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Commodities Briefing 17.Nov 2015

Posted on 17 November 2015 by VRS |  Email |Print

The renewed weakness in global commodity prices is obviously a concern for producers, but the current pessimism looks overdone, says Capital Economics. Key commodity prices - notably oil and copper - have been slipping over the past weeks, pulled down by worries about China’s growth and as chances grow that the US Federal Reserve will start lifting US rates in December, which has strengthened the greenback and in turn weighed on commodities.
The falls have been sufficient to drag the most closely watched commodity indices down to their lowest levels in more than 10 year, falling below the troughs seen during the global financial crisis of 2008 and 2009………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Let’s assume that you are a somewhat contrarian investor and take the view that the recent slump to fresh lows in commodity prices, and the share prices of producers, is a sign that a turnaround is coming in 2016. If you do take this view, is it better to buy the actual commodities or the shares of the companies that extract them?
Unfortunately there is no clear precedent from recent history to suggest that one will significantly outpace the other, but that doesn’t mean there’s no value in looking in what has happened in prior commodity routs. BHP Billiton, the world’s largest diversified miner, reached its lowest since the 2008 financial crisis in Sydney trading on Nov. 11, hitting an intraday low of A$19.81 ($14.06) a share, before closing at A$20.23………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Despite the astounding surge in the oil supply over the last year, the Bank of England reported that 60 percent of the recent decline in oil prices was due to demand factors. Cumulative percentage change in the Brent oil price since June 19, 2014, based on 200 commodity price co-Movements. Source: Bank of England November 2015 Inflation Report.
The BOE bases this analysis on the co-movement of oil prices with those of other commodities. If oil prices drop simultaneously with other commodity prices, then presumably some common cause is the source. The supply of a range of commodities is unlikely to balloon all at the same time. Therefore, if supply is not the cause, then weak demand is likely to blame………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

