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Commodities Briefing 11.Jan 2016

Posted on 11 January 2016 by VRS |  Email |Print

Chile is expanding its largest open-pit copper mine below the northern desert to dig up 1.7 billion additional tons of minerals, even as metal prices plummet around the globe. India is building railroad lines that crisscross the country to connect underused coal mines with growing urban populations, threatening to dump more resources into an already glutted market.
Australia is increasing natural gas production by roughly 150 percent over the next four years, as energy companies build half a dozen export terminals to serve dwindling demand. Across the commodities landscape, this worrisome mismatch mainly traces back to the same source: China………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

The commodities hangover after an end to China’s once-voracious appetite for metals, crops and fuels may be here for a while. Iron ore last traded down 1.2 per cent and crude oil is trading at $US33 a barrel.
Still, Chile is expanding its largest open-pit copper mine to dig up 1.7 billion tons of minerals, even as metal prices plummet, India is building railroad lines that crisscross the country to connect underused coal mines with growing urban populations, and here in Australian producers are boosting natural gas production by roughly 150 per cent in the next four years as energy companies are building export terminals to serve dwindling demand………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

It was a bloodbath for commodities in 2015. Brent crude oil fell 45.7% for the year, the most out of any commodity. From its high of US$127.07 per barrel, Brent’s been smashed by more than 70% in the past 18 months. It’s now trading at US$33.55 per barrel.
Other big losers were nickel (down 42.6%), heating oil (down 41.4%), and gas oil (down 40.2%). Copper lost a quarter of its value, declining for a third straight year. It’s the longest slump for the base metal since 1998. Among other base metals, zinc was down 25% and aluminium fell 18% for the year. Even gold languished at multi-year lows, down about 10%. It was unable to attract buyers………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Having serially disappointed investors for a while, commodities could well offer investors one of the most compelling investment opportunities in 2016. The sector’s attractiveness is likely to increase as the year proceeds, offering multiple entry points for potentially attractive medium-term return opportunities. Exploiting them will require emphasis on portfolio construction, with the design of the right investment vehicles as important as careful asset selection.
To say that 2015 was a difficult year for commodities would be an understatement. While oil grabbed most of the headlines with its volatile drop of one-third in price to seven-year lows, the damage was widespread with copper, corn, platinum and sugar also falling significantly………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Oil investors are trying to survive a brutal start to the year. They’re coping with crude prices sinking to 12-year lows as Chinese demand falls and ballooning U.S. stockpiles fuel fear. Relief, however, may be on the way. One top analyst expects prices to triple back into the $90 a barrel range by 2018. At present, few analysts expect crude prices to recover that sharply.
But before the markets get there, the pain could intensify. “It looks like a rough year,” Wolfe Research managing director and senior oil and gas analyst Paul Sankey told CNBC’s “Fast Money” recently. “Our base-case scenario is not for a full-blown recession,” but the firm is “pretty negative” on the year………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

In the middle of 2014, oil traded for more than $100 a barrel. Today, it is below $35. Traditionally, there would be numerous positives from low oil prices, but many of these have yet to materialize or may no longer be relevant at all. The U.S. shale boom, one of the great American growth stories, appears to be rolling over, and the jobs are drying up.
China, as it is with the vast majority of commodities, is both a dominant force behind growth, and a significant participant in its decline. And for the traditional energy power brokers in the Middle East, the harsh reality of low oil has already begun to destabilize the region………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Last week, renowned Saudi Arabian contractor Abdullah A M Al-Khodari Sons claimed that the Kingdom’s rising energy and electricity prices would significantly increase its operational costs for outstanding projects over the next five years. Al-Khodari predicted that these changes would increase its expenses by $11.81m (SAR44.3m) between 2016 and 2020.
In a bourse statement to Tadawul, the contractor added that its operational costs would increase by $5.8m (SAR22.1m) in 2016, “which may possibly be of a significant impact on the net profit of the said financial year”………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Gold bounced back on Monday with the market inching towards last session’s nine-week high as pressure on Asian stock markets triggered safe-haven bids for the metal. Gold climbed to its highest since early November on Friday, adding more than 4 percent to its value this year, as concerns over the Chinese economy and tumbling stock markets boosted the safe-haven appeal of the precious metal.
Investment appetite for bullion showed signs of picking up last week. Holdings of the world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 4.2 tonnes on Thursday, data from the fund showed………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

I suspect if Saudi Arabia were able to travel back in time to OPEC’s November 2014 meeting, the oil markets would look very different today. Because at that meeting the group made a decision that has thus far proven to be very costly to OPEC members.
The decision left me scratching my head at the time. Whenever I try to anticipate an OPEC decision, I first ask myself, “What would I do if I were responsible for making that decision?” Of course to OPEC, the self-interests of its members are more important than the interests of the rest of the world………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

