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Commodities Briefing 06.May 2015

Posted on 06 May 2015 by VRS |  Email |Print

Amonth or so ago we highlighted a research note from Barclays that showed how investors were continuing to retreat from commodities. Long-term readers will not be surprised to learn that looks to have marked a turn of fortune for the sector. The Continuous Commodity Index is an equally weighted measure of 17 commodity futures, including energy, base metal and agricultural benchmarks, along with precious metals, too.
As such, it is a useful gauge of sentiment towards the broad asset class. The CCI hit a five-year low in March but has trundled higher of late, forming what chartists might consider a solid looking base………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

The economic cycle of depression/recession has created the need for Quantitative Easing (QE), the occasionally used and effective tool used by central banks across the globe. The world knows all about it and will be remembered for ages. Before we delve deep in to this topic, it is essential to understand the basic definition of this much hyped “Quantitative Easing” and how it is supposed to work.
Quantitative Easing can be defined as monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective. The new money swells the size of the bank reserves and lower interest rates will stimulate the economy by encouraging banks to make more loans which in turn boosts investment………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Saudi Arabia’s oil minister has turned to divinity over the issue of slumping prices in oil, claiming that “it’s up to Allah”. Speaking to CNBC, oil minister Ali al-Naimi said that “no one can set the price of oil – it’s up to Allah”.
Saudi Arabia is the world’s biggest producer of oil and, while oil prices have been staying low on the market, the country has decided to increase its production of the substance rather than cut it. Sanctions currently placed on Iran could soon be lifted as part of international nuclear negotiations, which would mean the country’s crude oil would come back on to the market and cause prices to plunge further………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

The recent fall in oil prices has received so much coverage that its recent recovery is almost unnoticed by the wider market. And yet oil has recovered exactly as predicted and to the point generally predicted by most experts, high enough to support the continued flow of much of the unconventional oil which the market was consuming before the price spike led to temporary excess capacity. The drop was self-correcting.
The sell off in energy stocks triggered by this market event was indiscriminate. Even SolarCity wasn’t immune, though it is quite hard to make a case that it’s current business model is threatened by cheap oil. But will that always be the case?……………………………………….Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

EOG Resources Inc. and Pioneer Natural Resources Co., two of the largest shale-oil producers, are preparing to boost drilling again after oil prices climbed 40 percent in the past seven weeks. EOG Chairman and Chief Executive Officer William Thomas said Tuesday his company will increase drilling as soon as oil prices, which closed above $60 a barrel for the first time this year, stabilize at $65. Pioneer is planning to add drilling rigs starting in July, subject to oil price movements and the sale of other assets.
New drilling now means the companies can add to production in 2016. The statements come a month before the Organization of Petroleum Exporting Countries is scheduled to meet to discuss supply quotas………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

OPEC countries are set to maintain current production levels at a meeting next month, three delegates said, as Gulf states continue to focus on market share and a rally in crude prices mutes calls from other members for supply cuts.
While the June 5 meeting in Vienna is likely to hear demands from some members of the Organization of the Petroleum Exporting Countries for a reduction in the amount of oil pumped, even officials from countries which favour a curb see it as unlikely………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Italian energy company Eni announced Tuesday it was ahead of the curve with what its partners described as a breakthrough operation offshore Angola. Eni holds a 20 percent stake in a section of the Kizomba project off the coast of Angola. The Italian company said production there has started ahead of schedule.
Kizomba is part of the country’s Kakocha, Bavuca and Mondo South fields. “The project develops approximately 190 million barrels of oil with peak production currently estimated at 70,000 barrels of oil per day,” the Italian company said in a statement………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Gold held below $1,200 an ounce before U.S. monthly jobs data later this week that may provide indications on when the Federal Reserve will boost interest rates. Gold last week erased this year’s gains after the Fed said U.S. growth will rebound, damping speculation that rate rises may be delayed amid mixed data on the economy.
Fed Bank of Chicago President Charles Evans said on Monday the central bank should wait for more evidence wages are rising before boosting rates. Higher rates hurt the allure of gold, which usually only provides a return if prices rise. “The market will remain focused on the U.S. payrolls number to be released this week,” Australia & New Zealand Banking Group Ltd. wrote in an e-mailed note. “A weak print could see gold push above $1,200 an ounce.”……………………………………….Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

