Commodity Markets

Posted on by raju
Press Release
08 Sep

Having heard on global financial markets in our earlier session, we would like to extend our discussion to commodity markets.

  1. What is your outlook on oil?
    • WTI (US) price has come to $84 after going upto $115 by last week of April 2011 , It’s lowest in this year was close to $79 per barrel in 2nd week of August 2011 on concerns of Euro crisis and global economic recovery. Concerns about Irene is having impact on oil but it is minimal It has come down 11% YTD.
    • Brent Crude had come to $ 110 after going upto $126 in 1st week of April 2011.It’s lowest in this year was close to $93.per barrel in 1st week of Jan 2011. It is still up by 16% YTD.
    • WTI has taken a bigger hit than Brent crude in current year due to concerns of global economic outlook.

    Key Reasons

    • WTI Oil prices came down to near $84 a barrel as US economy gains no jobs in August 2011, rate remains at 9.1%, early the week it arose after a hurricane left minimal damage among refineries along the U.S East Coast.
    • Oil not rising much despite fall in US dollar as concerns of Euro Zone still remain which can impact Global economic outlook.
    • US economy grew at a paltry 1% annual rate in the second quarter after growing only 0.4% in the first three months of the year, impact oil prices.
    • Oil is hoping for further economic stimulus from Obama in this week.
  2. What are recent trends on oil supplies from OPEC countries?
    • The Organisation of Petroleum Exporting Countries’ crude output in August 2011 rose to the highest level since November 2008, led by Saudi Arabia, which pumped the most oil.
    • Daily output by the 11 members with quotas, all except Iraq, climbed 130,000 barrels to 27.35mn, 2.505mn barrels above their target.
    • Saudi Arabia, Opec’s biggest producer, increased output by 75,000 barrels, or 0.8%, to 9.85mn bpd highest level since at least January 1989.
    • Nigerian production rose 100,000 bpd to 2.28mn bpd in August the biggest gain in Opec and the highest level since February 2006.
    • The UAE raised output by 40,000 bpd to 2.55mn bpd in August, the third-biggest increase after Nigeria and Saudi Arabia. The gain left the country’s production at the highest level since September 2008.
    • Libyan output fell 55,000 barrels to 45,000, the lowest since at least January 1989.
  3. In recent times what is the impact on natural gas?
    • Natural gas was around 4.59$ per Million British thermal units (mmbu) by end of Dec 2010.
    • It reached a highest of $4.893 per MMBTU on 8th June 2011.
    • It reached a low of $ 3.83 per MMBTU in last week of Aug 2011.
    • Presently Natural gas is 3.886$ per Million British thermal units. 17% down YTD.

    Overall all the Reasons for YTD drop

    • Higher stock of inventories than expected resulted in drop reflecting the fact that market is well supplied.Recently the U.S. Energy Information Administration report showed total domestic gas inventories rose last week by 55 billion cubic feet to 2.961 trillion cubic feet.
    • Moderate temperatures reduced demand for natural gas as reduced demand for heating/cooling.
    • Slow down in consumption from U.S.
    • Recent storms in U.S could impact prices in short -term.
  4. How has Gold performed in recent times?
    • Gold prices has reached all time high exceeding $1900 dollars this week on account of fresh concerns of Europe ,anemic growth in US economy and poor job data from U.S.
    • Gold has arose by 3% last Friday after US job data stagnated.
    • Gold is 34% UP YTD.
    • It was $1420.78 on 31st Dec 2010 and lowest (this year) was $1314 on 27th Jan 2011.
    • It dropped by 7 % to its lowest level in Jan 2011 on improvement in US employment rate which fell to 9% and also due to speculation that European Union leaders will stabilize the region’s economy.
    • Gold will continue to rally if global fears increase.
  5. How about silver?
    • Silver was at $31 as at Dec 2010. It reached a yearly low of $27 in last week of Jan 2011 (Dropped by 13%) on account of expectations of recovery in U.S and settlement of issues in Europe.
    • Silver had recovered and was $48 by end of April 2011. (Rose by 78% since its lowest level) due to the following:
      • a weaker U.S. dollar.
      • geopolitical turmoil – Libya, Middle east and Japan issues, Portugal concerns and Concerns of US government shutdown was also there.
      • Threat of a major government shutdown in USA caused turmoil.
    • SILVER had fallen since August however SINCE JULY / AUGUST SILVER SHOWS A RISING TREND due to concerns of global economy recovery, US debt and Euro crisis.
    • Next to Gold , Silver is expected to be major beneficiary due to Global worries.
    • Silver is now at $43. YTD – 38% UP.
  6. How has copper performed in recent times?
    • Copper was at $9600 a tonne by end of Dec 2010.
    • Copper reached highest of $10,160 per tonne in 2011 (By Mid of Feb, 2011) on expectations of demand from china. (6% Higher since beginning).
    • It reached a low of $8,595 a tonne in 2nd week of August 2011 after end of QE 2 in June 2011 and concerns of slowing down of china due to higher rate action from Chinese central bank.
    • and it is now at $8940 a tonne. It is still down by 7% YTD.
    • Copper fell this week on concerns from Europe.
    • Metals can witness some short- term rally on hopes of measures from FED in Sept 2011.
  7. How have other base metals performed in recent times?

    Aluminum

    • Aluminum was $2470 per tonne (1st Jan 2011).
    • It touched to $2,785 (17% rise to its highest since its lowest level) by 1st week of May 2011 on account of falling dollar and demand from china for its industrial output.
    • It has now come down to $2300 in last week of August 2011, after end of QE 2 in June 2011 and concerns of slowing down of china due to higher rate action from Chinese central bank.It is now at $2350 (Down by 5%).

    Nickel

    • Nickel was at $24,650 per tonne as at 1st Jan 2011, It touched above $29,300 per tonne in Feb 2011. (18% rise since its lowest and highest since April 2008) mainly due to demand from china and QE 2.
    • It had come down to $20,600 in last week of August 2011. after end of QE 2 in June 2011 and concerns of slowing down of china due to higher rate action from Chinese central bank.
    • It is now at $20852. (15% down YTD). Nickel fell a bit last week after US unemployment data.
    • Metals can witness some short -term rally on hopes of measures from FED in Sept 2011.