Commodity Blog

Posts Tagged ‘Europe’

Crude oil went down to the five-week low and Brent dropped to the two-month minimum as the concerns for Europe intensified, fueling fears that the global economic growth would falter. The yield on the Italian and Spanish bonds increased. Germany opposed the idea to boost the European Stability Mechanism (Europe’s bailout fund). The indecisiveness of the European politician continues to hurt markets.

There were other reasons for the drop of oil. OPEC increased its production ceiling for the first time in three years. China’s manufacturing continued to decline this month, albeit with slower pace. China’s Manufacturing PMI fell to 49.0 in December from 47.7 in November, according to the flash HSBC/Markit estimate.

January futures for crude oil rose $0.01 to $94.96 per barrel, in electronic trading on NYMEX, following yesterday’s 5.2 percent drop to $94.95, the lowest closing price since November 4. Brent traded at $106.14 per barrel as of 4:33 GMT today on ICE after it tumbled during yesterday’s trading session from $109.47 to $104.83.

The start of this week was an unpleasant one as most commodities took a great hit as concerns about Europe reemerged. The main reason for the pessimism was the warning from Moody’s Investor Service that it may downgrade the credit ratings of the eurozone countries. The European leaders attempted to address the problems during the summit on the last Friday, but the implications of the meeting will be felt over a longer term, not in an immediate future, so the rating agency wrote:

But in the absence of policy initiatives in the near future that stabilise credit market conditions effectively, Moody’s believes that the system remains prone to further shocks, which would likely lead to selective rating changes. As a result, Moody’s intention remains to revisit sovereign ratings of euro area and EU countries during the first quarter of 2012.

The Standard & Poor’s GSCI index of 24 commodities fell as much as 1.3 percent to close at 638.93 after earlier it reached 636.8, the lowest level since November 25.

Gold slumped from $1,707.50 to $1,663.90 per ounce on COMEX yesterday and traded today at $1,654.70. Silver slipped from $31.76 to $31.25 on the previous trading session. Copper was down from $3.5045 to $3.4460 per pound and traded today near $3.4435. Brent crude rose from $107.23 to $107.50 per barrel today on ICE after yesterday’s drop from $108.75 to $107.11 per barrel.

Commodities, including copper and oil, gained today on good news from Europe and the United States. The European politicians discussed on today’s summit ways to resolve the region’s debt problems and announced a range of measures, including leverage for the temporary bailout fund and an implementation of more permanent stability mechanism next year. The US consumer confidence improved this month, according to the preliminary estimate of the University of Michigan.

Agricultural commodities, specifically corn, soybeans and wheat, haven’t joined the rally as the US Department of Agriculture boosted its forecast for the next year’s inventories. The outlook for the global stockpiles of corn was 4.6 percent higher than in the previous estimate, for soybeans 1.5 percent higher and for wheat 2.9 percent above the previous forecast.

January futures for delivery of crude oil advanced $1.07 to $99.41 per barrel on NYMEX, while Brent jumped from $107.78 to $108.68 per barrel today as of 21:48 GMT on ICE. Copper rallied from $3.4720 to $3.5560 per pound on COMEX. Corn fell from $5.8900 to $5.8500 per bushel, soybeans slumped from $11.3100 to $11.0575 and wheat traded near its opening price of $5.7675 after falling to $5.6775 today on CBoT.

Gold fell today, following yesterday’s advance, as the optimism for the eurozone again emerged. The European Central Bank will hold the monetary policy meeting today and many analysts believe that the Bank will cut its interest rates to reduce the pressure on the most indebted economies of the European Union. The precious metal rallied yesterday as France and Germany again showed disagreement in their approaches to battling the debt crisis. Gold was down today from $1,742.00 to $1,737.70 per pound as of 3:04 GMT on COMEX, following the advance from $1,730.60 to $1,741.00 per pound yesterday.

Oil hasn’t profited from the reemergence of the optimism as the US crude oil inventories unexpectedly rose last week. The stockpiles grew 1.3 million barrels to 336.1 million barrels. Forecasters predicted a decline by 800,000 barrels. January futures for delivery of crude oil rose $0.19 to $100.30 per barrel in electronic trading on NYMEX. Brent was down from $109.60 to $109.35 today on ICE after it fell from $110.70 to $109.50 yesterday.

Crude oil rallied today on the good news from Europe and the United States. Earlier, crude dropped on the speculation that the US inventories increased last week.

