Category Archives: Commodities

Saudi Arabian Oil Minister Naimi Says Oil to Reach $75 a Barrel

Posted on by


[Skip to the end]

No reason to expect it won’t happen if they want it to happen.

Saudi Arabian Oil Minister Naimi Says Oil to Reach $75 a Barrel

by Adam L. Freeman

May 23 (Bloomberg) — Saudi Arabian oil minister Ali al- Naimi said the price of oil will climb to $75 a barrel when demand picks up.

“We’ll get there eventually,” al-Naimi told reporters in Rome today where he will attend meetings with energy ministers from the Group of Eight industrialized nations. “The trick is keeping it between $70 and $80. It will be achieved as demand rises and the fundamentals are better than they are now.”

To reach that goal, Naimi said he will recommend OPEC members “stay the course” at their meeting in Vienna on May 28. Saudi Arabia is the biggest and most influential member of the Organization of Petroleum Exporting Countries, which produces about 40 percent of the world’s oil.

The group is likely to keep daily output quotas unchanged at 24.845 million barrels at the Vienna gathering, according to a Bloomberg survey.

Crude oil for July delivery rose 62 cents to settle at $61.67 a barrel at 2:45 p.m. on the New York Mercantile Exchange yesterday. The July contract increased 8.2 percent this past week. Oil is up 38 percent this year.

Naimi said oil should keep at about $75 a barrel “because that is what is desired for the world economy.”

Saudi Arabia produced less than its quota of 8 million barrels a day last month, according to a May 13 OPEC report. The Saudis produced 7.9 million barrels of OPEC’s 25.3 million- barrel daily output.

Naimi said last month that helping to keep oil prices at $50 a barrel was his country’s contribution to the world economy, which is fighting the worst recession in six decades. Since he made those comments in Tokyo on April 25, crude prices have climbed more than 20 percent to above $60 a barrel.

Exceed Ceiling

The 12 members of OPEC, which overshot their ceiling by 410,000 barrels last month, will update their policy on oil output at this month’s meeting. At the last summit on March 15, the group decided to leave quotas unchanged and adhere to its earlier commitment to restrict supply by a total of 4.2 million barrels a day from levels in September 2008.

Naimi said his country “very recently” started production at the Nuayyim oil field and it pumping 100,000 barrels a day. He added that even though Saudi Arabia has opened new production global markets don’t need the product.

“The problem is the market, that the demand is only in one place — Asia and that’s all.”

The group’s production rate rose during April, and most members are still producing more than their quota, a report from the OPEC Secretariat in Vienna showed earlier this month.

OPEC cut its 2009 forecast on May 13 and now estimates daily oil demand will fall by 1.57 million barrels, or 1.8 percent, to 84.03 million barrels of oil a day this year.


[top]

Share

U.S. Trade Gap Widens on Oil Imports

Posted on by


[Skip to the end]

(email exchange)

>   
>   On Tue, May 12, 2009 at 9:20 AM, wrote:
>   As you predicted….
>   

You mean as I feared!

Higher oil = dollars easier to get overseas = weak dollar all else equal (which it never is, of course)

Higher crude = higher headline CPI = higher government and private CPI adjusted payments

And I suspect higher fuel prices will mean higher government transfers to ‘help Americans afford to heat their homes etc.’ which is not a ‘bad thing’ but does serve to drive up prices that much further.

Creating more spending power does not create more fuel (at least in the medium term) – only higher prices.

The world’s newly forming higher income individuals are back to outbidding our lower income individuals for fuel. With food following close behind as biofuels continue to link the two.

WSJ NEWS ALERT: U.S. Trade Gap Widens to $27.58 Billion on Oil Imports

by Jeff Bater

May 12 (WSJ) — The U.S. trade deficit widened for the first time in eight months during March, as the price and use of imported oil both climbed. The U.S. deficit in international trade of goods and services increased to $27.58 billion from February’s revised $26.13 billion, the Commerce Department said Tuesday. Originally, the February deficit was estimated at $25.97 billion.

U.S. exports in March slipped by 2.4% to $123.62 billion from $126.63 billion as trading partners bought fewer consumer goods and cars from the U.S. Imports fell at a lower rate, dropping 1% to $151.20 billion from February’s $152.76 billion.


[top]

Share

China’s Reserve Strategy

Posted on by


[Skip to the end]

(email exchange)

>   
>   On Tue, May 12, 2009 at 11:22 AM, J A Kregel wrote:
>   
>   And you can add to this the undeclared policy (confirmed to me last week) that
>   Chinese reserve diversification to hedge dollar exposure will be primarily in
>   stockpiling natural resources, not currency diversification
>   


[top]

Share

China to boost commodity stockpiling

Posted on by


[Skip to the end]

Looking like they are diversifying a bit away from financial reserves:

China to Boost Commodity Stockpiling Storage Capacity

by John Duce

Apr 19 (Bloomberg) — China will give priority to boosting its storage capacity for resources such as oil and grains to ensure supply and smooth price volatility, a senior government official said.

China is also likely to further ease state controls on oil prices to reflect the market value of the fuel and encourage energy saving, said Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission.

“We need to improve and strengthen our permanent commodity storage,” said Zhang at the Boao meeting of business and political leaders in southern China. “We should also deepen our reform of the oil price system,” he said.

China, the world’s largest consumer of commodities, said March 31 that it will carry out an audit of its grain and soybean stockpiles. The results of the survey will not be made public, according to a joint statement issued by 10 ministries and state agencies. Emergency reserves of oil will be built to store up to 100 days of demand, the head of the National Energy Administration said this month.

