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Commodities Briefing 12.Feb 2015

Posted on 12 February 2015 by VRS |  Email |Print

The costs of shipping bulk commodities have fallen to a near three-decade low, raising concerns about global economic growth. However, there are a number of elements at play and analysts have warned about reading too much into the slump.
The Baltic Dry Index, a measure of a number of shipping routes and the prices for transporting major bulk commodities, has fallen 29.2 per cent in 2015 to 554 points – the lowest level since 1986. Over the past 12 months it has dropped close to 50 per cent. The World Bank recently downgraded global growth by 20 basis points to 3 per cent for 2015. So it would appear that a drop in the BDI would match the faltering growth narrative in the World Bank’s forecasts………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

The Commodity Transaction Tax (CTT) was introduced in the 2013 Union Budget on non-agricultural commodities traded on futures exchanges. This was based on the premise that commodity exchanges have matured; and there is no difference between stock and commodity derivatives trading.
Therefore, the very existence of Securities Transaction Tax (STT) in stock exchanges justified the CTT, as was stated during the time of the tax announcement. Since then, and even before that, several arguments have been put forward on the differences between the commodity and the stock exchanges; but that is immaterial now as the impact of CTT on the commodity futures markets is quite perceptible in the non-agricultural segment………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Lower oil prices will be sustained throughout 2015 but don’t expect any boost for the majority of the world’s countries, according to a global growth forecast from Moody’s Investor Service. “Lower oil prices, which we expect to be sustained, would in principle provide a significant boost to global growth,” Marie Diron, senior vice-president of Credit Policy at Moody’s and author of the agency’s “Global Macro Outlook 2015-16″ report published Wednesday.
“However, we are maintaining our G-20 forecast,” she said. “For the G-20 economies, we expect gross domestic product (GDP) growth of just under 3 percent each year in 2015 and 2016, unchanged from 2014 and from our November 2014 Global Macro Outlook,” Diron added………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Oil industry analysts have been engaging in a burning debate: Have prices hit bottom or do they have further to fall? Energy company CEOs have been voicing their views on the question as they report their quarterly earnings results. The International Energy Agency weighed in as well in a somewhat bearish five-year forecast released Tuesday, saying that oil prices will eventually rebound from current levels but still stay below the $100 a barrel mark.
The group said global stockpiles would rise, putting prices under more pressure before spending cuts by oil producers kick in to ease the supply glut. Here’s a safe call: Get ready for plenty of thrills, chills and volatility along the way. Let’s take a look at five key lessons from energy company conference calls so far this earnings season, and at several stocks that will benefit from the next chapter that’s about to play out in the ongoing saga of oil price volatility………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Oil prices will get a heck of a lot worse before they get better, a top industry analyst said on Tuesday. Tom Kloza, chief oil analyst at Oil Price Information Service, predicted that oil prices would bottom during the second quarter of the year “simultaneously to one of the expirations of the WTI contracts.”
He warned that the price of West Texas Intermediate crude could be in the $30s at some point in the second quarter. “I think the cycle has a long way to run out,” Kloza said on CNBC’s “Fast Money,” adding that the spread between Brent and WTI could widen to about $10 or so………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Just when investors thought the oil rout was over, an analyst at Citi warned that the recent 20% rally in the price of oil is just a “head fake.” Worse yet, Citi sees the price of oil resuming its plunge and going all the way down to $20 per barrel. That’s quite the opposite view of many others as OPEC said it thinks that oil has already bottomed and could zoom higher while the International Energy Agency, or IEA, sees $55 oil being here to stay this year.
However, as we’ve seen in this market, anything is possible once OPEC steps aside. A big drop in the U.S. rig count over the past few weeks should lead to a slowdown in U.S. oil production growth, which has largely fueled the rally off the bottom in recent weeks………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

The global oil market is entering a new phase where cheap oil is failing to ignite growth in demand, the International Energy Agency (IEA) says. Demand growth will remain sluggish because of fuel switching, more fuel-efficient cars, reduced oil subsidies and structural changes in the global economy, according to the IEA’s Medium-Term Oil Market Report.
Market dynamics suggest oil demand should increase strongly in response to falling oil prices, which have halved since last summer. But the IEA argues oil markets are entering a “business-as-unusual” phase, where the usual rules of supply and demand have changed………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

