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Commodities Briefing 27.Aug 2014

Posted on 27 August 2014 by VRS |  Email |Print

Hedge funds have extended their misfortune on agricultural commodities, as increasingly negative sentiment on sugar and livestock more than offsets a reevaluation of laid-back positioning on wheat.
According to data from the Commodity Futures Trading Commission regulator, managed money cuts its net long position in futures and options in the top 13 U.S.-traded agricultural commodities from coffee to corn by more than 18,000 contracts in the week leading up to last Tuesday. It was the eighth consecutive week in which hedge funds reduced their net long………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

These are really changing times. It is no longer enough to have a coup, a plane hijack or violence erupting in one oil producing country to have prices skyrocketing. The hotspots are all over the map of the Middle East from key producers such as Iraq and Libya to marginal ones like Yemen and the two Sudans to ongoing tightened sanctions against Iran. Brent crude prices that briefly rose in mid–June above $115 following the take-over of Iraq’s city of Mosul by IS radicals dropped to 14-month low a few days ago.
Moreover, and following the downing of the Malaysian Airliner in mid-July, prices rose some 2 percent or $1.99 a barrel in New York Mercantile Exchange, but only to reach $104 a barrel and briefly before retreating again………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Iran’s oil minister said Tuesday he wasn’t alarmed by a recent drop in crude oil futures, reflecting a widely- held view among oil producers that prices are still at an acceptable level and their decline won’t last. The remarks suggest members of the Organization of the Petroleum Exporting Countries–of which Iran is one of the largest–won’t need to alter their production for the time being.
Iran’s oil minister Bijan Zanganeh was quoted by his ministry’s Shana website as saying “crude oil prices on global markets are at an appropriate level and seasonal fluctuations in crude oil prices will not continue.”……………………………………….Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

An Iraqi Kurdish crude oil tanker has been seen floating off the coast of Israel after offloading its cargo, ship tracking data has shown. If true, the transaction would be in open defiance of Baghdad, with whom Israel has no diplomatic or commercial relations. Furthermore, any commercial transaction between an Arab country and Israel violates the ruling of the Arab Boycott Bureau that bans all commercial exchanges with the Jewish state.
But it would not be the first time that Kurdish oil has found its way into the Israeli market. Iraqi Kurdistan, although autonomous, is still in principle supposed to conduct its oil transactions through Baghdad. Selling into the oil market directly and independently of Baghdad provides the Kurds in northern Iraq with much needed funds. It also helps the Kurds move away from Baghdad and toward independence, which it has made no secret of wanting………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Liquefied natural gas sent from North America to European markets likely won’t make much of a regional difference, the director of the IEA said from Norway. International delegates are gathered for an annual energy conference in Stavenger, Norway. The theme for the ONS conference, organizers said, is change.
Maria van der Hoeven, executive director of the International Energy Agency, said the glut of natural gas from North American shale is changing the dynamics of a global energy sector where demand centers are pivoting toward Asian economies………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery on Tuesday attempted a comeback of sorts, recovering from a two month low. By the close of regular trade gold was changing hands for $1,285.20 an ounce, up over $6, after earlier hitting a day high of $1,291.90. The gains follow six weak sessions which saw the metal lose 2% in value.
Tuesday’s move lifted the metal above its 200-day moving average – a bullish technical sign – after bouncing off support at $1,272 and could now attempt a move back above $1,300 an ounce………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

As gold prices linger near a two-month low, demand in Asia has started edging higher with buyers in India increasing purchases ahead of a Hindu religious festival this week. The mark up to global gold prices, known as a premium, that Indian consumers pay has climbed to $10 to $13 a troy ounce from zero in July, a sign that appetite for gold is picking up in the world’s second-largest consumer of the precious metal.
The vast majority of India’s gold supply comes from abroad. As a result, Indian gold buyers typically pay a premium to global prices that reflects the tightness of locally available supply as well as the government-imposed import duty………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

By all accounts in the mainstream media, gold demand in Asia, and in particular in China and India, has been slipping dramatically this year which some see as the principal reason behind current price weakness. But all may not be as the reports suggest. Is Chinese demand, as suggested by the enormous slippage in gold imports though Hong Kong really as bad as the figures appear to show?
Reuters reports Hong Kong net gold exports to mainland China in July as falling to the lowest level since June 2011 at 22 tonnes (Bloomberg reports the figure as 21 tonnes). Compare this with the heady days last year when such gold imports exceeded 100 tonnes monthly for 6 months in a row from May to October………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