Speculation in commodity markets drove up prices in recent months, said Zhang. Boosting reserves would help ensure supply at reasonable prices, he said, without giving details of the likely scale of increases in stockpiling capacity.

“We also need to develop the commercial-sector storage capacity, so we can have a joint effort here,” he said.

Oil prices are controlled by the government to limit their contribution to inflation. The government introduced a pricing mechanism last December which ensures a profit margin for refiners and reflects the market price for crude oil.


[top]

Share

Commodities bottoming as the great Mike Masters inventory liquidation runs its course

Posted on by


[Skip to the end]

It all came to a near halt with the world wide inventory liquidation. Now flows are resuming but will be at lower levels than before, reflecting lower demand.

Prices should recover over time to something above replacement costs.

Look for deteriorating real terms of trade for the US as the modest fiscal adjustment adds to demand, and import prices grow faster than export prices, led by Saudi crude pricing.

Shipping Index Surge Signals Commodity Currency Gains

by Ye Xie and Candice Zachariahs

Feb 17 (Bloomberg) — Shipping costs have more than doubled this year, so it may be time to buy kroner, Aussies and loonies.

The 147 percent jump in ocean-transport prices is evidence that China’s $580 billion stimulus plan will lift raw materials, said Ihab Salib, who oversees $3 billion at Federated Investments Inc. in Pittsburgh. That would benefit countries exporting them, so Salib is “actively trading” Norway’s krone and Australian and Canadian dollars, nicknamed Aussies and loonies.

Salib and other currency traders have started using the Baltic Dry Index’s global gauge of raw-material shipping costs to help make such decisions. The index and the value of a basket of those three resource-rich countries’ currencies are increasingly moving in tandem — 96 percent of the time in the past year, up from 84 percent in the past decade, data compiled by Bloomberg show.

“Historically, the Baltic Dry Index is a good leading indicator for commodity prices,” said Salib, who declined to detail his investments. “Commodities are very depressed right now, and they offer good long-term value. Once they come back, these currencies should do well.”

The shipping gauge is a sign that China’s stimulus spending on housing, highways, airports and power grids will have impact beyond its borders. By Feb. 28, it will have spent 25 percent of its stimulus budget, Deutsche Bank AG said Jan. 20, predicting the country’s economy will grow at a 12 percent annual rate between the fourth and first quarter, after shrinking 2.3 percent between the third and fourth.

Oil Rebound

China is the world’s biggest consumer of copper and iron ore and has helped each rally this year by about 10 percent, benefiting Australia and Canada, which account for 10 percent of world production of the two metals. Oil,Norway’s top export, will average $66 a barrel in the fourth quarter, up from an average of $40.62 since Jan. 1, according to the median forecast of 34 analysts surveyed by Bloomberg. China is the world’s second-biggest energy user.


[top]

Share

Re: Commodities liquidation

Posted on by


[Skip to the end]

Thanks!

>   
>   On Tue, Jan 13, 2009 at 3:51 PM, Joshua wrote:
>   

Commodities Liquidation

No Exit From Commodities as Hedge Funds Return: Chart of Day

by Chanyaporn Chanjaroen

Jan 13 (Bloomberg) — Hedge funds are proving there was no complete exit from bets on higher commodities prices during the worst slump in a half-century and are now starting to return.

The CHART OF THE DAY shows hedge funds and other large speculators increasing their net long positions, or bets prices will rise, in an index of 20 commodities monitored by the U.S.

Commodity Futures Trading Commission. The gauge fell 97 percent from its peak in February to its low last month.

“The massive de-leveraging and exit from indexes appeared to have stopped,” John Reade, a strategist at UBS AG in London, said by phone yesterday. “It could well be about value — prices are very, very low from what they were before.”

The Reuters/Jefferies CRB Index retreated 36 percent last year, the worst performance since it started in 1956, and has fallen a further 3.9 percent this year. Fifteen of the 19 raw materials tracked by the gauge declined last year, led by a 59 percent plunge in gasoline.

Net purchases of agricultural futures for index products have been positive for three weeks, Reade said. Disinvestment peaked at $2.3 billion in the week ended Oct. 7, he said.

“It is a broad indication of what is going in commodity index investment in general,” Reade said.


[top]

Share

Re: Comments on Thoughts on Treasury plan

Posted on by


[Skip to the end]

(an interoffice email exchange)

>   
>   On Fri, Sep 19, 2008 at 9:50 AM, David wrote:
>   So creating liquidity for toxic assets RTC style.
>   

maybe, jury is still out on how that might work

>   
>   Make the government a little money and inspire confidence in banks, ok.
>   
>   We are thinking that this is overtly inflationary for financial assets (maybe all
>   assets?)
>   

supports a lot of equity value by removing a large element of risk, but cost to shareholders still unknown

fixed income going higher in yield, prices there going down

>   
>   Should I expect this to re-inflate the commodity asset bubble in the medium
>   term???
>   

not directly. crude price up to the Saudis.

>   
>   Do you think the dollar’s rally will help cap any commodity asset price rise???
>   

yes, in the competitive markets. crude is not a competitive market. saudis merely set price and let quantity adjust

>   
>   PS- I expected to come in today to $110+ crude, $8+ gas, and $900+ gold.
>   

as above. crude up even with dollar up, but gold down.

warren


[top]

Share