank Offered Rate (Libor) or Treasury Bills………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

A year after a US$920 million payment default at a spot commodities bourse cut trading from gold to soya beans futures, jolting India’s biggest brokerages, investors are returning as newer regulations buoy confidence.
The volume of commodities traded on the Multi Commodity Exchange Ltd, India’s biggest commodity bourse, has rebounded from a five-year low after the regulator tightened warehousing and shareholding norms in response to the payment crisis that unravelled at the National Spot Exchange Ltd (NSEL). Volumes on the National Commodity & Derivatives Exchange of India Ltd, the second largest bourse, have recovered from a 10-year low………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Stocks made big gains yesterday, the big NASDAQ Composite in particular making new multiyear highs as buyers charged into equities to start the week. But one corner of the market has quietly been outperforming the rest — and no, it’s not technology. I’m talking about the “commodity stocks,” basic materials sector names with outsized exposure to the commodity markets. Typically, commodity-centric names tend to have low correlations with the rest of the broad market, but not in 2014. Instead, materials names are just magnifying the S&P 500’s gains this year.
So far, the S&P has managed to climb 7.19% higher since the start of the calendar year — but the basic materials sector has basically done double, climbing 14.34% over that same stretch. Even better, there are still some big trading opportunities in materials right now………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Using a forward contract to fix at the current exchange rates is worth exploring while the pound is strong against the dollar and euro. This year has proved to be a good one for sterling, with the pound hitting highs against both the dollar and euro. But what does the future hold for those needing to make currency transfers?
David Nicholls, of currency specialists UKForex, said: “The pound-euro has moved from €1.20 to €1.25 since April, a change of 4pc in only four months………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Czech virtual currency CzechCrownCoin (CZC) started to be traded publicly today, its first limited issue amounting to 100,000 Kč. The initial price stood at 0.25 CZC against the Czech crown at noon. By 12:30 it was already 1 Kč higher.
After each limited issue is sold, another one will follow for a period of ten days. After that, an exchange office will be opened at the www.czechcrowncoin.cz website, where the currency will be traded for the price reached during the sale of the first issue………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

The harvest workers at Sovkhoz Lenina carry the apples to the trailer one bucket at a time. Soon the ripe load piles up under the balmy sun, ready for customers in nearby Moscow, who are hungry for fresh, healthy, homegrown produce.
Since the Russian government banned food imports from western countries earlier this month in retaliation for sanctions over the Ukraine crisis, Moscow has been trying to persuade consumers that domestic produce is better and telling farmers that Russian agriculture’s time has come………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Guangdong, the biggest of China’s seven pilot carbon trading markets, will this year hand out around 6 percent more emission permits to companies than in 2013, potentially aggravating oversupply that sent prices tumbling earlier this year.
The market is meant to rein in climate-changing greenhouse gas emissions from power stations, cement factories, petrochemicals, and iron and steel producers emitting more than 20,000 tonnes of carbon dioxide each year………………………………………..Full Article: Source

Posted on 20 August 2014 by VRS |  Email |Print

Over the past few months, geopolitical crises seem to have proliferated. First, in March, long-simmering tension between Russia and the Ukraine metastasized to a full-blown crisis after the government of Ukraine was toppled by a popular revolt.
That then led to the Russian annexation of Crimea, which was followed by sanctions imposed by the Western states, armed conflict between Russian separatists and the Ukrainian government in eastern Ukraine, and even more sanctions. Then, in June, we witnessed the sudden eruption of another brief, intense war between Israel and Hamas-controlled Gaza, which saw daily scenes of bombs and missiles and reports of death and mayhem………………………………………..Full Article: Source

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