Commodity Blog

Posts Tagged ‘Greece’

Oil fell yesterday on concerns about the credit woes of European countries that may derail global economic growth. Today prices rebounded somewhat as tensions about Iran still provide support for the commodity.

Discussion among Greece and private bondholders about a debt haircut ended in a stalemate. The country offered very low interest rates on its bonds that creditors didn’t wish to accept. The bad outcome of the talks spoiled market sentiment that previously was lifted by speculation that European lawmakers devised plans for battling the debt crisis.

Iran still may disrupt supply of crude, but analysts think that such move is already priced in. Analysts estimated that US inventories of crude oil grew 0.9 million barrels last after falling 3.4 million barrels in the week before. A report from the Energy Information Administration about stockpiles will be released later today.

March futures for delivery of crude oil rose $0.24 to $99.19 per barrel in electronic trading on NYMEX after falling $0.63 to $98.95 yesterday. Brent rose from $110.24 to $110.52 per barrel as of 4:11 GMT today on ICE, following the drop from $110.84 to $110.33 yesterday.

Coffee futures retreated on outlook for growing global supply. Concerns about the situation in Europe also weighed down on commodities.

The International Coffee Organization increased its forecast for the world coffee production by 3.8 million bags from December to 132.4 million bags in the season that started in October. Analysts say that short sellers drive the market now, while buyers perhaps expect prices to fall further.

Greece is talking with private creditors in an attempt to convince them to write off part of the country’s debt. Initially, the talks improved mood of traders, boosting commodities, but the optimism started to wear off as market participants began to doubt success of the discussions.

Coffee price went down from $2.2390 to $2.2000 per pound yesterday on ICE after reaching earlier $2.1785 — the lowest level since January 9.

Crude oil slumped, erasing previous two-day gains, as concerns that the sovereign-debt crisis will spread across the European Union hurt demand for commodities. Greece yet again was provider of bad news, while Italy still causes worries.

Yield on the Italian bonds surged to a record, dampening the optimism caused by the news about Berlusconi’s resignation. The efforts to create a interim unity government in Greece are falling apart as opposing parties are arguing about installation of a new prime minister. There rumors that German Chancellor Angela Merkel proposed to allow members of the EU to exit the shared 17-nation currency.

US crude oil inventories decreased by 1.4 million barrels to 338.1 million barrels last week. Analysts predicted an increase by 700,000 barrels. In other circumstances the unexpected drop could support oil prices, but the present unfavorable conditions imposes a pressure to the downside that is too great to be easily opposed.

Crude oil spot price was $112.26 per barrel today as of 3:15 on ICE, following yesterday’s slump from $115.35 to $112.10 per barrel.

Crude oil jumped as the prospects for new leadership in Greece and Italy spurred hopes that the European debt crisis can be contained. Traders still have mixed feelings about these new developments in the Eurozone situation and crude retreated somewhat at the start of today’s trading.

Greek Prime Minister George Papandreou agreed to step down. The ruling and opposition parties formed a unity government that may deal with the political obstacles on the way to getting new portion of the bailout.

There is a mounting pressure for Italian Prime Minister Silvio Berlusconi to resign as well. Prime Minister’s former spokesman Giuliano Ferrara claimed that Berlusconi will leave the office soon. Berlusconi declined such rumors.

Juergen Stark, member European Central Bank’s Board, said that the sovereign-debt crisis in Europe will be contained in two years.

Crude oil rallied from $112.41 to $114.88 per barrel yesterday and traded today near $114.42 per barrel as of 3:21 GMT on ICE.

Investor Paul continues his series of videos about gold. This time the Greek Prime Minister George Papandreou has got in the focus as he is about to resign in favor of the interim government. From the technical analysis point of view, gold has broken through the upper border of the channel and looks to be ready for a rally.

Commodities gained today as Greece rejected the planned referendum and the European Central Bank lowered its key interest rate. Crude oil and wheat were among the gainers.

The referendum, promised by Greek Prime Minister George Papandreou, threatened the stability of the Eurozone. Some of the European leaders even spoke about expelling Greece from the European Union. Now tensions receded, reinvigorating markets.

Economists expected the ECB to keep the interest rates unchanged today. Many market participants were concerned that the rates are too high for the strained economy of the EU. The central bank, lead by its new President Mario Draghi, surprised everyone by cutting the main minimum bid rate by 25 basis points to 1.25 percent.

