Archive through August 11, 2005

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rederob

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Post Number: 1045
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Friday, July 08, 2005 - 11:57 pm:

headline matters this week:
oil holding to close above $60 and possibly a record high on hurricane news in Mexico Gulf
copper shorts savaged by strike action across minesites in Americas - copper to close on a high for the week
nickel offtake increasing, with 1446 tonnes of warrants cancelled in last fortnight after price slump - expect rally to continue near term
lead inventories continue to increase - price weakness extended
aluminium stabilising after closing in on lowest prices of past year
zinc perking up after hitting 6 month lows last week

summarising:
oil to continue uptrend
copper and nickel to extend price gains - due to continued tightness
other base metals to meander or consolidate in actionless conditions

perler59

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Saturday, July 09, 2005 - 12:52 pm:

Rederob,

Oil ended the week with a bearish looking candle. I think the market is already looking past the hurricane to a down trend next week.

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rederob

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Saturday, July 09, 2005 - 04:24 pm:

perler
thanks for your continuing series of great oil charts
dead right in terms of friday's bearish candle
but it may have been a shade early (clearly we will know better next week)
G8 may have been the prompt for the sharp turnaround, in conjunction with OPEC stating a further intention to ramp up output
let's see if the fundamentals will cruel the technicals come monday's close: the hurricane season has intensified after market closing and the analysts have already changed their short term view: the following article from very early morning Oz time

Oil higher as hurricane Dennis gathers pace nearing Florida, OPEC discuss action
07.08.2005, 01:13 PM

LONDON (AFX) - Oil futures were higher as hurricane Dennis strengthened closing in on Florida en route to US oil facilities in the Gulf of Mexico.

This weeks price busting trading this afternoon prompted the OPEC president Sheikh Ahmad Fahd al-Sabah to restart talks on raising the group's production output to help dampen prices.

At 4.46 pm, August-dated Brent futures contracts were up 78 cents at 60.08 usd, within reach of yesterday's record of 60.70.

Meanwhile, US benchmark August-dated contracts were up 82 cents at 61.65, near yesterday's record of 62.10 usd.

'Today's price action is based on hurricane Dennis, and how badly the impact will be, which we will not know until after hours tonight,' said Alaron analyst Phil Flynn.

'If Dennis hits like Ivan (last years most devastating US hurricane), then 70 dollars or even 80 a barrel is not out of the question,' Flynn said.

Thousands of residents evacuated southern Florida, while others boarded up their homes in anticipation of a potentially devastating hit by the hurricane Dennis. Florida's governor Jeb Bush declared a state of emergency.

The Miami-based National Hurricane Center overnight upgraded Dennis from a category two to four--out of a maximum rating of five --as it continues to gather strength south of central Cuba, with gusts of up to 140 miles per hour.

Tropical storm Cindy has already hit the US mainland yesterday, hampering production so far of 300,000 barrels in southeast Louisiana, as well as causing modest reductions in refinery production due to power loss, analysts said.

Flynn said: 'Its not a question of how much production the US has lost so far, but the actual production that will be lost. It will be a situation that we have never been in before.'

Analysts are not convinced that OPEC can do much more to dampen prices.

'Its nice that OPEC are talking about raising output, but do they have any production to spare, and if they do why are they not pumping it because prices are already at 60 dollars a barrel,' Flynn said.

He added, it might not be a good idea for OPEC to crank up production given their lack of spare production, which would leave oil prices even more vulnerable to spikes (from record levels), should there be any more supply constraints.

a third of US oil production is from the Gulf of Mexico
continuing squeezes on supply mean that fractional impacts have exponential consequences
the oil futures market has carried a high premium for unpredictable geopolitical and natural catastrophes, so when they actually flare, part of that premium "locks-in" - thus forecasts of $80 are no longer to be laughed at but, instead, expected sooner rather than later

rederob

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Sunday, July 10, 2005 - 11:09 pm:

Some info about the Gulf of Mexico's importance on US oil/gas:
819 manned platforms
134 rigs
daily production of oil in GOM is approximately 1.5 million BOPD
gas production is currently approximately 10 BCFPD
is part of the 1.76 billion acres of the Outer Continental Shelf, which provides 30 percent of oil and 21 percent of natural gas produced domestically

over the weekend much of the oil/gas production was "shut-in", stressing supply
4 storms in first month of season is a record and bodes ill for Gulf weather
oil speculators will be wary of shorting the market during the storm season as an "Ivan" like event will steal their money

rederob

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Tuesday, July 12, 2005 - 08:48 pm:

we are tonight caught in the conundrum of a sideways commodities market pressured by a weak greenback, and declining inventory (or squeeze) for copper, tin, nickel and oil
the greenback was a little toppy, and surprised many with its persistence
alas, time for a reversal - it might be brief, but will still do damage via higher US denominated prices for key commodities

looking specifically at copper, there remains not a speck of evidence the market is yet in balance
with copper backwardation again over $250/tonne we really should be seeing a stock recovery given so much "chatter" about there being plenty of metal around
or maybe there is plenty of metal, but it's spoken for - thanks very much and go away!!!