The plunge in global crude prices makes it difficult for North American shale oil producers to survive, the chairman of Russian gas giant Gazprom said in Saudi Arabia on Wednesday. Viktor Zubkov told an industry gathering that “a lot” of shale producers are suffering from the drop in oil prices and current conditions make shale production “nonsense.”
“The low price of oil, $45, $50, or even $60 (per barrel), it’s not a driver for shale business,” he told the International Energy Forum (IEF) in Riyadh. Crude prices dropped from around $100 to below $50 per barrel over the past year on concerns over a supply glut and weakening demand………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

OPEC’s Secretary General Abdulla al-Badri announced that the oil price may have bottomed out and predicted “you will see more than $200 when it comes to future oil prices.” In the current reduced-oil-price environment, we see oil companies cut back on budgets, curtail exploration, and pull in rigs — in many places it costs more to get the oil out of the ground than the present sales price.
In today’s market for crude oil, a reduction in the number of drilling rigs in the United States does not mean overall production declines. It means less production in the future. Tim Snyder, an energy economist with Lubbock, Texas-based Pro Petroleum Inc., who analyzes trends to help his company and others make educated decisions and manage risk, told me: “We anticipate a decrease in ‘new’ production in the U.S. as exploration and production companies reallocate capital expenditures and reduce drilling exposure.”……………………………………….Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Investors are buying more gold as an alternative to hold Swiss franc cash deposits, according Vontobel Holding AG, a Swiss bank and wealth manager. “We keep noticing that gold is coming back into favor with investors,” Vontobel Chief Executive Officer Zeno Staub, 45, told reporters Wednesday after the Zurich-based company announced full-year earnings.
Concerns that Greece may abandon the euro and Ukraine may be headed for a wider conflict have spurred demand for haven assets. Gold has climbed 4.2 percent this year, even as the dollar strengthened on prospects of higher U.S. interest rates. Investors’ holdings in gold-backed funds are near the highest since October………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Gold is likely to be trading at $1,250/oz and Eur1,200/oz by the end of 2015, Commerzbank said Wednesday. That implies the euro would be trading around $1.042 at the end of the year, Platts calculated, a level last seen early 2003 and compared with $1.130 at 1230 GMT.
The German bank noted the price of gold was up as much as 10% in parts of January, despite the firmer dollar, owing to a culmination of factors. “The gains were triggered by the announcement of extensive bond purchases by the European Central Bank, the surprising decoupling of the Swiss franc from the euro by the Swiss National Bank and the renewed flaring up of the Greek debt crisis following the election victory of Syriza,” it said………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Glencore Plc, the mining and commodities trading company headed by billionaire Ivan Glasenberg, said it’s planning to distribute its 23.9 percent holding in platinum producer Lonmin Plc to its own shareholders.
“As we do not trade platinum and have no special insight into the market, we believe that it is better to leave to our shareholders the decision as to how to manage the Lonmin shares,” Glasenberg said in a statement Wednesday………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Against a background of crashing commodity prices, mining in Africa is facing increasing pressure as governments and investors struggle over distribution of the mineral wealth lying under much of the continent.
The subject is a key focus of more than 7000 delegates from around the world, including government ministers and mining company CEOs, meeting in Cape Town this week at Africa’s biggest annual mining conference - the “Mining Indaba”………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Indian investors don’t seem to consider gold as a ’safe haven’, unlike their foreign counterparts, gold exchange-traded fund data show. Local investors redeemed units worth Rs 131 crore in gold ETFs in January, up from Rs 111 crore in December, market data show.
In comparison, assets under management in SPDR Gold Shares, the world’s largest gold ETF, increased by 64 tonnes to 773 tonnes in January from 709 tonnes at the end of last year. The sentiment in Indian gold ETFs can be gauged from net inflows or outflows from these instruments. Every unit an investor purchases is backed by gold — one gram normally. An outflow from the fund reflects an investor’s negative sentiment towards the metal………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Agribusiness exchange traded funds could experience stunted growth as depressed grain prices squeeze farmers’ profit margins. Over the past year, the Market Vectors Agribusiness rose 7.7% and PowerShares Global Agriculture Portfolio increased 7.6% higher.
U.S. farmers are beginning to cut back on farming equipment as the low crop prices and rising costs diminish income, reports Alan Bjerga for Bloomberg. The U.S. government projects that farm income this year is heading toward the third consecutive decline and will post its largest fall since the Great Depression. Net-cash income from farm activity is expected to plunge 22% to $89.4 billion, the biggest drop off since 1932………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Boardage Capital Management, LLC, announced the launch of its strategy focused on basic materials, mining and metals. Dallas-based Boardage seeded the investment approach with internal capital in October 2013. As part of the firm’s growth, Boardage also announced the addition of Collin Schuhmacher to the team as Partner. Schuhmacher will be responsible for heading Boardage’s business development, operations and compliance as Chief Operating Officer.
Founder Kevin Nicholson employs a top-down approach to identifying opportunities and investment themes within the basic materials sector. Bottom-up fundamental research subsequently identifies equities most impacted by these themes………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Even the most stability obsessed countries have made unexpected economic moves, but barriers to growth remain largely unaddressed – and central banks cannot tackle them alone. Six and a half years after the global financial crisis, central banks in emerging and developed economies are continuing to pursue unprecedentedly activist – and unpredictable – monetary policy. How much road remains in this extraordinary journey?
In the past month alone, Australia, India, Mexico and others have cut interest rates. China has reduced reserve requirements on banks. Denmark has taken its official deposit rate into negative territory………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