Wheat was down yesterday as the record harvest boosted the global stockpiles. International Grains Council estimated that output will increase 5 percent to 684 million metric tons in the 12 months ending June 30, pushing inventories to the highest level in a decade. The supply expanded as major wheat exporters, such as Russia and Ukraine, resumed their shipments after the drought last year.

Wheat was up today from $6.2300 to $$6.3575 per bushel as of 22:27 GMT on CBoT, following yesterday’s decline from $6.2900 to $6.2225 per bushel. Spot price for Brent crude jumped today $109.11 to $110.83 per barrel today on ICE, rebounding from the daily low of $107.83 per barrel.

Most commodities fell as concerns about the debt crisis in the European Union and the slower economic growth of China and the United States made traders wary and unwilling to invest in risky assets. Gold was an exception, running to the upside.

The concerns about the upcoming referendum in Greece can be easily explained. Most Greek citizens are strongly opposed to the austerity measures required by the rescue plans for Greece and very probable negative vote will likely lead to a default of the European country.

There was another report suggesting about a faltering economic growth in the USA. The Purchasing Managers’ Index of the Institute for Supply Management dropped to 50.8 in October from 51.6 in September. Analysts promised an increase to 52.1. The index is dangerously close to the 50.0 level and a drop below this level would mean that the US manufacturing is starting to decline after 27 consecutive months of expansion.

Gold price rose today to $1,726.20 from $1,726.21 today as of 2:35 GMT on COMEX, following yesterday’s advance from $1,716.80 to $1,721.50. Palladium traded today near $638.0 per ounce after yesterday it dropped from $644.0 to $637.0 per ounce. Copper settlement was down from $3.5540 to $3.5130 per pound on yesterday’s trading session.

Commodities declined today as the debt problems in Europe, particularly the situation with Greece, don’t show signs of improvement.

Greece’s new budget has a deficit of 8.5 percent, while the nation promised to cut it to 7.6 percent in order to receive new portion of the bailout funds. Now the European politicians argue about providing the aid for the indebted nation that is likely to fail meet other demands for the bailout. Many economists, as well as politicians, think that Greece may face a default as early as November.

November futures for crude oil delivery dropped $1.59 to $77.61 per barrel on NYMEX, the lowest level since September 28, 2010. Prices declined 15 percent this year. Spot price for Brent crude was $100.69 as of 22:18 GMT today on ICE, falling from $101.91. The drop followed the advance to $102.80 — the intraday high.

The lack of positive news from the European Union spurred the return of the downward rally in commodities. Significant drops are seen in the cocoa and soybean futures. The decline was also notable for speculative precious metals — silver and gold.

Investors wait for the European officials to agree on the Greece bail-out plan and its implementation. It’s a very important step, as with the failure of Greece or any other eurozone members the global financial climate would severely deteriorate, sending all markets (except several safe haven assets, like the US dollar and the Japanese yen) crumbling.

Cocoa was in an uptrend during the last two days and has now lost a half of its gain. Soybeans haven’t really stopped falling and now demonstrate the strongest decline since Friday. Both these agriculture commodities depend heavily on the state of the global economy. As a considerable part of their recent growth can be attributed to speculative buying, these positions are now getting closed by the traders to cover up losses in more “serious” markets — stocks and bonds.

Cocoa December futures fell from $2,704 to $2,654 per 10 metric tons as of 16:38 GMT on ICE today with an intraday low at $2,630. Soybeans November futures declined from $1,260.50 to $1,238.50 per 5,000 bushels on ECBOT.

Following a deep 3-day fall caused by the liquidity crisis combined with the global risk aversion, oil is now rising for the second day in a row. The commodity recovered to above Thursday’s open close level and last Wednesday’s high.

Although the extent of the recovery is impressive — more than 4.5 percent from the yesterday’s low, the reasons for this growth aren’t. Oil gained along with the rest of the commodities and stocks inspired by the speculations regarding the Greek debt crisis. After the US Federal Reserve refused to pour extra money into the world’s financial system, it’s now ECB‘s turn to raise or ruin the markets. If the European officials come to an agreement and the eurozone’s central bank will have its hands untied to provide more help (print more money) for the troubled states, the crude oil will be among the most benefiting assets.

While many analysts believe that it’s a viable reason to bet on oil (among the other oversold commodities), some warn the market participants about the possibility of the unfavorable outcome of the events. If Greece has to declare a real default or if some of the eurozone’s members will have to leave the union, the catastrophe for oil may be even worse than the 2008 financial crisis fall.

Brent oil blend went up from $104.63 to $106.27 per barrel on the spot market as of 17:50 GMT today. A monthly low of $101.66 was reached yesterday for this energy commodity.