On Friday GoldCore posted an article asking whether JP Morgan was cornering the silver bullion market, noting their Comex warehouse stocks of 55 million ounces and claims by Ted Butler that they “may be holding as much as 350 million ounces of physical silver.” My short answer: I don’t think so.
The clear import from the article is that because the warehouse has JP Morgan’s name out front that all the silver insider is theirs. However, JP Morgan has large market share of global precious metal market activity with a significant number of industry participants using JP Morgan to buy and sell physical and futures, and for storage services. It is therefore highly unlikely that none or little of the silver in JP Morgan’s warehouse is held on a custodial basis for clients………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Silver’s long bear market, from its 2011 highs, is believed to be “nested” within a larger bull market, along with gold’s, as discussed in more detail in my parallel Gold Market update, to which the reader is referred. This is an echo of what happened in the 70s, when both gold and silver went into a heavy correction in 1975 and 1976 that was taken at the time to be a new bear market, but ended up leading into a massive parabolic ramp that took silver to dizzying heights as the Hunt brothers attempted to corner the silver market.
The second major upleg of this bull market should take silver to levels that dwarf those of the 70s peak, and this is not some deluded fantasy but based on a sound assessment of the trends in currencies and debt now extant………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Copper’s longest rally in almost a decade pushed the metal into a bull market on signs that supplies are tightening just as speculation mounts that demand from China will rebound. Glencore, the world’s third-biggest copper-mining company, said output of the metal slid 9 per cent last quarter partly as ore grades fell.
The Baar, Switzerland-based company’s results add to supply concerns after a disruption in February from an electrical failure at a site owned by BHP Billiton. Almost a 10th of global output is at risk of being lost due to labor disruptions this year, Barclays estimates………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Zinc hit its highest price in eight months on Tuesday and copper its loftiest since mid-December thanks to a combination of concern about supply shortfalls and optimism over the global economy. All the metals on the London Metal Exchange (LME) attracted buying, which also pushed nickel to a six-week high, as the market reopened following a British public holiday on Monday.
‘Commodities are bouncing back up, led by oil and iron ore. Base metals seem to be following the herd,’ said Richard Fu, director of Asian commodities trading for Societe Generale Newedge in London………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Damage undone: base metal equities largely back to where they started the year before copper’s rout. Early this year copper prices dropped hard and fast. They went from about $3/lb to, briefly, under $2.50/lb in late January. Asian traders took a sudden bearish view of copper on the back of routs in oil and iron ore and drove the price down.
With the crashing copper price so went the miners, no surprise here. Mining equities with key copper operations tumbled heavily. The likes of Lundin Mining and Hudbay lost a quarter or so of their share price over the course of a few days back in mid-January. As noted back then, the copper rout seemed overdone. In contrast to iron ore, copper did not (and does not) suffer the same bearish outlook of a pervasive and sizeable long-term oversupply………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Global iron ore prices staged a recovery last month reversing a trend that witnessed a sharp fall in past months. Prime grade ore with iron content of 62% (Fe 62% grade) rose nearly 10% to $56.2 per tonne, in what markets term a relief rally on a month on month basis in April. Ore with Fe content of 58% gained 2.1%. However, domestic iron ore prices fell due to higher availability. This is expected to add stability to steel prices according to analysts.
Ore prices had shrunk to an almost ten year low in beginning of April 2015. The upturn, close to the biggest gain in prices in nearly two years was led by Australian giant BHP Billiton announcing a slower pace of expansion. Last week, Brazilian mining major Vale announced production cuts to contain price fall in iron ore………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Metal ETFs persistently gave a weak performance for much of 2014 and the initial phase of 2015. The combination of a stronger greenback, a slumping China, the oil price rout and the adverse demand-supply imbalance have put a hold over several industrial metals in recent times.
However, since the last one month, a huge reversal in the space is being noticed, as many metals in the segment have started to see bumper trading. In fact, the metal space has seen Pure Beta Lead ETN ( LEDD ) returning as high as 21% in the last four-week period. A dovish Fed which is in no hurry to hike key rates in the U.S. and the resultant moderation in the greenback lent a hand in pushing the space higher………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