The early stage of the interest rate increase cycle is bearish for gold. There are currently no catalysts for gold to rise. The price of gold is likely to continue to fall in 2016.
My thesis was that there is no positive catalyst for gold and that the price would continue to fall. My forecast turned out to be correct as the price of gold fell 12% from $1207 to $1061 since the article was written. I explained in the article how a rising dollar is likely to be bearish for the price of gold………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Surprising many investors in the market, gold hit a 9-week high during the previous week as the appetite for risky assets faded in the background of Chinese troubles.
We have turned bullish on gold for medium to long term a couple of months back precisely banking on two facts, that the best in the US equities and the worst for gold which is the Fed’s rate policy have been excessively discounted, now the known unknown is China, along with the fact that the net-short positions on Comex Gold for managed money stand at an all-time high hold a perfect backdrop for extending the strength in gold on slightest provocation………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

As people go bargain hunting after the recent selling pressure, investors should consider exchange traded funds that track small capitalization-weighted stocks, which have typically outperformed at the start of a new year. According to financial data provider Kensho, small-cap stocks have returned more than large-cap companies in the first quarter for the past two decades, reports Deirdre Bosa for CNBC.
Investors who have historically bet on blue-chip Dow Jones Industrial Average stocks in the first quarter for the past two decades were only positive 50% of the time and generated an average 0.92% return. In contrast, the Russell 2000 small-cap index has provided more reliable returns, trading positive 65% of the time and returning 1.6% on average………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

As investors rush to protect their portfolios in a tumultuous start to the year, odds are they will be using options on exchange-traded funds to do it. While much of the recent focus on the ETF phenomenon has centered squarely on their inflows and trading growth, they are quietly becoming the epicenter of the equity option market.
ETFs now account for about 70% of all equity option volume, or $770 billion of the approximate $1.1 trillion traded per day, using a sample of the past 20 trading days. That’s double what the average volume was five years ago, at a time when more people than ever are buying and selling puts and calls on ETFs than they are on individual stocks………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

There isn’t a single listed commodity that currently trades at a lower price than at any time since January 1974. So how can an entire commodity index, which presumably includes a whole range of commodities, have fallen to a 42-year low?
Had one invested in commodities via GSCI excess return index, the nominal value of the investment would now be at a 42-year low. However, the same is not true of the commodities the index is composed of (although buying them directly wouldn’t have helped much). Many popular commodity indexes, in fact, do not reflect actual underlying commodity prices. This is due to the so-called “rollover effect”………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Global investors are planning to cut their exposure to hedge funds in 2016 following a disappointing performance in the past year, according to a survey. The poll data, from research group Preqin, will be met with dismay by the hedge fund industry, which had hoped volatile stock markets would encourage investors to seek alternative sources of return. It is also likely to add extra pressure on hedge fund fees.
Preqin’s survey of institutional investors showed that more are planning to cut their hedge fund holdings this year than are planning to increase them, by 32 per cent to 25 per cent……………………………………….Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Global equity markets have experienced steep declines since the new year, and many assert the devaluation of the yuan by the People’s Bank of China is a major cause of this week’s turmoil.
These devaluations have fueled long-standing outcries that China is playing dirty. Presidential hopeful Donald Trump, for example, recently claimed on these pages that “the wanton manipulation of China’s currency” is “robbing Americans of billions of dollars of capital and millions of jobs.”……………………………………….Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

China’s decision to push the value of its currency lower has opened a new front of worry for global investors and consumers alike, namely a potential wave of currency devaluations among the so-called Asian tigers — South Korea, Singapore and Taiwan, sparking an Asian-wide currency war.
Such an outcome, foreign exchange specialists say, would further curb global growth expectations, which already are being revised downward as China’s once booming economy retrenches. The US dollar’s strong run recently — together with the plunge in the price of oil and other commodities — has damaged fragile emerging market economies such as Brazil, Turkey and South Africa………………………………………….Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Investors are betting the kingdom’s dollar peg will soon collapse, but oil giant should deploy the full force of firepower to protect riyal, say World Bank. Saudi Arabia should use its massive foreign exchange reserves to defend the riyal, amid fears the world is descending into a new phase of global currency wars, the World Bank has said.
The kingdom’s shaky currency peg with the dollar has come under record pressure this week as the price of oil has plummeted to near 12-year lows at $32-a-barrel………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

The Climate Trust, a mission-driven nonprofit that specializes in mobilizing conservation finance for environmental benefit, announced its third annual prediction list of 10 carbon market trends to watch in 2016.
The trends, which range from climate change playing a larger role in federal decision-making to increased carbon market linkage and momentum in conservation finance, were identified by The Climate Trust based on interactions with their diverse group of working partners—government, utilities, project developers and large businesses………………………………………..Full Article: Source

Posted on 11 January 2016 by VRS |  Email |Print

Poland has filed a lawsuit at the European Court of Justice (ECJ) calling for an annulment of the decision to implement a market stability reserve (MSR) for the EU emissions trading scheme (ETS). The complaint was filed to the ECJ on the 4 of January, the country’s permanent representation to the EU told Argus.
The Polish government said last week that it would challenge the decision on the basis that the reserve’s introduction in 2019 will disrupt phase 3 (2013-20) of the EU ETS, thereby undermining investor certainty. Warsaw also argued that the MSR effectively violates the principle of proportionality by increasing the EU’s emissions reduction goals beyond its international obligations………………………………………..Full Article: Source

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