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Commodities Briefing 23.Nov 2015

Posted on 23 November 2015 by VRS |  Email |Print

Global markets are ill prepared for the challenges they will face in 2016. Investors are facing a growing number of risks as global capital markets enter 2016, with many of the central pillars that have supported a record bull run during the past six years looking decidedly shaky.
Companies that should never have been able to borrow money have done so in record amounts due to years of near-zero interest rates. However, the era of profligate lending is now coming to a close. In the US energy sector record low oil prices have placed extreme strain on the finances of shale oil drillers………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Goldman Sachs claims that the low prices of natural resource commodities are set to continue. Natural resource commodities have had a tough year. From oil to metals, prices have been persistently low. According to Goldman Sachs, however, this trend is not going to shift anytime soon – and prices could fall even further.
The banking giant has said that the bearish nature of commodity markets is set to continue, with prices not yet bottoming out, unless supply is restricted or demand picks up again………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Tumbling commodity prices suggest the global economy is headed toward recession, but the free-fall has more to do with excess capacity than a warning about the world’s economic health, Newsmax Finance Insider, economist and market strategist Ed Yardeni said.
Very high capacity was built in anticipation of a commodity super-cycle, and the free-fall does not indicate pending doom, said Yardeni, founder and president of Yardeni Research Inc, at the Reuters Global Investment Outlook Summit in New York………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

OPEC made its position abundantly clear — it won’t reduce its output to artificially increase oil prices unless it’s joined by other oil-producing nations. That’s because it wants to maintain, if not increase, its control of the oil market. And it’s willing to suffer through the short-term consequences of weak prices to be in the position to capture the long-term gain it sees up ahead.
That said, it’s growing more worried that future oil prices could really skyrocket because of the growing potential for the current supply-demand imbalance to flip from oversupply to significant shortfall………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

OPEC, the 12-nation cartel of oil producers, will discuss Iran’s upcoming return to the global oil market in 2016, after financial and energy sanctions against it are scrapped, Iraqi Oil Minister Adel Abdel Mahdi said Sunday.
Earlier on Sunday, Mahdi met with his Iranian counterpart Bijan Zanganeh to discuss Iran’s oil production and other oil-related issues in the wake of Tehran’s anticipated comeback next year. “We discussed everything, including the OPEC,” Mahdi told reporters. “There is still no decision on the next meeting [of OPEC member states on December 4]. We will meet at the OPEC and thrash it all out.”……………………………………….Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

At around $80 a barrel in 2020, the market is expected to balance. But higher prices will bring back a rise of tight oil production and we could see a repeat of what is going on now. IEA’s Executive Director Fatih Birol, said that overzealous capex cuts in response to low oil prices could sow the seeds of a future oil price spike where IEA expects upstream investment “to be at least 20 per cent lower than last year [and] continue to decline next year”.
He added that in the next ten years “the amount of money we need just to compensate decline at existing fields is in the level of $650 billion, because decline rates are becoming steeper.”……………………………………….Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Here’s a traffic jam that will actually make drivers smile. It’s no secret that a massive supply glut has caused global oil prices to crash this year. Ferocious production from OPEC and near-record U.S. output is adding to sky-high oil inventories around the world.
But what’s less widely known is that the oversupply problem has gotten so bad that oil tankers waiting to be offloaded are piling up off the U.S. Gulf Coast because there’s nowhere to put the crude. So-called “floating storage” of crude oil soared to nearly triple the normal level last week, according to ClipperData, which tracks global shipments of crude………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Asia’s oil and gas consumers are set to benefit from weaker prices for an extended period, while the region’s producers struggle to adjust. However, for the energy-hungry region, the latest forecasts make happy reading overall with expectations of a quick rebound in prices rapidly fading.
On Tuesday, U.S. crude’s benchmark West Texas Intermediate (WTI) futures closed at $40.67 a barrel on reports of stronger U.S. inventories. U.S. crude hit a six-year low of $37.75 a barrel in August, with WTI futures now exceeding the global financial crisis of 2008-09 for their longest period under $50………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Gold prices took a blow last week as the Fed minutes of the October meeting hinted at a rate hike by the central bank in December. The yellow metal saw prices drop to a five-year low of $1,065/ounce and ended finally at $1,076/ounce on Friday.
A Fed spokesperson said the bank is confident of seeing inflation returning to its target of 2 per cent soon. The US dollar index, which measures the strength of the greenback against six other major currencies, rallied closer to the 100 mark. It hit a high of 99.85 on Wednesday and closed the week at 99.565………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Hedge funds are betting gold’s decline is far from over, as the metal’s month-long slide deepened on expectations for higher U.S. interest rates. Prices are trapped in their worst rout since July as Federal Reserve officials talk up improvements for the U.S. economy and reinforce signs that they’re ready to raise borrowing costs for the first time since 2006.
That prospect has sent investors fleeing. Assets in exchange-traded products backed by gold have fallen to the lowest since 2009. Money managers are holding a net-short position in the metal for first time since August as their long wagers shrunk to the smallest in seven years………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

There are hardly any takers for gold or its jewellery in the local market even though their prices remain low for almost a month now. Bullion traders and gold jewellers say they don’t know the reason for dampened demand, but the fact remains that the market is dull, particularly after Eid Al Adha.
Gold prices have been moving within the band of QR3,823.57 and QR4,005.65 per ounce (28.3495 grammes) for the past few weeks, traders said. Yesterday, for example, the rates ranged between QR127.5 and QR133 for a gramme of pure, or 24-carat gold, and the prices for 22, 21 and 18-carats were lower………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Silver prices are trading at levels last seen in late 2009, but that doesn’t mean investors should completely ignore the gray precious metal. Keep this in mind: the lower silver prices go, the better the opportunity.
For the precious metal to hit its lowest level since 2009, which is around $8.50 an ounce, silver prices will have to break below three key supports. They will also have to break below a major psychological level of $10.00………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