A broad market reversal is battering hedge funds, spoiling the industry’s strongest annual start since the financial crisis. Many funds that bet on global financial and economic trends run by firms such as Fortress Investment Group LLC and Discovery Capital Management LLC suffered losses in April as they tried to benefit from a constellation of market moves that gained momentum in mid-2014 and were widely expected to continue throughout 2015.
They included rising European bond prices, spurred by the European Central Bank’s bond-buying program, and falling commodity prices as global growth stalled. But several factors upended those bets, beginning in late March and intensifying recently. Several rounds of unexpectedly weak U.S. economic data forced many investors to push back their forecast for when the Federal Reserve may raise interest rates………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Imposing CRD IV capital rules on trading houses, utilities and oil majors carries huge costs and makes no sense. The notion of imposing capital requirements on firms that trade commodities has been advocated by some financial regulators in recent years. It has also been loudly cheered by banks, which argue non-bank commodity traders enjoy an unfair competitive advantage from not having to set aside regulatory capital against their assets.
Since the entry into force of Europe’s Mifid II legislation in July last year, this abstract debate has become very real indeed. Mifid II both removes and narrows exemptions to financial market rules that many commodity trading firms previously benefited from. That means such firms may be forced to comply with CRD IV – the European Union version of Basel III bank capital rules………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

As the corrupt regimes of the West move slowly but inexorably toward “banning cash”; it’s very important that bullion-holders understand the full implications of the latest, fascist moves by these regimes. Simply, “banning cash” = bullion confiscation.
If the Zombie-serfs of Western nations are no longer allowed to hold any of our debauched paper ‘money’, they certainly won’t be allowed to hold real money – i.e. gold or silver. However, even here there may be a means of escape, for those who plan for this (inevitable?) eventuality………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

The internationalisation of China’s renminbi faces its stiffest test yet as the International Monetary Fund debates whether to endorse the “redback” as a reserve currency alongside the dollar, euro, yen and sterling.
Becoming a constituent in the IMF’s Special Drawing Rights basket would be a big step forward for the currency, which remains tightly controlled by Beijing. Economist Louis Gave of GaveKal Dragonomics likens the move to Japan’s currency liberalisation in the 1980s and the subsequent run-up in yen assets………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

This year the International Monetary Fund (IMF) will decide whether China’s renminbi (RMB) will join its Special Drawing Rights (SDR) basket of currencies. Asian market participants believe its inclusion is vital. The IMF determines the weightings of currencies in its SDR basket every five years. Later this year the IMF will consider adding the RMB to the basket, which includes four currencies: the euro, Japanese yen, pound sterling and US dollar.
While the SDR is rarely used in actual transactions - it makes up around only two percent of foreign exchange transactions – the move would be an automatic acknowledgement of reserve currency status. All central banks would hold RMB through their SDR assets………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

The Canadian dollar is bouncing higher again today, moving in a wide range to best the 83-cent mark. It’s largely because of a weaker U.S. currency, rather than anything to do with Canada, however.
The loonie touched a high of 83.31 cents U.S. today, and a low of 82.43 cents., hovering below the 83-cent mark by late afternoon. Greg Moore, senior currency strategist at RBC Dominion Securities, said the main driver of today’s bounce played the major role………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Bloc to create market-stability reserve in effort to stabilize price of emitting carbon dioxide. The European Union agreed Tuesday to create a stabilization mechanism for its emissions-trading system in an effort to push up the cost of releasing carbon dioxide into the air and encourage investment in low-carbon technologies.
The EU’s cap-and-trade system for CO2 emissions has been undermined by a severe drop in prices in recent years, partly because of the decline in industrial activity amid the economic crisis and an over-allocation of emission allowances when the word’s first carbon market was set up in 2005………………………………………..Full Article: Source

Posted on 06 May 2015 by VRS |  Email |Print

Carbon Market Watch calls for safeguards as emissions trading pact sets precedent for China and South Korea tie-ins. An EU-Swiss carbon market link is due to be agreed by the end of the year, officials said on Tuesday.
Carbon Market Watch warned the tie-up will dilute the EU’s climate ambition unless it is coupled with deeper emissions cuts. With China, South Korea and US states also developing emissions trading systems (ETSs), the think-tank urged policymakers to bring in safeguards for potential future links. “The impact of a link with the Swiss ETS is relatively small,” said policy analyst Femke de Jong………………………………………..Full Article: Source

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