By appearances, OPEC has the tell-tale signs of an aging prizefighter. It still technically possesses a knockout punch, but it’s unable to land one against younger, more agile opponents, amid doubts as to whether it has the legs to go the distance.
The last few days have bolstered this view. As OPEC continues its now-17-month price war against upstart US shale oil, global oil prices fell under $45 a barrel last week, breaking through a threshold that had held for months. Alarmingly if you happen to be an OPEC member, that’s far below the price needed by almost all of them to balance their state budgets ……………………………………….Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The average price of crude sold by OPEC fell below $40 a barrel for the first time 2009, underscoring the financial cost of the group’s strategy to defend its market share. The daily OPEC Basket Price fell to $39.21 a barrel on Nov. 13, according to an e-mail on Monday from the organization’s secretariat in Vienna.
The basket, an average of export grades from each of the group’s 12 members, typically trades below international oil futures as some OPEC nations pump denser or higher-sulfur crude that’s less profitable to refine. Oil has slumped since the middle of last year as the Organization of Petroleum Countries keeps output elevated to pressure rivals it sees as responsible for creating a global surplus………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The rumblings of revolt against Saudi Arabia and the OPEC Gulf states are growing louder as half a trillion dollars goes up in smoke, and each month fails to bring about the long-awaited killer blow against U.S. shale. Algeria’s former energy minister, Nordine Ait-Laoussine, says the time has come to consider suspending OPEC membership if the cartel is unwilling to defend oil prices and merely serves as the tool of a Saudi regime pursuing its own self-interest.
“Why remain in an organization that no longer serves any purpose?” he asked. Saudi Arabia can of course do whatever it wants at the OPEC summit on December 4. As the cartel hegemon, it can continue to flood the global market with crude oil and hold prices below US$50………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Russia will keep its competitiveness on the global oil market even if oil prices remain low. That’s according to Energy Minister Alexander Novak. “Our production costs are not much different from leading producers which have the lowest one, so we are absolutely competitive,” he said.
Novak added that most of oil price in Russia comes from taxes, while production costs at some fields is in the range of $3 to $15 per barrel. “The prices don’t scare us,” the Minister concluded. However Novak admitted lower oil prices have a negative impact on Russia’s economy, as the oil companies receive less currency income, but on the other hand due to currency fluctuations, the ruble revenues remain the same………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The precious metal has long acted as a safe store of value during periods of heightened global uncertainty. That role faded somewhat this year as investors have focused on the timing of the next U.S. interest rate rise, a trend that kept a tight lid on Monday’s rally. The most actively traded gold futures contract, for December delivery, gained $2.70 to $1,083.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
It did touch a one-week intraday high overnight, but spent most of the session slowly retreating from there. “Obviously, the tragic events in Paris are looming large in the market this morning,” said Jonathan Butler, a precious metals strategist at Mitsubishi Corp. “We saw something of a safe-haven bid, as one often sees in these times.”……………………………………….Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The gold price rose in afternoon trading in the US on Friday – and again in Asia overnight – as investors rushed to safe havens in the wake of the Paris terror attacks. As markets digested the impact of the tragedy on the economy and tourism-related stocks in particular fell sharply, equity indices receded.
In contrast gold, which is traditionally used as a sanctuary in times of heightened risk, has rebounded from the near-six-year lows reached last week. Having fallen as far as $1,073 an ounce at one point on Thursday, according to Investing.com, the gold price rallied to $1,091 in New York in late afternoon trading on Friday as news of the Paris atrocity broke………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The three gold schemes launched by the Modi government recently may have the potential to perform well, particularly among rural areas, compared to such schemes rolled out in the past, according to a global brokerage firm. Prime Minister Narendra Modi launched three gold schemes on 5 November, including the ‘India gold coin’ with the Ashoka Chakra minted on it.
The other two schemes — Gold Monetisation Scheme (GMS) and Gold Sovereign Bond Scheme — are aimed at reducing the physical demand for the yellow metal in the country. Households and institutions in India hold an estimated 22,000 tonnes of gold directly or indirectly, which is worth about $800 billion or 39% of the country’s GDP………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The price of iron ore has continued its slide toward a 10-year low amid another broad retreat in commodities. At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US47.30 a tonne, down 0.2 per cent from its prior close of $US47.40.
The commodity has rarely seen positive numbers over the past month thanks to ongoing concerns around Chinese demand, the prospect of persistent supply increases, weak crude prices and a US dollar that is rising ahead of a likely rate hike in December. The former and latter concerns are plaguing the broader commodities space, with base metals and oil all struggling since the US Federal Reserve hinted at a rate move two weeks ago………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Copper prices fell to their lowest in more than six years on Monday in a sell-off triggered by the attacks in Paris, a stronger dollar and poor demand prospects in top consumer China. Benchmark copper on the London Metal Exchange slid as low as $4,685 a tonne in early trading, matching the low seen in June 2009. The metal used in power and construction closed down 2.8 percent at $4,690.
Risky assets, such as commodities and equities, came under pressure as investors turned to safer assets, such as the dollar, after suspected Islamist militants launched coordinated attacks across Paris. “We’re struggling to see light at the end of the tunnel, things aren’t getting any better in China, we can’t see what is going to turn things around for industrial metals,” Cantor Fitzgerald analyst Asa Bridle said………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Chinese traders have placed a new round of speculative bets against aluminium and copper prices after months of quiet trading, suggesting funds in the country expect prices to keep falling even after sinking to six-year lows.
Investors in China this month have increased their bets that aluminium prices will fall 15 per cent, while average trading volumes have doubled. Average copper volumes in Shanghai have risen fourfold during November, while short positions have also increased………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Investors are back to dumping precious metals as gold trades near five-year lows and banks including Barclays Plc forecast more price declines. Outflows from US exchange-traded funds backed by precious metals have reached $1.12 billion so far in November, heading for the first monthly loss since July, data compiled by Bloomberg show.
Gold prices have fallen for four straight weeks as Federal Reserve Chair Janet Yellen signalled that officials are getting closer to raising US interest rates, cutting bullion’s appeal as a store of value. Holdings in futures contracts have dropped to a five-week low. Until a few weeks ago, investors had poured money into precious-metal ETFs for three months, the longest stretch since 2012. Bulls were anticipating that slowing global economies, especially in China, would deter Fed policy makers from raising rates………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