then we have this view of "manipulation" in the markets
let's do the maths
about 75,000tonnes at $3,500/tonne
so for just over $250m you can take all the stock off the table (actually it's much less than that because cancelled warrants take almost 20% off what's available)
any of the big funds could corner the market if they really wanted to, without raising a sweat

just as better prices are ahead for oil, i suspect the second half will similarly treat copper

rederob

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Friday, July 15, 2005 - 11:42 am:

Copper still defying the shorts via strikes at Asarco's sites and now in Zambia with nation's biggest producer. These actions will constrain the supply chain further and preclude the inventory build needed prior to northern hemisphere consumers getting back into full swing.
Nickel inventories adding small quantities, but still also experiencing cancellations, suggesting the price of $14500- $15000 is about right for the market to digest. Unless large quantities of stock turn up at LME warehouses over the next few months, we might see another uptrend get underway from September.
Tin has been continuing its decline, with large fund sales knocking prices under $7000.
Lead inventories are increasing, and despite an RSI of 22, it may be difficult to get much support for this metal near term.
Aluminium is a more interesting play, with smelter closures in Europe and capacity builds elsewhere. Stock levels have declined this year, but two way movement suggest we are near balance medium term - steady prices likely to prevail.
Zinc stocks are solid and the price may stabilise around 50cents/lb after peaking earlier in the year around 65cents.
Oz miner/producers will generally be doing OK despite some price falls in recent months as the slightly weaker Australian dollar has been a consolation.

rederob

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Saturday, July 16, 2005 - 11:36 am:

perler
Oil read your post and dipped almost $4 from last week's peak.
I think the market was after a breach of $55 and a target closer to $50 but Emily is hovering in the Gulf of Mexico with typical feminine indecisiveness (disclaimer: this is of course a gender-based view I have developed over 50 years which may not reflect every situation).
Note that US inflation data, consumer confidence, and industrial production are unper turbed by high energy costs for now.
On the base metals front, copper remains defiant - see below chart.
Otherwise there is a general tapering off in price across the complex as output starts to match or exceed demand - this most evident for lead.
As the weeks draw on this year, talk of a "commodity supercycle" becomes more prevalent, but more balanced. The more bearish views see continuing strong demand - for 10-15 years - matched with increasing output and lower prices albeit significantly higher than cycle lows.
Taking the bearish scenario, we are likely to see Australian commodity producers reap ongoing profits and add significant value to our economy.

rederob

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Saturday, July 16, 2005 - 11:46 am:

vermante
I hope you are still holding TYC.
I note that from obscurity it has risen to "front page news" over the past month or so.
Do you see it fighting off takeover talks or will BHP or some other stump up with another counter bid?
Given the size of its resource - which keeps growing as more drilling results come in - it clearly fits the profile for any of the biggest producers to add to their portfolios of quality, world class, mineral assets.

vermante

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Saturday, July 16, 2005 - 01:55 pm:

rederob

Still holding.As previously discussed BHP is my bet for a takeover. I hope you were able to get on board.

Cheers

Vermante

danielc

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Saturday, July 16, 2005 - 02:36 pm:

tyc redrob cracker of a chart day and week fits past poster from tmbah trade profile/must take a possie monday

rederob

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Wednesday, July 20, 2005 - 06:47 pm:

9.5% quarterly growth in China has the tongues wagging wildly in commodities circles
talk of the "hard landing" is waning and major international companies with China exposure are cockahoop
while there is a softness to base metals generally, copper continues to buck the trend, repeatedly bouncing from selldowns to $1.62 (see chart posted above on 16 July)
this all begs the question - have analysts been too willing to get bearish on the promise of greater production, not realising it is being constantly matched by demand?
still too soon to tell as the summer lull is yet to shake off, so come September we will have a good review of the 3 quarters passed

looking at the impact of high oil prices, it's hard to see any difference to the US situation, however Europe seems more sensitive to costs
can't see this as a problem as European industrial production appears to have a minimal impact on commodity prices at moment

overall, i see there being a reasonable chance that the second half could see another rally in base metal prices, despite ramped up production
at this stage there is simply not enough evidence to suggest commodity supply has beaten the demand equation in the medium term

rederob

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Thursday, July 21, 2005 - 08:07 pm:

Last night saw base metals across the board do well.
Greenspan's words on US economic growth, added to China's robustness, will assure the complex of a better 2nd half than most have forecast in recent months.
Production supply shortfalls are now being exacerbated by labour strikes affecting copper, lead and zinc, and the recent shutdown of Olympic Dam to to a site fatality.
Oil is off the boil and will give producers some relief, perhaps allowing them to consider offtake midsummer - I am being the optimist.
As these weeks pass and metals continue to shimmer or shine, the prognosis going forward is significantly better than in many months previous.
Should we see any weakness in the greenback during the second half, base metal prices will glow in the dark.

ingot54

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Thursday, July 21, 2005 - 08:20 pm:

Rob

Pardon the pun, but PDN is already glowing!

Wish I'd got some when Nightstalker first started posting about them - see PDN thread.

Keep Smiling