Italy auctioned its debt today and the results were good, nothing like the disastrous outcome of the German auction. The confidence of the US consumers improved as was shown by the index that rose from 40.9 in October to 56.0 in November.

The Organization of Petroleum Exporting Countries said that it’s going to keep the quotas at the current level. The protests in Iran may lead to disruption of supply.

January futures for crude oil delivery gained $1.58 to $99.79 per barrel on NYMEX. Brent oil was up from $108.52 to $110.44 per barrel as of 23:02 GMT today on ICE.

Copper advanced as the sentiment about the situation in the European Union improved, boosting prospects for raw materials. Analysts are worried, though, that the optimism may be short-lived.

There’s the speculation that the International Monetary Fund prepared a loan to Italy. The officials denied the rumors, but traders felt their mood improving. In general, Monday was a day of ”risk-on mode” and most of commodities rallied.

Unfortunately for traders, there are many reasons for the rally to be short-lived. Moody’s Investor Service warned that the indecisiveness of the European leaders may lead downgrades for the credit rating of the European countries. The rating agency wrote:

The continued rapid escalation of the euro area sovereign and banking credit crisis is threatening the credit standing of all European sovereigns, cautions Moody’s Investors Service in a new Special Comment. In the absence of policy measures that stabilise market conditions over the short term, or those conditions stabilising for any other reason, credit risk will continue to rise.

Futures for delivery of copper in March rose as much as 2.7 percent to $3.3715 per pound by 13:14 on COMEX.

Both copper and gold performed in a similar manner in the recent past, but the outlook for the metals is vastly different. Traders are bullish on gold, but bearish on copper. Why is that?

There is actually a single reason for such different expectations: the European debt crisis. The borrowing costs of the European nations continue to rise, while the credit ratings of Europe’s countries continue to be downgraded by rating agencies. That’s unfavorable environment for industrial metals, but a blessing for precious metals.

So why gold doesn’t look like it’s “blessed”? There are different theories on this matter, but two of them sound most logical. Firstly, the crisis makes investors to run to the dollar and gold suffers from that as it’s inversely correlated to the greenback. Secondly, demand for the yellow metal an inflation hedge wanes as the slowing global economy means slower inflation growth.

Gold closed at $1,681.00 per ounce today on COMEX after opening at $1,693.80. Copper fell to the closing price of $3.2680 per pound from the opening of $3.2730.

Crude oil rallied today after the German business confidence improved. Yesterday’s decline of the US inventories also helped crude.

The German Business Climate index, according to the Ifo Institute for Economic Research, increased to 106.6 in November from 106.4 in the previous month. Not a big increase, but it’s still better than the predicted drop to 105.3.

The US crude oil inventories decreased by 6.2 million barrels to 330.8 million last week. That’s compared to the forecast of a 0.3 million decrease and the decline by 1.1 million in the week before.

The leaders of Germany, France and Italy met today in Strasbourg, France, to discuss the ongoing debt crisis in the Eurozone. The results of the meeting were mixed. On one hand, the European chiefs discussed the measures to ensure a fiscal discipline among the members of the European Union, and such talks were a good sign. On the other hand, the idea of joint euro-bonds was postponed or even completely rejected, and that wasn’t particularly good news.

Brent crude rose to $107.20 to $107.76 per barrel today as of 22:14 GMT on ICE and earlier touched $108.08. Crude oil gained $1.01 to $97.18 per barrel on NYMEX.

Crude oil fell on the speculation the spreading Europe’s crisis will slash demand. Germany auctioned its debt yesterday and it was considered a disaster as there was a significant lack of demand for the government bonds, reinforcing concerns about Europe’s economy. The US economy also showed sings of slowdown. January futures for crude oil dropped $2.25 to $95.76 per barrel before trading at $96.45 on NYMEX.

Sugar prices declined on the outlook for higher supply from Brazil. Luis Pogetti, chairman of the Copersucar SA, predicted that production will go up to 34 million metric tons in Brazil’s Center South next year. India is also expected to add to the global supply. March contract for delivery of raw sugar fell 1 percent to $0.2321 per pound on ICE after reaching $0.2316 — the lowest level since June 2.

Bart Melek, Head of Commodity Strategy, TD Securities, explains in the interview his outlook for different commodities, including oil, natural gas, gold and silver. He talks about various factors, such as the European crisis, that have an impact on commodities. The video also mentions the place that commodities have in investor’s portfolio.