As trade agency IE Singapore pushes ahead with efforts to develop Singapore as a precious metals trading hub, industry players say they are benefiting from more growth and trade opportunities.
Of all the gold and silver stored by bullion retailer Silver Bullion, about 90 per cent is owned by foreigners. Silver Bullion said Singapore is seen by overseas buyers as a secure jurisdiction for storing their precious metals. On top of strong global demand, it said growth in the domestic industry gave a lift to sales in recent years - in particular, the removal of 7 per cent goods and services tax for investment precious metals in 2012………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

Intercontinental Exchange Inc, the owner of the New York Stock Exchange, said it would buy commodities trading platform Trayport from BGC Partners Inc and GFI Group Inc for about $650 million in stock. ICE said the deal would help it to provide new services to the European over-the-counter energy markets, including power, natural gas and coal.
The exchange and clearing house operator said it also planned to extend the platform to cater to over-the-counter energy markets in Asia. GFI will receive 2.5 million ICE shares as part of the deal. ICE may substitute cash for part or all of the stock consideration, BGC said in a statement………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The Nigerian Commodity Exchange (NCX) was established to provide a practical solution to a number of challenges that have adversely affected the growth and development of the Nigerian agricultural sector, especially the heavy post-harvest losses associated with poor warehousing and the absence of a ready market for the disposal of farm produce at realistic prices.
The NCX is an end-to-end integrated system of decentralized trading, warehousing, quality certification of commodities, clearing, settlement, delivery and market information. It enables agro-commodity merchants, exporters and industrial end users to have access to reduced transaction costs in terms of cost of logistics and aggregation of commodities………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The market doubts it, but it is possible that the Chinese currency, the renmimbi (RMB), may become part of the International Monetary Fund’s special drawing rights, the multilateral institutions basket currency. That could be the match the lights the renmimbi rocket in the years ahead as a global reserve currency, likely replacing the Japanese yen and Great Britain pound in the currency hungry emerging market central banks.
The IMF Managing Director Christine Lagarde said they will make a decision about the RMB on Nov. 30. A few months ago, media reports suggested that people inside the IMF were saying that the Chinese currency was not yet ready for the big time………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The country spent the better part of a year reforming its currency to join the International Monetary Fund’s special group of world currencies. China finally got the news it has been lobbying for: its currency, the renminbi, is set to be included in the International Monetary Fund’s basket of top currencies alongside the world’s reserve currency, the U.S. dollar, as well as the Euro, British pound, and Japanese Yen.
It’s a win for China, which has lobbied for the past two years to be included in the club of countries whose currencies make up the ‘Special Drawing Right’. The SDR’s only practical purpose is that it’s the currency in which the IMF and other multilateral lenders draw up their accounts. But symbolically, it has always represented the balance of power in global financial markets………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

The Paris talks beginning November 30 will mark the most important negotiations on climate change since the 15th gathering of the Conference of the Parties to the United Nations Framework Convention on Climate Change in Copenhagen in 2009 (COP 15). The world has changed markedly since then.
Part one of this post examined key developments in science and emission trends. Part two below takes a look at how politics and attitudes have shifted in the last six years. Parts one and two were written by Fiona Harvey and originally published on Ensia.com, a magazine that highlights international environmental solutions in action. The world has moved on politically since the Copenhagen talks………………………………………..Full Article: Source

Posted on 17 November 2015 by VRS |  Email |Print

In 2009, President Obama turned his attention from his campaign victory to a carefully crafted legislative wish list, handed to him by liberal lobbyists and the radical base of the Democratic Party. Among their top priorities were extreme carbon-trading schemes and a war on fossil fuel. Despite the president’s personal popularity, his policy initiatives were met with strong opposition, forcing him to enlist the help of then Senate Majority Leader Harry Reid (D-Nev.) and then Speaker of the House Nancy Pelosi (D-Calif.).
Democrats enjoyed sizeable majorities in the House and Senate, and the president was certain he could impose European-style cap-and-tax in America. The American Clean Energy and Security Act, also known as the Waxman-Markey Bill, was the cap-and-tax legislation Obama believed would secure him international accolades and a lasting legacy………………………………………..Full Article: Source

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