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Commodities Briefing 15.Jan 2016

Posted on 15 January 2016 by VRS |  Email |Print

Reading others on 2016 it sounds as if it will be a re-run of 2015. It’s often safest and easiest to forecast little change. A trend is a trend, after all, until it reverses. Calling major turning points is never easy — it usually means standing out against the herd of other commentators. The quiet life is to predict more of the same, and more of the same is what often happens.
Last year, many were writing that inflation would stay low, interest rates would stay lower for longer, and shares should do better than bonds. They did for a bit in China, they did all year in Japan, and just about did better in parts of the EU and the US………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Commodity producers worldwide had a long and profitable run of high prices thanks to strong worldwide demand which was largely driven by China. In the past few years prices have fallen as China’s economy slows at the same time as new production hit the markets.
Falling demand and rising supply is a bad combination for producers but it can happen when producers scramble to chase high price and arrive late to the party. Producers and investors should not blame China’s economic weakness for their problems; they are to blame for their current predicament………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Financial markets are notoriously fickle and events ranging from geopolitical crises to weather patterns can impact them dramatically. Right now, the El Niño weather phenomenon is in effect and is estimated to stick around until around the second quarter of this year, and it’s already having an impact on certain market sectors and commodities.
Some effects of El Niño can be predicted in advance, such as California receiving precipitation after its long drought spell and Southeast Asia seeing just the opposite with less rainfall. The severity of the current El Niño effect is one of the strongest on record and many scientists have attributed the wave of intensifying weather to changing global climates. Whatever the cause, the effect it’s having on the global economy is significant………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Much of Latin America has seen an unusually long period of relative political stability since the early 2000s. With the exception of Cuba, democratically elected governments seem embedded throughout the region.
The political rules of the game largely seem to be followed. Indeed, the international outcry following the 2009 coup that removed Honduras’ president, Manuel Zelaya, served to reinforce how much Latin American politics had changed since the 1970s, when military dictatorships were the dominant form of government………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

The world’s economy is in “quite a mess right now,” and while the American economy is doing well, its growth remains “mediocre by historical standards,” argued Carl Weinberg, chief economist of High Frequency Economics. It’s hard to overstate the deleterious effect of falling commodity prices, Weinberg said.
“There’s a crash in commodity prices right now that’s potentially catastrophic to the global economy,” he said. The steep price declines in everything from iron ore to gold to agricultural products — not to mention oil—“10 or 20 years ago” would have had only a modest effect on global GDP, but that’s not now the case, he said………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

On the railways criss-crossing the western US farm belt, grain trains are so abundant you can’t give one away. Big agricultural commodity traders have been offering as much as $200 per covered hopper car to anyone willing to sublet their 110-car shuttle trains.
“You actually have to pay someone to take your cars,” says Dan Mack, vice-president of agricultural transportation and terminals at CHS, a large US grain merchant. Spare capacity in the US freight rail system underlines the breadth of a commodities rout that just entered its sixth year………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Oil: Is there no bottom? Of course there is. But, while producers might quibble, the price of crude isn’t nearly at the kind of irrational levels that would signal a nadir. For that to be the case, price would be no object for a related but far-less-quoted asset.
Oil storage certainly is at a premium as inventories reach record levels around the world, reflecting a continuing glut. In fact, the price of the most expensive potential form of storage, gigantic crude tankers, remains relatively expensive………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Just over four years ago, the United States and Europe sanctioned the sale of Iranian oil in an effort to curb Tehran’s nuclear program. Oil was trading at $110 per barrel, and Obama administration officials fretted about how to curb Iran’s exports without causing a price spike.
How quickly things change. This week, crude dropped below $30 per barrel for the first time in 12 years, thanks largely to a boom in U.S. production. Sanctions against Iran will likely be lifted soon, unleashing more oil that will further depress an already glutted market………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Many analysts predicted that crude oil prices could decline further from $30 per barrel — prices which has not been seen since for over a decade. Canadian oil sand producers are feeling the pain from the continues decline of crude oil prices, with prices there even lower than current crude prices.
Standard Chartered Bank has the most bearish oil outlook among the major banks. The British Bank forecasts the possibility that crude oil prices could crash to as low as $10—which is now happening in Canada. The last time crude oil prices reached as low as $10 a barrel was during the height of the financial crisis in Asia in 1998………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Get used to low oil prices. They’re here to stay, and may have to fall even further to take out excess supplies. The slump in prices was the global economic story of 2015. They’ve fallen another 20% already this year to around $30 a barrel - a level not seen for about 12 years.
This is having a colossal impact as importers reap the benefits, while dwindling revenues put intense pressure on producers. Oil is a volatile commodity and we’ve been here before. So why is the price collapse different this time?……………………………………….Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Oil at $20 per barrel is a stark prediction. Continued global oversupply and China’s increasingly unpredictable economy could make it a reality unless members of the Organisation of the Petroleum Exporting Countries can put aside their differences and agree to deep production cuts. It could happen, if major producers outside the cartel such as Russia co-operate.
Brent crude has tumbled by 15 per cent since the beginning of 2016 to around $32 per barrel on January 12 and a number of major international banks have slashed their price forecasts. Morgan Stanley now predicts that crude could crash to $20 per barrel due to the depreciation of the yuan and fresh supplies of crude from Iran. Goldman Sachs foresaw something similar in November. Opec’s smaller members are worried………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Barclays has pegged average gold prices at $1100/oz for 2016 (compared to previous forecast of $1,150/oz), $1200/oz for 2017. Average silver prices would be at $14/oz for 2016 (compared to previous forecast of $16/oz), $15.75/oz for 2017 (compared to previous forecast of $16.75/oz).
Barclays forecast average copper price at $1.98/lb for 2016 (compared to previous forecast of $2.55/lb), $1.90/lb for 2017 (compared to previous forecast of $2.30/lb). Average zinc price has been forecast at $0.75/lb for 2016 (compared to previous forecast of $1.04/lb), $0.85/lb for 2017 (compared to previous forecast of $1.15/lb)………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Gold Prices again fell below $1090 per ounce in London trade Thursday, heading for a 1.7% loss from last Friday’s 10-week closing high as European stock markets fell hard and crude oil whipped around $30 per barrel – its lowest price since April 2004.
2016 gold prices will average $970 per ounce, says Bernard Dahdah at French investment and bullion bank Natixis – winner of the 2015 gold forecast competition held by trade association the LBMA – ranging between $900 and $1300. That would mark a 14% drop from last year’s average, and the fourth drop in a row since gold’s annual average peaked in 2012 at $1669 after 11 consecutive gains………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