What is an asset bubble? An asset bubble occurs when a large number of buyers, normally not usually prone to speculate in an asset, bid the price of that asset much higher than underlying valuations would support, most often fueled by leverage or borrowed money. Typically, towards the terminal phase of the bubble the most compelling reason for continuing to buy the asset is due to the rising price itself, as all caution is thrown to the wind amid the collective belief that prices can only move higher still.
Then, when the last possible speculator has purchased the asset, the inevitable occurs and the price of the asset collapses as previous buyers turn into sellers and attempt to get out………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

If you’ve been watching silver for some time, you know it’s been in the doghouse. After peaking at $49 back in April 2011 the white metal is down 60%, having languished between $19 and $22 for the past two years.
But a confluence of factors is building that make today’s silver prices look downright cheap. Here’s how the bull is going to run - and how you can ride it all the way up from here… To explain how the precious white metal behaves, I like to use the phrase: silver is like gold - on steroids………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Frustrated investors in physical gold and its derivative asset classes have fumed quietly as a mal-regulated market for counterfeit gold and silver (futures contracts, certain ETFs) leads precious metals prices around by the nose for the exclusive enrichment of an elite cadre of financial institutions.
Entities such as Goldman Sachs, HSBC, Barclays, J.P. Morgan, and others are able to issue contracts deemed to represent millions of ounces of gold for future sale or purchase anonymously, and without limit. These paper representations of gold, while notionally tied to the prices of silver and gold, have the effect of suppressing the prices of the physical commodities because they represent exponentially more gold and silver than is physically available, thus creating a supply scenario that is utterly false………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

A combination of labour issues, various spats with government and a number of operational issues are not yet behind Lonmin, Impala Platinum and AngloPlats and investors should be wary of committing to buying shares despite a recent recovery. Lonmin in particular was one of the big movers in Europe last week, rising just over 5%. But Peter Garny, head of equity strategy at Saxo Bank was not convinced.
He told clients: “Our quant model remains significantly more bearish than consensus with a 12-month return target of only 2% compared to 31% based on 25 sell-side analyst estimates. As a result, Lonmin is the least favoured mining company in Europe by our model and the technical picture shows significant negative momentum so, in our view, it is too early to play the turnaround case………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Large speculators cut their net-long gold futures and options holdings on the Comex division of the New York Mercantile Exchange in the latest Commodity Futures Trading Commission data for the week ended Aug. 19, reversing some of the gains established in the last report.
The retreat came as geopolitical fears subsided and pushed the yellow metal under $1,300 an ounce during that timeframe. Platinum group metals activity was mixed, with large speculators adding to bullish palladium holdings and dropping platinum. These traders continued to trim net-long silver positions and cut their exposure in copper , too………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

The global copper market is at its biggest deficit in seven years, says Morgan Stanley, citing data from the International Copper Study Group. The group says the copper deficit is 466,000 metric tons for the January-May timeframe, versus a 250,000 surplus in the same period of 2013, Morgan Stanley says, while adding its full-year forecast is for a 90,000 ton deficit.
ICSG also showed global use was up 15% year-over-year, with strong demand out of China seen. “Given this wide supply shortfall, we remain comfortable with our forecast for deficit conditions this year and next, as well as progressively higher prices,” Morgan Stanley says, also forecasting London Metal Exchange copper prices to average $7,165 a metric ton in the fourth quarter………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Front month West Texas crude futures ended the session just barely higher, up by 1 cent at $93.35 per barrel on the NYMEX. To be had in account, militants in Libya took control of the Tripoli airport, underscoring the still tenuous security situation in the North African country - from which oil exports have recently increased moderately.
Gold futures for December delivery ended the day lower by just $1.9/oz. at $1,278.9/oz. on COMEX despite the still unsettled geopolitical backdrop………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

The big miners, rather than slowing growth in China, are being blamed for the steep fall in the price of Australia’s top export, iron ore. However it is unlikely they are worried about it. Iron ore fell below $US90 a tonne on Monday for the second time this year, selling for $US89.20.
The aggressive multi-billion dollar expansions by Australia’s Fortescue Metals, Anglo-Australians BHP Billiton and Rio Tinto and Brazil’s Vale of recent years are widely considered to have caused a glut in supply………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