New steel and aluminium contracts to be launched next week by the London Metal Exchange (LME) are expected to attract initial interest from customers, but building up strong liquidity in the current bear market may be challenging. The launch on Monday is a key element of a strategy by the LME’s owner, Hong Kong Exchanges and Cleaning (HKEx), to boost profitability at the 138-year-old exchange.
Three new contracts in steel rebar, steel scrap and aluminium premiums will go live nearly three years after HKEx bought the LME for $2.2 billion, pledging to widen the scope of the exchange from its core business in key industrial metals………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Zinc has surged nearly six per cent after top Chinese smelters agreed to cut output in 2016 by 500,000 tonnes, but gave up the bulk of gains on scepticism over whether shortages would kick in. Zinc, mainly used in galvanising steel, rebounded a day after sinking to its weakest point in six years, jumping on the back of the joint announcement by Chinese zinc producers to slash production.
“The scale of those cuts is quite significant. A surge of refined output from China has been weighing on the whole zinc market all year,” said Caroline Bain, senior commodities economist at Capital Economics in London. Three-month zinc on the London Metal Exchange shot up 5.8 per cent to an intraday peak of $US1,620.50 a tonne, the biggest one-day gain in over a month………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Record high temperatures in October may be a prelude to a strengthening El Nino weather pattern, potentially leading to opportunities in the commodities space and related exchange traded products.
Last month was the hottest October since records have been kept in the past 136 years and the eighth record-breaking month so far this year, reports Tom Randall for Bloomberg. This week, the El Nino phenomenon started setting records as well, with some of the highest weekly temperatures ever recorded across the equatorial Pacific………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

On Wednesday, 23 exchange traded products hit all-time lows and the bulk of those products were commodities funds. The iPath Dow Jones-UBS Copper Subindex Total Return ETN, an exchange traded note, is included in that group. JJC has tumbled 29.4% year-to-date as slack demand for the red metal from China has prompted an array of global banks to pare their outlooks on copper.
Goldman Sachs argues that the base metal is headed for a seven-year-long bear market cycle, reports Aza Wee Sile for CNBC. “It is, in our view, highly likely that the four-year trend decline in copper prices is set to continue through at least 2018,” Goldman Sachs said in a note………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

For more than a year now, commodity prices have been under pressure from the strong U.S. dollar and slowing global demand. This has made a huge dent in the balance sheet of many net exporters of resources, in turn weakening their currencies.
This should come as a shock to no one, but what most people don’t realize is just how closely some currencies track certain commodities. When I presented at the International Mining and Resources Conference in Melbourne, Australia, earlier this month, I shared several charts that show this correlation. Many attendees were astounded—and we’re talking professional economists, money managers and CEOs here………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

The continued build of short currency futures positions characterizes the changes in the speculative positioning. All the currency futures we track saw an increase in gross short positions. This is what drove the large net short positions. One thing this means is that late shorts are in weak hands, and as we have seen in the Australian dollar, vulnerable to a squeeze.
There were five significant (10k+ contracts) gross currency adjustments in the CFTC reporting week ending November 17. The gross short euro position jumped 21.1k contracts to 243.1k contracts. The record high set in March was near 271k contracts. The bears added another 11.1k short yen contracts to their gross short position, lifting it to 113.1k contracts………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Reserve Bank of India (RBI) Governor Raghuram Rajan voiced support for the yuan’s International Monetary Fund (IMF) ambitions, combining a call for multilateral institutions to grant greater recognition to emerging markets, with a dismissal of claims that China sparked a currency war in August, according to the South China Morning Post.
It’s unfair to pin the blame on the August 11 yuan devaluation because currencies were already declining due to the “unconventional monetary policies” of some nations, Rajan was cited as saying in an interview with the newspaper. RBI is including yuan assets to diversify its holdings, he said………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Analysis indicates Australia’s ability to show it has met the requirements for its 2020 emissions target will make the challenges more difficult in the years ahead. Australia will use “accounting rules” to tell the Paris climate summit it has met its greenhouse gas reduction targets even though its carbon pollution is increasing, an analysis has confirmed.
The environment minister, Greg Hunt, announced via the Australian newspaper last week that Australia would reveal at the UN meeting in Paris that it had already met its target to reduce emissions by 5% by 2020, compared with 2000 levels. “The huge expectation is that it will be below zero. We’ll be able to say that we’ve already met our target,” Hunt said………………………………………..Full Article: Source

Posted on 23 November 2015 by VRS |  Email |Print

Alberta’s NDP government is imposing new curbs on emissions from the oil sands and establishing an economy-wide carbon tax in a sweeping new plan aimed at showing it is serious about fighting climate change. The long-awaited strategy, which comes days before world leaders meet in Paris for a major climate summit, also includes a phaseout of coal-fired power generation in the next 15 years, a 10-year plan to nearly halve methane emissions, as well as incentives for renewable energy.
There are no hard carbon targets, but under the plan, Alberta’s carbon emissions will begin to fall under today’s levels by 2030. The government promised the moves would be revenue-neutral, and all money would be reinvested in the province on such things as new technology to fight pollution and into a new “adjustment fund” to help affected families and businesses deal with the changes………………………………………..Full Article: Source

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