An acute shortage of readily marketable physical gold is developing that we believe will deepen in years to come. This possibility seems to be unrecognized by those who are short the gold market through paper contracts.
The relentless dumping of synthetic or paper gold contracts since 2011 by speculators in Western financial markets has caused the shortage. The steady selling has driven down the price of physical gold, hobbled the gold-mining industry, and drained the stores of gold held in the vaults of Western financial centers………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

It’s been a scary start to 2016 for global markets and investors are responding by buying more gold than at any time in the past year. In the past five days, investors bought 26.8 metric tons of bullion through exchange-traded products backed by the metal, the most since January 2015, according to data compiled by Bloomberg.
Gold is one of the few commodities doing well, with prices up 2.8 per cent so far this year. Interest in the precious metal is being driven by demand for a safe haven after losses spread across Chinese and US equity markets and oil collapsed to $30 a barrel………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Many parents will have given their children electric toothbrushes for Christmas, hoping that the sensors that buzz after two minutes will keep them brushing longer than their flimsy elbow grease.
Both generations may, however, be ignorant of the fact that in that time the toothbrushes produce more than 62,000 strokes; that the power to generate such motion comes from tiny magnets using three rare metals, neodymium, dysprosium and boron; and that some of these metals are so coveted that in 2010 they were at the centre of a dangerous rift between China and Japan………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

ETFs/ETPs listed in Europe gathered US$82.0 billion in net new assets in 2015 which is 32.5% above the prior record level of US$61.8 billion gathered in 2014. This marks the 14th consecutive month of positive net inflows.
During 2015 there has been growth on most measures: the number of ETFs/ETPs has increased from 2,089 to 2,188, assets under management have increased from US$458 billion to US$506 billion, and the number of providers has increased from 49 to 51………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Global assets in ETFs and ETPs rose by a record level last year, with $372bn (£269bn) of new inflows for 2015. Assets rose by 10 per cent on 2014’s inflows as market turmoil drove investors to passive markets, according to data from research and consultancy firm ETFGI.
ETFs and ETPs listed in Europe clocked up $82bn of inflows in 2015, beating 2014’s inflows by 32.5 per cent. ETFGI found that assets under management for products listed in Europe have risen from $458bn to $506bn over the year………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

It’s been years since basic materials ETFs last saw their days of glory. As for the last few years, the space has been an area of concern thanks to a surging greenback, massive crash in oil prices and hard landing fears in China. Moreover, supply glut has been a long-lasting issue for this space.
Things were fragile for long in China given the protracted slowdown in the domestic manufacturing sector, credit crunch concerns and a property market slowdown. As a result, the Chinese economy has been undergoing a tumultuous phase for the last few months. To shore up the ailing economy and the turbulent market, the Chinese government took several measures; but nothing could really heal the pain………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

We are well into a political season as the U.S. presidential campaign heats up. We are also in the midst of deflationary pressures evident in the unprecedentedly low cost of oil and other commodities, and the falling dollar value of the yuan.
Many Republican candidates, led by Donald Trump, are keen to blame America’s economic troubles on President Obama and, of course, on the Chinese. “Currency manipulator” is the typical charge against China. But what does it mean and why is being thrown around now?……………………………………….Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

This week’s unprecedented surge in the cost of borrowing yuan in Hong Kong is putting a spotlight on one of China’s biggest policy dilemmas: whether to create a real international reserve currency, or to keep control of its value.
The cost of maintaining control came to the fore on Tuesday as interbank lending rates in the city jumped five-fold to a record 66.82 percent, a side effect of central bank intervention to combat the yuan’s slump to a five-year low. Such efforts to influence market pricing are untenable if China wants to develop active offshore markets for financing and trade in the currency, according to Rabobank Group and Royal Bank of Canada………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

Virginians could reap significant economic benefits by implementing a carbon trading program, along with stronger renewable energy and energy efficiency standards, to comply with the Environmental Protection Agency’s Clean Power Plan, according to a Union of Concerned Scientists (UCS) study.
“Virginia has a relatively modest emissions reduction target compared to other states around the nation,” said Jeremy Richardson, study author and senior energy analyst at UCS. “State officials would be smart to realize that shifting to cleaner energy doesn’t take much………………………………………..Full Article: Source

Posted on 15 January 2016 by VRS |  Email |Print

China has released the names of another batch of projects deemed eligible to generate carbon offsets, of which nine will be able to supply around 1.1 million CCERs annually to compliance buyers in the pilot emissions trading schemes and the national ETS.
Over the past two days, the NDRC has published design documents for 17 projects that have been given the go-ahead under China’s national offset programme (two of them were published in Dec.). The approvals themselves were awarded in July, but not reported until now………………………………………..Full Article: Source

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