After launching the actively managed Pimco Total Return ETF (BOND | B)—an ETF version of Pimco’s flagship Total Return Fund (PTTRX)—in February 2012, Pimco is looking to strike it big again in ETFs. BOND was the second-most-successful ETF launch in the 21-year history of ETFs, gathering its first $1 billion in less than three months. Pimco in a recent regulatory filing has detailed a similar approach as it took with BOND, replicating three existing mutual funds in tradable ETF wrappers.
I’ll talk about one of those three proposed ETFs, partly because—like BOND—Gross will manage the new ETF version of the sister mutual fund he already manages, but also because the fund’s strategy is designed to outperform—and has outperformed—the S&P 500 Index in the past five years………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Exchange traded funds are the next big thing, a product which should have done well earlier but will definitely do now. Just as the name suggests, an exchange-traded fund, or an ETF, is essentially a fund that is traded on the exchanges. Since it trades like an equity share, it is easy for all investors to buy and sell.
They have a nomenclature similar to funds because they too track a basket of assets like the nifty or banking stocks or even gold. As the price of the underlying investment changes, so does the price of ETF on trading screens………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

After pulling through its worst drought in decades, Brazil, the world’s largest supplier of coffee, is expected to experience an extended period of poor harvests, boosting coffee futures and related exchange traded notes.
The iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN increased 5.7% Tuesday while iPath Pure Beta Coffee ETN rose 5.2%. Coffee has been the best performing commodity this year, with JO up 62.8% and CAFE up 59.0% year-to-date………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

A judge has dismissed London Metal Exchange Ltd as a defendant from U.S. antitrust litigation accusing banks and commodity companies of conspiring to drive up aluminum prices by restricting supply, hurting manufacturers and purchasers.
In a decision made public on Tuesday, U.S. District Judge Katherine Forrest in Manhattan concluded that the LME was an “organ” of the UK government, and therefore immune from the lawsuit under the Foreign Sovereign Immunities Act………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

Soybeans fell to their lowest intraday price for a front-month contract in almost four years, as September futures near expiration, spurring investors to close out their positions. The so-called first-notice day is Friday, when investors who had bought contracts betting on rising price trend may be required, depending upon terms of their original transaction, to take delivery of the soybeans.
To avoid taking delivery, contract holders must sell and either liquidate their position or roll their investment into a future month. The September contract expires on Sept. 12. The bulk of soybean futures contracts traded on commodities exchanges don’t end in delivery of the underlying product………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

In this article, Joseph Yechong Chen extends Kirk’s formula to spread option pricing when forex is a stochastic factor and is multiplied to one leg in the payoff formula. The article illustrates the importance of forex risk factors and the need to include them in the business strategies of asset acquisitions and divestitures
Several different forms of spread options are used in energy markets. The most popular ones are European call options on the spread of energy price pairs. If we consider energy prices in different locations and times as individual commodities, a spread option can be generally considered as the right to exchange one unit of a commodity for a certain amount of units of another commodity at given strike price………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

The biggest threat to investors may come from the foreign exchange market rather than the stretched prices of equity and bond markets. Judging by recent policy and technical signals, the forex market may be about to exit an unusual phase of low volatility.
After a prolonged period of monetary policy alignment, advanced economies are embarking on increasingly contrasting paths. This “multi-track” world of central banks reflects notable divergence in underlying economic performance………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

When Australia’s Prime Minister Tony Abbott last month steered through Parliament repeal of the country’s carbon pricing mechanism, he was cheered on by business associations representing major international and domestic companies. They had campaigned hard for repeal of the scheme, which required about 360 large emitters to pay a fixed price for their emissions, with the intent of moving to a floating price by mid-2015.
The scheme’s supporters, including influential economy professor Ross Garnaut, say leading business associations demonstrated unprecedented partisanship and helped unleash a form of “money politics” not seen before in Australia………………………………………..Full Article: Source

Posted on 27 August 2014 by VRS |  Email |Print

European carbon prices edged lower in thin trade on Monday ahead of an increase in supply from government sales of carbon allowances. Front-year EU Allowance (EUA) futures closed at 6.34 euros, down 4 cents on Friday’s settlement.
Liquidity was poor with around 4 million allowances of all vintages changing hands across all platforms as many traders were absent from their desks due to a national holiday in Britain. “The biweekly UK auction on Wednesday as well as the prospect of auction volumes going back to pre-August level in September could slow down the upward trend we have seen recently,” analysts at Thomson Reuters Point Carbon said………………………………………..Full Article: Source

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