Archive through October 03, 2004
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     rederob
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Username: rederob
Post Number: 267
Registered: 10-2002Rating: N/A
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| | Tuesday, August 10, 2004 - 01:38 pm: | 
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Copper was sold heavily overnight by funds gambling that summer's slumber will see reduced demand combined with warehouse restocking .
This 5 year chart of LME stocks shows the dire position copper is in - similar pictures emerge if you look at NYMEX or Shanghai.
Although economic data is not strong from the US at present, manufacturing productivity is very high. Accordingly jobs data is just one side of a large equation when trying to decipher what is really happening.
Meanwhile the analysts are still trying to work out if China has applied the brakes to its economy, or if it's on cruise control - I suspect the latter.
Copper prices are still in a recent uptrend and I have little doubt that any USD weakness will quickly convert to a jump in the red metal's price.
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rederob
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Username: rederob
Post Number: 269
Registered: 10-2002Rating: N/A
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| | Friday, August 13, 2004 - 08:33 pm: |
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Oil prices are certainly topical.
Record highs are being hit intraday almost every day in the past fortnight.
Not surprisingly the Fed increased interest rates to 1.5% during the week, putting some ginger into the greenback.
Pundits are suggesting a cooling in rates is needed.
My view is that oil prices (40% up on last year and 65% up on 2 years ago) - which are a good proxy for energy costs - will have ratcheted up inflationary pressures such that the Fed will have no choice but to add more rate hikes in months to come.
On the commodities front higher energy costs have stymied the upward path of base metals despite inventory drawdowns persisting into the northern summer - a traditional restocking time due to thin trade and market torpor.
Aluminium remains in free-fall, although stock levels have not reached their nadir of December 2000 (around 300,000tonnes).
Anticipate general weakness/flatness in commodity prices over the next month, with a probable spurt on any weakness of the dollar.
By the way, copper's largest drawdowns are happening in the USA, which helps explain their "jobless recovery".
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rederob
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Username: rederob
Post Number: 272
Registered: 10-2002Rating: N/A
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| | Saturday, August 14, 2004 - 12:09 pm: |
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Just showing how the greenback influences markets, copper spiked 3% overnight on dollar weakness with other base metals following suit (except for lead).
This is where we are with inventories:
London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
yesterday
Aluminum 798,625 -6600
Copper 80,725 -600
Nickel 8,886 +312
Lead 39,825 +275
Zinc 736,875 -425
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
yesterday
Aluminum 127,445 +1514
Copper 71,074 -708
Nickel is precariously placed with stainless steel suppliers concerned about getting caught without inventory, but reluctant to hold too much in case prices improve. As the nickel market continues to thin there will be some sharp technical downward price moves, but the strength is likely to be in upswings going forward.
Aluminium drawdowns are maintaining price pressure on the metal but the real concerns are energy costs and electricity supply for manufacturing plants - already a concern for Chinese producers.
Oil posted yet another high overnight, with market players seriously worried about supply on 4 separate fronts - Iraq, Venezuela, Russia and the US (hurricane season).
NYMEX WTIC closed at $46.58 (record peak intraday at $46.65).
WTIC has covered all gaps and is technically solid in its continuing run to $50+/bbl - now likely within the fortnight on trend and even quicker if any catastrophe befalls the industry.
Australian equities have taken a relatively defensive position on commodity-sensitive companies on the basis that the present run will quickly turn in their favour.
Anything is possible, I guess, but remember that present high prices feed into future profits.
In the case of oil producers, average oil price in 2003/4 financial year was about US$34/bbl. Already since end-June it is averaging almost US$43 or over 25% more. The likes of WPL, STO and OSH may have an excellent 6 months ahead of them.
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rederob
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Username: rederob
Post Number: 281
Registered: 10-2002Rating: N/A
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| | Thursday, August 19, 2004 - 07:23 pm: |
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Copper added over 30,000tonnes to inventory overnight and saw the markets sell it down quickly, dropping 3%.
LME warehouses at Singapore and Korea were restocked with the copper, possibly a first shipment from Freeport's re-opened Grasberg (Indonesia) mine.
A blip?
While the restocking added almost 40% to LME's total inventory, it would take another 20 similar episodes to bring warehouses to levels at the beginning of the year - an improbability for the near term.
As if yesterday did not happen, copper drawdowns continue today at the same pace as before restocking.
Nickel has been defying the recent trend of metal price falls. This is largely due to its inventory remaining below 10,000tonnes. However, as this traditional "quiet" period draws out, weakness in price should be anticipated: look for strong support at $12,000/tonne.