Brazil’s real sank to a 10-year low as a record drop in retail sales added to concern that Latin America’s largest economy is slumping. The local currency slid 1.2 percent to 2.8679 per dollar at the close of trade in Sao Paulo, the lowest closing level since October 2004. It is 0.6 percent weaker than the year-end median forecast of 2.85 per dollar among analysts surveyed by Bloomberg.
The real fell after the national statistics agency reported that retail sales tumbled 2.6 percent in December from a month earlier, the biggest drop since the series of data began in 2000. Analysts predict zero growth for Brazil this year, according to the median of about 100 estimates in a central bank survey published Monday………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

The carbon market has a new exchange, after European Environmental Markets plc (EEM) yesterday announced the official launch of its new platform. The company, which also announced it has appointed Adrian Rimmer as its new chief executive, said it would “provide businesses and financial institutions with efficient, credible trading platforms and risk management tools for environmental commodities”.
EEM revealed it has completed a two year consultation and development period that has resulted in the launch of a new transactional exchange that will offer a fully regulated, automated spot trading platform for environmental commodities such as emissions permits………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

One goal for U.N. climate talks is to stop industry fleeing Europe to escape regulatory costs, a Dow Chemical director said on Wednesday, adding there was no need to intervene in the EU carbon market to drive up prices. The European Union has sought to lead efforts to curb greenhouse gas emissions with its Emissions Trading System (ETS), the world’s biggest carbon market.
But it is currently negotiating reforms, with some countries saying emissions permits are too cheap to spur a shift to a low-carbon economy. EU nations are also preparing to submit national emissions cuts ahead of a U.N. conference in Paris at the end of the year to seek a global climate change deal. Preparatory talks take place in Geneva this week………………………………………..Full Article: Source

Posted on 12 February 2015 by VRS |  Email |Print

As widely expected, South Korea’s carbon market had thin trading in the first month of opening due in large part to a lack of confidence and the reluctance of affected companies to actively join the new trading scheme, data showed on Wednesday.
The Korea Exchange (KRX), the country’s bourse operator, opened the cap-and-trading system on Jan. 12 after the government offered an emission quota of 15.98 billion Korean Allowance Units (KAUs) to 525 companies to curb emissions to 30 percent below business-as-usual (BAU) levels over the next five years. One KAU is equivalent to a ton of carbon dioxide gas………………………………………..Full Article: Source

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