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rederob
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Username: rederob
Post Number: 291
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| | Tuesday, August 24, 2004 - 07:23 pm: |
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Oil
The US accounts for about 20% of world oil use.
Over the past year China's use increased around 40% and India's about 10%.
India, and Asia generally, are expected to maintain their increasing demand/use for oil.
The US anticipates their annual demand to increase by around 2% per year and world demand to increase by over 2.5%/year.
The US has a Strategic Petroleum Reserve (SPR) of around 670 million barrels (almost 2 months "export" demand satisfied). The US Congress and/or the President can release oil from the SPR (Congress has 3 approvals and Bush senior released oil from the SPR in Gulf War I).
While so much of the day to day focus is on the US, the real story is unfolding in Asia.
Analysts are in general agreement that oil over US$35 is here to stay for perhaps the next 12 months or so.
There is also some sentiment for a significantly higher price near term.
On the supply side there is little, if any, spare capacity.
On the demand side there is no sign of letup.
Until there is an acknowledged and sustained sign of a turnaround the medium term outlook remains for an oil price closer to $40 than $35.
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greatdane
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Username: greatdane
Post Number: 107
Registered: 12-2002Rating: N/A
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| | Thursday, August 26, 2004 - 08:29 am: |
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Wed, Aug 25, 2004
NEW YORK (Reuters) - Oil prices fell nearly $2 a barrel on Wednesday, dragged down by heavy losses in U.S. gasoline futures after summer driving demand in the world's largest consumer failed to meet expectations.
U.S. light crude on the New York Mercantile Exchange ended down $1.74 to settle at $43.47 a barrel, its lowest closing level since Aug. 4. It fell as low as $43.22 on the day.
London Brent closed down $1.64 at $40.68 a barrel.
Prices are now down nearly $6 from record highs last week.
Sellers overwhelmed the market after the U.S. Energy Information Administration said U.S. gasoline stocks were unchanged at 205.7 million barrels last week, near the upper end of their five-year average.
Analysts had expected gasoline supplies to decline due to summer vacation consumption, but the EIA said gasoline demand over the past four weeks was just 0.7 percent higher than last year.
"Gasoline appears to be the weakest link in the complex right now. That's typical, as we're just 10 days until the end of the summer driving season," said Marshall Steeves, a market analyst at Refco Group.
The weak performance in gasoline stocks outweighed a fall of 1.7 million barrels in crude stocks to 291.3 million barrels, pulling inventories to their lowest level in five months.
Crude stocks fell as refineries worked at 96 percent of capacity, eating up feedstocks at a rate of 16.05 million bpd.
"We're seeing runs at unusually strong pace for this time of year, chewing into crude supplies," said Jim Ritterbusch, president of Ritterbusch and Associates.
Diesel fuel demand this summer has been unusually high, due in part to surging freight activity and manufacturing. Distillate fuel demand, including diesel, is running more than 7 percent above last year.
U.S. EMERGENCY RESERVES
On Tuesday, the Bush administration indicated it would tap the U.S. emergency crude oil stockpile if imports of 6 million barrels per day, or about half of the nation's daily oil and petroleum purchases, were halted.
Vice President Dick Cheney (news - web sites)'s comments during a campaign appearance in Iowa marked the first time the administration has given a specific example of the type of emergency that would cause it to tap the stockpile.
Cheney made it clear that the White House was not budging from its position, and would not release emergency oil unless there was a "national crisis."
If the United States "were dealing with a situation where we lost 5 or 6 million barrels a day, for example, out of the 20 million barrels a day that we currently consume, that would be the kind of national crisis that would drive prices so high and probably bring large parts of our economy to a halt," Cheney said. Such a situation would require using the oil reserve, he added.
The United States imports about 11 million barrels per day of crude oil, gasoline and other petroleum products.
The kind of shortfall that Cheney described would be the equivalent of the United States losing its top four oil suppliers -- Canada, Mexico, Saudi Arabia and Venezuela. The four nations exported 5.9 million barrels per day to the U.S. market during the first half of this year.
IRAQ BACK
Oil prices fell this week after Iraq (news - web sites) restored full crude exports of 2 million barrels a day from its southern Basra fields and restarted deliveries at 450,000 bpd, half capacity, from its northern Kirkuk fields for the first time since May.
Worries about an output cut from Russia's leading producer, YUKOS, which is battling to avoid bankruptcy, have also eased after Russian President Vladimir Putin (news - web sites) gave President Bush (news - web sites) an assurance on Russian supplies.
Russia has allocated YUKOS its usual crude export levels through major ports in September, including 520,000 tons through the Baltic port of Primorsk, where total volumes will set a record.
So far there is not much evidence that fuel costs are undercutting economic growth, either in big industrial powers or in emerging economies such as China and India.
European Central Bank President Jean-Claude Trichet said on Wednesday the bank's outlook for euro zone growth remained unchanged.
"All things considered, petrol prices and all the rest, I don't think there is a need to revise downwards our forecasts for growth for the euro zone," Trichet said.
He said the situation was not comparable with the energy crises of the 1970s and 1980s, because current oil price increases were not on the same scale and economies now were better protected against fuel costs.
Regards, GreatDane
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rederob
Member
Username: rederob
Post Number: 297
Registered: 10-2002Rating: N/A
Votes: 0
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| | Friday, August 27, 2004 - 11:14 pm: |
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More on Oil....
http://www.newsite.woodside.com.au/NR/rdonlyres/efu7a7wmgjhg44fdqbudcrk3pgmigojh qz4sqaljw36i4a37t2eiczlo4pxknompa35mqe3ghvuhfegr6pdw32diweh/AustraliasRoleinChin asGrowingEnergyMarket27Aug04.pdf
If the linkage doesn't work go to Woodside Petroleum's website and look for David Maxwell address of 27 August.
Some interesting data from it: China uses 50% less oil equivalent (boe) per capita than the global average, Australians 3 times and Americans 4 times the global average.
If China were today consuming the "average", another 8 million boe per day would be consumed, which is around 5 million boe per day beyond world capacity.
China is currently making 5 million cars per year, and will ramp this up to at least 10 million by 2010.
The statistics on China's appetite for raw materials and energy are staggering.
Should world economies decline in coming years, China's internal growth - its organic needs - would still see it importing significant quantities of raw materials.
At this stage the world's largest democracy, India, is seen to be taking a back seat.
With Western wealth and technologies flowing into the sub-continent, that won't be for that much longer.
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rederob
Member
Username: rederob
Post Number: 305
Registered: 10-2002Rating: N/A
Votes: 0
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| | Friday, September 03, 2004 - 10:40 pm: |
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Base metal trends are mixed.
Aluminium inventories on LME continue to trend sharply down, tho on NYMEX have been steady.
On the other hand copper inventories on LME have climbed, while NYMEX drawdowns have been consistent throughout this year.
Nickel inventories remain tight despite some restocking in recent weeks and net lead drawdowns remain the theme (with occasional restocking).
Zinc is running its own race - mostly at half pace.
Given that this past month should have seen across the board restocking, a strong price rebound in October is looming: That should coincide with US manufacturing back online after summer's slumber.
Warehouses show the following:
London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
yesterday
Aluminum 745,100 -3950
Copper 110,375 -800
Nickel 11,946 +186
Lead 34,150 -450
Zinc 733,075 -425
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
yesterday
Aluminum 117,528 -2279
Copper 60,604 -1015
Oil is set for another rebound.
With oil production capacity reportedly at 99% gives no margin for falls of any magnitude near term - not helped any by Russian shenanigans.
RSI in neutral territory, 200dma over $37/bbl and 50dma at $42.30 - not a nice picture for consumers.
OPEC have some spare capacity, but it's for "sour" oil which, despite its cheapness in normal market conditions, is not worth a cracker because of the difficulties in refining it in an already tight market.
Over the past 40 years new oil discoveries have failed to match annual usage: By 2025 it is anticipated that world oil production will have peaked (unless technologies intervene and string out an extra few years production).
In the meantime nobody is forecasting annual demand to decline year on year for the foreseeable future.
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rederob
Member
Username: rederob
Post Number: 318
Registered: 10-2002Rating: N/A
Votes: 0
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| | Saturday, September 11, 2004 - 12:05 pm: |
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Oil jumped massively leading into the Iraq war, and fell as impressively within weeks of the war getting underway when it was obvious the US had a stranglehold on Baghdad.
OPEC spokesmen say oil will be back under $30 soon, so what will be the trigger?
Excess supply.
I expect "soon" to be a while coming as supply has been ramped up throughout this year and is being constantly met by demand.
US oil inventories actually fell this week, and the northern winter is now months away - a particularly cold winter winter would see oil well over US$50/bbl.
On the base metals front the past week has been tough, especially for nickel.
Anticipate recoveries in prices across the board as the US swings back into production from summer closures and China's demand perks up into the 4th quarter.
Inventories continue to tighten (aluminium, copper and lead) or remain at critically low levels (nickel and tin).
Copper for example got a record boost of LME stocks in August, but total inventory in COMEX, LME and SHFE fell almost 6000tonnes for the month. US and Shanghai copper inventories will be at critical levels by November at current drawdowns:
London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
yesterday
Aluminum 718,925 -5525
Copper 106,675 -1125
Nickel 13,674 +282
Lead 33,575 -125
Zinc 725,700 -1175
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
yesterday
Aluminum 111,460 -1011
Copper 56,883 -630
Aluminium at LME warehouses is deceptively lower, with only 600,000 tonnes available for purchase - a fall of 88,000 tonnes over the month and showing no letup.
Despite trades of thin volume in recent months in most complexes, prices have held up well given that high oil prices have placed downward pressures on the markets.
Unless there is a rapid turnaround in global markets the probability of a return to the high prices of early this year is again on the cards.
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rederob
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Username: rederob
Post Number: 322
Registered: 10-2002Rating: N/A
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| | Tuesday, September 14, 2004 - 08:15 pm: |
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Although early on Tuesday (for northern markets) the base metals are up in price again.
The likely driver is continuing demand coupled with stronger drawdown rates (except nickel thus far).
China has reported its first increase of industrial production in 6 months, and US data remains supportive.
Aluminium is interesting: China has scaled back output this year, largely as a result of power issues, while the US is running steadily.
With demand unabated throughout this year, you can see from the LME chart below that conditions will tighten considerably into 2005 (LME warehouse levels halved since January this year):
More remarkable is the acceleration of copper drawdowns as the US swings into action after summer holidays. If today's net 2% drawdown (LME, COMEX, SHFE) rate is indicative of things to come, late October will see copper prices at early year peaks again, and climbing higher still.
To round off the picture, we would need to see oil drop below US$40/bbl, while anything nearer $30 would propel the metals complex.
Although early days, this is where the pace traditionally picks up, and the ingredients are nicely in place.
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rederob
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Username: rederob
Post Number: 324
Registered: 10-2002Rating: N/A
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| | Thursday, September 16, 2004 - 10:04 pm: |
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Nickel rebounded strongly this week, and is accompanied by stock drawdowns after a few weeks replenishment.
Copper prices are looking very tight and early tonight is up by 2%.
Today's position at warehouses is as follows:
London Metal Exchange Warehouse Stocks
Metal Tonnes in Storage Change from
yesterday
Aluminum 701,700 -1125
Copper 102,850 -800
Nickel 13,506 -288
Lead 32,525 -325
Zinc 718,700 -2575
New York Futures Market Warehouse Stocks
Metal Tons in Storage Change from
yesterday
Aluminum 103,972 -1919
Copper 54,765 -675
In terms of where the year began, warehouse stocks for the complexes have declined by the following since 1 January:
Aluminium, by 52%
Copper, by 88%
Nickel, by 64%
Lead, by 81%
Tin, by 84% and
Zinc, by 5%
With base metals demand in China, the US and Europe firm to strong, it is difficult to see replenishment of stock levels for a considerable time.
Accordingly, a breach of the early year highs for the base metals, apart from Zinc, is highly probable before year's end.
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rederob
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Username: rederob
Post Number: 327
Registered: 10-2002Rating: N/A
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| | Sunday, September 19, 2004 - 04:15 pm: |
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All this year Commsec commodities' analysts have forecast oil to fall: For much of the year they said "below US$30/bbl".
Being wrong by 50% does not faze them, it seems.
One of the smaller stocks to do well from oil's continuing rise is BSO. At present the probable 6 monthly dividend is in the range 24-28cents, and possibly more if gas usage is as seasonally high as previous years (this is on top of the 25cent capital redemption).
I don't advocate BSO as a good buy at its present price as the capital redemption means the stock disappears in late 2007.
But it illustrates the value of oil in any company's assets at present, WPL being on everyone's lips.
Recent articles on China suggest the early-year slowdown did its job admirably, but renewed activity is needed to prevent a stalling of infrastructure developments in particular, especially related to energy supply.
Nickel and copper producers anticipate strong demand over coming months, a move predicated by funds re-entering the ring on the long side.
With Jamaica's alumina industry (5% of world supply) stalled by recent hurricane damage, aluminium prices are also likely to tick nicely higher.
The likes of BHP seems undervalued despite its historically high price.
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rederob
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Username: rederob
Post Number: 329
Registered: 10-2002Rating: N/A
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